WASHINGTON — The U.S. Postal Service is bracing for a first-ever default on billions in payments due to the Treasury, adding to widening uncertainty about the mail agency's solvency as first-class letters plummet and Congress deadlocks on ways to stem the red ink.
With cash running perilously low, two legally required payments for future postal retirees' health benefits — $5.5 billion due Wednesday, and another $5.6 billion due in September — will be left unpaid, the mail agency said Monday.
Postal officials said they also are studying whether they may need to delay other obligations. In the coming months, a $1.5 billion payment is due to the Labor Department for workers' compensation, which for now it expects to make, as well as millions in interest payments to the Treasury.
The defaults won't stir any kind of catastrophe in day-to-day mail service. But analysts, labor unions and business customers are troubled by continuing losses that point to deeper, longer-term financial damage.
Postmaster General Patrick Donahoe has described a "crisis of confidence" amid the mounting red ink that could lead even once-loyal customers to abandon use of the mail.
"I think for my generation it was a great asset — if you had a letter or package and you needed it to get up to the North Pole, you knew it would be delivered," said Jim Husa, 87, of Lawrence, Mich., after stopping to mail letters recently at his local post office. Noting the mail agency's financial woes, he added: "Times have changed, and we old-timers know that. FedEx and UPS and the Internet seem to be making the Postal Service obsolete."
Banks are promoting electronic payments, citing in part the growing uncertainty of postal mail. The federal government will stop mailing paper checks starting next year for millions of people who receive Social Security and other benefits, paying via direct deposit or debit cards instead.
First-class mail volume, which has fallen 25 percent since 2006, is projected to drop another 30 percent by 2016.
Art Sackler, co-coordinator of the Coalition for a 21st Century Postal Service, a group representing the private-sector mailing industry, said the payment defaults couldn't come at a worse time, as major and mid-sized mailers are preparing their budgets for next year.
"The impact of the postal default may not be seen by the public, but it will be felt by the business community," he said. "Mailers will be increasingly wary about the stability of the Postal Service. The logical and likely move would be to divert more mail out of the system."
The Postal Service, an independent agency of the government, does not receive taxpayer money for operations but it is subject to congressional control. It estimates that it is losing $25 million a day, which includes projected savings it had expected to be accruing by now if Congress this spring had approved its five-year profitability plan. That plan would cut Saturday delivery, reduce low-volume postal facilities and end its obligation to pay $5 billion a year for future retiree health payments.
While the Senate passed a bill in April that provides an $11 billion cash infusion to help the mail agency avert a default, it also would delay many of the planned postal cuts for another year or two. The House remains stalled over a measure that allows for the aggressive cuts the Postal Service prefers.