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Postal Service
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Philip W. Buchen Files
Philip Buchen's General Subject Files
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Conflict of interests
Postal matters
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The original documents are located in Box 43, folder "Postal Service" of the Philip Buchen
Files at the Gerald R. Ford Presidential Library.
Copyright Notice
The copyright law of the United States (Title 17, United States Code) governs the making of
photocopies or other reproductions of copyrighted material. Gerald R. Ford donated to the United
States of America his copyrights in all of his unpublished writings in National Archives collections.
Works prepared by U.S. Government employees as part of their official duties are in the public
domain. The copyrights to materials written by other individuals or organizations are presumed to
remain with them. If you think any of the information displayed in the PDF is subject to a valid
copyright claim, please contact the Gerald R. Ford Presidential Library.
Some items in this folder were not digitized because it contains copyrighted
materials. Please contact the Gerald R. Ford Presidential Library for access to
these materials.
Mr. Buchen: Let's this. have something done about
H.W.-Attorney.
-
nothi
Jack Anderson
sonal
HEW
also
Milc
HF
FIRST CLASS MALE
]
Cali
WASHINGTON.
Service continues to decline. Unless
on
Postmaster General Ted Klassen has
Congress bails him out, the free-wheel-
built himself the most luxurious office
Ing postmaster will ask for another
P
$
in Washington with taxpayer funds,
rate hike soon. It may cost 13 cents to
but regularly leaves it for personal
mail a letter and help underwrite Ted
junkets, also courtesy of Uncle Sam.
Klassen's royal way of life.
The impulsive Klassen, who has just
warned that the price of a stamp is
Health, Education and Welfare Secre-.
going up again, spent $12,870 on 32
tary Caspar Weinberger permitted the
Ch
trips to 18-cities in 1973, a travel record
Iniversity of California to keep $50
by a
that almost puts him in a class with
million in federal contracts despite ad-
paigr
Secretary of State Kissinger.
vice
Digitized from Box 43 of the Philip Buchen Files
at the Gerald R. Ford Presidential Library
THE WHITE HOUSE
WASHINGTON
SecGroff
about these
A
Gistin file SERVICE" RALO FORD LIBRARY
re "Postal
THE WHITE HOUSE
WASHINGTON
September 5, 1974
MEMORANDUM FOR:
PHILLIP BUCHEN
SUBJECT:
Proposed Presidential Meeting with
the Postmaster General
The Postmaster General, E. T. Klassen, and the Chairman of the Board of
the Postal Service, Frederick R. Kappel, have requested a meeting with
the President. The purpose of the meeting is to discuss inflationary prob-
lems confronting the Postal Service that have created a deficit and a need
for a rate increase to meet costs. This issue is important and it would be
desirable for the President to discuss it and other postal matters with them.
Recent allegations by Jack Anderson in the "Washington Post" about the
misconduct of Mr. Klassen make it desirable to obtain your opinion on the
advisability of such a meeting. Briefly, Anderson makes the following claims:
(1) Klassen was involved in a conflict of interest and a violation of the law
when he accepted approximately $20, 000 in fees from a client whom he
aided while a member of the Postal Board of Governors. (2) Under Klassen,
the Postal Service filled many jobs as political favors. (3) Klassen misused
funds by lavishly furnishing his office and by taking trips on Postal Service
funds to visit his properties. (4) The Postal Service slowed service in 1972
to aid the Nixon Campaign. (5) Klassen is under investigation by the FBI
for these activities.
I have attached copies of the most recent articles to give you a flavor of
their content. OMB has commented regarding the $302, 200 for furnishing
the Executive Office suites, and the $528, 360 to outfit the Board of Directors
offices and conference rooms and the $12, 870 in Klassen's traveling expenses
in 1973, that there appears to be no illegal activity involved, although one
could conclude that these activities might be done less expensively. A GAO
report to Congressman H. R. Gross, on this matter, dated December 16, 1973,
reported that the office procurements and the travel expenses appeared valid,
but implied in the case of the furnishings that more competitive bid purchases
might have been used.
FORD
LIBRARY
-2-
I would appreciate your feelings on this matter as soon as possible. It is
important that the President become aware of the problems besetting the
Postal Service and unless there are reasons to the contrary, Klassen and
Kappel should be the individuals to brief the President. The Postmaster
General is not a Presidential appointee; he is appointed by the Board of
Governors of the Postal Service, who are appointed for nine year terms
by the President with Senate confirmation.
is Ly {
F. Lynn May
Attachments:
1.
Schedule Proposal re: above
2.
Six Jack Anderson's articles from the "Washington Post"
LIBRARY GERALD R. FORD
SCHEDULE PROPOSAL
DATE:
September 3, 1974
FROM:
Geoff Shepard
VIA:
Warren Rustand
MEETING:
With E.T. Klassen, Postmaster General of the
United States and Frederick R. Kappel, Chairman of
the Board of Governors of the U.S. Postal Service
DATE:
Open (Mr. Kappel will be in D. C. on September 10
on Postal Service business)
PURPOSE:
To discuss problems of the U.S. Postal Service in-
cluding current performance, economic factors, labor
contracts and future appointment to the Board of
Governors
FORMAT:
-Oval Office
-Participants: E.T. Klassen, Frederick R. Kappel and
Benjamin F. Bailar, Senior Assistant Postmaster
General
SPEECH
Background material and talking points regarding the
MATERIAL:
Postal Service will be supplied by the Domestic Council
Staff
STAFF:
F. Lynn May
RECOMMEND:
Ken Cole
BACKGROUND:
Since the post office reorganization in 1971, it has been
strongly criticized as unresponsive to Congress and the
needs of the American people. The Service was intended
as a semi-independent corporation to place the post office
on a paying rather than a deficit basis. Inflated fuel and
labor costs plus customer resistance to mechanization
and re-routing have hurt the attempts to balance the books.
Klassen has also figured in allegations in Jack Anderson's
columns.
The Postmaster General is not a Presidential appointee;
he is appointed by the Board of Governors of the Postal
Service, who are appointed for nine year terms by the
President with Senate confirmation.
APPROVE
DISAPPROVE
ulz
The Washington Merry-Go-Round
THE WASHINGTON POST
Saturday, June 8, 1974
E59
Postmaster Manages to Balk Critics
By Jack Anderson
One House committee mem-
meaningless letter warning
Percy charged, often "are nei
SCHULZ
ber, Rep. Charles Wilson (D-
Klassen that his patience "has
ther professionally qualifiet
In a series of columns, we
Calif.), wanted help in his pri-
worn thin." That was six months
nor adequately equipped to di
have carefully documented how
mary election campaign. Sud-
ago; yet Dulski's patience still
agnose and treat acute ear dis
Postmaster General Ted Klas-
denly, the Postmaster General
hasn't been exacerbated.
orders."
sen has lavished himself with
turned up in the unlikely town
rs
Elsewhere, officials of the
the appurtenances of power,
of Lynwood, Calif., which had
Washington whirl-The pres
American Postal Workers Un-
doled out jobs and contracts to
just been added to Wilson's con-
tigious, nonprofit Population
ion, citing our columns, have
his cronies and put politics
gressional district.
