[Senate Hearing 114-593]
[From the U.S. Government Publishing Office]




                                                        S. Hrg. 114-593

                     NOMINATION OF JEFFREY A. ROSEN

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

                                HEARING

                               before the

                              COMMITTEE ON
               HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS
                          UNITED STATES SENATE

                    ONE HUNDRED FOURTEENTH CONGRESS


                             SECOND SESSION

                               __________

NOMINATION OF HONORABLE JEFFREY A. ROSEN TO BE A GOVERNOR, U.S. POSTAL 
                                SERVICE

                               __________

                             APRIL 21, 2016

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        COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS

                    RON JOHNSON, Wisconsin Chairman
JOHN McCAIN, Arizona                 THOMAS R. CARPER, Delaware
ROB PORTMAN, Ohio                    CLAIRE McCASKILL, Missouri
RAND PAUL, Kentucky                  JON TESTER, Montana
JAMES LANKFORD, Oklahoma             TAMMY BALDWIN, Wisconsin
MICHAEL B. ENZI, Wyoming             HEIDI HEITKAMP, North Dakota
KELLY AYOTTE, New Hampshire          CORY A. BOOKER, New Jersey
JONI ERNST, Iowa                     GARY C. PETERS, Michigan
EN SASSE, Nebraska

                  Christopher R. Hixon, Staff Director
Gabrielle D'Adamo Singer, Deputy Chief Counsel for Governmental Affairs
              Gabrielle A. Batkin, Minority Staff Director
               John P. Kilvington, Deputy Staff Director
       John A. Kane, Minority Senior Governmental Affairs Advisor
             Katherine C. Sybenga, Minority Senior Counsel
                     Laura W. Kilbride, Chief Clerk
                   Benjamin C. Grazda, Hearing Clerk
                   
                   
                   
                   
                   
                   
                   
                   
                   
                   
                   
                   
                   
                   
                   
                   
                            C O N T E N T S

                                 ------                                
Opening statements:
                                                                   Page
    Senator Lankford.............................................     1
    Senator Carper...............................................     2
    Senator Portman..............................................     3
    Senator Tester...............................................     8
    Senator McCaskill............................................    10
Prepared statement:
    Senator Lankford.............................................    17
    Senator Carper...............................................    18

                               WITNESSES
                        Thursday, April 21, 2016

Jeffrey A. Rosen to be a Governor, U.S. Postal Service
    Testimony....................................................     5
    Prepared statement...........................................    20
    Biographical and financial information.......................    22
    Letter from the Office of Government Ethics..................    43
    Responses to pre-hearing questions...........................    47
    Responses to post-hearing questions..........................    64

 
                     NOMINATION OF JEFFREY A. ROSEN

                        THURSDAY, APRIL 21, 2016

                                     U.S. Senate,  
                           Committee on Homeland Security  
                                  and Governmental Affairs,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 9:18 a.m., in 
room 342, Dirksen Senate Office Building, Hon. James Lankford, 
presiding.
    Present: Senators Lankford, Portman, Ernst, Carper, 
McCaskill, Tester, and Peters.

             OPENING STATEMENT OF SENATOR LANKFORD

    Senator Lankford. Good morning. Today, we will consider the 
nomination of Mr. Jeffrey Rosen for the position of Governor, 
on the Board of Governors of the United States Postal Service 
(USPS). The Committee takes the nomination process very 
seriously. We are pleased to have a strong nominee before us 
today.
    Nine members of the Postal Service Board of Governors serve 
at USPS like a board of directors, controlling expenditures, 
planning for the long term, making policy, and reviewing 
current practices.
    Jeffrey Rosen is a native of Boston. He received his 
Bachelor of Arts in economics from Northwestern University, and 
his J.D. from Harvard Law School. After graduation, Mr. Rosen 
worked as a litigator for 25 years at Kirkland and Ellis's D.C. 
office, where he is currently a partner. Mr. Rosen served as 
the General Counsel (GC) for the Department of Transportation 
(DOT) and for the Office of Management and Budget (OMB). In 
addition to this impressive resume, Mr. Rosen possesses the 
necessary experience and legal and policy background to serve 
the Postal Service.
    The Committee staff reached out to a variety of Mr. Rosen's 
colleagues and affiliates, who spoke very highly of his 
judgment and abilities. The Committee staff also had the 
opportunity to interview Mr. Rosen on an array of issues, 
ranging from his years of government service to his legal work 
in energy, toxic tort, regulatory, and antitrust law. He has 
thoughtfully and competently answered each question to our 
satisfaction.
    To date, the Committee has found you to be qualified for 
the position you have been nominated. I look forward to 
speaking with you more today about your experience and 
accomplishments, and how you intend to bring them to bear on 
the Board of Governors for the United States Postal Service.
    I would now like to recognize Ranking Member Carper for his 
opening Statement.

