1, 2014 over 12,000 detainers by our enforcement personnel were not honored. frankly, in my view this state of affairs puts public safety at risk. so we've done away with the secure communities program and created a new program in its place, which in my view solves the legal and political controversy. we're no longer placing detainers on individuals except if there's probable cause to solve the legal issue. we're replacing that with request for notification. we're no longer putting detainers on people based simply on an arrest. we're now only seeking the transfer of suspected terrorists, felons, convicted felons, those convicted of aggravated felonies, those active in street gangs those convicted of significant

misdemeanors and those convicted of three or more misdemeanors. so here's my ask. we want to work with you to restore this relationship. we've replaced secure communities with a new program for the benefit of public safety. but i need a partner. in those in this room, in governors and mayors county commissions, and so forth. we've done our part to end the controversial secure communities program. now i ask that you and others get with your city attorney, your city council, your police commissioner, your chief get a hold of the policy document that i issued in november to see how we've replaced the secure communities program. for the benefit of all of toes we serve. and if you're one of those 177 jurisdictions, you will get a knock on the door from me. because we want to work with you

to rebuild this relationship. in my view it is a public safety imperative. elsewhere in our department we're moving forward on our cyber security mission. we had legislation passed late last year. the administration has a new proposal for cybersecurity this year which we hope the congress will act on. we're doing a number of things to reform the way in which we do business in the department of security. department of homeland security. we've filled all the senior-level vacancies. we're rebuilding morale within the organization. we're moving in the direction of more transparency and so forth. so this is a good time right now for homeland security. we have a new budget. and we're moving forward with our very important mission. but my overarching message here with all of you is it takes a partnership with the men and

women in this room for homeland security, for hometown security for public safety, for all of the people we as public servants represent. the last thing i'll say to you is for my part i recognize that homeland security is a billion. it's a balance between basic physical security and our american values. the things we cherish. our civil liberties. our right to peaceably assemble. our right to travel. diversity. the diversity we cherish. our immigrant heritage we cherish. i'd like to tell audiences that i could build you a perfectly safe city. we could build higher walls. we could interrogate more people. we could erect more scanning devices. we could screen more people to create a perfectly safe space.

but it would not be a shining city on a hill. it would be a prison. so homeland security must be a balance between security of our people and the preservation of the things we value as americans. i look forward to working with all of you in the days ahead on our joint homeland security public safety mission. thank you very much, and thank you for listening to me. [ applause ] >> secretary johnson on behalf of the national league of cities and its members, i want to thank you for joining us today. i also want to thank you for all of the good work do you to keep our cities safe our country strong and our citizens protected. it is now my great pleasure to introduce the members of this afternoon's panel session on infrastructure and climate

change. at this time let me introduce our panel, and each of these panelists are incredible folks in what they do on behalf of all of us and their particular focus for us was cities. first dr. ernest moniz the secretary of the department of energy. energy. [ applause ] please join me also in welcoming gina mccarthy the administrator of the environmental protection agency. [ applause ] thank you. and finally, i would like to invite to the stage peter rogoff, who is the undersecretary of transportation. peter, thank you for joining us. [ applause ]

so i'm going to ask each of these panelists to maybe just give us a brief comment, and then we're going to go into a series of questions around topics that are so important to us as cities as well as obviously within their realms of responsibility. mr. undersecretary, to you first. >> i think we're actually starting with the secretary. >> excuse me. >> it doesn't matter. >> okay. mr. secretary. why don't you start? >> well, thank you. mayor becker. and also greetings to my administration colleagues here. i'm not going to get into things that you know very well, like the importance of cities and the importance of cities also in the context of our climate challenge. but let me focus on a few items in these opening remarks. of course all of you have tremendous responsibilities in

terms of managing a lot of infrastructure in this country. let me say a word about the quadrennial energy review first installment that we expect to have coming out in a few weeks. this is a study that's been going on for over a year across the administration looking specifically at the issues of energy infrastructure. transmission, storage, and distribution of energy. that includes electricity. it includes fuels. it includes looking at reliability, resilience safety, security of infrastructure and as i say, we'll be coming out with that shortly. some of the findings in there i'll just note things like looking at analyzing risks from storm surges for example. the modeling there showing that category 1 storms could inundate

about 1,000 vital electric substations, for example, over these next decades. heat waves degrading our infrastructure but also increasing things like peak cooling requirements. oil and gas supplies depend upon reliable electricity to operate. but in turn, particularly our power sector relies on natural gas. a complex interdependency that we have to be careful about. the energy industry, another different aspect is by 2020 we expect to need to fill about 2 million jobs in the energy industry. and of course we need to therefore focus on some of the training areas which we are doing. the -- in addition, some of the outcomes of the qer are already in our fiscal year 16 budget.

so i can talk about those. for example, we will have in there $63 million proposals for state grants for reliability and for energy assurance. so hopefully the states and the cities will be working together to come forward with those planning activities which then in turn can lead to eligibility, which hope, for what will be major infrastructure project support. also in the budget there's something called the local energy program, and that is $20 million to help cities and counties accelerate investments & in efficiency and clean energy. so these are just some of the items that are in that budget. let me just mention two new things today. we are issuing now a notice of technical assistance for our 16

climate action champions. one of them is seated here at the table. so he's happy. maybe there are 15 more of you out there happy with that particular grant. but also we're also pleased to announce $6 million through our clean cities program for alternative fuel, vehicle market growth projects. this will support 11 community-led projects to reduce market barriers and improve buyer awareness of plug-in electric and other alternative fuel vehicles. one such project will enable visitors in orlando, for example, to rent and receive information on plug-in electrics. and a whole bunch of other projects that as i say will be announced today. those are just a few of the things that we are moving forward in terms of clean energy, climate, and energy

infrastructure reliability and resilience. thank you. >> thank you so much. and i hope everyone's taking notes on opportunities there may be to help advance efforts in your community through these department of energy initiatives. administrator. >> well, first of all, mayor, thank you for moderating and thank you for being one of the really best mayors in the u.s. it's so exciting to see all the work that you're doing. [ applause ] it's amazing. and he's also finding time to help the epa with our committees and so i thank you for being a great adviser to the agency and a great partner. so first of all, thank you. thanks nlc for letting me be back again. i don't know what i did wrong last time, but maybe i did something vietright. i know you're dying to get to your questions. and i hope you know we always follow up and w. each and every one of them. thank you for letting me join. i just want to mention a couple of things because i know that communities across the u.s.,

particularly our cities and towns, have been really wonderful partners for epa. both in identifying how best to spend things like state revolving funds effectively, to look at brownfield's redevelopment, and continuing to support that, look at our sustainable communities' work. our fiscal year budget this year, the president's request, has really been recognizing what a great partner you are and is looking in a variety of ways to enhance that partnership with additional dollars. so i wanted just to point out a few things. number 1, the o'42% of epa's budget goes directly to local states, communities, and tribes. and the president is looking up to that ante to provide us some additional funds to continue to work together, particularly on climate resilience, so that we can provide you expertise and tools that you need to address your changing weather patterns. the extreme weather events that you're using.

but also we know climate islyly lyly challenging our water infrastructure. what go do about water and waste water infrastructure. what you all invested in 40 to 50 years ago as well as seeing the significant challenges we're seeing on the drinking water side. we're going to continue to work with you on integrated planning but also the president has requested a significant increase over last year's request in the area of srf. and we're looking at new ways of continuing to support water and waste water infrastructure not just in terms of helping with resilience and helping you look at how to do integrated planning and green infrastructure but we have also recently announced the creation of a water infrastructure and resilience finance center. that's a way to have one place you can go to think about whether there are creative financing opportunities that will bring private sector dollars to the table.

really build public-private partnerships because we know that the money that we have in the public sector is not going to be able to get the job done that we're seeing. because there's $600 billion in water infrastructure need out there over the next 20 years. we have to pump it up and find new ways to finance it. we're also moving forward this year to lay the platform for our center under wfia. because that's an important opportunity to take advantage of creative financing that the transportation agencies have found effective and we want to do it as well. so we're going to be well up that center as well. hopefully we'll be creating a partnership and enhancing it and looking for every opportunity to understand what your needs are and to support that as effectively as we can. and i think i'll stop there. >> thank you. >> well thank you. first off and foremost i need to express my apologies from a former mayor and a former nlc member, anthony fox.

