Thursday, July 21, 2011

Could the Deficit-Reduction Deal Limit Postal Pay Raises and Rate Increases?

An apparently unintended consequence of the proposed bipartisan "Gang of Six" deficit-reduction deal is that it could reduce future inflation-based increases in U.S. Postal Service wages and rates.

One section of the plan calls for a "shift to the chained-CPI (a more accurate measure of inflation) government-wide starting in 2012" to calculate changes in inflation. The document adds that, "According to CBO [the Congressional Budget Office], the shift to chained-CPI would result in the annual adjustment growing, on average, about 0.25 percentage points per year slower than the current CPI."

CPI, which comes in such variants as CPI-U and CPI-W, is the Consumer Price Index, which is used to determine cost-of-living adjustments (COLAs) for most USPS employees and to cap rate increases on the vast majority of mail, such as First Class, Standard (direct mail and catalogs), and Periodicals. A difference of 0.25% would probably translate to an impact of more than $100 million annually on both postal wages and postage rates.

Chained-CPI is a method for calculating inflation that takes into account people's tendency to substitute a less expensive item.

"One of the problems of inflation is it doesn't account for the fact that when the price of apples goes up, you buy oranges or bananas," Marc Goldwein, a chained-CPI advocate, told NPR. The Gang of Six would use chained-CPI to lessen cost-of-living increases for programs like Social Security.

The proposal does not specify whether chained-CPI would just be an alternative method of measuring inflation -- which would not affect union contracts or the rate-cap law that specify CPI-W or CPI-U -- or whether it would become the new method of calculating CPI-W and CPI-U. The "government-wide" reference suggests that, even if CPI-U is left as is, there could be a push to change the rate-cap law so that it refers to chained-CPI rather than CPI-U.

11 comments:

Anonymous said...

Another bullshit way of trying to say there is no inflation, yet my food, energy and clothing bills go up every month. What do you do when the cost of everything goes up?

Anonymous said...

food, water, energy, housing and clothing are the staples of life and should comprise the cpi. you cant eat a big screen tv, you could live in the box in the new america i suppose.

Unforgiven said...

This is truly one more way to limit spending at the expense of those most hurt by inflation.

Anonymous said...

This writer does not have his facts straight. ALL Postal contracts use the CPI-W not the CPI-U as he states. I believe that SS COLA as well as Federal annuities also use this gauge. How much of the rest of this is garbage?

Anonymous said...

It says LIMIT Postal Pay raises. Well, if they combine that, with No CP increase, and I have the same dependents needing the same food, and use the same amount of gas for the vehicles, and don't have any other extra expenses, BUT, the paycheck goes down, then I guess I will be in the lower class. And paychecks going down will not help the economy for everyone else, no matter the consumer index. Companies and retailers need to LOWER their price, and then we all might benefit.

Anonymous said...

I certainly hope that they close the Postal Service down for good.
It's about time that EVERYONE has to pay the REAL FREIGHT for "mailing" things.
UPS and FedEx have a VERY DIFFERENT RATE STRUCTURE than USPS.
Wait until America experiences REAL STICKER SHOCK when it comes to PAYING FOR LETTER AND PARCEL TRANSPORT.
It's what they want...THEN GIVE IT TO THEM...

D. Eadward Tree said...

To Anonymous (12:54 p.m. July 21): You're right; I goofed and forgot about CPI-W. I have revised the article to reference both CPI-W and CPI-U.

Anonymous said...

Every one knows that when a person retires, they may draw 60 to 70 % of their wages. Then cost of living comes into play. Say the cola is 2% for a year, well 2% of $20,000.00 is a lot less than 2% of $60,000. or $100,000. I say change the cola to where everyone gets the same amount of dollars, no matter what their retirement amount is. So if a $20,000. retirement gets a cola of $400.00, then the person drawing $100,000. in retirement only gets a cola of $400.00.

Anonymous said...

2012 will be a bad year for members of Congress. We will vote them all out of a job.

Robert Mitchell said...

There are fundamental issues here. We could opt for socialism. The wise and powerful (dictators) would tell you where to work and when to retire. Then you would get a small room and a little food. If the price of food increased, you would still get it. The quality of life and the standard of living would be very low, for everyone.

Instead, we have a system in which you watch out for yourself (perish the thought that anyone would have to do that). We have tried to layer in a concept of inflation, but not a cost-of-living adjustment. Oh how people complain when it appears the latter would help them. But they don’t complain when the price of hard drives goes from very high to almost nothing. And my phone bill is a fraction of what it once was.

Anonymous said...

Inflation would not be so bad if the government stopped using food for duel, allowed more domestic production of oil, stopped printing money so the dollars we have today are worth less than the dollars we had last year. ITS THE GOVERNMENT!!! STUPID!!