More Expensive Stamps Won’t Save the Post Office

A newly proposed increase would bring $2 billion in annual revenue—but that's nothing compared with the post office's budget gap

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The U.S. Postal Service is requesting a postal rate hike that would generate $2 billion annually. That sounds like a lot of money – until you realize how deep the U.S.P.S. is in the hole.

On Thursday, Postmaster General Patrick Donahoe addressed the Senate Homeland Security and Governmental Affairs Committee yet again in an attempt to get Congressional permission to fix the post office’s dire financial situation.

U.S.P.S. is required by Congress to set aside $5.5 billion each year to cover future retirees’ healthcare costs. But the post office can no longer afford to make those payments as people send less mail. The volume of mail has dropped 25% over the last five to six years, according to Donahoe, and the Post Office’s fortunes have fallen with it. In 2012 the Post Office lost $16 billion, and defaulted on two retiree payments. This year, it expects to lose $6 billion.

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To mitigate the postal service’s problems, Donahoe is trying to reduce delivery to five days a week while putting a halt to its Congressionally mandated billion-dollar retiree payments. But in the meantime, the post office wants to raise the price of a stamp. Again.

The Postal Service’s Board of Governors is requesting that the independent Postal Regulatory Commission approve a 3-cent increase in the price of a stamp, to 49 cents; a 1-cent increase for each additional ounce of first-class mail, to 21 cents; a 1-cent increase for mailing a postcard, to 34 cents; and a 5-cent increase for mail sent overseas, to $1.15.

The proposed rate hike for the price of a stamp is 6.5%, well above the rate of inflation. The post office, under federal law, isn’t allowed to raise postal rates more than the inflation rate unless it gets approval from the regulatory commission.

In a statement, Board of Governors Chairman Mickey Barnett requested the rate increase in light of the post office’s “precarious financial condition” and the “uncertain path toward enactment of postal reform legislation.”

“Of the options currently available to the Postal Service to align costs and revenues, increasing postage prices is a last resort that reflects extreme financial challenges,” he said. “However, if these financial challenges were alleviated by the timely enactment of laws that close a $20 billion budget gap, the Postal Service would reconsider its pricing strategy.”

(MORE: Post Office Wants to Hike Stamp Prices)

In a way, the price hike is an attempt to put further pressure on Congress. If enough people get agitated about it, Congress could be pressed to act. But that’s unlikely to happen. If anything, raising the price of stamps and first-class mail may actually dissuade even more Americans from using its services.

The postal service also wants to raise rates for bulk mail, periodicals and package service rates by almost 6%. But both the Greeting Card Association and the Association of Magazine Media, (of which Time Inc., is a member), two of the biggest users of bulk mail in the U.S., have criticized the proposal, suggesting it will merely worsen the post office’s already gloomy situation. Even if it doesn’t, the rate hikes aren’t likely to help that much either.

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