proposes to establish a system of Federal supplementary benefits to be administered in conjunction with State systems, and it is herein provided that no State shall be allowed to apply an actively seeking work test if the Secretary of Labor finds that it should not be applied. To me, this is very significant. Here is the same issue approached from still another tangent.

I think, Mr. Chairman, in view of the time, I will break off with that. If there are any questions, I shall attempt to answer them.

I would like to enter in the record a statement from the Chamber of Commerce of the State of New York which I was asked to enter. The CHAIRMAN. It may be published.

Mr. ATKINSON. I have here a request similarly from the Cleveland Chamber of Commerce which has a brief statement. The Kansas State Chamber of Commerce I understand has presented a special communication to the committee, and if the committee has not received it already, I would like to place a copy of that in the record, if I might. The CHAIRMAN. You may place all those in the record. (The statements referred to follow :)

A STATEMENT BY THE COMMITTEE ON INDUSTRIAL PROBLEMS AND RELATIONS OF THE CHAMBER OF COMMERCE OF THE STATE OF NEW YORK, REGARDING REORGANIZATION PROPOSAL No. 2

The Chamber of Commerce of the State of New York was among the first organizations to endorse the recommendations of the Hoover Commission. In a resolution, adopted unanimously at the regular monthly meeting on April 7, 1949, the chamber pledged to the President and the Congress its support in the task of reorganizing the executive branch of the Government at the earliest possible date, and it urged that the President be granted authority to institute reorganization plans, as recommended by the Hoover Commission, subject to congressional disapproval.

In its report on the work and recommendations of the Hoover Commission, the chamber recognized that in so great a task there were undoubtedly proposals that should be reconsidered in the light of experience and in the public interest. It urged that such changes in the Commission's recommendations as may be desirable must be achieved without impeding progress toward the goal of greater economy and efficiency in the administration of the executive branch through the adoption of the large majority of the Hoover recommendations.

Certainly no task is more important in our time than to make the executive branch of our Federal Government a more efficient and economical structure. We applaud the significant service that has been rendered to the Nation by the Hoover Commission. We believe that the overwhelming number of its recommendations are sound and in the public's best interest. It is a matter of regret, therefore, that we cannot lend our endorsement to Reorganization Plan No. 2, which would transfer the Bureau of Employment Security, the Veterans' Placement Service Board and the Federal Advisory Council from the Federal Security Agency to the Department of Labor.

The administration of the Nation's complex, Federal-State system of social security is one which must be handled with the greatest possible degree of objectivity, and in the interests of all the people. It would be unfortunate if this important function were to be directed for the special benefit of a particular segment of our society, or administered with possibly partisan political motives. This principle was recognized in the original social-security legislation, in 1935, when it was determined that the social-security program that was then established should be administered by a wholly new and independent agency. The original bills provided that the Department of Labor should undertake the direction of the program. But Congress, wisely, we think, decreed that the public interest would best be served by the creation of an independent Social Security Board to supervise the program, in order to avoid the possibility of special favoritism to any particular group. It was insistence on this same principle that led the Seventy-ninth and Eightieth Congresses to disapprove

earlier reorganization proposals that would place the administration of some of the social-security programs in the Department of Labor.

It is a matter of general knowledge that the Department of Labor has, almost since its inception, been viewed primarily as labor's voice in the Cabinet. Under the law, the Department is directed to "* * * foster, promote, and develop the interests of the wage earners." It has been our observation that the Department has rather consistently followed its statutory mandate, sometimes, we think, to an extreme position. We believe, therefore, that the Department of Labor, perhaps to a greater extent than any other executive agency, is a special-groupinterest agency. As such we believe that it would be a step backward now to add to its responsibilities the administration of the unemployment-compensation and employment-service programs that are of such important and immediate concern, not only to the wage earners but to our society as a whole.

Members of Congress are aware of the campaign that has been, and is being relentlessly pursued by the spokesmen for certain national labor organizations, calling for the complete nationalization of the unemployment-compensation and employment-service programs. We have consistently opposed transfer of these programs from the States to the National Government. We believe that the widely varying conditions existing among the States make it desirable that each State retain the power to establish its own program to meet its specific requirements. For example, the requirements of an effective unemployment-compensation program in a heavily industrialized State like New York vary substantially from the requirements of a State having a predominantly agricultural economy. The present system permits, therefore, a degree of flexibility which, we think, is indispensable to the over-all success of our Federal-State system of unemployment compensation.

If the transfers contemplated in Reorganization Plan No. 2 were to be made, we believe that the administration of the Federal Government's responsibilities in the unemployment-compensation and employment-service programs would be directed toward the complete nationalization of these programs. The present Secretary of Labor has frequently expressed his support of the nationalization objective, and so have other spokesmen for the Department. With his new powers, should Reorganization Plan No. 2 be approved, the Secretary would have great leverage, through his budget-approval, rule-making, and supervisory functions, to further substantially the cause of nationalization. This, we think, would be most unfortunate, and not in the interests of the general public. Certainly it would not be in the interests of the employer who, in nearly all States, pays the bill for unemployment compensation. Added to this is the threat of repeal of all merit-rating provisions, now part of all State unemploymentcompensation laws.

