[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]


 
    MORE THAN STAMPS ADAPTING THE POSTAL SERVICE TO A CHANGING WORLD 

=======================================================================

                                HEARING

                               before the

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

                                 of the

                         COMMITTEE ON OVERSIGHT
                         AND GOVERNMENT REFORM

                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             FIRST SESSION

                               __________

                            NOVEMBER 5, 2009

                               __________

                           Serial No. 111-37

                               __________

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


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

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              COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

                   EDOLPHUS TOWNS, New York, Chairman
PAUL E. KANJORSKI, Pennsylvania      DARRELL E. ISSA, California
CAROLYN B. MALONEY, New York         DAN BURTON, Indiana
ELIJAH E. CUMMINGS, Maryland         JOHN L. MICA, Florida
DENNIS J. KUCINICH, Ohio             MARK E. SOUDER, Indiana
JOHN F. TIERNEY, Massachusetts       JOHN J. DUNCAN, Jr., Tennessee
WM. LACY CLAY, Missouri              MICHAEL R. TURNER, Ohio
DIANE E. WATSON, California          LYNN A. WESTMORELAND, Georgia
STEPHEN F. LYNCH, Massachusetts      PATRICK T. McHENRY, North Carolina
JIM COOPER, Tennessee                BRIAN P. BILBRAY, California
GERALD E. CONNOLLY, Virginia         JIM JORDAN, Ohio
MIKE QUIGLEY, Illinois               JEFF FLAKE, Arizona
MARCY KAPTUR, Ohio                   JEFF FORTENBERRY, Nebraska
ELEANOR HOLMES NORTON, District of   JASON CHAFFETZ, Utah
    Columbia                         AARON SCHOCK, Illinois
PATRICK J. KENNEDY, Rhode Island     BLAINE LUETKEMEYER, Missouri
DANNY K. DAVIS, Illinois             ANH ``JOSEPH'' CAO, Louisiana
CHRIS VAN HOLLEN, Maryland
HENRY CUELLAR, Texas
PAUL W. HODES, New Hampshire
CHRISTOPHER S. MURPHY, Connecticut
PETER WELCH, Vermont
BILL FOSTER, Illinois
JACKIE SPEIER, California
STEVE DRIEHAUS, Ohio
JUDY CHU, California

                      Ron Stroman, Staff Director
                Michael McCarthy, Deputy Staff Director
                      Carla Hultberg, Chief Clerk
                  Larry Brady, Minority Staff Director

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

               STEPHEN F. LYNCH, Massachusetts, Chairman
ELEANOR HOLMES NORTON, District of   JASON CHAFFETZ, Utah
    Columbia                         MARK E. SOUDER, Indiana
DANNY K. DAVIS, Illinois             BRIAN P. BILBRAY, California
ELIJAH E. CUMMINGS, Maryland         ANH ``JOSEPH'' CAO, Louisiana
DENNIS J. KUCINICH, Ohio
WM. LACY CLAY, Missouri
GERALD E. CONNOLLY, Virginia
                     William Miles, Staff Director
















                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on November 5, 2009.................................     1
Statement of:
    Bernstock, Robert, president, Mailing and Shipping Services, 
      U.S. Postal Service; Ruth Goldway, chairman, U.S. Postal 
      Regulatory Commission; Phillip Herr, Director, Physical 
      Infrastructure, U.S. Government Accountability Office; 
      Michael Coughlin, deputy postmaster general, U.S. Postal 
      Service (ret.); and Robert Reisner, president and CEO, 
      Transformation Strategies..................................    15
        Bernstock, Robert........................................    15
        Coughlin, Michael........................................    41
        Goldway, Ruth............................................    27
        Herr, Phillip............................................    51
        Reisner, Robert..........................................    68
Letters, statements, etc., submitted for the record by:
    Bernstock, Robert, president, Mailing and Shipping Services, 
      U.S. Postal Service, prepared statement of.................    17
    Chaffetz, Hon. Jason, a Representative in Congress from the 
      State of Utah, prepared statement of.......................     7
    Connolly, Hon. Gerald E., a Representative in Congress from 
      the State of Virginia, prepared statement of...............     9
    Coughlin, Michael, deputy postmaster general, U.S. Postal 
      Service (ret.), prepared statement of......................    44
    Cummings, Hon. Elijah E., a Representative in Congress from 
      the State of Maryland, prepared statement of...............    11
    Goldway, Ruth, chairman, U.S. Postal Regulatory Commission, 
      prepared statement of......................................    30
    Herr, Phillip, Director, Physical Infrastructure, U.S. 
      Government Accountability Office, prepared statement of....    53
    Kucinich, Hon. Dennis J., a Representative in Congress from 
      the State of Ohio, prepared statement of...................   100
    Lynch, Hon. Stephen, a Representative in Congress from the 
      State of Massachusetts, prepared statement of..............     4
    Reisner, Robert, president and CEO, Transformation 
      Strategies, prepared statement of..........................    70


    MORE THAN STAMPS ADAPTING THE POSTAL SERVICE TO A CHANGING WORLD

                              ----------                              


                       THURSDAY, NOVEMBER 5, 2009

                  House of Representatives,
Subcommittee on Federal Workforce, Postal Service, 
                      and the District of Columbia,
              Committee on Oversight and Government Reform,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 10 a.m., in 
room 2154, Rayburn House Office Building, Hon. Stephen F. Lynch 
(chairman of the subcommittee) presiding.
    Present: Representatives Lynch, Norton, Davis, Cummings, 
Kucinich, Clay, Connolly, Chaffetz, and Cao.
    Staff present: Aisha Elkheshin, clerk/legislative 
assistant; Jill Crissman, professional staff; Margaret McDavid, 
detailee; Dan Zeidman, deputy clerk/legislative assistant; Adam 
Fromm, minority chief clerk and Member liaison; Howard Denis, 
minority senior counsel; and Alex Cooper, minority professional 
staff member.
    Mr. Lynch. Good morning and welcome. The Subcommittee on 
the Federal Workforce, Postal Service, and the District of 
Columbia hearing will now come to order. I want to welcome my 
colleague and friend, Ranking Member Chaffetz, and members of 
the subcommittee, hearing witnesses, and all those in 
attendance.
    The purpose of today's hearing is to examine what steps the 
Postal Service has taken and plans to take since Congress 
passed the Postal Accountability and Enhancement Act [PAEA]--
I'll try to keep the acronyms to a minimum--to use its 
increased flexibility to grow revenue.
    Furthermore, we are here to discuss barriers or limitations 
to the Postal Service's innovations and what lessons can be 
learned from foreign posts in this area. The Chair, ranking 
member and members of the subcommittee each will have 5 minutes 
to make an opening statement and all Members will have 3 days 
to submit statements for the record.
    Ladies and gentlemen, I will yield myself 5 minutes for my 
opening statement. In the series of hearings the subcommittee 
has held on the Postal Service thus far this year, the 
discussion has tended to focus on the Postal Service's bottom 
line or its cost-cutting and consolidation efforts; and 
rightfully so, as the past 2 fiscal years have presented some 
significant financial challenges for the Nation's mail system.
    However, today the subcommittee convenes not to discuss 
what the Postal Service has been doing to reduce expenditures, 
but more so to learn about what the organization is doing to 
grow revenue and the overall value of mail as part of an 
ongoing effort to bring about fiscal turnaround.
    Today, almost 3 years since the passage and enactment of 
the landmark Postal Accountability and Enhancement Act, we look 
forward to hearing what exactly has been done to grow the 
business under the new price flexibilities and product 
innovations afforded to the Postal Service in 2006.
    First, however, I must briefly acknowledge the financial 
reality before us. The Postal Service expects a net loss of 
approximately $7 billion for fiscal year 2009 prior to 
accounting for the recent legislation in the form of a $4 
billion deferred payment to the Retiree Health Benefit Fund.
    I'm pleased Congress was able to grant the Postal Service 
authority to defer a share of its Retiree Health Benefits 
prepayment, which allowed the organization to meet its 
financial obligations and improve its cash position. However, 
as my friends from both sides of the aisle acknowledged last 
month, the relief measure was only a temporary solution to a 
host of long-term problems.
    Moreover, I would like to note that this was not a bailout. 
Many Americans think the Postal Service is largely supported by 
Federal Government dollars. It is not. This is an important 
point I want to stress. The Postal Service is over 99 percent 
self-supporting with less than 1 percent of its funds provided 
by the Federal Government to support important things like mail 
for the blind and overseas voting. Again, that is less than 1 
percent.
    Additionally, up until postal reform, the Postal Service 
operated under the so-called break-even mandate preventing the 
organization from even making a profit. Post PAEA--I'm trying 
to stay away from these acronyms--the Postal Accountability and 
Enhancement Act, however, the Postal Service is now permitted 
to operate more like a business in terms of profit earning and 
product diversification.
    To that end, I look forward to hearing from today's 
witnesses on the extent to which the Postal Service has 
attempted to grow its business from the novel summer sale to 
the offering of flat-rate boxes and holiday greeting cards. 
Today's hearing is intended to examine the steps that the 
Postal Service has taken and the results achieved so far in the 
area.
    And looking to the future, Postmaster General Jack Potter 
recently described several initiatives the Postal Service is 
potentially interested in to diversify and grow revenue. He 
observed that the Postal Service has more retail outlets in the 
United States than McDonalds, Starbucks, and Wal-Mart combined.
    Perhaps surprising to some, he proposed that the Postal 
Service should be permitted to offer its customers alternate 
services such as banking, insurance, and telecommunications. 
Given past experiences and the extreme caution required when 
enterprising a business, I'm interested in hearing the extent 
to which these newly proposed ideas have been vetted, as well 
as what risks have been evaluated.
    Further, I have asked today's witnesses to address what 
lessons can be learned from foreign posts in the area of 
product and service development and diversification. I know 
there are some foreign posts such as those in Japan and France 
that offer banking services and sell mobile phones, for 
example. However, I also know that several countries have 
privatized their Postal Services, while the U.S. Postal Service 
remains an independent Federal establishment of the U.S. 
Government.
    In the coming months, our subcommittee will continue to 
provide close oversight of the Postal Service, including an in-
depth examination of the Postal Service's business model to 
help determine which longer-term changes are necessary to help 
the Postal Service return to financial viability. The Postal 
Service undoubtedly needs to move forward with its efforts to 
grow its revenue and increase the value of mail, perhaps even 
more so than focusing on cutting costs or reducing its Retiree 
Health Benefit obligations.
    I thank each of you for being with us this morning. I look 
forward to your participation and I yield for 5 minutes to the 
ranking member, Mr. Chaffetz.
    [The prepared statement of Hon. Stephen Lynch follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Mr. Chaffetz. Thank you, Mr. Chairman, and thanks for 
agreeing to hold this very important discussion. My comments 
will be brief because we came to listen and hear from this 
panel. But let me just concur and echo the sentiments the 
chairman articulated, as I think he has it exactly right.
    We will obviously spend time and attention talking about 
cost-cutting measures, but at the end of the day we need to 
increase the relevancy of the U.S. Postal Service. In order for 
it to thrive and to serve the citizens of the United States of 
America, we need to increase its relevancy. At the same time, I 
think there needs to be caution in making sure that we are not 
tripping on top of the private sector and, maybe with good 
intentions, maybe some unintended consequences competing in a 
space that is probably best left to the private sector.
    Yet the U.S. Postal Service, under our Constitution, has a 
unique place in this country. And I would like to see us do 
more. One of the things in particular that I think we should 
pay attention to: What is the cross functionality that we can 
take advantage of with other segments within government? One, 
for instance, that I would like to see us continue to pursue is 
the conducting of the U.S. census, something we do every 10 
years, given $14 billion in order to execute it. We have real 
estate, we have very able people. Again, something I think we 
should continue to pursue.
    What are the things that we can do with FEMA, what are the 
things we can do with other government agencies that need the 
types of resources that are uniquely provided by the U.S. 
Postal Service?
    So I look forward to your comments. I appreciate the 
chairman's approach on this as well. And I hope this is the 
start of a series of dialogs about the potential impact of the 
potential new openings and increased relevancy for the U.S. 
Postal Service. And with that, Mr. Chairman, I will yield back 
the balance of my time.
    [The prepared statement of Hon. Jason Chaffetz follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Mr. Lynch. Thank you. I know the gentleman has recently 
arrived. I would like at this point to yield 5 minutes to the 
gentleman from northern Virginia, Mr. Connolly, for 5 minutes.
    Mr. Connolly. Thank you, Mr. Chairman, and thanks for 
holding this hearing on the long-term viability of the Postal 
Service. This is precisely the type of process we should be 
conducting in order to determine those changes that will enable 
the Postal Service to thrive in the future. In general, we 
should be wary of short-term cost-cutting measures that could 
reduce Postal Service market share and revenue in the future, 
such as a shift, for example, to 5-day mail delivery. Instead 
it would preferable, from my point of view, to examine changes 
that enable the Postal Service to augment its existing sources 
of revenue.
    I'm pleased the Postal Service is examining 15 new revenue 
sources that could complement mail service. These changes 
should not be limited to marginal changes. For example, perhaps 
it would be possible for the Postal Service to work in 
partnership with community banks to integrate banks and post 
offices in a manner that would help both existing community 
banks and the Postal Service itself.
    The goal of exploring these new revenue options should be 
to preserve the outstanding services offered by the Postal 
Service. We all benefit from affordable and convenient mail 
delivery. The ability of the Postal Service to deliver mail 
quickly, 6 days of the week, not only protects our 
constituents' quality of life but also creates opportunity for 
businesses that rely on mail for advertising and product 
distribution. If the Postal Service did not exist, there is 
little doubt that the mailing market would have oligopolistic 
characteristics with negative implications for affordable and 
consumer choice.
    The Postal Service continues to play an important role in 
limiting the prices of sending mail and packages, which helps 
all consumers. The Postal Service also makes an important 
contribution to our economy. Approximately 615,000 people work 
for the Postal Service, generally earning high union wages, or 
fairly high union wages. During the Bush administration, for 
the first time in history, median wages for American families 
actually fell during a full economic cycle of expansion, 
recession, and recovery. Protecting high-paying blue collar 
jobs such as those provided by the Postal Service must be part 
of our broader efforts to help the economy recover.
    Thanks again, Chairman Lynch, for holding this important 
series of hearings on the long-term viability of the Postal 
Service, and I look forward to hearing from our witnesses.
    Mr. Lynch. Thank you.
    [The prepared statement of Hon. Gerald E. Connolly 
follows:]

