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When Jews and Christians Compete   Grim Budget Outlook Forces Treasury ...
Apr 29 2008 9:58PM EDT

Does It Make Sense to Buy Forever Stamps?

The United States Postal Service announced yesterday that the one-year-old Forever stamp -- 1st-class postage that will be good any time in the future even if mailing prices go up -- has been a hot seller as the date of a one-cent hike approaches.

Over 6 billion have been purchased since last April comprising roughly 17 percent of all stamps sales.

"We introduced these stamps as a customer convenience to ease the transition during price changes, and they also deliver economic value," the Postal Service said in a press release.

Does that claim hold up? Looking back at rate hikes over the past 30 years, it would be hard to make a good case for buying Forevers as they haven't kept up with inflation.

stampprices.360.gif

If the Forever stamp had been introduced in 1978, you would've been better off spending the $0.15 on most anything else. At all points in the following 30-years the inflation-adjusted price of stamps was less than $0.15. There would have been no point in hedging against rising stamp prices.

For individuals, the economic loss is tiny, if you'd stocked up with $100 worth of Forever stamps in 1978 and used them over the next 30 years, you'd be out $2. But for the postal service, the overall gains would've provided a small boost to revenues. (People who would've put off buying stamps until after a price hike would now have some incentive to buy Forevers instead.)

Going forward, the Forever stamps still won't make sense economically for consumers since rate hikes are capped at C.P.I.

But because of the small costs involved, the first part of the Postal Service quote above seems accurate: If I was about to buy a packet of stamps before the price hike next month, I'd opt for the Forever stamps. There is something defeating about having to buy one-cent stamps so you can use your old postage.

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