Government is big business. And when it comes to size, complexity, and impact on the lives of Americans, few government-run enterprises can top the United States Postal Service.
The USPS employs more than 600,000 people. It collects $71 billion in operating revenue each year. Its fleet of vehicles — 230,000 strong — is one of the largest civilian fleets in the world. It delivers to 156 million addresses and has processed and delivered a staggering 154 billion pieces of mail.
It’s an immense operation — and one that will only grow in scope as more and more Americans eschew trips to the shopping mall in favor of online retailers.
The Postal Service has a lot on its plate — and that should be concerning, given the gross mismanagement plaguing the USPS’ handling of its finances and its position in shaping the future of the nation’s economy.
As was noted by President Trump in a recent series of tweets, the USPS gives a tremendous competitive and financial leg up to the nation’s largest online retailer, Amazon. And while close cooperation between the government and private sector is not inherently bad, the Postal Service’s arrangement with Amazon has been a loss-leader at best.
The president’s critics have been too quick to paint his criticism as a symptom of his agitation with the Jeff Bezos-owned Washington Post, and too reticent to look the issues inherent to the USPS-Amazon relationship squarely in the face. The fact of the matter, politics aside, is that subsidies and preferential treatment received by Amazon has not only been exceedingly costly to a Postal Service already in dire financial straits, but it has also made it even more difficult for online and offline retailers to compete with Amazon.
The concerns are tied to a number of examples of favoritism bestowed on Amazon. Take a 2014 deal giving Amazon exclusive access to same-day delivery of groceries in the San Francisco market. The arrangement gave Amazon a considerable head start in a rapidly emerging market, enabling them to test processes, establish an early customer base, and — perhaps most importantly — position itself yet again as an innovator on behalf of customers.
The USPS has also committed to deliver packages for Amazons on Sundays. The arrangement is adored by consumers, but the exclusive nature of the delivery structure — limited to Amazon year-round with exceptions during the holiday season — funnels even more business to a corporate titan already raking in billions.
Perhaps more distressing than the positive impact on one company’s bottom line, though, is the negative impact on every other company’s bottom line, from Fortune 50 companies to startups, and from big box retailers to mom shops.
These carve-outs are good for Amazon’s shareholders and good for its brand, but they come at a hefty price tag to the American people. Thanks to the outdated structure of pricing system put in place by Congress and the Postal Service in 2006, even record-setting volume doesn’t raise enough money to offset the costs to the USPS over the long term.
In the 12 years since pricing models were established, package shipments have exploded, accounting for a significant portion of the USPS’ total delivery expenses. The USPS is even updating its vehicle fleet to accommodate more packages in lieu of traditional mail. But despite this fact, the pricing model assumes that packages are only responsible for around 15 percent of the wear and tear on delivery vehicles. The model leaves the agency underfunded and ill-prepared for today’s market.
If pricing model concerns sound arcane or insignificant, think about it on a per package basis: Analysis from Citigroup found that the USPS’ pricing amounts to a $1.46 subsidy for each package delivered.
Mismanaged funds are not new to the Postal Service. The USPS debts and retirement obligations exceed assets by more than $122 billion. Shareholders wouldn’t stand for this if the perpetrator was a private company. And taxpayers shouldn’t stand for it at the hands of the government.
It’s time for Congress and the USPS to focus on new pricing models that prioritize competitiveness, parity, and a stable financial future instead of lining the pockets of one of the world’s largest companies.
Drew Johnson Drew Johnson is a senior fellow at the National Center for Public Policy Research. To read more of his reports — Click Here Now.
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