ments of the Federal Security Agency now comprehend, in addition to the employment security, old-age and survivors benefits, aid to dependents, public health and welfare, education, and pure food and drug. These functions require personnel, technical staff, and auditing, serving in some capacity on all programs, that are now and would have to continue to be duplicated by the Department of Labor.

Regional representatives confined to the two programs ought to be consolidated, but regional directors would not be consolidated. Auditing force of the Federal Security Agency are concerned with auditing State agencies for all the grant programs, which would continue even though the employment service and unemployment compensation functions were sent to the Department of Labor, which would then require a comparable auditing system by the Department of Labor. Except for the present temporary assignment of the United States Employment Service, the Department of Labor has no other functions related to the States on a grant-in-aid or grant of funds for administrative purpose basis, such as assigned to the Federal Security Agency. Whether there would be economy and efficiency on the Washington level under the proposal is also conjectural; at best it would be little different if in the Federal Security Agency or Department of Labor, and may merely mean a transfer of personnel.

It is significant that no reorganization specified in a reorganization plan shall take effect unless the plan is transmitted to the Congress before April 1, 1948 (Reorganization Act of 1945, ch. 582, title I, sec. 5, 59 Stat. 615; 5-6 U. S. C. A. s. 133 y).

The Congress should by resolution indicate it does not favor Reorganization Plan No. 1 of 1948, because—

(1) It does not represent an orderly transition of the United States Employment Service and Bureau of Employment Security from war to peace, which would require their continuance in the Federal Security Agency as present law provides;

(2) The continuance of duplicating arrangements for carrying out the programs of the Federal Security Agency and the Department of Labor would not reduce expenditures and promote economy consistent with the efficient operation of the Government;

(3) The plan does not group, coordinate, or consolidate agencies and functions of the Government, as nearly as may be, according to major purposes, in that the primary concern of the Department of Labor is in the promotion of the welfare of labor, alone, without that disinterestedness necessary in the administration of employment service and unemployment compensation;

(4) There would be no reduction of the number of agencies;

(5) There would not be as complete elimination of overlapping and duplication of effort under the plan as presently provided by law in the Federal Security Agency;

(6) Lastly, it is not demonstrated that the public interest would be served by carrying out the plan, or that there would be accomplished an over-all reduction in administrative costs.

Senator BALL. We have received word from Mr. Folsom, chairman of the committee on social scurity, United States Chamber of Commerce. His plane has been grounded and he cannot get here. His statement will be placed in the record.

(The statement referred to follows:)

REORGANIZATION PLAN NO. 1, 1948

ADMINISTERING SOCIAL SECURITY TO PROMOTE EFFICIENCY, ECONOMY, AND A LOGICAL GROUPING OF FUNCTIONS

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The Chamber of Commerce of the United States supports House Concurrent Resolution 131. Thus, the chamber opposes Reorganization Plan No. 1, a position based on a declaration of policy adopted by the membership at the chamber's 1947 annual meeting. A copy of this declaration is at the end of my statement.

1 Statement of Marion B. Folsom, treasurer, Eastman Kodak Co., representing the Chamber of Commerce of the United States, Washington 6, D. C., before the labor subcommittee of the Senate Committee on Labor and Public Welfare on H. Con. Res. 131 (to disapprove the President's Reorganization Plan No. 1 of 1948), February 28, 1948. Mr. Folsom is chairman of the Committee on Social Security of the Chamber of Commerce and is a member of the Senate Finance Committee's Social Security Advisory Council.

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THE FOURTH PLAN IN LESS THAN A YEAR

Reorganization Plan No. 1 represents the fourth separate and distinct approach to government organization, so far as Federal job-finding and unemploymentbenefit-paying activities are concerned, which the President has sponsored in less than a year.

First, late last spring he proposed Reorganization Plan No. 2, 1947, which would have placed job-finding activities in the Department of Labor, separating them from unemployment-benefit-paying activities which would have been placed in the Federal Security Agency.

Second, a few months later, he participated in the appointment of the distinguished Hoover Commission, charged with the duty of making an authoritive study, with recommendations, about the organization of the executive branch. Federal employment security activities are definitely within the scope of the study, and in fact, the Brookings Institution has been delegated the task of reporting on all Federal health, education, and social security functions-an important piece of work that is still in progress.

Third, only last month in his State of the Union message, the President called for the establishment of an executive department of health, education, and security. The new department, in which all Federal activities in these fields would be centralized, would be a successor to the Federal Security Agency, and surely would include both the unemployment-compensation and employmentservice functions.

The present plan-clearly inconsistent with any of the foregoing-would tear both functions away from the other social security activities and would put them both in the Labor Department. Being thus the fourth distinct approach in a very short period of time, how can the plan be considered a mature, carefully thought-through proposal to improve the executive branch Let us, however, examine the plan in terms of the objectives it is said to serve.

STATED OBJECTIVE OF PLAN

Reorganization Plan No. 1 is designed, states the President's message transmitting it:

(1) To aid in grouping Government agencies and functions according to major purposes;

(2) To incerase governmental efficiency; and

(3) To promote governmental economy.

