A brief review of the principal units of the Federal Security Agency will indicate the important role it plays. First, there is the Social Security Administration in charge of public assistance for the aged, the blind, and the dependent children, the old-age and survivors' insurance system, the employment-security program, and the Federal credit-union program. Through the Children's Bureau it also administers child and maternal health and welfare activities and studies problems of child life.

The Office of Education administers grants for vocational education and conducts studies and investigations to assist the States in improving their educational systems. The Public Health Service carries on a broad program of research, operates the marine hospitals and the quarantine service, and administers grants for State and local health work and the control of various major diseases. The Food and Drug Administration enforces the Food, Drug, and Cosmetics Act. The Office of Vocational Rehabilitation provides grants and assistance to States in the rehibilitation and retraining of the disabled, and the Bureau of Employees' Compensation administers workmen's compensation systems for Federal employees, longshoremen and harbor workers, and the District of Columbia. In addition, the Federal Security Agency supervises certain Federal institutions in the District of Columbia.

The conversion of the Federal Security Agency into a Department of Welfare is much more than a change of name. First of all, it assures Cabinet representation for one of the most important groups of functions carried on by the Government. In the second place, it lends a prestige which helps to strengthen administration. The executive departments have long been recognized as the leading agencies of the Federal Government and have acquired much greater popular prestige than attaches to other Federal agencies. This prestige makes it easier to obtain outstanding persons for the posts of Secretary and Assistant Secretary than for comparable positions in other agencies. Furthermore, it lends weight to, and gains acceptance of, administration action and leadership. These are intangible assets, but they contribute_significantly to effective administration. There certainly is no good reason why an agency with responsibilities such as those of the Federal Security Agency should be denied these benefits.

In testifying before the Senate Committee on Expenditures in the Executive Departments on June 30, former President Hoover stated that this reorganization plan is in accord with the recommendation of the Commission on Organization of the Executive Branch for a new Department to replace the Federal Security Agency. The plan also conforms to the recommendations of the Commission as to the top officials of the Department and the scope and nature of their authority and responsibility. To head the Department, it provides for a Secretary, an Under Secretary, and three Assistant Secretaries. This is exactly the battery of principal officers proposed for the Department of the Commission. Furthermore, the plan follows the recommendation of the Commission in leaving to the Secretary the assignment of duties to the various Assistant Secretaries.

By consolidating the functions of the various officers and constituent units in the Secretary, the plan also carries out two basic recommendations of the Commission for improving departmental management

throughout the Government. The Commission stressed the principle that

Under the President, the heads of the departments must hold full responsibility for the conduct of their departments. There must be a clear line of authority reaching down through every step of the organization, and no subordinate should have authority independent from that of his superior.

The consolidation of functions in the Secretary fixes responsibility and eliminates question as to his authority to direct the affairs of the Department. At the same time it gives him the control over internal organization which the Commission recommended.

As the Commission pointed out, the heads of departments must have authority to adjust the internal organization of their agencies to changing conditions if they are to achieve the most efficient administration. The concentration of functions in the heads of the departments and agencies, subject to delegation, is a principle long followed by the Congress with respect to the Department of Agriculture and some other departments. Its desirability has recently been reaffirmed by the Congress in the act creating the additional Assistant Secretaries of State and transferring the statutory functions of officers of that Department to the Secretary and also in the Federal Property and Administrative Services Act, which vests most of the functions of the new General Services Administration in the Administrator.

The creation of the Department of Welfare will close a serious gap in the departmental structure of the executive branch. In my judgment and that of the President, this plan is a major step in improving the organization of the Government. I hope that the plan will be allowed to become effective.

Mr. Chairman, that completes my formal statement.

The CHAIRMAN. I think you pointed out in your statement that heretofore none of the reorganization acts that the Congress had passed delegated to the President the power to create a new department of Government.

Mr. PACE. That is true. In the Reorganization Act of 1939, no such power existed.

