Stampflation Strikes Again

The rates they are a-climbin'

Photo by Ali Bakhtiari on Unsplash

No one has a crystal ball. After all, any bona fide prophet would surely be rich from the stock market after divining the twists and turns of the trade war.

But one thing is for sure: the USPS will always hike the price of first-class mail. Last week, the agency told the Postal Regulatory Commission its plans to hike prices (effective July) for the seventh time in five years. Here is a breakdown of the changes, courtesy of the USPS:

The claimed rationale for these changes is straightforward. The agency lost $9.5 billion in fiscal year (FY) 2024, and expects to lose $6.9 billion in FY 2025. It desperately wants more revenue. The problem is that, especially in the digital age, hiking stamp prices will almost certainly backfire. And, shockingly, the USPS isn’t great at projecting the impact of price hikes on its bottom line. A March 2024 report by the non-profit postal watchdog “Keep US Posted” concludes,

Under the current process, the USPS proposes new rate increases before the impact of prior increases can be fully realized. USPS demand models, which are used to justify rate increases, have never been tested in this way. USPS stands to lose considerably from miscalculating its customers’ sensitivity to price.

Keep US Posted estimates that these flawed revenue projections cost the USPS $1.8 billion annually, or roughly one-third of projected 2025 losses. The report also notes that the USPS has been making large-scale changes to its demand model — “in FY2024 there were 63 items in its change log” — without showing sensitivity analyses indicating how changes in forecast design can lead to different results.

The USPS needs to do a far better job showing its work to the public. The reality though is that only spending reforms are likely to get the agency on firmer fiscal footing.

And I know exactly where to start!