This morning I realized that I had no idea what a postage stamp costs.
Not that this is somehow critical to my well-being. I rarely mail anything, and I’m still using up an ancient roll of “forever” stamps. Which, I guess, is appropriate.
A first-class stamp costs 73 cents, as of July 2024.
An unintentionally deep dive.
I pivoted from that factoid to a chart of the inflation-adjusted price of a U.S. domestic first class letter. Via Wikipedia, below. The nominal (dollar) price of a stamp is in dark blue. The real (inflation-adjusted) price is in light blue. The graph covers a bit over a century.
Source: Wikipedia, history of U.S. postage rates.
So, no, the price of a stamp isn’t up. Or up much, anyway. It’s just about what it has always been, in inflation-adjusted terms. To be exact, the July 2024 price of 73 cents would equate to 58 cents on the graph above, showing prices in January 2019 cents. That, per the BLS inflation calculator.
The current price of a stamp is just a touch higher than recent (five-decade) average, accounting for inflation. And it’s slightly below its recent all time high, which occurred back in the 1970s.
Then I thought about what has happened to the volume of mail, and of first-class mail, during this time period
Source: Underlying data are from the USPS, history of mail since 1926.
That peak in total volume also coincides (roughly) with the peak in volume per U.S. resident.
Even though this is clearly dropping like a stone, compared to the peak in 2000 or so, note that the 2020 number is around the 1950 number. And that as of 2020, we were still using first-class mail to the tune of three piece of first class mail per week, for every man, woman, and child in the U.S.
At any rate, if you want to read the full story, there is no better source than to download the PDF of the USPS Office of the Inspector General analysis of these issues, publication number RISC-WP-24-008.
But it’s about what you’d expect. First-class postage is the major source of revenue for the USPS. That’s falling for all the reasons you’d think, starting with the reduction in monthly bill payments made via mail. And USPS revenues have taken roughly as large a hit as you’d think they would, given the reduction in first-class mail use. The above, from the report just cited.
If you read the numbers closely, even junk mail ain’t what it used to be.
Still, the USPS is explicitly an average-cost organization. As volume falls, average costs go up. Yet, the real price of a stamp did not rise, until just recently.
Given that, I find it impressive that the USPS has survived so far. By whatever means they managed to survive it.
And it’s not as if this volume decline is likely to get better soon. Given that, it doesn’t seem unreasonable to let the USPS raise the real price of first class mail. Somewhat.
Which is my take on what’s going on now. Starting with 2022 legislation.
So here’s my vague and not-documented impression of what has been going on.
It looks like there was some sort of agreement the price of a stamp would not rise faster than inflation, at the creation of the USPS in 1970/71. (That’s when the United States Post Office was abolished, and its duties taken over by the United States Postal Service (USPS). I’ve seen that vaguely mentioned, but cannot pin it down.
Formal or not, you can see that it’s a fact. That’s the “Too flat to be a coincidence” line, below.
Source: Wikipedia, history of U.S. postage rates, annotations mine.
This was formalized in 2006 legislation. I’m not sure what else the 2006 USPS legislation did, but I see it discussed as imposing an explicit CPI cap on first-class stamp price increases.
(And the fact that the 2006 legislation is characterized that way tells me that whatever went on before that … must have been something else. Some less explicit rule or mechanism that had the effect of fixing the price of a first-class stamp in real (CPI-adjusted) terms. Which explains why I can’t seem to find anybody just saying that.)
Finally, I get the feeling that, in practice, that CPI cap was removed in 2022 legislation. Again, I’m sure there’s more to the legislation than that, but that seems to be the gist of the recent twice-a-year rate increases. What we’re seeing now is likely just the start of a move to a permanently higher first-class rate in the U.S., in CPI-adjusted terms.
And that’s just part of the reality of dealing with what’s happened to USPS volumes during this century.
But we owe it to ourselves …
There is a separate issue, regarding accounting for future promised retirement benefits (mostly, it seems to be an issue of health benefits for retirees). At one point, the USPS was supposed to put that on their operating books and, I think, literally squirrel that money away as a sinking fund. But, as it is impossible to get blood from a stone, those $5B a year payments, to that sinking fund, to pre-fund future retiree benefits, were never made, and the 2022 legislation let them take that off their current accounts.
Edit: Well, what I actually recall reading is that those required payments haven’t been made since 2012, which seems to imply that the USPS did make some, then stopped? Doesn’t matter. They (either entirely or mostly) didn’t make them. Doesn’t matter which, does it?
The USPS is still on the hook for the eventual payments. They just don’t have to pre-fund them now. Not that they ever did, because they never had the revenues to do that with, and keep delivering mail. But now it doesn’t have to be accounted for in their annual profit-loss statement. That cumulative deficit is hidden, until such time as those folks actually retire.
Whether we, the taxpayers, are on the hook for those unfunded pension mandates, I’m a bit hazy.
At points, the enabling statute seems to say that debts of the USPS are not full-faith-and-credit debts of the U.S., and at other points it seems to say “except sometimes”. And as a practical matter, there’s some kind of weird incestuous relationship going on between the USPS issuing debt, and the Treasury buying it? Or some such. Not clear that I understood that, nor that I needed to, for the simple reason that the annual losses of the USPS — whatever they are, if such losses exist — have to be a drop in the bucket compared to the annual Federal deficit, which seems to be somewhere just shy of the $2T mark.
