Mr. JOHANSEN. When was that reduction from two to one made? Mr. THOMAS. That reduction was in 1950.

Mr. JOHANSEN. That is what I thought.

Mr. THOMAS. 1950, yes. And then, to further complicate matters, from there on in the collection service was decimated, with the result that during 1950, when the delivery service was reduced, the Department took cognizance of the fact that it was necessary to do something to get mail delivered the next day to residential routes. So what they did was to put in a collection service at night that was late. And they also put in an early morning collection service that would pick up the surplus that was mailed after 9 or 10 o'clock.

Well, now, if you mail a letter in a metropolitan area in a box at 7 o'clock, you are getting delivery now every other day on first-class mail, because in the residential section it will not be delivered the following day, but the day following that-assuming that it is properly cased.

Mr. LESINSKI. Mr. Thomas, was that a ruling of the Department or a mandate of Congress?

Mr. THOMAS. That was a ruling of the Department, I assume. I am not prepared to just specifically state, but I think-it was a directive; let me say that. And let me say furthermore that this is a hodgepodge. When I say that, I mean that conditions obtaining in Philadelphia might be different in New York or Chicago or St. Louis. The hour, instead of 7, might be 6 somewhere else. But the general purpose was to reduce the frequency of service to curtail the collection service, which automatically resulted in the mail taking 2 days to deliver in your own city.

Mr. LESINSKI. If I recall correctly, it was during the 80th Congress, and Congress had cut the appropriations to force the Department to act accordingly.

Mr. THOMAS. I can recall that when I was in, naturally, we were all interested. The post office employees, as the Postmaster General has said on numerous occasions, are generally dedicated, and it is a matter of regret to see that the service is deteriorating because an administrator is going to be called up on the carpet because certain letters do not make a certain dispatch or certain letters are not delivered overnight, when such a thing is virtually impossible. It has bad affect on the morale.

a

You read about proposals in the offing that mail will be shot from rockets from New York to San Francisco, and delivery will be made overnight. Well, our problem when I was in the post office and this goes for New York and Chicago--was to get overnight delivery on mail in an adjoining station of our own the next day. That was our problem. And it still is.

Mr. LESINSKI. Probably it is a good idea, Mr. Thomas, to shoot a rocket up from New York to San Francisco and let it blow up over the city and scatter mail around the whole town.

. Mr. THOMAS. It might be that.

The CHAIRMAN. Mr. Thomas, have you appeared before this committee before?

"Mr. THOMAS. Never.

The CHAIRMAN. You served under Postmaster General Summerfield.

Mr. THOMAS. Yes, sir.

The CHAIRMAN. And Mr. Donaldson?

Mr. THOMAS. Yes, sir.

The CHAIRMAN. And Mr. Walker?

Mr. THOMAS. Yes, sir.

The CHAIRMAN. And Mr. Farley?
Mr. THOMAS. Yes, sir.

The CHAIRMAN. Did you ever protest against the legislation for air increase in mail rates?

Mr. THOMAS. Why should I, as a Government employee? I could not. I was not permitted to. I am not a Government employee any longer.

The CHAIRMAN. No, you are loose now, and you are working for a third-class mail house now. You are in a different category.

Mr. THOMAS. That is right.

The CHAIRMAN. You were in the postal service, and now you are with a third-class mail-order house?

Mr. THOMAS. Yes.

The CHAIRMAN. And your views have changed; haven't they?

Mr. THOMAS. Not a bit. I am on record. If you will go into the Department, you will find letters where I critized the cost ascertainment. As a matter of fact, through some caustic letters I wrote to the Department about 10 years ago, they changed a number of tables that they had on the number of pieces on first-class mail.

My views haven't changed. If you are interested in finding out about that, you might consult with some of the members of the staff of the Postmaster General. There are some of them that quietly agree with me on a number of these things. But that is neither here nor there. I am not testifying to save my job.

Mr. PORTER. Mr. Chairman?

The CHAIRMAN. Mr. Porter.

Mr. PORTER. I guess the gentleman was postmaster at the time the Postmaster General inadvertently overspent his money a couple of years ago, illegally. Does the gentleman remember that situation? Mr. THOMAS. A postmaster?

Mr. PORTER. The Postmaster General overspent his funds and came to Congress for a supplementary appropriation, and threatened to cut off various services.

Mr. THOMAS. I do remember that, yes.

