Mr. ESLICK. For the purpose of the record, I want you to briefly describe the kind of mail that falls in each of these classifications. Mr. BROWN. The first class is sealed letter matter. It is sealed and nobody knows what is in it. The second are publications which go out at a very low rate, averaging from a cent to a cent and a half per pound.

Mr. ESLICK. Does that include magazines?

Mr. BROWN. Magazines may go that way, too. They may be entered as second class if they want to. The third class is merchandise up to 8 ounces and in excess of 8 ounces it is fourth class, merchandise including catalogs, seeds, and things of that kind.

Mr. ESLICK. And above eight ounces?

Mr. BROWN. Fourth class is above 8 ounces, and third class is under.

Mr. ESLICK. The fourth class is generally what we term parcel post?

Mr. BROWN. Parcel post, because most parcels weigh more than 8

ounces.

The CHAIRMAN. I want to say that I appreciate your position in regard to the committee not having the authority to do it. I was just making these observations because that is the way I feel about it, that each committee ought to take care of the work before it.

Mr. LEWIS. General, it has happened in my public work that I have given much attention to postal institutions, and I do not hesitate to express the opinion that it is easily the most efficient and economical organization in the world, private or public. In connection with that statement I would like to ask you to prepare a statement of the number of postal employees, running back for a generation, year by year, and compared, as far as your files will permit, with number of pieces handled, and with the volume of work done per employee. Do you understand the suggestion?

Mr. BROWN. Yes.

Mr. LEWIS. I believe you could do it for some years. I hope you will be able to do it for quite a number of years, running back to 1900, if possible, and the average salaries also.

Mr. BROWN. You mean you want that information for this committee?

Mr. LEWIS. I would like to have it in connection with your statement here this morning.

Mr. BROWN. That would be a very laborious task. We will try to work it out for you, but we can not do it for some time. We know how many employees we have from year to year, and we can estimate the number of pieces of mail that we handle. Of course, when it goes in bulk, goes out by the pound, it is pretty hard to estimate it. The salaries vary with the number of hours.

Mr. LEWIS. I do not mean individual salaries, but average salaries per employee.

Mr. BROWN. Since the first of last July, while the salaries remained fixed, the hours have been reduced from 48 to 44, which makes a very substantial difference in the rate of pay per hour, and is an increase of 83 per cent in the salaries. There are a good many factors in it, although I would be glad to give you what I can.

STATEMENT OF HON. JAMES M. MEAD, CHAIRMAN COMMITTEE ON THE POST OFFICE AND POST ROADS OF THE HOUSE OF REPRESENTATIVES

Mr. MEAD. Mr. Chairman and gentleman of the committee, I come before you at the unanimous request of the Committee on the Post Office and Post Roads.

I take issue with the suggestion of the Postmaster General that your committee act on postage rates, and ask that the entire matter be turned over to our committee.

Our committee, as you know, is just organizing; our subcommittees are just beginning to function, and we are seriously considering the problem that has been sugested to the members of this committee. We differ in some degree with the Postmaster General, but we are intensely interested in improving the service, decreasing the deficit, and placing the Post Office Department on a more efficient basis.

We are suffering, as everybody knows, from a loss in the volume of business; that, more than any other cause, has brought about this deficit. There are some costs in the department that readily yield themselves to the drop in the volume of business, but there are other costs in the department that are constant and do not deviate, either in times of prosperity or times of depression. The rates, for example, are always constant. Salaries fluctuate to some degree and are reflected in the reduced volume. For example, salaries of postmasters in the first, second, third, and fourth class offices are set in accordance with the receipts of the offices, and the losses in revenue in their particular office or offices results in a decrease in the salaries of those postmasters and the supervisory employees under them.

As a result of a recent survey conducted by the department, the service has been curtailed and the personnel of the department has been reduced. It has been estimated that 6,000 positions have been abolished, and in many cases substitutes working for smaller salaries are doing the work formerly done by the regulars in the service.

The rural routes, as the result of the policy of merging and consolidating, have been reduced by 866. This work is now being done by a smaller organization, with resulting reduction of cost amounting to about $866,000.

