(1) There is a claim that the partial restoration of weight and size limits is an unprecedented action. The proposed action is not unprecedented. The size-weight structure was enlarged twice in 1913 and again on three later occasions.

(2) There is a claim that the passage of H.R. 12367, particularly section 3, will mean the demise of REA Express. A witness, friendly to REA, admitted that too often before REA had cried "wolf" when faced with proposals with which it disagreed. This time, he said, the wolf-cry argument was justified. We fail to see, however, any facts that would support this sudden clearing of what has been shown again and again to be a very cloudy crystal ball.

(3) There is a claim that the financial position of the Post Office Department will be hurt, rather than helped, by passage of H.R. 12367. Assistant Postmaster General Nicholson will show that passage of H.R. 12367 will enhance, not damage, finances of the Post Office Department.

(4) There is a claim that express service as it now stands is sufficient. In theory REA provides service to nearly all. Practice, however, has long left theory behind. The facts are that REA rates for single parcels are prohibitively high for all except those that are part of bulk shipments.

(5) There is a claim that passage of H.R. 12367 would be unfair to private enterprise. Well, there are innumerable businesses, very much involved in private enterprise, which feel strongly that Public Law 199, by giving a privileged sanctuary to one company, was an infringement on private enterprise, and that companies who need hidden subsidies may be enterprising, but not completely private. Let me state unequivocally that the Post Office Department would not advocate passage of H.R. 12367 if we did not have good reason to believe that the legislation would promote more vigorous activity in the private sector.

(6) There is a claim that large numbers of employees of REA Express will become unemployed or otherwise disadvantaged as a result of this legislation. We totally reject this claim. The Postmaster General has already stated that we stand ready to offer any displaced REA Express employee a comparable position with the Post Office Department.

(7) There is a claim that the Post Office Department is incapable of handling larger parcels. The Post Office, as a result of the intensified mechanization and construction program now underway, is better able than ever to handle larger packages. In addition, under the present law, favored by opponents of H.R. 12367, we are permitted to handle 70-pound, 100-inch parcelsjust so they don't move between first-class post offices, precisely those offices most capable of doing the job because they possess the proper equipment.

(8) Finally, there is a claim that all we need to do is raise rates to solve the parcel post problem. On the contrary, the whole thrust of our experience shows that raising rates alone is not the answer. Each rate increase causes further shrinkage in volume. Under the 4-percent rule, each volume shrinkage requires the Post Office Department to raise rates.

Thus, the opponents of H.R. 12367 rest their entire case upon certain contentions about the possible effect of this legislation on their operations. These contentions, in our judgment, are incorrect, and their case is without foundation.

But, even if this were not so, there is the second and more important area of argument-that of the public interest. The opponents of H.R. 12367 have remained silent on this question. They have not addressed themselves to the public interest at all. Why? Simply because there is no way to reconcile public interest with private privilege at the expense of public interest.

Testimony by the Postmaster General and others has clearly shown that the public interest has been, and is being, damaged by the restrictive provisions of Public Law 199.

I urge the subcommittee to report this bill favorably so that the damage to the public interest may be speedily repaired.

(The complete prepared statement of Mr. Belen follows:)

PREPARED STATEMENT OF DEPUTY POSTMASTER GENERAL FREDERICK C. BELEN Mr. Chairman and members of this subcommittee, I wish to thank you for this opportunity to review the major issues developed in the course of this hearing. The Post Office Department has very carefully studied the arguments developed by those who oppose H.R. 12367, and if I may be permitted to characterize that testimony, I would say that it is an able attempt to justify the unjustifiable, and a full exposition of everything but the essential points.

What, you might ask, are the essential points?

In my view there are five essential points.

First, what will be the end result of continuing the present system, not alone on the balance sheet of one company and its railroad stockholders, but on the balance sheet of millions of farmers, businessmen, and consumers?

Second, which has a more important claim on our attention, the general interest or the interest of a particular company?

Third, are the people-not companies, or interests, or railroads, or corporations, or profit and loss statements-but people are the people getting the kind of parcel service they deserve?

