owned transportation services of any type are available for the transportation of property or persons. I am wholeheartedly in support of the U.S. Government and the Post Office Department getting out of the transportation business, lock, stock, and barrel and turning it over to private business. As a representative of the transportation industry, can you tell me of any privately owned carrier or carriers that are fit, willing, and able to take this service over if the Government were to get out of it?

Mr. WELLER. All of it, sir?

Mr. DANIELS. Lock, stock, and barrel.

Mr. WELLER. No, sir. I think if by fit, willing, and able you mean immediately, I would say this is probably not so, that there is probably not an organization in being that could handle all the parcel post business the Post Office Department does. I would suggest-and it would be a personal opinion that if this would happen there would in a short period of time appear people who would handle it. They would, of course, as private enterprise, have to handle it at compensatory rates and these may be higher than the parcel post rates.

Mr. DANIELS. Do you think there is any hope for private carriers, either through consolidation or merger, to be able to take over this parcel post business if they were given time to do so say 3, 4, or 5 years?

Mr. WELLER. Yes, sir.

Mr. DANIELS. Why don't you give it some thought?

Mr. WELLER. I take it you are speaking to me as an individual. As an investment man I would be very intrigued with your suggestion. Mr. DANIELS. I think it is something that should be given consideration. I am for private enterprise.

Mr. WELLER. I understand the sense of your question and it makes a great deal of sense.

Mr. DANIELS. I do not like to see the Government in the transportation business-parcel post-or taking over the railroads or any other industry. The carriers have complained that this is an unjust intrusion in their business, and private enterprise particularly those engaged in this business ought to give consideration to taking it over. I am sure there is plenty of support for that in Congress.

Mr. WELLER. I will give it some thought, sir.

Mr. DANIELS. No further questions.

Mr. MORRISON. Mr. Daniels has brought up a point here that I do not think was brought up before. I have sat on this committee and heard witnesses for the transportation industry criticize the parcel post system and make all kinds of statements about Government competition with private enterprise. What I do not understand is why the people in the transportation business did not come up 5 or 10 years ago with a better plan than the parcel post system of the Post Office Department. Maybe they could perform the service at a cheaper rate to the public and give better service. But just criticism of the Government being in the parcel post business against private enterprise without offering any alternative-I think that is a negative position. If you really feel that way-it seems to me if you and all the witnesses. who have come before this committee over the years I have been on it are sincere, and I have no doubt you are-why has not an alternative

to the parcel post system been submitted to the Congress? To my knowledge no alternative has been brought before this committee.

Mr. WELLER. I think, Mr. Chairman-first let me say this is the first time I have appeared before you personally, and I must say also I have not been in the investment business very long. But it seems to me perhaps the question you have just asked has some merit and I will bring it to the attention of the TAÄ board.

Mr. MORRISON. These various transportation people, particularly the railroads, testify that it is wrong for the Post Office Department to be in this business. They say the Post Office is in a deficit position and does not give proper service. Yet all these people do is make negative criticism and nothing positive is ever brought before the committee saying, "This is the way it should be done."

I am trying to impress you with the strength of the people you represent. They are powerful. But when you take the position all is wrong with the Post Office Department in the way they handle parcel post and you do not come up with an alternative proposal, it is just criticism against a Government agency that says they are operating under all sorts of problems and need this legislation. You say you are against this legislation, although some members of your board of directors do not agree with you, and no alternative is offered. It seems to me that if you are going to keep on taking that position, and if all the other witnesses before this committee take that position, maybe, as Mr. Daniels says, you will come up with an alternative proposal, and maybe we might surprise you and let you have the business.

Mr. WELLER. I would be very much interested in that.

Mr. MORRISON. If there are no further questions we thank you. I want to submit for the record a statement by Mr. Victor F. Condello, vice chairman and general counsel of the New York Railroad Association. It will be inserted in the record at this point.

(The statement follows:)

STATEMENT OF VICTOR F. CONDELLO, VICE CHAIRMAN AND GENERAL COUNSEL, NEW YORK RAILROAD ASSOCIATION

SUMMARY

Section 3 of H.R. 12367 and S. 2843 proposes to amend and partially repeal Public Law 82-199, which became effective January 1, 1952, by increasing the size and weight of acceptable parcel post pieces moving between first-class post offices, from 20 to 40 pounds in weight and from 72 to 100 inches in length and girth combined.

The New York Railroad Association, representing 14 railroads operating in the State of New York, which accounted for 97 percent of the existing rail trackage in the State, is opposed to enactment of section 3 of these bills because enactment would:

(a) Cause certain bankrutpcy within a few months, of REA Express, a member of this association and the county's only privately owned and operated common carrier transportation agency serving all 50 States,

(b) Jeopardize seriously other parcel and small shipment carriers by greatly increasing the competition of subsidized parcel post service,

(c) Place and parcel post service of the U.S. Post Office Department in unnecessary and destructive competition with private enterprise carriers representing all modes of transportation,

(d) Disrupt needlessly the flow of small shipments from thousands of express shippers and consignees across the country who depend upon the services offered by REA Express and other small shipment carriers, and

(e) Deteriorate even more the existing first-class mail and parcel post service by overcrowding existing postal facilities in most cities by the influx of a greatly expanded volume of larger and heavier packages.

