Wednesday, May 3, 2006

The Forever Stamp from the United States Post Office

The United States Postal Service has an idea to make their proposed three-cent increase in First Class letter rates next year a little more palatable:

The Postal Service said it would begin selling a "forever stamp" next year that would be good for first-class mail "no matter how prices might change beyond 2007." While some consumers might use it as a hedge against future price increases, it is intended to eliminate the inconvenience for consumers of having to buy new stamps every time the rates increase, said Stephen Kearney, vice president for pricing and classification.

This is a good idea, from the Post Office's point of view. They'll get a big chunk of change up front, and probably won't have to provide the service of delivery for years to come. And some of these "forever stamps" will likely be lost or destroyed before they can be used.

For most of us, buying the "forever stamps" won't make fiscal sense. As the Washington Post article implies, postal rates for first class letters have gone up a little less than three percent per annum since 1981. Just about anyone, even the most conservative investor, would have beaten that rate of return by putting their money elsewhere. The only folks for whom buying this product would be a sound fiscal move would be those on limited incomes that won't grow as quickly as inflation, and who mail lots of first class letters. And that's not taking into account that the "forever stamps" will have to have a pricing premium over normal first-class stamps to make them worthwhile for the USPS to issue and honor them.

Kearney is right that the major economic incentive for buyers of these "forever stamps" would be the avoidance of future hassle. Having to get in line for three-cent stamps has a cost of time and convenience that many people would like to avoid. Especially if the only time you can get to the post office is during peak usage (lunch hours and quitting time). When I lived in Rockland, Maine, I rented a larger mail box in order to avoid standing in line to pick up parcels that wouldn't fit in the small boxes. In terms of convenience, it was a wise investment. Especially when I got to upbraid postal workers for making me stand in line for parcels that would have easily fit into my box. That was worth every penny.



Linking to: Stop the ACLU, Diane's Stuff, Cigar Intelligence Agency

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