Posted on 04/12/2018 9:02:44 AM PDT by Kaslin
Critics might be right that President Trump is more interested in attacking the Washington Post than the Amazon/U.S. Postal Service shipping deal. But Trump is right that the deal is a bad one for the Postal Service and for U.S. taxpayers.
As I wrote last September, Amazon has a deal with the Postal Service to handle the last mile of delivery for its packages. Even though Amazon presorts most of the packages and prepares them for delivery at its depots, the Postal Service has continued to improperly allocate its costs, which has resulted in undercharging Amazon for delivery of those packages by $1.46 per unit.
The Postal Service also spent $200 million three years ago to furnish carriers with 270,000 Internet-connected handheld scanners needed for real-time package tracking and $5 billion to replace 190,000 deliver vehicles to better serve the needs of Amazon and other package customers.
Everyone involved understands that package delivery is and will continue to be a big part of the Postal Service’s future. First-class mail – the Postal Service’s most profitable product – has declined in volume by 40 percent since 2001 as Americans have learned to pay bills and send party invitations over the Internet and order products to be delivered in packages by the Postal Service.
That’s why it is so important to get these deals right. The agency has lost more than $65 billion since 2007 and expects to lose about $6 million more this year.
Packages are about a third of the Postal Service’s business now and about a fifth of its revenues. USPS also now delivers two-thirds of Amazon’s packages. Yet it is required to allocate only 5.5 percent of total fixed costs – everything from labor, transportation, infrastructure, sortation equipment, and much more – to packages and similar products. These costs are projected to rise further as larger trucks, higher fuel bills and more demanding delivery schedules are imposed through the Amazon deal.
If the true costs were passed along, the Postal Service would need to add $1.46 to the price to break even. It’s certainly a deal that none of Amazon’s shipping competitors can touch.
Thus, as CitiGroup pointed out in its analysis of postal finances, the “boom in parcel volume over the past several years has coincided with a steady deterioration in the USPS’ financial health” and “many consumers have been conditioned to expect shipping solutions which are not supported by economic activity.”
Some, such as Sen. Elizabeth Warren, D-Mass., want the Postal Service to close its shortfalls by potentially expanding into financial services for customers, which could mean providing ATMs and perhaps even making small consumer loans.
The suggestions by Warren and others on how to fix the Postal Service point to a reality critics of Trump’s tweets will not acknowledge – taxpayers are on the hook for these sizable losses. The Postal Service has burned through a $15 billion line of credit that it was granted in the last major postal legislation in 2006. It also has not paid a dime of its pension costs since 2011.
The Postal Service has three retirement plans with more than $350 billion in assets, but they are invested only in low-interest government bonds. Congress should allow it to investment in a more diversified manner, as is done by private companies and state governments.
President Trump is a businessman who knows a bad deal when he sees one. Regardless of one’s suspicions about the president’s ulterior motives with the Washington Post, it is impossible to ignore that the Amazon deal may be driving up volume for the Postal Service, but it is dealing a devastating financial blow.
That’s worth addressing no matter what President Trump and the Washington Post think of each other.
I remember a mail man friend of mine, about 18 years ago, telling me that if not for junk mail, he wouldn’t have a job.
It’s a shame that with the explosion of online shopping, the USPS seems to be utterly incompetent at capitalizing on it.
I saw this Amazon gay ad on TV yesterday, really in your face nauseating stuff. Avoid Amazon or use them as a search engine for products and then buy direct from the supplier who turns up in the search.
Turn the USPS into a social media and online bill pay site.
Here’s a chart of “historical employment” at the USPS
https://about.usps.com/who-we-are/postal-history/employees-since-1926.pdf
As you can see, it has dropped precipitously since 1999. But I have read where even the current number is double what it should be based on business activity. And just think of the massive retirement costs that are going along with this decline in employees, leaving the taxpayer with yet another huge bill to pay, because you have to believe that in addition to the 250,000 that have left because of reduced demand, many others have just retired. I am betting we are paying for the retirements for as many as a half a million people.
I Paid $7.30 to mail a large envelope from N Nevada to So Calif yesterday-—8.30 oz—about 450 miles. 3 days before delivery.
