to be u.s. special forces or u.s. ground operations. but one of the things in my analysis of whether or not we're going to be able to defeat ice is is that we are diving the recommendations from the ground up. when you have a very talented two star or three or four star with a a lot of combat experience. they understand the enemy, the government, the culture. without their hands being tied behind their back they are able to say quhakt xaktly what we need to do to defeat isis s. that two star does he have the flexibility he needs to if he wants, in his mind, if he wants to send an army ranger unit or marines or navy s.e.a.l.s or delta force or barets to

do a night mission in syria or iraq, they come under the cover of darkness or get actionable intelligence does that two star have the ableility to execute that kind of a mission? >> being cautious about operational security, what i would say congressman is that the chain of command has been empowered by the chairman to make the appropriate recommendations to carry out the strategy. >> so, when secretary kerry was here, he, one of my colleagues, mr. grayson, was trying to interpret whether or not the authorization included offensive operations. the secretary's initial response indicated this it did not authorize offenseive operations. with my question clarifying that he was not referring to kinetic air strikes, but the one thing that was left unanswered from

that back and forth due to a lack of time was whether or not the aught rithorization allows for the use of u.s. special operations forces to be able to conduct that kind of a mission. does the authorization for the use of military force, the president gave to congress, does that authorize that commander on the ground to execute that kind of a mission? >> the president's transmittal letter included things that are not enduring operations. such as rescues involving u.s. orrico ligs personnel. u.s. of personnel to take action against isil and their leadership or the use of forces not intended. so just so i understand, general, and my time is expired.

just so i understand is, would that commander on the ground be authorized, if congress was to pass this for use of military force, will that commander will authorized to conduct that special operations mission to take out a high value target? >> again congressman within the bounds, the commander will be able to make the recommendation for the appropriate military operation to match the appropriate means, the appropriate outcome. >> thank you general. at this time i'd like to recognize mr. sherman of california. >> thank you. we're talking about the aumf keep in mind the president has total power to deploy our forces outside combat areas for training. the p president has the right to engage in a series of ground operations lasting 60 or 90 days per operation. then finally, unless we repeal

the 2001 aumf, the president has total power to do just about everything he wants against not only al-qaeda, but organizations once affiliated with al-qaeda. our focus is on isis. because they have forced us to focus on them. through not only their territorial akcquisitionsacquisitions, but because of their gruesome youtubes they have they are the only group in the middle east who has in effect asked us to bomb them. we have obliged. another area where, but i think that the shiite alliance is is more dangerous than isis. they've killed far more americans. including the marines in the 1980s in beirut. they have conducted operations on every continent including

hezbollah, buenos aires and of course, they're trying to develop a nuclear weapon. so, the total direction out of isis is probably not available to us, but even if it was, we would have to ask who's going to fill that idea logical, that territorial and cyber space and i'm not sure that we would see an improvement in the middle east. like to focus just a second on yemen. i'll ask general fantani, are we assisting the saudis in the military actions they're taking by air over yemen? >> congressman, yes, we are. we are providing enabling support to the gcc and saudi arabia in particular. >> okay.

do we know whether the former president and current president is in the country? >> because of the classification -- >> do we know fwh a way you can disclose in this room? >> no. i would not feel comfortable answering that. >> okay. general allen, we've all seen the world war ii movies. the french government in exile didn't exactly send checks and money to those living under nazi occupation but in iraq, we've got the government in baghdad hanging people in mosul, the money then goes to isis to the extent isis wants the money. they can grab as much as they want. but my concern here is does the iraqi government generate from facilities it controls such as mosul dam on electricity, which then goes into isis occupied areas. >> i'll take that question.

>> there has been work on mosul dam recently. >> we saved the mosul dam. we've gotten no credit from the from the iraqi people. at any time in the last few months, has the iraqi government allowed electricity? >> yes. >> they have? >> that's correct. >> does isil pay for it? >> no they don't, obviously. >> so, while we're bombing isis, we're giving them free electricity or rather, iraq is giving them free electricity sending them free sending them money gratuitously. it's an unusual way to wage a war. one suggestion made it the last and i'd like to run it by you, should there be a change in the

design of iraqi currency so as to make in -- that isis was able to seize. those who are corrupt, those who are evading taxes, pretty much those in control of the government in baghdad. is there serious discussion of making all that currency that isis sees worthless by doing a currency replacement? >> sir, you have posed these questions before? >> yes. >> they are very important questions, actually, for how we woul envision this counteroffensive ultimately. what i would ask is you permit us to come to you in a closed session or permit us to provide you a classified response. >> i look forward to getting a classified response, but this isn't sources and methods of intelligence.

