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NOMINATION OF ROBERT W. MCGOWAN 

HEARING 

BEFORE THE

COMMITTEE ON 

HOMELAND SECURITY AND 

GOVERNMENTAL AFFAIRS 

UNITED STATES SENATE 

ONE HUNDRED TENTH CONGRESS 

SECOND SESSION 

ON THE 

NOMINATION OF ROBERT W. MCGOWAN TO BE A GOVERNOR, U.S. 

POSTAL SERVICE 

NOVEMBER 17, 2008 

Available via http://www.gpoaccess.gov/congress/index.html 

Printed for the use of the 

Committee on Homeland Security and Governmental Affairs 

( 

(II) 

COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS 

JOSEPH I. LIEBERMAN, Connecticut, Chairman 

CARL LEVIN, Michigan 

DANIEL K. AKAKA, Hawaii 

THOMAS R. CARPER, Delaware 

MARK L. PRYOR, Arkansas 

MARY L. LANDRIEU, Louisiana 

BARACK OBAMA, Illinois 

CLAIRE MCCASKILL, Missouri 

JON TESTER, Montana 

SUSAN M. COLLINS, Maine 

TED STEVENS, Alaska 

GEORGE V. VOINOVICH, Ohio 

NORM COLEMAN, Minnesota 

TOM COBURN, Oklahoma 

PETE V. DOMENICI, New Mexico 

JOHN WARNER, Virginia 

JOHN E. SUNUNU, New Hampshire 

MICHAEL L. ALEXANDER, Staff Director 

KRISTINE V. LAM, Professional Staff Member 

BRANDON L. MILHORN, Minority Staff Director and Chief Counsel 

JENNIFER L. TARR, Minority Counsel 

TRINA DRIESSNACK TYRER, Chief Clerk 

PATRICIA R. HOGAN, Publications Clerk and GPO Detailee 

LAURA W. KILBRIDE, Hearing Clerk 

(III) 

C O N T E N T S 

Opening statement: Page 

Senator Carper ................................................................................................. 1 

WITNESS 

MONDAY, NOVEMBER 17, 2008 

Robert W. McGowan to be a Governor, U.S. Postal Service 

Testimony .......................................................................................................... 3 

Biographical and professional information ..................................................... 15 

Responses to pre-hearing questions ................................................................ 20 

Letter from U.S. Office of Government Ethics ............................................... 31 

Responses to post-hearing questions from Senator Collins .......................... 33 

(1) 

NOMINATION OF ROBERT W. MCGOWAN 

MONDAY, NOVEMBER 17, 2008 

U.S. SENATE, COMMITTEE ON HOMELAND SECURITY

AND GOVERNMENTAL AFFAIRS, Washington, DC. 

The Committee met, pursuant to notice, at 10:07 a.m., in room 

SD–342, Dirksen Senate Office Building, Senator Thomas R. Carper, presiding. 

Present: Senator Carper. 

OPENING STATEMENT OF SENATOR CARPER 

Senator CARPER. The hearing will come to order. 

Mr. McGowan, either you or your daughter are welcome to have 

a seat here where your name appears. Sometimes when we have 

witnesses that appear before us and they have family members in 

the front row, I will acknowledge at some point at the end of the 

hearing that I could barely see the lips of the relative move while 

the witness spoke. [Laughter.] 

We will find out if that is the case here today. 

We are happy that you are here, and today we will be considering the nomination of Robert McGowan to be a member of the 

Postal Service’s Board of Governors. I mentioned to Mr. McGowan 

before the hearing began that a Bob McGowan has also been a 

long-time leader in the State of Delaware for the Veterans of Foreign Wars, where I am a life member, so you have a good name 

and one that is highly regarded, at least in Delaware, and obviously in Nevada, too. 

Mr. McGowan, I am certain that you have learned quickly that 

your nomination comes at a very difficult and challenging time for 

our country, but also especially for the Postal Service. The economic slowdown that we have found ourselves in has hurt any 

number of businesses, but it has hit the Postal Service early, and 

it has hit them hard. 

The Postal Service reported just last week that it lost some $2.8 

billion in fiscal year 2008, and things are projected to get even 

worse in the current fiscal year. I have been told that their losses 

could actually more than double. The number $7 billion has been 

mentioned, and that takes my breath away, and I suspect it does 

that to a lot of other people as well. A loss that high could be devastating to the Postal Service, and it could mean significant cuts 

in service. It could force the Postal Service, which is limited on how 

much it can borrow, to seek additional borrowing authority or even 

direct financial aid from the Congress. No matter what happens, 

2 

the Postal Service that we see a year from now may look a bit different from the one that we know today. 

