"The choices are that it would cease to exist or it would need a bailout," David Williams, the chief postal watchdog, told Britain's The Guardian newspaper.
The service -- one of the few government agencies explicitly authorized by the Constitution -- has reached its $15 billion credit limit with the U.S. Treasury and has effectively run out of money, said Williams, whose job is to prevent fraud, waste and program abuse and promote USPS efficiency.
"This is the year that they borrowed so much that they can't borrow anymore," he told the newspaper.
The post office bailout would not require taxpayer dollars, Williams said, but rather congressional intervention to reduce USPS pension payments, which are about $5.5 billion a year.
The post office has paid some $330 billion for benefits, but the U.S. Office of Personnel Management, which manages civil service in the federal government, recently told Williams the USPS would need an additional $64 billion to satisfy legal requirements.
U.S. Postal Regulatory Commission Chairwoman Ruth Goldway told The Guardian the pension payments, which the postal service had to go into debt to pay, are largely responsible for the service's dire financial condition.
"They wouldn't be in the situation they're in without having borrowed all this money," she said.
She noted with irony USPS pension payments go to the Treasury, which has been lending the service money to make the payments -- so for the past five years the USPS has been borrowing from the Treasury to pay the Treasury.
Rep. Darrell Issa, R-Calif., has suggested USPS employees be required to pay into their health and life insurance benefits, like other federal workers.
The USPS lost about $16 billion last year and about $41 billion in the past five years, the Postal Regulatory Commission says.
The price of a first-class stamp goes up a penny to 46 cents Jan. 27.