this is what color would the currency be. but you're right. we wouldn't want to disclose those plans in advance. >> that's krektd, sir. >> i look forward to getting an answer to these questions, which i've been posing for quite some time. >> if we could plan on doing that, after we return here in the house, how much time do you think it would be necessary for you to access that information so that we could have a briefing with the members of the committee? >> when you return from your, we could do that pretty quickly after you come back, sir. >> that would be my request. >> it would be helpful as well to update you on how the tikrit operation has unfolded. be be glad to do that. >> i would like to follow up on that. we go to mr. darrell issa. >> thank you, mr. chairman. general olsen, marines with pretty straightforward, so i encourage your answer to the earlier question when asked do you have does a two star have

the ability to perform x, y or z combat mission, you answered the chain of command has the ability to beg through the chain of command. do i have the p ability to ask. is that correct? >> the commander on the ground's mandate on the ground now is to advise an assistant. >> so, he has the ability to ask. they really don't have combat command authority. they have the ability to go off the chain of command and ask. something similar to the way vietnam was fought where you had to go practically back to not just the pentagon, but coffee table in the white house sometimes before you could get a go ahead. do you think that is the way the war should be conducted? in other words do we need to in short order, provide our combat leaders, whether they're an assisting road or quite frankly

if it's air strikes and targets of opportunity and so on, the normal ability within a combat arena to make decisions based on predetermined if thens rather than almost always having to go up the chain, which can cause a target or an opportunity to disappear. >> the way i would characterize the strategy is that we are executing by, through and with our iraqi partners. >> okay -- by, with iraqi partners are shia partners, who are on the ground with iranian operatives, correct? >> we are not directly advising or assisting any forces not under control of the government of iraq. >> right, but if shia zone individuals under control of iraq with operatives next to them call for a strike or assistance ultimately, you're responding as an iraqi responds,

correct? i don't want to get too far in the weeds. i think i'll give up on that because i think the associated press has made it clear you are doing it. the use of military force. currently, the president is asking to retain one and get rid of one prior use of force. additionally he wants worldwide ability to go after isil. correct? depending upon what name you want to use. that's essentially what it is. just tell me if i'm wrong. >> that's accurate. >> so, that begs the real question. in yemen today, the president is currently and i think appropriately assisting gulf allies led by saudi arabia in trying to stabilize the situation which iran backed dissent, not dissident

opportunities are trying to take that country by force, turn it into a shia-controlled nation similar to iran. that is not in the use of force request. it would not be covered, is that correct? >> yes. >> okay. so as we speak we are in fact in a situation which we have combat operation support that is likely to need, certainly doesn't fall under the normal global war on terrorism. matter of fact unless i missed by prep for this, we just took hezbollah in iran effectively off the terrorist list. didn't make them good guys x but took them off the list and are now in a situation which we're using them in iraq, maybe not as directly, using people in iraq. using people in syria. that are formally on a terrorist list. we are then fighting them in yemen and the president has not clarified under what authority

he plans to do that and for how long. am i missing anything there? >> sir i think first we believe that hezbollah still remains on the list. number two, you highlight an excellent point. it's an extremely complicated environment and we are pursuing this counterterrorism strategy with the precision strikes to halt isil and additionally, as you highlight to support our gulf partners as best we can because of the threats in the region. >> and my time is expiring, but based on the fact we have two different groups, isis sunni extremists and a myriad of shia extremists mostly if not all backed by iran, we are now as a committee being asked to consider the authorization of the use of military force only against half while in fact we would have to rely on vague,

past authorizations for the future and we do not have a plan for situations like yemen. so, i'll close with don't you believe that any authorization use of military force has to envision the ability and a plan to deal with the fact that in some places, we have two enemies, isis and iranian backed groups, and that we will be effectively on the ground fighting them in places such as syria and that there currently is no new authorization shouldn't there be an authorization or should it be included in the authorization we're being asked to render to the president? >> i believe the intent of the aumf was to afford the geographic flexibility as well as the flexibility to respond across to these types of threats. the issues associated with yemen i would estimate further need to

be adjudicated in terms of exactly what the -- truly mean in terms of what they truly represent. in terms of their affiliation and to isil dash and shia challenges within the region. >> former general clapper's list worldwide threat assessment did not list iran or hezbollah or they were near the top at the last time. just want to make sure the record is clear. we know there's still a terrorist, a nation backing terrorist. we know hezbollah is still a terrorist organization, but they dropped from the list and i always assume there are too many good people double checking things for that to be a clerical error, so, mr. chairman, i want to thank you for your indulgence, yield back. >> yes, we're going to go to mr. grayson, then mr. jeff duncan. >> thank you, mr. chairman.

