REORGANIZATION PLAN NO. 1 OF 1949-PROVIDING FOR A DEPARTMENT OF WELFARE FRIDAY, JULY 29, 1949 UNITED STATES SENATE, The committee met, pursuant to recess, at 10 a. m., in room 357, Senate Office Building, Senator John J. McClellan (chairman) presiding. Present: Senators McClellan (chairman), Smith, and Schoeppel. Present also: Walter L. Reynolds, chief clerk. The CHAIRMAN. The committee will come to order. At the conclusion of today's hearing I wish to have the following documents printed in the record: A telegram from Gov. Fielding L. Wright, of Mississippi. A letter from Mr. William Lavelle transmitting a statement from Mr. Paul Sifton, of the Congress of Industrial Organizations. Both letter and statement to be incorporated in the record. There is also a telegram from Al Whitehouse, president of the Kentucky CIO Council, and a resolution of the council. A statement by Mr. George R. Nelson, grand lodge representative, of the International Association of Machinists, which may be printed in the record. Also a letter from W. L. Mallon, chairman, public affairs committee of the NADA. Telegram from Gov. Mennen Williams, of Michigan. I have a request from Senator McCarthy to include a letter addressed to me from Mr. James J. Ewens, of Milwaukee. Those may be incorporated in the record following the hearings today. (The documents mentioned refer to Reorganization Plan No. 2 of 1949 and appear at the appropriate place in the record of that hearing.) The CHAIRMAN. The Chair has just been handed an unsigned letter from Mr. Oscar R. Ewing, Federal Security Admiinstrator. The letter was dictated over the telephone. Mr. Ewing has had no opportunity to sign it, but he asks that it be incorporated in the record, and Ĭ will let this letter be incorporated in the record at this point because it refers to some witnesses who testify this morning. If General Hawley is present, he might be interested in the contents of this letter and want to see it before testifying and he is at liberty to do so. 81 (The letter referred to follows:) Hon. JOHN L. MCCLELLAN, United States Senate, Washington, D. C. BLUE HILL, MAINE, July 29, 1949. DEAR SENATOR MCCLELLAN: Although I have had only a meager account of Senator Taft's testimony yesterday and can only guess what General Hawley will say today, nevertheless, I have some thoughts that I want to pass on to you for whatever they may be worth. It seems to me that Senator Taft, General Hawley, and other advocates of a United Medical Administration have mistaken the form in which to present their arguments for such an agency. A bill to create a United Medical Administration was introduced by Senator Thomas of Utah and referred to the Committee on Labor and Public Welfare. Senator Taft is ranking minority member of that committee. He and other advocates of the measure should direct their activities toward that committee and endeavor to have it hold hearings. This will give all sides an opportunity to present their views. Mr. Hoover has testified, and personally I agree with him, that a United Medical Administration can be established only by act of Congress and not by reorganization plans. It is unrealistic, therefore, to argue that Reorganization Plan No. 1 should be rejected because it does not contain provisions that cannot legally be incorporated in a plan. Furthermore, it is unrealistic to argue that changing the Federal Security Agency into an executive department will make the establishment of a United Medical Administration more difficult. The same objections will exist to the creation of a United Medical Administration whether the Public Health Service is in an agency or a department. The principal objections will come from the armed services and from the veterans' organizations. Certainly their objection will not be lessened by the fact that the Public Health Service is in an agency rather than in a department. After all, Congress is the body that will decide whether or not a United Medical Administration is to be established and it will give all arguments their proper weight irrespective of whether they are presented by an agency or a department. President Truman has moved expeditiously with respect to the recommendations of Mr. Hoover. The executive departments obviously are the fundamental components of any organizational structure of the executive branch of the Government. The President believes that in order to round out this fundamental part of the organizational structure he needs an additional executive department-a Department of Welfare. After such a department is established it is then possible to move about lesser governmental agencies from one department to another with greater ease. To deny this right to the President is to create at the outset an almost insuperable obstacle to the carrying out of the Hoover Commission's recommendations. Furthermore the evidence before the committee shows that hundreds of thousands of dollars can be saved each year by giving the Department of Welfare an integrated type of organization. If the Senate rejects Reorganization Plan No. 1 it must take the responsibility for failing to make possible these savings. Reorganization Plan No. 1 has been approved by Mr. Hoover who is better able than Senator Taft or General Hawley or other advocates of a United Medical Administration to determine if the plan is in line with the recommendations of the Hoover Commission. Very truly yours, OSCAR R. EWING, Federal Security Administrator. Senator SCHOEPPEL. Mr. Chairman, at your convenience I should like to offer for the record a letter transmitted to me by the Kansas State Chamber of Commerce. I think they forwarded one statement to you as chairman of the committee. I should like to have incorporated