Senator FERGUSON. As I understand it, you take for granted, then, or understand it to be, that if you have a consolidation you are apt to lose efficiency by getting a program so large that you have poor supervision and you do not save?

Mr. MERIAM. Well, you can get things so big that they are too big for anybody to supervise.

Senator FERGUSON. Is that what you are finding in Government now?

Mr. MERIAM. Well, I have not made any recent survey of the. Government, but I think in many cases that organizations get so large you are not able to have effective control over them.

The CHAIRMAN. Well, it is possible for Government itself to get so large that you lose control of it.

Mr. MERIAM. Correct.

Senator THYE. How can we remedy that, Doctor?

Mr. MERIAM. Well, I think the first recommendation or remedy would be to see how much you can cut down on what you are already doing.

Senator FERGUSON. Functions?

Mr. MERIAM. Functionally cut down. Eliminating activities. Boil it down. And then I think that we might get perhaps improved action from the Budget Bureau. And I would like to see, if it was possible to get, more direct responsibility on the part of the administrative officers-the point that was made this morning by Senator Lodge with respect to the Navy.

That is one of the things. We get three or four people responsible for spending money for the same appropriation instead of having a man directly responsible for the expenditure of a certain amount.

So, very frequently you find in the Government a situation in which you cannot pin responsibility on any one person as the head of the organization. His responsibilities are thoroughly divided.

Senator O'CONOR. Doctor, you mentioned, of course, some of the details. Of course, apart from the question of such matters, important. or otherwise, as to the selection of personnel and all, you approve in general the purpose of the bill?

Mr. MERIAM. I think the purpose of the bill is excellent. I would agree with the position you took a few moments ago that there comes a time in the Government service when it needs to be gone over thoroughly with the idea of seeing what has survived from the past that we do not need any more.

Senator O'CONOR. Just on that point, and for the record, I think it might be of interest to us all to have an opinion from you-and without, of course, predicting what will be discovered, because that alone would have to wait-as to the timeliness of it. Considering the position of our Government now, after the experience of recent years and decades, whether or not you think this is a timely occasion for such an undertaking.

Mr. MERIAM. I should say that it is well, you might say an imperative occasion. It is almost imperative that the Government be completely overhauled at this time. And, I think it is more in the question of overhauling it with respect to the unnecessary functions and activities than it is in the question of directly how it is managed. The second is important, but I do not think it is as important as the first. That was the first thing our group did when we went over this

bill when we got it yesterday afternoon or yesterday morning. That was the first thing we looked for.

In paragraphs 4 and 5 in section 1, No. 4 calls for the abolition of functions and activities, and No. 5 calls for defining and limiting them. And, that is the essential feature as we see it.

Senator FERGUSON. Is there any executive department now that does a similar service for the executive branch?

Mr. MERIAM. I should not say so; no,

sir.

Senator FERGUSON. Well, how do you account for that-that the executive branch itself has not set up a department to continually drive for economy and efficiency in government?

Mr. MERIAM. The Budget Bureau was in a sense set up for that purpose in the Budget and Accounting Act of 1921. But, the Budget Bureau is an arm of the President. It follows the instructions of the President and the policies of the President, and if the President becomes tremendously interested in other things and other duties, the Budget Bureau does not operate itself by itself. It does not function.

It can be used that way and has been used that way in past experience.

Senator FERGUSON. When did that cease?

Mr. MERIAM. Well, I do not think the Budget Bureau has functioned in that way since 1932.

1

Senator FERGUSON. It is now really the arm of the President? Mr. MERIAM. It is the arm of the President.

Senator FERGUSON. And functions from the President's branch rather than from its own branch?

Mr. MERIAM. It is an agency of the President. It has no powers except as the aide to the President.

Senator THYE. Well, Doctor, the thought that has been in my mind while we have been examining this question is that I cannot find any specific agency that really answers, except the Appropriations Committees which determine the amount of money that will be appropriated to the respective divisions, bureaus, or agencies.

What I am concerned about is how could we set up an agency that would have a specific responsibility to determine the actual needs insofar as the administration of the functions or the administration of an act as Congress conceives it at the time of the passage of legislation, are concerned.