The Postal Service’s current financial difficulties might be a little 

less troubling if we could guarantee that a significant portion of the 

mail volume that we have seen disappearing recently will come 

back once the economy recovers. Most reports and studies that I 

have seen, however, tell me that the mail volume that the Postal 

Service has lost as a result of the slowing economy may be lost for 

good. The number of communications options that are available to 

postal customers just continues to grow, and the ability to use 

them grows more easily, too. 

The Postmaster General and the Board of Governors have a tremendous record in recent years of doing what they need to do to 

cut costs and streamline in order to get through difficult times. The 

leadership and management skills that they have devoted to this 

task have rescued the Postal Service from financial disaster on 

more than one occasion since I began my service in the Senate and 

on this Committee almost 8 years ago. But from here on out, things 

actually do get tougher. The scale of the challenges that the Postal 

Service faces today as a result of the economy and the natural 

movement away from hard-copy mail are unlike any that they have 

faced in recent years. The decisions postal management will have 

to make over the next year or so may not be popular. They also 

may for the first time have a noticeable impact on the level of services that Americans expect from the Postal Service on a daily basis. 

It will also have a significant impact on the postal workforce, a 

workforce that has already been shrinking over the years. 

The Postal Service does have several options available to it other 

than cost-cutting to help close the budget gap in the coming year. 

The Postal Accountability and Enhancement Act (PAEA) has been 

the law of the land now for more than a year. My colleagues and 

I on this Committee and in the House drafted that legislation to 

help the Postal Service respond to the market and to change its 

prices using a streamlined ratemaking process, with which I am 

sure you are becoming familiar. It is my hope that this new rate 

system could be used to make the Postal Service more competitive 

in advertising and mailing markets. 

Now, there may not be much in the way of an advertising or 

mailing market for the Postal Service to exploit at the moment, but 

I want to see the Postmaster General and the Board of Governors 

become more creative over time and find innovative ways to increase mail volume and reduce the looming deficits that we see 

from the Postal Service. 

I believe that the Postal Service can make good use of the new 

service standards that it has developed through postal reform. The 

standards may need to change as a result of the Postal Service’s 

financial problems, but I hope that the Postmaster General and the 

Board of Governors realize that the standards they set, if they consistently meet them, can help make the Postal Service more relevant and more valuable to customers who have a lot of other communications options that are available to them. 

All of this—the challenges and the opportunities that the Postal 

Service will face in the coming year—make it vitally important that 

we have strong, experienced leadership on the Board of Governors. 

3 

Mr. McGowan, you will have some big shoes to fill if you are confirmed. You will be taking a seat held by Alan Kessler, a highly 

respected member of the board, who has recently been elevated to 

the position of its Chairman. He has a decade of experience helping 

run the Postal Service, experience that will be hard to replace. 

That said, I appreciate your service to the people of the State of 

Nevada and also your willingness to take on this tremendous challenge. 

I am going to swear you in and then invite you to give your 

statement. I think you filed responses to a biographical and financial questionnaire. I have actually read the responses—not to the 

financial questionnaire, but for the biographical questionnaire. And 

you have answered a number of questions submitted by the Committee. I have seen your answers, and we thank you for those responses. 

I believe that you have met with some staff members last 

week—— 

Mr. MCGOWAN. That is correct. 

Senator CARPER [continuing]. To go over your responses, to ask 

further questions, and to give you an opportunity to ask questions 

of them. Your financial statements have been reviewed by the Office of Government Ethics, and without objection, this information 

will be part of the hearing record. The financial data, however, will 

remain on file and are available for public inspection in the Committee’s offices. 

As I said earlier, Committee rules require that all witnesses at 

nomination hearings give their testimony under oath, and I am 

going to ask you at this time to rise and raise your right hand. Mr. 

McGowan, do you swear that the testimony you are about to give 

the Committee will be the truth, the whole truth, and nothing but 

the truth, so help you, God? 

Mr. MCGOWAN. I so swear. 

Senator CARPER. You may be seated. 

Now, Mr. McGowan, you are welcome at this time to offer any 

opening statement that you have. After one hour, I will cut you off. 

TESTIMONY OF ROBERT W. MCGOWAN, TO BE A GOVERNOR, 

U.S. POSTAL SERVICE 

Mr. MCGOWAN. Well, thank you. I will try and be much briefer. 

Mr. Chairman, good morning, and I am fully aware that time is 

at a premium, that you have many issues to face this week, so I 

will try and be brief. 

