Business Costs
Postal Rates Headed Higher -- Again
With payrolls in jeopardy, a desperate Postal Service seeks more revenue.
By Jim Ostroff, Associate Editor, The Kiplinger Letter
May 24, 2010
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Come January, mailers will have to pony up more for postage. In the cards: A 2˘ hike in the price of first-class stamps -- to 46˘ each -- and up to a 5% boost in postage for magazines, catalogs and bulk mail.
The U.S. Postal Service (USPS) realizes that raising rates will accelerate the shift by businesses and other mailers to e-mail and nudge businesses to increase their targeted Web advertising efforts.
But the USPS is in more immediate straits as it continues to rack up operating deficits. It may not be able to meet its payroll next year in light of a deficit that’s likely to balloon beyond the $7 billion in red ink it expects to run this fiscal year, which ends in September.
Stopping Saturday mail service as planned will help stanch the red ink. But it will take at least a year after Saturday service is halted -- likely sometime next year -- before big savings are realized.
We expect the USPS to seek a special dispensation from the Postal Regulatory Commission in early July for what amounts to an emergency rate increase. The USPS does have the authority to unilaterally boost postage prices, but any increase cannot exceed the inflation rate in the previous 12 months, and in the current slow motion economic recovery, inflation is nearly zilch.
Look for the regulatory commission to OK the rate hikes by fall.
Business mailers will scream, claiming that the 2006 postal reform law intended for emergency rate increases to be approved only in the wake of an extraordinary event, such as a pandemic or a terrorist attack, that slammed postal revenues, and not in a recession-provoked downturn in mail usage.
“We’ve had 20 recessions since 1900 and the postal service has been looking at and planning for drops in mail volume for the past decade, so the decline now can’t be a surprise to it,” says Jerry Cerasale, senior vice president of government affairs for the Direct Marketing Association, a trade group representing companies that reach consumers by mailing promotional material.
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Reader Comments (35)
Posted by: allen sanford at 05/21/2010 11:43:21 AM
Any postal rate increase should be held in abeyance until the results of the census are made available. This is the first census that has been taken since computerized automation of the mail was completed. The figures that the post office is using to justify the claim that they are losing money are from 2006. In 2006 the economy was operating in an unregulated environment with money that should not have been available. The decline in mail volume because of the recession has ended. This will be revealed when the results of the census are made available. A new norm will be established based on up to the moment statistics that are not influenced by hanky panky like storing the mail. We will see now why it is that I still get mail that is addressed to my mother who died in 1994!
Posted by: false statements at 05/21/2010 12:47:39 PM
ha your article is false there is and has not been a finale word on go to five day delivery, and it has to be approved by congress , tell the truth the press is the biggest problem by not reporting the true facts, the facts are the postal service if the pre paid retirement fund was lowered or done away with the service would be 800 million in the green year to DATE., come on man report all the facts not potters lies,prc is holding hearings all over the country and so far most business mailers and alot of retail mailers are against this move and most likely prc will not support the move,
Posted by: NALC1061 at 05/21/2010 02:00:55 PM
I thin it is a bunch of crap that some people and the media automaticall thinks the USPS is definately going to 5 day delivery. People need to be better educated on the process it takes to go to 5 day delivery. Congress and ONLY congress can decide if it is viable to go to 5 day delivery and the way it looks now, mail will be delivered 6 days a week for a long time.
Posted by: cleansweep at 05/21/2010 03:09:42 PM
Give more discounts to the big mailers and raise rates for the general public, Kinda like The tax breaks GW gave the rich
Posted by: psycho at 05/21/2010 03:29:07 PM
Here is the real story, find one postal welfare recepient that is interested in anything other than keeping his position as a government parasite. The post office gets a government pay check every other friday. they get paid the same whether they come to work or stay home . If they are on sick leave or annual leave , they still earn sick leave and annual leave while they are on either or. They have spent how many billions of dollars buying worthless outdated equipment from a prior postal employee, they have changed the logo three tiimes, (time for a sea gull instead of an Eagle.) and have publicly caught in fraud. Now having said that, if the post office didnt have to prepay their retirement funds, does anybody with an IQ of over 50 think there would be any money left when the payment came due, The cant pay bills now, can you imagine what they would do with a check for 75 billion, that filth reaks almost as prevelant as it does in congress. Where are the tax dollars that the hard earned taxpayers paid, gone, spent, wasted, . Now just think what the post office would do with that billions and billions. they have been in financial ruin since its existance. Since when did a leopard change its spots. Wake up and smell the coffee, Why hasn't one postal worker whined about bringing back the typewriter or the pinto and corvairs. The sooner this spiraling demise is imploded the sooner a more efficent and balanced society will become. Why should any human on earth make $57,000 a year to deliver grocery store ads that are free at the grocery store, and then make $39.00 /hr overtime to deliver net flix movies that are eventually gonna be offered by streamlining on cable. This makes Obooooma care look like a handout. And why is every face on the postage stamp that of a dead drug addict?
