WEB OFFSET REPORT -- Looking to Offset Losses
"Based on historical relationships between postal rate increases and corresponding decreases in direct mail advertising volumes, these actions could easily save $2 billion in direct mail printing alone through 2006," asserts Dr. Ron Davis, chief economist at Printing Industries of America (PIA) in Alexandria, VA. "Additional benefits would accrue to other print sectors that rely on mail delivery, such as magazine printing and envelope printing."
Davis says his calculation is based on the assumption that, without this legislation, a postal rate increase—in the range of the last one, or some 6 percent—would be passed. A commensurate cut in mailings typically follows.
"Generally, the biggest sales impact is seen in the first 12 months after a new postage rate goes into effect; then mail volume slowly recovers. However, the mail and printing business lost in the meantime is never recovered," the economist points out. "Currently, around $30 billion in annual printer revenues comes from direct mail printing."
According to Benjamin Cooper, executive vice president of Public Policy at PIA, the roots of the retirement funding issue go all the way back to the founding of the modern USPS in 1970. "It was not, as some believe, privatized," he explains. "It was created as a quasi-government entity. Employees were provided many of the same rights as federal employees, including participation in the CSRS."
About 15 years ago, the USPS began to suspect it was overpaying into the CSRS, Cooper says. "Since there was no real crisis at the time, it really didn't pursue any corrective action," he adds.
The situation changed when outside groups—PIA and others—began to raise this retirement issue, the public policy exec notes. "We made the point that, if the USPS is overpaying into the system, it is the rate payers that are picking up the tab. In response, the treasury finally did a study of the issue last year. It found that, by using the existing formula, the USPS not only was overpaying now, but would overpay some $78 billion over the next 30 years," Cooper concludes.