offered by senator john mccain, which mirrors the house version. how do these measures differ from the current senate version? >> yeah, so, john mccain offered a bill that is basically the companion version of republican darrell issa of california's bill in the house. basically, that bill would create a politically appointed five-person commission that would be approving millions of dollars worth of closures. and basically, what that does is it would take the power from the postal service management, and that commission would be the one that has to approve all these closures. >> well, congress is facing a may 15th deadline when the moratorium, current moratorium on post office closings will be lifted. any indication that they're on a path to get a bill passed? >> well, they've been chatting about it quite a bit, but frankly, they've been pushing it off since this fall. lawmakers originally hoped to take this up in august, and then it was september, and then it was before christmas, and now

it's around, you know, the presidents' day weekend. but i think the senate bill will be moving in the next few weeks. reid has said that he's making it a top priority for the first part of the session of the 112th congress. so, it will probably be coming up in a few and i think they will meet that may deadline. >> an update from rachael bade with "congressional quarterly." you can read more at cq.com. thanks for joining us. >> thank you so much. u.s. postmaster general patrick donahoe has said that if congress would approve everything the usps has recommended, the organization would be out of the red by the end of 2013. he also says the bills that have been introduced in congress don't come close to what the usps needs financially. here are his remarks at the national press club. this is an hour.

good afternoon and welcome to the national press club. i'm mark hamrick, broadcast and online journalist with the "associated press" and i'm the 104th president of the national press club. good to have you here today. we are the lead's leading world professional organization for journalists committed to our profession's future for programming, events such as this, while working for a free press worldwide. you can visit www.press.org. and to donate to programs offered through the public through our national press club journalism institute, you can check the website there as well. on behalf of our members worldwide, i'd like to welcome our speaker today as well as those of you attending today's event. our head table includes guests of the speaker as well as working journalists who are all club members. and if you hear applause in our audence, and this is something i'm reminding people throughout thisit event, if you hear applause in the audience, we note that members of the general

public are atengding, so it's not necessarily evidence of a lack of journalistic objectivity. [ laughter ] laughter is encouraged. i'd also like to welcome our c-span and public radio audiences. our luncheons are also featured on our member-produced weekly podcast from the national press club, available for free download on itunes. you can also follow the action on twitter using #npclunch. now it is time to introduce our head table guests. please note the journalists' presence at the head table does not imply or signify an endorsement of the speaker. i'd ask each of you to stand briefly as your name is announced. we begin from your right, matt small, veteran radio producer my shop, the "associated press." so confident, we call him the beast. also joining us today, ralph woody jr., club member, vice president of the global business development for the eurasian

business coalition. good to have you here today, ralph. drew von bergen is among several former ncp presidents e and is public relations director with the national association of letter carriers. so that's how he got his ticket. also joining us today is john cosgrove. he is our senior surviving npc first postal forum. and for those of you who aren't club members and don't know john's story, he was inaugurated 51 years ago this next january. so, john was inaugurated when jfk came over and offered him congratulations that day. i'm very happy that john can join us today as well. ron stroman is the deputy thank you for being here, ron. skip over the podium for just a moment. angela gryling-keen is a reporter for "bloomberg news," new chair of the speakers committee and also our membership secretary. thank you for all of that. skip over the speaker for just a moment. amy morris is the organizer of today's luncheon.