Fourth, is the economy as a whole being hindered or hurt by the present parcel post system?

Fifth, how is it possible to claim that a situation in which a private company is the beneficiary of special legislation, that clearly harms many businesses and farmers, favors private enterprise?

Before I examine these points, which are the considerations that impel the Post Office Department to support H.R. 12367, permit me to examine a few of the arguments adduced by opponents of this legislation.

One of the main arguments is that section 3 of H.R. 12367, the key section dealing with removal of restrictive size and weight limitations, is unprecedented. According to one witness, "Congress has never, in the 53 years of parcel post history, increased parcel post sizes and weights."

Even if this point were true, it would be meaningless. This country has risen to its present peak of power and prosperity because it has learned to innovate. Our Nation has accepted the warning of Thomas Jefferson to avoid being governed by "the dead hand of the past." An America that feared innovation would not be the America that unlocked the secret of the atom, or secured the full potential of modern technology. This country is at its best when it innovates, and that our political processes foster innovation is one of their finest attributes. Hence, the argument that a certain action by Congress is unprecedented is a weak argument that properly has no place in a society that is, like ours, facing unprecedented problems.

But the claim that H.R. 12367 is unprecedented is, itself, merely a matter of playing with words. Size and/or weight limits on parcel post have been increased five times in the past. Each change was made by the Postmaster General, with the consent of the ICC. Now, it is obvious that actions by the Post Office

Department are not undertaken in opposition to congressional desire. Section 8, article 1 of the Constitution places the postal power where it should bewith the Congress. These increases in size and weight were certainly carried out in the context of congressional approval, both through the appropriations process and otherwise. Hence, to say that section 3 of H.R. 12367 is unprece dented is to stretch the word "unprecedented" almost to the breaking point.

Further, I think the record should show that the Post Office Department does not seek to expand its size and weight limitations, as some have claimed. Rather, the proposed legislation seeks no more than a restoration, and a partial restoration at that, of size and weight limitations that the American people had come to accept as traditional during a period of over two decades.

We are asking for a partial restoration, for the minimum possible restoration, in order to place the parcel post service on a break-even basis and to provide 140 million Americans with service they are now being denied. The whole genius of our economy resides in low unit costs through high volume. This is the basis of section 3 of H.R. 12367: that increased use of parcel post through removal of present barriers will produce increased net revenues. This argument should not be strange or hard to accept-it is a credo of American business that sees its reflection in the highest standard of living in the world.

All this bill asks is a twin injection of economic sense and postal service into parcel post.

What do the opponents of partial restoration of size and weight limits have to say about economic sense and postal service?

Very little, I'm afraid. The entire argument of the opponents of this partial restoration rests on considerations affecting their own business operations.

This is to be expected, and is perfectly legitimate. But by the same token it should be equally expected and legitimate that the Post Office Department speak out for the public interest, for the tens of millions of individuals and businesses who have no eloquent spokesmen to show how the $4 minimum charge for REA general parcel service hurts them, the tens of millions of individuals and businesses who cannot produce charts and diagrams to show that they are not getting the service they want and need, the tens of millions of individuals and businesses whose economic health is being sacrificed to a greater or less degree in order to foster the economic health of one company.

Under the present system as established by Public Law 199 and supported by REA Express, there is but one outcome, and I think the record has clearly shown what that outcome will be: a continuing, upward movement of parcel post rates. I want to repeat that point, unless the present law is reformed, rates will increase sharply, year after year after year.

Parcel post was established in 1911 in order to provide the people with a more economical alternative to high-cost express service. This purpose will no longer guide our parcel post system unless Congress takes action now.

So, to answer the first question I raised, what will be the end result of continuing the present system, not alone on the balance sheet of one company and its railroad stockholders, but on the balance sheet of millions of farmers, businessmen, and consumers? I think the answer is clear. The laws that now bind parcel post to an escalator of rising rates will soon leave the average individual with no reasonably priced parcel service.

