Trump Versus Bezos: They May Both Be Right

(Bloomberg View) -- Maybe-billionaire President Donald Trump is not fond of mega-billionaire Amazon.com founder, Washington Post owner and aspiring space colonizer Jeff Bezos, and has repeatedly taken to his favorite bully pulpit to let us know it. See here and here and here.

So I guess nobody should have been surprised by this:

And, more recently, this. And this.

The self-appointed fact-checkers in the press were quick to note that the president's claim of Amazon taking advantage of the USPS was based on some fairly questionable sources. But it must be said that the USPS's official response is a bit thin as well: The chief financial officer, Joseph Corbett, explained that since the service is legally obligated to put together "competitive package products," we should simply assume it does so.

So, who's telling the truth? To get an answer, I talked with somebody who knows more about the United States Postal Service than perhaps anybody since Benjamin Franklin: Kevin R. Kosar. Kosar is the vice president of policy and heads the postal policy program at the R Street Institute, a Washington think tank that operates under the mantra "Free Markets. Real Solutions." (Sentiments that echo the mission statement of an opinion site near to my heart.) Previously, he was with the Congressional Research Service and taught public policy at New York University. Here is a lightly edited transcript of our chat:

Tobin Harshaw: Let's start with the tempest in the teapot before moving on to the big picture. Who, in the fight between Trump and the USPS, is right? I have a feeling that's a simple question with a very complicated answer.

Kevin Kosar: Only the Postal Service -- and the Postal Regulatory Commission that oversees it -- knows for certain whether the USPS is profiting on parcels. There is a robust process for reviewing deals that any firm, including Amazon, cut with the Post Office. The proposed deal is reviewed by the regulator to ensure it comports with the law, and it also gets reviewed at the conclusion of the agreement. In some cases, the regulators have flagged deals with mailers and shippers for being money-losers for the Postal Service.

Figuring out the viability of any particular deal is complicated -- exceedingly complicated. Much of it boils down to how to attribute costs. For instance, if the USPS has to redesign its trucks to carry more parcels, how much of that charge gets assigned to any particular parcel shipment? And, obviously, how the USPS calculates costs will affect the determination of profitability.

TH: One reason it's hard to discern the facts on the contract with Amazon is that Congress has explicitly made the USPS exempt from Freedom of Information Act requests on its deals with private entities, right? Is that necessary?

KK: FOIA, which applies to nearly every federal agency, has a host of provisions that exempt certain types of government information from public disclosure. One of those exemptions is for commercially sensitive information. The rationale is straightforward: In the private sector, firms do not tend to spill out publicly the details of their deals with other firms. So when private companies cut deals with the government, why should the particulars be exposed?

Of course, this cuts contrary the growing public expectation that government should rarely keep secrets and it fuels anxieties about cronyism -- a favorite Trump theme.

TH: Trump issued an executive order to create a commission to recommend USPS reforms. Do you think this will be an earnest investigation or a witch hunt?

KK: I would be surprised if it was a witch hunt. The quality of the report, undoubtedly, will depend heavily on which individuals get tasked with researching and writing it. The task force is being run entirely out of a few executive branch agencies, and the timeline for getting the work done is only three months.

Hopefully, they will utilize folks who are expert on postal issues. Unfortunately, there are not too many of those in Washington. Graduate schools rarely plop out budding experts on postal issues. Mostly, those who know the topic work in the private sector or learn the topic as staffers on Capitol Hill.

TH: The executive order laid out a handful of issues that should be considered for reform. Is that the right list? What would you add to it?

KK: The task force's mandate is broad and basically threefold: review the USPS's business model and figure out if it is financially viable; consider its public purpose; and assess whether this agency has nosed too far into the private sector.

I think these are the right questions to ask, and I really believe the second subject will be the toughest topic. It opens an existential question: “What do we want and need from a Postal Service in the 21st century?” Right now, the USPS is tasked with conflicting mandates: it is supposed to cover its costs while delivering mail six days per week to every address and paying high compensation -- in an era of declining demand for mail.

I should add that there is a wild card in the executive order. It has the Department of Justice playing a role. DOJ can bring antitrust cases, which raises the specter of the final report recommending antitrust action against USPS on parcels.

TH: Even if there is a radical restructuring of the agency's practices, it will remain mostly the same huge federal bureaucracy it has been. Many European nations have either wholly or partially privatized their postal delivery. Have they been successful? Which would be a model for the U.S.?

KK: Yes, other nations have successfully privatized their posts, with positive results. Back in 2001, William Henderson, who previously led the Postal Service, publicly advocated giving the USPS to its employees. The USPS would be under an employee stock ownership plan, and those who operate the business would decide how to run it. Interestingly, the four major postal unions did not express much enthusiasm for this proposition.

To date, however, Congress has shown little appetite for privatizing any portions of the USPS. This is a shame, because the discussion should be had. Right now, USPS is at least three businesses in one: it retrieves and delivers mail; it retrieves and delivers parcels; and it runs 30,000 or so retail shops (i.e., post offices). Should it do all these things? That's a question we should discuss.

TH: We talked a few weeks ago about an even more radical shift: ditching the idea that the USPS should remain one of the nation's 10 largest employers, scale back its ambitions in package delivery, and stop striving to turn a profit but rather be looked at another federal subsidy that, one hopes, could cost taxpayers as little as possible. What then would that USPS look like, and is it a feasible proposition given congressional love for the jobs it provides, its huge pension liabilities, and its union contracts?

KK: In time, yes, maybe Congress will be willing to accept more fundamental alterations to the Postal Service. USPS has more than $100 billion in debt and unfunded obligations, and it tapped out its borrowing line with the Treasury. USPS does have enough cash to keep the lights on and the mail moving, but if its cash position starts to weaken Congress will need to act. Having the USPS simply not open one day would have significant economic effects. This is an agency that moves 150 billion mail pieces per year, most of which are sent by businesses, not-for-profits and government. And few members of Congress want to vote for a taxpayer bailout of the Post Office.

So there are real incentives to saving the Postal Service from financial doom. The real trick to getting action will be to convince senators from rural states that their constituents will still get sufficient levels of mail and parcel services if USPS is overhauled.

TH: Last, I'm hardly the only American weary of lugging piles of junk mail I never wanted to the recycling bin. Is there anything we can do about it?

KK: Oh, certainly. Anyone easily may sign up for the Mail Preference Service's “do not mail” list. One can also use a service like Catalog Choice, which helped me reduce the tidal wave. And whatever you do, do not participate in mail sweepstakes; they tend to sell your address to other marketers. For other ways to reduce your junk mail flow, readers can check out my little tip sheet on this very topic.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Tobin Harshaw writes editorials on national security, education and food for Bloomberg View. He was an editor with the op-ed page of the New York Times and the paper's letters editor.

To contact the author of this story: Tobin Harshaw at tharshaw@bloomberg.net.

To contact the editor responsible for this story: Philip Gray at philipgray@bloomberg.net.

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