Apropos of President Trump’s Bezos bashing is this 2017 article from the Wall Street Journal: Why the Post Office Gives Amazon Special Delivery
Myopia is the first word that springs to mind on reading this. Well, the first polite word. The author knows regulation is the problem, and proposes more regulation as the solution.
Yes, United States Postal Service delivery of parcels is probably (it’s debatable that USPS even knows*) mis-priced, but it’s most definitely not Amazon’s fault. And it won’t be fixed by tweaking regulation, because if it could be it wouldn’t be a problem in the first place.
At the margin – “[USPS] has filled its spare capacity by delivering more boxes” – USPS would be far worse off without Amazon. It’s evident that without Amazon – whose parcels arguably cost the USPS next to nothing to deliver, since they’re making all those mandated stops anyway – USPS losses would be much greater. USPS must think so, too, since it has been making Sunday parcel deliveries in peak periods for some time now.
At least taxpayers get something back for subsidizing the government delivery service if they shop at Amazon. Or Newsweek, or National Review… USPS subsidized periodicals with $273 million in 2006.
All USPS problems result from its monopoly on first class mail, attendant regulatory price caps and other interference, consequent market cluelessness, and a refusal to innovate typical of government supported monopolies. USPS pricing errors are no “accident of history.” Unless you use Obamacare pricing as your definition of ‘accident.’
Maintaining delivery capacity USPS can’t fill is mandated by the Federal government. Rather than enable USPS to compete, our Congresscritters cap the first class mail rates and then make “it illegal for the Postal Service to price parcel delivery below its cost.”
Of course, *”calculating cost can be devilishly subjective.” So, to fix the problem legislators caused, the regulator decides to layer on some more regulation – “its regulator determined that, at a minimum, 5.5% of the agency’s fixed costs must be allocated to packages and similar products. A decade later, around 25% of its revenue comes from packages, but their share of fixed costs has not kept pace.” Well, they don’t actually know that, do they?
And, why not 5.8%, or 6.49%? And, kept pace with what? Isn’t 5.5% still 5.5%? And, isn’t that still the ‘right’ number a decade after it was imposed by the wise men? Or, did variable costs change “unexpectedly”? And, if 5.5% is a minimum regulatory stricture, why hasn’t USPS already raised it – since it’s illegal not to?
Gotta admire the precision decimal acumen of those nimble central planners, who can’t react to internet disruptions even as rapidly as every 10 years, and base pricing on fixed costs.
What do you bet UPS and FedEx know their total costs and don’t calculate them the way USPS does?
Yep, “devilishly subjective” pricing is a perfect scenario for a stultifyingly bureaucratic, government unionized organization with health care and pension liabilities at 169% of the fiscal 2016 revenues, and $15 billion in low interest loans from the U.S. Treasury.
“Select high-volume shippers are able to drop off presorted packages at the local Postal Service depot for “last mile” delivery at cut-rate prices. With high volumes and warehouses near the local depots, Amazon enjoys low rates unavailable to its competitors.” Let me rephrase that, “Because Amazon has invested in efficient logistics and well planned locations, it makes it easier for any delivery company to transport its goods. Especially an organization with tens of thousands of locations in that ‘last mile’” What do you bet Amazon gets volume discounts from FedEx and UPS?
“[T]he Postal Service needs to stop picking winners and losers in the retail world.”? How? There is no way to subsidize a government delivery service without “picking winners and losers in the retail world.”
Spare me the “universal-service obligation—to provide for all Americans at uniform price and quality. This communication service helps knit this vast country together, and it’s the why the Postal Service exists” argument. If that’s the mandate nobody should be surprised we have to subsidize it. Stop whining about the cost resulting from that choice, and stop scapegoating the companies (there will always be some) who can take advantage of regulatory winner/loser decisions, until you are willing to privatize the USPS.
Of course, as in Europe, the Post Office should be privatized. To do that, the first class mail monopoly must be eliminated. Then USPS can compete on price and service. Delivery to marginal locations will become more expensive and/or a bit slower. IAC, the “first class” mail rates would rise to market values. Junk mail volume would plummet, and we’ve been subsidizing that too. If “[T]wo-thirds of Amazon’s domestic deliveries are made by the Postal Service,” the Post Office’s burdensome real estate holdings might even become an advantage. At current pricing, they already are.
Or we could nationalize UPS and FedEx. That would fix the problem and provide more jobs for regulators.
USPS demonstrates exactly what happens to protected industries; misallocation of capital, mispricing, insensitivity to customer needs, complacency about markets – resulting in inability to innovate or compete.
The President’s ire is misdirected. Since it’s an economic question, that’s unsurprising. Well, actually, it’s petty personal animus toward Jeff Bezos, but that’s even less surprising.