The mounting problems of the U.S. Postal Service have been brought home to all Americans in the past two weeks with the introduction of the 13-c- stamp and other increased rates. Next week Congress will return to work and will certainly have to deal with the very serious financial crisis that has been building up at the U.S. Postal Service. As a publishing company that uses the mails extensively, Time Inc. is also gravely concerned with this essential national service. With that concern in mind, Time Inc. Chairman Andrew Heiskell sent a letter to President Ford on Dec. 12, pointing out what he regards as the basic reasons for the crisis. The President has not yet replied, but we feel the letter is of sufficient interest to share it with you.

Dear Mr. President:

Recently, you and members of your staff held a meeting at the White House with magazine publishers, in which you indicated that you will continue to oppose both additional federal appropriations to defray the increasing costs of public services provided by the U.S. Postal Service, and funds for phasing increases in second-class mail rates, as authorized by Congress in P.L. 93-328.

I want to thank you for your time and your candor in stating your position. I would hope that you will accept an equally frank response.

As you are aware, you and your associates have repeatedly described appropriations for public service by the Postal Service as "subsidies" to the various users, whether such users happen to require these services or not. You, yourself, have also compared the deficit problems of the Postal Service with the deficit problems of the City of New York. I quote from your statement:

"I just don't accept that they [the postal system] are doing as well as they should be doing. We have to prod them, just like we are prodding New York City, to improve their efficiency productivity ... If we don't keep the pressure on them ... You know how things operate in Government ... That's one of the basic problems in New York City. No one really put the screws on them until this year, and now they are faced with reality. I think the post office department --management and labor--has to face up to that reality--here as well as in New York."

The comparison of the problems of the Postal Service and New York is yours. Let me demonstrate how apt the comparison is. We all can recognize that a major element in the New York problem has been the unwillingness of political management--in this case the city officials--to come to grips with escalating costs, costs that flow largely from the escalating demands of the municipal-workers unions.

What has been the situation in the operations of the Postal Service? Federal fiscal year 1971 was the last year under the "prereform" postal system, the long-existing system under which postal rates and postal expenditures were set by Congress. Fiscal year 1972 was a period of transition. In fiscal year 1973, the first year of full operation, the "reform" postal system generated a deficit of $13 million. In fiscal year 1974, the deficit had swollen to $438 million; in fiscal year 1975, which ended this summer, the deficit was $825 million; and in the current fiscal year, which will end June 30, 1976, the Postmaster General currently predicts that the deficit will exceed $1.4 billion--and then only if another substantial increase in postal rates, including a -c- first-class-letter rate, takes effect on Dec. 28, as scheduled. You are right, Mr. President. Such arithmetic is quite comparable to the record in New York.

However, it is unfortunate that you proceed from that damaging conclusion to a further one that labels appropriations to make up these deficits as "subsidies" to the mail users. For what has been responsible for these soaring red figures? A number of elements have contributed, of course: ques tionable management, an expensive capital-equipment program, outdated and perhaps unnecessary services. But there is one factor that stands out above all: salary and benefit escalation for the nation's approximately 700,000 postal workers. While I do not want to pass arbitrary judgment on the merits of the labor contracts negotiated in recent years by the Postal Service, here are some important figures.

Salaries and benefits now account for 85% of the postal budget. The basic wage of postal workers nationwide is presently $13,400 a year. To carry your analogy a little further, the average basic wage of New York policemen is $14,700; New York firemen, $14,700; New York teachers, $13,200.

On a national basis, the average police salary is $11,800; firemen, $11,200; teachers, $11,600. Consider also that assistant professors of four-year colleges earn a national average of $12,600, while postal workers earn an average of $13,400. As you surmised, only New York, the case you have cited as an example of disastrous municipal mismanagement, can be said to have kept pace with the Postal Service in this regard.