how many countyries have we asked to provide air support in the sense of offering to actually execute strikes? in iraq or syria? how many countries have we asked for that kind of support? >> when we talked to i just have to go to sent com on that. >> first let's go to mr. jeff duncan. then back to our second round. >> thank you. >> i thank you, mr. chairman. going to reset the clock here. i hope first off, general olson, i was appalled when i heard about elements of the state department asking the united states marines to leave their weapons behind to be destroyed in yemen. i told secretary kerry in this hearing a couple of weeks ago, never disarm united states marines ever again and i apologize that that happened. that's how i feel about it. i want to make sure that the men

under your command have the weapons to defend their colleagues and this nation and our liberty. thank you all for what you do. i visited iraq in november of 2012 on mccall and i will say that general austin executed the withdrawal of u.s. forces from iraq in a very professional manner and i am a huge fan. his goal was to not lose another american life in withdrawal. while we were there, we were concerned about the premature withdrawal of u.s. forces. i said that because there was a lot of uncertainty of the readiness of the iraqi security forces, of their border security. there was concern that iran would fill the void after u.s. troops left. isis wasn't on the radar screen then, but al qaeda was and i believe they were waiting for the u.s. to leave to fill that void. so i disagree from letting the

enemy know on the timeline. there's a three-year deadline in the aumf, which i disagree with. i want to make sure we give commanders the ability to do their job. the ableility to with the rules of engagement, to defeat the enemy, but we still have a lot of threats in the region. and we've seen what happened in libya, we now see how what's going on in terrorism in tunisia. north africa, what's going on in yemen, the iranian backed regime. we have aqap, boca horan and a lot of other terrorists organization organizations around the globe. i'm concerned they're already going to join forces.

this question may have been asked, but how do the kurdish militia play into our goal because they're the only ones doing the heavy lifting on the ground now. i appreciate that, but how do they fit in to this dynamic? >> they're a force for stability. they are an example. of an area where the social factors and relationships between and among the people within the kurdish element of the iraqi population have been able to achieve a level of stability and prosperity that are an example for the region so the kurds play an important social role both for iraq but more broadly for the region. at a military level, peshmerga and kurdish forces have been successful.

as you correctly point out through the use of coalition air power. and recovering all of its previous holdings and then a bit more. in that respect without getting into specific operational plans, with regard to the counter counteroffensive, my very strong suspicions are this the peshmerga and the platform of kyrgyzstan will play an important role as the counteroffensive unravels in the north and northwest. >> i think they should. i've been impressed. did any of the weapons from libya make their way to syria and in the hands of isis? specifically man pads or any of that? >> let me take that question come back to you with a classified answer please.

>> let me -- my time is about up. so i'll let you answer that question or we can answer it classified. >> i'd prefer to answer that in a classified. >> let me ask you about yemen. how does yemen play in this scope of combatting isis? is isis part of the driving force in yemen or is it a completely different group? are they interconnected and expand on that because i mentioned all the other terrorist organizations around the globe. how does that fit into what we're trying to do here to defeat this enemy? >> the, we have three principle forces at work in yemen. the hootis a shia element that is in some form of another, supported by iran. we have the regime, which is failing. and we have al qaeda which has

been a problem for some period of time. aqap it's often called. al qaeda in the arabian peninsula. those three forces are in contention at this particular time. obviously, to restore the territorial integrity and sovereignty of the state. so, to your point at this juncture, al qaeda, which is not isis, in fact, they are at odds with each other. al qaeda is the principle sunni element, extremist element that is on the ground in yemen. hootys are the shia element on the ground with regard to yemen and then we have the state, which we still support. we are calling on all parties, obviously, to come to an agreement that supports the central government and it is a central government.

that the saudi-led ten-nation coalition is now supporting with military operations, so those are really the three contending parties at work. >> wouldn't you agree the arab spring combined a lot of those elements? >> i think the arab spring was a catalytic effect that created instability in yemen in particular. one of the realities i know with respect to yemen is that the hootys grew in prominence and capabilities, it drove sunni elements into the arms of al qaeda. it's a very real issue. and al qaeda of course by virtue of its sunni dent is is by no means an ally of the sunni states in that region that we support as well. so, that's one of the reasons that yemen is so important to us

in terms of dealing with the dynamic there is and yemen of course, geo strategically is located at the exit of the red sea. which is a major shipping region. so, yemen is a very important area for us geo politically and of course, our long-term relationship with the central government is important to us. >> thank you, general allen. >> i would ask for a classified hearing as well. >> mr. duncan, we will do exactly that. we'll incorporate those together. is that, mr. duncan do you think that makes sense to you? >> let me just say, chairman this is about isil, we'll come ready to talk about isil, but tell us what you want and we'll make sure we have the right people in the room. >> i'll work with mr. duncan and others to submit those questions in advance. >> great. >> now to our chairman ameritus.

