	Introduction: Recent Challenges for Periodical Publishers

A spate of autumn 2008 news stories reported the downsizing or closure of periodicals and their publishers due to financial challenges:
U.S. News & World Report magazine will reduce its paper issues to once per month; Time Inc., which publishes 24 magazines for the U.S. market, has said it will cut 600 jobs, about 6% of its workforce; Alpha Media Group, publishers of Maxim and other magazines for young men, will lay off 50 to 60 of its staffers; Hearst magazines will transition CosmoGirl magazine to a web-only publication; Condé Nast announced that it would reduce its business magazine, Portfolio , from 12 issues per year to 10, and Men ' s Vogue from 10 issues per year to 2; Radar magazine ceased operations in October, and Manhattan Media Inc. announced that it had put off its plans to restart publication of 02138 , a lifestyle magazine for Harvard University alumni; and The century-old Christian Science Monitor , a newspaper that is delivered via U.S. mail five days per week, will cease publishing in paper format in April 2009. In light of these high profile incidents, and because of a possible U.S. Postal Service postage increase in 2009, the 111 th Congress may be asked to help periodical publishers reduce their operating costs by providing them with increased postage subsidies. Some publishers sought postage relief during the 110 th Congress. Such assistance would not be unprecedented. In fact, as this report details, Congress has subsidized periodicals postage since the founding of the United States. Newspapers were a means to provide information to the geographically dispersed members of the public so they might ably discharge their duties as citizens. In 1917, Congress bifurcated the postage rates paid by periodicals. The law also had effects on periodicals, which had continued to fail to provide the USPS with revenues that covered the cost of their delivery. Subsidized Postage for Periodicals Retained

As described above, periodicals had received special treatment under postal law since 1792. Periodicals rates were particularly problematic. The new rate schedule would remedy this inequity. A New Law and an Unclear Future for the Postage Subsidy for Periodicals

The enactment of the Postal Accountability and Enhancement Act (PAEA; P.L. 109-435 ; 120 Stat. The PAEA requires the new Postal Regulatory Commission (PRC) to devise a new postage rate-setting system. Additionally, one of the "factors" that the PRC had to consider in establishing the new pricing system is
the requirement that each class of mail or type of mail service bear the direct and indirect postal costs attributable to each class or type of mail service through reliably identified causal relationships plus that portion of all other costs of the Postal Service reasonably assignable to such class or type (120 Stat. The new rate-setting system mandated by the PAEA must limit the annual postage increases for periodicals and other market dominant products. Government provision of postage subsidies for periodicals long has been a contentious issue because it involves disputed principles and vexing implementation issues. Postage subsidies policies inevitably have raised two contentious questions: (1) Which periodicals should receive these subsidies?
Recently, financial challenges have compelled a number of publishers of periodicals (e.g., magazines and newspapers) to downsize their operations and to cease printing certain publications. To cite just two examples—Time Inc. has said it will cut 600 jobs, and the century-old Christian Science Monitor newspaper, which is delivered via U.S. mail five days per week, is to cease publishing in paper format in April 2009.
In light of these high profile incidents, and because of a possible U.S. Postal Service postage increase in 2009, the 111th Congress may be asked to help periodical publishers by providing them with increased postage subsidies. Some publishers sought postage relief during the 110th Congress. Such assistance would not be unprecedented. In fact, Congress has subsidized periodicals' postage since the founding of the United States.
This report describes and assesses the major federal policies that have subsidized postage for periodicals. These policies have been contentious because they involve disputed principles and vexing implementation issues. Some persons believe that periodicals provide important information about politics and government to U.S. citizens, which helps members of the public to discharge their civic duties. Others dispute this contention. Additionally, considerable implementation issues also arise, such as "which periodicals should receive these subsidies?"
Since 1792, Congress has provided periodical mailers with reduced rates that are lower than their delivery costs. Initially, Congress funded these postage subsidies through annual appropriations. Senders of other types of mail, such as first-class letters, have paid rates that covered the revenue shortfall of periodicals.
In 2007, the Postal Regulatory Commission (PRC) restructured the postage rate schedule to more accurately peg periodical rates to their delivery costs. The postage paid by some periodical mailers jumped dramatically and their postage subsidies fell. Later that same year, the PRC established the new rate-setting system mandated by the Postal Accountability and Enhancement Act (PAEA; P.L. 109-435; 120 Stat. 3198-3263). The system requires each class of mail to bear its "direct and indirect costs," but it also includes a rate cap that forbids the USPS from raising postage rates by more than the rate of inflation, except in "extraordinary or exceptional circumstances." The long-term effects of the new rate schedule and rate-setting system on periodicals subsidies are unclear. Thus far, the USPS's periodicals delivery costs continue to exceed greatly its periodicals postage revenues.
This report will be updated as events warrant.