Death, Taxes, and Postal Rate Hikes | Citizens Against Government Waste

Death, Taxes, and Postal Rate Hikes

The WasteWatcher

It seems that, in addition to death and taxes, one more thing is certain:  the price rise of postage stamps.  My earliest recollection of the price of a stamp?  It was in 1972:  an 8-cent stamp, providing my first appreciation for Dwight D. Eisenhower, whose visage was pasted to the upper right-hand corner of any mail I received or sent.

According to a September 25, 2013 article by USA Today, the USPS has proposed to increase the cost of a first-class stamp from the current 46 cents to 49 cents (or 6.5%) starting on January 26, 2014, generating an additional $2 billion in annual revenue to the USPS.  Ironically, this rate of increase is more than four times the current rate of inflation, which is hovering at around 1.5%.  Postal rates, by law, are not allowed to exceed the inflation rate.  Under the plan, first-class mail postage for postcards and packages would also increase 3 cents.

This action signals lingering financial challenges for the USPS, which posted a $15.9 billion net loss in 2012 and expects annual losses to burgeon to $18.2 billion by 2015, accumulating $92 billion in debt by 2016.  The proposed price hike comes at a time when the USPS governing board claims the increase is needed due to the agency’s precarious financial condition, which includes a congressional mandate to pre-fund billions of dollars in future retirement benefits for employees.  While the postal service argues that this requirement is unfair, the reality of the overwhelming unfunded pension liability in the federal government gives us pause:  in the most recent report available, the unfunded liability for federal pensions hit $761.5 billion, a virtual time-bomb for taxpayers.  In this instance, it is refreshing to see that Congress is insistent on protecting its constituents from being on the hook for these foreseeable costs.

Citizens Against Government Waste (CAGW) has long opposed consumer price increases, preferring for Congress to let the USPS operate more like a private-sector business in order to control its operations, cut costs, and reduce the risk of a taxpayer bailout.  In a recent WasteWatcher report, CAGW highlighted the USPS’ efforts to strengthen the agency by leveraging opportunities to implement better business practices. Unfortunately, all efforts at structural reform made by the USPS have been blocked by Congress, thus increasing the risk of failure and a taxpayer bailout.  Although a world leader in “work-sharing,” the USPS does virtually nothing (including logistics, transportation, and mail services) that could not be done, and done more efficiently, by private-sector companies.

When postal management has attempted to move forward with overdue modernization initiatives, such as five-day delivery, it is saddled with an intransigent labor force that resists modernization.  At the same time, Congress is fixated on short-term, “feel-good” measures that pose as postal reforms, instead of focusing on the long-term financial health of the USPS.

“USPS teeters on the brink of financial ruin. As with the rest of the nation’s fiscal problems, Congress is ignoring the big picture,” said CAGW President Tom Schatz. “Accordingly, Congress should resist parochial pressures and allow the USPS to react as any business would to the problem of falling demand for its services: by cutting costs, not increasing prices.”

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