Postal Service faces grim ‘new reality’

By Peter Schroeder - 09/15/11 01:50 PM ET

The current mail system of the United States is "no longer financially sustainable," and the U.S. Postal Service (USPS) is looking for billions of dollars in cuts to its services.

The postal service announced Thursday it was considering closing nearly 250 processing facilities, cutting equipment by 50 percent and slowing mail delivery in an extreme cost-cutting effort. It is looking for $3 billion in annual savings.

And as the president and Congress search high and low for ways to boost job creation, up to 35,000 people could be laid off as part of that effort.

"We are forced to face a new reality today,” said Postmaster General Patrick Donahoe. “With the dramatic decline in mail volume and the resulting excess capacity, maintaining a vast national infrastructure is no longer realistic."

Since the advent of email and other electronic communication, the postal service has seen a steady decline in its use. More than 43 billion fewer pieces of mail are sent now than they were five years ago. First-class mail has dropped 25 percent, and the transmission of stamped letters is down 36 percent over that time frame. The postage purchased to send first-class mail is a primary source of revenue for the USPS.

The American Postal Workers Union blasted the move.

“The Postal Service should be urging Congress to address the cause of its problems – not slashing service and demolishing its network," union president Cliff Guffey said.

And lawmakers responded to the announcement by repeating their calls for legislative action to help shore up those ailing finances.

"Congress and the administration must act quickly to help the Postal Service save itself," Sen. Tom Carper (D-Del.) said. "Failure to act will result in the Postal Service being insolvent within a year, if not sooner, bringing more pain to communities across the country and wreaking havoc on our already fragile economy."

House Oversight Committee Chairman Darrell Issa (R-Calif.) said it was time for Congress to allow the USPS to act "more like a true business."

"Congress must enact decisive and comprehensive postal reform," he said.

The USPS is expected to hit its $15 billion borrowing limit by the end of September and has indicated it would not be able to make a $5.5 billion payment due at that time. As the USPS seeks to delay that payment until the end of the year, those struggles are driving concerns that the agency could default.