President Trump Criticizes USPS-Amazon Relationship On Twitter
ROBERT SIEGEL, HOST:
And now a reading of a President Trump tweet from this morning. Quote, "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." And there's an exclamation point at the end, and much more is in all caps. The U.S. Postal Service reported a $2 billion loss in the third quarter of the year, and it does have a $15 billion outstanding debt. That's the statutory limit.
Devin Leonard is a staff writer for Bloomberg Businessweek, and he's the author of a book about the Postal Service. And he joins us now. Welcome back to the program.
DEVIN LEONARD: Thanks for having me, Robert.
SIEGEL: The president is likely referring in that tweet to a deal between the U.S. Postal Service and Amazon by which the company uses the Postal Service to finish what's referred to as the last mile of delivery. Mail carriers are delivering millions of Amazon packages every day. What do we know about this agreement, how it actually works?
LEONARD: Well, the president's right that USPS, the United States Postal Service, is subsidizing Amazon. Amazon's built these sorting facilities all over the country, and they deliver packages from these sorting cities to post offices, the closest post office to where the package is going. And they're paying the Postal Service. Neither Amazon nor the Postal Service will - you know, will disclose the amount. But Wall Street analysts estimate it's about an average of $2 per package, and that's about half of what they pay UPS or FedEx. So it's a pretty good deal for Amazon.
SIEGEL: Is it less than what I would pay if I sent a package with the U.S. Postal Service?
LEONARD: It is because the difference is, Robert, is that you go to the post office and you hand your package to a clerk and then they have to do all the sorting and all that stuff, whereas Amazon does that all itself.
SIEGEL: Well, is Trump on to something? Is Amazon getting a very good deal out of the U.S. Postal Service? Or is the U.S. Postal Service getting a good deal out of Amazon?
LEONARD: Well, I think Amazon is doing better than the United States Postal Service. But the folks at the United States Postal Service say they are turning a profit, you know, on all of these packages. And if there's one thing they need right now, it's some sort of profitable business because as you mentioned before, they're losing a billion dollars a year.
SIEGEL: Trump's tweet called for the Postal Service to raise the rates. Would a rate increase work? Or would Amazon just move more of its operations to private shippers?
LEONARD: Well, that's the thing the president seems to have overlooked, which is that Amazon's been setting up its own delivery operations not just in the United States, but around the world. And they've been shifting more and more of their packages to this in-house operation. And I think if Amazon had to make a choice between paying higher rates on packages, you know, and giving up free delivery to Prime members or shifting more packages to its own service, I think it would definitely do the latter.
SIEGEL: For domestic deliveries in the United States, is it practical - could Amazon really develop a delivery system that would be as broad and scattered all across the country as the U.S. Postal Service?
LEONARD: You raise a good point. Most of Amazon's in-house delivery operations are in, you know, densely populated areas and cities. If you go out into, you know, rural areas it's a lot more expensive because you just don't - you know, you still have to hire a lot of people. They don't carry as many packages. So could they do the whole country? I don't think so. But I do think they could do more in cities and suburbs.
SIEGEL: I should ask you to remind us - how did the Postal Service get $15 billion in debt?
LEONARD: Well, there's two parts to that. One is that historically its most profitable, you know, product has been first-class mail, and that's really declined, you know, because of the Internet. At the same time, in 2006, Congress passed a law requiring the Postal Service to prefund the retiree benefits for its future retirees because they were concerned about, you know, its financial prospects going forward. But that was right when first-class mail started to decline. And it hasn't been able to pay that $5 billion payment a year since 2012. So that's really the big problem.
SIEGEL: The CEO of Amazon is Jeff Bezos, who also owns The Washington Post, which is a regular target of Donald Trump. Bezos also happens to be the richest person in the world. Could there be something personal in this tweet as well as institutional?
LEONARD: Well, Robert, I think it's totally personal. I - you know, Trump's been attacking Amazon since he's been on the campaign trail. He called Amazon a monopoly. That's where all the - you know, the jabs are coming from. And I think they're still going to continue.
SIEGEL: Devin Leonard writes for Bloomberg Businessweek, and he's the author of "Neither Snow Nor Rain: A History Of The United States Postal Service." Thanks for talking with us once again.
LEONARD: Thanks, Robert.
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