Sunday, March 25, 2007

The Forever Stamp Hoax

The Post Office has recently announced that they are considering a new first class stamp with no value on the face. No matter when you buy it or what you pay for it, it can always be used in the future to mail a first class letter. They claim this forever stamp will save money. Not only does the Post Office not have to print new stamps when there is a rate increase, the one cent stamps that people must buy to use up the first class stamps with the old rate cost more to produce than their face value. A one cent stamp costs more than one cent to produce and distribute which means the Post Office loses money every time it raises the price of a first class stamp.

I'm not sure the forever stamp is a good idea, even though there are some countries who have been using it for years. The Post Office says it will be good for consumers, but I'm not so sure.

The Post Office says that this will save people money, but this new policy may actually cost some consumers even more money to mail their letters. When the Post Office announces a rate increase, some people will stock up on the forever stamp. Some people will buy a six month or one year supply of stamps. This means that the extra income that would currently be generated starting the day the new rate goes into affect will now be delayed by months as the forever stamps purchased at the old rate are used up. The Post Office will have to plan and implement rate increases much earlier than they are really needed so that most of the stamps purchased under the old rate will have been used up by the time the Post Office really needs the extra revenue. That means people who don't stock up on stamps before the rate increase will be paying for a more expensive stamp before current postal policies would have required.

There is an even simpler solution to this problem than the forever stamp. Allow first class stamps to used for some period of time after the new rate goes into affect. For example, let's say the price of a first class stamp is being changed from 37 cents to 39 cents on January 1. The Post Office could allow the 37 or 39 cent stamp to be used on first class envelopes until the end of February. This would allow people to use up the old stamps without the inconvenience or expense of one or two cent stamps and the Post Office would know that their revenue increase would be in full affect in only two months.

Sounds too simple, doesn't it? That is because you are not being told the true reason for the forever stamp. With the forever stamp the Post Office doesn't have to create, print and distribute new stamps for each rate increase. A process that takes time. With the forever stamp the Post Office can announce a rate increase a couple of days before it is to take effect.

This will also make it easier to have fractional cent stamps, 45.5 cents for example. A book of 10 would cost $4.55, two stamps would cost 91 cents and a single stamp would cost 46 cents.

It will also make it easier to adopt periodic rate increases (for example, a first class stamp whose price goes up one cent every 3 months for the next two years) or for rate increases every year based on the rate of inflation. These kind of increases will not get the same kind of news coverage so rate increases will become a non-issue.

Maybe we should talk about this forever stamp a little more before it is implemented.

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