this is her first and she's done a fabulous job. thank you for all of that. and she is executive editor and anchor for federal news radio, part of the wtop empire. thurgood marshall jr. is vice chairman of the board of governors for the postal service. he is the incoming chair as well. congratulations. nice to have you here today. and the list of former presidents goes on and on. jerry zremski, former president and also bureau chief of the "buffalo news." shawn riley is a reporter for "the federal times," and mike kazi is senior correspondent for federal news radio. and now please, give them your round of applause. [ applause ] popular lure tells us of the u.s. postal service, neither snow nor rain nor heat nor gloom of night stays these couriers from the swift completion of their appointed rounds. but what weather might not

prevent a financial storm could. the fact is, the united states postal service has been woven throughout the tapestry of american life. since the birth of this country, it has been part of our community and our communication. but that tradition, that service is very much at risk. the postal service is an organization in need of a new business model, it seems. as it stands, it cannot simply fold. it is under a legal mandate to serve all americans, no matter where they live. the letter carrier who goes door to door in downtown washington has the same responsibilities as the one who travels by boat to remote villages in alaska. it is one of the few government agencies authorized by nothing less than the united states constitution, article 1, to be precise. the workers, businesses and communities that rely upon the postal service, its deliveries, and frankly, its contracts, see it as a linchpin for their survival. it is part of a more than $1 trillion industry that employs upwards of 8 million people.

while it might be regarded as too big to fail it continues to hemorrhage money, and failure appears to be a possibility, if not an option. the convenient blame is often placed on technology -- e-mail, text messaging, cheap phone service, making the classic handwritten letter seemingly obsolete. as mail volume declines, revenue continues to fall, a fiscal yea service lost more than $5 billion, as we now know. the bigger aspect of fault perhaps lies with the retirement health care pl postal service i in paying prepayments towards retiree health benefits. it's a bill that's come due and the postal service cannot pay. the man who is tasked with fixing all this is our guest today, the postmaster general. patrick donahoe has been with the postal service for 35 years. he began his career there as a clerk. he was formally named postmaster general less than one year ago, and he has his work cut out for

him. in early september, he warned lawmakers, the postal service was operating at that time with just one week's worth of cash. the weekly cost for the postal service add up to about $1 billion. and now, congress is involved. the 21st-century postal service act of 2011 has passed the senate committee on homeland security and government affairs. it awaits action in the senate, seemingly like a lot of things. this bill would preserve six-day mail delivery for the next two years, and it would also allow the postal service to renegotiate existing union contracts, offer buyouts to its employees and recalibrate the prefunding requirements for its retiree health benefits. so, how can the postal service be saved? will the legislation do the trick, or is it going to be a short-term fix that merely buys a little time? that's why we're here today. let's find out. ladies and gentlemen, please give a warm national press club welcome tpostmaster general himself, patrick

donahoe. [ applause ] >> thank you, mark, for that introduction. it's a pleasure to be here today to speak with all of you. i'd like to thank the national press club for the invitation for organizing today's event, too. i have the privilege of leading one of america's greatest institutions. it's an organization that serves literally 150 million american households and businesses on a typical day. it facilitates trillions of dollars in commerce, it supports a $900 billion mailing industry that employs 8 million people. the postal service is part of the bedrock infrastructure of the united states economy and of our society. throughout our rich history, we've bound the nation together,

and we do so today, even in this digital age. we connect every sender to every receiver and provide regular delivery to the most remote locations in this country. americans today view the postal service very favorably, as a familiar institution and a trusted, reliable part of american life. but for the institution to thrive, it requires a rational business model. the postal service is fundamentally a business. yes, it's a government institution, but it operates as a business. we charge for delivery of products and services, our revenues go up and down depending on mailing trends in the economy, we record profit and losses, we issue quarterly financial statements. as a matter of fact, we're even sarbanes-oxley compliant. and contrary to the understanding of most americans, the postal service is not supported at all through

taxpayer dollars. we generate all of our money from the sale of postage products and services. that means the postal service must compete for customers. we must sell, not just offer, but actively sell and persuade people to buy our products in a very competitive marketplace. and unfortunately, while we have the mandate to operate like a business, the reality is that we do not have the flexibility under current law to function like a business. america needs a postal service that can operate more like a business. consider the example of a post office. most retail companies would close retail stores that fail to turn a profit. roughly 25,000 out of our 32,000 post offices operate at a loss. we've got thousands of post offices that bring in less than $20,000 of revenue in a year that cost more than $60,000 to

