March 24, 2017 – Linn’s Stamp News
If you think that Postmaster General Megan Brennan has a difficult job trying to convince Congress to help the financially struggling United States Postal Service, you’re right.
But that’s only one of the fights that the nation’s 74th postal chief is facing. Brennan’s other, less-known struggle could be just as difficult.
She is trying to convince the four-member Postal Regulatory Commission to remove a 10-year-old price cap that limits the size of stamp price increases to no more than the rate of inflation.
That’s proven not to be enough to keep the nation’s mail system from running huge deficits, the Postal Service argued in a March 20 filing with the commission.
“The price cap has failed to achieve most or all of the statutory objectives,” concluded the 224-page filing.
“Moreover, it is unnecessary in light of the adequacy of market pressures to incentivize efficiency, service quality, and pricing restraint,” the USPS argued.
Not surprisingly, major mailers are buying none of Brennan’s arguments.
In a joint filling, three major mail groups have told the PRC that allowing rate increases larger than inflation “would be a devastating mistake.”
Far from being in financial trouble, the Association for Postal Commerce, Alliance of Nonprofit Mailers, and the Association of Magazine Media say “reports of the Postal Service’s impending demise are greatly exaggerated.”
Revenues and earnings of the USPS “are improving, not declining,” they say. Mail volume has stabilized, they add.
True, the Postal Service has chalked up years of “net losses,” the mailers acknowledge.
That, they say, “is an artifact of the arbitrary payment schedule” Congress enacted in 2006 to force the USPS “to prefund quickly the Postal Service’s future liabilities for pension and health benefits for its retirees.”
Once those missed payments are pushed aside, the mailers argue that the USPS is in “good shape and has made an operating profit for each of its last three fiscal years.”
Allowing high rate increases, they say, will only allow the Postal Service to raise funds that will be “squandered” on overly generous contracts with postal unions and “laxer control of costs.”
The postmaster general has hedged her support for new legislation that would ease currently required Treasury payments on securing greater pricing authority from the PRC.
The filing with the commission argues that the Postal Service is “in a highly precarious financial position, with no realistic prospect of achieving financial stability so long as the current system remains in place.”
It says under the current price cap “the Postal Service would continue to have net losses each year.”
The USPS says the PRC should replace the price cap “with a new system that will achieve the statutory objectives, based on regulatory monitoring and forward guidance.”
In short, Brennan’s plea is USPS headquarters’ familiar refrain: trust us to manage the USPS and set fair prices.
The mailers’ rejoinder is a reminder of what the mailing industry has argued from the Postal Service’s inception: Control over mail must be closely watched.
They say the price cap “is the only real protection that mailers have from abuse of the Postal Service’s monopoly power.”
So, when the four current members of the commission rule on the current regulatory system, probably this fall, the ruling could have profound consequences for everyone who uses the mail.