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MORE THAN STAMPS ADAPTING THE POSTAL

SERVICE TO A CHANGING WORLD

HEARING

BEFORE THE

SUBCOMMITTEE ON FEDERAL WORKFORCE,

POSTAL SERVICE, AND THE DISTRICT

OF COLUMBIA

OF THE

COMMITTEE ON OVERSIGHT

AND GOVERNMENT REFORM

HOUSE OF REPRESENTATIVES

ONE HUNDRED ELEVENTH CONGRESS

FIRST SESSION

NOVEMBER 5, 2009

Serial No. 111–37

Printed for the use of the Committee on Oversight and Government Reform

(

Available via the World Wide Web: http://www.gpoaccess.gov/congress/index.html

http://www.house.gov/reform

(II)

COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

EDOLPHUS TOWNS, New York, Chairman

PAUL E. KANJORSKI, Pennsylvania

CAROLYN B. MALONEY, New York

ELIJAH E. CUMMINGS, Maryland

DENNIS J. KUCINICH, Ohio

JOHN F. TIERNEY, Massachusetts

WM. LACY CLAY, Missouri

DIANE E. WATSON, California

STEPHEN F. LYNCH, Massachusetts

JIM COOPER, Tennessee

GERALD E. CONNOLLY, Virginia

MIKE QUIGLEY, Illinois

MARCY KAPTUR, Ohio

ELEANOR HOLMES NORTON, District of

Columbia

PATRICK J. KENNEDY, Rhode Island

DANNY K. DAVIS, Illinois

CHRIS VAN HOLLEN, Maryland

HENRY CUELLAR, Texas

PAUL W. HODES, New Hampshire

CHRISTOPHER S. MURPHY, Connecticut

PETER WELCH, Vermont

BILL FOSTER, Illinois

JACKIE SPEIER, California

STEVE DRIEHAUS, Ohio

JUDY CHU, California

DARRELL E. ISSA, California

DAN BURTON, Indiana

JOHN L. MICA, Florida

MARK E. SOUDER, Indiana

JOHN J. DUNCAN, JR., Tennessee

MICHAEL R. TURNER, Ohio

LYNN A. WESTMORELAND, Georgia

PATRICK T. MCHENRY, North Carolina

BRIAN P. BILBRAY, California

JIM JORDAN, Ohio

JEFF FLAKE, Arizona

JEFF FORTENBERRY, Nebraska

JASON CHAFFETZ, Utah

AARON SCHOCK, Illinois

BLAINE LUETKEMEYER, Missouri

ANH ‘‘JOSEPH’’ CAO, Louisiana

RON STROMAN, Staff Director

MICHAEL MCCARTHY, Deputy Staff Director

CARLA HULTBERG, Chief Clerk

LARRY BRADY, Minority Staff Director

SUBCOMMITTEE ON FEDERAL WORKFORCE, POSTAL SERVICE, AND THE DISTRICT OF

COLUMBIA

STEPHEN F. LYNCH, Massachusetts, Chairman

ELEANOR HOLMES NORTON, District of

Columbia

DANNY K. DAVIS, Illinois

ELIJAH E. CUMMINGS, Maryland

DENNIS J. KUCINICH, Ohio

WM. LACY CLAY, Missouri

GERALD E. CONNOLLY, Virginia

JASON CHAFFETZ, Utah

MARK E. SOUDER, Indiana

BRIAN P. BILBRAY, California

ANH ‘‘JOSEPH’’ CAO, Louisiana

WILLIAM MILES, Staff Director

(III)

C O N T E N T S

Page

Hearing held on November 5, 2009 ........................................................................ 1

Statement of:

Bernstock, Robert, president, Mailing and Shipping Services, U.S. Postal

Service; Ruth Goldway, chairman, U.S. Postal Regulatory Commission;

Phillip Herr, Director, Physical Infrastructure, U.S. Government Accountability Office; Michael Coughlin, deputy postmaster general, U.S.

Postal Service (ret.); and Robert Reisner, president and CEO, Transformation Strategies ..................................................................................... 15

Bernstock, Robert ...................................................................................... 15

Coughlin, Michael ..................................................................................... 41

Goldway, Ruth ........................................................................................... 27

Herr, Phillip ............................................................................................... 51

Reisner, Robert .......................................................................................... 68

Letters, statements, etc., submitted for the record by:

Bernstock, Robert, president, Mailing and Shipping Services, U.S. Postal

Service, prepared statement of .................................................................... 17

Chaffetz, Hon. Jason, a Representative in Congress from the State of

Utah, prepared statement of ........................................................................ 7

Connolly, Hon. Gerald E., a Representative in Congress from the State

of Virginia, prepared statement of .............................................................. 9

Coughlin, Michael, deputy postmaster general, U.S. Postal Service (ret.),

prepared statement of ................................................................................... 44

Cummings, Hon. Elijah E., a Representative in Congress from the State

of Maryland, prepared statement of ............................................................ 11

Goldway, Ruth, chairman, U.S. Postal Regulatory Commission, prepared

statement of ................................................................................................... 30

Herr, Phillip, Director, Physical Infrastructure, U.S. Government Accountability Office, prepared statement of ................................................. 53

Kucinich, Hon. Dennis J., a Representative in Congress from the State

of Ohio, prepared statement of .................................................................... 100

Lynch, Hon. Stephen, a Representative in Congress from the State of

Massachusetts, prepared statement of ........................................................ 4

Reisner, Robert, president and CEO, Transformation Strategies, prepared

statement of ................................................................................................... 70

(1)

MORE THAN STAMPS ADAPTING THE POSTAL

SERVICE TO A CHANGING WORLD

THURSDAY, NOVEMBER 5, 2009

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON FEDERAL WORKFORCE, POSTAL

SERVICE, AND THE DISTRICT OF COLUMBIA, COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM, Washington, DC.

The subcommittee met, pursuant to notice, at 10 a.m., in room

2154, Rayburn House Office Building, Hon. Stephen F. Lynch

(chairman of the subcommittee) presiding.

Present: Representatives Lynch, Norton, Davis, Cummings,

Kucinich, Clay, Connolly, Chaffetz, and Cao.

Staff present: Aisha Elkheshin, clerk/legislative assistant; Jill

Crissman, professional staff; Margaret McDavid, detailee; Dan

Zeidman, deputy clerk/legislative assistant; Adam Fromm, minority

chief clerk and Member liaison; Howard Denis, minority senior

counsel; and Alex Cooper, minority professional staff member.

Mr. LYNCH. Good morning and welcome. The Subcommittee on

the Federal Workforce, Postal Service, and the District of Columbia

hearing will now come to order. I want to welcome my colleague

and friend, Ranking Member Chaffetz, and members of the subcommittee, hearing witnesses, and all those in attendance.

The purpose of today’s hearing is to examine what steps the

Postal Service has taken and plans to take since Congress passed

the Postal Accountability and Enhancement Act [PAEA]—I’ll try to

keep the acronyms to a minimum—to use its increased flexibility

to grow revenue.

Furthermore, we are here to discuss barriers or limitations to the

Postal Service’s innovations and what lessons can be learned from

foreign posts in this area. The Chair, ranking member and members of the subcommittee each will have 5 minutes to make an

opening statement and all Members will have 3 days to submit

statements for the record.

Ladies and gentlemen, I will yield myself 5 minutes for my opening statement. In the series of hearings the subcommittee has held

on the Postal Service thus far this year, the discussion has tended

to focus on the Postal Service’s bottom line or its cost-cutting and

consolidation efforts; and rightfully so, as the past 2 fiscal years

have presented some significant financial challenges for the Nation’s mail system.

However, today the subcommittee convenes not to discuss what

the Postal Service has been doing to reduce expenditures, but more

so to learn about what the organization is doing to grow revenue

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and the overall value of mail as part of an ongoing effort to bring

about fiscal turnaround.

Today, almost 3 years since the passage and enactment of the

landmark Postal Accountability and Enhancement Act, we look forward to hearing what exactly has been done to grow the business

under the new price flexibilities and product innovations afforded

to the Postal Service in 2006.

First, however, I must briefly acknowledge the financial reality

before us. The Postal Service expects a net loss of approximately

$7 billion for fiscal year 2009 prior to accounting for the recent legislation in the form of a $4 billion deferred payment to the Retiree

Health Benefit Fund.

I’m pleased Congress was able to grant the Postal Service authority to defer a share of its Retiree Health Benefits prepayment,

which allowed the organization to meet its financial obligations and

improve its cash position. However, as my friends from both sides

of the aisle acknowledged last month, the relief measure was only

a temporary solution to a host of long-term problems.

Moreover, I would like to note that this was not a bailout. Many

Americans think the Postal Service is largely supported by Federal

Government dollars. It is not. This is an important point I want to

stress. The Postal Service is over 99 percent self-supporting with

less than 1 percent of its funds provided by the Federal Government to support important things like mail for the blind and overseas voting. Again, that is less than 1 percent.

Additionally, up until postal reform, the Postal Service operated

under the so-called break-even mandate preventing the organization from even making a profit. Post PAEA—I’m trying to stay

away from these acronyms—the Postal Accountability and Enhancement Act, however, the Postal Service is now permitted to operate more like a business in terms of profit earning and product

diversification.

To that end, I look forward to hearing from today’s witnesses on

the extent to which the Postal Service has attempted to grow its

business from the novel summer sale to the offering of flat-rate

boxes and holiday greeting cards. Today’s hearing is intended to examine the steps that the Postal Service has taken and the results

achieved so far in the area.

And looking to the future, Postmaster General Jack Potter recently described several initiatives the Postal Service is potentially

interested in to diversify and grow revenue. He observed that the

Postal Service has more retail outlets in the United States than

McDonalds, Starbucks, and Wal-Mart combined.