in the record the letter sent to me from the Kansas State Chamber of Commerce and a copy of that statement if it has not heretofore been offered for the record. The CHAIRMAN. The letter may be placed in the record along with the statement, either a copy or the original, if the original is on file with the clerk of the committee. Senator Smith, did you have some letters to present? Senator SMITH. Yes, I have several letters and telegrams I should like included at the proper place in the record. Also a statement from the Labor Department signed by Secretary of Labor Tobin in answer to some of the opposition. The CHAIRMAN. They may all be placed in the record. (The documents referred to follow :) KANSAS STATE CHAMBER OF COMMERCE, Topeka, Kans., July 26, 1949. Hon. ANDREW F. SCHOEPPEL, Washington, D. C. DEAR SENATOR SCHOEPPEL: The Kansas State Chamber of Commerce is opposed to Presidential Reorganization Plan No. 2, transferring control of Unemployment Compensation and Employment Service to the Department of Labor. Our position will be expressed before your Committee on Expenditures in the Executive Departments by Mr. Herschel Atkinson of Columbus, Ohio, executive vice president of the Ohio State Chamber of Commerce and chairman of the social-security committee of the Council of State Chambers of Commerce. In addition, we will appreciate it if you will submit to the committee the enclosed statement by Fred W. Stein, Atchison, president of the Kansas State Chamber of Commerce. Ws urge you to actively oppose Presidential Reorganization Plan No. 2. Very truly yours, C. C. KILKER, Manager. STATEMENT OF FRED W. STEIN, ATCHISON, KANS., PRESIDENT, KANSAS STATE CHAMBER OF COMMERCE Mr. Chairman and members of the committee, the Kansas State Chamber of Commerce, with a membership of more than 2,000 Kansas businessmen from every section of our State, opposes Presidential Reorganization Plan No. 2, transferring jurisdiction over unemployment compensation and employment service programs from the Federal Security Agency to the Depa.ment of Labor. The opposition of the Kansas State chamber is not something which has been created by the current proposal. We have expressed our position each time the proposal has been made, and our basic position remains the same on this occasion. We believe that the control and administration of the unemployment compensation and employment service programs are matters of general public concern and, consequently, should not be lodged in a department whose basic philosophy is directed by law toward furthering the interests of a single group. The Kansas State Chamber of Commerce has no quarrel with labor or with the department set up to serve it. We believe that it is proper to have a department concerned with being of service to labor, as it is proper to have the Department of Commerce serving business. We do not believe, however, that the department serving labor should be allowed full and final administrative control over programs which are of vital and equal concern to labor, to business, and to the general public. At the present time, this administrative control is lodged in an agency which is much more able to maintain a neutral attitude and to assure equal protection to the interests of all concerned. The Kansas State Chamber of Commerce recognizes that the current proposal is being brought forward with the contention that it has the blessings of the Hoover Commission. In general, we subscribe to the excellence of the Hoover Commission reports. We fear, however, that in this instance the Commisison overlooked the primary and fundamental fact that the transfer of these two programs to the Department of Labor would be ignoring the public interest in favor of the interests of the single segment of the population which this Department represents. There are many other convincing arguments as to why this transfer should not be made, and we are sure that they will be capably presented to the members of this committee. We have requested Mr. Herschel Atkinson of Columbus, Ohio, executive vice president of the Ohio Chamber of Commerce and chairman of the social security committee of the Council of State Chambers of Commerce, to represent the Kansas State chamber in the presentation of these additional arguments. We do, however, desire to submit this separate statement in an effort to emphasize our considered conviction that transfer of unemployment compensation and employment service to the Department of Labor will be in direct violation of democratic processes. We urge you to consider carefully the ultimate effects of permitting a department which is directed by law to service a single group to control completely programs which are by their very nature, as well as by their legal structure, of vital concern to every member of our citizenry. For these reasons, and for the additional reasons which Mr. Atkinson will express on our behalf, we earnestly urge that your committee recommend that the Presidential Reorganization Plan No. 2 be refused. Hon. MARGARET CHASE SMITH, United States Senate, Washington, D. C. DEPARTMENT OF LABOR, OFFICE OF THE SECRETARY, DEAR SENATOR SMITH: This is in reply to your request for information as to whether the contribution rates paid by employers in Maine under the experience rating system, now ranging from 1.09 to 2.7, would be raised if the unemployment compensation program is transferred to the Department of Labor. I appreciate the opportunity of clearing up this question. Only Congress and the State legislatures can abolish or change the experience rating system. The Federal Security Agency, and the Social Security Board before it, have advocated the abolition of the experience rating system for over 10 years, but this