mean, because if you price yourself out of the market and you don't sell anything, then you're out of business. i think the postal service needs the same level of flexibility that you have in the private sector. the kind of flexibility that will allow us to be market driven. in fact, when that happens i think oftentimes prices ind up going down because you're not driving volume up and you end up driving prices down and you increase value in that institution and increasing value for the american public. i agree with that particular section. i agree with my colleagues. they have more flex bimt. think, is on the ground. dr. coburn had an incredible career. he was a very successful businessperson, he did that for a number of years, and then he decided, i'd like to become a doctor. he became an ob/gyn and delivered tens of thousands of babies.

he did that for a number of years and then he said, i think i'd like to become a congressman. he became a congressman for oklahoma and did that for a while. then he said, maybe i'd like to be a senator. he did that for ten years and he's going to step down about two years early before the end of his term this year. god knows what he'll do next. maybe he's going to land a plane. we'll find out before he gets here, but he should be here before too much longer. ms. kennedy, same line of thought we have. one of the things dr. coburn really insisted on, pushed for when we introduced our initial bill a year ago last august, this past august, and he basically said, the postal service is not foolish, they're not stupid, they're not deaf to the marketplace. let's give them the flexibility of set rates. if they charge too much, customers will stop using them. if they -- they'll eventually

find a sweet spot. in the end we did not do that. there was a large criticism from the public and so forth. we thought we had a good medium here with the rate increase becoming the baseline and have a cpi cap going forward. then in 2017 the opportunity to revisit this. if you were on the board of governors, you'll have the opportunity to participate in that. ms. kennedy? >> mr. chairman, thank you. as a general rule, as i've said, i believe in flexibility and being able to be nimble. on the specific issue of rates, i also believe in being cautious and not answering something that i am not as deeply familiar with as my colleagues here, so it's something i would like to understand on it in a deeper and fuller way. so it sounds great. i think what they've said makes a lot of sense to me, but i'd like to understand it more. >> i understand. just a little bit of background, what we've done with the ray

case, what it does for folks who say you're nonprofit, and i think before the exit rate, i think the cost of mailing an envelope was about 10 cents, and with the exit rate case, it goes up to about a penny or $11 cent. with the extra rate case becoming the baseline, it goes up to 28 cents. correct me if i'm wrong, john, but i think for catalogs, their price is somewhere at 45, 46 cents and it would go up by about 2 cents, so those are not outrageous increases, especially due to the strength of the economy. >> i'm aware of what the provisions are. that was not the issue. it's just the whole underlying philosophy and theory behind them being set that i wanted to be -- >> okay. good enough. dr. miller, do you want to say something else?

no? all right. i think i mentioned in my opening statement today the board of governors of the postmaster general announced a week or so ago that if we don't do our job here in the senate and the house to pass a hopefully thoughtful, effective postal service reform, then they will feel compelled to go ahead in closing mail increases. it wasn't long ago we were at 600. we're down today to about 325, and the postal service is saying unless we do our job, they may be compelled with no help from congress and the president to close another 80 or so starting at the beginning of next calendar year.

from our point of view, in our legislation, we have a stipulation that says two years after enactment, the postal service may move forward. 62 senators, mostly democrats, voted for, some republicans. i'd like each of you to give your thoughts to closing additional plants. what dr. coburn and i try to do with the legislation is lay it down so the postal service can pay its obligations and have money for pay raises and have money in the bank when all is said and done ten years from now. but i'm not interested in seeing a lot of additional plants close or any additional plants close, i just want to make sure the postal service is profitable and viable. dr. miller, if you would just lead us off on this, i would appreciate it, please. >> mr. chairman, first let me

say that i have not done an analysis of these 82 and these specifics. there are some that maia p may here to the points i'm making and some may not. my impression based on my work on the board of governors ending two years ago, three years ago is that a number of mail processing facilities are there and have not -- that under ordinary market circumstances would have been relocated, would have been changed, but for the fact that there would be the impediments from congress, displeasure from members of congress, restraints put in appropriations bills, none of the provisions had not been changed. that led interestingly to a perverted outcome, because when you think there's going to be a change, you want to make as many changes as you can in one fell swoop. so it is just an inefficient system unless you give the postal service some freedom to

