This argument is fallacious on several of its premises. The Post Office Department, by congressional directive, must operate on essentially a break-even basis. That was made clear in the Postal Policy Act of 1958. The Post Office, while not unique among Government agencies in its objective to operate on a break-even basis, is essentially and fundamentally different from those agencies which depend almost exclusively upon taxation for their operating costs. The functions of these latter agencies can be broken down into such categories as judicial, regulatory, national defense, international relations, and so forth. All these functions are intangibles. They are incapable of being reduced to measurable units of service or benefit to the individual. These agencies are operated for the benefit of all citizens, without any direct charge to the users who are individually unidentifiable. I submit, Mr. Chairman and members of the committee, that it is the proper and historic function of taxation to collect from the general public the costs of Government which cannot be collected directly from the beneficiaries of the service rendered. But the Post Office is different. It provides a service of measurable value to individuals who seek such service and it charges a fee for such service. It is not, and it never has been, the function of taxation to meet such identiñable collectible expenses. Of course, there are some public services the Post Office performs—such as free mail to the blind, free-in-county, and so on. These public services are now being financed through direct appropriation from the general funds of the Treasury. Mr. Chairman, it is gross exaggeration to say that the Post Office is unique among Government agencies in that it seeks to break even in its financial operation. Other agencies which supply measurable services to identifiable recipients all seek to break even, at the very least. It is true that many of these services, like the postal service, are not breaking even now. But it is a matter of congressional policy that these identifiable services should ultimately pay their way. Public Law 137 of the 82d Congress spelled that out very explicitly. Numerous identifiable Government services pay their way. Let me cite just a few of these: AEC services to business, such as isotope sales. The St. Lawrence Seaway. The Panama Canal Company. The Washington National Airport. Testing services of the National Bureau of Standards. Sale of Government utilities. Oil and gas leases. Timber sales. Grazing sales. I understand that one of the direct-mail representatives who appeared before this committee cited the Patent Office as one example of an identifiable service which does not pay its way. That is perfectly true, just as it is true that thirdclass mail does not pay its way. But what this witness neglected to tell you is that legislation has been introduced in both the House and the Senate to make that service more nearly self-sustaining. The House bill, H.R. 2739, 86th Congress, has been reported out favorably. If that bill is approved, the charge of 25 cents for patent copies will be increased 300 percent when the number of pages is in excess of 25. I trust that this committee will follow that same course in amending thirdclass postal rates. It seems to me that it is highly illogical to say that the Post Office, on the one hand, should charge fees to individuals for the services it performs for themand then to say that the Post Office should not bother to eliminate its deficits. These two concepts cannot exist together. The logical alternative to a reasonable approach to a break-even operation is to argue that the Post Office shouldn't charge any fees at all for its services. And I am sure that you, Mr. Chairman, and the other members of this committee will all agree that such a position would be absurd. STATEMENT OF E. F. MCDERMOTT, GENERAL MANAGER, IDAHO FALLS (IDAHO) POSTREGISTER, AND CHAIRMAN, POSTAL AFFAIRS COMMITTEE, INLAND DAILY PRESS ASSOCIATION My name is E. F. McDermott. I am general manager of the Idaho Falls (Idaho) Post-Register which has a circulation of 18,808 daily and 18,730 on Sunday. I present this statement, however, not primarily in behalf of the PostRegister but in behalf of the 478 newspapers which are members of the Inland Daily Press Association, because I am chairman of the postal affairs committee of the association. Except for six which are in Ontario, Canada, these newspapers are located in 22 States, principally in the North Central and Rocky Mountain areas, and our 472 member newspapers published in these States have a combined circulation of 12,937,032. The members of our association in the United States include 36 with circulations over 50,000 and 96 with circulations over 25,000. Well over half, 257, have circulations under 10,000. Four-fifths, 378, have circulations under 25,000. It is these smaller newspapers, and particularly the smallest of them, which would be hardest hit by the