Amazon gets those kinds of shipping prices? No wonder I am paying so much.
“...by potentially expanding into financial services for customers, which could mean providing ATMs and perhaps even making small consumer loans.”
I wouldn’t use USPS loan or ATM services.
Have a problem at the ATM machine or with your loan payment? Throw in USPS inefficiency along with their good old government “I’m on union mandated break” attitude...good luck getting it straightened out.
“I remember a mail man friend of mine, about 18 years ago, telling me that if not for junk mail, he wouldn’t have a job”
I am really really bad with mail. About every six months I finally crack and go through the pile. Literally, without exaggeration, I toss 8 big hefty bags out and average 1 or two letters that are important . What a colossal freakin waste of resources
The US Mail service (1.8.7) should be able to contract with delivery services as much as defense contractors work with the Pentagon imo.
But I also agree with Pres. Trump that Amazon shouldn’t be ripping off taxpayers.
Insights welcome.
I recently ordered 200 feet of hot-dip galvanized chain, with “Free Shipping”
A week later I received two USPS Priority Mail - Flat Rate Boxes (”If it Fits, it Ships!”) with my chain.
“Priority Mail Large Flat-Rate Box $13.95 12-1/4” x 12-1/4” x 6” “
As you might imagine, I had a time even picking up one of the boxes. The shipping manager at the Chain Company deserves a bonus. The USPS might want to review their rates.
Our local postman needs a back brace and a year’s free membership in the local chiropractor club!
Yes, it looks like a clear case of discrimination to me.
Favoring one company at the expense of all others. Crony progressive capitalism!
SS1
How much is stupidity; how much is corruption?
How big a bribe would a bureaucrat get for signing on to a deal that loots the USPS?
It is absurd to claim that Amazon is "ripping off taxpayers."
Amazon doesn't set the price they pay. The negotiate it. The Post Office was already used to losing money on Bulk Mail and they obviously continued the tradition with Bulk Packages. Who would expect Amazon to suggest that they are not being charge enough by the Post Office, or any vendor?
ML/NJ
I’m not so sure the USPS is losing money on its Amazon deal. If you simply take their cost of doing business and divide it by the total number of units they deliver, it’s true that Amazon may pay less than this unit cost. But a lot of these USPS costs are fixed costs they’d be paying regardless of whether or not they delivers anything for Amazon. To examine this objectively you really need to look at just the incremental added cost of the Amazon deliveries, not the total cost for the USPS.
one of the best thing someone taught me about mail is to never let it go through your hands twice.
have a can by the door, pitch the junk as it comes in, open and deal and pay the mail that needs attention, right away. I have the can by the door, and my check book too. nothing ever leaves the hall, and there is no mess.
Thanks for replying.
Pres. Trump has undoubtedly studied the numbers on this Amazon / USPS deal and I trust his expert analysis.
So Jeff Bezos is not only the richest man in the world, now he is the meanest and strongest for intimidating and threatening those poor little Postal Managers into making a deal where the USPS loses money!
Maybe Pres. Trump should replace the upper managers at the USPS and hire some of Amazon’s people to do the job.
I have a close friend that bid and won mail delivery for rural routes. Her bid was based on what was expected for normal mail. All of the sudden, she was required to begin delivering a very significant increase in packages — you guessed it, Amazon packages. And, she was paid no more because of the increase even though the USPS had made a deal they knew would significantly increase her workload. So Amazon gets a great deal and the person on the ground gets screwed. Sounds about right.
I know personally that the USPS is horribly mismanaged and has been for decades.
A few easy decisions there could help fix that enterprise.
Most effective would be to stop the 6 days per week delivery of junk mail. People did not receive mail every day until many decades after the Constitution commissioned the Service. It is not Constitutionally required.
The Post was a ‘natural monopoly’ back in the day and everybody gets their mail for the same price, no matter where they are. Fed Ex and UPS just say no to that nonsense, let the USPS get it. No profit there, a financial disaster subsidized by us all.
Unions in the USPS are an insane idea. Eliminate them.
I don’t believe he’s studied the numbers at all. It would be a giant waste of his time to do that.
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