tions about governmental behavior and the behavior of the public, but those projections, because they look to the future-I am familiar with tax projections and very often we base those projections on information that later proves to change for reasons that we could not anticipate.

Mr. WRIGHT. Yes; it happens all the time. It happens in my private financial affairs, and in those of every Government agency. I think what you are saying is that with respect to this kind of a contingency, if the 5.5-percent overrun projection proves, for whatever reason, to be unrealistic, that what happens and who pays the difference will have to be decided at that time between the Postal Service and the U.S. Army Corps of Engineers.

Mr. NATHAN. That is correct, exactly correct.

Mr. WRIGHT. All right. Now, you stated earlier, Mr. Benton, that Mr. Blount was very strong and affirmative in his insistence that the Postal Service does not expect to make any more than that, so we will just leave it up to the Army at that time if that occurs which we hope does not occur, to try to persuade Mr. Blount to another point of view.

Now then, on the question of these flexible appropriations that go, I think, through fiscal 1984, who determines the amount of the actual appropriations for subsidy? Is that the Office of Management and Budget?

Mr. NATHAN. Let me describe the process this way: The Post Office makes a determination which they propose be included in the budget, and then the Congress makes the final and ultimate decisions as to how much subsidy will be provided.

At one point in the process, the Office of Management and Budget can print, if it should choose to do so, in the budget a different figure from that which is determined by the Post Office, but it is quite clear from our experience already this year that the Post Office's determination would be on the public record, and would be presented to the Congress at the time that the Congress considered that appropriation, as was done this year.

Mr. WRIGHT. Are there other agencies of the Government which present budget requests contrary to those approved by the Office of Management and Budget?

Mr. NATHAN. Every agency submits to us, Mr. Chairman

Mr. WRIGHT. No. The question is: Are there other agencies of Government which submit to the Congress budget requests different from those approved by the Office of Management and Budget?

Mr. NATHAN. I think, Mr. Chairman, it is accurate-I did not mean to deflect your question onto another point-to say that this is a quite unique arrangement. I cannot think of any case like this.

Mr. Benton may be able to think of an analogous case.

Mr. WRIGHT. That is the point I was trying to make. This is indeed a unique arrangement which vests in this newly created Postal Corporation a greater latitude of freedom from any governmental restraint than exists with respect to any other independent agency of the executive branch, is that not true?

Mr. NATHAN. I think it is fair to say that in the development of postal reform legislation this year, it was the intention of the Congress and the aim of the executive branch, to permit the Post Office to operate on an independent comprehensive basis as regards its own operations,

and for that reason the legislation that was enacted by the Congress does give unique flexibility in operation to this new corporation, or to the new agency, I should say.

Mr. WRIGHT. Would you not say that the newly created Postal Corporation possesses more power and greater latitude to act without regard to any governmental restraint by the Executive than any other independent agency of the executive branch of Government?

Mr. NATHAN. Mr. Chairman, I really could not answer that question, because there are many kinds of matters on which an agency can be independent.

Now, take the so-called independent regulatory agencies. They have considerable independence of a different character, but still independent on a policy basis from the rest of the executive branch.

There are other cases where we have set up corporations which have considerable powers of their own. The TVA is the first and the most notable. We also recently established the Public Broadcasting Corporation. There is discussion now of a new corporation for legal services. There are many cases in which the Government chooses to give different kinds of operating activities and policy processes a certain autonomy from the overall decision process of the executive branch.

Now, I would not want, at this hearing-without considerable study and staff work on our part-to characterize the Post Office as being more or less autonomous in what kinds of different ways from other agencies that have similar characteristics, but it was intended that the Post Office be able to determine in a large measure its own affairs, and the spirit and the lettter of the law clearly does move in that direction.

Mr. WRIGHT. With regard then in a more narrow sense to the ability to come to Congress with a respect for money independent of, or different from a request approved by the Office of Management and Budget, would you say that the Postal Service has greater latitude than any other

Mr. NATHAN. I would be willing to say-though I want to examine the matter further and I may find it necessary to submit a letter to you on this point, but I would be willing to say that the inference of your question is true.

