Stamping Out a Deficit

To the average letter-writing American, postage means little more than those gummed and perforated squares that he buys for a few cents and pastes on his letters. To U.S. newspaper and magazine publishers, postage is much more significant; it is a large part of the rising cost of getting their publications to the reader. By last week, a new postal-rate-increase bill was threatening to raise the mailing costs of magazines and newspapers well beyond the ability of most publishers to pay.

Death Sentence. In some cases, the proposed increases add up to something close to a death sentence. Among the potential victims: such so-called "little magazines" as the New Republic, National Review, the New Leader, the Nation.

These journals of opinion--and limited circulation--chronically lose money and depend on well-heeled readers and sympathizers to bail them annually out of the red. They would be hard put to survive even a modest postal rate increase--and the one under consideration is by no means modest. It would, for example, boost the Nation's annual mail bill from $6,800 to $18,630.

Some magazines that manage to pay their own way also stand in serious if not mortal danger. Last year, for example, four magazines addressed primarily to contemplative readers--Atlantic Monthly, Harper's, Catholic Digest and Saturday Review--together netted only $55,74DEG on a combined circulation of 1,557,000. The new postal rates would add some $535,000 to their combined postal bill. Atlantic Monthly Publisher Donald Snyder has estimated that his magazine's share alone would be $91,000--more than seven times Atlantic's 1961 profit before taxes ($12,600).

Even the big magazine publishing houses would suffer severely. The postal bill of Philadelphia's beleaguered and money-losing Curtis Publishing Co., already embarked on a drastic cost-cutting program (TIME, March 30), would rise by $6,500,000 a year, to $21.5 million. The Reader's Digest (circ. 13.5 million) has estimated that the proposed rate increases would push its annual mail costs up 28%, to $16.2 million; TIME INC.'S postage payments would rise $7,500,000 a year, to $25.5 million.

Ancient Problem. The proposed postal increases are embodied in H.R. 7927, a bill that has passed the U.S. House of Representatives, but still needs Senate and presidential approval to become law.

All three of the major classes of mail are affected. First-class (ordinary letter mail) would rise from 4-c- to 5-c- an ounce. Second-class (by which newspapers and magazines deliver to mail subscribers) would go up a penny: half a cent this year, another half-cent in 1963. The cost of third-class mail--chiefly direct-mail advertising, which most publications rely upon for winning new readers and keeping old ones --would also rise about one penny per piece of mail.

The bill is the Administration's solution to an ancient problem: balancing the Post Office budget. Postmaster General J. Edward Day inherited both the problem and the solution from his predecessor in office, Arthur E. Summerfield, a man whose insistence that his department at least break even was on the vehement side. Few Postmasters General have felt so strongly about it. The postal department has not consistently made money since the 1830s; in this century it has produced a surplus only ten times, most recently in 1945 ($169 million). Since then, the Post Office has lost a total of $7.5 billion. Its current annual deficit, on $4.3 billion worth of business, is dangerously near $1 billion.

H.R. 7927 would add an estimated $691 million to postal revenue--but by means that newspaper and magazine publishers consider unfair. They point out that since World War II first-class mail rates have gone up only 33 1/3%, would rise only another one-third under Day's proposals. In contrast, the cost of second-class mail, already up 89%, would soar to 178% of the 1945 rates. Third-class mail, now 150% higher than in 1945, would rise to 250% (see chart).

Day's argument is that neither second-nor third-class mail has ever paid its own way. According to his calculations, for example, second-class is currently paying only 25% of its cost; Day wants to raise the ante to 40%. But behind this seemingly reasonable request lie facts and fig ures that not only erode Day's case but present compelling reasons why the postal department's very real dilemma should be solved in more equitable ways.

Public Service. The fact is that what those who favor raising second- and third-class mail rates persist in calling a news paper and magazine "subsidy" is some what of a misnomer. Special mail rates for publications are part of a national philosophy so fundamental that it goes all the way back to George Washington.

Because Washington recognized the na tional value of a free press, as well as its inability to pay full letter rates, Washing ton urged that newspapers be posted free.

As this philosophy grew, a series of postal laws clearly established the public-service aspect of second-class mail. It was most recently confirmed in the Postal Policy Act of 1958, which restated the principle that the Post Office encourages "the dis semination of information, the advance ment of education and culture" by offer ing below-cost rates.

The Post Office performs other public services. It sells U.S. Government bonds, holds Civil Service and Peace Corps ex aminations, distributes census and in come-tax forms as well as franked (i.e., free) congressional mail (86 million pieces last year). The cost of these services is partially borne by all mail users, and even Postmaster Day has agreed that this is unfair. H.R. 7927 proposes an increase in the postal department's "public service" allowance from $62.7 million to $248 mil lion a year.* There are other ways to solve the postal problem than by upping the charge to periodicals. One alternative is for Congress to finance an accelerated modernization program for an operation that is historically inefficient. Some of the Post Office's inefficiency may be inherently uncorrectable. Three-fifths of the nation's 34,995 post offices do an annual business of less than $5,000 a year, and though they are too vital to eliminate, they are also too small to accommodate new cost-reducing techniques. But where it could improve, the department has been slow--or has lacked the funds--to do so. Last year it spent $12 million or about one-third of one per cent of its revenues for research and development.

Undeserved Bargain. The most readily curable Post Office problem is caused by the first-class postage stamp itself. Today's 4-c--stamp buyer is getting an undeserved bargain--as Day himself admits.

"If letter postage was worth 3-c- in 1932." the Postmaster General said, in a recent appearance before the U.S. Senate Post Office and Civil Service Committee, "it would be worth nearly 7-c- today in terms of 1962 dollars.'' But the Administration's bill would raise first-class only from 4-c- to 5-c-. If it were increased to 6-c-, it would wipe out the current deficit and still be a bargain.

* Some feel the figure should be even higher.

In 1957, a Citizens Advisory Council appointed to study the postal department's problems suggested that the figure be raised to $392-4 million.

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