Reference Bureau, which co-
called for Klassen's removal.
ahead of delivering the mail.
Although Klassen is a Repub-
ined the term "population ex
Footnote: Congressman Wil-
He has managed to get away
lican and Wilson a Democrat,
plosion," is short $85,000. The
son denied that Klassen to
3
with these abuses by intensely
lz
The Washington Merry-Go-Round
THE WASHINGTON POST
Thursday, June 20, 1974
F7
Klassen Paid by Firm He Aided
By Jack Anderson
Instead, we have exposed a
structed personal aides to make
record of misspending and mis-
House hatchetman Charles Col-
out the paperwork that would
management. Klassen cut back
son, acknowledging they would
Postmaster General Ted Klas-
justify the deal. Then he tried to
postal workers and slowed
have had difficulty convicting
sen has collected several thou-
hide the transaction by entrust-
sand dollars in secret fees from
down the mails during the 1972
ing the Segal file to a loyal aide
him. The likelihood, therefore,
election campaign, we reported,
is that he will get a light sen-
a firm doing business with the
who kept it under lock and key.
tence
in order to avoid raising postal
Washington skeptics
Postal Service.
(We got hold of the
lz
The Washington Merry-Go-Round
THE WASHINGTON POST
Friday, July 5, 1974
F15
Postmaster's High Life Not Denied
By Jack Anderson
a no-parking zone, the car's en-
money but denies only that it
their sails, however, when we
discovered that Klassen's per-
In response to our investiga-
gine idling to power the air con-
was secret
ditioner. When the Klassens
No one on the board of gover-
sonal friends had also received
tive series on postal abuses, the
emerged triumphantly with the
nors knew Klassen had taken a
stamp albums.
postal authorities have been
fee from a postal contractor. We
The postal poobahs labeled
fencing with the facts. They
curtain rods, the chauffeur pop-
interviewed people at the high-
false our charge that the mails
have put on a dazzling display of
ped out, deposited the curtain
drove
off
est levels of the Postal Service;
are moving slower now than
They
The Washington Merry-Go-Round
THE WASHINGTON POST Thursday, July 25, 1974
F 19
Allegations Against Klassen Probed
Justice Department to deter-
left leg had resolved itself and
ment to protect personnel
By Jack Anderson
mine whether these activities
that the President was "fine."
againstfirearms.
The FBI is now investigating
This was contradicted later by
Our report was echoed a
were illegal or merely im-
our allegations against Post- proper.
both the President's physician,
month later by Sen. Henry
master General Ted Klassen.
Dr. Walter Tkach, and staff
Jackson (D-Wash.). Ziegler im-
Ziegler's Lies-Despite all the
We have reported that Klas-
Watergate lies that have back-
chief, Gen. Alexander M. Haig,
mediately denied it. He had
acknowledged
that
the
spent an entire morning, he
The Washington Merry-Go-Round
THE WASHINGTON POST Tuesday, August 13, 1974 B13
Complaints on Klassen's Style Rise
By Jack Anderson
Plaza, however, he is continuing
$5,748, a $1,141 conference table
million to bring the new postal
The clamor last week for
unabashedly to live in the high
and a $194.50 telephone table.
headquarters up to Klassen's
Richard Nixon to evacuate the
style we have described in pre-
His carpet cost the taxpayers
standards.
White House was accompanied
vious columns.
$11,666 and the draperies came
Because the building was pur-
by a more modest demand that
His latest extravagance is a
to $5,999. Not far away is a pan-
chased "as is," all repairs must
Ted Klassen leave the Postal
carpeted and paneled stairwell
try, which cost the taxpayers an-
be paid by the Postal Service.
Service.
for his rare walks between the
other $5,280.
Already, $357,500 has been laid
out for additional architectural
the food from the
work
Now
a
The Washington Merry-Go-Round
THE WASHINGTON POST Friday, August 30,1974 D19
Klassen Is Well- Traveled Postmaster
By Jack Anderson
only one other local postal offi-
not be cancelled as is pre-
cial, while be journeyed eight
Society campaign. What is sur
Postmaster General Ted Klas-
scribed by law for those who
times to or near his far flung
discriminate.
prising is that Church's Repub-
sen has built himself the most
properties.
lican opponent Bob Smith has
inxurious office in Washington
But Weinberger's general
Even Klassen's wife gets in on
counsel, John Rhinelander
not condemned the Birchers'
with taxpayer funds, but regu-
the act. The Postal Service
smear.
larly leaves it for personal jun-
bucked the memo back to Miles,
picked up a $340 tab when she
As many as 100,000 reprints of
kets, also courtesy of Uncle
scrawling on it, "Either hold or
was the guest of honor at the Na-
destroy." Instead, it was slipped
a Birch Society article are being
Sam.
tional Association of Postmas-
circulated in an effort to dis-
The impulsive Klassen, who
out of the files and into our
ters convention in Salt Lake
hands.
credit Church on Vietnam. The
has just warned that the price of
City.
right-wing circular quotes
When we reached Rhinelan-
a stamp is going up again, spenti
Meanwhile. the postal service
Church as saying that America's
der, he insisted that
$12,370 on 32 trips to 18 cities in
is
good
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T. 8/19/74
8/28/74
Honorable Donald C. Alexander
Commissioner
Internal Revenue Service
Washington, D. C. 20530
Dear Mr. Alexander:
As you know the Department recently conducted an internal
study of the effectiveness of the Federal Organized Crime Strike
Foces and the questions of whether or not they should be retained in
their present form. That study was completed recently with a recomenda-
tion that Strike Force activity be retained in its present: form.
I have reviewed this report and have adopted its findings and
conclusions as by am. I advise you of this first of all so that you may
provide for support of the Strike Forces for the foresecable future in
your internal planning.
One of the recomendations of the reviewing cosmittee was that
even greater agency participation be encouraged. In this connection I
have been informed that you have taken certain actions which have had the
effect of decreasing the participation of the Internal Revenue Service in
the organized crime drive.
The steps I refer to are:
1. The resoval of audit representatives from all the
strike forces. As you know these agents with
expertise in accounting have served as liaison between
the strike force and the accountants in the audit
division of the District. This lisison has been
invaluable in the past in translating the accountants
art to the attorneya on the strike force and in keeping
the Audit Division informed of Strike force intelligence
which he considers to be of importance to the accountants
RECORDS
in the District.
WNCH
NERSEN
This loss of easy communication between accountant and
TYCE
lawyer is no longer available and must be conducted by
TL
a special agent who may have no accounting background.
