The Washington Post reported yesterday that the U.S. Court of Appeals for the DC Circuit has sent back a case filed by the U.S. Postal Service (USPS) against the Postal Regulatory Commission (PRC). At issue is USPS’s justification for proposed rate hikes. The Postal Service had argued to the PRC that it should be allowed to increase the prices of several mail services, including the price of a first class stamp, at higher than the rate of inflation because the recession had so severely impacted USPS revenues. The PRC responded by saying that even though the recession qualified as an “extraordinary” event, the requested rate increase was predicated upon the USPS’s more on the “long-term structural problems,” rather than the economic downturn.
We agree with the Postal Regulatory Commission.
Just like raising taxes won’t close the federal budget deficit, postal price increases cannot be relied on to cover the $238 billion deficit USPS is expected to amass over the next 10 years. Raising prices (and taxes) changes behavior. That’s why, for private businesses, raising prices is often one of the last options exercised to raise revenues. In a competitive marketplace raising prices makes it less likely consumers will choose their product. In fact, the USPS has seen mail volume drop dramatically over the last several years and estimates are that by 2020, it will drop another 15 percent.
When the bottom line sours in the private sector, all those pesky extra luxuries, the fancy cars, drinks, and lap dances, are usually the first to go; it’s unclear whether that’s so at USPS.). Scandalous stories like that don’t help, obviously. USPS leadership should continue to look at serious options for reform, like eliminating Saturday delivery, or reforming union bargaining and Congress should stay out if its way. But even those changes will only work for so long. The GAO has said the USPS has a broken business model. The long-term solution is privatization of the postal service.
Because of its political entanglements, some of these choices are obviously going to be politically difficult to make, but they must be explored and enacted before the taxpayers are on the hook for yet another bailout.