    [Senate Hearing 112-261]
    [From the U.S. Government Publishing Office]

                                                            S. Hrg. 112-261

              NOMINATIONS OF HON. MARK D. ACTON AND ROBERT G. TAUB

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

                                    HEARING

                                   before the

                                  COMMITTEE ON
                   HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS
                              UNITED STATES SENATE

                          ONE HUNDRED TWELFTH CONGRESS

                                 FIRST SESSION

                                   __________

          NOMINATIONS OF HON. MARK D. ACTON AND ROBERT G. TAUB TO BE
                  COMMISSIONERS, POSTAL REGULATORY COMMISSION

                                 JULY 28, 2011

                                   __________

            Available via the World Wide Web: http://www.fdsys.gov/

                           Printed for the use of the
            Committee on Homeland Security and Governmental Affairs

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            COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS

                   JOSEPH I. LIEBERMAN, Connecticut, Chairman
    CARL LEVIN, Michigan                 SUSAN M. COLLINS, Maine
    DANIEL K. AKAKA, Hawaii              TOM COBURN, Oklahoma
    THOMAS R. CARPER, Delaware           SCOTT P. BROWN, Massachusetts
    MARK L. PRYOR, Arkansas              JOHN McCAIN, Arizona
    MARY L. LANDRIEU, Louisiana          RON JOHNSON, Wisconsin
    CLAIRE McCASKILL, Missouri           ROB PORTMAN, Ohio
    JON TESTER, Montana                  RAND PAUL, Kentucky
    MARK BEGICH, Alaska                  JERRY MORAN, Kansas

                      Michael L. Alexander, Staff Director
                   Kristine V. Lam, Professional Staff Member
     John P. Kilvington, Staff Director, Subcommittee on Federal Financial
    Management, Government Information, Federal Services, and International
                                    Security
                   Nicholas A. Rossi, Minority Staff Director
                       Jennifer L. Tarr, Minority Counsel
      William H. Wright, Minority Staff Director, Subcommittee on Federal
                                   Financial
    Management, Government Information, Federal Services, and International
                                    Security
                      Trina Driessnack Tyrer, Chief Clerk
                     Patricia R. Hogan, Publications Clerk
                        Laura W. Kilbride, Hearing Clerk

                                C O N T E N T S

                                     ------
    Opening statement:
                                                                       Page
        Senator Carper...............................................     1
        Senator Brown................................................     3
        Senator Tester...............................................    12
        Senator Pryor................................................    15
        Senator Begich...............................................    18
    Prepared statements:
        Senator Carper...............................................    37
        Senator Brown................................................    39

                                   WITNESSES
                            Thursday, July 28, 2011

    Hon. John M. McHugh, Secretary, U.S. Army........................     3
    Hon. George A. Omas, Former Chairman of the Postal Rate
      Commission.....................................................     5
    Robert G. Taub to be a Commissioner, Postal Regulatory Commission     6
    Hon. Mark D. Acton to be a Commissioner, Postal Regulatory
      Commission.....................................................     8

                         Alphabetical List of Witnesses

    Acton, Hon. Mark D.:
        Testimony....................................................     8
        Prepared statement...........................................    70
        Biographical and financial information.......................    71
        Letter from the Office of Government Ethics..................    79
        Responses to pre-hearing questions...........................    80
    McHugh, Hon. John M.:
        Testimony....................................................     3
        Prepared statement...........................................    42
    Omas, Hon. George A.:
        Testimony....................................................     5
    Taub, Robert G.:
        Testimony....................................................     6
        Prepared statement...........................................    44
        Biographical and financial information.......................    46
        Letter from the Office of Government Ethics..................    58
        Responses to pre-hearing questions...........................    59

                                    APPENDIX

    Document for the Record submitted by Senator Begich..............    40

              NOMINATIONS OF HON. MARK D. ACTON AND ROBERT G. TAUB

                                  ----------

                            THURSDAY, JULY 28, 2011

                                         U.S. Senate,
                               Committee on Homeland Security
                                      and Governmental Affairs,
                                                        Washington, DC.
        The Committee met, pursuant to notice, at 2:35 p.m., in
    room SD-342, Dirksen Senate Office Building, Hon. Thomas R.
    Carper, presiding.
        Present: Senators Carper, Pryor, Tester, Begich, and Brown.

                  OPENING STATEMENT OF SENATOR CARPER

        Senator Carper. This hearing will come to order.
        We want to welcome our witnesses, our introducers, and
    everyone in the audience. If there are any family members that
    you would like to introduce, you are welcome to do that.
        Today, we are going to be considering two nominations to
    fill openings on the Postal Regulatory Commission, Mark Acton
    and Robert Taub.
        As my colleagues know and I am sure much of our audience
    and our nominees know, this is a very challenging time for the
    Postal Service and this country. We are a few months away from
    the end of the fiscal year, and the Postal Service is
    projecting further record losses, perhaps more than $8 billion.
        Postal Service management has already stopped making its
    share of its employees' Federal Employees Retirement System
    (FERS) pension payments. Absent a change in the law, payments
    due in September and October related to retiree health and
    workers' compensation could be in jeopardy due to a serious
    cash crisis at the Postal Service. It is not out of the
    question that the Postal Service's ability to meet its payroll
    and, as a result, to continue operations might be in danger, as
    well, once the new fiscal year starts in October. Other than
    that, everything is pretty good. [Laughter.]
        Unfortunately, things are not projected to get a whole lot
    better. Just over a year ago, our former Postmaster General
    Jack Potter announced the findings from a group of three
    respected outside consultants showing that the Postal Service's
    financial condition is likely to continue to erode in the
    coming years. Those consultants found that without major
    change, the Postal Service would run up cumulative deficits of
    more than $230 billion by 2020.
        The Postal Service, in partnership with its employees, is
    starting to chip away at that number, but more and difficult
    change will need to occur in both the near and the long term if
    we are going to set things right. We will need to work quickly
    to start making that change happen. Even if the Postal Service
    was able to somehow make it through the financial land mines it
    will encounter in the coming months, fiscal year 2012 is
    shaping up to be little short of a disaster for the Postal
    Service and for all the customers and businesses that rely on
    it.
        Even during the slow and halting economic recovery that our
    country is experiencing today, mail volume has been falling,
    particularly First Class mail volume. This likely means that
    the electronic diversion of the mail is happening at an even
    quicker rate than any of us might have imagined. If this trend
    continues or if it should worsen, the Postal Service will
    almost certainly run out of cash and borrowing authority and be
    forced to shut its doors no later than next summer. We cannot
    afford to let that happen in this country.
        Millions of jobs in a wide variety of industries depend on
    a healthy Postal Service. We owe it to the men and women who
    hold those jobs to take whatever steps might be necessary to
    ensure that the Postal Service continues to remain solvent. We
    have to take those steps even if they may prove, at least in
    the near term, unpopular.
        Now, I know that it is Congress and the Postal Service that
    will ultimately need to take those steps, not the Postal
    Regulatory Commission (PRC), but I wanted to mention all this
    at this hearing because it is essential that anyone who serves
    on the Commission or is thinking of joining the Commission be
    mindful of the current crisis and the impact their decisions as
    commissioners could have in either improving or worsening it.
        I have not made a secret of the fact that I have some
    concerns about the Commission and some of its recent work. It
    was troubling to me, for example, when the Commission's Chair
    expressed her views on the Postal Service's proposal to
    eliminate Saturday delivery before that proposal had even gone
    to the Commission for examination. It was even more troubling
    when the Commission's report on the advisability of the Postal
    Service's proposal did not appear for about a year and, in a
    lot of ways, created more questions than it answered. On top of
    that, two recent Commission decisions on rate making and the
    Postal Service's licensing authority were recently remanded to
    the Commission by the courts. In one of those cases, the courts
    even criticized the Commission for doing sloppy work.
        At a time like this, we need to do better. All of us need
    to do better, and that includes me. We need to do a better job
    here in Congress in finding consensus around the changes in law
    that are necessary to help the Postal Service survive, and the
    Postal Regulatory Commission can probably do a better job, too.
        I look forward to exploring with our witnesses today how
    they would contribute to the Commission's work at this
    difficult time, and I also want to explore how they would
    balance the competing demands placed on the Commission to weigh
    both customer service needs and the Postal Service's financial
    challenges.
        With that having been said, I am going to close my remarks
    at this point and turn to Senator Brown, the Ranking Republican
    of my Subommittee on Federal Financial Management, Government
    Information, Federal Services, and International Security, to
    ask him to make any comments he might like to make.

                 OPENING STATEMENT OF SENATOR BROWN \1\

        Senator Brown. In the interest of time, since I would like
    to hear the nominees who are here testifying, I will submit my
    comments for the record.\1\ Thank you.
    ---------------------------------------------------------------------------
        \1\ The prepared statement of Senator Brown appears in the Appendix
    on page 39.
    ---------------------------------------------------------------------------
        Senator Carper. Thanks so much. Thanks for being here.
        Before we start our questions, we have a couple of
    distinguished guests to introduce our witnesses, and we will
    start with John McHugh, a former colleague of mine in the House
    of Representatives, a fellow who is probably regarded as the
    foremost Representative with knowledge of the Postal Service as
    anyone that has served, certainly in the time that I have been
    here. He is now the Secretary of the Army. I had the pleasure
    of meeting last night with your boss, Leon Panetta, who was
    also an old colleague of mine in the House. You are going to be
    introducing Robert Taub, so please go ahead with your
    introduction and then we will yield to Mr. Omas. But again,
    thank you, Mr. Secretary. Thank you so much, and thank you for
    your continued service to our country.

       TESTIMONY OF HON. JOHN M. MCHUGH,\2\ SECRETARY, U.S. ARMY

        Secretary McHugh. Well, thank you, Mr. Chairman, and let me
    tell both you and the distinguished Ranking Member, Senator
    Brown, how much I truly appreciate the opportunity to be here
    today to appear before this distinguished Committee on behalf
    of my good friend and long-term colleague and, I would add,
    partner, Robert Taub.
    ---------------------------------------------------------------------------
        \2\ The prepared statement of Secretary McHugh appears in the
    Appendix on page 42.
    ---------------------------------------------------------------------------
        I would be remiss, gentlemen, if I did not also gratefully
    acknowledge the presence of Mark Acton, someone who has been in
    the trenches and has been working these issues, and, as a
    member of the Commission and to introduce him, my good friend
    George Omas, who spent many years in the House of
    Representatives on Postal Service issues and other matters and
    did so after his time in the House, as well. So I am sure they
    will provide you with some very provocative thoughts on these
    very important issues, as you said in your opening statement.
        I am particularly pleased because, as I understand it, Mr.
    Chairman, under the protocol, I am neither expected to face
    questions nor submit responses for the record, which, compared
    to my other congressional appearances----
        Senator Carper. No, we have questions. [Laughter.]
        Secretary McHugh. You will have to catch me on the way out.
    [Laughter.]
        But that is a good day for me and probably for you, as
    well. But I would note, as you so graciously noted, I am here
    today principally in my position as the 21st Secretary of the
    Army, but I think it is very relevant to take a moment to
    reflect on the 17 years I spent as a member of the House of
    Representatives and dwell a bit on what I think is a shared
    experience between members of both Houses. Whether it is on
    national talk shows or local television, members of the Senate
    and the House are the faces and the voices of those we serve.
    It is a life that we all live in the public eye with demanding
    schedules, bad hours, writing laws, meeting in committees, long
    sessions in Washington, longer commutes back home. And every
    few years, they ask you to campaign, to go out and raise a lot
    of money, with just incredible strains on time and attention.
        But we choose to do that, living in the public eye. We are
    blessed, though, to have around us individuals who do not seek
    the attention or the praise, who at the same time keep our
    schedules and meet our demands and whose industry and counsel,
    I would argue, are absolutely essential to all that we do.
    While members of Congress are the face and the voice, the
    individuals behind us are often the heart and the soul of what
    we are able to do.
        And during my time in the House and later in the Pentagon,
    I have been fortunate--indeed, I have been blessed--to have
    just such a person working for me, working with me, for now the
    better part of 17 years. And as you noted, Mr. Chairman, while
    in Congress as my Chief of Staff, Mr. Taub was instrumental in
    assisting me better overcome the daily rigors of congressional
    life and, more to the point for your consideration today, was a
    key figure in the advancement of postal reform legislation that
    in the House, I had the opportunity to work on for the better
    part of 10 years as chairman of the Postal Service
    Subcommittee, and I guess the fact that it took us 10 years
    speaks to my incompetence.
        But nevertheless, on the day we voted on that bill, I told
    my colleagues during floor proceedings that Mr. Taub was, as I
    put it, the intellectual and spiritual glue that held the
    effort together. And truly, to my amazement, he was always
    willing and, frankly, even anxious to hold one more meeting,
    make one more effort to advance reform. When others saw
    failure, he saw a challenge. When others lost hope, he remained
    focused. And when others became angry, including me often, he
    remained calm. In short, he is a truly remarkable man.
        I said back then and I want to repeat to you today that as
    proud as I was of his work and his steadfastness, I am prouder
    still that in my heart, I consider him a friend. That
    friendship has endured and has grown since Mr. Taub joined the
    committee staff back in 1995, continuing a career in public
    service that first began when he was a student at Gloversville
    High School, when he would go to work at his State
    Assemblyman's office after classes got out--and I have it on
    good authority he did it for free--I would hope he would not
    have to meet his next challenge in that way, but it is another
    thing Mr. Taub and I have in common. We are both from small
    towns in upstate New York. Of course, where I live now in
    Pierrepont Manor, it has a population of about 1,600.
    Gloversville, where Mr. Taub's home town is, has about 15,000
    residents, so we used to call that the big city.
        But I know he was raised in an environment that cherishes
    loyalty, respects hard work, and values achievement. I want to
    be honest. It is very difficult for me to lose him. He came
    with me to the Pentagon as a Special Assistant when I was
    confirmed as the Secretary, and I have relied so deeply upon
    his friendship, his common sense, and his good judgment. But I
    know that his commitment to the postal regulation environment,
    his steady leadership, and his calm resolve will serve the
    Postal Service, all of you in this great Congress, and our
    Nation so very well.
        America's first Postmaster General, Benjamin Franklin,
    observed in his famous Poor Richard's Almanac that ``a good
    example is the best sermon.'' Mr. Taub continues to set a good
    example every day in everything he does. I am grateful for
    President Obama's wise nomination of this great leader, and I
    would, gentlemen, respectfully urge your favorable
    consideration of his nomination.
        With that, I yield back.
        Senator Carper. Well, thank you very much. We hear a lot of
    introductions here. That was truly a lovely introduction. Thank
    you. If he is half the man that you say he is, we are lucky to
    have him.
        Secretary McHugh. He is all of it.
        Senator Carper. Good.
        I know your schedule is busy, and whenever you need to
    leave, feel free to do so.
        Secretary McHugh. I will respectfully wait for Mr. Omas.
        Senator Carper. Very good.
        Our next introducer is George Omas. He was a former
    chairman of the Postal Rate Commission. He knows something
    about that Commission and the kind of men and women that we
    need to serve. Mr. Omas, even though you are a former chairman,
    we are delighted that you are here and look forward to hear
    what you have to say about Mr. Acton. Thank you. Welcome.

    TESTIMONY OF HON. GEORGE A. OMAS, FORMER CHAIRMAN OF THE POSTAL
                            RATE COMMISSION

        Mr. Omas. Thank you, Mr. Chairman and Members of the
    Committee. It is indeed an honor to once again appear before
    this panel. And I will say, it is going to be very difficult to
    follow Congressman McHugh after that glowing remark, but I will
    try. I served as chairman from November 2001 until December
    2006 of the Postal Rate Commission, which was, as you know, the
    predecessor to the Postal Regulatory Commission. I really do
    take some pride in believing that during my time at the agency,
    I contributed toward making many key decisions that benefited
    the greater interest of the Postal Service and the postal
    community as a whole.
        I am here today to say that selecting your nominee, Mr.
    Acton, as my special assistant when I became chairman is
    certainly among the best choices I made while I was chairman. I
    have known Mr. Acton for more than 25 years, and I have known
    him to be a man of honor and integrity. I have always been
    impressed that once Mr. Acton becomes a part of a staff for any
    endeavor, he diligently sets out to learn the principles, and
    he did that in trying to learn the principal regulations and
    rulemaking because when he came to the Commission, I think all
    he knew was the name of the Commission. But in his vigor to
    become a better partner with the rest of his colleagues at the
    Commission, he went on to earn an M.B.A. and to prepare himself
    for the role, and for the past 5 years, I feel he has served
    with distinction as a member of the Commission, and I am
    pleased that he has decided to continue to secure a second term
    at the Commission.
        Mr. Chairman and Members of the Committee, I am delighted
    to introduce Mark Acton to you and to endorse his second term.
    Thank you.
        Senator Carper. Mr. Omas, very nice to see you. Thank you
    for those kind words about Mr. Acton.
        Mr. Secretary, so long.
        Secretary McHugh. Thank you, Mr. Chairman.
        Senator Carper. Take care. As we say in the Navy, fair
    winds and a following sea.
        Mr. Taub, would you like to lead off? Your entire statement
    will be made part of the record. Feel free to introduce any
    special guests or family members that you have with you. You
    are recognized at this time.

     TESTIMONY OF ROBERT G. TAUB \1\ TO BE A COMMISSIONER, POSTAL
                         REGULATORY COMMISSION

        Mr. Taub. Mr. Chairman, Senator Brown, distinguished
    Members of the Committee, I want to thank you for the
    opportunity to appear before you today and for your
    consideration of my qualifications to be a Commissioner of the
    Postal Regulatory Commission. I would like to thank President
    Obama for the opportunity he has afforded me through this
    nomination. I am honored by his trust. I am pleased that many
    of my family, friends, and colleagues are here and am grateful
    for their support.
    ---------------------------------------------------------------------------
        \1\ The prepared statement of Mr. Taub appears in the Appendix on
    page 44.
    ---------------------------------------------------------------------------
        Senator Carper. Where are they sitting?
        Mr. Taub. Well, while I cannot acknowledge them all, I
    would like to introduce my family.
        Senator Carper. Sure.
        Mr. Taub. My dear wife, Cynthia Taub.
        Senator Carper. Which one is your wife?
        Mr. Taub. At the end. Our daughter, Hannah Taub.
        Senator Carper. Hannah, welcome.
        Mr. Taub. Her twin sister, Madeline, is at camp and cannot
    enjoy our Constitution in action today.
        Senator Carper. Are they identical twins?
        Mr. Taub. Fraternal.
        Senator Carper. Very good.
        Mr. Taub. My sister and brother, who traveled a distance to
    be here, Beth Laddin and Bill Taub----
        Senator Carper. Where did they come from?
        Mr. Taub. Albany, New York, and Cherry Hill, New Jersey.
        Senator Carper. I have a son living in Albany now, so keep
    an eye on him. [Laughter.]
        Welcome all.
        Mr. Taub. Like good families everywhere, all have lent me
    love, encouragement, and a good dose of understanding. While
    our parents could not be physically present, I feel their
    support with us today, as well.
        Finally, a special thank you to Secretary of the Army John
    McHugh for his kind introduction. For close to two decades, I
    have had the privilege of working with one of the finest
    officials I have ever met in my 25 years of public service. If
    confirmed, I know I will succeed in the challenges of being a
    Commissioner if I can bring even half the measure of dedication
    to duty and thoughtful analysis that I have seen in Secretary
    McHugh these many years.
        We started working together in January 1995, when he became
    Chairman of the newly created House Postal Service
    Subcommittee, and I had joined the staff after 8 years at the
    Government Accountability Office. Neither of us could
    anticipate that the journey of modernizing our Nation's postal
    sector would take so long or be so challenging.
        In addition to the numerous postal issues we worked on for
    15 years, most notably in passage of the Postal Accountability
    and Enhancement Act, I subsequently had the honor of serving as
    his Chief of Staff for a decade, helping him represent that
    very rural area of Northern New York State where we were both
    born and raised. And for the past 2 years, I have supported him
    at the Army as he confronts the challenges of managing that
    Department in the midst of tightening budgets concurrent with a
    decade of war. So, deep thanks to my boss, my mentor, and my
    friend, Army Secretary John McHugh.
        Last month, the Army celebrated its 236th birthday since
    its founding in 1775. Another institution as venerable as the
    U.S. Army also marked its 236th birthday this year, the U.S.
    Postal Service. Indeed, almost to the day of this hearing, it
    was on July 26, 1775, that the Continental Congress appointed
    Benjamin Franklin as our Nation's first Postmaster General. For
    236 years, this is a service that American people and American
    businesses alike have come and grown to expect. Universal
    service at a uniform price, no questions asked. Very few in
    this country go to his or her mailbox or his or her local post
    office wondering if the mail will be there. It is always there.
    It has always been there. But the true question, the question
    confronting our Nation, is will the mail always be there?
        I want to assure this Committee that I appear here before
    you today with few delusions as to the difficulties that lie
    ahead. I believe I have a clear understanding of the serious
    and numerous challenges that face America's postal system. As
    you all know well, the mail stream of today has been diminished
    by electronic means of communication that replace mail. They
    replace stamps. And, thus, they replace the revenues necessary
    to operate our key mail delivery system. Some may even suggest
    that the time of the Postal Service has passed. But the fact
    is, for all the challenges the Postal Service of the 21st
    Century faces, it still retains an integral place as a key cog
    in how American businesses conduct their affairs and how
    Americans all across this land communicate.
        The U.S. postal and delivery sector represents a $1-
    trillion-a-year industry with 8 million jobs, making it vital
    to our economy. Postal marketers speak of the proverbial ``mail
    moment,'' that instant of receiving and opening mail that holds
    special meaning. And despite the immediacy of email or Skype,
    take one look at the men and women in the military and their
    families stationed around the planet when they get that hard
    copy letter or packet.
        However, the Postal Service is in a serious financial
    crisis. For the Postal Service to continue to be self-financing
    may require a restructuring of its statutory and regulatory
    framework to reflect business and consumers' changing use of
    the mail. I am aware that the Postal Regulatory Commission is
    now conducting its 5-year review of the law with
    recommendations to improve it.
        If confirmed, I would welcome the opportunity to focus my
    executive and management skills on ensuring transparency and
    accountability of the Postal Service and fostering a vital and
    efficient universal mail system. I would bring to the job 25
    years of public service achievement, and I pledge to work with
    all stakeholders to address the current difficulties. There are
    no easy answers to these challenges, but answer, we must. And I
    promise you, if confirmed, my first priority will be, along
    with this Committee, the Congress, the President of the United
    States, and, of course, the other Commissioners, to engage in a
    constant search for the discovery and implementation of
    solutions.
        I am truly honored to be considered. Thank you.
        Senator Carper. Thank you, Mr. Taub. Mr. Acton, welcome.
    Please proceed.

       TESTIMONY OF HON. MARK D. ACTON \1\ TO BE A COMMISSIONER,
                      POSTAL REGULATORY COMMISSION

        Mr. Acton. Thank you, Mr. Chairman and Members of the
    Committee. I am honored to be with you today, and I thank you
    for holding this hearing to consider my nomination as a Postal
    Regulatory Commissioner.
    ---------------------------------------------------------------------------
        \1\ The prepared statement of Mr. Acton appears in the Appendix on
    page 70.
    ---------------------------------------------------------------------------
        I want to thank President Obama for his confidence in me
    and for the honor of nominating me for this important
    appointment.
        I am most grateful for the support of our Minority Leader
    and my home State Senator, Mitch McConnell. My thanks, too, to
    the Committee staff for their expert guidance. I would also
    like to acknowledge the loving support of my partner, John
    Channing Wickham, my family, and my friends.
        I want to make special mention today of my fellow
    Commissioners, Chairman Ruth Goldway, Commissioner Nancy
    Langley, and Commissioner Tony Hammond.
        I am fortunate to have spent 4 years on staff at the former
    Postal Rate Commission assisting the agency chief, Chairman
    Omas, in administering all PRC operations in the past 5 years,
    as first a Postal Rate Commissioner and now a Postal Regulatory
    Commissioner.
        To the employees of the PRC, I want to offer my profound
    thanks for their dedicated hard work.
        Much has changed in the postal world during my 9 years at
    the Commission, and we find ourselves today in particularly
    challenging times. I believe that my experience affords me a
    clear appreciation of the key postal issues and a close
    familiarity with the concerns of the postal community
    stakeholders, and I am quite pleased to be considered for a
    continuing role.
        If confirmed, I pledge today to work with this Committee in
    advancing workable solutions that help to renew and ensure the
    vitality of a great American institution, the U.S. Postal
    Service.
        Mr. Chairman, I look forward to working with you and the
    other Members of this Committee, and I will be pleased to
    answer any questions.
        Senator Carper. Mr. Acton, thank you. Thanks for your
    testimony.
        Our Committee rules require that all witnesses at
    nomination hearings give their testimony under oath.
        I ask you to stand and raise your right hand.
        Do you swear the testimony you will give before this
    Committee will be the truth, the whole truth, and nothing but
    the truth, so help you, God?
        Mr. Taub. Yes, I do.
        Mr. Acton. I do.
        Senator Carper. I have three standard questions that we ask
    of all nominees, and I will pose each question and ask each of
    you to briefly respond, and we will do that three times.
        First, is there anything you are aware of in your
    background that might present a conflict of interest with the
    duties of the office to which you have been nominated?
        Mr. Taub. No, Mr. Chairman.
        Mr. Acton. No.
        Senator Carper. Do you know of anything, personal or
    otherwise, that would in any way prevent you from fully and
    honorably discharging the responsibilities of the office to
    which you have been nominated?
        Mr. Taub. No.
        Mr. Acton. No.
        Senator Carper. Do you agree without reservation to respond
    to any reasonable summons to appear and testify before any duly
    constituted committee of Congress if you are confirmed?
        Mr. Taub. Yes, I do.
        Mr. Acton. Yes, certainly.
        Senator Carper. All right. So far, so good. Senator Brown.
        Senator Brown. Thank you, Mr. Chairman.
        Senator Carper. You are welcome.
        Senator Brown. First of all, congratulations to you both
    for being nominated. I certainly look forward to your answers
    to a lot of the questions. As we know, the Postal Service is
    having difficulty, and I think you noted, Mr. Taub, what the
    challenges are. I have had people in my office, probably more
    people than I know or I can remember on a particular issue,
    advocating, wondering, and questioning where we are going and
    what are the solutions. They are the same questions we are
    asking today on where we are going on our debt and, obviously,
    our default issues.
        In a rush to bring the Postal Service into the 21st
    Century, what are your biggest concerns with ensuring that the
    Postal Service continues to provide a safety net for those left
    behind by the digital revolution? Mr. Acton.
        Mr. Acton. Thank you, Senator Brown. That concern falls
    pretty squarely under the rubric of the Universal Service
    Obligation (USO), and the regulator plays an important role in
    ensuring the integrity of the Universal Service Obligation.
    Indeed, part of the provisions of the Postal Accountability and
    Enhancement Act of 2006 (PAEA) was a mandate that the
    Commission look at the question of the Universal Service
    Obligation and suggest a definition and a framework of what
    defines the USO. We did that in a 2008 report where we put
    forth a framework of different elements and aspects that should
    be included, and part of that includes uniform price and range
    of products, accessibility, and those sorts of questions. So
    the regulator, the Postal Regulatory Commission in this
    instance, has an important role in ensuring that type of
    universal service availability.
        Senator Brown. You know, it is interesting, one of the
    suggestions that I have heard about getting the fiscal and
    financial stability of the Postal Service under control is to
    eliminate Saturday service.
        As somebody who is a consumer and user of the Postal
    Service, there are two things that I recognize. There is a cut-
    off point where we will stop using the post office if the price
    of a basic stamp gets too high. I am not quite sure what that
    is for me, but for many people, it is getting really close.
    They can do it online. They can save that 44 cents, and
    ultimately their cut-off may be 50 cents.
        It would seem that cutting Saturday delivery potentially
    would be counterproductive, whereas that seems to have the most
    opportunity to excel and expand upon because your competitors--
    FedEx, UPS, DHL--do not really have that niche. So any comments
    on that issue of the Saturday delivery and then that breaking
    point? Mr. Taub.
        Mr. Taub. Senator, the Saturday delivery issue, having it
    on the table, I think, is emblematic of the challenge we are
    facing with the Postal Service today. They lost $8.5 billion
    last year, and they are on that pace again. One of the
    requirements of the postal reform bill of 2006 was mandating
    that the Postal Service prefund its future retiree health
    benefits, and that is a very important goal. But as the
    Government Accountability Office and others have pointed out,
    given the current financial state, that should be a mandate
    that is required only to the maximum extent financially
    feasible.
        That being said, having worked on that issue a couple of
    years ago in the House with then-Congressman McHugh before he
    went to the Army, there are Congressional Budget Office (CBO)
    challenges in scoring that. And where that leaves you in the
    Postal Service, it seems, is having to look at a variety of
    other options to save money, and one of those is Saturday
    delivery. I know the Commission has looked at that and has
    raised some concerns about the impact in rural areas. So I
    think, at the end of the day, that has to be a very carefully
    considered approach. But I well understand, given the financial
    challenges of the Postal Service, that policy makers should
    have all options on the table where there can be savings.
        Senator Brown. I know that you know, probably both of you,
    that Senator Carper and Senator Collins have two competing
    bills. Do you have any comments on those bills and what your
    preference would be at all?
        Mr. Taub. Senator, I believe that the goal shared by
    Senator Collins, Senator Carper, and the folks in the House is
    everyone is trying to get to that same end game. How do we
    preserve universal service?
        One of the aspects of the postal reform bill of 2006 was to
    mandate a few studies. We did not anticipate that the financial
    situation would be such, but one of those was a Government
    Accountability Office study of the long-term business model.
    That was done in April 2010. That laid out a menu of options
    for policy makers to consider in the regulatory area,
    governance area, products, prices, and many of those ideas are
    reflected in the pending bills before the Senate.
        I think the goal is the same at the end of the day. It is a
    matter, frankly, of getting the votes and moving it forward to
    help the Postal Service.
        Senator Brown. Mr. Acton, do you believe that the Universal
    Service Obligation applies in consideration of eliminating that
    Saturday service, and if so, why?
        Mr. Acton. It is definitely a component of the USO. The
    frequency of delivery is an essential element of the Universal
    Service Obligation. It does not mean that it prohibits the
    elimination of Saturday delivery. It just means that when you
    contemplate the balance that is needed when trying to satisfy
    the USO requirements, frequency of delivery is an important
    part of that balancing.
        I would like to touch base on a couple of questions that
    you addressed to both of us earlier.
        Senator Brown. Right.
        Mr. Acton. I would echo most of what Mr. Taub just said,
    but the question of giving up Saturday delivery and the very
    unique niche that Saturday delivery is for the Postal Service
    was something that the Commission wrestled with in our advisory
    opinion, as well. In the course of our testimony, we heard
    viewpoints from both sides, and some of the most perplexing
    aspects of that decision involved very forward-thinking,
    progressive organizations who were on opposite sides of the
    issue. Netflix was fine with eliminating Saturday delivery.
    Amazon, on the other hand, wanted the addition of Sunday
    delivery.
        So it is hard to go anywhere where you can get a unanimous
    viewpoint on whether or not the elimination of Saturday
    delivery is a good or bad thing. But for me, it comes down
    eventually, in the longer term, to a cost-benefit analysis. At
    what point are the benefits that you garner from having
    Saturday delivery outweighed by the cost involved in providing
    that service, and I think that is really the crux of the issue.
        Senator Brown. Right, but what if they took the gloves off
    a little bit and let you do more in that Saturday time frame,
    versus eliminating it, versus taking the gloves off and letting
    you do more and expand that Saturday service? It would be more
    competitive.
        Mr. Acton. Certainly, that is an option. One thing that the
    Postal Service clearly demonstrated during the course of its
    development of that proposal for the elimination of Saturday
    delivery is that when they learned of individual constituency's
    concerns about certain aspects of their proposal, they were
    very good at applying their resources toward coming up with
    better solutions, albeit each time they did that, it cuts into
    the proposed cost savings. But at the same time, it makes the
    plan more workable.
        Senator Brown. Right. Thank you, Mr. Chairman.
        Senator Carper. Senator Tester.

                  OPENING STATEMENT OF SENATOR TESTER

        Senator Tester. Thank you, Mr. Chairman.
        I want to thank you both for your willingness to serve and
    your public service in the past. I just have a couple of
    questions.
        Now, the Postal Regulatory Commission is there to give
    recommendations to the Postal Service, is that correct?
        Mr. Acton. It is correct in the sense we certainly do
    fulfill an important advisory role, but we also have important
    compliance duties, as well.
        Senator Tester. For example, when they are talking about
    going from 6-day to 5-day delivery of mail, do they let you
    know ahead of time they are thinking about it and do they ask
    you for your recommendation?
        Mr. Taub. Not having served at the Commission--Mr. Acton
    was there--but indeed under the statute and under the process,
    when you have a national change in service, they have to seek
    an advisory opinion from the Postal Regulatory Commission.
        Senator Tester. Did you give them an advisory opinion?
        Mr. Acton. We did, indeed.
        Senator Tester. And what was that opinion?
        Mr. Acton. The opinion was that we believed that the
    financial prospects, the cost savings from their proposal is
    considerably less than what they forecast. The Postal Service's
    estimate is in the realm of about $3.1 billion annually, and we
    are estimating more along the lines of $1.7 billion annually.
        Senator Tester. And I would assume they have their
    accountants and you have your accountants, is that right?
        Mr. Acton. That is right, Senator.
        Senator Tester. They just announced 3,700 post offices
    being closed, a fair number of them in Montana. The Chairman
    got lucky. He got off with none. But the question is, did they
    ask you about your recommendation on those 3,700 post offices?
        Mr. Acton. Well, they have asked us, as a matter of fact.
    There was an earlier advisory opinion that the Postal Service
    requested of the Postal Regulatory Commission, and we offered
    some very thoughtful feedback----
        Senator Tester. Yes.
        Mr. Acton [continuing]. Primarily about processing
    procedures, and the Postal Service has incorporated a lot of
    those thoughts in their new advisory opinion request, which was
    filed yesterday and docketed this morning. So I think the
    Postal Service hears the call for better adherence to the sort
    of regulations and rules that they are obligated to follow when
    they want to close these post offices. But how closely they
    have managed that in their new proposal is too early for me to
    report, simply because the filing was only yesterday, and once
    it is filed, I cannot talk in depth about it.
        Senator Tester. Yes, but do they not ask you before they
    file it?
        Mr. Acton. They ask if they can close a post office?
        Senator Tester. Yes, if you think it is a good idea.
        Mr. Acton. I am speaking of the advisory process in terms
    of what the Commission thinks and the community thinks about
    what it is they are proposing. What you are talking about, I
    think, is the appeals process.
        Senator Tester. What I am talking about is there are 3,700
    post offices they are recommending closing. Does the Commission
    have any recommendations on those closures, either generally or
    specifically?
        Mr. Acton. We do. We have an important role. It is outlined
    in statute.
        Senator Tester. And what was your recommendation to the
    Postal Service?
        Mr. Acton. Well, it is an instance-by-instance assessment,
    Senator. Each time they want to make a change in the status of
    an individual post office, station, or branch, they do that
    themselves, and then if there is a party involved with the
    community who has a problem with it, then they file a
    complaint----
        Senator Tester. So there are 3,700 of them.
        Mr. Acton. There are a lot.
        Senator Tester. There are 85 in Montana, alone.
        Mr. Acton. It is an enormous----
        Senator Tester. Are you going to do that on an individual
    basis?
        Mr. Acton. Well, we do not know how many of those will
    reach us for further consideration.
        Senator Tester. So what you are saying is that--I do not
    want to put words in your mouth--the post office in Hingham,
    Montana, for example, could be closed down and you would never
    be able to make a recommendation on it because it would be long
    gone by the time it gets to you?
        Mr. Acton. Well, the distinction to make here is that you
    have the appeals process and you have the advisory opinion
    process, and in no instance is the Postal Service planning on--
    they tell us--advancing with the closure of those thousands of
    post offices you have on your list until the beginning of the
    year. And by then, the Postal Regulatory Commission will have
    issued its advisory opinion.
        Senator Tester. On each one of them?
        Mr. Acton. The advisory opinion is----
        Senator Tester. Or it will be more general?
        Mr. Acton [continuing]. Comprehensive in scope, Senator----
        Senator Tester. You both talked about how the post office
    is always there. The post office mail is always there. You
    talked about workable solutions for the future. I can tell you
    that in Montana, these are all rural post offices, frontier
    post offices. In some cases in Southeastern Montana, people are
    going to have to get their mail in Wyoming because there is not
    going to be a post office for 40 miles.
        Do you think the Commission's position on this would be to
    put the shortfall on the back of rural post offices?
        Mr. Acton. I can answer that.
        Senator Tester. Yes, go ahead.
        Mr. Acton. And again, keep in mind, Senator, they have
    filed a request for an advisory opinion.
        Senator Tester. Yes.
        Mr. Acton. Counsel advises me to tread cautiously in terms
    of how I respond because I do not want to give you the
    impression that I have prejudged anything, which I have not.
    But I am quite ready to answer your concern.
        Senator Tester. Sure. That is OK.
        Mr. Acton. I am from Kentucky. I have been in a few rural
    post offices.
        Senator Tester. Yes.
        Mr. Acton. I know the value of the rural post office back
    home.
        Senator Tester. I figured you might.
        Mr. Acton. In fact, I make a regular stop there when I make
    visits back to the Commonwealth.
        Senator Tester. Sure.
        Mr. Acton. But an important element that I have tried to
    stress with the Postal Service before they filed their advisory
    opinion because I had this concern, as well----
        Senator Tester. Yes.
        Mr. Acton [continuing]. Is they present a very cogent and
    thorough assessment of the alternative access provisions that
    they will include when they are talking about closing any rural
    or other post office so that individuals who otherwise might
    have had to go to that post office have some workable option
    instead. And how that applies in this particular instance, we
    have not assessed yet.
        Senator Tester. You will also assess how much money they
    are proposing to save versus how much money you think they are
    really going to save, much like 6-day to 5-day delivery?
        Mr. Acton. We do that in the context of the advisory
    opinion, almost surely.
        Senator Tester. All right. Can you tell me, what does the
    Postmaster General make?
        Mr. Acton. Well, he reports that to us regularly. The
    organization does. I cannot tell you to a penny, but probably
    about $250,000.
        Senator Tester. Is that with benefits?
        Mr. Acton. I am guessing. I certainly can look it up for
    you.
        Senator Tester. Well, it is not very transparent. I wish it
    was more transparent.
        Mr. Acton. Well, we make it available----
        Senator Tester. But our figure is a little different than
    yours.
        Mr. Acton. Yes.
        Senator Tester. It was about $550,000.
        Mr. Acton. I understand that.
        Senator Tester. Does that sound reasonable? I mean, does
    that sound accurate?
        Mr. Acton. It certainly sounds reasonable. If it is
    accurate to the dollar, I cannot say without referencing our
    Web site----
        Senator Tester. We are in the ballpark.
        Mr. Acton [continuing]. Where we disclose that information.
        Senator Tester. The shortfall is billions of dollars, and
    we are talking about a couple hundred grand, but it seems to me
    that if we are really looking to save money, the first place we
    cut a service is shutting down post offices. Do you ever make
    recommendations on salary? Quite frankly, I think I make a lot
    of money in the U.S. Senate, and he makes over triple.
        Mr. Acton. We are not asked by the provisions of the
    statute to provide insight on the salary of the executives of
    the Postal Service. That primarily, I believe, is the Board of
    Governors' responsibility. Typically, the regulator does not
    have a role in that other than to ensure the sort of
    transparency that you are asking for here today.
        Senator Tester. I understand, and I think we probably have
    a little role in that, too.
        Mr. Acton. Yes, you do.
        Senator Tester [continuing]. And we might be asking for
    your recommendation on that because, quite frankly, when times
    are tough, when you start cinching your belt down, that ought
    to be the first place we are looking, not the last place.
        Mr. Acton. I do not necessarily disagree with you, Senator,
    I am just trying to explain to you my understanding of the
    differentials in terms of the management responsibilities of
    the Postal Regulatory Commission----
        Senator Tester. I understand.
        Mr. Acton [continuing]. Versus the Board of Governors.
        Senator Tester. And I also understand that you give
    recommendations, and I appreciate that and I think they ought
    to be listened to a lot more than they have been listened to,
    quite honestly. You have important jobs, important connections,
    and quite frankly, from my constituency's base, you are a big
    deal because you can make a difference. The poor old man who is
    living 12 miles west of Big Sandy who gets his mail in his
    mailbox forever, and it has always been there for 6 days a
    week, and now we are looking at 5 days a week, we are looking
    at potentially shutting a post office down near him or maybe
    his post office, and this is going to raise heck with rural
    America, I am just telling you. And I think I hear you say
    similar things.
        Mr. Acton. I appreciate knowing your views on a first-hand
    basis, Senator Tester.
        Senator Tester. Yes. Thank you very much.
        Senator Carper. Senator Pryor.

                   OPENING STATEMENT OF SENATOR PRYOR

        Senator Pryor. Thank you, Mr. Chairman, and I want to thank
    our two witnesses for being here today.
        I would first like to let you know that just a couple of
    days ago, Senators Tester, Begich, McCaskill, and I sent a
    letter to the Postmaster General. I do not know if you have
    seen this letter, but one of the reasons we sent it is that
    some of us have been frustrated with a lack of detail and
    analysis in the process of closing certain post offices and how
    the money works. You all may have access to that, but it has
    been very difficult to get information out of the Postal
    Service.
        Mr. Acton, does the Postal Service provide you with an
    analysis of how much money is saved for each post office they
    close?
        Mr. Acton. As I mentioned earlier, Senator, they have filed
    a request for an advisory opinion, and in that advisory
    opinion, typically, there are the details that you are
    describing. But I have not had a chance yet, given that it was
    filed late yesterday, to actually examine this filing and know
    for sure that it does contain the information that usually is
    included.
        Senator Pryor. But they will give a breakdown of how much
    savings there will be per post office or other postal facility?
        Mr. Acton. I think that if they do not, it is fair to
    expect that the Commission may have an interest in knowing
    that.
        Senator Pryor. This has been a sore point with me because
    in Arkansas, some facilities have been closed and consolidated,
    and I just cannot tell if the numbers add up. They tell us that
    there is a certain amount of savings, and maybe there is, but
    the numbers do not seem to add up to me. For whatever reason,
    they do not want to or they are not able to give us the entire
    picture of how things are impacted.
        Mr. Acton. Well, Senator, it is a very commonplace
    occurrence, regrettably, for the Commission and the Postal
    Service to differ in terms of our cost savings estimates and
    other data points. But one important thing to remember is that
    Congress in the Postal Accountability Enhancement Act empowered
    the new Postal Regulatory Commission with subpoena privileges.
    And if need be, if there is important information that has been
    excluded that the regulator needs to properly examine the issue
    at hand, I do not think there will be a lack of popular support
    to get it any way we need to.
        Senator Pryor. I would encourage you all to consider that
    as you look at the most recent request by the Postal Service
    because we need more transparency and someone needs to hold the
    Postal Service accountable. Given the way things are set up
    today and just how things have been going, it has been
    difficult to do that.
        I understand that the Postal Service is in a financial
    bind. Everybody understands that, but I just want to make sure
    the process is fair. It sounds like that is your concern as
    well, and I want to make sure that it is fair and it is done
    right, according to the law and according to the rules.
        We talked about the advisory opinion role, and I know that
    is a statutory issue. In your opinion, should the PRC have more
    authority to go beyond just an advisory opinion? Mr. Taub, do
    you want to respond?
        Mr. Taub. One of the big changes done in 2006 with the
    Postal Accountability and Enhancement Act was transforming what
    had been, frankly, a weak rate-recommending body, the Postal
    Rate Commission, into a Postal Regulatory Commission with many
    tools, such as subpoena authority and final decisionmaking
    authority in certain areas of products and prices. It did
    retain advisory opinion on operational issues, such as this
    one, that the Board of Governors is responsible for.
        Not having served at the Commission, one of the things that
    the Commission did after the law had been passed in 2006 was
    undertake a Strategic and Operational Plan to assess where they
    are going. I would, if confirmed, advocate that the Commission
    review that plan, which has not been updated in 4 years, to
    identify areas of strengths and weaknesses that it would help
    to identify, to the extent that there are changes needed.
        And one last point. The law did mandate 5 years after the
    enactment of 2006, which is this year, that the regulator
    provide to Congress a report on how well the law is working
    with recommendations for improvement. I would assume that would
    be looked at as part of what the Commission will be doing
    coming forward, and if confirmed, I would certainly make sure I
    had a chance to look at that to the extent it is still going
    on.
        Senator Pryor. Great. Thank you. Mr. Acton.
        Mr. Acton. The Commission is presently in the midst of
    developing the response to Section 701 of the Postal
    Accountability and Enhancement Act, and it will include a
    reference to this concern.
        If I can just touch on a couple of points that you raised
    here quickly, Senator. One has to do with this question of the
    availability of data, and I agree with you that the Commission
    needs certain data in order to make a proper assessment of what
    is happening in terms of the Postal Service proposal, and the
    issue we often are addressed with when we take up this cause is
    the Postal Service is citing its fiscal state and the fact that
    it takes money to develop the sort of data that we are asking
    for. So we are trying to walk that balance where we ask for
    what is reasonable in terms of fulfilling our lawful
    responsibilities. But just keep in mind that we try to do it in
    a way that is not going to contribute toward the fiscal
    insolvency that the Postal Service is already suffering.
        I think you are asking if we should have final authority
    over these questions. It is not my belief that the regulator
    should have final authority, but we certainly have an important
    role, and I think the way that it is described and has been
    outlined now in the rules, the regulations, and the law works
    as long as the Postal Service works with the regulator in
    ensuring they provide us the information we need and a ripe and
    robust administrative record that we can review to be sure that
    issues like the Universal Service Obligation, which goes to the
    core of this access issue that you are raising, are properly
    satisfied.
        Senator Pryor. Let me make a quick statement for all of you
    to consider as you are looking at the Postal Service's most
    recent request for an advisory opinion. When you look at the
    breakdown of the post offices and postal facilities that are
    closing, Arkansas happens to be fourth in the number of
    facilities that would close. That puzzles me because we are not
    fourth in population. We are nowhere close to that. We are not
    fourth in geographical size. We are nowhere close to that. So,
    again, I am curious. I really think we all deserve to know what
    the criteria is for how the Postal Service makes these
    determinations.
        Another thing I have heard and would like you to know about
    is that the Postal Service is, in some cases, bound and
    determined to close a certain facility. They may give public
    notice, but it is not very adequate and the folks that you
    think would want to know about it may not know about it. But
    then they are actually closing the facility during the appeal
    process. I have heard of that complaint. Again, I have not
    verified that, but that would certainly be a concern of mine.
        I would like to ask one last question about an issue that
    you have been focused on, Mr. Chairman. This may not have
    anything to do with this panel, but I am just curious if you
    have a viewpoint on the retirement fund issue. We hear the
    Postal Service is, in effect, overpaying into that fund right
    now, at least by some standards. Do any of you have an opinion
    on whether that should be addressed?
        Mr. Taub. I know the Commission, in fact, has done a study
    looking at the funding of the retirement obligations. They had
    an outside group, the Segal Group, that studied that issue and
    indeed in their opinion found that there was an enormous
    overpayment, on the order of $50 billion, and recommended
    changes to that. I know Mr. Acton could speak to that issue, as
    well.
        Related in a different way is the statutory mandate to
    prefund future retiree health benefits, and for the first 10
    years after enactment, there were statutory locked-in figures
    of $5 to $6 billion. I think all would agree it is important to
    prefund, but the Postal Service, not with appropriated dollars,
    but with ratepayer money, has prefunded on the order of $42
    billion already, and given the current financial circumstances,
    that would be an area, it would seem, that Congress, to the
    extent possible, working with CBO, could revisit.
        Mr. Acton. Mr. Taub did a good job of describing the
    findings of the Commission, and that is an important
    contribution of the Commission for this debate because there is
    a provision in the PAEA that calls for the Commission, upon
    request from Congress or the Postal Service, to engage in
    independent, expert studies. And in producing these numbers,
    the Commission did not craft these outcomes on its own. It was
    a bit of a crapshoot in terms of going down this road and
    wondering where it was going to take us.
        But in the end, an independent and certified actuarial firm
    told us that this methodology that is imposed on this retiree
    health benefit fund as well as the prepayments for the Civil
    Service Retirement System (CSRS) is really out of keeping with
    modern standards. So it is the Commission's view that Congress
    should take a close look at that and see if there is a way to
    better amortize those costs in a responsible fashion that still
    meets the need but does not sink the Postal Service in the
    process.
        Senator Pryor. Thank you. I am sorry I have exceeded my
    time.
        Senator Carper. Quite all right. We are glad you are here.
        I would say to our witnesses, there are more ``Marks'' in
    the U.S. Senate than any other name. There are five, and we are
    privileged to have two of them here--they are not all from
    States that start with the letter ``A''--the Marks from
    Arkansas and Alaska are here, and we are now pleased to
    recognize Senator Begich.

                  OPENING STATEMENT OF SENATOR BEGICH

        Senator Begich. Thank you very much, Mr. Chairman.
    Sometimes people forget AK and AR; they get them mixed up--not
    the people at the post office, the people who write the
    letters. We work on that.
        I want to follow up on, first, Senator Tester and Senator
    Pryor's comments. I know we had a great conversation already in
    regard to my view on the closings and the process, but I just
    want to give a visual from the State of Alaska's perspective.
    Here would be Montana. Here would be Arkansas, to give you a
    visual. All these blue dots here or squares are the post
    offices that are going to be closed, or at least on the list, I
    should say.\1\ You can see the distance there for just my
    State. Delaware is too small to even have on the map, but----
    [Laughter.]
    ---------------------------------------------------------------------------
        \1\ The map submitted by Senator Begich appears in the Appendix on
    page 40.
    ---------------------------------------------------------------------------
        Senator Carper. That is not true. I took my family to
    Denali, a great national park, several years ago for vacation,
    and we learned that Denali is three times the size of the State
    of Delaware.
        Senator Begich. There we go. [Laughter.]
        Senator Carper. We do not even have a national park. You
    have one three times bigger than our State.
        Senator Begich. There we go. [Laughter.]
        We had a little discussion--you know my views, and I will
    state them here again. I think your role regulatory role and
    the process you go through should be more aggressive than it
    has been. I do not think it has been as aggressive as it could
    be.
        In regard to these 3,700 locations, I think Senator
    Tester's question was when do you enter the process, and if it
    is case by case, that is never going to happen. He had a four-
    or five-page list that I am sure he was going to show you. I
    know Senator Pryor has a list of rural sites. That is not what
    I am interested in. I am interested in when they say we have
    3,700 locations we are considering, is it at that point when
    they announce it that you enter, or is there work done ahead of
    time to have a conversation before they file and create a
    docket? The problem is, as you said, there is this legal
    framework once they create a docket, and some agencies will use
    that with the regulatory board so they do not really have to
    talk to you. They are making a decision and will tell you what
    the decision is, and then you have to respond, but they have
    already moved down the path.
        So is there a process and do you think you have the powers
    to have the process before a docket is filed, before you get
    restricted, because, obviously, you want to have as much
    freedom of discussion to create a better outcome than just this
    regulatory process, which is not always the best way to do
    things. Who would like to respond? Either one.
        Mr. Acton. Senator, I will just say again, and this is the
    last time I will add this caveat about it being the pending
    docket, that I do not want to give the impression with anyone
    that I have prejudged a matter that I have not had a chance to
    explore yet. It is of great concern to the attorneys when I do
    that.
        I would like to say that there was a previous advisory
    opinion, which I think helps go to your point, that the Postal
    Service had brought to the Commission for our thoughts about
    the disclosure process that they were using at the time, and we
    did provide some good feedback in terms of procedures and
    process, which I believe they may have incorporated in their
    new request for an advisory opinion. And prior to this request
    yesterday, the Postal Service had come over and consulted with
    the Commission and briefed us, basically, on what it is they
    were planning.
        Senator Begich. At that time, do you give input or are you
    in a listening mode only?
        Mr. Acton. We are first in a listening mode----
        Senator Begich. Sure.
        Mr. Acton [continuing]. And then we certainly do provide
    input, not official input because that is----
        Senator Begich. I understand that. But, I mean, input that
    maybe helps areas in which they are not doing as well as they
    could and saying, here are some suggestions----
        Mr. Acton. For instance, I can share with you that the last
    time I had an informal discussion, before this request for an
    advisory opinion was filed, with the top executives at the
    Postal Service, I tried to stress with them the import in their
    proposal of ensuring that there was an adequate, thorough, and
    robust discussion of alternative access and the integrity of
    the Universal Service Obligation. So I am hopeful that when I
    make time when we are done here today to sit down with that
    proposal and read it in greater detail, they will be taking
    care to be specific in addressing a lot of the concerns that
    you are raising today.
        Senator Begich. Very good. Mr. Taub, do you want to add to
    that as a new member?
        Mr. Taub. Yes, and not having ever served at the
    Commission, but Mr. Acton's description certainly is consistent
    with the framework set up in the statute.
        Senator Begich. Very good. Let me ask you both--I think I
    know the answer to this, but I want it on the record. Do you
    believe the Postal Service should have universal service, no
    matter where the locations are, equal treatment in whatever
    delivery of service? Now, equal treatment could be a kiosk,
    could be a post office, or could be home delivery, but people
    should get their mail wherever they are located.
        Mr. Taub. Universal service is, to me, the key cornerstone
    of what we are expecting of our Nation's Postal Service and its
    postal system.
        Mr. Acton. Senator, having enjoyed this process for the
    second time now, I can ensure you that the importance of the
    regulators' role in preserving the integrity of the Universal
    Service Obligation is of paramount interest to me and to the
    agency.
        Senator Begich. Who do you believe, at the end of the day,
    you represent?
        Mr. Taub. From my perspective----
        Senator Begich. Yes.
        Mr. Taub [continuing]. If confirmed, I would be
    representing the public interest.
        Mr. Acton. Well, I would agree with that, but I also
    recognize----
        Senator Begich. Sure.
        Mr. Acton [continuing]. That for the details of these
    important policy concerns where it comes to the U.S. Postal
    Service, you have a lot of work to do up here, and you are
    looking for proxies who are going to delve into the weeds and
    bring to the fore the information you need to make more
    informed judgments.
        Senator Begich. And based on the statutes we have passed.
        Mr. Acton. Yes.
        Senator Begich. Yes.
        Mr. Acton. Of course. So I think that we are there to do a
    lot of the spade work for you so that we can offer up the sort
    of information that informs your views.
        Senator Begich. Do you think that going from 6-day to 5-day
    delivery, if that ends up an issue, has a conflict with
    universal service?
        Mr. Taub. Frequency of delivery is one measure of universal
    service. Since 1982, Congress has, in essence, mandated the
    frequency of 6 days in the annual appropriation bill, and
    unless and until that no longer is in the bill, that standard
    will be there. At the end of the day, then, it is up to
    Congress.
        Senator Begich. So if it is out of the appropriation bill
    as a rider, then----
        Mr. Taub. The Postal Service would have that operational
    flexibility.
        Senator Begich. Do you agree with that, Mr. Acton?
        Mr. Acton. Senator, when we met, I think I mentioned that
    we had a lot to say in those 200 pages of the advisory opinion
    on the elimination of Saturday mail delivery.
        Senator Begich. Right.
        Mr. Acton. A lot of it went to cost differentials and to
    service impact discussions. And honestly, I think we got it
    more closely correct than the Postal Service. But the crux of
    my concern with the Saturday proposal does not so much go to
    the differential in terms of cost and service impact. It goes
    to the role of the regulator in guarding the integrity of the
    Universal Service Obligation because the way I perceive this
    proposal, in its present form and at the present time, but
    maybe not going forward because this is a dynamic environment
    we are living in----
        Senator Begich. Right. It is in movement now.
        Mr. Acton. Yes. It is not the same tomorrow as it is today.
        Senator Begich. Right.
        Mr. Acton. And the trend seems clear that we are heading
    toward a time when perhaps not having Saturday delivery, given
    that there is proper accommodation in all these special
    circumstances, may be possible. But for the time being, at
    least, it was the Commission's assessment on a consensus
    viewpoint that there is a disproportionate effect between all
    of America and rural, remote, and non-contiguous America. So as
    long as that gap exists, then the proposal is problematic.
        Senator Begich. Very good. If I can just take one last
    question because I think all of us would be concerned about
    this next one, which is military bases. I know in Alaska, on
    that chart I just showed you, all of our military bases look
    like they might have a post office closed. Here is the dynamics
    of a military base.
        In our State, we will probably have 8,000 troops deployed
    by January in Afghanistan. Many of the spouses do not
    necessarily have transportation off base. I mean, that is it.
    Base is base. That is where they live. That is their community.
    That is their place of business and so forth. I want you to
    know, not only my State but other States have issues around
    this. In Alaska, I am very concerned about this. I know this as
    a mayor. We had challenges trying to have people come off base
    to be integrated into the community while their spouses are
    gone. It is a very difficult task because they live on the
    base, that is where their life is. And if you close the post
    office and they are trying to get communication back and forth,
    even though they utilize email quite a bit, you cannot email a
    care package, let me tell you that. That does not work. Maybe
    some day. I do not know. But you cannot do it.
        So do you believe, as a regulator, in regard to these base
    issues with post offices, that there has to be full
    accommodation of some sort--maybe it is a kiosk or it is sales
    through the commissary. These bases are too isolated in some
    cases. I mean, I can tell you, Fort Greely, we are talking
    isolated. Clear Air Force Base is isolated. So tell me your
    thoughts on that.
        Mr. Taub. Senator, having served the last 2 years as a
    senior executive in the Army supporting Secretary McHugh, I
    well understand and appreciate what you are describing. In
    fact, a year ago, I was with him up at Fort Wainwright in
    Fairbanks----
        Senator Begich. You know exactly what I am talking about.
        Mr. Taub [continuing]. And to the extent that this is part
    of the proposal of the 3,700 post offices on which the Postal
    Service is seeking an advisory opinion, if confirmed, indeed,
    as with all of them, but particularly in that area, I would be
    looking to get a good assessment of that because what you have
    described of the men and women serving in our military and
    their reliance of communicating--email and Skype are nice, but
    that hard copy, package----
        Senator Begich. The care package.
        Mr. Taub [continuing]. Is an important one.
        Mr. Acton. Senator, again, it is a pending matter, and I
    think part of my response earlier about the stress for
    alternative access and the integrity of that information is
    responsive in part to what you are asking.
        But I certainly recognize that this is a difficult issue
    because I appreciate the circumstance the Postal Service finds
    itself in. They have an infrastructural network that was
    developed decades ago that is not in touch with modern consumer
    demands. And I appreciate that may be the case for most of
    America. But I also understand that there are particular
    instances in areas like Alaska, which is separated from the
    rest of us by another nation, where you have special challenges
    that have to somehow be addressed by this American institution.
    So that is the nature of the issue we are wrestling with.
        Senator Begich. Very good. I know I took more time than I
    should, but I appreciate your meeting yesterday--I think it was
    yesterday, I have lost track of time, maybe it was the day
    before--but thank you very much. I really appreciate it, and I
    look forward to seeing you on the regulatory board. Thanks.
        Senator Brown [presiding]. Thank you very much. Senator
    Carper stepped out for a moment and asked me to take over.
        I had a follow-up to Senator Pryor's question. Mr. Taub,
    you indicated that there has been that overpayment and there is
    about $50 million--was it million or billion?
        Mr. Taub. About $42 billion in prefund----
        Senator Brown. So $42 billion is great.
        Mr. Taub. There is the $50 billion on the Civil Service
    Retirement System that there have been studies suggesting
    that----
        Senator Brown. Right. So basically the Postal Service has
    overpaid between $40 and $50 billion into these funds, correct?
        Mr. Taub. Those are two separate issues. The Civil Service
    Retirement System, there is a view that they have overpaid----
        Senator Brown. Yes.
        Mr. Taub. The prefunding is real money that over the last
    several years the Postal Service has paid $42 billion.
        Senator Brown. Right. So let us take the Civil Service
    Retirement System overpayment. There are other civil service
    groups that have actually underpaid. So when you say that we
    would like to maybe adjust because of those overpayments, I
    mean, where is the money--who is going to write the check
    because we do not have any money. That is why we are coming up
    to a deadline. So when you say that we want to adjust, and if
    we get that money back we will have the ability to do this and
    do that, I have not heard anybody tell me where the money is
    actually coming from, and it is the biggest question that is
    hanging out there. It is the big red herring.
        Mr. Taub. You have hit that right on the head. I mean, that
    is the challenge of dealing with this. There is the issue of
    the Postal Service itself having paid, in their perspective,
    ratepayer money. This is not taxpayer dollars that----
        Senator Brown. Ratepayer money into where?
        Mr. Taub. The CSRS, and some----
        Senator Brown. And the CSRS does not want to give it back.
        Mr. Taub. Right. As some would view it, they are helping
    mask, if you will, a deficit that actually would be there if
    the ratepayer had not been overpaying, and given the financial
    situation of the Postal Service, there is the view that this
    would help deal with a fairness issue. But that is the policy
    making challenge from that score.
        The study done by the Segal Group was for the Postal
    Regulatory Commission. I do not know if Mr. Acton may have
    better insights on that, but it is really a judgment call at
    the end of the day on the overpayment issue, I would suggest.
        Senator Brown. Well, let us just assume that everyone
    agrees with you. Once again, where is the money? Where is it
    coming from? How do you get it from them back to you? Not you,
    per se, but back to them?
        Mr. Taub. I know the Administration, in their fiscal year
    2012 budget proposal, outlined an approach amortizing it over
    30 years, reducing some payments----
        Senator Brown. Yes, but that does not really help the issue
    at hand in terms of the fiscal and financial stability of the
    Postal Service.
        Mr. Taub. It definitely would not be a check back for $50
    billion right now, but it would be a piece of the billions of
    dollars----
        Senator Brown. So you are saying maybe it would be $8.5
    billion over time per year to get them off the problems that
    they are having right now?
        Mr. Taub. Yes, and again, Senator, I think that is why so
    many areas are on the table to be looked at, whether it is 5-
    day delivery--the Government Accountability Office, the Postal
    Service's Inspector General, all have identified a menu of
    areas where they could save money. Some would have big
    implications, whether it is rural service or the service we
    have come to expect, but given the times they are facing in the
    Postal Service, understandably, they are looking to put
    everything on the table.
        Senator Brown. Thank you.
        Mr. Acton, with the Postal Service recently releasing, as
    has been talked about by Senator Begich and Senator Pryor,
    3,700 post offices for closure or conversion, 44 of which would
    be in my home State of Massachusetts, in your pre-hearing
    questionnaire, you endorse a Base Realignment and Closure
    (BRAC) type of approach for closing post offices. What benefit
    do you think this approach has over any other approach?
        Mr. Acton. I believe in my public policy questionnaire,
    Senator, I did reference the BRAC approach from Chairman
    Darrell Issa's proposal as something that Congress may want to
    consider when they are talking about making this type of
    change, and I included that view primarily because it is a
    proven vehicle for driving the type of change and the network
    arrangement that we are talking about, one that removes some of
    the constraints that otherwise are in place and puts it perhaps
    into a more impartial environment where some of the difficult
    choices can be made. But it all depends on the structure of the
    Commission and what their priorities are. I appreciate that. So
    I was not addressing the details of the application of BRAC,
    but I was talking about the general acceptability and proven
    record of that type of approach.
        Senator Brown. Thank you. Senator Begich, did you have some
    other questions, too, because I just have one more.
        Senator Begich. Yes, I just had one more to follow up on
    your pension question.
        Senator Brown. Well, please go ahead.
        Senator Begich. I want to follow up because I want to make
    sure we understand the two buckets. The first is the $50
    billion overpayment in the Civil Service Retirement System
    years ago. The issue is there is an analysis done that assumes
    that number was paid by ratepayers and what can be done.
        The second piece is your existing retirement fund that the
    Postal Service manages. You have been paying into it at a
    pretty high rate based on a 10-year schedule, which I agree
    with you--I mean, that is CBO black box magic. No one does it
    that way. I dealt with this when I was the Mayor of Anchorage.
    You amortize it over a period of time, which is much longer,
    usually 20, 30, or 40 years, depending on the assumptions you
    utilize, and that is the real government and private sector
    model. That is what you want to achieve. Is that a fair
    statement? Both of you, if you could just quickly respond.
        Mr. Taub. That is correct, Senator.
        Mr. Acton. Yes, Senator, that is a fair characterization.
        Senator Begich. And under that scenario, then you can take
    into account changing assumptions, maybe on a 3-year, 5-year,
    whatever that rolling basis is, because the economy could
    change and a lot of things could change. Rate of return, all
    kinds of assumptions could change. That would also potentially
    have an impact, is that fair?
        Mr. Taub. Actually, it would not. The issue of the
    prefunding is prefunding future retirees' health benefits,
    separate from the pension.
        Senator Begich. I apologize. You are right. And the last
    part of this is, if this one item could be resolved, the amount
    of fiscal pressure on the Postal Service could be reduced
    significantly, is that a fair statement?
        Mr. Taub. Very much so, Senator. The Postal Service points
    out that they have paid in $21 billion over the last 4 years.
    At the same time, they have lost $20 billion. They have, in
    fact, maxed out their borrowing from Treasury to prefund these
    future retiree health benefits.
        Mr. Acton. Not to sound cliched, Senator, but there is no
    silver bullet. But this is an important move that is a
    responsible approach that is endorsed and recommended by a bona
    fide and certified actuarial accounting firm, which we have
    hired in response to a provision of the law.
        Senator Begich. Right.
        Mr. Acton. So the Commission did not cook these numbers up.
    It is something that is a modern and equitable approach toward
    this type of accounting.
        Senator Begich. Again, I appreciate your being here, and I
    guess if everything breaks down and we cannot get to a bigger
    package, if there is one thing we could do, in my personal
    opinion, this is it, in order to create an actual private
    sector model for pension management and health care management.
    I do not know why anyone would be against that, other than CBO,
    but they operate in a world no one knows. No disrespect to the
    CBO people who might be watching and the work they do because I
    need good scores on some of the things I am working on.
    [Laughter.]
        But, again, you just want a model like the private sector
    and other government practices that are done all over the
    country.
        Mr. Taub. In fact, Senator, I would simply add, the Postal
    Service is the only Federal Government entity that is required
    to prefund for its future retiree health benefits.
        Mr. Acton. I would just like to mention quickly, too, that
    there is a good reason why no other organization, public or
    private, suffers under this type of responsibility. It is
    because it is a recipe for insolvency.
        Senator Begich. Right. You just summed it up. Thank you
    very much for giving me an opportunity to add a little bit.
        Senator Carper [presiding]. Senator Begich, it is always a
    pleasure.
        I sat back during this hearing. I wanted the other Senators
    to go ahead with their questions. I have been on the phone a
    little bit and trying to follow what is happening on the floor.
    But what is going on here actually very much involves what is
    before the Senate and before the House this evening.
        As we all know, we are spending a little more than $1
    trillion a year more than we have, and the Postal Service is
    drawing down pretty much all of its $15 billion line of credit
    from the Federal Government. As I said earlier, we had those
    three really smart consulting groups that worked about a year
    ago and said that the Postal Service was on line to lose about
    $230 billion more over the next 10 years. That was when we had
    actually somewhat rosier forecasts, particularly for First
    Class mail, than we have today.
        So this all plays into it. Almost in every part of our
    Federal Government, although the Postal Service is sort of a
    quasi-public-private operation, we just have to make tough
    decisions.
        For Democrats, those tough decisions involve, among other
    things, entitlement programs to try to rein in the growth of,
    for example, Medicare. We are going to spend a little over $500
    billion this year in Medicare, and in 2020, we will spend over
    $900 billion. That will include so-called improper payments
    with respect to Medicare, about $50 billion in improper
    payments, mostly overpayments, and about another $60 billion in
    fraud involving Medicare, and the numbers for Medicaid are
    significant, too. So we have a lot of concern on our side about
    how we do not want to cut benefits for folks, particularly
    older folks, but is there some way we can rein in the growth of
    those costs and maybe, even with less money, get some better
    results.
        My bumper sticker these days is ``Better results for less
    money,'' or ``Better results for not much more money,'' and we
    need to do that everywhere, and we need to try to figure out
    how we can do that with the Postal Service. One of the things
    we have been talking about here today is what many believe to
    be the overpayment of the Postal Service's obligation to the
    Civil Service Retirement System, and we have four studies now,
    including some pretty reputable outfits--Segal Company used to
    do a lot of work for us in Delaware when I was State treasurer
    and governor--that think the overpayment is anywhere from $50
    to $75 billion. We have the Office of Personnel Management
    speaking for the Administration that says, not so fast. Do not
    think you are going to get that money to help address this
    problem.
        We have the concern about going from 6 to 5 days, and we
    have estimates anywhere from $1.7 billion or so per year up to
    a little more than $3 billion. CBO says it is about $2.5
    billion a year that could be saved by going from 6-day-a-week
    service to 5-day-a-week service, and some think that is fine.
    There is some interesting polling data, I think it was by
    Gallup, indicating that fewer people object to that than I
    thought would be the case. We saw some numbers from earlier
    this year that said maybe two-thirds of the people in this
    country were OK with going from 6-day to 5-day service. They
    probably do not live in rural areas, that would be my guess. In
    some places, it is less a burden.
        But for myself, I like the idea of 6-day-a-week service. I
    have offered legislation that actually allows the Postal
    Service to use its judgment to go to 5 days if they think they
    need to in order to cut their losses. My own view is I
    personally like the idea of 6-day-a-week service and think it
    can be helpful as part of their business model. But having said
    that, we have to figure out how, collectively, to save enough
    money so the Postal Service does not continue to rack up debt
    and become a drain on the Federal dollars.
        In the legislation I have introduced, we want to be able to
    allow the Postal Service to diversify, to move away from their
    basic bread and butter to be able to do some other things that
    are related to delivery of mail, things like delivery of wine
    and spirits that we allow other folks to do but we do not allow
    the Postal Service to do, but there are other things, as well.
    People object to that, as you might imagine.
        So you have folks who do not agree with the idea of
    recovering the overpayments in the Civil Service Retirement
    System. You have folks who do not want to go from 6-day to 5-
    day-a-week delivery, even if it would save some real dollars.
    You have folks who do not think we ought to let the Postal
    Service diversify because they are going to encroach on
    somebody else's market share or business. And we have concerns,
    legitimate concerns, raised about closing or consolidating post
    offices, even if they are consolidated into a convenience store
    that is open 24/7 or a supermarket that is open 7 days a week.
    We have people that are concerned about closing mail processing
    centers around the country because of the impact it has on
    employment in regions, and I can understand that.
        Senator Collins has been trying to do something with
    respect to Workers' Compensation, as some of us know, and to
    try to be humane in doing that, but to try to make sure that we
    do not continue to spend money that is just, I think, hard in
    the final judgment to really continue to do, and that is
    another source of contention.
        This stuff is not easy, and that is why I suppose we find
    ourselves here as we sort of hit the three-quarters mark in the
    fiscal year with the Postal Service on the ropes. But I believe
    in the words of Albert Einstein, who used to say, among other
    things, ``In adversity lies opportunity.'' There is great
    adversity here, and there is also real opportunity. For us, the
    adversity is the challenges that we have been talking about.
    But the opportunity is to find a way to navigate out of it, and
    we can do that. And we can do that with our Federal budget, as
    well. I was just on the phone with one of our leaders trying to
    talk through a couple of aspects of that.
        As I think both of our witnesses are aware, and as I
    mentioned in my opening statement, it was frustrating to me
    that it took the Commission as long as it did to issue an
    advisory opinion on an issue as important as the Postal
    Service's proposal to eliminate Saturday delivery. I have just
    a couple of questions about that issue. You have already been
    asked a little bit about it, but I want to come back and drill
    down on it just a little bit more.
        First, and this would be for both of you, would you agree
    that it was acceptable or unacceptable for the Commission to
    keep the Congress and the Postal Service waiting for so long
    for the Commission's thoughts on the Saturday delivery issue?
    Mr. Acton, please go first.
        Mr. Acton. Without getting into a discussion of the
    circumstances, Senator, I would like to answer your question
    directly, and for my own personal perspective, in retrospect, I
    do believe that we took too long to develop that product, and I
    think it is important that we work to do better going forward.
        Senator Carper. All right. Thank you.
        Any response to that same question, Mr. Taub?
        Mr. Taub. Being on the outside looking in, I am not sure to
    what extent any internal challenges are there. That is why I
    had suggested the Commission may be well served revisiting its
    Strategic and Operational Plan last done 4 years ago to
    identify areas where there may be challenges getting things
    out.
        I would also just simply observe that when the Postal
    Accountability and Enhancement Act was passed in 2006, there
    were a variety of on-the-record proceedings that were mandated
    with statutory time frames, one of them being the very complex
    exigency case, which required an on-the-record proceeding, and
    that was given only 90 days. In these challenging times for the
    Postal Service, with important issues being asked of the
    Commission, I certainly recognize that, without knowing the
    details of the internal operations, trying to more closely hit
    a 90-day schedule, give or take, is much more important to the
    policy makers.
        Senator Carper. All right. Thank you. There is an old
    saying that haste makes waste, but it works the other way, as
    well.
        I have a follow-up question, if I could, to Mr. Acton, and
    then I am going to ask Mr. Taub a variation of this question.
    But just share with me, if you will, your personal thoughts on
    what went wrong and what can you commit to do if reconfirmed to
    address whatever problems contributed to the delay.
        Mr. Acton. Yes, I appreciate that, Senator. Mr. Taub did a
    good job without having been at the table of recognizing some
    of the details of the operational challenges that the
    Commission was faced with. I would just add on a personal note
    here that in my 9 years of public policy experience, four on
    the staff and five on the bench, I have never been presented
    with an issue as complex, as far-reaching, as, candidly,
    polarizing as this question of the elimination of Saturday
    delivery. And the Commission was determined to do a thorough
    job as quickly as due process allowed, but that meant hosting a
    whole series of field hearings and testimony here in
    Washington, development of the data, back and forth with the
    Postal Service to get what we needed to make a proper judgment.
    All of that ended up taking more time than it should have.
        And in addition to that, it was complicated by the fact
    that in the middle of our review, we were presented with the
    first ever exigent rate request, which, by the way, does, of
    course, have a deadline, as you outlined in PAEA. So we had to
    make some difficult choices about resource allocation, and we
    decided to allocate our resources toward ensuring that the
    exigent case was resolved within the time frame that was
    allowed.
        In terms of what we should be doing differently going
    forward, there is definitely some very sound and basic business
    principles that can be brought to bear at the Commission to
    ensure that there is a new administrative protocol for
    assessing these advisory opinions at the outset and making sort
    of a critical path gauge of what important milestones need to
    be done along the way and how long it will take to do it and
    how that is progressing throughout the development of the
    product. Believe me when I tell you, Senator, the Commissioners
    are very cognizant of your concerns on this front, and we are
    quite eager to be responsive.
        I hope we demonstrated part of that by filing today the
    notice of docketing of this request for an advisory opinion
    that was filed last evening from the Postal Service. And in
    that, we are putting forth the sort of procedural scheduling
    information that you are calling for.
        Senator Carper. Thank you. And, Mr. Taub, same issue, as an
    outsider potentially coming into the Commission, following the
    issuance of a Saturday delivery report, how would you seek to
    address the problems that led to its delay?
        Mr. Taub. I am a big proponent of strategic planning,
    whether it is at the Army with Secretary McHugh, trying to get
    a sense of where the Army is going in tightening budget times
    with two concurrent wars going on, or for the 10 years as Chief
    of Staff in the personal office for him as a member of
    Congress. It is critical you figure out where you are going,
    where you want to go, so you are not spending time
    unnecessarily focused on areas you should not. And part of that
    is getting a good assessment of the challenges one faces, the
    resources available.
        I, again, would advocate a revisiting of the Commission's
    Strategic and Operational Plan, which I hope would provide an
    opportunity to lay out what might be some of the challenges to
    meet a more aggressive time frame with the limited resources of
    a 70-some-person Commission, given all the issues on their
    plate.
        Senator Carper. All right. Thank you.
        Mr. Acton, you mentioned the filing last night, I think, of
    some paperwork, and let me just drill down on that, if I can.
    The Postal Service has, I believe, filed the paperwork with the
    Commission seeking an advisory opinion on its recent proposal
    to close a significant number of post offices across the
    country. We have read a lot about that in the media. But could
    both of you commit that, if confirmed, you would work with your
    colleagues on the Commission to get your work done more quickly
    than the Commission did on this Saturday delivery issue? And by
    quickly, I mean something much closer to the 90 days that the
    Commission's own regulation envisioned it completing work on
    advisory opinions.
        Mr. Taub. Certainly, Senator, you have my commitment in
    that regard.
        Mr. Action. Senator, I am on the record with that
    commitment and the notice of the filing this morning with
    respect to that docket.
        Senator Carper. Good. Thank you both.
        I spent a fair amount of time, as you may recall, in my
    opening statement discussing the Postal Service's financial
    situation. I will discuss it a little more when my colleagues
    have finished asking their questions. But what role should and
    what role will postal finances play in your consideration of
    the issues that come before the Commission, if confirmed? Mr.
    Acton, would you go first.
        Mr. Acton. With things as bad as they are, Senator, Postal
    Service finances are always the gorilla in the room regardless
    of the issue at hand. We try to make decisions based on the
    facts of the matter, and that is what we do. But we also have
    to be cognizant that the Postal Service is short on cash. Worse
    than that, they are billions of dollars in debt. So when we
    make decisions about allowing them to enter into experimental
    product pursuits or to do something that may not strictly be
    within the normal realm of the market test they have explored
    in the past, the Commissioners do that with the mindset that we
    do not want to be thwarting the sort of innovative thought that
    the Postal Service needs to engage in to help earn its way out
    of this hole.
        Senator Carper. All right. Thanks for that. Mr. Taub.
        Mr. Taub. I would concur with Mr. Acton in that regard. You
    know, when it comes to the finances of the Postal Service,
    given the cloud we are living under right now, one has to be
    very sensitive to that. Obviously, the issues presented to the
    Commission have to be decided on the facts presented. But it
    also seems to me we need to be very careful of keeping in mind
    the proverbial second- or third-order effects of a decision,
    how it may affect unintentionally the finances of the Postal
    Service because during these times that the Postal Service is
    facing, it seems, the Commission has to always be very
    sensitive to how its decisions may affect the finances.
        Senator Carper. Thanks. As Commissioners, you would be
    charged with reviewing and approving new products and
    services--I think we just talked a little bit about this--that
    the Postal Service might want to offer. Do you think that the
    Postal Service has done enough to innovate and to make the mail
    more valuable, and has the Commission done enough to facilitate
    the good ideas that the Postal Service has put forward?
        Some people think that the Postal Service does not do
    anything different now than they did 5, 10, 15, or 20 years
    ago, and actually, there are a lot of products that they offer.
    They did not deliver a lot of pharmaceuticals just a few years
    ago. Today, they do a lot. Netflix was not part of the package
    that ended up in the mail until very recently. Now, it is a big
    piece of their business. There are flat-rate boxes, and there
    are a number of things, like the idea of doing these
    cooperative arrangements where the Postal Service delivers the
    last mile for UPS and FedEx, and that is all smart stuff.
        So I do not want to take anything away from them, although
    I have said to two Postmaster Generals, the current one and the
    last one, both of whom I respect, that if I were in your job, I
    think I would create an entity within the Postal Service or
    maybe from outside the Postal Service where you have a lot of
    entrepreneurial people just looking at the basic business model
    and thinking, how can we use this basic business model, where
    we go into every community, every mailbox 6 days a week? How
    can we actually derive financial value from that? The nature of
    a big organization like that is not really to be
    entrepreneurial, as we know, and the same is true for a lot of
    big business organizations.
        In any event, do you think the Postal Service has done
    enough to innovate and make itself more valuable? Has the
    Commission done enough to facilitate the good ideas the Postal
    Service has put forward? And what thoughts would you have with
    regard to how we might end up with a Postal Service that
    actually is more innovative and entrepreneurial going forward?
        Mr. Taub. Senator, I think the Postal Service, looking at
    it from the outside, has improved in its use of the tools
    available under the law, whether it is seasonal pricing,
    experimental market tests. I think they are trying to be more
    innovative.
        But you have hit on a key point. That was really the
    essence of the 2006 law, trying to take what had been a
    proverbial cost of service regulatory structure, where the
    Postal Service, whenever it felt the need for more money,
    generally speaking, could set its own revenue requirement.
    There might be an argument at the Commission over whether First
    Class might pay more than periodicals, but at the end of the
    day, whatever they wanted as the revenue, generally they would
    get. They were moved to a price cap system, where if they could
    live within that, they could retain earnings. Obviously, the
    financial challenges they are facing right now have caused them
    to hit the cap, but the idea of that system was to encourage a
    much more innovative culture at the Postal Service.
        And one of the other big changes in the law was, as I
    mentioned, taking what was a weak rate-recommending body,
    transforming it to a much more vibrant regulator, and 5 years
    later, we have a robust, transparent array of data on costs and
    revenues that we did not have before. So to the extent that
    Congress is looking to maybe revisit the non-postal
    prohibition--certainly, there are issues to consider on fair
    competition and costs and how those would be funded, but unlike
    what we had in 2006, today, we do have a much more transparent
    process that may allow for moving in that area or allowing the
    Postal Service the opportunity to look at some innovative
    solutions.
        Senator Carper. Mr. Acton.
        Mr. Acton. Senator, there is always room for improvement on
    that front, but I would vehemently disagree with individuals
    who feel there is not innovative thought going on at the Postal
    Service. There is a new executive leadership team there under
    Postmaster General Donahoe, and there is a group that is headed
    up by Paul Vogel, who is in charge of bringing in all the
    revenue that the Postal Service can generate.
        I had the privilege of seeing a demonstration of his team's
    work on this front in terms of new, innovative products at the
    National Postal Forum earlier this year, and it reminded me a