Senator CARPER. I am going to ask you, do not feel that you have 

to rush. This is an important responsibility, and I want to make 

sure that we have ample opportunity to get to know you and to discuss your qualifications. 

Mr. MCGOWAN. Thank you. 

To address some of the things you raised in your opening statement, I think the Postal Service has the advantage over an awful 

lot of other agencies in that it is the most trusted and the most reliable agency, not only in government, but across the board. I think 

if you look at businesses around the United States, the Postal Service is consistently in the top 10. 

4 

The Postal Act of 2006 provided a structure to build on that 

trust, and I think there are opportunities out there to address the 

concerns of the lower volume going forward. And I think the economy is going to be at risk at least for three quarters yet, and so 

business will not be on the uprise. Business is down. Advertising 

will be down. Consequently, the mailers will have less pieces going 

out. 

But that said, I think there are methods afoot, such as the smart 

mail, the bar coding of the mail, the idea of cleaning up the mailing 

list. I understand now they are going to clean up those lists every 

3 months. They used to do it, I believe, twice a year. It will be done 

every 3 months not only on first-class mail but on second-class 

mail. Those kinds of things are going to help not only to hold down 

the cost, but as you can target mailing, you will make it more affordable to more people. To do a mass mailing, of course, for most 

people it is a tremendously expensive thing to do. If you can target 

and know you are going to get people you are going to get results 

from, it becomes a lower cost for business to do, thus making it 

more affordable, I think, for more folks to use it, and that could 

help grow the volume that we are concerned with. 

So with all that said, it is important that whoever is confirmed 

to this position work with the board, work with the Postmaster 

General, other stakeholders that we have, to increase business volume, control the costs. And I read somewhere it was a fundamental 

right—whether it is or not—it is certainly a right of every American to send and receive mail affordably. 

I have a little personal story. I was in Italy a year and a couple 

months ago. I mailed a postcard from the Uffizi Museum, which is 

in Florence, a big city. I am not out in the sticks anywhere. I have 

not received that postcard yet. I tell that story to my Italian 

friends, and they do not act surprised. So we have something here 

that is a lot better than those places, and I think we can be proud 

of that. 

Senator CARPER. I wonder if they have a Forever Stamp in Italy. 

[Laughter.] 

Mr. MCGOWAN. I did ask if I had the right postage on it before 

I gave it to the lady. But it has not arrived yet. 

I just think as the economy improves, you will see some changes, 

but I think we are in for a haul. It is going to be a difficult time. 

But that is the time you want to be involved. That is the time, if 

you do not want to use another phrase from this town—a potted 

plant—you want to be involved because you feel you can do things. 

I did have to make budgets in a public setting and balance budgets in a public setting. In my experience, which is a lot smaller, of 

course, than the Postal Service, we never overspent our budget. We 

controlled costs by taking advantage of the technologies that were 

available, and trying to build up funds so we could acquire the new 

technologies as they came along. And as you know, especially in 

processing mail, there are a lot of opportunities out there to make 

it less labor intensive. 

Again, I look forward to the opportunity to do it. I welcome the 

challenge as far as the work that is involved. At least I think I do. 

I might come back to you in a year’s time and have a different 

story for you. But I am a retired person. I certainly have the time 

5 

to do it now. And I think I have the energy to stay involved and 

focused on the things we have to get done. 

Senator CARPER. All right. Thank you. 

Under the rules of the Committee, there are three questions that 

I need to ask you for the record, and if you will respond to these, 

then we will get into some other questions as well. Let me start 

my questioning with the standard questions that we ask of all 

nominees. 

First, is there anything that you are aware of in your background 

that might present a conflict of interest with the duties of the office 

to which you have been nominated? 

Mr. MCGOWAN. I am not aware of any. I did speak with the Ethics Officer of the Postal Service, and we went over things, and she 

also got copies of my financials. And she was of the same opinion 

I am, that currently there isn’t. If I thought of anything that would 

come up, I would certainly speak with her and abide by whatever 

her decision was. 

Senator CARPER. All right. Thank you. 

Do you know of anything, personal or otherwise, that would in 

any way prevent you from fully and honorably discharging the responsibilities of the office to which you have been nominated? 

Mr. MCGOWAN. No, I do not know of any. 

Senator CARPER. And, third, do you agree without reservation to 

respond to any reasonable summons to appear and testify before 

any duly constituted Committee of Congress if you are confirmed? 

Mr. MCGOWAN. I absolutely agree totally with accountability and 

transparency. 

Senator CARPER. All right. Do you agree to testify if summoned? 

