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Washington, D.C. The subcommittee met at 10:15 a.m., pursuant to recess, in room 2253, Rayburn House Office Building, Hon. James C. Wright, Jr. (chairman of the subcommittee), presiding.

Mr. WRIGHT. The subcommittee will come to order.

The Chair wishes to apologize for a slightly late beginning this morning occasioned by the fact that we did

not receive the statement of the witnesses for today until quite late, and the Chair and members of the committee wanted an opportunity to review the statement before the session began.

Our witnesses today are Mr. Richard P. Nathan, Assistant Director of the Office of Management and Budget, and Mr. Charles E. Benton, Assistant Chief of the General Government Programs Division of the Office of Management and Budget.

Would you gentlemen be sworn!

Do you solemnly swear that the testimony that you will give to the subcommittee will be the truth, the whole truth, and nothing but the truth, so help you God?

Mr. NATHAN. I do.
Mr. BENTON. I do.
Mr. WRIGHT. Thank you.

Inasmuch as the statement did arrive rather late, I think it would be appropriate, Mr. Nathan, if you were to proceed on the basis of reading the statement to the committee.

Mr. NATHAN. Fine, I appreciate that.



Mr. NATHAN. Mr. Chairman, I am Richard P. Nathan, Assistant Director of the Office of Management and Budget, and have with me Mr. Charles E. Benton, who has worked in this area for some time as Assistant Chief of the General Government Programs Division.


First of all, let me say I regret the statement we prepared did not reach

you in time for you to go over it well in advance of the hearing because of the time we needed to finish our work on it, I am afraid.

I thought it might be useful for me to say a few words here about how we are organized in the Office of Management and Budget. I am Assistant Director, responsible—we have three program assistant directors. Each of the program assistant directors supervises the work of two program divisions. I supervise the work of the Human Resources Program Division and the General Government Programs Division.

The General Government Programs Division has responsibility for both the Postal Service to the extent that we are involved in activity affecting the Postal Service, and the General Services Administration. We have in the General Government Programs Division in the Office of Management and Budget several people who are quite expert on General Services Administration and postal affairs, Postal Service matters.

I would estimate that we spend on the order of 3 man-years on an annual basis in our review and consideration of the General Services Administration matters.

I understand that representatives of the General Services Administration, the Corps of Engineers, and the Postal Service have discussed—or are scheduled to discuss—with the committee in some detail their relationships concerning the postal reorganization.

As I indicated in my introductory remarks, because of the way we are organized, I am not knowledgeable in as much detail as the agency witnesses will be on the matters of interest to your committee, but I will do whatever I can to answer your question about the role that the Office of Management and Budget plays in this kind of subject.

There are several points which I think deserve special emphasis during your consideration of some of the past decisions and for an understanding of some of the additional decisions which lie ahead. I understand that one of the particular concerns of the subcommittee is the background concerning the decision that the Corps of Engineers serve as the construction agency for the Postal Service.

Certain matters relating to the history of the postal reorganization are paramount to any review of interagency relationships both within the executive branch and with the Congress. There are four such points that I would make.

First, the Postal Reorganization Act provides authority for the Postal Service to acquire in any lawful manner such facilities as it deems necessary without review of any kind by the President or Congress. The choice of method of acquisition is left to the discretion of the Postal Service.

Mr. WRIGHT. On that point, Mr. Nathan, you say that the Postal Service is authorized to acquire any facilities it wants to without review of any kind by the President or the Congress.

Mr. NATHAN. I think the second point, Mr. Chairman, indicates the extent to which there are restrictions on that review procedure.

Mr. Wright. Mr. Nathan, I have read your second statement. I want to ask some questions relating to your first statement, if you will, please.

Mr. NATHAN. The intent of the law setting up the Postal Service was to permit them to manage their affairs on a comprehensive basis in a way that meets the very important public need of improving the Nation's mail service and making it faster and more efficient. That law is written in a way that, among other authorities, permits the Postal Service to acquire facilities which it believes are necessary to the efficient handling of the mail.

Mr. WRIGHT. May I ask a question with regard to your statement !

Do you interpret the construction of the Posal Service in such a way that it may operate without review of any kind by the President?

Mr. NATHAN. Well, there is a limit, as indicated, on the total dollar bonded indebtedness and a requirement for coordination with the Treasury before bonds are sold publicly, but otherwise, I would say that the way in which we relate to the Postal Service depends very much on their and our good will in terms of making necessary arrangements for coordination, which I discuss later on in my testimony as regards facilities jointly used by the Postal Service and other Government agencies.

Mr. WRIGHT. But so far as their operations are concerned, they operate without review of any kind by the President?

Mr. BENTON. This first point is directed to post office construction, and the fact that the Postal Reorganization Act contains no provisions for Presidential review or congressional review similar to the Public Buildings Act that controls General Service Administration construction, for example, where you have this prospectus procedure in which we are involved, in which the Public Works Committee is involved.

Mr. WRIGHT. I understand that.
Mr. BENTON. That is what the intent of that sentence is.

Mr. WRIGHT. The committee is fully cognizant of the provisions of the Public Buildings Act of 1959, it having been the original author of that act, and it having been the agency through which the prospectuses were submitted.

Now, I think it really does need some careful stipulation when you say that they are authorized to engage in this building program in any way they see fit without review of any kind by the President or the Congress. Now at this point I think we ought to make that clear.

Mr. BENTON. I think this statement is not intended to be so broad as to say that the Congress cannot, on its own initiative, inquire into the Postal construction program and do what it wishes with it, or the President can inquire into it and make such recommendations to the Congress, or initiate such discussions as he may want to with the Postal Service.

