Message to the Congress Transmitting the Annual Report of the Postmaster General for the Fiscal Year Ended June 30, 1911 and the Report of the Commission on Second-class Mail Matter

To the Senate and House of Representatives:

In transmitting the annual report of the Postmaster General for the fiscal year ended June 30, 1911, it gives me pleasure to call attention to the fact that the revenues for the fiscal year ended June 30, 1911, amounted to $237,879,823.60 and that the expenditures amounted to $237,660,705.48, making a surplus of $219,118.12. For the year ended June 30, 1909, the postal service was in arrears to the extent of $17,479,770.47. In the interval this very large deficit has been changed into a surplus, and that without the curtailment of postal facilities. Indeed, in the same time there have been established 3,744 new post offices, delivery by carrier provided in 186 additional cities, and new rural routes established, 2,516 in number and aggregating 60,679 miles in extent. The force of postal employees has been increased by more than 8,000, and a liberal policy in the matter of salaries has been followed, so that the amount expended for salaries is now $14,000,000 more than two years ago. The average salary has been increased from $869 to $967 for rural carriers, $979 to $1,082 for post office clerks, $1,021 to $1,084 for city letter carriers, and $1,168 to $1,183 for railway postal clerks.

The report shows that the postal-savings system was begun experimentally in January, 1911, and that it has now been extended so as to include 7,500 presidential post offices, which includes practically all of the post offices of that class. Preparations are also being made to establish the system at about 40,000 fourth-class offices. The deposits in n months have reached a total of $11,000,000, distributed among 2,710 national and State banks.

The Postmaster General recommends, as I have done in previous messages, the adoption of a parcel post, and the beginning of this in the organization of such service on rural routes and in the City Delivery Service first.

The placing of assistant postmasters in the classified service has secured greater efficiency. It is hoped that the same thing may be done with all the postmasters.

The report of the Postmaster General is full of statements of the important improvements in the organization and methods of the postal service made since the last annual report, and of tentative drafts of legislation embodying certain recommendations of the department which need legislation to carry them out.

There is only one recommendation in which I can not agree—that is one which recommends that the telegraph lines in the United States should be made a part of the postal system and operated in conjunction with the mail system. This presents a question of Government ownership of public utilities which are now being conducted by private enterprise under franchises from the Government. I believe that the true principle is that private enterprise should be permitted to carry on such public utilities under due regulation as to rates by proper authority rather than that the Government should itself conduct them. This principle I favor because I do not think it in accordance with the best public policy thus greatly to increase the body of public servants. Of course, if it could be shown that telegraph service could be furnished to the public at a less price than it is now furnished to the public by telegraph companies, and with equal efficiency, the argument might be a strong one in favor of the adoption of the proposition. But I am not satisfied from any evidence that if these properties were taken over by the Government they could be managed any more economically or any more efficiently or that this would enable the Government to furnish service at any smaller rate than the public are now required to pay by private companies.

More than this, it seems to me that the consideration of the question ought to be postponed until after the postal savings banks have come into complete and smooth operation and after a parcels post has been established not only upon the rural routes and the city deliveries but also throughout the department. It will take some time to perfect these additions to the activities of the Post Office Department, and we may well await their complete and successful adoption before we take on a new burden in this very extended department.

I cannot speak with too great emphasis of the improvement in the Post Office Department under the present management. The cutting down of cost, the shortening of methods, and the increase in efficiency are shown by the statistics of the Annual Report.

One of the most important matters referred to by the Postmaster General is the proposed fixing of new rates of postage for second-class mail matter. In connection with this subject, I have the honor to transmit herewith the report of the Commission on Second-Class Mail Matter, appointed pursuant to a joint resolution of the Sixty-first Congress, approved March 4, 1911.

The commission consists of Hon. Charles E. Hughes, Associate Justice of the Supreme Court of the United States; President A. Lawrence Lowell, of Harvard University; and Mr. Harry A. Wheeler, president of the Association of Commerce of the city of Chicago, whose character, ability, and experience command for their findings and recommendations the respect and confidence of the Congress and the country.

The report discloses a most exhaustive and critical inquiry into the subject of second-class mail matter after adequate notice to all the parties in interest. Extensive hearings were held by the commission, at which the Postmaster General and the Second and Third Assistant Postmasters General appeared and submitted formal statements presenting the various contentions of the Post Office Department, together with all the relevant official data and evidence relating to the cost of handling and transporting second-class mail matter. Certain of the leading magazines were represented by counsel, while various other publications appeared by representatives and were heard in oral argument or permitted to submit written briefs setting forth their respective reasons for opposing a change in the present postage rate on second- class mail. The Second and Third Assistant Postmasters General, together with minor officers of the department, were critically cross-examined by the counsel and representatives of the periodicals, and all the various phases of the second-class postage problem were made the subject of a most painstaking investigation.

