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Wed August 1, 2012
USPS Defaults On $5.5 Billion Payment To Treasury
For the first time ever, the United States Postal Service has defaulted on a payment to the Treasury.
The USPS warned of a default in a statement on Monday. It it would not make the $5.5 billion payment due today and that it would also default on a $5.6 billion payment due Sept. 30. Both of those payments are federally mandated and go toward prefunding retiree health benefits.
Basically, USPS said, this will not affect delivery or payments to employees. Benefits to retirees will also continue to flow.
The AP reports that the real problem here is that the USPS has proposed changes to its operation to handle its money problems, but they have to be approved by Congress, which, in an election year, is deadlocked on pretty much everything.
The AP spoke to Democratic Sen. Tom Carper of Delaware, chairman of the Senate subcommittee that oversees the Postal Service. Carper said in the short term, this means nothing.
"The real damage is to the reputation [of the Postal Service] and to the perception that mailers will have in the months ahead," Caper told the AP. The problem, he said, is that businesses might choose FedEx or UPS instead.
Federal News Radio reports that things could get ugly in October, when the Postal Service is expected to run out of cash for expenses.