POSTAL REVENUES

STATEMENT OF HON. WALTER F. BROWN, POSTMASTER GENERAL OF THE UNITED STATES

The CHAIRMAN. General, we appreciate your appearing before the committee. The committee a few days ago adopted a rule that the witnesses be confined to 15 minutes on account of the large number of them, and the shortness of the time in which we have to consider these matters, but I wish to say to you that the rule provided an exception in the case of the Postmaster General on account of the recommendations that had been made in the Secretary of the Treasury's letter, which involves something like $150,000,000, and I want to say to you that the 15-minute rule does not apply to you.

Mr. CRISP. You may take such time as you desire.

Mr. BROWN. Thank you, gentlemen.

Your letter invited us to make suggestions as to how an additional postal revenue of $150,000,000 could be raised. We did not know just what you wanted to know, just what you wanted in the way of information. If you will indicate to me, I will be very glad to furnish what I can.

The CHAIRMAN. I will say to the Postmaster General that my recollection of the testimony is, and my colleagues will refresh my mind if I am wrong, that when Mr. Mills, who presented the case of the Treasury, was questioned with regard to the $150,000,000 suggestion that could be saved in the postal department, stated that he preferred, as that was in another department, that you would present that part of the matter with reference to postal expenditures and retrenchments.

Mr. CRISP. Mr. Chairman, may I state this: When Mr. Mills was testifying before the committee on behalf of the Treasury Department he made a recommendation that $150,000,000 more revenue be raised out of the Post Office Department. I interrupted Mr. Mills and asked if he would please specify and give the committee the benefit of the Treasury's recommendation, as to how that additional sum could be raised from the postal service. Mr. Mills replied that as that was in another department the Treasury did not care to suggest, but thought the Post Office Department should make the recommendation as to how this sum should be raised. Thereupon I asked the committee to extend an invitation to you to appear before the committee and make any sort of recommendation you desire to make, if you desired to make one.

Mr. BROWN. Well, I have not understood we were being invited to make a recommendation with respect to this matter, but rather that we were to furnish such information as we had. We will be quite willing to furnish a formal and written recommendation if the committee desires it at the end of this hearing. In the meantime, I am prepared to say to you how additional revenue can be produced from the postal service.

The CHAIRMAN. Of course, General, we wish you to proceed in your own way.

Mr. CRISP. I think I voice the sentiment, General, of the committee when I say we have no desire whatever for you to make any recommendation unless it is your desire to do so, but in view of the fact that the Government was recommending this we thought the proper and courteous thing to do was to invite the departments having it in charge to make any recommendation they saw fit. If you do not care to make any recommendation, I am sure the committee will not expect you to do so.

Mr. BROWN. The war revenue act of 1917 made some changes in postal rates, principally first class, post cards and second class rate. I assume the committee will be interested in knowing what was the effect of those increases upon the volume of the mail affected by the increased rates.

One cent was added as a war revenue measure to all first-class mail. The effect on the revenues was not appreciable so far as the volume was concerned. There was an increase in volume all through the period in which the 3-cent rate was in effect, perhaps the normal increase of business of the country at that time. There was no falling off in the first-class postal revenue attributable to the increase in the rate.

An increase in the present rate from 2 cents to 3 cents would, as we estimated it, produce a little in excess of $100,000,000 based upon the present postal volume. We believe that this increase at this time is entirely justifiable, based upon the value of the service and the rates that prevail in other countries. Perhaps you would be interested in knowing what the rates are in the other countries that are comparable to the United States.

Great Britain's rate is 3 cents, Canada's rate is 3 cents, Australia's rate is 4 cents, Germany's rate is 32 cents for five-sevenths of an ounce. Our rates are based on 1 ounce, so that is about 4 cents an ounce. France's is 2 cents, for five-sevenths of an ounce, Italy is 43 cents, Russia is 712 cents, Argentina 6 cents, Mexico 4 cents.

It might interest you to know that we pay our letter carriers in New York City an average of $2,100 a year, and the letter carriers in London are paid an average of $900 a year. The average haul of our letters across the country is probably four times as great as that of any of the other countries that I have mentioned.

