The Postal Service Is Quickly Running Out of Money — a Decision by Amazon May Make It Worse

The head of the United States Postal Service says his agency will run out of money in less than 12 months unless Congress allows it to charge more for postage or borrow more money.Adding to the pressure is a report that Amazon is aiming to reduce its use of the Postal Service to deliver packages by two-thirds later this year. The online retail giant is the agency’s largest customer.Postmaster General David Steiner told a House Oversight subcommittee that the service is at a “critical juncture.”There has been a drastic reduction in the use of mail in recent years, from a historic peak volume of 213 billion pieces per year in 2006 to 109 billion pieces per year now.“For perspective, if all of that lost volume was paid at the current price of a stamp, which is 78 cents, that’s about $81 billion of lost revenue,” Mr. Steiner told lawmakers. “No company could weather that much revenue loss, so it’s not hard to see how we got here.”On top of that, because the agency is mandated by law to deliver to every address in America six days a week, a majority of its delivery routes are financial money-losers.“We’re regulated like a monopoly. But we no longer exist as one,” Mr. Steiner said. “In fact, we’re regulated worse than a monopoly because even a monopoly is allowed to make money.”Mr. Steiner told lawmakers that prices needed to be raised on both packages and mail delivery. He noted that first class stamp prices in America are the lowest in the industrialized world. The price in France is almost $3 and in England it is about $2.50.“If we were to change the stamp price to 90 cents to 95 cents, which is still less than half of the cost of foreign posts, that would largely solve our controllable loss,” Mr. Steiner said.At least one committee member was not in favor of price increases. “More and more Americans are struggling to cover the costs of basic goods and services and increased postal service prices are especially hard to accept,” Congresswoman Eleanor Holmes Norton said.Ms. Holmes Norton also wanted answers from the Postal Service on reports that some Washington, D.C. post offices have been closed during normal business hours. Mr. Steiner did not address that concern directly but said that the postal service needs to be able to close some money-losing post offices and replace them with alternative means of providing mail service. It is unclear what those alternatives could be, but around three in five post offices lose money every year.Mr. Steiner said the amount that the Postal Service is allowed to borrow has been capped at $15 billion for decades. Based on inflation or the agency’s revenue, he suggested that limit should be as high as $40 billion, giving the agency more flexibility to continue operating as it attempts to reshape itself.Another issue contributing to the financial issues is a requirement that the retirement system can only invest in Treasury notes. Mr. Steiner says that is limiting chances to grow the retirement system’s funding.Some lawmakers were skeptical of the Postal Service’s ability to adapt. Congresswoman Virginia Foxx says she regularly mails items and says service has declined. She says her husband is still waiting for a Valentine’s Day card she mailed to him. Ms. Foxx said the Postal Service needs to continue to find ways to cut expenses.“You’re not going to cut your way out of this problem,” Mr. Steiner told the committee.With Amazon seeking to dramatically reduce its reliance on the Postal Service, the pressure to act is mounting quickly. Postal carriers delivered more than a billion packages for Amazon last year, about 15 percent of all mail service packages, the Wall Street Journal reported.The Postal Service handles the so-called final-mile deliveries for Amazon and other retailers, the final step in the delivery process and traditionally it’s most expensive, especially in rural areas.Amazon’s contract with the Postal Service expires in October and the retail giant reportedly initially planned to increase its use of the postal carriers. The Postal Service made a change last year, however, and now is forcing companies to take part in a confidential bidding process to win its final-mile service. Amazon says it was blindsided by the change, the Journal reported, and was concerned it could be forced to quickly change its delivery network if its bid is not accepted.Amazon has decided to pivot and is now proactively changing its system to deliver more of its packages itself. That will deprive the Postal Service with much-needed revenue and hurt a segment of its business that is not losing money.

The Postal Service Is Quickly Running Out of Money — a Decision by Amazon May Make It Worse

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