The second fault we find with Reorganization Plan No. 2 is that it would increase substantially the Federal Government's cost of administering its part of the unemployment-compensation, employment-security program. This plan, therefore, runs counter to the Hoover Commission's primary objective of security greater economy in the executive branch.

Experience has indicated that it is necessary to have a regional office organization adequate to carry out the social-security program (including unemployment compensation and the employment service). At the present time, the Federal Security Agency administers these programs through their regional organization.

If the transfer is made, it will be necessary for the Labor Department to establish its own field organization, including offices, key personnel, et cetera, to perform these added functions. It is an inescapable conclusion that this will require substantially greater expenditures than are now incurred. From the viewpoint of Federal economy, therefore, we believe that the transfer should not be made.

In our judgment, congressional disapproval of Reorganization Plan No. 2 need not, in any sense, jeopardize the many excellent other recommendations of the Hoover Commission. Fortunately, the disapproval of Reorganization Plan No. 2 does not "veto" any desirable and essential transfer, and, therefore, Congress is not placed in the position of imperiling, through its disapproval of this proposal, any essential change.

We therefore urge that the Senate and the House of Representatives disapprove of Reorganization Plan No. 2. In making this recommendation we wish to emphasize that the Chamber of Commerce of the State of New York supports wholeheartedly the great majority of the proposals of the Hoover Commission,

claiming the privilege only of disapproving of those few Commission recommendatins that, in our judgment and in the light of experience, are not in the best interests of the public. We believe that Reorganization Plan No. 2 is one of these, and that it should not be viewed with favor. July 26, 1949.

JAMES TANHAM, Chairman,

Committee on Industrial Problems and Relations,
Chamber of Commerce of the State of New York.

STATEMENT OF THE CLEVELAND CHAMBER OF COMMERCE, RE HOOVER REPORT AND REORGANIZATION PLAN No. 2

The Cleveland Chamber of Commerce is in the main thoroughly in accord with the 24 major recommendations of the Hoover Commission Reports on Organization of the Executive Branch of the Government, believing that most of them are sound and should be adopted by the agencies themselves, by the President through reorganization plans submitted to the Congress, or by separate acts of Congress where necessary.

With several of the Hoover Commission recommendations, the Chamber is not in agreement. They are as follows:

1. The Selective Service System should not be placed in the Department of Labor as recommended by the Commission since it is really supposed to be a temporary agency, but most important it is an agency involving, in most cases, employer and employee relations and should, therefore, remain independent and not placed in the Department of Labor, which is purely an agency for the promotion of labor.

2. The present Council of Economic Advisers, consisting of three members, should be retained. The Hoover Commission recommended one economic adviser. The chamber is of the opinion that if the Council were to consist of one man, the President might obtain distorted views on economic matters if the one adviser himself had distorted views.

3. Reorganization Plan No. 2, 1949, and the Hoover Commission's proposal to transfer the Employment Service and the unemployment-compensation programs, now administered by the Federal Security Agency, into the Department of Labor, is in opposition to the views long held by this chamber. This opposition was based primarily on the fact that the Department of Labor existed for the sole purpose of furthering the interests of labor and has never given any concern to the interests of employers. A prolabor agency should never pass on matters of policy involving employer-employee relations, employer merit rating under unemployment-compensation laws, and other unemployment-compensation matters to which employers have continually objected.

As an alternative, we propose that the Employment Service and the Bureau of Employment Security remain in the Federal Security Agency, but that the Federal Security Agency be transferred to the Department of Commerce.

HERSCHEL ATKINSON,

Hotel Washington, Washington, D. C.:

TOPEKA, KANS., July 26, 1949.

In your appearance before the Senate committee holding hearings on the President's Reorganization Plan No. 2 of 1949 we specifically request that you voice the unqualified opposition of the Kansas State Chamber of Commerce to the transfer of unemployment-compensation administration to the Labor Department or to any other agency of Government responsible to any single class group. Unemployment compensation must be supervised by a Government agency devoted to the general public welfare or it will presently be overwhelmed by public criticism and social gains to date be lost.

FRED STEIN,

President, Kansas State Chamber of Commerce. Senator IVES. That is the Chamber of Commerce of the State of New York?

Mr. ATKINSON. Yes, sir.

Senator IVES. There is one question I should like to ask you. Do you know anything about the attitude of organized labor in Ohio toward experience rating?

Mr. ATKINSON. Yes, sir. It has been diametrically opposed at all times and the national offices of both CIO and A. F. of L. have been diametrically opposed.