he is recovering from some minor knee surgery but he is not up and about otherwise he'd be with you here today. let me also echo gina's observation about what a great partner mayor becker is. he's not just a great adviser to us but he and his city have been a great grantee. now, would you say secretary moniz, whatever amount of technical assistance and money you just gave, we've given a lot more. >> it would be a good competition. see if we can get that going. >> if they gave me more money i would win. >> if anthony fox would be here, he would be talking about the absolute imperative that congress move forward and pass the green america act in the last few months. last year was a four-year $302 billion bill. so we can get away from all of these incremental extensions that numbers from 32 separate individual extensions that have just been milking the program

along for the last several years. last year we submitted a $342 billion bill and we got frozen funding for ten months. this year under president obama's leadership we're doubling down. we're going to be submitting in the weeks to come a six-year, $478 billion bill that will bring overall funding to something closer to 60%. and we state precisely what part of the tax code we could amend to pay for it where we would get the money to augment the existing highway trust fund. and we've also said to congress that if they done like our offset to pay for it we are open to talking about others. but they need to act. why are we pushing the grow america act so hard? we're doing it because we've looks into the future and seen what happens if we don't change our transportation policies and we don't change our funding tra trajectory trajectory. just a few weeks ago we at

d.o.t. released our draft beyond traffic study. i would really encourage all of you to look at it. you can see it at www.dot.gov/beyondtraffic. it's a draft, and we're looking for your comments. but importantly, what this document does is it looks 30 years into the future and looks at all of the trends that we're going to experience both in population growth, 70 million more people by 2050, by the fact that all of these people are going to be locating in some of the areas that have already undergone dramatic growth, especially in the south and the west that is already undergoing punishing congestion. frankly, this study has taken on a resonance with the american public because far beyond what we expected. we are approaching a quarter of a million downloads from our website of this study. and we think it's taken on this resonance because the people know that something is wrong.

they see it in the potholes they're hitting every day. they see it in worsening congestion. they are seeing it in transit service that is increasingly unreliable in some areas, even while transit ridership grows. and we've seen that what will happen if this persists for the next 30 years is a form of congestion we don't currently know in this country and one that will absolutely drag our economy down rather than serve as something that's going to grow jobs to support those 70 million additional americans. we're not asking for increased funding just because we like infrastructure investment. we're asking for dramatically increased funding and improved policies because that's what our economy's going to need going forward. thank you. [ applause ] and we do a lot of our growth in areas that are is he sustainable in areas like transit and rail. mayors of yours like mayor garcetti will tell you that in

places like los angeles there is not room for additional highways. so we are very concerned at the current moment that many of our partners in congress are looking to undershoot the target. some want to go into the tax code and only raise enough money to freeze funding for the next six years. the reality is that frozen funding won't even allow us to maintain the infrastructure we have. and for the critical pieces of infrastructure that are 50, 60, 70, in some cases more than 100 years old, they will just continue to deteriorate because we will not have the money to replace them. so when it comes to frozen funding and status quo policies we are against the policy and we are against the politics. we frankly don't understand the politics where congress goes into the tax code and raises money for transportation for the first time in more than two decades, only to deliver to the public the existing deteriorated infrastructure, the existing challenges in being able to

maintain our system. we think it makes a lot more sense if we're going to dig into the tax code and raise the necessary revenue to really address transportation and what our needs are going forward. we need to raise enough revenue to provide the growth that the economy needs going forward. that is where we need your help. we need you to deliver that message to your legislators. there are many things in the grow america act that this community should like. there's opportunities with the increased funding to increase the funds to states and localities by more than 50%. there is more than a doubling of the tiger program a program that has served many cities including salt lake very well, but where we are turning down 15 applications for every one we can find. so let me encourage you to tell your federal legislators that it's time to really address this issue and not tinker on the margins. if we're going to go in and raise money through the tax code to pay for transportation, we should raise enough to prepare

us for our future. thanks. [ applause ] >> thank you so much to all three of you. isn't it refreshing to hear talk about innovation, about creativity, about meeting the needs and partnering with our communities? i mean really this was a fabulous set of three statements. soif a few questions that hopefully will allow each of you to maybe expand a little bit on some of the things that you talked about in your comments. you've noted of course but our infrastructure is failing. we certainly feel that very directly in our local roads and transit systems. and the things we're trying to do to meet today's needs. tell me what your thoughts may be. and i know this is true with your grow america act. and eve heard it in some of your comments. but how you think we can pay for

that better. in maybe a little more detail. ideas that you have for how we can bring some of our costs down. and in working with cities ideas that you may have to make sure that some communities aren't left behind. for example it was referenced the tiger grant, and we were incredibly fortunate, and benefited from a tiger grant. but for many smaller communities particularly, having the wherewithal to develop a grant application is really intimidating. so maybe you could comment on some of those things in the work that you're doing and each of you i think if you could respond. thank you. mr. secretary. >> should i start? let me start by expanding a little bit on what mr. rogoff said in terms of -- he mentioned tiger -- you mentioned tiger, mayor. i just want to say that the tiger grant's clearly way

oversubscribed and the point i want -- i really want to make is in our quadrennial energy review broadening it out from tigers want to note that when we think about energy infrastructures we think about wires and pipes. but in fact, associated infrastructures like docks -- i mean ports, inland waterways rail these are all critical for energy today, and in fact the energy boom we are seeing in the united states in oil and gas are severely taxing the infrastructures in many, many ways we have not seen. so things like grow america and other initiatives that we hope to bring forward on these related infrastructures are very, very critical. just one comment on the issue of perhaps smaller communities. two points. one is as i mentioned earlier,

we are putting forward to congress -- and again, we hope there will be action in terms of these planning grants. these planning grants $63 million, as i mentioned, they are in the budget request. these are precisely to develop plans that can then be fundable. and that should go through all communities in the states. in fact in developing this qer we held 13 regional meetings and we had many, many representatives of state, local, and tribal governments. and we are just hoping that we're going to be able to work with you in terms of developing these planning approaches that will allow us to move forward on infrastructure. a second point i'll just make, and i was out recently -- this is not a very small community, but in toledo, ohio for

example, where the city's plans for downtown rebirth very much tied in to developing novel ideas around energy. combining power and renewables, et cetera. those are areas again, through our city's programs that we are very happy to talk with communities and provide technical assistance in terms of developing proposals that are forward-looking in providing infrastructure that's good for the economic growth but also good for resilience in the face of the threats that we see ahead. >> let me mention a few things because i think all of you know that epa does not have the zeros on the end of our budgets that these guys do. so we have to work on it. and one of the things that i think epa does very well is to

provide technical assistance to communities. we have strong relationships with our communities. we don't go in there telling them what our vision is. we go in there asking the question of how do we work with you to make your vision succeed. and i think we have seen that in the work we do with sustainable communities. you know, it's amazing what a $15,000 or 20 thousands technical community grant can do to get a community to recognize some good steps moving forward about how they can change their dynamic, how do they make it more vibrant and economically and use some of the funds that the other agencies can bring to the table to then get a tiger grant. it doesn't take much to build a bike path, but when a community decides they're going to build it we can help with that. but then that changes the dynamics of that community. it makes it more visible, vibrant, active. all of a sudden other things

happen. so one of the good things the epa is trying to figure out how to do better is that learning lessons from sustainable communities, we're going to be honing our technical expertise in our regions. we have identified 50 communities where our regions are actively working with communities and with our regional partners. our partners from hud from d.o.t., from d.o.e., from other agency that's can work with us and work with communities and do exactly what they want us to do. is listen to them identify opportunities for funding. and we're going to track those 50 communities, and we'll come back to you with our success on those. what did you do? you'll be amazed at what a brownsfield's grant does for planning and cleanup. the economy of local communities can dramatically change as a result of a small cleanup of a small lot that makes people feel better about their community, makes it safer, makes it more vibrant. we're looking at how do we

ex-pantex- expand our opportunities to track it. the other thing i wanted to mention is we have a bunch of work that's going on which i think you know on infrastructure is how do we look at infrastructure planning differently? how do we build green infrastructure that makes communities more livable, more vibrant in and of itself but also happens to be a whole lot better than concrete in building big pipes? so there are opportunities to actually cure the problems we're trying to cure in a way that's tremendously cost effective and also builds up local economies and grows jobs at the same time. believe it or not, i firmly believe that climate efforts are exactly the same thing. that is exactly why as we're looking at our carbon strategies and power plants we are opening up opportunities for states to create more opportunities about how to work with you to bring

advantage economically in job growth on the choices they make on how to reduce their carbon pollution. they can do it if they want to. so get active in those discussions with your states. we're actually providing, hopefully if the president's budget goes through $25 million for states to just help them with this planning and implementation piece. the president has proposed a $4 billion budget line item that actually is trying to establish an incentive for states that want to go faster and further to be able to build the kind of infrastructure that you need to make climate reductions work. these are things that we can do together. and so all we have to do is to be really smart partners. the epa needs to be focused on providing you the technical assistance to know how you can meet your environmental challenges in ways that actually promote your economic growth and your job growth. if we can keep our eye on both of those prizes at the same

time, we will be the partners that our public demands. the partners that actually can keep them safe keep our actual infrastructure moving and healthy, keep them healthy and continue to grow the economy. that's what we're all working toward. none of us are in our own fiefdoms in our little stovepipes. i which i was because ernie brothers me a lot. but i'm trying to get over it and let him talk to me and deal with these issues together because that's what you want with delivering. >> two folks from new england. you can tell right? >> so let me quickly address an issue about lowering costs because it's actually embedded in title 1 of our grow america act as a very important initiative that we've worked with epa and our other partners in the administration who are responsible for the environmental review process. and that is a whole series of statutory provisions, all intended to allow us to speed up

the environmental review process on our infrastructure projects while getting better results for the environment. and it's not all that hard but some of it does take statutory change. areas where we could do our reviews coincidentally or at the same time rather than concurrently where someone is going through the file for many months only to hand it to the next agency who hands it to the next agency. we're making progress on that. we think we can make a lot more progress. secretary fox will tell you when he was mayor of charlotte projects would just get 20%, 30%, 40% more expensive just through the passage of time. and the initiatives that were affordable could quickly become more affordable just with the passage of time. if we could take time off the process we could get more projects for the money. we have a series of initiatives in our bill to address that issue head on.

