President Trump has decided to make Amazon, the giant Internet retailer, his personal, private-sector punching bag, while portraying the heavily subsidized, inefficient, and generally unloved U.S. Postal Service as Amazon’s victim. The president has spent the last week deriding Amazon because it uses the USPS to deliver millions of its packages cheaply. Trump is trying to goad the mailman into charging what it truly costs to deliver Amazon’s goods. That’s another way of asking Amazon to charge its American customers more for what they buy on the website.

Fair enough, though the American taxpayer is already paying that cost in the subsidies that Washington provides to the USPS. The federal government has long subsidized the USPS with special exemptions that save it billions of dollars as a monopoly. Still, the rise of the Internet and the decline in usage of first-class mail—once the essence of why the Postal Service existed—have widened its losses and deepened worries about the cost of bailing it out. A 2015 study by Sonecon estimated that, taking into account the USPS’s special treatment—including its monopoly access to residential mailboxes, its exemption from state and local taxes, and its access to below-market government loans—amounts to an annual subsidy from Washington of $18 billion. Entities that receive such continual and growing support tend to operate less efficiently, and the USPS is no exception. Bureau of Labor Statistics data show that over a 25-year period starting in 1987, postal productivity grew by an average of just 0.7 percent annually, compared with average gains of 2.5 percent per year for private-sector shipping and transportation businesses.

When private businesses underperform, they have to cut costs or suffer the consequences. But even as the post office’s core function has declined, Congress has consistently protected it and blocked cost-saving measures, such as eliminating Saturday mail delivery, though polls show that about 60 percent of Americans favor it. In 2014, when the agency moved to shut 82 mail-processing facilities, 50 senators sent a letter protesting the cuts. Modest efforts at reform, such as 2017 legislation to enroll Postal Service retirees in Medicare instead of in private medical insurance, have been blocked. No wonder, then, that the Government Accountability Office considers the Post Office a “high risk” agency because of its liabilities, including $131 billion in unfunded retiree costs that have been building for decades.

Today’s USPS is a strange hybrid. On the one hand, it must comply with the universal-service mandate that obligates it to provide first-class mail service to every community in the country; on the other, it has moved into private-sector areas of growth, like parcel delivery. Among its biggest clients is Amazon, though who wins in this relationship is a matter of debate. Private studies estimate that the USPS is losing nearly $1.50 on every Amazon package, but others argue that its deal with Amazon helps provide revenues to support fixed costs that the USPS can’t easily cut because of its federal mandates.

If Trump truly wanted to address the USPS’s Amazon problem, he’d push Congress into making reforms to the post office that might minimize its exploitation by a big business—if that is even what is happening. The most comprehensive of these reforms would split the agency into two separate operations: one would compete with private package-carriers for expanding parcel delivery, charging competitive prices for its services, and another would more narrowly deliver first-class mail on a reduced schedule, recognizing that this service is no longer as essential to the functioning of the country as it was in 1776, when Congress created the Post Office. These changes could address the Postal Service’s huge liabilities, which hang over taxpayers’ heads.

All this supposes, though, that Trump took on Amazon because he was concerned about its relationship with the USPS as a public-policy issue. Most observers have concluded otherwise, suggesting that Trump is angry at his treatment by the Washington Post, owned by Amazon’s founder and CEO, Jeff Bezos. Amazon, so the thinking goes, makes a convenient target for Trump because big technology companies are growing rapidly unpopular with the average American, and tweets from the president can have a devastating impact on a publicly held company’s stock—and consequently on the owners’ wealth. That’s a troubling precedent for a president to set, though no one will cry for Bezos who, even after the worst of the battering administered to Amazon’s stock this week, was still worth more than $100 billion. The rest of Amazon’s shareholders, including, presumably, ordinary investors who may have even voted for Trump, may not be so comfortably cushioned from the president’s tweets and the market’s gyrations.

A big company like Amazon can’t escape public scrutiny. It has been criticized for destroying retail jobs, though studies show that ecommerce sites have created more employment than they have eliminated. As it has expanded its physical facilities, Amazon has also accepted tax incentives from states eager for its jobs. This, too, has earned it censure, though such disapproval is more appropriately directed at local governments that offer these unwise deals than with the companies that accept them.

But at a time when far greater concerns exist over, say, the “curating” of news or gathering of personal data by tech firms like Facebook and Google, Amazon’s issues hardly rise to a level that should precipitate a presidential tweet storm.

Photo by Scott Olson/Getty Images


City Journal is a publication of the Manhattan Institute for Policy Research (MI), a leading free-market think tank. Are you interested in supporting the magazine? As a 501(c)(3) nonprofit, donations in support of MI and City Journal are fully tax-deductible as provided by law (EIN #13-2912529).

Further Reading

Up Next