Thursday, January 5, 2006

Another Postage Increase? Damn USPS!!

Many curse the post office for every rate increase (the latest in 2002), some arguing it should be much cheaper and government subsidized and others arguing it should be privatized (along with schools, prisons, and social security). In this case the Post Office is NOT raising rates because of a huge deficit (take note Federal Government). It actually paid off its outstanding debt (down from $11.3 billion in 2002) and grossed $1.4 billion net. Rather Congress (in 2003) requires the post office to contribute $3.1 billion to an escrow account annually. So in order to make this escrow contribution you and I have to pay an extra 2 cents starting January 8th, with increases across the board. The history and politics of this decision are well covered in DIRECT, a direct mail publication.

The backstory to this rate proposal quandary dates to 2002, when the Office of Personnel Management found that the USPS was about to make an overpayment of more than $70 billion into a fund for the costs of retirement benefits relating to military service. Many retired postal workers are eligible for such military pensions. The [Direct-Mail] industry and other parties lobbied successfully to get the U.S. Treasury to take over those costs. But instead of putting the $70 billion back in USPS’ coffers, and largely because of what Del Polito terms “a lack of trust” between some members of Congress and the USPS, legislators passed a bill that put that overpayment into an escrow account.

That law, P.L. 108-18, expired at the end of 2004, and CongressÂ’ questions about the USPSÂ’ ability to handle its money have long been answered, Del Polito says. But because the escrow provision was written into law, the USPS needs another law to get out from under the required payments. That new law has proven difficult to get through Congressional committees, and even more difficult to get signed by President Bush, because it has become tangled up with budget-deficit considerations.
And if the USPS is still under requirement to pay into the escrow account when that next rate case is filed in 2006, it could propose a rate increase of as much as 8% to 10%. ThatÂ’s on top of the 5.4% rate hike the USPS wants in 2006. In other words, direct mailers could face a 13% to 15% rate increase in the course of the next two years.

But Del Polito points to one over-riding interest that may prevent either of these bills from becoming law: the Bush administration. President Bush was able to stall two similar bills last year with a veto threat. And while he hasn’t vetoed any bills yet this year, his administration has signaled “concerns” that will need to be addressed if the two bills get to a conference and then find their way to the President’s desk.

The chief White House concern is that any bill be revenue-neutral. The postal escrow payments have already been projected as income into the multi-year federal budget; eliminating them will put that budget even further into deficit than currently projected. So the White House wants to see those erstwhile escrow payments applied instead to the USPSÂ’ unfunded health liability for its retirees.

So remember on January 8th when you buy those 2 cent stamps you are really helping to pay off a federal deficit (and not one of those good deficits that comes from bloated social programs); your small contribution is subsidizing capital gains tax cuts and wars in other countries. Although if you're a student you've already made a much bigger contribution by shouldering one of the largest cuts in aid for higher education in this nation's history.

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