U.S. Postal Service announces stamp hike

Be prepared to pay another three cents to mail a letter starting January 26.

The U.S. Postal Service recently announced the largest rate hike in 11 years, which will be in effect for two years, to give the service a temporary infusion of extra revenue to help it recoup losses it suffered as a result of the economic downturn of 2008-2011.

Since 2006, the agency has been required to limit rate increases to the rate of inflation, unless regulators approved more, in order to prod the Postal Service to cut costs and to benefit the mailing industry. This raise includes a one-cent increase for inflation and two cents for the extra revenue, resulting in an overall six-percent jump in rates.

The Postal Regulatory Commission rejected a petition for a permanent raise as the increase is not meant to offset losses by Americans' growing reliance on electronic communications and commercial delivery services, and could result in an "over-recovery" from the impact of the recession on the Postal Service. Further, the commission stated that the downturn "does not eliminate the Postal Service's obligation to respond to revenue losses by reducing costs or improving efficiency."

The higher rates will also apply to magazines, newspapers, advertising mail and bills, accounting for most of the 158 million pieces of mail delivered every year. This is a blow to mail-dependent industries, which lobbied against an increase, saying it would add millions of dollars in costs for consumers and depress mail volume.

Mary G. Berner, president and chief executive of the Association of Magazine Media, a trade group, fears the rate hike "will have ripple effects through our economy - hurting consumers, forcing layoffs, and impacting businesses."

Disagreement over the temporary increase lingers over whether the increase should be permanent or temporary, leaving the fate of "Forever" stamps in question. Customers could stockpile them before the 49¢ price takes effect, but what happens to those bought at 49 cents when the price goes back down to 47 cents? Others think that in two years with the rate of inflation, the rate will be 49 cents anyway.

The Post Office is still struggling after significant workforce reductions, the declining mail volume, and a congressional mandate to pay $5.6 billion annually to cover expected healthcare costs for future retirees, and may have to make large-scale cost cuts, such as changing delivery to five days a week.

Legislation to reduce the healthcare payment and give the agency more flexibility to raise money has been stalled in Congress for two years. The Postal Service's board of governors called the request for an emergency rate increase a "last resort" after Congress failed to pass legislation.