SOURCE: CNN Money
WASHINGTON (CNNMoney) — The head of the U.S. Postal Service said Tuesday that if the service doesn’t cut costs and Congress fails to act, it’s going to be in the same dire straits as Greece.
He said that Greece’s ratio of debt compared to gross domestic product is 1.61 and the U.S. Postal Service’s ratio of debt compared to revenue is 1.51.
Donahoe clarified later that he was sincere in the comparison, except he didn’t think the U.S. Postal Service is on the verge of default or a bailout.
“But, it’s true,” said Donahoe, speaking with reporters at a postal policy forum called Postal Vision 2020. “Unfortunately, if we don’t do something we will look like that.”
He added that the U.S. Postal Service’s cost-cutting plan, and legislation passed by the House and Senate, would prevent the Postal Service from having “to go down that path.”
Last month, the Postal Service announced plans averting closures of rural post offices and delaying consolidations on postal plants. Only 48 plants are to be closed or consolidated in July and August. Other consolidations happen in 2013 and 2014 — and could be trumped by Congress.
The Postal Service reported a $5.1 billion loss last year, citing the recession, declining mail volume and a congressional mandate to prefund retirement health care benefits.
The health care mandate is a major liability for the Postal Service. Officials have said they won’t have the cash to make a $5.5 billion payment that’s due Aug. 1, nor the $5.6 billion payment due Sept. 30.
Unions say the health care payments are the main cause of the Postal Service’s financial woes and should be eliminated. They say plant closures and mail service delays turn more customers away and should be avoided.
But Donahoe pushed back hard on the union’s argument, saying those who make that argument are “irresponsible.”
“The idea that if we just eliminate the prefunding and and we’ll be OK — wrong!” Donahoe said. “That’s entirely wrong.”
He said that even without making the regular payments to prefund retirement benefits, the U.S. Postal Service is still an “unsustainable business.”
The Senate passed a postal rescue bill in April. The House has a vastly different approach that Donahoe expects will be considered next month.
Donahoe for the first time lent public support to the Senate plan, even though the Postal Service board blasted the measure when it was passed, saying it put too many restrictions on the agency.
“The way the Senate bill is set up, I’ll take that, because it leaves the door open to change the system,” Donahoe said.
Other changes he wants to pursue include creating a new health care system for Postal Service employees, he said.
Donahoe also made a plea for ending Saturday mail service and shrinking excess capacity from the postal network.
“We’ve just lost way too much in first class mail to maintain six-day delivery — it makes no sense,” said Donahoe, who spoke plainly without a script to the audience, many of whom have businesses that depend on the Postal Service.