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Postal Service’s budgeting may backfire

John Dimsdale Jul 6, 2010

Postal Service’s budgeting may backfire

John Dimsdale Jul 6, 2010


Bill Radke: If you bought one of those big, fat rolls of Forever Stamps, you’re feeling savvy. Today, the post office asked for another rate increase — bringing a first-class stamp from 44 to 46 cents. The last two-cent increase was only a little over a year ago. Not only are mailing costs rising faster than inflation, the post office wants to eliminate Saturday service. These are all attempts to get control of losses that could reach $240 billion in the next decade.

But Marketplace’s John Dimsdale reports these budget-balancing efforts may just dig the hole deeper.

John Dimsdale: In addition to the first class rate hike, USPS is asking for an 8 percent increase for magazine deliveries and a 5 percent boost for catalogs.

That’s bad news for the mail-order menswear company Paul Frederick in Fleetwood, Penn. Chief Operating Officer Allen Abbott says the company mails nine million catalogs a year, and the post office is chasing away his business.

Allen Abbott: It will do exactly the opposite of what the Postal Service is hoping it will do. It will reduce the amount of mail we send. It will cause them to lose more money than they’re currently losing.

The Magazine Publishers of America will challenge the rate request. They rely on the post office for 90 percent of their deliveries. The MPA’s Jim Cregan says a postage increase will drive more magazines onto iPads and other mobile devices.

Jim Cregan: It’s not the case as it was 15 years ago, where the Postal Service could raise rates and people would have no place else to go and they would just have to shrug and swallow it.

Despite rate increases of more than 50 percent over the past decade, the post office continues to lose money — nearly $4 billion last year. You can blame that on the Internet.

Canadian researcher Robert Campbell says post offices in other countries have done better because of fewer regulatory restrictions on the services they can offer.

Robert Campbell: Everything from selling cell phones and phone plans to travel insurance, doing currency exchanges, selling mortgages.

Today’s USPS rate hike request will be reviewed by the independent Postal Rate Commission. Any approved increases would go into effect next January.

In Washington, I’m John Dimsdale for Marketplace.

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