Perhaps surprising to some, he proposed that the Postal Service

should be permitted to offer its customers alternate services such

as banking, insurance, and telecommunications. Given past experiences and the extreme caution required when enterprising a business, I’m interested in hearing the extent to which these newly proposed ideas have been vetted, as well as what risks have been evaluated.

Further, I have asked today’s witnesses to address what lessons

can be learned from foreign posts in the area of product and service

development and diversification. I know there are some foreign

posts such as those in Japan and France that offer banking servVerDate 11-MAY-2000 15:19 Mar 08, 2010 Jkt 000000 PO 00000 Frm 00006 Fmt 6633 Sfmt 6633 U:\DOCS\54696.TXT KATIE PsN: KATIE
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ices and sell mobile phones, for example. However, I also know that

several countries have privatized their Postal Services, while the

U.S. Postal Service remains an independent Federal establishment

of the U.S. Government.

In the coming months, our subcommittee will continue to provide

close oversight of the Postal Service, including an in-depth examination of the Postal Service’s business model to help determine

which longer-term changes are necessary to help the Postal Service

return to financial viability. The Postal Service undoubtedly needs

to move forward with its efforts to grow its revenue and increase

the value of mail, perhaps even more so than focusing on cutting

costs or reducing its Retiree Health Benefit obligations.

I thank each of you for being with us this morning. I look forward to your participation and I yield for 5 minutes to the ranking

member, Mr. Chaffetz.

[The prepared statement of Hon. Stephen Lynch follows:]

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Mr. CHAFFETZ. Thank you, Mr. Chairman, and thanks for agreeing to hold this very important discussion. My comments will be

brief because we came to listen and hear from this panel. But let

me just concur and echo the sentiments the chairman articulated,

as I think he has it exactly right.

We will obviously spend time and attention talking about costcutting measures, but at the end of the day we need to increase the

relevancy of the U.S. Postal Service. In order for it to thrive and

to serve the citizens of the United States of America, we need to

increase its relevancy. At the same time, I think there needs to be

caution in making sure that we are not tripping on top of the private sector and, maybe with good intentions, maybe some unintended consequences competing in a space that is probably best left

to the private sector.

Yet the U.S. Postal Service, under our Constitution, has a unique

place in this country. And I would like to see us do more. One of

the things in particular that I think we should pay attention to:

What is the cross functionality that we can take advantage of with

other segments within government? One, for instance, that I would

like to see us continue to pursue is the conducting of the U.S. census, something we do every 10 years, given $14 billion in order to

execute it. We have real estate, we have very able people. Again,

something I think we should continue to pursue.

What are the things that we can do with FEMA, what are the

things we can do with other government agencies that need the

types of resources that are uniquely provided by the U.S. Postal

Service?

So I look forward to your comments. I appreciate the chairman’s

approach on this as well. And I hope this is the start of a series

of dialogs about the potential impact of the potential new openings

and increased relevancy for the U.S. Postal Service. And with that,

Mr. Chairman, I will yield back the balance of my time.

[The prepared statement of Hon. Jason Chaffetz follows:]

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Mr. LYNCH. Thank you. I know the gentleman has recently arrived. I would like at this point to yield 5 minutes to the gentleman

from northern Virginia, Mr. Connolly, for 5 minutes.

Mr. CONNOLLY. Thank you, Mr. Chairman, and thanks for holding this hearing on the long-term viability of the Postal Service.

This is precisely the type of process we should be conducting in

order to determine those changes that will enable the Postal Service to thrive in the future. In general, we should be wary of shortterm cost-cutting measures that could reduce Postal Service market share and revenue in the future, such as a shift, for example,

to 5-day mail delivery. Instead it would preferable, from my point

of view, to examine changes that enable the Postal Service to augment its existing sources of revenue.

I’m pleased the Postal Service is examining 15 new revenue

sources that could complement mail service. These changes should

not be limited to marginal changes. For example, perhaps it would

be possible for the Postal Service to work in partnership with community banks to integrate banks and post offices in a manner that

would help both existing community banks and the Postal Service

itself.

The goal of exploring these new revenue options should be to preserve the outstanding services offered by the Postal Service. We all

benefit from affordable and convenient mail delivery. The ability of

the Postal Service to deliver mail quickly, 6 days of the week, not

only protects our constituents’ quality of life but also creates opportunity for businesses that rely on mail for advertising and product

distribution. If the Postal Service did not exist, there is little doubt

that the mailing market would have oligopolistic characteristics

with negative implications for affordable and consumer choice.

The Postal Service continues to play an important role in limiting the prices of sending mail and packages, which helps all consumers. The Postal Service also makes an important contribution

to our economy. Approximately 615,000 people work for the Postal

Service, generally earning high union wages, or fairly high union

wages. During the Bush administration, for the first time in history, median wages for American families actually fell during a full

economic cycle of expansion, recession, and recovery. Protecting

high-paying blue collar jobs such as those provided by the Postal

Service must be part of our broader efforts to help the economy recover.

Thanks again, Chairman Lynch, for holding this important series

of hearings on the long-term viability of the Postal Service, and I

look forward to hearing from our witnesses.

Mr. LYNCH. Thank you.

[The prepared statement of Hon. Gerald E. Connolly follows:]

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Mr. LYNCH. The Chair now recognizes the gentleman from Maryland, Mr. Cummings, for 5 minutes.

Mr. CUMMINGS. Thank you very much, Mr. Chairman, and I too

thank you for holding this critically important hearing on adapting

the Postal Service to our changing world. The U.S. Postal Service

is the second largest civilian employer, with approximately 623,000

career employees.

Although consumers rank the Post Office as one of the most

trusted government agencies and it continues to excel, the Post Office has not been immune to the downward economic trends currently facing our Nation. While final numbers are not available yet,

it is estimated that the Post Office will experience a $6.2 billion

loss, which is over two times more than last year’s loss. This loss

can be attributed largely to two factors: No. 1, the unprecedented

decline in mail volume due to increased use of electronic communications and other factors; and No. 2, the economic recession that

is affecting all sectors.

The Postal Service has been making a number of aggressive costcutting measures, but I’m interested in hearing about the new innovative ideas our panelists will present today. The Postal Accountability and Enhancement Act was signed into law in December 2006, allowing for flexibility in how services are designed,

priced and marketed. Because of that flexibility, the Post Office has

been able to create new innovative programs such as the standard

mail volume incentive pricing program this past summer. The summer sale provided a 30 percent rebate to eligible mailers on letters,

volume above a specific threshold. This program is estimated to

have generated at least $50 million in sales.

The Postal Service has also restructured its Web site and created

mobile device functionality for its customers. This allows greater

accessibility and added convenience for postal users. For 44 cents,

we can send a letter anywhere in the United States. We now all

would have to admit that’s a pretty good bargain. The Post Office

is and continues to be reliable and of great value.

I look forward to the discussion today about expanding services

and nonpostal products directly or in partnership with private-sector entities, and what Congress can do to help the U.S. Postal Service.

And with that, Mr. Chairman, I yield back.

Mr. LYNCH. I thank you.

[The prepared statement of Hon. Elijah E. Cummings follows:]

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Mr. LYNCH. The Chair now recognizes the distinguished gentleman from Illinois, Mr. Davis, for 5 minutes.

Mr. DAVIS. Thank you very much Mr. Chairman. And let me just

echo the sentiments that have already been expressed by my colleagues in thanking you for calling this hearing.

I think that the Postal Service is one of those critical elements

of our communications system that must be seriously addressed. So

I’m eager to hear an analysis of the impact of the efforts that have

been put forth by Postmaster General Potter and his staff and the

other entities associated with trying to make sure that we maintain the viability of our postal operation.

When I think of what we are facing with the impact of electronic

communication and all of the other economic indicators that are

upon us, we recognize that it is no easy task and that there are

no simple solutions to very complex issues. But I want to commend

you for your leadership as chairman of this subcommittee, how you

have been moving things along to try and help assure that our

postal operations will continue as viable instruments of our communication system.

So I want to thank you very much and look forward to hearing

the witnesses.

Mr. LYNCH. I thank the gentleman for his kind words.

What I would like to do, it is the custom of this subcommittee

to swear its witnesses before they provide testimony. And I invite

you to stand and please raise your right hands.

[Witnesses sworn.]

Mr. LYNCH. Let the record show that all of the witnesses, each

of the witnesses, has answered in the affirmative.

What I would like to do now is just offer brief introductions of

our panel of witnesses.

Mr. Robert Bernstock was named President of Mailing and Shipping Services, a new division at the U.S. Postal Service, in June

2008. He is responsible for development and management of all retail and commercial products for the Postal Service, including commercial sales and services. Mr. Bernstock has extensive senior

leadership experience with Campbell Soup Co., Scotts Miracle-Gro,

and Vlasik foods among others.

The Honorable Ruth Goldway was designated chairman of the

U.S. Postal Regulatory Commission by President Barack Obama on

August 6, 2009, and has served with the agency since 1998. She

is an experienced regulatory and public affairs professional with

expertise in citizens’ participation, consumer issues, urban planning issues, as well as the mailing industry.

Mr. Michael Coughlin is a recent retiree from Accenture, a global

consulting technology and outsourcing firm where he helped to

manage senior-level relationships with postal clients around the

world. Mr. Coughlin also spent 32 years with the U.S. Postal Service serving as Deputy Postmaster General and a member of the

Board of Governors from 1987 to 1999.

Mr. Phil Herr is Director of the Physical Infrastructure Team at

the Government Accountability Office. Since joining GAO in 1989,

he has managed reviews of a broad range of domestic and international concerns. His current portfolio focuses on programs at the

Postal Service and the Department of Transportation.

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Mr. Robert Reisner is president and CEO of Transformation

Strategies and has been a management consultant for more than

20 years, specializing in strategic market transformation. He has

previously served in the executive positions at the Postal Service,

including vice president for strategic planning from 1996 to 2001.

We will now begin our witness testimony.

Mr. Bernstock, you are recognized for 5 minutes.

