Mr. MACKEY. That is correct. May I give you another? During the last session of our legislature our legislature saw fit to write into the law a provision known as the noncommunistic affidavit provision, requiring a claimant for benefits to sign such a certificate before he drew any money out of the State fund. It wasn't long after this was introduced and passed in the house that we received word from Washington that this did not meet the approval of the Social Security Agency and would possibly throw the Ohio law out of conformity, thereby denying the right to Ohio employers to secure their offset against the Federal excise tax. We have a Governor in Ohio who has a mind of his own, who I understand immediately got on the telephone and asked whoever in Washington had the authority to make such a decision to put it in writing and send it to him post haste. To make a long story short, and it was rather a long story, lasting about 2 days, consisting of telephone conversations, and so forth, no one saw fit to put this ruling in writing and tell the State legislature that the inclusion of the noncommunistic affidavit provision would actually throw the Ohio law out of conformity.

That is just another illustration, Your Honor, of the potential power and authority that is actually exercised regardless of what the congressional intent may have been, but what is actually exercised by this central control that is lodged here in Washington. A threat, Your Honor, to throw the Ohio law or any other law out of conformity with the Federal law is sufficient to almost destroy any amendment which is proposed or to induce the inclusion of almost any amendment in a State law.

The CHAIRMAN. Senator McCarthy? Senator Ives?
Senator Ives. I think you will agree, Mr. Mackey, that these two

particular functions should be in one agency of Government.

Mr. MACKEY. Yes, sir; I do.

Senator Ives. You are not quarreling about that at all.
Mr. MACKEY. I am not.

Senator Ives. I want to get certain things clear for us.

The next thing I want to point out to you is that I do not think you can construe the action taken by the Congress in 1947 and 1948 as a mandate for anything in particular.

Mr. MACKEY. Possibly not.

Senator Ives. I point out particularly, with respect to action taken by the Congress in 1948 that a great many of us were opposed to that proposal, opposed in part at least, because we were awaiting the Hoover recommendation. We thought it inadvisable to go ahead until we had a proposal from them. We now have their recommendation.

There is just one more question I would like to raise, and that is this: You seem to be fearful of the influence of the Department of Labor in the way in which this whole system of unemployment compensation will eventually be determined. You were here yesterday, were you? Mr. MACKEY. I was, sir.

Senator Ives. You heard the conversation, probably, between the distinguished Secretary and myself in which it was finally pointed out that after all the Congress itself determines this question. It does not make any particular difference whether it is the Department of Labor that you have or any other department, as far as the law itself is concerned.

I realize the intent and I realize the interpretation and all that, but I think you will recall that the law was read into the record yesterday, and based on the testimony of the representatives of the Department of Labor, it was indicated that beyond a certain point they cannot go in their interpretation or in their regulations. In the final analysis it must rest with the Congress to decide. I think that perhaps in that connection there is an undue amount of fear being expressed on the part of a great many people because, after all, it does rest with the Congress. Do not think that I am not sympathetic toward unemployment compensation and unemployment insurance and experience rating in particular. It was largely because of my own personal efforts that that whole system was instituted in the State of New York, and in doing so we got organized labor with us in the undertaking. We all worked together on it. But I do not entertain the fears for that reason due to my own experience that so many are expressing, because I do recognize that it does rest finally in the Congress. You might get the most conservative labor department known to man, and if you suddenly got a Congress in the other direction, that would make no difference, and vice versa it would be equally true. I simply want to point that out.

Mr. MACKEY. May I comment?

Senator Ives. Surely. We are trying to clear up these things. Mr. MACKEY. I certainly don't disagree with you, Senator, and I wouldn't charge anybody with intention to violate the law.

Senator IveS. I did not mean to infer that.

Mr. MACKEY. I didn't mean that either, if there were any inferences of that kind. I do feel, however, that there is a wide field of discretion in the authority which is granted to whichever Federal agency it is lodged in here in Washington. We in the States feel this very definitely, and anyone who has had any part in the administration of one of these programs is everconscious of that influence. We would like to have whatever that influence is one which beyond any question or doubt is impartial in every way. That is all we are asking.

The CHAIRMAN. Senator Smith?

Senator SMITH. I have no questions.

The CHAIRMAN. Thank you very much, Mr. Mackey. (The prepared statement of Mr. Mackey follows:)

STATEMENT BY WALTER J. MACKEY ON BEHALF OF THE OHIO MANUFACTURERS* ASSOCIATION, COLUMBUS, OHIO

Reorganization plan No. 2 of 1949, prepared by the President and submitted to the Senate and House of Representatives on June 20, 1949, pursuant to the provisions of the Reorganization Act of 1949, provides that the Bureau of Employment Security of the Federal Security Agency, including the United States Employment Service and Unemployment Compensation, shall be transferred to the Department of Labor.