TRICE CHRON
FORD
SIMON
BERALD
LIBRARY
-2-
2. The placing of a ceiling on the man hours applied to
all special enforcement programs including the strike
force program to not more than that applied to the
program during fiscal year 1973. As you know the
percentage of direct investigative time for the Intelligence
Division, devoted to strike force work has diminished from
22.2% in fiscal 1972 to 15.7% in fiscal 1974. This decrease
in the amount of direct investigative time has been continued
by the Service program letter of July 15, 1974. This letter,
setting out the manpower Limitations for fiscal year 1975
limits the man years in the strike force program to the
level of fiscal year 1974. This curtailment of the investi-
gative time is a very apparent withdrawal of manpower from
the strike force program. The morale of the agents in the
strike force program and their enthusiasm for the program
is severely lowered by the diminution of effort on the part
of the Service. This loss of enthusiasm is a severe blow to
the entire strike force effort.
I am informed that these actions on your part, (taken without
consultation with those vested by Executive Order with responsibility for
the coordination of the efforts of the executive branch in the fight
against organized crime) has caused severe morale problems, not only in
the Internal Revenue Service but in the entire strike force effort.
I find the results of your action to be very distressing and
hereby request that you reverse the actions you have taken and in
addition that you give consideration to what further actions can be taken
by you to increase the impact of the Service in the fight against organized
crime.
I have this day written to the Secretary of the Treasury
enclosing a copy of this äetter to you.
Sincerely,
WILLIAM B. SAXBE
The Attorney General
enclosure
4
FORD
GERALD
LIBRARY
8/28/74
Honorable William E. Simon
Secretary of the Treasury
United States Treasury
Washington, D. C.
Dear Mr. Simon:
As you know the Department recently conducted
an internal study of the effectiveness of the Federal
Organized Crime Strike Forces and the questions of whether
or not they should be retained in their present form. That
study was completed recently with a recommendation that
Strike Force activity be retained in its present form.
I have reviewed this report and have adopted its
findings and conclusions as my own. I advise you of this
first of all so that you may provide for support of the
Strike Forces for the foreseeable future in your internal
planning.
One of the recommendations of the reviewing
committee was that even greater agency participation be
encouraged. In this connection I feel compelled to call
to your attention a situation which I consider to be very
disturbing. This is the apparent lessening of the commitment
of the Internal Revenue Service to the effort against
organized crime. I am enclosing a copy of my letter to
Commissioner Alexander where I request that he halt and
reverse this lessening of the commitment of the Service.
I consider this situation to be particularly
disheartening in view of the impressive contributions
made by the other Treasury agencies to the strike force
effort and the very impressive contributions made by the
Service in the past.
LIBRARY GERALD R. FORD
-2-
I respectfully request that you take such
actions as are necessary to increase the effectiveness of
the contributions of the Service in the Organized Crime Drive,
effort. thereby carrying out the Administrations commitment to the
Sincerely,
WILLIAM B. SAXBE
The Attorney General
enclosure
BERAHD & FORD 1441
THE WHITE HOUSE
file
WASHINGTON
Date 9/27/74
TO: Ja,French
FROM: DUDLEY CHAPMAN
I told LynnMay That
phil covidn't focus on
This that my proforrace #3 FORD
is to recemmed
GERAL
LIBRARY
I should this to Ken Lazarrs
t he agrees. of you do to you
milet call Lynn may as 8 told
him I cauld In phil.
THE WHITE HOUSE
WASHINGTON
09/27/74
TO:
PHIL BUCHEN
FROM: LYNN MAY 11th
FYI
COMMENT Please
let me know your recommendations
by tomorrow if possible. My
phone # is 6437. Thank you.
FORD LIBRARY 07V839
DRAFT
THE WHITE HOUSE
WASHINGTON
September 24, 1974
MEMORANDUM FOR THE PRESIDENT
FROM:
KEN COLE
SUBJECT:
Postal Subsidies
BACKGROUND
On June 30, 1974, President Nixon signed into law S. 411, which extends
Federal subsidies for several classes of mail, including second class
mail which encompasses magazine and newspapers. The bill requires
the President to include in his budget, without revision, the full subsidy
authorized by law. The bill, strongly pushed by the magazine lobby,
received bi-partisan support from the Congress, including Senators
Kennedy and McGee. The vote was 277 - 129 in the House and 71 - 11 in
the Senate.
OMB has not requested a $44 million supplemental from Congress, which
would be necessary to fund the subsidies, because OMB feels it would
not meet the urgency criteria for supplementals established between Roy
Ash and yourself in August. OMB concludes that while the legislation
requires the inclusion of the subsidy in the FY 76 budget (approximately
$94 million), it does not mandate payment of a subsidy this year. The
question of a supplemental was not dealt with in the Enrolled Bill Memo
on S. 411 or in the opinion papers submitted by the agencies.
The Postal Service recently submitted a request to OMB for a $44 million
supplemental to cover FY 75. It claims that it will have to increase its
postage rates in November to match the resulting loss of funds if the
supplemental is not forthcoming. Members of the Administration and
Congress have begun to receive phone calls from Mel Laird, John Byrnes
and others representing the magazine industry pressing for a supplemental
request.
The Postal Service has indicated that it will recommend a major rate
increase next year to meet the anticipated $500 million deficit incurred
this year. This will likely include the raising of a first class stamp
:
FOND
GERALD
LIBRARY
-2-
from 10¢ to 12¢ or 13¢ and will likely swell the steady criticism of the
Postal Service, increasing the pressure on Congress to vote additional
subsidies or perhaps curtail the independent status of the Postal
Service.
The Senate Appropriations Committee has agreed to hold open the
omnibus supplemental legislation until October 2 to allow the Admin-
istration to determine whether or not it wants to request a supple-
mental.
OPTIONS
1.
Forward a supplemental request to Congress
2. Do not ask for a supplemental, but let Congress deter-
mine on its own whether or not to appropriate the $44
million.
3. Do not ask for a supplemental and indicate that any
such supplemental will be actively opposed because
of its budgetary impact.
RECOMMENDATIONS
THE WHITE HOUSE
WASHINGTON
Biue Nichalson
Rustand's ofc
Called 1230
11/7
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THE WHITE HOUSE
WASHINGTON
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THE WHITE HOUSE
WASHINGTON
October 31, 1974
MEMORANDUM FOR PHIL BUCHEN
SUBJECT:
Proposed Presidential Meeting with the
Postmaster General
Attached are copies of two memorandums which give the background
of the proposed meeting. When I first approached you on this matter
in early September, you felt it would not be best for the President to
meet with Postmaster General Klassen at that time and suggested
that he meet with Dean Burch instead. This meeting took place but
did not satisfy Klassen's desire to brief the President.
Since that time, I have met with Wally Scott and representatives of
the White House Personnel Office who are responsible for appointments
to the Postal Board of Governors and the Postal Rate Commission.
The meeting established a mutual agreement to exchange information
of the Postal Service and to consult with one another on any problems
arising with the Postal Service.
