Although chugging along stronger than ever before just recently, the global economy has death-spiraled into what could be a second Great Depression. However, some industries are thriving. Apparently, the corona-caused recession has created a boom for a few select industries such as fitness equipment, board games, landscaping, among many more.
Experiencing a similar phenomenon is the U.S. Postal Service, whose deliveries of mail products have declined, the amount of packages has increased substantially of late. Such developments are largely unsurprising since the corona-panic has shuttered retail outlets. Even before this, packages were reported to have added $8.2 billion in profit in 2019 alone, according to the Postal Service's annual filings.
So more packages means great news for the post office, right?
Wrong, in fact the USPS predicts more doom and gloom, while demanding a $75 billion lifeline in the next stimulus bill.
The agency's board of governors is asking Congress for a $25 billion cash injection to offset expected losses, a $25 billion grant to fund "shovel ready" projects for modernization efforts, and another $25 billion in unrestricted borrowing authority. The USPS seeks all of this despite Postmaster General Megan Brennan's claims to the House Oversight and Reform Committee that USPS would lose a mere $13 billion due to corona.
Billions in reported package profits (if true) is pretty good, but finagling a $75 billion gain out of a projected $13 billion loss is truly amazing.
It is perhaps the case that the USPS is looking for a bailout of this magnitude to recover from the billions lost every year for the last 13 consecutive years. Further, as communications technologies and consumer preferences shift, USPS' annual operating expenses have accelerated by a margin of $9 billion more this year, compared what USPS had on its books six years ago. Now cost growth is as high as 10% in recent months as parcels inundate the system.
Rather than getting to the bottom of how skyrocketing costs have been driven by rapidly growing package volume, House Democrats have opted for another strategy — use the coronavirus as a convenient excuse to ram as much postal pork into stimulus packages as possible. House Oversight Chair Rep. Carolyn Maloney has even gone as far as to exploit the USPS to fundraise for her re-election campaign!
At the top of the USPS, CFOs have been making grand promises about long-term financial stability since 2007, but have made no major systemic changes whatsoever.
The USPS recently enacted the largest price hike ever for stamps, and the market has borne the cost — which it kind of has to since the post office has a monopoly on your mailboxes.
Rejecting the notion of a post office bailout, President Donald Trump insisted that it needs to charge more for eCommerce deliveries — a smart idea that aligns greatly with current postal data. As he told reporters in the Oval Office a few days ago: "every time they bring a package, they lose money on it."
Among one of the most substantive reviews on this topic, a Citigroup analysis found that each box the post office delivered gets a $1.46 subsidy. Since these revelations came to light in recent years, no noticeable action has been taken to correct the USPS' underpricing for its competitive market goods.
Ultimately, with rampant costs and undercharging for giant e-tailers, the veracity of these so-called package profits is deeply in doubt, if not disproved entirely.
No other business continues in unessential, unprofitable endeavors. In business, there is the phenomenon of the loss leader. But those are only sold when they're part of an otherwise successful product line, like fast food restaurants losing money on burgers in combo meals in order to sell super-profitable drinks. That's clearly not what's happening. Other popular ideas for cost savings include ending Saturday delivery, cutting hours at post offices, and continuing to grow the cadre of non-career employees.
But hand-outs make more sense to some in Washington than reform.
House Democrats have pursued a nonsensical path — they haven't held a hearing on USPS in a year nor sought out the 10-year business plan that USPS promised to deliver a year ago. The Postal Service should ordinarily be a simple matter of managing dollars and cents, but instead preserving the status quo failures has become a rallying cry.
There's still the need for the post office, but there certainly isn't the need for the bloated, wasteful dinosaur the U.S. taxpayer is on the hook for. The corona-recession is a time for forcing reforms, not more bailouts.
Jared Whitley is a long-time politico who has worked in the U.S. Congress, White House, and defense industry. He is an award-winning writer, having won best blogger in the state from the Utah Society of Professional Journalists (2018) and best columnist from Best of the West (2016). He earned his MBA from Hult International Business School in Dubai. Read Jared Whitley's Reports — More Here.
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