So, I say, based upon the value of the service to the public and based upon comparisons with the other countries perhaps comparable to ours, an increase in the rates to 3 cents as a revenue measure seems to us entirely justifiable.

The second-class rates were increased by the revenue act of 1917. They were increased over a period of four years, a little each year. That increase had no appreciable effect upon the volume of mail that was sent second class. The volume of mail fluctuated from time to time, as it does with the business of the country. It is a pretty fair barometer of the business of the country.

In the depression of 1921 the volume went down, and then it went up when that depression was over, so that we have no figures in our department which would justify a conclusion that a rate has ever been effective on second-class matter which has driven secondclass matter out of the mails.

The rates were reduced in 1928 on second-class matter in the belief on the part of Members of Congress and others that there would be an increase in the volume, but that theory was not justified by the facts. The volume was not increased, because the rate was reduced.

The revenue act of 1917, the emergency act, added 1 cent of revenue tax to all parcel-post packages, and a revenue stamp, a Treasury stamp was affixed to the package. Personally, I would not recommend that method of collecting additional revenue again, because it made our postal clerks responsible for those revenue stamps, and if it was desired to raise more money that way, it could be done by providing that parcel post should carry 1 cent postage plus the regular rate that Congress saw fit to make effective, rather than drawing the Treasury directly into the matter with a stamp tax, because, of course, revenue stamps are not nearly as easily procurable by the public as postage stamps.

There are a number of other ways in which small increases in revenue can be obtained. I perhaps ought to say before leaving the question of second class that if the second-class rates provided by the act of 1921 were made effective now, that is, that became effective in their maximum limit in 1921, they having been set up in 1917 under the war act, it would increase our revenues approximately $5,000,000 from that source.

We have been doing what we can to obtain more revenue and have with the approval of the Interstate Commerce Commission obtained the right to increase the limits of weight and size of parcel post fourth-class matter, so that we are expecting an increased revenue of $5,000,000 in the next fiscal year from that. That, however, does not require any additional legislation.

We have pending before the Interstate Commerce Commission, which has jurisdiction of the matter, an application for increase in the postal rates on fourth-class matter in the first three zones, and a slight reduction in the higher zones. If the relief which we ask for is granted we will secure from that source an estimated increased revenue of $7,500,000.

We have recommended several other minor changes in the laws. that will produce small sums of money. We think there should be a revision in the registry fees, and the limits of indemnity on the registry service. That would be an increase of $2,000,000 we estimate. I think there should be an increase in the insurable rate on parcel post and on the C. O. D. fees, which would produce $2,500,000; and a revision of the money-order fees, which would produce $1,250,000.

There are a few other small matters which offhand do not seem to me to be worth while to put into a revenue act. I assume you gentlemen are concerned with that. These other matters and most of those I have just mentioned seem to be more properly_matters to be studied by the Committee on Post Offices and Post Roads as part of the permanent administration of the postal establishment. For the purpose of revenue, a temporary matter to balance the Budget at this time, we can think of no effective way to produce any considerable sum of money except by an increase in the first-class rate as we have indicated. We are convinced that it will not re

duce the volume, and with the burden spread out over the country it would be very small and would fall on people precisely in the proportion in which they use the postal service.

Consideration can be given to a slight increase in the second-class rates, but that involves a very careful study of the whole problem, and we are not prepared to say at the present time whether that would materially affect business recovery. The advertising feature of second-class matter and its promotion of business over the country is a very important factor. The stimulation of business by a free flow of advertising matter is important. That matter should bear its just burden, but whether it can be dealt with satisfactorily and scientifically in a revenue measure I would somewhat doubt myself.

The CHAIRMAN. Generally, the first-class postage of 2 cents is where you get your big revenue, is it not?

Mr. BROWN. It is about one-half of the postal receipts.

The CHAIRMAN. That is more than self-sustaining now at 2 cents, is it not?