My second question had to do with which interest was more significant, the general interest or one particular private interest. While I do not think there is any doubt of your commitment or our commitment to the preeminence of the public interest, I would also say that we are certain that there is in fact no need for a choice in this instance. We came before this subcommittee convinced that H.R. 12367 offered no serious threat to REA Express or to any other company. If we thought otherwise, we would not have offered the bill in its present form. We carefully studied the record of these hearings and, as a result, our earlier views are unshaken. REA will not be hurt. If anything, the testimony given here by the witnesses for that company has strengthened our conviction.

The REA case against this bill cannot stand up under critical analysis. It is contrived to perpetuate REA's privileged sanctuary at the expense of private enterprise shippers, consumers, and farmers. To accomplish that aim, REA management has fanned the fears of employees and pensioners who, in their anxiety, have echoed and magnified its hollow predictions of impending destruction. REA Express has a history of what might be termed "compulsive pessimism.”

Its spokesmen again and again and again have perceived doom in any efforts to place the parcel business on a more competitive basis. For example, in 1960 REA President William B. Johnson saw in a United Parcel Service application for expanded service nothing more than a serious loss for REA. Granting of the application, he claimed in ICC Docket MC-115495, would put REA $5 million in the hole. This has not occurred, a fact which shouldn't surprise anyone who believes that competition breeds efficiency, and that expanded volume can produce profits for all.

REA Express, if I may be permitted to say so, has turned the cry of "wolf" from a fable into an art.

The testimony of REA Express witnesses presents that art form at its most expressive. In its opposition to this bill, REA stressed two main points.

First, its loss of business will be so great as to destroy the company, pulling down with it employees, pensioners, stockholders, and shippers who depend on REA.

Second, the Department's parcel post finances will be hurt rather than helped by enactment of the size-weight limits proposed in section 3 of H.R. 12367. We can and will prove REA is wrong on both points. That will require a review of some technical data and Assistant Postmaster General Ralph W. Nicholson, who heads our Bureau of Finance and Administration, will cover that part of our presentation. But before he does so, I would like to discuss the other essential questions untouched by the opponents of parcel post reform. The third and fourth questions revolved around whether the people are getting the kind of parcel post service they deserve, and whether the economy as a whole is being hindered or hurt by the present system.

The answers are plain.

Those who oppose H.R. 12367 would have you believe that the interests of individuals depend on shackling the parcel post service so that REA Express and possibly a few other carriers can reap certain economic benefits. But there is no doubt that the broad interests of our market economy and the cause of price containment have both been badly hurt by Public Law 199.

Mr. Chairman, when Mr. Johnson of REA answered your question, he dismissed your concern about the lack of parcel service between first-class offices. He said there is no service void because REA has offices covering 98 percent of these cities.

I firmly believe his reply begs the question, and a very serious one for 140 million of our urban residents. We concede that REA covers these larger cities. But at what cost to the consumer? Let's go back to the 79-inch parcel exhibited here by the Postmaster General. That parcel could not be mailed from a Georgetown post office to Westfield, Mass. A similar package mailed to nearby Hampden. Mass., required postage of $1.71. Now if the rejected package had been sent via REA, approximately the same distance as to Hampden, the charge for the 18-pound package would have been $5.10.

In theory, the REA service is there. But in practice it is available only to a relatively few shippers since REA rates for single parcels are prohibitively high for all except those that are part of bulk shipments. It can hardly be said that REA is set up to service single-parcel shipments when its rates are deliberately designed to embargo those shipments, in the words of the Interstate Commerce Commission.

The data submitted by REA to the Commission just last October indicate that single-parcel shipments are unprofitable, even at $4 minimum. Of course they are when REA costs exceed $5 excluding payments for line-haul transportation. According to Mr. Johnson's testimony to this committee, REA has been trying to get away from single-parcel shipments, and apparently with much success as reflected in his showing that class-rated volume dropped from 85 to 23 percent of total volume.