It is proposed that the functions of the Federal Security Administrator with respect to employment services, unemployment compensation, and the Bureau of Employment Security, together with the Administrator's functions under the Federal Unemployment Tax Act, be transferred to the Secretary of Labor.

It is provided that if this transfer takes place, functions so transferred shall be performed by the Secretary of Labor or subject to his jurisdiction and control, by such officers, agencies, and employees of the Department of Labor as the Secretary shall designate.

As we all know, this reorganization plan No. 2 of 1949 is one of a number of reorganizational proposals which have resulted from what appears to be an otherwise worth while and worthy attempt to streamline the executive departments of government and reduce the expenses thereof.

In our judgment, however, the reorganization plan No. 2 fails in this announced purpose, and instead, is being used to further a purely selfish objective on the part of the Department of Labor which objective it has been unable to accomplish heretofore in the Congress.

I am sure there is no conflict in the aims of this Congress with our own, in trying to bring about a much-needed curtailed cost of the operation of the Federal Government which, in our judgment, has grown top-heavy due partly to the many emergency functions assumed by the Government during the war period and which it has been reluctant to give up since the war.

It is our further belief that many of these functions could be better and more economically performed on a State or local basis.

We therefore oppose reorganization plan No. 2 for the following reasons:

1. When the original Social Security Act was passed by Congress, the Social Security Board was established as an independent Federal agency. The program should continue to be so administered. We are convinced that if this transfer is allowed to take place, there will be an ever-increasing effort to completely federalize our State unemployment compensation programs by those here in Washington who have striven so hard in the past, although unsuccessfully, to bring about this result.

2. It will be remembered that so far as unemployment compensation is concerned, all of the money used to pay unemployment benefits comes from a tax upon employers exclusively. This is true in my State (Ohio) as well as in every other State with the exceptions of Alabama and New Jersey.

To permit the control of the administration of these laws nationally, to be exercised exclusively by the United States Department of Labor is not only unsound from an administrative point of view, but is a breach of faith with the States which have accepted this program on the basis that it would be a plan impartially administered here in Washington by a Federal agency dominated neither by organized labor nor employer groups.

Although there have been many things lacking in the relationship between the present Federal Security Agency and the State administrative agencies, these difficulties would be multiplied if the administration were to be lodged with the Labor Department.

3. It is a fact that the Department of Labor does actually represent the particular interest of one segment of the population and not the impartial public interest of all.

The statute setting up the Department of Labor reads in part as follows: "The purpose of the Department of Labor shall be to foster, promote, and develop the welfare of the wage earners of the United States; to improve their working conditions; and to advance their opportunities for profitable employment."

This is a laudable purpose for any agency which is devoted to the interest of labor exclusively. It is, no doubt, the same purpose upon which the several Nation-wide labor organizations are founded-to promote the interest of laborand while we have no quarrel with these proper objectives of labor organizations, we believe that the United States Labor Department should not have the tremendous power and authority which is potentially contained in the administration of this far-flung system of unemployment and employment service.

Taking the State of Ohio as a typical example, the unemployment-compensation program is made up of two principal divisions: The employment service and the unemployment-compensation divison.

The function of one is to try to find a job for the unemployed individual and fit him to the job for which he is most capable. The function of the other is to pay benefits to those for whom jobs cannot be found.

One of the important problems of the State agency administering this program is to secure the cooperation and confidence of the employers in the employment service in order to have them list their job opportunities with this agency and cooperate in the filling of these jobs.

Let us be realistic. If both of these agencies were administered under the authority of the United States Department of Labor, largely dominated and controlled by the national leaders of organized labor, the inevitable result will be that the State agency will have greater difficulty in convincing the employers of its impartiality and be further handicapped in securing employer cooperation with the local employment offices.

4. The United States Employment Service which was established in 1933 was consolidated with the Unemployment Compensation Service in 1939 in order to secure better administration.

A Reorganization Plan No. 2 was proposed to Congress in 1947 providing that the Employment Service be transferred to the Department of Labor. This plan was rejected by both branches of Congress, as was required at that time to prevent the plan from going into effect.

In 1948, Reorganization Plan No. 1, proposed that Unemployment Compensation be transferred from the Federal Security Agency to the United States Department of Labor. Again this plan was rejected by both branches of Congress.

It is well known that the national organized labor groups are still exerting their influence to federalize our whole system of unemployment compensation. To now place the administration of these programs in the Labor Department whose policies are largely determined by the leaders of these national labor organizations would be a far step in the direction of federalization.

We submit that this is contrary to the best interests of those affected by the unemployment-compensation program. To permit administration of this broad insurance program by a Federal agency dominated entirely by representatives of the beneficiaries of these funds is not sound governmental procedure.