              OPENING STATEMENT OF SENATOR CARPER

    Senator Carper. Thanks, Mr. Chairman, and thanks for moving 
so quickly to schedule today's hearing to consider what I 
believe to be a very important nomination, to fill one of the 
many unfortunate vacancies on the Postal Service's Board of 
Governors.
    We are considering Mr. Rosen's nomination at what is a very 
challenging time for the Postal Service, but not a time without 
opportunity and potential. Albert Einstein once said, in 
adversity lies opportunity, but we need strong leadership on 
the Postal Service Board of Governors in order to take full 
advantage of the opportunities that are out there for the 
Postal Service.
    The Postal Service operates, as we know, as the center of a 
massive $1.4 trillion printing, delivery, and logistics 
industry that employs nearly 8 million people. And even as 
First Class Mail is lost to other forms of communication, the 
future is not without promise for the Postal Service in a 
number of other ways. Advertising mail is still popular and an 
effective option for a lot of mailers. Millions of people still 
look forward to receiving a wide range of magazines in the mail 
every week. And e-commerce and package delivery are booming, 
making the Postal Service a vital partner for businesses both 
large and small.
    Even the Postal Service's traditional competitors rely on 
it to carry items the last mile, the last five miles, the last 
10 miles, to rural communities across our Nation.
    I look forward to talking to Mr. Rosen today. It was a 
pleasure to meet you, and I look forward to talking with you a 
bit more about what you think can be done to address the 
ongoing challenges that face the Postal Service and to hear 
about the skills that you bring, the knowledge you bring, the 
experience that you bring to the Board, if confirmed.
    As a leader in both the Office of Management and Budget and 
the Department of Transportation during the Bush 
Administration, Mr. Rosen will bring unique policy and 
management perspectives to the Board of Governors.
    If reported out of this Committee, Mr. Rosen will join the 
five other Postal Board of Governor nominees pending before the 
Senate, all of which have been held up for more than a year. 
Some of them have even been waiting for confirmation since the 
last Congress. As a result, the Postal Service is currently 
down to one sitting Senate-confirmed Governor overseeing 
operations.
    This situation is worse than unacceptable. I believe it is 
shameful. I cannot imagine something like this ever happening 
in the private sector, because shareholders would demand 
oversight from a strong board to protect their investment. 
Congress needs to do our job to protect Postal customers as 
well as the investment of the American taxpayers by filling 
these positions.
    I believe we have a real opportunity here to inject some 
badly needed talent into the Postal Service at a time when the 
agency, given the vacancies on the Board, the loss of the most 
recent Inspector General (IG) to retirement, and the challenges 
the Postal Service is facing, is in grave need of independent 
oversight and direction. If we confirm all six of the pending 
nominees, we will make significant progress toward stabilizing 
and strengthening our Postal Service.
    I believe your wife is with you today.
    Mr. Rosen. That is correct.
    Senator Carper. Over your left shoulder? Good morning, 
Kathy.
    Mrs. Rosen. Yes.
    Senator Carper. Thank you for joining us today. Thank you 
for your willingness to share this fellow with the rest of us. 
All right. Take care.
    Senator Lankford. I would now like to recognize a tireless 
advocate for good government who has been at this for a while, 
both with OMB and here in the Senate, my friend and colleague, 
the distinguished Senator from Ohio, Rob Portman.

