PRC

Archives: Testimony of Taub and Acton on Saturday Delivery

on

taub
PHOTO: Robert Taub, PRC

In 2011, during Senate nomination hearings for the Postal Regulatory Commission (PRC), Mark Acton (R) and Robert Taub (R) discussed their views on ending Saturday delivery and the Postal Service’s Universal Service Obligation. Taub is now the Acting Chairman of the PRC, replacing Ruth Goldway (D). Mark Acton is currently the Vice Chairman. At the time, Senator Carper was displeased with Goldway and hoping for a new direction on key issues the Postal Service was facing, including Saturday delivery. Here is what the senator said in his opening remarks:

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.

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


<graphic(s) not="" available="" in="" tiff="" format="">






                  U.S. GOVERNMENT PRINTING OFFICE
68-019PDF                 WASHINGTON : 2012
-----------------------------------------------------------------------
For sale by the Superintendent of Documents, U.S. Government Printing 
Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; DC 
area (202) 512-1800 Fax: (202) 512-2104  Mail: Stop IDCC, Washington, DC 
20402-0001





        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.]


                            A P P E N D I X

                              ----------                              




<graphic(s) not="" available="" in="" tiff="" format="">


                                 


Recommended for you