Fact check: Does Amazon cost the Postal Service a ‘fortune’?
“How much it actually costs USPS to deliver parcels and whether these costs exceed the revenue in total or in particular instances is unknown,” Kevin Kosar, vice president of policy at the free-market R Street Institute, told TheDCNF.
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The Citigroup analysis, though, is not public. Neither Kosar nor O’Rourke could speak to its validity.
Another 2015 study paid for by the United Parcel Service (UPS), a USPS competitor, says that the USPS uses its special privileges and monopoly on letter delivery to subsidize package delivery.
O’Rourke dismissed the arguments by UPS and Citigroup. “First-class mail is not subsidizing anybody,” he said, noting that revenue from first-class mail is decliningsteadily.
But Kosar is more skeptical of the USPS’ accounting and suspects that it underestimates the cost of delivering packages. “Transporting and lugging a box does cost way more than toting a letter,” Kosar said.
The law mandates that revenue from competitive products like packages cover their associated costs so that the USPS doesn’t unfairly undercut private package delivery services. Package revenues are required to exceed 5.5 percent of the USPS’ fixed costs. This “appropriate share” was determined in 2007; shipping and package volume increased 73 percent from 2008 to 2017, but the requirement remains the same.
Since the USPS today receives less money from traditional mail and more money from packages, it presumably spends more on delivering packages than it did a decade ago. Yet package revenues still only have to cover the share of fixed costs set in 2007.
“Is the Postal Service really that lean and efficient?” Kosar said. “It doesn’t intuitively make a whole lot of sense.”
The PRC is in the process of adjusting its calculation on the share of fixed costs that package revenues must cover. UPS supports increasing the percentage, while Amazon opposes any increase.
Kosar said that unless an independent agency like the PRC, Government Accountability Office or USPS Inspector General releases some hard numbers, the questions that Trump is raising are not going to go away.