you also asked aboutwhat about communities that will struggle to get a tiger grant? we actually are hearing that message loud and clear again because we have a mayor as a boss whoo who has struggled to be able to put together dollars locally and he had a very prosperous city. you will see a difference in our difference in funding availability for tiger this year whereas we have always prized overmatch by local communities, we will continue to do so but also will recognize those communities that cannot provide an overmatch and make sure they are fully competitive with everyone else. that is a change we're making this year. >> could i mention one more thing i forgot to mention? i did mention the water infrastructure resiliency finance center which is a new effort to look at creative financing opportunities to bring in private sector dollars. that also is a partnership with usda. so i should mention that they have significant funds for rural infrastructure. and so a lot of the focus if

you're a small community in the center is going to be how do you bundle small community projects together to allow them new opportunities for financing? and usda is really on top of this issue. so if you're interested in the kind of work we're going to be doing, we're more than happy to reach out to you and make sure you have the right connections whether it's epa for srf or usda for rural funds. >> this is now a d.o.e., d.o.t. quotes, collaboration. but the power of these grants, a great example we have been involved in, it was with new jersey and it involved, again a novel approach to a microgrid to support a resilient transportation corridor. we did some cost sharing to

develop the plan and then that was successful at d.o.t. for literally hundreds of millions of dollars a grant to rebuild that infrastructure. so these are the kinds of creative ideas certainly that we are looking for in terms of new approaches to resilient energy infrastructure, in in quas supporting a new transportation corridor. >> it's a very good example because that one actually grew out of the disaster hurricane sandy and our relief money we got to address hurricane sandy, but importantly, and a lot of people don't know this for many, many of the transit tunnels and highway tunnels that flooded under hurricane sandy had just flooded a year earlier under hurricane irene. far less newsworthy. but it makes the point that if we're going to have the increasing frequency of major climactic conditions, when the president provided that money for hurricane sandy he made the point that the taxpayer should not have to pay to clean up

these critical facilities time and time again we need to build them smarter. we need to build them in a fashion that we can withstand the future. that's part of what the microgrid does. in a way that isn't dependent on the power lines that have been serving for the last 70 years. >> and to go back to the earlier theme about congress, you need to act, here's a place where it's not a budget there are also policy actions congress needs to take to remove constraints on federal assistance to rebuild something only the way it was before as opposed to building it for the future. >> absolutely. >> very good point. thank you. [ applause ] so we're just about to leave but we're just about out of time. >> what happened to the questions and answers? >> all right. let me turn -- do we have time for -- i'm afraid not.

>> they'll each give you their cell phone numbers. you're welcome to call them anytime. let me invite you to do this. follow up, please. e-mails to these folks in their departments and we'll follow up. and i'll say this. isn't it refreshing for those of us trying to work with what should be our federal partners to have the kind of direct conversation, to have the kind of direct input around issues we care about whether it's climate change or infrastructure and know that we have within these agencies and really leading these agencies folks who are genuinely looking for ways they can improve their partnerships to help us do our jobs locally. so to each of you thank you so much and we really appreciate you being here. >> plaus plaugs

. >> all right. well, thank you. they were suggesting actually that i just give all of you my cell phone number and then i can pass it along. no, but please follow up. it is now my great honor to introduce sally jewell, the 51st secretary of the u.s. department of the interior. as secretary she leads an agency of more than 70000 employees. the department of the interior

serves as the steward of approximately 20% of the nation's lands including national parks, national wildlife refuges, and other public lands. the department also oversees the responsible development of responsible and conventional renewable energy supplies on public lands and waters. it is the largest supplier and manager of water in the 17 western states. and it upholds trust responsibilities to the 566 federally recognized american indian tribes and alaska natives. prior to becoming secretary, sally jewell served in the private sector. most recently as president and ceo of r.e.i., recreational equipment inc. and she joined r.e.i. as chief operating officer in 2000 and was named ceo in 2005. during her tenure r.e.i. nearly tripled its business revenues to

$2 billion and was consistently ranked as one of the 100 best companies to work for in fortune magazine. secretary jewell, also as we know, has become a great partner with the national league of cities in our agreement with the department of the interior to further a program to connect kids with nature which she has made her special mission i think as secretary. please join me in giving a very warm welcome to secretary sally jewell. [ applause ] >> well hi, everybody. are you awake? okay. because yeah it's long enough after lunch. we should be fine. thank you for that kind introduction, ralph. i just had a nice visit with chris coleman. you've got strong past and current leadership, and it is a

pleasure to be here with all of you today. and i just want to start by thanking you all for your public service. whether you're a mayor or a city council member or commissioner or whatever they call you in your public service, i have come to appreciate just how tough your jobs are and how important your jobs are. so thank you for everything that you do. yes, we can give you a round of applause. that's good. also i want to express my appreciation to clarence anthony and the good work he does with the national league of cities. i got a chance to meet with clarence. we were together talking about a partnership we've got going. it's clear you are very important to this country because you have the president of the united states. you've had a good chunk of the cabinet. we should have a cabinet meeting. it seems we're all in town for the national league of cities. which is great. so i want to talk to you about maybe a bit different dimension than some of my other colleagues. and i want to start by asking you to just close your eyes for

a minute and picture the most special place from your childhood. would you just humor me and do that for a minute? okay. you got it? how many of you for that special place was outside? okay. that's what i figured. a pretty good chunk. all right. so when you think about that special place, it probably had something to do with the place you grew up or a trip that a loved one took you to. for me oftentimes a special place would be romping around in the hobo jungle behind my house. call it the hobo jungle because it was a homeless encampment. used to go put pennies on the railroad track and let the train run over the pennies. i used to camp out in the back yard which was a great stepping stone to a life of enjoying the great outdoors. my parents took me to city parks and state parks and national

parks. i used to sail little sailing dinghies, and we used to camp all the time. i think i remember camping 52 nights one year. and that was a bit of what my childhood was about. and when i think about that, and i think about the trajectory of my career, much of what i have done and where i've chosen to live has had to do with the quality of life of those communities. and that's something that you all care about because whether you are from a large city or a small town or a large county with few people or a small county with lots of people you want future generations to stay. you want them to say this is my special place. i want my children to have the same kinds of experiences you had when you closed your eyes about those special places. and that has something to do with how we create an environment around our cities and a lot of that has to do with

how we create parks and open spaces and public lands. so when i was preparing for, this i asked a couple of my colleagues what they special places were and what sxarkz open spaces meant to them. my colleague david jayo who was here and who has led my youth initiative at department of the interior, the only person i brought with me from the outside world, r.e.i. david is the only child of immigrant parents. and parks are where he learned to speak english. so they were very important to him. emily, also here, on my team is in her mid 20s, and i asked her about that and she said she played in the creek. can't remember if it was her house or her grarntsd' house, but played in the creek by king of prussia, pen. where she grew up. in her case there's a lot of development that's happened there. a lot of retail. it's a place actually that r.e.i. looked at putting a store because of the retail magnet. but like so many of those places like the hobo jungle where i used to play it's now all apartment buildings.