But this is not the end of the story. With the pay hikes granted in this year's postal-wage settlement, the average pay of postal workers will probably rise to around $16,500 by 1978, an additional increase of more than 23% over present levels. That will cost the Postal Service an additional $2 billion in wages alone.

When you say "management and labor" have to face up to reality, "here as well as in New York," you may have the full agreement of almost everyone familiar with the problem. The question is: Who is management? The embattled Mayor Beame is easy to identify. He is the duly elected, present incumbent at city hall.

In the case of the Postal Service, management, by law, is in the hands of the Postmaster General and a board of governors. Under the "reform" system, there have been three Postmasters General and a board of governors, whose original and present members were appointed by your immediate predecessor. President Nixon. In attempting to manage the overriding problem of dramatic wage escalation, the Postmaster General is subject to certain controls and restraints that are exercised by the White House itself.

His budgets must be approved by the board appointed by the President, and submitted to the Office of Management and Budget. You have the authority to make recommendations to Congress in regard to that budget. More relevant in the case of the recent postal-wage contract, the negotiations were ultimately conducted through the Mediation and Conciliation Service, an agency of the Federal Government, and the settlement, it is reliably reported, was not only greater than the Postmaster General would have accepted, left totally to his own devices, but was indeed approved by the White House.

If then the Postal Service is, as you indicate, another New York, it is a New York that has developed under Republican Administrations and subject to Republican control and direction. You have told us you are going to "put the screws on them," by "them" indicating that you mean postal management and labor. You have also told us you intend to block the increased federal appropriations necessary to defray the costs of these ruinous wage policies and uneconomic public services (like delivering mail to the bottom of the Grand Canyon and the North Slope of Alaska). And you have told us that your only other alternative to the deficit is to raise postal rates.

You are then, in reality, proposing to "put the screws on" the users of the postal system, even though the record is clear that many users who depend heavily on the postal system cannot survive much more escalation of rates.

You are, I believe, aware that continuation on this course will vitally affect a major medium of the communication of ideas in America -- the many diverse magazines and smaller newspapers. But even if this were acceptable to you -- and I am not prepared to believe that on reflection it will be -- consider the comments of the present Postmaster General, Mr. Bailar, who is indeed earnestly struggling to cope with the impossible conditions thrust on him by law and circumstances not entirely under his control:

"The last thing we want is a constant round of postage increases because we recognize that not only would this hamper the free flow of commerce and ideas through the mails, but it would also reduce our volume and hence our revenue, thus compounding our financial problems."

The danger is real, of course. Mail volume decreased last year for the first time in years. Parcel post is down. Electronic transfer of funds will increasingly affect first-class mail, and the volume of magazines and newspapers will dwindle as major magazines, including those we publish, and major newspapers, like the Wall Street Journal, flee the mails in the urban centers, where they now generate a very favorable positive cash flow for the Postal Service.

The present course of action, suggested by the White House meeting with publishers, can have only one end: bankruptcy of the Postal Service -- a bankruptcy that in the process will go a long way toward making the medium of print too expensive for millions of Americans.

The founding fathers' intention was that the postal sys tem should encourage the free flow of information in our nation. It was their conviction that the postal sys tem was a necessary service of government and not a busi ness. George Washington stated in 1782 that a postal service was needed to "bind these people to us with a chain that can never be broken." History shows that our first President was right. For nearly 200 year--, Congress and the American people have recognized the democratic and educational values of magazines and newspapers. Today magazines and news papers are jeopardized by an ineffective and misguided post al system.

I hope you will forgive these blunt words, Mr. President, but I cannot imagine that these results are your desire. I be lieve there are alternative ways of meeting the problems that the Postal Service faces. These problems are not quickly resolved. But I suggest that the national interest will be better served if your Administration would support proposals to meet the fiscal deficits of the Postal Service for a period of time that is sufficient to examine and evolve solutions to these problems. To label this assistance a subsidy for the users or to expect the users to provide such resources themselves would be a gross misplacement of responsibility.

Thank you for hearing me out.

Sincerely,

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