Unfortunately for postal stakeholders, Newt Gingrich's comments are problematic in three ways:
- First, they suggest a significant misunderstanding of the business of the Postal Service and in particular the financial impact of the forever stamp.
- Second, his reference to his comments on the Postal Service that are contained in his book, "To Save America," reflect a dated critique of Postal management that do little more than bash postal employees and their unions without an understanding that his solution would not be sufficient to solve the long-term financial problems of the Postal Service.
- Third, his comments reflect an understanding of the Postal Service workforce management strategy that has been placed in the waste bin by the new Postmaster General Pat Donohue.
The Facts on the Forever Stamps
Congressman Gingrich argued that "Congress should block the Post Office from implementing this genuinely dumb move" [making all First Class stamps, forever stamps.] What Mr. Gingrich misses is that the forever stamp is popular with the Postal Service Customers, reduces the Postal Service revenue minimally and saves significant costs by eliminating transactions for the purchase of 1 and 2 cent stamps when rates change.
The following bullets provide a rough estimate of the lost revenue of the forever stamp.
- The Postal Service in FY 2010 sold $8.8 billion in stamps, most of which were forever stamps.
- Based upon the calculations reported in the United States Postal Service - Inspector General Report on postage in the hands of public, 69% of the postage sold but not yet used is in the form of unused stamps.
- At the end of FY 2010 the Postal Service had $2.584 billion in deferred postage revenue. Therefore, the value of unused stamps is $1.782 billion.
- Unused stamps represent the equivalent of 2.4 months spending on stamps. This suggests that most "old" forever stamps will be used within three months of purchase.
- If all unused postage is one-ounce letter stamps, then the $1.782 billion in postage represents 4.05 billion stamps outstanding.
- A rate increase of one cent would "cost" the Postal Service $40.5 million from those not purchasing make-up stamps.
So getting the $40 million in lost revenue of offering forever stamps would cost the Postal Service $163 million. The shift was clearly a good business decision for an enterprise looking to cut costs where ever possible.
Mr. Gingrich needs to reverse his comments on the forever stamp and praise the Postal Service for making this move rather than calling for Congress to overturn it.
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11 comments:
I'd like to add that even if Mr. Gingrich's criticism was valid, most of his objections would be addressed by adding an expiration date, say 1 year from purchase, to the Forever stamps.
I'd like to see a comparison of what costs the Postal Service more: Alleged losses from Forever stamps, or Congressional franking privileges?
I believe the Postal Service is paid for Franking .....
Member Mail Allowances
Congress pays the U.S. Postal Service for franked mail through annual
appropriations for the legislative branch. Each chamber uses a formula to allocate funds
to Members from these appropriations. In the Senate, the allocation process is
administered by the Committee on Rules and Administration; in the House, by the
Committee on House Administration.
In the Senate, each Senator’s franked mail postage allowance is determined by a
formula that gives a maximum allowance equal to the cost of one first-class mailing to
every address in the Senator’s state. If the total Senate appropriation for official mail is
less than the amount required for the maximum allowance, each Senator’s allowance is
proportionally reduced.3 A Senate office that exceeds its allowance may supplement the
allowance with official office account funds. Senators are, however, limited to $50,000
for mass mailings (defined as 500 or more identical pieces of unsolicited mail) in any
fiscal year.4
In the House, the franked mail postage allowance is based on the number of
addresses in each Member’s district.5 Each Representative’s mail allowance is combined
with allowances for office staff and official office expenses to form a Member’s
Representational Allowance (MRA). Members may spend any portion of their MRA on
franked mail, subject to law and House regulations.6 Within the limits of their MRA,
House Members are not restricted as to the total amount they may spend on mass
mailings.
It never seems to fail that someone engages in typing with their logic circuit unhooked. What does one call a stamp with a one year expiration date? Certainly not a Forever Stamp. There is no expiration date on ANY stamp. You can go right now and rifle your sock drawer and find a 10 cent stamp issued 30 years ago, lick it and stick it on your outgoing mail. Now all you have to do is find the other 34 cents worth of postage to go with it...
Thanks for bringing this to Newt's attention and setting the record straight. It remains to be seen if Newt takes note and reverses his comments, although I have a hunch that it will take sometime before he praises the Postal Service. Thank you, Allen.
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Nowhere have I seen a estimate of how much will be saved by not having carriers collect postage due on letters sent short on postage after a price increase. Find out how much is spent collection 1 or 2 cents postage that way!!
Another point to add regarding the cost saving of no longer issuing 1 & 2 cent stamps is the labor cost savings of processing mail with insufficient postage due to customers not including make-up postage. With the advent of the Forever Stamp also came a public that is less informed of current postage prices. The time mail processors spend marking up post-due mail and carriers spend collecting it as well as return deliveries from refusals all add up, but could be eliminated if all stamps were Forever Stamps.
The cost to print the penny stamps? The cost to distribute the penny stamps? The "accountable paper" processes around the penny stamps?
While Mr. Robinson has identified enough savings through the retail transactional costs, these add to significant cost savings, as well.
There is also an enormous savings in stamp destruction costs of what would have been the old rate stamps. Even though the rate will remain at 44 cents, it was still a sound move to switch over to forever stamps.
Who gives a rat's a** about what what that little bug Gingrich says or even thinks. He's another extremist in a long line of them who makes up something and then the right wing false-news organization blasts it on the air ways.1 "GOD(gingrich)has spoken"--now everone bow down!!! What a waste
there is also the costs associated with removing and destroying stock on hand once the rate increases. and the added costs of printing and distributing new stamp stock. now all it will take for a rate increase is a few tweaks to a computer program
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