New Obama Deficit Plan Backs Postage Increase

One month after the United States Postal Service dropped its request for an exigent rate increase, the Obama administration's newly released deficit reduction plan says it will "permit USPS to seek the modest one-time increase in postage it proposed a year ago."

Last year, the USPS proposed rate hikes of 8 percent to 9 percent for periodicals mailers and 5.8 percent for other classes of mail (the Postal Regulatory Commission rejected that proposal). More recently, the USPS had sought to bump rates more than 4 percent in January 2012.

The new plan reverses some previous Obama administration stances on the USPS and would now allow the elimination of Saturday delivery and the closing of smaller post offices (the USPS is looking at closing approximately 300 processing facilities). The postal service would also be allowed to start selling "non-postal" products.

The new Obama claims to give USPS the chance to align the costs of postage with the costs of mail delivery while remaining within the current price cap. "That may refer to postal executives' desire to impose the highest rate hikes on products on which the USPS allegedly loses money, such as Standard flats (catalogs) and Periodicals mail," says Dead Tree Edition.

The USPS lost more than $3 billion last quarter. USPS chief HR officer and executive vie president Anthony Vegliante has previously said that if the Postal Service was a private business, it would have already filed for bankruptcy and used the process to "restructure its labor agreements to reflect the new financial reality".

When it comes to the "Three P's"-postage, paper and printer costs-postage has eclipsed paper and printer for many publishers.

"When you look at the Three Ps, in 2000, printing was 45 percent to 55 percent of costs, paper was probably 20-25 percent of your costs, and postage was between 30 to 32 percent of overall costs," says Cygnus Business Media president of manufacturing operations Tom Martin. "Looking at today's costs, the printer has probably lost 15 to 20 points because the printer is probably sitting with only 32 to 35 percent of overall costs. Paper hasn't changed that much on a percentage basis but the number that has changed tremendously is postage. That's probably sitting at 42-46 percent of overall costs depending on the magazine [based on a 35,000 to 50,00 average b-to-b run basis]."

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