Friday, January 15, 2010

Postal Rate Cap Finishes Year in the Red

It’s official: The U.S. Postal Service will not be able to carry out the usual May increase in First Class, Standard, and Periodicals rates this year. And there may be a bit of good news for mailers next year as well.

With today’s release of the December Consumer Price Index (CPI), the Postal Service’s annual rate cap for the “market-dominant” classes is -0.36%. That's because lower gasoline prices and the economic recession caused the average monthly CPI in 2009 to be below 2008's average.

The law and regulations governing the CPI-based rate cap do not seem to anticipate such deflation. There is certainly nothing that requires the USPS to reduce rates by -0.36% even though the CPI declined. (Nor will there apparently be pay cuts for postal workers whose unions have cost-of-living adjustments in their labor contracts.)

What is not as clear is how the rate cap for 2011 will be calculated. Most likely it will be a matter of comparing this year’s CPI to 2008’s, not the lower 2009 number. That means that a steady annualized inflation rate of 3% this year would yield only a 1.9% rate cap for 2011, and a 5% inflation rate would mean only a 3.0% rate cap.

Under special circumstances, the Postal Service can institute "exigent" rate increases that violate the price cap. Postmaster General Jack Potter says he won't propose those this year, but the Postal Service's budget deficit might increase pressure for such emergency increases.

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1 comment:

PaleWriter said...

Gee... does this mean government salaries across the board will not drop either?

Most unions have CPI-based raises as well as Social Security recipients, people on disability and retirees.

Guess they won't get reductions either?

Come on DeadTree... get real!
It's not a Postal conspiracy.