be added to the rolls because of the equalization of death pension eligibility. The total cases helped would be 1,132,000. 2. All income, regardless of source, counts except: (b) donations from public or private relief or welfare organizations; (c) payments by VA of pension, compensation, and dependency and indemnity compensation; (d) payments under policies of U.S. Government life insurance or national service life insurance, and payments of servicemen's indemnity; (e) lump-sum social security death payments; (f) payments to an individual under public or private retirement, annuity, endowment, or similar plans or programs equal to his contributions thereto; (g) amounts equal to amounts paid by a widow or child of a deceased veteran for come. (1) his just debts, (2) the expenses of his last illness, and (3) the expenses of his burial to the extent such expenses are not reimbursed by VA; (h) proceeds of fire insurance policies. 3. The income of the spouse (if not estranged) may count as the veteran's inIn determining annual income, where a veteran is living with his spouse, all income of the spouse which is reasonably available to or for the veteran except $1,200, or 50 percent of such income, whichever is the greater, shall be considered as the income of the veteran, unless in the judgment of the Administrator to do so would work a hardship upon the veteran. 4. All waived income counts. 5. Discretionary authority for a finding on the net worth of the veteran or the widow or child which could lead to a determination that the applicant is not eligible for pension because of net worth. 6. Places World War II and Korean conflict widows and children on same basis as widows and children of World War I for purposes of pension eligibility. 7. Under the savings provision, the amendments to title 38, United States Code, will not apply to pensioners on the rolls on the day before the effective date unless they seek and are granted pension under the amended title 38. Thus, no person on the pension rolls on the day before the effective date shall have his pension reduced or shall be removed from the pension rolls because of the enactment. All persons on the pension rolls on the day before the effective date will be permitted election to the higher rates if they qualify under the new program. Hearings: May 9, June 4, 5, 9, and 10, 1959. Reported: June 11, 1959; H. Rept. 537. Passed: House, June 15, 1959, by division vote, 226 yeas to 3 nays. (Pending before Senate Committee on Finance.) EXECUTIVE OFFICE OF THE PRESIDENT, BUREAU OF THE BUDGET, Washington, D.C., July 24, 1959. Hon. HARRY F. BYRD, Chairman, Committee on Finance, MY DEAR MR. CHAIRMAN: This will acknowledge your request of June 17, 1959, for the views of the Bureau of the Budget with respect to H.R. 7650, a bill "To modify the pension programs for veterans of World War I, World War II, and the Korean conflict, and their widows and children." On April 15, 1959, the Administrator of Veterans' Affairs submitted a draft bill for similar purposes which was introduced as H.R. 6432. This bill was the result of thoroughly considered efforts by the executive agencies over a period of several years to develop a sound and equitable proposal for modernizing the veterans' pension laws. It was designed to modify the traditional veterans' pension program so it could continue to serve a useful and proper function under present day conditions where the Government has developed other extensive and closely related programs to provide income for aged or disabled citizens and for their survivors. It still represents our views. It has been evident for some time that a thoroughgoing overhaul of the veterans' pension laws was needed in order to correct serious deficiencies which result in inadequate benefits to the genuinely needy while providing pensions to a large and increasing number of veterans who have incomes larger than many people who pay taxes for their support. Expenditures for pensions are mounting rapidly and legislation is badly needed if we are to most effectively spend the billions of dollars for pensions projected in the years to come. In the next 40 years aggregate pension disbursements under present laws are estimated at $106 billion-an average of more than $2.5 billion a year. We believe the provisions of H.R. 6432 would continue the veterans' pension program on a basis which would be fair to the veterans and yet not impose unnecessary burdens upon the taxpayers of the Nation. In keeping with the basic principle that pensions are designed to provide assistance to those in need, it would increase rates for veterans and dependents of veterans who have little or no other income. The largest increases would be for those with families. On the other hand, graduated income limitations would provide progressively lower pensions to veterans as their other income increases. All income, except public or private welfare payments, received by a veteran and his spouse would be counted, and assets would be considered, in determining eligibility for pension. While the maximum income limitations under the bill would compare favorably with those under present law, the sliding income scale and the related provisions would provide a more equitable basis for meeting need. These new provisions, however, would not be applied to individuals now receiving pensions because they would be permitted to continue under provisions of present law as long as they remain continuously on the pension rolls. H.R. 6432 would increase benefits for 55 percent of all those presently on the rolls and would reduce benefits for no person now receiving pension. It would require added expenditures of $100 million above present law in its first year, but in the next 40 years would reduce significantly the projected outlays under existing laws. H.R. 7650 embodies some of the features proposed by the administration. It uses the graduated income limitations to mitigate the all-or-nothing weakness of the present flat income limitations and provide increased pensions to those with lesser amounts of other income. It also counts part of the spouse's income and certain other income now excluded from the limitations, as well as assets, in determining eligibility for pension. However, while paralleling the administration bill in form, the major substantive provisions of H.R. 7650 depart significantly from the objectives recommended by the President in the following respects: 1. The income limitations proposed are too high to serve as effective tests of need. The maximum limits on outside income of $1,800 a year for a single veteran and $3,000 a year for a married veteran are $400 and $300 higher, respectively, than under present law and higher than the maximum benefits provided under social security. 