              OPENING STATEMENT OF SENATOR PORTMAN

    Senator Portman. Thank you, Mr. Chairman, and I echo the 
comments of my two colleagues who are both tireless advocates 
for good government.
    I am glad to be in their company, and I am just honored to 
be here today to introduce a very good friend of mine who 
happens also to be very talented. It is a nice combination when 
you are able to talk about a good friend and say how 
appropriate it is that he has been willing to step forward for 
this important post.
    I agree with my colleagues that this is a critical time for 
the Postal Service and that we need people who have a broad 
background of experience, but also good judgment and a level 
head, and that is what Jeff Rosen brings.
    He is, in my view, one of the most respected lawyers here 
in this town. I think that view is shared by a lot of other 
people. He is an accomplished litigator at Kirkland and Ellis, 
one of the major firms in Washington. He has handled a lot of 
very high stakes, complex cases for them. His practice has also 
focused, importantly for this Committee, on administrative law 
and holding the Federal agencies accountable to the laws that 
Congress has enacted, a topic that we address frequently here 
and that the Chairman is very interested in, as is the Ranking 
Member.
    But, Jeff is not just an accomplished lawyer in the private 
sector. He has also dedicated himself to public service. He 
served as General Counsel of the U.S. Department of 
Transportation. While there, he managed hundreds of lawyers and 
was also asked to take on other tasks, including DOT's 
regulatory program. Obviously, he was involved in all the 
litigation the Department was engaged in, and it was a big job.
    He later served as General Counsel of the Office of 
Management and Budget, and he did that because I asked him to. 
When I became Director of OMB, I wanted to surround myself with 
people smarter than me. That is not hard to do, but one person 
I reached out to was Jeff Rosen. And, honestly, recruiting him 
from the Department of Transportation, where he was running a 
much larger team, was a challenge, but he was willing to come 
to OMB to supervise a much smaller team because he realized 
that OMB is the nerve center for the Federal Government. From 
my point of view, I wanted someone like Jeff to provide me 
advice and counsel on the very complex regulatory matters that 
come before OMB as well as the legal issues and policy 
questions. He excelled in that role. I depended on his 
expertise. I trusted his judgment. He was part of our senior 
team.
    He left government in 2009, but his dedication to public 
service did not end there. He has remained active. He is a 
member of the Administrative Conference of the United States. 
He has been a leader in the American Bar Association (ABA). By 
the way, Mr. Chairman, he is current Chair of the 
Administrative Law Section, again, something very important to 
this Committee and to the Subcommittee that you chair. He has 
been a great resource to me. He has been an expert resource to 
a lot of us on regulatory reform, and specifically me on the 
Regulatory Accountability Act. I have really valued his 
judgment there.
    I think he has exactly the skills and aptitude we want 
right now to be a Governor of the U.S. Postal Service. He is 
vigilant about protecting the taxpayers' investment. He has the 
experience necessary to deal with what is an increasingly 
difficult challenge facing the Post Office. Senator Carper has 
talked about some of the opportunities, as well. They are there 
but someone needs to understand how to take advantage of the 
changing marketplace and those opportunities. And, I am just 
confident that with his background and expertise, the Board 
will be greatly benefiting from his involvement.
    So, I do want to mention Kathy for a moment, if I might, 
because I attribute most of Jeff's successes to the fact that 
Kathy is his much better half, and also with regard to Kathy, 
because of her upbringing in the State of Ohio. Just as Senator 
Carper took a little detour to Ohio to sharpen his skills at 
the Ohio State University, so Kathy has brought that Ohio work 
ethic and those Buckeye roots those common sense Buckeye roots, 
into Jeff's life and has played a key role in his ability to 
achieve what he has.
    So, seriously, I thank you both for being here. Thank you 
for your willingness to serve, to answer the call of public 
service once again, and I look forward to strongly supporting 
your confirmation.
    Senator Lankford. It is the custom of the Committee to 
swear in all witnesses before they appear. Would you please 
stand, Mr. Rosen, 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. Rosen. I do.
    Senator Lankford. You may be seated. Let the record reflect 
the witness answered in the affirmative.
    Mr. Rosen, I now recognize you for your opening statement, 
if you would push the ``talk'' button there in front of you so 
we can hear you clearly. We will be honored to receive your 
testimony at this time.