operate. and many of these are within a few miles of the next neighboring post office. and yet, a reaction from attempting to close one of these low-activity post offices and provide another option is really something to behold. people rally around their local post office, and they do so because it's part of their town, it's a cherished institution. on one hand, that demonstrates the power of our brand and the extent to which our customers feel connected to the postal service. but on the other hand, it makes no business sense. there are better and more efficient ways that we can serve our customers. here's an interesting statistic. purchasing stamps accounts for 48% of all the retail transactions that happen in a typical post office. now, think about that for a couple seconds. people drive out of their way, go to the post office to buy stamps, and they don't have to do that. today there are 71,000 locations operated by retail partners that provide a variety of postal products and services, such as

buying stamps, dropping off packages, depending on the location. these retail partners are in grocery stores, gas stations, pharmacies, and they're places that are convenient. part of your regular shopping pattern. they're open longer hours and most of them are open seven days a week. it provides a simpler, more convenient experience for our customers. in the coming years, we want to dramatically increase the number of retail partner locations that we offer, and we think there's a huge opportunity for small businesses to operate village post offices or some type of other postal retail unit. and by the way, virtually everything that you can do at the post office today you can also do on usps.com. now, the question is, will there always be a role for a traditional, full-service post office? absolutely, but there are other creative, convenient options for providing access to our products and services. we just need the flexibility, just like any other business, to

provide them. we're in a deep financial crisis today because we have a business model that is tied to the past. we are expected to operate like a business but do not have the flexibility to do so. our business model is fundamentally inflexible. it prevents the postal service from solving problems and being effective in a way a business would. delivery companies facing a significant downturn in revenue would consider adjusting delivery frequency, just as our competitors did when they saw the economy slowing in 2008 and 2009. looking ahead and facing another 20% volume decline on top of the 23% we've had already, the postal service should be able to do the same, adjust delivery frequency. most businesses make product and pricing decisions quickly based on market demand. we still have to go through a cumbersome process to price our products. our competition can make these changes on a moment's notice. most companies don't prefund retiree health benefits.

not only is the postal service required to prefund, we're required by law to fully fund an entire 40-year obligation in 10 years. the practical result is the postal service has had to borrow money from the treasury, $5.5 billion a year, to give it back to the treasury an annual $5.5 billion installments, and that's effectively bankrupted us. the postal service has also been obliged to overpay into the federal employee retirement system, not civil service, federal employee retirement system, by $11.4 billion over the course of the last 20 years. not only are we obliged to over -- [ inaudible shouting ] >> it's a public service! >> not a public center for fedex and u.p.s.! to rip off the people!

return overpaid pension funds. and the extreme 75% payments. that means the post office makes a profit. stop draining postal resources. stop closing post offices. stop breaking the postal unions. [ inaudible ] destroys the community. stop laying off the postal workers. post office should be based on human -- [ inaudible ] save it, stop destroying it. hey, hey, ho, h oo -- [ inaudible ]

[ booing ] >> well, the good thing is, they've definitely been paying attention to the situation. [ laughter and applause ] at any rate. if we could only get that $11.4 billion back, we'd be able to keep a couple post offices open. but such mandated obligations have really been an enormous drag on our financial stability, and they are obligations which we've had absolutely no control over. consider this -- during the worst downturn in mail volume in 2008 and 2009, the operations of the postal service, the operations were profitable. our $6.6 billion in losses were due to a $7 billion mandated retiree health benefit payment that no other business would have made. given the volume declines we