Posted by: sanford and son at 05/21/2010 04:08:24 PM
Allen Sanfords mom died in l994 and she still gets mail.??? No Allen, the inefficient post office does not print up mail for your mom and then have one of their people deliver it to you. SHE'S ON MAILING LISTS, HER NAME IS IN COMPUTERS, THE PEOPLE WHO TRY TO SELL HER STUFF DON'T KNOW SHE'S GONE. Your poor mailman who walks 9 miles or drives 30 miles while delivering a couple thousand letters per day, day in and day out can't possibly look to see if your deceased mom's mail is in there, and HE PROBABLY DOESN'T EVEN KNOW SHES DECEASED, god rest her soul.
Posted by: Jim Ostroff at 05/21/2010 04:54:15 PM
Thanks, everyone, for your comments. It's really important to know that Kiplinger doesn't report news and never takes sides. I and other reporters talk with people who are making decisions, or influencing them. Most times, we chat with these people off the record, because they're most likely to be open and honest; not just spin out PR. The odds are that Congress and the PRC will OK 5-day delivery. The erosion of mail volume is bound to continue, as e-mail, e-cards and e-billing, payment and advertising gain even more traction. One can point many fingers, rightly or wrongly, but USPS is facing a sea of red ink and soon may not be able to borrow more money. Mandated, pre-paid retiree health care funding is a significant issue, as the USPS must pay around $5 billion every year. The funds go to Treasury and are considered income, reducing the federal deficit.
Posted by: joe at 05/21/2010 05:16:22 PM
allen..you get a letter adreesed to your mom because a mailer/company sends it and doesn't update it's records..we can't control that..if a carrier isn't sure or unfamilar about the name they are supposed to delver it..you can mark it unknown and it goes back to sender who it's up to decide to update their lists..our job is to deliver what the sender paid for..the letter addressed to ur mom for ex
Posted by: Mark at 05/21/2010 05:24:26 PM
I'm sick of hearing how the post office is such a cash sucking pig. How spending 44 cents to mail a letter across the country is highway robbery. Wel folks.............................just wait a little while longer and you will see how reasonable and efficient the Post office is. Wait until these large companies (any business for that matter) start charging you a fee to pay your bills online. Some already have. I hate to think of what is ahead in our near future if the Post Office ends up extinct. Really people.......................just think about it. The internet is only 15 years old. The money-making opportunities for businesses is unlimited. Just think of the credit card companies. If they have (say 3,000,000) customers. They could charge $1 per month at the very least and make $3,000,000/month or $36,000,000/year. Now we all know about the consumers bill of rights which hurt the big banks. Just wait and see what happens folks. It's coming. Don't let the United States Postal Service dissolve. You will regret it!!!!!!
Posted by: Roy Schauffele at 05/21/2010 05:31:59 PM
Another successful government enterprise, makes Fannie Mae/Freedie Mac look well run, sure can't wait for Government Health Care.
Posted by: 2 cents in at 05/21/2010 06:15:58 PM
E-mail should be taxed at 2 cents for each one sent to support six day delivery. The USPS could then lower rates. E-mail, on line bill payments, faxes have taken our volume to the point we can no longer afford six day delivery.
Posted by: kirby engel at 05/21/2010 10:04:49 PM
i wish gas had went up only 2 cents a gallon in 2 years. how much has your cup of coffee at the expresso stand gone up? get a life.!!!