Mr. MCGOWAN. Yes, I do. 

Senator CARPER. OK. Thank you. All right. 

You spoke at least indirectly in your statement, but let me just 

start off by asking: What do you think are the biggest challenges 

that are facing the Postal Service? And a follow-up question to 

that: What in your background do you think has prepared you to 

address these challenges? And if confirmed, are there any in particular that you would like to personally focus on? So it is like a 

three-part question. 

Mr. MCGOWAN. Yes. Let me see if I can answer the questions as 

they come in. 

The issue, of course, of volume—and that is in the first-class 

mail—I think is not going to turn around. That is going to stay on 

a declining note simply because billings are done electronically 

now, and also an awful lot of people use e-mails to correspond 

where they used to use hard copies. In fact, as time has shown, I 

believe the second-class mail is a growing part of that, has overtaken the percentage of the volume that first-class mail used to 

hold. 

So the negotiated service agreements (NSAs) that are arrived at, 

that are sought, are going to be more and more important as the 

Postal Service moves into the years ahead. So those are going to 

be very important to look at. I think, one, you have got to be careful that you do not end up doing something for 75 cents that costs 

you a dollar to do, and that is certainly always out there. It is alVerDate Nov 24 2008 10:39 Feb 03, 2010 Jkt 045584 PO 00000 Frm 00009 Fmt 6633 Sfmt 6633 P:\DOCS\45584.TXT SAFFAIRS PsN: PAT
6 

ways hard to identify all the hard costs or the soft costs. And I 

think those are things that I like to look at, I like to analyze. 

I think the one thing that I am particularly interested in because 

I have had some success with it is better utilizing better—the technologies we have. One thing I noticed in the office that I headed, 

we had a computer on everybody’s desk, and it was on maybe 2 to 

3 hours a day. I think that has changed now today. But those kinds 

of things, there are technologies out there that I am sure we already have that are not being fully used. 

And then, of course, I do not know if the margin that the Postal 

Service works under provides enough resources to fully take advantage of evolving technologies. 

So those are areas I like because they are exciting. Budget is always an area that offers certain challenges. I think in a government setting, I do not know of any time we have said, we have got 

more money, let us find a way to spend it. There are always ways 

to find how to do a job smarter. I think you have to identify the 

things that you do not need to do and quit doing them. Doing something efficiently you do not need to do does not necessarily help you 

get the job done. So you have to identify what you can stop doing 

and not do. 

Reviewing the vision statement that the Postal Service had, I noticed there are some guidelines, like the universal service obligation (USO) and other things that require us to do certain things. 

And I noticed in my interviews on Friday, some of the items were 

brought up about whether you can cut back service, whether you 

can do this. Those are the last areas to look at. If things get terrible, obviously you have to put everything on the table and discuss 

them. 

I know the biggest cost is the labor cost. I am certainly not one 

to look at the labor side of the issue as the only problem; therefore, 

we have to do something about that. You can certainly look at 

other expenses to deal with first, and then I think respecting the 

dignity of labor is utmost, to me anyway. And in the end, that does 

help you at the other side because you have a better product, you 

have more efficient workers. That is basically the philosophy I 

would bring. 

Some of the experience that I have had in the office that I held, 

again, we have to deal people who are not particularly happy with 

the result of the work we did, and so we have to talk. Many times, 

just informing people of what you are doing and that you are following the law is not necessarily something that makes them 

happy. But you have to be as transparent as you can. I think transparency does bring a certain ease of acceptance. 

The hardest part that I see the governors having to face, is the 

hemorrhaging, I guess if you want to call it that, of the $8 billion— 

this $2 billion this year, but there are concerns it is going to be 

greater. The biggest ways to do that, I think, are to control your 

costs and try to find ways either through second-class mail or 

through the other products that we can sell and market. I understand there is a part of it in—I do not know if it was in the Reform 

Act or in the vision that had a division within the Postal Service 

that would help mailers target by using the intelligent bar code 

system that we will have where they will know where the mail is, 

7 

how it is being responded, and it does get them higher returns on 

their mailing, which, as I said before, would certainly enable more 

people to be part of that NSAs area. And I think that the NSAs 

seems to be the area that has the best opportunity to grow. 

Senator CARPER. You have answered some of the questions I 

asked and some of the questions I did not ask. 

Mr. MCGOWAN. OK. 

Senator CARPER. I just want us to go back, and let us just take 

them one at a time. 

Mr. MCGOWAN. All right. 

Senator CARPER. What do you think are the biggest challenges 

facing the Postal Service today? 

