By Kirsten Salyer

The U.S. Postal Service faces default today for the first time in its history, marking an unnecessary low point in a slow decline.

The service has been warning that it wouldn’t make a required $5.5 billion payment due today to the U.S. Treasury to cover future retirees’ health care, Bloomberg News reports. The USPS has argued that its obligation to cover retirees is preventing the agency from becoming financially viable.

The agency, which has lost $25 billion since 2007, faces a cash shortage of $100 million this October, and possibly $1.2 billion next year, the New York Times reports. Total mail volume fell by 20 percent between 2006 and 2010, with the most profitable mail, first-class mail, experiencing the biggest drop-off. With such declines, the USPS is struggling with cutting costs -- and getting congressional approval to do so.

A Senate bill passed April 25 to reform the service didn’t do enough to help, and the House hasn’t done anything. As Bloomberg View editors wrote on May 1, the Senate bill got a few things right: trimming the workforce by 100,000 and allowing the service to offer retirement incentives, raise postal rates, ship wine and beer, and sell things like fishing licenses.

But the Senate prevented further cost-cutting  by forbidding the elimination of Saturday delivery for two years and by making it difficult for the service to close mail-processing plants and local post offices that are no longer needed. If the agency isn't freed from congressional control, as Peter Orszag argues, the USPS needs more flexibility to cut spending.

The slow ruin of one of America’s oldest agencies is a sad sight.

(Kirsten Salyer is the social media editor for Bloomberg View. Follow her on Twitter.)

Read more breaking commentary from Bloomberg View columnists and editors at the Ticker.

-0- Aug/01/2012 16:53 GMT