>> thank you so much, mr. chairman and thank you, gentlemen, for your service to our countyry. thank you very much. brigadier general fantini, you testified that the syrian opposition train and equip program is set to begin later next month. in the past the administration has said that the purpose of the syrian opposition train and equip was to have the forces fend officei, isil. will it include fighting assad's forces and will these syrian fighters be -- >> congresswoman yes. to leahy vetting. the vetting process is very rigorous and essentially continuous. to your question of -- i'm sorry, can you repeat your first

question? >> yes, will it be fend off off isil? >> so, the mission is to train and equip, provide security in their territory. counter and engage and go offensive towards isil. >> it will be to go on the offensive against isil. >> eventually, right. but that won't be until we can develop develop enough combat power that they see conditions are right to move but it's counter isil force, not a regime. >> thank you. one of the most important issues that this committee and entire congress is consider is the aumf. the authorization for use of military force but isil isn't the only threat that we and the people of the region face and if we are going to defeat isil, we need a comprehensive approach that addresses isil, other

terror groups that are fighting in syria and iraq. assad and his allies, which include iran, the rigc and hezbollah. does the aumf give the authority to use force against assad's regime, al nuzra, hezbollah any other fighter fighting in syria and iraq or is it just limited to isil and anyone fighting with or alongside that terror group? >> i think it does not give the authority to use force against any regime. it's a complicated battle space. in the syrian area. but we believe that the aumf, the combination of the 2001 and this new aumf would provide the authority and flexibility for our forces and friendly forces to the u.s. government to be successful.

>> and general allen, it was reported in the news earlier this week that hezbollah is preparing a major offensive against isil while the lebanese armed forces, the laf, may not participate in hezbollah's offensive against isil, there's certainly going to be some level of coordination with hezbollah and as a result, the patron of the terror group, which is always iran. what can you tell us about hezbollah's alleged planned offensive? are there any known ties between hezbollah and the lebanese armed forces. can you confirm that any intelligence we share with the alf will not be shared with hezbollah? can you confirm that iranian generals and tanks are being used and the iraqi campaign in tikrit and can you confirm if the united states is on any level, directly or indirectly

coordinating our efforts against isil with iran? >> your last question, i can confirm that we are not. coordinating with iran and there's no intention to. to the other specifics of your question, you deserve specific answers, let me take that please, and come back to you with the details. >> i look forward to that because we want to work with our allies u be then if those allies are sharing information or are in cahoots with terror organizations, we end up unknowingly doing more harm than god in good in getting valuable information. so i know you will be handling that in a careful manner!. >> yes, ma'am. >> and thank you for your service again. >> we go to ted yoho of florida. >> i think that's a great idea, having that classifiedy edied briefs.

generals, i appreciate you being here in service to our great country. without the service of you the leadership of you guys and the military, our servicemen and women, we would not appreciate the liberties and freedoms we experience every day and we don't ever want to forget that, so thank you. you being the experts, and i'm glad to see the step up in sor fisties because when this first started, i think there was only like single digits in the beginning a month going on to degrade isis in the beginning. and i'm glad to see you've stepped that up. you being the experts, the recommendation to reduce and zeroous zero out is to where it is no longer a threat. i look at nazism, this is more of an ideology without a nation state. what is your recommendation, can we pursue it with what we're doing and i'm glad to see the coalition that's building up and

we had a classified brief wg you and you were telling me how you were doing some of the -- >> i remember it was a classified briefing. >> we shouldn't talk about those things, so i won't. that's why i look forward to the next one. can it be done with what we're doing without u.s. assistance in your opinions? >> well, u.s. assistance is being applied. >> how much do we need of u.s. assistance? i know we need to have some in there. with that coalition, if we're directing it and kind of strategizing or as president bush would say, the strategery, how much can we rely on the coalition partners? >> that's a really important question. the coalition partners in ways that i think we should all be very proud of. have stepped up to the plate in

many areas that are obvious. some of their airplanes are flying and dropping ordnance every day. some of their trainers are training some of their special operators are risking their lives just by being in the battle space. those are obvious ways in which the coalition has stepped up. there are other ways that are less obvious, but really important as well in combining their capabilities with us to go after finances to squeeze its ability to have operational -- >> and we have cooperation with all these other countries, correct? >> we to and it's quite impressive. it's foreign fighters. counterfinance. countermessaging. building stabilization capabilities. it's quite impressive. >> i guess the question i have is how do you break that ideology? why do you want to get into that? how do you break that? nobody's better at what you guys do than you but on the

diplomacy side, you know, thinking about that because what i see and you know, this goes back to reading stories to my kids, the cat in the hat, with the green spot that you couldn't get rid of, put it here, pops up over here. that's what i see isis doing with all the different countries it's going into because off that ideology. from a diplomatic standpoint, is there anything you'd recommend we do differently? you said countries that isis is going into. i think it's a very interestinging point. what we're discovering is that it's less about countries that isis is going into than it is movements locally are seeing an opportunity to leverage a relationship with isis to accomplish their own objectives. that's a really important point because it gets to the larger issue here because this coalition has come together to deal with dash as a symptom of a bigger problem but the

coalition is also evidenced real interest in getting after the broader, underlying factors that give rise to this. so, it's about political capacity. it's about democratic process. it's about human rights. it's about the rule of law. about economic opportunity. it's about having a hope of being successful in your lives and in many of these countries many of these countries where we find organizations like i'm sorry -- and the sinai peninsula or the junk lsgles of the philippines philippines, it's because they have no hope and are suspectable to radicalization. so, the coalition is really seek seeking to understand what these underlying factors are. so, that that as individual states and as a coalition, we can begin to move towards resolving some of those factors