STATEMENTS OF ROBERT BERNSTOCK, PRESIDENT, MAILING

AND SHIPPING SERVICES, U.S. POSTAL SERVICE; RUTH

GOLDWAY, CHAIRMAN, U.S. POSTAL REGULATORY COMMISSION; PHILLIP HERR, DIRECTOR, PHYSICAL INFRASTRUCTURE, U.S. GOVERNMENT ACCOUNTABILITY OFFICE; MICHAEL COUGHLIN, DEPUTY POSTMASTER GENERAL, U.S.

POSTAL SERVICE (RET.); AND ROBERT REISNER, PRESIDENT

AND CEO, TRANSFORMATION STRATEGIES

STATEMENT OF ROBERT BERNSTOCK

Mr. BERNSTOCK. Good morning, Mr. Chairman, and members of

the subcommittee. I appreciate your interest in the revenue generation activities of the Postal Service, as that is the primary focus of

my work.

I would like to begin by recognizing Congress’ active support of

the Postal Service this year, especially your understanding of the

urgency behind changing the retiree health benefit payment structure for fiscal year 2009.

The Postal Service continues to face severe financial challenges.

Our auditors are currently reviewing our fiscal year 2009 financials, and while I cannot give you the precise figures, I can say that

despite heroic cost reductions of over $6 billion, we expect our mail

volume to decline by approximately 26 billion pieces, with a net

loss of over $7 billion, prior to accounting for recent legislation.

There is no certainty that mail volume levels will recover or if

they will continue to decline, to be replaced with other forms of

communication. We are certain that without significant changes,

the potential exists for similarly large financial losses in the foreseeable future.

We are actively engaged in a four-pronged effort to correct public

service finances. The first and most obvious approach is to continue

to aggressively bring down our costs. The Postal Service has set

very aggressive cost-reduction targets. The change in delivery frequency from 6 days to 5 days and modification of retiree health

benefit fund payments are both integral elements of the second

strategy.

The third and fourth paths are the subject of today’s hearings:

to be equally aggressive in our efforts to grow revenue within the

law and to change the law to provide greater product and pricing

flexibility.

An example of how we utilize our pricing freedoms enabled by

the Postal Act is the standard mail summer sale. Working with the

PRC, we developed the summer sale, offering a 30 percent price

discount on incremental volume on advertising mail for 3 months

over this summer. We are still evaluating this program, but preliminary information suggests that over 400 of our largest cusVerDate 11-MAY-2000 15:19 Mar 08, 2010 Jkt 000000 PO 00000 Frm 00019 Fmt 6633 Sfmt 6633 U:\DOCS\54696.TXT KATIE PsN: KATIE
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tomers participated and mailed a significant number of incremental pieces of standard mail to help stimulate the economy.

I would like to give special thanks to the PRC for its quick and

thorough review of this proposal.

The summer sale, along with other revenue-generating initiatives

that I describe in some detail in my written testimony, like the priority mail advertising campaign, priority mail contract pricing, and

consumer products at retail, including greeting cards, are all underway, already taking advantage of the flexibility afforded by the

Postal Act. Some have already generated incremental revenue, and

others are just hitting the marketplace.

There are additional initiatives described in my testimony that

are still in the planning stages designed to extend or transform the

business by expanding the core capabilities into new business

areas.

Three examples are, first, renewed approaches to the distribution

of product samples; second, the extension of passport processing

and enrollment services to secure credentials; and third, the exploration of hybrid mail that is either sent, delivered, or both, in digital form.

One of the purposes of today’s hearing is to examine the constraints that hold the Postal Service back. I outline specific requests for changes in the postal law in my written testimony, including the authority to provide services to State and local authorities in addition to Federal agencies, to provide explicit authority for

purely electronic equivalence of the traditional physical services,

and to provide more freedoms to leverage our existing assets, especially our retail assets.

While I’m excited about our revenue-generating projects and the

potential for greater freedoms, I want to be clear that revenue

alone is not sufficient to close the earnings gap. Even at a 15 percent pretax profit margin, it would take profit generated by almost

$45 billion in new revenue to fill that earnings gap. The four

prongs together are necessary to provide a framework for the Postal Service to be self-sustaining while fulfilling our universal service

obligation at service levels the country has come to expect.

We are very proud of our accomplishments in meeting the communication and commerce needs of the country. But we recognize

that without the help of Congress, we cannot close our significant

profitablity gap and adequately meet our universal service obligation.

I would like to thank the subcommittee for holding this hearing

and to reaffirm my personal commitment to working with you to

ensure a Postal Service that meets the mailing and shipping needs

of the American public. I would be pleased to respond to any questions you may have.

Mr. LYNCH. Thank you.

[The prepared statement of Mr. Bernstock follows:]

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Mr. LYNCH. Ms. Goldway, welcome. You are now recognized for

5 minutes for an opening statement.

STATEMENT OF RUTH GOLDWAY

Ms. GOLDWAY. Thank you. Good morning, Chairman Lynch,

Ranking Member Chaffetz, Congressmen Davis, Connolly, and

Cummings. I’m pleased to be here today.

The subcommittee has a critical role to play in preserving a

treasured American asset. The Postal Service is a government

agency that connects together every American household, business

and institution through its universal service network. It is a part

of our daily life, taken for granted until taken away; part of the

fabric of the Nation, supporting its educational, political, and charitable institutions.

Congress has played an ongoing role in revitalizing the postal

system most recently through the PAEA. The law was designed to

preserve the Service’s historic attributes, while providing change

for the 21st century. But it was enacted at a time when both the

economy and the Postal Service appeared strong. Now the landscape has changed. I think the PAE is working, but it is hard to

see how well, given the recession.

There have been clear successes. First, the Commission and the

Postal Service who work together to take advantage of competitive

flexibilities in the law. Through our rate process, the Postal Service

has used its pricing power to significantly increase the rate of return on its overall competitive product line. Mr. Bernstock provided

the details.

Second, this year the Commission approved the Postal Service’s

first-ever request to test seasonal price incentive programs for

standard and first-class mail, as well as the first and only experimental product submitted under the PAEA.

Third, the Postal Service NSA proposals have accelerated under

the new law, rising 900 percent in less than 3 years. Preliminary

data on revenue-generation activities indicate that overall results

have been positive but modest.

Since the majority of these efforts involve price discounts, they

result in limited additional revenue and provide significantly less

contribution to overhead. So while the Commission would like to

see more progress being made, particularly in the experimental

area, there has been a reasonable effort expended to use the new

law.

The truth is that the powerful downturn in the economy which

has caused a sharp contraction in key mailing industries like housing, finance, and automobiles would have overwhelmed even the

most ambitious of these efforts. There is a tremendous difference

between a gradual annual decline of 1 or 2 percent in first-class

mail, which was the trend addressed by the PAEA, and a 13 percent drop in volume experienced this year.

As a result, the Postal Service could not make its payment to the

Retiree Health Care Benefit Fund [RHBF], and received $4 billion

in relief this year from Congress. And for the immediate future and

perhaps some time to come, the situation appears likely to continue.

28

The Postal Service has suggested that it needs additional freedoms modeled on the examples of foreign posts. The Commission

is open to considering new perspectives; however, we believe they

need to reflect American experience and tradition.

My written testimony includes several examples from foreign

posts. There may be some activities that fit the American model,

but there is no magic bullet. Any new business activities should

meet a set of reasonable but specific criteria, based on the core mission of the Postal Service, the needs of society, and the expectation

of a positive outcome for both. The rationales that others are doing

it does not satisfy the criteria.

Honestly, the Postal Service has directed most of its manage- ment resources toward reducing its cost this year by more than $6

billion. Cuts continue—from adjusting mail routes and renegotiating purchase agreements to removing collection boxes, consolidating plants, and closing post offices. Now the Postmaster agenda has

asked to lift the statutory language requiring 6-day delivery.

The Commission views proposals to reduce service with caution.

Service cuts made to address near-term financial difficulties may

have harmful long-term consequences for universal service. And

from a market perspective, the Postal Service could harm its greatest strategic advantage, its ubiquity.

I suggest a better alternative that Congress may wish to amend

the provisions of the PAA that set the RHBF’s payments. The annual average payment of $5.5 billion is an enormous burden. The

Commission study of alternate RHBF values found that significantly lower payments by the Postal Service could still meet the

original funding objectives of the law. Recalculation would be timely, as it would capture the Postal Service’s sizable work force reduction. Further, it would provide breathing room, resources for

new initiatives, and some capital investment to enable better longterm planning for the Service’s future.

Looking forward, the Postal Service currently provides a number

of nonpostal services that could generate new revenue. For example, the Postal Service now processes passports for the State Department. Other Federal and State agencies that issue licenses and

permits or have retail initiatives could partner with the Service as

well. The ‘‘America the Beautiful access’’ passes sold by the National Park Service is a partnership I have been advocating in particular.

Considering our Nation’s energy efficiency priorities, the Postal

Service has the Nation’s largest civilian vehicle fleet, which could

provide the critical mass needed to develop the transformational

technologies and infrastructure to be in our national energy goals.

Research indicates that postal delivery routes are especially wellsuited to electric vehicles. A national investment and a new fleet

for the Postal Service would speed transformation, add green jobs,

and reduce the Postal Service’s operational overhead for the foreseeable future.

Those of us in the mailing community have confidence in the

value of the mail, and it is important to our economy and society.

We believe that mail, letter carriers, and post offices serve a vital

role in our community. How well the mail comes back, however,

may well depend on how deeply service is cut now.

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That concludes my statement, and I would be happy to answer

any questions you may have.

Mr. LYNCH. Thank you.

[The prepared statement of Ms. Goldway follows:]

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Mr. LYNCH. Mr. Coughlin, welcome. You’re now recognized for 5

minutes.

