How The USPS Loses
Money Despite Government-Granted Mail Monopoly
by Brian McNicoll1 Apr 2016
On Jan. 17, Priority Mail and Priority Mail Express shipping went up
9.8 percent … except for packages shipped by Amazon, which will continue to
ship at 2015 rates.
The Postal Service delivers to about 4,000 routes
on Sundays
… unless Amazon needs it to deliver
to more.
The term Priority Mail is itself a bit misleading because
packages sent by Amazon have, well, priority
over packages through Priority Mail. That is even though the Postal
Service makes some of its highest margins on Priority Mail and almost certainly
loses money on its deal with Amazon.
There’s a postal
worker in North Carolina who says he came back from running his
route with some mail still in the bag that included Priority Mail packages –
for which customers paid top dollar for timely delivery – and Amazon packages.
The supervisor made a special trip to deliver the Amazon packages, the postal
worker says, but left the Priority Mail packages for delivery the next day.
Yes, Amazon has a sweetheart deal with the Postal
Service. It’s called a Negotiated Service Agreement, and its purpose is to make
it worth Amazon’s while to ship through the Postal Service rather than
competitors such as UPS or Fed-Ex.
It’s not a one-way street. When three consumer groups
raised concerns about the Amazon deal and the lengths to which the Postal
Service is willing to go to make it work, Amazon rode to
the rescue.
The groups say such deals would not be profitable if the
Postal Service did not use resources intended for regular mail delivery to give
itself and, by extension, Amazon, various monopoly-protected competitive
advantages. In short, the USPS is cross-subsidizing Amazon package deliveries
with money generated through its monopoly letter mail delivery business.
They groups have asked the Postal Rate Commission to
consider how Amazon alone gets exempted from a nearly 10 percent price hike and
how the move can be financially justified for the Postal Service otherwise.
They’ve also asked that the Postal Service be required to break out the costs
of providing its special favors to Amazon.
In response to the groups, Amazon told the
commission there is nothing in the rules that govern rate-setting
that “requires rates for either market-dominant (the products, on which it has
a monopoly, such as home delivery of first-class mail) or competitive products
(package and other delivery services) to cover fully allocated costs.” It
derides such accounting as a relic of the first third of the last century and
says such costs need not be broken out.
Why not? We have a stake in the viability of the Postal
Service. If it goes belly up, we will have to bail it out. It has monopoly
protection to deliver our mail, and its delivery network could not be replaced.
It has run up
$51 billion in losses in the last seven years and blown through a
$15 billion line of credit from the U.S. Treasury. It expects to lose $4
billion more this year despite a profitable first quarter.
And that’s with significant advantages because of its
government-enforced monopoly on home delivery, such as not having to pay
property taxes, vehicle or fuel taxes, nor for any local licenses.
But others are raising
what might be a more serious question: Is the Postal Service being placed in
the service of private goals at the expense of meeting the public need for
which it was devised?
The
changes it has made certainly suggest as much. It has shed a third
of its workforce, closed 400 mail distribution centers and relaxed its delivery
standards then failed to meet the new, weaker standards. Meanwhile, it has
pursued a variety of side businesses – delivering fish from a fish market and
groceries – that have had, at best, an uneven record.
Amazon likes to
point out that it is making the Postal Service a major player in the
package business and that, of course, the Postal Service belongs in that
business, as it has been since 1912, when Congress changed the law to allow it
to deliver packages so it could break up a cartel of delivery services.
But there is no small cartel of delivery companies now.
There are thousands, specializing in every conceivable niche of this massive
Internet-fueled industry.
If the Postal Service is doing these deals to improve its
bottom line and better fulfill its mission of delivering our mail in a timely
and affordable fashion, then why not open the books?
If it won’t share details of the Amazon deal and explain
how it benefits all Americans, it’s probably because the Postal Service’s
priorities are out of whack.
U.S. Postal Service
Margaret D. Noyes
is the art director & designer for the U.S.
Postal Service, and married to Gregory
B. Craig.
Note: Gregory B. Craig
is married to Margaret D. Noyes, a
trustee at the German Marshall Fund of
the United States (think tank), a partner at Skadden, Arps, Slate, Meagher & Flom LLP, was the White House
counsel for the Barack Obama
administration, and a trustee at the Carnegie
Endowment for International Peace (think tank).
German
Marshall Fund of the United States (think
tank) was a funder for the Carnegie
Endowment for International Peace (think tank).
Open
Society Foundations was a funder for the Carnegie
Endowment for International Peace (think tank).
George
Soros is the founder & chairman for the Open Society Foundations, and was the chairman for the Foundation
to Promote Open Society.
Foundation
to Promote Open Society was a funder for the Carnegie Endowment for International Peace (think tank), and the Brookings
Institution (think tank).
Lee H. Hamilton is
an honorary trustee at the Brookings Institution (think tank), and a
director at the BAE Systems Inc.
D. Michael
Bennett is the SVP for BAE Systems
Inc., and a member nominee for the U.S.
Postal Service.
Vernon E. Jordan
Jr. is an honorary trustee at the Brookings Institution
(think tank), Valerie B. Jarrett’s great uncle, a
director at the American Friends of Bilderberg (think tank), Antoinette Cook Bush’s stepfather, and
a 2008 Bilderberg conference participant (think tank).
Antoinette Cook
Bush is Vernon E. Jordan Jr’s stepdaughter,
and was a partner at Skadden, Arps,
Slate, Meagher & Flom LLP.
Christina M.
Tchen was a partner at Skadden,
Arps, Slate, Meagher & Flom LLP, and is the chief of staff to the first
lady (Michelle Obama) for the Barack Obama administration.
Gregory B. Craig
is a partner at Skadden, Arps, Slate,
Meagher & Flom LLP, married to Margaret
D. Noyes, a trustee at the German
Marshall Fund of the United States (think tank), was the White House
counsel for the Barack Obama
administration, and a trustee at the Carnegie
Endowment for International Peace (think tank).
Margaret D. Noyes
is married to Gregory B. Craig, and the
art director & designer for the U.S.
Postal Service.
German
Marshall Fund of the United States (think
tank) was a funder for the Carnegie
Endowment for International Peace (think tank).
Jamie S. Gorelick
was a trustee at the Carnegie Endowment
for International Peace (think tank), and is a director at the Amazon.com, Inc.
James Carney is
the SVP for Amazon.com, Inc., was
the press secretary for the Barack Obama
administration, and the Washington Bureau chief for Time magazine.
Strobe Talbott was
an editor for Time magazine, and is
the president of the Brookings Institution (think tank).
Lee H. Hamilton is
an honorary trustee at the Brookings Institution (think tank), and a
director at the BAE Systems Inc.
D. Michael
Bennett is the SVP for BAE Systems
Inc., and a member nominee for the U.S.
Postal Service.
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