am i right in assuming it won't be finished until the next government is in place? >> both? >> the n.s.c.? >> you're right. they'll get a span a period of the next election. we should be starting now. i don't think -- and if you go back over the national security strategy, it needs to refresh. i don't think it will be a complete overhaul. i think i hinted to margaret if i'm responsible for its eventual outcome, i think it will have that trade prosperity agenda perhaps more strongly. i wouldn't expect a huge change. in either the national security strategy or the sdsr. the strategy we took in the sdsr, having a gap in capacity, the exciting thing as we come into the next one, the gap will be coming to an end. we'll have fantastic new carrier in the high seas very soon. >> with planes. >> with planes and people in it. >> can we look between the three of us on this panel some of the

specific future things? in particular, we talked about the pivot for america. what about the european union? which we will not know in the next strategy whether the u.k. will be part of the european union on or not. so will that be spelled out, the implications being in or out and specifically, how it will change if the u.k. ceases to be a member of the european union? >> my strategy linked in with the national security strategy is that we secure a referendum and i want to recommend that we should remain part of a reformed european union and i plan on the basis of success rather than the basis of anything else. but we don't -- european issues, we haven't dealt within the national security council. we dealt with them elsewhere in government. i accept it has important implications to the u.k. i think we should plan on the basis of what we want to achieve. >> yes.

it's a democratic vote. if people are going to vote the other way, despite your recommendation, it has strategic implications. i mean, we have a vote this year on scottish independence and the government produced a series of papers setting out their case where the u.k. is better together. will you not do the same thing for the european union? >> well, we have done with the review looked at the various areas. i think once the negotiation is complete, there will then be a period before a referendum where the two sides in that debate can set out their arguments. i -- as you know, we are in a coalition government. the coalition partners have slightly different views about europe. my judgement is if we use the n.s.c. to debate and discuss europe issues, we would have a second reading debate. what i want is the actions necessary to deliver it. i think it's better to keep europe out of it. >> well, another specific issue

and i'll be quick about this one. we heard in the past that our food security and essentially we are about three days away from a food crisis. most of our food is in transit. we found that out with the truck driver strike. do you believe you have addressed enough about how some disruption of communications could lead to a food crisis and how have you responded? is that something that's central to the security strategy? because clearly food shortages could move the country to a crisis in the span of a short period of time? >> what we have done is handling the threats to food supplies, one did a review of emergency planning. it concluded there was relatively good resilience in the u.k. food supply chain. and carried out the assessment in 2010. it's part of the national critical infrastructure plan that we have. you're definitely right.

as a country that imports food, that has a lot of just in time delivery and all the rest of it, dislocation, whether volcanic ash from iceland or truck driver strike or what have you does impact those things relatively quickly. i'm satisfied that we have examined the issues, but that's not to say, you know, you don't get effects when infrastructure is threatened. >> prime minister, in the annual report on n.s.s. and the sdsr published last december, there was a paragraph which started with the sentence -- it has been a government priority to introduce the program to preserve the ability of the security intelligence and law enforcement agencies to have the access they require in communications. it goes on and ends with,

changes to the existing legislative stream work may be required to maintain these vital capabilities. and i understand that the interceptions commissioner is reviewing our legislation. and will no doubt report to you. edward snowden's leaked material, is there anything you could share with us today to comment about the position of the united kingdom in the light of what was said in this report? >> well, first of all, i'd agree with the report that over time we are going to have to modernize the legislative framework and practice when it comes to dealing with communications data. it's obviously a politically quite contentious topic. i'm not sure that we'll make progress on it in the coming months in terms of legislation. there may be things short of legislation that we can do. but i do think that politicians,

police chiefs, the intelligence services, we've got a role in explaining what this is all about. because i think, while i wouldn't go back to what i said earlier, i don't think snowden had an enormous public impact. it raises questions about who has access to my data and why. but i'm absolutely convinced that proper rules for communications data is essential. i didn't think we got it across to people yet the basics of this. in most of the serious crimes, child abductions, who called who and when and where was the telephone at the time, not the content of the call, but communications data is absolutely vital. and i think we need the police chiefs, the investigators and others and the politicians explaining what this is about. i love watching, as i probably should stop telling people, crime dramas on the television. there's highly a crime drama that a crime is solved without using the data of a mobile communications device.

and that's not about the content. it's about -- and the problem we have to explain to people is as you move from a world of people having fixed telephones and mobile phones to skype and phones on the internet and all of that, if we don't modernize the practice and modernize the law, over time we will have the communications data to solve these horrible crimes on a shrinking proportion of the total use of devices. and that is a real problem for keeping people safe. now, i don't know if that was the clearest explanation i could give but we need to make this explanation really, really clear and get it out to people and build, perhaps the start of the next parliament, a cross-party case, a sensible legislation to deal with this issue. i think it is possible, but i think it's going to take a lot of work by politicians across parties to try and take that civil liberties concern seriously but get them in proportion so we can then make

some progress. >> thank you, prime minister. i think we'd all agree with that. and i think it follows on very well from what -- perhaps this is something the n.s.c. can look at, how to get what you said over to the general public, the difference between data and content. >> well, the best attempt i've seen so far, i think one or two police chiefs wrote some articles in the newspapers and i thought when they explained just how much this involved in child abduction cases, in solving murders and solving serious crimes, you know, i absolutely see and my work with security services and how vital it is to prevent terrorist attacks, i -- you know, i feel passionate about this. i feel the first responsibility of my job is to help keep people safe. and the fact it's used so much in crime is a very straightforward thing that people can get a hold of. >> thank you. i want to ask you about

something else. prime minister, we all understand the desirability of foreign investment and so on. but has the n.s.c. looked closely enough at the issue of foreign ownership of parts of our critical infrastructure? i'm thinking of energy, nuclear power and waste, water and so on. and are you confident that there isn't reason to be concerned about whether or not there should be some clear red lines drawn about foreign ownership? >> well, we do have a proper system in place for examining whether inward investments and things like infrastructure are in our national interests. but actually sir kim and i were discussing earlier there will be a proper n.s.c. consideration of this because we have slightly different procedures for some

slightly different parts of our infrastructure. and i think it would be good to have a collective discussion when it comes to telecoms and electricity networks and gas networks and what have you that we have all the rules we need in place. so we will do that. i would -- and when we had a specific issue, like huawei, we properly responded to the i.s.c. report. i would not underplay that the fact that britain is saying to the world that we welcome it with investment and we welcome investment into, you know, key parts of infrastructure. the fact that the chinese will be invested, i think is a good thing. it means we can free up more of our own capital to spend on roads and railways and other things. and it also makes an enormous -- it's a very good message for britain going around the world. we are not embarrassed but delighted that indian capital is rebuilding the british car industry.