Mr. Wright. Yes; this is an independent executive agency of the Government, is it not?

Mr. BENTON. It is an independent establishment of the executive branch of the Government, I think the law states.

Mr. WRIGHT. As an independent establishment of the executive branch of the Government, it would be subject to the review of the President of the United States; would it not?

Mr. BENTON. Oh, yes.
Mr. WRIGHT. In all of its operations.

Mr. BENTON. In a manner consistent with the provisions of the Postal Reorganization Act; yes. We cannot require the Postal Service

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to get our approval, for example, before it initiates a construction project. The law specifically excludes that type of review.

Mr. WRIGHT. Can you require it to get approval of the President of the United States before it sets forth broad policies regarding the means in which it will engage in this broad construction program?

Mr. Benton. I would answer that question “Yes.”

Mr. Wright. So, therefore, it is not quite accurate to say that it may acquire such facilities as it deems necessary without review of any kind by the President, that is not quite accurate; is it?

Mr. BENTON. That is

Mr. NATHAN. I think it is fair to say that that is a very broad statement, and that your questioning does indicate that if we were to discuss that point in more detail, we would make the observations that you have suggested and drawn out of us in your question.

Mr. Wright. Then beyond that, there are appropriations that have to be made with regard to construction costs and I would imagine that those fall rightfully within the purview of the Office of Management and Budget; do they not?

Mr. NATHAN. I think here the second point of the list on page 2 of considerations, matters we considered in making this decision, is applicable. That is that the capital assets for Postal Service are determined in the law to be required to be within a dollar limitation on their bonded indebtedness and that they need to be required to coordinate with the Treasury on the selling of bonds.

Now, to that extent, there is clearly a responsibility that we have which is indicated in law. I would want to be very clear on one point, Mr. Chairman. That is that we are speaking from the point of view of the executive branch. From the point of view of the Congress, these matters are always subject to your legislative scrutiny and to your legislative revision.

Mr. WRIGHT. Surely. But now with regard to the operations of the Postal Service, is it not true that in this entire sweeping new program it is anticipated that the Service will operate at a deficit for the first few years? Is that not anticipated ?

Mr. BENTON. In terms of the subsidy that is provided specifically in the Postal Reorganization Act, yes, that statement is true.

Mr. Wright. All right, and that subsidy will have to be provided by appropriated funds; will it not?

Mr. BENTON. That is true.

Mr. WRIGHT. And under the law, all appropriated funds requested by the executive branch come within the purview of the Office of Management and Budget; is that not true?

Mr. NATHAN. That is true, Mr. Chairman.

I would indicate that there is in the law a formula for the determination of the subsidy which does have considerable force-I guess I would put it that way-in determining how we review and regard this matter in the budget review process.

Mr. Wright. That falls within the purview of the Office of Management and Budget to make the determination.

Mr. NATHAN. That is correct. In fact, as I am sure your committee is aware, Deputy Director Weinberger of the Office of Management and Budget did this year testify on a matter affecting the Postal subsidy where we did interpret the law in a way that some in the Congress and some outside the Congress in the public raised questions about. Those questions were answered by Mr. Weinberger in his testimony.

But that suggests, just as you indicate, that we have a certain review, but a review that is structured by the formula for the subsidy that was very carefully worked out by the Congress and the executive in the development of that legislation.

Mr. Wright. Now, with respect to the building program itself, under the agreement entered into between the Postal Service and the U.S. Army Corps of Engineers, the Army undertakes the responsibility of constructing buildings for the Postal Service, and of doing so while providing all management, design and other functions, and it agrees to hold the cost of management design and other functions payable by the Service to not more than 5.5 percent over and above the cost of actual construction. You are familiar with that provision?

Mr. NATHAN. Yes, I am.

Mr. WRIGHT. If the Army were unable to fulfill that obligation and discovered perforce that the overhead costs incurred by it in providing this service for the Postal Service should be perhaps 8 percent, then someone would have to pay that difference; would they not?

Mr. NATHAN. Yes. Mr. WRIGHT. If that were to come from appropriated funds, that obviously would be a matter of concern to the Office of Management and Budget; would it not!

Mr. BENTON. Yes; but I do not think the two matters are that closely related. The subsidy is specifically identified in the Postal Reorganization Act. A formula is specified there. We have, I think, established in Mr. Weinberger's testimony and in the action of the Appropriations Committee that we can vary that amount if we wish. We can appropriate less, but the amount of that appropriation is not directly related to the cost of running the Postal establishment.

I think the law pretty clearly leaves that to the determination of the Postmaster General.

Mr. NATHAN. I think that Mr. Benton's statement is useful, that the allocation within that subsidy as regards the total revenues of the Postal Service is a matter that is under the authority of the Postmaster General. If this agreement is not proven to be a workable agreement with the 5.5-percent overhead figure which you cite, why, it would be, I would imagine, a subject for further discussions as regards amending or revising the agreement by parties to it.

Mr. WRIGHT. Would the Office of Management and Budget have any interest in those subsequent discussions?

Mr. NATHAN. It is hard for us to speculate about that. It would be matter that would depend on exactly how the agreement works out, and the kinds of questions and issues that are raised as the departments or agencies, I guess it would be better to say-go forward in carrying out their activities.

Mr. WRIGHT. Given the assumption I offered earlier, that of a contingency in which it developed that the Army was not able to conduct its services within the 5.5-percent overhead cost, you have replied that obviously that money would have to come from somewhere.

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