The holiday season is big on traditions: lighted candles, carefully wrapped packages, decorated evergreen trees, and songs as familiar as the alphabet. But plenty changes each year too. Over the last decade, how people purchase their holiday gifts has radically transformed, as more and more people go online rather than to retail stores for shopping. In fact, visits from the postman, arms loaded filled with cardboard boxes, have become as much a sign of the season as wreaths and Christmas carols.
Of course, not everyone is happy with this change, and on December 29th, President Trump called out what he characterized as an abuse of the government-run postal system. He tweeted:
@realDonaldTrump: Why is the United States Post Office, which is losing many billions of dollars a year, while charging Amazon and others so little to deliver their packages, making Amazon richer and the Post Office dumber and poorer? Should be charging MUCH MORE!
The President certainly has reason to be concerned about the Post Office's financial situation: The government entity has consistently lost billions of dollars each year for the last decade and faces over $120 billion in unfunded liabilities.
Yet he is off the mark to blame Amazon and the other big retailers for the institution's fiscal woes. In fact, the Postal Service's Annual Report to Congress shows that package deliver is the one area in which revenues have been increasing, providing a life-line to the government institution that has seen a precipitous decline in its core business of first class mail delivery.
The Post Office's real problem is that it has tremendous fixed costs: USPS spent $6 billion on retirement benefits alone and employs nearly 640,000 workers. The Postal Service's leadership also has a limited ability to reform its operations to make ends meet. Congress and the Postal Regulatory Commission control key aspects of the services that USPS must provide and how much they can charge. In fact, the last Congress rejected a proposal to end Saturday delivery, which was proposed as a way to cut operating costs and help make the Post Office financially solvent.
Amazon and other major retailers have been entering into contracts to make use of the Postal Services infrastructure. They receive discounted rates for the volume of business and for helping streamline the process (such as by presorting mail). Raising prices on these retailers, as the President suggests, would encourage them to find other methods of delivering their packages or encourage them to turn to other providers. As Andrew Harrer writing for CNBC put it:
Amazon really, really doesn't need the United States Postal Service to do business. It can and does use a variety of delivery services — and probably can play those services off each other. In other words: Amazon doesn't need the USPS. The same isn't necessarily true for the USPS.
The more fundamental question that the President and other lawmakers ought to ask is why does the United States still have a government-controlled postal service and micromanage how we deliver individual pieces of mail at all? European countries have successfully reformed and even privatized their postal operations, efforts which the OECD concluded have led to “quality of service improvements, increases in profitability, increases in employment and real reductions in prices.” Surely the U.S. private sector, which already has a robust shipping and delivery industry, could figure out a way to deliver letters without dedicating an entire government agency to that task.
As is so often the case, it's not the businesses that are abusing the system and short-changing taxpayers, but the government-created system itself that is the real problem.