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GUY CORDON, Oregon, Chairman












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The subcommittee met at 10: 10 a. m., Senator Cordon (chairman) presiding.

Present: Senators Cordon (chairman of the subcommittee), Bridges, Knowland, McKeller, Hayden.

Senator CORDON. The committee will come to order.

This is the Subcommittee on the Treasury Department and the Post Office Department.


We will open the hearing with the showing to be made by the Treasury Department in support of its request for certain restorations in appropriating amounts as passed by the House.


At this time, I offer for the record, the letter of Secretary of the Treasury, John W. Snyder, which will be included. (The letter referred to is as follows:)


March 17, 1948.


Chairman, Subcommittee in Charge of the Treasury and Post Office Appropriations Bill, United States Senate, Washington 25, D. C.


MY DEAR MR. CHAIRMAN: Reference is made to your request of March which you asked the Department to provide you with information on any changes in the Treasury Department appropriation bill for the fiscal year 1949, as passed by the House (H. R. 5770) which the Department feels are absolutely essential.

I appreciate the courtesy and consideration of your committee in asking for my comments on the Treasury Department appropriations bill for 1949. I want the committee to know that I, personally, have spent considerable time on the Department's budget and that I went over, in some detail, the estimates for the various bureaus which were presented to the House Committee on Appropriations. The estimates as submitted by the President were relatively low and represented the amounts which are necessary to carry on efficiently the essential functions of this Department during the fiscal year 1949.

The budget estimates for 1949 for regular annual appropriations of the various bureaus included in title 1 of the House report amounted to $306,981,700. This figure was $7,000,000 less than the amount appropriated for the same bureaus for the fiscal year 1948. The 1948 figure, in turn, was about 281⁄2 million dollars less than the amount appropriated for the same bureaus in 1947. The estimates set 1


forth in the budget, therefore, already involve a $35,000,000 reduction in the cost of operating these bureaus during the 2-year period from 1947 to 1949. Moreover, it should be pointed out that in addition these bureaus will absorb approximately $11,000,000 representing amounts required for within-grade promotions during this 2-year period.

To a minor extent we have been able to make this reduction in the cost of operating these bureaus as a result of a reduction in the work load and of a reduction in the service being given to other agencies of the Government and to the people of the country. The major part of this reduction has, however, resulted from efforts of the top officials and bureau chiefs operating under my specific direction to reduce the cost of their operations through increasing the efficiency of their staffs and to improve and streamline their administrative procedures.

During my 21 months as Secretary of the Treasury, my immediate staff and I have spent considerable time actively working on the problems of reducing the cost of operating the various bureaus of our Department. Continuous attention has been given to these matters. The offices of the various bureaus here in Washington and in the field have been visited and we have brought their executives in our office where we have talked over and worked over the various problems. We have gone through voluminous reports and studies on how procedures could be improved. We have worked out with the various administrative heads of bureaus and divisions a great many changes in administrative and operating procedures which will save money. We have approached the problems from a business point of view.

The House made a further cut of $16,528,600 for the bureaus included in the House bill. In the case of five of these bureaus the cuts would severely affect their operating efficiency. It is imperative, therefore, to take them up with you and ask that certain amounts be restored.

The amounts we are asking to be restored are the following:

(1) The Division of Tax Research_.

Bureau of the Public Debt, United States Savings Bonds

Bureau of Internal Revenue.




Bureau of Engraving and Printing.

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$31, 400

908, 100 1, 264, 000

830, 000 10, 055, 000

13, 088, 500

In its report to the House, the Committee on Appropriations indicated that it felt that reductions could be made in the estimates without impairing the efficiency of the five bureaus. There is no question about the urgency of reducing expenditures of the Government, and, as you know, I have been strongly urging the accumulation of a governmental surplus that will permit us to reduce the public debt in this period of high economic activity. Nevertheless, I must advise the committee that from my personal acquaintance with the operations and problems of the five bureaus involved, the cuts in the appropriations made by the House committee and incorporated in the Treasury bill would severely affect the ability of these organizations to do an efficient job for the country.

With respect to the remaining reductions in the bill, we can follow the same procedure as last year. That is, await developments over the next 6 months before taking up with the Congress the question of restoring these amounts or parts thereof, if they should be necessary. Nearly all of the bureaus involved are service organizations. Their operations are fiscal in nature and they can do very little about their work load. We shall know better what the situation looks like a few months hence and if it should develop next year-as it did this year-that the work load in some bureau is much greater than was forecast by the House committee, the situation will be taken up with them and with you at that time.

The items which I should like to discuss at some length are the following:


The bill reported out by the House Appropriations Committee and passed by the House would reduce the appropriations for the Division of Tax Research from $141,400 to $110,000. The reduction involved is $31,400, a small amount, and it affects only a small number of employees. But these few employees are highly trained and are concerned with matters running into many billions of dollars.

This amount of $31,400 should be restored in order to permit the Division of Tax Research to carry on effectively work that I consider to be of great importance and highest priority.

The Division of Tax Research is a specialized group. It prepares economic material which I use as a basis for my tax suggestions to Congress. It prepares reports at the request of congressional committees, it assists agencies of the Government on tax matters, it provides tax information and services to individual Members of Congress and taxpayers, and it handles correspondence on tax matters.

The work load of this Division depends primarily upon the needs of the Secretary and the Congress, and is largely inflexible. It can be curtailed only by reducing the adequacy of services, a curtailment of which has already reduced the effectiveness of the Division's activities to some extent because of the reduction in appropriation made for the fiscal year 1948. A further reduction in appropriation, in addition to that sustained for 1948, would seriously impair the ability of the Division to assist the Secretary and the congressional committees on tax matters. It would narrow the range of skills available for handling matters relating to complex tax problems.