streamline and rationalize its logistical network, you're going to get these back and forth, and i think, inefficient decision making about these various installations. >> thank you. mr. carr? >> mr. chairman, i largely agree with jim's points. i think the devil is in the details here, and it's not for the board to dig into them, it's for the board to select criteria and policy. i think in general the postal service has been right. it needed to consolidate some of its facilities. it's already done a great deal. whether it needs to do more or not, i'm not capable of sitting here and saying yes or no. but -- and each time they do, that's painful for somebody somewhere. but as jim says, you're just pushing these problems to the future. automations made it easier to do a lot of this high-volume mail

processing. so on balance without trying to avoid commitment, i would just say it would be premature for me, given my level of understanding of the issue, to say anything about the next round of closings and consolidations of processing senators or plants. but i do think that it was appropriate to make some moves along those directions over the last two years. >> thank you. mr. bennett, please? >> mr. chairman, i'm very familiar with the issue. i'm not familiar with the details as to whether or not these particular plants should or should not be closed. however, what i would say, though, is that i think in this environment where we do have this incredible infrastructure that is in place, whether or not that facility is operationally efficient or not, i think you

have to be very careful when you start taking away some of your assets to make sure that those assets couldn't drive future revenue. one of the things that i think a lot of major corporations make a big mistake, and particularly very large ones, is when you start trying to cut costs, because you're so big, you start looking at your costs in silos, and you don't think about how those costs impact revenue someplace else. and so you really have to be careful to make sure that you consider the whole, you know, prior to doing these individual silo cuts. i don't have an answer to your question other than if i were looking at this more carefully, that's what i would do. i would consider, how does it impact the whole enterprise versus just the silos that we oftentimes look at with budget cuts. >> thank you. ms. kennedy? >> i echo the concerns that michael bennett just set forth.

i worry that i don't think you can cut your way to prosperity, i think you have to look at what the long-term implications are of closing these facilities. i don't know what those particular facilities are. i also worry about the impact on the universal service obligation. i don't know what it means for rural communities. i believe that universal service doesn't mean universal service someday. it means timely universal service. so what delays will happen by that many consolidations and closings? i think that matters. because the postal service is a lifeline for so many communities, and i think that's something that needs to be looked at. and i think you also have to be poised to take advantage with this terrific infrastructure that's in existence for innovation, poised to take advantage of the next great opportunity. i think all those issues need to be considered. >> i'll probably ask you to answer this next question for the record, but i may ask you to comment very, very briefly. it relates to the potential

closure of additional mail processing centers. the question that i have is think about it for a minute each, maybe. the service delivery standards, as some of you may recall, it wasn't that long ago that the postal service had delivery standards and delivered the mail in one day, in sort of like the same metropolitan region or geographical region, it was in one day. if you couldn't do that, the postal service is expected to deliver in two days. at the very least, the mailer and the mailee in the same states, there were three business days, one, two, three. the postal service says while they cut prices in centers, they changed the standard, and they've gone from a one h one-two-three day to one. one side of washington, d.c. and

if you live in another side of the metropolitan area, if i mail it to you today, you should get it tomorrow . if you live outside the metropolitan area, you may get it, you may not. i think the postal service would like to go to 2-3. two-day even in the same metropolitan area. could be in one, but two would be the expectation, and then three. in terms of what's appropriate for us, i'm not comfortable with the postal service saying this is how many postal centers we should have. some people said maybe the more appropriate thing for us to do, maybe with the involvement of the postal commission and certainly the board of governors in the postal service is to consider whether modified one-two-three days of service is appropriate, one-two-three is better or one-two is just fine. ms. kennedy? >> my first thought about that is if we have declining

