Obama budget calls for huge Postal Service cuts

Tuesday, February 14th, 2012 By

USPS Delivery truck

Deep cuts are being proposed for the United States Postal Service. Photo Credit: Michael Hicks/Wikimedia Commons/CC-BY-SA

The United States Postal Service  it continues to post huge losses and is struggling to stay viable. The recently released proposed budget from the White House is suggesting huge cuts be made, including canceling Saturday deliveries among other cuts.

Small town post offices preparing to close

The United States Postal Service is enduring the worst year of its existence financially. Tthe independent government agency has, according to Businessweek, posted a loss of $3.3 billion in the last quarter of calendar year 2011. It marked the ninth consecutive quarter in which the postal service has operated at a loss.

The agency is looking to shed 220,000 jobs and close 12 percent of post offices nationwide. Many of the post offices that are scheduled to close, according to Reuters, are located in rural areas. Of the 3,830 post offices on the list of proposed closures, 80 percent are located in rural areas and many have the highest rates of poverty in the nation.

Obama budget proposes deep cuts

The recently released “Obama budget,” as the proposed budget from the White House is dubbed, includes proposed cuts to the Postal Service in line with proposals the agency has already recommended, according to the Wall Street Journal. One recommendation is that delivery services be reduced to five days instead of the traditional six, or in other words cutting Saturday deliveries.

Saturday delivery, according to Bloomberg, would be phased out by Jan. 2013. The proposal also includes a postal rate increase.

The proposals also include refunding $10.9 billion in over-payments the USPS made into the retiree system of the federal government and curbing the annual prepayment mandate for the USPS retired worker healthcare fund. The agency is required to pay more than $5 billion per year into the fund to pre-pay for retirees.

Direst of straits

The goal is for the agency to shave $20 billion in costs by 2015. The agency, at its current pace, will post a $14.1 billion loss by Sept. 31 this year and a $13.6 billion loss for fiscal year 2013. Cutting Saturday deliveries would save an estimated $3.3 billion.

[A shortfall that big would take a lot of installment loans to make up for it]

Closing post offices in remote areas, according to Reuters, would be a “drop in the bucket,” according to former Postmaster General William Henderson. Roughly 90 percent of these locations operate at a loss, but the total cost is about $295 million, roughly 0.4 percent of the agency’s overall operating budget.

Sources

Reuters

Bloomberg

Wall Street Journal

Businessweek: http://news.businessweek.com/article.asp?documentKey=1376-LZ4PUE6JTSEH01-5L42MLGUHQLJD8DSECH399JK9H

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