USPS Will Default In August 2012 Unless Congress Acts Swiftly

James Johnson - Author

Jun. 15 2013, Updated 9:49 p.m. ET

The United States Postal Service will default on billions of dollars in loans if the US Congress does not act by August 1. On that day a $5.5 billion payment will be due, money that is supposed to be paid for future retiree benefits. After that payment another payment in the same amount is due again on September 30.

Congress is about to head into its August recess which means a vote is unlikely unless a special session is called to remedy the situation.

If you are worried about mail being delivered to your home the default will not immediately affect employees or mail delivery, however a spokesperson for the agency notes that “these ongoing liquidity issues unnecessarily undermine confidence in the viability of the Postal Service among our customers.”

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Executives at the United States Postal Service have argued since 2006 that future-retiree payments made under a government mandate is the reason for all of the agencies financial problems. The USPS recorded a $3.2 billion loss during the second-quarter of 2012. Q3 results will be announced on August 9 and should help shine more light on the issues faced by the postal agency.

Fredric Rolando, president of the National Association of Letter Carriers told the New York Times:

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“This is an artificial crisis created by the Congressional mandate that the USPS, alone among all agencies or companies, pre-fund its future retiree health benefits for the next 75 years.”

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Rolando then added:

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“This unaffordable burden accounts for 85 percent of all the Postal Service’s red ink. If lawmakers fix the problem they created, the sharp cuts in service they want to impose on Americans and small businesses would not be necessary.”

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