first-class mail volume, to have more delayed first-class mail delivery doesn't make sense. i mean, if possible i personally would like to see us have the faster standard of delivery. that concerns me. i think those two things would be in verversely related. you would have fewer people mailing letters. >> mr. bennett? >> i think the faster delivery would be better because it is the postal service. it is a service organization. every company in this country who is focused on service is focused on how do i provide better service to this customer than somebody else? having deliveries two or three days after you put it in the post office is probably not a good way to make sure your customers are happy. if you have customers that are happy on one end, they're going to want to use you for something else. i would focus on how to make my

customers most happy, and i would think that would be faster service to help my business. >> what strikes me when i think about this question, mr. chairman, is my daughter who is 14 and lives on her iphone when she is not at camp, and she finds e-mail to be slow and cumbersome. instant messaging is so much quicker, she tells me. to me, e-mail is just so rapid it's incredible. but the new generation is accustomed and expects what they want to arrive on the door, you know, within minutes. it's an instant sort of gratification, and we worry about that in some respects, and in other respects it's a tribute to the new communications and transportation capabilities that we've developed. and given that shift in culture, those expectations for speed and on-time delivery, i'm reluctant.

you know, you have to look at the economics of all this and the trade-offs and costs, but i hate to see the postal service give up one-two-three. >> thank you. dr. miller? >> mr. chairman, two things. one, as i recollect, the rationale of this was changed, so i hesitate to comment without analyzing the data. second, there is a trade-off. you can't do all things for all people and you have to make some choices here. service standards should be an input into the question of plant and logistical rationalization, it seems to me, and i just don't have -- i don't have my hands on the information necessary to -- everything else equal, i think there's something nice about

having, as you characterize it, the one-two-three kind of standard, and you would deviate that only for good reason. if there's a good reason there or chnot, i simply cannot say a this time. >> thank you. i mentioned earlier on saturday i was home for a little bit, and about 5:00 in the afternoon, our letter carrier came and delivered our mail on saturday. it turned out there were some things in the mail we actually very much wanted to receive. it's not always the case but it certainly was that saturday. part of the debate that surrounds postal reform these days is should we continue to have six-day-a-week service except when we have like a holiday that mixes in, like july 4th when it's on a friday, maybe. or should we allow the postal service at some point in time to go from six to five-day-a-week service? when we passed our legislation two years ago, 62 senators voted

for it, but in that bill, you may recall, it said the postal service could eventually go from six to five-day service if they chose to, but you have to wait until at least two years after an enactment of that legislation. if it had been enacted, it means the postal service would have been free this year to go from six to five-day service in 2015 and the same in terms of closing additional mail processing centers. the bill is inactive in 2014 and we're dealing with the same things with mail processing centers, standard delivery and six to five-day service. we've gone through six to five in this legislation. for years i have sat with labor friends at the postal union, especially to the letter carriers, and urged them to work with the postal service to find a way to continue delivering

mail on saturday and with a wage benefit structure, compensation structure, that makes the postal service more competitive. it doesn't lose as much money. we were told a couple years ago that going from six to five-day-a-week service for the postal service would save $3.5 billion a year going forward. we're told now because of the changes in the wage benefit structure that has been negotiated between the postal service and the letter carriers that that's no longer a $3 billion savings, it's somewhere between 1.5 and $2 billion a year. it makes the postal service lose money, but there is a tradeoff, maybe, between service and service delivery and the labor cost. our legislation, we took a different approach in the legislation. dr. coburn and i have brought to the committee and the committees have reported out. our legislation says we're not going to say to the postal service for two years you're

forbidden to go to five-day-a-week service. what wes in our legislation is let's look at a volume trigger. the postal service last year, i think, delivered about 158 billion pieces of mail, give or take. what we put in is a volume trigger that said if that number drops below 140 billion pieces of mail, then the postal service would be free to go from six to five-day-a-week delivery. if they were making money hand over fist, maybe they wouldn't want to. maybe they could find a way to use that internet, the digital connection, to make money. but the reason we decided to take this approach, to use a buying trigger instead of somebody saying you can go to five-day service in two years, is because we want to realign the incentives. we want to incentivize postal employees to work harder to sell product. whether it be on your route or if you happen to be in a post

