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Exigent Excerpts

On November 26, comments demanding the rejection of the U.S. Postal Service’s request for a 4.3% exigent rate increase were filed with the Postal Regulatory Commission by 13 mail industry stakeholders, among them the Direct Marketing Association and the American Catalog Mailers Association. Their argument centers on countering USPS’s contention that lingering effects of the Great Recession demand the rate hike.  Here are key excerpts from the filing.

“[USPS economic analyst] Thress’s analysis purportedly shows that essentially the entire net decline in percent—between Fiscal Years 2007 and 2012 was caused by the 2007-2009 recession. These claims are implausible on their face. First, the percentage decline in mail volume that Mr. Thress attributes to the recession is several times deeper than the percentage decline in the overall economy during the recession. Second, the overall recession bottomed out in 2009, and the economy has been recovering since then.”

Christian T. Lundblad, Professor of Finance, University of North Carolina.

“To date, consumer spending and business investment since the end of the recession have not provided the growth stimulus necessary to boost mail volumes. Due to the long-term impact of technological change, discussed above, we do not anticipate volume ever returning to the levels which we experienced in the mid-2000s. In fact, we anticipate that mail volume will, for the most part, continue to decrease for the foreseeable future.”

USPS Form 10-K for FY 2012

”The Postal Service’s financial dependence on First-Class Mail has been precarious for the last 16 years, as the expanded use of the Internet has made First-Class Mail less relevant to mailers.” —Lundblad

“Thress’s attempt to blame the decline in advertising mail volume on a recession-related decline in overall advertising spending, rather than electronic diversion, is also largely incorrect. The Postal Service contends that the decline in advertising mail volume between FY 2007 and FY 2012 was due in large part to a cumulative decline of approximately 15 percent in total spending on advertising, a decline that the Postal Service attributes to the recession. In fact, total spending on advertising other than direct mail declined by no more than 5 percent. —Lundblad

“It is hardly news that Americans—businesses and consumers alike—are growing increasingly comfortable with living and transacting business electronically, and that this growing comfort has resulted in substantial shifts from paper to electronic communication. It is also hardly news that the pace of these changes has increased over the past few years.” —Lundblad

“Based upon an economically sound interpretation of the Postal Service’s econometric models, I estimate that the impact of the recession on USPS finances peaked in FY 2009, at a cost to the Postal Service of about $900 million in lost contribution in that year. The loss in contribution caused by the recession has moderated since then, to approximately $500 million in FY 2012. The same analysis indicates that the 2007-2009 recession caused the Postal Service to suffer a volume loss that peaked at 5.9% in FY 2009, and has moderated since then. These estimates, unlike those offered by the Postal Service in this case, are consistent with the effect that the recession has had on the economy as a whole.” —Lundblad

“Electronic diversion is the primary driver of First Class Mail volume decline . . .The economy is NOT the main cause of diversion.”

USPS Plan to Profitability: 5 Year Business Plan

“The Postal Service, forced by the CPI cap to economize, downsized and cut costs. Congress provided relief by allowing the Postal Service to forego or defer several years of annual contributions to the Retiree Health Benefit Fund. The Postal Service continued to operate, meet payroll, and provide mail service. For these reasons, the Commission should require that any exigent rate increase approved in this case be rescinded on January 26, 2016, or 24 months after it takes effect.”

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