THE POSTAL REORGANIZATION ACT: APPLYING

THE LAW TO THE LETTER

The Post Office Department has been in dire need of reform for
many years. Last year it carried more than 83 billion pieces of mail—
more mail than was moved by all of the other post offices in the world
combined.' Despite this volume, its archaic organizational structure
and outmoded equipment and methods of processing mail were bring-
ing it to the verge of total breakdown under an ever-increasing volume
of mail. With over 700,000 employees, the Post Office Department was
one of the nation's largest employers.a But labor-management relations
within the organization were at an all-time low. Insufficiency of funds
and, consequently, massive operating deficits—last year approximately
$1.4 billion3.--were incurred as a result of these and other major prob-
lems.
Last August, in order to remedy these problems, President Nixon
signed into law the Postal Reorganization Act, 4 In essence, the Post
Office Department, which had been a Cabinet level "executive depart-
ment,"5 was disestablished, and the United States Postal Service, "an
independent establishment of the executive branch," was established in
its place.' This comment will discuss the causes of the current crisis
in postal service, evaluate the Reorganization Act, and present pos-
sible alternatives to that Act.
I. THE FAILURE OF THE POST OFFICE DEPARTMENT
There has been general agreement among most observers of the
postal situation as to the causes of the Post Office Department's prob-
lems prior to the enactment of the recent reform legislation. Generally,
these problems have been attributed to the labyrinthine statutory
framework which has enshrouded every major postal decision and
operation in clouds of red tape, and the politics of major mail users
and other interest groups. In addition, there are a number of specific
major problem areas; for example, political involvement in the appoint-
ment of postmasters and the Postmaster General, poor labor-manage-
ment relations, scarcity of funds for modernization, outmoded methods
for procurement of transportation, and congressional control over rates
and expenditures.?
1 S. Rep. No. 91-912, 91st Cong., 2d Sess. 2 (1970) (hereinafter cited as Senate
Report on Postal Reorganization).
2 The Report of the President's Commission on Postal Organization, 15 (1968)
(hereinafter cited as the Kappel Comm. Report).
a H.R. Rep. No. 91-1104, 91st Cong., 2d Sess. 5 (1970) (hereinafter cited as House
Report on Postal Reorganization).
4 39 U.S.C.A. § 101 et seq. (1970).
5 39 U.S.C. { 301 (1964)..
e 39 U.S.C. 1 201 (1970).
7 Kappel Comm. Report, supra note 2, at 14-31, 35-46; see also, House Report on
Postal Reorganization, supra note 3, at 4-5.
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 BOSTON COLLEGE INDUSTRIAL AND COMMERCIAL LAW REVIEW

A. Political Influence
The Post Office Department has existed in its present form since
the early days of the Republic. 8 The Postmaster General, a member
of the President's Cabinet, has been appointed solely on the basis of
political affiliation. In a less busy and complex era, this practice was not
of great significance. However, in the twentieth century, and especially
since World War H, the Post Office has become a major enterprise,
with a corresponding increase in the burdens placed upon the Post-
master General. The Post Office is one of the largest employers in the
world;° it moves as much mail as the post offices of all other countries
combined." Although in recent years there has been much dispute as to
whether this mammoth operation should be run as a business enterprise
or as a public service," there has been much less dispute over the ques-
tion of whether the Post Office needs the expert management that such
a vast undertaking requires. During this century, the term of office of
the Postmaster General has averaged about two and one-half years.
Clearly, this is far too short a period of time for one to learn the intri-
cacies of the postal machinery." Even in those few instances where the
Postmaster General has mastered the duties of his office, either a change
in political control or some other event has caused him to resign. In
light of these facts, many observers of the postal scene believe that no
structural improvement of the Post Office could be effective so long
as the appointment of its chief operating officer is directly related to
the political process." It is their opinion that no matter how hard the
Postmaster General might try to be fair and objective, political con-
8 Kappel Comm. Report, supra note 2, at 46-47; United States v. Kochersperger, 26
F. Cas. 803, 808-09 (No. 15,541) (C.C.E.D. Pa. 1860). According to the provisions of
the Reorganization Act, Pub. L. No. 91-375, § 15(a) (August 12, 1970), those sections
of the Act pertaining to the Board of Governors and the Postal Rate Commission took
effect immediately upon date of enactment. Most of the remaining provisions of the Act
were to go into effect one year after the date of enactment or on a prior date selected by
the Board of Governors and published by them in the Federal Register. On January 16,
1971, the Board published a notice of its intention to commence the operation of the
postal system by the Postal Service on July 1, 1971. Until this latter date, the Post
Office Department will continue in existence and operate the postal system. 36 Fed. Reg.
785 (1971).
Kappel Comm. Report, supra note 2, at 15.
10 Senate Report on Postal Reorganization, supra note 1, at 2; Kappel Comm.
Report, supra note 2, at 99.
11 "[T]oday the Post Office is a business." Kappel Comm. Report, supra note 2, at
48; "The United States Postal Service shall be operated as a basic and fundamental
service. . . ." 39 U.S.C.A. § 101(a) (1970); "[I]t [the Post Office] clearly is not a
business enterprise conducted for profit for raising general funds.. . ." 39 U.S.C. § 2301
(5) (1964); "It is hereby declared to be the policy of the Congress . . . that the post
office is a public service...." 39 U.S.C. 2302(b) (1964) ; "The Postal Service is a public
service but there is no reason why it cannot be conducted in a businesslike way and every
reason why it should be." House Report on Postal Reorganization, supra note 3, at 11-12.
12 House Report on Postal Reorganization, supra note 3, at 12; Koppel Comm.
Report, supra note 2, at 40.
1B Kappel Comm. Report, supra note 2, at 40; House Report on Postal Reorganiza-
tion, supra note 3, at 12.
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 THE POSTAL REORGANIZATION ACT

siderations must necessarily influence his actions, especially in the

area of appointments. For these reasons, the President's Commission
on Postal Reform (the Kappel Commission), recommended that the
Post Office be transformed into a public corporation."
Much of the criticism of the postal appointing process has been
quite accurately directed. Often, despite the best of intentions, the
Postmaster General and the President have been guided in the appoint-
ment of postmasters by political considerations rather than by con-
siderations of what would produce the best postal service. Prior to
the enactment of the Reorganization Act, the President, with the advice
and consent of the Senate, appointed postmasters for class 1, 2, and 3
post offices." According to the terms of the statute," the President
was authorized to select the postmaster from the top three candidates
on a list prepared by the Civil Service Commission. In practice, how-
ever, a system of local "advisors" emerged under which the advisors,
usually Congressmen of the same party as the President, (or some
other local party official if the incumbent Congressman was of a differ-
ent party affiliation) would select a person that they wished to fill the
position. If the designated individual was not a postal employee,
he would be given an examination by the Civil Service Commission and,
if necessary, it would be repeated until the designated individual fin-
ished among the top three. However, if the particular individual was a
postal employee, no examination was required. 11
In addition, in order to become a postmaster, the designated in-
dividual must have been a resident of the post office's delivery zone
for at least one year." This residency requirement has prevented post-
masters who have demonstrated their ability at smaller post offices
from being promoted to larger post offices where their abilities might
be put to better use. This provision is one example of the usurpation
of managerial decisions by Congress which inhibits the most effective
use of available personnel resources. It is a system which, although it
14 "We recommend that a Postal Corporation owned entirely by the Federal Govern-
ment be chartered by Congress to operate the postal service of the United States on a
self-supporting basis." Kappel Comm. Report, supra note 2, at 55.
15 39 U.S.C. § 3311, 3312 (1964). The postmasters in fourth class post offices are
appointed by the Postmaster General. 39 U.S.C. § 3311(b) (1964). The statute divides
post offices (each post office may have many branch stations) into four classes. The
division is made on the basis of the number of revenue units bandied by each post
office during the fiscal year. 39 U.S.C. § 702(a) (1964). A revenue unit is defined as "that
amount of revenue of a post office from mail and special service transactions which is
equal to the average sum of postal rates and fees received by the Department during the
fiscal year for 1000 pieces of originating mail ..." 39 U.S.C. § 1 (1964). Assuming an
average postal rate of six cents, classification of post offices is as follows: (1) first class
post offices do more than $57,000 of business each year; (2) second class post offices do
between $11,400 and $57,000 of business annually; (3) third class post offices do in excess
of $2,160 of business annually and (4) fourth class post offices constitute all others.
16 39 U.S.C. § 3311, 3312 (1964).
lz Kappel Comm. Report, supra note 2, at 41.
18 39 U.S.C. 3312(a) (1964).