 TESTIMONY OF JEFFREY A. ROSEN,\1\ NOMINATED TO BE A GOVERNOR, 
                      U.S. POSTAL SERVICE

    Mr. Rosen. Thank you, Mr. Chairman.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Rosen appears in the Appendix on 
page 20.
---------------------------------------------------------------------------
    Chairman Lankford, Ranking Member Carper, and Senator 
Portman and Members of the Committee, I want to begin, of 
course, by thanking you for the honor of appearing today and 
for the privilege of having my nomination considered for 
appointment to the United States Postal Service's Board of 
Governors.
    I also want to express my deep appreciation to my friend, 
Senator Portman, for that extraordinarily kind introduction, 
which I very much appreciate.
    I was going to take a second to introduce my wife, but you 
have all already done that, so I will move on, but I am very 
appreciative that Kathy is here with me today.
    In the course of my career----
    Senator Carper. How long has she been by your side?
    Mr. Rosen. In May, it will be 34 years.
    Senator Carper. Kathy, for you, no purgatory, straight to 
heaven. That is what people say of my wife, too. [Laughter.]
    Mr. Rosen. So, let me start by just saying, in the course 
of my career, I have had the great fortune to have had 
experiences with a number of different types of organizations 
that I think would prove helpful to the Postal Service Board of 
Governors. All of you have some familiarity with them, so I am 
not going to do this in detail, but I just wanted to quickly 
mention, first, my 28 years with my law firm, Kirkland and 
Ellis, where in addition to my roles as a litigator and 
regulatory lawyer, I have served in a management capacity, 
including several years on the firm's Management Committee and 
some years as co-head of its Washington, D.C. office.
    Second, with regard to my time at the U.S. Department of 
Transportation, obviously, you know that is a large cabinet 
agency. At the time, it had a budget of approximately $60 
billion and a little bit more than 50,000 employees, and I was 
very fortunate to work for Secretary Norman Mineta and assist 
him in a variety of roles, including things like the DOT Credit 
Counsel as the regulatory policy officer, a number of roles 
that did involve intersecting with the big parts of the agency.
    And then, third, I just wanted to touch on the fact that 
people are familiar with OMB, and I had the good fortune, of 
course, to work with Senator Portman there. But people do not 
always remember that the Federal budget, even at that time, was 
just short of $3 trillion and four million employees. So, we 
are talking about very complex budget, management, legislative, 
and regulatory issues, and I would say I was fortunate to learn 
from Senator Portman as to a number of those complex 
challenges.
    I see the Postal Service largely as a transportation, 
logistics, and delivery operation, so I anticipate that some of 
my experiences would prove helpful to the Board of Governors. 
And, I strongly appreciate and welcome that the Board's top 
priority must be, as Congress has set out, to represent the 
public interest generally.
    At the same time, I, of course, understand that the U.S. 
Postal Service is confronting very substantial challenges, both 
near term and over a longer term. I have begun the process of 
studying and analyzing these issues more closely and will look 
forward to doing so in much greater detail if I am approved by 
the Committee and confirmed by the Senate.
    I would aim to bring a problem solving outlook to the 
Board, but also vigorous oversight and accountability by the 
Board with regard to Postal management's plans to address the 
key challenges that are facing the Postal Service.
    If I am confirmed by the Senate, I can assure you I will do 
everything I can to fulfill the responsibility that would be 
entrusted to me by both the Congress and the President. I would 
look forward to trying to help address these issues facing an 
organization that I regard of being of such importance to both 
our national economy and to our fellow Americans throughout the 
country.
    In closing, I want to thank you for considering my 
nomination and I look forward to answering your questions.
    Senator Lankford. Thank you, Mr. Rosen.
    I am going to defer my questions to the end and recognize 
the Ranking Member for some questions. He has another Committee 
hearing that he is going to be heading toward quickly, so I 
want to make sure he has plenty of time for that. Mr. Ranking 
Member.
    Senator Carper. Mr. Chairman, thank you. Thank you so much.
    Thank you for your testimony, Mr. Rosen. I was inclined to 
support your nomination until I heard that this guy to my left 
[referring to Senator Portman] is such a strong advocate. I 
will have to reserve judgment now. No, seriously, it is helpful 
that he has this high regard for you.
    I want to talk a little bit about Postal reform 
legislation. The 800-pound gorilla in the room concerns the 
Postal Service being able to deal with the prepayment for the 
health care of their retirees. As you may know, the Postal 
Service and its employees pay more, in terms of FICA, into 
Medicare for retiree health care costs than any other employer 
in the country. Nobody pays more for Medicare coverage for 
their employees. The Postal Service does not get full value.
    My wife is retired from DuPont. When she reached the age of 
65, the DuPont Company said to her, and everybody else who 
reached the age of 65 and retired, we expect you to sign up for 
Medicare Part A, Part B, Part D, and we will provide wrap-
around coverage to fill in the gaps. All kinds of employers, 
large and small, do that when their employees or their retirees 
reach the age of 65, as you probably know.
    For the Postal Service, almost all employees and retirees, 
take advantage of Medicare Part A, the lion's share Part B, 
nobody Part D. The Postal Service, in fact, by overpaying into 
Medicare subsidizes other employers in this country, including 
their competitors. It is not right. It is not fair. It is not 
equitable.
    Is this an issue that you are familiar with? Do you have 
any views on this?
