Postage Increases — Why the Price of a Stamp Keeps Rising

Nearly every year since the 1990s, the US stamp price has risen steadily. While the differences are basically nominal — only a few cents — the yearly changes cause an uproar because of their logistical impacts on companies that depend on sending mail as a part of their business. Even though the price of a stamp’s frequent rise is controversial, it is necessary to keep the USPS running and in fact, it barely rises enough to meet the US postal service’s costs.

One of the main reasons the price of a stamp rises in such small increments so regularly is because the US postal service’s price hikes are regulated heavily by the US government. An independent part of the executive branch regulates the price. It’s called the Postal Regulatory Commission and its sole purpose is to regulate the Postal Service. It was created in the 1970s by the Postal Reorganization Act of 1970 and then restructured by the Postal Accountability and Enhancement Act of 2006. The act and the commission enforce what’s effectively a price cap on postage rates. This has forced the postage stamp’s price history to basically track with inflation over the years. The USPS can only increase the price of a stamp as much as the dollar has inflated over the past 12 months.

The problem with forcing the postal service to bind its stamp price to inflation is that it ignores the realities of the mail and shipping business today. The Postal Service can no longer cover its costs because profit margins are limited by the caps — and those profits can’t come back to cover the USPS’s overhead in other areas of the business. For instance, if inflation is low and mail volume decreases (and it currently is) then the USPS can’t increase the US stamp’s cost to balance the expenses associated with lower demand. An ordinary private business could increase its prices to deal with lower demand. In fact, the USPS can easily demonstrate that these increases don’t cover their overhead for several products. Competitors like email, electronic bill pay and other private companies mean that mail volume is decreasing, so the USPS will continue to loose money under the strict price cap of the Postal Regulatory Commission.

Another reality for the Postal service is the cost of fuel. Fuel and gas is one of the Postal Service’s largest costs since they depend on an enormous network of trucks and planes to shuffle mail all over the world. Fuel prices are rising more quickly than inflation so the economics here can’t work out for the USPS as a business.

In spite of all of these facts, the USPS is still regulated by the Postal Regulatory Commission and prevented from increasing the price of a stamp enough to cover its costs. Even though the historical timeline of the Postal Service’s increases frustrate consumers and businesses, the regulations according to inflation are outrageously restrictive and keep the US post office from running a stable business. Every year, in spite of postage stamp price increases, the USPS loses billions of dollars.