We point to the history of deficits in the Postoffice Department since 1879, when the pound rate of payment was established for second-class matter. The question at the head of this exhibit is answered by the successive changes in the size of the deficit, compared with coincident changes in the volume of second-class mail. It will be seen that the largest percentage of deficit in the past 40 years occurred _before_ the pound rate of 2 cents was, in 1879, established for second-class matter; that the percentage of deficit decreased with great rapidity as soon as second-class matter, under the stimulus of the new pound rate, began to increase rapidly; that this decrease in the deficit _was accelerated after the second-class rate was lowered, in 1885_, to the _present rate of 1 cent a pound, and after second-class matter had increased beyond any figure hitherto dreamed of_; that the decrease in percentage of deficit continued, coincidently with the increase in volume of second-class mail, until 1902, when large appropriations began for rural free delivery service. Then deficits began to grow as the specified loss on rural free delivery grew. In the last fiscal year, 1910, when the rural free delivery loss remained nearly stationary, as against 1909, the deficit decreased by approximately $11,500,000 to the lowest percentage but one in 27 years, although in this same year second-class matter made _the largest absolute gain ever known_, amounting to 98,000,000 pounds more than in 1909. We submit that so many coincidences, taken over a whole generation, and observed in relation to _the enormous production of profitable first-class postage through magazine advertising, raise_ the strongest presumption that _the larger the volume of second-class mail becomes the more fully the postoffice plant is worked to its capacity in carrying newspapers and periodicals and the first and third class mail their advertising engenders, and_ the smaller becomes the deficit, other things being equal. The other thing that is not equal is the new expenditures, unprofitable in the postoffice balance sheets for rural free delivery. According to the Postmaster General’s report there is in 1910 a surplus of over $23,000,000 outside the specific loss on rural free delivery. A chief reason why the Postoffice Department has this $29,000,000 to lose on rural free delivery is that periodical advertising, and the enormous postal business it generates, has long ago extinguished the deficit and given the huge surplus to spend for a _beneficent_ but financially unprofitable purpose.