    Mr. Rosen. Thank you, Senator Carper. I am generally 
familiar with the issue and I think there are really two parts 
to it. The first part is the prefunding obligation that was in 
the 2007 bill, and I do not think there is any need to second-
guess or revisit whether that made sense at the time. There are 
probably pros and cons.
    But as we sit here today, nearly 10 years later, the 
circumstances are different in a number of ways, including the 
fact some of those payments were made and, therefore, have 
prefunded some of the obligations, and it seems to me that we 
are now at a point where something has to be done about that 
legislatively. It is a big problem that we have such a large 
obligation for the Postal Service to pay and that it is unable 
to do so and last year did not pay it. So, we know we have a 
very serious problem that has to be addressed, it seems to me.
    The second part of that is, so, how should it be addressed, 
and that is where I know less about what were the options that 
have been analyzed or considered by the Postal Service or 
others in potential legislation, because I can envision there 
being multiple approaches to trying to get at that and I have 
not had the opportunity yet to be informed enough as to say, 
here is the right solution. I can think of a range of 
solutions.
    Senator Carper. You can just stop right there. Thank you. 
Thank you very much.
    Some people say this is not a real liability for the Postal 
Service. I think it is. It is a real liability for all 
employers, for State and local governments, as well, and for 
the most part, we do, across the board, a not very good job of 
meeting that liability, not even acknowledging it for a lot of 
State and local governments and for private sector employees. 
So, it is a real liability.
    The question is, over what period of time should it be 
addressed, and legislation, bipartisan legislation for which we 
held a hearing here several months ago basically says, this is 
a real obligation. Some money has been set aside already to 
meet that obligation. For the remainder of the obligation, the 
remainder of that liability, let us have a requirement to 
address about 80 percent of it over the next 40 years. And, 
even that is a far more conservative approach taken by most 
public employers, governments, and private sector employers.
    The real key is, are we going to allow the Postal Service 
to get full value for the money that they pay in, overpay into 
Medicare, and that has huge implications for the financial 
viability going forward. You will hear a lot more about this if 
you are confirmed, and maybe until you are confirmed.
    The other thing I want to ask is I have quoted Einstein--I 
quote him a lot--in adversity lies opportunity. Plenty of 
adversity for the Postal Service. A lot of the adversity is 
brought to us by the Internet, but there is a real opportunity 
there, as well. Talk to us about some of the opportunities that 
you would like to see the Postal Service pursue if you are 
confirmed.
    Mr. Rosen. Well, I think the challenge there is to think 
about what is the role of the Board and what is the role of the 
management, and there is a real need for more innovation, and I 
suspect use of technology, as well, to improve both the 
revenues and to manage the cost by doing things more 
efficiently.
    And I think for the Board, the challenge is to really push 
management to be considering a wider range of opportunities, to 
be more thorough in exploring what opportunities exist, to 
bring urgency to that, and to see what practices are in place 
and whether there is a staleness. I mean, sometimes, 
organizations, one of the biggest challenges is they want to 
keep doing it the way it was done. And, so, I think part of the 
challenge for the Board is to try to break through to get more 
creativity, more innovation, more best practices learned from 
others.
    I do not actually think the Board should try to substitute 
for management as to do more of this or less of that, except in 
response to management educating the Board about options.
    So, I think my view is that there is a need for a lot more 
innovation and to take advantage of opportunities, some of 
which I think you were starting to identify.
    Senator Carper. The only other thing I would say is--this 
is more to my colleagues than to you--among the President's 
nominees to the Postal Board of Governors are folks who have 
private sector experience running companies, pretty big 
companies, and some of their experience involves the use of 
technology and creativity in that regard. I think the potential 
for having some of the nominees to serve on the Board is they 
have done this kind of stuff before.
    Mr. Rosen. Yes.
    Senator Carper. They have actually, as people running 
companies and serving on the boards themselves, they have 
thought about this, not just thought about it, but actually 
done some of these things, and I think they would bring great 
value to the, not just to the Postal Board of Governors, but to 
the Postal Service as we try to seize the opportunity, seize 
the day.
    Thanks so much. Welcome, and good luck.
    Mr. Rosen. Thank you very much, Senator.
    Senator Carper. And thank you very much, Mr. Chairman.
    Senator Lankford. Thank you. Senator Portman.
    Senator Portman. Thank you, Mr. Chairman.
    Again, I have strong support of Mr. Rosen based on his 
management experience he talked about, but also the judgment he 
brings.
    And, I think it is interesting, in his response to Senator 
Carper, he talked about thinking outside the box and having the 
Board be in a position to bring innovation and best practices. 
The Postal Service issues that we talked about earlier, some of 
the challenges they face require that, and we have made some 
progress here in Congress in dealing with some of these issues 
on a short term basis, but over the mid and long term, we have 
big challenges.
    So, I am just glad that you are willing to step up and to 
help with the reforms that are necessary and appreciate you 
bringing that judgment and that experience and I wish you the 
best of luck.
    Mr. Rosen. Thank you very much, Senator.
    Senator Lankford. Senator Tester.