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 BOSTON COLLEGE INDUSTRIAL AND COMMERCIAL LAW REVIEW

has some defenders,' runs contrary to the needs of any large enter-
prise, whether it is designated a public service or not. It is not certain,
however, that this problem, at least as it relates to the appointment of
postmasters, could not have been alleviated within the framework of
the former Title 39.
A significant problem which is actually an unmentioned part of
all of the problems outlined below, is the fact that prior to the enact-
ment of the Reorganization Act the Postmaster General, although
charged by statute with responsibility for the operation of the Post
Office,2° was hemmed in by a maze of statutes which severely restricted
his discretion. Key managerial decisions were often made for him by
statute so that there were large areas in the management of the
Post Office over which he had virtually no contro1. 22 These restrictions
on the discretion of the Postmaster General made it almost impossible
for the Post Office to adapt to the constantly changing needs of the
consumers of postal services.
B. Labor-Management Relations
The influence of partisan politics on the selection of postmasters
has had an adverse effect in another area--labor-management relations.
For years, low morale among postal employees has been a critical
problem, and the method of appointment of postmasters has had a
direct bearing on it. The majority of postal workers have felt that it
was hopeless to aspire to higher positions in their respective post offices
because they expected that regardless of how hard they strived to earn
a promotion to postmaster, political influence would, in large part, be
19 91 Cong. Rec. 5586, 5592 (daily ed. June 16, 1970); 91 Cong. Rec. 5681-687
(daily ed. June 17, 1970).
20 39 U.S.C. § 302 (1964).
21 39 U.S.C. § 6402(5) (1964) requires the Post Office to use Post Office-owned
trucks to transport airmail to and from airports if the airport is less than 35 miles from
the post office. 39 U.S.C. 3339 (1964) forbids consolidation, of rural routes except when
the carrier's post is vacant on account of death, retirement, resignation or dismissal on
charges.
22 See Hearings on the Post Office Appropriations Bill Before the Subcomm. on
Post Office Appropriations of House Comm. on Appropriations, 90th Cong., 1st Sess.
27-28 (1967) in which the following testimony was given:
Mr. Steed: General ... would this be a fair summary:, that at the present time,
as the manager of the Post Office Department, you have no control over your
workload, you have no control over the rates of revenue, you have no control
over the pay rates of the employees that you'employ, you have very little con-
trol over the conditions of the service of these employees, you have virtually no
control, by the nature of it, of your physical facilities,` and you have only a
limited control, at best, over the transportation facilities that you are compelled
to use—all of which adds up to a staggering amount of "no control" in terms
of the duties you have to perform. . . .
Mr. O'Brien: Mr. Chairman, I would have to generally agree with your premise
. that is a staggering list of "no control." I don't know (whether] it has ever
been put that succinctly to me. If it had been at an appropriate time perhaps I
wouldn't be sitting here.
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 THE POSTAL REORGANIZATION ACT

the decisive factor." Although not the most important cause of labor-
management stress, this system of promotion served as an important
and ever-present irritant.
The most important aspect of any employer-employee relation-
ship is meaningful bargaining over wages and other conditions of
employment. With respect to the Post Office Department, this rela-
tionship simply did not exist. Congress alone set the wages and other
benefits for the postal workers. Postal unions were not given any oppor-
tunity to deal with postal management on these issues; they had to
go directly to the Congress and lobby there for pay increases.' By the
time the Post Office and the unions actually sat down to negotiate, all
that was left to negotiate were local working conditions, and even in
this area, management had little authority if the solution to any
grievance required the expenditure of money." The result was that
neither labor nor management had any incentive to develop responsible
attitudes towards collective bargaining. 20
Numerous other problems in the area of labor-management rela-
tions existed. One major source of complaint was the absence of any
"area wage differentials" for areas in which the cost of living was above
the national average. The result was that while in some rural areas
postal appointments were among the best paid positions available (in
fact, rural mail routes are highly prized), in areas such as New York
City, postal workers lived at or near the poverty leve1. 27
Another irritant among postal workers was the length of time it
took to reach the highest rung in the postal rate scale for any class of
employee. Prior to the passage of the Reorganization Act, it took
twenty-one years to attain maximum seniority;" under the Reorgani-
zation Act it will take only eight years." This change should go part
of the way towards alleviating another major problem, namely, the
lack of incentive either to seek promotion or to accept it when offered.
Until now, there were two major difficulties in this area. One was that
when an employee accepted a promotion, very often the increase in his
rate of pay was not commensurate with the increase in responsibility."
This meant that employees with the most experience were the ones
with the least to gain financially from a promotion. This difficulty is
alleviated to some degree under the new Act since the top of a pay class
will be reached much more quickly.
The great emphasis placed upon seniority in assigning tours of
28 Kappel Comm. Report, supra note 2, at 15.
24 Id. at 18.
28 Id. at 16.
26 Id. at 20-22.
27 Hearings on H.R. 7 and Related Bills Before the Subcomm. on Position Classifica-
tion of the House Comm. on Post Office and Civil Service, 90th Cong., 1st Sess. 8, 68, 78,
92, 93 (1967). 91 Cong. Rec. 5587 (daily ed. June 16, 1970).
28 39 U.S.C. § 3552 (1964).
29 Pub. L. No. 91-375 * 10(6) (1970).
°
3 Kappel Comm. Report, supra note 2, at 106, 109-10.

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 BOSTON COLLEGE INDUSTRIAL AND COMMERCIAL LAW REVIEW

duty also militated against acceptance of a promotion. In this system,

the longer an employee remained in one occupational classification,
the better his chance of getting his first choice of tour of duty assign-
ment. Conversely, the employee who accepted a promotion started out
at the bottom of the seniority ladder in his new occupational classifica-
tion. Thus, when a senior employee accepted a promotion, not only
did he have a minimal increase in salary, but he also had to return to
the bottom of the seniority "ladder" and take the least desirable tours
of duty." The result was that over 80 percent of postal employees
retired from the Post Office in the same position in which they had be-
gun.82
The hiring process has also been a source of much irritation. On
the average, a prospective employee had to wait thirteen weeks to be
hired." It is hardly surprising, then, that quite often by the time be
was informed of his selection for employment the applicant had already
taken another job. Frequently applicants were required to start out
as "area substitutes," a status which was, in many cases, continued
for weeks, months, or even longer, and which involved only part-time
work only when needed."
C. Failure to Modernize
The Post Office has long been burdened with outmoded and in-
efficient equipment. Its methods for processing the mails have not
changed significantly in several generations." For years, the Post
Office did not construct any new postal facilities of any significance,"
and until 1960, the Post Office did not have a research and development
program." The responsibility for this situation can be placed directly
on Congress which has never appropriated enough funds to carry out
an effective modernization program. This has led to a situation in
which the productivity of the postal worker has lagged far behind that
of workers in almost every other major field of employment in the
United States."
31 Id. at 106.
32 "[Might out of every ten postal workers enter and retire from the service at the
same grade level." Id. at 106.
33 Id. at 16.
34 Id. at 102.
88 Id. at 24; "Most of today's mail, therefore, is collected, processed, and delivered
by the same methods employed a century ago." Cordtz, It's Now or Never for the Post
Office, Fortune, vol. 75, 134, 136 (March 1967).
ea 91 Cong. Rec. 5590 (daily ed. June 16, 1970).
sr 39 U.S.C. 2231-34 (1964).
88 See Rappel Comm. Report, supra note 2, at 24, where the following comparisons
are made:
Output Per Man-Hour (Percentage fro
Change Per Year, 1956-1966)
Communications 6.2
Transportation 4.0
Mining 3.7
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 THE POSTAL REORGANIZATION ACT