Mr. MCGOWAN. I think getting control of the budget losses, somehow finding a way to minimize—not only on the cost side, but on 

the expense side. You have to find some ways to do that—not on 

the expense side but on the volume side. So the biggest problem 

would be the budget. 

Senator CARPER. All right. I am not just asking for the biggest, 

but challenges, are there other challenges? 

Mr. MCGOWAN. Oh, challenges, yes, I think there are challenges 

in how to structure the NSAs so that we can receive the maximum 

return and not scare away the user. I am sure there are labor challenges of which I am not fully aware. I think the Postal Service 

just on a mutual agreement settled three of the union agreements, 

and the fourth is going to arbitration. So I would imagine there are 

concerns there, too. 

But as I said, if I had to focus on one thing, I would certainly 

focus on the budget and how do you get control of that hemorrhaging. 

Senator CARPER. All right. And you spoke to this, but I want you 

to come back and speak to it more directly. You know your background better than I ever will, and you know what in that background enables you or prepares you for this really major responsibility. But what is it in your background that you think has prepared you to address the challenges that you have just mentioned? 

Mr. MCGOWAN. I think for 24 years I had to prepare and balance 

a government budget, and we did. We controlled the spending by 

taking advantage of the technologies that were out there. We found 

ways to work smarter. 

At budget time and when retirements came around, we reviewed 

each position to see if we could combine them with others, if we 

really needed to fill that position. 

In the course of the time that I was there, we went from 96 employees, again, small by scale here, but we went down to 78 employees. And that was at a time when the volume in our county 

went from 86,000 parcels to 160,000 parcels. So we are doing more 

work, more accurate work, and we are doing it with less folks. And 

when I say ‘‘we,’’ I really mean that word ‘‘we.’’ It was not me. It 

was a lot of people who I had working around me that participated 

in and helped make this happen. 

So I am not here to tell you that I have all the solutions. I am 

just here to tell you that I have the curiosity to try to find the solutions. 

8 

Senator CARPER. And go back to my third question, which was: 

Of the challenges that we face, the skills and expertise and interest 

that you bring to the task, which one of the challenges are you 

most interested in focusing on? 

Mr. MCGOWAN. Well, I think both the cost and the efficiency, 

how to better use the equipment or the technologies we have, and 

how to take advantage of the emerging technologies that are going 

to be coming along, those are areas I would like to be involved in. 

Senator CARPER. All right. Thank you. 

As you know, the economic slowdown has hit the Postal Service 

especially hard. This problem is compounded by the fact that at 

least some postal customers are leaving the mail or considering 

leaving it in favor of other forms of communications. 

If confirmed, how would you recommend that the Postal Service 

use the new pricing flexibilities that were given to it in our legislation a year and a half ago? How would you recommend that the 

Postal Service use those new pricing flexibilities that we have 

given it to bring in new customers? 

Mr. MCGOWAN. Well, I think the competitive nature of the business today, if viewed in the correct light, will make us sharper, will 

make us better able to compete. It will force us to use the marketplace. 

I think there are some things that are still out there that restrict 

full use of the marketplace by the Postal Service, and I would certainly like to see those at least addressed as to why they are there, 

and if they, in fact, can be altered in any way or any form. 

Senator CARPER. I will restate my question. If you are confirmed, 

how would you recommend that the Postal Service use the new 

pricing flexibilities that are given to them in the new law? 

Mr. MCGOWAN. It is there. I am at a loss because I am not fully 

aware of all the pricing structures. If you are asking me about 

transportation costs, I know there is a regulatory rate commission—not a regulatory, but the rate setters which the board does 

not control. And so I guess I need more information to answer the 

question. 

Senator CARPER. All right. Fair enough. 

You have mentioned NSAs several times, negotiated service 

agreements. But as you know, negotiated service agreements with 

individual customers have been talked about for some time as a 

tool that the Postal Service can use to find efficiencies and to bring 

in additional businesses. Do you believe that the Postal Service has 

taken full advantage of its opportunities in this area? And if confirmed, how would you recommend that the Postal Service work 

with individual postal customers to reach quality agreements that 

can bring in new mail volume and, hopefully, additional mail revenues? 

I will just say that again. If confirmed, how would you recommend that the Postal Service work with individual postal customers to reach quality agreements that can not only bring in new 

volume but also additional revenues? 

Mr. MCGOWAN. Well, again, I think I have mentioned that is one 

area that does offer growth for the Postal Service. How I would go 

about doing that—I have not been involved in any of that work yet. 