There is no congressional action that can foresee just how much money will be required except by a close estimate of a certain function, and yet we find repeatedly that departments have gone beyond the appropriation and are over here with a deficit. There is just no one that is responsible for that deficit.

I am wondering in which manner you would proceed to make that agency responsible. Could it be made responsible specifically so that it would be in violation of law if the provisions for appropriation were exceeded? Or would it be responsible to Congress, or to the President?

Mr. MERIAM. Well, I think the executive department ought to have the primary responsibility for the efficient administration of the departments. Congress itself should be sufficiently equipped either itself or through the independent agencies such as the Comptroller

I should have said since Lewis Douglas was Director of the Budget in 1933-34.

General's Office to be able to send its own people in to determine whether that agency is being efficiently administered or not.

That kind of thing, it seems to me, ought to be part of a continuous operation and functioning of the Government. But, times come like the present when there seems to be what you might think of as this bill providing for an immediate audit by this commission of all operations of Government and an audit of that kind in a period like the present seems to be highly desirable.

Senator FERGUSON. That is really an audit of management, is it not?

Mr. MERIAM. An audit of management. You would be in the position of business reexamining its lines of activity to tell how it should redirect them in the future,

Senator FERGUSON. Then, you say it is an audit both of management and operation?

Mr. MERIAM. Yes, sir. Functions and management.

Senator LODGE. And, it is not inconsistent with the audit of the General Accounting Office to which the distinguished Senator from North Carolina referred.

Mr. MERIAM. No. That is an entirely different audit as I see it. You do not expect the Comptroller General to come in here and say, "Gentlemen, we think you ought to abolish the OPA." That is not a function of the Comptroller General. The Comptroller General can tell you how much money you are spending for OPA, but a question as to whether you should abolish OPA or the extent to which you should cut OPA is primarily your own congressional responsibility.

Senator LODGE. So, the probability is that the distinguished Senator from North Carolina's suggestion, which I think is a very good one, would be that those findings would be useful to this commission. Mr. MERIAM. Yes, sir.

Senator LODGE. As a foundation for this other thing that they plan to do.

Mr. MERIAM. One of the first things you have to do in a survey like that is get your financial data. It is basic for a study of this kind. And, you get a substantial amount of the necessary financial data from the General Accounting Office.

At the time we made the study for Senator Byrd in 1936 we wanted to know what percentage of the expenditures of the Federal Government went for the actual administration, and the Comptroller General's Office was very cooperative, and through them we got the data. That was in 1936, and about 18 percent of the Federal budget went for administrative costs.1

Senator FERGUSON. Do you know what it is now?

Mr. MERIAM. No, sir; I do not. It It is quite a job to get that figure. Senator FERGUSON. Do you think it is higher or lower? Mr. MERIAM. Well, I do not know. I would say probably somewhere in the same neighborhood. I doubt very much if you would

1 I regret that my memory was not exact here. Our study to determine what percentage of Federal expenditures was open to modification by structural reorganization and improved management without curtailment of functions and activities was made in 1938. The figures are for the fiscal year ended June 30, 1938. They are contained not in the Byrd report but in Reorganization of the National Government: What Does it Involve? published by the Brookings Institution in February 1939. That book grew out of our work on the Byrd study and in my memory is identified with it.

I am submitting a copy to the committee. The detailed discussion is presented in appendix A, pp. 231-36. The summary is on pp. 22-26.

These figures, it should be specifically noted, include the money available for the postal service. I was in error in saying they were omitted. The postal service was not included in the detailed studies of organization made for the Byrd report, but we included the figures for the postal service in the financial study.

find more than 20 percent of all your expenditures are in actual administration.

Senator FERGUSON. What do you classify as administration?

Mr. MERIAM. Well now, for instance, take the Veterans' Administration. All the money that goes to pay the veterans is not an administrative cost.

Senator FERGUSON. That is right. Direct to the veterans.

Mr. MERIAM. Direct to the veterans as a benefit payment. All the money that goes for interest on the public debt is not an administrative cost. What you pay the members of the armed forces for their services is not an administrative cost.

Now, you have to go into the department and find out how much it costs them to get these benefits to the veterans, how much it costs the Treasury Department to get the interest payments to the public. That is where your administrative costs come in.