office if a town or city or community. we want them to be incentivized to sell more. whether it be the catalog folks or magazine, we want to in se incentivize them to mail more to keep six-day-a-week delivery if that's what they want. on five-day-a-week delivery we said, you can't do that, as opposed to some sort of volume trigger today. please, dr. miller. >> mr. chairman, i said in my response to questions from the committee, i think the postal service made a mistake in trying to obtain permission or first stated it would accomplish this without congressional acquiescence but then tried to obtain permission to do five -- go from six-day to five-day delivery. i think they should have asked

for delivery flexibility. there are a lot of places in america where five-day delivery -- excuse me, six-day delivery makes eminently good sense. some places, seven-day delivery makes good sense. other places, five-day delivery. other places, still two or three-day delivery per week. the postal service needs to have that kind of flexibility. i think the postal service can provide what any reasonable person would say is universal service. there's some places in america at two days or three days where the costs are just extraordinary of doing six days a week. the postal service did couple its proposal with the provision that the post office would remain open on saturdays if someone were expecting an important bill or payment or box of medicine or something like that, they could go to the post office and get it. i live on a lane. i have to go a third or half a mile every day to pick up my

mail every day at my mailbox. a lot of people go pick up their mail at the postal -- post office. so, you know -- and i know a lot of people have very remote locations, et cetera, especially in rural communities, more rural than mine. but i think that with some flexibility, the postal service could inconvenience a few people somewhat but save a lot of money, money that is being provided by other postal rate payers. for the most part, what we're talking about in terms of the postal service's revenue base is not money from the taxpayer, it's money from other postal patrons. they are paying for the losses that are ascribed to service that is just economically prohibitive. >> thank you very much for that insight.

mr. crawford, please. >> just to add to those very thoughtful comments, jim. i see it as a last resort. i was -- you know, when i was on the transition team, the volume in 2008 was 203 billion pieces. 158 billion this year from second quarter results, it will be 151 billion pieces or so in 2014. we're approaching some of the thresholds that are in the bill. but what has struck me since i was here two years ago about -- and i learned this from the reform legislation that you and dr. coburn have introduced -- is the potential savings in retirement and health care expenses which exceed even what i imagined when i had done earlier examinations. and i think in light of the

really large possibilities there that it may not be necessary to go to five-day delivery. i think jim makes a good point about it depends on where you are and what makes sense, and i do believe the postal service should have the flexibility. it should not be -- it would be better if it weren't just legislative, that they had that capability. but at the same time as a governor, i view any reduction in service. it's a little like one-two-three and service standards highly regrettable and should only be taken as a last resort if we can show -- and i think the numbers show that there would be some savings, as you say, 2 or 3 billion a year. that's not chicken feed. but next to what we're talking about in the health care and retirement expenses, it just may not be necessary. and for a lot of people who

deliver catalogs, i get my economist most weeks on saturday. that would be a loss to have to wait until monday or tuesday on a holiday week. so i'd like to see us keep six-day delivery but have the flexibility to reduce if we need to. >> thank you very much. mr. bennett, please? >> i think that six-day delivery is something that's kind of a foundation at the post office in that people expect that, and i think that customer service would probably almost demand it in most cases. however, that said, i think this is -- i think we have to be careful to try and have a one size fix all fix for all the various problems. as jim pointed out, that sometimes there may be some areas where five-day delivery is just fine. and some areas where seven-day delivery is most important. but at the end of the day, i

think we've got to be very, very careful not to try and fix the one size fix all kind of solution to the various challenges. if this is just about the financial issues, i think as steven crawford said, tlrs othe other ways you include it in the bill to address the major financial issues. so just to make that change for the purpose of financials, as big of a savings as it would have, i'm not sure that's the right thing. again, if you go back and think about the model i talked about earlier where you've got these various silos of costs, you start driving costs down in one area, you may drive costs up in other areas. ending saturday delivery while we have this trigger of 140 billion pieces of mail before you can actually drop saturday delivery, if you drop it, then all of a sudden, pieces of mail