experienced, that statistic says to me that we do a very good job at controlling cost, but we're working with insurmountable constraints. over the past four years, we've reduced the size of the workforce by 128,000 employees, reduced annual operating costs by $12.5 billion, and we did so while maintaining record level service. and that's a testament to the tremendous job that our employees do on a daily basis. looking ahead, we're accelerating the pay cost productions. we've announced plans to reduce the total number of mail processing facilities from 460 today to less than 200 by the year 2013. we have announced plans to study 3,500 low-activity post offices for potential closure or consolidation. and we're stream-lining our delivery operations with the goal of reducing another 20,000 delivery routes. but as significant as these cost reductions and revenue generation activities are, they do not come close to returning

the postal service to profitability. to turn a profit and to get on a sustainable financial track, we have advanced a plan to achieve a $20 billion cost reduction by 2015. unfortunately, as things currently stand, we do not have the flexibility in our business model to achieve this goal. and for this reason, we've proposed important changes to the laws that govern the postal service. we've proposed gaining delivery flexibility which we'd use to transition to a five-day delivery schedule. most other posts around the world have done this years ago and there's been very little customer impact and a lot of benefit from a financial standpoint. we've proposed rebalancing our retirement funds, including the restoration of the $11.4 billion in overpayment into the federal employee retirement system in the first account and a more rational retirement benefit schedule. we proposed taking over our

employee health insurance, meaning leaving the government and shifting to private providers. we'd also be able to reduce current costs for current and retiring employees while providing better benefits. we propose streamlining our profit and pricing process so we can get to the market quicker. and we also are seeking the ability to manage our workforce morse effectively and with greater flexibility. these and other proposals would enable the postal service to operate more as a business does, to provide better service and better compete for our customers. i'm grateful that congress is now working on postal reform legislation and the entire universe of stakeholders should be grateful as well. we've seen a strong commitment to our issues from congress and the administration. however, there is a big question that needs to be answered about what that final package will look like, how it treats the postal service as a business, and give us the business model flexibility that we need. and there's a simple standard to apply, and that has to do with

the concept of speed. the postal service is contending with a steady decline, 7% a year in the use of first class mail. this is due to the rise of electronic communications. people are paying bills online. the 7% annual decline puts us in a race to get ahead of the cost curve. to become profitable, we must be able to cut costs faster than the rate of decline with first class mail. speed is the answer and speed is also the best way to judge whether congress is truly interested in enabling the postal service to operate more like a business. provisions that delay our ability to cut costs will resul. for example, if we're unable to implement the five-day delivery schedule now, we will needlessly carry a $3 billion operating a number. if, instead of consolidating 260 mail processing facilities in the next two years, legislation

were to slow or delay that process, we might needlessly carry another $3 billion in operating expense. the same goes for provisions that would impact our ability to modernize our retail networks and to manage our workforce and our health care costs more effectively. if congress does not pass the legislation that allows for more effective cost control and does not make fundamental changes to our business model, the postal service could soon be running deficits in the range of $10 billion to $15 billion annually. you know that phrase speed kills? well, lack of speed will kill the postal service. that's a stark choice, a more flexible business model that allows us to control costs more quickly or very large losses that will ultimately burden the american taxpayer? will first class mail volumes eventually level off? we'll see. but we know that volume will decline quickly for the rest of this decade, and we simply don't

have the ability to cut our costs quick enough. those are the facts. however, with the right legislation that enables swift action, the postal service can quickly return to profitability and stay profitable and continue to self-fund the universal service that we provide today. we need provisions in the final legislation that provide us with the speed to reduce our costs by $20 billion by 2015. businesses don't decide operational issues for years on end and create impediments to resolving problems. they make decisions quickly and they act quickly. unfortunately, the legislation currently drafted in both houses of congress would not provide the postal service with the speed and flexibility that it needs. both bills have elements that delay tough decisions and impose greater constraints on our business model. taken as they are, they do not come close to enabling the cost reductions of $20 billion by 2015, which they must do for us in order to return back to profitability. if passed today, either bill