              OPENING STATEMENT OF SENATOR TESTER

    Senator Tester. Thank you, Mr. Chairman.
    I want to echo Senator Portman's comments about your 
willingness to serve. I do not know as much about your 
management style, obviously, as Senator Portman does, but I do 
think it is important we have good people that are willing to 
serve in these positions, so thank you for that.
    And thank you, Mr. Chairman, for being so courteous. I very 
much appreciate that.
    I could ask you a lot of questions about the intricacies of 
the Post Office, but I think that would be patently unfair, so 
I think we will get to just something that is fairly 
fundamental with the Postal Service.
    I come from Montana, which is a pretty rural State, and I 
will tip my hand by telling you that I think the Postal Service 
is pretty important, especially for rural areas. There are some 
that think the Postal Service has gone the way of the Pony 
Express and that it is time to turn this operation over to the 
United Parcel Service (UPS) and Federal Express (FedEx) and 
others in the private sector to run it as they would, as a 
business.
    You well know, I am sure, that the Postal Service is 
running deficits at this point in time. We have not done much 
to help them solve that problem. But, nonetheless, we are where 
we are, and it is, in my opinion, if the Postal Service is 
going to continue, it is going to take some good work done by 
this Committee and Congress, and it is also going to take some 
appropriations to keep them afloat, taxpayer dollars.
    So, the question I have for you, from a very fundamental 
standpoint, if it takes taxpayers' dollars to keep the Postal 
Service afloat over a fairly long period of time, more than 
just a one-time expenditure, which camp do you fall into? Do 
you fall into the camp that says, go ahead and spend the 
taxpayer dollars, keep it going, because it is that important, 
or do you fall into the camp that says, you know what, maybe it 
is time--we are in the 21st Century--to turn this over to the 
private sector and erase the Post Office?
    Mr. Rosen. Well, Senator, let me say as to what is 
sometimes referred to as privatization, that is not my 
position. I am aware that for decades now, Congress determined 
that the Postal Service should be a public entity within the 
Federal Government with the unique charter to operate as a 
self-sustaining commercial enterprise, including service to 
areas that might not be served by a private company, or 
minimally served, and that includes, I am sure, your concern 
about rural areas.
    So, my own feeling is that at this juncture, it still makes 
sense that the Postal Service should remain a Federal entity 
that should function like a private business, but not actually 
become one.
    Senator Tester. I appreciate that answer. So, let me flesh 
it out just a little bit further, because self-sustaining, that 
is a key term.
    Mr. Rosen. Yes.
    Senator Tester. So, we can continue to raise rates. There 
will be folks in front of this Committee that say, do not do 
that, it will put us out of business, and they may be correct. 
Or, we can subsidize. What is going to be the determining 
factor for you that pushes you one way or the other?
    And, so, I do not want to be too cryptic about this. There 
are some--and I am not saying they are wrong, either, they may 
be right--that say that this should be self-sustaining and it 
is not, and the fact is that if it cannot be, we ought to 
eliminate it. So, I am trying to get a feel from you----
    Mr. Rosen. Yes.
    Senator Tester [continuing]. Where you are at on taxpayer 
subsidies of the Postal Service over the long haul.
    Mr. Rosen. So, here is the thing. The Post Office has been 
self-sustaining for most of the period since it was created in 
its current form and it seems to me that is a very good thing 
and that is what we should want. And I think what needs to 
happen next is to truly push and explore for all the options as 
to how to continue that, because that is in everyone's best 
interest.
    And, I am new to the issues, so I will have to qualify 
that, but my sense is that not every option has been fully 
pushed, explored, analyzed, not enough creativity brought to 
bear, and so is there need for more revenues? Yes. I thought it 
was somewhat encouraging that over the last quarter the Post 
Office had an increase in revenues. It looks like it was on the 
order of half-a-billion dollars for the quarter. Has that been 
exhausted in terms of revenue opportunities? I doubt it.
    On the cost side, what you really want is efficiency, 
right, not just slash, grow yourself into the ground. That does 
not work.
    And then on innovation, which is what I think Senator 
Carper was interested in, can you bring something new to this 
because we are in the Internet era and First Class Mail is 
declining, although I query whether that is as inevitable as 
some people think it is. I am not as sure they are right about 
that.
    So, I think the next step is to preserve the self-
sustaining model. That is in the taxpayers' interest. That is 
in the public's interest, if it is doable. I am inclined to 
think it is, but I have to acknowledge that I am relatively new 
to studying the issues and experience over the next, 2 to 5 
years or some relatively short period in the future, is 
probably going to tell us a lot about that.
    Your question in some sense is hypothetical, which is, 
well, what if everything appropriate is tried? Then what? And, 
I hate to go there in a sense because it sounds like then we do 
not have to try as hard as we should. It seems like the Board 
should be--its mission is to deliver what the public needs, the 
level of service, the expectations that are set out by 
Congress, in a self-sustaining way. What happens then? I do not 
really know, but as I have said, I would not be in favor of, 
well, we just get rid of the Post Office.
    Senator Tester. OK. I appreciate that, and I will tell you 
that I agree with you. You should never quit trying, and I 
appreciate that. I can tell you their deficits are significant, 
and not this Postmaster General but the previous one's solution 
was cutting service, which is a business model that I am not 
familiar with, cut service to your customers, expect to become 
more profitable, and where they are cutting that service is 
rural America and I prefaced that is where I was from. And, so, 
you certainly noted that.
    Thank you for your service. Thank you for being available 
for this job. And thank you, Mr. Chairman.
    Senator Lankford. Senator McCaskill.

             OPENING STATEMENT OF SENATOR MCCASKILL

    Senator McCaskill. Senator Tester, Senator Heitkamp, and I 
have all worked very hard on rural Post Offices, because being 
born in a very small town and growing up for part of my 
childhood in a small community, I know that the Post Office is 
more important than the brick and mortar in terms of that 
community in the sense of community. So, we are adamant about a 
model at the Postal Service that does not shortchange rural.
    I have been on a harangue about giving deals to our 
competitors, and I preface my comments today by saying that the 
last time I went on this harangue in this Committee, people 
from our competitors came out and stopped me in the hall and 
said I was right. We are giving a really good deal to our 
competitors. I have never seen another business entity who 
says, because we are so starving for volume, we are going to 
take the most expensive part of our architecture, which is the 
last mile, and we are going to give our competitors a deal on 
that last mile. And, I have yet to have anyone give me the 
analysis that shows me that they have, in fact, at the Postal 
Service considered what price they are giving to UPS and FedEx 
for that last mile of delivery as it relates to our costs.
    Now, call me silly, but it seems like to me we should 
charge them extra for the most expensive part of our 
architecture, right? We are competing with them. I mean, either 
FedEx is going to carry the last mile or UPS is going to carry 
the last mile or we are going to carry the last mile. And if 
they can get a good deal from us for carrying the last mile, 
well, why would they under any scenario ever invest in the 
architecture in the last mile like we have to?
    So, I would like your sense of that, Mr. Rosen, and if you 
could, I would just like someone to show me the business data 
that supports the prices that we are giving UPS and FedEx to do 
that last mile of carry.
    Mr. Rosen. Thank you, Senator McCaskill. I think you raise 
a very interesting point. I am not informed at the level of 
detail of what the Post Office is charging, so that is now 
going to be added to my ``to do'' list, and I appreciate that.
    But, I think you raise an interesting point, because Postal 
delivery is a network business, and we have other network 
businesses that we know a lot about. You allude to the last 
mile as the crucial thing, in telecommunications, energy 
delivery, transportation. And, so, I have wondered--and that is 
the way I will put it at this 
stage--whether the Postal Service is maximizing its revenue 
opportunities from two things, at least. That was one of them, 
the last mile, that it has the final access into homes and 
businesses for delivery.
    And the other is its extraordinary real estate portfolio 
that covers the entire country and some places that people 
might think of as remote. I think there needs to be some 
scrutiny of that.
    I think one of the functions of the Board, I alluded to 
this with Senator Carper--is to really be pushing management. 
We cannot just do what we did, or say this is how we always did 
it, so we will just keep doing it. There has to be, where are 
the revenue opportunities? Are we capturing the advantages we 
have as a network? Are we being creative in terms of being 
responsive to the marketplace?
    And, I think we know from the financial results it is not 
satisfactory and something is going to have to be done better. 
So, I think the Board has to really push, demand plans, 
strategic thinking as to opportunities, and, obviously, close 
scrutiny of the financial aspects.
    So, I am not well versed enough today to speak to how much 
are they charging FedEx or UPS, but I think you raise on the 
last mile an extremely important issue.
    Senator McCaskill. Yes. Well, I think we are getting taken, 
and I think this happened because there was a panic about the 
drop in First Class Mail and there was a sense, we have to make 
it up with volume in packages. So, let us give them a good 
volume discount, our two competitors. Well, I do not think they 
should get a discount at all. I think they should pay the same 
as I pay for the last mile. And then what is going to happen is 
they are going to have to raise--either they are going to pay 
us or they are going to have to pay the price of their 
delivery, which means we will get more customers.
    So, I will look forward to circling back with you after you 
have had time on the Board, assuming that your confirmation 
goes well, which I am sure it will.
    Thank you, Mr. Rosen. Thank you, Mr. Chairman.
    Mr. Rosen. Thank you, Senator. I appreciate it.
    Senator Lankford. Thank you.
    Mr. Rosen, there are three questions that we ask every 
person that comes before this Committee that I need to ask you, 
as well, to be able to get a clear answer for the record, so I 
am going to run through these three and then I will have some 
followup questions for you.
    Is there anything that you are aware of in your background 
that might present a conflict of interest with the duties of 
the office to which you have been nominated?
    Mr. Rosen. No, not that I am aware.
    Senator Lankford. 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. Rosen. No, sir.
    Senator Lankford. Do you agree, without reservation, to 
comply with any request or summons to appear and testify before 
any duly constituted Committee of Congress if you are 
confirmed?
    Mr. Rosen. Yes, I do.
    Senator Lankford. Great. Thank you.
    I need to ask you a couple more followup questions, as 
well, just get some additional detail just for me on this.
    You once made a statement before a Congressional Committee 
dealing with transportation issues, talking about Amtrak in 
particular. You made the statement, in no other functioning 
service market would rising costs and declining revenues be 
defined as success if this produced a small increase in 
customers. It was an interesting statement to make dealing with 
Amtrak in particular.
    What I am interested in is, what have you learned from the 
experience in transportation and Amtrak and the problems with 
Amtrak that is transferrable to the Postal Service in trying to 
deal with some of the issues there?
    Mr. Rosen. Well, there are things that are germane and 
things that are not, because there are some aspects of Amtrak 
that are very different. I think that one of the things that is 
germane is holding management accountable. Amtrak--I cannot 
speak to it today, but during the period when I was at DOT, 
Amtrak was losing a great deal of money but declaring success, 
and there were routes, for example, cross-country routes where 
passengers were being subsidized something on the order of $500 
per ticket. And yet there were other places there was an urgent 
need for service and that were being underserved.
