U.S. Postal Service Is on Brink of Default … Again

by Nate Wooley | September 28, 2012 8:33 am

U.S. Postal Service Is on Brink of Default … Again

The U.S. Postal Service is in danger of defaulting on a $5.6 billion payment due Sunday.

The payment, pre-funding future retiree health benefits, is ordered by congressional action dating from 2006, according to Businessweek[1]. No other government agency is required to make similar pre-funding payments. It would be the second such default this year for the postal service.

Both USPS management and unions blame Congress for the risk of default. While the USPS does not receive tax dollars, it is controlled by Congress. Management requested last year that it be allowed to reduce the payment, decrease hours at low-revenue post offices and eliminate Saturday delivery to avoid default. Congress has failed to act on the request and is now in recess through the upcoming election.

The Senate passed a bill in April aimed at assisting the USPS, but the bill stalled in the House of Representatives. It is unknown whether Congress will take up the legislation during the lame-duck session following the election.

The postal service has faced stiff competition in recent years, losing ground in the lucrative package delivery market to FedEx (NYSE:FDX[2]) and UPS (NYSE:UPS[3]).

Other InvestorPlace stories about the United States Postal Service:

Endnotes:
  1. according to Businessweek: http://www.businessweek.com/ap/2012-09-28/us-postal-service-to-default-on-second-5b-payment
  2. FDX: http://studio-5.financialcontent.com/investplace/quote?Symbol=FDX
  3. UPS: http://studio-5.financialcontent.com/investplace/quote?Symbol=UPS
  4. Why the Postal Service is Fixable: http://investorplace.com/2012/05/why-the-postal-service-is-fixable/
  5. It’s Time to Privatize the Postal Service: http://investorplace.com/investorpolitics/postal-service-privatize-mai/
  6. Who Would Want the Postal Service?: http://investorplace.com/2012/08/who-would-want-the-post-office/
  7. US Postal Service Delivers $5.2B Q3 Loss: http://investorplace.com/2012/08/u-s-postal-service-delivers-5-2b-q3-loss/

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