Why a Higher Postal Rate Is Good for the Economy

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The U.S. Postal Service, confronting a $7 billion loss in 2011, has requested a 2-cent increase in first-class postage. Since the increase will only erase part of its deficit, the USPS is considering other cost-savings measures, including ending Saturday delivery. The news has generated a predictable response from organizations and businesses that depend on cheap mail. "Consumers everywhere will pay more for the letters and packages they need to send; businesses—large and small—will suffer and even more jobs will be lost," complained Tony Conway, executive director of the Alliance of Nonprofit Mailers and designated spokesman for the Affordable Mail Alliance. The alliance's membership includes the Magazine Publishers of America, of which my employer, Newsweek, is a member; Time Inc.; paper companies; direct marketers; and the Envelope Manufacturers Association.

At the risk of biting one of the hands that feeds me, I'd argue that the increase isn't so much a job-killing tax as it is a good start. The financial collapse of 2008 and the deepest recession in several generations has set off a widespread re-examination of how consumers pay for many essential goods, services, and experiences. Technology and large-scale economic trends are forcing and enabling what I call the repricing of America—from auto insurance (now available by the mile) to rental cars (now available by the hour), from government services (taxes are going up) to online content (meters and pay walls are coming in). There's no reason mail should be any different.

When the U.S. Postal Service loses money, it's effectively subsidizing inefficient business models and operations. And less mail would be better for the economy, better for businesses and consumers, and better for the environment. (Here's an experiment: Don't open your mail for a week; put it in a box, and then go through it. What percentage of it is stuff that you wanted to receive or asked for?) So rather than complain about the rising cost, power mail users should do what others do when the price of any resource rises—figure out how to use it more efficiently. Businesses have to get smarter. And many uses of today's mail simply aren't smart.

If postage rates were higher, direct marketers would be more judicious about the volume of junk mail they send. Couldn't Pottery Barn offset the cost of higher postage by sending us one catalog every month instead of the two identical ones they've been shipping for the last several years? Couldn't Home Depot, which I've never patronized, save a few pennies by ceasing to send the mailers addressed to my house's previous owner, who moved out eight years ago? How about all those baby-product vendors whose offers I receive on a weekly basis? Surely their sophisticated data-mining techniques can tell them my kids are approaching their teens.

Or consider billing. I continue to be amazed by the number of service providers who still send out bills by mail and demand to be paid with a check sent back through the mail. Someone who mails a monthly bill instead of e-mailing it is imposing a $10.56 annual cost on himself and his customer just for postage—not to mention the cost of paper, envelopes, checks, and processing. Why can't my electric utility company, which is so concerned about energy efficiency, simply e-mail me my 14-page monthly bill instead of printing it out and sending it through the mail? If sharply higher rates spur more people to adopt electronic billing and bill payment, it would be a boon to the economy.

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As for magazines, yes, raising their postage rates would certainly be kicking them while they're down. But magazines have long had a business model that relied on discounting circulation and then relying on cheap mail and generous advertisers to turn a profit. That model is changing, in large measure because advertisers are looking elsewhere. The emerging preferred business model for print publications is a healthier balance between circulation and advertising revenues. The reality: If you want content delivered on paper to your home, you're going to have to pay more for it. A hike in postage rates will give magazines a convenient excuse to do what they need to do anyway.

I understand that the increase in postage rates can impose a hardship and extra cost on nonprofits and charities. And I understand that expecting older people and those with less means to adopt computer-based payments isn't entirely realistic. But 10 years from now, mail won't be nearly as important or vital as it is today. Already, the best way to deliver social-welfare benefits isn't through checks sent in the mail, it's through smart cards. And for those with computer access, e-mail is essentially free. In the future, the best way to deliver cash benefits to people without bank accounts or computers will be through mobile phones.

Daniel Gross is also the author of Dumb Money: How Our Greatest Financial Minds Bankrupted the Nation and Pop!: Why Bubbles Are Great For The Economy.