A balanced approach to postal rates is critical
Enabling inefficient operations with unwarranted increases causes more harm than good
Since 2006, thanks to the Postal Accountability and Enhancement Act, the U.S. Postal Service has been required to abide by a cap on postal price increases tied to inflation.
The price cap protected mailers from runaway price increases and provided them with the means to budget their expenses accurately. Now the USPS is asking the Postal Regulatory Commission (PRC) to scrap the law’s pricing system and give the USPS unchecked power to set its own rates, with little or no oversight by the PRC.
We all want the USPS to be financially successful. A healthy Postal Service is in everyone’s interests, especially those of us who depend on it for our organizations and businesses. But enabling inefficient operations with unwarranted rate increases causes more harm than
The price increase cap is the only real protection that mailers have from abuse of the Postal Service’s monopoly power. The USPS has a monopoly over many classes of mail and exclusive use of the nation’s mailboxes, and its monopoly pricing power still requires regulatory oversight.
For years, we have seen grim predictions from USPS warning of its pending financial demise. What we haven’t seen, however, is a clear and accurate picture of its financial outlook — or any evidence of sustained cost control and modernization efforts across its vast enterprise.
In fact, the USPS is in much better financial health than it says publicly, and above-inflation postage increases are unnecessary. It has approximately $8 billion of cash on hand and generated nearly $3 billion of cash from operations each year from FY 2014 to FY 2016. It has also pre-funded its major liabilities much more than federal and state governments and most private employers; USPS has $340 billion in its pension and retiree health care accounts, enough to pay benefits for decades.
If the USPS is genuinely dissatisfied with its finances, it has many ways to improve them by operating more efficiently, including rethinking operational decisions, reinvigorating stalled cost-reduction efforts, leveraging their vast real estate holdings, reducing compensation premiums (the USPS pays its workers about twice what the private sector pays for similar work), and seeking a better return on its very large investment portfolio.
In the absence of a real commitment by USPS to modernizing and finding cost savings, the commission would be sending the wrong message by making changes to the pricing system right now. Giving the USPS unchecked monopoly pricing power would also cause great financial harm to those of us who need the USPS to deliver personal and business correspondence, nonprofit fundraising letters, magazines and newspapers, and other types of mail that millions of Americans depend on.
Arguably, higher postal price increases won’t even help the USPS in the long run. In response to significantly higher postal rates, mailers will cut back on volume, leaving the USPS no better off financially.
The Postal Rate Commission will issue its determination about the price cap later this year. If your business depends on the USPS for communicating with customers, promotion, or shipping, it’s in your interest to encourage the PRC to maintain the cap. You can submit your comments to the PRC at prc.gov or write them at 901 New York Ave. NW, Suite 200, Washington, DC 20268.
Jamie Trowbridge is president and CEO of Yankee Publishing, Dublin. McLean Communications, publisher of NH Business Review, is a subsidiary of Yankee Publishing.