[Senate Hearing 110-993]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 110-993

                    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




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        COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS

               JOSEPH I. LIEBERMAN, Connecticut, Chairman
CARL LEVIN, Michigan                 SUSAN M. COLLINS, Maine
DANIEL K. AKAKA, Hawaii              TED STEVENS, Alaska
THOMAS R. CARPER, Delaware           GEORGE V. VOINOVICH, Ohio
MARK L. PRYOR, Arkansas              NORM COLEMAN, Minnesota
MARY L. LANDRIEU, Louisiana          TOM COBURN, Oklahoma
BARACK OBAMA, Illinois               PETE V. DOMENICI, New Mexico
CLAIRE McCASKILL, Missouri           JOHN WARNER, Virginia
JON TESTER, Montana                  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











                            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

 
                    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, 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.
    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.
    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 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 always 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, 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.
    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 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 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 first-class 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 price-wise; well, I have used 
both, so I know we are competitive price-wise 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.
    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.
    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 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 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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