we're delighted that the chinese are going to own part of water, investing in heathrow. i think it's one of our calling cards that we are an open economy that encourages people to invest. so, yes, by all means, let's check if there were security issues we could act properly and appropriately and we will do, but don't lose the position as a great open economy. i was very struck by one of the large chinese investors, britain is better than all. i thought that was a good endorsement. >> thank you. >> prime minister, i think when you're saying you wish you could spend more time and effort on asia, some had a history of trade in this country. [inaudible]

i just want to get your view. mr. gates made a comment the other day, former defense secretary of america, to ensure global reach in support of our long-term security interests and fulfilling our part with a crucial relationship with the united states navy, we must guarantee that we have high-end capability with the necessary number and mix of ships? you stated on the 31st of january, 2013, your words, your strong view was that the defense budget will require year-on-year growth beyond 2015. as a leading member of nato, no less than 2% of our g.d.p. for our defense budget, i hope

you're able to confirm that this is still very, very much your view and intention and will be emphasized at the nato conference this september. >> i don't move away from the importance of our defense budget and what that should mean for the future at all. where i take issue slightly with former secretary gates is i think actually if you look at the equipment program for our navy, it is absolutely a full spectrum equipment program. you have the two carriers under construction. you have the type 45 destroyers coming into action. you got the future frigate program that is there. you have the hunter-killer submarines. you have the trident submarines and the pledge to renew them and

the immense ability the royal marines. in terms of the navy it has a very bright future and it is a full spectrum capability from, you know, the nuclear deterrent at one end to, you know, smaller vessels right at the other end. so i don't accept that we are, you know, shrinking the navy or it's not a full spectrum capability. it absolutely is. as for what you say about asia, i completely agree. we've seen a big increase in our experts to china, for instance, but we're still only 1% of chinese exports. we can, you know, quite easily get to 2% which will be great for us without being a huge change. >> prime minister, there are some who would suggest having more at 26 frigates to meet the very ambitions you have been talking about today will be more than useful. >> i have this debate with the navy all the time.

because clearly what's been happening is that we are having fewer, more expensive ships, type 45's, you know, are pretty close to a billion pounds each. they are phenomenally expensive. they are the most modern, most effective. one of our type 45s that's doing more at the moment. i think it's getting quite a lot of attention. there is obviously a discussion we should have, is there a role for other sorts of vessels we should be using as well and what's the tradeoffs between these multipurpose ships that can do everything from drug interdiction in the caribbean right through carrier escorts or complex warfare, is it right to do that or should you try to have more ships that are carrying out more different tasks? and i think it's a debate that will continue.

up until now the answer is let's have the multirole ships that can do everything. >> let me switch a subject and that's the role of the n.s.c. and that's energy and energy policy. there are two aspects of it. you have the shorter term policy and the longer term policy. am i right in saying that the only real security strategy is the department of energy and climate change document which obviously leaves out foreign policy, planning and range of other issues and frankly looking 50 or 100 years ahead as to what we should be considering, is that something that almost at the top of the agenda in the years to come on long term? i'll come back to short term in a moment. >> clearly energy security is

vital. we were talking earlier about how do you define security? clearly energy security, the ability to power your economy, to power your homes and businesses, that's the key aspect of security and it is something taken seriously by the national security council. we have discussed it and taken papers on it. i would argue that we have a good strategy there. we are renewing our nucelar and we will follow next. we set out a very clear strategy so everyone knows what the rules and the costs are for investing in renewables. and we're moving ahead, not just with new gas plants as appropriate but also with onshore shale gas which i think could be a major industry for britain in the future. so i think we got a long-term plan. and we've got to make sure that every piece of that is put in place.

>> and i think our position does put us -- being reliant on so much. >> i think if you look at our energy penetration of imports compared with other countries, because of the north sea, we had a relatively good record. we got the interconnector with france. a potential interconnector with norway. if we make the most of shale gas, then as north sea gas runs down we'll have a new national resource. so when i look at our position in europe and look at, you know, how reliant we are on imports, i'm -- i think we're relatively secure position. we must keep up. that's why the relationship with gasa and others in terms of imported gas, the relationship with norway is fantastically important. making sure we get a decent contribution for renewables. and making this program work. >> could i bring up the other thing that is a really serious

problem? we believe our country is facing potentially a very serious crisis of supply and competitiveness at this very moment in time we speak. and are you prepared to set aside the targets in the 2008 climate change act in order to get through this period? if you're unable to act unilaterally, will you seek consensus with the major countries on behalf of the commitments? prime minister, what i ask with that is, do you accept now in retrospect these targets, those set by the former government but were endorsed by you, were huge mistake that threatens the severely damaged and indeed our already damaging europe competitive and growth prospect in years to come?

>> prime minister, this view that he expressed may not be shared by -- >> of course. two questions in there. one is the climate change act framework, can that work for us in the long term? my answer is yes, it can. we set these budgets. we have to make sure they'reach. i supported the climate change act and i think we can make it work. the second part i think about the european targets which i think we are capable of meeting, i think you go back over the history and argue whether it was right to have as many specific targets, you might come to a different answer. europe is reviewing -- the e.u. is reviewing this at the moment about whether the specific targets are correct. but look, the question i ask and i got the energy industries, the national grid and everybody else around the table, i checked that

our situation was robust, is are we content with the rules we have in place and everything we have in place that we are energy secure in terms of our short, medium and long-term future or are there any changes we need to make about decommissioning coal plants, bringing on gas more quickly or anything else and the answer i got was that the rules and regulations and capacity mechanisms are in place so we have the energy security that we need. so the question you put is very important. but i don't think either the climate change act or our own situation is one that we ought to be concerned with but one that i think we need to make major change.