STATEMENT OF MICHAEL COUGHLIN

Mr. COUGHLIN. Thank you, Mr. Chairman, and members of the

subcommittee. The chairman did earlier just introduce me. I am

Michael Coughlin. I want to make clear I am here not representing

any particular organization or group, but I have spent over 40

years in the postal industry. I did spend 32 years with USPS, and

for the last 10 years I have been working in a consulting role primarily focused on foreign posts.

I have been asked here today to share my perspective on the revenue-generation efforts of the foreign posts and the lessons we

might take from those here in the United States.

My written statement touches on the range of initiatives undertaken by foreign posts and summarizes the very levels of success

that some of them have had. I’m not going to rehash those here.

But let me get right to what I think are the common success factors that some of these posts have had in raising alternative revenues and some of the lessons we might glean from them.

When I look at something like 15 different postal organizations

around the world and their revenue-generation efforts, I see four

kinds of common management characteristics among the more successful of those, at least in the revenue-raising efforts.

Those four characteristics include real clarity around strategic direction and a narrow focus on markets and segments that they

want to target. They know what they want to do and they do it.

There is a strong innovation agenda in these organizations and

a forward-looking culture that embraces change. In those organizations, innovation is an expectation.

These posts generally have the ability to recruit top talent. Many

of the key players, particularly on the revenue-generation side,

come from outside the traditional postal experience. And one other

common factor among them is they tend to focus when they undertake those initiatives on the customer experience and making that

as positive as possible. Whatever the successful posts set out to do,

they strive to do it better than the competition.

Now, these are the four kind of common characteristics, and

these are largely created by the management themselves, and for

the most part—there are some exceptions—but for the most part

I think these are generally within the current capability of USPS.

But every bit as important to their success is the set of conditions

that the governments of these posts have put in place as they have

looked at their posts and their futures.

There are three critically important conditions that they they

tend to have in common. The legal framework within which they

operate provides complete commercial freedom of action to operate

in a competitive market. They operate very much like private entities do in their country and in this country as well.

The regulator in these countries usually has a light and a supporting hand, and their primary focus is generally on universal

service issues, the reserved areas, and the generation of competition in their local postal markets.

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Third, there is little political interference in the basic business

decisions that these posts make, provided the post operates within

the legal framework they have been given.

In my judgment, these are the fundamental success factors for

those posts in virtually all aspects of their operations. And, of

course, they generally have very solid leadership and a very effective governance structure at those posts.

So what does this mean for USPS? Mr. Chairman, and members

of the subcommittee, I think there are two other important factors

to keep in mind in a discussion of revenue initiatives and the authority and the flexibility that USPS has under the law.

The first of these issues is scale. I do not want to discourage anyone, but the problem USPS faces today is measured in billions of

dollars. Finding new sources of revenue for USPS is important. But

think about it: 1,000 projects, worth $1 million each, will generate

$1 billion; or make it 10 projects, worth $100 million. And that may

not be enough.

While the recent reform law provided some additional flexibility

to the Postal Service, I frankly have not heard of any initiatives approaching anything like that, and I don’t say that to denigrate in

any way what the Postal Service and its colleagues have tried to

do. But to have a real impact in this area, it’s going to take some

different and some very big thinking.

The second issue is every bit as challenging. Unlike most of the

posts I have discussed today, here in the United States there is a

very strong philosophical aversion to a government entity competing in private markets with goods and services that are already

available from private sources. In the past, when USPS has attempted to offer such services, there has been very strong and

noisy resistance, and eventually USPS hears from some of you. I

have personally experienced that. I do not see that situation changing simply because the postal revenue problem is bigger today.

Now, given this latter challenge, whatever revenue initiatives the

USPS undertakes outside the traditional postal arena will probably

have to involve partnerships and alliances with private entities

where both parties can leverage the strengths of the other. In the

case of USPS, it has enormous geographic reach in its retail network, and they touch virtually every home in the country throughout their delivery network. Some of the opportunities might include

expanded financial services availability, expanded delivery options,

government and agency services, or a link between the physical

presence of the USPS and emerging communications technologies

and services.

After hearing the Postmaster General’s October 8th speech at the

National Press Club, I can imagine that some of the bankers in

this country were bristling when the Postmaster General answered

a hypothetical question at his National Press Club speech about

what new business he would like to be in, by saying he would like

to be a bank. Well, instead of immediately thinking——

Mr. LYNCH. Mr. Coughlin, you need to wrap up. We are way over

on your time.

Mr. COUGHLIN. Instead of thinking defensively, perhaps the

bankers ought to put their innovative hats on and try to imagine

how they can capitalize on what USPS has to offer. The same goes

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for other organizations looking for really new ways of engaging

their customers.

So what have we learned from foreign posts? Frankly, I think we

have learned that what they are doing is interesting but it’s not

terribly applicable to the USPS.

Thank you, Mr. Chairman.

Mr. LYNCH. Thank you sir.

[The prepared statement of Mr. Coughlin follows:]

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Mr. LYNCH. Mr. Herr, welcome back. You are now recognized for

5 minutes. Thank you.

STATEMENT OF PHILLIP HERR

Mr. HERR. Chairman Lynch, Ranking Member Chaffetz, and

members of the subcommittee, I’m pleased to appear again before

this subcommittee today to discuss the Postal Service’s revenuegeneration initiatives. First, I will provide an update on the Postal

Service’s financial condition; second, discuss revenue-related

changes made by the Postal Accountability and Enhancement Act

of 2006 [PAEA]; third, outline actions the Postal Service has taken

to increase revenue since 2006; and fourth, discuss issues related

to generating new postal revenues.

Turning first to the Postal Service’s preliminary financial results

in fiscal year 2009 and going forward, mail volume declined about

28 billion pieces, and revenue declined from about $75 billion to

$68 billion. Congressional action was required to reduce the Postal

Service’s mandated retiree health payment by $4 billion. Outstanding debt increased by $3 billion to $10.2 billion. At this pace, the

Postal Service will reach its $15 billion statutory debt limit in fiscal

year 2011. Further, deficits over $7 billion are predicted in fiscal

years 2010 and 2011.

With regard to revenue generation and key postal products,

PAEA gave the Service greater pricing flexibility, including for

market-dominant products to generate 88 percent of its revenues.

Market-dominant mail is generally subject to an inflationary price

cap. Competitive products are not subject to a price cap, but each

competitive product must have cover its costs.

PAEA prohibited the Postal Service from offering new nonpostal

products and services.

Turning to actions that the Postal Service has taken since PAEA

was enacted, the Service increased average rates for market-dominant mail in 2008 and 2009 at virtually the maximum allowable

under the price cap. This year, three targeted rate incentives were

provided to stimulate mail volume. A summer sale was introduced

for standard mail, and there is an ongoing fall sale for first-class

mail and an incentive program for saturation mail.

For competitive products, there are annual rate increases for priority and express mail in 2008 and 2009, and the Service introduced volume discounts for these types of mail as well as a priority

flat-rate box.

The Postal Service has entered into about 90 contracts with large

mailers for other competitive products that are generally volumebased, with provisions intended to lower its costs. With regard to

generating increased revenues, the Postal Service has asked Congress to change the PAEA restriction on offering new postal products so that it could move into areas such as banking, insurance,

and nonpostal retail services.

We previously analyzed past Postal Service forays in the nonpostal area, reporting a loss of nearly $85 million in the mid-nineties on 19 new products, including electronic commerce services

and a remittance processing business.

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In 2001, we reported that none of its electronic commerce initiatives were profitable, and the management of these efforts was

fragmented.

The Postal Service’s interest in moving into new business lines

raises several fundamental questions. Should the Postal Service

compete in areas where there are already private sector providers?

Should antitrust and consumer protection laws apply equally to the

Postal Service and its competitors? If the Postal Service were to

compete in banking, insurance, and retail services, should it be

subject to the same regulatory entities as its competitors? If the

Postal Service used its 37,000 retail facilities to offer new nonpostal

services, would this provide an unfair competitive advantage? And

how would nonpostal activities be financed, given the Service’s current debt levels? Would it be allowed to borrow at Treasury rates?

In conclusion, we added the Postal Service to our high-risk list

this past July, noting that it urgently needs to restructure to remain financially viable. Although it has used its pricing and product flexibility, results to date have been limited, in part linked to

the economy. At this point, the Postal Service has no business plan

that clearly details its proposals for entering new nonpostal markets and what specific legislative changes would be needed.

Generating new revenues from Postal Service products and services appears more promising than venturing into potentially risky

nonpostal areas. At the same time, much work remains to reduce

postal operational costs.

Mr. Chairman, this concludes my statement, and I’m pleased to

answer any questions. Thank you.

Mr. LYNCH. Thank you sir.

[The prepared statement of Mr. Herr follows:]

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Mr. LYNCH. Mr. Reisner, welcome. You are now recognized for 5

minutes.

STATEMENT OF ROBERT REISNER

Mr. REISNER. Good morning, Mr. Chairman, Ranking Member

Chaffetz, and members of the subcommittee. In my statement I explain why I believe the Postal Service and the mailing community

can become a source of innovation and new postal revenue through

public-private partnerships that were encouraged by Congress in

section 1004 of the Postal Accountability and Enhancement Act.

Today there is a broad consensus that bold action must be taken

to reinvigorate the Postal Service, and fortunately there are some

real and tangible opportunities to create new value for postal customers.

To be clear, let me offer a few examples that might be called Enabling the Last Mile, Extending Democracy’s Reach, and Promoting

Green Routes.

By enabling the last mile, I refer to the many opportunities that

exist for putting technology in the hands of the letter carrier; in

other words, on the doorstep of the postal consumer. One of the

areas of greatest interest to mailers has been wanting to know

where their mail is while it’s en route to its destination. The USPS

was seen as a black hole compared with FedEx and UPS, who have

invested billions to enable their higher-end services to track and

trace mail products. This is going to change imminently because

the Postal Service is on the verge of creating a smart grid of intelligent mail services. Now we can go beyond the bar code and offer

tracking technologies that have exciting possibilities for adding

new value for customers. What’s more, we can download applications to the scanner technology that is finally, within the last 6

months, in the hands of the letter carriers. Customers can realize

new, tangible benefits, and new postal revenue can be created. But

to make this happen, we need to collectively create an innovative

enterprise of tests and trials and partnerships.

