Press Release No. 01-2

For Immediate Release

Contact: Robert E. McLean

Release No. 01-2

703-418-0390

March 20, 2001

bmclean@mailers.org

Mailers Council Warns that the Postal Service May
Price Itself Out of Business

WASHINGTON, March 20, 2001—The Mailers Council, the nation's largest coalition of mailers, has called on the United States Postal Service to reconsider plans for filing a double-digit rate increase this summer, warning that the increase will be counterproductive and could precipitate an unprecedented and irreversible decline in mail volume that could soon make the Postal Service unaffordable to many business mailers.

The Postal Service, which predicts a loss this fiscal year of up to $3 billion, has announced plans to file a rate case early this summer, with increases of 15 percent. Such price hikes, on top of the increase implemented in January, will result in millions of dollars in added expenses for mailers.

McLean issued the following statement on the Postal Service's plans:

"In the past week we have sent letters to the chairman of both the Postal Service's Board of Governors and of the postal oversight committee in the House of Representatives warning that the contemplated postage increase would be counterproductive to the Postal Service's goal of increasing revenue. We know from experience that a double-digit increase will devastate volume in the months immediately following the new rate implementation. This time, such plans will ensure permanent volume losses in several mail classes. Many small businesses that use the mail exclusively to market their businesses, and small publishers that operate on exceptionally thin margins, simply cannot absorb two large postage increases within a 13-month time period.

"We believe the Postal Service must consider alternative steps in response to declining revenues. Implementing such large increases guarantees that many mailers will mail less often, or stop mailing completely. If that occurs, mail volumes will decline even further, creating the need for yet another rate increase. We could see postal rates spiral upward with increases substantially higher than the rate of inflation.

“The Postal Service adopted a short-term strategy recently by eliminating or postponing over 800 new facility projects. That will reduce expenses now, but will not cure the long-term problems the Postal Service has failed to address in response to its current financial troubles. It is now obvious that the Postal Service cannot afford a workforce of almost 800,000 employees. Instead of raising rates, the Postal Service must find a way to substantially reduce the size of its workforce, which today represents over 76 percent of its operating costs. Programs like last year's that cut 700 vacancies (not employees) from the headquarters level are far too small to affect the bottom line. The Postal Service also must continue improving the productivity of its employees. Although the Postal Service has increased its productivity in recent quarters, sustained productivity has never existed in the over 30 years since the US Postal Service was created.

"Our members have differing opinions on the need for postal legislative reform; however, we all believe that current postal leaders must face the admittedly difficult task of slimming the size of its workforce—in both operational and administrative functions. If the Postal Service is unable or unwilling to take steps now other than raising its rates, it may soon find that it has priced itself out of business."

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Note to Media: For a copy of the Mailers Council letters to Board of Governors Chairman Robert Rider and House Committee on Government Reform Chairman Dan Burton, call Joan Worden at 202-337-5411. For background on the Mailers Council, visit the website (www.mailers.org).