While industry, including the utilities, to which the Post Office

is often compared, has invested heavily in labor-saving devices, the
Post Office has not. Moreover, most postal facilities are outdated"
and located in central cities near major rail facilities." This was
acceptable in the days when mail volume and wages were lower and
most inter-city mail moved by train; but in an era of ever-increasing
wages and of the demise of the inter-city passenger train, it could lead
only to poor service and enormous deficits. Congress has apparently
been more willing to expend scarce funds on more glamorous or highly
visible projects than to spend money to develop and improve what has
been called "the chief artery of our Nation's commerce.""
Even when Congress was willing to loosen the purse strings for
the construction of new facilities, it took inordinately long periods of
time to get a project from the planning stage to completion." This
delay resulted from the fact that the Committees on the Post Office
and Civil Service, which oversee the Post Office, did not control con-
struction of post offices. Rather, control was vested in the Committee
on Public Works, which has led to extensive delays in the planning and
construction process. Often, under this system, Congressmen had an
important if not the final voice in questions of design and location
when a new facility was destined for their district's
In the area of inter-city transportation of mail, the Department's
efforts to secure the fastest and least expensive mode of transportation
were often stymied by a web of restrictive statutes surrounding the
procurement of such transportation. Restrictions were placed upon
procurement procedures, and certain modes of transportation were
preferred over others.
D. Postal Rates and Expenditures Prior to the Reorganization Act
Probably the greatest problems were caused by the exclusive
control which Congress exercised over the purse strings of the Post
Office Department. Congress regulated both income and expenditures.
The Department's receipts were paid into a Treasury fund earmarked
for the Post Office, but the Department had no control over the fund. 44
Manufacturing 3.2
Wholesale and retail trade 3.4
Finance, insurance, and real estate 2.7
Services 1.9
Post Office 0.23
89 Fortune, supra note 35, at 136, where it is pointed out that even if the Post Office
were to obtain new equipment, many of its existing buildings are so old and outdated that
they could not accommodate such equipment. "[Wle did not construct one post office
throughout this great Nation, from the 1930's through to the 1950's." 91 Cong. Rec.
5590 (daily ed. June 16, 1970).
40 Fortune, supra note 35, at 136; Kappel Comm. Report at 169.
41 91 Cong. Rec. 5591 (daily ed. June 16, 1970).
42 Kappel Comm. Report, supra note 2, at 35.
411 91 Cong. Rec. 5686 (daily ed. June 16, 1970).
44 39 U.S.C. ft 2201, 2202(a) (1964).

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 BOSTON COLLEGE INDUSTRIAL AND COMMERCIAL LAW REVIEW

With certain exceptions, funds could be expended only as they were

authorized and appropriated by the various 'congressional committees
involved.. This practice severely limited the discretion of the Post-
master General in allocating funds according to the Department's
needs. He could only reallocate up to five percent of the Post Office
budget to purposes different from those for which the funds were
appropriated, and then only if the appropriation act permitted such a
reallocation." Thus, it was almost impossible to meet unexpected con-
tingencies without a supplementary appropriation from the Congress.
Moreover, the need to resort to the congressional appropriation
process introduced further distortions into the Post Office's fiscal struc-
ture. In private industry, budget planning is normally done four to six
months in advance of spending; the Post Office had to plan its budget
for each fiscal year one and one-half years in advance. Accurate esti-
mates are almost impossible to make that far in advance. In addition,
this approach induced overestimation of expected needs from fear of
budget cuts."
Congressional control over postal rates has been an even greater
obstacle to sound postal management. The Department has been un-
able to alter the rates and classes of mail, with the exception of fourth
class mail,47 to meet the changing needs of its patrons. The Post Office's
accounting system, the Cost Ascertainment System, was imposed on
it by Congress, and the Department used a "fully allocated" method
for determining the costs attributable to each class of mail. This sys-
tem does not take into account many intangible factors which should
affect the cost of a given service, making it impossible to determine
which, if any, class of mail is actually "paying its way."" Thus, even
if Congress had wished to set some or all postal rates according to cost
per unit, it would have been unable to do so. The matter of rate making
was further complicated by the indecision of the Congress on the
question of whether the Post Office should be operated as a public
service or pay its own way." The members of the Kappel Commission
believed that since most mail is sent by business, there was actually
very little of the public service element Ieft in the Post Office.'" Many
members of Congress, on the other hand, still feel that certain classes
of mail and certain classes of customers are deserving of subsidies,
for example, publications, non-profit organizations, the blind, and
members of the Armed Forces, and they have consistently voted
45 39 U.S.C. § 2202(b) (1964).
4o Kappel Comm. Report, supra note 2, at 37.
47 Provided that the consent of the Interstate Commerce Commission is secured, the
Postmaster General is authorized to reform the rates of postage and conditions of
mailability for fourth class mail. Act of Feb. 28, 1925, Pub. L. No. 68 368, 207, 43 Stat.
-

1067. This authority is restricted by 39 U.S.C. § 4554 (1964) for educational and certain
other types of material.
48 Kappel Comm. Report, supra note 2, at 29-31.
49 Id. at 55.
50 Id. at 50.

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 THE POSTAL REORGANIZATION. ACT

public service subsidies for these groups." The result has been that,
according to Post Office figures, only first class mail has paid its own
way, and the other classes have run up deficits of various sizes, in-
cluding a staggering loss for second class mail." In any case, the
,

Congress has not really been consistent in its rate policies and has
granted subsidies where it has not so intended.
During the nineteenth century, legislative rate making was com-
mon, but it has all but disappeared today. The Post Office, in fact, is
the last utility to have its rates set legislatively.° Rate making is a
complex process involving difficult judgments in many highly technical
disciplines; it is hardly an activity that is suitable for a legislative
body involved in making important policy decisions. Most reform plans
have provided for another body to set postal rates, with Congress re-
taining at most a veto over rate increases." In any case, congressional
rate making has led to an irrational rate structure in Aich one class
more than pays its share, and some other classes do not even cover the
costs that are unique to that class. This jumbled rate structure has
caused much of the confusion that has brought on the current crisis.
Thus, it can .be seen that the Post Office urgently needed vital
and far-reaching reforms. The Reorganization Act deals with most of
the problems that confronted the Post Office, but the question of
whether it has dealt effectively with these problems remains. In the
remainder of this comment an attempt will be made to show that
Congress could have used alternative methods to deal more effectively
with the problems that afflicted the Post Office.
IL THE REORGANIZATION ACT—PROSPECTS FOR THE FUTURE
A. Structure
On August 12, 1970, the Postal Reorganization Act° was signed
into law by the President, disestablishing the Post Office Department
as an executive department and re-establishing it as the United States
Postal Service, "an independent establishment of the executive
branch."5° (Emphasis added.) The significant word in this description
is "independent." Most of the reform proposals submitted to the
Congress contained one common feature, namely, some method of
removing the postal system from political influence and control. The
motivating principle of. the reform effort was that the delivery of the
mail is a nonpartisan affair, and decisions affecting the Post Office
61 See, e.g., 39 U.S.C. §§ 4045, 4351-69, 4421-22, 4454, 4653-54 (1964); 91 Cong.
Rec. 5585-586, 5592 (daily ed. June 16, 1970).
52 The Report of the President's Commission on Postal Organization, 31 (1968)
(hereinafter cited as Kappel Comm. Report).
6 B Id. at 39.
54 "We recommend that the Board of Directors after hearings by expert Rate
Commissioners, establish postal rates, subject to veto by concurrent resolution of the
Congress." Id. at 61; see also 91 , Cong. Rec. 5585 (daily ed. June 16, 1970).
113 39 U.S.C.A. § 101 et I seq. (1970), 1
55 39 U.S.C.A. § 201 (1970).