that have given rise to organizations like dash. >> i've got one more question i'll smith and i thank you for your service. you're our best home. thank you. >> mr. desanctis of florida. >> good morning. general allen, how many u.s. service members were killed when we were in iraq by iranian-backed forces and shiite militia? >> i'll have to get that number for you. >> at least hundreds at a minimum, correct? i've seen estimates by one of your colleagues, up to 1500. and the force commander, he was involved in directing a lot of those operations during that time period. is that correct? >> that's correct. >> so, we know that sulemani is now directing some of these shiite militia now fighting isis. i know it's been discussed about our air strikes and how that

might be working, even though we're not doing it explicitly. if we were conducting air operations, would somebody like sulemani be a target? >> we don't at this time intend it. >> and why is that? >> we're in this to assist the iraqi government in dealing with dash. that's the reason we're there. not to go to war with iran. i think it's important for us to keep that in mind. i'll just leave it there. when the shia forces are clearing areas, how are they interacting with the sunni population who's left behind? are they oppressing them or trying to have a unified country? >> that's a very important question. we have seen reports of massacres and atrocities. those report rs under

investigation. they've been condemned by us. condemned by the iraqi government. condemned by grand ayatollah. i was just in iraq last week and as tikrit was kicking off and we did know there were shia elements part of the clearing force, i met with sunni leaders from the province in which this is undergoing underway and specifically asked the question what do we know about the potential repetition of these kinds of atrocities or acts? at the time, they were satisfied that this was not happening. but they recognized that in the end, when you transition from a clearing operation to a holding operation, so that the clearing force can keep on going the holding force has to look like it's der i'ved from the

population that's ultimately held. to that extent, minister of interior has asked for substantiate in helping to cover the sunni police of the three provinces. ultimate ly ultimately to follow behind the clearing forces to become the hold force on top of the sunni population, so that we don't end up with that dynamic of a shia irregular clearing force sitting on top of and holding the sunni population. the iraqis are very conscious of that. >> and in fact a sunni arab, who sees the alternative to isis to be impression by the shia, they're going to be more likely to want to side with groups if they don't think there's a future for them apart from being o oppressed by shiites. do you agree with that? >> in the abstract, i would, but i think there have been measures that this government has taken in iraq that fundamentally give

the sunnis and the shia an opportunity to coexist inside the government, inside iraq, under the leadership of prime minister abadi. that is why the shia minister of interior, by the way, is very interested the in reconstituteing the sunni police of the sunni provinces. i think that's a very positive thing. >> do you believe that iran has provided arms to the government of iraq or any of its affiliates? >> we'll take the question. i don't, we'll take the question. i want to give you the absolutely you deserve. >> and if they, and if they are, we do have authorities on the books, both at the u.n. and under u.s. law that would that i think would be implicated, so if you can let us know what the status of that is and if you think iran has been doing this, what would the administration's response would be, i would like to know that.

>> thank you for the question. >> thank you, general, i yield back. >> thank you so much. and we will recognize mr. smith for three minutes. sorry about that, but our witnesses have until 11:00 p.m. >> thank you for the second round. general allen as you know and all of you know all of us know, president obama touted him as a significant success story yet today, it's imploding so much so that there's been an intelligence loss of u.s. information according to several news outlets including the l.a. times. and i was wondering if you could tell us how serious that breach might be? is it serious? the yemen, intelligence services of yemen, which is overrun and apparently, the files are not destroyed fast enough. that could have an impact on our fight against isis and all issues relative to the war on terror. also, while i deeply appreciate and i'm encouraged by your statement that the allure of the

so-called cal fate has been shattered, you know, it is hard to make predictions i would hope that the word diminish might be used, because every time we're make making progress, some other moving part comes to wear. i just offer that unslis itted, i hope it's shattered, but i'm concerned it has not been. you also testified about disrupting the flow of foreign fighters fighters is an urgent concern. i wonder if you might elaborate briefly on what new best practices are being contemplated so these killers, these terrorists, who become hardened in this battle don't return to the united states and of course, to europe, to kill americans and europeans. >> to your first point on on the potential intelligence loss, we'll take the question. the answer will be classified, so we'll want to come back to you with that. with regard to foreign fighters,

the commitment by the coalition has been very impress neviaeh that regard. we're not where we want to be. because that momentum was developed before we began to build our own momentum against it, but it operates at several different levels. it is countries adopting their own legislative approaches. the italians will be prosecuting these traffickers of foreign fighters under legislature that has derived directly from dash ond our coalition activities, so we're beginning to see countries across the region, we're beginning to see the activities of the eu helping to create a unity of purpose and vision on this issue. we have seen and we'll continue to see best practices being applied on border control measures. the sharing of information and intelligence the sharing of personnel name passenger name records. and that will improve over time.

we all of course, our nation's, especially the western european states along the united states and canada, are states where privacy is an extraordinarily important aspect of who we are as a nation and our population. >> thank you, general. i know that since your time is limited, we are -- >> yes, ma'am. >> if you could finish that thought. >> well, we'll continue the best practices associated with working with indigenous populations and at risk populations to reduce the attractiveness of dash. and similar extremist organizations, legislative approaches, individually and across the entire effort coalition and also, to strengthen the work of the counterforeign fighter working group, which is chaired by the netherlands and turkey and we'll be meeting next week in an cur ra for the first time.

