Blueprint For Troubled Postal Service Included In Obama's Deficit-Reduction Plan

WASHINGTON -- In his deficit-reduction plan detailed on Monday, President Obama put forth a comprehensive reform package aimed at restoring financial stability to the beleaguered U.S. Postal Service.

The President's plan includes five proposals that would cut costs at the agency, which has said it could go bankrupt as early as next year if Congress doesn't intervene. Parts of the President's plan are expected to be widely agreed upon as necessary -- such as the restructuring of billions of dollars in payments to workers' retiree health benefits. But other elements, such as allowing the agency to move from six-day delivery to five, may draw less of a consensus.

The White House said the plan would bring the postal service $20 billion in relief over the coming years, as well as trim the federal deficit by $19 billion over the next decade.

"The Administration recognizes the enormous value of the U.S. Postal Service to the Nation's commerce and communications," the plan noted. "Bold action is needed to ensure that USPS can continue to operate in the short-run and achieve viability in the long-run."

In a hearing on Capitol Hill earlier this month, Postmaster General Patrick Donahoe told lawmakers that the postal service is "at the brink of default" and could miss a $5.5 billion payment on retiree benefits at the end of this month.

With the agency expected to post a $9 billion deficit this year, Donahoe said he would like to cut more than 100,000 postal jobs that are covered by no-layoff clauses in union contracts, as well as eliminate the agency's mandatory annual payment into employee health benefits. He pleaded with lawmakers to pass legislation that would make the postal service more like "a private-sector business."

Obama's plan would appear to give the agency more of the discretion that businesses enjoy. In addition to allowing the elimination of Saturday delivery, the plan would allow the agency to offer "non-postal products," although it did not detail what such products might be. It also suggests allowing the postal service to "better align the costs of postage with the costs of mail delivery" -- that is, raise prices -- while still working within the current postage price cap.

Republican Rep. Darrell Issa, chair of the House oversight committee, quickly pounced on the President's plan for the postal service, saying it proposes "sticking taxpayers with the tab." He said the oversight committee will propose on Wednesday its own plan that would save $10.7 billion annually.

"Rather than backing an effort to seek fundamental reform, the accounting gimmicks used in the plan are a thinly veiled attempt to offset continued operating losses with a taxpayer funded bailout," Issa said in a statement.

Yvonne Yoerger, a spokeswoman for the postal service, said agency officials haven't fully reviewed the President's plan and couldn't comment in detail. However, she added, "We're grateful that the President acknowledged the value of the postal service. Also, it's heartening that he's recognized the urgent need for reform."

The National Association of Postal Supervisors, which represents 32,000 active and retired postal managers, agrees with the President's recommendation to restructure the health-benefit payments, as well as to refund two years' worth of overpayments to a retiree pension fund, worth $6.9 billion. But like the union representing letter carriers, the association believes that ending Saturday delivery would be bad policy.

"We oppose cutting service to the country by allowing deliveries to be reduced to five days," Louis Atkins, the association's president, said in an email. "This change would have serious implications for Americans who rely on the mail for the delivery of prescription medicine and the local newspaper industry that relies on the Postal Service for the delivery of weekly newspapers, generally on Saturdays."

Donahoe has warned that the postal service could run out of cash as early as next summer and may no longer be able to make good on its contracts. With a $1 trillion mailing industry relying on the postal service, a bankruptcy could have broader impacts on an already weak economy. In its deficit plan, the White House noted that the postal service's operating deficit has been " exacerbated by the precipitous drop in mail volume in the last few years" due to a slow economy and the growth of online transactions.

The President's larger, $3 trillion deficit plan calls for $1.5 trillion in new taxes over the coming decade, and he promised to veto any package coming out of Congress that does not include new revenues.

This story has been updated with comment from the postal service.

READ the White House's plan for cutting costs at the U.S. Postal Service: