An Historic First: Post Office May Default

The United States Postal Service (USPS), for the first in its 237-year history, may actually go into default over a "legally required annual $5.5 billion payment, due Aug. 1, into a health-benefits fund for future retirees," the Wall Street Journal reports.

And considering that the House is preparing to leave for its August recess without addressing the ailing agency's financial woes, we can pretty much assume that's how this story will end.

"[T]hese ongoing liquidity issues unnecessarily undermine confidence in the viability of the Postal Service among our customers," said spokesman David Partenheimer.

But that’s not all!

“The agency says it will default on its 2012 retiree health payment as well -- also roughly $5.5 billion, due Sept. 30 -- if there is no legislative action by then,” the WSJ notes.

Now, whether the USPS should be allowed to default is debatable. What is not debatable, however, is that the entire agency needs a massive overhaul.

“It had a loss of $3.2 billion in the second quarter of this fiscal year; it is to report third-quarter results on Aug. 9. The agency blames factors including declining mail volumes and the unusual 2006 mandate by Congress that it annually set aside billions for future retirees,” the WSJ reports.

And while the Senate has passed legislation that would supposedly help restructure the agency, the House says it probably won't take up its own proposal until after August.

The Senate voted in April for legislation that would limit the USPS' ability to close certain offices and stop Saturday delivery. The legislation also “shores up the agency's finances by returning an estimated $10.9 billion overpayment made into the federal employee pension system,” the WJS adds.

So, um, that was the Senate's fix?

The House, however, prefers legislation that would require the agency to run more like a professional business and would require the USPS to close down offices that are deemed redundant or operating at too much of a loss.

Bottom Line: There will "in all likelihood be no vote before the August recess," said a staffer for Rep. Dennis Ross (R-FL), one of the main advocates of the House bill.

Meanwhile, the office of Sen. Tom Carper (D-DE), one of the authors of the Senate bill, had this to say: "[E]very day that is lost in passing reform legislation puts the Postal Service another step closer to collapse, and unfortunately it appears that House Leaders are prepared to let that happen."