    And so the board required the management to come up with a 
strategic plan and then begin to execute it, and I think there 
are two components of that that perhaps have relevance. One is 
requiring management to present the board with plans that 
include options so the board can say, that is not going to work 
or this is. But, forced the process to produce better results 
with some guidance. I think both places, the board members have 
obligations to the public interest.
    The other is accountability. If you are not getting the 
results, then you have to do something about it, and at Amtrak, 
we actually wound up having to replace the chief executive 
officer (CEO).
    So, I would say those are perhaps a couple of observations. 
I have made the point that in other ways, Amtrak and the Postal 
Service are very different, because Amtrak grew out of the rail 
bankruptcies in the late 1960s, early 1970s, and so Amtrak was 
actually set up as a private company incorporated under State 
law, but as a private company that gets a Federal 
appropriation. The Postal Service is almost the opposite. It is 
a Federal establishment that does not get an appropriation.
    And, so, I think there are things that transfer, as I say, 
strategic thinking, accountability, facing reality of certain 
economic aspects, that you should not be subsidizing passengers 
$500 a ticket when they can get an airplane for less in the 
Amtrak context. But, I think there are other aspects that are 
very different and have to be thought of on their own.
    Senator Lankford. Let me followup with you, as well, on 
some of the conversations that happened here, both rural-urban 
packages, first class, magazines. There is this wide variety of 
pieces that USPS carries, and there has been an ongoing 
lingering question about Saturday mail delivery. I am not going 
to ask you specifically where that is. You are not on the Board 
of Governors at this point. But, when we start to take in some 
of these issues that become pretty dramatic in the way that the 
Postal Service currently functions, how do you address those, 
and if you would like to address the Saturday delivery option, 
if you have clear information on that already, you are welcome 
to be able to address that, as well.
    Mr. Rosen. Well, I will offer what I will call a tentative 
thought about the Saturday delivery issue, which is I look at 
that really as a consumer, because I do not have the benefit of 
the analysis and thinking of the USPS management at this point. 
As a consumer, I look at it and I say Saturday delivery seems 
pretty desirable and is a valuable service both to the people 
that get the mail, like me, and the people that are sending it. 
So, I start with a disposition to think that sounds like it 
could be a competitive advantage.
    At the same time, as I said, I am not familiar with the 
business case and what are the tradeoffs and compromises, so I 
do not want to be closed minded at all about it in the sense 
that, ultimately, as I have said and others have said, the 
Postal Service should function like a business. But, I would 
have to say that while I would want to see the business case 
and the arguments, I would probably start with some skepticism 
against proposals to eliminate it. But, as I say, I do not want 
to completely prejudge what I do not know. But, I start with 
some skepticism, is the way I would put that.
    Now, as to the bigger picture that you were getting at, I 
know time is limited, so I will not repeat myself much. I think 
the Board has to play really a vigorous and energetic role at 
pushing urgency on management to develop options, thorough 
analysis, strategic thinking, innovation, and so on.
    Senator Lankford. One last question that I have for you is 
trying to deal with the expectation of information flowing not 
only from Congress and from the Board of Governors to Congress, 
but from the Board of Governors and the leadership of the USPS. 
You have a responsibility to be able to hold people to account, 
to be able to bounce around ideas, to be able to, as a Board, 
talk through the difficult issues, and to be able to help 
provide a second guess in this and to be able to help make that 
decision.
    Tell me your expectation for the quality of information, 
the timeliness of information, and the thoroughness of 
information that you would expect coming to you on the Board of 
Governors.
    Mr. Rosen. I think you probably are getting at something I 
feel pretty strongly about, which is the Board of Governors has 
to be insistent on that and has to be diligent itself, not 
passive, not as in, oh, we asked for something and they said it 
would be next month, but it got canceled to the next meeting. I 
think that the direction of energy on that has to be the other 
way.
    The Board has to be saying, not we will just show up and 
you will tell us whatever you want, but we want A, B, C, and D. 
We want a presentation on this. We want to see a plan on this. 
We want to know what we are doing about the personnel on this. 
We want it promptly and we may want followup and we want that 
to be done promptly, and I do not think everything has to wait 
for meetings. I think there is a little bit of a balance, that 
Governors should not become micromanagers or interfere with 
management, but should be insistent on timely information.
    Senator Lankford. Mr. Rosen, I am going to give you an 
opportunity to make any other final statements you want to make 
to be able to put on the record before this hearing closes.
    Mr. Rosen. Thank you, Senator, but I think that between the 
statement and the questions, I am happy to stop here, and if 
there are other questions, I would be more than happy to answer 
them, but I think I have had my say. And I look forward, that 
if the Committee chooses to approve me and the Senate confirms 
me, I would, as I said at the outset, do everything I can to 
fulfill the expectations and responsibilities you would be 
entrusting to me.
    Senator Lankford. OK. Mr. Rosen has filed responses to 
biographical and financial questionnaires, answered prehearing 
questions submitted by the Committee, and had financial 
statements reviewed by the Office of Government Ethics. Without 
objection, this information will be made part of the hearing 
record, with the exception of the financial data, which is on 
file and available for public inspection in the Committee 
offices.
    The hearing record will remain open until noon tomorrow, 
April 22, 2016, for the submission of statements and questions 
for the record.
    Mr. Rosen, thank you for being here, and for your already 
consistent public service that has happened in the past. We 
appreciate this and look forward to being able to move forward 
on this in the future.
    This hearing is adjourned.
    [Whereupon, at 10:02 a.m., the Committee was adjourned.]

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