increases in second-class postage rates which have been proposed. I will give you several examples. First, however, let me say that if it can be proved that some increases in second-class rates applying to newspapers are justified, our members would not oppose them. We want to pay our way and do not favor any second-class postal subsidy. We do not believe we have such a subsidy now. For years the Post Office Department has charged daily newspapers with far too much of its deficit. For example, Congress created the rural free delivery service for the benefit of farmers and other citizens living too far from their post offices to call for their mail, yet the Post Office Department charges against second-class mail a large proportion of the cost of the rural delivery, actually more than it charges to first-class mail. In 1958 the Congress enacted the Postal Policy Act declaring that the Post Office is a public service and instructed the Postmaster General to separate the public service costs of his Department. The act further specified that such public service costs "should not constitute direct charges in the form of rates and fees upon any user or class of users of such public services or of the mail generally." The Citizens Advisory Council to the Senate Post Office Committee of the 85th Congress itemized $392,400,000 of public service costs of the Department and in addition listed many other items to which it could not assign definite dollar values because accurate information was not available. In 1958 the Post Office Department, itself, calculated public service costs to total $171,259,000, not including anything for star route service and third- and fourth-class post offices, though the Postal Policy Act specifically names "the loss resulting from the operation of such prime and necessary public services as the star route system and third- and fourth-class post offices" as one of a long list of specific public services of the Department. Now, however, the Post Office Department is asking Congress for an appropriation of only $49 million for its public service losses for the fiscal year 1961 and it is on the basis of this greatly reduced estimate of its public services that the Department is claiming its huge deficit and demanding higher postage rates. In its current estimates of public service costs the Department is not including anything at all for star route service and its losses in operating the many thousands of small third- and fourth-class post offices which no private business would think of keeping open, but which the Department maintains as a public service. Several other specific public services named in the Postal Policy Act are also not included in the estimates. It should be pointed out that the Postal Policy Act declares that "the total loss resulting from" its long list of Post Office Department public services should be deducted to arrive at net costs for rate determination purposes But in estimating what it expects Congress to appropriate to cover its public services for the fiscal year 1961, the Post Office Department instead limits its estimates to "revenue losses." The result of these failures of the Post Office Department to list properly its public service costs in accord with the Postal Policy Act of 1958 is to greatly overstate the amount of the postal deficit chargeable to second-class mail. So, our position must continue to be that, until the Postmaster General complies with the Postal Policy Act of 1958 and until all public service costs are properly accounted for and not included in the Department's allocations of charges against daily newspapers, we should never again be accused of receiving a subsidy or threatened with any such rate increases as are proposed in the bill before you. If the rates now proposed become effective they would have the effect of pricing many small daily newspapers out of the mails. Here is the way the new rates would apply to my newspaper's 6,587 mail subscribers: Present rate per year per subscriber_.. January 1961, 15-percent increase already scheduled_. $2.26 34 1.51 4. 11 Second-class rates were increased 30 percent between 1952 and 1954, an additional 15 percent in 1959, and 15 percent more this year. Another 15-percent jump is slated for 1961 under the terms of a 1958 act of Congress. On the Post-Register last year the paper and ink costs for each subscriber amounted to $8.39. If you add that to the proposed total mailing charge of $4.11 you get $12.50 against our mail subscription rate of $13 per year, which is just about as high as a paper of our size can go for mail delivery. In other words we would have only 50 cents per year left to cover all our other costs of recordkeeping, addressing, bundling, and sorting for the post office, hauling to the post office, etc., for each subscriber. Now let me give you some figures furnished me by a number of other newspapers in our membership. The La Crosse (Wis.) Tribune, which has a circulation of 32,752 