The Post Office, on the fiscal side of the equation-the new Postal Service does have more authority to submit its own appropriation than any other case I can think of as I sit here and respond to your questions.

Mr. WRIGHT. Fine. I think we may have explored this long enough, unless there are other questions from other members of the subcommittee.

Just a minute.

Mr. GROVER. Let me suggest this: you are reflecting on the independence, the fiscal independence, of the new Postal Corporation. Of course, the Corps of Engineers is not fiscally independent. I know in the argreement you have some study periods, interim study periods, and the only thing that directs itself directly to this point of cost overrun over 5.5 is an agreement to agree.

Now, the Engineers have a budgetary restraint from the House Appropriations Committee and the Senate Finance Committee, of course,

but there is no budgetary restraint on the new Postal authority, so that assuming that things went awry and you had a 6.5 overhead for the $2 billion construction program, you would have a $20 million item to be picked up by someone.

The corps, then, does not have that kind of a general type of budget where it could absorb $20 million. Perhaps it does, but it still has to answer to the House Appropriations Committee, which somewhat dilutes its bargaining power.

On the other hand, you have a very broad fiscal independence in the Postal authority which perhaps would enable them, with your oversight, to pick up that tab on their own. How would you anticipate something like this would balance out within the framework of the agreement?

Mr. NATHAN. That was a good point, Mr. Grover. If the Corps of Engineers were, in the case such as you described, to decide that it was responsible for the cost overrun and to pay it out of appropriated funds, then we would review that matter. There would be a process by which we would review that matter, and the Congress, in its Appropriations Committees, would also review that matter. It would be handled differently, as you point out, than with the Postal Service to absorb that.

Mr. GROVER. Then notwithstanding the intent of this agreement and the general reservation of powers in the Postal Service Act, it becomes quite obvious that there are three parties to this agreement to agree, and the third party, of course, are the Appropriations Committees of the Congress.

Mr. NATHAN. To the extent that the agreement requires their participation, I guess that would be fair to say-if everything works as agreed to and anticipated, then I would think that that would be less true, although there are still authorities that the Congress has at all times, and that the executive has as regards the Corps of Engineers that could be exercised.

Mr. GROVER. I am not referring to the very general oversight of the Congress over the Postal Service Act itself. I am referring now more specifically to the fact that if there is an overhead overrun over 5.5, and if it is then determined mutually between the Corps of Engineers and the Postal Service that they are going to absorb it mutually, the budget of the Corps of Engineers is subject to congressional scrutiny and approval so that we in effect are third parties to the negotiation in a

sense.

Mr. NATHAN. Under those conditions.

Mr. WRIGHT. Mr. Terry, do you have any questions?

Mr. TERRY. I have one, Mr. Chairman.

Since the Office of Management and Budget has overview as to the Corps of Engineers, and your examination of the Corps of Engineers budget and their expenditures in the course of the year showed that the 5.5-percent limitation imposed by the terms of the agreement was deficient as far as the corps, would the Office of Management and Budget enter into the arbitration, or is there another form of arbitration as between the corps and the Postal Service?

Mr. NATHAN. The way I believe this process would operate under those conditions is that the Corps of Engineers would come to us asking us to reprogram funds to provide for this contingency that Mr. Grover describes.

At that point we would be consulted, as would the Congress after we had reviewed their reprograming request.

Now, let me make it clear at this point, just so that we are being responsive on the best basis, that one of the reasons I described at the outset of the testimony the areas that I am responsible for in the Office of Management and Budget is that it just so happens that another Assistant Director is responsible for the Corps of Engineers as a program responsibility.

In answer to your question as to how we would operate, I am relying on my knowledge of how we would operate in the program areas in which I have responsibility. I doubt very much that there would be any difference.

In that case, there would be a request for reprograming, and that request would typically be reviewed by us, and then submitted for consideration to the subcommittee of the Appropriations Committee with which the corps deals.

