Mr. Chairman and members of the committee, I thank you for your attention and interest in our Department. I shall be happy to try to answer any questions you may have and members of my staff are here to assist.

There are here with us this morning several members of my staff who can go into any depth questions.

Mr. BROOKS. Mr. Secretary, we want to thank you for a fine statement evidencing the fact that any job that is not needed is abolished, and those that you have are performed efficiently.

If it's all right with the other members, if they have no other questions at this time, I would like to go particularly into the Office of Internal Audit and develop some questions on that, which I think is probably one of the key factors in the continuing evaluation of the Department.

Mr. Wallhauser?

Mr. WALLHAUSER. Mr. Chairman, could I ask the Secretary a few questions about this statement before we do this?

Mr. BROOKS. Surely.

Mr. WALLHAUSER. I, too, appreciate your appearance before us this morning, Mr. Secretary, and congratulate you for what I believe to be a very constructive statement.

When was the Department of Commerce officially instituted in the Government of the United States; do you know?

Mr. HODGES. Fifty years ago this coming year, 1913.

Mr. WALLHAUSER. How many employees did we have then?

Mr. HODGES. I don't know. I imagine just a handful. It was called originally the Department of Commerce and Labor. The two departments were together, but as happens in all government at all levels, it splits off and multiplies itself

Mr. WALLHAUSER. In other words, we have added substantially a number of employees today?

Mr. HODGES. Mr. Wallhauser, my experience in local, State, and Federal government is that we always add substantially.

Mr. WALLHAUSER. I believe the total is 1 out of every 6 people are employed either in national-Federal or State or local government, which is an astounding figure, I believe.

Mr. HODGES. I can believe that.

Mr. WALLHAUSER. On page 2 you talk about development of production standards and work measurement methods. Do you have in mind using comparability with private industry in these studies? Mr. HODGES. Insofar as you can.

Mr. WALLHAUSER. There's no comparability in private industry to your departments?

Mr. HODGES. Yes; I think you could take any department of Government and make some comparison, sir, with private industry. What we are talking about here is doing, probably not in as great detail as a private business would, where you usually send out and get a consulting outfit which is doing efficiency studies, things like that; I don't think the Government has done that, or proposes to do it unless they have a particular situation they wish to have examined. As referred to in your chairman's statement, Director Bell of the Budget Bureau has just sent out certain basic measurement standards he wants to consider; namely, if you have a number of people on the payroll you will do a little more work with the same number, next

year you will do more, for greater productivity. I think that's a good goal. I don't know whether we will reach it or not.

Mr. WALLHAUSER. Is there anything in your Census Bureau production standards program conflicting with private enterprise? Mr. HODGES. I wouldn't think so.

Mr. WALLHAUSER. Aren't some of the firms complaining that you use economic growth predictions as well as actual history of the economy of the country?

Mr. HODGES. There may be somebody from Census could answer the detail on it. I have not seen it. It has not come to my attention. I think that the Census Bureau, if you picked out any bureau in the Government, has the greatest integrity about figures. I'm talking about what it does. It projects certain things; but basically what it does is it reveals facts.

Mr. WALLHAUSER. I think it's in the projection area that certain firms have objected to the fact you are in competition with them. Mr. HODGES. I have not heard that.

Mr. WALLHAUSER. You talk about $32 million of loans and grants for 76 projects which promise to create more than 17,000 new jobs, and another $126 million, representing 271 financial assistance projects, which is now in the pipeline and which potentially will create about 36,000 new jobs.

This isn't a very good record, is it, would you say?

Mr. HODGES. Knowing it pretty intimately, Mr. Wallhauser, I would say, "Yes; it's good." It's what is currently in the pipelines that is of far greater importance than this. It took about 6 months to even get started there. If you will realize the ARA setup calls for local origination, initiative, and participation, and it took great length of time for the localities and the States to prepare their planning programs before they got to the Federal Government, so I would say now that we are doing as much in 30 days as we did the first 6 months. Mr. WALLHAUSER. How much per job would your arithmetic say 17,000 new jobs cost?

Mr. HODGES. Well, I haven't tried to figure it out, Mr. Congress

Mr. WALLHAUSER. And if we are trying to lick the unemployment problem in this country by spending that amount of money for each job, we are in pretty sad shape, aren't we?

