The reorganizations included in this plan will provide for greater flexibility of internal organization, clearer responsibility, and more effective administration of the functions of the new Department. The benefits in improved service and lower costs will flow from the administrative actions made possible by the plan rather than immediately from the plan itself. Over a period it is probable that substantial reductions in expenditures will result in comparison with those which otherwise will be necessary, but it is not practicable at this time to itemize such reductions.

The creation of a Department of Welfare represents a sound and muchneeded step in the improvement of Federal organization. It provides appropriate recognition for the related and highly important functions which the Government carries on to advance the welfare of its people. I urge that the Congress allow this reorganization plan to become effective.

THE WHITE HOUSE, June 20, 1949.

HARRY S. TRUMAN.

REORGANIZATION PLAN No. 1 OF 1949

Prepared by the President and transmitted to the Senate and the House of Representatives in Congress assembled, June 20, 1949, pursuant to the provisions of the Reorganization Act of 1949, approved June 20, 1949

DEPARTMENT OF WELFARE

SECTION 1. Department of Welfare.-The name of the Federal Security Agency is hereby changed to "Department of Welfare" and such Department is hereby constituted an executive department.

SEC. 2. Secretary of Welfare.-(a) There shall be at the head of the Department of Welfare a Secretary of Welfare, who shall be appointed by the President by and with the advice and consent of the Senate and receive compensation at the rate of $15,000 per annum or such other compensation as shall after the date of transmittal of this rorganization plan to the Congress be provided by law for the secretaries of executive departments.

(b) All of the functions of the Depaertment of Welfare and of all officers and constituent units thereof, including all the functions of the Federal Security Administrator, are hereby consolidated in the Secretary of Welfare.

(c) The Secretary of Welfare is authorized to delegate to any officer or employee or to any bureau or other organizational unit of the Department designated by him such of his functions as he deems appropriate, except that the function of promulgating or approving regulations may be delegated only to the Under Secretary or an Assistant Secretary.

(d) Pending the initial appointment hereunder of the Secretary of Welfare, but not for a period exceeding sixty days, the Federal Security Administrator in office immediately prior to the taking of effect of the provisions of this reorganization plan shall be Acting Secretary of Welfare. He shall, while serving as Acting Secretary, receive the compensation of Secretary of Weifare.

SEC. 3. Under Secretary and Assistant Secretaries of Welfare.—There shall be in the Department of Welfare an Under Secretary of Welfare and three Assistant Secretaries of Welfare who shall be appointed by the President by and with the advice and consent of the Senate and each of whom shall perform such duties as the Secretary shall direct. The Under Secretary (or, during the absence or disability of the Under Secretary or in the event of a vacancy in his office, an Assistant Secretary designated by the Secretary) shall act as Secretary during the absence or disability of the Secretary or in the event of a vacancy in the office of Secretary. The Under Secretary and the Assistant Secretaries shall each receive compensation at the rate of $10,330 per annum or such compensation as shall after the date of transmittal of this reorganization plan to the Congress be provided by law for the Under Secretaries and Assistant Secretaries, respectively, of executive departments.

SEC. 4. Abolition of offices.-(a) The office of Federal Security Administrator is hereby abolished.

(b) The office of Assistant Federal Security Administrator is abolished as of the time that the first Under Secretary of Welfare is appointed, or sixty days after the taking effect of this reorganization plan, whichever shall first

occur.

(c) The two offices of assistant heads of the Federal Security Agency (provided for in section 5 of Reorganization Plan No. 2 of 1946 (60 Stat. 1095)) are abolished as of the time that an Assistant Secretary of Welfare is first appointed, or sixty days after the taking effect of this reorganization plan, whichever shall first occur.1

The CHAIRMAN. This morning we are scheduled to hear three witnesses, the Director of the Budget, Mr. Pace, the Federal Security Administrator, Mr. Ewing, and also Col. George E. Ijams, Director of the Rehabilitation Service of the Veterans of Foreign Wars of the United States.

The committee will hear Mr. Pace, the Director of the Budget, first. Mr. Pace, will you come around, sir?

STATEMENT OF FRANK PACE, JR., DIRECTOR OF THE BUREAU OF THE BUDGET, WASHINGTON, D. C.

Mr. PACE. May I have the privilege of bringing some of my staff up with me, Mr. Chairman?

The CHAIRMAN. Of course. Bring your staff with you, and identify them, if you will. I know Mr. Lawton.

