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As Biden Signs Postal Reform Into Law, USPS Announces a Huge Jump in Prices

Stakeholders had hoped the legislative overhaul would help avoid another large rate hike.

The U.S. Postal Service is once again seeking to raise its rates by historically unusual amounts, announcing the increases on the same day President Biden signed into law a bipartisan bill to erase much of the agency’s debts and allow it to pursue new lines of revenue. 

The Senate approved the 2021 Postal Reform Act last month, but it took several weeks to get the measure to the White House for the president’s signature. The measure will require most postal workers to enroll in USPS-specific health care plans, shift most retirees to Medicare, take onerous payments toward health care benefits for future retirees off the agency’s balance sheets, allow USPS to provide some non-postal services and create new oversight and transparency requirements. Some stakeholders had hoped the financial relief from the bill would allow USPS to take a less aggressive approach to pricing, but postal management declined to do so. 

“The requirement of that law stretched the Postal Service’s finances almost to the breaking point,” Biden said at a White House signing ceremony on Wednesday.

The new prices, which are set to go into effect July 10, would raise rates for regular, First-Class mail by 6.5% and by 8.5% for package services. A standard stamp would go from $0.58 to $0.60. The large increases were made possible under new authority the Postal Service’s regulator granted it in 2020 and which USPS employed for the first time last year. DeJoy promised as part of his 10-year business plan to use his authority to raise rates above inflation "judiciously," but predicted USPS would generate between $35 billion and $52 billion by 2031 by raising prices.

The Postal Service finished 2021 with $23 billion on hand and recently erased much of its debt thanks to the reform law, but it still opted to pursue the significant price hikes. USPS noted in a statement the changes reflect a “judicious implementation” of its authority and the total was still less than overall inflation in 2021, though the mailing agency essentially maxed out the increases allowable under federal regulations. Through a complicated formula derived from factors including inflation, declining mail volume and retiree costs, USPS could have raised its First-Class mail rates by 6.507%. It chose to raise them by 6.506%. 

Industry groups swiftly condemned the increases. PostCom, an association of large-scale private sector postal customers, said “the windfall from legislation will not be helping mailers.” The Alliance of Nonprofit Mailers had pushed USPS to defer some of its authorized rate increases to future years, arguing it did not need an immediate surplus of cash and mailers were struggling from supply-chain issues and other economic factors. 

The Postal Regulatory Commission must still sign off on the increases, but the review will amount to simply checking USPS’ math to ensure its proposals stayed within the parameters of its rate-setting authority.

Some lawmakers and stakeholders have criticized DeJoy’s dual approach of raising rates while slowing down delivery for some mail, arguing it will accelerate losses to mail volume. DeJoy has defended his strategy as necessary to set realistic goals and put the agency on firmer long-term financial footing. 

The USPS board of governors signed off on the price proposals, likely for the last time under its current makeup. The Senate Homeland Security and Governmental Affairs Committee on Wednesday approved Biden’s final two nominees to the board, Dan Tangherlini and Derek Kan, who have pledged to reassess DeJoy’s key initiatives. If confirmed by the full Senate, the board would be made up by a majority of Biden’s appointees. 

At the White House on Wednesday, Biden praised lawmakers for finally delivering postal reform after a decade of false starts. He noted they helped him fulfill a campaign promise to usher through an overhaul of the mailing agency. 

“I made the promise, you did all the work,” Biden said. 

The president praised USPS for delivering 320 million free COVID-19 test kits through the mail and for all of its work during the pandemic. He mentioned his unhappiness with postal management’s decision to primarily replace its aging fleet with gas-powered vehicles—vowing to push it to purchase more electric vehicles—but said the legislation would still bring about fundamental reform.   

“Today we enshrine in law that the Postal Service is fundamental to our economy, to our democracy, to our health, to the very sense of who we are as a nation,” Biden said. “This bill recognizes that the Postal Service is a public service and ensures it can continue to serve all Americans for generations.”