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Mr. Lynch. The Chair now recognizes the gentleman from 
Maryland, Mr. Cummings, for 5 minutes.
    Mr. Cummings. Thank you very much, Mr. Chairman, and I too 
thank you for holding this critically important hearing on 
adapting the Postal Service to our changing world. The U.S. 
Postal Service is the second largest civilian employer, with 
approximately 623,000 career employees.
    Although consumers rank the Post Office as one of the most 
trusted government agencies and it continues to excel, the Post 
Office has not been immune to the downward economic trends 
currently facing our Nation. While final numbers are not 
available yet, it is estimated that the Post Office will 
experience a $6.2 billion loss, which is over two times more 
than last year's loss. This loss can be attributed largely to 
two factors: No. 1, the unprecedented decline in mail volume 
due to increased use of electronic communications and other 
factors; and No. 2, the economic recession that is affecting 
all sectors.
    The Postal Service has been making a number of aggressive 
cost-cutting measures, but I'm interested in hearing about the 
new innovative ideas our panelists will present today. The 
Postal Accountability and Enhancement Act was signed into law 
in December 2006, allowing for flexibility in how services are 
designed, priced and marketed. Because of that flexibility, the 
Post Office has been able to create new innovative programs 
such as the standard mail volume incentive pricing program this 
past summer. The summer sale provided a 30 percent rebate to 
eligible mailers on letters, volume above a specific threshold. 
This program is estimated to have generated at least $50 
million in sales.
    The Postal Service has also restructured its Web site and 
created mobile device functionality for its customers. This 
allows greater accessibility and added convenience for postal 
users. For 44 cents, we can send a letter anywhere in the 
United States. We now all would have to admit that's a pretty 
good bargain. The Post Office is and continues to be reliable 
and of great value.
    I look forward to the discussion today about expanding 
services and nonpostal products directly or in partnership with 
private-sector entities, and what Congress can do to help the 
U.S. Postal Service.
    And with that, Mr. Chairman, I yield back.
    Mr. Lynch. I thank you.
    [The prepared statement of Hon. Elijah E. Cummings 
follows:]

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Mr. Lynch. The Chair now recognizes the distinguished 
gentleman from Illinois, Mr. Davis, for 5 minutes.
    Mr. Davis. Thank you very much Mr. Chairman. And let me 
just echo the sentiments that have already been expressed by my 
colleagues in thanking you for calling this hearing.
    I think that the Postal Service is one of those critical 
elements of our communications system that must be seriously 
addressed. So I'm eager to hear an analysis of the impact of 
the efforts that have been put forth by Postmaster General 
Potter and his staff and the other entities associated with 
trying to make sure that we maintain the viability of our 
postal operation.
    When I think of what we are facing with the impact of 
electronic communication and all of the other economic 
indicators that are upon us, we recognize that it is no easy 
task and that there are no simple solutions to very complex 
issues. But I want to commend you for your leadership as 
chairman of this subcommittee, how you have been moving things 
along to try and help assure that our postal operations will 
continue as viable instruments of our communication system.
    So I want to thank you very much and look forward to 
hearing the witnesses.
    Mr. Lynch. I thank the gentleman for his kind words.
    What I would like to do, it is the custom of this 
subcommittee to swear its witnesses before they provide 
testimony. And I invite you to stand and please raise your 
right hands.
    [Witnesses sworn.]
    Mr. Lynch. Let the record show that all of the witnesses, 
each of the witnesses, has answered in the affirmative.
    What I would like to do now is just offer brief 
introductions of our panel of witnesses.
    Mr. Robert Bernstock was named President of Mailing and 
Shipping Services, a new division at the U.S. Postal Service, 
in June 2008. He is responsible for development and management 
of all retail and commercial products for the Postal Service, 
including commercial sales and services. Mr. Bernstock has 
extensive senior leadership experience with Campbell Soup Co., 
Scotts Miracle-Gro, and Vlasik foods among others.
    The Honorable Ruth Goldway was designated chairman of the 
U.S. Postal Regulatory Commission by President Barack Obama on 
August 6, 2009, and has served with the agency since 1998. She 
is an experienced regulatory and public affairs professional 
with expertise in citizens' participation, consumer issues, 
urban planning issues, as well as the mailing industry.
    Mr. Michael Coughlin is a recent retiree from Accenture, a 
global consulting technology and outsourcing firm where he 
helped to manage senior-level relationships with postal clients 
around the world. Mr. Coughlin also spent 32 years with the 
U.S. Postal Service serving as Deputy Postmaster General and a 
member of the Board of Governors from 1987 to 1999.
    Mr. Phil Herr is Director of the Physical Infrastructure 
Team at the Government Accountability Office. Since joining GAO 
in 1989, he has managed reviews of a broad range of domestic 
and international concerns. His current portfolio focuses on 
programs at the Postal Service and the Department of 
Transportation.
    Mr. Robert Reisner is president and CEO of Transformation 
Strategies and has been a management consultant for more than 
20 years, specializing in strategic market transformation. He 
has previously served in the executive positions at the Postal 
Service, including vice president for strategic planning from 
1996 to 2001.
    We will now begin our witness testimony.
    Mr. Bernstock, you are recognized for 5 minutes.