>> [inaudible] this is just not my view. it's head of the international energy agency based in paris and in london here today, we were discussing only the subject of deep, deep critical concern about europe's competitiveness. >> the european union -- they'll debate at the march council. they'll think very carefully about international competitiveness and prices. the united states has 10,000 shale gas wells. in europe we got about 100. and so i think we do need to think about the competitiveness picture. i completely agree with that. i don't think throwing out the window the concern about carbon emission reduction. what is the market in europe, that would be a very good thing. make sure we make use of shale gas. we are committed to cheap green energy and keep driving down the

price of these new technologies. if we do all those things we can be green and competitive. >> we are almost out of time. i just want to take you back for a moment. to something you said about the maritime -- about the navy. i am reminded about what was said recently, unless we change our current course, not enough people. to staff it. he said the royal navy was close to its critical mass. and i applaud what you said about the navy. >> well, i think -- to be fair, what was said, if spending reductions went further, there would be a danger of what was called hollowing out. if we were in danger of that happening with what we have. the point i would make is that in the sdsr we made decisions with the chiefs of the defense

staff around the table that we're about the future capabilities of the u.k. and a very strong argument was made, which i completely agree with, that we need to have a navy that is full spectrum, that's got everything from those submarines, the type 45's, to the future frigates and everything else. and that was a real priority. we've taken this gap in capability, which we'll refresh with the new carriers, and that's incredibly important. i don't see -- obviously want to do everything we can on value for money, on efficiency. i think if we do that i don't see any reason why we won't be able to properly run and crew these excellent assets. and also i think it's encouraging people to join the navy. the opportunities when you got this absolutely world first- class equipment that's running

out of our ship-yards at the moment, it is terrific to encourage people to join up. >> can i applaud what you just said about the gap being replaced by new carriers? [laughter] >> you have about two minutes. >> [inaudible] going back to the earlier question, in a public meeting, if the secretaries get their way and break scotland up from the kingdom, what are the national security implications of that? i think you stated publicly some of those implications but i wonder if you could elaborate a little bit more. >> in a nutshell, we are more secure together as well as more prosperous and all the rest of it. scotland makes an enormous contribution to the u.k.'s defense. i will be making a speech soon

which is it's very important everyone in the rest of the united kingdom emphasizes how much we benefit of scotland staying in the united kingdom and that's something i feel passionate about. >> we're grateful, prime minister. and i think we got through most of the things we wanted to get through. i think you would have gathered that we are very anxious about the national security strategy, anxious that the next one will be better. one point we have made repeatedly is how much we would like to see it drawn outside experts and other views. without any disrespect to the people we have. and a couple of times it's been suggested that the government might consult this committee and we very much hope that it will and we will do our best to be cooperative and helpful. >> thank you. we are keen to hear the views of others. in the end, the government has got to own this document. so it's got to reflect our

collective view. but the more input and also identifying gaps and weaknesses that your committee does frankly the better. >> very kind of you. thank you very much indeed. order, order. the meeting is now adjourned.

>> so i think we ought to come i think we adopted this amendment and previous iteration a couple years ago. and so i would offer this

amendment at this time. >> senator coburn? >> i have no objection to this amendment. amendment. amendment. i think without too accepted unanimously unless some of our colleagues disagreed. >> i agree. all in favor say aye. opposed to nay. the ayes have it. the amendment is agreed to. senator mccain. >> i'd like to propose an amendment, amendment number five. intent of the amendment is to allow the postal office to move to five day mail delivery. it would allow the postal service to move to a five day mail delivery while still providing universal mail service to the american public. i guess the amendment needs to be distributed, or -- it has been? postal service estimates that move into a five day mail delivery will say them

$2 billion a year. the cost savings come from reducing overhead costs involving delivering mail six days a week. regardless of mail volume. if we don't reduce current costs, we asked the chairman pointed out, the taxpayer bailout of the postal service is inevitable. the bill today does include language that would allow the postal service to move to five day mail delivery, if total mail volume during any consecutive quarters drops below 140 billion pieces, according to recent projections by the postal service, mail volume won't drop below that level until 2017 or 2018. and i believe we should not wait for five years for this commonsense approach to save billions a year.

since 2009, the postmaster general has been coming to congress, including before this committee, asking for this flexibility. i think that we ought to understand that in this day and age, family, friends, colleagues, all of us communicate with each other in a very different way than we did years ago. we all use smart phones an e-mail to communicate. the postal service must be given the opportunity to adapt to changing times. the american people already have. the mail delivery changes need to be based on declining mail volume, which is declining at a fast pace. the average household received five mail pieces daily a decade ago. it now gets for pieces a day. three pieces a day is projected by 2020. first class mail which is the primary source of revenue for the postal service will be 50% off its peak by 2020.

and not only is the falling of mail been dramatically reduced, a larger and larger percentage of that mail is what we know of as, quote, chart mail, which we all know what that means. the gao supports moving the five day mail delivery and concluded that it would, quote, in the words of the gao, quote would improve usps's financial condition by reducing costs, increasing efficiency and better aligning its delivery operations with reduced mail volumes. the president of the united states, president obama recognizes the postal service needs to move to ip delivery and included his recommendation in his 2014 budget proposal. the american people i am convinced will accept five day delivery system and are willing

to adopt, and public opinion polls, show large majority support five day delivery. we are in an era of change of how we communicate with one another, and i think it's pretty obvious the impact that they said had on the postal service -- that this has had on the postal service and fiscal condition which is unsustainable at this time. so mr. chairman, the issue is pretty well known. we've had hearings on it, without the postmaster general here, we've had gao studies. so i don't think we need a great deal of debate. i know most members have made up their minds on this issue, and that would be glad to curtail further -- i would hope that we could vote on this as soon as possible since it's an issue that's very well known to all of us. i think most members have already made up their minds on this issue. thank you, mr. chairman. >> let me see if i understand your amendment, senator mccai

mccain. >> i just forgot something. i want to thank you and senator coburn for the hard work that you've done on this issue. we've had hearing after hearing, meeting after meeting, and the degree of cooperation and effort the two of you have put together on this issue, i'm deeply appreciative. >> well, you know, just looking at the mission last night of immigration reform in the president's speech, we know how hard you've worked on other issues that are at least as difficult or more difficult than this, and we know we're not we need to go on those come and we have some way to go on this one as well. there's been good spirit of negotiation and were looking for principle compromises, and i'm encouraged today, not discouraged. at the end of the day i think our goal should be the postal service is in the condition they need to be in, fiscal condition.

if i understand your amendment, the language in our bill, again, the trigger for going from six to five days a wee week services to get off a volume cap i stated earlier and i'll say it again, the bill we passed two years ago was 62 votes. we said the postal service, you cannot go from six to five day a week service into these two years after that. two years after enactment. the bill that tom and i introduced change the language and said no, postal service, you cannot go until one year after that happens. i want to thank dr. coburn for working with us and looking at a lot of different options, but one of the ideas that was brought to us is, i repeat myself, that it's worth repeating, one of the things i like to look at how do we incentivize behavior, personal or behavior, by the way we write our rules and regulations and

laws. i'm convinced we don't incentivize anybody in the postal service to work any harder, any creatively, to sell harder if we simply say you can go from six to five in a year or two years. that doesn't incentivize anything. it doesn't motivate anybody. this last saturday, personal example, i went to the post office at one of our local post offices near our home. i wanted to mail a package to my oldest son up in albany, new york. and i was there, just like an oversized envelope. the first thing was the mail clerk, he tried to sell me six different kinds of products. do want to get tracking, do you want interest? he did what he is supposed to be. i want to incentivize everybody. i want to incentivize them to sell and to do what normal you do in a real business enterprise, and that's why i

prevail, and tom, i thank him for allowing us to go along with a volume to about 140 billion pieces of mail. here's my question, john. in your proposal, when with the postal service be able to go from six days a week service to five? what would the trigger be? >> i would like to give them the flexibility to do so, and i wouldn't set a specific time that they should do so, but i think it should be allowed to make the decision to become just as the postmaster general has testified continuously before this committee, and the gao has said so, and even the president wants it. but i'm not setting a specific time date's been they would have the discretion? >> move forward as quickly as is necessary to do so. it saves $2 billion a year of the taxpayers money. i think that's, you know -- >> that's real money. >> allow them to do so. >> let me make one more comment

and then i will yield to dr. coburn. in a number of hearings with head, witnesses including the postal service, also the unions, and one of the conversations we had, not that many months ago again with i believe both the postal service and the letter carriers who i had urged over the years to negotiate a different kind of rate structure for saturday delivery. to move away from, like, so that they would offer, negotiate a different kind of compensation schedule for the mail that would be delivered on saturday. as you'll recall, the savings that is about $1.8 billion a year according to the postal service. they have taken about 40% out of the cost of delivery on saturday. which i think is a positive. that's still real money, and we have a decision to make it up, the postal service would be allowed to go from six to five next month, next year, the year after that or have some kind of

volume trigger. i would urge us to stay with the language on the volume trigger for now, but yield to dr. coburn and to others who have some thoughts. >> my only quick response is they should have done it years ago. >> i actually agree with senator mccain on the need to go to five day. but we have crafted compromise. this bill will not come out of this committee as i can vote if we take it to five day. we don't have the votes to move the bill out of committee. and what i'm trying to do is to keep this carefully ate 20 rule -- 80/20 rule together so we can fix the problem. if we put this in, which i agree it should be there. i think senator mccain has made excellent points about it. we won't have a bill. because of the majority of the colleagues on this committee don't agree with that. so even though i agree with the

principle, it's not possible to pass the bill with this amendment in and so, therefore, i'm going to stay with the chairman and vote against this amendment. >> mr. chairman, i'm aware of the sentiment of the committee. that doesn't prevent me, nor has it i been any other time, my tie here in the senate -- [laughter] so i would be more than happy to have the vote move onto the next amendment. >> anyone want to say something on this amendment? all right. all in favor of the amendment please say i go. opposed a nay. the nays appeared to have it. the amendment is not a doctor. what would be next? senator pryor. >> if i may, thank you. i'm going to start with one of my minutes, when to start with senator landrieu's amendment number one. i would ask that a be added as a

cosponsor, but this has to do with the fuel usage for the postal system. in 2012, the postal service used $520 million worth of fuel costs. as we know, they are currently using some natural gas in their smaller vehicles, what senator landrieu is asking, within 180 days from enactment, the postmaster general would submit to the committee a report on the feasibility of a pilot program to government the use of natural gas and propane as tools for heavy-duty over the road trucks as a fuel cost saving measure. i would ask that the committee get that consideration, and i appreciate your input. >> we discussed this amendment yesterday. we are inclined to accept the amendment. they are already doing that, so this is an amendment that something they're already looking at, and in this capital

expenditure, special in terms of vehicles, that's one of their priorities so we think it's a good amendment and we accept it. >> i accept it as well. any further discussion on the landrieu amendment offered able to buy the senator from arkansas? if not then all in favor say aye. opposed, nickel. the ayes have it in the amendment is agreed to. we go back to republican side. senator johnson. >> mr. chairman, i do not have any amendments to offer. let me explain why. i also want to express my appreciation for the hard work both you and senator coburn have done trying to craft a real solution here. it's not the approach i would take. we've got to solve this problem or else american taxpayer will be on the hook for public tens of billions of dollars, so i truly appreciate the effort. i would have all kinds of different suggestions and ways of doing things, but it really is the 80/20 roads are not going

to offer any amendments. i'm going to speak to a number of them that i will support and oppose but i just want to encourage my colleagues to understand the difficult customize, and it's what they're asking for, striking compromise, work with each other and start moving in the right direction. it's not the perfect solution but it does move the ball in the right direction. so i have no amendments to offer other than to support both of your efforts, and thank you for them. >> thank you very been much. thank you for this comment and working for us and to willingness to continue to do so as we move forward. senator pryor, i know you took your shot and offered a senator landrieu's amendment. i would be willing to let you have another one if you want. >> thank you, mr. chairman. thank you very much. i do have a prior amendment number three, and it has to do with hardship waivers and again, i want to thank the chairman and ranking member for the very hard

work to put this bill together. it's not been an easy task. i completely understand that. the bill currently includes language to establish a waiver program for individuals whom centralized or curbside is delivered would be a hardship, that it doesn't say that they could be charged an additional fee for that. so pryor amendment number three makes it clear that those with fiscal hardship to apply for and receive these waivers will not be charged a fee for their waiver application or the actual waiver itself. >> this is one that dr. coburn and i discussed earlier this week. i think we are good to go. >> you spend any more comments? i think we will accept this amendment. >> thank you spent all in favor say aye. opposed, nay. the ayes have it and the amendment is agreed to. and i think dr. paul, you are up, my friend. >> thank you.