daily and 32,617 on Sunday, has calculated the effects of the rate proposals as follows: The Tribune's newsprint cost per subscriber is $8.05 annually. Add the newsprint cost alone to the postage proposed and the total cost per year per subscriber would be $13.14 against the Tribune's mail subscription rate of $12 per subscriber. Yet newsprint cost alone is only 17 percent of the Tribune's total cost of producing its newspaper. "In other words," writes the Tribune publisher, William T. Burgess, "we're losing our shirt on mail as it is and any further increase in subscription prices to the farmer will practically put an end to mail circulation. If Congress wants to solve its postal problem by eliminating rural route distribution of newspapers this bill is one good way to do it." Let me quote now E. C. Hayhow, publisher of the Hillsdale (Mich.) News which has a daily circulation of 8,470: "The Hillsdale Daily News paid $171.94 last month for second-class postage. If our bill had been computed on the basis of the Post Office Department's recommendation, our bill would have been $572.50. "Our bills vary little from month to month, so that a projection to cover a year's costs has some validity. Such a projection shows our second-class costs would more than triple-from $2,063.28 to $6,870. "While the proposed increases would hurt all newspapers, the small dailies and weeklies serving rural areas by mail would be the most seriously injured. "I don't want a subsidy; I want to pay my share of appropriate and legitimate postal charges, but until the Post Office comes up with a cost-ascertainment program which permits an honest determination for the various classes of mail service, I am going to continue to believe that present charges are adequate." Kenneth B. Way, publisher of the Watertown (S. Dak.) Public Opinion, which has a daily circulation of 13,567, has analyzed the proposed increases as follows: "Our statement from the post office for the month of March was $1,027.10, Under the proposed rates our costs for the month of March would have been $2,260.19, a 120-percent increase. We think this is confiscatory. It would mean an increase of approximately $15,000 over a year's period." H. J. Waters, Jr., publisher, Columbia (Mo.) Daily Tribune, which has a circulation of 10,596, says: "We figure that the proposed postal rate increase would make a difference of $1.60 per subscriber per year on Tribune subscriptions in the county and $1.54 on subscriptions outside the county. Because of our competitive situation we cannot raise subscription rates. Therefore, the increase in postal rates would have to be absorbed. In our case this would amount to something over $40 per week, or $2,080 per year. "Also in the Tribune's case, we do part of the work of delivering our papers that go out by mail, which offsets to a large degree the work of the local post office. We haul more than half of the papers going to adjoining counties. Nevertheless, we are still paying full postage on these papers. I am sure that a similar situation exists in the cases of many newspapers throughout the country." Gordon K. Bush, publisher, Athens (Ohio) Messenger, which has a circulation of 15,657 daily and 17,458 Sunday, writes: "We have calculated that our monthly post office bill would increase from the present figure of around $621 to $1,407, an increase of 226 percent, if this proposed change went through. "The result is obvious: We would just have to cut out all mail subscriptions, because we certainly could not increase the subscription prices sufficiently to cover such postage charges. "If the intention of the Congress is to restrict the dissemination of news and information furnished by newspapers, they are going at it the right way." Robert Petteys, general manager, and Everett Dawson, circulation manager of the Sterling (Colo.) Journal-Advocate, which has a daily circulation of 6,444, put it this way: "Our March 1960 postage bill for mailing of newspapers was $259.30. Under the new proposals this amount would be increased by the amount of $379.90 to a total for the month of $639.20. This is in the area of 145 percent increase. Let us point out that this does not include the 15 percent already scheduled to take effect January 1, 1961, and that second-class postage rates were increased 15 percent in 1959 and 15 percent in 1960 and other increases were made previously in the 1950's. "Almost 50 percent of our 6,444 circulation must be distributed through the mails, of which a large portion goes right here in northeastern Colorado. We find it economically impossible to distribute by any other means, but we seriously doubt that we will be able to assume this added postage cost without passing it along to our subscribers, many of whom will in turn drop their subscriptions because of the high cost. We can say in all sincerity that we believe these new proposed rates will help to price us right out of the business." V. R. Blackledge, business manager of the