U.S. Postal Service Undercharges Amazon for Shipping…and Loses $1.3 Billion in 3 Months: 10 Shocking Facts You Should Know

U.S. Postal Service Undercharges Amazon for Shipping…and Loses $1.3 Billion in 3 Months: 10 Shocking Facts You Should Know

The U.S. Postal Service (USPS) is financially hemorrhaging … wasting your tax dollars … and heading for a massive $65 billion taxpayer bailout.

Why?

Because of the inefficient and self-serving actions of:

  • The American Postal Workers Union
  • Politicians who crave union political contributions
  • The postal bureaucracy
  • Hostility and ignorance from all of the above about the importance of direct mail used by thousands of businesses

Here are 10 frightening facts about the severely dysfunctional USPS…and what must be done to save taxpayers and consumers from a massive bailout.

Fact #1: In the first 3 months of 2018, the USPS suffered a $1.3 billion loss … compared to a $562 million loss in the same period last year.

The loss for October through December of last year – the quarter when mail and package delivery jumps for the Christmas holidays – was a “mere” $500 million…

That adds up to a total loss of $1.8 billion over a 6-month period…

This is money that you and I – and all taxpayers – must pay back.

Fact #2: The United States Postal Service (USPS) has lost $65.1 billion…that’s right, billion…over the last 11 fiscal years.

No private company could stay in business if it lost an average of nearly $6 billion every year for 11 years…

But government agencies don’t have to operate profitably.

Bureaucrats don’t care if they lose money because they know taxpayers will always bail them out … whether they want to or not.

USPS bureaucrats don’t care that:

  1. Their government-mandated business model is unsustainable.
    * Total operating revenue grew 1.4% last year…but operating expenses increased by 5.7%.
  2. Legislation requires the Postal Service to prefund 75 years-worth of retiree health benefits.
    * Retiree health benefits increased 60% last year … Unfunded retirement benefits increased 142%.

All they care about is collecting their paychecks and keeping their cushy taxpayer-funded benefits.

Fact #3: The USPS grossly undercharges for package delivery … and gives additional special treatment to Amazon.

Take a look at these shipping rates for domestic U.S. delivery of a standard 2-pound box-shaped package:

  • USPS – $10.80
  • UPS – $18.25
  • FedEx – $18.66

That’s a huge, unfair difference…

USPS claims it’s package delivery service is profitable despite the disparity between what it charges and what UPS and FedEx charge…

That’s because Congress has prohibited USPS from setting its parcel prices below its costs … but the formula Congress established in 2006 for calculating the share of infrastructure costs associated with package delivery is wrong – it doesn’t adjust for the fact that package delivery is a much larger share of USPS’s business in 2018 than it was 12 years ago.

Translation: USPS package revenue covers its direct costs … but not its overhead costs.

Here’s an example of how this works:

I own an advertising agency…

If I charge – let’s say – $7,000 for an advertising service, I could say it was profitable because the revenue would cover my direct costs for copy and artwork. But it wouldn’t cover my utilities, rent, salaries, insurance and other overhead costs.

So, if I operated my business that way, I’d lose money every year … just like the USPS.

But unlike the USPS, I’d be forced out of business … or be forced to declare bankruptcy.

On the other hand, if I charge $20,000 for the same advertising service, I not only cover all my indirect costs as well as my direct costs … but I have profits left over to invest in new technology and to grow my business.

The USPS needs to price its package delivery service in the same way as a business such as FedEx or UPS does…

And it needs to stop giving Amazon an even greater discount than what it’s giving to all package delivery across the board.

An independent study conducted by Citigroup last year found that USPS should be charging $1.46 more per package just to break even with actual costs.

If USPS had charged Amazon just the amount per package that covers its true costs, the additional revenue from the 480 million packages Amazon shipped through USPS would have wiped out the $1.3 billion loss for the last fiscal quarter.

Only an independent audit will reveal the secret Amazon discount they are getting from USPS.

Fact #4: The USPS management team is nonexistent.

The USPS is supposed to be run by an 11-member Postal Board of Governors:

  • 9 members appointed by the President and approved by Congress
  • The Postmaster General and Deputy Postmaster General

The Postal Board of Governors has the following primary responsibilities:

  • Advise the Postal Service on management
  • Approve rate hikes
  • Fire the Postmaster General if necessary

The board must have 6 members to have a quorum.

Currently, they only have two members: the Postmaster General and the Deputy Postmaster General. The other nine seats are vacant.

Why?

The Senate blocked several candidates nominated by former President Obama.

President Trump has nominated 3 board members – including the agency’s former inspector general – but the seats are still vacant.

Senator Bernie Sanders (I-VT) has blocked nominees because of the postal unions – and because he believes “they would slash jobs and outsource one of America’s oldest institutions to private companies.”

No new governor has been approved by Congress since 2010 … leaving the USPS to make decisions in its own self-interest.

In fact, the Board of Governors has taken full advantage of this circumstance…

Without a quorum, the Board established 3 new rules out of thin air:

  • Hiring, firing, and postal rates can be decided without a quorum.
  • No specific number of governors are needed to make decisions.
  • A “Temporary Emergency Committee” has been established giving the Postmaster General and his top staff complete authority.

It’s absolute authority with no oversight or accountability.

So, without a quorum, the Postal Service hiked rates anyway on January 20th, 2017 … hurting itself in the long run…

How?

