More Postal Inflation

Amid red ink, a big whammo that will hurt everyone

Neither rain nor snow nor complaints about slow delivery nor public worry about inflation can keep the Postal Service from completing its next appointed round of rate increases. By the end of May, the service will raise mailing costs enough to push some businesses into lifting their prices more and sooner than they otherwise would have done. For all classes of mail, the rise voted last week by the Postal Rate Commission averages 25.5%. First-class postage goes from 13-c- to 15-c- (vs. 6-c- as recently as 1971). The cost of second-class mail for magazines and newspapers will jump 29.6%. The minimum rate for mailing a 2-lb. package parcel post will leap more than 49%, to $1.15.

This will immediately push up the costs to magazine and newspaper publishers, mail-order houses and direct-mail advertisers, as well as to utilities, department stores, credit-card issuers and other businesses that mail bills by the billions. Says Robert Lenz, assistant comptroller of New York Telephone Co.: "The impact is very direct on us because we mail about 6.2 million bills a month. Roughly each cent of postal increase will cost us some $800,000 a year. That's a big whammo."

As a result of the new rates, more companies will deliver letters to the Postal Service in bundles presorted by Zip code, for which they now earn a penny-a-piece discount; that discount will double under the new rate schedule. Security Pacific Bank, for example, will shortly mail all customer statements not from its 530 branches in California but from its Los Angeles headquarters, using automated equipment. Some businesses may turn more to private mail-delivery services; the Wall Street Journal, Reader's Digest and Time Inc. already use carriers to hand-deliver some papers and magazines.

Yet many businesses will have to raise prices or reduce mailings. Says an official of Sears, Roebuck: "This is just one measure of inflation that is going to hurt everyone." Esquire magazine had planned to mail circulation promotions to as many as 5 million potential subscribers; now it may solicit fewer. Says Financial Vice President Louis Isidora: "It costs us as much to mail as to print the stuff We have a fixed number of dollars to work with. If postage goes up, something has to go down." Publishers fear that rises in second-class mailing rates will force some magazines to stop printing.

Users of the mail might be less disturbed if they could believe that the postal boost would improve service or reduce the postal deficit. Neither seems likely. Since it was set up in 1970 as a Government-owned corporation that was supposed to earn its own way, the Postal Service has raised rates 150% and cut back service. For example, it now delivers mail to most businesses once a day rather than twice. But it still lost three-quarters of a cent on every piece of mail handled in fiscal 1977, vs. about half a cent in 1974. One reason is that, while almost every other index of the economy has been rising smartly in the past few years, the volume of mail has been stagnant. Last year the Postal Service handled 92 billion pieces of mail, barely more than the 90 billion in 1974; per capita deliveries actually declined a trifle, from 429 pieces to 427. Continual rate increases probably have discouraged greater use of the mails. The Postal Service will go even further into the red if it gives a huge wage boost to 550,000 employees whose union contracts expire on July 20.

Is there any way to break out of the cycle of rate increases, leading to fewer mailings and then to more rate increases? The House last month passed, by 384 to 11, a bill that would repeal the $920 million ceiling on Government contributions to the service out of tax revenues; it would authorize Congress to appropriate any amount that the Postmaster General could demonstrate was needed for public-service functions. Supporters of the bill argue persuasively that the Postal Service cannot operate strictly as a business but that it must provide services that have no hope of paying their own way. Just two examples: maintaining post offices in tiny towns, and charging the same rate to mail a letter from midtown Manhattan across the street or across the continent.

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