grams should be reviewed in the attempt to establish priorities and with government competition with private enterprise, is attached. With appreciation for your courtesy in this matter. Sincerely yours, ARCHER L. BOLTON, Jr., Chairman, Government Expenditures Committee. SUPPLEMENTARY STATEMENT TO THE TESTIMONY OF ARCHER L. BOLTON, JR. ON BEHALF OF THE NATIONAL ASSOCIATION OF MANUFACTURERS ON S. 2116 AND S. 47 In reply to Chairman Ribicoff's question, "What types of programs should be reviewed in the attempt to establish priorities?", NAM would say, "all types of programs." When we consider non-defense programs, certainly old programs must be reexamined to see whether they are still justified. Similarly, relatively new ones must be evaluated to see whether they are, in reality, solving the problems to which they were addressed. And the newest of all should be scrutinized to see whether their very rapid growth is, in fact, necessary. Further, as the hearings last year before the Subcommittee on Economy in Government of the Joint Economic Committee brought out, the entire question of cost-benefit ratios relating to public works must be re-assessed. Although the priority of national defense is not debatable, there are certainly non-emergency defense programs which are of lower priority at this moment than Vietnam. The Department of Defense's emphasis on program-planningbudgeting in recent years attests to the possibility of improved, more economical management. In reply to the Chairman's question on what government programs are competitive with private enterprise, we would suggest that two broad areas merit special inquiry: federal lending programs and those operations which provide goods and services for the government's own use. NAM's policies on these two subjects are attached. With respect to activities providing goods and services to the government for its own use, the executive branch has expressed its "general policy" of relying on the private enterprise system to supply its needs, and we believe this policy should be vigorously implemented. The predominance of such activities falls in the broad defense area. NAM's Defense Committee deals with this problem as a member of the Council of Defense and Space Industry Association. Among the concerns of that group are proposals which would displace contractors' employees or contract technical service personnel by civil servants. This presents a serious problem of government competition. Inquiry should also be directed to the production by government of commodities used by the military services. Since the executive branch has specified its policy of relying on private enterprise, there is some obligation on government itself to see that this is, in fact, the case. In other words, a self-policing responsibility exists. This is one reason for singling out the aspect of S. 47 which looks toward eliminating certain functions which are competitive with private enterprise. The second broad area of our concern with government competition has to do with federal credit programs. Government lending has expanded rapidly over the last few years, although the budgetary impact was masked for a time by the device of using proceeds (or anticipated proceeds) from the sales of participation certificates as a deduction from expenditures. The new budget concept treats the proceeds from such sales as a means of financing the deficit. This reform was in line with NAM policy. Nevertheless, there are still problems: some credit programs compete with private lenders; others are not self-supporting and involve unreported costs to the taxpayers. The whole question of government competition with private enterprise has received special attention from the Council for Private Enterprise, in whose activities NAM has participated; and we draw the Subcommittee's attention to several quotations from the Council's booklet, "Why We've Grown", published in 1967: "Uncle Sam is the nation's biggest businessman. He is the biggest spender, lender, insurer, landlord and tenant. He is the nation's largest warehouse operator, shipowner and truck fleet operator.. "It would be difficult to name a part of the American economy in which our ubiquitous government is not involved. There are Federal employment agencies, Federal printing shops, Federal florists, Federal shipyards and Federal barber shops. In 1960, in fact, the Bureau of the Budget admitted to 24,000 examples of Federal competition with the private sector: 19,100 were maintained by civilian agencies and some 5,000 by the Department of Defense. A 1963 Congressional report put the worth of Federal holdings that were once in the private domain at $82 billion." Pertinent also are the survey findings of Opinion Research Corp., which the Council included in its booklet and which we quote here: "While government is increasing its loans to business, 50 per cent of the people want less government lending to business. "While federal power continues to rise, the public by a margin of 8 to 1 would prefer to see more privately-owned public utilities. "While government continues to operate businesses and corporations supplying materials and services, the public by 7 to 1 would prefer to see the private sector and not the government make those products used mainly by the government. "The government maintains 11 shipyards whose total assets of more than $3 billion exceed individually such corporate giants as General Electric, RCA, IBM and Boeing. Yet, 66 per cent of the public would prefer that shipyards which build government ships be run privately." We appreciate the privilege of submitting this supplementary statement to the Subcommittee. It is intended to be suggestive, not comprehensive. It is the magnitude of the problem of identification and evaluation of programs which leads us to look