>> mr. angle. >> thank you madam chair. i want to build on a question i asked about the aumg frk. finding the right language is difficult. finding one that can pass congress is difficult. republicans and democrats have each attacked what the whout sent up for different reasons. how important is it for congress to pass a new aumf and what would be the consequences if we did not do so and how would our troops and kocoalition partners view sauch development if we did not do so? >> very important question. there are as you know, three major areas of discussion within the aumf and we obviously welcome the robust conversation associated with those, the size of the force that could be committed, the nature of the force, the duration that force might be committed and where

that force might be committed. so, those are all issues that deserve a very thorough conversation. but there's a fourth area that's really important and that is that whatever it looks like at the end where ever the administration and the congress have ultimately agreed that this should whatever the measure should be fulfilled, a strong bipartisan support of the aumf is an extraordinarily important outcome of this because it reenforces the reality and the appearance of american strategic leadership and it also sends a very clear message to dash that its days are numbered. that's why the aumf is so important. we'll deal with the issues about the size and duration and location. that's an appropriate platform for us to have the kind of conversation with the congress that the american people deserve. but approved with a strong bipartisan vote, an approved

aumf preserves american leadership and puts dash on notice that its end is in sight. >> thank you general. i want to ask one final question about syria and assad. in an interview with foreign affairs, syrian president assad asserted that any fighter working with the syrian military, quote, be fought like any other illegal militia fighting against the syrian army, end quote, so when fighters are reintroduced back into the battlefield will assad target these fighters? it's a real situation. which members of congress need to have information on. will the u.s. or other members of the coalition talkrget assad? >> i'd like to present that comment, the answer to that when we have the closed session, if we may. it's very much on our minds, obviously. >> thank you, general. we

then two minutes for mr. sherman and then witnesses will have to depart. >> only two minutes, let me just note that i did some work in vietnam in 1967, was not in the military but my father was the retired lieutenant colonel in the marines and when i got back, i was dismayed and remember talking to him about what a a confusing mess that was in vietnam. we used earlier to describe the challenge that you face and my father told me, said, well if you think that's a confusing mess, you should have seen what it was like when i landed, the first dc 3 into the plussen perimeter, so we have faced these confusing messes before. it was important for us as my father described, had we not been successful in korea japan

would have been neutralized, it would have changed the whole nature of the cold war and the soviets may have won. and i think what we're doing right now to confront dash will either basically eliminate our deal with a challenge that is of that magnitude because if we don't and if president el cici does not win in egypt, does not overwhelm, those people are trying to destroy him and replace with a cal fit government. we may have a world in which a huge chunk is controlled by radical islamists who want to destroy western civilization. so, we wish you success. i believe that the strategy of using insurgencies as we did in afghanistan with the northern

alliance works. your success in anbar province reaffirms that. iltd hope that our commitment to assist the iraqi government in this challenge does not get in the way of successful -- successfully implementing that strategy that we know that will work. so thank you all very much. >> thank you mr. rohrabacher. mr. sherman. >> thank you. i know we'll get into it in closed session but i'll reiterate that i'm confused. on the one hand we tout the failure of isis to provide governance. their inability to provide for the people under their control. then at the same time, the iraqi government helps them provide governance with free electricity, setting salaries, et cetera. but what i want to deal with in open session is whether the aumf should include assad, or whether it should be limited to isis.

now in the absence of isis, and before the beheadings, this country wanted to have as little military involvement in the middle east as possible. now americans see this as a problem that we have to confront but we have to confront it carefully. on the one hand we have to go after isis for what they've done. on the other hand there is this war between shiites and sunnis and it is not our role to be on one side of that or the other. the most evil element of the shiite alliance is assad. he hasn't beheaded anybody on youtube, but he has killed close to 200,000 innocent people. should -- and general i realize there will be others at the state department that will give us some input on this but should the aumf authorize the president -- should he wish to -- to go after not only isis

but also to go after assad, perhaps not with the goal of destroying either, but at least confining, mowing the grass of both of these evil elements. >> thank you so much. we have ten seconds. >> the answer is that this -- at least the state department permits me to speak about this. the aumf was submitted as a counter-daesh measure. it does not envision provisions to deal with bashar al assad. but that's an important and separate conversation to be had. but in the context of the provided and draft legislation that's about daesh. >> thank you so much. >> madam chair, i'd ask unanimous consent to ask one minute to plant a question so it can be answered later. >> mr. issa asks for unanimous consent to put something on the record and make a statement. >> very quickly. generals, when we go into