Scottsbluff (Nebr.) Star-Herald, which has daily circulation of 13,867 and Sunday circulation of 13,966, gives the same sort of startling figures, and makes a couple of interesting points about the bill before you. I quote: "The provisions of H.R. 11140 would make large increases in mailing costs for daily newspapers without any effort to establish what correct handling costs actually are. Most affected would be small daily newspapers and rural route subscribers, since large, metropolitan dailies make comparatively little use of mail delivery. "With the help of our postmaster, I figured our January and February 1960 mailing costs on the basis of the rate increase already scheduled for 1961, plus the increase proposed in bill mentioned above. Our January 1960 bill of $734.96 would be $812.03 if figured on the 1961 rates already approved. If figured on the 1961 rate plus the increases proposed in H.R. 11140, the bill would be $1,296.85. "Our February 1960 postage of $669.94 would be $741.13 on the 1961 rates and $1,102.22 if the increases proposed are put into effect. "A part of this increase we are quite willing to accept-namely, the increase already scheduled for 1961 and the proposal in H.R. 11140 which would eliminate any 'free in county of publication'. We do not want the free-in-county privilege. But we think any further increases should be based on and justified by the true cost of handling daily newspapers through the mails, not by the cost of handling all second-class matter, nor by the overall cost of operating the Post Office Department. Let newspapers pay the full cost of mailing newspapers, but do not charge them with any part of the cost of mail carried free for Government agencies or at reduced rates for charitable organizations." Finally, Loring C. Merwin, president of our association and publisher of the Bloomington (Ill.) Pantagraph, which has a daily circulation of 39,881 and Sunday circulation of 35,347, writes as follows: "A farm reader of the Pantagraph pays $11.50 per year for his 6-day paper. The three annual increases voted by the 1958 Congress have already increased our postage cost per subscriber from $1.71 (about 10 percent) to $2.42 (almost 25 percent). The proposal would more than double this-to $4.88 (almost 50 percent of the total subscription price). "The Pantagraph wants no postal subsidy, nor I believe does any other self-respecting newspaper. We have consistently urged that the free-in-county provision be eliminated and that the Post Office Department ascertain the true cost of handling daily newspapers so we can pay our own way. "Since 80 percent of all our mail copies (and we are typical) is delivered in our own trucks direct to outlying post offices at no expense to the Postal Department, the cost of handling our papers is relatively small." WASHINGTON, D.C., May 9, 1960. Hon. Toм MURRAY, Chairman, House Post Office and Civil Service Commission, Acting officially for our nationwide membership, all independent business and professional men-voting members, totaling in excess of 150,000, we oppose any increase in postal rates at this time, and particularly as it applies to firstclass rates. It is our understand that first-class mail pays for itself. Therefore, to increase postal rates at this time will be just another load small business will have to carry. Will you kindly make this message a part of the record of the hearing? National Federation of Independent Business. TOM MURRAY, COLUMBUS, OHIO, May 16, 1960. Chairman, Post Office Committee, House of Representatives, Washington, D.O.: By action taken at the annual meeting of Printing Industry of Ohio held May 14, the members of which are producers and users of printed second- and third-class mail, authorized the sending of this telegram vigorously opposing a further increase in such rates at this time due to the unfair impact such an increase would have on the current business economy. R. REID VANCE, Executive Secretary, Printing Industry of Ohio. THE COLUMBIA DAILY TRIBUNE, Representative MORGAN M. MOULDER, Washington, D.C. DEAR MORGAN: I am writing to protest the proposed large increase in secondclass postal rates, which would place a heavy burden on newspapers throughout the country, particularly small newspapers that are least able to bear the increase in cost. For your information I am enclosing a current bulletin issued by the Inland Daily Press Association, which is the best informed organization in the country on the problems of small- and medium-sized newspapers. The estimate of the increase in cost to newspapers in the Inland Bulletin corresponds very closely to our own computation. We figure that the proposed postal rate increase would make a difference of $1.60 per subscriber per year on Tribune subscriptions in the county and $1.54 on subscriptions outside the county. Because of our competitive situation we cannot raise our subscription rates. Therefore, the increase in postal rates would have be be absorbed. In |