so favorably on the appointment of a Commission to study government programs. Since the April 4th, 1968 hearings, Senator Jacob Javits has introduced S. 3294, which is identical with legislation sponsored by the minority members of the Joint Economic Committee. I am taking advantage of this supplement to my testimony to commend the features of this bill as worthy of consideration before the Subcommittee determines finally on the components of the bill it will report. NATIONAL ASSOCIATION OF MANUFACTURERS POLICY POSITIONS An Advisory Council on Federal Credit Programs As an aid to Congressional and Executive policy makers, an Advisory Council on federal credit programs should be established. Its members should include representatives of private industry for each of the areas in which federal loan programs operate, and from the banking and credit fields in general. Its purpose should be to offer information and guidance to the Congress to facilitate annual review of the programs and their costs, and to help achieve an orderly substitution of private credit for federal credit. The Council and its purposes should be designed to minimize if not fully eliminate federal provision of direct loans and the guarantee or insurance of loans from other sources. Federal Business-Type Activities The federal government's general policy of relying on the private enterprise system to supply its needs, and of avoiding competition with private business, should be vigorously implemented. To further a policy of reliance on private enterprise, the following principles should apply with respect to government provision of products and services either for its own use or the use of the public. 1. In providing a product or service for its own use the government should not start or carry out any business-type activity if such product or service can be obtained from private enterprise through ordinary business channels. The only exceptions should be cases in which specific findings have been made that overriding considerations of national security, the necessity of ensuring availability of critical services or commodities, or a demonstrable and substantial cost-saving dictate otherwise. When a significant saving is the controlling factor, the government should base its decision on a cost-determination containing all elements necessary to be comparable with private business costs, including income and other taxes. Commercial or industrial activities should be undertaken or continued by the government only after: (a) guidelines for assuring maximum government reliance on private enterprise for its needs have been strictly applied; and (b) ample opportunity has been given private business in open hearings to demonstrate its readiness and capacity to provide a commodity or service needed by the government at costs not materially higher than the government's estimates of obtaining the product or service from its own activity. The Bureau of the Budget should conduct a continuing and rigorously enforced program—including provision for review of agency decisions to assure government reliance on private enterprise according to these recommendations. 2. A government activity providing a product or service to the public should neither be authorized by the Congress nor-if in existence-continued by the executive branch when private enterprise offers to, and satisfies the government that it can feasibly, conduct such activity at reasonable charges. In all business-type activities conducted by the government to provide products or services to the public, the activity should normally be operated on a self-supporting basis. Alternatively, if a subsidy is intended, its purpose and nature should be clearly specified and measured. Substantive legislation for federal business-type activities involving credit should provide that interest rates and maturities be based on market realities, except where a subsidy is expressly specified and measured. All such federal lending programs, including those which are self-supporting, should be reviewed periodically with a view to discontinuing the activities when possible. Any lending operations caused by circumstances which are no longer present should be discontinued as soon as possible without causing sudden or undue hardship to those sectors of the economy which have become dependent on this form of governmental support. Necessary lending operations of the government should be so conducted as to avoid confusion of the activity and its purposes with political motives and purposes. (Whereupon, the subcommittee adjourned, subject to the call of the Chair.) ESTABLISH A COMMISSION TO STUDY THE ORGANIZATION AND MANAGEMENT OF THE EXECUTIVE BRANCH OF THE GOVERNMENT WEDNESDAY, MAY 15, 1968 U.S. SENATE, SUBCOMMITTEE ON EXECUTIVE REORGANIZATION, Washington, D.C. The subcommittee met, pursuant to notice, at 10: 10 a.m., in room 6202, New Senate Office Building, Senator Abraham Ribicoff (chairman) presiding. Present: Senators Ribicoff and Hansen. Also present: Paul Danaceau, staff director. Senator RIBICOFF. The subcommittee will be in order. Our first witness will be Mr. Robert B. Choate. STATEMENT OF ROBERT B. CHOATE, PROGRAM ASSOCIATE, NATIONAL INSTITUTE OF PUBLIC AFFAIRS, WASHINGTON, D.C., ACCOMPANIED BY DR. EDGAR S. CAHN, EXECUTIVE DIRECTOR, CITIZENS ADVOCATE CENTER, AND STEVEN ROSENFELD Mr. CHOATE. Mr. Chairman, thank you for letting me speak to bills S. 2116, S. 47, and S. 2542. I come as a private citizen, a businessman who has spent a year consulting for the Citizens Board of Inquiry into Hunger and Malnutrition in the United States. Recently this group has published a report entitled, "Hunger, U.S.A."-this document. Coincidentally, five Senator RIBICOFF. Without objection, your report will be made a part of the record. Mr. CHOATE. Yes, sir. 347 |