(d) The benefits of the bill should accure to any official of the Department of State who subsequent to November 26, 1909, occupied a position of secretary in the Diplomatic Service or any foreignservice officer who might be promoted to the grade of minister. (e) The rate of deduction for foreign-service officers should be 5 per centum of basic salary instead of 2 per centum, as in the case of civil-service employees.

(f) An appropriation of $50,000 to be authorized for annuities payable during the year 1923.

That bill was considered by this committee, and as you know was reported favorably as H. R. 13880 and passed by the House of Representatives. In its final form it omitted the authorization of an appropriation of $50,000 for such annuities as should become payable during 1923, but made them payable from the civil-service retirement and disability fund. It also required that in this fund should be deposited the 5 per cent contributions of foreign-service officers. These changes were made, I believe, for reasons of legislative expediency because of conditions existing at the time the bill was reported to the House.

The Federal employees whose contributions had created the civilservice retirement and disability fund and who depend upon that fund for their annuities now and in the future, not unnaturally objected to the provision of the bill which made the larger annuities of foreign-service officers payable out of the civil-service retirement fund even though those officers were to contribute several times as much per man as were other Federal employees themselves. The latter objected to what they regarded as an unwarranted use of their money. It is understood that Representative Lehlbach concurred in the objections of the Federal employees.

Meanwhile, the question of the actuarial soundness of the retirement section now know as section 16 of this bill was submitted to the Government Board of Actuaries. The report of that board concurred in the objections of the Federal employees and advised a separation of the retirement fund for foreign service officers from the civil service retirement and disability fund, and also the administration of the foreign service fund by the Secretary of State. Therefore the redraft of section 16, to which Mr. Rogers has called attention, represents an attempt to meet the objections to the bill you passed last year, in the following manner:

1. By authorizing the President to prescribe rules and regulations for the establishment of a foreign service retirement and disability system to be administered under the direction of the Secretary of State instead of the Commissioner of Pensions as advised by the Board of Actuaries.

2. By creating, as advised by the Board of Actuaries, a special fund to be known as the "Foreign service retirement and disability fund" from which annuities of foreign service officers shall be paid instead of from the civil service retirement and disability fund.

These two provisions are understood to remove the objections which the Federal employees, Representative Lehlbach, and the board of actuaries have had to H. R. 13880 and H. R. 17 in its present form.

Furthermore, the new draft of section 16 specifically limits the maximum liability of the Government under the bill to an amount

not in excess of the total annual contributions of foreign service officers, which is a step in advance of the existing civil service retirement law, and it requires each annuitant who has not paid to the fund a contribution of 5 per cent of his salary during the entire period of service previous to reaching the retirement age of 65, to have deducted from his annuity such a proportion of 5 per cent of the annuity as the number of years in which he did not contribute bears to the total length of service. The latter is eminently just to the annuitant and is but fair to the Government and to the contributing employees.

Mr. LINTHICUM. I am compelled to leave and I want to see if I can not ask you a question out of order.

Mr. CARR. Will you do so?

Mr. LINTHICUM. Under Mr. Rogers's amendment, the proposed amendment on pages 31 and 32 of the first part of the hearings, I take it that the principal amendment he proposes is that contained in paragraph (o) of section 16, to wit: "Any diplomatic secretary or consular officer who has been, or any foreign-service officer who may hereafter be, promoted from the classified service to the grade of ambassador or minister, or appointed to any official position in the Department of State, shall be entitled to all the benefits of this section in the same manner and under the same conditions as foreign-service officers.

Is not that practically the clause we have stricken out in the last Congress?

Mr. CARR. Yes. That is the clause that has been referred to in the hearings before today as one of the defects in the present bill which should be cured. Mr. Lay spoke of it yesterday. It was stricken from the bill last year for several reasons, one of which was that a man who had risen to the office of ambassador or minister had had sufficient reward and should not be provided with the retirement allowance.

Mr. LINTHICUM. Then there is the question of the salary that an ambassador gets, $17,500, far more than he could get as a consular officer, and then I think the additional question arose as to whether we could pass a bill through the House providing a pension system for minister or ambassador.

Mr. CARR. Yes, that did arise.

Mr. COLE. It would apply only to those who were in the classified service, would it not?