start to fall further. so the savings impact could end up causing revenue losses in other areas that we haven't thought about. i think there needs to be careful analysis in that area to look at what the impact is across the enterprise. >> thank you. ms. kennedy? >> i really support what my colleague said, and i really don't need to repeat it only to say that i think we need to project a postal service that is working and that is available for people to want to use. any time -- and i really reiterate strongly what steve crawford said -- any time you have a cutback of service in any way, whether it's delivery standards, whether it's daily delivery, six days a week, i think it's a black eye. i think it hurts us. and we want people to feel that the postal service is excellent in every way. that the mail, when they drop that letter in the mailbox, when

it's picked up by their postal carrier that it's going to get where they want it to go, that it's going to get there in a timely fashion, that they can rely on the united states postal service. that's the image we want to project, that's what we want to have happen. so i would love to see us find other ways to keep our finances robust and to maintain the postal service. >> thank you. i just want to reflect on this for a moment. the legislation reported on this committee a couple months ago allows the postal service to consider whether or not to reduce service from six to five with a number of caveats, including the post office has to be open on weekends, have access to their mailboxes and that kind of thing. certain kinds of items still have to be delivered, including

pharmaceuticals, medications ndk that kind of thing. senator levin, we didn't just use a straight trigger, a volume trigger to say if the mail volume dropped to 140 billion, even next year you can go to five days. we didn't do that. we said you can't do it before 2017, and i don't think we're going to see a plummet with the economy coming back. the effect of what we've put to our legislation is that for the earliest we can go from six to five in the first part of 2018. we'll see how it works. i think the challenge for the postal service employees is to figure out how to get more people to use the service. how do we make saturday delivery

not something that maybe loses $1.8 billion a year but actually make it even profitable. that's the key. how do we do that? and as we figure out how to do better, get this digital intersection figured out, and mr. bennett, if you get on this committee, the board of governors, i know you're going to help us do that. i think that's a challenge for us. how do we use this? how do we take this legacy organization and make money with it and do so without encroaching on inappropriate ways on the private sector. we're still hoping dr. coburn is going to join us. he's flying in from tulsa. you know the old gene pitney song "only 24 hours from tulsa." it doesn't take quite that long to get here from tulsa, but dr. coburn's flights have been delayed somewhat. chris, do you have anything?

all right. i have some bad news for you, and that is that dr. coburn's flight has apparently been delayed further and he's not going to be able to be here until 8:00. so we'll have dinner and you guys can get to know each other even better. no, i think we're going to wrap it up, and knowing dr. coburn, he'll have plenty of questions for the record. if he hasn't had a chance to meet with you, he'll want to do that. make time to do that if you can. he's a very thoughtful, creative

person. he's saddled with not very good staff -- no, he's blessed with some staff and so am i. they keep us out of trouble most of the time. a lot of times what i'll do with a hearing if we have an opportunity, we're invited to make an opening statement and you make comment. sometimes if we have time, i like to give our witnesses a chance to give a closing statement, about five minutes, just to reflect on what you've heard, what you've said and others have said of some questions that were skasked. if you just take a moment and think about a closing statement just to take maybe a minute or so to do that. and i'll make a couple of comments and then we'll call it a day. ms. kennedy, would you like to lead off? >> sure. thank you so much, mr. chairman. thank you for giving us the opportunity to be here today and thank you for your very thoughtful questions. i think the challenges are

there, but i think they're great opportunities. the united states postal service is a tremendously vital asset for this nation, and i look forward to having the opportunity to serve, and if confirmed, i look forward to serving with these magnificent gentlemen here to my right and having a great continuing conversation with you and with dr. coburn and the rest of the members of the committee. thank you very much. >> thank you, ma'am. david michael bennett from charlotte, north carolina. >> absolutely. this is a really neat process. thank you so much for the opportunity to be here. >> confirmation hearings aren't normally this much fun. sometimes they can be downright, as dr. miller says, pretty awful. >> may i say it's more of a comment on my personality than anything else. but this is a real opportunity.

