In recent weeks, President Donald Trump has engaged in a war of words with Amazon, arguing that a deal it cut with the United States Postal Service to ship Amazon packages for about $2 apiece is a rip-off that is bleeding the postal service dry.
In a recent tweet, for example, President Trump cited reports he said show “that the U.S. Post Office will lose $1.50 on average for each package it delivers for Amazon.” Then he went on to claim that the loss of revenues “amounts to Billions of Dollars.”
In certain respects, the president raises a valid point, at a time when Amazon relies on the USPS to deliver two-thirds of its packages. An analysis from Citigroup concluded that U.S. Postal Service delivers Amazon packages below its costs – about $1.46 below costs, to be precise.
“It is as if every Amazon box comes with a dollar or two stapled to the packing slip—a gift card from Uncle Sam.,” Josh Sandbulte, co-president of a money-management firm that owns FedEx common stock, wrote in an opinion article published in the Wall Street Journal last year. “It’s as if Amazon gets a subsidized space on every mail truck.”
While Amazon is certainly profiting from the low rates under its deal with the Postal Service, the truth is that the agency has had financial problems that can’t be explained away as the result of the sweetheart deal Amazon secured. In fact, the Postal Service’s problems go back years and reflect fundamental flaws in the postal system.
Consider this little-known fact: since 2007, the postal service has reported a total net loss of more than $63 billion. To be sure, the Amazon deal is not helping matters. Since the Postal Service started delivering packages for Amazon in 2013, the carrier has lost $19.4 billion, according to the Postal Service’s own figures.
So who is really losing in all of this? The American taxpayers.
Tax dollars have been subsidizing the Postal Service’s financial blunders at an alarming rate. In an analysis by Robert Shapiro, former Treasury undersecretary and chairman of the economic consultancy Sonecon, direct and indirect subsidies to the Postal Service were found to be worth $18 billion annually. These subsidies include exclusive mailbox access, exemptions from state and local property and real estate taxes, and below-market borrowing rates from the Treasury.
Part of the Postal Services problems is that is has strayed from its mission to “provide postal services to bind the Nation together through the personal, educational, literary, and business correspondence of the people.” Instead, it has plunged into other services, like the deal to deliver Amazon packages.
This isn’t the first time the Postal Service has diverted resources away from its main mission. At one point, the Postal Service tried to diversify itself by offering same-day delivery of groceries and alcoholic beverages. None of those ventures worked in the mail carrier’s favor.
To make matters worse, the USPS is ignoring the losses it is experiencing in its deal with Amazon to buy new trucks to accommodate the giant retailer. The cost? A staggering $6 billion. As troubling, the Postal Service has imposed price increases to squeeze more money out of its captive mail customers when it ought to be focusing on cost-cutting that will make it a more efficient and potentially profitable institution.
The Postal Service has a unique market position that no other entity has. It should stick to its core competency – delivering the mail – instead of entering into new lines of business that, as the Amazon case shows, only compound its problems.
John Burnett is a GOP strategist and CEO, 1 Empire Group, a consulting firm specializing in business analytics and development, operations, process re-engineering, growth strategies, risk management, and public affairs. He holds a long position in Amazon.
The views and opinions expressed in this commentary are those of the author and do not reflect the official position of The Daily Caller.