USPS Should Rethink, and Withdraw, the Proposed Exigency Increase

Today, July 6, 2010, the Postal Service is filing a request for an emergency, or “exigency” rate increase with the Postal Regulatory Commission.  Averaging some 5.6% across all “market dominant” classes, the request is for approximately 5.4% in the critical First Class.  The Service, running a deficit projected at $6.5 billion this year, and perhaps a larger one next year, had proposed an action plan to deal with its financial situation back in March.  A key component was this exigent increase.  Unfortunately, it runs more than 10x the current rate of inflation.  And, with its customers and their suppliers still reeling from the recession themselves, coupled with the availability of alternatives, especially online, this increase is ill-advised and will likely speed departures from the mail.  The result is that mailers and suppliers have unified in an unprecedented effort to block this increase through litigation.  More than 150 associations, companies and nonprofit organizations have grouped together to battle this increase.  Never before has that kind of group come together to push back against a rate increase.

It is clear to all that one key to resolving USPS’ fiscal difficulties is for Congress to act, by restructuring the $5.5 billion retiree health benefits premiums pre-funding that USPS must do, by law, each year, and the other is to transfer some $50 billion in overpayments to the CSRS Pension Fund, as found by both the Postal Service Inspector General and an independent actuary retained by the Postal Regulatory Commission.  Another key is sizing USPS’ infrastructure to the mail it is likely to have for the foreseeable future.  Built for nearly 300 billion pieces, USPS’ system is currently handling barely half that, and that number is expected to continue declining.

Absent these changes, USPS will not be able to maintain its solvency.  A federal bailout may become necessary. But one thing is certain, raising its prices is not the way out – especially when its customers are no longer captive.  The Postal Service should rethink this counterproductive rate increase proposal, and withdraw it.

Proposed "Exigent" Rates        
Proposed "Exigent" Rule Changes        

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