i lo i look forward to having a chance to tackle it. the problems the postal service have that we talked about today and we talked about at our lunches are really challenging, but they're the same kinds of problems other businesses have faced for the last decade. ibm transformed themselves. cisco is having to transform themselves now. at&t. company after company has had -- they've had to transform themselves and they've come out on the other side better than they were before. i think we have an opportunity to take this 200-plus-year-old organization and make it better than it was before. do some things that are different. maybe in a year we're not even talking about the number of pieces of mail that we deliver. maybe we're talking about the number of shoes or the number of other items that have been faxed that we've had a chance to deliver. i mean, so the world is changing, and we have an opportunity, i think now at this

critical juncture, we have an opportunity to take the most unique organization in the world in terms of logistics and moving things around and make it something really special for the american people. i look forward to the opportunity, and i hope i get the opportunity to serve on the board of governors and help make that happen. >> thank you. i think you will, too. dr. crawford, not mr. crawford. for the closing statement, i want to recognize dr. crawford. i kept asking my staff, is he a mister or ciis he a doctor? all the times i called you mister. i apologize. dr. crawford. >> i just take this opportunity to say i was here two years ago almost to the day for my hearing the first time around, and sf 1789 had actually passed in the senate. since then, my wife has said to

me this classic question that we've all been asked, why do you want to do this? the board can't fix what's wrong with the postal service. congress seems to be reluctant to act. and to be perfectly frank, i had to ask myself, does this make good sense? and it has been so gratifying to come back this time because s 1486 had been reported out of the committee, and i am just so impressed by the changes that it holds forth and am hopeful enough that those or something like those will be enacted that i find myself almost sharing michael david bennett's

enthusia enthusiasm, and the fact that there are four of us together here now with such an interesting background, i have to confess that i, too, and it's not like a cynical old professor and army officer, but i, too, am enormously enthusiastic about this opportunity because of the legislation that's under way and because of the team that's here together. so thank you for the opportunity. >> you're welcome. dr. crawford, thank you for your willingness to take this on yet again. we'll try and get it done this time. dr. miller, please. >> thank you, mr. chairman. i appreciate the opportunity of being here today, and i appreciate also the opportunity of the prospect of serving with these three individuals whoorm,s i say, i've gotten to know and respect. i think great things could come from the postal service being led by them as well as the

current governors. i concur with what dr. crawford has just said about the two legislative vehicles. i think the current one is much improved over the former one. a matter of which gave rise to some lack of cohesion last two years ago. i think mr. bennett, michael, summarized things well and made the case for something i had been saying all along, and that is i think the postal service really needs the freedom, the flexibility to operate like a business. those businesses that have remade themselves have been able to do that because they had the freedom to experiment and do things of a sort that stephen mentioned earlier. all along we have to be

cognizant of the public service mandate the postal service has as articulated by mrs. kennedy. i think we can do that. i think working with congress, both houses -- as you know, the other body has not come with a proposal that is quite similar to the one that you have. there's more work to be done. i think, though, that the prospects are reasonably good because the situation with the postal service is so dire. i congratulate you on the progress this committee has made, and i urge your prompt attention to the nominations and to the prospective full board operating in high gear. thank you, mr. chairman.

>> thank you all. those are wonderful. wonderful closing statements. let me add a couple of things. one is humorous and the other serious. not long ago, my wife and i happened to be driving by a cemetary. she's always after me to update our wills. i said, martha, i have no intention of dying any time soon. she says, well, we need to update our wills. one day she said to me, we were driving by a cemetary, she said, everything you would like to have on your tombstone. what would you like to have on your tombstone? i thought about it for a minute and i said s, you know, i have. i think i'd like these words: return to sender. return to sender. it's not just a great song but a

pretty good something to put on a tombstone. fits nicely, too, i think. the leaders are many things. you all have been leaders throughout your lives. leaders -- i like to think that leaders are humble, not haughty. we lead by our examples not to say as i do but do as i do. i like to think of leaders as having the courage to go out of step while others are marching to the wrong tune. leaders are also purveyors of hope. and this is not a hopeless situation. this is actually quite a hopeful situation. i've been up here drinking water. sometimes i have to be careful not to drink too much in these hearings when i'm by myself, but this is a glass half full situation. this is definitely a glass half full situation. and if we can get our act together here in this body on capitol hill working with the

