WASHINGTON – The Postal Service is continuing to hemorrhage money, reporting a loss Tuesday of more than $2 billion over the first three months of the year and warning it could be forced to default on federal payments. Such a default would not interrupt mail service to millions of Americans, but it could further hobble an agency struggling with a sharp decline in mail because of the Internet and a tough economy.

The agency says the $2.2 billion loss covers Jan. 1 to March 31, 2011 – sharply higher than the net loss of $1.6 billion for the same period last year.

The post office also said it will have reached its borrowing limit, set by Congress, of $15 billion by the end of the fiscal year.

Unless Congress intervenes, the Postal Service said, the agency won’t have the cash for certain payment to the government, such as billions for a trust fund to provide health care benefits for future retirees.

Total mail volume, about 41 billion pieces, was down 3.1 percent for the January to March period, compared to the same time a year earlier, the Postal Service said. A modest increase in revenue from standard mail wasn’t enough to offset the revenue loss from fewer pieces of first-class mail.


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