A second broad theme that Chairman Ruth Goldway, in particular, has championed has been Vote by Mail. The Postal Service can

do this and can provide many other government services as well.

To be practical and secure, it will require connecting hard-copy

services to Internet services, and that will necessitate partnerships.

But the opportunity to expand the capacity of the Postal Service to

continue to serve as democracy’s agent is here.

And third, there are opportunities for the Postal Service to again

serve the Nation by carrying parcels that today cause three and

four trucks to travel the same route. We can reduce carbon emissions by creating green postal routes. This will take some reengineering and perhaps some recognition under cap-and-trade, but

there are new opportunities here if we seize them.

In conclusion, I didn’t invent these ideas, they came from the

community, from the mailing community, from letter carriers, who

have said, why not? They come from creative mailers who have

said, why can’t we have a smart envelope? And from suppliers who

have shown how to do it. To tap this creativity, mindsets that were

established when the Internet was still a future vision have to be

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changed. To homegrown governmental Internet services, it’s time

to say, That was then, this is now.

In the future, innovation is going to come through collaboration

and partnership where the Postal Service does what it does best

and where the private sector, through partnerships, provides Internet services and makes mail relevant to the consumer of the future.

If we make the modern Postal Services relevant by connecting

them to this multichannel Internet marketplace, they will generate

more mail. This is the real revenue opportunity entailed in what

we are talking about here today.

The coming years could be an exciting time of transformation, or

they could bea train wreck. The difference will be whether there is

clear public policy guidance that can define the difference between

the creative balance of what should be public and postal, and what

the private sector can do best.

Thank you very much Mr. Chairman. I look forward to answering any questions.

Mr. LYNCH. Thank you.

[The prepared statement of Mr. Reisner follows:]

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Mr. LYNCH. I yield myself 5 minutes for questions.

Mr. Bernstock, I do appreciate your honesty in your statement

that we are not going to solve this on the revenue side alone. I

think that’s apparent just by the numbers. In 2008, we saw mail

volume go down 9.5 billion pieces, and then in the fiscal year ending October 1, 2009, we saw it drop 26 billion. There is no way in

the near term that we can turn the system around and solve that

problem by selling more greeting cards or any other service that we

might be capable of doing right now.

And at the same time, we are a little bit disappointed up here

with the consolidation effort and the cost-saving side. It does not

appear that the original target of closing maybe 1,400 facilities is

anywhere near probable. I think the Post Office has reduced its

consolidation numbers to below 400 now, and it won’t nearly capture the savings that we thought were possible.

As well, the early retirement incentives that—well, not great incentives—but the programs themselves have not gleaned the type

of utilization on the part of the employees, so we still have a lot

of people that are resisting an early buyout, we still have a large

work force, understandably so. Those workers, their 401(k)’s are

cut in half, most of them, so they don’t want to retire in an environment like this.

Yet we face a situation where we need transformational leadership. We need a truly dynamic change at the Post Office with the

way we do business. And there is a saying that says there’s nothing

more disruptive to the human condition than the pain of a new

idea. And, unfortunately, that is what we are facing.

Look, I love my postal workers, and I will be the first one to

admit it. I don’t want to see layoffs. I don’t want to see any of that.

So I’m trying all these other measures to protect the employees because, quite frankly, when we grade the consumer satisfaction

among the Federal agencies, the Post Office because of the work of

their clerks, because of the work of their mail handlers, because of

the work of their letter carriers that go to every home and business

in America 6 days a week, by far they are the highest rated Federal agency that we have in America today. They do the best job.

So I think it would be a mistargeting of our problems to look at

the backs of our employees to try to solve this problem.

So we need to change our structure. And I was wondering, there

have been a few things mentioned here today about allowing the

Post Office through the Postal Accountability and Enhancement

Act to branch out into these other areas. And I know that there is

some apprehension in competing with the private sector.

But there are some areas—specifically, my colleague, Mr.

Chaffetz, came up with an idea about the Postal Service taking

over major responsibilities from the census. Now, the Post Office

already, through the mail handlers and the letter carriers, they go

into every home and business in America already. And that’s basically what the census does; it tracks the population most effectively

through those home visits.

Have you looked at any of that, so it would be government taking

over government work, but just doing it more efficiently for the taxpayer? Have we looked at any of that or have we looked at—Ms.

Goldway has mentioned the Vote by Mail—have we looked at any

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of those? I know they are disruptive. I know bureaucracies are not

going to be satisfied with that. But I think we have very limited

choices. Have you looked at any of those type of initiatives that

might really transform what we are doing at the Post Office?

Mr. BERNSTOCK. Mr. Chairman, we’ve looked at everything you have said. We’ve looked at the fact that we have $6 billion in cost

savings that came in this year, and we are looking to lose $7 billion. We are looking at the fact that mail has declined. And we are

looking at both huge transformational revenue issues—as I said,

$45 billion is what it would take to close the gap. We have some

initiatives underway and we have also looked very specifically at

the initiatives you have identified.

On the census piece, my understanding is through the mail 80

or 90 percent of census responses come in. And while it’s not within

my area of responsibility, I do understand that there was a report

by our operations team, meeting with the Census Bureau, which

said that for going back and knocking on doors six or seven or eight

times to get that last 5 percent, we may not be the best-suited

agency. But we are willing to relook at that.

Vote by Mail, we are very actively looking at a range of ways we

can do that and have a series of initiatives underway.

Mr. LYNCH. I have exhausted my time, so I’m going to yield to

the ranking member for 5 minutes.

Mr. CHAFFETZ. Thank you.

Mr. Herr, has there been any sort of analysis—or any of you actually can answer that—the one area we can point to where there

is some cross-functionality within the government is passports. Is

that a revenue generator? Is it just a break-even operations? Is

there any sort of analysis that says, boy, that was a good idea?

Mr. HERR. We have not done that analysis. Mr. Bernstock perhaps, or Ms. Goldway.

Ms. GOLDWAY. The Commission has done the analysis and it not

only breaks even, but it provides a contribution to overhead, so, in

fact, it would make a profit for the Postal Service. It does. It is a

successful revenue-generation tool.

Mr. CHAFFETZ. So I want to hear some ideas here. So I like the

one about that you mentioned about the National Park passes and

that sort of thing. That is not going to get us out of the financial

hole that we are in. But what are the big ideas that are floating

out there?

And I just want to express again the sincere reluctance to get

into areas where the private sector is already competing, the financial services, the telecom stuff. I can’t imagine being supportive of

that. I’m just being as candid as I can, because they already have

those services in the marketplace.

But if we look at State and local government, if we look at Federal Government, if we look at our constitutional duties, roles and

responsibilities, it seems to me there are a number of agencies that

would benefit by the sheer structure and magnitude of the work

force, above and beyond what we have creatively thought of today.

Mr. BERNSTOCK. Congressman, I agree with that statement. And

we do have the authority to provide credentialing and enrollment

services to Federal agencies if we extended that authority to State

and local agencies, I think we could do even more.

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Mr. CHAFFETZ. How many are you doing at the Federal level?

Give me a better sense of——

Mr. BERNSTOCK. Well, the passport, the enrollment process on

the passport is one act of business we are engaged in. We feel we

could partner with a whole range of Federal agencies, be it TSA or

Social Security or Agriculture. There’s a number of ways we can do

credentialing and enrollment work.

Mr. CHAFFETZ. Is there a list of these out there?

Mr. BERNSTOCK. We are actually engaged with several Federal

agencies.

Mr. CHAFFETZ. Can you give me more specifics about which ones

you are pursuing?

Mr. Bernstock. I don’t have that data.

Mr. CHAFFETZ. Did you want to add something to that, Ms.

Goldway?

Ms. GOLDWAY. I’m very, very gratified that the Postal Service is

now beginning to look at this area, because it is potentially a great

resource and a great source of stability for the local post offices in

the community.

One of the issues that came up in a hearing we had recently is

that while the post office itself may not generate a lot of revenue,

having a post office in a local community shopping center creates

revenue and economic development activity for the rest of the community around it. So it’s important, I think, for the well-being of

the economy overall to continue to support post offices and

these——

Mr. CHAFFETZ. I agree. We are just looking for real specifics

here.

Ms. GOLDWAY. These abilities to connect with local government

will provide at least enough revenue to continue to justify the service, if not solve the entire problem.

Mr. CHAFFETZ. Mr. Reisner, if you had to come up with a list of

the best three or four ideas that you’ve seen or heard out there,

what would be on that list?

Mr. REISNER. The biggest thing of all, and I think Mr. Bernstock

just talked a minute ago about the credentialing services, the idea

that government-to-government services are something that the

Postal Service can do and is encouraged to do under the law, offers

a platform for coming up with other creative ideas. I think the

most important thing is that the marketplace bring the Postal

Service the ideas, but that the Postal Service has, as Mr. Coughlin

just talked about, become an innovative place where people have

the sense that they can come and plug and play and try ideas and

test their ideas in the marketplace to the benefit of postal customers.

Mr. CHAFFETZ. Mr. Chairman, I would definitely echo that. I

would like us to put out a call to the private sector to say, please,

come to our rescue here. We need the creative innovation that is

going to come from the populace across this country with the creative, innovative ideas that are going to be those big ideas that the

Postal Service can participate in, at the same time making sure we

don’t overly step into the private sector where, rightfully, the private sector should be leading the charge. But there are

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credentialing services, and we need to continue to explore those

ideas.

I tend to think that the private sector is going to help come up

with these ideas, bigger and broader. So please, if you have those

ideas, send them to us. We need them. And I see I’m out of time.