Mr. BROWN. Mr. Chairman, that is entirely a matter of viewpoint. If you count the number of pieces of mail that go through the mails of every class and divide the total cost of the service by the number of pieces, we are obtaining more revenue from first-class mail than the postage, but if you take into consideration the preferential treatment that first-class mail is given, and the fact that we would not have many of the facilities that we have at all if it were not for first class, we believe that the rate is too low. For instance, the carrier goes out in the morning on his first round. He takes nothing but first class. The newspapers and the other things wait. We would never have these railway postal cars, the traveling post offices, to distribute parcel post. That does not require any haste. All of our preferential treatments, all of the department is really set up for the purpose of carrying on the first-class mail, and the second and third and fourth class mails are purely incidental. They are carried, too, by other agencies. We can not get from the people more than other people are willing to perform that service for. But the first-class mail, which the public demands shall be secret, secure, and swift, all of the facilities of the Government are massed for the purpose of working that and I say, when you take into consideration the preferential treatment, the things that are done for first class and are not done for the others at all, we think we are not getting what it costs us.

The CHAIRMAN. The first-class mail is also, if I may use the word, a feeder for the additional mail, because the first-class mail provides the means of communication between the buyer and seller for which is provided the third and fourth class mails.

Mr. BROWN. It does.

The CHAIRMAN. How does the parcel post under the present postage rates compare with expenses? How do the revenues compare with the expenses?

Mr. BROWN. We think we are not getting our costs back in the first three zones. The mail-order houses have adopted the practice of establishing branches over the country. Then they send from

their factories or their main storage places stocks of goods to those branches, and from there they distribute them just in the first, second, and third zones and they get the benefit of the very low rate in those zones. We have had cases where they would truck the material from their storage warehouses into a zone where they wanted to deliver it, and then turn it over to our postmaster there to deliver. So, the parcel-post rates with respect to the first three zones are rather too low, but we believe they are too high in the highest zones to make it attractive. But that is a matter that does not require congressional sanction, and we have pending now before the Interstate Commerce Commission a proceeding to adjust those rates equitably, and the case is to be heard in a very few days.

The CHAIRMAN. What I understand you mean by that is that they will truck or send by express or otherwise the short-haul goods, and on the long haul, as across the continent, they send that by mail; is that right?

Mr. BROWN. No; just the reverse. Instead of sending a parcelpost package from Kansas City to western Kansas by mail from Kansas City, where we are all set up to handle parcel post in large quantities, they will truck the parcel post to Wichita, which is over the line of the next zone, so they would then get a very low rate from Wichita to western Kansas.

The CHAIRMAN. There is another question in connection with your testimony; the Post Office Department insures these packages at a very reasonable premium. How has that worked out? Have you lost much on that?

Mr. BROWN. Well, we think those rates are too low and we have recommended to Congress an adjustment of them which would produce perhaps $2,000,000 or a little more.

The CHAIRMAN. What would be the amount in revenue if the first. class rates were raised one cent? Have you estimated that?

Mr. BROWN. Yes; if it were raised 1 cent on all letters it would produce about $135,000,000. If drop letters were excluded-that is, letters that are posted in Washington for delivery in Washingtonwhich we call a drop letter, or if the increase was limited to letters which came from one post office to another post office, it would be from $100,000,000 to $105,000,000, based on the present volume. If you increased it all the way around, it would bring about $30,000,000 more. Increasing the post-card rate would cause a very appreciable decrease in volume and it would not result in more revenue. The CHAIRMAN. I did not get that.

Mr. BROWN. Increasing the post-card rate, or the postal-card rate, the postal card being the card we issue ourselves, with the insignia stamped on it, the post card being the one that the sender affixes his own stamp to-if we were to increase that the history of the department shows there would be a marked decrease in the post cards because at once the post card comes in competition with the drop letter at 2 cents, and if a man can send a sealed letter in his own home town for 2 cents he will not pay 2 cents for a post card.

Mr. LEWIS. General, I will first read some figures that were gotten from your cost division, in order to lay an intelligent foundation for later questions. And may I take this occasion publicly, sir, to congratulate your service on the very fine work that is being done in your cost division?