U.S. Postal Service Likely to Seek “Emergency” Increase in Stamp Prices

Posted: Sep 06, 2013 12:01 AM

The U.S. Postal Service is structured to subsist on the revenues it generates from the sale of its products and services. In recent years, however, USPS expenses have exceeded revenues and the government agency now finds itself effectively broke having maxed out its $15 billion line of credit with the U.S. Treasury.  

Postal employee unions blame a 2006 law that forces the USPS to prefund retiree health benefits (a benefit that a small and declining number of private sector workers enjoy) for the government agency’s financial woes. But as a recent Congressional Research Service papernotes, the USPS would be in trouble even without the required payments:

While [Retiree Health Benefits Fund] payments have affected the USPS’s profitability, the USPS would have run deficits each of the past four years even if the agency did not have to make RHBF payments. These non-RHBF deficits would total $14.7 billion, an amount nearly equal to the USPS’s total borrowing authority. [T]hese deficits were produced by a sharp drop in revenues. (Expenses did not fall equivalently.)

Congress has been fumbling around with postal reform legislation for a couple of years now. And as I’ve noted more times than I can count, congressional micromanagement makes it difficult for the USPS to downsize its operations to match 21st century realities. So the USPS is reportedly looking to generate more revenue through higher stamp prices.

The USPS is limited in its ability to increase stamp prices. For “market-dominant” (the government’s amusing euphemism for “monopoly”) products, annual price increases cannot exceed inflation (as measured by the Consumer Price Index for All Urban Consumers). The USPS can, however, request a rate increase above inflation on the basis of extraordinary or exceptional circumstances from its regulator, the Postal Regulatory Commission (PRC).

The PRC rejected such a request in 2010, but it appears that the USPS will try again. And both the Washington Post and The Hill are reporting that industries forced to use the USPS (greeting card companies, magazines, direct marketers, etc) are non-too-pleased with the prospect of higher prices. The mailers argue that an excessive price increase to deliver their products will speed up the diversion from physical mail to electronic alternatives (and thus hurt their bottom lines).

Here’s my opinion on an exigent increase in stamp prices: the postal service should beprivatized and delivery charges should be determined by market forces. Maybe the mailing industry is paying too little; maybe it’s paying too much. I think it’s impossible to say so long as the government maintains a monopoly on the delivery of its products and delivery prices are set by politicians and regulators. Unfortunately, ending the government mail monopoly and privatizing the postal service isn’t even a topic for discussion in Congress.

Nope, those busy little bees have more important postal matters to attend to (from the New York Times):

As Congress has become less and less efficient, the numbers are all the more striking. In the 111th Congress, which met from 2009 to 2010, members passed 383 statutes, 70 of which named post offices. In the 112th Congress, the last Congress to meet before the current one convened in January, members passed 46 measures naming post offices, out of 240 statutes over all.