STATEMENTS OF ROBERT BERNSTOCK, PRESIDENT, MAILING AND SHIPPING 
  SERVICES, U.S. POSTAL SERVICE; RUTH GOLDWAY, CHAIRMAN, U.S. 
POSTAL REGULATORY COMMISSION; PHILLIP HERR, DIRECTOR, PHYSICAL 
INFRASTRUCTURE, U.S. GOVERNMENT ACCOUNTABILITY OFFICE; MICHAEL 
   COUGHLIN, DEPUTY POSTMASTER GENERAL, U.S. POSTAL SERVICE 
 (RET.); AND ROBERT REISNER, PRESIDENT AND CEO, TRANSFORMATION 
                           STRATEGIES

                 STATEMENT OF ROBERT BERNSTOCK

    Mr. Bernstock. Good morning, Mr. Chairman, and members of 
the subcommittee. I appreciate your interest in the revenue 
generation activities of the Postal Service, as that is the 
primary focus of my work.
    I would like to begin by recognizing Congress' active 
support of the Postal Service this year, especially your 
understanding of the urgency behind changing the retiree health 
benefit payment structure for fiscal year 2009.
    The Postal Service continues to face severe financial 
challenges. Our auditors are currently reviewing our fiscal 
year 2009 financials, and while I cannot give you the precise 
figures, I can say that despite heroic cost reductions of over 
$6 billion, we expect our mail volume to decline by 
approximately 26 billion pieces, with a net loss of over $7 
billion, prior to accounting for recent legislation.
    There is no certainty that mail volume levels will recover 
or if they will continue to decline, to be replaced with other 
forms of communication. We are certain that without significant 
changes, the potential exists for similarly large financial 
losses in the foreseeable future.
    We are actively engaged in a four-pronged effort to correct 
public service finances. The first and most obvious approach is 
to continue to aggressively bring down our costs. The Postal 
Service has set very aggressive cost-reduction targets. The 
change in delivery frequency from 6 days to 5 days and 
modification of retiree health benefit fund payments are both 
integral elements of the second strategy.
    The third and fourth paths are the subject of today's 
hearings: to be equally aggressive in our efforts to grow 
revenue within the law and to change the law to provide greater 
product and pricing flexibility.
    An example of how we utilize our pricing freedoms enabled 
by the Postal Act is the standard mail summer sale. Working 
with the PRC, we developed the summer sale, offering a 30 
percent price discount on incremental volume on advertising 
mail for 3 months over this summer. We are still evaluating 
this program, but preliminary information suggests that over 
400 of our largest customers participated and mailed a 
significant number of incremental pieces of standard mail to 
help stimulate the economy.
    I would like to give special thanks to the PRC for its 
quick and thorough review of this proposal.
    The summer sale, along with other revenue-generating 
initiatives that I describe in some detail in my written 
testimony, like the priority mail advertising campaign, 
priority mail contract pricing, and consumer products at 
retail, including greeting cards, are all underway, already 
taking advantage of the flexibility afforded by the Postal Act. 
Some have already generated incremental revenue, and others are 
just hitting the marketplace.
    There are additional initiatives described in my testimony 
that are still in the planning stages designed to extend or 
transform the business by expanding the core capabilities into 
new business areas.
    Three examples are, first, renewed approaches to the 
distribution of product samples; second, the extension of 
passport processing and enrollment services to secure 
credentials; and third, the exploration of hybrid mail that is 
either sent, delivered, or both, in digital form.
    One of the purposes of today's hearing is to examine the 
constraints that hold the Postal Service back. I outline 
specific requests for changes in the postal law in my written 
testimony, including the authority to provide services to State 
and local authorities in addition to Federal agencies, to 
provide explicit authority for purely electronic equivalence of 
the traditional physical services, and to provide more freedoms 
to leverage our existing assets, especially our retail assets.
    While I'm excited about our revenue-generating projects and 
the potential for greater freedoms, I want to be clear that 
revenue alone is not sufficient to close the earnings gap. Even 
at a 15 percent pretax profit margin, it would take profit 
generated by almost $45 billion in new revenue to fill that 
earnings gap. The four prongs together are necessary to provide 
a framework for the Postal Service to be self-sustaining while 
fulfilling our universal service obligation at service levels 
the country has come to expect.
    We are very proud of our accomplishments in meeting the 
communication and commerce needs of the country. But we 
recognize that without the help of Congress, we cannot close 
our significant profitablity gap and adequately meet our 
universal service obligation.
    I would like to thank the subcommittee for holding this 
hearing and to reaffirm my personal commitment to working with 
you to ensure a Postal Service that meets the mailing and 
shipping needs of the American public. I would be pleased to 
respond to any questions you may have.
    Mr. Lynch. Thank you.
    [The prepared statement of Mr. Bernstock follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Mr. Lynch. Ms. Goldway, welcome. You are now recognized for 
5 minutes for an opening statement.

                   STATEMENT OF RUTH GOLDWAY

    Ms. Goldway. Thank you. Good morning, Chairman Lynch, 
Ranking Member Chaffetz, Congressmen Davis, Connolly, and 
Cummings. I'm pleased to be here today.
    The subcommittee has a critical role to play in preserving 
a treasured American asset. The Postal Service is a government 
agency that connects together every American household, 
business and institution through its universal service network. 
It is a part of our daily life, taken for granted until taken 
away; part of the fabric of the Nation, supporting its 
educational, political, and charitable institutions.
    Congress has played an ongoing role in revitalizing the 
postal system most recently through the PAEA. The law was 
designed to preserve the Service's historic attributes, while 
providing change for the 21st century. But it was enacted at a 
time when both the economy and the Postal Service appeared 
strong. Now the landscape has changed. I think the PAE is 
working, but it is hard to see how well, given the recession.
    There have been clear successes. First, the Commission and 
the Postal Service who work together to take advantage of 
competitive flexibilities in the law. Through our rate process, 
the Postal Service has used its pricing power to significantly 
increase the rate of return on its overall competitive product 
line. Mr. Bernstock provided the details.
    Second, this year the Commission approved the Postal 
Service's first-ever request to test seasonal price incentive 
programs for standard and first-class mail, as well as the 
first and only experimental product submitted under the PAEA.
    Third, the Postal Service NSA proposals have accelerated 
under the new law, rising 900 percent in less than 3 years. 
Preliminary data on revenue-generation activities indicate that 
overall results have been positive but modest.
    Since the majority of these efforts involve price 
discounts, they result in limited additional revenue and 
provide significantly less contribution to overhead. So while 
the Commission would like to see more progress being made, 
particularly in the experimental area, there has been a 
reasonable effort expended to use the new law.
    The truth is that the powerful downturn in the economy 
which has caused a sharp contraction in key mailing industries 
like housing, finance, and automobiles would have overwhelmed 
even the most ambitious of these efforts. There is a tremendous 
difference between a gradual annual decline of 1 or 2 percent 
in first-class mail, which was the trend addressed by the PAEA, 
and a 13 percent drop in volume experienced this year.
    As a result, the Postal Service could not make its payment 
to the Retiree Health Care Benefit Fund [RHBF], and received $4 
billion in relief this year from Congress. And for the 
immediate future and perhaps some time to come, the situation 
appears likely to continue.
    The Postal Service has suggested that it needs additional 
freedoms modeled on the examples of foreign posts. The 
Commission is open to considering new perspectives; however, we 
believe they need to reflect American experience and tradition.
    My written testimony includes several examples from foreign 
posts. There may be some activities that fit the American 
model, but there is no magic bullet. Any new business 
activities should meet a set of reasonable but specific 
criteria, based on the core mission of the Postal Service, the 
needs of society, and the expectation of a positive outcome for 
both. The rationales that others are doing it does not satisfy 
the criteria.
    Honestly, the Postal Service has directed most of its 
management resources toward reducing its cost this year by more 
than $6 billion. Cuts continue--from adjusting mail routes and 
renegotiating purchase agreements to removing collection boxes, 
consolidating plants, and closing post offices. Now the 
Postmaster agenda has asked to lift the statutory language 
requiring 6-day delivery.
    The Commission views proposals to reduce service with 
caution. Service cuts made to address near-term financial 
difficulties may have harmful long-term consequences for 
universal service. And from a market perspective, the Postal 
Service could harm its greatest strategic advantage, its 
ubiquity.
    I suggest a better alternative that Congress may wish to 
amend the provisions of the PAA that set the RHBF's payments. 
The annual average payment of $5.5 billion is an enormous 
burden. The Commission study of alternate RHBF values found 
that significantly lower payments by the Postal Service could 
still meet the original funding objectives of the law. 
Recalculation would be timely, as it would capture the Postal 
Service's sizable work force reduction. Further, it would 
provide breathing room, resources for new initiatives, and some 
capital investment to enable better long-term planning for the 
Service's future.
    Looking forward, the Postal Service currently provides a 
number of nonpostal services that could generate new revenue. 
For example, the Postal Service now processes passports for the 
State Department. Other Federal and State agencies that issue 
licenses and permits or have retail initiatives could partner 
with the Service as well. The ``America the Beautiful access'' 
passes sold by the National Park Service is a partnership I 
have been advocating in particular.
    Considering our Nation's energy efficiency priorities, the 
Postal Service has the Nation's largest civilian vehicle fleet, 
which could provide the critical mass needed to develop the 
transformational technologies and infrastructure to be in our 
national energy goals. Research indicates that postal delivery 
routes are especially well-suited to electric vehicles. A 
national investment and a new fleet for the Postal Service 
would speed transformation, add green jobs, and reduce the 
Postal Service's operational overhead for the foreseeable 
future.
    Those of us in the mailing community have confidence in the 
value of the mail, and it is important to our economy and 
society. We believe that mail, letter carriers, and post 
offices serve a vital role in our community. How well the mail 
comes back, however, may well depend on how deeply service is 
cut now.
    That concludes my statement, and I would be happy to answer 
any questions you may have.
    Mr. Lynch. Thank you.
    [The prepared statement of Ms. Goldway follows:]

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    Mr. Lynch. Mr. Coughlin, welcome. You're now recognized for 
5 minutes.