ECONOMIC THREAT TO REA

Section 3 of the proposed legislation relating to the expansion of size and weight dimensions for packages, if enacted, immediately threatens REA Express, a firm in the small-shipment field for more than 127 years, with a conservatively estimated loss of 42 percent of its business volume.

REA Express estimates that this decline in volume would shrink the company's total revenues by 27 percent or $120.3 million at a time when its equity is classified at only $14 million and when its payroll costs to some 32,000 people exceeds $220 million a year.

In 1964, REA netted $1,030,000 on an average gross revenue of $400 million, a return of only one-fourth of 1 percent. Further, it has committed some $93 million to plant improvement.

Since these bills have been introduced, REA has suffered financial setbacks in its credit and personnel programs. Should section 3 be enacted into law, REA seriously anticipates that insolvency would follow in less than 6 months.

OTHER CARRIERS AFFECTED

Other carriers in the small-shipment field would undoubtedly also be financially hurt if section 3 is enacted into law.

For example, these carriers are closely regulated by the Interstate Commerce Commission while the parcel post service of the U.S. Post Office Department operates without any regulation. By empowering the Post Office Department to increase the size and weight of packages that it may handle, Congress would place the small shipments transportation industry at a severe competitive disadvantage, especially since parcel post services are subsidized substantially by taxpayers while the operation of private enterprise carriers are not.

Importantly, severe operating problems would result from any change in the distribution patterns within the small shipment industry. With expanded size and weight allowances, the volume of parcel post business would surely and rapidly rise. In cities where parcel post, first class and other specialized mail services are handled, this would inevitably result in the clogging of already overcrowded postal facilities to the detriment of the shipping public.

THE ALTERNATIVES

The proposed legislation calls for an 8-cent rate increase and increased size and weight allowances to make up a deficit of $96 million. Since the Government already allows a 4-percent deficit over operating costs for parcel post service, a rate increase of 10 cents per package would yield $74 million and result in a figure well within the permissible deficit range.

Additional revenues could be obtained by rounding out parcel post charges upward to the nearest figure. This would yield an additional $14 million, leaving a total deficit of only $8 million. The problem of eliminating or reducing the remaining $8 million could well be a subject for further studies and a continuing program of operating improvements.

CONCLUSION

The railroads operating in the State of New York oppose the enactment of section 3 of H.R. 12367 or S .2843 since such legislation would destroy REA Express, a privately financed, publicly regulated company, which employs some 32,000 people, contributes approximately $440 million annually to the gross national product and pays over $30 million annually in taxes.

We earnestly contend that such legislation, since it would be detrimental to the economic welfare of thousands of persons and contrary to a sound national transportation policy, is not in the public interest.

Mr. MORRISON. The subcommittee will stand adjourned until further notice.

(Thereupon, at 12:30 p.m. the subcommittee adjourned subject to the call of the Chair.)

PARCEL POST

TUESDAY, APRIL 19, 1966

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON POSTAL RATES OF THE

COMMITTEE ON POST OFFICE AND CIVIL SERVICE,

Washington, D.C. The subcommittee met, pursuant to recess, at 10 a.m., in room 346, Cannon Building, Hon. Dominick V. Daniels presiding.

Mr. DANIELS. The Subcommittee on Postal Rates will now come to order.

Our first witness this morning is Mr. C. L. Dennis, president of the Brotherhood of Railway & Steamship Clerks, Freight Handlers, Express & Station Employees, AFL-CIO, who is accompanied by Mr. Charles B. Bailey.

I note, Mr. Dennis, that there are several other persons in your panel. Would you care to introduce them for the record?

STATEMENT OF C. L. DENNIS, PRESIDENT, BROTHERHOOD OF RAIL WAY & STEAMSHIP CLERKS, FREIGHT HANDLERS, EXPRESS & STATION EMPLOYEES, AFL-CIO; ACCOMPANIED BY CHARLES B. BAILEY, NATIONAL LEGISLATIVE REPRESENTATIVE; G. E. LEIGHTY, PRESIDENT, TRANSPORTATION COMMUNICATIONS UNION; ROBERT OLIVER, CONSULTANT; DAN J. SULLIVAN, VICE PRESIDENT, EXPRESS DIVISION, BROTHERHOOD OF RAILWAY CLERKS; AND JAMES L. HIGHSAW, JR., ATTORNEY

Mr. DENNIS. This is Mr. James Highsaw, Jr., our attorney; Mr. Dan J. Sullivan, our vice president of the express division located in New York City; Mr. George E. Leighty, chairman of the Railway Labor Executive Association, and president of the Transportation and Communications Employees Union; Mr. Robert Oliver, our consultant; and Mr. Charles Bailey, national legislative representative, on the end. Mr. DANIELS. Mr. Dennis, you may proceed.

Mr. DENNIS. Mr. Chairman, my name is C. L. Dennis. I am grand president of the Brotherhood of Railway and Steamship Clerks, Freight Handlers, Express and Station Employers, which is one of the organizations associated with the Railway Labor Executives' Association (RLEA). I appear here today because it is our ox that is being gored. This goring will occur if the legislation you are considering H.R. 12367 and related bills-is adopted in its present form. I therefore intend to state the vigorous opposition of my organization and the RLEA to this legislation. In our judgment, these proposals threaten the livelihood and future of a substantial number of