Monday, June 8, 2015

USPS's Court Victory Could Cost Mailers Billions

July 30, 2015 update: The PRC went with the Postal Service's minimum -- $1.2 billion (or $1.191 billion, to be exact). The USPS will collect that amount from mailers via an extension of the exigent surcharge. That means the surcharge is slated to expire somewhere around April 2016 instead of August 2015. But remember that, in Washington, "temporary" taxes tend to become permanent.

Despite news reports to the contrary, the only thing clear about Friday’s appeals court decision on postal rates is that the U.S. Postal Service won and mail-dependent industries lost.

Worth 49 cents -- or 47?
Sure, the Postal Service didn’t get everything it asked for – namely, making the 4.3% exigent surcharge permanent. But a ruling that is likely to bring in more than a billion dollars, at the expense of mailers, can hardly be called a loss for the USPS.

As detailed in an article I wrote today for Publishing Executive (See Get Ready for Roller-Coaster Postage Rates.), the one thing the federal judges didn’t like about the current surcharge is the “count once” rule for determining how much the recent recession cost the Postal Service.

They court sent the Postal Regulatory Commission back to the drawing board to come up with what could be called a “count multiple times” rule.

Minimum cost: $1.2 billion
If the count-once rule is transferring “only” $2.8 billion from mailers to the Postal Service via the surcharge, we can only imagine what the “count many times” rule will do given that the recession lasted several years.

The Postal Service said today the additional amount is a minimum of $1.2 billion. That's the equivalent of about 8 months of the current 4.3% surcharge. And postal officials will argue for a much larger amount.

Some writers assume that, instead of allowing the surcharge to expire this summer, the PRC will just leave it in place until it brings in enough money to satisfy the “count many times” rule. Or that, as the Postal Service requested today, the PRC will at least leave the surcharge in place until the new revenue target and surcharge are approved.

But it’s not necessarily so simple. Unlike the appeals court judges, the PRC commissioners are no doubt aware that canceling the surcharge and then reinstating it weeks later would be disruptive for both the Postal Service and for mailers. (Just think of the public’s confusion if the price of Forever Stamps drops to 47 cents and then bounces back to 49 cents only a few weeks later.)

But the commissioners have to proceed cautiously and allow for due process, especially given the propensity of both postal officials and mailers groups to appeal PRC decisions regarding exigent rate hikes. They will have to wade through reams of mind-numbing econometric analyses before arriving at a revenue target for the new surcharge.

They may not be able to finish their work before the current surcharge expires. And even a perfectly reasonable assumption – that the USPS will not be overcompensated if the current surcharge is left in place until the details of “count many times” are worked out – may be open to legal challenges.

Nothing, by the way, says that the new “count many times” surcharge has to be 4.3%: The PRC could decide to make it higher so that the Postal Service is fully compensated for its recession losses in a timely manner.

And when the new “temporary” surcharge is supposed to expire, Congress might decide to make it permanent as a way of dodging real postal reform. I’m reminded that, back in January, my fortune-telling friend Madame Marie predicted that the surcharge would not disappear this year, adding this gem of political science: “What, you think I have crystal ball or something? All I know is, don’t ever bet on government getting rid of a temporary tax or fee.”


michaelejahn said...

you wrote;

"(Just think of the public’s confusion if the price of Forever Stamps drops to 47 cents and then bounces back to 49 cents only a few weeks later.)"

Why would the public be confused ? Better said, why would the public even care ? It is a Forever Stamp, who cares if it represents 47 or 49 cents - you stick it on and it works! It was designed to STOP confusion, and that is what it did ! I do not have to think "oh, crap, what combination of different stamps to I need to put on a letter TODAY !?

The only think that was confusing to me was what you said there.

Help me understand what you were thinking might be confusing.

D. Eadward Tree said...

The point was that people may feel cheated when the stamps they bought for 49 cents are now worth only 47 cents. And then confused when the stamps become worth 49 cents again a few weeks later. But you're correct that Forever Stamps have taken much of the hassle out of postage increases for consumers.

Urban said...

It doesn't matter what they are worth. You can't return them and they are all good to get a letter from point A to point B. No confusion.

Anonymous said...

Who wrote this stupid article of complete no sense rhetoric anyway???

Anonymous said...

looks like the 'smart-alec' commentors are back.
the usps is such a poorly run organization / bureaucracy
that they will always be at deaths door unless the gov't decides to throw
boatloads of taxpayers money at them and that seems unlikely. the scary part is that i believe all your government agencies are operated in this wasteful, unethical,
incompetent fashion which doesn't bode well for the future of the united states.
my advice to you would be to buy bottled water and lots of guns and ammo
and be prepared if the 'worst' comes. i wouldn't spend my days worrying about
whether the forever stamps are worth 47 cents or 49 cents. this country faces more pressing issues as the citizens seem to be oblivious to the level of incompetence within their government.