Both OMB and the White House Personnel Office felt there were advan-
tages to be gained as a quid pro quo in setting up a meeting between
Klassen and the President in the area of tightening up Postal Service
management procedures and appointment procedures. They also ex-
pressed the fear that when a major rate increase goes into effect next
year or if a postal strike takes place, the Postmaster General can
deflect criticism by claiming that he tried to inform the President of
the Postal Service's difficulties but was denied an interview.
Granted that Jack Anderson has continued to sporadically attack Klassen,
FORD LIBRARY
there seems to be positive reasons for a meeting between the President
and Klassen. Do you still feel that the meeting should be postponed?
D Lynn my
F. Lynn May
Attachment
September 12, 1974
MEMORANDUM FOR:
DEAN BURCH
SUBJECT:
Proposed Presidential Meeting with
the Postmaster General
PURPOSE
The Postmaster General, E.T. Klassen and Frederick R. Kappel, Chair-
man of the Board of the U.S. Postal Service have requested a meeting
with the President to discuss the current deficit in the Postal Service,
approximating $500 million this year. Mr. Klassen claims that the short-
fall is a result of unexpected inflationary factors like increased fuel costs,
material shortages and cost-of-living salary increases. He believes that
it will be necessary to request the Postal Rate Commission for a raise in
postal rates to pay for these deficits, asking for a 2$ or 3¢ increase in the
price of a first class stamp. The alternative to this would be increased
government subsidies which would further hamper efforts by the Postal
Service to become self sufficient but would be a course favored by magazine
publishers and similar businesses.
Klassen and Kappel also wish to discuss appointments to the Board of
Governors, who are nominated by the President and confirmed by the FORD
Senate. Klassen stated that Congressional criticism of a do-nothing Board
chosen on the basis of political cronyism is justified in some instannes. at
LIBRARY
BACKGROUND
The Postal Service has suffered severe setbacks in its drive to become a
paying operation due to inflation. Personnel costs which make up 85% of
the Service's budget have jumped because of automatic cost-of-living con-
tract clauses. The Service is also facing major contract negotiations
within a year that will add greatly to these costs. A rate increase appears
to be a better choice in returning the Postal Service to a balanced budget
than a subsidy. The rate increase will come about without Executive
Branch action when the Postal Rate Commission recommends changes to
-C-
the Board of Governors. This action may spark Congress to vote aditional
subsidies to the Postal Service in lieu of the rate increase. This would
violate the principle of the Postal Reorganization Act to make the Postal
Service a paying operation and would place an additional burden on the
government budget.
The Board of Governors, who serve nine year terms, is comprised of
nine members nominated by the Senate plus a Postmaster General and his
Deputy, who are appointed by the Board. The current Board is comprised
of nominally qualified men but whose average age is quite high. Some
critics have speculated that the age of the Board and the distance some
have to travel have encouraged absenteeism and made it possible for the
Postmaster General to dominate the Board. One vacancy now exists due
to a recent resignation and Kappels' term ends in December. The White
House personnel staff is currently opposed to Kappels' reappointment
because of his age (72) and questionable merit.
Recently Klassen has been the subject of allegations by Jack Anderson,
summaraized as follows:
(1)
Klassen was involved in a conflict of interest and a violation of
the law when he accepted approximately $20,000 in fees from
a client whom he aided while a member of the Postal Board of
Governors.
(2)
Under Klassen, the Postal Service filled many jobs as political
favors.
(3)
Klassen misused funds by lavishly furnishing his office and by
taking trips on Postal Service funds to visit his properties.
(4)
The Postal Service slowed service in 1972 to aid the Nixon
campaign.
(5)
Klassen is under investigation by the FBI for these activities.
GERAL
LIBRARY
So far GAO has suggested no illegality in the matter.
Phil Buchen has requested that you meet with Klassen and Kappel, or
Klassen alone, to further determine their motives in meeting the President.
Klassen is the logical choice to brief the President on the rate question,
which might have a heavy political impact. It would not be in the Presidents'
interest, however, to appear to reinforce Klassen's position in the light
of allegations against him or to assent to any spot agreement on appoint-
ments to the Board of Governors.
If you need any additional information please let me know.
F. Lynn May
FORD : 034870 LIBRARY
THE WHITE HOUSE
WASHINGTON
September 5, 1974
MEMORANDUM FOR:
PHILLIP BUCHEN
SUBJECT:
Proposed Presidential Meeting with
the Postmaster General
The Postmaster General, E. T. Klassen, and the Chairman of the Board of
the Postal Service, Frederick R. Kappel, have requested a meeting with
the President. The purpose of the meeting is to discuss inflationary prob-
lems confronting the Postal Service that have created a deficit and a need
for a rate increase to meet costs. This issue is important and it would be
desirable for the President to discuss it and other postal matters with them.
Recent allegations by Jack Anderson in the "Washington Post" about the
misconduct of Mr. Klassen make it desirable to obtain your opinion on the
advisability of such a meeting. Briefly, Anderson makes the following claims:
(1) Klassen was involved in a conflict of interest and a violation of the law
when he accepted approximately $20, 000 in fees from a client whom he
aided while a member of the Postal Board of Governors. (2) Under Klassen,
the Postal Service filled many jobs as political favors. (3) Klassen misused
funds by lavishly furnishing his office and by taking trips on Postal Service
funds to visit his properties. (4) The Postal Service slowed service in 1972
to aid the Nixon Campaign. (5) Klassen is under investigation by the FBI
for these activities.
I have attached copies of the most recent articles to give you a flavor of
their content. OMB has commented regarding the $302, 200 for furnishing
the Executive Office suites, and the $528, 360 to outfit the Board of Directors
offices and conference rooms and the $12, 870 in Klassen's traveling expenses
in 1973, that there appears to be no illegal activity involved, although one
could conclude that these activities might be done less expensively.
A
CAO
report to Congressman H. R. Gross, on this matter, dated December16, 1973,
reported that the office procurements and the travel expenses appeared valid
but implied in the case of the furnishings that more competitive bid purchases
might have been used.
-2-
I would appreciate your feelings on this matter as soon as possible. It is
important that the President become aware of the problems besetting the
Postal Service and unless there are reasons to the contrary, Klassen and
Kappel should be the individuals to brief the President. The Postmaster
General is not a Presidential appointee; he is appointed by the Board of
Governors of the Postal Service, who are appointed for nine year terms
by the President with Senate confirmation.
F. Lynn May
Attachments:
1.
Schedule Proposal re: above
2.
Six Jack Anderson's articles from the "Washington Post"
as
FORD
GERALD
THE WHITE HOUSE
WASHINGTON
October 31, 1974
MEMORANDUM FOR PHIL BUCHEN
SUBJECT:
Proposed Presidential Meeting with the
Postmaster General
Attached are copies of two memorandums which give the background
of the proposed meeting. When I first approached you on this matter
in early September, you felt it would not be best for the President to
meet with Postmaster General Klassen at that time and suggested
that he meet with Dean Burch instead. This meeting took place but
did not satisfy Klassen's desire to brief the President.
