President Donald Trump’s critics say his comments on the Postal Service’s money-losing deal with Amazon actually were directed at another of owner Jeff Bezos’ properties, The Washington Post.
But even the Post had a few nice things to say about Trump ordering a task force to look into the Postal Service’s finances and initiatives and offer recommendations for reform.
“An examination of the facts,” the Post grudgingly admitted, “would certainly be preferable to more Twitter battles.”
The president is on to something here. The Postal Service is in trouble, and business as usual won’t fix it.
Since 2008, volume on first-class mail — the Postal Service’s most profitable product and one for which it is legally granted a monopoly — has dropped by about a fourth. The Postal Service has lost money for 11 straight years, and its losses now total $65 billion over that period.
It also has failed to make any payments toward its pension and retiree health benefits funds since 2009, and that liability now totals nearly $40 billion – expenses for which taxpayers could be on the hook.
The president has called for the postal system to “operate under a sustainable business model to provide necessary mail services to citizens and businesses, and to compete fairly in commercial markets.”
The last clause probably is the key. Trump’s tweetstorm about Amazon pointed indirectly to a study by Citigroup that found the Postal Service, which charges $2 per package for last-mile delivery of Amazon orders, would have to charge another $1.46 per package on average just to break even. Given it now delivers 40 percent of Amazon’s packages, that’s a lot of loss.
That report may not even cover all the losses. The Postal Service has to operate on Sundays to fulfill its requirements to Amazon and has been forced to branch out into other even more difficult business environments – such as grocery delivery and delivering fish from the docks of port cities to restaurants in those cities.
These kinds of deals, which require specialized trucks, handling and other equipment, have been particularly damaging to the Postal Service’s bottom line but particularly beneficial to Amazon’s.
“Before any other player had a shot in the grocery delivery market, the Postal Service penned a trial arrangement with Amazon in 2014 for the San Francisco market,” wrote Ross Marchand of The Taxpayers Protection Alliance. “… By exclusively offering Amazon the opportunity to establish itself as the first major e-grocer, the Postal Service gave the multi-billion-collar corporation a major leg up over any potential competitor.”
The commission’s work probably will include some effort to reform the Postal Service’s pension and retiree health care obligations, which continue to increase unabated. It also will include a look at the mailbox monopoly and the Universal Service Obligation.
The mailbox monopoly is the monopoly on physical mail delivery and positions the Postal Service to charge other shippers, such as UPS, Amazon and Fed-Ex, for last-mile delivery. The Universal Service Obligation is the requirement the Postal Service deliver all mail to and from the entire population of the U.S. and military personnel living abroad at uniform prices that are based on solely on weight and not distance. In 2015, the Postal Regulatory Commission valued the benefit of the mailbox monopoly at $5.4 billion per year and the cost of the Universal Service Obligation at $4.1 billion per year.
The task force also will look at aspects of the 2006 Postal Accountability and Enhancement Act, the last major postal legislation. PAEA broke mail products into two categories – competitive mail, the products, such as packages, for which the Postal Service competes with other shippers, and market-dominant products, such as first class and standard mail, over which it holds a monopoly.
It is supposed to assess 5.5 percent of its institutional costs — salaries, buildings, delivery equipment – to outside shippers, but experts say that cost is now more like 25 percent or higher. This is how Amazon gets a deal no other shipper could touch that costs the Postal Service $1.46 on every package delivered and yet the Postal Service still claims the deal is somehow profitable.
These and other items, such as granting “flexibility” to the Postal Service to set rates, will take up the task force’s time.
The keys to effective reform are clear. The Postal Service must get out of the deal-making business. It clearly doesn’t handle this task well. And it must apportion its costs appropriately and pay for the pension and health benefits of its retirees.
If it addresses these problems, the problem on the bottom of its balance sheet won’t look so bad anymore.
Brian McNicoll is a writer based in Virginia. He has worked as a senior writer for The Heritage Foundation and as communications director for the House Committee on Oversight and Government Reform.
The views and opinions expressed in this commentary are those of the author and do not reflect the official position of The Daily Caller.