Unable to come up with billions of dollars due in August and September for future retiree health benefits, the U.S. Postal Service is desperate for a way out of its fiscal problems.

Bankruptcy, perhaps?

Bankruptcy protection would enable the Postal Service to renegotiate its labor contracts, says U.S. Sen. Rand Paul, a Kentucky Republican.

Wages and benefits account for about 80 percent of Postal Service costs, significantly more than the two privately owned couriers — unionized UPS and non-union FedEx (50 percent, 38 percent, respectively).

Rewriting burdensome union contracts would help staunch the flow of Postal Service red ink, Paul says, but there are "too many strong political, partisan voices here (Capitol Hill) to let that happen."

If not bankruptcy, what then?

"Privatization would be great but how we go about doing that is another story," Paul says.

To Peter Orzag, a former director of the Office of Management and Budget in the Obama administration, privatization is the only way forward.

Privatization would take the "partisan voices" out of the picture, Orzag says, referring to Congress.

Privatization would enable the Postal Service to more efficiently manage its assets — 32,000 post offices, 461 processing facilities, monopoly access to residential mailboxes and an overfunded pension plan.

"These assets would attract bidders," Orzag insists.

Orzag says a privately run postal system would be free of oppressive congressional oversight. It could continue to provide universal service. ("For the hard-to-reach, unprofitable routes, a subsidy could be provided," he says.) And private ownership could ease the transition to what invariably would be a leaner work force, for example, by offering more generous buyout packages.

Orzag acknowledges that the Postal Service has become more productive in recent years. For example, a decade ago, 35,000 letters an hour required 70 employees. Today, only two are required.

But mail volume has fallen by more than 20 percent in the last five years alone, he says, and revenue has declined by 12 percent. From fiscal year 2007 to 2011, the Postal Service has lost $25 billion.

Orzag points to the success of privately run postal services in Germany, the Netherlands and Japan. But he also says privatization can sometimes turn out to be a disaster.

In essence, Orzag is saying there are no guarantees.

But it's clear the U.S. Postal Service, try as is might, is not keeping up with the digital age.

Bankruptcy might help right the ship. Privatization would offer the opportunity for clear sailing.