APRIL 24, 2020
WASHINGTON, D.C. – President Trump on Friday threatened to block an emergency loan to shore up the U.S. Postal Service unless it dramatically raised shipping prices on online retailers, an unprecedented move to seize control of the agency that analysts said could plunge its finances into a deeper hole.
“The Postal Service is a joke,” Trump told reporters in the Oval Office. To obtain a $10 billion line of credit Congress approved this month, “The post office should raise the price of a package by approximately four times,” he said.
Trump for years has alleged the Postal Service has charged too little for packages and personally pushed the head of the agency to charge far more to ship goods for big online retailers. Several administration officials, speaking on condition of anonymity, have said Trump’s criticism of Postal Service rates is rooted in a desire to hurt Amazon in particular. They have said that he fumes publicly and privately at Amazon’s founder Jeff Bezos, who also owns The Washington Post, for news coverage that Trump believes is unfair.
But raising USPS prices so sharply may not have the impact the president desires, analysts said, as it would put postal services prices far above those of UPS and FedEx, allowing them to raise prices a little and still gain market share, they said.
“This is about as catastrophically stupid an idea that anyone could ever imagine,” said Mark Cohen, director of retail studies at Columbia University Business School. “As if anyone from Amazon to the local mom and pop delivery businesses would ever put up with a rate increase like that when they have alternatives.”
Jon Gold, the vice president of supply chain and customs policy at the National Retail Federation, said in a statement that higher prices would “significantly hurt rural communities and small businesses in addition to USPS.”
“Retailers and consumers are heavily relying on USPS during the pandemic to deliver goods, as bricks-and-mortar stores are temporarily closed,” Gold said.
Trump’s proposal could hit Amazon harder than other shipping companies because it cannot as easily pass costs onto consumers. It also contracts more often with USPS for “last-mile” service — or deliveries between warehouses and homes.
But a dramatic spike in USPS package rates could push the e-commerce giant to do more last-mile shipments on its own. Amazon already delivers close to half of its own shipments. Before the pandemic, it was on pace to deliver more packages annually than either UPS or FedEx by 2022, according to Morgan Stanley.
Such a price increase would also hurt a broad swath of businesses, including brick-and-mortar retailers and other Amazon rivals, which have turned to the Postal Service to get goods to consumers after the pandemic closed down many malls and physical stores.
“Raising rates like that on the post office, which is a thinly veiled attempt to get at Bezos, will merely result in Amazon and other shippers moving their business,” Cohen said. “It will kill the post office.”
The Postal Service has not taken federal funding since 1970, operating instead from revenue it raises from stamp sales and other products. But it has struggled as first-class mail plummeted in the Internet era, and is burdened by a congressional requirement to pre-fund its health benefits for retired employees. The agency has stopped making those payments. As it has run up multibillion-dollar debts, Congress has debated new subsidies and business plans to lessen its financial problems — but never agreed on a solution.
Delivering packages has been a good business for the Postal Service, making up just 5 percent of the Postal Service’s volume, but accounting for 30 percent of its revenue. And package volume jumped 53 percent last week, compared with the same period in 2019, as a homebound nation dives into e-commerce for groceries, prescriptions and household essentials.
But overall, the pandemic has worsened the agency’s finances as catalogues, real estate ads and other business mail have spiraled down. Postal officials say revenue has plunged by almost a third, and growth in package business has not been able to compensate for the other losses.
The Postal Service repeatedly has defended its arrangement with Amazon, saying it gets fair rates for the services it provides in a highly competitive environment. But Trump has doubted those statements.
“They’re handing out packages for Amazon and other Internet companies, and every time they bring a package, they lose money on it,” Trump said on Friday. He also accused post office officials of being “very cozy” with big online merchants.
“If they don’t raise the price of the service they give, which is a tremendous service, and they do a great job and the postal workers are fantastic — but this thing’s losing billions of dollars,” Trump said. “If they don’t raise the price I’m not signing anything, so they’ll raise the price so that they become maybe even profitable but so they lose much less money, okay? ”
His comments are drawing the Postal Service into a political showdown. The agency says revenue have dropped down by close to a third during the pandemic.
Lawmakers, postal unions and other entities that rely on the post office accused the president of exploiting the pandemic to punish his enemies.
House Speaker Nancy Pelosi (D-Calif.) said the president was trying to starve the Postal Service so he and his allies can turn it over to a private company.
“Right now, I see a big danger for our country in the form of the administration’s interest in privatizing the post office,” she told reporters. “This is just about somebody on the outside making money off the post office instead of recognizing the important role [it] plays.”
Under the $2.3 trillion coronavirus stimulus relief passed last month, Treasury was authorized to loan $10 billion to the USPS, which says it may not be able to make payroll and continue mail service uninterrupted past September.
Treasury Secretary Steven Mnuchin rejected a bipartisan Senate proposal to give the Postal Service a bailout amid the negotiations over that legislation, a senior Trump administration official and a congressional official previously told The Post.
Any decision on higher package rates as a condition of the Treasury loan would be up to the agency’s board of governors, which currently has five Senate-confirmed members appointed by Trump.
“If you raise prices by 400 percent, people are no longer going to be able to mail packages — or they will move to the Postal Service’s competitors,” said Art Sackler, a longtime lobbyist for mailers, postal shippers and suppliers.
After months of attack on Amazon early in his term, Trump commissioned the Treasury Department to lead a task force on the post office’s financial troubles. In a December 2018 report, the task force concluded that the agency “is on an unsustainable financial path” and recommended restructuring that included higher package prices and labor concessions that called for a shift to nonunion employees in some parts of agency operations.
Since becoming president, Trump has taken an unusual interest in the Postal Service, according to current and former aides. He has asked for detailed briefings on the agency’s finances and operations and has complained repeatedly to senior aides about its status as a financial “loser,” the aides said. Mnuchin, whose agency has provided many loans to the post office as its fortunes sank — loans with no strings attached except interest payments — took on the challenge of getting Trump what he wanted.
“[Trump] is interposing his own flawed judgment for a very complex, technical enterprise that serves at least a $2 trillion industry,” said Rep. Gerald E. Connolly (D-Va.), who chairs the House subcommittee in charge of postal oversight. “It’s one of the most important services in America. It serves every business and every household and it has a workforce of 630,000 people who put themselves at risk every day on behalf of the American population. And he’s willing to risk it all because he’s got a bugaboo in his mind that Jeff Bezos and Amazon are getting a good deal.”
Former Army secretary John McHugh, chairman of the Package Coalition advocacy group, said in a statement that Trump’s proposal would raise prices for consumers, small businesses and rural communities.
“Now, when Americans need affordable and reliable package delivery service more than ever, Congress must fight to guarantee emergency relief for the Postal Service and stop this package tax,” he said.
Courtesy/Source: Washington Post