Posted by: kevin C at 05/21/2010 10:37:23 PM
Anyone who thinks it is rediculous to pay 46 cents to mail a first class letter in 4 days or less is too expensive deserves to use fedex and UPS. People are wierd in that, they don't realize that once the Postal Service is gone, its gone! Hope you don't have friends or relatives in Mono, TN, or Juno, Alaska, or any other rural area. It has just gotten to the point that people want to spend their money on delivey to make them selves feel good I guess. $19 dollars to Fedex is good, $16 tp USPS is bad...? use your Postal Service and support it before its gone.
Posted by: monkeyfurball at 05/21/2010 11:10:12 PM
Post office is another leeching federal deficit increasing organization that needs to live within a budget. WAKE UP POSTAL SERVICE!!!!!!!!!!!!!!! Your days of overgenerous salaries, pensions and perks are over. Fire and reduce wages now.
Posted by: cncrystals.com at 05/22/2010 01:43:12 AM
that's a nightmare for onlineshop if the postage cost goes more higher,especially to those international sellers.
Posted by: MekhongKurt at 05/22/2010 02:32:46 AM
If trash mail were eliminated (or at least severely restricted), that alone would be a huge step towards lowering costs for the USPS. I looked into a piggyback direct-mail ad campaign a few years ago, and was startled to hear the salesman enthuse that as many as "1/2 of 1% of the receivers might" -- might! -- "actually LOOK at it!" Which means 99.5% would go right straight to the trash. Why do trash mailers love trash mail? -- because we effectively SUBSIDIZE their marketing campaigns. If we don't want to eliminate trash mail -- fine. Quintuple the rates, effective immediately.
Posted by: Tom Landis at 05/22/2010 05:30:00 AM
Not so fast with the USPS negativity. This one sided view represents the interests of mailers who are scamming the citizenry. the biggest problem with USPS revenue shortfalls is the discounts this trade group has weaned from postal coffers. It is the public which is subsidizing the mailing industry. The other part of the equation is the limits placed on the ability of the USPS to compete for revenues.
Posted by: richard nigro at 05/22/2010 09:39:57 AM
A $7 billion loss next year,can't make payroll?That's the govrnment.The same thing applies to Amtrac and now the medical reform bill.The government could't run a latrine business at a profit or efficiently
Posted by: Bill West at 05/22/2010 10:34:57 PM
Get the facts Kipplinger! You are reporting only one side. The Postmaster General was awarded almost $900,000 in bonuses. He stands to be given more for his latest proposals. THAT is his motivation in getting you to spin this story. He gave testimony in March 2010, that if the $75 BILLION the USPS has OVERPAID to pre-fund retiree benefits were released, there would be no need for rate hikes, nor elimination of Saturday service. Please report the facts.
Posted by: Pauly at 05/22/2010 11:17:57 PM
If they eliminate Saturday delivery the unions should accept AT LEAST a 15% cut in compensation across the board. They are the ones responsible for all the problems.
Posted by: bamz at 05/23/2010 01:34:32 AM
I believe that the Postal service should do 7 days delivery given the current and future strength of online business, so it may capture more of the package delivery business. Also cut down on the post office presence, but have small ones, or Kiosks every where to saturate their presence. people will flock back to them, as they truly do have lower prices, deliver to every address in the nation, are one of the most trusted organization etc.
Posted by: Cliff at 05/24/2010 12:44:28 AM
News to me " and I work there" !
Posted by: a. vanegas at 05/24/2010 02:58:39 AM
Again, Where do you get your information on 5-day delivery "likel"y taking effect next year? As stated by other posters, Congress has to bring it to the table. The Postmaster General is not running a private business where he calls the shots (with his $850,000 salary). I understand that it makes for good stories, but know the facts before you report them. Also, the USPS has OVERfunded retiree health benefits by approximately 75 billion. If Congress would adjust the pay schedule, the USPS would be fine financially. But I guess that makes for a boring story.
Posted by: Jerry at 05/24/2010 01:41:09 PM
If there would service OK. Live in a small town with 4 windows at PO and never more than 2 filled and lately 1. Sign says box mail up by 10 and lately it has been way after 11 and the clerk says they are shorthanded and cannot do overtime. The Postmaster is now gone to disability and service just worse. Not clerks fault. Drop Sat and give service!!!
