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TheStreet Open House

10 Remedies for an Ailing Postal Service

Rate increases
The Obama administration threw its support Sept. 19 to postage rate increases that go beyond traditional adjustments for inflation.

The administration promoted the rate increase as part of a $3 trillion deficit-reduction plan. That recommendation included a suspension of Saturday mail delivery as part of the effort to stem the $10 billion loss the Postal Service is on track for this year -- because of future pension obligations -- and save more than $20 billion over the next few years.

The proposed increase, similar to one proposed last year, would hike rates by 8% to 9% for periodicals and catalogs and 5.8% as an average increase for all other mail.

Testifying before Congress in March, Ruth Goldway, chairwoman of the Postal Regulatory Commission, spoke about what she sees as the benefits of not letting rates exceed inflation adjustments.

"The price cap ... has proven to be a powerful incentive for the Postal Service to improve efficiency and reduce costs, including $11 billion in cost reductions in the past three years," she said. The streamlined rate-setting processes "have performed well, assuring postal customers small, predictable price increases not to exceed the rate of inflation. Since 2008, including the 1.7% increase approved this February, postage rates for market dominant products will have increased by a cumulative 8.4%, compared to a 16.8% increase in the published rates for Postal Service competitive products, which are not capped."

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