Rate hike will harm postal service

Let’s face it, the U.S. Postal Service is facing a large financial problem, and everyone agrees that it must be fixed. However, the exigency rate increase on the price of postage, recently approved by the Postal Regulatory Commission, amounts to little more than a short-term stopgap measure. Even worse, it will ultimately cause further damage to the long-term viability of the Postal Service.

Sure, the agency might see some short-term increases in revenue. But in an industry already fraught with competitive pressures, it makes no sense to add another negative feature that will lead to lower mail volume levels, while failing to bring about comprehensive postal reform.

{mosads}Under the law, the Postal Service is not allowed to raise prices above the rate of inflation unless there are serious exigent circumstances. These increases are meant to create better business in times of need, but unfortunately, this increase is not the silver bullet the Postal Service’s budget requires. It won’t solve the financial crisis, nor will it create a stronger product — just the opposite.

When combined with this year’s inflation-based increase, the 4.3 percent price hike will cause the overall cost of postage to rise a full 6 percent at the end of January. In the past seven years, annual increases have averaged only 2.4 percent, so the likelihood of “rate shock” and a big drop in mail volume this time is very real.

The striking difference in price will only drive away customers in the future, resulting in lower mail volume and revenue down the road. Furthermore, the unprecedented size of this increase makes it impossible to forecast just how negative customer reaction will be, as the effects of such a large rise in cost cannot be accurately predicted using data from comparatively smaller hikes in the past.

The bottom line is that we cannot continue to depend on these types of piecemeal solutions in pursuit of temporary revenue increases, when the lasting consequences of those reforms could be extremely harmful and enduring. Already operating under the weight of a $15 billion budget deficit and hemorrhaging $25 million a day, this unprecedented price hike will simply exacerbate the existing problems, adding to the Postal Service’s structural deficit.

We all want to see the agency get back on its feet and regain financial health. But a sustainably strong Postal Service must be one that is able to maintain universal services while keeping rates competitive. 

To that end, the Greeting Card Association has put together a set of commonsense solutions that will permanently strengthen the structural integrity of the agency, helping it improve efficiency and productivity and ultimately leading to increases in revenue.

 First, the Postal Service should immediately begin the installation of cluster boxes wherever feasible, while abandoning politically divisive proposals to end services like Saturday delivery. 

Second, as the only federal agency required by Congress to pre-fund its retirees’ health benefits 100 percent within 10 years, the Postal Service needs steps taken to reform this unprecedented funding requirement and unreasonable timetable. 

Third, the Postal Service should assess the cost savings achieved by the implementation of the first two steps over the balance of this year. If a determination is reached that more deficit reductions are needed, it can develop an additional plan that draws from any of the 53 remaining proposals available under the authority of its existing management without congressional action or union negotiation.

 Instead of relying on ineffective and shortsighted solutions like exigency increases, we support common-sense reforms that will allow the Postal Service to provide vital services depended on by millions of Americans.

Morrissey is vice president of postal affairs for the Greeting Card Association.