The CHAIRMAN. Notwithstanding that various commissions at different times, and the Presidents, have recommended the creation of such a department, and that we have had some four or five different reorganization bills authorizing the President to reorganize the executive branch of the Government, this particular power to create a department has never been granted to the President heretofore until the enactment of the 1949 Reorganization Act.

Mr. PACE. That is correct.

The CHAIRMAN. And this is the first plan ever submitted by a President that would create a department by the plan procedure. Mr. PACE. That is correct.

The CHAIRMAN. There is one particular fact that should be developed if it can be established, and that is as to the question of economy that may be involved, the benefits in economy if any that may accrue by reason of the establishing or the creating of a Welfare Department.

As I recall, when the President submitted these plans in his general message he pointed out that it was hardly possible for him to evaluate the particular economy in each plan; but I am wondering if the Bureau of the Budget could indicate whether there will be any actual

money economies resulting from the administration of the socialsecurity functions by reason of creating a department.

Mr. PACE. I think, Mr. Chairman, that the answer to that must be that, of course, it is impossible to evaluate in specific dollar terms what the result of changing an agency into a department might be. I think that the over-all pattern of the Hoover Commission reports indicates that the creation of this particular department fits in with the normal program of better management which it has recommended. It will establish more centralized authority in a man of Cabinet status. It will mean that those intangible functions of better management should in the long run effect specific dollar savings. Either to state exactly how that will occur or what the dollar savings might be would be both impossible and impracticable.

I feel that in the position we occupy in the Bureau of the Budget this reorganization will lend itself to a better pattern of management in the executive branch which will in the long run effect savings of dollars without loss of service in that particular area.

The CHAIRMAN. The plan actually abolishes no function, no service, that is now being performed.

Mr. PACE. That is correct; and it will accomplish no immediate saving.

The CHAIRMAN. That is right. In other words, the constituting of this group of activities as a separate department will probably mean. no change in personnel; the same number of personnel will be required to perform the identical functions that are now being performed. So the hope of economy (which is what it really amounts to) should develop, or can be expected to develop, over a period of time, on the theory that by granting this authority and establishing this line of responsibility as recommended by the Hoover Commission, as this plan does, you would get more efficiency in administration. In other words, I have used this expression heretofore about the Hoover Commission reports and recommendations: that through them we ought to get better government for the same cost.

Mr. PACE. That is correct.

The CHAIRMAN. I have never subscribed to any figure, however, in that connection. I have never considered it with the view that, if all of the Hoover recommendations were put into effect and the Government were reorganized on the basis of those recommendations, there would be a $3 billion saving or a $5 billion saving. I do not think anyone can determine that, and I do not think it is possible for you to even point out an actual dollar saving in this plan, because I do not think it actually exists. The only hope is that if we get a better-organized Government, a better-integrated Government, we can get better government; at least better government for the same money we are now spending.

Mr. PACE. Exactly; or, alternatively, the same government for less money.

The CHAIRMAN. I hope we will get a better government, at least. Senator EASTLAND. How will we get a better government by the adoption of this plan?

Mr. PACE. I can only say that this Commission, which spent a substantial period of time studying managerial practices in the Government, came to the conclusion that by allocating authority at the top and by setting up a structure that fits into the over-all pattern of

Government more intelligently, and by analogy with business practices elsewhere, came to the conclusion that the establishment of a department with centralized authority would permit an administrator at the top to operate more efficiently, to establish lines of authority, to eliminate such duplications as might be eliminated, and to generally operate on a sounder and more efficient basis.

Senator EASTLAND. You speak of duplication of authority that would be abolished. Can you tell me what that is?

Mr. PACE. I said such duplication as might be abolished.

Senator EASTLAND. Do you know whether duplication exists or not? Mr. PACE. Do I know whether it exists? Specifically, I can't specify that duplication does exist; no, sir.

The CHAIRMAN. Senator Long?