i think if there ever was an organization that was bankrupt, it's the post office. i commend you for trying but i think it's not salvageable in its current form. it would have to go through bankruptcy, have to be completely reorganize, have a chance. we do a lot of paper and over and accounting things to shift cost to other people but the other people are still us. we are going to shift $8 billion to medicare and that still us. it's like we're taking it from one taxpayer holding where we '02 another taxpayer place where we still owe it. it doesn't fix the underlying problem of the post office, which is it's an untenable model. i think we should declare bankruptcy and start over. to this amendment, declares that the post office can, in fact, declare bankruptcy. we would then renegotiate contracts. i'm going to introduce amendment number two actually. it i believe includes all of this, declaring bankruptcy. it also would say that you can

still have unions but collective bargaining over wages should not be something that we do in the post office to we have done this in wisconsin and we saved dramatic amounts of money. wisconsin has gone from only like $4 billion to being in the black light in when you. it's a phenomenal success. wisconsin is now turning back nearly a billion dollars to its taxpayers, so does work. i'm not against collective bargaining. i'm all for the little guy. in fact.in fact, i think the liy should organized a power and leverage against the big guy. the problem with government unions is that you are sorted using your collective bargaining, coming together to of leverage against people who are on the other side of the table who you gave money to india elected. it is a truly and adversarial relationship. if the union on one side with their sympathizers on the other side so you're not negotiating and avicel process. as a consequence you don't achieve a market price for anything. you achieve an inflated price. the post office has i think 80%

of the cost of the post office our labor. ups which is unionized and i'm not opposed to ups's in my state and i'm not going to do anything to prevent ups or been unionized, 80% of their costs our labor. look at fedex, it's 38%. they are nonunionized. the cost of labor is too high. it has to be reform. it can only be by starting over and having a new contract without collective bargaining. the only other thing my enemy does is it gets rid of the clause that says you can never let anybody off. nobody wants to do this but that's what any business would do, you would lay off some people. so this amendment would fix the problem. it's dramatic, and i'm sure it will be opposed by some, maybe many, but the thing is this is how you would fix the post office if you truly want you and you truly cared about the taxpayer. thank you and i would like a recorded vote. >> sure, we will. i would like some of the

comments, please. >> mr. chairman? >> senator johnson, then senator tester. >> i believe this is the way to resolve this situation, through -- you we organized through the protection of bankruptcy laws. it sounds scary going bankrupt but you are reorganizing under the protection of bankruptcy laws. we are trying to reorganize under the protection of the political process. we will see if it works. i don't know if we could maybe i'm and senator paul's amendment, but that's a we're trying to do. if this process fails, this is probably going to be the only way to resolve it. we have plenty of successful, or unsuccessful private sector businesses that goes the reorganization of the protection of bankruptcy laws and it is the way to resolve this situation but it is very complex and is nonpartisan, arbitrated manner as possible. that's of course what you've been trying to do here and i

applaud your efforts but we'll see whether or not we succeed or fail. thank you. >> senator tester. >> yeah, mr. chairman, and this is a question for senator paul through you. and that is i just want to clarify which amendment we are talking do. are we talking about the amendment authorized as -- to file for bankruptcy or are we talking about the other paul amendment that basically takes away collective bargaining? >> we've include all of them public in amendment number two initiative on the length of amendment number two. i'm not going to introduce the other one. bankruptcy, collective bargaining and layoff clause are the three i believe the basic items. >> super. thank you. >> let me give a brief summary of what dr. paul is suggesting. under current law, the postal service unions collectively bargain over working conditions, pay and some benefits.

i believe that dr. paul's subsidy would expand to further include pension benefits for new hires, something established by a statute now. the amendment would i believe in collective bargaining, prohibit no layoff clauses but also of the postal service to file for bankruptcy. a process which presumably i think could force some additional cuts in labor costs. let me make a couple of observations if i can. there are a lot of costs they need to be taken out of the auto industry, not that many years ago. it had more assembly plants then you needed. they had more part plants that they need. they had more employees than they needed and they were almost, people would say the auto industry is a health care provider in this country that happens to have a subsidiary that builds cars, trucks invents.

with the auto industry did was several things. one, the right size of the enterprise. to reduce the number of a sum of plants and the number of parts plants, they reduced their headcount significantly, and they fix their health care problems. as you recall, you have members in your own state that were involved in this in the uaw. the last head of the uaw was from louisville. what they did was the uaw took over the running of the health care program for its members. a right size the enterprise. what the postal service has been trying to do is actually sort of summer do this. with the legislation against it is the same. headcount is down from over 800,000 down to five and thousand. mail processing plants down from over 600 to almost 300. out of 30 some thousand post offices, roughly a third are on the way to being open maybe two,

four, maybe six hours a day, not think the postmaster 50, 60, $70,000 a year to run those not paying an hourly employee to come in and work roughly $12 an hour to run those of out, for those limited hours. that takes a half a billion dollars out of the cost. the other thing, on health care these compiled is mentioned this briefly. some of the heard menus example of comparing health care treatment and costs -- i'll use a palm, my wife is retired from dupont. when she reaches the age of 65, up until now, she's retired, she receives health care coverage from dupont but when she turns 65, dupont company will say to her, we will continue to provide a wraparound program for health care for you, but we expect you to get your primary health care for medicare eight, b. and part d. that's it. it's not just for. it's not just -- it's for a lot

of companies in our country. when they -- when the retirees reached 65, they are expected to go to medicaid. the employer provides a wraparound policy to cover those folks. the postal service and dupont company by the way, they get their money, the revenues from their customers. the goods and services that they sell. on the other hand, you have the postal service who pays more money to medicare and any employer in the country. their source of revenues are also good and services they sell. but not from the taxpayers but from their customers. but when you post a retiree reaches the age of 65, the postal service can't say, all right, like dupont and all these other real companies, from now on, retiree, age 65, you've got to get your primary source of health care from medicare and we will provide a wraparound. they can do that.

if it's good for dupont and all these other companies in the country that get their revenues from the sale of goods and services they make, why shouldn't the postal service be able to do that? and that's a simple, basic issue. we've about the postal service to mandate the integration of medicare with a wraparound program. it saves money for the postal service. we think it's a fair and equitable thank you. i do know that the it's going to but that's the rationale. let me just yield to others who might have comments to make. i can, i'll say, what were presented to you is again plan that enables the postal service we believe to be financially not just in return divide dough in the year two, but viable tinges out and hopefully will be on that, to right size of the

enterprise and to build on the progress that's been made thus far. anybody else? all right. senator paul has asked for a recorded vote. with that, let me turn first to his vote. senator levin. [roll call] [roll call]

[roll call] >> mr. chairman, on the vote of those present the a coso for and the nays are none. on this vote the motion is not agreed to. >> senator paul, although we were not able to the agreement, thank you for offering. thank you for really are created and thoughtful approach to these issues in ways that we need to hear, so thank you.

senator mccaskill, i believe you are next. >> thank you, mr. chairman, and thank you and just as hard work on this legislation. this is not easy stuff. the amendment that i would like to bring up is mccaskill amendment number one. it establishes a one year moratorium on closing rural post offices and it strikes the five year sunset. it is offered on behalf of myself, senator heitkamp, senator tester, senator pryor and senator begich. there really is no rational reason for sunsetting these protections. protections are there for a good reason, to make sure that the universal service mandate is respected and usps should have the right an opportune to right size itself based on the size of its business revenue and there's nothing in this amendment that prevents that. these requirements are not onerous on the postal service, but it does force them to recognize the unique role of post offices in world

communities. and i would urge the adoption of this amendment by the committee. >> dr. coburn, do you want to go first? >> when you visit with the postal service, their post plan has -- and it said no closing of rural post offices. to whether this is in the bill or not won't make any difference to what they're going to do because they have no plans to close another wrote post office because they've taken the majority of the costs out. i know there's a trust factor there, so i'm not in opposition. if you want to put it in, it's there. will have to work on it as we go to the floor in terms of online that with what they are planning, but they have no intention now of doing it. i don't think that's a smart move. and the reason it's not -- i

tried 3.8 miles to my post office. in a lot of the rural areas of oklahoma we have less than 3.8 miles between towns, and yet there's a post office in each of those towns. i live in a count of 40,000 people, so what we are saying is even though it makes economic sense, it's no hardship and the vast majority of this committee, i think senator tester drives almost 70 miles to a post office, the vastly greater of the members of the many tribal i get to the post office. so by putting this in what we're really doing is come in the future, would we not at some point say that if there's three towns in a radius of 10 miles, would it not make sense from a cost standpoint -- it's certain not more inconvenient. maybe it's you, claire, 6.8 miles. so the point, the point i'm making is if you do this, and

you put this in, which i'll vote with the chairman on it, however were -- however when he goes, which are doing is saying when it going to ever look at commonsense consolidations, even though i know we don't trust what the postmaster has said on this, but that's the fact that the post plan is working pretty well now. i think most people would agree. >> thank you, dr. coburn. some other comments, please. >> i woul which is clarify, it's 10 miles in the amendment. >> just a quick -- what is it about the post plan that you find troubling? >> listen, we would have a lot less to do around it if we decided we'd just take a pass when government agencies said they plan and doing something. i mean, we do legislation all the time to lock in agencies on

plans that they have stated. and this is just frankly locking them in, which i think is important in terms of rural communities. >> i see we have any audience the deputy postmaster general, very nice to see. in our conversations before, we've talked about the implication of the post plan. for those of you not familiar with the, the idea the postal service offer a menu of options to communities that the postal service is sinking. what i understand in a post plan, the postal service has a menu of options that could be keep your post office, it could be keep their post office that will be a pretty necessary six days a week eight hours day but could be six or four hours a day. it could be with someone paid, not suffered postmaster but someone paid on an hourly basis.

that's an option to other options include moving the post office into a local store, convenience store, general star, something like that. it could be rural delivery, kind of like a bookmobile. some other options as well. what we want to make sure going forward, and dr. coburn and i talked a fair amount about this amendment trying to find some common ground with senator mccaskill. i want to make sure at the end of the day, a lot of folks about a chance to look at this, i just want to make sure there's nothing in this amendment that separates the post plan. and i would just ask you, go ahead and take a table and just want you to answer for us on the record. i don't mean to put you on the spot, but i'm going to. i would appreciate hearing from you whether it's for you can tell, your understanding of this event, it's not undermine the post plan can we still be in a position to be in a position to

implement that. if you could just react to this amendment from that perspective, please. co-head and make sure mic is on, please. >> correct, mr. chairman. the restrictions are little more restrictive than we have now in the post plan but generally speaking, this would be acceptable to us. i mean, it is consistent with the overall intent of the post plan. so while it is slightly more restrictive than the post plan is now, i think generally speaking we would be able to live with it. >> mr. chairman, can i ask a question? >> please. >> it also strikes the five your son said on additional requirements before closing. are those requirements pretty onerous? doesn't make it impossible to close a post office and is that a problem for the post office? >> as the chairman indicated right now we are not interested and have no intention of closing post offices. we think right now the ability to reduce traffic, take costs out, consistent with revenue is the way we want to go.

i mean, i think we believe as a useful -- universal service obligation to row american that we take very, very socially. i think the existing post plan is working well. again, this is slightly more restrictive but i think we'll be able to work with it. >> so there's no plan to close any post office anywhere in the united states an american? >> not in rural america, no. not right now. >> what about urban american? >> i think what we have to look at and urban america is ever have an issue. i think it's a question of -- >> in other words, no plan. thank you. >> just to clarify this, if we can, in terms of -- what we're interested in doing is trying to take costs out of the system and still provide service? >> that's right. were not interested in closing post offices at this point. >> they say we were not close your post office necessary, but it ain't going to be open six days a week, not eight hours a day and were not going to pay a

postmaster $70,000 a year. it may be open to hours a day, four hours, whoever is working there, we'll get paid 10, $12 an hour. that takes huge amounts of costs out of the postal service's budget. i think it takes about half a billion dollars a year out of their costs. >> that's the savings, that's correct. that's a lot of money. >> naked series consideration to goes and i think 5000 those office. they decided after running the numbers they could save more money i doing this than closing for 5000 post offices. strange as it may sound. senator mccaskill, can you -- with that in mind, anyone in discussion of this amendment? clutter, i would just ask you come you worked with dr. coburn and myself and my staff going to the fore. i want to talk to you about it more. so it's well understood, okay?

we will go with you today. and in that spirit let me ask -- has anybody asked for a recorded vote on this amendment? no recorded vote. all in favor say aye. opposed say nato. -- say nato. with that having been said, the ayes have it and the amendment is agreed to. dr. coburn, thank you. >> senator enzi, you are next. >> thank you, mr. chairman, and my amendment, the one i put in, ma follows on the discussion that we just had. but it doesn't just refer to rural post offices. this would refer to all post offices, and my only regret is, and this comes from the way that the last closings were kind of handle. we got this list of post offices that were going to be closed. we had no idea what the costs were, nor did the people who lived in those communities.

and there was a lot of angst over it, and eventually they were persuaded, i guess, to hold some hearings in those towns, and they did get some suggestions. of course, that resulted in none of the post offices being close for a variety of reasons. but what we're talking about calls, some the urban post offices have a whole lot more costs than the rural post offices. those costs ought to be looked at, too. and it shouldn't be just on the basis of getting a hold of him and say, here's some cost and we're looking at closing you down. any business is supposed to look at all of its costs every year all the time. and so all of the people in those post offices often with the costs of their post office is, and the cost of their jobs. years ago i had been into a thing called the great game of business. it was about a firm in missouri that was about to go out of operation. they re- fabricated tractors and

the employees look at losing their job and they said wait a minute, maybe we ought to buy the plant. maybe we could do it. they didn't have the money to be able to purchase it, but they were able to work some different mechanisms and actually took control of the plant and figured out what every single persons, every action cost and are able to make that a growing concern. it's a fascinating way of having the employees even celebrate all the successes of their operation, and there's no reason that should happen in the post offices. so that all ought to be concerned about how much what did you and what everybody else does and what it costs and what advantages would be of expediency and service and other services. so i think we ought to give that challenge every post office. and this one, unfortunately, just as they won't close the post office. that's what they ought to be

doing. so i would hope that wewould approve this amendment. >> senator enzi, i think you put forward a thoughtful a minute and i plan to support and whatever -- urge my colleagues to do the same. dr. coburn? no, okay. all in favor please note i go. opposed nay. the ayes have it. thanks so much. it's part of the bill. senator baldwin, you are next, please. please proceed spent i appreciate my colleagues allow me to go out of order. i was called to preside at men, and i would like to be present during the discussion on the a minute i want to offer. i want to start also by thinking the chairman and ranking member for the process, the hearings we had come the access to discuss this throughout the process.

and in particular as a new senator, they hearings gave me the opportunity to appreciate how the economy of my state is intertwined with the health and sustainability of the post office. i come from a state with a timber industry, a paper industry, a printing industry, a mailing industry. we employ 12,000 postal workers and about 200,000 folks who work in those related industries. and the health of each are intertwined. and so i'm offering an amendment today and do so because i understand that interconnectedness, and because i want to make sure that the 10 year picture is a positive one. and maybe in the discussion if you want to go into the grass further, i certainly dispute the tenure number.

but let me just talk a little bit about this amendment before we get into the debate. since i have to, let me make sure that i call up baldwin-mccaskill number one and recognize my colleague and thank her for her work with me on this. the amendment strikes section 301. that section concerns also rates, and it does so while maintaining the repeal of political committees rate preference. i want to make that clear. the amendment maintains the recently decided exigency rate increase which allows for the 2.8 billion in revenue to be collected by the postal service from its customers. it will also maintain the scheduled rewrite of the rates in 2017, which could lead to

future rate increases. only they would be part of a transparent process that involves postal service customers, and i want to return to this point in a moment because there are two their import aspects to this amendment. one is about rates but the other is about governance. as the rates, as currently drafted section 301 of the substitute, permanent locks in the 4.3% exigency rate and will allow postal rates to increase by as much as 22.5% in three years. i'm not saying that will happen but that's what it will allow. this will drive mail volume out of the system, hasten the move to five day delivery and put in an industry that has lost more than a million jobs since 2007 at further risk. but now i want to turn some attention to the issues of governance. because i think that's a really

key issue here. under current law, which are amendment would maintain, the postal regulatory commission, the regulatory agency, which established the new rate system in 2017. however, under the substitute, it transfers this authority to the board of governors of the postal service. it transfers the authority to the postal service. the board is instructed to consult with its regulator, but they can override the prc with a two-thirds vote of the board. no public or quasi-public entity, especially one with monopoly power, should have the near absolute control in setting its own prices. it's just wrong and there is no circumstance in which a monopoly like the postal service should be able to override its

regulator. i ask you to think of other instances. setting utility prices. you can't imagine giving the utilities sold out to do that, or near sole power to do that. you go through a regulator that represents the voices of the people and the customer. so with that brief description, i offer the amendment and urge its adoption, and would be happy to participate in the debate. >> senator coburn? >> could you explain how you got 22.5% potential rate increase? >> so, it's the compounding of the exigency rate over the three

years taking in the rate, cpi plus when you're out. >> i would just make the point for the record that the exigent pricing -- for so, we passed the bill in 2006, and we have a system that you're proposing we stay with. and what happens to this? the prc didn't allow the rate increases to go to meet the cause of the post office. and so, therefore, if you price in the cpi plus one for two years, the difference between the exigent price increase and cpi plus one is .6%. that's the only difference between exigent. but i would also remind our colleagues that the exigent price increase is limited.

it falls back after they of the committed so much in revenue. and the other point i would make is that the mailer today are suing over the exigent price increase, i believe everybody acknowledges that. we have a system that lost $12 billion last year, and they got a cpi plus one for two years added in as an exigent price increase and they are still not going to be profitable. so abandoning what we put in the bill to allow pricing at cpi plus one will do, it's fine to do that if you want to do that. tell me where you're going to take the costs out too great a positive cash flow for the post office. you can offer to cut all this revenue and then say, here's how we balance that, with a positive

cash flow. so i don't have any problem with what you want to do, just tell me where we're going to cut the cost to make it cash flow neutral. not a loss. they don't have to necessarily have to have positive. tell me what going to do to be able to get the costs down. recommend the cost cuts to pay for the. and the point is, what people discount is the post office knows where they can and can't push prices for our mailers. and i understand -- i understand we are changing the way we communicate in this country. we've lost a third of first class mail since 2007. 32% decline in volume. it's going to continue to decline, four to 6% per year. and that's where we make money. we subsidize the mailing industry today to the tune of about $1.3 billion a year.