Mr. PORTER. As I remember the proposal then, he included thirdclass mail in this. Was he not going to shut off all third-class mail? Mr. THOMAS. I remember that very distinctly.

Of course, frankly, it has been traditional with men who have been in the service for a long time to completely disassociate the rates from the overhead of the post office.

Mr. PORTER. I was wondering, Mr. Maginnis perhaps remembers the figures of that time. I was very much interested, because there was nothing in the law that provided for any punishment, although it was very plain he had overspent his quarterly allotment-and had done it knowingly.

I am responsible for some legislation, which I hope some day will become law. Were there not some figures on that, Mr. Maginnis? Mr. MAGINNIS. In 1957, I think it was April, he actually ordered the embargo of third-class mail for a 3-month period. And he announced to the United States and to the world that he would save $40 million by so doing. But he neglected to say that during the same

period of time he would lose $70 million in revenue from third-class mail matter which was the answer I have been trying to show, that third-class mail is a very profitable money raiser for the Department. The CHAIRMAN. Mr. Johansen?

Mr. JOHANSEN. Mr. Chairman, I gathered from a remark Mr. Thomas made, when he said he was not testifying to save his job, that there was an implication that the people from the Department who have come up here, the subordinates in the Department, were testifying to save their jobs. Is that the impression the gentleman wants on the record? If he does, he is impugning the integrity and the motives of these subordinates, and I am not going to sit here and listen to it. Mr. THOMAS. I think you are reaching far afield. When I made that statement, I said it very sincerely, that I was not being forced to testify, I came down voluntarily, and that if I did not testify, when I went back to Philadelphia my boss would not say, "We don't need you any more.

Does that clear up the matter for you?

Mr. JOHANSEN. No, it does not. It further obscures it. Nobody has implied that you are testifying to save your job. I just wanted the record clear, that is all, that you are not implying that the subordinates of the Postmaster General have testified under that kind of duress.

Mr. THOMAS. No. But I would repeat the statement that I made before, that the cost ascertainment system, basically, is unsound. Mr. JOHANSEN. I am glad to have any testimony that the gentleman offers on that point that is valid, and that I can support. I respect that, and I respect the gentleman. But I certainly do not want any implication of that sort in the record.

Mr. PORTER. Mr. Chairman, may I say that I am looking forward to the first employee of the post office who comes in here and disagrees with the Postmaster General. It would be an interesting experience for me to hear that. I do not expect it to happen, however.

The CHAIRMAN. Are you about through now?

Mr. THOMAS. Well, not quite. I am almost through, Mr. Chair

man.

The CHAIRMAN. All right.

Mr. THOMAS. What I wanted to elaborate on was the handling of the bulk third-class pieces extending beyond that which is required by the Department. I mentioned this Metro system, which means, in essence, that if our firm has mail for an adjoining community in New Jersey or Pennsylvania, a separate and distinct post office, not only makes these separations as required but, in addition, takes the mail directly to the post office and saves the transportation costs. wanted to add that to the testimony.

The CHAIRMAN. Is that all of your statement, then?

I

Mr. MAGINNIS. Mr. Chairman, I am suggesting to Mr. Thomas there is a gentleman here from Seattle who came an awfully long way, and who has a statement no more than 2 minutes long. I would certainly like to see him get on, if it is possible, before the bells ring. Mr. Lou Jepson.

The CHAIRMAN. Is Mr. Thomas through now?

Mr. THOMAS. I can conclude here, Mr. Chairman.

The CHAIRMAN. All right, call this gentleman you are referring to, Mr. Maginnis. What is his name?

Mr. MAGINNIS. Lou Jepson.

STATEMENT OF LOU JEPSON, PRESIDENT, WALTER DOUGLAS ENTERPRISES, INC., SEATTLE, WASH.

Mr. JEPSON. My name is Lou Jepson. I am president of a personal label business in Seattle, Wash., named Walter Douglas Enterprises, Inc. Our business started in 1952 for the sole purpose of printing personal labels for people to use on their envelopes, books, records, and various other possessions.

We have used, almost exclusively, a single-fold double business reply card, and it has worked. Or I should say did work very successfully for about 6 years. I use the phrase "did work" because that is actually the case. It did work well until 1958, when the bulk thirdclass rate went from $15 per thousand to $20 per thousand.

When the last postage raise went into effect, the money we spent annually for postage decreased 53 percent from $188,796 in our fiscal year ending March 31, 1958, to $89,474 in our fiscal year ending March 31, 1960. The main reason for this decrease in money spent for postage was the elimination by us of a great amount of occupanttype mail. Our overall volume of third-class mail dropped from 8,275,000 pieces in 1958 to 2,888,000 this year.