But I would imagine you would have to be competitively priced 

9 

and, again, I did point out that you cannot agree to do something 

for more than it is going to cost you to do. 

I think there are times when by trying to build your volume to 

look at those—I think that was one of the most important parts of 

the Reform Act, was the NSAs. That certainly gives us area to 

grow. How I would precisely do it is by making sure we are competitive in our pricing that we can compete against the other suppliers. 

Senator CARPER. All right. Thank you. 

The Postal Service has proposed a set of service standards for its 

market-dominant products. How do you think the Postal Service 

should be using these new standards? And do you think that they 

can play—‘‘they’’ being the standards, the new standards—can play 

a role in adding value to the mail and attracting new business? 

Mr. MCGOWAN. Well, I am trying not to be too general because 

I am not particularly familiar individually with what you are talking about. But I would imagine you want my experience of the 

past—the average person does not know the services, all the services that the Postal Service has to offer. And I think you have to 

market that in and of itself, that here is what we have to do. 

Service levels, I think, in the past have been things they want 

to—I know during hard economic times, you want to cut back and 

adjust. I think the USO, if I am using that term correctly, does 

state what levels you have to provide at, and I do not know if that 

has anything to do with your question, if I am going the right way 

here. 

So it might take even some clarification in the legislation as to 

what flexibilities you do have. I do not know if that is clear, at 

least as I have read the law—and that has only been in the last 

few days that I have read that law. I know there are some limitations to what you can do that in the real marketplace would not 

be there, would not exist. 

Senator CARPER. All right. Thank you. 

Recently, the Postal Service submitted a report laying out its 

strategy for managing its facilities networks. As you can probably 

guess, any and all hints in that plan of an effort to close or to consolidate the facilities have been met with resistance, not surprisingly. But at the end of the day, tough decisions in this area and 

in others will need to be made. Some of those decisions may need 

to happen sooner than we would like. 

If confirmed, how would you recommend that the Postal Service 

work with customers, with employees, and with communities in 

order to achieve its cost-cutting goals? 

Mr. MCGOWAN. Well, if it is in the fact of either closing or selling 

off assets, I think as the volume goes down, I am sure we are going 

to have an awful lot of space that previously was used that we do 

not need to use. To the point that it affects displacement of workers, I firmly believe you have to have the maximum amount of time 

that the economy will allow to give these workers either a chance 

to go to other spots or seek other ways to mitigate their circumstance. 

The communities that these facilities are involved in would even 

be another picture, and I think you have to work with—if it is a 

10 

city or county—the governments involved to mitigate, again, the 

impacts of those. I think that is a very important thing to do. 

So I guess my overall concern, of course, is that we balance the 

budget, and we cannot be spending money we do not have. But I 

think you have to look at the ramifications of what we are going 

to do on the community and on the people involved, and I would 

certainly be concerned with those. But I cannot close off the idea 

that when it has to be done, it has to be done. 

Senator CARPER. All right. Thank you. 

Is there any area where you might sort of draw the line, if you 

will, as a board member, as a governor, and tell your colleagues 

and postal management, no, we need to cut costs, but it would be 

foolish or inappropriate to cut costs in a particular area, Area X, 

Y, or Z? Does anything come to mind? 

Mr. MCGOWAN. That is absolutely off the table? 

Senator CARPER. For you. 

Mr. MCGOWAN. When hard times arise, the first place, it seems 

like, most people look at is labor because it is certainly sometimes 

the biggest cost. In most cases, it is the biggest cost. But in my experience, what I have done over my career, to me that is the last 

place I look. I look at economies we can make either in stopping 

what we do not need to do, taking advantage of retirements and 

the easy way out, I guess you could say, with the least impact on 

people’s lives. 

But there is nothing that I would right off the top of my head 

say that I would be absolutely against. 

Senator CARPER. OK. Thank you. 

Mr. MCGOWAN. I guess service cuts would be the closest. 

Senator CARPER. You have sort of addressed this, at least indirectly, but I want to come back and draw on it a bit more. The 

issue here is as the Postal Service loses volume, whether it is firstclass mail or other classes of mail, for reasons that we have discussed, just talk with us about the business opportunities that you 

see out there for the Postal Service for growth in volume, for 

growth in revenues. 

Mr. MCGOWAN. The growth in volume, of course, is in the NSAs. 

Again, the cost, I think it is 28 percent of the revenue the Postal 

Service gets comes from NSAs, as I was reading the report the 

other day, and they do about 48 percent of the volume. And with 

the growth we are going to see, I would imagine, in the next decade 

anyway, it will probably be in that area. We seem to have high returns in the priority mail. And our record on priority mail has really improved—I do not know when it started, but it has improved 

over where it had been in the past. And we are competitive pricewise; well, I have used both, so I know we are competitive pricewise in priority mail. And I think people need to know so they can 

use it more. 