Since that time, I have met with Wally Scott and representatives of
the White House Personnel Office who are responsible for appointments
to the Postal Board of Governors and the Postal Rate Commission.
The meeting established a mutual agreement to exchange information
of the Postal Service and to consult with one another on any problems
arising with the Postal Service.
Both OMB and the White House Personnel Office felt there were advan-
tages to be gained as a quid pro quo in setting up a meeting between
Klassen and the President in the area of tightening up Postal Service
management procedures and appointment procedures. They also ex-
pressed the fear that when a major rate increase goes into effect next
year or if a postal strike takes place, the Postmaster General can
deflect criticism by claiming that he tried to inform the President of
the Postal Service's difficulties but was denied an interview.
Granted that Jack Anderson has continued to sporadically attack Klassen, B.
FORD
there seems to be positive reasons for a meeting between the President
and Klassen. Do you still feel that the meeting should be postponed?
of Lynn mg
F. Lynn May
Attachment
September 12, 1974
MEMORANDUM FOR:
DEAN BURCH
SUBJECT:
Proposed Presidential Meeting with
the Postmaster General
PURPOSE
The Postmaster General, E.T. Klassen and Frederick R. Kappel, Chair-
man of the Board of the U.S. Postal Service have requested a meeting
with the President to discuss the current deficit in the Postal Service,
approximating $500 million this year. Mr. Klassen claims that the short-
fall is a result of unexpected inflationary factors like increased fuel costs,
material shortages and cost-of-living salary increases. He believes that
it will be necessary to request the Postal Rate Commission for a raise in
postal rates to pay for these deficits, asking for a 2$ or 3¢ increase in the
price of a first class stamp. The ålternative to this would be increased
government subsidies which would further hamper efforts by the Postal
publishers and similar businesses.
Service to become self sufficient but would be a course favored by magazine
Klassen and Kappel also wish to discuss appointments to the Board of
Governors, who are nominated by the President and confirmed by the
Senate. Klassen stated that Congressional criticism of a do-nothing board
chosen on the basis of political cronyism is justified in some instances.
BACKGROUND
paying operation due to inflation. Personnel costs which make up 85% of a
The Postal Service has suffered severe setbacks in its drive to become FORD
the Service's budget have jumped because of automatic cost-of-living con-
tract clauses. The Service is also facing major contract negotiation.
LIBRARY
within a year that will add greatly to these costs. A rate increase appears
to be a better choice in returning the Postal Service to a balanced budget
than a subsidy. The rate increase will come about without Executive
Branch action when the Postal Rate Commission recommends changes to
the Board of Governors. This action may spark Congress to vote aditional
subsidies to the Postal Service in lieu of the reae increase. This would
violate the principle of the Postal Reorganization Act to make the Postal
Service a paying operation and would place an additional burden on the
government budget.
The Board of Governors, who serve nine year terms, is comprised of
nine members nominated by the Senate plus a Postmaster General and his
Deputy, who are appointed by the Board. The current Board is comprised
of nominally qualified men but whose average age is quite high. Some
critics have speculated that the age of the Board and the distance some
have to travel have encouraged absenteeism and made it possible for the
Postmaster General to dominate the Board. One vacancy now exists due
to a recent resignation and Kappels' term ends in December. The White
House personnel staff is currently opposed to Kappels' reappointment
because of his age (72) and questionable merit.
Recently Klassen has been the subject of allegations by Jack Anderson,
summaraized as follows:
(1)
Klassen was involved in a conflict of interest and a violation of
the law when he accepted approximately $20, 000 in fees from
a client whom he aided while a member of the Postal Board of
Governors.
(2)
Under Klassen, the Postal Service filled many jobs as political
favors.
(3)
Klassen misused funds by lavishly furnishing his office and by
taking trips on Postal Service funds to visit his properties.
(4)
The Postal Service slowed service in 1972 to aid the Nixon
campaign.
(5)
Klassen is under investigation by the FBI for these activities,
So far GAO has suggested no illegality in the matter.
Phil Buchen has requested that you meet with Klassen and Kappel, or
Klassen alone, to further determine their motives in meeting the President.
Klassen is the logical choice to brief the President on the rate question,
LIBRARY
which might have a heavy political impact. It would not be in the Presidents'
interest, however, to appear to reinforce Klassen's position in the light
of allegations against him or to assent to any spot agreement on appoint-
ments to the Board of Governors.
If you need any additional information please let me know.
F. Lynn May
LIBRARY GERALD 2007
THE WHITE HOUSE
WASHINGTON
September 5, 1974
MEMORANDUM FOR:
PHILLIP BUCHEN
SUBJECT:
Proposed Presidential Meeting with
the Postmaster General
The Postmaster General, E. T. Klassen, and the Chairman of the Board of
the Postal Service, Frederick R. Kappel, have requested a meeting with
the President. The purpose of the meeting is to discuss inflationary prob-
lems confronting the Postal Service that have created a deficit and a need
for a rate increase to meet costs. This issue is important and it would be
desirable for the President to discuss it and other postal matters with them.
Recent allegations by Jack Anderson in the "Washington Post" about the
misconduct of Mr. Klassen make it desirable to obtain your opinion on the
advisability of such a meeting. Briefly, Anderson makes the following claims:
(1) Klassen was involved in a conflict of interest and a violation of the law
when he accepted approximately $20, 000 in fees from a client whom he
aided while a member of the Postal Board of Governors. (2) Under Klassen,
the Postal Service filled many jobs as political favors. (3) Klassen misused
funds by lavishly furnishing his office and by taking trips on Postal Service
funds to visit his properties. (4) The Postal Service slowed service in 1972
to aid the Nixon Campaign. (5) Klassen is under investigation by the FBI
for these activities.
I have attached copies of the most recent articles to give you a flavor of
their content. OMB has commented regarding the $302, 200 for furnishing
the Executive Office suites, and the $528, 360 to outfit the Board of Directors
offices and conference rooms and the $12, 870 in Klassen's traveling expenses
in 1973, that there appears to be no illegal activity involved, although one
could conclude that these activities might be done less expensively. A GAO
report to Congressman H. R. Gross, on this matter, dated December 16, 1973,
reported that the office procurements and the travel expenses appeared valid,
but implied in the case of the furnishings that more competitive bid purchases
might have been used.
=
FORD
GERALD
LIBRAR
-2-
I would appreciate your feelings on this matter as soon as possible. It is
important that the President become aware of the problems besetting the
Postal Service and unless there are reasons to the contrary, Klassen and
Kappel should be the individuals to brief the President. The Postmaster
General is not a Presidential appointee; he is appointed by the Board of
Governors of the Postal Service, who are appointed for nine year terms
by the President with Senate confirmation.
F. Lynn May
Attachments:
1.
Schedule Proposal re: above
2.
Six Jack Anderson's articles from the "Washington Post"
GERALD ? GROA
Postal
Thursday 11/14/74
9:20 Lynn May's office called re the proposed meeting with
6437
the Postmaster General.