it's all been developed. and yet when i made a decision about where to live after college i looked at quality of life. i ended up in a rural community in oklahoma because i started my career in the oil business. but what did we do from there besides going to football games? which i hadn't gone to high school football games since my own high school. but football's big in oklahoma, so that's what you do. but i also went to the wichita mountains. and that's where i came face to face with some texas longhorn cattle that were out there. ancient cattle. i saw lots of lizards and representless. first time i dipped my feet in the cool rung stream to cool them off after a long hike i realized they had leaches there. you know it's nature. the buffalo river in arkansas was not a long drive. and that's one of the places we went to recreate. and then we went to denver. and it was about the rocky mountains and it was about skiing. but it was also about theater and quality of life within the community. and we moved back to seattle. with the outdoors closy and

family. and family is always going to be the most powerful tug that we have. but these are special places. and i think that for awful us as we think about how do we create a future for our families where they choose to live by us i'm going back to seattle after this job. i have my first biological grandchild and two stepgrandchildren. so i know i'm going back there. the tug is very strong. but what is it that's going to attract your kids to come back to your communities? and that's something that i think is very relevant to what the national league of cities is doing right here and doing actually with the department of the interior and the ymca. i always thought about where do we open stores? we doubled the amount of stores over the 13 years i was there. we put a store in place like greenville south carolina. why? because greenville is turning its face to the river and embracing its river which used to have -- it used to turn its

back to the river as so many communities did. and it made its community more livable. and it put parks along that river. and it was very inviting. and an eagle scout about d. a project which was little brass mice hidden all around greenville. and you can go on a treasure hunt and look for the mice. and it gets you outdoors and you see these little restaurants and shops and you buy yourself a donut, which i did p and that's what makes these communities livable. so when you're a businessperson like i was at r.e.i. you think about that. think about putting a store in a place like pittsburgh. pittsburgh that turned a brownfield site into a great retail complex. and for a city that had turned its back to the river, in fact the river had been a dumping ground as so many rivers were, particularly in the east, but really all over the country, it turned its face to the river put a bike path along the river. r.e.i. put its store where people could test out bikes on that bike path. so you have a lot of control about the liveability of your cities because parks and open spaces and communal areas and community activities really help

define quality of life in our communities. and they help distinguish one community from the other. but we all have a challenge. and that is that children are growing up more disconnected from nature than ever before. the millennial generation, young adults, say, age 18 to 33 they're a larger generation than the baby boom by more than 3 million. they've grown up very scheduled. they've grown up trying to juggle competition between school work, which was pretty intense for them. organized youth sports which sometimes went year-long. television and video games which are a powerful draw, and very little time exploring the natural world on their own. parents were afraid. afraid of strangers. chastised by other parents for letting their kids walk home from school alone. all of those things that many of us did and thought it was normal. today's kids are not getting to do. and yet it is those kinds of

activities that help bring -- build creativity, build independence, build self-confidence. so at the department of the interior we've launched a youth initiative. david jayo my colleague-s running it. and it is really working with all the bureaus of the department of interior to say let's be part of the solution here. first step is let's let children play. how about that? let's let them play. [ applause ] i was at a tribal school -- i've been to a lot of native american schools here lately as we work to transform indian education. and i'll get down with little kids and say what's your favorite part of school in and inevitably they say recess. which i get. that was my favorite part too. but play is the first step. letting kids play. giving them the time and space to play and not telling them what to do. but also when they're playing they are playing in i think the finest classroom in the world.

and that is the classroom that has no walls. that is mother nature. and of course that can be nurtured and supported by adults. adults like my colleague's interpretation in engs at the national park service or the bureau of land management. it can be a school teacher who goes through the teacher ranger teacher program and takes the skills learned as a ranger during the summer back to the classroom. but it is a place to learn. let kids play. let them learn in the outdoors. and let's let them serve. and i say that because i've done hundreds of service projects all over the country. when r.e.i. opened a store we'd go and do a service project. you know when i was in pittsburgh opening that store we got in kakayaks not a bad service project, floated the river and picked garbage out of the river. on the martin luther king jr. holiday we went down with 450 people, many of them young many of them from the community around an-costia river in

southeastern d.c., and we picked garbage out of the river and so the bike path felt more safe. i guarantee you every one of those children felt and a pride that was going to change their behavior themselves towards garbage and littlering and cycling and open spaces and enable them to help change that behavior. so play, learn serve. some of them are going to want to work in jobs like mine and your parks and reck folks and wild life biologists and scientists that understand the natural world. we need them. we need them at every level of government. 40% of my employees will be eligible to retire within five years. who is going to replace them? 40%. it's not easy to sign up for public service as you know. people aren't glam clamoring to work for the federal government.

we have put a good job of putting down federal employees yet they are so critical to what we do. that is what we are doing at interior. the national league of cities has cities promoting access to nature project. thank you for working with the foundation raising $2 million, helping each other figure out what works because at a local level that is often times people's first experience to nature. the president announced three weeks ago when he was in chicago announcing the national monument that we were launching every kid in a park. and that was focusing on fourth graders and giving every fourth quarter grader and their family a free pass to national parks and public lands. so we blend that with the kind of program you have with the efforts we have going collectively and we will get every kid in a park because that will shape their lives and shape

the way they think about your communities so they choose to come back there and live. so it's about partnerships in this time when there is not enough money to go around. how many of you have plenty of money for your parks and open spaces? i don't see a single hand. that's kind of what i figured. and yet when you put bond issues on your ballot how many of you have had pretty good experience with those? that's kind of what i figured, too. certainly not everybody. people love their parks and open spaces. how do we get creative and smart about how we spend our money? one of the things that we are doing is partnering with you. last april mayor becker who early in his career was a park ranger and chris coleman did his

summers during college as a bartender and waiter at glacier national park. it's probably no coincidence that they are great partners for us and perhaps leading this organization, too because they care about these places, these special places that make the united states stand out among countries reepd the world. if you hiked in the alps there is no wild life. you can get a beer on the trail. kind of nice. there is no wild life. we have something very different. our crown jewels are our national parks, public lands, history, culture. they are the blend of the small and the big and the pride that

we have in who we are and our individuality and our commonality commonality. in the announcement in september with mayor becker we had neil nickel, the president of the ymca and i will tell you in advance that i have been scheming with him for years because he used to be the head of the ymca of greater seattle. at that time he said we serve 6 million children a day in daycare but we have very few programs. we have 9 million people under the age of 18 that are members of the ymca who do day camps and summer camps with us. we have 40,000 young people that we employ in our camps. and we have over 500,000 volunteers that serve us every day. we thought let's work together where we have cities that want to support parks and open spaces. we have the ymca that can help

harness volunteers and is serving a lot of young people and you have federal government and department of interior with 20% of the land in the united states. let's blend these together and see if we can make magic together. that is what we are doing. so we are launching later on this week the beginning of a 50 cities campaign which is taking strong federal presence strong support from the local community and strong ymca leadership and blending that with financial contribution to get many, many more kids out playing in parks and open spaces. while 50 cities is a small subset of what is represented in this room i know we are going to learn what works. the national league of cities will teach us what works. you will help us and we are going to do a better job by working together. we have a memorandum of understanding together.

the national league of cities providing technical assistance. ymca is orchestrating efforts and we are out raising private money to do it. we have support already for many of our programs to engage young people and service on public lands through companies like american eagle and coca-cola and the north face and a big announcement coming later on this week. what it says is we don't have to do it all on our own budgets and with our own employees. we can do it by working together in partnership. we can be so much more together than we are apart. so i want to thank the leadership of the national league of cities. clarence mayors becker and coleman and all of you for stepping up and showing us the way with the work that you are doing and recognizing. let's give you guys a round of applause for that. [ applause ] recognizing that we want our young people to stay. we want our young people to come

home. we want them to build careers and raise their families and have as much fun growing up as we did. and we all have work to do it. if we do it well it will be the gift that keeps on giving because young people will have a connection, a place that will never leave them. communities will be more fun and more livable. they will create an environment where people will want to raise families and that will build on itself. i want to end by saying thank you for your leadership. thanks for standing up for these things that make your communities more livable. thanks for giving us a chance a big federal bure ocacy to be your partner and work collectively with the private sector to make this happen. you guys are great. i wish you all the best and we want to be your partner. thank you. here are some of our

featured programs for this weekend. saturday at 10:00 p.m. eastern author peter wallson says government policies caused the 2008 financial crisis. sunday afternoon at 5:00 director of the earth institute at columbia university on a development plan to counter global issues like poverty, political corruption and environmental decay. and saturday morning at 10:30 eastern on american history tv on c-span 3 a discussion on the last major speeches of abraham lincoln and martin luther king jr. and then the 1965 meet the press interview with martin luther king jr. find our complete television schedule and let us know what you think about the programs you are watching. call us, e-mail us at comments or send us a tweet at c-span.

join the conversation, like us on facebook. follow us on twitter. this sunday on q&a eric larson on his new book "dead wait." >> it gets complicated when the question arises as to what ultimately happened to the luce tainia. why was it allowed to enter the sea without escort without the kind of detailed warning that could have been provided to captain william thomas turner but was not. and this has led to some very interesting speculation about was the ship set up for attack by churchill or someone i found no smoking memo. i would have found a smoking

memo if it existed. nothing from churchill to jackie fisher or somebody else saying let's let it go into the sea because because -- next a discussion on the future of the u.s. postal service. then u.s. customs and border protection commissioner talks about security on the north and south u.s. borders. after that a house hearing on recent secret service incidents with director joseph clancy. now the brookings institution hosted a special on the future of the u.s. postal service. panelists include acting chairman and current specter general of the u.s. postal service. they address the current health

of the postal service and what changes are needed in order to modernize and improve the financial condition of this government institution. this is an hour and 25 minutes. good morning everyone. i am the director of the center for public management here at brookings.

