Deals with mass-mailers, labor unions hurt customers

Article published in the Buffalo News

On Monday, the price of a first-class stamp will rise by a penny. With gas now costing nearly four bucks a gallon, a 42-cent stamp may not sound like much. But while stamp prices climb, the Postal Service keeps offering sweetheart deals to bulk mailers and the postal labor unions.

Ordinary consumers ought to ask why the Postal Service is delivering for everyone but them.

In the last decade, stamp prices have gone up 31 percent. Following sweeping congressional reforms in 2006, the Postal Service hinted at annual rate increases. With Monday’s increase — the second in as many years — the Postal Service seems to have settled on raising prices each year in mid-May.

At the same time, the Postal Service has taken to offering discounts to big mailers based on how much mail they send. When done right, such agreements can save both the Postal Service and the mailer money. But in several previous agreements, the Postal Service has either granted a discount for mail that would have been sent anyway or granted discounts deemed excessive by regulators.

In 2006, the Postal Service’s regulator issued a decision on an agreement with Bank One. The report wondered whether discounts were necessary in light of expert analysis revealing “tremendous growth in the amount of direct mail solicitation undertaken by the credit card industry.”

Indeed, when was the last time you opened up your mailbox and didn’t find an envelope announcing that you were preapproved for another piece of plastic? Is it really necessary to pay mass mailers to send us more junk mail?

The most recent deal, this one with Bank of America, was even more generous — and much more egregious. The Postal Regulatory Commission’s official opinion found that the Postal Service could lose between $25 million and $45 million as a result of the deal.

The Postal Service can’t seem to strike a good bargain with its powerful labor unions, either. Last year, after lengthy negotiations, it reached long-term agreements with its major unions. But on several issues important to its financial ledger, it simply went along with union demands.

Paramount among these was labor flexibility. The Postal Service agreed to a moratorium on contracting delivery routes and a prohibition on hiring temporary workers.

Contractors cost significantly less than comparable union employees and can therefore play an important role in the Postal Service’s efforts to cut labor costs, which account for four-fifths of annual expenses. Such efforts are urgent, as the Postal Service is on the hook for some $50 billion in pension-funding contributions over the next decade.

An extra penny for a stamp won’t break the bank. But the Postal Service shouldn’t lean on ordinary consumers to fund its money-losing deals with big mailers or its cozy relationship with its labor unions.

Robert R. Schrum is a research fellow at the Lexington Institute.