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 BOSTON COLLEGE INDUSTRIAL AND COMMERCIAL LAW REVIEW

should be made on the basis of what will promote the best and most
efficient postal service and not what is best for a given political party
or interest group."
The Kappel Commission recommended that a public corporation
be chartered to replace the Post Office Department." The TVA and
other government corporations would be used as models, and ultimately
the postal corporation would, as the others have done, be able to
operate on at least a "break-even" basis. The Commission felt that
the Post Office was actually a public utility and should be run in the
same way—for a profit." They demonstrated that the difference be-
tween the actual cost per piece for public service mail and the current
rates was so small that the difference could easily be covered by small
increases in rates." Moreover, since most of the mail today is business
oriented, the Commission felt that there was very little reason for any
subsidies."
The Congress, however, did not agree with this assessment. The
first reform bill filed during the Ninety-first Congress provided for a
continuation of the present department along with extensive reforms
in its structure." After the postal strike of April, 1970, the President's
bill, which encompassed most of the Kappel Commission's recom-
mendations, was filed. Because many members of Congress believed
that a corporation would not be sufficiently responsive to the will of
the people through their elected representatives," the United States
Postal Service emerged as a compromise. The feeling of the majority
was that so long as the Postmaster General continued to be appointed
by the President, there would always be a political tinge to decisions no
matter how-diligent an effort was made to exclude political considera-
tions from executive decisions.°4 On the other hand, it was felt that
the Post Office is a public service, and that it is too important an
instrument of public policy to be completely abandoned. The remedy
to this dilemma provided by the Reorganization Act is a structure
which is intended to remove the Post Office from direct political con-
67 Kappel Comm. Report, supra note 52, at 42, 51.
08 Id. at 3, 58.
59 Id. at 57, 61-62, 128-29.
00 Id. at 62, 137. The rates for certain classes of mail such as second class mail only
take into consideration the special expenditures incurred by this type of mail. Fully
allocated costs such as overhead are not considered when setting the particular rates.
Public service mail is a subclass of mail within these classes and enjoys an even lower
rate. Using the Kappel Commissions's figures, the subsidy for these classes of mail, which
subsidy the Commission considers to be the difference between the usual rate and the
special rate, represents only 3.8% of postal costs. According to the Commission's figures,
the special rates can be maintained without any subsidy, but rather, by a small increase
in rates for general mail service.
01 Id. at 48-49.
02 H.R. 4, 91st Cong., 1st Sess. (1969).
68 "{Mluch evidence was presented which indicated that a corporation was not the
final answer to true postal reform." 91 Cong. Rec. 5591 (daily ed. June 16, 1970).
04 H.R. Rep. No. 91-1104, 91st Cong., 2d Sess. 12 (1970) (hereinafter cited as House
Report on Postal Reorganization).
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 THE POSTAL REORGANIZATION ACT

trol but not from the overall supervision of policy by the elected repre-
sentatives of the people.° 9 The congressional intent that the Post Office
continue to be operated as a public service and not as a profit-making
venture is enunciated in the statement of postal policy contained in
the Act. In that statement, Congress declares that the "Postal Service
shall be operated as a basic and fundamental service. . . ."" The
primary mission is to serve the people.: The only provision relating to
costs is that they be apportioned fairly and equally.°
The new postal establishment will be "directed by a Board of
Governors composed of 11 members. . . ."" Nine of the Governors
are to be "appointed by the President, by and with the advice and
consent of the Senate ..." for staggered nine-year terms.7° The Post-
master General, the tenth member, is to be selected by the Board and
shall be a voting member of the Board. 71 The eleventh member, the
Deputy Postmaster General, shall be selected by the other ten mem-
bers." In order to reduce political influence to a minimum, a provision
was included which limits to five the number of appointed members
who may be of one political party." As the ultimate source of power
within the Postal Service, the Board has the complete range of powers
usually possessed by corporate boards of directors including among
others the power to sue and be sued," enter into contracts and expend
money," acquire and operate property, both real and personal," take
property by eminent domain,77 and all other powers necessary to carry
on its functions." The Board may delegate these powers to the Post-
master General or to one of his committees. 79 There is also a statement
of the Service's general duties which are to "plan, develop, promote
and provide adequate and efficient postal services at fair and reason-
able rates and fees.'"°
B. Rates
In the important area of rates and fees, the Postal Service has the
power "to prescribe . • . the amount of postage and the manner in
which it is to be paid.""- This power is limited and shared with the
65 Id. at 5, 12-13.
06 39 U.S.C.A. 101(a) (1970).
67 39 U.S.C.A. 101(d) (1970).
68 39 U.S.C.A. 202(a) (1970).
69 Id.
70 39 U.S.C.A. 202 (b ) (1970).
71 39 U.S.C.A. 202(c) (1970).
72 39 U.S.C.A. 202(d) (1970).
79 39 U.S.C.A. 202(a) (1970).
74 39 U.S.C.A. 401(1) (1970).
76 39 U.S.C.A. 401(3) (1970).
76 39 U.S.C.A. 401(5) (1970).
77 39 U.S.C.A. 401(a) (1970).
79 39 U.S.C.A. 401(10) (1970).
79 39 U.S.C.A. 402 (1970).
80 39 U.S.C.A. 403(a) (1970).
81 39 IJS.CA. 404(a) (1970).
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 BOSTON COLLEGE INDUSTRIAL AND COMMERCIAL LAW REVIEW

Postal Rate Commission." The Commission consists of five members"

who serve staggered six-year terms," and no more than three of whom
may be of one political party.'" The Rate Commission is a completely
independent body, but its expenses are paid by the Board of Governors.
Normally, this position would give one body great influence over the
other. However, the powers of the Board over the Rate Commission's
budget are severely limited, and it is hoped that in this manner the
independence of the Postal Rate Commission will be preserved.'"
The Board of Governors establishes rates and classifications of
mai1,87 but it may not make any changes in the rates or classifications
of mail until the Rate Commission has submitted to it a recommended
decision on proposal changes pursuant to a request from the Board
for such a ruling." In making its recommended decisions, the Rate
Commission must consider a variety of factors which have an effect
upon the rates to be charged and classifications to be assigned to the
various types of mail." Board requests for changes in rates or classifi-
cations must be promptly considered, but the Commission must hold
a public hearing, at which the Postal Service, mail users, and one
officer of the Commission representing the public may present views
prior to rendering a recommended decision.'" The recommended deci-
sion is submitted to the Board which may approve it, allow it to take
effect under protest and seek judicial review in any U.S. court of
appeals, or resubmit its proposed changes to the Commission.' In the
82 39 U.S.C.A. § 3601 (1970).
83 Id.
84 39 U.S.C.A. § 3602 (1970).
85 39 U.S.C.A. § 3601 (1970).
80 The Board of Governors may only accept the budget presented to it by the
Rate Commission or reduce the entire amount requested by the Commission. The Board
may not reduce or eliminate any specific item contained in the budget. 39 U.S.C.A.
§ 3604(c) (1970).
87 39 U.S.C.A. § 3621 (1970).
88 39 U.S.C.A. § 3622(a) (1970).
89 39 U.S.C.A. § 3622 (1970) provides in part:
[T]he Commission shall make a recommended decision . . . in accordance with
.. . the following factors:
(1) the establishment and maintenance of a fair and equitable schedule;
(2) the value of the mail service actually provided each class or type of mail
service to both the sender and the recipient • . . ;
(3) the requirement that each class of mail or type of mail service bear the
direct and indirect postal costs attributable to that class or type plus that portion
of all other costs of the Postal Service reasonably assignable to such class or type;
(4) the effect of rate increases upon the general public, business mail users, and
enterprises • . . engaged in the delivery of mail matter other than letters;
(5) the available alternative means of sending and receiving letters and other
mail matter at reasonable costs;
(6) the degree of preparation of mail for delivery ... performed by the mailer
and its effect upon reducing costs to the Postal Service;
(7) simplicity of structure for the entire schedule . . . ;
(8) such other factors as the Commission deems appropriate.
°
9 39 U.S.C.A. § 3624(a) (1970).
81 39 U.S.C.A. § 3625(a)-(c) (1970).