Posted by: Aretha and Gerrye at 05/24/2010 02:02:59 PM
The post office in Lakewood, Ohio (Warren Rd) had ONE CLERK on April 15th, tax day. That clerk was slower than molasses in Jan. Why should she hurry? She gets paid no matter how slow ... and unproductive she is. Is it any wonder why the postal service is having so many problems? I am glad folks are switching to online banking, UPS and FedEx in order to avoid using them anymore than they have to.
Posted by: david berger at 05/24/2010 02:54:05 PM
If the U S Post office went to even amounts for postage the us could get rid of the penny. Someone is paying the U S Postmaster a lot of money to keep the numbers odd thus protecting the Copper industry. And if the Gov would let me run the post office i GUARANTEE i would have that dept making money. and soon.
Posted by: MyAddl2Cents at 05/24/2010 08:18:51 PM
You really do need to get your facts before writing and publishing a story. Going to 5 day delivery is FAR from a done deal as you so seem to report. The chair of the PRC is not even leaning towards agreeing to that. There are a number of Senators & Congressmen that are now also leaning towards not agreeing to it. They are seeing through the Postmaster General poor ideas. Now is NOT the time to cut your service; degrade your service; when you are in decline. Now is the time to improve your service and make your service superior. There are also 4 major unions and 2 management organizations that have to all be dealt with--the 4 unions with contacts due this year. This could bring the mail service to a COMPLETE halt across the US that has only been seen one time before in the history of the United States. The PMG has a lot on his plate, and it is not prime rib. He is looking to privatize the USPS, so then those of you that a hollering about paying an extra 2 cents can hollar about paying $16. per letter....and possibly not even getting delivery to your home...because private couriers will only cherry pick where they want to go...and it will only be where they make money...it will NOT be to every single house in the United States like the good ole United States Postal Service.
Posted by: Fhefferren at 05/24/2010 10:26:21 PM
What a surprise, Dems want to raise rates/taxes again and again and again and again. The USPO is a typical money burning bloated waste from our U.S. federal Gov't. The system is completely broken and corrupt, we need to go back to the ideals of our founding fathers and the constitution if this country is to survive.
Posted by: gearguy at 05/24/2010 10:42:28 PM
I think the USPS is in the same family as Fannie and Freddie. Self-serving entities that have gotten completely over-weight and unable to launch. Must be nice having a rich uncle.
Posted by: dave at 05/24/2010 10:59:02 PM
i got idea, why not deliver mail every other day, and cut ya budget
Posted by: FloridaDude at 05/25/2010 12:44:33 AM
I do agree with some of the comments here that the PO should be saved.... BUT .. the employees are WAY overpaid for what they actually do ! Only if the unions ( ie. employees ) agree to lower their hourly pay , pay more in health benefits and maybe less vacation time , can the PO even think of surviving. If nothing is done, there will not be a PO in 3 yrs.
Posted by: Stefan Lasiewski at 05/25/2010 02:04:26 PM
It's still pretty amazing that I can send a letter from San Francisco to New York for less then $0.50 . The USPS should be given more independence. It's ridiculous that many USPS operations still need to get congressional approval.
Posted by: Larry at 05/25/2010 07:57:12 PM
A postage rate increase again!! They don't need a rate hike untill they can deliver the mail to the correct addresses. I have to keep returning mail to the post office that was delivered to my address since they will not pick up those wrongly delivered items. I am okay with the elimination of Saturday delivery if the credit card companies and others that I pay monthly also understand that the mail only moves five days a week and not six. The credit card companies will not cut you any slack over the holidays when the mail volume is up so we can expect others to start throwing on late payment fees. Do every thing by the internet and the heck with USPS.
Posted by: Frank at 05/27/2010 08:34:17 AM
The USPS and overall U.S. Gov't bloats their own wages/pension every year while the private sector has seen a decline of (inflation adjusted) income over the past decade. We've already seen 4 consecutive annual stamp increases and now another is coming. While the private sector is on it's knees with 10% unemployment, paycuts, & pay freezes, the solution from our Gov't in recent years is to get bigger, increase fees/taxes, and waste more money. Instead of serving the public, it has evolved into a huge parasitic burden to our economy. I can only hope that the November elections is the starting point for a much needed massive overhaul back to the intent and ideals of our founding fathers.
Posted by: Judy at 06/09/2010 09:42:13 PM
How about eliminating supervisors' bonuses at the end of the year. This would not solve All the financial problems of the postal service but it certainly would be a good start.