By Palash R. Ghosh: Subscribe to Palash's RSS feed
October 1, 2011 10:22 AM EDT
It appears to be the end of days for the U.S. Postal Service (USPS).
Although the Senate recently extended the deadline for a $5.5 billion payment due to the federal government by the USPS to Nov. 18 from Sept. 30, the extra six weeks or so will not make much difference for the beleaguered and financially crippled postal service.
The USPS doesn’t have the money, is not likely to get the money from a federal government that has grown weary of further bailouts, and, more important, will probably run out of cash by next summer -- meaning it will have little or no hope in meeting its payroll.
Moreover, the $5.5 billion the USPS owes to its retirees’ health care benefits fund may be the least of its monumental problems.
Of greater worry to the federal government is the fact that since USPS is not mandated to fully fund its retirement-related costs, any default by the postal service would fall on the backs of taxpayers -- perhaps to the tune of tens of billions of dollars.
Follow us
As a self-funded organization, the USPS has been forced to borrow from the federal government to cover its operating expenses in the face of plunging mail volume. Labor costs account for a huge 80 percent of its total operating costs.
However, there is a $15 billion limit to how much it can borrow from Washington, and this year the postal service will reach that limit.
The USPS is on its last legs -- the final salvo occurred in the middle of the last decade when increasing masses of people started sending correspondence by email; became very comfortable and adept at sending bill payments online; and, most important, stopped sending first-class letters -- completely eschewing the old paper-envelope-stamp route, and costing the postal service billions of dollars in revenue every year.
Mail volume is plunging.
Between 2006 and 2010, mail volume in the U.S. dropped by 20 percent, from 213 billion pieces to 170 billion. Over that span, the USPS lost $20 billion.
After posting an $8.5 billion loss last fiscal year, the postal service is on a pace to go $10 billion in the hole in fiscal 2012.
All of these declines have created significant excess capacity in the postal system.
And these trends will only keep accelerating.
The Boston Consulting Group said in a study that mail volume in the U.S. will fall by another 15 percent by the year 2020, with first-class mail (the postal service’s main cash generator) plummeting by a whopping 35 percent. By that point (assuming the USPS is still in existence), the postal service will lose an astonishing $15 billion per year.
Mark Zuckerberg's $6.4 Billion Loss: Value Of Facebook CEO's Stake A Gambler's Nightmare
Tasha Reign Says ‘Super Hot’ Bill Clinton Wanted To Meet Her and Brooklyn Lee, ‘Sympathetic’ For Viral Photo
Larry Flynt Blasts ‘Prudish And Delusional Right Wing’ Over S.E. Cupp Hustler Photo As ‘The View’ Hosts Jump To The Defense
Joe Biden Says He Understood Suicidal Thoughts In Wrenching Speech To Families Of Fallen Troops
Mitt the Bully, Barack the Stoner? Candidates Have Very Different High School StoriesWe value your privacy. Your email address will not be shared.