Mr. PACE. This is Mr. Lawton. Mr. Levi is here, Mr. Atkinson over here, and Mr. Stauffacher is coming up now.

The CHAIRMAN. You have a prepared statement on plan No. 1? Mr. PACE. I do, Mr. Chairman.

The CHAIRMAN. Do you wish to read it, or do you wish just to submit it for the record and testify as to the highlights of it? Just proceed according to your wishes.

Mr. PACE. I think that most of the points that I might make verbally I will make in this prepared statement, which is not unnecessarily long; and if it does not burden the committee I would like the privilege of reading it.

The CHAIRMAN. It will not burden the committee at all.

Mr. PACE. As this is my first occasion to appear before the committee, I would like to state first that it is a pleasure to appear before the chairman and the members of this committee.

The CHAIRMAN. I may say for your information that we have had members of your staff here before the committee heretofore, and they have been most cooperative and very helpful. I can say that on behalf of all the committee.

Senator LONG. As a matter of fact, Mr. Pace, it is sort of hard to tell which is our staff and which is yours, because we have seen Mr. Lawton here so much.

Mr. PACE. Well, that is most pleasant for me to hear, of course. The CHAIRMAN. All right. You may proceed, Mr. Pace.

Mr. PACE. Mr. Chairman and members of the committee; Reorganization Plan No. 1 of 1949 converts the Federal Security Agency into a Department of Welfare and improves its top administrative structure. The first section of the plan changes the name of the Federal Security Agency to Department of Welfare. Section 2 provides for a Secretary of Welfare to be appointed by the President with the advice and consent of the Senate. In order to fix responsibility and clarify lines of authority, it also consolidates in the Secretary the

1S. Res. 147, a disapproving resolution on Reorganization Plan No. 1, was introduced July 29, 1949. See p. 105.

functions of the various officers and units of the Federal Security Agency, and authorizes him to delegate functions to subordinates. Section 3 creates an Under Secretary and three Assistant Secretaries appointed by the President subject to confirmation by the Senate, and section 4 abolishes the offices of the Federal Security Administrator, the Assistant Administrator, and two so-called assistant heads of the Agency.

The creation of a Department of Welfare, as provided by this plan, will accomplish an improvement in Federal organization which has been repeatedly recommended in the last 30 years by Presidents, special commissions, and students of government. President Harding proposed the establishment of such a department in a message to the Congress early in 1923. A similar recommendation was made by the Joint Committee on Reorganization the following year. While the reorganization orders submitted to the Congress by President Hoover in 1932 did not set up a separate Department of Welfare, they did group in one of the existing departments the principal agencies concerned with education, health, and welfare. In 1937, both the President's Committee on Administrative Management and the Brookings Institution in its report for the Senate Select Committee to Investigate the Executive Agencies of the Government recommended the creation of a Department of Welfare to administer these functions. Altogether, out of eight comprehensive plans for the reorganization of the executive branch developed by responsible officials and agencies within the last 30 years, six have concentrated the functions as to education, health, and welfare in a single department-five of them in a new department devoted exclusively to these activities-and the other two plans have provided a new department in charge of the greater part of these functions.

In providing for a Department of Welfare, the plan does what undoubtedly would have been done when the Federal Security Agency was created in 1939 had not the Reorganization Act of 1939 specifically forbidden the creation of executive departments by reorganization plan. It has long been recognized that in practice the Federal Security Agency is a department in virtually all respects except in name and official status, and that the failure to give it its appropriate title and rank is anomalous and unfortunate.

By any test the Federal Security Agency is of departmental magnitude and importance. It has more than 35,000 employees and total annual expenditures of more than $2,000,000,000. Thus, it outranks three departments in size of personnel and a majority of the civil departments in expenditures. Excluding payments for grants-in-aid and insurance benefits, it still exceeds several departments in volume of expenditures.

Judged by the nature and scope of its programs, the Federal Security Agency likewise merits Cabinet representation and a place in the highest rank of executive agencies. Its functions are among the most basic performed by the Federal Government including as they do the principal national activities for improving the health, education, and social security of the entire population. No agency of Government has a more vital impact on the lives and well-being of the people.

A brief review of the principal units of the Federal Security Agency will indicate the important role it plays. First, there is the Social Security Administration in charge of public assistance for the aged, the blind, and the dependent children, the old-age and survivors' insurance system, the employment-security program, and the Federal credit-union program. Through the Children's Bureau it also administers child and maternal health and welfare activities and studies problems of child life.

