Could the Deficit-Reduction Deal Limit Postal Pay Raises and Rate Increases?

An apparently unintended consequence of the proposed bipartisan "Gang of Six" deficit-reduction deal is that it could reduce future inflation-based increases in U.S. Postal Service wages and rates.

One section of the plan calls for a "shift to the chained-CPI (a more accurate measure of inflation) government-wide starting in 2012" to calculate changes in inflation. The document adds that, "According to CBO [the Congressional Budget Office], the shift to chained-CPI would result in the annual adjustment growing, on average, about 0.25 percentage points per year slower than the current CPI."

CPI, which comes in such variants as CPI-U and CPI-W, is the Consumer Price Index, which is used to determine cost-of-living adjustments (COLAs) for most USPS employees and to cap rate increases on the vast majority of mail, such as First Class, Standard (direct mail and catalogs), and Periodicals. A difference of 0.25% would probably translate to an impact of more than $100 million annually on both postal wages and postage rates.

Chained-CPI is a method for calculating inflation that takes into account people's tendency to substitute a less expensive item.

"One of the problems of inflation is it doesn't account for the fact that when the price of apples goes up, you buy oranges or bananas," Marc Goldwein, a chained-CPI advocate, told NPR. The Gang of Six would use chained-CPI to lessen cost-of-living increases for programs like Social Security.

The proposal does not specify whether chained-CPI would just be an alternative method of measuring inflation -- which would not affect union contracts or the rate-cap law that specify CPI-W or CPI-U -- or whether it would become the new method of calculating CPI-W and CPI-U. The "government-wide" reference suggests that, even if CPI-U is left as is, there could be a push to change the rate-cap law so that it refers to chained-CPI rather than CPI-U.