We have that advantage that we are considered the most reliable 

and trusted agency the government has and one of the top 10 businesses in the United States as far as being efficient at the work 

we do. So we have to just keep finding more ways—and they will 

arise because technology keeps changing. But as the challenges 

come up, we have to find ways to use that technology to cut down 

those costs which, in return, should help the bottom line. 

11 

And doing that—and this is a philosophical statement—you have 

to realize when you are talking about bottom line, you also are 

talking about people’s lives and what people have come to expect 

from the Postal Service. So I think that you want to be very careful 

with our service levels, and you want to be very careful with how 

we treat the people that work for us. 

Senator CARPER. I was talking with somebody the other day 

about all the mail that I have found, my family and I have found, 

in our mailbox over the last couple months up to the election that 

dealt with campaigns, and it is hard for me to imagine that the 

Postal Service could still be running a deficit given the incredible 

volume of mail that we received. It would be interesting to look at 

the revenues to see if there is a little uptick, especially in the 

month of October and beginning of November, because of that. 

In terms of business opportunities, there are some States in 

which they are still counting the voting. One of the States, up in 

Alaska they are still counting the results from not just absentee 

ballots but also, I think, from early ballots that were cast, and they 

are still being counted. 

Do you see any potential business opportunities for the Postal 

Service with respect to voting, and voting by mail? And if so, would 

you like to talk about those? 

Mr. MCGOWAN. Well, the opportunity, of course, would be when 

it happens. In the presidential election, of course, you only have 

that happen every 4 years, and that is certainly the largest number 

of votes. Local elections happen on a more regular basis. Probably 

every year you have some form of election going on. 

I had the very same thought you did, that we might see a dip 

in volume again simply because there will not be the political mailings going out in this year to come. 

A big concern that was not brought up that I have more so than 

what we were just talking about is there are, I believe, seven 

States that have—I do not know if it is stop mail or mail they can 

elect not to receive, advertisements or so on, things they decide. I 

understand none of that has passed. And in some of the States, 

though, that does not even require an act of the body to reintroduce 

it. It automatically is reintroduced. That to me is going to offer a 

bigger challenge to the volume of the Postal Service. 

But I think there might be some issues of freedom of speech. So 

I think that is going to be a long argument going on. It might not 

be effective in any State. I believe no State has passed it yet. But 

that is a concern, something we ought to keep, I think, abreast of 

and find out what things as a board we can do about that. I am 

not sure. I have not been involved in it so I do not know, but it 

is certainly an area that, when I read it, my ears perked up, and 

I thought it was an area we need to be concerned with and see 

what can be done. 

Senator CARPER. Let me go back and just re-ask my question 

once again. We have talked a bit about cost containment. We have 

talked about using technology to do that. We talked a bit about facilities and what the Postal Service may or may not do with their 

facilities. But moving off of the cost containment side and looking 

at growing revenues, just talk to us again about that. 

12 

Mr. MCGOWAN. Well, I do keep coming back to the NSAs on that. 

I think that is the biggest part where we can hopefully improve. 

With the products that we sell, the shipping—I think we are limited to 70 pounds, the current level—and there is always the concern out there: Do we want to compete on the private side? And 

I think there is an argument to say that government should not 

compete against people to do things for a profit. I probably would 

tend to think that is more of a gray area than some people would 

like it to be. I think there are some areas where government can, 

in fact, get involved and do the job that some people would argue 

private enterprise ought to be doing. 

That area, to the extent you start selling those things or getting 

that market, that might be an area that certainly is worth discussing at a board level. Whether it gets any traction or not, I do 

not really know. 

The other thing is I do not understand why the mailers—by 

mailers, I think mean the products we put the mail in. Those are 

free. You do not really charge for those. That might be something 

to explore. Whether that makes sense or not, I do not know. But, 

if they are free, you grab three or four of them, you use one and 

throw the other two away. I know there are people that do it. And 

people that use those flat-rate boxes will grab all kinds of them, 

fill up the ones they use, do not even return the other ones. I would 

think that somehow you got to look at that. 

Again, small things, but I imagine over the 33,000 offices and 

other outlets, it can add up. The old saying, a million here, a million there, and you are talking about real money. 

Senator CARPER. When you think of the challenges the Postal 

Service faces today, would you just go back and kind of explain in 

your own words how you think the Postal Service found itself in 

this challenging situation? Just talk us through that. 