                 STATEMENT OF MICHAEL COUGHLIN

    Mr. Coughlin. Thank you, Mr. Chairman, and members of the 
subcommittee. The chairman did earlier just introduce me. I am 
Michael Coughlin. I want to make clear I am here not 
representing any particular organization or group, but I have 
spent over 40 years in the postal industry. I did spend 32 
years with USPS, and for the last 10 years I have been working 
in a consulting role primarily focused on foreign posts.
    I have been asked here today to share my perspective on the 
revenue-generation efforts of the foreign posts and the lessons 
we might take from those here in the United States.
    My written statement touches on the range of initiatives 
undertaken by foreign posts and summarizes the very levels of 
success that some of them have had. I'm not going to rehash 
those here. But let me get right to what I think are the common 
success factors that some of these posts have had in raising 
alternative revenues and some of the lessons we might glean 
from them.
    When I look at something like 15 different postal 
organizations around the world and their revenue-generation 
efforts, I see four kinds of common management characteristics 
among the more successful of those, at least in the revenue-
raising efforts.
    Those four characteristics include real clarity around 
strategic direction and a narrow focus on markets and segments 
that they want to target. They know what they want to do and 
they do it.
    There is a strong innovation agenda in these organizations 
and a forward-looking culture that embraces change. In those 
organizations, innovation is an expectation.
    These posts generally have the ability to recruit top 
talent. Many of the key players, particularly on the revenue-
generation side, come from outside the traditional postal 
experience. And one other common factor among them is they tend 
to focus when they undertake those initiatives on the customer 
experience and making that as positive as possible. Whatever 
the successful posts set out to do, they strive to do it better 
than the competition.
    Now, these are the four kind of common characteristics, and 
these are largely created by the management themselves, and for 
the most part--there are some exceptions--but for the most part 
I think these are generally within the current capability of 
USPS. But every bit as important to their success is the set of 
conditions that the governments of these posts have put in 
place as they have looked at their posts and their futures.
    There are three critically important conditions that they 
they tend to have in common. The legal framework within which 
they operate provides complete commercial freedom of action to 
operate in a competitive market. They operate very much like 
private entities do in their country and in this country as 
well.
    The regulator in these countries usually has a light and a 
supporting hand, and their primary focus is generally on 
universal service issues, the reserved areas, and the 
generation of competition in their local postal markets.
    Third, there is little political interference in the basic 
business decisions that these posts make, provided the post 
operates within the legal framework they have been given.
    In my judgment, these are the fundamental success factors 
for those posts in virtually all aspects of their operations. 
And, of course, they generally have very solid leadership and a 
very effective governance structure at those posts.
    So what does this mean for USPS? Mr. Chairman, and members 
of the subcommittee, I think there are two other important 
factors to keep in mind in a discussion of revenue initiatives 
and the authority and the flexibility that USPS has under the 
law.
    The first of these issues is scale. I do not want to 
discourage anyone, but the problem USPS faces today is measured 
in billions of dollars. Finding new sources of revenue for USPS 
is important. But think about it: 1,000 projects, worth $1 
million each, will generate $1 billion; or make it 10 projects, 
worth $100 million. And that may not be enough.
    While the recent reform law provided some additional 
flexibility to the Postal Service, I frankly have not heard of 
any initiatives approaching anything like that, and I don't say 
that to denigrate in any way what the Postal Service and its 
colleagues have tried to do. But to have a real impact in this 
area, it's going to take some different and some very big 
thinking.
    The second issue is every bit as challenging. Unlike most 
of the posts I have discussed today, here in the United States 
there is a very strong philosophical aversion to a government 
entity competing in private markets with goods and services 
that are already available from private sources. In the past, 
when USPS has attempted to offer such services, there has been 
very strong and noisy resistance, and eventually USPS hears 
from some of you. I have personally experienced that. I do not 
see that situation changing simply because the postal revenue 
problem is bigger today.
    Now, given this latter challenge, whatever revenue 
initiatives the USPS undertakes outside the traditional postal 
arena will probably have to involve partnerships and alliances 
with private entities where both parties can leverage the 
strengths of the other. In the case of USPS, it has enormous 
geographic reach in its retail network, and they touch 
virtually every home in the country throughout their delivery 
network. Some of the opportunities might include expanded 
financial services availability, expanded delivery options, 
government and agency services, or a link between the physical 
presence of the USPS and emerging communications technologies 
and services.
    After hearing the Postmaster General's October 8th speech 
at the National Press Club, I can imagine that some of the 
bankers in this country were bristling when the Postmaster 
General answered a hypothetical question at his National Press 
Club speech about what new business he would like to be in, by 
saying he would like to be a bank. Well, instead of immediately 
thinking----
    Mr. Lynch. Mr. Coughlin, you need to wrap up. We are way 
over on your time.
    Mr. Coughlin. Instead of thinking defensively, perhaps the 
bankers ought to put their innovative hats on and try to 
imagine how they can capitalize on what USPS has to offer. The 
same goes for other organizations looking for really new ways 
of engaging their customers.
    So what have we learned from foreign posts? Frankly, I 
think we have learned that what they are doing is interesting 
but it's not terribly applicable to the USPS.
    Thank you, Mr. Chairman.
    Mr. Lynch. Thank you sir.
    [The prepared statement of Mr. Coughlin follows:]

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    Mr. Lynch. Mr. Herr, welcome back. You are now recognized 
for 5 minutes. Thank you.

                   STATEMENT OF PHILLIP HERR

    Mr. Herr. Chairman Lynch, Ranking Member Chaffetz, and 
members of the subcommittee, I'm pleased to appear again before 
this subcommittee today to discuss the Postal Service's 
revenue-generation initiatives. First, I will provide an update 
on the Postal Service's financial condition; second, discuss 
revenue-related changes made by the Postal Accountability and 
Enhancement Act of 2006 [PAEA]; third, outline actions the 
Postal Service has taken to increase revenue since 2006; and 
fourth, discuss issues related to generating new postal 
revenues.
    Turning first to the Postal Service's preliminary financial 
results in fiscal year 2009 and going forward, mail volume 
declined about 28 billion pieces, and revenue declined from 
about $75 billion to $68 billion. Congressional action was 
required to reduce the Postal Service's mandated retiree health 
payment by $4 billion. Outstanding debt increased by $3 billion 
to $10.2 billion. At this pace, the Postal Service will reach 
its $15 billion statutory debt limit in fiscal year 2011. 
Further, deficits over $7 billion are predicted in fiscal years 
2010 and 2011.
    With regard to revenue generation and key postal products, 
PAEA gave the Service greater pricing flexibility, including 
for market-dominant products to generate 88 percent of its 
revenues. Market-dominant mail is generally subject to an 
inflationary price cap. Competitive products are not subject to 
a price cap, but each competitive product must have cover its 
costs.
    PAEA prohibited the Postal Service from offering new 
nonpostal products and services.
    Turning to actions that the Postal Service has taken since 
PAEA was enacted, the Service increased average rates for 
market-dominant mail in 2008 and 2009 at virtually the maximum 
allowable under the price cap. This year, three targeted rate 
incentives were provided to stimulate mail volume. A summer 
sale was introduced for standard mail, and there is an ongoing 
fall sale for first-class mail and an incentive program for 
saturation mail.
    For competitive products, there are annual rate increases 
for priority and express mail in 2008 and 2009, and the Service 
introduced volume discounts for these types of mail as well as 
a priority flat-rate box.
    The Postal Service has entered into about 90 contracts with 
large mailers for other competitive products that are generally 
volume-based, with provisions intended to lower its costs. With 
regard to generating increased revenues, the Postal Service has 
asked Congress to change the PAEA restriction on offering new 
postal products so that it could move into areas such as 
banking, insurance, and nonpostal retail services.
    We previously analyzed past Postal Service forays in the 
nonpostal area, reporting a loss of nearly $85 million in the 
mid-nineties on 19 new products, including electronic commerce 
services and a remittance processing business.
    In 2001, we reported that none of its electronic commerce 
initiatives were profitable, and the management of these 
efforts was fragmented.
    The Postal Service's interest in moving into new business 
lines raises several fundamental questions. Should the Postal 
Service compete in areas where there are already private sector 
providers? Should antitrust and consumer protection laws apply 
equally to the Postal Service and its competitors? If the 
Postal Service were to compete in banking, insurance, and 
retail services, should it be subject to the same regulatory 
entities as its competitors? If the Postal Service used its 
37,000 retail facilities to offer new nonpostal services, would 
this provide an unfair competitive advantage? And how would 
nonpostal activities be financed, given the Service's current 
debt levels? Would it be allowed to borrow at Treasury rates?
    In conclusion, we added the Postal Service to our high-risk 
list this past July, noting that it urgently needs to 
restructure to remain financially viable. Although it has used 
its pricing and product flexibility, results to date have been 
limited, in part linked to the economy. At this point, the 
Postal Service has no business plan that clearly details its 
proposals for entering new nonpostal markets and what specific 
legislative changes would be needed.
    Generating new revenues from Postal Service products and 
services appears more promising than venturing into potentially 
risky nonpostal areas. At the same time, much work remains to 
reduce postal operational costs.
    Mr. Chairman, this concludes my statement, and I'm pleased 
to answer any questions. Thank you.
    Mr. Lynch. Thank you sir.
    [The prepared statement of Mr. Herr follows:]

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    Mr. Lynch. Mr. Reisner, welcome. You are now recognized for 
5 minutes.