The findings of the commission confirm the view that the cost of handling and transporting second-class mail matter is greatly in excess of the postage paid, and that an increase in the rate is not only justified by the facts, but is desirable.

The commission reports that the evidence submitted for its consideration is sufficient to warrant a finding of the approximate cost of handling and transporting the several classes of second-class mail known as paid-at-the-pound rate, free-in-county, and transient matter, in so far as relates to the services of transportation, post-office cars, railway distribution, rural delivery, and certain other items of cost, but that it is without adequate data to determine the cost of the general post-office service and also what portion of the cost of certain other aggregate services is properly assignable to second-class mail matter. It finds that in the fiscal year 1908, the period for which the statistics for the Post Office Department were compiled, the cost of handling and transporting second-class mail, in the items of transportation, post office cars, railway distribution, rural delivery, and certain miscellaneous charges, was approximately 6 cents a pound for paid-at-the-pound-rate matter, and for free-in-county and transient matter each approximately 5 cents a pound, and that upon this basis, as modified by subsequent reductions in the cost of railroad transportation, the cost of paid-at-the-pound-rate matter, for the services mentioned, is now approximately 5 1/2 cents a pound, while the cost of free-in-county and transient matter remains as formerly, namely, each at approximately 5 cents a pound.

Since the commission has determined that the cost of handling and transporting second-class mail is approximately 5 1/2 cents for matter paid-at-the-pound-rate and approximately 5 cents each for free-in-county and transient matter, without taking into account the cost of the general post-office service and certain unassignable items of expense, it is apparent that the aggregate cost of all service performed by the postal establishment in connection with this class of mail matter is considerably above that amount.

The postal service is now, for the first time in years, operated upon a self-sustaining basis, and in my judgment this is a wise policy; but it should not be carried out at the expense of certain classes of mail matter that pay revenue largely in excess of their cost. It is not just that some classes of mail should be exorbitantly taxed to meet a deficiency caused by other classes, the revenue from which is much below their cost of handling and carriage. Where such inequalities exist they should be removed as early as practicable. The business enterprises of the publishers of periodicals, however, have been built up on the basis of the present second-class rate, and therefore it would be manifestly unfair to put into immediate effect a large increase in postage. That newspapers and magazines have been potent agencies for the dissemination of public intelligence and have consequently borne a worthy part in the development of the country all must admit; but it is likewise true that the original purpose of Congress in providing for them a subvention by way of nominal postal charges in consideration of their value as mediums of public information ought not to prevent an increase, because they are now not only educational but highly profitable. There is no warrant for the great disparity between existing postage rates on periodicals and the cost of the service the Government performs for them. The aggregate postal revenues for the fiscal year 1911 were $237,879,823.60, derived mainly from the postage collected on the four classes of mail matter. It is carefully estimated by the Post Office Department that the revenue derived from mail matter of the first class is approximately one and one-half times the cost of handling and carriage; that the returns from third and fourth class matter are slightly in excess of their cost of handling and carriage; and that while second-class matter embraces over 65 per cent of the entire weight of all the mail carried, it, nevertheless, yields little more than 5 per cent of the postal revenues.

The recommendations of the commission as to the postage rates on second-class mail are as follows:

1. The rate of 2 cents a pound on copies mailed by publishers to subscribers, to news agents, and as sample copies, and by news agents to their subscribers or to other news agents.
2. The rate of 1 cent for each 4 ounces for copies mailed by other than publishers and news agents; that is, the present transient rate.
3. The present free-in-county privilege retained, but not extended.

The commission also recommended that the cent-a-copy rate for newspapers other than weeklies and for periodicals not exceeding 2 ounces in weight, and the 2-cent-a-copy rate for periodicals exceeding 2 ounces in weight, when mailed at a city letter-carrier office for local delivery, be abolished.

As to the effect and adequacy of the proposed increase of 1 cent a pound in postage the commission says:

Such an increase will not, in the opinion of the commission, bring distress upon the publishers of newspapers and periodicals, or seriously interfere with the dissemination of useful news or information. A reasonable time should be allowed, after the rate is fixed, before it is put into effect. While the new rate will be very far from compensating the Government for the carriage and handling of second-class matter, it will to some extent relieve the existing burden and result in a more equitable adjustment of rates.

The commission suggests that the department "maintain an adequate cost system, so that the effect of the new rates may be closely observed and a proper basis may be secured for the consideration of any future proposals."

In these recommendations the Postmaster General and I heartily concur and commend them to the early attention of Congress. The proposed increase of 1 cent a pound in the second-class postage rate, I believe, to be most reasonable, and if sufficient time is allowed before the change goes into effect it should work little serious injury to the business of the periodical publishers, while equalizing, at least in a measure, the burdens of postal taxation.

WM. H. TAFT.

THE WHITE HOUSE, February 22, 1912.