The United States Postal Service will lose a record $10 billion this year

The United States Postal Service will lose a record $10 billion this year. And because of this financial insolvency, no later than next summer, it will fail to meet payroll. This action most certainly will stop the mail — and leave taxpayers on the hook with a multi-billion-dollar “postage due” bailout bill.

Tackling this challenge presents Congress with an opportunity to save a constitutionally authorized American institution and save it by cutting costs and freeing it to make better decisions. I call it a business restructuring plan. What it promises taxpayers is a better working system without any taxpayer-funded bailout.

The Postal Service is a part of the federal government, but it became an independent agency in 1971 so that it could be run more like a business.

In simple terms, this “spin-off” deal gave the newly independent Service billions of dollars in land, buildings, equipment, vehicles, and a trained workforce of 700,000. In return, the Postal Service was required to cover its own expenses, and not rely on taxpayer money.

There is however, one small exception: because postal workers are federal employees, taxpayers automatically provide a backstop to certain Postal Service–paid obligations — like pensions and retiree health benefits. It pays the Treasury to cover these costs.

The Postal Service stopped making this payment for its share of employee retirement benefits in late June. Even with a six-week grace period signed into law by President Obama this week, they will miss a $5.5 billion payment for retiree health care.

If they do not ultimately make these payments, the American taxpayer will pick up the bill. Even worse, a chorus of voices in Washington — pushed by political allies and others, would rather just pass another a bailout and kick the can down the road another few years.

They say, erroneously, that the Postal Service doesn’t really owe these obligations anymore and that in fact, it has “overpaid” into its retirement funds to the tune of $50–75 billion.

The postmaster general and union leaders claim that to “save” the Postal Service, Congress must simply give this money “back.” They are attempting to rebrand a taxpayer-paid bailout as a “refund.”