Senator IVES. Thank you.

Mr. ATKINSON. Incidentally, to destroy experience rating would raise tax rates at a time when we are trying to cut taxes.

Thank you, gentlemen.

The CHAIRMAN. Thank you very much, Mr. Atkinson. The Chair apologizes to you for rushing you through. It is not in my interest. It is to accommodate others.

Mr. ATKINSON. Pardon me if I have intruded upon your time.
The CHAIRMAN. You did not.

The next witness is Mr. Goodwin. We do want to hear at least three, and I hope we can hear the four witnesses listed this morning, so as you come on the stand, bear it in mind and file your prepared statement. STATEMENT OF ROBERT C. GOODWIN, DIRECTOR, BUREAU OF EMPLOYMENT SECURITY, SOCIAL SECURITY ADMINISTRATION, FEDERAL SECURITY AGENCY, WASHINGTON, D. C.

Mr. GOODWIN. I have some notes, Mr. Chairman, from which I should like to talk.

My name is Robert C. Goodwin and I am Director of the Bureau of Employment Security in the Federal Security Agency. From September 1945 to July 1, 1948, I was Director of the United States Employment Service in the Department of Labor, and from February '45 to September '45 I was Executive Director of the War Manpower Commission which included the United States Employment Service. In addition, I served nearly 3 years as regional director of the Social Security Board in the Cleveland region, which included the responsibility for both the Employment Service and the unemployment insurance function.

I would like to address myself briefly, Mr. Chairman, and members of the committee, to the point that has been raised on bias in the Department of Labor and say simply that in my almost 3 years of experience in the Department of Labor as the Director of the United States Employment Service I was not at any time subjected to pressures from any source within the Department to make decisions in the interest of any particular group, including labor.

The CHAIRMAN. Let me ask you at that point: Did you undertake to subject State administrative groups and officials to any point of view that was held by the Department of Labor in the administration of the law? There has been testimony here that you undertook to put on pressure at the local level in the State to get certain legislation that you wanted, to get the experience-rating clause knocked out and other features of the program to which organized labor objects. What do you say about that?

Mr. GOODWIN. As a matter of fact, Mr. Chairman, at that time only the Employment Service was in the Department of Labor. Experience rating was not involved in any way. But as a matter of fact, I found the philosophy of the top officials of the Department of Labor during that period to coincide with my own to the effect that they

regarded the program as a public program and that it should be administered in the public interest.

I might add that I have found that same point of view in the Federal Security Agency. I don't think there is any material difference as far as that point is concerned.

The CHAIRMAN. You did not directly answer my question whether you undertook to subject any officials at the local level of administration to pressure. You said none was applied on you in the position you held, but there has been testimony here that you undertake to use this position to impose the views of labor or the Labor Department on the several States and their administrative agencies. I am giving you an opportunity to deny it. I am trying to at least.

Mr. GOODWIN. In my view, Senator, we did not. We carried out the law in the way Congress intended it to be carried out.

The CHAIRMAN. As I understood some of the evidence, that charge was made and I wanted you to have the opportunity to deny it. Mr. GOODWIN. Yes, and before I get through there are a couple of points I would like to deny specifically.

The CHAIRMAN. You may proceed.

Mr. GOODWIN. During the course of the hearing some of the witnesses have expressed the fear that the approval of Reorganization Plan No. 2 will result in various actions to which they are opposed. Those included federalization of the system and elimination of experience rating. I think perhaps by this time the testimony has made it clear that on these two points changes can be made only by the Congress or by the State legislatures in the case of experience rating.

The area of discretion left to any administrator in the determination of these laws is limited, and under no circumstances could it be stretched to the point of basic modification of the system. That certainly has been my experience in dealing with these laws. It is my understanding that in his testimony Mr. Williamson, commissioner of the Employment Security Department of South Dakota, cited the fact that the Federal Security Agency had determined that a rule proposed by the State administrator was not in conformity with section 1602 (a) (1) of the Internal Revenue Code. That is the section of the act having to do with experience rating. This was cited, as I understand it, by Mr. Williamson, as an example of the wide discretion on the part of the Federal Security Administrator. The rule that was proposed by Mr. Williamson would have provided that employers could obtain tax reductions based upon one preceding year of benefit experience. We read the section of the act here the other day, 1601 (a) (1) of the Internal Revenue Code, and, as you know, that made it very clear that reduced rates must be based on the employer's experience with respect to unemployment or other factors bearing a direct relationship to unemployment risks during no less than the three consecutive years immediately preceding the computation date.

It is, I think, clear that no Federal Administrator would have had any alternative in this case. I cite that because it was used as a basis for arguing about the alleged wide area of discretion which can be used on the part of the Federal Administrator.

Several questions have been raised before the committee about the policies governing the operation of State employment services. These policies have been developed over the years with full cognizance of