Stamp Prices Ready to Jump -- Again

Companies and their customers could benefit from a switch to an e-postal service.

By Jim Ostroff, Associate Editor, The Kiplinger Letter

July 24, 2009

Are we headed to a high-tech e-postal service? It’s at least a fair bet, with the U.S. Postal Service (USPS) facing a $7-billion loss for this fiscal year and little or no prospect of pulling itself out of the sea of red ink anytime soon. USPS may be forced to scan and send mail electronically within a few years.

That’s what the Swiss do now, and most mail recipients and senders seem to like it. With mailers’ approval, the Swiss Post scans in letters and bills and then delivers them via secure electronic mailboxes. Delivery of hard copies can be requested.

At a cost of just a fraction of a cent per scanned piece, the model has a lot of appeal, especially for businesses that rely on snail mail because either their volumes don’t justify taking on e-billing themselves or their customers don’t seem to be interested in a switch.

An e-postal service could be helpful to firms in the selling of products or services. Electronic delivery of advertising and promotional incentives would enable instant analysis, permitting companies to determine the effectiveness of their pitches. They could see who’s buying and who’s not and implement a quick revamp of campaigns if need be.

Postal unions would squirm, fearful of losing thousands of jobs. But they also know that year after year of deficits would doom the unions to a slow death.

In the meantime, another big hike in the cost of a first-class stamp looms -- to 50¢ from the current 44¢. That follows a 2¢ hike earlier this year. Odds are better than even that regulators will approve an emergency jump next year, as USPS mail volume continues to slump and revenues continue to shrink.

The 2006 postal reform law says that USPS can boost postage each year in line with hikes in the Consumer Price Index in the preceding 12 months, but it provides an escalation clause if the Postal Service is drowning in red ink.

The jump in stamp prices could be averted with help from Congress and the Obama administration, but they remain intransigent. Lawmakers and the White House insist that USPS should continue overpaying around $3 billion a year toward its retirees’ benefits. The money is held by the Treasury, helping to offset the federal budget deficit. It’s part of a larger budget shell game that’s been used for decades, counting Social Security and nuclear waste cleanup trust funds as revenue, for instance.

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