                  STATEMENT OF ROBERT REISNER

    Mr. Reisner. Good morning, Mr. Chairman, Ranking Member 
Chaffetz, and members of the subcommittee. In my statement I 
explain why I believe the Postal Service and the mailing 
community can become a source of innovation and new postal 
revenue through public-private partnerships that were 
encouraged by Congress in section 1004 of the Postal 
Accountability and Enhancement Act.
    Today there is a broad consensus that bold action must be 
taken to reinvigorate the Postal Service, and fortunately there 
are some real and tangible opportunities to create new value 
for postal customers.
    To be clear, let me offer a few examples that might be 
called Enabling the Last Mile, Extending Democracy's Reach, and 
Promoting Green Routes.
    By enabling the last mile, I refer to the many 
opportunities that exist for putting technology in the hands of 
the letter carrier; in other words, on the doorstep of the 
postal consumer. One of the areas of greatest interest to 
mailers has been wanting to know where their mail is while it's 
en route to its destination. The USPS was seen as a black hole 
compared with FedEx and UPS, who have invested billions to 
enable their higher-end services to track and trace mail 
products. This is going to change imminently because the Postal 
Service is on the verge of creating a smart grid of intelligent 
mail services. Now we can go beyond the bar code and offer 
tracking technologies that have exciting possibilities for 
adding new value for customers. What's more, we can download 
applications to the scanner technology that is finally, within 
the last 6 months, in the hands of the letter carriers. 
Customers can realize new, tangible benefits, and new postal 
revenue can be created. But to make this happen, we need to 
collectively create an innovative enterprise of tests and 
trials and partnerships.
    A second broad theme that Chairman Ruth Goldway, in 
particular, has championed has been Vote by Mail. The Postal 
Service can do this and can provide many other government 
services as well. To be practical and secure, it will require 
connecting hard-copy services to Internet services, and that 
will necessitate partnerships. But the opportunity to expand 
the capacity of the Postal Service to continue to serve as 
democracy's agent is here.
    And third, there are opportunities for the Postal Service 
to again serve the Nation by carrying parcels that today cause 
three and four trucks to travel the same route. We can reduce 
carbon emissions by creating green postal routes. This will 
take some reengineering and perhaps some recognition under cap-
and-trade, but there are new opportunities here if we seize 
them.
    In conclusion, I didn't invent these ideas, they came from 
the community, from the mailing community, from letter 
carriers, who have said, why not? They come from creative 
mailers who have said, why can't we have a smart envelope? And 
from suppliers who have shown how to do it. To tap this 
creativity, mindsets that were established when the Internet 
was still a future vision have to be changed. To homegrown 
governmental Internet services, it's time to say, That was 
then, this is now.
    In the future, innovation is going to come through 
collaboration and partnership where the Postal Service does 
what it does best and where the private sector, through 
partnerships, provides Internet services and makes mail 
relevant to the consumer of the future.
    If we make the modern Postal Services relevant by 
connecting them to this multichannel Internet marketplace, they 
will generate more mail. This is the real revenue opportunity 
entailed in what we are talking about here today.
    The coming years could be an exciting time of 
transformation, or they could bea train wreck. The difference 
will be whether there is clear public policy guidance that can 
define the difference between the creative balance of what 
should be public and postal, and what the private sector can do 
best.
    Thank you very much Mr. Chairman. I look forward to 
answering any questions.
    Mr. Lynch. Thank you.
    [The prepared statement of Mr. Reisner follows:]