1162
 THE POSTAL REORGANIZATION ACT

case of an approval under protest, the Board must make this appeal a
preferred matter, but it may only either approve the decision or return
it to the Commission for further consideration. In the event of judicial
review, a court may not issue a temporary restraining order, nor may
it alter the recommended decision."
When the Board has returned the recommended decision to the
Rate Commission, the Board may, if it is still dissatisfied, modify the
second recommended decision by a unanimous written vote. However,
the Board must conclude in a written decision that such modification
is in accord with the record established by the Commission and the
policies of the Act, and that the revenues are needed to cover the costs
of the Postal Service."
If the Commission is too slow in considering a request for a deci-
sion or a resubmitted decision, the Board may, on ten days notice,
place into effect temporary changes in rates or classes. Such changes
shall be effective for no more than thirty days beyond the date of the
Commission's recommended decision."
C. Labor-Management Relations
Since the Postal Service may now control its income and ex-
penditures, one of the major obstacles to effective labor-management
relations has been removed because postal management may now
bargain over the full range of concerns usually included in collective
bargaining, including wages and other benefits.
With respect to the hiring of employees, the Postal Service
possesses almost the full range of privileges and prerogatives possessed
by any private concern." The Board of Governors or its designee
appoints all officers and employees and fixes the procedures for ap-
pointment and promotion." Although the Act makes postal employees
civil servants, the power of the Postal Service to set its own employ-
ment standards independently of the Civil Service Commission effec-
tively removes them from civil service 9 7
02 39 U.S.C.A. $1 3625(c), 3628 (1970).
93 39 U.S.C.A. $ 3625(d) (1970) provides:
[With the unanimous written concurrence of aU of the Governors . the
Governors may modify any such further recommended decision of the Commis-
sion under this subsection if the Governors expressly find that (1) such modifica-
tion is in accord with the record and policies of this chapter, and (2) the rates
recommended by the Commission are not adequate to provide sufficient total
revenues so that total estimated income and appropriations will equal as nearly
as practicable estimated total costs.
See also 39 U.S.C.A. g 3625(e) (1970).
04 39 U.S.C.A. § 3641(a) (1970).
00 39 U.S.C.A. § 1001(a) (1970).
00 39 U.S.C.A. g 1001(b) (1970).
97 During the hearings in the House on the Postal Reorganization Act, Representa-
tive William Scott solicited the opinion of the Comptroller General on the effect which
the legislation would have on employee rights and benefits. The Comptroller replied:
We believe the intent of subsection [1001(b)] is to remove postal employees
from the competitive service. In the competitive service appointments and pro-
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 BOSTON COLLEGE INDUSTRIAL AND COMMERCIAL LAW REVIEW

In Section 1002 of the Act, Congress has made an attempt to

remove political influence from the processes of appointment and
promotion." Appointments shall be made without regard to recom-
mendation of members of Congress, elected state or municipal officials,
political party officers, or any other individuals or organizations. Not
only are these persons prohibited from making any such recommenda-
tions," but the employee is also prohibited from soliciting them.'"
Should such a recommendation be submitted, the Postal Service may
not consider it.'U 1 In addition, it may punish any employee who violates
these provisions.'" The Postal Service may, however, solicit recom-
mendations from former employers when they relate only to the
qualifications and the character of the applicant.'
The newly established Postal Service is to be a career service.' 94
It is the declared policy of Congress that the Service should encourage
promotion from within, and that there shall be freedom to transfer to
other positions within the Service."' The residency requirement for
postmasters has also been removed to encourage career mobility. An
improvement in employee morale should follow as a consequence of
these changes.
Despite the many changes in the new law, certain provisions of
the old employment system remain. When the new law took effect, em-
ployees were transferred to the new service with all of their old
seniority privileges intact, including accumulated sick and vacation
leave.'" They retain accumulated benefits in the Civil Service retire-
ment fund,'" and there may be no variation in fringe benefits if the
result will be a diminution of the program of benefits now in exis-
tence."" On the other hand, the ban on strikes by federal employees is
retained for postal employees.'"
motions are based upon merit and fitness as determined by examinations. How-
ever, as stated, subsection . . . [1001(b)] provides that appointments and
promotions shall be in accordance with procedures established by the Authority.
It is evident, therefore, that such personnel actions are not to be subject to the
laws and regulations governing the competitive service. Moreover, we note that
the provisions of title 5, United States Code, pertaining to the competitive
service are not specifically made applicable to employees of the Authority.
House Report an Postal Reorganization, supra note 64, at 68.
98 39 U.S.CA. 1 1002 (1970).
99 39 U.S.C.A. § 1002(a)(1-4) (1970).
100 39 U.S.C.A. 1 1002(c) (1970).
tot 39 U.S.C.A. § 1002(b)(1) (1970).
192 39 U.S.C.A. § 1002(f) (1970).
198 39 U.S.C.A. § 1002(e) (1970).
194 39 U.S.C.A. H 1001(b), 1006 (1970).
108 39 U.S.C.A. § 101(c) (1970).
100 39 U.S.C.A. § 1005(e) (1970).
107 39 U.S.C.A. § 1005(d) (1970).
198 39 U.S.C.A. § 1005(1) (1970).
109 Since employees of the Postal Service are federal employees by virtue of 39
U.S.C.A. § 101(c), 1001-11 (1970), 5 U.S.C. § 7311 (Supp. II, 1967), prohibiting
strikes by United States employees, should also apply to them. However, it should be
noted that 0 7311 is not explicitly made applicable to the postal service, so there may be
1164
 THE POSTAL REORGANIZATION ACT

Aside from the above mentioned denial of the right to strike,

the postal unions have been granted almost the full range of rights
accorded to labor unions by the Labor Management Relations Act."'
The National Labor Relations Board (NLRB) is given the authority
to determine in each case the unit appropriate for collective bargaining,
and the Postal Service shall recognize exclusively in each unit so
determined the organization selected by the majority of its employ-
ees."' Elections are to be conducted under the NLRB's supervision," 2
and all questions of representation shall be decided by that body.' 13
Under the Reorganization Act, those portions of the Labor Manage-
ment Relations Act that deal with unfair labor practices also govern
the Postal Service and the postal unions."4
In the area of collective bargaining, the Reorganization Act con-
tains a provision for binding arbitration."' However, arbitration is to
be the final step in a rather lengthy bargaining process. Under the new
system, it could possibly take as long as 180 days until the arbitration
board is established, and the board has an additional 45 days before it
must render a decision."'
One feature of the Act that aroused storms of protest when it was
presented to Congress was the provision that would have permitted a
union shop to become a reality as a result of bargaining between labor
and postal management. Much of the debate in both Houses of
Congress centered on this point."' Many Congressmen and Senators
some doubt on this matter. In addition, the collective bargaining procedure set out in
39 U.S.C.A. I 1207 (1970) would seem to preclude the right to strike because binding
arbitration is the culmination of this process. In the words of the House Committee on the
Post Office and Civil Service, "the Postal Service is too important to the people and
economy of this Nation for us to tolerate postal strikes." House Report on Postal Re-
organization, supra note 64, at 14.
110 39 U.S.C.A. § 1209(a) (1970) incorporates by reference 29 U.S.C. §$ 151-68
(1964), which is the Labor Management Relations Act.
111 39 U.S.C.A. § 1202 (1970).
112 39 U.S.C.A. § 1204 (1970).
ita 39 U.S.C.A. § 1203 (1970).
114 29 U.S.C. §§ 158, 160 (1964).
115 39 U.S.C.A. § 1207(c) (1970).
110 39 U.S.C.A. § 1207 (1970).
117 H.R. Rep. No. 91-1104, 91st Cong., 2d Sess. 61, 63 (1970) (hereinafter cited as
House Report on Postal Reorganization); Representative Latta feared that the provision
for a union shop would eventually give labor control over the government. 91 Cong.
Rec. 5580 (daily ed. June 16, 1970); Senator Javits favored giving the postal unions
the same rights as other unions, including the right to negotiate for a union shop.
Senator Goldwater was opposed. 91 Cong. Rec. 10331-0332 (daily ed. June 30, 1970);
Senator Mondale supported the concept of a union shop, while Senator Baker feared
that some industrial unions might be legislated out of existence. Id. at 10332; Senator
Cooper stated, "I hold also that no citizen' of the United States should be required to
he a union member to be a Government employee." Id. at 20333; Senator Fanin stated
his opposition to the existence of a union shop and, in so doing, quoted from a speech
given by former Secretary of Labor Arthur Goldberg at a convention of the American
Federation of Government Employees in which the former Secretary said, "I know you
will agree with me that the union shop and the closed shop are inappropriate to the
Federal government." Id. at 10335. The anti-union shop provision was adopted by the
1165
 BOSTON COLLEGE INDUSTRIAL AND COMMERCIAL LAW REVIEW