Raising postal rates results in 3 consequences:

  • It harms businesses that rely on the mail to generate sales—and jobs.
  • It reduces the quantity of mail sent – both marketing mail and first-class mail.
  • It reduces revenue rather than increasing revenue.

And yet they plan to hike rates again this year … without a legal quorum.

Fact #5: The postal bureaucracy is archaic, resistant to change.

Overstaffed, fighting automation and resistance from powerful postal worker unions, the postal bureaucracy has become wasteful and inefficient.

They make decisions not based on market need and business reality … but based on what pleases bureaucrats, unions, and politicians.

For example, in 2014 the Postal Service set up an agreement with Staples that allowed its employees to operate post office desks inside Staples’ retail outlets.

It was convenient and popular with Staples customers … but not with the American Postal Workers Union.

The union immediately began staging protests at selected Staples outlets … and eventually succeeded in obtaining an order in 2016 by a National Labor Relations Board Administrative Law Judge to discontinue the program.

Fact #6: The Postal Service is a government-protected monopoly in need of competition.

Monopolies don’t work – especially the bureaucracy monopoly…

Only choice and competition can create efficiency and progress.

If the auto industry, the computer industry – including email and texting – and eye surgery were bureaucratic monopolies, their products would be very expensive, second-rate, and immune to positive change.

If the horse and the buggy industry were protected the way the Postal Service is, we’d be riding horses instead of driving high-powered cars…

We’d have giant computers like in the 1960s, not iPhones in every home…

We’d have government-approved glasses, not Lasik.

The USPS has tried to stop innovations and advances in postal delivery…

Years ago, it tried to stop UPS, FedEx, and other private delivery services…

Fortunately for businesses and consumers, the government monopoly failed.

Then the USPS tried to control email … but fortunately for businesses and the consumer, they failed.

Fact #7: Post offices have fallen into desperate disrepair…creating even more debt.

Nationwide, post offices are a wreck.

Even the USPS Office of Inspector General has said that the majority of facilities nationwide violate security and building codes…

And nearly half of them violate cleanliness and maintenance guidelines.

Many buildings have been found to be infested with mold, bugs, or rodents … and even have foliage growing inside the facility.

Plus, most post offices do not even maintain a customer complaint log … meaning that most issues go unresolved and unacknowledged.

Fact #8: The Post Service shouldn’t be controlled by Congress.

Much of the dysfunction is caused by the United States Senate and House.

Individual members of Congress prevent the free market from working:

  • They prevent the closure of inefficient postal facilities.
  • They prevent the hiring of good people.
  • They block implementation of technical improvements.
  • They act to please their union donors rather than to benefit the American people.

Fact #9: The Postal Service wants to increase postal rates…bad for thousands of businesses.

The Postal Service’s solution to its massive debt is to hike rates 34-41% over the next 5 years – with or without approval from Congress or from the Postal Board of Governors.

These price hikes aren’t permitted under the 2006 Postal Accountability and Enhancement Act – the major law that governs the Postal Service.

This colossal increase in prices will hurt thousands of small and large businesses that rely on direct mail.

It will also hurt magazines and newspapers.

Already, new postal rates are hitting businesses, killing jobs and commerce…

Rate hikes cause at least 3 unintended consequences:

  1. fewer mailing pieces
  2. less revenue
  3. a larger deficit

The last postal rate hike was a huge job killer—and the post office, the consumer and business were the victims…

Many direct mailers drastically cut back on their efforts to obtain new customers – to the tune of $181 million last year.

My direct-mail clients of my advertising agency won’t send as much direct mail – and some won’t send any – with the coming hike.

They’ll lose new clients and experience less revenue from existing clients.

The clients’ prospects won’t get their special offers. They’ll lose a great product.

And instead of the Postal Service generating increased revenue, it will generate less.

Bad policy. Less mail. Less revenue. Everyone loses.

Fact #10: The solution to the USPS mess is competition and choice.

The USPS is hurting the American economy and jobs….and it’s hurting taxpayers.

The proposed change by the Postal Service means continued inefficiency … massive multi-billion-dollar debt … and more measures that hurt consumers and weigh heavily on taxpayers.

There’s a better solution…

Like Obamacare, a repeal and replace system must be established for the USPS.

The dysfunction can’t be fixed without major, immediate reform…

A well-planned transition is needed.

President Trump has gotten a good start by nominating 3 new individuals to the Board of Governors.

But even if all 3 of his nominees are approved by Congress, the Board still won’t have a quorum.

He needs to nominate at least 1 more candidate … preferably 6 more.

Here are further steps President Trump must take so that everyone wins:

  • Work non-stop and quickly to make changes. Ignore the bureaucracy, unions, and politicians.
  • Fight against this proposed change to hike up postal rates.
  • Fire bad personnel and downsize departments.
  • Nominate members to the Board of Governors and hire staffers who understand business, competition and job creation.
  • Change the dysfunctional rules.
  • Privatize the Postal Service.
  • End the mail monopoly and stop the waste.

Not only is the USPS going bankrupt … but their wasteful incompetence and abuse is hurting business owners, consumers, and jobs.

There can be no delay. Trump needs to act now to Make Postal Delivery Great Again – or at least tell the mail monopoly: “You’re Fired!”

Contact your representatives right now and tell them: “Reform the postal service now!”

 

What do you think? Write me at craig@cdmginc.com

 

Here are the rest of this week’s articles:

 

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