A Possible USPS 'Exigent' Rate Increase - Playing Politics on the Backs of Ratepayers?
There are rumors that the USPS may request another exigent rate increase. Why are we going through this again?
Advertisers, marketers and the business community love certainty—and have a strong distaste for uncertainty. When one considers the financial situation of the U.S. Postal Service during the past couple of years—from uncertain prospects of postal reform legislative efforts, to what any emerging postal reform effort might contain or not contain in cost savings, to short-term financial viability and this past year's default—it's enough to keep mailers at bay in planning their ad budgets, and keep them from devoting much to direct mail in the overall media mix.
Tying postage increases to the consumer price index and giving USPS the latitude to implement such increases annually (as is now the law) has helped give the business community certainty about postage costs, so they can plan and budget accordingly.
Allowing an "exigent" or additional postage increase to happen when there are extraordinary circumstances (as is also now the law) was intended as a "last resort" to make Postal Service finances whole. Let's be honest: An extraordinary circumstance happens when there is an absence of postal reform efforts moving forward, and, possibly, when there is an absence of U.S. economic growth and an exhaustion of wise cost containment initiatives inside the Postal Service. All three of these latter scenarios don't exist—so why even consider an exigent increase?
It's a bad idea. First, USPS customers would detest such a rate hike, as they do. It's an uncertainty.
Recently the Direct Marketing Association (DMA) in its Direct from Washington newsletter reported:
With reason to believe that the United States Postal Service (USPS) Board of Governors may vote on a potential exigency rate increase in early September, the Affordable Mail Alliance (AMA), including the DMA, sent a letter to the Governors voicing their opposition of such an increase. The letter expressed concern about the negative effects that would come with such an increase, especially for the mailing industry and its suppliers. The letter recognized the continued financial struggles that confront USPS, but also stated that an exigent rate increase is not the solution to those struggles. With recent progress toward comprehensive postal reform in Congress, along with steady improvement in the USPS balance sheet, the letter stated that an exigency filing 'at this point would be premature.' The letter additionally requested a meeting with the Board to discuss the issues at hand and to ensure that USPS is fully informed before making a decision of such great magnitude.
Second, if the architects of an exigent rate hike think that such a case is what is needed to convince lawmakers that postal finances are indeed a mess, and that a reform law—now in discussion—is desperately needed to fix them, then how dare play politics on the backs of ratepayers? An exigent rate hike is unlikely to move best-case legislation forward (and may even help move a bad bill, from customers' perspective) and will saddle mailers with even higher costs than budgeted. Thus, there would be more uncertainty and more mail dollars flowing elsewhere in advertising.