Postal Price Hikes Are Tame…For NowJanuary 27, 2021
It’s January so that means millions of households are bracing themselves for the annual slew of postal price hikes. Surprisingly, after a decade of increases, changes will be fairly mild for ordinary stamp buyers.
For the second year in a row, the United States Postal Service (USPS) has opted to leave the price of first-class forever stamps frozen at 55 cents. This, coupled with the agency’s decision to tack a new $100 fee onto parcels that exceed the maximum mailable size limit (combined length and girth in excess of 130 inches), will reduce the risk of ordinary stamp buyers subsidizing the very-largest e-commerce companies. USPS must continue to reject unwise and unfair price increases and deliver on cost-cutting reforms.
This year, the USPS opted to keep prices low for households buying postage. In fact, 1- ounce letters and flats will see no price change, though the price to put postage on an additional ounce for letters will rise from 15 cents to 20 cents.
In contrast, the agency is raising prices across the board for “competitive products” (read: packages) and ensuring that oversized parcels are priced out of the system. This will be a relief for struggling families and small businesses who have been footing the bill for artificially low package delivery services.
Back in 2016, financial analyst Robert Shapiro found that the USPS’s current, opaque pricing system subsidized “competitive” products by under attributing costs to parcel delivery and setting the bar for cost coverage far too low. While first-class mail more than covers its delivery costs, it is hard to say the same for packages. As a result of this flawed system, first-class mail revenues will disproportionately be used to pay for large, package-centric trucks and scanners.
Even though the USPS appears to be moving away from this broken status-quo, there’s still ample cause for concern. In November, the Postal Regulatory Commission released an order allowing the USPS to hike letter prices above the rate of inflation. Despite letter rates remaining low for now, this new policy opens the door to price gouging ordinary consumers to drive package prices ever lower.
Instead of stacking the deck against households and small businesses buying postage, the USPS should keep prices low by getting its fiscal house in order. While the agency has enough cash on hand to teeter around (for now), they will likely run out of money sometime this year unless costs are cut across the board. Absent a change to the status-quo, taxpayers and consumers will be on the line for more than $160 billion worth of debt and unfunded liabilities.
To get back on the right path, Postmaster General (PMG) Louis DeJoy should work closely with lawmakers to introduce increased flexibility and allow the agency to hire lower-cost employees and contractors.
Additionally, the agency should look into expanding the Contract Delivery Service (CDS) program, which contracts out last-mile deliveries to private parties. While the initiative has the potential to reduce labor costs, CDS contractors currently only deliver mail to about three million delivery points per year (compared to about 160 million delivery points overall across the country). Expanding the program could result in significant cost savings for the agency and alleviate current shipping backlogs.
PMG DeJoy should work closely with Congress and the Biden administration to reduce costs and get the USPS back into the black. Additionally, postal leadership should strive to keep postage prices low for the families and small businesses struggling the most during this pandemic. Further pricing games and cross-subsidization will only plunge the beleaguered agency deeper into debt.
Ross Marchand is a senior fellow for the Taxpayers Protection Alliance.