president, all the key sta stakeholders, this could turn out a whole lot better than some people are willing to believe just a few years ago. and part of the key to this is having the right folks on the board of governors. when people say to me, what is your all-time favorite job? i tell them my best job i ever had was at ohio state university where i was a pots and pans man at the delta gamma sorority house. that was a great job. a close second would be governor of delaware. i loved being governor. a privilege to serve here, but i loved being governor. i tell people i'm a recovering governor when they ask what i do. people who don't me say, i'm a recovering governor. and someday i'd like to have the chance to say you're recovering governors, too. i think you would all be a great addition to the board of governors. we're going to try when dr.

coburn arrives, i'll have a chance to talk to him tomorrow and talk about how he would like to move forward and how we would like to move forward and do it in a timely way. with that, let me just say that, again, we're deeply grateful to each of you for your time and preparation today, for meeting with our staff. all the responses to the biographical questionnaires, answering previous questions by our committee. you had your financial statements reviewed by the government of ethics. without objection, this will be made part of the hearing record with the exception of the financial data which are on file and available for public inspection in the committee offices. without objection, the record will be kept open until 5:00 p.m. tomorrow for the submission of any written questions or statements for the record. i'm sure dr. coburn will have some additional questions, and

some of our colleagues will, too. with that it's a wrap and i'll adjourn this hearing today. thank you again so much. >> thanks, mr. chairman.

and here on c-span3, we'll take you back live to capitol hill for a hearing this morning on the u.s. tax code. the senate finance committee will be looking into the u.s. system of international taxation, including what are called inversions where a large u.s. firm acquire s a smaller overseas firm in order to reduce its tax burden. our lineup of witnesses this morning including the deputy assistant treasury secretary for international tax affairs, that's robert stack. the finance committee headed birb by ron wagner held a hearing. in june they held a hearing on the tax code in reducing student debts. this meeting should get under way shortly. 9:30 was its scheduled start.

cq writes that majority leader harry reid yesterday filed closure on the motion to proceed to legislation that would give tax breaks to employers who return jobs to the united states barri states. barring a time committeissue, t will happen. there's the chairman. this is live on c-span3.

the finance committee will come to order. the u.s. tax code is infected with the chronic diseases of loopholes and inefficiency. these infections are hobbling america's drive to create more good wage, red, white and blue jobs here at home. they are a significant drag on our economy and are harming u.s. competitiveness. the latest outbreak of this

contagion is the growing wave of corporate inversions where american companies move their headquarters out of the united states in pursuit of lower tax rates. the inversion virus now seems to be multiplying every few days. medtronics' proposed merger was record breaking when it was announced in june. but the ink in the record books had barely dried when abv announced its intention on friday to require shyer for almost $55 billion. according to the july 15 edition of marketplace -- and i'm going

to quote here -- what's going on now is a feeding frenzy. every investment banker now has a slide deck that they're taking to any possible company and saying, you have to do a corporate inversion now because if you don't, your competitors will. the congress has been aware of the inversion problem. the underlying sickness continues to gnaw away at our economy with increasing intensity. the american tax code is an anti-competitive mess. accountants, lawyers and fast buck artists looking for tax shelters feed off it. this mess is driving american

investment dollars overseas, and according to the joint committee on taxation, it is costing american taxpayers billions. on a bipartisan basis, the finance committee must respond now. the in verversion loophole need be plugged now. second, let's use the immediate steps to apply the indisputable ultimate cure: tax reform.

