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Postal Reorganization [n.d.]
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Postal Reorganization [n.d.]
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White House Staff Member and Office Files (Nixon Administration)
Martin Anderson's Files
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Memorandum for Henry Cashen
CC
Ken Cole
FROM
Ed Harper
SUBJECT
Fiscal Implications of Postal Reorganization Plan
The purpose of this memorandum is to raise three issues with
in The
respect to the fiscal outlook and budgetary process, and postal reform meatures
before The Congress
POSTAL SELF-SUFFICIENCY
When John Ehrlichman briefed the press on the postal settlement,
he emphasized that the President's principle that the Post Office should
be a self-substatining organization had not compromised except to the
extent that the Post Office would, during the next couple of years, phase
into the position of being completely self- staining.
I am now told that this explanation is not correct which I think
means that John Ehrlichman and I do not understand the agreements
which the Post Office Department has negotiated with the Congress.
I am now told that the House version of the Postal Reform Bill
includes a decline in public service subsidy deficit to be paid out of the
general fund which would taper off to approximately to $400 million a
year, but then would either level off or begin to rise again. The Senate
version, I am informed, is very vague on this point, but has lead some
people to the conclusion that it would result in general fund subsidy for
the Post Office Department annually amounting to a billion dollars or
if my information n consect,
more. Clearly neither of these bills is consistent with the President's
announced policy
Reproduced at the Richard Nixon Presidential Library
- 2 --
:
POSTAL RATES AND DEFICITS
The highest Post Office deficit in the 1960's occurred in 1967 when
the deficit was $1.1 billion. The projectedpostal deficit for FY 70 is
$1. 2 billion The postal deficit now projected for FY 71 is $3. 3 billion.
The projected projected $3 3 billion deficit assumes that postal
workers will receive a 6% comparability increase in January, 1971,
costing $400 million, and that the $1. 6 billion in postal rate increases
we had projected to go into effect July 1, 1970, will not be passed in
FY 71. Given the temper of federal employee unions, and recent
reports from Capitol Hill, these assumptions seem quite safe.
Given the fact that we can now anticipate a FY 71 deficit which will
have to be announced shortly before the FY 70 elections, and that we
project an FY 72 deficit many times larger than the FY 71 deficit, is
there anything at all that can be done to get action on our rate increase
proposal?
Dick Cook was of the opinion that there was nothing that caxxx could
be done to save our rate proposal, and the $1. 6 billion in revenues which
they represent. He interprets the attitude of the Congress as being
"why don't you just give them their 8% pay raise and leave us alone?"
:
Reproduced at the Richard Nixon Presidential Library
- 3 -
The attitude is further interpreted as being, "why don't you just forget
about the rate increase for now and get it when the new postal organization
takes effect.? 11
If we are to wait for the new postal reorganization to be approved,
to be established, and to to grind through its lengthy processes for setting
12 to
rates, we will be waiting probably/eighteen months before there will be
any postal rate increases.
BUDGET PROCESS IN PROPOSED REORGANIZATION
There has recently been an exchange of memoranda among the
BOB, the Post Office Department General Counsel and yourself about
the budgetary process proposed for the reorganized postal service
Both BOB and Post Office agree that under the bills currently on the
Hill, the President would no longer have any statutory power to modify,
amend or revise the budget of the postal service The BOB views this
fact with alarm, because the Post Office Department will still be in the
Administration's budget, and it could easily add literally billions of
dollars in outlys in any given year. for this reason, the BOB has requested
that the President be given some minimal statutory power to revise thexx
or amend the Post Office Department's budget. The Post Office Department's
reply is essentially (1) that the minimal budget supervisory powers asked
by the Bureau for the President did not amount to anything more
than moral suasion, thus there was no need for any statutory provisions.
Reproduced at the Richard Nixon Presidential Library
- 4 -
Furthermore, the Post Office argues, that it has cut a deal with the
union; and cannot back down from that deal
Three relevant points deserve careful attention in considering
this debate
1
What is the nature of the legislation currently in the Senate and
the House,?
2. What exactly is our agreement with the unions ?
to
3
What is the potential magnitude of the problem, which the BOB
is pointing?
First, it is my understanding that on both the House and the Senate
sides, the draft legislation is virtually silent on the matter of the budgetary
process
rpcess - there isn't even a provision for an annual report to the Congress
according to one person who has read the bills. Second, our agreement
with the unions is, as I understand it, (1) that we would not change any of
the points agreed upon in our negotiations with them which included an
agreement that the postal organization would not be a government corporation,
because this would "drastically undercut the barganing power of postal
employees and their unions 11 (AFL/CIO, Labor Looks at Congress, 1969,
an AFL-CIO Legislative report, Page 11 )
:
Reproduced at the Richard Nixon Presidential Library
- 5 -
The unions clearly object to converting the Post Office into a Corporation,
however, I have heard no one say that the unions object to the minimal
budget supervisory powers granted the President in the government
Corporation Act.
Finally the lack of any statutory President oversight over the
postal budget could create incredibly difficult political and fiscal problems
for the President. For example, if the new postal organization were
controlled by forces unfriendly to the President, they could create a
.
very difficult and embarassing situation for him by greatly increasing
their outlays without consulting him. As noted above, the postal
operating defictt could range in the billions of dollars, as could the
Post Office's capital investments.
If it could be guaranteed that the Post Office was going to be a
self-substanting operation, and that it would not be able each year to
make or break the President's budget, the fact the he has no control
over that budget would not be significant. However, it xoxx is now my
understanding that the Present reorganization plan$ before both the
Senate and the House, guarantee a substantial operating deficit indefinitely
in the future.
RECOMMENDATION
1.
That you ask the Post Office [Department and the BOB to agree
upon the fact of whether : the present reorganization plans will
result in sizable postal operating deficits indefinitely in To the future -
Has
that is to say tha the President%fundamental principle, will be set
Reproduced at the Richard Nixon Presidential Library
that The Postal smine ke set
A on a self-substanting basis has been abanonded,
2.
That an immediate and thorough review be done to see if there
is anything the White House can do to rescue our postal rate bills?
3. That if indeed, the President's basic principles of self-sufficiency
has been compromised since our negotiations with the labor
unions were comphex completed, the Postmaster inform the labor
unions of this fact, and of the fact that he will go to the Congress
and ask them under these circumstances to provide the President
with minimal statutory supervisory authority over the budget of
the new postal service
Reproduced at the Richard Nixon Presidential Library