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Also involved is the basic question of Federal control and dictation over State functions. The USES and the Bureau of Employment Security are not and should not be operating agencies. They are, however, responsible for policies in connection with Federal grants for administration of the States' employment services and unemployment-compensation programs. The danger of Federal control of State policies is inherent in this system. Under Labor Department administration this danger would be intensified. It is easy to see how-through Federally set policies as to what constitutes suitable work in referring individuals to available job openings, for example-unemployment payments might be needlessly increased, artificial scarcities of labor created, and unemployment-compensation reserves used as a vehicle to regulate wage rates. The philosophy of the Labor Department and the pressures behind it are far more likely to bring these results than under administration by a neutral agency. Likewise, the strongest pressure for elimination of the present experience ratings-which are an incentive to maintain continuity of employment-comes from labor circles.

Congress has consistently refused to Federalize the unemployment-compensation program and in 1946, against the objections of the Labor Department, returned the employment services to the States. We urge that no move be made now to inject a greater tendency toward Federal dictation into these important activities of the States.

Finally, we suggest that any reorganization plan having such far-reaching consequence as that now proposed should await the studies of the bipartisan Commission, headed by former President Herbert Hoover, which is now surveying the organization of the executive branch of the Government, and which will report its findings to Congress early in the next session.

We sincerely hope that House Concurrent Resolution 131 will be favorably reported by your committee and approved by the Senate, thereby rejecting the undesirable and ill-advised reorganization plan now before you.

Very respectfully yours,

THE AMERICAN MINING CONGRESS,
JULIAN D. CONOVER, Secretary.

STATEMENT OF CHARLES C. FICHTNER, EXECUTIVE VICE PRESIDENT BUFFALO CHAMBER OF COMMERCE, BUFFALO, N. Y., ON REORGANIZATION PLAN No. 1, 1948

The Buffalo Chamber of Commerce, with a membership of 2,000, includes more than 1,300 firms who are substantial employers of labor. Committees of executives of these firms interested in the social security program, after careful study of the implications of the President's Reorganization Plan, have reported their findings to the Board of Directors of the Chamber and on that basis, the Board has voted unanimously to oppose the transfer of the United States Employment Service and the Bureau of Employment Security to the Secretary of Labor as proposed in the President's Reorganization Plan No. 1 of 1948.

The principal reason for rejecting the President's plan is that impartial administration of the social security program is deemed essential to the achievement of its objectives. The public interest in the social security program is far broader than that of any special group. The program, therefore, should not be administered by an agency which exists to serve a special group or groups such as the Department of Commerce or the Department of Labor. It is the statutory responsibility of the Department of Labor to foster and promote the welfare only of the employee classes. Top administrative officials of the Department of Labor are selected in consultation with the great labor unions. The influence of these powerful labor organizations is inevitably interwoven in the policies and practices of the Department of Labor.

If these two phases of the social-security program-the employment service and unemployment compensation—are regarded as labor legislation to be supervised by the Department of Labor, then there is no reason why the entire social-security set-up should not be taken over by the Department of Labor. Yet that proposal was rejected by the Congress in 1935.

The Buffalo Chamber of Commerce holds that the social-security program concerns citizens and beneficiaries generally, and employers and taxpayers particularly, as well as organized labor. Employers rightfully object to the transfer of social-security functions to labor inasmuch as employers bear a large share of the taxes which are levied for unemployment-insurance reserves. Under meritrating plans the net costs of these assessments are materially affected by admin

istrative formulas and policies. As regards employment service, it is obvious that the interests of management must be considered as employers. Management in the Buffalo area does not feel that their interests in these two important fields would be properly served under Department of Labor administration.

It is logical, moreover, that all social-security functions be kept unified in one agency and not divided and passed around to other departments of the Government. Economy in the Federal Government will be best achieved in our judgment, by the coordination and integration of these two phases of social security within the Federal Security Agency rather than by a proliferation of such administration as implied in the reorganization plan.