Senator LONG. Although this changes the name of the department, I do not see that it adds any number of functions to the Federal Security Agency as it now exists. Can you tell me offhand what functions would be added to the Federal Security, or what change this would bring about other than the change of name?

par

Mr. PACE. Senator, no functions would be added to it by this ticular plan, and no functions would be subtracted from it. This is merely the first step in the area of recommendations made by the Hoover Commission and generally concurred in by all members of the Hoover Commission as a wise move and one which the President also, after consideration, feels has merit.

I should point out that, in addition to the better managerial practices that exist, it seems advisable to place an agency that has within it programs of this importance on a Cabinet level; so that it has the status of a Cabinet operation, and also in order that the counsel of that particular organization may be heard at Cabinet level and integrated into the over-all Cabinet discussions at the Presidential level.

Senator LONG. I do not believe anyone doubts that an agency of this magnitude should be accorded Cabinet status. There are some people in the medical profession who feel that they should be separated from it and that they should be elevated to Cabinet status from the standpoint of medical care and the handling of all medical facilities. Do you have any ideas on that subject?

Mr. PACE. That is currently under consideration, Senator. It raised a great many problems and apparently was the basis for a difference of opinion within the Commission itself. I think there was a dissenting opinion to that particular provision. But since we have it under consideration now, I do not think that I am in a position to comment upon what the ultimate determination of the President in that area might be.

Senator LONG. This, if anything, leaves all of the health program just exactly where it was before.

Mr. PACE. That is correct.

Senator LONG. Although it would elevate the status of the entire department; so that in effect it would somewhat, indirectly, elevate the health status, too; because that falls into a Cabinet position under a Cabinet officer rather than being left outside.

Mr. PACE. Yes, sir. Your question raises one point that I am. not sure I have made clear, and that is that the creation of a department does not inhibit in any way any other steps that might be taken

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in terms of recommendations that were made by the Hoover Commission.

Senator LONG. And this does not at all mean that in the future the President may not see fit to send down an organization plan that would separate the health activities and place them in a separate department.

Mr. PACE. He is completely free to act in that area if he deems it

wise.

Senator LONG. No further questions.

The CHAIRMAN. Senator Smith?

Senator SMITH. No questions.

The CHAIRMAN. Senator Schoeppel?

Senator SCHOEPPEL. I would like to ask you this: With this concentration under one head, is there a possibility that there may be a tendency to encompass other activities, to reach out and grab other types of activities, which tendency might be harmful?

Mr. PACE. Senator, I think the answer to that question probably lies in the fact that other departments currently have this type of authority; and other department heads. We are not creating anything unusual if we have a Cabinet officer in the Department of Welfare. We are only giving him a status that is comparable to that of other Cabinet officers or other department heads. I would feel that there would be no greater tendency on his part than there might be on the part of any other head of an executive department to attempt to encompass other fields.

Senator SCHOEPPEL. I understood you to say awhile ago that you saw no reason to expect any savings by this type of reorganization at the moment.

Mr. PACE. I spoke of "immediate savings." That is correct, Sen

ator.

Senator SCHOEPPEL. That is one of the main reasons, really, that we are striving to effect these reorganization plans. We look for greater efficiency, less hit-and-miss activity.

Mr. PACE. That is correct; yes. I think that the main purpose of the Hoover Commission is to establish a more effective form of government, which will establish economies. Some of the economies are not the type of economics that will show up in terms of an immediate saving. I think it is generally recognized that better government means more economical government; and that is the purport of the Hoover Commission operation.

I should point out that this is only one of a number of plans that have been submitted, in conformity with the Hoover Commission reports. There are also areas of legislation which carry out the recommendations of the Hoover reports; also areas of administrative action that carry out recommendations of the Hoover reports. And I think that, as you suggest, the purpose of this is to establish a climate of good management and good operation that will result in operating our Government not only more efficiently but more economically as time passes. It is unfortunately true that the effects of good management and establishing a system of good management are not reflected in immediate savings in every instance; but to create the basis for those savings is enormously important.

The CHAIRMAN. Any further questions?