These are good aims. The chamber of commerce supports them.

Perhaps the plan is intended also to serve other aims. If so, they are not stated in the President's message. While there may be a problem of building up the Department of Labor, the stated aims of this plan should not be sacrificed for that purpose.

The plan, having been offered as a means of serving specified, desirable purposes, should be evaluated, I believe, simply and solely in terms of whether or not it would serve these purposes. If the Senate finds that the plan fails-as the chamber is convinced-to serve the purposes named, then the plan should be rejected.

Before considering the three aims, however, I may stress that the chamber of commerce supports unemployment compensation and the employment services. It has a consistent record of upholding these desirable social programs. Its only interest in the present issue is a concern that the programs be so administered as to make the greatest possible contribution to the national welfare.

GROUPING RELATED FUNCTIONS

How best to group together related functions in the executive branch of the Government, is not a simple problem. The four distinct approaches which have been made are perhaps proof enough of this.

All social-security functions, it would seem, should logically be grouped together in a single agency. It may be noted that the Federal Security Agency shares this view. As the agency states in its just-released annual report:

"It is important for the years ahead

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that our unemployment insurance system be so organized that it makes its maximum contribution to the maintenance of a high level of employment in the Nation. * ** It is important too, that the employment security program continue to function as part of a comprehensive system of social security. Moreover, all the social-insur

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ance programs have common concepts and administrative and financial interrelationships that require continual review, revision, and coordination in the light of changing economic and social conditions." (Sec. 1, pp. 93-4.)

Despite the strength of the considerations quoted, there may be still other points (such as the arguments used to support the present plan) which should also be taken into account in determining a proper grouping of the Government's socialsecurity functions. Thus, the establishment of the Hoover Commission, with the task of investigating the matter deeply, seems particularly wise-by far the wisest of the four approaches mentioned.

The subject of government organization is complex; hasty action under an expiring statute should be avoided. Congress should await the Hoover Commission's report, to be made at the beginning of the next session, before coming to definite conclusions as to a logical grouping of related functions.

INCREASING GOVERNMENT EFFICIENCY

The President's second objective is closely related-to increase governmental efficiency. The Congress and the Chief Executive have repeatedly been faced with the question of how, most efficiently, the Government's social-security functions should be administered. Examining the record, for such guidance as it may furnish, one notes a definite thread of consistency leading toward the administration of all social-security activities by one independent arm of the Government.

In 1935, when the original Social Security Act was enacted, the possibility of placing the new activities in the Labor Department was seriously considered. But Congress and the President decided that an independent Social Security Board would be more efficient. They realized that the new programs were not only "labor" programs-they were citizens' programs. They realized that not only "labor," but employers, taxpayers, and citizens generally were vitally concerned.

By 1939, the close connection between the new program of unemployment compensation and the older United States Employment Service-then housed in the Department of Labor-was realized. Efficiency could be served, it was seen, by bringing together these two arms of the combined employment security programs. President Roosevelt sought to do this. But did he consider tearing unemployment compensation away from the other social-security programs and placing it in the Labor Department? No; on the contrary, he logically concluded that efficiency could best be served by uniting the Employment Service with the other social-security activities in the Federal Security Agency, which he had created earlier in the same year to bring together the Government's functions in the fields of health, education, and social security.

The pattern thus established was interrupted during the war, but with the coming of peace it is being reestablished. The return to the States in 1946 of the operating aspects of the placement functions (thereby bringing them under the supervision of the Federal Security Agency) reflected the return to the previous pattern for peacetime efficiency; and so, too, did the rejection by Congress of last year's Reorganization Plan No. 2.

This brief review shows, I think, that in the past, at least, Congress and the Chief Executive have sought to promote efficiency along an opposite line from that now proposed.

Let me make one more point about efficiency: For efficiency, and for effective use of the program, impartiality is necessary; only an impartial agency can win the cooperation needed for efficient operations. Employers know that the Department of Labor is required by law to foster and promote the interests of labor. Employers constitute an important group of our citizens. They have the jobs to give. Their cooperation is essential. Their desire for the impartial administration of the employment-security program cannot be overlooked if efficient operations are desired.

PROMOTING GOVERNMENTAL ECONOMY

The third aim of Reorganization Plan No. 1, which the President cited, is the promotion of governmental economy. This is a splendid aim, yet nowhere in his message is it explained how any economies would or could result from the plan, or where any economies would or could be made by reason of the plan. Moreover, at the House hearings on the plan, the executive branch did not even attempt to show how or where economies would or could be made. (Indeed, it would seem almost impossible to contend that both the present plan and the

diametrically opposite Plan No. 2 of the last year could each result in economies-yet that has been the precise position of the executive branch.)

Economies will be possible if and when the Government's employment-service operations are returned to the Federal Security Agency, as provided under present law. Of course, it is economical for the two arms of the employment-security program to operate together. But, will it be more economical for them to operate together in the Labor Department, separated from other social-security functions, or for them to operate together in the Federal Security Agency—that is the question at issue.

