Remember that inevitable scene in Laurel and Hardy films when Ollie would turn to Stan and say: “Well, here’s another fine mess you’ve gotten me into!”? If anybody at postal headquarters really understands how customers are reacting to the latest round of rate increases, I’m sure they’re turning to the bozo who engineered this disaster and saying the same thing.
How the U.S. Postal Service intends to maintain an appeal to dot-com firms by raising Priority Mail rates 15%, bound printed matter rates 18%, and advertising mail rates 14.8% is beyond me. If implemented, the USPS is sure to drive its most sought-after customers into the arms of its competition.
How did the USPS work itself into such a sorry state? The blame lies partly in the way rates are structured and set. When it comes to ratemaking, there’s first class and there’s everything else. Each penny increase for a first class stamp equals about $1 billion. When the USPS says it wants to raise the price of a stamp by a penny, it intends to raise $1 billion in new revenue.
In this case, it’s seeking increases to produce $2.73 billion in revenue. If you up the price of a first class stamp by 2 cents, that places an additional $2 billion burden on first class mailers, while saddling all others with a more modest $730 million in new rate obligations.
It didn’t take long for postal tacticians to conclude that raising 2 cents from first class mailers wouldn’t pass muster. First class is the rate the public and the press understand, and the one that can get a postmaster general’s neck in a noose on Capitol Hill. So the USPS opted for the politically safer course by seeking only a 1-cent first class increase.
Unfortunately, that left it with no other option than to seek $1.73 billion in new revenue from all others. Doing so means all others’ prices are destined to go through the roof.
Could it have done anything to avoid this fine mess? Sure. We’ll discuss it in an upcoming column.
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