President Donald Trump late Thursday took his first concrete step toward changing the way the United States Postal Services operate after a weeks-long barrage of critical tweets over its relationship with e-commerce giant Amazon.
Continue Reading Below
The president issued an executive order that will create a task force to study the Post Office and its business model, which Trump said needs to be restructured to prevent a “taxpayer-funded bailout.”
While acknowledging its serious fiscal situation, the Postal Service issued a statement late Thursday saying the order provides an opportunity to consider “fundamental statutory reforms.”
“Congress structured the Postal Service to pay for our universal retail, processing and delivery network entirely through the sale of high-quality mail and package products and services, without receiving any tax revenues to support our operations,” the USPS said in the statement. “An open and transparent review process in which the perspectives of all stakeholders are fully represented to develop reform proposals could benefit American businesses and consumers.”
The Postal Service has been hemorrhaging cash for years. During its most recent fiscal year, which ended in September, the USPS reported total annual revenue of $69.7 billion, which was less than the $71.4 billion recorded in fiscal year 2016. The most recent year’s losses of $2.7 billion are down from more than $5 billion in each of the prior two fiscal years. The last time the USPS recorded a profit was more than a decade ago.
Even during its fiscal first quarter, which is typically its strongest of the year because it includes the holiday mailing season, the USPS saw a decline in revenue of $169 million and a net loss of $540 million.
The White House said the service has lost $65 billion since the financial crisis.
In recent weeks, the president has taken aim at the USPS for charging what he views as too little to ship Amazon’s packages, saying those policies are making “Amazon richer” and itself “dumber and poorer.”
As many experts have noted, however, Amazon has little to do with why USPS has been bleeding red ink.
The agency’s packages and deliveries segment was actually one of the few bright spots during the agency’s last fiscal year and through its fiscal first quarter. Package volume expanded by 111 million pieces, or 7%, during the first quarter, and the agency said it “continues to grow its package business.”
Those gains, however, are not enough to offset declines in its mail business, its “main source of revenue and contribution.” During the first quarter, that segment declined by 2 billion, or 5%. Included are cards, letters and first-class mail.
The agency is also drowning in “higher than normal” costs of retiree benefits, including pensions and health care.
The president has suggested that raising shipping costs could help alleviate the USPS’ financial burden. An analysis by Citigroup found that the USPS does in fact charge less than it should to ship packages, which “could make Amazon susceptible to significant USPS price increases.”But a change in prices could ultimately hurt the USPS, considering that Amazon could take its business elsewhere. Its sheer volume of shipments makes it an attractive customer and gives it massive bargaining power.
Another option that has been proposed is privatization, which is something the Trump administration has favored in other circumstances – including parts of the proposed $1.5 trillion infrastructure overhaul and even potentially the International Space Station.