President Donald Trump threatened to block aid to the U.S. Postal Service unless it raises the price of shipping a package by "approximately four times." Some analysts believe that idea could drive further business away from the postal service though, especially as internet retail giant Amazon could decide to ship even more packages on its own. Lawmakers have tried to include relief for the USPS in coronavirus relief bills, but were only able to get a $10 billion loan in the CARES Act signed into law last month.
"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," Trump said in the Oval Office Friday as he signed a coronavirus relief package for small businesses and hospitals, reports Axios. "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." Trump added that if the Post Office does not raise prices, "I'm not signing anything."
On Friday afternoon, Trump took to Twitter, where he claimed he would not let the Post Office fail. "I will never let our Post Office fail," he wrote. "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!"
Earlier this month, sources told the Washington Post the president threatened to veto the CARES Act if money going directly to the USPS was included. Lawmakers hoped to include a $13 billion bailout, but the final version signed by Trump only included a $10 billion loan from the Treasury Department. The USPS, which is only funded by its services and not taxes, has said it will struggle to keep operations going through September as the coronavirus has only worsened its finances.
As the Washington Post explains, package deliveries makes up 30% of its revenue, but just 5% of its total volume. Package volume jumped by 53% last week compared to the same period in 2019 while people are stuck at home, putting in more orders. However, officials said revenue has plunged by a third as catalogues, real estate ads and other business mailings have dropped off. Packages alone have simply not made up the difference.0comments
Analysts who spoke with the Post feared that Trump's idea of forcing the USPS to suddenly quadruple shipping costs would only make the problem worse. The high costs would drive Amazon to ship more product themselves. Customers might also be less likely to use USPS services due to the price hike. In addition, as Axios points out, the USPS is barred from charging for delivery below costs, so the worst USPS can do is break even.
"This is about as catastrophically stupid an idea that anyone could ever imagine,” Mark Cohen, director of retail studies at Columbia University Business School, told the Post. "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."