let's, however, recognize that what really counts is that the finance committee is back here once again discussing to keep plaguing the american economy. it's going to get tougher to create those good waves, red, white and blue american jobs. our tax base is going to keep eroding. eroding. cash piles overseas there elsewhere. the finance committee invited a number of ceos from the inverting companies to join our

discussion today. none accepted our invitation. i hope these that these executi will soon change their minds and be willing to answer questions that finance committee members have about this issue. the fact is that without immediate comprehensive tax reform, an antidote to the inversion virus is needed now to protect the american economy. this wave of inversions may be good for shareholders and investment bankers and private equity firms. yet, the barrage is bad for america. america's free enterprise system is at its best when there is a level playing field. and inversions bestow tax savers on some parties that further distort the free market. absent tax reform being enacted immediately, colleagues, what happens if the inversion virus

leads to 20 more inversions over this summer? many inversions to this point have happened in the medical field. but "the wall street journal" just reported that there's evidence of inversion spreading to manufacturing and retail. how many more infections can america's economic body endure. globe markets are expanding. stockpiles of cash sitting overseas grow at record levels. foreign competitors get more aggressive at champing at the bit to get a deal on the backs of the american taxpayer. the time for action is now. our committee needs to move on a bipartisan basis to close the loopholes that are fuelling the growth of the inversion virus. then the finance committee needs to cure the disease once and for all with comprehensive tax reform. i just want all colleagues to know that i am going to be working with each of you on a bipartisan basis to accomplish

both of these tasks. let me recognize my colleague and friend, senator hatch. >> thank you, mr. chairman. i appreciate you holding this, today's hearing. i think we can all agree that addressing the short comings of our international tax system is a critical step on the road to tax reform. as we ask reforms to our tax code, our primary goals should be should be to make the u.s. a better place to do business and to allow american companies more effectively compete with their foreign counterparts in the world market place. sadly, when it comes to our international tax system, much of the tension gets placed elsewhere. for example, in 2013, the lecd launched its shifting of betts project. while we appreciate of bringing tax authorities together to discuss issues, many of us have expressed concern that the betts project can be used by other countries as a way to increase taxes on american taxpayers.

the issues with the negotiations on the betts project are complex and can have far-reaching and negative consequences. while i think we should be willing to work through these issues snal an international consensus is reached, we should not be rushed into accepting a bad deal just for the sake of reaching an an agreement. i think we're right to expect that the treasury department will represent its employers and workers in the betts association while discussing with congress while the discussions proceed. hopefully, in the end, the focus of these discussions will return to base erosion principles, instead of ways that foreign companies can raid the american treasury or american businesses. of course, while the betts negotiations are importants the most high profile international tax system today happens to be tax inversions. it seems every day we're hearing about a u.s. multinational

opting to revert. as i said, i'm glad to be concerned about these corporate inversions. ultimately, the best way to solve this problem would be to reform our corporate and international tax system in a manner that will make our multinationals competitive against their foreign counterparts. that would mean among other things a significant reduction in the corporate tax rate and major changes to make our international tax system more competitive. over the past few months we've seen a handful of legislative proposals to address the issue of inversions. most of them are punitive and retroactive. rather than incentivizing american companies to remain in the u.s., these bills would build walls around u.s. corporations in order to keep them from inverting. i think that's not only stupid, but i think it's going to -- going to result in results that nobody wants. this approach in my view completely misses the mark. while it may put a stop to

traditional inversions it could actually lead to more acquisition inversions as u.s. multinationals would, under this approach, become more tractive acquisition targets for foreign abo ak acquisition reversion, the result is the same continued stripping of the u.s.-act base. it reminds me of an old joke. a drunk is looking for something understand a street light. a police officer walks up to him and asks, what is he looking for. the drunk says my keys. the police officer helps the drunk look for a few minutes and finally asks did you lose your keys here? the drunk said, no, i lost them across the street. the officer responds then why are you looking for them on this side of the street? and the drunk replies because the light is better over there -- over here. once again, the ultimate answer

to this problem and the only way to completely address the issue of reversions is to reform our tax code. however, as i've also said publicly, there may be steps that congress can take to at least partially address this issue in the interim. while i don't support the anti-inversion bills we've seen thus far, i personally am open to considering alternative approaches. although i do have a few stipulations as to what proposals are considered. for example, whatever approach we take, it should not be retroactive or punitive. and it should be rev knew neutral. our approach should move us towards or at least not away from the territorial tax system. and should not enhance the bias to foreign acquisitions. most importantly, it should not impede our overall progress towards comprehensive tax reform. toward that end, it should not be inconsistent with our house colleagues' approach. i think there's a gr