I’m going to be under time this time, Mr. Chairman. I would just

like to note that. Oh, shoot, I blew it.

Mr. LYNCH. Well done. OK, Mr. Davis is now recognized for 5

minutes.

Mr. DAVIS. Thank you, very much, Mr. Chairman. I try to be as

optimistic as possible. And as I listened to the witnesses, I thought

of the baseball game that I was watching last night, especially

when the score got to be 7–1.

And I was wondering if there was any way that Philadelphia was

going to get back. And I thought, you know, if you bunt, get a guy

on first base, you bunt again, get another one on second base; that

is, you come up with a number of different ideas, but they are all

kind of small in terms of generating the big runs that you really

needed.

And so when I think of changing prices for shipping services,

bring down the cost, reorganize sales, become more competitive, I

guess I’m thinking reorganize sales to sell what, other than stamps

and shipping? Or if you got got some of the other services, is there

any way that you can really be competitive or as competitive as you

need to be?

And so, Ms. Goldway, I’m thinking that eventually you get down

to this last resort business. And I wanted to ask, what would you

consider to be last resort in terms of being forced to cut services?

When would last resort come?

Ms. GOLDWAY. The Commission has a process for making these

decisions, and it involves hearing from the public and getting a

whole range of information about costs and benefits before we

would make such a decision.

Certainly, the Postal Service has brought forward to us an end

case. We are looking at the possibility of closing some post offices.

And they have suggested that they may bring another case about

reducing service from 6- to 5-day delivery. There is not agreement

yet on what the cost savings would be to close post offices. And

there is certainly no agreement yet on what the cost savings would

be to reduce service from 6 to 5 days.

And the tradeoff between reducing service and reduction in potential volume is something that needs to be looked at. If you cut

service, do you reduce demand more than you would if you maintained service?

I think it’s a very complicated matter. And what I think our

Commission’s responsibility to do is to focus on what the PAA tells

us, which is to ensure an efficient and effective Postal Service that

provides universal service. So, we would have to look at those

tradeoffs.

I may be more of an optimist than you. I’m a Dodger—a Brooklyn Dodger fan, and I’ve survived.

I think that incremental support can make a difference and that

there are many surprising things that develop in the postal service.

Netflix, for instance, is one that, at least for a time, is bringing us

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in a significant amount of revenue. And there may be about others

that develop as well. I certainly hope so.

Mr. DAVIS. Thank you very much. I appreciate the efforts and

the creative thinking that the Postal Service has put forth. I just

don’t want Casey at the bat.

Mr. Coughlin, let me ask you, because I listened closely to your

testimony, do you have a prognosis under which we can really pull

this out and pull it off?

Mr. COUGHLIN. Well, that’s the $68 billion question, I think. Let

me just say I’m not quite perhaps as big an optimist as Chairman

Goldway about the future of mail volume. I do think it is going to

continue to slide.

I think the short term, relatively short-term, options the Postal

Service have on the cost side are fairly evident. They’ve pretty

much have been talked about.

I think they need to reduce the number of delivery days. I think

we’re one of the few countries in the world who still has 6-day delivery. I think they need to reduce the size of their processing network from around 300 processing facilities to perhaps half of that

size. And I think they need to reduce the size of their retail network.

Those are, I think, some obvious moves; and I know they are difficult. They are not changes that are going to go down easily, and

they have some costs associated as well as some savings.

I think the Postal Service itself needs to think in terms of what

would a 400,000-person Postal Service look like and how would you

operate and still deliver on the universal service obligation? Because I think, in my judgment, that’s probably where it’s going to

go.

You need to continue to work on the revenue issues that have

been discussed. The ranking member, Mr. Chaffetz, talked about

the ideas that are generated from here.

What I would really encourage—I’d encourage, on the one hand,

the Postal Service to get out there and sell the obvious benefits of

the Postal Service in terms of its ubiquity and its geographic reach

to potential partners out there. I see new bank branches going up

constantly in growing neighborhoods out there, new brick and mortar. I would have to ask myself as a banker, is there a possibility

to partner with an organization like the Postal Service to provide

financial services, agency services. All kinds of opportunities are

out there.

It gets complicated, I think, partly by the way that the Federal

Government is organized and the way its funding processes work

in terms of the subparts of agencies. So that makes it complicated

to kind of get an overall view of how an agency delivers services

and how it might tap into the Postal Service. But there are a lot

of opportunities out there. I hope I’m wrong, but I think that’s the

direction it’s going.

Mr. DAVIS. Thank you very much, Mr. Chairman.

Mr. LYNCH. The Chair now recognizes the gentleman from Ohio,

Mr. Kucinich, for 5 minutes, who yields to the gentleman from Virginia, Mr. Connolly, for 5 minutes.

Mr. CONNOLLY. I thank my colleagues.

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You know, listening to all the hearings we’ve had on this subject,

we are clearly in search as we move forward in this century for a

new, viable business model for the U.S. Postal Service. And, on the

one hand, I think we in Congress maybe want to have it both ways.

On the one hand, we recognize the iconic value of the Post Office

in a given community, its centrality in especially rural parts of our

country; and we don’t want that change. We don’t want you closing

offices. We don’t want you changing routes. We don’t want you cutting back on service or the numbers of days of service.

By the way, we don’t want you unnecessarily competing with the

private sector for anything.

On the other hand, why aren’t you viable? Why are you losing

money? Whey aren’t you making money? Why aren’t you like your

competitors?

And we in Congress can’t have it both ways. We’re going to have

to work with you to recognize that, by statute—and, Mr. Herr, I’d

be interested, listening to your testimony, I think one of the things

we have to talk about, should the Post Office be subject to the

same regulations as the private sector? Well, by statute, we put

some requirements on the Postal Service, don’t we, that we don’t

put on the private sector that I think significantly circumscribes

the ability of the Post Office to sort of break out here and just be

a rational actor in the private market?

Mr. HERR. I’d agree with that. I think part of it is we’re just simply trying to pose some questions that folks in your situation

should be considering as you take a look at this.

It is a large enterprise. It touches everyone’s life 6 days a week.

I mean, as Chairman Lynch mentioned at the opening, you know,

no other institution does that 6-days a week. As you proceed thinking about this, some of those tradeoffs, those get raised; and I think

it is important to put them on the table as folks consider them. Because if we don’t raise them now, they’ll come up later.

Mr. CONNOLLY. I would just add to your list, though. I think you

have an obligation, GAO, to look at the statutory limitations or expectations we put on the Postal Service that make it different than

an entity in the private sector.

Mr. HERR. And on that point we have ongoing work looking at

the Postal Service business model, and as part of that we’re factoring those kind of things into it as well. So thank you.

Mr. CONNOLLY. OK.

Mr. Reisner, how could the Postal Service incorporate, let’s say,

the banking idea that Ms. Goldway talked about without threatening community banks?

Mr. REISNER. Well, I think that Mr. Coughlin just really talked

about it a second ago. I think that there has to be a process that

creates some kind of partnership in which the private sector gets

to do what it does best. This is the marketplace that we live in

today.

Just one quick point that I’d make, too, that I think Jack Potter

the other day in his speech at the National Press Club created this

framework and embraced something that Ruth Goldway had endorsed, which was looking out to the future 10 years and trying to

imagine what kind of a Postal Service should we have to serve the

public purposes that we see 10 years from now. And I can’t look

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out 10 years and imagine that the Internet isn’t a part of that, the

marketplace, at that time.

Now is it appropriate for the Postal Service to provide those services? Probably not. And so finding partnerships where the public

sector can be compensated for its retail presence and its ubiquity

and the private sector can provide what it provides best it seems

to me is part of that 10-year vision.

Mr. CONNOLLY. Ms. Goldway, and anyone else, what do we know

about the elasticity of demand for the price of stamps? I mean, is

the demand inelastic such that we can raise the price to whatever

we need to raise or do we see significant followup in volume every

time we, in fact, raise prices?

Ms. GOLDWAY. Well, we have about 40 years of following the

prices.

Mr. CONNOLLY. Ms. Goldway, I’m sorry. I cannot hear you.

Ms. GOLDWAY. Oh. We have about 40—in the Commission, we

have about 40 years of following what we call the elasticity of price

of first-class mail. And for pretty much all that time we could say

it was inelastic. You raise the price and sales might drop off a little, but they’d come back up. And that stamp usage followed the

rate of population growth and, to some degree, the economy all

through that time.

But things really seem to have changed in the last 4 to 5 years,

and there was a slow but steady decrease in the first-class mail,

and it has been greatly increased by this recession. And the dilemma for all of us is to see whether the recession was an unusual

event—there was a great drop-off in mail after 9/11, but it picked

right back up again—or is this a lasting phenomenon.

I think all of us feel that the growth of the Internet makes the

role of mail very different from what it may have been in the past

and that we’re all trying to find ways to make mail relevant and

valuable. So it may not be that we sell as many stamps but what

we sell is more valuable, people are willing to pay more for it, or

there is some other way in which the community supports it.

Some of the European posts have subsidies for their mail or specific subsidies for post offices. And in fact even those that have had

great profit in the last few years are having real problems under

this recession as well. So just assuming you can follow a European

model where there is privatization will get you some ongoing independent Post Office is not assured either.

Mr. CONNOLLY. Mr. Chairman, my time has expired; and I thank

you. I do think Ms. Goldway’s answer underscores—and I thank

you for it—underscores the fact that, moving forward, we can’t just

tinker at the edges. We’ve got to figure out a new business model

that’s going to work.

Thank you.

Mr. LYNCH. I thank the gentleman.

The Chair now recognizes the gentleman from Ohio, Mr.

Kucinich, for 5 minutes.

Mr. KUCINICH. Thank you very much, Mr. Chairman. I’m grateful that, under your leadership, this committee continues to look at

what we can do to secure universal service to the people of the

United States.

