sound administrative principles. As the Hoover Commission pointed out again and again in its various reports, one of the most important of these principles is the placing of clear authority and responsibility in the head of a department rather than in his subordinates.

Plan No. 27 directly violates this important principle and establishes a "holding company" type of Department in which the Cabinet officer nominally in charge would have no real authority over his subordinates. I understand that this provision was intended as a concession to gather support for the plan. As far as I am concerned it makes the plan that much more objectionable.

For these reasons I urge that steps be taken to reject plan No. 27 by favorable committee action on Senate Resolution 302.

The CHAIRMAN. Senator Butler is not present, and I understand he will submit a statement.

(The statement referred to follows:)

STATEMENT BY HON. HUGH BUTLER, A UNITED STATES SENATOR FROM THE STATE OF NEBRASKA

Mr. Chairman, in my judgment, the committee should approve Senate Resolution 302 which I joined in sponsoring and which disapproves Reorganization Plan No. 27, providing for creation of a Department of Health, Education, and Security.. This reorganization plan does not conform to the recommendations of the Hoover Commission. The reorganization powers of the President were given to him primarily so that he might put into effect the Hoover Commission's recom-mendations and thereby begin to realize some of the large savings to which the Commission has pointed the way. Instead, he has unfortunately used the reorganization authority to concentrate power in his own hands and in those of his selected lieutenants.

Those portions of the Hoover Commission's recommendations which centralize greater power in the hands of the President, he has enthusiastically endorsed and generally included in his various reorganization plars. Those portions of the Commission's recommendations which do not conform to this purpose have generally been ignored. To the best of my recollection, none of the President's reorganization plans have specifically promised the saving of one single dime. Personally, I have repeatedly stated tha: I endorse the Hoover Commission's recommendations, that I would vote to approve them en bloc if they were presented to us in that manner, and tha. I am very favorably disposed toward any reorganization plan which closely follows the Commission's proposals. Plan No. 27 does no fall into that category and promises no saving of Federal expenses. The principal effect of this reorganization proposal is to give the Federal Security Administrator, Mr. Oscar Ewing, a portion of the authority which he has sought in previous reorganization proposals over some bureaus in his agency such as the Public Health Service and the Office of Education. In the past, the Congress has refused to go along with proposals to wipe out all the independent statutory authority of the Surgeon General and Commissioner of Education and place complete authority over their bureaus in the hands of the Federal Security Administrator.

It is argued in behalf of plan No. 27 that it does not go so far as previous proposals along these lines. I do not believe that is a sound argument. I see no reason why we should grant the Administrator any additional powers unless a definite money saving can be shown to result. No such showing has been made in this

case.

If this reorganization plan is approved, it is morally certain that before very long we shall be requested to approve an additional plan or plans which will go still further in concentrating authority in the hands of the Federal Security Administrator. If this process continues, he may eventually arrive at his original. objective of controlling these bureaus completely. He can accomplish his purpose just as well on a step-by-step basis as by taking it in a single leap. I believe such officials as the Surgeon General should have a certain amount of independent statutory authority when not in conflict with the general policies of the Federal Security Administrator. I see no reason why we should compromise on this question.

Under these circumstances, I hope the committee will favorably report Senate Resolution 302.

The CHAIRMAN. The next witness is Mr. Lawton, the Director of the Bureau of the Budget.

STATEMENT OF FREDERICK J. LAWTON, DIRECTOR OF THE BUREAU OF THE BUDGET

Mr. LAWTON. Mr. Chairman and gentlemen of the committee, Reorganization Plan No. 27 of 1950 creates a new executive Department to be known as the Department of Health, Education, and Security and transfers to it all the functions and agencies of the Federal Security Agency. In short, it provides departmental organization and status for Federal activities in the three important fields indicated by the title of the Department. The basic issue presented by the plan is whether the major social programs of the Government should have the type of organization and status long provided for nearly all other Federal undertakings of comparable magnitude and importance.