has had no effect on Congress. During this period the Social Security Board and the Federal Security Agency approved experience rating plans for every State and Territory covered by the Federal Unemployment Tax Act. My interpretation of my powers, if the unemployment compensation program is transferred to the Department of Labor, is that I must approve any plan that meets the requirements of section 1602 (a) of the Federal statute enacted by Congress which is commonly known as the Internal Revenue Code. Attached is a copy of an opinion dated July 22, 1949, from the Solicitor of Labor to me to this effect. I hope that this information will be helpful to you, and if you should require any additional information, please do not hesitate to call upon me. Yours very truly, MAURICE J. TOBIN, Secretary of Labor. DEPARTMENT OF LABOR, Memorandum. To: The Secretary. From: William S. Tyson, Solicitor. Subject: Experience rating systems under State unemployment compensation laws. This is in reference to your request for information as to the provisions of applicable Federal statutes relating to approval of State laws which provide for so-called experience ratings. Specifically, you ask my opinion whether the Federal Security Administrator or any other Federal official upon whom Congress may devolve the responsibility for approving State laws providing for additional tax credits as provided for in section 1602 (a) of the Internal Revenue Code, possesses unlimited discretion with respect to whether or not he shall approve such State law. As you know, the Federal Unemployment Tax Act (26 U. S. C. A., sec. 16001611) imposes on employers employing eight or more persons during a certain number of weeks in a taxable year, a tax of 3 percent of the total wages paid by the employer during such year. However, the taxpayer may credit up to 90 percent of such tax the amount of contributions he had made into an unemployment fund maintained during the year under the unemployment compensation law of a State which the Federal Security Administration finds complies with the standards set forth in sections 1600-1611 of the Federal Unemployment Tax Act. In order to encourage employers to decrease their labor turn-over, section 1602 (a) of the Federal Unemployment Tax Act provides that a taxpayer shall be allowed additional credits with respect to a reduced rate permitted by State law if the Federal Security Administrator finds that such State law meets certain prescribed Federal standards. The act provides for at least three general types of State plans in this regard. While each of these plans must conform to certain conditions, definite standards are imposed as to the size of the reserve necessary to qualify for such additional credits with reference to two plans. The plans referred to are those establishing a so-called "guaranteed employment account" or "reserve account." The statutory standards relating to these plans are most definite. The size of the reserve is mathematically ascertainable under the somewhat complex formulae set forth in the statute. In view of the definiteness of the standards established, it is my opinion that the Administrator possesses very little, if any, discretion with respect to the approval of State laws conforming to such standards. With respect to the third type of plan (so-called pooled fund or partially pooled fund), the only condition set up by Federal law is that no employer's rate shall be lower except on the basis of 3 years' experience "with respect to unemployment or other factors bearing a direct relation to unemployment risk." It seems self-evident that request for approval of this type of a plan may require the Administrator to exercise greater range of judgment by virtue of the indefiniteness of the statutory standard involved. However, this does not mean that the Administrator has unlimited discretion with respect to the approval of this type of a State plan. It seems clear that Congress in enacting the Social Security Act and its companion statute, the Federal Unemployment Tax Act, intended to specify the minimum requirements of a sound unemployment compensation law, and left to the States to determine whether they wished to enact laws with higher standards. Consequently, notwithstanding the broad and somewhat vague standard which Congress has set up, it is my opinion that the Federal Security Administrator is nevertheless definitely circumscribed in the scope of judgment he may exercise with respect to the approval of this type of a State plan. It is also very likely that the exercise of the Administrator's judgment in this regard is subject to court review. As stated by the Supreme Court in a relatively recent decision, "Administration, when it interprets a statute, acts as a delegate to the legislative power. * * * An agency may not finally decide the limits of its statutory power. That is a judicial function." Social Security Board v. Nierotko (327 U. S. 358, 369 (1946)). While this case involved an interpretation of the term "wages" as used in the Social Security Act, the language employed appears to be equally apropos of the discretion vested in an administrative agency whether a particular factual situation meets a prescribed statutory standard. The CHAIRMAN. Is Senator Aiken available? (No response.) I will call Dr. Borzell. Is he present? (No response.) Is Dr. Fischelis present? Will you come forward, Doctor, please. Do you have a prepared statement? Dr. FISCHELIS. Í have, Mr. Chairman. The CHAIRMAN. Do you wish to read it? Dr. FISCHELIS. I think I should like to read most of it. The CHAIRMAN. All right, you may proceed with it. If you fail to read all of it, it may be incorporated in the record. Dr. FISCHELIS. Thank you, sir. |