Mr. GROSS. Despite the fact you do not advocate a tax increase to take care of the added $1 billion expenditure for this purpose?

Mr. MACY. My view would be that the tax question has to be considered in terms of a large number of economic factors that extend beyond this particular proposal.

Mr. GROSS. Thank you, Mr. Macy.

Mr. MORRISON. Mr. Addabbo, do you have any questions?

Mr. ADDABBO. In setting the comparable positions, how would you compare a clerk or a carrier to an employee in private industry? How would you get a ratio there?

Mr. MACY. As far as the clerk and carrier are concerned, there was not a direct comparison with a private enterprise position.

What we did was to make the comparison between like jobs in Government and industry, jobs that are common in the Classification Act and in private enterprise, and then from the national averages that we obtained in that survey, we constructed a pay line for the Classification Act, and then a pay structure from that line, and then, working on this with the Post Office Department, we arrived at points of linkage between the Classification Act and the postal service.

The linkage was determined by the content of the jobs in the Classification Act and the postal service, recognizing certain unique features in the postal service, particularly at level 4 where the clerks and carriers are located. We linked PFS-4 with GS-5. That is how we determined the particular rate that is recommended in here for that level.

We also matched GS-11 and PFS-11 as another point of linkage, and then at the top, PFS-20 and GS-17, and then we developed a pay structure for the postal field service, utilizing those three matching points. So I think this much explanation is necessary in order to respond to your point. We did not find directly comparable jobs in private industry with the clerk or with the carrier.

Mr. ADDABBO. I can state that in New York, I believe the average salary of a laborer is higher than level 4 and possibly level 5. I believe a survey by the Labor Department would indicate there are greater percentages in the postal service in level 4 and 5 and below where you have both husband and wife being forced to work to have any sort of income coming in in your straight laboring class.

I cannot see this raise over a period of 3 years.

On this question of the 3 years, and the further survey to be made, if, through some miracle, there is a reduction in comparable salaries in private industry in the next 2 or 3 years, would that wipe out this so-called 7-percent increase?

Mr. MACY. No.

As the proposal is presented, there would be enacted a scale that would apply in 1963, 1964, and 1965 which in effect would be a floor for those particular dates. If the unlikely situation you describe would come about, the rates would remain at the level specified in the bill for that specific date.

Mr. ADDABBO. This is a definite commitment for the years 1963, 1964, and 1965?

Mr. MACY. For these three dates, by statute there would be a commitment for the specified salary structure that is in the bill, so this would constitute a floor. There would be consideration of any in

creases if during the surveys that were conducted in the intervening years there was an indication there had been a rise in prevailing salaries on the outside.

Mr. ADDABBO. Thank you.

Mr. MORRISON. Mr. Johansen.

Mr. JOHANSEN. Mr. Macy, am I correct in the understanding that there is a request or instruction by the President of the United States that all witnesses from governmental agencies would support this proposal in their testimony before the committee?

Mr. MACY. None that I know of.

Mr. JOHANSEN. I read a statement in the press which seemed to me to indicate that. However, and especially if there is no such instruction, are the witnesses that appear here for the Government to be free to digress from the recommendations and proposals of the administration in any particular in their testimony?

Mr. MACY. The committee has called as witnesses a number of representatives of the administration to testify on this proposal. I would assume that in the course of cross-examination the committee may raise questions with the witnesses with respect to pay problems in their own department. I would assume that they will be responsive and provide whatever factual information the committee requests. Mr. GROSS. Will the gentleman yield?

Mr. JOHANSEN. Yes.

Mr. GROSS. Mr. Macy, does the full membership of the Civil Service Commission concur in this proposal?

Mr. MACY. Yes, Mr. Gross, it does.

Mr. GROSS. Thank you.

Mr. JOHANSEN. As a part of that responsiveness, will it be tolerated and permitted that there be any disagreement by these witnesses or is this a totally united front presentation?

Mr. MACY. In the development of the plan there was consultation with all of the agencies and general agreement in the provisions that were developed. It is my assumption that there is support throughout the executive branch for this proposal, but there certainly has been no instruction

Mr. JOHANSEN. I am reasonably confident there will not be any deviation from the official line in the presentation.

Now let me ask this question: Does everyone in the pay systems covered by this bill get a pay raise?

Mr. MACY. Yes, sir.