(Marilyn)
Indicated Mr. Lynn May had sent a memo on October 31st.
He has been in contact with the Postmaster General and
Mr. Lynn would like to know your decision.
This is my file -- I do not find the October 31 memo;
checked both your action and hold file and do not find.
Mr. areedo
said it was
OK for the
meeting.
LIBRARY GERALD R. FORD
Personal
Postal
Thursday 12/12/74
4:20 Robert Off called from the Personnel Office to
6531
ask if Mr. Buchen has any recommendations for the
Rm. 143
Postal Service Board of Governors -- the dealine
for recommendations was 12/9.
They will start reviewing candidates right away
and would hope to hear from us.
6:25 advised Mr. off
that neither mr. Bucher
mor mr. areeda
had any suggestions.
GERALD R FORD LIBRARY
Postal
Phil A:
Do you have any
suggestions? ?
P.
FORD si LIBRARY
168B
12/5
THE WHITE HOUSE
WASHINGTON
December 4, 1974
MEMORANDUM FOR:
DONALD RUMSFELD
L. WILLIAM SEIDMAN
JOHN 0. MARSH
ROBERT HARTMANN
PHILIP W. BUCHEN
WILLIAM J. BAROODY
FROM:
WILLIAM N. WALKER Fall
SUBJECT:
Postal Service Board
of Governors (WAE-PAS)
Mr. Frederick Kappel, Chairman of the subject Board, will
be leaving at the end of his term in December. Also, Dr.
Robert Ing has submitted his resignation because of poor
health. Both of these newly created vacancies will be for
Republicans. We would like to move quickly and assemble
names for the President to consider.
The Postmaster General's office strongly believes that one
of these appointments should go to a black since blacks
comprise approximately 20% of the postal work force. A1-
though there are no formal requirements, the candidates
should be individuals with a good management background
and solid credentials (Kappel is the retired Chairman of
A.T. & T.). This Board has the final responsibility for
policy decisions that concern the total operations of the
U.S. Postal Service. It also selects the Postmaster Gen-
eral and the Deputy who then become members of the Board.
The Board of Governors receive $10,000 per year in salary
and $300 per meeting. They meet approximately once a month.
Please forward any recommendations by December 9, 1974.
FORD is LIBRAD
Postal
Thursday 12/12/74
4:20 Robert Off called from the Personnel Office to
6531
ask if Mr. Buchen has any recommendations for the
Rm. 143
Postal Service Board of Governors -- the dealine
for recommendations was 12/9.
They will start reviewing candidates right away
and would hope to hear from us.
GERRLO
FORD LIBRARY is 0778
Ken Lazarus recom- has
org. for
mendation FORD for me
to transmet. GERAL
EIBRUPY P. Buchen
THE WHITE HOUSE
washington
March 14, 1975
MEMORANDUM FOR PHIL BUCHEN
JACK MARSH
JIM LYNN
SUBJECT:
Decision Memorandum
Attached is a draft decision memorandum for the President. I would appreciate
your recommendations by COB today. Thanks very much.
of hy g
F. Lynn May
Attachment
&
GERALO
FORD LIBRARA
DRAFT
3/14/75
MEMORANDUM FOR THE PRESIDENT
FROM:
JIM CANNON
SUBJECT:
Chief Administration Liaison Contact with the Postmaster
General
You met with the Postmaster General on Thursday, March 13, 1975. He requested
that you designate a senior White House official to serve as a contact with the
Postal Service. You indicated that you would do so within a few days.
OPTIONS
The following individuals could serve in this function:
Jim Lynn
Phil Buchen
Jim Cannon
DISCUSSION
1.
Jim Lynn
PRO:
OMB could provide management and budgetary assistance
to the Postal Service and has a large staff to provide
back-up.
CON:
Most of the dialogue between the White House and the
Postal Service will be on matters of political and legislative
policy. OMB does not have budgetary review authority over
the Postal Service.
FORD & LIBRARY 074870
2.
Phil Buchen
PRO:
The Counsel's Office would assure "correct" dealings with
the Postal Service as it does with the regulatory agencies.
CON:
The Counsel does not routinely deal in postal policy matters
and has a limited staff.
-2-
3.
Jim Cannon
PRO:
Could effectively discuss political policy matters and
coordinate postal liaison with other domestic policy issues.
CON:
Limited Staff.
RECOMMENDATIONS
GERA LIBRARY FORD
THE WHITE HOUSE
WASHINGTON
March 18, 1975
MEMO FOR: PHIL BUCHEN
FROM:
KEN LAZARUS to
Due to the press of time, I communicated
your views to May by phone.
There is no particular sensitivity involved
in this assignment. I suggested that May
delete the draft argument supporting your
designation and insert instead (1) your senior
status and (2) experience with political and
legislative issues.
rhoted, with P. thanks.
Post Office
THE WHITE HOUSE
WASHINGTON
March 14, 1975
MEMORANDUM FOR, PHIL BUCHEN
JACK MARSH
JIM LYNN
SUBJECT:
Decision Memorandum
Attached is a draft decision memorandum for the President. I would appreciate
your recommendations by COB today. Thanks very much.
of has of
F. Lynn May
Attachment
LIGRARY GERALD R. FORD
DRAFT
3/14/75
MEMORANDUM FOR THE PRESIDENT
FROM:
JIM CANNON
SUBJECT:
Chief Administration Liaison Contact with the Postmaster
General
You met with the Postmaster General on Thursday, March 13, 1975. He requested
that you designate a senior White House official to serve as a contact with the
Postal Service. You indicated that you would do so within a few days.
OPTIONS
The following individuals could serve in this function:
Jim Lynn
Phil Buchen
FORD
Jim Cannon
DERALO
LIBRARY
DISCUSSION
1.
Jim Lynn
PRO:
OMB could provide management and budgetary assistance
to the Postal Service and has a large staff to provide
back-up.
CON:
Most of the dialogue between the White House and the
Postal Service will be on matters of political and legislative
policy. OMB does not have budgetary review authority over
the Postal Service.
2.
Phil Buchen
PRO:
The Counsel's Office would assure "correct" dealings with
the Postal Service as it does with the regulatory agencies.
CON:
The Counsel does not routinely deal in postal policy matters
and has a limited staff.
-2-
3.
Jim Cannon
PRO:
Could effectively discuss political policy matters and
coordinate postal liaison with other domestic policy issues.
CON:
Limited Staff.
RECOMMENDATIONS
FORD is LIBRARY
THE WHITE HOUSE
Paster
WASHINGTON
January 7, 1976
MEMORANDUM FOR:
JIM CONNOR
FROM:
PHIL BUCHEN T
SUBJECT:
Proposed letter to Andrew Heiskell,
Chairman of the Board of Time
Incorporated
I believe that the proposed letter gets involved in
too much detail and too much defense of the postal
system management to be signed by the President.
