By Bernie Becker - 09/25/13 03:40 PM EDT
The U.S. Postal Service (USPS) announced Wednesday that it would seek to increase prices for mailing letters and postcards, a move it called a last resort in the face of billions of dollars in losses.
Under the proposed plan, mailing a letter would cost 49 cents, up from 46 cents, starting in January 2014, marking the first time in more than four decades that the price of a stamp would increase faster than the rate of inflation. Those price hikes, the agency says, would raise an extra $2 billion per year in revenue.
The Postal Service’s board of governors voted for the rate increase on Tuesday. Postmaster General Patrick Donahoe told lawmakers and reporters last week that the move would have to happen unless Congress came together on postal legislation.
“We are actively trying to work with Congress to get the legislation moved,” Donahoe said after a Senate hearing. “But we also have a responsibility to start moving down the line on price changes.”
Mickey Barnett, the chairman of the board of governors, told the agency’s customers in a letter that the USPS would reconsider the price changes if President Obama signs a postal reform bill into law.
“Of the options currently available to the Postal Service to align costs and revenues, increasing postage prices is a last resort that reflects extreme financial challenges,” wrote Barnett.
“However, if these financial challenges were alleviated by the timely enactment of laws that close a $20 billion budget gap, the Postal Service would reconsider its pricing strategy.”
By law, the Postal Regulatory Commission has to approve any price increase over the rate of inflation, a process that could take months.
Banks, magazines and a variety of other companies and interest groups have lobbied for weeks against a price increase above the rate of inflation.
They say that those sorts of price hikes would be counterproductive by reducing the amount of mail in the system. The USPS has said it don’t believe that moderate price increases would drag down mail volume that much.
Rafe Morrissey of the Greeting Card Association (GCA) said the group was disappointed by the board’s decision and that they hoped the agency’s regulator would deny the request for the price increase.
"Raising rates or cutting critical services will exacerbate the Postal Service's current predicament by driving away much-needed mail volume to other competitors,” Morrissey said in a statement.
“Pursuing both simultaneously, as some propose, is a recipe for disaster. As the GCA has consistently said, the need to cut essential services or raise rates simply does not exist — and a more commonsense approach should be considered."
The House Oversight Committee cleared postal legislation from Chairman Darrell Issa (R-Calif.) in July. Issa’s bill relaxes some of his previous proposals but did not receive any Democratic votes in committee.
In the Senate, Homeland Security Committee Chairman Tom Carper (D-Del.) and Sen. Tom Coburn (R-Okla.) have released a bipartisan bill that has drawn some criticism from Democrats who say the measure is not as strong as legislation the Senate passed in April 2012.
Donahoe has asked for legislation that would give the agency more power to cut costs and raise revenue. Lawmakers are dealing with a number of knotty issues, including the required prepayment, whether to limit Saturday delivery and whether to move away from door-to-door delivery.
Carper said the announcement "further underscores the need for Congress to move quickly to pass comprehensive postal reform legislation."
"I hope this announcement brings key stakeholders to the table and urges all parties to work harder to find common ground.”
Issa said Wednesday that he understood why the board would move for a price increase but that he also thought that a bipartisan reform bill could be reached soon. The California Republican also urged the mailing industry and other stakeholders to step up their game in lobbying Congress for legislation.
“If implemented, today’s announcement may ease the financial burden on USPS in the very near term. But this rate hike and the ones sure to follow will only push more and more private sector customers to stop using the mail altogether,” Issa said.
“The rate increase poses a direct threat to the eight million private sector jobs that are part of the mailing industry as businesses shift from paper-based to electronic communication and mailers are priced out of business.”
— This story was updated at 2:18 p.m.