Mr. HODGES. I don't think it's quite fair to put it on a pure arithmetical basis because you may have here a loan, sir, for a sewer system for an industrial park that might amount to three or four hundred thousand dollars. Whereas for the moment you would only have 50 or 100 new jobs, that sewer system will serve 500,000 new jobs as it will 50.

Mr. WALLHAUSER. Well, you haven't analyzed it in your statement, have you?

Mr. HODGES. No; we have not.

Mr. WALLHAUSER. Turning to the tourist figures, how about Great Britain and Italy? Have we attracted many of their tourists?

Mr. HODGES. Great Britain is where we have most fun in connection with our program. Great Britain has gone up equally as much as France and some of the others.

I would like to say this, Mr. Congressman, that under the travel bureau, although it's a small thing, it has probably done more to pay its way than any like amount I have seen invested in anything.

Mr. WALLHAUSER. It also has the other side of the coin whereby a lot of American money is going abroad to pay the way for these people to come to the United States.

Mr. HODGES. Not in this program.

Mr. WALLHAUSER. I'm not talking about your program; I'm talking about people coming from Italy, for instance, and Great Britain, who often times can't pay the way with their own money so their relatives or friends in the United States send them money.

Mr. HODGES. That's possible. I suppose Italy is the best example you would have. That has been going on for years. It would go on you didn't have a U.S. Travel Service.

if

Basically this is one consideration, what they will spend here; and the taxes we will get from it is one that will pay its way.

I would like to say this in passing, that this is going to do something for this country that hasn't been done. You see, it takes a bureaucracy, whether it's a State or Federal bureaucracy, under either party, it takes several years to turn around and shift its gears. We have been used, in this country, to trying to keep people out through immigration restriction. For the first time we are really trying to learn how to be hosts and bring people in here and turn some of this money around. I'm very proud of this.

Mr. WALLHAUSER. Increasing your effort to export, is it within your purview to work-to reduce the quota system and the income tax credits that some foreign countries use against us? Is that within the purview of your Department or the State Department?

Mr. HODGES. It's in the purview of the administration as a whole. From a policy standpoint, as a whole the Department of Commerce chairs that.

Mr. WALLHAUSER. Are we making any progress?

Mr. HODGES. Some. We have made a great deal from convertability. We are now working through GATT and other agencies to try to cut down on these other nontariff restrictions that you refer to.

Mr. WALLHAUSER. I'm sure your suggestion has merit, or else you wouldn't make it, about transferring from one department to another within the appropriation process. You don't have to spend funds within one department for programs that are not useful if you don't want to, do you?

The

Mr. HODGES. That's a very good theory, Mr. Wallhauser. answer would have to be technically "No"; but actually no government operates that way, as we all know.

Let me try to explain it briefly.

We gave this of course, we know this isn't the proper committee to ask for it, but we requested the Senate Appropriations Committee last year, and repeated it again 2 weeks ago.

Let us say we have 12 or 15 separate appropriations given to the Department of Commerce. Well, under the so-called line item budget which you practice in Congress, we have to spend according to the way the allocation or appropriation is made. Two weeks ago we said to the Senate committee: Here are four bureaus in our Department of Commerce which spend about $20 million among them. Would you mind giving us a 10-percent leeway of that $20 million, and let us

take where we can move around as much as $2 million; stop this job or slow it down, or put less people on it, or on a new thing. Instead of going out for a brandnew appropriation to Congress-which is immemorial; everybody does it maybe we could use some of that money for a new program without having to ask for a new appropriation. Give us the leeway of moving it around. We will make a report to the congressional committee, if it will give us a chance to move it a bit.

Under the present Federal regulations, and the way Congress puts out a budget, it's almost impossible to make any changes or get rid of a job.

Mr. WALLHAUSER. What about attrition?

Mr. HODGES. Attrition would do it, but attrition is not the whole answer; that's the answer in numbers of bodies, but the attrition many times happens and it doesn't affect the right agency, and doesn't affect the right kind of people.