The new Department will be headed by a Secretary to whom the plan transfers the functions now vested in the Federal Security Administrator. The plan also creates an Under Secretary, an Assistant Secretary, and an Administrative Assistant Secretary to aid in the management of the Department. In addition, it reestablishes the offices of Surgeon General, Commission of Education, and Commissioner of Social Security on a more nearly uniform basis, with provision for appointment by the President with the consent of the Senate from persons having appropriate professional qualifications. Finally, the plan authorizes the Secretary to establish central administrative services in the fields of procurement, accounting, budgeting, and other services common to the various agencies of the Department. Plan No. 27 differs in several respects from the plan to convert the Federal Security Agency into a Department of Welfare, which was rejected by the Senate last year. In the main, the changes are designed to meet major objections raised against the 1949 plan. One of the principal criticisms of last year's plan was that, by vesting all of the functions in the head of the Department, it would weaken professional leadership in the fields of health and education. While I do not feel that that danger was sufficient to offset the advantages of concentrating legal authority in the head of the Department, the present plan accedes to the views of the Congress on this point with respect to this Department as expressed in the action on last year's plan. Under the new plan, the various constituent agencies of the Federal Security Agency are transferred to the Department intact, and the Surgeon General and the Commissioner of Education retain their existing statutory authority.

Though, as a result, the Secretary will not have as complete control over internal organization as was provided by the 1949 plan, the authority which the new plan provides with respect to the centralization of administrative services will enable him to effect adjustments important to efficient and economical administration. In this connection, it should also be noted that the plan transfers to the Secretary all of the functions of the Federal Security Administrator, and that these include not only broad powers of supervision and direction with respect to the entire Agency but also the major part of the substantive functions administered by the Agency except those of the Surgeon General and the Commissioner of Education.

Plan No. 27 also differs from the 1949 plan in the title of the Department. The term "Department of Welfare," used in the earlier plan,

was resented by some as implying the subordination of the health and education programs to public assistance and social security. While this represented an unduly narrow construction of the term "welfare," it indicated the desirability of the more-descriptive title used in the present plan.

This plan constitutes another and very basic step in the reconstruction of the Federal Security Agency. Reorganization Plan No. 2 of 1949 took the first step by transferring the Bureau of Employment Security from the Federal Security Agency to the Department of Labor. A second step was taken by plan No. 19 of 1950, which transferred the Bureau of Employees' Compensation and the Employees' Compensation Appeals Board to the Labor Department.

The CHAIRMAN. May I interrupt you at that point and ask you to clarify? By saying that "This plan constitutes another and very basic step in the reconstruction of the Federal Security Agency,' what do you mean by "reconstruction" of it?

22

Mr. LAWTON. The development of the Federal Security Agency along the lines of or into a Department of Health, Education, and Security, as was envisioned by the Hoover Commission. The Hoover Commission, as I point out here, recommended the transfer away from it of certain functions, and the transfer into it of certain functions.

The CHAIRMAN. You feel that that is rather binding and persuasive, the recommendations of the Hoover Commission with respect to that point?

Mr. LAWTON. I feel it is an indication of the viewpoint of that Commission as to what the proper status of these functions should be in government and, to the extent that the President has made decisions, he has moved in the direction that the Commission recommended.

A second step was taken by plan No. 19 of 1950, which transferred the Bureau of Employees' Compensation and the Employees' Compensation Appeals Board to the Labor Department. Both of these changes conformed to recommendations of the Commission on Organization of the Executive Branch. The Commission further recommended the creation of a new department to replace the Federal Security Agency. This plan will effectuate that recommendation..

As you know, the Commission on Organization recommended some additional changes in the composition of this Department, namely, the transfer of the Public Health Service to a United Medical Administration, the division of the functions of the Food and Drug Administration, and the transfer of the Bureau of Indian Affairs to the new department. Plan No. 27 deals with only a single problem-the establishment of the Department-and does not attempt to carry out any of the other changes recommended by the Commission on Organization with respect to the Federal Security Agency. Thus, it enables Congress to pass upon the question of departmental status on its individual merits without having to consider any other and fundamentally different reorganization issues. The plan, however, does not in any way interfere with the accomplishment of any of those changes, either by further reorganization plans or by legislation. As a matter of fact, a bill is now pending in the Senate to establish a United Medical Administration including the Public Health Service.

In its first report dealing with the general management of the executive branch, the Commission on Organization strongly recom

mended that executive agencies be grouped into departments as nearly as possible by major purpose and that so far as possible the President be placed in a position to supervise and direct the manifold activities of the executive branch through a limited number of Department heads directly responsible to him. This plan is an important step toward bringing the organization of the executive branch into conformity with that fundamental principle.