>> -- one of the perhaps oldest, along with the united states army, organizations in the u.s. government. and about which there's been much written, and even a movie made. okay? or two or three. and the post office is at a particular crossroads. i will ask you to just think of the following. when is the last time any of you got a letter with a stamp on it? okay. now some of you did. i suspect those of you born after about 1980 don't even really own any stamps. just for the edification of the young people here, stamps are these things that you stick on envelopes and put in post office box and it would go to your grandmother or someone like that. so, we are at a crossroads here. there's some very big and very serious issues to be addressed. there's also been a reluctance to confront these issues in the congress.

not only do they have a lot to do, but they, as you may have noticed, have a hard time doing anything these days, because they disagree about so much. but, we are here to say it's time to stop kicking the can down the road, and to start having an intelligent conversation about some of these big issues. so to start us off today, i'm going to call on four people who know a great deal about this. and i'm going to introduce all of them now, and then they'll just speak in turn, and we'll open it up for questions from the audience. to my left is robert taub. he was designated acting chairman of the postal regulatory commission by president obama on december 4th, 2014. he's a little bit new to the job but he was also sworn in as a commissioner in 2011 and elected vice chair in 2013. he came to the post office from

the army, where he was special assistant to the secretary of the army john mchugh, and before that he served as chief of staff to u.s. congressman john mchugh for a whole decade. to his left is dr. robert shapiro. he is a president and co-chairman and founder of sonicconllc which is a highly rated economic consulting company here in washington. he's also a senior fellow at the georgetown school of business, an adviser to the international monetary fund, director of the globalization center at ndm, and in the clinton administration, he was undersecretary of commerce for economic affairs where he oversaw the statistical agencies, and the census. not at all a small job. to his left we have david

williams. david is inspector general of the united states postal service. he was sworn in as the second inspector general for the post office in august of 2003, so he has a lot of years looking at this institution. he's responsible for a large staff located all over the country, and he investigates the largest civilian agency in the government. in 2011, williams was appointed by the obama administration to serve as vice chair on the government accountability -- board which will develop plans for enhanced transparency for public spending. last but not least we have gene del polito. he is president of the association for postal commerce. he's been there for the past 31 years. and he is highly regarded within the postal community as an effective advocate on behalf of those who use mail for business communication and commerce. he has received post-com's j.

edward day ward, the association's highest honor granted in recognition of distinguished service to the nation's postal community. so, as you can see, we've got a power house up here of people. i don't know that they'll all agree on everything, but that's going to be the fun part. so i'd like to start by having each of them make some introductory remarks, and then we'll open it up. so go ahead, robert. >> thank you, elaine. good morning, everyone. i thought i'd just for the few minutes for each of us to set the table, shall we say, hit three issues. one to give you a thumbnail of what the postal regulatory commission is vis-a-vis the postal service and then more importantly give you a sense of what's going on with the postal

service today. particularly financially. there's bad news and good news, and i'll try to hit on both of that. then lastly hit upon what i think is an important issue for us to consider going forward, which to me is the issue of universal service. indeed, why else do we have a government institution in the postal sphere if it isn't to provide universal service to the american public at home or at work, wherever you live. now the postal service itself today is a nearly $67 billion operation. almost half a million employees. it's 100% part of the government, 100% part of the executive branch. it is not hybrid anything. it is not quasi-government. it is 100% part of the united states government. however, it receives no tax dollars to fund its operations. it is solely self-sustaining through the rates it charges for the services it provides. the postal regulatory commission is the entity that polices and has final authority over the

postal service's prices, its products, services, adjudicates complaints. as elaine indicated, it's a regulatory commission like many in washington, with five commissioners appointed by the president, confirmed by the senate, and it is independent and totally separate from the postal service. the commission is the regulators, not the operator, of our nation's postal system. and a key point on that, why a regulator? as i said the postal service is 100% part of the government. it has one of the few agencies that every day is operating in a very commercial marketplace. and it has many captive customers who have no alternatives to use the mail. so when it comes particularly to prices and products, because it's 100% a government entity with a commercial marketplace the idea is the commission is there to protect the public interest in these spheres. so let me move to kind of a

snapshot of where things are at with the postal service today. obviously most of the attention we've seen and heard is the bad news about their financials. and it is bad news. they ended last year with a $5.5 billion net loss. it has brought their total net losses over the last eight years to $51.7 billion. just pause and think about that for a minute. $51.7 billion in net losses over eight years. last year's loss was $500 million higher than the year before, and $900 million higher than planned. and so far in 2015, their total net loss is $750 million more. now they paid $21 billion during the first five years of this eight-year period to prefund overly ambitious prefunding mandate and they've since defaulted on that and have been unable to make any future payments into the prefunding for future retiree health benefits. they've maxed out on their

borrowing authority so they have no borrowing authority available. and mail volume is continuing to decline overall. total mail volume in 2014 dropped to levels not seen since 19 7. now in the face of all that the postal service over the past seven years has reduced its workforce by about 200,000 employees. it's cut cost by about $16 billion. and they've increased productivity. today, the postal service delivers roughly the same amount of mail that it delivered in 1987, but with 173,000 fewer employees. but even with these reductions, and many more planned, they don't have the cash to pay down their debt or make much-needed capital investments into their infrastructure. they need new delivery vehicles, package sortation equipment, probably about $10 billion of capital investments that's deferred. so if a downturn in the economy, or another stressing event should affect the postal service it really is concerning about their liquidity. the postal service currently estimates they have about 21 days of liquidity. but despite all that bad news,

there's good news. there's strength in the system. as i mentioned, the postal service is the one entity that touches every american, whether at home or at work. the postal service literally delivers 150 million delivery points every day on a typical day, to american households and businesses. it facilitates trillions of dollars in commerce. $900 billion is the estimate of the mailing industry that the postal and delivery sector and the postal service is a key cog and part of, employing nearly 8 million americans. and there are positive signs of late. the total first quarter volume and revenue has shown some good signs on our net operating basis. that's without noncash workers comp, and the prefunding mandates that i had mentioned. the postal service has a net operating income of last quarter of about a billion dollars which

is about $360 million better than planned. and while its high margin of first class mail continues to decline, they're starting to see some modest increases in revenue. particularly driven by increases in revenue and volume from a shipping and package services. fuelled by the growth in e-commerce. so as elaine mentioned, this 240 year history of the postal service, despite its challenges today, there's immense strength in the system. and i would argue the postal service throughout his 240 year history has dealt with numerous disasters, numerous challenges, a great depression, and despite expected calls for its imminent decline has not only continued to operate, but has thrived. and i would argue postal service despite these challenges has strength in the system that will get us through. the last point i mention is how do we deal with this larger issue, though, of the challenges, given the very scary financial news. i would argue it's this issue of

universal service. why else is the postal service a government institution than to provide universal service? the postal regulatory commission back in 2008 did a study, as mandated by law, to try to define what it is in the united states, what do we define universal service as? and the commission came up with seven criteria. seven attributes that would make up a definition of universal service. geographic. range of products. access to services. delivery frequency. prices. affordability. quality of service. and the seventh is users rights or enforcement. most other nations around the planet have very specific guidelines for many, if not all of those seven attributes and they're in law, they're either

regulation, or licensing. in the united states, for much of our 240 years, instead we have not defined it. we've expected the postal service to meet the needs of the nation, balancing its budgetary constraints, and exempt for the mandate in the annual appropriations bill since 1982, that provides six-day delivery, it's really been left to the postal service. the commission, by law, annually estimates what does this cost in universal service? our current estimate is it's about $5 billion a year. so the challenge for the postal service it seems to me is given all those other major financial challenges on its plate, how do we ensure that that $5 billion

