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May 8, 2008

Stamp prices to rise, must stay within inflation rate

Stamp prices go to 42 cents Monday. Here is something I did not know about stamps and the Post Office, from a PR pitch from the Lexington Institute and their economist, Charles Guy:

Thanks to reform legislation passed in 2006, USPS must keep future rate increases within the official rate of inflation. The legislation also requires the Postal Service to provide $50 billion to fund its pension obligations over the next decade.

"With stamp prices tied to the Consumer Price Index, the Postal Service can't just raise prices to meet its pension-funding requirements. That leaves it only two ways to cover costs: lowering the amount spent on labor or introducing new products that will increase revenue," explained Guy.

Monday's rate hike represents the fifth price increase since 2001. Stamp prices have gone up nearly 24 percent during that time.

Obviously pension costs aren't the only pressure the USPS is facing. Its transportation costs are rising much faster than the consumer price index, thanks to $3.70 gas.

Posted by Jay Hancock at 9:59 AM | | Comments (0)
        

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About Jay Hancock
Jay Hancock has been a financial columnist for The Baltimore Sun since 2001. He has also been The Baltimore Sun's diplomatic correspondent in Washington and its chief economics writer. Before moving to Baltimore in 1994 he worked for The Virginian-Pilot of Norfolk and The Daily Press of Newport News.

His columns appear Tuesdays and Sundays.
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