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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.

Mr. ČARR. I hope in anything I may say here that I may not be understood as merely advocating doing something for men. The 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.

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 ihat these appointments should b: 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 amı 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

utilize their services in the superior positions. Hence the importance to the government of retaining the ablest men we develop:

Mr. CONNALLY. Would you include their years of service as minister in computing their retirement? What is your idea about that?

Mr. CARR. I should think that would be fair. They would be paying all of this on a maximum classified salary of $9,000.

Now, I should like to give you another illustration of the attitude of the men toward the service. One of the men in the Consular Service received a salary of $4,500 a year. He was one of our very best men.

He went out of the service because he could not support his family and lay anything up for old age. He had a wife and two children. He resigned from the service and went to New York. He was in my office not more than a month ago and said, “I am getting $50,000 a year as president of my firm, a banking house of New York.”

Mr. CONNALLY. And most of that training the Government gave him that made him get tnat $50,000 a year.

Mr. Carr. That is perfectly true. But coming back to what I started to say, he said, “ I am getting $50,000 a year, but the saddest moment of my life was the other day when I passed my fiftieth birthday and I realized that even if I should make enough money for my needs I could not take the examination again and return to the Consular Service, because I like the work better than anything else I have ever done."

I honestly believe that had that man had the benefit of a retirement provision such as is proposed here, we would have him to-day with us in the Consular Service.

I will digress for a moment, if I may, to say something of what other governments are doing by way of improving their service. Nearly every government in the world since 1918 has reorganized and improved its foreign office and its foreign service. We alone have not done it. Great Britain has entirely reorganized her entire foreign service, and made large increases in the compensation of the personnel. France has improved her service. The Norwegian Government has done a great deal with its service. The Swedish Government has reorganized its service. The Netherlands Government has reorganized its foreign office. And so on throughout the world. Only recently Premier Mussolini, who is now in control of the Italian Government, reorganized the Italian Foreign Office and the Italian foreign service. The Italians have taken the idea embodied in this bill and have combined their diplomatic and consular services into one service. They have made admission into that service dependent upon a probationary period of appointment, through which they determine whether a candidate has the qualities for successful foreignservice work and whether he shall go into one or the other branch of the service; and they have even reserved a certain share of their diplomatic appointments for consular officers.

In that respect they have gone ahead of us and ahead of nearly every other Government.

Mr. CONNALLY. I had a clipping quoting Mussolini which I have mislaid, but he said that he would reduce salary allowances in all their diplomatic service.

Mr. CARR. I saw that, but I do not know how much truth there is in it and do not know what the effect would be.

Mr. CONNALLY. The reason I say that with regard to their reorganization is I assumed that would be a rather important feature of it.

Mr. CARR. I have here a few tables that may prove interesting in this relation. They show that the United States pays its consul general at Hongkong $6,500. The Italians pay theirs, salary and local allowance, $9,500.

Mr. O'CONNELL. Is that the Italian!
Mr. CARR. Yes.

Mr. CONNALLY. On what rate of exchange, pre-war or present? The lira is worth less than half of what it was before the war.

Mr. CARR. Mr. Gibson informs me that Italy pays its officers in gold. At Johannesburg we pay our men $5,900 and they pay their gold. At Johannesburg we pay our men $5,900 and they pay theirs $10,904. At Sao Paulo, Brazil, we pay ours $5,000 and they pay theirs $11,000. At Shanghai we pay ours $6,500 and they pay theirs $9,900. At Buenos Aires we pay ours $8,000 and they pay theirs $11,000. In all these high posts they are ahead of us very considerably and ahead of anything proposed in this bill.

Mr. O'CONNELL. They will be ahead of us even if we pass this bill. Mr. CARR. Yes. The CHAIRMAN. Perhaps Mussolini intends to reduce the salary of Italian ambassadors to fit in with this bill.

Mr. O'CONNELL. Mr. Rogers has set out to arrange salaries for Italy as well as the United States.

Mr. CONNALLY. He can do it. Mr. O'CONNELL. He is very modest about it, I can see that. Mr. CARR. You have provided in this bill a very moderate scale of compensation, less than the British, and less than the Italian, as I have shown you. The only reason why we think that that will accomplish what you have in mind, is that it is coupled with a retirement system based upon the present civil-service retirement system. Coming back to the provisions of this retirement section, this redrafted retirement section printed on page 31, that Mr. Rogers has asked me to discuss, the redrafted section 16 differs from the existing civil-service system in this, that instead of tying this retiremen scheme up with the civil-service retirement fund, it separates the two and requires a separate administration of each, places the administration of this one under the Secretary of State in accordance with the recommendation of the board of Government actuaries to whom the provision in the bill you passed last year was submitted.

Mr. ROGERS of Massachusetts. And also in accordance with the recommendation of Representative Lehlbach, who probably knows more about this subject than any other Member of either House.

Mr. CARR. Exactly. This section provides that contributions of foreign-service officers shall be 5 per cent. The civil-service retirement act requires that contributions of civil-service employees shall be 24 per cent. This section of the bill provides that the rate of annuity shall be that fixed by the civil-service act for civil-service employees, but the arbitary restriction of annuities to a maximum of $720 a year shall not be applicable to foreign-service officers.

This redrafted section provides also that the maximum cost to the Government, the maximum average annual cost to the Government

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