Stamps only one of the reasons service cannot gain positive ground
San Francisco, CA -- (SBWIRE) -- 02/04/2013 -- While the price of first-class stamps rise to another over the weekend to 46 cents per, the United States Postal Service is now simply operating on borrowed time, as the facts of the financial ruin is now wholly looming.
"We are currently losing $25 million per day," Postmaster General Patrick Donahoe warned earlier this month. The agency lost nearly $16 billion in its last fiscal year, and its line of credit with the U.S. Treasury is tapped out.
If lawmakers don't act, it could run out of money "between six months and a year at most," said Richard Geddes, associate professor of policy analysis and management at Cornell University.
"There could be a period when mail is not being delivered," said the director of the Center for Research in Regulated Industries, Michael Crew, and professor of regulatory economics at Rutgers University.
The country's postal service is keeping letters moving as its top priority, and will do so even if it means It must default on its retirement benefits funding yet again. "Although our liquidity situation remains a serious concern, the Postal Service is continuing to prioritize payments to ensure employees and suppliers are paid on time, preventing any interruption in our operations," spokesman David Partenheimer said via email.
But the question many are asking is how did the Post Office get into such a predicament, even with the price of stamps ever rising.
The answer is that 46 cents per stamp is actually a quality deal when all is said and done. To make a comparison, the United Kingdom has first-class stamps at the equivalent of 94 cents. Canada has their stamps at 63 cents. Geddes stated that if the postal service was reformed to be a delivery service, it would pay much higher prices for their shipping needs.
The Postal Service is currently limited in the way it can raise the price of postage, yet that is only one factor that allows the service to run in the red.
"The other thing that's hurt the postal service is it's an industry where we have scale economies," Crew said. The post office's fixed costs — keeping the lights on at its huge network of facilities, maintaining its fleet and paying its employees — are amortized across the amount of mail it processes. "As you increase volume, unit costs decline."
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