Trump v. Amazon

[GMDino]

Besides the obvious hypocrisy of Trump complaining that someone ELSE isn't paying enough taxes there is his "concern" with the USPS.

This article is from December of 2017.

http://money.cnn.com/2017/12/29/news/economy/trump-amazon-postal-service/index.html

Quote:On Friday morning, President Donald Trump decided to take on the U.S. Postal Service.



"Why is the United States Post Office, which is losing many billions of dollars a year, while charging Amazon and others so little to deliver their packages, making Amazon richer and the Post Office dumber and poorer?" he wrote on Twitter. "Should be charging MUCH MORE!"

The tweet gave Trump the opportunity to slam Amazon (AMZN), which has been a frequent target of his ire. But with the tweet, the president also waded into a long-running, Byzantine debate over how much the Postal Service should charge for its services.


In short: Trump is likely right that the Postal Service charges less than it really costs to deliver packages, and Amazon is one of its biggest customers. But that's not the root of the agency's fiscal problems.

Quote:
[/url]Donald J. Trump

@realDonaldTrump





Why is the United States Post Office, which is losing many billions of dollars a year, while charging Amazon and others so little to deliver their packages, making Amazon richer and the Post Office dumber and poorer? Should be charging MUCH MORE!
9:04 AM - Dec 29, 2017

First of all, the U.S. Postal Service is unlike any other business. It has a government sanctioned monopoly over first-class mail, which it is obligated to send to every corner of the United States for the cost of a stamp.

At the same time, it competes with FedEx and UPS to deliver parcels — but its rates are approved by a board appointed by the president, and almost every aspect of its operations are governed by Congress.


With email replacing snail mail, that first-class mail business has declined dramatically — it's down by 40% since peaking in 2000. Meanwhile, the parcel delivery business has exploded. But the Postal Service hasn't been able to compensate for collapsing mail volumes due to a 2006 law that capped price increases at the rate of inflation and also limited the proportion of its budget that could be devoted to its parcel business.


Related: UPS unveils Saturday delivery -- and 6,000 new jobs


Still, the Postal Service might be able to eke out a profit if it weren't for another way in which Congress has tied its hands: It requires the agency to pre-fund its retiree health benefits and count them as operating expenses. In fiscal 2016, the Postal Service brought in $69.4 billion in revenue, was liable for $5.8 billion in retiree health benefits and reported a $5.6 billion net loss.


It makes sense to look to package delivery as a way to turn those fortunes around.


An analyst note by Citigroup from April found that prices would have to go up by $1.41 per package in 2018 — or about 40% — to reflect the true cost of delivery. (Those calculations are based on an analysis by UPS (UPS), which along with FedEx (FDX) stands to gain enormously if the Postal Service raises its prices, so they should be taken with a grain of salt.)


That could be a big hit to Amazon, which is one of the largest users of that parcel delivery service. The Citigroup analysts estimate that would add $2.6 billion to its current shipping costs, an increase of about 28%. Amazon did not respond to a request for comment.


Perversely, that could end up benefiting the Seattle retail behemoth. According to Citigroup, Amazon already gets bulk pricing discounts because of its enormous volume, and is rapidly building out its own distribution network, which will give it more delivery options down the line. For that reason, the Citigroup analysts predict that a Postal Service price hike would hurt other retailers more than Amazon.


"Such a scenario should further increase Amazon's cost advantage to consumers," Citi's note reads. "While the higher shipping costs would likely hurt Amazon's margin in the short-term, increased purchase frequency and customer density should benefit margins over time."


Related: Trump budget would hit tens of thousands of federal workers


So, is any of this going to happen?


In the short term, partially. The Postal Regulatory Commission just completed a year-long reviewof rate-setting policy, and recommended that the Postmaster General be given the authority to raise rates a couple percentage points above inflation, which could bring the agency closer to breakeven.


Meanwhile, the Postmaster General has urged passage of legislation pending in Congress that would give the agency more control over its operations and relieve it of the burden of pre-funding health benefits. Looking forward, a coalition of unions and public interest nonprofits have advocated for allowing the Postal Service to provide other services, such as banking, through its vast network of post offices.


Trump has sway over the Postal Service. He's made three board nominations, who are currently awaiting Senate action. By law, it's supposed to have nine appointed members, and currently it has none.

And more recently it turns out (shockingly) that Trump is wrong/doesn't understand what he is talking about:

https://www.cbsnews.com/news/amazon-contract-with-usps-fact-checking-trumps-tweet-about-amazon-and-the-post-office/

Quote:President Trump fired off a tweet at Amazon on Thursday, alleging that, among other things, the company's use of the postal service causes "tremendous loss to the U.S."


Mr. Trump has previously blasted Amazon for making the postal service "dumber and poorer."

Quote:
Donald J. Trump

@realDonaldTrump



[url=https://twitter.com/realDonaldTrump/status/979326715272065024]

I have stated my concerns with Amazon long before the Election. Unlike others, they pay little or no taxes to state & local governments, use our Postal System as their Delivery Boy (causing tremendous loss to the U.S.), and are putting many thousands of retailers out of business!
7:57 AM - Mar 29, 2018

There is little to these claims. While the postal service is struggling, it's not because of Amazon. In fact, package delivery is one of the few lines of business that's growing.

The postal service has lost money for 11 straight years, mostly because of pension and health care costs. In 2017, the service lost $800 million on $69.7 billion operating revenue. Under a 2006 law, it must pre-fund 75 years' worth of retiree health benefits. Neither the government nor private companies are required to do that. (It has defaulted on those payments periodically, with the last one made in 2015).

A widely cited Citigroup analysis from last year holds that the "true" cost of shipping packages for the Postal Service is about 50 percent higher than what it currently charges. "It is as if every Amazon box comes with a dollar or two stapled to the packing slip -- a gift card from Uncle Sam," read the ensuing editorials.

But Citi arrived at that figure by re-allocating the Post Office's benefits costs -- not the costs specific to package delivery.

The 2006 law also mandated that each line of business within the postal service cover its attributable costs. In other words, for the postal service to lose money on package delivery would be against the law.

How much does Amazon pay the postal service?
Amazon ships enough with the post office to qualify for bulk rates, giving it a significant volume discount that varies depending on package weight and number. (Here are the postal service's latest rates.)

Amazon uses FedEx and UPS as well as well as its own fleet of carriers, but it often relies on the post office for 'last mile' delivery -- bringing a package to a customer's door.

The post office in 2013 started to make Amazon deliveries on Sunday, but the agreement detailing those arrangements remains heavily redacted.

Amazon has denied benefiting from postal service favoritism. "The Postal Regulatory Commission has consistently found that Amazon's contracts with the USPS are profitable," the company told Fortune last year.

Packages and shipping are one area that's growing for the postal service, bringing in more than $19 billion in revenue last year even as volume of letters and magazines declined. In fact, its projected revenue growth "is driven entirely by increases in shipping and packages," the postal service said in its latest annual report.