Is the post office too big to fail? Maybe not

WASHINGTON — Talk in recent weeks of post office closings and the elimination of Saturday mail delivery has shifted to a more dire prospect: The entire U.S. Postal Service could go out of business within a year.

Postmaster General Patrick Donahoe told a Senate hearing Tuesday that the postal service is running out of money and could go into default as soon as next month unless Congress acts.

"Without legislative change this year, the Postal Service faces default," Donahoe told the Senate Committee on Homeland Security and Governmental Affairs.

If the Postal Service is forced to make its required $5.5 billion annual payment to the federal health care benefit plan, it will exhaust its $15 billion line of credit from the U.S. Treasury and trigger a default. John Berry, the director of the Office of Personnel Management, told the panel that the White House would ask Congress to grant the Postal Service a 90-day extension on the health care payment.

But that's only the first step. Donahoe said the Postal Service, which is on track to lose $10 billion this year, must take additional, drastic measures to avoid shutting down and is seeking Congress' blessing to cut back delivery, close thousands of mostly rural post offices, consolidate processing centers and eliminate at least 120,000 jobs.

"Short-term, stopgap measures will not help," Donahoe said. "These are aggressive steps, and they are necessary."

A shutdown of the Postal Service would deal a staggering blow to the economy. With more than 500,000 employees, it's the second-largest employer in the country behind Wal-Mart. It supports millions of other jobs in related industries, such as newspaper and magazine publishers, and paper and printing companies, businesses that would be crippled without it.

"That is the last thing our struggling economy needs and the last thing our country needs," said Sen. Joe Lieberman, a Connecticut independent who's the committee's chairman. "We must act quickly to prevent a Postal Service collapse."

The sluggish economy has contributed to the Postal Service's woes, but nothing has eroded its business more than the Internet. Total mail delivery is down 22 percent in the past five years, but first-class mail is down 26 percent. About 60 percent of Americans now pay their bills online, and electronic forms of communication have made the handwritten letter a thing of the past.

Sen. Claire McCaskill, D-Mo., said that letters help fill "gaps in history," and that the Postal Service should mount a marketing campaign to promote the lost virtues of letter writing. There's "something special about that piece of first-class mail," McCaskill said. "You might be surprised what it will do for your Christmas season."

But Sen. Susan Collins, R-Maine, the committee's ranking member, said there was no going back. "Americans are unlikely to abandon email and text messaging and return to first-class mail," she said.

"First-class mail is going away," said Sen. Tom Coburn, R-Okla.

Faced with the irreversible decline in first-class mail, Donahoe said the Postal Service would focus its attention on growth areas, such as direct-mail advertising, its package business and even venture into digital communications.

"America depends on a financially strong Postal Service," he said. "This will always be so, even in an increasingly digital age."

Donahoe said the Postal Service relies solely on the sale of postage to fund its operations and isn't seeking a bailout from taxpayers.

"We do not want taxpayer money," Donahoe said.

Sen. Tom Carper, D-Del., said that so soon after the country narrowly missed default, a Postal Service default would be "embarrassing and dangerous."

Sen. Scott Brown, R-Mass., worried that any legislation to help the Postal Service would get bogged down in the same partisanship over raising the debt ceiling that brought the country almost to the brink.

"I'm tired of working to the very last minute to get anything done," he said. "Are we going to fight about the post office, too?"