of universal service cost is continuing to get in to the postal service, so it remains self-sustaining? and where do we look for the answers to those questions? well, i would argue we have to look at ourselves. what sit that we as the american public need from a postal service in 2015 to provide universal service? what is it that we as the americans expect for universal service? and what is the cost? and once we know that it seems to me then we can ensure that the postal service is structured in a way to ensure that money gets to the bottom line of the postal service. as elaine mentioned, congress has been trying to deal with modernizing our nation's postal laws. the last congress both committees in the house and senate moved forward bills but they didn't get enacted. the administration has had its proposal. while all of them have been helpful, i would argue none deal with this central bottom line issue of what is it that we expect from our nation's postal system. and it is that from my perspective where we should focus from the public policy debate. >> great, thank you. the second robert. >> thank you, elaine. it's always a pleasure to be back at brookings. i'm not here to either praise or demean the postal service. i'm here to try to describe how economists thinks about these questions, and the conclusions

economic thinking brings to this problem. you know, almost all governments have compelling reasons to communicate with their subjects or their citizens, so some form of postal service has been a public good that most governments provide for a very long time. now, businesses and individuals also want to communicate with each other, and private companies prepare to compete with postal services for at least a piece of their business, when allowed to, by the law, for example delivery of packages in the united states. they've also been around for a long time. the spread of advanced technology, information, communications technologies, as elaine noted, is only intensified that competition since internet communications have increasingly displaced the central monopoly of most postal systems, which is the monopoly over the near universal delivery of letter mail. we all used to get our bills in

the mail. and not so often anymore. now, this subject always draws a lot of attention. i.e. all of you who showed up today, because most people and most businesses still need dependable postal service. mail service. and providing that service on a universal basis costs a lot of money. and when a public, or semipublic entity receives subsidies for providing a public service, there's a danger of those subsidies being leveraged into a competitive market. one of the -- one of the singular characteristics of the postal service is that it exists simultaneously in a monopoly market where no one can compete, is allowed to compete, and in a competitive market, with pretty intense competition. before addressing those issues, i recently studied the subsidies

themselves, which the postal service receives, and in the context of the cost that congress imposes on the postal service, as robert suggested. for example, congress requires the postal service to maintain residential delivery six days a week. and the prc under robert is estimated that reducing deliveries to five days a week, which most of the public would support, would save the postal service about $2.2 billion per year. congress mandates discounted rates for religious, educational, charitable, political, other nonprofit organizations, which the prc figures costs the postal service more than $1.1 billion every year. every time i say prc i think of china, i'm sorry. congress also directs the postal service to provide a special

mailing rate for periodicals, restricts the ability to close inefficient post offices, they estimate that costs about $300 million a year. and all tolled, as robert suggested, prc estimates that legal and regulatory requirements cost the postal service around $4.5 billion a year. now this happens to correspond roughly to the postal service average reported deficit over the last decade, $5.5 this year but $4.2 billion average over the last decade. and to the commission's estimate of the total value of the postal service special privileges. including its monopoly on delivering letters, its exclusive access to residential and business mailboxes, and the exemption from a lot of state and local taxes and fees. so by this accounting the postal service is effectively self-sufficient financially. an economist approaches it differently and comes to a

different accounting. which suggests that the subsidies are substantially greater. i estimate worth about $18 billion per year. rather than $4.5 billion. for example. the commission estimates that the postal service monopoly on access to residential and business mailboxes worth about $810 million in the 2013 fiscal year. now this is a very interesting provision, and one that i was not aware of until i became immersed in the research for this. it says that the postal service and only the postal service, can leave a letter or package in a residential or business mailbox. whether it's a curbside mailbox, or one in a central mail room. everybody else that makes deliveries, u.p.s., fedex, dhl,

whomever, individuals, has to leave them at the front door. of the residence or business. that's a substantial burden in a large apartment house, or business. or office building. the postal service itself estimated that in 2008, that ending the current bar on private delivery companies accessing mailboxes would cost the postal service $1.5 billion to $2.6 billion per year. and that was after all, 2008. so that's seven years ago. and is two to three times the estimate of the value of the subsidy. it's going at it a different way. i'm not saying that there was any problem in the accounting. it's the way you approach it. how you conceptualize the subsidy. this is how an economist would conceptualize it, and that is that you would look at the

volume of mail delivered to curbside mailboxes and centralized mail rooms, and the cost of doing so compared to delivery to each customer's door. because that's the privilege they get as compared to the requirement for private companies. by that accounting, the mailbox monopoly saved the postal service $14.9 billion in fiscal 2013. which is another way of looking at the additional burden on private delivery companies. the commission also valued the postal service's legal exemption

from state and local property and real estate taxes. at about $315 billion in 2006, last time it was done, adjusted for inflation, that would be about $370 million today. but this estimate is based on the financial statements issued by the postal service, which value its real estate holdings at $27.5 billion. but, as the inspector general reported recently, this valuation represents the historical cost of the property. not their fair market value. which is how property taxes are applied. using the fair market value, those properties were worth in 2012 $85 billion, not $27.5 billion. and if we use an average property tax rate, that's what economists do, of 1.8% that exemption from taxes actually provides a subsidy of about $1.5 billion. in 2012, it would be a little bigger today. again, a different way of approaching the problem of the value of this. and of course this is only one of a number of exemptions the postal service enjoys from state

and local requirements including vehicle registration fees, road tolls, state sales taxes on fuels, parking tickets. imagine, no parking tickets. there are also some other subsidies which have not been reported and calculated for. but which from an economic point of view are pertinent to this discussion. for example, the postal service borrows from the treasury through the federal financing bank up to $15 billion, they've hit that limit, but it does so at very highly subsidized interest rates. currently it has $15 billion in debt. its legal limit it pays on average a very below market interest rate of 1.2%. that cost is $184 billion in interest last year. if they had to borrow at

commercial rates, and as a aaa credit risk, as its competitors do, its interest payments would have been $600 million to $675 million. so that creates another subsidy from an economic point of view of between $415 million and $500 million. there's also the special arrangements for the federal income tax on the profits that the postal service generates from selling competitive goods and services. and its competitive side it has to pay taxes on the profits that it earns from delivering packages where it's competing with fedex and u.p.s. but there's a very interesting

arrangement. i wish i could pull it off. the treasury credits those tax payments to the postal service fund. the postal service fund is a special revolving fund that at the treasury which the postal service draws on to cover any expense. so the federal tax payments circulate back to the postal service. that's a subsidy worth $850 million last year. finally, and this is really where we get into the economics of it, the postal service -- the monopoly over letter mail has created what economists call major economies of scale and scope. protected from competition and its monopoly area, it maintains this huge network of post offices and postal workers that reaches, as congress requires, and as robert noted, 153 million delivery points six days a week. however, the postal service can leverage these economies of

scale and scope to cut its cost in its competitive markets for package delivery and express mail. in the most consequential example, the postal service's core function of delivering letter mail to most homes and businesses on a daily basis means it can pick up and deliver packages to or from any home or business at little additional cost. this produces what economists call a network advantage since a private competitor's cost to pick up and deliver a package exceeds the postal service's incremental cost to pick up and deliver the same package along with its normal service. at the same time the monopoly is the main reason the postal service needs subsidies. think of it this way. in the absence of any legal monopoly the postal service would face full competition from private companies and be forced to undertake the strategies and investments necessary to match the productivity of the private sector in this area.

it happens we can quantify that. because, the bureau of labor statistics found that from 1987 to 2012 the postal service productivity, labor productivity, grew at an average annual rate of 0.7%. per year. private companies in the business of shipping, warehousing, storage and delivery, the basic functions of the post office, recorded average annual productivity gains at 2.5% for a year over the same years. so, if the postal service had not enjoyed its monopoly position over this 25-year period, it would have been forced to be as productive as its private sector counterparts, and by 2012, that higher productivity would have reduced its 2012 costs by $20 billion. that's a lot of money. that's even greater than the subsidy, the value of all the subsidies if you approach it as an economist would.

it's much greater than the deficits that the post office endures. now this is technically not a subsidy. but it represents an economic burden on everyone who uses the mail, and taxpayers, that arises directly from the monopoly position, and in addition, to the -- in addition, the subsidies, the effective economic subsidies associated with that position which reinforce the need to not compete. now, the higher salaries and benefits that postal employees enjoy and the larger number of employees relative to some but not all private delivery firms account for less than half of those additional costs. the other half reflects the weak competitive pressures on the

postal service to become more efficient and innovative, which ultimately lead to less effective management practices, investments, and operating procedures. this is not a criticism of the postal service. this is the way any subsidized monopoly responds. it is inherent in the position, and the problem is the position. and those costs are certainly grounds, i think, for a serious discussion about reforming the arrangements of the postal service. thanks. >> thank you, robert. david? >> thanks, elaine. the postal service is the largest link in a worldwide communications and logistics infrastructure value chain. like all infrastructures, our role is to provide common solutions to problems that cannot be reasonably solved individually. we're complemented by adjacent infrastructures that are both traditional and digital. and the suddenly faster and global environment. so what are the new respective roles of the infrastructures?