classified session in two or so weeks, the president has called for regime change in syria. he also has refused to participate in a no-fly or buffer zone even for humanitarian relief in northern syria. as a result, turkey is very well known, not cooperating with us in providing the normal air cover that would shorten our distances for attacks both in syria and in iraq. so during the classified session, i would ask that you be prepared to provide us with the information on what is going, what the impediments were, what the logistical changes would be if we were to come to an agreement with the turks to provide that no-fly zone and buffer zone, and the humanitarian relief in syria rather than the millions that are in lebanon jordan turkey and even a few scattered around europe. so if i could ask and get an agreement that you'd include that in the material brought to

the classified briefing, that would be helpful to me. >> glad to. >> thank you so much, mr. issa. we certainly appreciate the time of our witnesses today. these are critical issues. we look forward to following up when we return, particularly in the area of the tikrit mission and iran's role. and with that chairman royce this committee is adjourned. >> thank you, ma'am.

now saturday, a discussion on the future of the u.s. postal service. they explore the new ways so-called millennials are engaging their communities. here's a portion of that event. >> i believe there is a misunderstanding of our generation. i believe it is because as our generation is coming into positions of power to influence business, government and policy we're being disruptive. right? we're looking at new ways to do things and we aren't necessarily trusting or in favor of establishment or institutions. there is a recent pew research poll showing that our generation trusts political and religious institutions far less than any of the other generations before us. i think that that can be really disconcerting to folks. that means that there has to be a change in stat cuss quo in order to be able to engage young people. think about this past election. there's a lot of folks talking

about how millennials didn't turn out to vote, but in reality we turned out at the same level as we did in 2010. the problem was that people didn't know how to reach us. i don't check my mailbox for ballot -- for -- i don't do that. but if you were to contact me via text message, maybe i'll actually see it. i think that that's a way that we can be engaging millennials in a different way that is just not happening as much as it should be. >> the new america foundation hosts a discussion by young adults concerning the issues that motivate their generation. you can see it saturday, 8:00 p.m. eastern on c-span. 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 effective public management here at brookings. we are gathered leer today to talk about a very large and very important entity -- the united states postal service. one of the -- the, perhaps oldest, along with the united states army, organization of the

u.s. government. and about which there has 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 soniccon llc 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 depolito. 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 customers in a commercial marketplace, the idea is the xh igs is there to protect the public interest in these sfeers. spheres. so let me move to kind of a snapshot of where things are at pheres. 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 1987. 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 a net operating basis. that's without non-cash workers comp and these 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 except 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 is it 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 an economist thinks about these questions, and the conclusions

economic thinking bring 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 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 you're 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. fourth 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. we 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 currently 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 of 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 from a very specific prism and that is from the perspective of the people i represent whose businesses are tied in one way or the other 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 to 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 related. only 5% of the mail that the

postal service carries is actually what you would characterize as personal communications. and, my god over the past several years we should quickly have eelized that facebook has all but supplanted mail as that vehicle by which grandma and the grandkids 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 mailers 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 it 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 postal 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 from the postal system today be with and we can leave it to those who would 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. that 95% element of the business transaction related, that's where it gets what's necessary in toward 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. not only over the carriage of mail but also the deposit of mail in mail receptacles. now, i haven't said anything about prices. the only thing i'm going to say about prices is before the

enactment of the postal accountability act, the postal service was quite proud of itself by saying we have always been able to operate by keeping postal prices within the ranks of inflation. no one thought that was going to be different the day the act was passed. okay. we ended up going through a deep recession that had some structural impacts in just about every business that there was in america. but what's the problem? when you see costs of operating the system are exceeding the revenues you're now able to gain because of the transfers that occurred because of the way we communicated when we do business. it is 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 mail services still should be offered roughly within the context of

inflationary limits. do we mean to say that they have to be as they are defined today limited by cpi constraints applied at the class level? no, maybe that's not necessarily so. maybe that's what the regulatory commission needs to take a look at as it goes forward. but we also need to be mindful that maybe what's wrong with taking a look at that kind of constraint is not whether or not it is tied to inflation, but the manner in which it is defined. we continue to define mail services today exactly the way we did even before postal reorganization had taken place. we talk about first class mail. we talk about periodicals. we talk about advertising mail. we talk about packages. why? those elements are not at the heart of what drives the postal service's business. the elements that are at the heart of what the postal service does or 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 heterogenesis grouping of costs and packages and services we may be able to define them a little more homogeneously so that we can appropriately apply them to whatever they may be. >> thank you. thank you very much. this is a lively discussion. so i want to take some questions from the audience and 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. as 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 -- as the post office moves in to 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 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 every other number we're talking about here is this is limited to millions. so should that be changed. and finally, how should we think about the monopoly post office, which rob describes, and the competitive post office, which i think you really described, david. should they be separate entities? what should we do with those two pieces of the business? so those are just a couple things that i'm thinking about. i made four questions into one and let's open it up. >> sure, thanks. 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 at the time, and the postmaster general sat in the president's cabinet. 1970 came along because of all the financial challenges for the postal service and created this business-like entity that we have today. so it really removed a lot of the political involvement. a key part of that was the postal service no longer had its rates set by congress, but it was created to set rates. so until 2006 that was the law we operated under, and generally speaking, whenever the postal service felt the need to change rates and needed more money, it would come to the commission and the commission would gear up and over a year-long process would set the rates. the postal service had a sole