would provide at best a couple of years of profitability and at least many decades of steep losses. however, taking the best of the house, the senate and the administration approaches, congress can provide the postal service with the legal framework and business model that it needs. it all comes back to the notion of speed. will the postal service be able to get ahead of the cost curve or will we be doomed for perpetual losses? congress needs to step back and look at the postal service as a business and give us the business model that allows us to act quickly to lower our costs. today we operate in a very dynamic environment. people in businesses have many ways to communicate, and we've responded within the constraints of our current business model. we compete for customers and are more market responsive and efficient than we've ever been. we deliver nearly half of the world's mail and do that with record-level high service. we use the most advanced mail

sorting technology in the world. in fact, about 95% of mail that comes through our system, letter-sized mail, is never really touched by human hands until the letter carrier puts it in the mailbox. our productivity has increased dramatically since 2000. in fact, we deliver roughly the same amount of volume we delivered in 1992 with about 170,000 fewer employees. the result of cultivating the mindset of a postal service that records profits and losses, operates efficiently, like a business, and competes for customers, we've got to go much farther down that path. if we do so, i'm convinced that the postal service can have a very bright future. we can continue to provide the nation with secure, reliable, affordable delivery platform. we can be profitable and be self-sustaining. we can continue to innovate and change to meet the mailing and shipping needs of the american public for generations to come. we can also be thought of differently as a successful

business enterprise that performs a vital national function. it will only happen if congress develops a single, simple, straight-forward piece of legislation that provides key areas of flexibility -- the ability to determine our own delivery frequency, the ability to develop and price products quickly, the ability to control our health care and retirement costs, the ability to quickly realign our mail processing, delivery and retail networks, to streamline governance and to provide more flexibility in the way we leverage our workforce. all of this needs to be done right now. the postal service is far too integral to the health of the economic health of this nation to be handcuffed to the past and to an inflexible business model. america needs a postal service that can evolve and operate with fewer constraints. i have no doubt that the postal service will remain a great american institution, but in order to do so, we need a great business model.

thank you very much. [ applause ] >> thank you very much for your poise and your speech. appreciate that very much. so, talking about congress, obviously in the news today for other reasons, and the so-called super committee, and you're talking about congress needing to get the job done for you. let's break this down in two steps. first of all, where is that legislation that you're talking about, in terms of moving forward, and how do you look at those prospects at this point? and then the other piece would be, what does the apparent breakdown of the super committee's work, or the inability to come up with a $1.2 trillion, how does that affect your operations? so, two pieces there. >> okay. first off, i thinkind that when we talk about legislation,

we are pushing for legislation that will help the united states of america, that helps the mailing industry and makes sure that the postal service is strong and vibrant for the future. so, that's the focus of the entire industry and the people we serve in this country. from the standpoint of where the bills are, there are a couple things going on. number one, the administration has weighed in with a letter they sent to the deficit commission. i'll talk about that in a second. but what they've said is they agree that we should move on the six to five-day and also make changes, give us our overpayment and defers back and other small things. so, you've got that on the table. there are two bills, one in the house, one in the senate. both have gone through a mark-up process. again, there is very good points in each one of them. in the house, they're talking about quickly allowing us the delivery flexibility. there are some other opportunities in there for us to control some costs and also some flexibility from a pricing perspective going forward.

in the senate, we've got some good opportunities there from a standpoint of new product development. they have the ability to move from six to five-day and some is, there's a little bit of a delay in time on that. so, what we'd like to be able to do over the course of the next couple months is try to get everybody on the same page, work through the legislative process and come up with, again, what we outlined here today as we've talked about this. from a super committee standpoint, we don't know what's going to happen. we've heard that we're in the bill. there's nobody that's come forth and said we're definitely in there. we'll have to see tonight what the outcome is, just like the rest of the american public. >> so, in terms of the prospects for passage of that legislation in the house and senate, how confident are you? >> you know, there's a lot of people that would say it's going to be a tough year, and if you don't get it done this year, nothing's going to happen with the elections next year. but i will say this, i think the administration and the congress, both the house and the