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    Mr. Lynch. I yield myself 5 minutes for questions.
    Mr. Bernstock, I do appreciate your honesty in your 
statement that we are not going to solve this on the revenue 
side alone. I think that's apparent just by the numbers. In 
2008, we saw mail volume go down 9.5 billion pieces, and then 
in the fiscal year ending October 1, 2009, we saw it drop 26 
billion. There is no way in the near term that we can turn the 
system around and solve that problem by selling more greeting 
cards or any other service that we might be capable of doing 
right now.
    And at the same time, we are a little bit disappointed up 
here with the consolidation effort and the cost-saving side. It 
does not appear that the original target of closing maybe 1,400 
facilities is anywhere near probable. I think the Post Office 
has reduced its consolidation numbers to below 400 now, and it 
won't nearly capture the savings that we thought were possible.
    As well, the early retirement incentives that--well, not 
great incentives--but the programs themselves have not gleaned 
the type of utilization on the part of the employees, so we 
still have a lot of people that are resisting an early buyout, 
we still have a large work force, understandably so. Those 
workers, their 401(k)'s are cut in half, most of them, so they 
don't want to retire in an environment like this.
    Yet we face a situation where we need transformational 
leadership. We need a truly dynamic change at the Post Office 
with the way we do business. And there is a saying that says 
there's nothing more disruptive to the human condition than the 
pain of a new idea. And, unfortunately, that is what we are 
facing.
    Look, I love my postal workers, and I will be the first one 
to admit it. I don't want to see layoffs. I don't want to see 
any of that. So I'm trying all these other measures to protect 
the employees because, quite frankly, when we grade the 
consumer satisfaction among the Federal agencies, the Post 
Office because of the work of their clerks, because of the work 
of their mail handlers, because of the work of their letter 
carriers that go to every home and business in America 6 days a 
week, by far they are the highest rated Federal agency that we 
have in America today. They do the best job. So I think it 
would be a mistargeting of our problems to look at the backs of 
our employees to try to solve this problem.
    So we need to change our structure. And I was wondering, 
there have been a few things mentioned here today about 
allowing the Post Office through the Postal Accountability and 
Enhancement Act to branch out into these other areas. And I 
know that there is some apprehension in competing with the 
private sector.
    But there are some areas--specifically, my colleague, Mr. 
Chaffetz, came up with an idea about the Postal Service taking 
over major responsibilities from the census. Now, the Post 
Office already, through the mail handlers and the letter 
carriers, they go into every home and business in America 
already. And that's basically what the census does; it tracks 
the population most effectively through those home visits.
    Have you looked at any of that, so it would be government 
taking over government work, but just doing it more efficiently 
for the taxpayer? Have we looked at any of that or have we 
looked at--Ms. Goldway has mentioned the Vote by Mail--have we 
looked at any of those? I know they are disruptive. I know 
bureaucracies are not going to be satisfied with that. But I 
think we have very limited choices. Have you looked at any of 
those type of initiatives that might really transform what we 
are doing at the Post Office?
    Mr. Bernstock. Mr. Chairman, we've looked at everything you 
have said. We've looked at the fact that we have $6 billion in 
cost savings that came in this year, and we are looking to lose 
$7 billion. We are looking at the fact that mail has declined. 
And we are looking at both huge transformational revenue 
issues--as I said, $45 billion is what it would take to close 
the gap. We have some initiatives underway and we have also 
looked very specifically at the initiatives you have 
identified.
    On the census piece, my understanding is through the mail 
80 or 90 percent of census responses come in. And while it's 
not within my area of responsibility, I do understand that 
there was a report by our operations team, meeting with the 
Census Bureau, which said that for going back and knocking on 
doors six or seven or eight times to get that last 5 percent, 
we may not be the best-suited agency. But we are willing to 
relook at that.
    Vote by Mail, we are very actively looking at a range of 
ways we can do that and have a series of initiatives underway.
    Mr. Lynch. I have exhausted my time, so I'm going to yield 
to the ranking member for 5 minutes.
    Mr. Chaffetz. Thank you.
    Mr. Herr, has there been any sort of analysis--or any of 
you actually can answer that--the one area we can point to 
where there is some cross-functionality within the government 
is passports. Is that a revenue generator? Is it just a break-
even operations? Is there any sort of analysis that says, boy, 
that was a good idea?
    Mr. Herr. We have not done that analysis. Mr. Bernstock 
perhaps, or Ms. Goldway.
    Ms. Goldway. The Commission has done the analysis and it 
not only breaks even, but it provides a contribution to 
overhead, so, in fact, it would make a profit for the Postal 
Service. It does. It is a successful revenue-generation tool.
    Mr. Chaffetz. So I want to hear some ideas here. So I like 
the one about that you mentioned about the National Park passes 
and that sort of thing. That is not going to get us out of the 
financial hole that we are in. But what are the big ideas that 
are floating out there?
    And I just want to express again the sincere reluctance to 
get into areas where the private sector is already competing, 
the financial services, the telecom stuff. I can't imagine 
being supportive of that. I'm just being as candid as I can, 
because they already have those services in the marketplace.
    But if we look at State and local government, if we look at 
Federal Government, if we look at our constitutional duties, 
roles and responsibilities, it seems to me there are a number 
of agencies that would benefit by the sheer structure and 
magnitude of the work force, above and beyond what we have 
creatively thought of today.
    Mr. Bernstock. Congressman, I agree with that statement. 
And we do have the authority to provide credentialing and 
enrollment services to Federal agencies if we extended that 
authority to State and local agencies, I think we could do even 
more.
    Mr. Chaffetz. How many are you doing at the Federal level? 
Give me a better sense of----
    Mr. Bernstock. Well, the passport, the enrollment process 
on the passport is one act of business we are engaged in. We 
feel we could partner with a whole range of Federal agencies, 
be it TSA or Social Security or Agriculture. There's a number 
of ways we can do credentialing and enrollment work.
    Mr. Chaffetz. Is there a list of these out there?
    Mr. Bernstock. We are actually engaged with several Federal 
agencies.
    Mr. Chaffetz. Can you give me more specifics about which 
ones you are pursuing?
    Mr. Bernstock. I don't have that data.
    Mr. Chaffetz. Did you want to add something to that, Ms. 
Goldway?
    Ms. Goldway. I'm very, very gratified that the Postal 
Service is now beginning to look at this area, because it is 
potentially a great resource and a great source of stability 
for the local post offices in the community.
    One of the issues that came up in a hearing we had recently 
is that while the post office itself may not generate a lot of 
revenue, having a post office in a local community shopping 
center creates revenue and economic development activity for 
the rest of the community around it. So it's important, I 
think, for the well-being of the economy overall to continue to 
support post offices and these----
    Mr. Chaffetz. I agree. We are just looking for real 
specifics here.
    Ms. Goldway. These abilities to connect with local 
government will provide at least enough revenue to continue to 
justify the service, if not solve the entire problem.
    Mr. Chaffetz. Mr. Reisner, if you had to come up with a 
list of the best three or four ideas that you've seen or heard 
out there, what would be on that list?
    Mr. Reisner. The biggest thing of all, and I think Mr. 
Bernstock just talked a minute ago about the credentialing 
services, the idea that government-to-government services are 
something that the Postal Service can do and is encouraged to 
do under the law, offers a platform for coming up with other 
creative ideas. I think the most important thing is that the 
marketplace bring the Postal Service the ideas, but that the 
Postal Service has, as Mr. Coughlin just talked about, become 
an innovative place where people have the sense that they can 
come and plug and play and try ideas and test their ideas in 
the marketplace to the benefit of postal customers.
    Mr. Chaffetz. Mr. Chairman, I would definitely echo that. I 
would like us to put out a call to the private sector to say, 
please, come to our rescue here. We need the creative 
innovation that is going to come from the populace across this 
country with the creative, innovative ideas that are going to 
be those big ideas that the Postal Service can participate in, 
at the same time making sure we don't overly step into the 
private sector where, rightfully, the private sector should be 
leading the charge. But there are credentialing services, and 
we need to continue to explore those ideas.
    I tend to think that the private sector is going to help 
come up with these ideas, bigger and broader. So please, if you 
have those ideas, send them to us. We need them. And I see I'm 
out of time. I'm going to be under time this time, Mr. 
Chairman. I would just like to note that. Oh, shoot, I blew it.
    Mr. Lynch. Well done. OK, Mr. Davis is now recognized for 5 
minutes.
    Mr. Davis. Thank you, very much, Mr. Chairman. I try to be 
as optimistic as possible. And as I listened to the witnesses, 
I thought of the baseball game that I was watching last night, 
especially when the score got to be 7-1.
    And I was wondering if there was any way that Philadelphia 
was going to get back. And I thought, you know, if you bunt, 
get a guy on first base, you bunt again, get another one on 
second base; that is, you come up with a number of different 
ideas, but they are all kind of small in terms of generating 
the big runs that you really needed.
    And so when I think of changing prices for shipping 
services, bring down the cost, reorganize sales, become more 
competitive, I guess I'm thinking reorganize sales to sell 
what, other than stamps and shipping? Or if you got got some of 
the other services, is there any way that you can really be 
competitive or as competitive as you need to be?
    And so, Ms. Goldway, I'm thinking that eventually you get 
down to this last resort business. And I wanted to ask, what 
would you consider to be last resort in terms of being forced 
to cut services? When would last resort come?
    Ms. Goldway. The Commission has a process for making these 
decisions, and it involves hearing from the public and getting 
a whole range of information about costs and benefits before we 
would make such a decision.
    Certainly, the Postal Service has brought forward to us an 
end case. We are looking at the possibility of closing some 
post offices. And they have suggested that they may bring 
another case about reducing service from 6- to 5-day delivery. 
There is not agreement yet on what the cost savings would be to 
close post offices. And there is certainly no agreement yet on 
what the cost savings would be to reduce service from 6 to 5 
days.
    And the tradeoff between reducing service and reduction in 
potential volume is something that needs to be looked at. If 
you cut service, do you reduce demand more than you would if 
you maintained service?
    I think it's a very complicated matter. And what I think 
our Commission's responsibility to do is to focus on what the 
PAA tells us, which is to ensure an efficient and effective 
Postal Service that provides universal service. So, we would 
have to look at those tradeoffs.
    I may be more of an optimist than you. I'm a Dodger--a 
Brooklyn Dodger fan, and I've survived.
    I think that incremental support can make a difference and 
that there are many surprising things that develop in the 
postal service. Netflix, for instance, is one that, at least 
for a time, is bringing us in a significant amount of revenue. 
And there may be about others that develop as well. I certainly 
hope so.
    Mr. Davis. Thank you very much. I appreciate the efforts 
and the creative thinking that the Postal Service has put 
forth. I just don't want Casey at the bat.
    Mr. Coughlin, let me ask you, because I listened closely to 
your testimony, do you have a prognosis under which we can 
really pull this out and pull it off?
    Mr. Coughlin. Well, that's the $68 billion question, I 
think. Let me just say I'm not quite perhaps as big an optimist 
as Chairman Goldway about the future of mail volume. I do think 
it is going to continue to slide.
    I think the short term, relatively short-term, options the 
Postal Service have on the cost side are fairly evident. 
They've pretty much have been talked about.
    I think they need to reduce the number of delivery days. I 
think we're one of the few countries in the world who still has 
6-day delivery. I think they need to reduce the size of their 
processing network from around 300 processing facilities to 
perhaps half of that size. And I think they need to reduce the 
size of their retail network.
    Those are, I think, some obvious moves; and I know they are 
difficult. They are not changes that are going to go down 
easily, and they have some costs associated as well as some 
savings.
    I think the Postal Service itself needs to think in terms 
of what would a 400,000-person Postal Service look like and how 
would you operate and still deliver on the universal service 
obligation? Because I think, in my judgment, that's probably 
where it's going to go.
    You need to continue to work on the revenue issues that 
have been discussed. The ranking member, Mr. Chaffetz, talked 
about the ideas that are generated from here.
    What I would really encourage--I'd encourage, on the one 
hand, the Postal Service to get out there and sell the obvious 
benefits of the Postal Service in terms of its ubiquity and its 
geographic reach to potential partners out there. I see new 
bank branches going up constantly in growing neighborhoods out 
there, new brick and mortar. I would have to ask myself as a 
banker, is there a possibility to partner with an organization 
like the Postal Service to provide financial services, agency 
services. All kinds of opportunities are out there.
    It gets complicated, I think, partly by the way that the 
Federal Government is organized and the way its funding 
processes work in terms of the subparts of agencies. So that 
makes it complicated to kind of get an overall view of how an 
agency delivers services and how it might tap into the Postal 
