Special Message to the Congress on Increasing the Postal Rates.

To the Congress of the United States:

For the last several years, the United States postal service has been incurring very large deficits. The rapidly rising costs of delivering the mail have been substantially larger than the .postage revenues received. The deficits have had to be made up by general tax revenues--or, to put it bluntly, the general taxpayer has been giving large subsidies to certain users of the postal system.

In the fiscal year 1952, the postal revenues are expected to be about 1,840 million dollars. Postal expenditures, at present cost levels, are expected to be about 2,361 million dollars, leaving a deficit of about 521 million dollars. This deficit may be larger if the Interstate Commerce Commission and the Civil Aeronautics Board raise transportation rates for carrying mail, as they have been requested to do by the railroads and airlines, or if other cost increases occur.

A postal deficit of more than one-half billion dollars is obviously unsound, especially at a time when every effort must be made to reduce the size of the Federal budget. The taxpayers of this country are faced with an unavoidably large burden in financing our defense program. It is unreasonable and fair that they should also have to pay for postal costs which should be borne by those who receive the direct benefit of postal service.

At present, all major types of postal service, except first-class mail, are operated at a loss. Losses are especially heavy for second-class mail (newspapers and magazines) and third-class mail (mainly circulars and advertising matter). Together, these two classes of mail account for over $300 million of the anticipated deficit.

The large deficits being incurred in postal operations result primarily from post-war cost increases. The largest part of postal expenses is accounted for by the salaries of postal workers and the costs of transporting mail. These personnel and transportation costs are about 96 percent of all postal expenses.

During the past five years, these costs have risen sharply. The salary increases for postal employees enacted in 1945, 1948, and 1949 have added approximately 800 million dollars to annual costs. The cost of transporting mail by rail and by air has risen, since July 1, 1945, by about 175 million dollars on an annual basis. Including increased rentals and equipment and supply costs, the annual cost of operating the postal system is now more than one billion dollars higher than it was in 1945--more than a 100 percent increase in five years.

These increased costs obviously could not have been avoided. Postal employees should receive fair salaries. The railroads and air lines are entitled to fair compensation for carrying the mail.

To some extent, the effect of higher salary and transportation rates has been offset by increased output per man-hour worked. Since the end of World War II, the productivity of postal employees per man-hour has increased by more than 10 percent-which compares favorably with the record of private industry over the same period.

The Post Office is constantly working to improve the efficiency of postal operations. The Post Office Department has been considerably reorganized. Simplified accounting methods are being instituted. A streamlined money order system will shortly be established. Some services have been cut down or eliminated. Research on new and better methods for sorting and handling mail is going forward all the time.

But the plain fact is that no possible increase in efficiency could absorb the extremely large cost increases that have taken place. In spite of the increase in productivity per man-hour since 1945, the average cost of each postal transaction has increased by nearly 60 percent. During the same period, the average revenue from each transaction has increased by only 5 1/2 percent.

Under these circumstances, it is dearly necessary to increase postal rates in order to reduce the postal deficit.

Accordingly, I recommend, as I have recommended a number of times over the past several years, that the Congress increase postal rates sufficiently to wipe out the bulk of the present postal deficit, which should not be borne by the general taxpayer.

The deficit should not be eliminated completely. Some postal costs are incurred to carry mail sent on official business by the Legislative, Executive and Judicial Branches of Government. The airline subsidies--the amounts paid to the airlines over and above the cost of carrying air mail--are also charged to the Post Office. These, and a few over special expenses, amounting in all to about 160 million dollars, are incurred for general purposes of the Federal Government, and it is only reasonable that we should pay for them as we pay for other Federal expenditures, through Federal taxes.

The bulk of the deficit, however"'estimated in fiscal year 1952 at 361 million dollars--is incurred in the course of providing postal service to users other than the Federal Government. There is no good reason for taxing our people to pay these costs. Postal rates should be raised enough to cover them.

Increasing postal rates presents many complex problems of detail, since our system of postal rates has been built rather haphazardly over the years. In the light of current conditions, it contains many deep lyin-grained inequities and special privileges. The Committees of Congress who are responsible for determining most postal rates will, of course, want to consider carefully the specific rates for each class of mail and type of service. The Postmaster General is prepared to present a number of suggestions for raising postal rates to more reasonable levels. I wish to emphasize here a few of the major considerations which seem to me important in raising rates.

1. First-class mail (ordinary letters and cards) in total more than pays its way at the present time. Postal and post cards, however, do not. Consequently, the only major change in first-class mail rates I believe to be warranted at this time is in the rate on such cards. These cards were authorized by the Congress in 1872 at a rate of one cent each. The same low rate prevails today. This year more than four billion postal cards will be handled through the mails--over 90 percent of them used for commercial and advertising purposes. The cost of handling each card is 2.8 cents, while the revenue is one cent. I believe this rate should be raised to two cents, which would bring in, on the present volume, about 47 million dollars of additional revenue.

2. Major changes are needed in postal rates for second-class mail (newspapers and magazines). In the fiscal year 1952, more than six billion individually-addressed newspapers and magazines are expected to be carried, at a cost of about 242 million dollars. But the postage paid will be only about 42 million dollars. Thus the newspaper and magazine publishers will have 200 million dollars--or 80 percent--of their postal costs paid for them by the general public.

Newspapers and magazines are now carried for 1 ½ cents a pound, without regard to distance, for the reading matter they contain, and a graduated rate for the advertising matter in them, rising from 1 1/2 cents a pound, for distances up to 150 miles, to 7 cents a pound, for distances over 1,800 miles. These rates were intentionally set low, when they were established, in order to encourage the spread of information and education among our citizens. This is still a desirable objective, but clearly does not warrant a subsidy as extreme as that which now exists.