We do not challenge REA's contention that it is set up to serve over 98 percent of all first-class post office cities. But it is apparent that REA pricing policies make the presence of these offices a matter of academic significance for most patrons who send or receive single parcels rather than quantity shipments. Not only is REA essentially unconcerned about the plight of the consumer who simply cannot afford the high minimum costs of REA service, but REA has also largely wasted the special privilege conferred upon it by Public Law 199. Despite this handsome incentive, REA has permitted a wide void to appear in the small package service our Nation so sorely needs.

According to REA's own figures, Public Law 199 was enacted when its dependence was mainly on class-rated traffic. But now, REA's interests are largely in bulk-rate volume business and in air express. REA has not disputed that conclusion. If anything, the testimony of REA witnesses confirmed there has been a basic shift away from parcel-post-type business to freight-size bulk shipments at special rates. At a matter of fact, in the same United Parcel Service case I cited a moment ago, Mr. Johnson advised the ICC: "Our rate policy right now is shooting for shipments that are around 100 and 125 pounds." That, in conjunction with 10,000-pound aggregate shipments, is quite a bit different from the 40-pound maximum we seek in section 3.

While its marketing policies and its office closings are aimed at turning REA away from single-parcel shippers and receivers, that company bitterly resists the efforts of the Post Office Department to fill that service void-a void created by REA's innability or refusal to meet the obligations of a monopoly conferred at its request.

We were struck by the deep irony in the testimony of witnesses for the railroads who cited a surplus of capacity in our Nation's transportation network. Yet, despite that surplus, most commercial carriers cannot find a place in their systems for single-parcel shipments to or from households, farmers, or even off-the-main-line urban localities. It is this residue of high-cost traffic-unwanted by private carriers except at repressive minimum charges-which has been dumped on the parcel post service. And while these private carriers carefully tailor their operating areas, routes, and pricing policies to attract more of the cream of package traffic, they loudly deprecate a parcel post service that cannot subsist on what they reject.

If there is a surplus of transportation capacity, it is clearly not the small businessman or the farmer who benefits from it. Only those benefit who can muster sufficient volume for a container shipment, a palletized load, or an aggregate rate.

While rural areas were exempt from the onerous restrictions of Public Law 199, these areas have not been able to avoid the sharp rise in parcel rates which, in large part, was a direct result of that law. In 1951, postage for a 5pound carton shipped by a farmer to a customer 100 miles away was only 21 cents. Today that postage rate is 57 cents, and the bill before the Congress would raise it again to 65 cents. Alternatively, if parcel size and weight limits are not revised as proposed, rates must be raised, initially, to 71 cents-an increase of 28 percent over the 1951 rate. With our narrowing volume base, confined more and more to the parcels no other carriers want, we are caught in a cycle where each rate increase simply sets up the next one.

Of all consumers, the farmer and other occupants of rural areas are hardest hit by this unending rise in parcel post rates. They do not have the wide range of transport modes available for shipments between urban areas.

The immediate purpose of the proposed size-weight revision is to restore some mailing privileges that were once enjoyed by urban areas. A parcel post service confined increasingly to rural areas would soon become only a token public utility for those areas. The farmers and rural residents of this Nation can use the parcel post system only if its costs are shared with urban areas.

I think the facts show that a few companies, interests, railroads, or corporations may gain by the continuance of the present system, but the public interest, the interest of large numbers of individuals and business will continue to suffer. The final question revolves around whether special privilege for one company will stregnthen private enterprise. It has been claimed that this bill is inimical to private enterprise. A rebuttal by representatives of Government may not be entirely convincing, but representative voices from the private sector, businessmen and farmers, men whose entire point of view is that of complete alvocacy of private enterprise should be a more convincing rebuttal. There is testimony supporting our position from organizations representing many thousands of private shippers. There is testimony supporting our position by the National Grange and the American Association of Nurserymen. The U.S. Chamber of Commerce, in the past a supporter of the REA position, this year has not given that support. These are the real voices of private enterprise, as distinguished from the voice of one particular enterprise.

I think the subcommittee will be most interested in a survey of the small business community recently conducted by the National Small Business Association. This survey showed overwhelming approval of the proposed revision in