2. The rates of pension for veterans in the upper permitted income brackets are excessive. A single veteran with $1,800 of income would receive a tax-free pension of $480 a year ($2,280 in all). A married veteran with $3,000 of outside income would receive tax-free pension payments of $540 a year ($3,540 in total, or even more if the spouse has income). The inadequacy of the proposed income limits as tests of need is indicated by the fact that other people with income of this size are required to pay $300 to $400 of Federal income taxes. 3. Insufficient recognition would be given to veterans with dependent children. A flat maximum rate of $90 per month would be provided for all veterans with dependents, regardless of number, as contrasted with graduated rates of up to $100 for veterans with children under the administration proposal. 4. Large and increasing amounts of income would be exempted from the income limitations. The bill entirely exempts other Veterans Administration payments. It exempts $1,200 a year or 50 percent, whichever is greater, of the spouse's income. It also exempts social security and other contributory benefits completely until the individual has received benefits equal to his prior contributions. These exemptions will result in anomalous and wasteful situations under which individuals or families with incomes of $5,000, or even $10,000, a year, will be able to receive VA pensions. 5. Millions of widows and children of World War II and Korean conflict veterans would be established as likely potential recipients of veterans pensions on the same basis as dependents of World War I veterans. The extensive readjustment benefits which have raised the living standard of World War II and Korean conflict veterans and their families and the extension and improvement of our social security programs so that survivorship protection is almost universally enjoyed by them make this costly change of relatively low priority. 6. The bill, including the provisions for widows and children, would cost $308 million more than present law the first year. In the next 40 years, instead of effecting a saving, it would add $10 billion to the cost of the program under present law. In the 1960 budget message (p. M73), the President stated: "We must continue veterans' pensions and increase pension rates for those who are without other resources, particularly if they have families. However, eligibility should be determined according to effective tests of need, both as to income and as to net worth, so that payments will no longer be made where the veteran or his family has adequate resources for basic necessities from other sources. Properly applied, I believe this approach can better serve those who are now in need and at the same time minimize the burden placed on taxpayers by present laws." H.R. 7650 represents a considerable departure from the principles recommended by the President. On the other hand, enactment of legislation along the lines of H.R. 6432 would be in accord with the program of the President, and we therefore urge that it receive your favorable consideration. Sincerely yours, ELMER B. STAATS, VETERANS' ADMINISTRATION, July 24, 1959. Hon. HARRY F. BYRD, Chairman, Committee on Finance, U.S. Senate, Washington, D.C. DEAR SENATOR BYRD: I am pleased to respond to your request for report on H.R. 7650, 86th Congress. The purpose of the bill is to modify the pension programs for veterans of World War I, World War II, and the Korean conflict, and their widows and children. Disability pensions are now available to these veterans if they are seriously disabled from causes not related to service. The basic pension rate is $66.15 monthly and is raised to $78.75 when the disabled veteran is 65 years of age or has been on the pension rolls for 10 consecutive years. Those who require aid and attendance are paid $135.45 per month. No pension however is paid to a single veteran whose annual income exceeds $1,400 or to a married veteran with an annual income in excess of $2,700. Death pensions are payable to certain widows and orphans of veterans of World War I, World War II, or the Korean conflict who die from causes not attributable to their service. The basic monthly rate for a widow alone is $50.40. If there is a widow and one child the rate is increased to $63, and $7.56 is payable for each additional child. Pension of $27.30 monthly may be paid for a child if there is no widow, $40.95 for two children, $54.60 for three children, and $7.56 for each additional child. Pension may not be paid to a widow or a child whose annual income exceeds $1,400. The widow with one or more children is subject to an income limitation of $2,700 annually. H.R. 7650 would establish a graduated scale of pension payments which would vary according to income and family status. The maximum annual income limitation would be $1,800 for a single veteran, a widow, or a child, and $3,000 for a veteran with a wife or child and for a widow with a child. The monthly pension rates would range through three increments from $85 to $40 for a single veteran; $90 to $45 for a veteran with wife or child; $60 to $25 for a widow; $75 to $40 for a widow and child, plus $15 for each additional child; and $35 for a child alone, plus $15 for each additional child. The veteran's rate would be increased by $70 monthly if he needs regular aid and attendance. In determining annual income the bill would require exclusion of the following: (a) payments of the 6 months' death gratuity; (b) donations from public or private relief or welfare organizations; (c) payments by the Veterans' Administration of pension, compensation, and dependency and indemnity compensation; (d) payments under policies of U.S. Government life insurance