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My neighborhood in Cleveland, OH, I have seen over the last few

years the post boxes disappear from neighborhoods; and I don’t

take that lightly because, to me, that has been an essential part

of the infrastructure, the Postal Service.

Now the next part of the infrastructure of the Postal Service are

the branches; and, of course, we know that the postal administration has been systemically targeting branches, particularly in areas

which are economically disadvantaged. Think about universal service. And we know they are cutting hours. They keep trying to

downsize this Postal Service.

Now, at the same time, there has been an expansion of dealings

with the private sector. The private sector take over more and

more. Now I think we need to look long and hard about this creeping privatization that’s been going on in the Postal Service, because

it’s really at odds with universal service. If the Postal Service is a

money loser, why does the private sector want to take it over?

Think about that. If it loses money, why would anyone want to

take it over, even turning it into a bank if it is such a money loser?

This service belongs to the people of the United States.

And while certainly every business model needs to be updated,

privatization is not updating the business model of the Postal Service. It’s destroying the Postal Service.

I have a question for Chairman Goldway. Welcome to this committee, Mr. Chairman. Your testimony echoes my concern that, in

diversifying the services the U.S. Postal Service provides, plans to

move forward with providing non-postal-related services could lead

to a reduction in essential services traditionally provided by the

Postal Service and could subordinate the provision of these services

to the pursuit of revenue. Much of the U.S. Postal Service airmail

has been already outsourced to FedEx.

Can you please explain and can you expand on the Postal Regulatory Commission’s concerns regarding cuts and essential services

until revenue generation plans have been successfully implemented? And is the Commission concerned that moving away from

traditional services could lead to the privatization of core services

the Post Office is mandated to provide? If you could respond.

Ms. GOLDWAY. Thank you, Congressman Kucinich.

Both of us met each other 30 some odd years ago when we were

mayors——

Mr. KUCINICH. If you could speak up.

Ms. GOLDWAY. Both of us first met each other when we were

mayors of our respective cities about 30 years ago, so we share this

focus on the local impact of the Postal Service, I think.

I don’t think the Commission is opposed to the Postal Service

providing non-postal services, and our litmus test is that we expect

the services to be in support of the mail function. So greeting cards

are fine. Money orders that the Postal Service has provided and

even electronic money orders internationally are fine. Copying services are fine. But there are a range of services that are fine. And

we are certainly open to the Postal Service coming up with any

number of experimental products, should they have them, that are

related to postal services that we can define as Postal Service. So

we actively support and look forward to the Postal Service coming

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forward with those new ideas, and I think our record is that we

accept almost all of them.

The problem is, if you look at the Postal Service and its network,

the retail clerks that are there are paid very high wages, and I

think they should be. But look at the bank next door and the wages

that are paid to the bank next door. It’s not likely that a bank is

going to want to partner with the Postal Service unless there is

some real change in wage structure, which may result in problems

as well.

So all of these proposals——

Mr. KUCINICH. If I may, my time is expiring; and I just would

like to make this observation.

Mr. Chairman, concluding, if banks want to partner with post offices the only reason they’d want to do that is so that they could

take over the post offices so that people then would have to do

their postal businesses through banking. This is very easy to see.

These things go either way.

We used to be able to go to banks and pay bills. Then they

stopped doing that. It is easy for them to take up the function of

mailing and then just take it over from the government. We already had enough experience with the workings of banks here to

know that if we’re looking for the private sector to provide solutions for government services, we’re probably looking in the wrong

place.

Mr. LYNCH. I thank the gentleman.

Just briefly, I want to yield myself 15 seconds.

I think what’s happening here, though, is that now we see a

model out there, a competitive model. When I go to the Stop and

Shop or you go to the Piggly Wiggly to do your shopping, there is

a bank there. There is all kinds of different things offered. So I

think the Postal Service is under that similar pressure as well.

But I’ll wait until I have 5 minutes to expound on that a little

further. But I deeply appreciate the gentleman’s comments, and I

agree with the threat that he’s identified.

At this point, I would like to also welcome former Representative

William Clay. Thank you very much, sir. We appreciate your attendance, just in time to hear from your son, the gentleman from

Missouri, Mr. Clay, for 5 minutes.

Mr. CLAY. Thank you, Mr. Chairman, and thank you for conducting this hearing today. Like all of us, I am deeply invested in the

success of the Postal Service; and I’m happy we have continued to

think critically about ensuring a positive future for the USPS.

Also, let me welcome our panel to these proceedings; and I thank

you for being here to share your expertise.

Also, as the chairman mentioned, my older brother is in the front

row, too. We welcome him, also.

Let me start off by saying much of your recent effort has gone

toward innovation in new markets. Is there any value in expanding

existing postal services to increase revenue and customer loyalty?

And anybody can take a shot at it. Ms. Goldway.

Mr. BERNSTOCK. Sure. I think, Congressman Clay, that there’s a

balance between driving down costs and growing revenue. And I

think the tension starts with the fact that, once again this year,

we had $6 billion in cost savings. And we did a little bit of reVerDate 11-MAY-2000 15:19 Mar 08, 2010 Jkt 000000 PO 00000 Frm 00097 Fmt 6633 Sfmt 6633 U:\DOCS\54696.TXT KATIE PsN: KATIE
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search. We think that’s the single largest cost savings by any company in this country possibly ever. Yet we lost $7 billion.

So all the revenue-generating initiatives that we’re pursuing

within the law clearly contribute. But when you have is a loss of

that magnitude you can’t get back to a stable Postal Service or

Postal Service without some changes in the cost-saving initiatives

that are not within the law at the current time.

Mr. CLAY. Has there been any effort to strengthen these services,

such as first-class mail?

Mr. BERNSTOCK. At the current time, we’re running a fall firstclass incentive program; and the impact of that we estimate will

be $50 million, $100 million in incremental revenue, in that ballpark. But, once again, in comparison to a $7 billion loss, it is relatively modest in the impact.

So there are things we’re doing. Elasticity, as Chairman Goldway

pointed out, is increasing, both from consumers and commercial

mailers. And so we’re fighting a very, very difficult uphill battle.

Mr. CLAY. So I guess that begs the question then how can the

USPS carve out their own niche in the postal market and continue

to differentiate itself from other mail services?

Mr. BERNSTOCK. Well, as many of the panelists have said and as

we’ve heard, we have an enormous number of strengths. Be it our

infrastructure, our retail infrastructure, our delivery capabilities,

or our logistics capability, the fact that we’re No. 1 in trust, all of

the strengths that we have should be leveraged. What we need to

do is have freedom to expand our model as this country changes

and build on the strengths that we have.

Mr. CLAY. You know, you cite examples in international markets

as evidence that USPS should include other services for customers.

How successful have these efforts been internationally? Do they

turn a profit or do they break even? Perhaps Mr. Coughlin can answer.

Mr. COUGHLIN. I will comment on it. I do list in my written

statement some of the results they’ve had. Some of these posts

have generated as much as 75 percent of their total revenues from

non-postal sources.

Deutsche Post in Germany is an example. The Dutch Postal

Service, TNT, is generating 60 percent. But they have undertaken

major, major diversification.

The Germans, for example, have bought heavily into the logistics

business. They have made several multi-billion Euro acquisitions to

get into that business. They have had, to be perfectly honest, although they show profits for the most part, they have, as Chairman

Goldway said, they are having a little trouble right now with the

fall in mail. And the interesting thing about the Germans is they

are getting 75 percent of their revenues from non-postal sources,

but they are getting 50 percent or more of their profits from mail.

So mail is still a pretty good business for those people.

So to call them a success, yeah, there are some success stories,

but some are not doing quite as well as they look like they are on

their surface.

Mr. CLAY. Thank you, Mr. Chairman. I yield back.

Mr. LYNCH. I thank the gentleman.

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One of the things that I worry about, and I yield myself 5 minutes, is that adage that, just like our military, we tend to fight the

last war.

Now the things that we’re looking at, as Mr. Connolly has described as being nibbling around the edges, I look out there and

you look at some of these other countries—as Mr. Coughlin has

noted, Sweden has a system where you actually click on and you

see your mail. You can actually read some of it, you know, the

pamphlets or brochures or whatever that come to your house. You

can click on whether you want to have it delivered or not. And

that’s a great environmental benefit I think in the long run, but

it will drop the volume of mail, but I think that’s really the future.

So I don’t want to get caught up in addressing the things that

we see now, but I’d rather us try to anticipate, as a commercial

business would, what’s coming down the line. I also see some of

even our domestic models like Earth Class Mail and Zumbox,

where it’s a similar Internet-based or Internet-centered system.

And I just think we have to really, really think long term here.

There is a book out—it’s an older book—The World is Flat by

Tom Friedman. And he has one chapter there on UPS—I know my

friends from UPS are in the back here. But he gave the example

of Toshiba computer company. They had a warranty on their laptop

computers where, if anything happened, you just mail it back to

Japan. They would fix it and send it back to you within a certain

amount of days.

Well, UPS, as it describes in this story, turned that all around,

to the fact where, instead of the user just sending their laptop to

Atlanta and then off to Japan to be fixed, UPS put their own people to work repairing those computers. And that is totally outside

of the delivery business. They now became computer fixers, and

they would save the Toshiba company a ton of money and make

their customers happier.

So, you know, it’s that type of innovation and just the transformative change that we need in the Postal Service. And I know

it is frightening, and I know that bureaucracies are even more resistant to change, but I just see, with the drop-off in volume, what

we see coming down the line.

I see the number of retirees we have in our postal system. We

have to have a business model that allows us to continue to provide

those benefits to retirees. So we’re going to fall off a cliff here if

we don’t get our business model matched up with the realities that

we have here.

I know there may be some short-term disruption here, but we

just encourage you to take that chance, to think big. This is a big

problem, so the response here has to be, as I say, transformative.

We have to look at this in a different way than just nibbling

around the edges and trying to bring in a few more million in in

revenues.