Mr. CARR. I would like to say concerning this that I earnestly hoped the committee this year will consider the provision favorably. I would not advocate a provision that would base an annuity on a $17,500 salary. I would not advocate a provision for an annuity on a salary of $10,000. I would, however, urge most strongly that the men who have risen by their merit from the classified service for which you are providing in this bill to places much higher and of greater responsibility, be not deprived of the retirement pay, which they have justly earned in the lower grades of the service, and would have received had they remained in positions of lesser responsibility.

Mr. LINTHICUM. What would be their retirement pay under that section? Upon what would their retirement pay be based?

Mr. CARR. It would be based upon their highest salary for the preceding 10 years of their service, not in excess of $9,000, the maximum classified salary.

Mr. LINTHICUM. It is not so stated in the paragraph.

Mr. ROGERS of Massachusetts. Is not that the average salary for 10 years?

Mr. CARR. The average salary?

Mr. ROGERS of Massachusetts. You said the highest salary for 10 years.

Mr CARR. I should have said the average salary for the preceding 10 years not in excess of the highest classified salary of $9,000. Mr. LINTHICUM. Section 2 would not indicate that.

Mr. CARR. If you will turn to subsection (d) on page 31 you will find it stated there that "all basic salaries in excess of $9,000 per annum shall be treated as $9,000, and all basic salaries less than $2,500 shall be treated as $2,500."

That prevents an annuity being paid on a salary higher than $9,000. I would like to discuss that for a moment. Consider men like Hugh Gibson, our minister to Poland; like Joe Grew, our minister to Switzerland; Mr. Fletcher, our ambassador to Belgium; Mr. Morgan, our ambassador to Brazil; and others I could mention, who have grown up in the Diplomatic Service and are highly creditable members of it. Assume that they have no private means of their own and they reach the highest grade of their classified diplomatic career, that of counselor. Suppose the President should offer them appointments as minister. The salary as minister would be $10,000, which is $1,000 more than they would be getting under this bill as counselor. The expense of the position, however, would be vastly greater than the expense of the post of counselor. The necessity of forfeiting the benefit of the retirement provision of this bill would inevitably compel them to decline to accept promotion, and the Government would lose the benefit in the higher positions of their ability and experience acquired through years of service. Am I not right? Mr. GIBSON. Quite right.

Mr. CARR. Therefore, without enabling men promoted to the grade of minister to retain the right to retirement pay, you fail to obtain for your higher posts, the post of minister and post of ambassador, the benefit of all the training gained from starting in the lower ranks of the service and climbing up by sheer merit to the top of the classified service, and you impair the efficiency of the Diplomatic Service and discourage the men in it.. It would mean a very small expenditure to make the secretaries certain that if offered the post of minister they could accept it, confident of retaining all the benefits of the retirement allowance which they would have had had they stayed in the post of counselor.

The CHAIRMAN. May I not add to that, which they have paid for? Mr. CARR. Exactly.

The CHAIRMAN. I might add that every man who goes into the service hopes to reach the top. That is the Eldorado held out to him as an incentive to give the best he has. To take that away and say to him, "When you do reach the top you are going to be denied your retirement and lose the money you have put in," is a discouraging proposition.

Mr. ROGERS of Massachusetts. That would discourage instead of encourage the best.

The

Mr. CARR. I hope in anything I may say here that I may not be understood as merely advocating doing something for men. thought that lies back of anything that I may say to the committee is that what we need to concern ourselves with is the building of a service, the building of efficiency in that service, getting into the higher diplomatic posts and higher consular posts the best men we can develop and induce them to remain in the service. Mr. Lay told you yesterday that because there was no provision for retirement pay to which he could look forward, after having spent his private means, after having reached a high place in the consular service, he felt himself forced to leave the service and go into private business at a very much higher salary, several times the salary his Government paid him.

Mr. CONNALLY. It was reported in the newspaper yesterday that it was $40,000. It did not quote him but stated that Mr. Lay was getting $40,000 a year from Speyer & Co.