There are many ways in which we could attack the deficit, but I am sure that I could not definitely explain just what we intend to do. We are considering the question of the air mail and its increased costs; we are considering the expense of postal quarters; we are considering such changes in the first, second, and third class mails, particularly in the special services, as would increase the revenues and plug up the leaks that are costly; and in a number of other ways we intend to consider this problem in a businesslike way.

Now, gentlemen of the committee, I want to give you four or five. reasons why I think the jurisdiction should rest with our committee rather than with yours and I will read them. The first is that of jurisdiction. Never in the history of Congress have postage rates been changed

Mr. ALDRICH. Mr. Chairman, does anyone of the committee think we have jurisdiction?

The CHAIRMAN. I do not think so, in speaking for myself.
Mr. MEAD. It might be interesting to know-

The CHAIRMAN. For record purposes, it might be well, Mr. Chairman, if you permit us to insert that in the record, so in any case we would have a precedent, so that in the future if anything like this arises

Mr. MEAD. Your committee has on one or two occasions gone into this matter and took the authority away from the Post Office Committee

The CHAIRMAN. I do not think, Mr. Mead, there is a disposition on the part of the committee to take the jurisdiction away from you. I think I speak with the full approval of the committee when I make that statement.

Mr. MEAD. Our committee was prompted to send me before you, perhaps because of the statements in the press that the Treasury Department would recommend the postal revenues be increased at this particular time by your committee

The CHAIRMAN. I think the gentleman from New York [Mr. Mead] is clearly in his rights in regard to the recommendation of the Under Secretary of the Treasury, to present for the record his statement here.

But there is no question, as I can see, no disposition, to use that word, that I can see, on the part of the Committee on Ways and Means to usurp the power and the authority of the committee of which the gentleman, the witness before us, is chairman.

Mr. MEAD. Our committee will appreciate that, and the chairman will also.

Mr. CHINDBLOM. I think it should be made clear that the Postmaster General not force this matter on us.

Mr. MEAD. No; I understand he came in response to a request. Never in the history of Congress have postage rates been changed by any other committee than the Post Office and Post Roads Committee, except during the War of 1812 and the World War. In war all rules lapse, but there is no justification now for the Ways and Means Committee dealing with postage rates.

We want to particularly explain our position with regard to the 3-cent postage rate. At least, I want to take issue with the Postmaster General, and I believe I speak, although not by direct authority, but I think I speak for the Post Office Committee. The entire net deficit of $98,000,000 for 1931 was due to a business depression which decreased the volume of mail. For the 15 years preceding 1930 the annual increase in revenues averaged $30,000,000. If that increase in revenue had kept up, there would have been no substantial deficit. The present deficit can be entirely eliminated in the next few years by the normal increase in postal revenues. The 3-cent rate will not mean correspondingly greater revenues. It will mean a reduction in the volume of the mail, which in turn will mean a higher cost on every letter handled. There is a definite overhead cost in the Postal Service. The postmasters, letter carriers, clerks, and others are on the job. They can handle a certain volume of mail at the most economical cost possible. Reduce that volume and the cost goes up, and in the end the deficit is greater.

And in making a definite formal statement, here is an example of just how it may work out: In the act of February 28, 1925, we

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increased the rate on post cards from one cent to two cents, on the statement that it would increase revenue $10,000,000 a year. The actual experience showed that we lost $6,000,000 of the amount which had been received at the 1-cent rate. Congress immediately restored the rate, and the volume has been slowly coming back to the previous point, to its previous high levels. If 3 cents now is made the letter postage rate, then business men all over the country will stop expenditures, and it will be very difficult to get them started again, even when the rate is reduced to its former level. This 2cent rate was fixed in 1885, being reduced from the former rate of 3 cents. The growth of the per capita use of the Postal Service shows how good a business move this was. The one way to overcome the deficit is through low postage rates, which will make the increased volume a source of aggregate revenues.

