It is really difficult to guess what is behind our president’s latest Twitter rants over Amazon – but after weeks of tweets disparaging the giant tech company, things came to a head on Thursday evening when President Trump signed an executive order calling for a review of the agency’s finances, reports Bloomberg News.
Trump claims that Amazon is “costing the United States Post Office massive amounts of money for being their Delivery Boy,” a situation that puts “many thousands of retailers out of business.” He also claims the USPS makes “$1.50 on average for each package it delivers for Amazon” and said “only fools, or worse” would believe the Postal Service is making money.
The order, which does not mention Amazon, notes the USPS has lost more than $65 billion over the last decade. “The USPS is on an unsustainable financial path and must be restructured to prevent a taxpayer-funded bailout,” the order reads.
In other words, the president is blaming Amazon for the US Postal Services financial woes. And of course, this has nothing to do with the fact that Jeff Bezos also owns the Washington Post, which has aggressively covered the Trump administration. As has been mentioned – It is difficult to guess at what sets the president off these days.
Trump is stretching the truth
First of all, yes, the USPS is losing a huge amount of money. In 2017, the Postal Service reported a net loss of $2.7 billion. And since 2007, it has lost $65.1 billion. However, this has nothing to do with Amazon.
The culprit is a 2006 law mandating that the USPS pre-fund future retirees’ health benefits, and technology, particularly the Internet. First-class mail, the USPS’ biggest source of revenue, also continues to shrink, with a $1,87 billion loss in 2017.
Interestingly, in 2012, Digital Journal reported that the USPS, in a Feb. 9 USPS press release, said the delivery agency continues to suffer great losses as the first three months of its 2012 fiscal year closed. This reflects the time frame of Oct. 1 – Dec. 31, 2011.
“Technology continues to have a major impact on how our customers use the mail,” said Postmaster General and CEO Patrick Donahoe. “While it has helped us grow our Shipping Services businesses, it has had a significant negative impact on some of our much larger sources of revenue, particularly First-Class Mail. Revenue from Shipping Services represents about 17 percent of total revenue and, even with continued growth, cannot fully offset the decline in First-Class Mail revenue.”
In the statement, USPS said they anticipate “large losses to continue” until the agency has downsized, gotten a network redesign, and restructured its healthcare program. Until Congress allows the USPS “typical commercial freedoms” and reimburses over $10 billion of prepaid payments made for retirees, it’ll continue to struggle.
And that right there is the biggest problem – The USPS is not allowed to operate as a competitive business because of the governmental restraints that have been put on the agency. It should also be noted that no other agency is required to prefund this type of account.
Package delivery is the one bright spot
The one bright spot in the USPS’s latest financial statement is revenues from package delivery. In 2017, parcels brought in $19.5 billion, or 28 percent of USPS’ annual revenue. At $2.1 billion, packages contributed the largest revenue increase.
Of that $19.5 billion in revenue, about $7.0 billion came from private shippers like Amazon and others. Because of contract confidentiality, details of the postal service’s deals with private shippers are considered proprietary and not made public. So we don’t know how much of that $7.0 billion came from Amazon, specifically.
Also, and this fact is set by the 2006 Postal Accountability and Enhancement Act – Amazon is not getting a “special” rate for package delivery because it would be illegal for USPS to price parcel delivery below its cost.
In an August 2017 USPS press release, the agency said: “By law, our competitive package products, including those that we deliver for Amazon, must cover their costs. Our regulator, the Postal Regulatory Commission (PRC), looks carefully at this question every year and has determined that they do. The PRC has also noted that competitive products help fund the infrastructure of the Postal Service.”
And as a matter of fact – the Postal Regulatory Commission gave the green light to the USPS-Amazon deal the same day Trump began tweeting about Amazon.
Bottom line? Before everyone starts taking sides in this latest Trump tantrum, learn the facts. You may be surprised.
