Opinion

Guest column: Rate boost to put Postal Service afoul of break-even law

The Postal Service's captive consumers will soon pay more to mail a letter. The USPS has officially approved a 5.4 percent rate increase, which will take effect on Jan. 8. That will push the cost of a stamp to 39 cents. Unfortunately, this increase ignores Aunt Minnie, the ordinary consumer. The Postal Service must appeal to a regulatory body, the Postal Rate Commission, whenever it wants to increase prices. The commission initiates a "rate case," in which it hears opinions from affected groups, including big business mailers, nonprofit customers and postal labor unions. Forty-six parties participated in this rate case. But only the Office of the Consumer Advocate represented ordinary consumers. And far from supporting the rate increase, the OCA voiced sharp criticism. As the OCA points out, USPS estimates it will have $2.58 billion in cumulative net income at the end of 2005. This is a historical first: USPS had been loss-making since it was set up in 1971 until 2003. While the Postal Service has rightly celebrated its new success, it didn't factor in the surplus when calculating its rate request. USPS says it needed the rate hike to cover a $3.1 billion payment to an escrow fund mandated by Congress. By the OCA's calculation, though, the service needed at most a 0.8 percent rate hike to cover the payment. In fact, by approving the 5.4 percent increase, the Postal Rate Commission seems to have set aside federal law. "Section 3621 … unambiguously requires that the commission recommend rates that produce a break-even position," the OCA notes. The break-even law was instituted because, as a government bureaucracy created to serve citizens, USPS shouldn't be earning profit. Yet that's exactly what the 5.4 percent increase allows it to do. "It would leave the Postal Service with a net income of nearly $1.64 billion," the OCA noted. The OCA also identified flaws in USPS data: One study the Postal Service presented "suffers from a wholly inadequate database that must culminate in rejection of all of the study's results." The OCA wasn't the only one with qualms about USPS' requested hike. Ken McEldowney, executive director of Consumer Action, observed that "the rate increase will impact low- and moderate-income consumers the hardest, and they are the ones who really don't have an alternative to the post office." The division of cost burdens is already unfair: USPS charges the most money to individual letter-mailers, who provide its biggest revenue stream, while giving big discounts to corporations sending out junk mail. But the Postal Service has indicated that it will soon request further hikes. Gene Del Polito, president of the Association for Postal Commerce, says to expect "the mother of all rate cases" in 2006. We can't prevent the 39-cent stamp. We can ask lawmakers and the Postal Service to please, next time, consider the consumer.