Postal Service to Default on Payment at Midnight

The United States Postal Service owes the Treasury a multi-billion dollar payment that it expects to default on Wednesday at midnight. The payment is for $5.5 billion and is supposed to go towards retiree health benefits. The Postal Service said that the default on the payment will not affect its daily operations but it marks the first time in the history of the agency that a payment has been defaulted.

The postal service has not been blamed much for the default, as many advocates of reform have blamed Congress. Those blaming Congress noted the law from 2006 that increased the financial obligations of the postal service. The law from 2006 requires that the agency make a $5.5 billion payment each year into a retiree health benefit fund.

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Patrick Donahoe, the postmaster general, asked Congress to lighten the load of the prefunding and to make cuts because of the decrease in mail due to the web. The cuts would amount to 150,000 jobs, the end to Saturday deliveries and the closure of half of the agency’s processing facilities. On Monday, the postal service issued a statement that asked Congress to start new legislation. “[C]omprehensive postal legislation is needed to return the Postal Service to long-term financial stability,” the agency said. “We remain hopeful that such legislation can be enacted during the current Congress.”

The chair of the House Oversight and Government Reform Committee, Republican Darrell Issa, has been the advocate for a bill that would cut 150,000 jobs and cut delivery to five days per week. Issa released a statement on Tuesday that said, “The default by the Postal Service on its obligation to its own employees and retirees follows decades of mismanagement, and a willful blindness to fundamental changes in America’s use of mail. The Postal Service continues to fail to do all it can under current law to cut costs.”

A bill has also been created in the Senate that would cut 100,000 jobs. That bill has been sponsored by Senator Tom Carper, a Democrat from Delaware. In a statement sent to the Huffington Post, Carper said, “Every day Congress delays fixing this problem, the financial challenge grows more difficult and the potential solutions become more expensive. If the House has a plan to prevent the Postal Service from defaulting for the first time in its history, I think they should bring it to the floor and pass it. We shouldn’t be waiting around until the 11th hour to do the right thing and fix the serious, but solvable, financial challenges plaguing this American institution.”

Posted by Jim Vassallo on July 31, 2012. Filed under Business News. You can follow any responses to this entry through the RSS 2.0. You can skip to the end and leave a response. Pinging is currently not allowed.