Editor’s Notes : USPS Goes Postal?

While most consumers will barely blink an eye at another two cents being tacked onto the price of a First-Class stamp, businesses are bug-eyed at the U.S. Postal Service's current proposal for an exigent price increase.

Overall, the USPS is requesting a price hike of between 4 percent and 5 percent. But some mail classes are destined for whopping changes. Standard Mail parcels, for example, would get hit with a 23.3 percent increase. Catalogs and Standard Mail, the direct marketing industry's bread and butter, will see increases of about 5 percent, enough to drive even more catalogers out of the mail channel—or even out of business.

At a time when the USPS had been trying to encourage marketers to mail more, via a second annual summer rate reduction program, and support the agency in its goal of cutting Saturday service, this move pretty much cancels out any relief companies expected from that "we're in this together" plan.

If enacted—the doomsday date would be Jan. 2, 2011—the Postal Service estimates the proposed rates will generate roughly $2.3 billion for fiscal year 2011, and $3 billion for fiscal year 2012. Well, unless marketers reject direct mail for their own exigent needs. Sen. Susan Collins (R-ME), who has played a large role in postal reform over the years, released the following sound byte in response to the USPS' announcement: "The Postal Service's plans to hike rates so substantially, as well as to cut services, may well produce a death spiral of fewer customers and ever-declining volume, exactly the wrong direction."

With the USPS facing a projected deficit of nearly $7 billion for its next fiscal year—even with congressional help last year that allowed the agency to pay its retiree health benefits directly from the benefit fund instead of its operating budget—Postal Service management claims there is no other way to offset its expected shortfall, than to raise rates.

Au contraire, says the Affordable Mail Alliance, a new group of industry associations and marketers that has taken up arms to protect postal system users' interests. Many of the group's arguments against an exigent rate case that hikes prices 10 times above law-sanctioned rates come down to the need for better management of the USPS. For example, the group points out that while mail volume decreased 13 percent last year, the Postal Service's labor costs were shaved by only 1 percent. And the consolidation of post offices, it contends, is moving slowly—with the USPS trying to blame Congress for impeding its progress.

So the real question isn't how to get a healthy, economically viable postal system, but who should be in charge of righting the ship. Looking for pots of gold in the Civil Service Retirement System fund is not a long-term solution.

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