Service. But there are a lot of opportunities out there. I hope 
I'm wrong, but I think that's the direction it's going.
    Mr. Davis. Thank you very much, Mr. Chairman.
    Mr. Lynch. The Chair now recognizes the gentleman from 
Ohio, Mr. Kucinich, for 5 minutes, who yields to the gentleman 
from Virginia, Mr. Connolly, for 5 minutes.
    Mr. Connolly. I thank my colleagues.
    You know, listening to all the hearings we've had on this 
subject, we are clearly in search as we move forward in this 
century for a new, viable business model for the U.S. Postal 
Service. And, on the one hand, I think we in Congress maybe 
want to have it both ways.
    On the one hand, we recognize the iconic value of the Post 
Office in a given community, its centrality in especially rural 
parts of our country; and we don't want that change. We don't 
want you closing offices. We don't want you changing routes. We 
don't want you cutting back on service or the numbers of days 
of service.
    By the way, we don't want you unnecessarily competing with 
the private sector for anything.
    On the other hand, why aren't you viable? Why are you 
losing money? Whey aren't you making money? Why aren't you like 
your competitors?
    And we in Congress can't have it both ways. We're going to 
have to work with you to recognize that, by statute--and, Mr. 
Herr, I'd be interested, listening to your testimony, I think 
one of the things we have to talk about, should the Post Office 
be subject to the same regulations as the private sector? Well, 
by statute, we put some requirements on the Postal Service, 
don't we, that we don't put on the private sector that I think 
significantly circumscribes the ability of the Post Office to 
sort of break out here and just be a rational actor in the 
private market?
    Mr. Herr. I'd agree with that. I think part of it is we're 
just simply trying to pose some questions that folks in your 
situation should be considering as you take a look at this.
    It is a large enterprise. It touches everyone's life 6 days 
a week. I mean, as Chairman Lynch mentioned at the opening, you 
know, no other institution does that 6-days a week. As you 
proceed thinking about this, some of those tradeoffs, those get 
raised; and I think it is important to put them on the table as 
folks consider them. Because if we don't raise them now, 
they'll come up later.
    Mr. Connolly. I would just add to your list, though. I 
think you have an obligation, GAO, to look at the statutory 
limitations or expectations we put on the Postal Service that 
make it different than an entity in the private sector.
    Mr. Herr. And on that point we have ongoing work looking at 
the Postal Service business model, and as part of that we're 
factoring those kind of things into it as well. So thank you.
    Mr. Connolly. OK.
    Mr. Reisner, how could the Postal Service incorporate, 
let's say, the banking idea that Ms. Goldway talked about 
without threatening community banks?
    Mr. Reisner. Well, I think that Mr. Coughlin just really 
talked about it a second ago. I think that there has to be a 
process that creates some kind of partnership in which the 
private sector gets to do what it does best. This is the 
marketplace that we live in today.
    Just one quick point that I'd make, too, that I think Jack 
Potter the other day in his speech at the National Press Club 
created this framework and embraced something that Ruth Goldway 
had endorsed, which was looking out to the future 10 years and 
trying to imagine what kind of a Postal Service should we have 
to serve the public purposes that we see 10 years from now. And 
I can't look out 10 years and imagine that the Internet isn't a 
part of that, the marketplace, at that time.
    Now is it appropriate for the Postal Service to provide 
those services? Probably not. And so finding partnerships where 
the public sector can be compensated for its retail presence 
and its ubiquity and the private sector can provide what it 
provides best it seems to me is part of that 10-year vision.
    Mr. Connolly. Ms. Goldway, and anyone else, what do we know 
about the elasticity of demand for the price of stamps? I mean, 
is the demand inelastic such that we can raise the price to 
whatever we need to raise or do we see significant followup in 
volume every time we, in fact, raise prices?
    Ms. Goldway. Well, we have about 40 years of following the 
prices.
    Mr. Connolly. Ms. Goldway, I'm sorry. I cannot hear you.
    Ms. Goldway. Oh. We have about 40--in the Commission, we 
have about 40 years of following what we call the elasticity of 
price of first-class mail. And for pretty much all that time we 
could say it was inelastic. You raise the price and sales might 
drop off a little, but they'd come back up. And that stamp 
usage followed the rate of population growth and, to some 
degree, the economy all through that time.
    But things really seem to have changed in the last 4 to 5 
years, and there was a slow but steady decrease in the first-
class mail, and it has been greatly increased by this 
recession. And the dilemma for all of us is to see whether the 
recession was an unusual event--there was a great drop-off in 
mail after 9/11, but it picked right back up again--or is this 
a lasting phenomenon.
    I think all of us feel that the growth of the Internet 
makes the role of mail very different from what it may have 
been in the past and that we're all trying to find ways to make 
mail relevant and valuable. So it may not be that we sell as 
many stamps but what we sell is more valuable, people are 
willing to pay more for it, or there is some other way in which 
the community supports it.
    Some of the European posts have subsidies for their mail or 
specific subsidies for post offices. And in fact even those 
that have had great profit in the last few years are having 
real problems under this recession as well. So just assuming 
you can follow a European model where there is privatization 
will get you some ongoing independent Post Office is not 
assured either.
    Mr. Connolly. Mr. Chairman, my time has expired; and I 
thank you. I do think Ms. Goldway's answer underscores--and I 
thank you for it--underscores the fact that, moving forward, we 
can't just tinker at the edges. We've got to figure out a new 
business model that's going to work.
    Thank you.
    Mr. Lynch. I thank the gentleman.
    The Chair now recognizes the gentleman from Ohio, Mr. 
Kucinich, for 5 minutes.
    Mr. Kucinich. Thank you very much, Mr. Chairman. I'm 
grateful that, under your leadership, this committee continues 
to look at what we can do to secure universal service to the 
people of the United States.
    My neighborhood in Cleveland, OH, I have seen over the last 
few years the post boxes disappear from neighborhoods; and I 
don't take that lightly because, to me, that has been an 
essential part of the infrastructure, the Postal Service.
    Now the next part of the infrastructure of the Postal 
Service are the branches; and, of course, we know that the 
postal administration has been systemically targeting branches, 
particularly in areas which are economically disadvantaged. 
Think about universal service. And we know they are cutting 
hours. They keep trying to downsize this Postal Service.
    Now, at the same time, there has been an expansion of 
dealings with the private sector. The private sector take over 
more and more. Now I think we need to look long and hard about 
this creeping privatization that's been going on in the Postal 
Service, because it's really at odds with universal service. If 
the Postal Service is a money loser, why does the private 
sector want to take it over? Think about that. If it loses 
money, why would anyone want to take it over, even turning it 
into a bank if it is such a money loser? This service belongs 
to the people of the United States.
    And while certainly every business model needs to be 
updated, privatization is not updating the business model of 
the Postal Service. It's destroying the Postal Service.
    I have a question for Chairman Goldway. Welcome to this 
committee, Mr. Chairman. Your testimony echoes my concern that, 
in diversifying the services the U.S. Postal Service provides, 
plans to move forward with providing non-postal-related 
services could lead to a reduction in essential services 
traditionally provided by the Postal Service and could 
subordinate the provision of these services to the pursuit of 
revenue. Much of the U.S. Postal Service airmail has been 
already outsourced to FedEx.
    Can you please explain and can you expand on the Postal 
Regulatory Commission's concerns regarding cuts and essential 
services until revenue generation plans have been successfully 
implemented? And is the Commission concerned that moving away 
from traditional services could lead to the privatization of 
core services the Post Office is mandated to provide? If you 
could respond.
    Ms. Goldway. Thank you, Congressman Kucinich.
    Both of us met each other 30 some odd years ago when we 
were mayors----
    Mr. Kucinich. If you could speak up.
    Ms. Goldway. Both of us first met each other when we were 
mayors of our respective cities about 30 years ago, so we share 
this focus on the local impact of the Postal Service, I think.
    I don't think the Commission is opposed to the Postal 
Service providing non-postal services, and our litmus test is 
that we expect the services to be in support of the mail 
function. So greeting cards are fine. Money orders that the 
Postal Service has provided and even electronic money orders 
internationally are fine. Copying services are fine. But there 
are a range of services that are fine. And we are certainly 
open to the Postal Service coming up with any number of 
experimental products, should they have them, that are related 
to postal services that we can define as Postal Service. So we 
actively support and look forward to the Postal Service coming 
forward with those new ideas, and I think our record is that we 
accept almost all of them.
    The problem is, if you look at the Postal Service and its 
network, the retail clerks that are there are paid very high 
wages, and I think they should be. But look at the bank next 
door and the wages that are paid to the bank next door. It's 
not likely that a bank is going to want to partner with the 
Postal Service unless there is some real change in wage 
structure, which may result in problems as well.
    So all of these proposals----
    Mr. Kucinich. If I may, my time is expiring; and I just 
would like to make this observation.
    Mr. Chairman, concluding, if banks want to partner with 
post offices the only reason they'd want to do that is so that 
they could take over the post offices so that people then would 
have to do their postal businesses through banking. This is 
very easy to see. These things go either way.
    We used to be able to go to banks and pay bills. Then they 
stopped doing that. It is easy for them to take up the function 
of mailing and then just take it over from the government. We 
already had enough experience with the workings of banks here 
to know that if we're looking for the private sector to provide 
solutions for government services, we're probably looking in 
the wrong place.
    Mr. Lynch. I thank the gentleman.
    Just briefly, I want to yield myself 15 seconds.
    I think what's happening here, though, is that now we see a 
model out there, a competitive model. When I go to the Stop and 
Shop or you go to the Piggly Wiggly to do your shopping, there 
is a bank there. There is all kinds of different things 
offered. So I think the Postal Service is under that similar 
pressure as well.
    But I'll wait until I have 5 minutes to expound on that a 
little further. But I deeply appreciate the gentleman's 
comments, and I agree with the threat that he's identified.
    At this point, I would like to also welcome former 
Representative William Clay. Thank you very much, sir. We 
appreciate your attendance, just in time to hear from your son, 
the gentleman from Missouri, Mr. Clay, for 5 minutes.
    Mr. Clay. Thank you, Mr. Chairman, and thank you for 
conducting this hearing today. Like all of us, I am deeply 
invested in the success of the Postal Service; and I'm happy we 
have continued to think critically about ensuring a positive 
future for the USPS.
    Also, let me welcome our panel to these proceedings; and I 
thank you for being here to share your expertise.
    Also, as the chairman mentioned, my older brother is in the 
front row, too. We welcome him, also.
    Let me start off by saying much of your recent effort has 
gone toward innovation in new markets. Is there any value in 
expanding existing postal services to increase revenue and 
customer loyalty? And anybody can take a shot at it. Ms. 
Goldway.
    Mr. Bernstock. Sure. I think, Congressman Clay, that 
there's a balance between driving down costs and growing 
revenue. And I think the tension starts with the fact that, 
once again this year, we had $6 billion in cost savings. And we 
did a little bit of research. We think that's the single 
largest cost savings by any company in this country possibly 
ever. Yet we lost $7 billion.
    So all the revenue-generating initiatives that we're 
pursuing within the law clearly contribute. But when you have 
is a loss of that magnitude you can't get back to a stable 
Postal Service or Postal Service without some changes in the 
cost-saving initiatives that are not within the law at the 
current time.
    Mr. Clay. Has there been any effort to strengthen these 
services, such as first-class mail?
    Mr. Bernstock. At the current time, we're running a fall 
first-class incentive program; and the impact of that we 
estimate will be $50 million, $100 million in incremental 
revenue, in that ballpark. But, once again, in comparison to a 
$7 billion loss, it is relatively modest in the impact.
    So there are things we're doing. Elasticity, as Chairman 
Goldway pointed out, is increasing, both from consumers and 
commercial mailers. And so we're fighting a very, very 
difficult uphill battle.
    Mr. Clay. So I guess that begs the question then how can 
the USPS carve out their own niche in the postal market and 
continue to differentiate itself from other mail services?
    Mr. Bernstock. Well, as many of the panelists have said and 
as we've heard, we have an enormous number of strengths. Be it 
our infrastructure, our retail infrastructure, our delivery 
capabilities, or our logistics capability, the fact that we're 
No. 1 in trust, all of the strengths that we have should be 
leveraged. What we need to do is have freedom to expand our 
model as this country changes and build on the strengths that 
we have.
    Mr. Clay. You know, you cite examples in international 
markets as evidence that USPS should include other services for 
customers. How successful have these efforts been 
internationally? Do they turn a profit or do they break even? 
Perhaps Mr. Coughlin can answer.
    Mr. Coughlin. I will comment on it. I do list in my written 
statement some of the results they've had. Some of these posts 
have generated as much as 75 percent of their total revenues 
from non-postal sources.
    Deutsche Post in Germany is an example. The Dutch Postal 
Service, TNT, is generating 60 percent. But they have 
undertaken major, major diversification.