I would recommend sending two letters: A brief
acknowledgement by the President, including a
notation that he has referred the letter to an
appropriate member of his staff who participated
in the White House meeting with magazine publishers;
and a detailed response by such staff member on
behalf of the President.
LIBRARY BERNED FORM
THE. WHITE HOUSE
CTION MEMORANDUM
WASHINGTON
LOG NO.:
ate:
January 6, 1976
Time:
FOR ACTION:
CC (for information):
Phil Buchen
Jack Marsh
Jim Cannon
Paul Theis
Bob Hartmann
Bill Seidman
FROM THE STAFF SECRETARY
DUE: Date:
Tuesday, January 6
Time:
cob
SUBJECT:
Proposed Letter to Andrew Heiskell,
Chairman of the Board of Time Incorporated
ACTION REQUESTED:
X
For Necessary Action
For Your Recommendations
Prepare Agenda and Brief
Draft Reply
X For Your Comments
Draft Remarks
REMARKS:
We apologize for the short time on this item but
we are receiving pressure to send an answer to
Mr. Heiskell.
LIDRARY CERALD R. FORM
PLEASE ATTACH THIS COPY TO MATERIAL SUBMITTED.
If you have any questions or if you anticipate a
delay in submitting the required material, please
Jim Connor
telephone the Staff Secretary immediately.
For the President
December 31, 1975
Dear Mr. Heiskell:
Thank you for your letter of December 12, 1975.
I appreciate your sharing your thoughts with me
with respect to the problems of the U.S. Postal
Service.
At the time of postal reform, our postal system
was in serious trouble. at was suffering under an
archaic organizational structure, overlapping and
often contradictory laws and regulations. It was
also hindered by an ancient physical plant, low
employee moral sad productivity, and political
pressures. These problems left a poor legacy
and postal management has struggled to bring
about change. Improvements have been made and,
despite occasional complaints, the overall record
of the Postal Service in terms of reliability and
speed of delivery is quite good, particularly when
compared with other countries.
This is not to say that postal management cannot
do more to reduce unnecessary costs. I know that
Postmaster General Dailar is devoting his full en-
ergies to this goal. While recent rate increases
have been larger and more (requent than we would
like, these cannot be attributed solaly to the acts
of the postal management. The Postal Service,
like all business type operations, has had to dont
with the strong inflationary pressures or the pact
few years.
LIBRARY CERALD FORD
. 2 -
I still believe that the principles embodied la
postal reform will provide as with at far more
efficient postal system. Among those principles
is one which calls for the appartioning of the costs
of all postal operations to all USCTS of the mail on
a fair and equitable basis. I support that principle:
1 believe it is cound and that it should be parsued to
the maximum extent possible.
The cost of postal operations must be met and should
be mot equitably. The alternative to users supporting
the postal system is to shift the burden to the general
taxpayer. Such an approach is not fair and -- by
liself -- would do nothing to reduce postal costs.
I would like to comment briefly ca some specific
points which you raised in your letter concerning
Executive Branch control over the Postal Service.
Under the Reorganization Act the operating budget
of the Postal Service is the responsibility of the
Board of Covernors. Federal appropriations to the
Postal Service Fund represent only a small portion
of total postal revenues and are provided to cover
certain specific costs. Among other things, they
provide for public service assistance to the Postal
Service during the transition to a completely lade-
pendent status. I have continued to support the
assual appropriation of those funds as set forth to
the Deorganization Act, out 1 have also opposed
further taxpayer assistance for extended phasing.
I do not have responsibility for making recommenda-
tions os the remainder of the Postal Service's budget.
la keeping with the Postal Service's new Independent
status, the White House neither approved nor dis-
approved the recent postal labor settlement.
is
GERALD
FORD
LIBRARA
There are no casy solutions to the problems and
deficits which face the Postal Service. Future
rate increases will be necessary to cover costs,
and I bolieve It is reasonable to expect such in-
creases as long as they follow other general price
increases in the economy. I remala unconvinced
that taxpsyers should be responsible to held down
rates for users.
Again, thank you for writing and best wishes.
Sincerely,
Mr. Andrew Heiskell
Chairman of the Board
Time, Incorporated
Time and Life Building
Rockefeller Center
New York, New York 10020
bee: Nessen/White/O'Nelll
GRF:OMB:RN:EMO:RLE:sby
is
BERALD
FORD
LIBRARY
TIME & LIFE BUILDING
TIME
ROCKEFELLER CENTER
NEW YORK 10020
INCORPORATED
(212) JU6-1212
CHAIRMAN OF THE BOARD
December 12, 1975
Dear Mr. President:
Recently, you and members of your staff
held a meeting at the White House with magazine pub-
lishers in which you indicated that you will continue
to oppose both additional federal appropriations to
defray the increasing costs of public services pro-
vided by the U.S. Postal Service and funds for phas-
ing increases in second class mail rates as author-
ized by Congress in P.L. 93-328.
I want to thank you for your time and your
candor in stating your position. I would hope that
you will accept an equally frank response.
As you are aware, you and your associates
have repeatedly described appropriations for public
service by the Postal Service as "subsidies" to the
various users whether such users happen to require
these services or not. You, yourself, have also com-
pared the deficit problems of the postal service to
the deficit problems of the City of New York. I
quote from your statement:
"I just don't accept that they (the postal
system) are doing as well as they should be doing.
We have to prod them, just like we are prodding New
York City, to improve their efficiency productiv-
ity
if we don't keep the pressure on them. you
know how things operate in government that's one
of the basic problems in New York City. No one
really put the screws on them until this year and
now they are faced with reality. I think the post
office department -- management and labor -- has to
face up to that reality -- here as well as in New
&
York."
GROWN
The comparison of the problems of the postal
service and New York is yours. Let me demonstrate
LISTARY
how apt the comparison is. We all can recognize that
a major element in the New York problem has been the
unwillingness of political management -- in this case
the city officials -- to come to grips with escalating
costs, costs that flow largely from the escalating
demands of the municipal workers unions.
-2-
What has been the situation in the operations
of the postal service? Federal fiscal year 1971 was
the last year under the "pre-reform" postal system,
the long existing system under which postal rates and
postal expenditures were set by Congress. Fiscal year
1972 was a period of transition. In fiscal year 1973,
the first year of full operation, the "reform" postal
system generated a deficit of $13 million. In the
fiscal year 1974, the deficit had swollen to $438
million; in fiscal year 1975, which ended this summer,
the deficit was $825 million; and in the current fis-
cal year which will end June 30, 1976, the Postmaster
General currently predicts the deficit will exceed
$1.4 billion dollars -- and then only if another sub-
stantial increase in postal rates, including a 13 cent
first class letter rate, takes effect on December 28
as scheduled. You are right, Mr. President. Such
arithmetic is quite comparable to the record in New
York.