    lot of my time in business school, where you had a lot of young
    and bright individuals who are trying to think how to leverage
    this Postal Service commodity in a new and maybe before-now-
    unheard-of way. So the regulator is obliged to try to promote
    that type of innovation whenever it can, and I think that the
    PRC has done a good job of doing that through the use of market
    test products and through experimental arrangements. We
    approved the sample box. We approved the Quick Response (QR)
    code. All of those sorts of experimental and market test
    initiatives that were brought to the Commission, we have
    approved, and we do that keeping in mind that we do not want to
    be in the way of good innovation at the Postal Service.
        Senator Carper. All right. Thanks.
        You mentioned the name of our current Postmaster General,
    and his name is spelled ``D-o-n-a-h-o-e,'' I believe, and his
    name is pronounced all different kinds of ways, ``Donna-hue,''
    ``Donna-ho.'' I asked him one day, how do you pronounce your
    last name? And he said, ``Donna-who.'' And I said, like The
    Who? As in, who are you? And he said, that is it. So since
    then, I have done a pretty good job of pronouncing his last
    name.
        Mr. Acton. Senator, if I could just interject, I asked the
    same question, and he told me it was like the talk show host,
    Phil Donahue. So apparently he answers to several versions.
    [Laughter.]
        Senator Carper. He is as bad as guys like me. [Laughter.]
        All right. Give me your best idea of an innovative piece of
    business that the Postal Service, if you were giving advice,
    might want to pursue. Just think about it. What might be a
    smart thing for them to do, kind of thinking outside the box?
        Mr. Taub. Senator, the Postal Service itself about a year
    ago in their Long-Term Action Plan acknowledged that e-
    commerce, for example, is an area that may provide some new
    ways of providing the safety and security and peace of mind
    that many people have with the Postal Service, but using its
    brand to do so. It is an issue they have looked at in the past
    that was not much of a money maker. And in that same report,
    the Postal Service did point out part of the challenge of the
    financial pressures they are under now is, if you are going to
    get new ideas started, you need that capital to invest in it,
    and capital is so tight right now for them.
        But certainly e-commerce would be one idea that the Postal
    Service, I know, has looked at within the confines of the
    current structure, continues to look at, but at the end of the
    day, as with all these new ideas, it is a balance of how much
    you are going to invest. These are risks, part of innovating.
    You are going to have things that succeed and fail. But when
    you are losing $8 billion a year, how much risk can you truly
    afford?
        Senator Carper. Thanks. Mr. Acton, any thoughts?
        Mr. Acton. Yes, Senator. I would sort of take a bifurcated
    approach in answering that. I think there are operational
    approaches that the Postal Service should do differently and
    better in order to promote themselves here on the Hill and
    elsewhere. I think that their new Deputy Postmaster General,
    Ron Stroman, has made a new effort to try to engage the Hill in
    these discussions, and that is going to be, as you know, an
    important part of the challenge because you hold all the key
    chips and those important decisions are going to be up to you,
    and they have to do a good job of being aggressive in pursuing
    their agenda and being sure that they are providing you the
    information you need.
        Now, that is separate and apart from what you are talking
    about, but on the product front, I encourage them to look to be
    more interactive with new technologies that are emerging, much
    in the way that Netflix is their biggest business mailer, and
    there is a reason for that. It is because Netflix is a very
    unique and progressive mix of new technologies that also
    incorporates into their business model in a very fundamental
    and important way the U.S. Postal Service. We need more of
    that.
        Senator Carper. Yes. If you look at the legislation Senator
    Collins and I co-authored in 2006, one of the things we did was
    we spelled out in the legislation the kind of background that
    we are looking for when the President nominates people to serve
    as a Governor on the Board of Governors. We have had very fine
    people who serve, who continue to serve.
        But I do not think we have anybody who comes from, if you
    will, industries that involve social networking. There is
    nobody from Google, Facebook, Cisco, or any of those kinds of
    companies, and I think we are going to have a vacancy or two
    here in very short order, and one of the things I am going to
    do is to suggest to the Administration and the President that
    we make sure that we have some folks serving on the Board of
    Governors who bring a new perspective, really a perspective
    that is probably more akin to that of my sons, who are 21 and
    23 and who are all over this social networking stuff. It might
    be helpful to have people who bring a different perspective and
    who are really innovative. That is kind of what they live and
    breathe. So that might be helpful.
        The last question I have concerns the legislation that I
    have introduced, which would allow the Postal Service to take
    advantage of its resources and its delivery network to
    experiment on a limited basis with non-postal products, and you
    have had a chance to comment on that, but I would welcome any
    other thoughts that you have. Let me just ask, how would you
    approach non-postal proposals if they were to come across your
    desk as a Commissioner? If you could just amplify some on what
    you have already said.
        Mr. Taub. Oh, sure thing, Senator. Again, to the extent
    Congress provides more leeway there, I think the Commission,
    having a robust track record of transparent data, accountable
    data out there that was not there before, would allow maybe a
    little bit more of a comfort level if Congress went down that
    road. Certainly to the extent that there is criteria the
    Commission would need to look at, I would assume would be in
    statute, but things like unfair competition or the effect on
    competition of services that are already out there, how losses
    would be covered, revenue issues, things of that nature, may be
    some of the criteria that one would want to consider.
        Senator Carper. Thank you. Commissioner Acton.
        Mr. Acton. Well, Senator, this viewpoint is colored by the
    acknowledgement we all share that the Postal Service has a
    mixed record in terms of these sorts of enterprises. But that
    does not mean they should not be doing more of it going
    forward. It just means that the regulator is obliged to be sure
    that they are doing it in the context which you outline in your
    question, which means limited and perhaps experimental. That
    way, they can go ahead with the type of innovative thought
    everyone wants to encourage, but they can have a third-party
    non-biased regulator involved to be sure that there are no
    market distortions or monopoly misuses taking place.
        Senator Carper. I have a couple of things I am going to say
    as we close down, but before I do, I just want to give each of
    you another minute or two, if there is anything else that you
    would like to add or take away, some things you did not mean to
    say or wish you had said.
        Mr. Taub. Mr. Chairman, I would simply say, having spent a
    lot of blood, sweat, and tears for many years on this issue
    with now-Secretary McHugh in the House, this is a big
    challenge. These are challenging and fearful times in many ways
    for the Postal Service. But if confirmed, I would look forward,
    hoping in some small way, to add to the solutions and have a
    viable Postal Service.
        Senator Carper. Thank you.
        Mr. Acton. The one encouragement I offer, Senator, is to
    ask you to keep pursuing that legislative solution that you
    include in your bill, which calls for some addressing of these
    concerns about the retiree health benefits and the Civil
    Service Retirement System, because even though I do not regard
    that as a long-term repair for what needs to be done, it can
    provide some short-term adjustment if it is done in a
    responsible fashion that gives us all more time to think about
    what needs to be done going forward.
        Senator Carper. Thanks for those thoughts.
        Mr. Taub, you just mentioned that these are fearful times
    for the Postal Service. For a lot of people in our country,
    these are scary times, and I would just say, whether we are
    talking about the Postal Service or our Nation as a whole, we
    just need to remember that we are all in this together. And in
    the end, people who elect us expect us to govern, and they do
    not expect us to throw bombs at each other here. They expect us
    to work together. That is the way we do business in Delaware. I
    wish the rest of the country were just maybe a little bit more
    like my State in that regard.
        But Senator Collins and I worked a lot together, and some
    of you in this room helped a lot with the legislation we
    crafted in 2006, and ultimately we came together on legislation
    that, I think for the most part, was good. But things have
    changed, as we all know, in our economy and with the increased
    diversion away to electronic media. But my hope is to be able
    to work with Senator Collins, as we have in the past, with our
    Chairman, Senator Lieberman, and others on this Committee,
    including Senator Brown, to enable us to bring forth a
    bipartisan bill.
        I do not know if we are going to be here in the month of
    August. I have suggested to the President, if we end up unable
    with the House and the Senate to work something out in the near
    term on the debt ceiling, that he ask the Congress for maybe a
    30-day bump-up in the debt level and that he basically say to
    the Congress, unpack your bags. You are not going anywhere in
    August until we work this out. And for the folks who have been
    planning on August recess, forget it. We need to solve this
    problem.
        And there are a bunch of us, Democrats and Republicans in
    the Senate, who pretty much like an idea that was worked up a
    year or so ago by the Fiscal Commission led by Erskine Bowles
    and Alan Simpson. That does not have to be the final answer,
    but I think that is a pretty good roadmap, one that I think we
    can follow.
        But we are all in this together, and part of the need to
    address the Postal Service and resolve its financial issues is
    because it is a significant part of the bigger problems and
    challenges that we face as a Nation.
        So I am not sure if we will be here in the month of August.
    If we are still in session, my hope is that Senator Collins and
    I can introduce bipartisan legislation and maybe hold a hearing
    before Labor Day. And if by some small miracle we work out our
    differences with our Republican friends in the Senate and the
    House and actually go forward with legislation that lifts the
    debt ceiling and provides for the opportunity for an up-or-down
    vote on, among other options, the Bowles-Simpson Commission
    idea, then maybe we will put off our bipartisan hearing until
    September. So we will see.
        This has been informative. We appreciate very much, first
    of all, your appearance here today, your preparation for this
    hearing, for Mr. Acton, your service already, and for Mr. Taub,
    your work with a very good former member of the House of
    Representatives, someone I had a chance to work with and have
    huge respect for and am very pleased to see have the
    opportunity to serve as our Secretary of Army today.
        Thank you all, and to your families, I would just say, I
    was watching your wife very carefully when you spoke, Mr. Taub,
    and I could just barely see her lips move when you spoke.
    [Laughter.]
        Senator Carper. You guys are pretty good at this.
        Mr. Taub. Nearly 18 years, we have been practicing that.
        Senator Carper. That is good. How old is your daughter?
        Mr. Taub. She will be 15 in a few weeks.
        Senator Carper. Fifteen years old, and is she going to be a
    sophomore?
        Mr. Taub. A sophomore in high school.
        Senator Carper. Those are good years. When our oldest boy
    was reaching the end of his sophomore year, we went out on road
    trips, and on these road trips we would drag along his younger
    brother, who is 2 years younger, and we would visit colleges
    and universities, here generally on the East Coast, and those
    were great trips. I do not give people a lot of advice, but
    just have a good time doing that. Hopefully, one of the places
    that you will take a look at is the University of Delaware----
    [Laughter.]
        Or Delaware State University. There are some good places.
    Maybe over at Ohio State where I spent some time. There are a
    lot of great choices. But the great thing is just enjoying the
    trip. What do they say, the trip is sometimes better than the
    destination, so just have a good time out there on the road.
    And hopefully, if you are confirmed, your duties will allow you
    to have a little time to do that sort of thing.
        Our thanks to those who are with you, your loved ones and
    family, for their willingness to share you with us, or continue
    to share you with us.
        I think there are some Members of our Committee who were
    here today who will have some more questions and probably will
    submit those in writing. If they have any questions, they have
    until the close of business tomorrow to submit those questions.
    But if you get any, please respond right away.
        And with that, this hearing is adjourned. Thank you very
    much.
        [Whereupon, at 4:21 p.m., the Committee was adjourned.]

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