    The Germans, for example, have bought heavily into the 
logistics business. They have made several multi-billion Euro 
acquisitions to get into that business. They have had, to be 
perfectly honest, although they show profits for the most part, 
they have, as Chairman Goldway said, they are having a little 
trouble right now with the fall in mail. And the interesting 
thing about the Germans is they are getting 75 percent of their 
revenues from non-postal sources, but they are getting 50 
percent or more of their profits from mail. So mail is still a 
pretty good business for those people.
    So to call them a success, yeah, there are some success 
stories, but some are not doing quite as well as they look like 
they are on their surface.
    Mr. Clay. Thank you, Mr. Chairman. I yield back.
    Mr. Lynch. I thank the gentleman.
    One of the things that I worry about, and I yield myself 5 
minutes, is that adage that, just like our military, we tend to 
fight the last war.
    Now the things that we're looking at, as Mr. Connolly has 
described as being nibbling around the edges, I look out there 
and you look at some of these other countries--as Mr. Coughlin 
has noted, Sweden has a system where you actually click on and 
you see your mail. You can actually read some of it, you know, 
the pamphlets or brochures or whatever that come to your house. 
You can click on whether you want to have it delivered or not. 
And that's a great environmental benefit I think in the long 
run, but it will drop the volume of mail, but I think that's 
really the future.
    So I don't want to get caught up in addressing the things 
that we see now, but I'd rather us try to anticipate, as a 
commercial business would, what's coming down the line. I also 
see some of even our domestic models like Earth Class Mail and 
Zumbox, where it's a similar Internet-based or Internet-
centered system. And I just think we have to really, really 
think long term here.
    There is a book out--it's an older book--The World is Flat 
by Tom Friedman. And he has one chapter there on UPS--I know my 
friends from UPS are in the back here. But he gave the example 
of Toshiba computer company. They had a warranty on their 
laptop computers where, if anything happened, you just mail it 
back to Japan. They would fix it and send it back to you within 
a certain amount of days.
    Well, UPS, as it describes in this story, turned that all 
around, to the fact where, instead of the user just sending 
their laptop to Atlanta and then off to Japan to be fixed, UPS 
put their own people to work repairing those computers. And 
that is totally outside of the delivery business. They now 
became computer fixers, and they would save the Toshiba company 
a ton of money and make their customers happier.
    So, you know, it's that type of innovation and just the 
transformative change that we need in the Postal Service. And I 
know it is frightening, and I know that bureaucracies are even 
more resistant to change, but I just see, with the drop-off in 
volume, what we see coming down the line.
    I see the number of retirees we have in our postal system. 
We have to have a business model that allows us to continue to 
provide those benefits to retirees. So we're going to fall off 
a cliff here if we don't get our business model matched up with 
the realities that we have here.
    I know there may be some short-term disruption here, but we 
just encourage you to take that chance, to think big. This is a 
big problem, so the response here has to be, as I say, 
transformative. We have to look at this in a different way than 
just nibbling around the edges and trying to bring in a few 
more million in in revenues.
    So, again, you know, do you have anything like that, some 
big moves that would help us take a bite out of the deficit 
that we see?
    Mr. Bernstock. Chairman Lynch, I speak for the Postal 
Service; and we fully agree with what you're saying. We are 5 
percent of the world's population and 40 percent of the world's 
mail. We have been the world's innovator in hard-copy mail, and 
what's frustrating is we believe we have the same kind of role 
to play within digital communications.
    It is hard for us to look at Sweden leading the United 
States. We believe we should be out in front of the technology 
changes that are occurring, not for any other reason than to 
foster commerce and to be a market maker and to have the result 
be that the United States is a leader in this transformation to 
digital products and that we offer hybrid products.
    So I think, with these kind of transformational moves in 
concert with the cost savings we've talked about, we can have a 
thriving, growing Postal Service.
    Ms. Goldway. I'd just like to add the Postal Service has 
presented hybrid mail products to us in the past, and we've 
approved them. Mailing online and post TCS were both approved 
by the Postal Regulatory Commission, Postal Rate Commission at 
the time. It was the Postal Service that found that they could 
not implement those programs. They weren't up to the task.
    Now if there is some partnership that they can develop I 
think the Postal Regulatory Commission would certainly review 
that. I'm not sure that there is any need for any legislation. 
We'd be interested in looking at those issues.
    Mr. Lynch. Yeah, I'm just thinking of it this way. You see, 
what Wal-Mart and these Stop and Shop and Piggly Wiggly and 
Harris Teeter, these big box stores, have done is they didn't 
try to recreate their own bank. They didn't try to recreate 
their own mail facility. They brought the Post Office in. They 
brought the banks in.
    When you think about our scale, as Mr. Coughlin has 
outlined, that's also an advantage if we use it the right way, 
use that as leverage. And we have 37,000 post offices out 
there, and so we own the footprint. And what we put in there--
and it may be--I'm not suggesting go out there and start the 
U.S. postal bank, but can we bring in other services within the 
footprint of the postal facility to offer more than what we're 
offering right now and have that entity, that private entity, 
pay some of the freight there, since we already own a lot of 
the facilities? Although I'm surprised to see how much we're 
still leasing. I don't know. I'm trying to multiply our 
competitive advantage where we can.
    Mr. Bernstock.
    Mr. Bernstock. Yeah, Chairman Lynch, the greeting card test 
we're running now is a very good indicator of what you're 
talking about. Before we went out and launched that, we went to 
consumers and the feedback was that, yes, they would be very 
pleased to have greeting cards offered in the Postal Service. 
They thought it was appropriate and would expect to purchase 
them there. So there is a whole range of other products that we 
could sell that we actually think would grow the market and our 
customers would want those.
    In addition, beyond passports, we think there is a series 
of transactional activities we can be involved in. So I would 
agree there is a lot more we can do with the facilities that we 
have.
    Mr. Lynch. Yeah. I appreciate that. I know change is 
difficult----
    Mr. Bernstock. Some would require changes in the law. Some 
would not.
    Mr. Lynch. We're happy to work with you and with the postal 
employees as well to see what we can do.
    The Chair recognizes the gentleman from Illinois, Mr. 
Davis.
    Mr. Davis. Thank you, Mr. Chairman; and I certainly agree 
that we've got to think big. I think part of the problem, 
though, is we don't think we'll like the answers that we get. 
It's kind of like everybody wants to go to heaven, but nobody 
wants to die.
    We generate at one location, but then we spend at another 
one. I mean, we generate as people come in to purchase whatever 
it is that they are purchasing, but the output is as we 
maintain or try to maintain the concept of universal service.
    I know it is difficult to receive a piece of first-class 
mail, for example, if you live out on P.O. Box, like I used to 
live, you know, where the carrier would go 5 miles before 
delivering another piece of mail. Well, I don't know how much 
you generate from the Post Office as you sell whatever product 
you are selling.
    It seems to me that we've had some experiences and continue 
to have some experiences with bailouts. We've put resources 
into places. I think we have to do some serious thinking in 
relationship to what it is that we expect.
    I rely don't want to have cancer and have somebody tell me 
I've got a sore. I don't want to have pneumonia and somebody 
have me believing or thinking that I've just got a cough, I've 
got a little cold.
    So I agree that there are no shortcuts or easy routes or 
easy ways home. But I do think we're going to have to go for 
the big picture in terms of reevaluating our thinking relative 
to what it is that we want from our Postal Service.
    I never will forget. A guy made a speech when I was in the 
eighth grade. He came to our school. He said, I want you to ask 
yourselves three questions: one, who am I; two, what do I want; 
and, three, how do I propose to get it. And I think we're going 
to have to ask ourselves those three questions about our Postal 
Service.
    I'm a staunch union supporter, always have been, always 
will be. I believe that people should get the maximum of what 
can be received in terms of quality of life and expectation, 
but I also believe that there has to be realistic thinking in 
relationship to how do we manage a way to do that.
    If anyone would respond, I would appreciate it. If not, Mr. 
Chairman, I thank you very much for the opportunity.
    Mr. Lynch. Have they just signaled votes? They have.
    What I would like to do is recognize the gentleman from 
Virginia, Mr. Connolly, for 5 minutes.
    Mr. Connolly. I thank the Chair.
    Mr. Coughlin, do you believe that the USPS has a culture of 
innovation? And, if not, why not?
    Mr. Coughlin. I think it has pockets of innovation.
    Mr. Connolly. I'm going to ask every one please to speak 
into the microphone. I cannot hear you, believe it or not, up 
here.
    Mr. Coughlin. I believe there are pockets of innovation 
within the Postal Service. I do believe that there are some 
conditions that exist. And I will say I don't think it's unique 
to the Postal Service. I think it's a characteristic of 
government generally that discourages risk taking and 
discourages innovation and it doesn't generate an environment 
where innovation is expected on the part of employees.
    Mr. Connolly. Or rewarded.
    Mr. Coughlin. I'm sorry?
    Mr. Connolly. Or rewarded, perhaps.
    Mr. Coughlin. Well, that's a difficult issue as well.
    I mean, I spent 32 years there. I think it is the greatest 
work force in the world. There are some enormously creative 
people there, and they are going to need all of that creativity 
as they go forward. I do believe that Jack Potter and his team 
have done a terrific job in terms of generating an environment 
that encourages people to come forward with new ideas, and the 
move of bringing in people like Bob Bernstock and some of his 
colleagues to help support the traditional postal thinking has 
to help in the long run.
    And want I go back to the chairman's comments earlier about 
the future. I wish I had an answer to what that business model 
ought to be. I don't right now. I do think that these things 
evolve over time.
    One of the things I mentioned in my testimony was I believe 
one of the possibilities for the Postal Service down the road 
is in this nexus between their geographic physical presence and 
the communications technologies that are out there. I think 
that's some of what, for example, the Swedish example you 
mentioned gets to. So, yes and no is the answer to your 
question about innovation in the Postal Service.
    Mr. Connolly. I thank you.
    Ms. Goldway, you intriguingly noted that the Postal Service 
fleet is one of the largest in the country and that in some 
ways, given the route structure, it is tailor made for 
electrification and sort of talking about innovation, cutting-
edge green technology being deployed. Could you expand a little 
bit on that? Have we done any studies to know how many 
CO2 and noxious gases could be avoided, what the 
energy savings can be?
    Ms. Goldway. This is an issue I've entered into just in 
January of this year; and I've discovered that there is a whole 
range of expertise, far greater than mine. I do have many 
studies that I can forward to you about this.
    It appears that the Postal Service is ideally suited for 
transition to an electric vehicle fleet. Its current vehicles 
get about 8 to 12 miles to the gallon, and they are all at 
least 18 years old.
    Unfortunately, given the financial reality of the Postal 
Service, they don't have the capital to buy new vehicles; and I 
think it would be worthwhile to find funds in some of the other 
subsidies that are provided through the government and have 
those directed to the Postal Service so that they could invest 
in new vehicles, reduce some of their overhead, and lead the 
country in a national transformation.
    Mr. Connolly. Let me ask you, because I think we're on to 
something here, how many vehicles in the fleet?
    Ms. Goldway. 150,000. Although I think it may be 140,000 
now. They've reduced them a bit.
    Mr. Connolly. Any idea what it would cost to replace them 
with electric vehicles?
    Ms. Goldway. What I think the thinking is--and I believe 
that Congressman Serrano is working on some legislation--is to 
develop a program so that you phase in over 3 to 5 years enough 
vehicles with enough testing so that you know exactly what to 
buy. But it is billions of dollars that are needed.
    Mr. Connolly. My time is about to expire, but I just want 
to pick up on your thought.
    It seems to me, Mr. Chairman, again, both Mr. Coughlin, 
where he was pointing us to, we legislatively can look at how 
we can help foster a more innovative culture or we may be part 
of the problem.
    Second, with respect to what Chairwoman Goldway is talking 
about, we were willing to put billions into Cash for Clunkers. 
Are we willing to invest into our own Postal Service to give it 
that cutting edge, innovative delivery of service to help make 
it more competitive, to give it the capital it lacks right now 
and do a good thing for the environment and the auto industry 
while we're at it?
    Ms. Goldway. I think all of us at the table would support 
that effort and work with you to make sure that happens.
    Mr. Connolly. Thank you so much.
    Mr. Lynch. I thank the gentleman.
    I think this panel has suffered enough. We've actually got 
votes on the floor, but I did want to thank you for your 
willingness to come before the subcommittee and offer your 
thoughts and suggestions. We appreciate that. You're on the 
ground level where you can offer unique perspective.
    I will hold the record open. I know there were several 
hearings going on this morning, so my Republican colleagues 
could not all attend, so I leave it open for their comments as 
well.
    But I want to thank you for your willingness to come 
forward and to help the committee with its work. Thank you very 
much. I bid you good day.
    [Whereupon, at 11:43 a.m., the subcommittee was adjourned.]
    [The prepared statement of Hon. Dennis J. Kucinich 
follows:]

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