The CHAIRMAN. Well, inasmuch as many expenses of the Government are limited to about 5 percent for administrative costs, it must follow that some of the administrative costs in some departments are very high in order to get an average of 18 percent for the total.

Mr. MERIAM. Yes, sir.

The CHAIRMAN. Could you recall offhand what some of the higher ones are?

Mr. MERIAM. No, sir. I will look up in the Byrd report and see how much we covered on that.

The CHAIRMAN. Did you cover the departments by themselves? Mr. MERIAM. I do not recall at the moment.2

The CHAIRMAN. Eighteen percent seems to be very high. That means some departments must have drawn at least 25 percent.

Mr. MERIAM. There are some departments where practically all the money that they spent would be classified as administrative cost. Take the Census Bureau, for example. That is pretty much.

The CHAIRMAN. How would you classify the Post Office Department? How would you break that down? Would postmasters be administrative?

Mr. MERIAM. The Post Office was not in on ours.3
The CHAIRMAN. It was not?

Mr. MERIAM. No, sir.

Senator FERGUSON. I am going to ask this question. What good did the Byrd survey do? What was accomplished?

Mr. MERIAM. Well, the Byrd survey is partially responsible for the emphasis that is placed on curtailing the functions and activities of Government. The agreement between the Brookings Institution and the congressional committees at that time provided that we were not to go into the question of curtailing the functions and activities of Government.

Senator FERGUSON. Every function was important and should remain?

Mr. MERIAM. We were not going to review for that study all the congressional legislation. We assumed that the congressional legislation remained, and we were concerned only with the reorganization, sometimes popularly referred to as "bureau shuffling."

The study was not made by individual departments. Items which could not be directly affected by structural reorganization and management were determined and subtracted from the total to determine the limits within which reorganization could result in savings without curtailing functions and activities. My memory was faulty here. The figures for the postal service were included in this study.

It is the distinct limitations of that kind of study that result in the emphasis that we place in this statement on those fourth and fifth provisions.

Senator FERGUSON. In this bill, you do not find any limitations? Mr. MERIAM. No, sir. There are no limitations. Numbers four and five specifically cover the things that we were to leave out. Senator FERGUSON. You think that they are the most valuable? Mr. MERIAM. Yes, sir. I do not think there is any question about it. I thought I had a copy of that bill right here. It says that number four is abolishing services, activities, and functions not necessary to the efficient conduct of the Government, and number five defining and limiting the executive functions, services, and activities.

Now, those two are the basic ones, according to our experience, and I would not say I would be as cordial with respect to this bill as I am if those two were not in it.

Senator THYE. Then, in other words, occasionally you find an agency functioning that was created 20 or 30 years ago. For instance, I have in mind the agency created for the supervision and development of the spruce timber for airplane construction back in the years 1917 and 1918 for war purposes. That agency has continued over all this period of time, requiring an appropriation for its function, and it has no earthly purpose in our economy today or in the function of government today.

Now, there is what I have in mind when I say there is a confusion and a haze here that you cannot see through.

Mr. MERIAM. Well, that is the point at which this Commission, as I see it, could make its great contribution, and I think that is the thing which the existing organizations working today, day in and day out, do not reach.

Senator FERGUSON. Have you ever made a survey of the Government corporations in your agency?

Mr. MERIAM. No, sir; we have not.

Wait a minute. Mr. Seideman, our accountant, was on the committee that worked out the system for bringing in the corporations under congressional control. Senator FERGUSON. Under the Byrd-Butler bill?

Mr. MERIAM. Yes, sir. He was a member of that committee. But, we have had under consideration a broad over-all study of the Government corporations, but thus far we have not had opportunity to do it.

Senator FERGUSON. You have not started it yet?

Mr. MERIAM. No, sir.

Senator HOEY. I started to ask you a while ago about the present functions of the Comptroller General's office. I do not think there would be any conflict at all with this, but I was seeing about the new duties the Reorganization Act imposed on him

Mr. MERIAM (interposing). You read them?

Senator HOEY. Yes. I wondered whether or not it could not be correlated.

Mr. MERIAM. I think if you had a competent staff director, sir, managing this Commission, he would make every possible use of every agency that there is in the Government.