So, again, you know, do you have anything like that, some big

moves that would help us take a bite out of the deficit that we see?

Mr. BERNSTOCK. Chairman Lynch, I speak for the Postal Service;

and we fully agree with what you’re saying. We are 5 percent of

the world’s population and 40 percent of the world’s mail. We have

been the world’s innovator in hard-copy mail, and what’s frustratVerDate 11-MAY-2000 15:19 Mar 08, 2010 Jkt 000000 PO 00000 Frm 00099 Fmt 6633 Sfmt 6633 U:\DOCS\54696.TXT KATIE PsN: KATIE
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ing is we believe we have the same kind of role to play within digital communications.

It is hard for us to look at Sweden leading the United States. We

believe we should be out in front of the technology changes that are

occurring, not for any other reason than to foster commerce and to

be a market maker and to have the result be that the United

States is a leader in this transformation to digital products and

that we offer hybrid products.

So I think, with these kind of transformational moves in concert

with the cost savings we’ve talked about, we can have a thriving,

growing Postal Service.

Ms. GOLDWAY. I’d just like to add the Postal Service has presented hybrid mail products to us in the past, and we’ve approved

them. Mailing online and post TCS were both approved by the

Postal Regulatory Commission, Postal Rate Commission at the

time. It was the Postal Service that found that they could not implement those programs. They weren’t up to the task.

Now if there is some partnership that they can develop I think

the Postal Regulatory Commission would certainly review that. I’m

not sure that there is any need for any legislation. We’d be interested in looking at those issues.

Mr. LYNCH. Yeah, I’m just thinking of it this way. You see, what

Wal-Mart and these Stop and Shop and Piggly Wiggly and Harris

Teeter, these big box stores, have done is they didn’t try to recreate

their own bank. They didn’t try to recreate their own mail facility.

They brought the Post Office in. They brought the banks in.

When you think about our scale, as Mr. Coughlin has outlined,

that’s also an advantage if we use it the right way, use that as leverage. And we have 37,000 post offices out there, and so we own

the footprint. And what we put in there—and it may be—I’m not

suggesting go out there and start the U.S. postal bank, but can we

bring in other services within the footprint of the postal facility to

offer more than what we’re offering right now and have that entity,

that private entity, pay some of the freight there, since we already

own a lot of the facilities? Although I’m surprised to see how much

we’re still leasing. I don’t know. I’m trying to multiply our competitive advantage where we can.

Mr. Bernstock.

Mr. BERNSTOCK. Yeah, Chairman Lynch, the greeting card test

we’re running now is a very good indicator of what you’re talking

about. Before we went out and launched that, we went to consumers and the feedback was that, yes, they would be very pleased to

have greeting cards offered in the Postal Service. They thought it

was appropriate and would expect to purchase them there. So there

is a whole range of other products that we could sell that we actually think would grow the market and our customers would want

those.

In addition, beyond passports, we think there is a series of transactional activities we can be involved in. So I would agree there is

a lot more we can do with the facilities that we have.

Mr. LYNCH. Yeah. I appreciate that. I know change is

difficult——

Mr. BERNSTOCK. Some would require changes in the law. Some

would not.

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Mr. LYNCH. We’re happy to work with you and with the postal

employees as well to see what we can do.

The Chair recognizes the gentleman from Illinois, Mr. Davis.

Mr. DAVIS. Thank you, Mr. Chairman; and I certainly agree that

we’ve got to think big. I think part of the problem, though, is we

don’t think we’ll like the answers that we get. It’s kind of like everybody wants to go to heaven, but nobody wants to die.

We generate at one location, but then we spend at another one.

I mean, we generate as people come in to purchase whatever it is

that they are purchasing, but the output is as we maintain or try

to maintain the concept of universal service.

I know it is difficult to receive a piece of first-class mail, for example, if you live out on P.O. Box, like I used to live, you know,

where the carrier would go 5 miles before delivering another piece

of mail. Well, I don’t know how much you generate from the Post

Office as you sell whatever product you are selling.

It seems to me that we’ve had some experiences and continue to

have some experiences with bailouts. We’ve put resources into

places. I think we have to do some serious thinking in relationship

to what it is that we expect.

I rely don’t want to have cancer and have somebody tell me I’ve

got a sore. I don’t want to have pneumonia and somebody have me

believing or thinking that I’ve just got a cough, I’ve got a little cold.

So I agree that there are no shortcuts or easy routes or easy

ways home. But I do think we’re going to have to go for the big

picture in terms of reevaluating our thinking relative to what it is

that we want from our Postal Service.

I never will forget. A guy made a speech when I was in the

eighth grade. He came to our school. He said, I want you to ask

yourselves three questions: one, who am I; two, what do I want;

and, three, how do I propose to get it. And I think we’re going to

have to ask ourselves those three questions about our Postal Service.

I’m a staunch union supporter, always have been, always will be.

I believe that people should get the maximum of what can be received in terms of quality of life and expectation, but I also believe

that there has to be realistic thinking in relationship to how do we

manage a way to do that.

If anyone would respond, I would appreciate it. If not, Mr. Chairman, I thank you very much for the opportunity.

Mr. LYNCH. Have they just signaled votes? They have.

What I would like to do is recognize the gentleman from Virginia, Mr. Connolly, for 5 minutes.

Mr. CONNOLLY. I thank the Chair.

Mr. Coughlin, do you believe that the USPS has a culture of innovation? And, if not, why not?

Mr. COUGHLIN. I think it has pockets of innovation.

Mr. CONNOLLY. I’m going to ask every one please to speak into

the microphone. I cannot hear you, believe it or not, up here.

Mr. COUGHLIN. I believe there are pockets of innovation within

the Postal Service. I do believe that there are some conditions that

exist. And I will say I don’t think it’s unique to the Postal Service.

I think it’s a characteristic of government generally that discourages risk taking and discourages innovation and it doesn’t generate

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an environment where innovation is expected on the part of employees.

Mr. CONNOLLY. Or rewarded.

Mr. COUGHLIN. I’m sorry?

Mr. CONNOLLY. Or rewarded, perhaps.

Mr. COUGHLIN. Well, that’s a difficult issue as well.

I mean, I spent 32 years there. I think it is the greatest work

force in the world. There are some enormously creative people

there, and they are going to need all of that creativity as they go

forward. I do believe that Jack Potter and his team have done a

terrific job in terms of generating an environment that encourages

people to come forward with new ideas, and the move of bringing

in people like Bob Bernstock and some of his colleagues to help

support the traditional postal thinking has to help in the long run.

And want I go back to the chairman’s comments earlier about

the future. I wish I had an answer to what that business model

ought to be. I don’t right now. I do think that these things evolve

over time.

One of the things I mentioned in my testimony was I believe one

of the possibilities for the Postal Service down the road is in this

nexus between their geographic physical presence and the communications technologies that are out there. I think that’s some of

what, for example, the Swedish example you mentioned gets to. So,

yes and no is the answer to your question about innovation in the

Postal Service.

Mr. CONNOLLY. I thank you.

Ms. Goldway, you intriguingly noted that the Postal Service fleet

is one of the largest in the country and that in some ways, given

the route structure, it is tailor made for electrification and sort of

talking about innovation, cutting-edge green technology being deployed. Could you expand a little bit on that? Have we done any

studies to know how many CO2 and noxious gases could be avoided, what the energy savings can be?

Ms. GOLDWAY. This is an issue I’ve entered into just in January

of this year; and I’ve discovered that there is a whole range of expertise, far greater than mine. I do have many studies that I can

forward to you about this.

It appears that the Postal Service is ideally suited for transition

to an electric vehicle fleet. Its current vehicles get about 8 to 12

miles to the gallon, and they are all at least 18 years old.

Unfortunately, given the financial reality of the Postal Service,

they don’t have the capital to buy new vehicles; and I think it

would be worthwhile to find funds in some of the other subsidies

that are provided through the government and have those directed

to the Postal Service so that they could invest in new vehicles, reduce some of their overhead, and lead the country in a national

transformation.

Mr. CONNOLLY. Let me ask you, because I think we’re on to

something here, how many vehicles in the fleet?

Ms. GOLDWAY. 150,000. Although I think it may be 140,000 now.

They’ve reduced them a bit.

Mr. CONNOLLY. Any idea what it would cost to replace them with

electric vehicles?

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Ms. GOLDWAY. What I think the thinking is—and I believe that

Congressman Serrano is working on some legislation—is to develop

a program so that you phase in over 3 to 5 years enough vehicles

with enough testing so that you know exactly what to buy. But it

is billions of dollars that are needed.

Mr. CONNOLLY. My time is about to expire, but I just want to

pick up on your thought.

It seems to me, Mr. Chairman, again, both Mr. Coughlin, where

he was pointing us to, we legislatively can look at how we can help

foster a more innovative culture or we may be part of the problem.

Second, with respect to what Chairwoman Goldway is talking

about, we were willing to put billions into Cash for Clunkers. Are

we willing to invest into our own Postal Service to give it that cutting edge, innovative delivery of service to help make it more competitive, to give it the capital it lacks right now and do a good thing

for the environment and the auto industry while we’re at it?

Ms. GOLDWAY. I think all of us at the table would support that

effort and work with you to make sure that happens.

Mr. CONNOLLY. Thank you so much.

Mr. LYNCH. I thank the gentleman.

I think this panel has suffered enough. We’ve actually got votes

on the floor, but I did want to thank you for your willingness to

come before the subcommittee and offer your thoughts and suggestions. We appreciate that. You’re on the ground level where you

can offer unique perspective.

I will hold the record open. I know there were several hearings

going on this morning, so my Republican colleagues could not all

attend, so I leave it open for their comments as well.

But I want to thank you for your willingness to come forward

and to help the committee with its work. Thank you very much. I

bid you good day.

[Whereupon, at 11:43 a.m., the subcommittee was adjourned.]

[The prepared statement of Hon. Dennis J. Kucinich follows:]

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