Yet the needs for services of the Division of Tax Research will be at least as great in 1949 as they are this year, and as they were last year. The Division has been preparing, at my direction and at the request of congressional committees, a series of basic studies relating to the postwar revision of the tax system-a revision which I hope can be undertaken soon. Members of the congressional tax committees have evidenced a marked interest in these studies and have indicated a desire that the Treasury expedite further phases of the work. So far the Treasury has completed and transmitted to the congressional committees 16 basic studies. Another 15 remain in various stages of completion, some of which will be completed in the fiscal year 1948. The shortage of staff has severely handicapped the Division in preparing these studies and they are now several months behind in their schedule. Further reductions will seriously delay if not make impossible their completion.

The amount involved for this Division is small, and it is my personal feeling that it would be disastrous to this Division to make a further reduction in its appropriation at this time.


The next appropriation item is that of the Bureau of the Public Debt. The House committee cut this Bureau by $1,713,200, of which $908,100 is for the United States Savings Bonds Division. This $908,100 item is the only part of the Bureau's cut that we are protesting; we are not protesting the remainder. The reduction for the United States Savings Bonds Division is from $4,658,100 to $3,750.000, or almost 20 percent. A reduction of this amount will seriously impair the operations of the Division during the fiscal year 1949. I urgently recommend that your committee restore the amount eliminated by the House committee.

The United States Savings Bonds Division, as you know, is the organization that promotes the sale of savings bonds to millions of people across the country. One of the fundamental objectives of our debt management policy up to now, both during wartime and the postwar period has been to sell as many securities as possible to the mass of our people. Since the end of the war the idea has been to reduce bank holdings of Government securities and to increase holdings of individuals, and to reduce thereby as much as possible the development of inflationary pressures.

The present inflationary situation makes it desirable to increase both the amount and the proportion of the debt that individuals hold. The job, however, is a promotion job. The savings bond program must be sold across desks by personal interviews with bankers, labor leaders, business executives, educators, and other national, State, and local leaders. Take the pay roll savings plans as an example. This plan, which has been a great boon to our sales efforts in the past because of the ease with which it enables the smallest wage earners to save, has recently been on the decline because the Treasury has not had the organization to sell it forcefully, business by business, industry by industry. Likewise, the new bond-a-month plan, inaugurated during the last year, has reached only a fraction of its full potential due to the lack of manpower and materials for promotion. Sales of bonds through both of these plans can be expanded if we increase our personnel.

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To be fully effective, the volunteer and paid sales representatives must operate with a continuous array of publicity and advertising. Bond promotion must come out of the loudspeaker; it must speak from the full page ads of our newspapers; and it must strike the magazine reader constantly. National promotion hits the potential buyer at every turn, and this is supplemented by local promotion through institutions which the prospective buyer has learned to respect. As the Treasury promotional force works against this backdrop, it can exploit bond buying potential which has been escaping.

The $3,750,000 provided in the House bill and recommended by the House Committee on Appropriations will not be sufficient to provide an adequate program in the fiscal year 1949. It will not be enough to enable us to develop the large corps of volunteer workers on which we must rely for the success of our sales program. We will not be able to pull into the program the tremendous volume of personal services, time, and energy contributed in the national interest by our Nation's leaders that we will require. In the past, our volunteers have come from management and labor, banks, agricultural organizations, schools, radio, press, and other public media, clubs, organizations, and national, State, and local leaders. We can sell our program only through these people. To obtain their efforts requires a tremendous amount of personal contact work. This can be done only by paid representatives of the Treasury Department.

The appropriation request of $4,658,100 provides for the absolute minimum of personnel and materials with which the donors of these uncompensated services can be obtained and held together in an effective program. A cut of $908,100 would make it impossible to do the job adequately and I earnestly request the committee to restore the amount cut by the House Committee on Appropriations from the appropriation request.


The Bureau of Internal Revenue requested an appropriation for the fiscal year 1949 of $188,004,500, which was approximately the same amount as was allowed the Bureau to operate during the fiscal year 1948. The House committee reduced the appropriation request by $1,264,000. This cut will follow a cut of approximately $20,000,000 in the amount requested by the Bureau for 1948. As we told your committee last year, many of the Bureau's activities are not being carried on now with the intensity and effectiveness that proper tax administration requires.

The cut in Internal Revenue's funds was for activities of the Washington office. No cut was made in the funds for the field offices where most of the collection, investigative, and related work of tax administration is done.

For personal services in the District of Columbia the House Committee on Appropriations reduced the amount requested from $16,530,000 to $16,000,000. This represents a reduction of $530,000.

Based on average salaries of the Washington office, the reduction of $530,000 requires the loss of 156 positions. We cannot reduce the number of positions in the Washington office without serious consequences to the over-all management and control work performed in that office in respect to the whole task of tax administration both in Washington and throughout the country.

The important control work performed in Washington involves, among other matters (1) the administrative check maintained by each major operating unit over the work of its respective field organizations; (2) technical review of the application and interpretation of the Internal Revenue Code in respect to cases settled by the field organizations; and, (3) certain types of assessment and overassessment work which the Commissioner is required by law to perform.

No reduction should be made in the management work in the Washington office since its need during 1949 will be greater than at any previous time. Among the reasons for this are the following:

(a) Numerous basic changes in operating plans for purposes of improving efficiency are now being developed and will be pushed further during 1949. An example of such a plan already under way is the shifting from manual to machine methods. The first large experiment with punch-card equipment in respect to the computation of taxes and refunds by the collectors on Forms W-2 is now well under way in the Cleveland district. When the operating procedures have been worked out completely, the machine method will be introduced in all districts to reduce costs.

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