USPS Broke by August 2012 According to Prediction by USPS Deputy Postmaster General

By Charles Ty on Sep 6, 2011 in Business, Economy, United States, World • No comments

The US Postal Service or USPS is broke and is in the brink of declaring a bankruptcy on August 2012 if economic conditions don’t improve and Congress doesn’t act, according to USPS Deputy Postmaster General Ronald Stroman on August 18, 2011, as reported by various international news sites.

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Image Credit: USPS.com

The USPS is reported broke since 2008 when it started to post losses. USPS lost $2.8 billion in 2008, $3.7 billion in 2009, $8.3 billion last year, and it’s $8.5 billion in the red this year. Overall, USPS has to fill a $20 billion budget gap between now and the end of 2014 to regain profitability, Postmaster General Patrick Donahoe said.

USPS CFO Joe Corbett identified e-mail and other electronic options as the primary culprit for its losses. He mentioned that even as mail volume is continuously decreasing, USPS is getting more and more expenses as labor costs keep on rising. Currently, it is estimated that labor costs now make up 80 percent of USPS’ expenses.

In order to cut costs, USPS is asking the Congress for permission to cut $20 billion from the agency’s $75 billion in annual costs by 2015, by closing post offices, laying off 120,000 employees, shedding another 100,000 through attrition, ending Saturday mail delivery, and fixing its failing health-care system, among other major changes to remain in business.

Several USPS employees will be retiring soon. The health care “prepayment” which is due on September 30, 2011, is mandated under the 2006 Postal Accountability and Enhancement Act to ensure coverage for these retirees. Broke USPS has so little cash on hand that it cannot make any of that payment, USPS Postmaster General Patrick Donahoe said on August 17, 2011.

USPS officials intend to seek congressional approval for their moves to stay afloat, Stroman said, adding that discussions with the House and Senate are underway.