Apr 24, 2020 - Economy & Business

Trump tightens the Postal Service squeeze

Illustration of an envelope with a return to sender stamp across the front
Illustration: Aïda Amer/Axios

President Trump threatened on Friday to veto any new coronavirus legislation that includes funding for the U.S. Postal Service if it doesn't raise the price large companies, like Amazon, pay for a package "by approximately four times."

Why it matters: USPS is facing widening losses amid the coronavirus pandemic and could run out of money by the end of year if Congress fails to rescue it in the next stimulus package.

  • Meanwhile, some Trump administration officials see the agency's struggle for survival as an opportunity to reform USPS, or even go as far as privatizing it.

What Trump's saying: "The Postal Service is a joke because they’re handing out packages for Amazon and other internet companies, and every time they put out a package, they lose money on it," he said in the Oval Office Friday.

  • "The Post Office should raise the price of the packages to the companies, not to the people ... if they did that it would be a whole different story."
  • "If they don't raise the price I'm not signing anything," he concluded.
  • Trump later softened his comments on Twitter, writing: "I will never let our Post Office fail. It has been mismanaged for years, especially since the advent of the internet and modern-day technology. The people that work there are great, and we’re going to keep them happy, healthy, and well!"

Reality check: Contrary to Trump's claims, the Postal Service is not losing money when it delivers a package for Amazon or other companies — it can't.

  • By law, the agency is barred from charging delivery prices below what it costs the agency to fulfill them. So at worst, the USPS is breaking even on these arrangements.

What we're hearing: Saving the Post Office is a top Democratic priority in the next coronavirus relief package, but GOP leaders are less committed.

  • On a Senate Democratic conference call Tuesday, Senate Minority Leader Chuck Schumer promised to push for more money for USPS, per a person on the call.
  • A spokesman for House Speaker Nancy Pelosi also told Axios that, while the first stimulus bill included roughly $10 billion for USPS, the White House refused her request to add even more funding — but it continues to be a top priority in negotiations over the next package.
  • A Senate GOP aide told Axios that Senate Majority Leader Mitch McConnell has made clear that any new coronavirus policy "will be thoroughly debated by Congress in person" and that "the Postal Service space certainly [is] going to be part of that, not because we want to focus on it but because the Democrats will want to."
  • Treasury Secretary Steven Mnuchin said Friday that the administration will create new criteria for any new postal reform program.

How we got here: The postal service has been juggling revenue declines and mounting losses for years.

  • USPS revenue has been decreasing. First class mail has been declining since its peak in 2001, coinciding with the internet’s ubiquity, contributing to mounting losses.
  • And a 2006 law forced the USPS to pre-fund health benefits for current and future retirees. No private business or government agency has this exact obligation.

How the USPS makes money: Unlike other government agencies, the Postal Service is self-funded via fees it charges for its various delivery services.

  • Those include First Class mail, marketing mail, and packages.
  • It also provides last-mile delivery to logistics companies like Amazon, FedEx, and UPS to harder-to-reach areas.
  • In 2019, the postal service brought in $71.1 billion in operating revenue, with $28.8 billion of that from shipping and parcels, the only category that grew from the prior year. It also netted an $8.8 billion loss for the year.

Between the lines: Can’t we just have FedEx and UPS for all our mail? Perhaps, but even those companies use the USPS for some of their business, in part because it’s more efficient to reach more remote areas.

  • The USPS even delivers about 40% of Amazon packages in the US, according to some estimates.

The postal service is the only way for some Americans to access important resources and services, largely because it's required to deliver to every address in the country.

  • These include medications and government communication like this year’s census forms — as well as stimulus checks for people who don't have a bank account on file with the IRS.
  • And it’ll be crucial to voting as we head towards the presidential election in November, given that the coronavirus is still likely to be with us and there’s no clarity yet as to whether it’ll be safe to vote in person.

The bottom line: A failure to intervene would have serious repercussions on fundamental activities like voting, not to mention adding to the widespread unemployment.

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