Finally, it is difficult to understand why the reorganization plan should be pressed at this time when the Commission, headed by Herbert Hoover, has yet to make its report on the reorganization of the executive branch of the Federal Government. The Brookings Institution, it has been announced, is making a special survey of social-security functions. It would seem reasonable, therefore, that the Senate would wish to reject, as has the House, the President's reorganization plan until such time as the results of the Brookings' study and the recommendations of the Hoover Commission become available.

REORGANIZATION PLAN No. 1, 1948

ADMINISTERING SOCIAL SECURITY TO PROMOTE EFFICIENCY, ECONOMY, AND A LOGICAL GROUPING OF FUNCTIONS 1

1

The Chamber of Commerce of the United States supports House Concurrent Resolution 131. Thus, the chamber opposed 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.

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 unemployment-benefit-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 unemplyoment-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 authoritative 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 Employment Service 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.

1 Statement of Marion B. Folsom, treasurer, Eastman Kodak Co., representing the Cham ber 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.

STATED OBJECTIVES 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 increase 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 state 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.

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*

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 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 socialinsurance 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. 93–94.)

* * *

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 social-security 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. Examing 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 program. 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 operating the two arms in conjunction with all other socialsecurity functions.

CONCLUSIONS

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)."

PRESIDENTIAL REORGANIZATION PLAN No. 1 OF 1948

Statement of the Kansas State Chamber of Commerce, Topeka, Kans., for presentation to the subcommittee of the Senate Committee on Labor and Public Welfare, February 27, 1948

Mr. Chairman and gentlemen of the subcommittee, the Kansas State Chamber of Commerce, through this statement, respectfully urges your committee to give active support to House Concurrent Resolution 131, rejecting Presidential Reorganization Plan No. 1 of 1948. The Kansas State Chamber of Commerce is a voluntary, nonprofit organization whose 2,000 members include representatives of trade, industry, finance, the professions, and practically all segments of private business enterprise in Kansas.

Our membership strongly opposes transfer of Federal unemployment compensation activities from the Federal Security Agency to the Department of Labor and permanent assignment of the United States Employment Service to the Department of Labor, as proposed by Presidential Reorganization Plan No. 1 of 1948. The Kansas State Chamber of Commerce has no quarrel either with labor or with the Department of Labor. The latter was created to serve labor and to articulate the viewpoint of labor in national affairs (and properly so), just as the Department of Commerce was created to perform the same functions for business. Unemployment compensation and employment service were conceived in, and should be administered in, the public interest, rather than by a special-purpose bureau. These matters are just as much the concern of employers and the public as of labor and, if they are to continue under Federal control, should come under a neutral agency.

Moreover, Presidential Reorganization Plan No. 1 of 1948 is ill-considered and premature, because it is at complete variance with recent action taken by the Congress and the President. The Commission on Organization of the Executive 'Branch of the Government, created on July 7, 1947, has the task of making a thorough study of the executive branch, to the end of eliminating overlapping bureaus and grouping functions properly, in the interest of economy and efficiency. To us, it appears distinctly out of order that piecemeal and special-purpose reorganization be undertaken now when both the Congress and the President have indicated a major overhauling of the executive branch might soon be considered. The Reorganization Act of 1945, pursuant to which the President's current plan was submitted, specifies that there must be a showing that a saving of at least 25 percent in administrative costs will accrue as a consequence of a reorganization. Under the proposed plan, has such a saving been proven to be a distinct probability?

It is quite true that a substantial number of States, including Kansas, are now operating their employment security programs under the State labor department. However, most such State departments in performance are in reality departments of labor and industry-comparable to a combination of Labor and Commerce Departments at the Federal level. For example, the Kansas law setting forth the duties of the State labor department states in part that this agency shall exploit such subjects "as will tend to promote the permanent prosperity of the respective industries of the State (G. S. 1935, sec. 44-634).

For these reasons and others brought out in the statement by the spokesman for the National Association of State Chambers of Commerce, which we have endorsed,

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