Mr. CARR. I think that is an error. I do not think it reaches that amount, but I have good reason for believing that it is more than $20,000. Now if private organizations, who have a just appreciation of the value of money, will pay such a salary to a man who has obtained a lot of experience in the Diplomatic and Consular Service, is it not worth while to insure a continuance of retirement pay in order to endeavor to hold a man such as that in the Government service for the benefit of the Government?

Mr. CONNALLY. I believe there is much to what you say, but in the case of Mr. Lay do you think that the fact that he got $9,000 would have kept him in when he saw this $25,000 before his eyes? He would have gone just the same.

Mr. CARR. With this retirement allowance?

Mr. CONNALLY. Yes; speaking of the retirement allowance.
Mr. CARR. Yes; sir.

Mr. CONNALLY. Do you think he would stay in the service?

Mr. CARR. Yes; sir. I will tell you why. There is a spirit in the foreign service which the man on the outside does not quite appreciate. These men who go out of the service, who are highly useful men and ought to stay in, are often driven out by force of circumstances and not from any wish to go out merely for the sake of larger compensation.

Mr. CONNALLY. Is it not true of all branches of the Government service that one in Congress might quit or one on the bench might quit, or one in the Cabinet-true in all such cases on account of the fact that none of them have retirement features, except the judiciary.

Mr. CARR. Some do, and there will always be some officers who will leave the service to enter more inviting fields of endeavor; but what we need to do, and I am sure you will agree with me in this, is all that can be reasonably done to retain as much as possible of the ability that we can accumulate in this foreign service of ours. We are coming into a period when experience, technical knowledge, personality, and ability to negotiate are going to be more essential than ever before to the welfare of this Government in connection with its foreign relations.

A

Now, I would like to prove what I said to you a moment ago in regard to the desire of our officers to remain in the service by citing an example of a man who has so far resisted the importunities of private business establishments and remained in the service. How much longer he will do so, I do not know. He happens to be unmarried and have a salary of $5,000 and traveling expenses-he is an inspector. When he takes a post as consular general he will be eligible to $8,000. He is, as I say, unmarried. He has, to my certain knowledge, declined offers beginning at $15,000 and increasing until the last one he declined was $28,000. He said, "No; I will not leave the service." Suppose he should marry and want to bring up a family. Force of circumstances are almost certain to make that man leave the service, because he will then have to think of making some provision for old age. With legislation such as this, I am practically confident this man would remain with the Government.

Mr. LINTHICUM. May I read a section from what the Secretary of State had to say on Monday, as follows:

I have not spoken at all of the grade of minister, to which the bill does not apply. It is true that every once in a while some one is promoted from the Diplomatic Service to the post of minister. I am gratified at that. It has been extremely agreeable to me to have had the opportunity while I have been in office, occasionally to secure such an appointment. We have a man present here Mr. Hugh Gibson, our minister to Poland-who represents one of the best records that has been made in the Diplomatic Service. Now, unfortunately, I would say, those cases are rare, because, as you know, the political pressure for appointments of the grade of minister and ambassador is strong, and from the standpoint of the Department of State, if one can secure a few representatives of the service in the higher diplomatic posts he must be well satisfied with the achievement. That pressure and demand are not entirely unjustified. The reason is that this country must always be able to call upon men for its higher diplomatic work who have had the great advantage of contact with the experience of American life and who come out of other callings with a ripened judgment which, perhaps, could never be obtained in a more limited career in the Diplomatic Service.

It would seem from that that the Secretary of State rather felt hat these appointments should be made from the outside, regardless of the Diplomatic Service.

Mr. CARR. I think the views of the Secretary of State and the views which I have expressed to you are in no way inconsistent. I know the Secretary's feeling about the service. I know that he feels just as I do, that the right of the President to bring superior men of broad experience from outside of the service into the higher diplomatic posts, should never be impaired but I believe and I am quite certain that he believes that the stronger we can make the classified Diplomatic and Consular Service, the higher the type of men that we can bring into that service, the broader their knowledge and their contact with life, and the greater their technical proficiency, the more likelihood there will be of the promotion from the ranks of the service of officers to fill the majority of the posts of ministers. This must of necessity depend upon the quality of the men we produce in the service. If they are inferior in ability and usefulness to men from outside the service they should not be promoted to the higher positions. If they are clearly superior to persons from the outside, no one will deny that the government should