President Donald Trump on Friday targeted online retailer Amazon in a call for the country’s postal service to raise prices of shipments in order to recoup costs.
The agency, which is completely self-funded through the sale of postal products and services, last reported its earnings on Nov. 17. During its 2017 fiscal year, spanning Oct. 1, 2016, to Sept. 30, 2017, the USPS recorded $69.6 billion in revenue, a decrease of $1.8 billion from the previous year. The postal service reported a net loss of $2.7 billion, a decrease in net loss of $2.8 billion compared with 2016.
In 2017, mail volumes also declined by approximately 5 billion pieces, or 3.6%, while package volumes grew by 589 million pieces, or 11.4%. This increase could be attributed to Amazon orders — the e-commerce giant announced this week that holiday shoppers broke spending records on its platform. Globally, Amazon reported more than 1 billion items ordered during the holiday season. From Thanksgiving to Cyber Monday alone, shoppers around the world bought more than 140 million products from Amazon.
Trump’s solution is simple. The Postal Service “should be charging MUCH MORE!” Trump is right — the USPS is not the best at making deals. Beyond that, some have argued that USPS should be charging more for its packages across the board. A Wall Street Journal op-ed in July 2017 by Josh Sandbulte, a money manager who closely watches the shipping industry, also suggested the Postal Service is probably effectively subsidizing Amazon and other online retailers. Sandbulte’s claim is based on how the Postal Service sets its prices. USPS is not allowed to set prices so low that it loses money on delivering packages. (If it could, it could undercut competitors like FedEx or UPS.) But the formula for how it sets its prices was created by Congress in 2006, and doesn’t account for the fact that packages are a much bigger share of the USPS’s business than they used to be.
Sandbulte drew his conclusions based on a Citigroup analysis that suggested the average USPS parcel should cost about $1.46 more per package across the board than it does right now.
The USPS is the second largest civilian employer in the United States, employing around 640,000 people, so “a 1% change in 10-year treasury rates can cause an increase or decrease in workers’ compensation liability of approximately $2 billion,” the agency said in its 2017 annual report to Congress.
The USPS has over the years introduced modest increases to the costs of shipping. The next rate increase, which will take effect Jan. 21, 2018, will increase the cost of non-commercial postage stamps from 49 cents to 50 cents, and large flat envelopes from 98 cents to a dollar.
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!
— Donald J. Trump (@realDonaldTrump) December 29, 2017