or national service life insurance, and payments of servicemen's indemnity; (e) lump sum social security death payments; (f) payments to an individual under public or private retirement, annuity, endowment, or similar plans or programs equal to his contributions thereto; (g) amounts equal to amounts paid by a widow or child of a deceased veteran for (1) his just debts, (2) the expenses of his last illness, and (3) the expenses of his burial to the extent such expenses are not reimbursed by the Veterans' Administration; and (h) proceeds of fire insurance policies. Currently (a), (c), (d), (f), and (h) are excluded as well as mustering-out pay, Federal or State bonus payments, railroad retirement benefits, annuities paid by service departments to survivors of deceased retired members of the Armed Forces, and compensation for overtime performed in the Federal Government. Other changes in income computation provided by the bill are nonrecognition of any waiver of income, and charging the veteran with his spouse's annual income in excess of $1,200 or 50 percent, whichever is greater, unless to do so would work a hardship on him. Further it grants authority to deny pension when the net worth of the claimant's estate is so large that a part should be used for his maintenance. Under existing law widows and children of World War II or Korean conflict veterans are ineligible for pension unless the veteran at time of death had some percent of service-connected disability. H.R. 7650 would eliminate this requirement and thereby make these groups eligible for death pension on the same basis as widows and children of World War I veterans. The bill would preserve the eligibility under present law of persons on the pension rolls when it would become effective (July 1, 1960), as well as those whose claims are pending at that time. The new program would, of course, be available to such persons and, if they so elected, it would become the only system under which they might qualify thereafter. Section 5 of the bill authorizes the Veterans' Administration to furnish an invalid lift, if medically indicated, to veterans receiving pension based on need for aid and attendance. This benefit would be available to eligible veterans of all wars. You will recall that on April 15, 1959, I submitted to the Senate a proposal to modernize the pension programs for veterans of World War I, World War II, and the Korean conflict, and their dependents. I pointed out present inequities and deficiencies and explained how my proposal would remedy them. H.R. 7650 embodies a number of the basic principles I advocate. However, in certain areas it departs from the concept of pension based on need. My proposal recommended the principle of a graduated scale of pension payments. I believe the rate tables I recommended are consistent with a pension program designed to assist needy veterans and dependents. On the other hand the maximum income limitations proposed by H.R. 7650 are too high while the tests of need are too low. Any program based on need should contain a realistic test of need. H.R. 7650 departs from this principle in failing to take into account all moneys available for support. This is exemplified in its provisions excluding certain payments from computation as annual income. The availability of a dollar rather than its source should control in determining whether a person needs assistance. H.R. 7650 partially recognizes this principle in requiring that a portion of a spouse's income should be charged to a veteran seeking pension assistance. The basis for partial exclusion is not apparent. Recognizing the realities of the situation, I believe that all of a spouse's income should be counted if the veteran and his spouse are living together. While a pensioner is being maintained at Veterans' Administration expense in a hospital or home, the need on which his pension is based has been materially reduced. I have recommended the elimination of this duplication of benefits by reducing his pension after a short period of such hospitalization or home care. H.R. 7650 does not take account of this duplication. As previously noted the bill provides for equalizing death pension eligibility requirements. This was not included in our legislative program this year because of the primary importance of correcting the more basic inequities in the present pension system. It should be remembered, of course, that veterans of World War II, and the Korean conflict have been provided with liberal readjustment benefits for themselves and their families. The first 5-year net additional cost of H.R. 7650, if enacted, is estimated as follows: Over the next 40 years H.R. 7650, which includes $22 billion for death pension equalization, would cost $10 billion more than existing law. My proposal, on the other hand, would significantly reduce projected outlays under existing law. Insofar as it embodies those basic principles I submitted with my proposal of April 15, 1959, H.R. 7650 represents a forward step. However, I feel that my proposal would provide a more realistic test of need, result in a more equitable pension system than is authorized by present law or as it would be amended by H.R. 7650, and carry out the President's desire to "better serve those who are now in need and at the same time minimize the burden placed on taxpayers by present law." Sincerely yours, SUMNER G. WHITTIER, Administrator. The CHAIRMAN. The first witness this morning is the very distinguished Director of the Bureau of the Budget, Mr. Maurice H. Stans. STATEMENT OF MAURICE H. STANS, DIRECTOR OF THE BUREAU OF THE BUDGET Mr. STANS. Mr. Chairman and members of the committee, I appear here this morning at the request of the committee to discuss H.R. 7650 which was passed by the House on June 15, 1959. With me today is Deputy Director Elmer B. Staats and several members of the staff of the Bureau and the Commissioner of Social Security, William L. Mitchell, who are here to assist the committee in answering any questions of detail that the committee may be interested in following. The legislation which you are considering involves major modifications in the approach to veterans' pensions and, if enacted, is likely to determine national policy on veterans' pensions for many |