believed that employment by the federal government should never

be conditioned upon membership in a union. 118 As a result of this
furor, a section was added to the Act protecting the rights of employees
to join or refrain from joining unions.19 Also, no union may negotiate
a contract which provides for compulsory deduction of union dues from
the wages of union members; this is a matter which is subject to agree-
ment between the Postal Service and the individual employee. The
Postal Service may not deduct union dues from an employee's wages
unless the employee signs a written assignment.'
D. Transportation
The Post Office was substantially restricted in the selection of the
means available to it for transporting inter-city mail. The Reorganiza-
tion Act gives the Postal Service. almost unfettered discretion in its
choice of carriers and modes of transportation. The Act also gives the
Postal Service greater control over the rates it must pay for such
transportation. Prior to the Reorganization Act, the railroads were
the focal point of the mail transportation system. 121 Only a small
section of the former Title 39 was devoted to air mail,' 22 and practically
nothing was said about highway transportation of mail.' 23 Moreover,
the Department could negotiate long-term contracts of up to four years
with railroads for transportation of mail at rates above or below those
set by the Interstate Commerce Commission (ICC), thus giving the
Department some flexibility. 124 In contrast, the Department could
only obtain highway transportation by long-term contracts since it
was not able to ship mail by highway common carrier. 128 Air mail
could be shipped only on Civil Aeronautics Board (CAB) certified
carriers' except when surface transportation was determined to be
inadequate. 127 In that case, the Department could contract for "air
star routes," if the CAB would certify "that the proposed route does
House, rejected by the Senate, and finally adopted by the conference committee. 39
U.S.C.A. § 1209(c) (1970).
118 During the debate in the House, Representative Purcell stated, "[The right
of a U.S. citizen to work for his own Government approaches an absolute right. It is
not, nor should it be conditioned upon the payment of union dues." 91 Cong. Rec.
5594 (daily ed. June 16, 1970).
118 39 U.S.C.A. § 1209(c) (1970).
120 39 U.S.C.A. § I205(a) (1970).
121 39 U.S.C. i§ 6201-15 (1964).
122 39 U.S.C. § 6301-05 (1964).
123 39 U.S.C. §§ 6401-02a, 6402(a) (1964).
124 39 U.S.C. I 6215 (1964). The ICC sets rates on mail sent by rail on a common
carrier basis. 39 U.S.C. 16208 (1964).
125 39 U.S.C. § 6402(a) (1964); "Unlike ordinary shippers and other Government
agencies, the Post Office is prevented by law from purchasing transportation on a
common carrier basis from the thousands of trucking firms which move freight over
the nation's highways." The Report of the President's Commission on Postal Organiza-
tion, 171 (1968) (hereinafter cited as the Kappei Comm. Report).
120 39 U.S.C. § 6301 (1964).
127 39 U.S.C. 1 6303(a) ( 1 964).

1166
 THE POSTAL'REORGANIZATION ACT

not conflict with the development of air transportation as contemplated

under . . . title 49," 128 and if certain other stringent conditions were
met.
The Reorganization Act, on the other hand, places the greatest
stress on road and air transportation. In the cases of road, rail and
air transportation, the Postal Service may compel a common carrier to
carry the mail at rates set by the ICC and CAB, respectively.'" If a
common carrier refuses to carry the mail, the Postal Service may im-
pose a fine on it."° In addition, the Postal Service has wide discretion
in the matter of contracting with carriers for longer terms if it finds
that to be desirable."' This discretion is limited somewhat in the area
of air mail. While the Service may ship unlimited amounts of letter
mail by certified air carriers at rates set by the CAB, when such a
carrier is under long-term contract, only ten percent of the mail by
weight may be letter mail. 1 The purpose of this restriction is to pro-
tect the airlines from being forced to carry mail at uneconomical rates.
Some members of the Senate felt that postal officials were more in-
terested in saving money on transportation costs than they were on
speeding mail service, and that an unlimited authority to contract for
air transportation of mail would be used to pressure airlines into grant-
ing uneconomical rates. The feeling was that this attitude would con-
tinue to prevail under the Postal Service."' It is not clear though that
the airlines are so dependent on revenues from the carriage of mail
that they would agree to such contracts regardless of the terms. In addi-
tion, the Postal Service cannot require a carrier to enter into such a
contract, and the CAB may disapprove these contracts if it finds that
they are contrary to the policy set forth in the Civil Aeronautics Act ]."
The Postal Service may contract for air carriage of mail by air
carrier under such terms and conditions as it deems appropriate be-
tween points when no carrier has been certified for carriage of mail
between those points. Such contracts shall be canceled if the CAB
later authorizes such service." In a case in which the Postal Service
feels that air carriage of mail between cities already served by certified
air carriers is inadequate, it may contract with air taxi operators to
128 39 U.S.C. 6303(b) (1964).
120 39 U.S.C.A. §§ 5203(b), 5207 (1970) (trucks and railroads); 39 U.S.C.A. § 5403
(1970) (aircraft).
130 39 U.S.C.A. § 5206 (1970) (trucks and railroads); 39 TJ.S.C.A. § 5403 (1970)
(aircraft).
101 39 U.S.C.A. §§ 5212, 5214 (1970).
132 39 U.S.C.A.-§ 5402(a) (1970).
133 "The administration proposal . . . indicates to some students of postal admin-
istration that the primary goal of the postal service is to save money without regard to
the impact on mail service or the need of the transportation industry for revenues
sufficient to maintain adequate, reliable and safe transportation." S. Rep. No. 91 912,
-

91st Cong., 2d Sess. 18 (1970) (hereinafter cited as Senate Report on Postal Reorganiza-
tion).
134 39 U.S.C.A. § 5402(a) (1970).
133 39 U.S.C.A. § 5402(b) (1970).

1167
 BOSTON COLLEGE INDUSTRIAL AND COMMERCIAL LAW REVIEW

carry the mails, if it deems that appropriate."' Such a contract may be

canceled if sufficient service is later instituted by certified carriers
under CAB authorization. 137 This portion of the Act provides an
adequate foundation on which a good system for the transportation of
mail may be based. Except for the restriction on the carriage of letter
mail by certified air carriers under contract, the Postal Service now
has the discretion it needs to function efficiently in this key area.
E. Modernization
The methods that the Post Office Department uses to process the
mail have not changed significantly in several generations. The meager
increases in the productivity of postal workers has been attributed to
this factor.'" The reason that productivity is so low is that Congress
has acted niggardly in appropriating funds for the construction of
modern postal facilities and for research and development of mail
processing machinery and the installation of that machinery."' The
new Act provides a method for financing the needed modernization—
the issuance and sale of bonds. The question remains, however, whether
sufficient sums of money can be raised by bond financing to conduct a
thoroughgoing modernization of the postal establishment. The Postal
Service is authorized to sell up to $10 billion of its own bonds; it may
issue a maximum of $1.5 billion annually for modernization and $500
million annually to defray its expenses."' It may pledge its assets and
revenues as security for the obligations 141 and issue the bonds in the
manner and form that it deems most desirable."'
Since most investors do not like to invest in losing propositions,
and since at present the Post Office is exactly that, it is unlikely that
the Postal Service's bonds will prove attractive investments unless
there are "sweeteners" added to make them more attractive. One
possibility is to make the bonds the obligations of the United States.
However, the Act directly provides against this possibilit y,143 unless
the Postal Service asks the Treasury to pledge the credit of the United
States, and the Treasury agrees to do so."' Another "sweetener" that
was included in the Act is that Postal Service's obligations shall "be
exempt both as to principal and interest from all taxation now or
hereafter imposed by any State or local taxing authority except estate,
inheritance, and gift taxes. . . ." 145 The sponsors of the Act hope that
this provision will be enough to make the bonds attractive to investors.
136 39 U.S.C.A. § 5402(c) (1970).
187 Id.
188 Rappel Comm. Report, supra note 125, at 24-26.
135 Id. at 27-28.
140 39 U.S.C.A. § 2005(a) (1970).
141 39 U.S.C.A. 2005(b) (1970).
142 39 U.S.C.A. § 2005(c) (1970).
143 39 U.S.C.A. § 2005(d)(5) (1970).
144 39 U.S.C.A. § 2006(c) (1970).
145 39 U.S.CA. § 2005(d) (1970).

