Going Postal on Inflation

Going Postal on Inflation

I like collecting stamps. My grandmother got me started in 1969 with a six-cent stamp [1] honoring explorer John Wesley Powell, who went down the Colorado River through the Grand Canyon. Here’s a picture:

A few months ago, talked with a friend who is sorting his father’s old stamps. My friend observed that it costs a lot more to mail a letter these days. I agreed and filed that fact away. A few weeks ago, I read that the first-class letter rate increased from 58 to 60 cents. Wow, mailing a letter has risen by ten times since I started collecting in 1969!

I decided to quantify this rise using Postal Service data. I looked at what it cost to mail a one-ounce letter via first class mail from 1885 to 2022. I plotted the first-class postage rate versus time using a logarithmic scale; that makes it easier to view change over time. Note: You can scroll into this plot to see the dates and rates. The formatting and weird spacing after the plot – that’s due to my poor knowledge of WordPress.

I first noticed how flat the left side of the plot was. It cost two cents to mail a letter from 1885 to 1932 except for one interval around World War One; the rate was increased to three cents from 1917 to 1919. So, the rate stayed flat for most of 47 years.

The first long-term increase was from two to three cents in July 1932 during the Depression. This rise of 50%was a decision by the Hoover administration. Now, we might think it was just a penny but keep in mind that the value of a penny in 1932 was equal to about 21 cents in 2022. [2]

First-class postage jumped to 4 cents in August 1958; this was 26 years after the last increase. Another way to think about this is the doubling time, which was 73 years to double from 2 to 4 cents.

Our next doubling of rates from 4 cents to 8 cents happened in 1971, just 13 years. The plot is starting on an upward trend. The increase from six cents in 1969 to 8 cents in 1971 coincides with a significant change for the Post Office, which moved from a government department to an independent United States Postal Service as defined in the Postal Reorganization Act of 1970. President Nixon said: ““Our present postal system is obsolete; it has broken down; it is not what it ought to be for a nation of 200 million people.… And now is the time to act.“ My take is that you might want to hold on to your wallet when a President decides to tinker with the postal system. [3]

Our fastest doubling of postal rates took only seven years during the stagflation years of the 1970s, under the Nixon, Ford, and Carter administrations. [4] These were tough times for the United States; we experienced high inflation with high unemployment. Sadly, the 2020s look like they will mirror the 1970s.

We had another 13-year doubling period in 1991. The inflation-fighting of Fed Chairman Paul Volcker had tamed inflation. We reaped the benefits of lower inflation for the next 30 years; it took that long for postal rates to jump from 29 to 58 cents. The table below summarizes the doubling data, I have added a column for Consumer Price index (CPI) data as a reference.

July 1, 1885273.17.99
August 1, 1958473.128.9
May 16, 1971812.840.3
May 29, 1978157.064.5
February 3, 19912912.7134.8
August 29, 20215830.6273.57
Summary of First Class Postage Doubling Interval, 1885-2021

Now, any bets on the time it takes for postage to double from the 58-cent rate of 2021? My best guess is seven years since we just entered what looks to be another period of epic inflation.

Notes and Sources

[1] “John Wesley Powell, the noted geologist who explored the Colorado River, was honored on a 6-cent stamp issued August 1, 1969. Powell led an 1869 expedition down the Green and Colorado Rivers, a 1,000-mile, four-months’ journey.” Image and text from US Bureau of Engraving and Printing via Wikipedia https://en.wikipedia.org/wiki/File:John_Wesley_Powell_1969.1.jpg accessed 25 July 2022

I should mention that the John Wesley Powell stamp made me realize I wanted to explore the Grand Canyon. I got my first look at the Grand Canyon, from he North Rim, in the summer of 1978. I have now hiked around and across many times. I still hope to raft the Colorado some day.

[2] The Consumer Price index (CPI) was 13.60 for July 1932. The CPI was 292.3 in May 2022. the ratio 292.3 / 13.6 is 21.5

Source U.S. Robert Shiller data set, Stock Markets 1871-Present and CAPE Ratio

[3] The Nixon quote is from Ryan Ellis, he provides a good description of the background behind the Postal Reorganization Act of 1970
The Birth of the USPS and the Politics of Postal Reform by Ryan Ellis accessed 25 July 2022

[4] Doubling the 8 cent rate of 1971 would require a 16 cent rate. I chose the closest rate of 15 cents in 1978, which isn’t quite double. I also chose 29 cents in 1991 as the next closest rate from 15 cents. While not perfectly accurate, I think they make the point.

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