Strategic Sales February 2007

The internet is the predominant medium of information, and print is the predominant medium of promotion and persuasion. Thanks to government restrictions on telemarketing, fax and email promotion, print is virtually the only mass medium available for exposing an advertising message to a consumer or businessperson who did not “call it up.”

It’s no wonder that our industry took great interest in the proposed reforms of the U.S. Postal Service, an agency whose name is considered by many to be an oxymoron. It’s estimated that half of all U.S. print finds its way into the postal stream. So-called postal reform was promoted by President Bush, who appointed a presidential commission to consider alternatives early in his first term. That commission’s recommendations were forwarded to Congress, which finally passed a bill literally moments before adjourning in early December.

“Billions of dollars in U.S. Postal Service funds held in escrow by the Treasury Department have been freed, but none of those funds will go toward rate relief.”

A condensed version of the hearings, lobbying and machinations that preceded passage would fill volumes. No two constituencies could agree on anything—and some of those constituencies are powerful: postal employees (800,000 of them), mailers, direct mail marketers, postal unions, printers, politicians, small communities faced with the loss of a local post office, the White House, advertisers, Postal Service management and competitive delivery services.

The Senate passed a bill by voice vote in the wee hours of the morning. Most of the members hadn’t even read the bill on which they voted. The legislation, in my opinion, is not reform. It’s a case of many constituencies retreating while declaring victory. The only winner is the president. On July 26, 2005, the Office of Management and Budget sent Congress a “Statement of Administration Policy,” outlining the steps that needed to be taken to justify the president’s signature. These steps included a “hard cap” on postal rates tied to the Consumer Price Index, reform of postal workers’ compensation system and Postal Service adherence to federal financial reporting standards.

The final bill met the administration’s standards. Much of the legislation imposed restrictions on postal workers and postal unions.

No Luck for Rate Relief
Here are my predictions about the postal legislation’s impact on the print community and its customers:
• The rate increases and changes in rules, standards, and classifications scheduled to become effective May 6, 2007 will not be affected. (However, details of those increases and changes are not finalized as this column is written.)
• Given the implementation date of the legislation, it is possible, though unlikely, to have another increase under the existing system early in 2008.
• Billions of dollars in U.S. Postal Service funds held in escrow by the Treasury Department have been freed, but none of those funds will go toward rate relief. All of it will be applied to the huge unfunded liability of retirees’ health care and pensions.
• Tying postage rate increases to a figure no greater than the annual increase in the Consumer Price Index is hailed by Printing Industries of America and others as an important, meaningful step. This virtually guarantees an annual postage rate increase. However, a reading of the legislation reveals that the Postal Service is allowed some “wiggle room” to exceed the CPI guideline. In the past, the Postal Service has been adept at changing rules and classifications, creating a de facto rate increase but insisting that it didn’t raise rates. Finally, the legislation implies that postal rates have, until now, increased at a rate that exceeds the rate of inflation. That isn’t the case. It seems that way because rates have been adjusted every few years.
• There’s nothing in the legislation that addresses the closing of post offices, a step that would have reduced operating overhead. In fact, several congressmen agreed to vote for the bill only if communities in their respective districts were given unique ZIP codes.

Despite the rhetoric, little is likely to change in the short run regarding the rates and operations of the U.S.P.S. Changes in the structure, organization and financial reporting standards may contribute to efficiency and accountability in the intermediate and long-term. The events leading to passage of the legislation confirm the canard that there are two things Americans shouldn’t be allowed to see being made: sausage and laws.

Postal “Reform” Reflects Status Quo