For example, the popular, digest-type magazines, which carry no advertising, are sent by mail throughout the country at the rate of 1 1/2 cents per pound. Since on the average, three copies of this type of magazine weigh one pound, the postage works out to about one-half cent per copy transported anywhere in the United States. (It costs more to handle a copy of such a magazine than it does to handle an ordinary letter, for which a person pays 3 cents--six times as much postage.) It seems ridiculous for the taxpayers to be paying postage bills for magazines like these, which can well afford to pay their own way. Increasing the postage on such magazines obviously would not detract measurably from the purpose of spreading information and education among our citizens.

The large-circulation magazines which carry many pages of advertising pay a somewhat higher rate of postage, but one which is still only a small fraction of what it costs the postal service to handle these magazines. This means that, in plain fact, under present postal rates, the general taxpayers are generously subsidizing the advertisers, who are able to send their advertising into the homes of our people at less than cost. There seems to me no excuse whatever for the general taxpayers to subsidize advertisers. Surely advertising was not part of the public information and education which the Congress intended to subsidize 70 years ago when it established second-class mail!

These excessive subsidies for newspapers and magazines are not only wrong, they are seriously inequitable. Books, which are surely as important as newspapers and magazines in disseminating information, and mail-order catalogues, which carry advertising generally similar to that in newspapers and magazines, are classified as fourth-class mail. Under the recommended rates, there will be little, if any, subsidy in carrying these publications--a startling discrimination in comparison to the situation on second-class mail.

Newspapers and magazine publishers have substantially increased their subscription and advertising rates in recent years--in many cases doubling or tripling these rates. Second-class postage rates, on the other hand, are close to the average level of 1879, when this class of mail was first established. Publishers who charge prices geared to present-day costs cannot reasonably expect to 'pay postage at rate levels 70 years old.

For these reasons I believe it is imperative now to increase second-class mail rates. If these rates are doubled--which is the least that should be done--this would bring in only about 40 million dollars, and the general taxpayers would still be subsidizing second-class mail to the extent of more than 60 percent of its postal costs.

As a matter of long-term policy, second-class mail should be brought gradually toward self-sufficiency in postal revenues. The immediate recommendations for rate increases which the Postmaster General will make should be regarded as only the first step. Further changes should include adjustments in the basic structure, as well as in the level, of second-class rates. Accordingly, I am asking the Postmaster General to review the second-class rate structure thoroughly, looking toward later consideration by the Congress.

3. More than 10 billion pieces of third-class mail (mostly circulars and advertising matter) are anticipated in fiscal year 1952. The costs of carrying this mail are now estimated to be about 271 million dollars. Third-class postal revenues, however, are expected to be about 148 million dollars, leaving an estimated deficit of about 123 million dollars.

The circulars and advertising matter which make up most of third-class mail are usually mailed in bulk at one cent for each piece. It costs nearly as much, of course, to handle a piece of this mail as it does to handle a first-class letter which has a three cent rate. I believe the minimum rate should be increased from one to two cents, which would increase revenue by about 66 million dollars, and cut the deficit on this class of mail by more than half.

4. The postal rates on fourth-class mail (parcel post) can be changed either by action of the Congress, or by action of the Interstate Commerce Commission approving changes proposed by the Postmaster General. Last year the Congress instructed the Postmaster General to seek the consent of the Commission for rate increases sufficient to make this class of mail pay its way. This he has done, and increases are now being considered by the Commission which would bring in an additional 105 million dollars in revenue, enough to cover the fourth class deficit.

5. In addition to carrying the four classes of mail, the post office provides certain special services. The major services for which fees are charged--registry, insurance, C.O.D. mail, and special delivery--are being operated at a loss, estimated at about 29 million dollars in fiscal year 1952.

I believe that the fees for these services should be increased by enough to eliminate the deficit in this portion of the postal operation. Furthermore, I believe the Postmaster General should be given authority to revise these fees from time to time in order to keep them in line with costs. Such authority was included in a bill passed by the House of Representatives last year.

These various suggestions, together with certain less important changes, will, if enacted by the Congress, wipe out the bulk of the postal deficit. Some deficit will remain, above the amount that is properly chargeable to the general taxpayers. The amount of this remaining deficit is not certain now, in view of the possibility of higher transportation rates and other cost increases. Consequently, I am not now recommending all the rate increases that should be enacted to put the Post Office on a self-sufficient basis. However, as soon as the outlook on future costs is more clear, the Postmaster General will submit to the Congress such further recommendations for rate increases as may then be necessary to reduce the deficit to a proper level.

I strongly urge the Congress to correct the present unsound condition of the postal revenues. This is a time of emergency, when we must raise taxes on everyone to meet the heavy costs of stronger military defenses. Now, more than ever, it is wrong to ask the taxpayer to bear costs which should be borne by users of the mail service--users many of whom have enjoyed large special privileges in the form of low, subsidized postal rates.

The Federal budget I submitted to the Congress in January was based on the assumption that the postal deficit would be reduced from over 500 million dollars to about 160 million dollars--the amount which is properly chargeable to the general taxpayer. My tax recommendations were likewise based on this assumption. To the extent that postal rates are not raised enough to meet that objective, even higher taxes will be needed to balance the budget.

HARRY S. TRUMAN

NOTE On October 30, 1951, the President signed S. 1046, an act to readjust postal rates (Public Law 233, 82d Cong., 65 Stat. 672).