Perhaps no very substantial savings will be possible either way. However, in the absence of any convincing evidence that the plan would result in specific economies, it seems safe to assume that if there are any savings possible, they would come from opreating the two arms in conjunction with all other socialsecurity functions.

CONCLUSION

In conclusion, the Chamber of Commerce of the United States supports House Concurrent Resolution 131 and opposes Reorganization Plan No. 1 because the plan would not accomplish the three highly desirable aims which, avowedly, it is intended to serve. The plan would not serve toward grouping related Government functions together; it would not operate to increase Government efficiency; and it would not promote Government economy.

Moreover, I have tried to bring out three important additional considerations: 1. Impartial administration of the social-security program is essential.

2. Any executive reorganization should await the report of the Hoover Commission. 3. Administration of the Employment Service should be such as to attract the support of employers.

Finally, let me call your attention to an excellent article on this subject by the distinguished Commissioner of the Tennessee Department of Employment Security, W. O. Hake. The article, Should Federal Employment Security Activities Be Placed in the Labor Department?, appears in the November-December 1947 issue of American Economic Security, a social-security magazine published by the chamber of commerce. It is available for insertion in the record, if desired.

DECLARATION OF POLICY OF THE CHAMBER OF COMMERCE OF THE UNITED STATES ADOPTED BY THE MEMBERSHIP AT ITS 1947 ANNUAL MEETING WITHOUT DISSENT

"The State public employment services should remain under State jurisdiction. Agricultural and other public placement operations should be consolidated with such services. The consolidated services should be conducted pursuant to the public policies of the individual States.

"The necessary Federal activities in connection with the State public employment services (consolidated as indicated above) should be integrated with the Federal unemployment compensation activities in the Federal Security Agency (or any successor)."

Senator BALL. The next witness is Ray C. Smith, director, Michigan Manufacturers Unemployment Compensation Bureau, Detroit, Mich. STATEMENT OF RAY C. SMITH, DIRECTOR, MICHIGAN MANUFACTURERS UNEMPLOYMENT COMPENSATION BUREAU, DETROIT, MICH.

Mr. SMITH. First I would like to submit my prepared statement for the record.

Senator BALL. It will follow your testimony.

Mr. SMITH. I had made some notes to discuss orally, but in the interestof brevity, I am perfectly willing to forego those, particularly in view of the fact that Mr. Carroll has covered it much more adequately and with much better first-hand information than I could. I would like to make a short, brief, more or less extemporaneous statement, however, for the record.

I am the technical director of a group of Michigan employers. Our members include almost every industry, the Big Three of the automobile industry, and so forth, and I am interested in the figures concerning the volume of placement and the employer cooperation with the United States Employment Service. I think those figures were introduced by Mr. Schwellenbach in his statement before the House Committee on Expenditures in the Executive Departments. I am very much pleased to see an 18-percent increase in placements. I am a little bit disappointed and chagrined that it is not more, because in all the public appearances that I have made before industrial groups in Michigan, I have urged constantly greater use of the public employment services.. I believe fully in public employment services, that the best thing to do is to get a person a job-not necessarily to get a waitress who happens to have worked as a riveter for a few weeks another job as a riveter. I don't mean that. But I believe fully in the idea of keeping people working, and I think most conscientious people feel the same way about it.

As far as fears are concerned, I am fearful-I don't mind admitting it; I am not ashamed of it-of these functions going to the Department of Labor. "Fear" has been belittled in these hearings-I don't mean from you gentlemen necessarily, but I mean from the statements. Certainly we know the power of fear, and if we stop to think about it, the press last summer was full of fear of certain groups concerning legislation pending before this Congress, and certainly within the last month we have even had some evidence of fear on the part of Federal and State officials in the South concerning certain things that are now proposed by the Executive. I am scared to death, based on the statements that have been made by Labor Department officials as to what might possibly happen.

Now those fears might be unfounded. I hope they are. But, nevertheless, they are very persuasive. They are so persuasive that between February 5, when the House committee heard arguments on this same point, and the time that I left Detroit last Tuesday night, many employers have indicated to me that they would withdraw their cooperation, or at least diminish it, with the public employment service. Now that is not malicious propaganda, not in any sense of the word. I should call it current information, to affect the people. It is a choice of words, Senator; you can appreciate that. I shall call it current information rather than malicious propaganda. It depends on which side of the fence you are standing on. At any rate, I do know that many employers will, because of lack of confidence in the Department of Labor and fear of doctrines that have been expressed publicly by Mr. Schwellenbach particularly, withdraw some of their support of the public employment service.

As I say, my statement covers the position. I have nothing new, frankly, that hasn't been covered by others, but I did want to say that I am not ashamed of being afraid of this thing.

Senator BALL. Is the employer's main interest the type of employee that is referred to him, the job applicant, or the protection of his contribution rate to the fund?

Mr. SMITH. It is difficult to answer that yes or no, but may I answer it in this manner, if you please, sir. In my State, most of the members of my organization, as a matter of fact, most industry in Michigan, is highly organized. There is not a union contract that does not have