However, it is unfortunate that you proceed
from that damaging conclusion to a further one which
labels appropriations to make up these deficits as
"subsidies" to the mail users. For what has been
responsible for these soaring red figures? A number
of elements have contributed, of course: questionable
management, an expensive capital equipment program,
outdated and perhaps unnecessary services. But there
is one factor that stands out above all: salary and
benefit escalation for the nation's approximately
700,000 postal workers. While I do not want to pass
arbitrary judgment on the merits of the labor con-
tracts negotiated in recent years by the Postal
Service, here are some important figures.
Salaries and benefits now account for 85 per-
cent of the postal budget. The basic wage of postal
workers nationwide is presently $13,400 a year. To
carry your analogy a little further, the average basic
wage of New York policemen is $14,700; New York fire-
men, $14,700; New York teachers, $13,200.
FORD
On a national basis the average police sal-
ary is $11,800; firemen, $11,200; teachers, $11,600.
Consider also that assistant professors of four-year
LIBRARY
colleges earn a national average of $12,600, while
postal workers earn an average of $13,400. As you
surmised, only New York, the case you have cited as an
example of disastrous municipal mismanagement, can be
said to have kept pace with the Postal Service in this
regard.
-3-
But this is not the end of the story. With
the pay hikes granted in this year's postal wage
settlement, the average pay of postal workers will
probably rise to around $16,500 by 1978 -- an addi-
tional increase of more than 23% over present levels.
That will cost the Postal Service an additional $2
billion in wages alone.
When you say that "management and labor" have
to face up to reality "here as well as in New York,"
you may have the full agreement of almost everyone
familiar with the problem. The question is: who is
management? The embattled Mayor Beame is easy to
identify. He is the duly elected, present incumbent
at City Hall.
In the case of the Postal Service, management,
by law, is in the hands of the Postmaster General and
a Board of Governors. Under the "reform" system there
have been three Postmasters General and a Board of
Governors, whose original and present members were
appointed by your immediate predecessor, President
Nixon. In attempting to manage the overriding problem
of dramatic wage escalation, the Postmaster General
is subject to certain controls and restraints that
are exercised by the White House itself.
His budgets must be approved by the Board
appointed by the President and submitted to the
Office of Management and Budget. You have the auth-
ority to make recommendations to Congress in regard
to that budget. More relevant, in the case of the
recent postal wage contract, the negotiations were
ultimately conducted through the Mediation and Con-
ciliation Service, an agency of the Federal govern-
ment, and the settlement, it is reliably reported,
was not only greater than the Postmaster General
would have accepted, left totally to his own devices,
but indeed was approved by the White House.
If then the postal service, is as you in-
dicate, another New York, it is a New York that has
developed under Republican administrations and sub-
ject to Republican control and direction. You have
told us that you are going to "put the screws on
them," by "them" indicating that you mean postal man-
agement and labor. You have also told us that you
intend to block the increased Federal appropriations
COOP
necessary to defray the costs of these ruinous wage
policies and uneconomic public services (such as
delivering mail to the bottom of the Grand Canyon and
LIBRARY
the North Slope of Alaska). And you have told us
that your only other alternative to the deficit is
to raise postal rates.
-4-
You are then, in reality, proposing to
"put the screws on" the users of the postal system
even though the record is clear that many users who
depend heavily on the postal system cannot survive
much more escalation of rates.
You are, I believe, aware that continuation
on this course will vitally affect a major medium of
the communication of ideas in America, the many diverse
magazines and smaller newspapers. But even if this
were acceptable to you -- and I am not prepared to be-
lieve upon reflection that it will be -- consider the
comments of the present Postmaster General, Mr. Bailar,
who indeed is struggling earnestly to cope with the
impossible conditions thrust upon him by law and by
circumstances not entirely under his control:
"The last thing we want is a constant round
of postage increases because we recognize that not
only would this hamper the free flow of commerce and
ideas through the mails, but it would also reduce our
volume and hence our revenue, thus compounding our
financial problems."
The danger is real, of course. Mail volume
decreased last year for the first time in years.
Parcel Post is down. Electronic transfer of funds
will increasingly affect First Class mail, and the
volume of magazines and newspapers will dwindle as
major magazines including those we publish and major
newspapers such as The Wall Street Journal, flee the
mails in the urban centers, where they now generate
a very favorable positive cash flow for the Postal
Service.
The present course of action, suggested by
The White House meeting with publishers, can have
only one end: bankruptcy of the Postal Service --
a bankruptcy that in the process will go a long way
toward making the medium of print too expensive for
millions of Americans.
The Founding Fathers' intention was that the
postal system should encourage the free flow of in-
formation in our nation. It was their conviction
that the postal system was a necessary service of
government and not a business. George Washington
stated in 1782 that a postal service was needed to
"bind these people to us with a chain that can never
be broken." History shows that our first President
was right. For nearly 200 years, Congress and the
GERALD
OF
LIBRARA
-5-
American people have recognized the democratic and
educational values of magazines and newspapers.
Today, magazines and newspapers are jeopardized by
an ineffective and misguided postal system.
I hope you will forgive these blunt words,
Mr. President, but I cannot imagine that these re-
sults are your desire. I believe there are altern-
ative ways of meeting the problems which the Postal
Service faces. These problems are not quickly re-
solved. But I suggest that the national interest
will be better served if your Administration would
support proposals to meet the fiscal deficits of the
Postal Service for a period of time that is sufficient
to examine and evolve solutions to these problems.
To label this assistance a subsidy for the users or
to expect the users to provide such resources them-
selves would be a gross misplacement of responsi-
bility.
Thank you for hearing me out.
Sincerely,
Hudrey Andrew Heiskell
blushell
The President
The White House
Washington, D.C.
FORD is GERALD LIBRARY
THE WHITE HOUSE
CTION MEMORANDUM
WASHINGTON
LOG NO.:
Date:
April 1, 1976
Time:
FOR ACTION:
CC (for information):
Phil Buchen
Jim Cannon
Jack Marsh
Max Friedersdorf
Bill Seidman
FROM THE STAFF SECRETARY
DUE: Date:
Friday, April 2
Time:
3 P.M.
SUBJECT:
Proposed Letter to James H. Rademacher
President of National fAssociation of Letter
Carriers
ACTION REQUESTED:
X
For Necessary Action
For Your Recommendations
Prepare Agenda and Brief
Draft Reply
X For Your Comments
Draft Remarks
REMARKS:
The principal point made by the President's letter is the necessity
of a reasoned consideration of the principal issue in this area, i.e.
the advisability of Federal subsidies to the Postal Service. However,
certain portions of the draft letter appear to be conclusory in nature
and to the effect that any subsidies would be inappropriate. Accordingly,
I suggest that you consider the possibility of deleting the first
paragraph on page 2 and adding the words "I do note that " at the
beginning of the second paragraph on that page.
Ken Lazarus 4/2/76
PLEASE ATTACH THIS COPY TO MATERIAL SUBMITTED.
If you have any questions or if you anticipate
delay in submitting the required material, please Jim Connor
telephone the Staff Secretary immediately.
For the Pres.