that's what associated costs with their rates. so the very people that are being subsidized today are suing because they got a rate increase, and now want no further rate increases in the future. and i think the compromise that we put forward when i met with those people, what they said is we need certainty about what the future is going to be. we have locked that in with this bill. we blocked and what it is. it doesn't say they would've cpi plus one. it says a major cpi plus one. the other point i would make, you have a business entity and it's a quasi-business, i agree with you, that has a board of governors they can't govern because they have another board that has to prove what they do in terms of rates, and then even when they do, a court ends up deciding.

will never get the post office profitable. if we don't raise rates, you have to increase cuts. i'll remind everybody here that the tough one that we had before this committee is cut, cut, cut is not a way to save the post office. that was one of the big messages that we had in our hearing. you can't cut it in savings to kept increase revenues and yet the end of it. one of the things we put in this bill is innovation. senator sanders idea coming forward. so the other thing i would say, if this amendment passes, this bill fails and we have to start all over. what i would suggest to my colleague from wisconsin is offer this amendment with the cuts that you would put in place to replace the revenue. tell us where else we can, where the post office can do that if, in fact, we're going to not allow them to have rates. and running the post office is,

in terms of pricing come is are difficult for them to do because they know when rates go up there going to lose more falling. so they have a pressure on them to keep their volume up, and much like senator carper said, selling more, doing more, promoting more, their goal is to try to raise volume, you know, hang on to the volume that they can. so i understand perfectly why you are offering your amendment, but i would say the amendment is incomplete without balancing the difference -- the differences in terms of revenue decreases. and if you actually take those numbers, if you take the baldwin amendment and the court upholds the prc position, we go to $7.8 billion negative cash flow. and if you have, and no five day

delivery or orders come prefunding and cpi, cpi increase only with the court upholding it, you go to $18.3 billion debt, negative cash flow for the post office. so that's what the result is ever there's no reason to pass a bill if we strike 301 because we will not have solved the problem. so my suggestion is offer them in with the appropriate cuts and also seek a positive cash flow or at least a neutral position in terms of the debt of the post office. because we don't really do the mailers a favor by not passing the bill. and if we're not going to pass the bill, we need to go back to what senator paul suggested. put it in bankruptcy. so it's an unbalanced and, ma

and i understand the motivation behind it, but it doesn't solve the problem. it solves the problem for one group but it makes the problem for the post office that much more arranges, $18 billion. that's a $25 billion shipped to the post office. >> thank you. i agree. i was a some comments of my own. not just yet, but doctor -- dr. johnson to senator johnson, you want to chime in and we will go back to senator baldwin? >> i would usually like to understand all the pricing throwing around terms and percentages and with custom spreadsheets which are really appreciate. i'm a number of gaza want to understand this. without putting anything on the spot, i truly would like to understand the work of other 22% potential price increase, in number form, start with an

invoice i can is exactly how that's working. i would also like to understand exactly the price break up or makeup of these schedules. how is this actually working? so again, it's just a question. i almost can't ask more questions without a little more detail on this. this is all quite confusing. and i believe what senator coburn is saying is if this amendment passes, the bill fails. it would be a real problem. we need to really fully understand what we are talking about here. as an accountant i don't understand this. >> back to you, senator baldwin, and i want to make some comments of my own. >> let me say a couple of things. first of all, senator coburn, in your comments you referred to the committee furnished tenure charts on -- tenure charts it might men were to be adopted,

and i guess when that was first distributed i have some objections to the projections, because under my amendment, which maintains current law, in 2017 they would still be a scheduled rewrite of the rate process. and so anything to the right of that is, you know, a projection. of course, you have to make those and we struggle with the. i would say if you do a line to the right of the column that says 2016 in both graphs we would be dealing with hard data, anindicating to the right of tht we are dealing with estimates and projections. it is my belief that when you challenged me, senator carper, to sort of talk about how we end up in the black at the end of those 10 years, i would talk

about the compromise that i've been discussing with the committee prior to offering my amendment. because since the exigency rate was approved by the prc a little over a month ago, you know, that sort of changed the starting point for this discussion. so i think that if you allowed the exigency rates to continue, but instead of doing it all at once you've flattened it out over three years with the cpi plus one gap, you maintain the cpi -- sorry, the postal regulatory commission authority to rewrite the postal rates in 2017 within but, of course, from the u.s. postal service but also from mailers and policy unions and postal customers, as is in

the current law, and to gradually bring the increased rates of underwater classes of mail outside of the 2.8 billion in revenue from the exigency case that, that's the projection to get us to being in the black in the 10 year projection. but in the meantime, i guess also want to respond to what you had to say about, you know, the current system working. again, this is a monopoly. the idea of, say, an electrical utility just setting its rates and not being able to be overseen by, you know, public service commissions of our states is almost unthinkable. but with prc oversight, the exigency case did go through. so that shows that that regulatory process does not

preclude exigency or emergency rate increase the. and it wouldn't precluded in the future. we've just seen that this regular oversight can work. the last thing i wanted to just mention, i have the formula, how we got up to 22.5% in three years, assuming inflation readings constant, of course. the formula is -- let's see. 100 times 4.3% exigency plus 1.7 cpi plus 1% compounded over three years. that's where we get there. >> we would be only over to. you're importing a. that would be 15 and 16. >> the underlying bill of ousted to go through for three years. >> let's back up just a little bit. obviously this year, dr. coburn

and i introduced a compromise bipartisan postal bill. and with respect to rights, what we basically agree to is a free market system. the idea that the postal service would be able to come would take away the caps. we had a cpi cap in place were a number of years. take it away. the id would be the postal service could come in with different products, charge what about the market would bear. our thinking was if they come in and want to raise rates for magazines or catalogs or other products, if they raise them too high, the business will drop off and don't have to figure out how to lower the rates so that mailers start mailing those particular products. that was the original idea. sort of a pure market system. but we got a lot of pushback on that and what we've done in offering our amendment, our manager's amendment come is to say that the exigency rates ca

case, decided by the prc on a two-year basis to make that the base, the new baseline, then after to provide on an annual basis starting in 2016 cpi plus one. what that does is a couple of things. one, mailers don't like it. i'm not going to suggest that they do. but in terms of better enabling the postal service to cover the cost of different products, it gives them some additional flexibility. number two, it provides some certainty for the mailers. it's not like our original bill, which is a crapshoot, in their words. ..