1168
 THE POSTAL REORGANIZATION ACT

There are, however, some who believe that unless the Postal Service
demonstrates an ability to put an end to the chronic postal deficits, it
will find that its bonds will not sell irrespective of the "sweeteners."'
III. PROBABILITY OF SUCCESS AND ALTERNATIVES
A. The Outlook for the Postal Service
Major reform legislation on any matter is generally very difficult
to pass. When such legislation establishes an entirely new agency, it is
usually even more difficult to administer successfully. The Postal Re-
organization Act is no exception to this rule. The Board of Governors
and the administrators of the new Postal Service are expected not only
to operate the Post Office efficiently, but also to operate it on a "break-
even" basis. In view of the long history of postal deficits, this should
prove a formidable task.
The Post Office has been a chronic money loser; it has not oper-
ated profitably since 1945.'4' A major part of the problem has been
the defects in the Department's administrative structure. A more
difficult problem is presented by the fact that the Postal Service is a
"labor intensive" industry requiring prodigious numbers of employees
to operate the system efficiently. 148 It is anticipated that even with the
expected operating economies of modernization, there will not be a
substantial reduction in the number of postal employees.'" The signifi-
cance of these facts in an era of high labor costs cannot be over-
estimated. According to Post Office estimates, it is expected that with-
out an increase in postage rates this year, the deficit will be over $2.5
billion on account of the latest postal pay raise.'" This alone does not
augur well for the financial well being of the Postal Service. The
Kappel Commission often compared the proposed corporation to other
149 Mr. William Simon, a "major bond dealer," speaking at the annual National
Postal Forum, stated that the Postal Service would have trouble selling its bonds in
today's crowded bond market without a government guarantee unless the Service quickly
became a financial success. In fact, such a guardntee could be necessary even if the Postal
Service is financially successful. Mr. Simon said that in addition to rate increases, other
steps should be taken to increase revenues and to improve the Post Office's public image.
N.Y. Times, Oct. 28, 1970, at 29, col. 8. The Act protects the Postal Service from losses
incurred during the transition years. During its first ten years, the Postal Service will
receive a subsidy of ten percent of its 1971 fiscal year appropriation. The subsidy will
then be diminished one percent per year until 1984, at which time it will be at five percent
of the 1971 figure. The subsidy will then continue at that level until such time as the
Postal Service no longer requires it. 39 U.S.C.A. § 2401 (1970). Since the Post Office is
currently recovering only about eighty percent of its expenses from its revenues, the ten
percent subsidy will still leave one-half of the deficit unfunded.
147 Hearings on Post Office Appropriations Bill Before the Subcomm. on Postal
Appropriations of the House Appropriations Comm., 89th Cong., 2d Sess. 53 (1966).
148 Kappel Comm. Report, supra note 125, at 156.
149 Id. at 7. Since over 80% of the Post Office's budget is allocated for manpower
needs, without a significant reduction in the total number of postal employees, there can
be little reduction in costs.
190 91 Cong. Rec. 5682 (daily ed. June 17, 1971).

1169
 BOSTON COLLEGE.INDUSTRIAL AND COMMERCIAL LAW REVIEW

successful government corporations; 151 however, none of them started

out with a legacy of deficits. It is only logical to wonder how high
postal rates must go if costs are to be covered.
In addition, Congress has added to the burden the Postal Service
must bear by providing that certain classes of mail should continue to
have preferences." The Postal Service has the discretion to raise some
or all of the special rates in question, but it must do so gradually. In
no case may the rates be raised above the total of the direct and indirect
costs attributable to mail of that class. When the rates for a class
entitled to special rates do not equal the direct and indirect costs of
that class, Congress may appropriate a sum sufficient to cover the
difference.'" If the Congress fails to appropriate an amount sufficient
to cover the deficiency, the Postal Service may gradually adjust the
rates.'"
Finally, the Congress has expressly reserved for itself the power
to amend or repeal any provision of this Act." Supporters of the Act
contend that if anything goes wrong, Congress has the power to rectify
the situation, including even the power to abolish the Postal Service.'
It is submitted that Congress could have made all but one of the
improvements contained in the Reorganization Act without having
abolished the Post Office Department. It could have provided for merit
promotions within the postal establishment as high as Deputy Post-
master General, provided a flexible transportation system, vested com-
plete discretion for labor-management relations, including the setting
of wages, in the Post Office Department's management, and provided
adequate funding for a modernization program without having dises-
tablished the Department. The only change that could not have been
made without a major alteration in administrative structure would have
been the removal of the Postmaster General from partisan politics.
This point, however, raises the question whether a certain amount of
political influence is really a liability after all. The Act declares that
the Post Office provides a fundamental public service.'" In a system
151 Kappel Comm. Report, supra note 125, at 54.
152 39 U.S.C.A. § 3626 (1970). Special rates will be continued for newspapers, con-
trolled circulation publications (generally publications of non-profit organizations), and
special third class mail for non-profit organizations. While the direct and indirect costs
of these services will be recovered either from postage or from Congress, they will not
pay their share of the Postal Service's overhead. See also note 60 supra.
153 39 U.S.C.A. § 2401(c) (1970).
154 39 U.S.C.A. § 3627 (1970).
155 39 U.S.CA. § 203 (1970).
155 In the latter situation, if the Postal Service issues bonds without the backing of
the credit of the United States, some questions of validity could be raised on behalf of
the bond holders.
157 39 U.S.C.A. § 101(a) (1970). Many members of Congress, especially in the
House, expressed the fear that the profit motive would bring on the demise of many
public services rendered by the Post Office without any consideration of profit. Several
Congressmen announced that they had heard of a five-year plan to eliminate money-
losing services. In the House, Representative Mink of Hawaii stated:
Reportedly, a "5-year plan" has already been developed by the administration to
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that is to be operated on a break-even or even a profit-making basis,

the consideration that must receive priority is, "does it pay its own
way?" If an item is an unprofitable proposition, it must be eliminated
or the financial stability of the whole enterprise will be imperiled. How-
ever, if an operation is to be a public service, there may well be certain
classes of services that may cause loss of profits, but which must be
provided in any case. This contradiction can best be resolved by re-
taining the Post Office as an executive department. The Board of
Governors of the Postal Service might, in the face of a popular demand
for preferential treatment for certain types of service, refuse to pro-
vide such services. Indeed, it would be proper for it to do so since the
Board is charged with the responsibility of maintaining the financial
health of the postal system. The Postal Service would probably be
reluctant to accept a subsidy to provide such a service since that would
undermine its autonomy. 1" Congress would probably be reluctant to
intervene since a pattern of congressional intervention in postal affairs,
once established, would upset the autonomy, efficiency, authority,
morale and stability of the Postal Service. In this way, a fundamental
public need might not be fulfilled.
If the postal establishment were still an executive department, the
service would probably be provided since the Postmaster General, in his
capacity as a politically attuned official, would attempt to meet the
demands of the popular will. He could then deal with Congress, which
is also politically attuned, to provide a public subsidy from the govern-
ment's general revenues. Thus, the cost of such a service would be
spread equally among all of the people for whose benefit it is intended.
This is probably what George Meaney, a member of the Kappel Com-
mission, had in mind when he dissented from the Commission's recom-
mendation that a postal corporation be chartered. He stated that "the
status of the Post Office as a Cabinet Department has a positive value
that should not be discarded lightly."'"
B. Dismantle the Postal Monopoly
Repeal of the postal monopoly as an alternative to the Reorganiza-
tion Act was discussed briefly in Congress.'" The Kappel Commission
noted that if a postal system were being instituted today, it would
probably be operated by an investor-owned corporation."' This would
make the ownership structure of the postal utility similar to that of
be enforced as soon as this bill is passed. While details are being kept secret,
we are informed that it includes elimination of all Saturday delivery service and
window service, consolidation of existing postal facilities, curtailed mail delivery
service to colleges and universities, reduced clerical hours, discontinued air taxi
service . . . and numerous other cancellations.
91 Cong. Rec. 5788 (daily ed. June 22, 1970).
155 Kappel Comm. Report, supra note 125, at 62.
109 Id. at 2.
100 91 Cong. Rec. 5804-10 (daily ed. June 17, 1970).
101 Kappel Comm. Report, supra note 125, at 2, 53.