During this same period, our payroll dropped from $185,647 to $87,925, or a decrease of 53 percent. Our labor force dropped from an average of 100 to 50 in the same period. Our net operating profit dropped 118.41 percent during the same period. At the present time it costs us approximately $10 to produce and address 1,000 of our double cards and $20 for postage. It will be seen that postage presently represents two-thirds of the total cost of our mailings. Our experience in this regard refutes the McKinsey report.

Our occupant mailings bring back a return of under 2 percent. At the present time, this represents only a breakeven mailing, but it is an absolute requirement in our business. We create a customer and hope for repeat business.

The McKinsey report claims that we should offset the proposed increase by improving our mailing piece, our lists, and so forth. That to me sounds like an elementary statement. Unfortunately, it is an irresponsible conclusion, because we have not been sitting still and going along without trying continuously to improve our mailing piece and our mailing lists. I have hired special copywriters and advertising agencies to improve our mailing piece, and to date they have never been able to accomplish this. Incidentally, we are still trying.

The increase of $5 per thousand scheduled to go in effect on July 1, 1960, will cause us to become more selective than ever and cut our use of the mails even more than the 52.61 percent reduction we made during the period 1958-60.

The small business mailer, particularly, who depends entirely on the use of the mail to obtain business, is going to be hurt materially by the $25 per thousand rate already legislated. The proposed rates of $30 and $35 would be ruinous.

I sincerely hope that your committee will recommend that no raises be put into effect at this time and that you will give every consideration to suspending the one that is due to become effective July 1 of this year.

Thank you very kindly for giving me this time.

The CHAIRMAN. Are there any questions?

Mr. PORTER. Mr. Chairman, I would like to ask the gentleman if he has any idea how many of his colleagues are in the same boat; in other words, how general is the situation he describes here?

Mr. JEPSON. As far as I know, my competitors' mailings have dropped materially. I don't know to what extent.

Mr. PORTER. Why do you suppose third-class mail-you must be conscious of that because of your work-has such a bad reputation among some members of the public?

Mr. JEPSON. I do not think that actually exists to the extent that it is claimed. We get mail back occasionally which indicates, "Take me off your mailing list." But the percentage is so small that you don't notice it.

Mr. PORTER. As far as the people receiving it are concerned, you do not get much evidence of resentment; is that your position, relating to your returns? You only get a few back from people saying, "Take me off your mailing list"?

Mr. JEPSON. Well, I get 2 percent returns on orders.

Mr. PORTER. Yes. Do people talk to you, though, or are you aware of the fact that there is a certain amount of resistance to third-class mail? Mr. Maginnis testified how we almost abolished it here on the floor of the House because of the feeling against it. I was wondering whether from your experience you had any idea why third-class mail had such resentment against it, if it does.

Mr. JEPSON. It would have to be an opinion. If I understand your question, it is why it has a bad reputation.

Mr. PORTER. Yes. I mean it must have, if we almost threw it out here. And I get letters from time to time from people saying, "Do away with the trash mail."

Mr. JEPSON. Where did it start? Where did the word start?
Mr. PORTER. I think it started with the newspapers, myself.

Mr. JEPSON. I think so, too.

Mr. PORTER. I was just wondering what your personal experience had been.

Mr. JEPSON. I think it started with the newspapers, and I think that if third-class mail was eliminated, the newspapers might benefit. However, I cannot use it. I have tried it.

The CHAIRMAN. All right, thank you very much.

Are there any other witnesses here now, Mr. Maginnis?

Mr. MAGINNIS. I just wanted to say, Mr. Chairman, I was available for questions if there were any more, when I introduced Mr. Thomas.

The CHAIRMAN. I think since some witnesses are from out of town, they ought to get through and not have to come back here.

Mr. MAGINNIS. Mr. Fixler of Long Island has a 12 minute statement I think would fit in well.

STATEMENT OF BERNARD FIXLER, PRESIDENT, CREATIVE

MAILING SERVICE, INC., FREEPORT, LONG ISLAND, N.Y.

The CHAIRMAN. You have been before the committee before, have you not, Mr. Fixler?

Mr. FIXLER. No, never, sir, this is my first time.

The CHAIRMAN. Oh, I thought it was Mr. Tillotson. It is Mr. Fixler. All right.