First-class rates now pay a profit. In the Postmaster General's report, you will see that the first-class mail matter is the only class. which shows a gain. There is a loss in the second, third, and fourth classes, but the first class shows a gain of many million dollars. There is a loss in the other three classes, but the first class shows a gain of many million dollars. The only rate now which shows a profit, must assume the losses of the other classes. If we are to embark on higher postage rates, why not raise the rates on the losing classes, rather than on the profit-making classes?

Of course, I want to impress on the committee this one thought: There is a vast difference in rate making and the policy or method of cost ascertainment, and there is such a vast difference that it would almost take a professional rate maker to explain. For example, if we were to take second-class mail matter out of the post office altogether, you could not just figure the savings in ascertainment costs. You see, the postal organization is constantly serving every city and section and hamlet in the country, and taking one classification of mail out of the organization would only decrease the volume, and would have no material difference on the personnel, the salaries, or the organization; and, therefore, we would not save what is suggested in the ascertainment cost committee's report.

For example, if we remove the second, third, and fourth class mail from the service, and if it is estimated that we lose $150,000,000 in the handling of those three classes, we could not possibly decrease the deficit by $150,000,000; because we would only be able to decrease the personnel of the service by a very small degree. Therefore, it is just a question of the difference between scientific rate making and the method of ascertaining the cost of handling the various classifications of the mail.

The point I want to make is this: We need the volume, and volume will decrease the deficit and solve the problem that we seem to be worried about right now.

The CHAIRMAN. I want to say right there, Mr. Mead, your contention is that the deficit in the Post Office Department can not be badly affected by the change in the personnel; but its effect has been brought about almost solely by the decreased volume of business handled by that service.

Mr. MEAD. The normal, natural increase in receipts prior to the coming of these difficult times was $30,000,000 a year; and, as I said

before, there are costs that are constant and we can not do without them. The whole organization is capable of handling an immense volume of business, without adding to the cost; so we need the volume. The present deficit is in no way caused by the wages paid the personnel. Under the present wages, letters are being handled at a less unit cost than they were in 1885, when the 2-cent rate was established. Since 1913 postal employees have practically doubled their productivity, as measured by revenues, but their wages have only gone up 75 per cent. In proportion to their increased efficiency, they are receiving less than they did before the World War.

There is just one other point that I want to make and then I am ready to conclude. To consider raising the first-class rates alone is unjust; it is unjust to mail patrons that use that classification of mail. It is unjust, because it is now handled at a profit.

I do not believe that we have the right to make all of the people pay for the loss incurred as the result of congressional action in these outside activities that have been placed upon the Post Office Department. We are criticized very often by some of the leading men of the Nation because, in this business venture, the Government shows a deficit, and at the same time we were compelled to grant subsidies and charge them to postal activities.

It may be all right for us to maintain ships in the air and ships on the sea, but I think we are in error when we make an individual pay 3 cents on a letter in order to wipe out that deficit.

There are many ways in which we can add to the revenues, and we are going to try to do so.

Mr. CRISP. You said you do not believe these subsidies to build up a merchant marine are any more properly chargeable to the postoffice service than any other branch of the Government? That is what you mean, is it not?

Mr. MEAD. I agree with you. I imagine they were attached to the Post Office Department because they could not secure a direct subsidy.

Mr. CRISP. One other question, please: You said the deficit was largely brought about by the falling off of the business; how do the receipts, the gross receipts, for the Postal Service for the last fiscal year compare with the gross receipts for the fiscal year ending June 30, 1929, which, of course, was the boom year?

Mr. MEAD. That is in the report. Those revenues amounted to $656,463,000, while during 1930 they amounted to $705,484,000. Mr. CRISP. That is a decrease, is it not?

Mr. MEAD. That is a decrease. During the fiscal year 1931 the postal revenues amounted to $656,000,000, and the year before they amounted to $705,000,000. The revenues decreased approximately $50,000,000; and the normal and natural increase prior to that in good years was $30,000,000. This was usually absorbed, this increase, without increasing very materially our organization; it absorbed the increased volume of mail, due to the increased efficiency of the organization.

The CHAIRMAN. In other words, Mr. Mead, there is about $90,000,000 difference between the gross receipts in the post offices at the end of the year 1931 than it was at the end of the fiscal year June 30, 1929?