The desirability of departmental organization for the great social programs now administered by the Federal Security Agency has long been recognized. The creation of such a department was first recommended by President Harding nearly 30 years ago. Almost every comprehensive plan for the reorganization of the executive branch which has been developed since that time has provided for such a department.

On the basis of their importance to the Nation, these programs obviously call for departmental status and representation in the President's Cabinet. To name them is sufficient evidence of this fact. They include the stimulation of education and the provision of financial assistance for its development; the study of child life and the promotion of improvements in child care; research in problems of health and the development of public health activities; protection against impure foods and drugs; the promotion of vocational rehabilitation services; the operation of a national system of old-age and survivors insurance; and the financing and promotion of public-assistance activities.

Individually, none of these program areas is of departmental magnitude in the Federal Government. But all are vital to the well-being and the future of the Nation. All need and deserve a voice in the Cabinet and the highest level of executive leadership. Furthermore, they form a natural family of Federal services interrelated at many points. Collectively, they constitute one of the largest and most important groups of Federal activities, with a personnel of nearly 35,000 and annual expenditures of more than one and a half billion dollars. In number of employees they outrank three of the existing departments, and in expenditures they exceed most of the civil departments.

Reorganization Plan No. 27 is designed to provide for these basic social programs the type of organization and status in the executive branch which their size and importance clearly demand. I hope that the Congress will see fit to permit the plan to become effective.

The CHAIRMAN. Mr. Lawton, you make one statement here in reference to this plan in which you say, referring to this plan, "Thus, it enables Congress to pass upon the question of departmental status on its individual merits without having to consider any other and fundamentally different reorganization issues." I do not believe that that statement is quite accurate, because another basic and fundamental reorganization issue is whether the Health Department and whether the Public Health Service shall be grouped in a universal public-health agency.

Now, I think you cannot say that you can disassociate that and there is no issue involved. It is a departure from a reorganization issue, and that issue is the recommendation of the Hoover Commission with reference to where Public Health shall be placed. So that is fundamental, so far as the Hoover recommendations are concerned.

I do not see how you can say that you can consider this plan without reference to any fundamentally different reorganization issue.

Mr. LAWTON. If that were the case, you have the same issue in two of the plans that you have already passed on.

The CHAIRMAN. I am not talking about what was passed on; I am talking about this one. Is this quite an accurate statement?

Mr. LAWTON. I think it is accurate to this extent: that plan No. 27 provides for departmental status for existing functions which are now grouped together. The proposal to transfer one of those functions to a United Medical Administration is not merely a matter of transferring Public Health to another place and establishing it as a Department of Health or as a separate health agency. It is coupled with two very fundamental changes that have created a storm of discussion opposition, if you will-on the part of a great many individuals, that is, putting the hospitals serving veterans in the same administration and the other is putting the Army and Navy and Air Force hospitals in that same administration.

That is what I mean when I say the issue of the United Medical Administration is a fundamentally different issue from just moving the Public Health Service into that agency. It creates a number of other problems.

The CHAIRMAN. This plan varies from the Hoover recommendations, there is no doubt about that, and you can concede that?

Mr. LAWTON. The plan departs from the Commission recommendation, in regard to the Public Health Service. As I have indicated in my prepared statement, the Commission makes a different or at least a further recommendation.

The CHAIRMAN. In considering this plan and the placing of the Public Health Service in this new Department, have you considered, since the Hoover Commission reports were filed, the carrying out, by reorganization plan or by recommending legislation to carry out, the treatment of the Public Health Service in accordance with the Hoover Commission recommendations?

Mr. LAWTON. We have considered it to some extent, as we have a number of the other recommendations. We have not recommended action on it because there were so many problems involved in it that we felt it needed rather lengthy study. For example, the military services are changing their hospital set-up at the present time. The major effort that is being made there is a consolidation, within the Military Establishment we wanted to get that consolidation ompleted and get that job done before making any change in organizational structure and moving those medical services out of the Military Establishment.

The Secretary of Defense has set up in his own organization a medical Office which has been working on the consolidation of the military hospitals. They have consolidated a number, and they have eliminated some hospitals. Until that job is completed, we did not wish to make a change in the organizational status.

The CHAIRMAN. Let me ask you this further question: The argument is made, and I think that you make that argument in your statement, that this plan if carried out and if it goes into effect will not preclude the further consideration of establishing the Public Health Service in some other agency or any other reorganization plan. Of course, that can be said about any plan before the Congress. The