U.S. Postal Service going broke

The United States Postal Service is running out of cash, in a hurry.

In a report by The New York Times , the USPS will reach a $9.2 billion shortfall when its fiscal year ends at the end of September.

The postmaster general, Patrick Donahoe said in an interview, "If Congress doesn't act, we will default."

The default is due in large part to a payment the service must make to retirees' future health benefits. Congress passed a law in 2006 requiring the USPS to make a $5.5 billion dollar payment every year for ten years to ensure future health benefits for the next 75 years. Coupled will sharp declines in revenue and higher operating costs, it's a payment that the USPS might not be able to sustain.

The post office's problems stem from the Internet revolution; people corresponding more via email and paying bills online. Mail volume has plummeted 22 percent since 2006. And labor agreements with postal works are financially straining the agency.

Labor costs represent 80 percent of the agency's expenses, including salaries and benefits.

Donahoe has come up with controversial plans to trim costs, including eliminating Saturday mail delivery. He also wants to close up to 3,700 postal locations and layoff 120,000 workers.

The problem is federal law requires Saturday mail service, and labor agreements prevent any layoffs of postal workers. Postal locations can be closed legally, but community protests make that difficult.

Congress is considering numerous emergency proposals, including allowing the post office to recover billions of dollars in overpaid pension funds, a total reported near $60 billion.

The USPS is looking into gaining the right to deliver beer and wine. Also, advertisements on postal trucks and post offices would increase revenue, something the post office needs to do. They have also considered doing more "last-mile" deliveries for competitors FedEx and UPS.

It has even considered consolidating post offices with other government offices and adding operations at some large department stores.

The USPS cannot raise postage fees higher than inflation.

The Senate Homeland Security and Governmental Affairs Committee will hold a hearing to discuss the agency's financial problems. Republicans and Democrats have not yet been able to reach a consensus on how to fix the issues.

The USPS said if Congress does not take emergency action to help the agency stabilize its finances that it could be forced to shut down this winter.

Donahoe hopes to cut $20 billion of the $75 billion in annual costs by 2015. The unions associated with the USPS are alarmed about potential layoffs.

"We're going to fight this and we're going to fight it hard," said Cliff Guffey to the Times, president of the American Postal Workers Union, "It's illegal for them to abrogate our contract."

The USPS generates its own revenue, it receives $0 in taxpayer money to operate.