Mr. WALLHAUSER. What has the record of your administrationwhat has it been since you came in regarding attrition? I remember sitting on another committee and hearing you say there were 10 percent of jobs in your Department, or something like that amount, that you felt were not entirely necessary, and

Mr. HODGES. I repeat it, sir. That was a misunderstanding. I think I didn't say that there were 10 percent not needed.

Mr. WALLHAUSER. Doing jobs that were perhaps outmoded, obsolete.

Mr. HODGES. I indicated that I wanted the 10 percent leeway; that's where the 10 percent figure got in. I maintain that. I said there are lots of examples-not only in our Department; including State governments-which are outmoded. The greatest example I gave in history stemmed from the Franco-Prussian war. A small group were carrying out things that ought to have been stopped 40 years ago. But it was not stopped because they hadn't asked for an increase in the budget.

Mr. WALLHAUSER. Would there be some way of transferring the people doing outmoded jobs to people coming in?

Mr. HODGES. There is no initiative, no incentive given to a department head to do anything about it.

Mr. WALLHAUSER. Whose fault is this?

Mr. HODGES. How's that?

Mr. WALLHAUSER. Whose fault would this be?

Mr. HODGES. I would say it would be a joint situation. I would say Congress has to share part of it.

Mr. WALLHAUSER. But you have to share part, too. I'm not speaking of you as an individual.

Mr. HODGES. I know exactly, and I do share it. I frankly am sort of ashamed of myself on it, because I went before Senator Holland last year asking for an increase in our budget. He said, "I thought you were interested in saving money as Governor." I said, "I am,' I said, "This is tough"-and it still is, sir.

Mr. WALLHAUSER. Thank you very much.

Mr. HODGES. You are welcome, sir.

Mr. BROOKS. I would add, of course, that we agree it is a responsibility; and one of the reasons that our subcommittee, Governor, is concerned with this is that we know that apparently nothing has

89028-62-pt. 1—3

been done about it for many years. Now the Bureau of the Budget is starting its productivity measurement studies-which is a step in the right direction-their manpower studies which they have asked all of the Government administrative agencies to consider. And so I think that certainly we as individual Members of Congress are doing everything that we personally can to encourage the administrative heads in their efforts to increase efficiency which they, of course, will have to initiate themselves.

Mr. Schweiker?

Mr. SCHWEIKER. Just one question.

I'm very interested in your tourist figures, and I think the fact that you have hired only 58 new people in this is very commendable. I wondered what you meant by your statement of "temporarily operating out of your embassies * *

Mr. HODGES. I will answer that quickly. We will open in October-around that time-our own travel offices in the center of the travel area of Paris, London, and Frankfurt. We are opening later in the fall in Tokyo and Sydney. Right now we are using temporary offices in the embassy or consulate, but we will have our own rented space in the areas and will take them over within the next 6 or 8 months.

Mr. SCHWEIKER. In areas where you wouldn't have the tourist traffic volume you are talking about here

Mr. HODGES. We are only talking about eight or nine total out of the whole world. We don't plan to put them all over the world, just the big centers where you really have volume.

Mr. SCHWEIKER. That's all I have, Mr. Chairman.

INTERNAL AUDIT

Mr. BROOKS. Thank you.

I would like to ask you, Governor, about this internal audit staffing problem, realizing the importance of it and giving you full credit for having requested it to be set up in October of 1961, and having it set up. I would like to ask you, first, why were only 5%1⁄2 employees requested for the office in fiscal 1963 when the appropriation request was for over 2,000 positions of lesser importance?

Mr. HODGES. Well, Mr. Chairman, we originally asked for nine in the internal audit staff. We were granted six. I don't know where we lost a half a person. I just can't answer that. And I don't know who he is. [Laughter.]

Mr. SCHWEICKER. I think we better find him.

Mr. HODGES. But, seriously, we asked for nine and got six, and I'm sorry to say we made a mistake. When we got a reduction-and that brings back that same old business of breaking down by appropriation. They cut us down X millions of dollars, so we cut everything else down proportionately in the Department, and we cut the auditors the same way. We should have kept the nine auditors and cut somewhwere else.

Mr. BROOKS. You didn't cut the rest of the agencies 33% percent; did you?

Mr. HODGES. Yes. I mean the Office of the Secretary. I don't know about the agencies. But in the Office of the Secretary, let's say, we were cut so many hundred thousands or millions of dollars.