U.S. Postal Service had to default on payments to escape bankruptcy.
The loss has almost tripled compared to the previous year. It looks like the U.S. Postal Service can no longer hold itself together.
“It’s critical that Congress do its part and pass comprehensive legislation before they adjourn this year to move the Postal Service further down the path toward financial health,” said Postmaster General Patrick Donahoe, calling the situation “our own postal fiscal cliff.”
Though U.S. Postal Service has been carrying out a lot of cost cutting measures, the losses continues to climb as most of it is generated from retiree’s health benefits and this cannot be written-off.
The mandatory costs for future retiree health benefits made up $11.1 billion of loss. Compared to just $2.4 billion of operating loss, a figure much lower than the previous year.
“We cannot sustain large losses indefinitely. Major defaults are unsettling,” said Donahoe, who made clear that the Postal Service would now be profitable had Congress acted earlier this year.
Earlier this year, the post office defaulted on two of the health prepayments for the first time in its history.
Without legislative changes, annual losses will exceed $21 billion by 2016.
“If Congress fails to act, there could be postal slowdowns or shutdowns that would have catastrophic consequences for the 8 million private sector workers whose jobs depend on the mail,” said Art Sackler, co-coordinator of the Coalition for a 21st Century Postal Service, a group representing the private sector mailing industry.