Mr. MCGOWAN. Well, I think a business model that existed for 

the Postal Service before 1971 is when it went into an enterprise 

setting. Is that correct? It is somewhat predicated on before electronic mail, before the kinds of things that people used, before the 

advent of the other mailers—FedEx, UPS, and the others. And 

DHL has finally found out they cannot compete in the market. So 

the business model had to change, and I think with the advent, especially not only the 2006 Act, there was an Act in 1971 when it 

changed over. Those things have caused, I think, the Postal Service 

to look at itself in a different light. I think there is a move today 

to change the business model, and it has been moved. 

I think the fact that we were so slow in changing that business 

model probably was one of the major things that led to the problems that we have: Failure to recognize that e-mails were going to 

take the bite out of volume that they, in fact, did, and I do not 

think anybody thought that first-class mail would not be the main 

volume of our business. It has changed. 

So recognizing sooner that the world had changed would certainly have put us in a better light. That could be said of a lot of 

businesses, and I am sure you will be dealing with businesses that 

have that problem here directly. 

But if that answers your question, what I am trying to get at is 

that we have to change our business model. We are slow in doing 

13 

it, and now it seems to be on the track. I think the fact that it had 

to fund the health care for retirees and so on, those things have 

certainly led to the numbers that we are seeing in the current 

budget. And that is going to exist until 2010, I believe. So recognizing that the world changed, and it has. 

Senator CARPER. How long ago were you nominated, do you recall? 

Mr. MCGOWAN. From the White House or from the Senators’ office? The White House was just 2 months ago. 

Senator CARPER. OK. The official nomination was sent to us a 

couple of months ago. 

Mr. MCGOWAN. Right. 

Senator CARPER. And you may or may not have had a chance to 

do this, but if you have, I would be interested in your thoughts. We 

are not the only country that has to deal with mail. It used to be 

pretty much a government operation, and now it is really more of 

a private sector operation with government oversight and involvement. 

But when you look around the world at other countries that are 

wrestling with down economies, that are wrestling with their postal services, they are trying to deal with competition that may not 

have existed when their services were established, anything come 

to mind of lessons that we might learn from other countries that 

you are aware of? And you may not be aware of them. 

Mr. MCGOWAN. My only real experience was the story I related 

about the mail in Italy. But I have not used the mail in any other 

country—never had occasion. I have known, only because I have 

read about ours, of the high trust that we have, and I am not 

aware of any others that have that. Again, the postal office is in 

such a unique position that it has a great foundation to build on. 

I think the 2006 law certainly provided a structure to help improve 

on all of that. Also, the attitudes that I have been aware of, bring 

it back to the local level though, is that my experience at the Postal 

Service recently—and I have been—since this has come about, I 

have probably paid more attention to it—is the courtesy level of the 

employees seems to be way up, knowledge, they are very helpful. 

The lines seem to move faster. 

Now, this has all happened at a time when the economy certainly 

has been worse, their volume has gone down. So I do not know how 

we compare with other nations that are going through the same 

thing, but my experience is we are moving in the right direction 

in the Postal Service. 

Senator CARPER. Those are all the questions I wanted to ask you 

today, and I appreciate your appearing and responding to those 

questions. Is there anything you would like to say in closing before 

I make a closing statement? 

Mr. MCGOWAN. Well, again, I thank you for making the time to 

schedule this. I think that I can bring 25 years of making and balancing budgets in a public setting, using and looking for technologies that made my experience more efficient, the office more efficient. I think I bring the use of that. And I think the fact that 

of the size—the benefit of the size I was in, I think not only do you 

have to make policies and procedures, but you get to see them all 

the way down. They are not just a bottom-line figure. They are in 

14 

the face of the people that work there. You see how your policy decisions affect folks. And you get to see the real product that is coming out at the end. 

So I have been fortunate to have that experience, and it has 

been, like I say, in the government setting, and I think that will 

help me in my dealings with the board. Thank you. 

Senator CARPER. All right. Without objection, the hearing record 

will remain open until the close of business today for the submission of additional statements and questions. If you receive those 

questions, I would ask that you respond to them promptly, very 

promptly, this week, and that would be much appreciated. 

With that having been said, we thank you again for coming and 

for your interest in serving, and we will adjourn this hearing at 

this time. 

Mr. MCGOWAN. Senator, thank you. 

Senator CARPER. Thank you. This hearing is adjourned. 

[Whereupon, at 11 a.m., the Committee was adjourned.] 

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