Mr. TERRY. So that would be an additional appropriation by Congress to in effect subsidize the postal system in the instance that Congressman Grover cites. The deficiency or loss by the Corps of Engineers was $20 million in that $2 billion program if there was a 1-percent differential in their cost structure.

Mr. NATHAN. If we permitted the Corps of Engineers to reprogram-not necessarily provide additional money, but to reprogram funds for moneys in addition to what they are being reimbursed for from the postal corporation, were that to happen-we have no way of anticipating it will happen-but were that to happen, I think it would be an additional subsidy.

If it was above and beyond what the reimbursement from the Postal Service was and it is, of course, possible that if the Postal Service were to cover those costs, then it would not be an additional subsidy. Mr. TERRY. Would there be a chance that the Office of Management and Budget or higher authority than that in the President would serve as an arbitrator here to determine whether-for example, we learned yesterday there will be probable need for a rearrangement of a Corps of Engineer office in lieu of this new function they have taken on, which is not related to river basins.

There will be a first year cost of additional office space, additional staffing, certainly, that they will require, some of which will be nonrepeat items that would not be a problem in the second year of operation, perhaps, but my direct question is:

In situations like that, does your office, or the Office of the President, contemplate an overview, and perhaps acting as an arbitrator?

Mr. NATHAN. I believe the way we would operate when it became evident-if it became evident that the corps was going to be spending more money out of its appropriation than the amount which was being reimbursed by the Postal Service, under those conditions the matter would be submitted through the normal budget process to the Office of Management and Budget, and that after we made a review and determination, it would go to the Congress.

Now, in answer to your question as to whether the President would mediate in that kind of a case, I would say that the Office of Management and Budget would make every effort to try to carry out the intent

of the Congress that we improve our Postal Service and that the agencies work together on a good basis.

We would hope to try to keep everybody on a good track. That is basically our role.

But if the circumstances that you describe did occur, the matter would be referred through our normal procedure. Under the terms of the relevant appropriations authority and the customary procedures that are used as regards that authority, such a matter would be referred to the Congress once we reviewed it, and the administration had taken a position.

It would be taken to the Congress for its consideration.

Mr. TERRY. In more simplistic terms, would you or would you not get into a role as an arbitrator when you found that the Corps of Engineers had in fact legitimate absolute essential costs above and beyond the 5.5-percent figure?

Mr. NATHAN. Above and beyond the 5.5 figure, if there were legitimate above and beyond the 5.5 figure that could be attributed to the project that the Postal Service was undertaking, and the Postal Service agrees that that was so, and agreed to cover those costs

Mr. TERRY. I am saying that they do not agree to cover them. I am asking whether or not your office, or the Office of the President would undertake a role of arbitrator?

Mr. NATHAN. If we were asked to enter into the discussions we

Mr. TERRY. You are being asked by the Corps of Engineers, because you are firmly in the belief that they have legitimate costs in excess of the 5.5 percent.

Mr. NATHAN. We do have frequent relationships even now with the new Postal Service. We would surely be in discussion with the parties under those conditions.

Mr. TERRY. Maybe I should only use the word "arbitrator" as defined by the American Arbitration Association, or as defined in "Black's Law Dictionary."

Mr. NATHAN. There is no point in the law or in our various Executive orders and regulations that would automatically put us in the role of an arbitrator as rigidly defined.

Mr. TERRY. I am cognizant of that.

Mr. NATHAN. We would, in the way that most procedures of this kind work, I guess, attempt first to be concilliators and to enter into discussions that would hopefully resolve the matter. That is the way we operate in many areas.

Mr. TERRY. Say you did not. Then the Postal Service steadfastly said the agreement says 5.5 percent and the only provision in there for modification is that if we both agree, and we do not agree, and you were firmly convinced that it was above and beyond any control of the Corps of Engineers that the 5.5 percent cost figure was exceeded. Mr. NATHAN. We would, at that point-and I am speculating, as all of us are—undoubtedly take a position as to what the corps should do.

In other words, the administration would clearly be in a position to review any action under those circumstances taken by the corps. I guess you can say we would arbitrate in the sense that you pressed in a situation that could not be resolved by the parties, we would