It is also a matter of record that these labor groups are opposed to merit rating which is a fundamental part of practically every State law today. This is the feature of the State laws which permits the allocation of the cost of unemployment compensation to industries in proportion to the amount of unemployment; which encourages employers to stabilize their employment, thus preventing unemployment; and which sustains the interest of the employers in the quality of administration.

As one of those who was charged with a share of the responsibility of administering the unemployment-compensation program in Ohio from its inception in 1936 for 5 years thereafter, I have become convinced that without the employer's interest in how this law is administered, no program of this kind can be operated without opening the door to abuses of many kinds.

For example, the unemployment agency must rely upon the employer to furnish wage data, as well as other information necessary to determine a claimant's eligibility for benefits such as reason for separation, number of weeks worked, etc. Without some interest in the program, difficulties would increase in obtaining this vital information.

A program of this kind needs the sustaining influence of the labor groups on the one hand, the employer groups on the other, an impartial administrative agency as a referee, and the State legislature and Congress in establishing general rules and policies.

An example of the principles of these who advocate the domination of this program by the Labor Department, is found in the thirteenth annual conference of labor officials here in Washington in 1946. It was recommended that "in testing an unemployed worker's availability for work, no general requirement for 'actively seeking work' outside of registration at a public employment office be incorporated in any State law."

At that same conference with respect to "merit" or "experience rating" in the State laws, it was recommended that experience-rating provisions be removed from State unemployment-compensation laws.

If further documentary evidence is needed to prove that the influence under the United States Department of Labor would be partial to labor, it can be readily found.

:

As previously pointed out these added duties are to be performed under the direction of the Secretary of Labor by such officers, agencies and employees of his Department as the Secretary shall decide upon.

Instead of a consolidation, it appears that this will merely be another layer of authority superimposed on top of the present Federal Security Agency here in Washington.

If this is not to be the result and if there are economies to follow, then the various agencies which are to be eliminated by this transfer should be indicated.; It has been called to our attention that the so-called task force, an agency working under the Brookings Institution retained by the Hoover Commission to make a study of these departments, reached the following conclusion:

"The nature of this issue regarding the proper location of the Federal agency administering the Employment Service and unemployment compensation precludes its settlement on a purely factual basis."

Of what significance is this statement? Taken at its face value, it would seem to indicate that this study group could find no facts which would justify any concrete recommendation for such a transfer. In the absence of "facts" what, does the report mean when it says:

"A decision must be arrived at on the basis of judgment, and in last analysis this judgment must be exercised by the duly elected representatives of the people. The Brookings Institution is not submitting any formal recommendation on the subject because detailed facts alone do not determine the issue." (Taken from the Tack Force Report on Public Welfare, appendix P.)

We have shown what the judgment has been by those who are the "duly elected representative of the people," namely, Congress. There has been a consistent record of retaining these services under the jurisdiction of an impartial agency which is not subordinated, either to the interests of a Labor Department or to any employer-dominated agency.

We have been advised that possibly one reason for this proposal was sympathy to a Labor Department whose authority and functions have been decreased during the last few years. Congress surely had some very good reasons for its action taking away certain functions from this Department. Does mere sympathy for a department which has not conducted itself so as to hold the public confidence,.. justify such a reward?

We submit that Government expenses are not going to be reduced, if, through misplaced sympathy, any department which has had its wings clipped by Congress in the past should be suddenly, restored to a full-fledged Government agency and have its responsibilities and duties so vastly increased, before it has proved its ability, to fly in a straight direction. It is likely that, if the proposed transfer were made, this department would become an even greater problem to Congress.

If this proposed transfer is justified now, then President Roosevelt was wrong: when he gave these responsibilities to an independent and impartial agency, and Congress was wrong in approving this action at that time.

If this proposed transfer is right now, then Congress was wrong in 1947 in deciding to retain this independent status.

If this proposed transfer is right now, then both Houses of Congress were wrong in 1948 in rejecting a similar proposed transfer.

If this proposed transfer is right now, then all of those who have testified that the best interests of employees, employers, and the public can be served by con tinuing the administration of these services under an impartial agency, have been wrong and lacking in good judgment.

We believe that no such errors have been committed in the past and that the proposal has no more merit now than it had then.

Ohio industry favors the greater part of the recommendations of the Hoover. Commission, but we believe the proposed transfer of unemployment and employ-ment services to the Labor Department is out of harmony and inconsistent with the other parts of this report which deal with practical recommendations for economy, efficiency, and elimination of duplications of Government operations.

For these reasons, Ohio industry, through the Ohio Manufacturers' Association registers its objection to the proposed transfer of unemployment and employment services to the United States Labor Department.

The CHAIRMAN. The next witness is Mr. Donnelly. Do you have a prepared statement, Mr. Donnelly? Mr. DONNELLY. Yes, sir.

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