Facing Financial Crisis, USPS Suspends Pension Contributions

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By Yuval Rosenberg and Michael Rainey

Good evening. New data out today showed that inflation continues to run hotter than the Fed would like and that the economy grew 2.1% last year, slower than the 2.8% pace in 2024 and the 2.9% rate for 2023. We've got details on that and a move by the U.S. Postal Service to fend off a cash crunch.

Facing a Cash Crisis, USPS Suspends Pension Contributions

The U.S. Postal Service said Thursday that it will temporarily suspend its contributions to an employee pension plan to conserve cash as it faces a severe financial crisis. The postal service also announced that it will raise the price of a first-class forever stamp from 78 cents to 82 cents starting July 12.

The postal service has struggled for years, posting heavy losses as it faced a sharp decline in mail volumes. Its leaders have sought to raise prices and cut costs as part of a 10-year reorganization meant to achieve financial sustainability, but they have complained that the agency faces regulatory restrictions on its business practices, a $15 billion borrowing limit, sizable employee retirement costs and legal requirements (and public demands) that it still provide its services across the country six days a week.

The reorganization efforts have failed to improve USPS's financial outlook. USPS posted a $9 billion loss in fiscal year 2025, down only slightly from a $9.5 billion loss the year before. Postmaster General David Steiner warned Congress last month that, under the status quo, the postal service was on pace to run out of cash - and be unable to deliver the mail - in less than a year.

"If you want the same level of services that we have today-six-day-a-week delivery and 33,000 plus post offices, we can do that, and we are glad to do that," Steiner testified before a House Oversight hearing on March 17. "But someone has to pay for it, and the only options are postal ratepayers or taxpayers."

Steiner said at the time that he wants to raise the cost of a first-class stamp from 78 cents to between 90 cents and 95 cents to help address its financial crunch. USPS also said last month that it will enact a temporary 8% surcharge on some postage prices for packages from April 26 through January 17, 2027, to cover higher transportation costs. The mail agency is also calling on Congress to increase its borrowing authority to $34.5 billion.

USPS said Thursday that it had informed the federal Office of Personnel Management that it intends to suspend its contributions to the Federal Employees Retirement System (FERS) starting tomorrow. The postal service pays about $200 million every other week for the pension plan. It said that the temporary freeze will free up about $2.5 billion in funding for the current fiscal year and that it would still send employees' contributions to the pension plan along with the usual contributions to the Thrift Savings Plan, another retirement program. USPS also temporarily deferred FERS payments during a cash crunch in 2011.

"There will not be any immediate detrimental impact to our current or future retirees if normal FERS cost payments are temporarily withheld," Postal Service Chief Financial Officer Luke Grossmann said in a statement. "The risk to the Postal Service and the American public from insufficient liquidity for postal operations dramatically outweighs any longer-term risk to the pension funds from not making the currently due payments."

Grossman added: "It must be noted that our pension systems remain much better funded than other agencies."

In all, the postponed retirement contributions could free up $15 billion or so if they continue through the end of fiscal year 2030. The Postal Regulatory Commission, which granted a waiver to allow the suspension of payments, said the move "should allow the Postal Service to avoid a liquidity crisis over the next few years" but urged the postal service and Congress to use the "breathing room" being provided "as an opportunity to work toward meaningful and lasting change."

While lawmakers have stepped in before to deliver some financial relief for the postal service - including a 2022 reform that eliminated a requirement to pre-fund retiree health benefits, helping to save an estimated total of $107 billion - congressional Republicans reportedly have little appetite for rescuing the postal service now. House Oversight and Government Reform Chair James Comer reportedly offered Politico a blunt message for USPS: "No more bailouts," he said. "You're going to have to figure it out. You're going to have to stop the bleeding."

Economists Warn That Slower Global Growth, Higher Inflation Is Ahead

The International Monetary Fund said Thursday that it expects to lower its growth projections for the global economy this year due to the war in the Middle East.

IMF Managing Director Kristalina Georgieva told a group of finance ministers and policymakers gathering in Washington, D.C., that damage to infrastructure and disruptions in supply chains resulting from the war against Iran will mean that growth falls short of the group's estimates released earlier this year. In January, the IMF said it expects the global economy to grow at a 3.3% rate in 2026, and 3.2% in 2027, driven in part by significant investments in artificial intelligence.

"Even in a best case, there will be no neat and clean return to the status quo ante," Georgieva said. "We don't truly know what the future holds for transits through the Strait of Hormuz or, for that matter, for the recovery of regional air traffic."

Georgieva warned that economic growth will be slower "even if the new peace is durable."

Analysts at Oxford Economics echoed that view Thursday, saying that higher energy prices will be a factor for some time, negatively affecting Asia's economies in particular. "Even if the cease-fire is durable, it will likely take some time for oil prices to return anywhere near pre-war levels," economist Nancy Vanden Houten said.

Lower US growth last year: Separately, the U.S. Commerce Department announced Thursday that domestic economic growth was weaker at the end of 2025 than originally estimated. Analysts initially pegged the growth rate in the fourth quarter at 1.4%, but that was revised down to 0.7% in the second estimate and now 0.5% in the third. For 2025 overall, the economy grew 2.1%, below the 2.8% rate in 2024 and 2.9% in 2023.

The department said growth in the fourth quarter was driven largely by consumer spending, while government spending and exports detracted from it. Government spending was reduced during the 43-day shutdown that started in October. Private investment was lower than first estimated, as well.

Inflation persists: Other data released by Commerce on Thursday show that inflation continues to run above the Federal Reserve's 2% target level - and that's before the Iran war began. The personal consumption expenditures price index rose 0.4% on a monthly basis in February, a tenth of a percentage point higher than in January, while the annual rate held steady at 2.8%.

Core PCE, which ignores volatile food and fuel prices and is seen by the Fed as a key measure of inflation, rose 0.4% on a monthly basis and 3.0% annually.

We'll get another look at inflation data tomorrow when the March Consumer Price Index report is released. Economists expect to see a big jump in inflation due to the Iran war, with some predicting CPI above 3% in March and perhaps above 4% in April.

"We're going to be paying the price for this through much of the year," Moody's Analytics Chief Economist Mark Zandi told CBS News. "We should see a bit of a bump in the cost of airline tickets. Grocery prices will probably be a bit higher. Obviously, that goes to transporting food from the port or the farm to the store shelf."

 

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