Yahoo Finance Trump could wreck the Postal Service, but he can’t beat Amazon
President Trump thinks he has found a way to punish the US Postal Service for delivering Amazon packages: deny the bailout money it needs to survive. But he won’t be able to touch his real target: Amazon and its CEO, Jeff Bezos, who owns the Washington Post, which frequently criticizes Trump, making him thirsty for revenge.
Trump said on April 24 that he would not approve a bailout for the Postal Service—which Congress has authorized—unless it raises package delivery fees to four times the current levels. “The post office is a joke,” he said, denigrating all of its 600,000 workers.
The Postal Service is not a joke. It’s a unique public-private enterprise that has to abide by rules Congress sets, which make it impossible to do normal business things like close underperforming post offices and branch out into more profitable lines of business. It also has the obligation to deliver mail to every address in the country, but in most cases it can’t charge the actual cost of delivering to remote areas. Its finances are a perennial mess, but UPS and FedEx would be just as bad if they had the same disadvantages.
The Postal Service says it needs $25 billion from Congress to cover losses from the coronavirus pandemic, plus more later to deal with chronic shortfalls. Congress approved a $10 billion loan to the agency from the Treasury Department, the bailout Trump has threatened to squash. It’s possible Treasury could insist on reforms in exchange for the loan, but there’s no chance the USPS will quadruple its package delivery rates to punish Amazon (AMZN).
The problem is not package delivery
First, the Postal Service actually makes money on package delivery, its only profitable line of business. It is most certainly not losing money by delivering packages for Amazon—or anybody else—below cost or at below-market rates. Trump has said many times that Amazon gets a sweetheart deal from the USPS. It doesn’t. Politifact rated this Trump claim false. Factcheck.org agrees. The agency’s biggest problem isn’t package delivery, it’s a Congressional requirement to prepay pension and health care costs for retirees.
Trump could push for a big hike in postal service package delivery fees. But that would hurt thousands of businesses and millions of consumers across the country, who would end up bearing the costs. Amazon is a behemoth that can survive just about anything. Other businesses can’t. Amazon is even developing its own delivery network, with trucks, planes and eventually drones, to reduce its dependence on the USPS and other deliverers. It’s better positioned than anybody to withstand a USPS rate hike and would probably end up stronger than the competition, not weaker.
Trump could try to target price hikes at Amazon alone. Litigation would ensue and Trump would lose. The government can’t unilaterally punish a single company in a matter of commerce that would otherwise be determined by competition and market rates. Trump could also try to prevent the bailout and let the USPS fail. But that’s a political loser. Some people depend on post offices and stuff that comes in the mail, like prescription drugs and government checks. They tend to be lower-income folks, and the media would go wild if Trump harmed them out of spite for Bezos.
Trump will run into opposition in Congress, too, if he harms the Postal Service—and not just from Democrats. Conservatives love to bash the inefficient, outdated Postal Service, yet they almost never let the agency close little-used post offices in rural districts, many represented by Republicans. And Republicans would never let the government completely free the Postal Service and let it operate like a normal business, because the cost of delivery to rural addresses would suddenly skyrocket.
There is a big fight coming over how much funding Congress should provide to aid vote-by-mail efforts in the November elections, since many states are likely to emphasize that over voting in person, to reduce coronavirus infection rates. Democrats favor generous funding, but Trump is opposed to expanding vote-by-mail, because he thinks it will cost Republicans vote—even though there’s no evidence of that. But that’s separate from providing a bailout to keep the postal service functioning.
So here’s what’s going to happen. Congress has no choice but to bail out the USPS, however much it costs. Treasury will grant the loan and there will be more aid later. There could be modest reforms as part of that deal, so Trump has something he can claim as a victory. But it won’t be Trump-mandated hikes in package delivery fees. Amazon, for its part, will continue weaning itself from postal delivery, which some day will leave the USPS without one of its best customers. And Trump will never beat Bezos, who’s probably grinning somewhere.
Rick Newman is the author of four books, including “Rebounders: How Winners Pivot from Setback to Success.” Follow him on Twitter: @rickjnewman. Confidential tip line: rickjnewman@yahoo.com. Encrypted communication available. Click here to get Rick’s stories by email.
Read more:
These 4 Republican states are ignoring Trump’s reopening guidelines
Get the latest financial and business news from Yahoo Finance
Follow Yahoo Finance on Twitter, Facebook, Instagram, Flipboard, SmartNews, LinkedIn, YouTube, and reddit.
