Post office nears historic default on $5B payment

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. Post offices will stay open, mail trucks will run, employees will get paid, current retirees will get health benefits.

But a growing chorus of analysts, labor unions and business customers are troubled by continuing losses that point to deeper, longer-term financial damage, as the mail agency finds it increasingly preoccupied with staving off immediate bankruptcy while Congress delays on a postal overhaul bill. Read more >>

Another reason not to hire - rising unemployment taxes

Companies have yet another reason not to boost hiring: rising unemployment taxes.

Employers around the nation are getting socked with higher state unemployment tax bills as states are forced to shell out more than $1 billion in interest payments this month. More than 30 states have had to borrow billions from a federal fund to cover unemployment benefits for their jobless residents in recent years.

And this is only the first of two tax spikes employers are contending with, on both the state and federal level. Come January, companies in 24 states could have to shell out between $21 and $63 more per employee in federal unemployment taxes.

These hikes are the latest in a series of unemployment tax increases as states look to replenish their unemployment trust funds devastated by the Great Recession.

Last year, employers paid 27.8% more in state jobless taxes, said Doug Holmes, president, UWC Strategic Services on Unemployment & Workers' Compensation, a business trade association.

"Unemployment taxes, which were a relatively low bottom-line cost in 2008, are now becoming a significant cost," Holmes said. "It discourages companies from electing to hire new employees." More...