and should the postal infrastructure adapt to this new speed of light ecosphere and what are the rules of the road for the road ahead? the first rule i would say is keep up, no matter who you are. if you're a key player it's critical that you keep up. the world is turning at the speed of blur. and when key players can't keep up, it creates distortions in the landscape. it's like trying to drive a car wearing magnifying glasses, for the rest of us. when one of us can't keep up. you individually, of course, need to keep up, as well. because no matter how young you are in this room, your world is disappearing. it's passing around the bend in the river of time. this is true whether you're a mailer, great customers, the postal service and its unions, customs that are constantly in the way these days, congress,

purposefully slow, and deliberative to avoid sort of being ruling the country by the roar of the mob. and the universal postal union whose stodgy rules are designed to assist developing nations long after they cease to be developing nations. so keep up for god's sake, don't find yourself in the way or clumsily picking winners or losers by your inaction. the second rule, i would say, is velocity doesn't really matter without focus. focus on the new end game. would everybody reach in their pocket and pull out a $1 coin and hold it up? they're very efficiently made, very cheaply produced. that's great. but nobody wants them. now you have a silver dollar, that's very impressive.

the road ahead is not about encouraging consumption of efficiently managed but unwanted manufacture, but unwanted goods. it's about customer value creation. third, enjoying the systems of the world and enable their value to your users. we shouldn't define the postal service literally as envelopes and parcels and traditional post offices. we need to define the postal service conceptually as an enabler of communications and logistics services. in an age of great upheaval and advancement, an age that left us with amazing gifts, but unanticipated restraints. the last great disruptive wave for the postal service was the near simultaneous development of railroads and the telegraph. the postal service at that moment didn't continue plodding along the postal roads that they built, because that's who they were literally five seconds ago. it was the first one to the railroads and the first ones to the air carriers, greatly

helping both of those fragile, infant industries. and as the value of mail increased it was also the first ones to the new highway system in america. history shows that the postal service rapidly adapts, as they're allowed and as it identifies better ways to serve americans so how should it adapt now to serve the emergent human and commercial needs of this new century. act as an intermediary enabling seamless navigation between people's digital and physical lives. gain an essential american neighborhood role in providing inputs to smart mega cities of the future. be sure to equip our trucks and our carriers and our post offices to become a mobile sensor net collecting and uploading data to customers, and to the smart city infrastructures.

should be testing wi-fi and cable strength in the neighborhoods, air quality, gas leaks, conduct meter readings, we should become neighborhood cohort centers for electricity reserves for the power grid, 3-d print centers, we should build wi-fi towers on post office roofs. did you ever think of that? gene suggested that. microwarehousing for people and small businesses. i guess rule five is we should act to protect the continuity of commerce during the coming supply chain wars. as the world becomes more digital and global, the supply chain is being disrupted. from the design and manufacture of goods all the way to the last mile delivery of the products, supply links are going digital, and middlemen are becoming embrittled and disappearing leaving behind residual services that cannot become digital, and they cannot finance the middlemen any longer.

here are a couple of examples. 3-d printing, and customers as creators of disturbing assembly lines and mass production with point of use manufacturing. that changes everything. chinese manufacturers are leaking over the entire supply chain. take goods straight off the assembly line and send them straight to your residence, nothing in between. amazon seeking to provide a one-stop shop for the entire supply chain. we're also seeing the rise of peer-to-peer commerce for products and services. that also leaps all the way over the supply chain. foreign shoppers in an increasingly global marketplace are often unable to buy u.s. goods without a u.s. delivery address. sixth, mediate disruption of the banking industry that blocks transactions for citizens, and adds friction to commerce. mobile banking has put a bank branch in everybody's palm. even before this began one out of twelve americans did not have a bank account.

bank branches may shrink from where they are today, 100,000 down to 10,000 bank branches remain. high cost payday loans and currency exchanges have stepped in to that vacuum that is rapidly growing. many americans can't engage in e-commerce. just at the time that brick and mortar commerce is disappearing. the postal service could provide financial services platform, and front office services where there are no banks. today, 59% of our post offices, 17,000 locations, are located in zip codes where there are no banks or a single bank in the entire zip code. post offices could provide financial instrument exchange at a time when their instruments are proliferating. prepaid and debit cards which could cash checks, money orders and we could become a loan mart platform.

seventh, become a network matter stream. we're seeing the end of a very peculiar world war that went on for ten years. between the very cool bits and the stodgy atoms. i think kids in the future are going to be laughing at what we're doing today. we're doing virtual work in a brick and mortar office. the worst of both worlds. we've been seeing digital as an end instead of a means. we've been insisting the digital communications are a passing fad in some instances, including at the postal service early on. anyway, that's all sorted out now. we are after all atomic structures and packages don't beam themselves off the assembly line to your home. so digital matter streams are finally anatomically incorrect. operating as the network matters

stream. so know how to optimally map citizens to those data streams into the internet of things. and to network matter streams. and the postal service needs to continue to integrate its network matter stream with its users data streams to enable e-commerce, e-health, mobile banking, e-government and soon e-learning. we also have the huge burden of the universal service obligation that you've heard about today. it would be great if we could turn that liability into a wonderful asset for americans, and for the postal service. we need to understand the impact of digital communications on the uso. we shouldn't be fearing and viewing them as competitors, but, in fact, digital communications can lighten the load with the immense burden of universal service. we could provide seamless visibility to senders and recipients of items traveling through the fulfillment value chain from smart postage and packaging, to intelligent

mailboxes and to virtual p.o. boxes. in short we need to ask ourselves who are we now? and not become distracted by the literal artifacts of yesterday. this evolution will also add to our viability, and will be profitable and maybe very profitable. but while we're updating our role of vital infrastructure, being fuelled by this, we can't forget we have an additional responsibility, one additional to the universal service obligation. we must take friction out of commerce and we have to minimize transaction costs as we finance this immense infrastructure without taxpayer dollars. we're the largest of the world postal networks, 40%. we're the engine of the global network effect. the postal service doesn't perform this mission because it chooses to, or because it's a business. it's our duty to you.

we're sentinels for a system that incentivizes innovation, meritocracy. we're conflict free in keeping the playing field level in supporting efficient market forces in the united states. thanks. >> thank you. gene? >> well, i've been in this industry for 31 years, and here we are once again at the brookings institution going about probing the nation's postal soul. and rather than sit up here and try to act as a social engineer, i'd rather sit around and talk to you from my view of things for those specific prism, and that is from the perspective of the people that i help whose businesses are tied in one way or another to the use of mail as a vehicle for the transaction of business communication and commerce. now we're in the process of talking about postal reform and you've heard others talk about the definition of universal service obligations and so on.

and i hope that my comments today might crystallize for you what mailers genuinely believe should be part of a postal reform package and what also should be part of their aspect of the definition of universal service. i'm not going to be talking about universal service from the perspective of the individual customer who is out there. i'm going to be talking about it specifically in terms of the way businesses would do it. i don't choose to talk about the world the way that i would like it to be or the way that i would believe it to be. i have to talk about the world the way that it is. and when you take a look at the mail today, and you look at business communication, business-to-consumer communication, consumer-to-business communication, and tally it all up, what you come to is the reality that 95% of all mail

carried by the postal service today is business transaction, really. only 5% of the mail that the postal service carries is actually what you would characterize as personal communications. for the past several years we should quickly have realized that facebook has all but supplanted mail as that vehicle by which grandma and the grand kids get together, talk to each other, exchange birthday greetings, and also share pictures with one another. from the business' perspective, considering that 95% of all mail is business transaction related, i find it compelling to conclude that when you look at mail, you have got to say, it is an important part of the nation's economic infrastructure. now when we talk about infrastructure, it's all too easy to lapse into the social engineer's perspective, talking about whether it's good or it's bad, it's fair or it's unfair. none of which matters.