The Office of Education administers grants for vocational education and conducts studies and investigations to assist the States in improving their educational systems. The Public Health Service carries on a broad program of research, operates the marine hospitals and the quarantine service, and administers grants for State and local health work and the control of various major diseases. The Food and Drug Administration enforces the Food, Drug, and Cosmetics Act. The Office of Vocational Rehabilitation provides grants and assistance to States in the rehibilitation and retraining of the disabled, and the Bureau of Employees' Compensation administers workmen's compensation systems for Federal employees, longshoremen and harbor workers, and the District of Columbia. In addition, the Federal Security Agency supervises certain Federal institutions in the District of Columbia.

The conversion of the Federal Security Agency into a Department of Welfare is much more than a change of name. First of all, it assures Cabinet representation for one of the most important groups of functions carried on by the Government. In the second place, it lends a prestige which helps to strengthen administration. The executive departments have long been recognized as the leading agencies of the Federal Government and have acquired much greater popular prestige than attaches to other Federal agencies. This prestige makes it easier to obtain outstanding persons for the posts of Secretary and Assistant Secretary than for comparable positions in other agencies. Furthermore, it lends weight to, and gains acceptance of, administration action and leadership. These are intangible assets, but they contribute significantly to effective administration. There certainly is no good reason why an agency with responsibilities such as those of the Federal Security Agency should be denied these benefits.

In testifying before the Senate Committee on Expenditures in the Executive Departments on June 30, former President Hoover stated that this reorganization plan is in accord with the recommendation of the Commission on Organization of the Executive Branch for a new Department to replace the Federal Security Agency. The plan also conforms to the recommendations of the Commission as to the top officials of the Department and the scope and nature of their authority and responsibility. To head the Department, it provides for a Secretary, an Under Secretary, and three Assistant Secretaries. This is exactly the battery of principal officers proposed for the Department of the Commission. Furthermore, the plan follows the recommendation of the Commission in leaving to the Secretary the assignment of duties to the various Assistant Secretaries.

By consolidating the functions of the various officers and constituent units in the Secretary, the plan also carries out two basic recommendations of the Commission for improving departmental management

throughout the Government. The Commission stressed the principle that

Under the President, the heads of the departments must hold full responsibility for the conduct of their departments. There must be a clear line of authority reaching down through every step of the organization, and no subordinate should have authority independent from that of his superior.

The consolidation of functions in the Secretary fixes responsibility and eliminates question as to his authority to direct the affairs of the Department. At the same time it gives him the control over internal organization which the Commission recommended.

As the Commission pointed out, the heads of departments must have authority to adjust the internal organization of their agencies to changing conditions if they are to achieve the most efficient administration. The concentration of functions in the heads of the departments and agencies, subject to delegation, is a principle long followed by the Congress with respect to the Department of Agriculture and some other departments. Its desirability has recently been reaffirmed by the Congress in the act creating the additional Assistant Secretaries of State and transferring the statutory functions of officers of that Department to the Secretary and also in the Federal Property and Administrative Services Act, which vests most of the functions of the new General Services Administration in the Administrator.

The creation of the Department of Welfare will close a serious gap in the departmental structure of the executive branch. In my judgment and that of the President, this plan is a major step in improving the organization of the Government. I hope that the plan will be allowed to become effective.

Mr. Chairman, that completes my formal statement.

The CHAIRMAN. I think you pointed out in your statement that heretofore none of the reorganization acts that the Congress had passed delegated to the President the power to create a new department of Government.

Mr. PACE. That is true. In the Reorganization Act of 1939, no · such power existed.

The CHAIRMAN. Notwithstanding that various commissions at different times, and the Presidents, have recommended the creation of such a department, and that we have had some four or five different reorganization bills authorizing the President to reorganize the executive branch of the Government, this particular power to create a department has never been granted to the President heretofore until the enactment of the 1949 Reorganization Act.

Mr. PACE. That is correct.

The CHAIRMAN. And this is the first plan ever submitted by a President that would create a department by the plan procedure. Mr. PACE. That is correct.

The CHAIRMAN. There is one particular fact that should be developed if it can be established, and that is as to the question of economy that may be involved, the benefits in economy if any that may accrue by reason of the establishing or the creating of a Welfare Department.

As I recall, when the President submitted these plans in his general message he pointed out that it was hardly possible for him to evaluate the particular economy in each plan; but I am wondering if the Bureau of the Budget could indicate whether there will be any actual