WH: USPS Could Save $20B and Cut Saturday Delivery
Business + Economy

WH: USPS Could Save $20B and Cut Saturday Delivery

Scott Olson/Getty Images

As part of President Obama’s deficit reduction proposal, the Administration outlined a financial rescue plan for the ailing U.S. Postal Service.

“The insolvency of the postal service and its unsustainable course is something that is both bad for the federal government’s deficit, bad for the postal service and bad for the economy,” a senior Administration official said. “We think the time for action is now.”

Immediate relief for the USPS would come in the form of a $6.9 billion refund payment over two years. The agency says it overpaid this amount into a federal employee retirement fund. The proposal would allow the USPS to restructure its annual payment for retiree health benefits and end Saturday delivery. The White House said the plan would save the USPS more than $20 billion over the next “few years” and reduce the federal deficit by $18.5 billion over 10 years.

At the end of the month the USPS expects to default on a $5.5 billion payment for pre-funded retiree health benefits, unless Congress steps in. The Administration said it would temporarily forgive this payment and allow the agency to spread it out over a longer period of time. Enactment of the Administration’s proposals would be up to the “Super Committee” who is already charged with finding at least $1.2 trillion in additional deficit savings by Thanksgiving.

The USPS faces as much as a $10 billion deficit this year, its second consecutive year hemorrhaging greater than $8 billion. Last week the USPS announced an aggressive plan to eliminate or consolidate more than 250 processing facilities in a bid to save $20 billion by 2015. The agency has sought Congressional approval to reform its health care benefits program and eliminate Saturday delivery. The USPS mail volume has dropped 22 percent since 2006 due to the growing use of email and a weak economy with fewer mailed advertisements.

In response to the Administration’s proposal, Chairman of the House Oversight Committee, Rep. Darrell Issa, R-Calif., offered his own amendment: “The Postal Reform Act”, that would produce at least $10.7 billion in annual savings for the USPS.

Issa called Obama’s plan “a bailout” and one that will “certainly cost taxpayers money.” As it stands, the Postal Service receives no tax dollars for operating expenses and relies on the sale of postage, products and services to fund its operations. “Rather than backing an effort to seek fundamental reform, the accounting gimmicks used in the plan are a thinly veiled attempt to offset continued operating losses with a taxpayer funded bailout,” Issa said.

Issa did back the Obama Administration’s proposal to reduce mail delivery to five days. The USPS has said cutting Saturday delivery would save it up to $3 billion annually.

In a statement Postmaster General Patrick Donahoe praised the President’s proposal. “The President also recognized the urgent need for reform to ensure the Postal Service’s future viability,” he said in a statement. “The President has offered helpful recommendations to stabilize the Postal Service’s financial crisis.”