when you talk about infrastructure, the only thing that matters is does it work? if you talk about electrical infrastructure, i don't care how you get the electricity here, all i want to know is that when i hit the light switch the lights will come on. when i turn the faucet, the water will come out. the same thing is also true with the mail. when i put the mail inside of the postal system i expect the mail to be delivered in a specific way. for us, the way that we judge the quality of this infrastructure is does it or does it not facilitate the transaction of commerce? if you're using it for commercial purposes, then obviously it should set itself up in a way that it facilitates using it for those particular kinds of purposes. now if you had to take a look at the postal system and say well, okay, how are you going to know that it's doing that? first of all there are two key criteria as far as business nailers are concerned. without a question, someone in the business of using the mail

as a communication vehicle, mail service has got to be reliable, it's got to be consistent, and it's got to be predictable. because i am building other elements of my business around the belief that certain things are going to happen at a certain time. how will i be able to prove that? well, clearly, in order to be able to do that, i must have how mail is provided in a system that is transparent, and accountable. i should be able to confront data that clearly says when you see these figures, when you see these facts, you clearly can make a determination that mail is being consistent and reliable and predictable. the second thing is, is, i must be assured the costs upon which all mail services are based are accurate, complete, and transparent. and when i say the costs of all mail services, i'm not just

talking about market dominant services. i'm talking about competitive services, as well. you know, in the days when paf was past we recast gaul into two parts, market dominant and competitive. we subjected the market dominance with specific regulatory regime for a reason and that is because you could not have competition within the market dominant area, you must take steps to be absolutely sure that there was not going to be this illegal, unwise subsidy going to competitive services for market dominance. the only way you can do that is to be assured that the costs upon which the postal service bases its prices and all of its other activities are accurate, complete, and transparent. the whole day of being able to go to the postal regulatory commission and finally got there when you asked for the costs of competitive services you find everything redacted should be long gone. i, as a user of market dominant

services have an absolute right to be assured that when i pay a price for that particular service, that price is covering the cost of my service, not the cost of somebody else's. so we're looking for a way in which we can actually say that we've got an ability to measure the costs in a way so that we're sure that they're accurate, complete and transparent. now the postal service to its own benefit is beginning to move very quickly for the implementation of its intelligent mail system which gives us the tools that are necessary to actually make those kinds of measurements, and make them apparent. but i should not have to be able to go over to the postal regulatory commission and when i look for the data, i'm required to burrow down from 15 different spreadsheets to hopefully find what i want to see. it should be there. it should be transparent, it should be discernible. so that everybody who is using

this system, and has to pay the costs associated with the system, knows exactly what is being done. now let me make this really, really clear. from the mailer's perspective, we don't care how the postal service goes about structuring its work rules. we don't care how it goes about compensating its workers. we don't care how it ends up dealing with its employee relations. and we couldn't care less whether congress likes it or not. all of these matters are of no concern to mail users. the only thing that matters is does the post system satisfy the mission that it was given as part of the nation's infrastructural system? if it does, and if we get from it those reliable services, based on costs that are accurately transparent we have received everything that we need to get to make postal system today, and we can leave it to those

so we're looking for a way in costs that are accurate and transparent they have received everything that we need to get from a postal system today and we can leave to choose to worry about the other aspects to handle those aspects itself. here are some of the realities people need to keep in mind. the entire cost of operating this nation's postal system is paid for by the people who use the mail, who send the mail, so that 95% element of the business transaction related, that's necessary in order to be able to make this thing go. we have talked about the division between market. dominant and competitive. we have talked about the fact that it's subjected to a regulatory regime. again, it's subjected to a regulatory regime because it has not one monopoly, but two monopolies that control within what happens over the mail. also the deposit of mail in mail receptacles. now, i haven't said anything about prices. the only thing i'm going to say is before the enactment the postal service was proud in

itself in saying we have always been able to operate by keeping postal prices within the ranges of inflation. no one thought that was going to be different the day the act was passed. one thought that was going to be different the day the post accountability act was passed. okay, we ended up going through a deep recession that had some structural impasse just like every business there was in america. but what's the problem when you see that the cost of operating the system are exceeding the revenues that you're now able to gain because of the transformation that has occurred in terms of the way that we communicate and do business. it's not because you're being overly regulated. it's because your costs have not been reduced to the level of the changes that have been going on within your own business. we believe, generally, that male

service mail services should be offered within the context of inflationary limits. do we need to say that they have to be defined today as they are defined at the class level? well, maybe that's not necessarily so. maybe that's what the commission needs to take a look at as it goes forward. but we also need to be mindful that maybe it was wrong taking a look at that kind of constraint. it's not whether or not it's tied to inflation, but the manner in which it's defined. we continue to define mail services today contactually the way we did even before postal reorganization had taken place. we talked about first class mail, we talked about periodicals, we talked about advertising mail we talked about packages. why? those elements are not at the heart at what drives the postal services business. the elements that are at the heart of what the postal service does and what drives its

business are determined by the shape of the mail pieces. so perhaps if we redefine classes, in accordance with the way the postal service actually processes mail within the system, we might find that instead of having a hetero heterogeneous group of services, we're able to define a little bit more homogeneously to apply them to whatever they have to be. >> i want to take some questions from the audience. i'm going to start off by talking about four things that i've heard here, okay? one is, david, you really laid out a vision of all sorts of things the post office could be doing in the future. and, so, i want -- and many of those are very intriguing. some of you know the post office is already doing a lot of

experimentation getting into the business of grocery delivery their partnership with amazon for sunday delivery, so there's a lot of thought and entrepreneurship going on. my first question is does the postal service as currently organized, have the capacity to actually -- the managerial capacity to actually develop competitive products. second, and it's related to this and related to rob's discussion is, well, okay. if the post office gets into these, right, how do we deal with the subsidies that the post office enjoys from the federal government? okay. because you're -- if -- as the post office moves into new territory, it is obviously going to compete with existing businesses and entities. so how should we think about that? what should congress think about that. third, maybe -- maybe for you, maybe for the whole group,

there's this weird $10 million limit on the test market test products which seems kind of ridiculous given that everything -- every other number we're talking about here is billions. and the entrepreneurial side of this is limited to millions chl. and, so, should that be changed? and, finally how should we think about the monopoly post afs office, which rob describes, and the competitive post office, right, which i think you really described, david. i mean, should they be separate entities? how should we -- what should we do with those two pieces of the business? so those are just a couple things that i was thinking about. i made four questions into one. and let's open it up. >> sure. thanks elaine. i think it's helpful as we look at those questions to just quickly give a little context as to where we are today.

until 1970, the post office department was a cabinet-level agency, the postmaster general usually had been the campaign manager for the president and was appointed the postmaster general, given all the patronage at the time. >> good job. >> the postmaster general sat in the president's cabinet. 1970 came along, because of all of the financial challenges because of the postal service and its managerial and created this business-like entity that we have today. so it really removed a lot of the political involvement. and the key part of that was the postal service no longer had its rate set by congress but this agency called the postal rate commission came. in 2006, that was the law we operated. generally speaking, whenever the post office felt the need to change rates and needed more money, it would come to the commissioner and the commissioner would gear up and over a year-long process, would

set the rates and assets. the postal had to set its own revenue requirement, generally speaking. if it needed 5 million$5 million it would generally get $5 million. the issue was would first class pay more, second class and so forth. jump ahead 12 years, the postal laws were changed. the postal accountability enhancement act. one of the key areas it was focused on was trying to modernize this rate setting. so instead of this long year-long process before the postal service could change any rate, the idea was give the postal service more modern flexibility to change its prices. but, as we've talked about it's capped customers in the market down side the postal rate commission, more powers and authorities to get at it and ensure that it was all out there and ensure that the postal service wasn't violating an inflation rate. but there's also recognition in

the debate that resulted in the law in 2006 was well, there's this whole competitive category of products. it is relatively speaking, much smaller in volume in revenue than the market dominance side. and gene eluded to ensuring that customers on the market dollar side were now subsidized. so a regulatory regime was set up to say the competitive side would be regulated like a price cap, with ways to ensure that cross subsidies aren't occurring. every single competitive product collectively has to kick into the overhead at a percentage that the commission sets and the commission looks at that not only preg ly only regularly, but annually. are rates and fees in compliance with the law? are service standards being met. and we report on that and we can order the postal service to take corrective action. as part of that separation the

law says look, on these competitive products, they are operating in commercial market place. and the commission needs to provide protection for information of a competitive nature as the commission gets it, set up rules much like a federal court would do. the commission set those rules up, 2008, they took effect. the commission has been operating under that. can it be improved, sure thing. and the commission has a role now to deal with a lot of these issues whether costing can be improved we've got 45 years from the 1970 law of how costing can be defined. postal service puts a lot of money into it. the commission is constantly ordering and looking at improvements and any party at any time can come to the commission and start a rule making to improve this process.

and my last point to go to the areas that you had raised was these areas of new products. the postal service, as they have, have come to the commission and can continue to do so. i would add what we did in '06, what's broad in the aperture of what they can get into.

the fair competition issues. to provide in the government agency and that should inform what then should be done with that. >> anybody else. >> i fortunately don't know the laws of economics and only congress. from an economic point of view, a single organization that's providing a monopoly service for a public good is always problematic. it is inhernt, it is built into the structure. it is pervasive and significant. we've doing a civility of that where we'll try to lay that out.