The U.S. Postal Service, which says it won’t be able to make required payments at the end of this month, should be allowed to end Saturday mail delivery and get back $6.9 billion paid into a federal retirement program, according to President Barack Obama’s deficit-reduction plan.

The proposal, which would also allow the agency to raise rates, would give the Postal Service $20 billion over “several years” and reduce the federal deficit by $19 billion over 10 years, according to the proposal released today.

The Washington-based service has sought Congress’s permission for all of the proposed changes. They are part of the $3 trillion deficit-reduction plan Obama sent to a congressional committee whose job it is to cut at least $1.5 trillion from the federal deficit. The Postal Service has said cutting Saturday mail delivery would save $3.1 billion a year.

“I would characterize it as a moderate proposal, one that should give the Postal Service some running room but will not provide it with the full amount of relief that it truly needs for the long-term,” said Art Sackler, coordinator of the Coalition for a 21st Century Postal Service.

The group, whose members include Verizon Communications Inc. (VZ) and FedEx Corp. (FDX), supports the changes except for raising rates faster than inflation, Sackler said in a telephone interview.

Raising Rates
The Postal Service last year unsuccessfully asked its regulator for permission to raise rates by an average of 5.6 percent. The administration would allow the service “to seek the modest one-time increase in postage rates it proposed a year ago,” according to the plan.

Representative Darrell Issa, a California Republican and sponsor of a bill with proposals to save at least $10.7 billion annually in postal spending, called Obama’s postal plan a “bailout.”

“Rather than backing an effort to seek fundamental reform, the accounting gimmicks used in the plan are a thinly veiled attempt to offset continued operating losses with a taxpayer- funded bailout,” Issa said in an e-mailed statement.

The Postal Service’s mail volume has dropped 22 percent since 2006, including the 2 percent decline that Postmaster General Patrick Donahoe forecasts for the fiscal year ending Sept. 30. The fastest decline is in first-class mail, which includes letters and some business correspondence and is the most profitable type of mail.

“If you raise postage by a significant additional percentage, a great deal more first-class mail will depart and that would be self-defeating,” Sackler said.

Donahoe, in an e-mailed statement, praised Obama’s proposal.

“The president also recognized the urgent need for reform to ensure the Postal Service’s future viability,” he said. “The president has offered helpful recommendations to stabilize the Postal Service’s financial crisis.” Bloomberg.