Stamp prices increase Monday

Special to the Ledger
Published: May 8, 2008

Monday’s stamp price increase, the second in two years, suggests that postal rates will rise annually, according to Dr. Charles Guy, the former director of the Postal Service’s Office of Economics and Strategic Planning.

“Raising stamp prices even on a yearly basis won’t save the Postal Service from the significant fiscal challenges it faces,” Guy said, now a senior fellow at the Lexington Institute.

Thanks to reform legislation passed in 2006, USPS must keep future rate increases within the official rate of inflation. The legislation also requires the Postal Service to provide $50 billion to fund its pension obligations over the next decade.

“With stamp prices tied to the Consumer Price Index, the Postal Service can’t just raise prices to meet its pension-funding requirements. That leaves it only two ways to cover costs: lowering the amount spent on labor or introducing new products that will increase revenue,” explained Guy.

“The postal service’s track record with new products has not been a good one,” continued Guy. “There’s no getting around it the Postal Service has to find ways to reduce its labor costs substantially.”

Monday’s rate hike represents the fifth price increase since 2001. Stamp prices have gone up nearly 24 percent during that time.
“Congress has made it clear that only ‘extraordinary or exceptional circumstances’ would allow the Postal Service to raise prices beyond the rate of inflation,” Guy said. “But Congress has also resisted USPS management’s efforts to control labor costs by consolidating facilities or outsourcing tasks.

“Monday’s stamp price increase may provide a temporary bump in revenues, but it’s not enough to solve the Postal Service’s long-term financial problems,” concluded Guy.