Dear Consumers: Get Ready For The Coming Postal Bailout


Steve Pociask President, American Consumer Institute
Font Size:

The latest news surrounding the U.S. Postal Service is that the price of stamps is climbing from 49 cents to now 50 cents next week. However, the Postal Service and its leadership aren’t being so forthcoming about the upcoming tidal wave of rate hikes that will impact millions of individuals across the country who use the mail on a regular basis.

On top the Postal Service’s annual price increase for the start of year, it will also gain broad new authority following the brutally anti-consumer ruling issued late last year by Postal Regulatory Commission, which is scheduled to take effect in the coming months.

The commission’s determination stems from a requirement in the current law governing the Postal Service – The Postal Accountability and Enhancement Act (2006) — to analyze how the prices of first-class and standard mail products have contributed to the agency’s financial condition over last 10 years.

Regrettably, the commission, led by Chairman Robert Taub, have announced a plan to give the Postal Service augmented pricing power by permitting the agency to petition for increases that go well beyond the rate of inflation, as measured by the Consumer Price Index. Through its regular authority and other emergency mechanisms, the postal service has already been granted nine separate rate increases in the last 10 years. During this time, the price of stamps increased from 39 to 50 cents starting this month.

Despite the past generosity in acquiescing to the Postal Service’s appeals, the commission is now enabling the Postal Service to seek rates hikes by the increase in the Consumer Price Index as well as an additional 2 to 3 percent, depending on the agency’s ability to meet certain performance standards. This plan will permit an annual escalation in prices that significantly exceeds the general rate of inflation for each of the next 5 years.

The American Consumer Institute (ACI) has consistently stated that granting further price increase authority would be a mistake by Postal Regulators.

In declaring that “the system has not maintained the financial health of the Postal Service,” Chairman Taub makes the commission’s faulty rationale clear. In truth, letter mail products, to which the new pricing authority is directed, have consistently proven to be among the Postal Service’s most profitable. Based on year-end data from the last two years, monopoly regulated first-class and standard mail services earned more than $2.25 in revenue for each dollar of cost to the Postal Service to provide such services, which has resulted in billions in profits. Yet, these profits on regulated services appear to be going to support unregulated “competitive” services.

With such unmistakable fiscal success with regulated letter services, it is perplexing that the commission did not arrive at prudent conclusions about the Postal Service’s overall operation. Specifically, it would be apt for the commission to require the Postal Service to publicly divulge all costs and revenue data for all products regardless of regulated “market dominant” or unregulated “competitive” designations.

Doing so would be a critical step in identifying the root causes of the Postal Services ongoing losses – such as unprofitable package and parcel services, subsidized competitive services, international mail, and numerous other ventures that are inconsistent with the Postal Services’ mission. The consequences of languishing lines of service and inability to control costs have resulted in $65.1 billion in losses over the last 10 years.

Yet, the Chairman claims that the immense letter mail profits are not sufficient, the commission arrives at the distorted notion that the Postal Service’s monopoly products exist solely to serve one primary purpose – to facilitate the Postal Service’s forays into the competitive market. Essentially, the commission’s plan is to increase prices on the Postal Service’s already profitable regulated services in order to subsidize unprofitable and unregulated ventures that compete against the private sector.

How does this plan benefit consumers?  How does it benefit the private sector?

This month’s decision reveals that the founding tenets of the Postal Service surrounding its universal service obligation, which is to provide quality mail service to all an affordable rate, have been flattened. Instead, the Postal Service’s core mission — to deliver the mail — has taken a backseat to establishing the Postal Service as a commercially competitive entity, but that will require the Postal Service to price gouge its captive monopoly mail customers. This includes countless businesses and their customers who look to send and receive a wide universe of items like prescription drugs, magazines, marketing materials, personal messages, and so much more. They will pay more to subsidize unregulated ventures.

These broad and diverse constituencies must continue to state their case to the commission that they should not be forced to pay for risky new postal products that they do not use. Transparency of full costs and revenues for all services – both competitive and regulated services – is an absolute must. Consumers deserve nothing less.

Going forward, the U.S. Postal Service has only scratched the surface on mail price increases. In the weeks ahead, we will undoubtedly express to the commission that their determination glaringly rejects the interests of the nation’s consumers.

Steve Pociask is president of the American Consumer Institute, a nonprofit educational and research organization. For more information about the Institute, visit www.TheAmericanConsumer.Org or follow us on Twitter @ConsumerPal.

The views and opinions expressed in this commentary are those of the author and do not reflect the official position of The Daily Caller.