authority to set its own revenue requirement, so if it needed $5 billion, it would generally get $5 billion. the issue was would first class pay more than second class or third class. jump ahead to 2006 after 12 years of effort, the postal laws were changed. the postal accountability and enhancement act. and one of the key areas that was focused on was trying to modernize the rate setting. instead of this year-long process before they could change any rate, give the postal service more modern flexibility to change its prices. but as we have talked about because there's customers in the market dominant side, this postal rate commission was turned into. the regulatory commission, more powers and authorities to get the data, ensure that it was all out there and that the postal service wasn't violating an inflation rate. but there's also a recognition in the debate that resulted in

the law of 2006, there's this whole competitive category of products. it's relatively speaking much smaller in volume than the market dominant side. and assuring that customers on the market dominant side were subsidized in the market. so regulatory regime was set up to say on the competitive side would be regulated unlike a price cap with ways to ensure that subsidies are occurring. every competitive product has to cover its cost. every product collectively have to kick into the overhead at a percentage that the commission sets. and the commission looks at that not only regularly, but annually. at the end of the this week, we have an annual compliance report. are rates and fees setting law. are service standards being met? we report on that and can order the postal service to take corrective action. as part of that separation, the law said on these competitive

products, they are operating in a commercial marketplace 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 the rules up. about 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 cost can be improves, 45 years from the 1970 law of how costing has been refined. the postal service puts a lot of money in it. the commission is 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. so the good news is on this score, we don't necessarily need to have an act of congress. we have a vibrant regulatory system set up from 2006 that can handle it.

my last point to go to what you had raised was these areas of new products. the law set up the commission is the one that calls the balls and strikes on can the postal service get into new products. the law made a decision in 2006, for better or for worse, that the postal service could only offer postal products. nonpostal were barred by law. that would take an act of congress to change. within that framework of what's postal, there's a lot of flexibility and the postal service, as they have, have come to the commission and can continue to do so. i would add if the laws change, we now have what we didn't have in '06, a regulator that has been in place looking at these things. if congress were to say let's broaden what they can get into, you can now put that into a process where a regulator can look under whatever criteria that the law would look at, fair competition issues, things of

that nature. but i would argue that gets us off from we should first look at what is it that we need from this institution to provide us a government agency. that should inform what then are the other things that should be done to do that. >> anybody else? >> i fortunately only have to operate under the laws of economics and not under the laws of congress. from an economic point of view, a single organization that's providing monopoly public service and a private good is always problematic. it's inherent, it is built into the structure and it is pervasive and significant. we're doing a new study of that where we're try to lay that out. but just think about the example of delivering a package at the

same time you're delivering the mail. the incremental cost of delivering that package given that you already had these enormous economies of scale and scope based on the monopoly product, we would be very uncomfortable if we said that the military could have a privacy business for private security forces. i don't see any difference, frankly. second, you know, the congress at least as robert just noted, has limited the activities of this government agency in the private market to postal products. we heard from our friends proposals for a whole line of new products.

this would only compound the problem. the notion that the postal service has the expertise to handle banking services and financial services, to me, in the 1970s the oil companies had a lot of money because oil prices are skyrocketing and said we are all going to become conglomerates and they started buying businesses that had nothing to do with the oil business. ten years later they had sold off virtually all of them at a loss. because all of the manager ss from harvard business school and engineers and scientists who ran exxon mobile and shell and chevron had no experience in the refrigerator business. no business in financial services, which they also got into. we have a very vibrant and effective and efficient market in all of those services.

i was once advising a very wealthy family who were thinking of getting into the private equity business because they thought they had all this money, how should they spend it, this would be fun. and i said to them, you know, the first question you have to answer is on what basis can you -- do you believe that you can do this better than all the people who are already doing it? because that's the only justification. otherwise you should invest in them. this is the same issue with respect to after all the investment ultimately comes from all the people who use the mail who would have to provide the resources to get into banking, et cetera. we need to think of it in exactly the opposite way. we need to think of it in terms of a public service function, which is separate, entirely

separate from and unable to subsidize the private sector business. otherwise, we undermine the innovation and effectiveness of what is a very effective private sector in delivery. >> david? >> you can tell robert and i have a slight different view of the road ahead. i'm pleased that when you said friend you didn't put that in air quotes. accenture dade very valuable useful study of world posts. and they looked at a subset of the world post that first began to emerge from the devastating blow of social networking and the economic downturn and so forth that had so devastated postal services. they said all of the winners had three aspects.