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other utilities. It concluded that since we have a postal system with a

huge investment, it would not be feasible to transfer the Post Office to
private ownership for reasons of financing. In other words, the Com-
mission seems actually to have favored investor ownership of the postal
system, but it could not see how that end could be practically achieved.
It has long been an established article of faith that the postal
monopoly must be protected in order to protect the public revenues.
Several decided cases have used that contention as a justification for
the postal monopoly.' 62 The argument has been that if competition is
permitted, the private operators will appropriate to themselves the
cream of the mail business (e.g., mail between major cities), and leave
the residue to the Post Office. The Kappel Commission demonstrated
the fallacy of this argument (although it subscribed to it) when it
showed that rural post offices are actually not a source of losses since
there is a positive value to having nationwide service.'" For example,
it is probable that a large mailer sending mail to all parts of the country
would prefer to deal with one organization that could deliver all of his
mail rather than deal with several, each of which could deliver only a
part. It would cost him more to sort mail for each carrier than to
deliver an entire mailing to one carrier who could handle the entire
task. Moreover, if the government monopoly were removed, and one or
more competitors to the Post Office developed, a regulatory body might
then be established. This body could conceivably order a private carrier
or carriers to provide service in rural areas even if it proved to be un-
profitable, just as is often done with other utilities. Higher rates could
be permitted to make up for any loss thus sustained. In any case, it is
a mistake to assume that private post offices would find it unprofitable
or undesirable to serve rural areas. The Post Office has two competitors
in the field of parcel carriage, United Parcel Service and Railway
Express Agency, and both of them service rural areas.
The Kappel Commission seemed to feel that ending the postal
monopoly must necessarily be accompanied by a termination or phasing
out of the Post Office. This result does not necessarily follow. Just as
the Post Office continues to operate in the field of parcel delivery despite
competition, so too, it could continue to operate even with competitors
in the delivery of mail. Competition might, in fact, bestow some bene-
fits on the Post Office. First, it would offer a true standard of com-
parison for speed of delivery, costs, wages, and other areas. Second, it
would relieve the Post Office of some of the crushing burden of the
ever-increasing volume of mail, thereby providing the Post Office with
a "breather" during which it could modernize its facilities without
substantial disruption of service. If, as a result of the competition,
there were a reduction in the volume of mail the Post Office handled,
the number of postal employees could be correspondingly reduced with-
162 United States v. Hall, 26 F. Cas. 75, 78 (No. 15281) (C.C.E.D. Pa. 1884);
Blackham v. Gresham, 16 F. 609, 612 (C.C.S.D. N.Y. 1883).
168 Kappel Comm. Report, supra note 125, at 50.

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out much difficulty since the Post Office has a 23 percent annual em-
ployee turnover rate."' Retention of the Post Office would also provide
a yardstick by which the private concerns could be measured. One
general benefit of having more than one mail delivery service is that
it would ensure continuation of mail delivery despite a strike in either
the Post Office or the private competitor. Since "no strike laws" for
government employees are notoriously ineffective, as the April, 1970
postal strike once again demonstrated, the mail would continue to go
through.
At the present time, the postal monopoly is not complete. As noted
above, the Post Office has two competitors in the field of parcel deliv-
ery. The monopoly is limited to a much narrower field than the full
range of services provided by the Post Office. Competition is excluded
only from the carriage of "letters or packets" over post routes."5 A
letter has been defined as "a message in writing . . . a packet is two or
more letters under one cover" (i.e., in a bundle or package).1 " Post
routes are basically those routes over which the mail is carried (includ-
ing letter carrier routes) and parallel routes.'" These definitions leave
certain areas in which private firms may compete. The term "letter"
may also embrace the term "circular,'" but a circular which is not
addressed to any person is not considered to be a letter.'" This latter
type of mail is known colloquially as "junk mail," and formally as
third class mail. The Post Office has not been able to make a profit on
third class mail, and, therefore, it has not been interested in extending its
monopoly to that class of mail. At least one entrepreneur is currently
making a profit delivering this type of mail at rates lower than those
charged by the Post Office. 170 Competitors of the Post Office have
encountered another less well known aspect of the postal monopoly,
that is, the Post Office's statutory monopoly on the use of mail boxes."'
The monopoly also does not extend to publications and certain types of
first class mail which do not transmit information or are not primarily
for the transmission of information (e.g., exact copies, bonds, and other
commercial papers which are primarily indicia of title, legal papers
and official records).1" In addition, firms may pick up and deliver
their own mail outside of the postal monopoly if the persons employed
in that function are employees of the firm."8 They may not hire another
104 Id. at 6.
188 39 U.S.C.A. a 601 (1970); 18 U.S.C. §11 1694, 1699 (1964).
188 Dwight v. Brewster, 18 Mass. (1 Pick.) 50, 56 (1822); see also Chouteau &
Valle v. Steamboat 'St. Anthony', 11 Mo. 226 (1847).
187 39 U.S.C.A. 5003 (1970).
188 Restrictions on Transportation of Letters, Post Office Dept. Publication 111,
7 (1967).
188 Id. at 10.
170 91 Cong. Rec. 5808 (daily ed. June 18, 1970).
171 18 U.S.C. fl 1725 (1964).
172 Restrictions on Transportation of Letters, supra note 168, at 9-10.
178 Id. at 17.

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 BOSTON COLLEGE INDUSTRIAL AND COMMERCIAL LAW REVIEW

firm to perform this service because that falls directly within the
postal monopoly. The statute also permits private firms to engage in
the delivery of mail for hire if the proper amount of postage is also
paid to the Post Office.'" Some businesses find it worthwhile to hire
the services of firms engaged in private messenger service to expedite
the handling of mail which requires rapid delivery.'"
CONCLUSION
It is submitted that all but one of the reforms which the Re-
organization Act made in the structure of the postal establishment
could have been accomplished within the structure of the Post Office
Department. It is questionable that the one that could not be made
without disesCablishment—removal of the leadership of the postal es-
tablishment from the sphere of partisan politics—is actually desirable.
If the purpose of the Post Office is, as is stated in the Act, to be a
basic and fundamental public service, then this purpose could be more
easily served if postal leadership is involved with politics and aware
of the desires of the people. These desires would, of course, be trans-
mitted to the postal authorities by the elected representatives of the
people. The Board of Governors, on the other hand, will be isolated
from the popular will. Moreover, it is doubtless true that the spirit of
public service will be diminished or lost in the push of the Postal
Service to at least break even, if not to earn a profit. While efficient
operation of the postal establishment is a praiseworthy objective, the
nation should not fear a postal deficit if by that route better postal
service will be provided. This is a point of view that will be unac-
ceptable to the Postal Service. In those cases in which the choice is
between improvements in service and economies which will reduce
expenses to a minimum, the latter course will be chosen to the pro-
found detriment of the people of the United States. It is submitted that
the people would have been better served if the Congress had made
the needed reforms within the existing structure of the Post Office
Department.
Finally, the notion that competition in business activities is
in the best interest of all of the people has long been a guiding prin-
ciple of our nation. Postal service is not one of the few truly natural
monopolies to which no competition may reasonably be permitted.
Rather, it is an enterprise, not unlike the transporation industry, in
which competition rightly should be encouraged.'" The current monop-
oly only masks the inefficiency of the Post Office since there is no
standard to which it may be compared. Consequently, Congress would

174 39 U.S.C.A. 601 (1970).

175 See 91 Cong. Rec. 5807 (daily ed. June 18, 1970).
175 Postal service is not like telephone service where, in order to have more than
one company serving one area, each home would need more than one instrument. It is
more like parcel delivery service by which three services currently serve each address.
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 THE POSTAL REORGANIZATION ACT

be acting in the best interests of the American people and for improved
postal service if it would re-establish and reform the Post Office De-
partment and remove the limited monopoly on the carriage of mail
currently enjoyed by the postal establishment.
RICHARD I. CHAIFETZ

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