Even With 3-Cent Hike, Postage Still Cheap by Historical Standards

Time to stock up on Forever stamps. The U.S. Postal Service is proposing its biggest postage hike in over a decade. On Wednesday, the USPS announced that its Board of Governors had voted to increase the cost of postage for a first-class letter from the current 46 cents to 49 cents.

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The proposed hike will be the first three-cent jump since rates increased from 34 to 37 cents in 2002. In aWednesday letter to postal customers, Mickey Barnett, Chairman of the USPS Board of Governors portrayed the move as one of necessity, driven by the postal service's dire financial straits. He also acknowledged that the increase far outstrips the rate of inflation.

"We believe this prudent price adjustment request is reasonable, equitable, and necessary," Barnett wrote, adding that he believes the proposed changes in postage rates constitute "a moderate course of action given the financial challenges we face."

Though the increase might shock customers who remember the days of 20-cent stamps, consumers may not want to complain just yet. When adjusted for inflation, Americans have been paying about the same amount for postage for decades. 

Even with a jump to 49-cent postage, the cost of sending a letter would still be less than in the mid-70s, when inflation-adjusted first-class postage was nearly 60 cents.

The proposed hike is in response to the postal service's long-standing fiscal problems. This year, the USPS expects to lose $6 billion, and in 2012 it lost nearly $16 billion. In his letter, Barnett also referenced a $20 billion budget gap that the USPS faces for 2013.

The rise of email has taken a bite out of postal service profits, but the USPS also often names other issues that it says are hurting its liquidity. The organization operates without tax dollars but must seek congressional approval to change many of its business practices. In his Wednesday letter, Barnett named several areas in which it is seeking greater freedom from Congress, including the authority to change its delivery schedule, change to a defined-contribution retirement system, and streamline its operations. The USPS also asked for a refund of overpayments it says it has made into the Federal Employees Retirement System.

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The change in postage prices is not final yet: it is set to go into effect on Jan. 26, 2014, and only if it is approved. The Postal Regulatory Commission, an independent government agency, must approve any postage increases that exceed the rate of inflation.

Such a move is called an "emergency rate hike," and Postmaster General Patrick Donohoe warned legislators last week that it might be coming.

"The Postal Service as it exists today is financially unsustainable," he old the Senate Homeland Security and Governmental Affairs Committee on Thursday.

"We've lost 27 percent of our mail over the course of the last five to six years," he added. "And when that happens, you have to make changes."