Speech to American Business Media on Postal Issues
Washington,
May 6, 2002 -
Speech to American Business Media on Postal Issues
May 6, 2002
By Henry A Waxman
Good morning. Thank you for inviting me to speak to you during your annual spring conference. As the Ranking Democratic Member of the House Government Reform Committee, which has jurisdiction over the U.S. Postal Service, I appreciate the opportunity to talk to you about postal reform. I want to thank Gordon Hughes II, President and CEO of American Business Media, for inviting me. I would also like to acknowledge my friend, Postal Rate Commissioner, Ruth Goldway.
The Postal Service is one of the oldest institutions in America, delivering our mail for over two hundred years. It is currently operating under a 30-year old law, the Postal Reorganization Act, which turned the Postal Service into a self-supporting entity with the charge to operate more like a business.
The Postal Service has served our nation well under this structure, maintaining universal service and delivering over 200 billion pieces of mail a year to roughly 138 million addresses. It has grown to a $67 billion entity employing close to 800,000 people and supporting a $900 billion industry that supports nine million jobs. The Postal Service is viewed positively by 90% of Americans. It is an American institution that we must protect.
Unfortunately, the structure that was created thirty years ago has been strained adapting to an increasingly competitive environment. The rise of the internet and other technology, such as fax machines, has eroded the Postal Service's core business. The rate of growth in mail volume has been declining along with the Postal Service's net revenue. Its debt has increased steadily and the Postal Service is close to reaching its debt ceiling of $15 billion. The anthrax attacks last October exacerbated this erosion. This past fall, the Postal Service saw the largest mail volume decline since the Great Depression.
Last year, this worsening financial condition caused the General Accounting Office (GAO) to put the Postal Service on its high risk list, saying that the Postal Service was "at growing risk of not being able to continue its mission of providing universal service." This year, GAO reviewed the Postal Service's progress since being put on the high risk list and found that the "financial situation has deteriorated." GAO called on Congress to "reassess [the Postal Service's] legal framework and take the necessary action to change the nation's postal laws in order for [the Postal Service] to be financially viable in the 21st century."
The Postal Service, in response to a request by the Senate, recently submitted its Transformation Plan, describing what reforms are necessary to insure its long-term viability. In the plan, the Postal Service discussed threats from increasing competition, security concerns, declining mail volumes, and rising costs. It devoted much attention to improvements it could make under current law, articulated a need for greater flexibility, and called for a revision of the 1970 Reorganization law.
As the Ranking Member of the Government Reform Committee, I am now deeply involved in legislative efforts to address the problems confronting the Postal Service and to ensure that universal postal service is available to all Americans. This process began in earnest last fall, when Chairman Burton and Representative John McHugh asked Representative Danny Davis and me to work together to develop bipartisan postal reform legislation.
During this process, the input of groups like American Business Media has been essential. In particular, I and my staff have met extensively with the Main Street Coalition for Postal Fairness and its member companies such as American Business Media, Evans & Black, and the Newspaper Association of America. I have personally visited with Rae Evans and Rafe Morrissey of Evans & Black; David Straus of Thompson Coburn; Mark Welches of the Los Angeles Times; Ty Bobit of Bobit Publishing; David Leytus of the Village Arts Press; and representatives from the Greeting Card Association, Hallmark Cards, Inc., and the Computer & Communications Industry Association. And of course, Jack Estes, the head of Main Street, has provided me with extensive advice. I appreciate your time and having the benefit of your views and comments on postal matters.
The legislative product we are developing will reflect much of your input. You strongly opposed the "revenue caps" in the McHugh bill. I agree with your criticisms and we have dropped that approach.
You have consistently urged that the Postal Rate Commission should have greater authority in the rate-setting process. We are heading in that direction. Our draft proposal establishes a modern rate setting system to be designed by the renamed Postal Regulatory Commission (PRC). This new proposed role for the PRC is consistent with the role of other federal regulators, such as the Federal Communications Commission and the Federal Regulatory Commission, who have had the ability to design rate regulations for decades. The PRC would write modern rate regulations for market-dominant or monopoly products (letters, magazines, advertising mail, and packages mailed by individuals).
We have also given the PRC new authorities, consistent with recommendations from your organizations. For instance, the proposal would enhance the role of the PRC as a regulator by authorizing it to subpoena data from the Postal Service.
Along with others, you have advocated the creation of a national commission to examine long-term strategic issues, such as the human capital challenges facing the Postal Service. We agree and would establish a National Commission on the Future of the Postal Service to examine the mission and role of the Postal Service and examine issues raised by the Postal Service in its Transformation Plan.
While you have persuaded me on many of your top priorities, there is one area where I hope to persuade you. This is the issue of "service agreements." I believe there is potentially significant value in allowing the Postal Service to negotiate with individual mailers to develop service packages that meet the needs of the mailers. Such arrangements can result in reduced costs and increased profits for the Postal Service. They can be a "win-win-win" proposition, benefitting the mailer by lowering its rates, benefitting the Postal Service by reducing costs, and benefitting other mailers by increasing the contribution to the overhead or "institutional costs" of the Postal Service made by the mailer who participates in the agreement.
I recognize that there are concerns that "sweetheart" deals between the Postal Service and large mailers would put smaller mailers at a competitive disadvantage. I share those concerns. For that reason, I would like to build in important safeguards, such as a requirement that the mailer make a larger contribution to the institutional costs of the Postal Service under the agreement than the mailer would make without the agreement. Another important safeguard is that the agreement cannot cause any other mailer's rates to rise. I also think there needs to be a strong oversight role for the PRC.
In addition, it is important that small mailers be allowed to participate in these agreements on the same favorable terms as larger mailers.
There are those who say that these safeguards are not enough. Their view is that any authority that you give the Postal Service to negotiate customized service agreements is going to be abused. I think this position is too extreme. There is a lot of potential benefit to service agreements, and there are ways to prevent against abuses. I hope you will also come to see this provision in the same way that I do.
Let me shift for a moment away from the substance of the legislation to discuss the process. My colleagues and I have been conducting negotiations in good faith. A consensus approach to many issues have been developed. An agreement on postal reform now looks possible, although a few issues still remain outstanding. I am confident that at the end of the process we will have acted upon legislation that gives the Postal Service flexibility and accountability.
In closing, let me again thank you for the opportunity to address you and for your involvement and input in the postal reform process. We in Congress have a big job ahead of us. Your involvement is essential because it helps educate us.
Representative Henry A. Waxman 30th District of California