Mr. JOHANSEN. If that is not a general pay raise I do not know the meaning of the word "general," yet I notice in the opening statement the Chairman says this is not a general pay raise.

Mr. MACY. As I explained, the use of the word "general" was applied to a flat across-the-board increase. The point I wanted to stress is that this is basically a salary reform plan rather than a general pay raise. Perhaps we are having semantics difficulties in the word.

Mr. JOHANSEN. I want the record to be clear that everybody gets a pay raise under this bill.

Mr. Macy, are you able to estimate what the Federal deficit will be for fiscal 1963?

Mr. MACY. The President's budget indicates there will be a balance of about one-half billion dollars. Beyond that I have no further knowledge.

Mr. JOHANSEN. Have there not been very clear public indications, both in Congress and I think by the Secretary of the Treasury, and certainly is it not inherent in the proposals pending before Congress from the administration, that if they are all adopted there will be a deficit for fiscal 1963?

Mr. MACY. I do not believe there has been any assumption to that effect up to the present time. There has been an indication that the rate of revenue receipts has not grown as rapidly as was forecast, but there has been no final conclusion that the President's forecast in his budget would not be met.

Mr. GROSS. Will the gentleman yield?

Is it not true that a small budget surplus was projected if there was a postal rate increase?

Mr. MACY. That is correct.
Mr. GROSS. For this year?

Mr. MACY. I believe Mr. Johansen's question was with respect to 1963.

Mr. GROSS. That is right, but there was one projected for 1962 provided there was a postal rate increase bill, was there not?

Mr. MACY. There was one projected for 1962 if there was a postal rate increase bill, yes.

Mr. GROSS. Then how much do those projections mean?

Mr. CUNNINGHAM. Will the gentleman yield?

Mr. MORRISON. Mr. Johansen has the floor.

Mr. JOHANSEN. Mr. Chairman, may I express the vary earnest hope that the witness will be brought back before the committee at the next hearing.

Mr. MORRISON. I had hoped we would complete his testimony today, but that seems impossible inasmuch as the bells have rung, either be cause of no quorum or for a vote, and the committee will have to adjourn. Our next hearing will be on Tuesday, May 8.

Mr. Chairman, will you be able to return at that time?
Mr. MACY. Indeed, I will make it a point to be here.

Mr. MORRISON. After the questions of the chairman are completed next Tuesday we will proceed to hear the testimony of Hon. Elmer Staats, Deputy Director, Bureau of the Budget.

Mr. JOHANSEN. Mr. Chairman, I ask to be recognized at the beginning of the hearing on next Tuesday.

Mr. MORRISON. You will be recognized first, Mr. Johansen.

Mr. JOHANSEN. Thank you.

Mr. MORRISON. The committee will stand adjourned until 10 p.m., Tuesday, May 8.

(Thereupon, at 12:20 p.m. on Thursday, May 3, 1962, the hearing was adjourned until Tuesday, May 8, 1962, at 10 a.m.)

REVISION OF MAJOR FEDERAL STATUTORY SALARY

SYSTEMS

THURSDAY, MAY 8, 1962

HOUSE OF REPRESENTATIVES,

COMMITTEE ON POST OFFICE AND CIVIL SERVICE,

Washington, D.C.

The committee met, pursuant to notice, at 10 a.m., in room 215, House Office Building, Washington D.C., Hon. James C. Davis (acting chairman) presiding.

Mr. DAVIS. The committee will come to order, please.

We are resuming hearings this moring on legislation pending before this committee to provide pay increases for postal and other Federal employees. On last Thursday, May 3, the committee received testimony from the distinguished Chairman of the Civil Service Commission, Mr. John Macy, and he is present this moring for the purpose of answering further questions.

While I do not want to cut off any member of the committee on any questions he or she may desire to ask, I would like to make this observation, that I hope that the committee will devote not more than half an hour this morning for the purpose of questioning Mr. Macy, and then proceed to hear the testimony of the Honorable Elmer B. Staats, Deputy Director of the Budget. I make this request because there are a number of witnesses who have already been scheduled to appear before our committee during the next few days, and in the interest of saving their time, and the time of the members of the committee, I think that it would be advisable to hear their testimony, the testimony of these witnesses, at the times they have been scheduled to appear. If it appears desirable or necessary to recall these witnesses, or any of them at a later date, why of course that action can be taken.

I believe that Mr. Macy was being questioned by Mr. Johansen at the time of the adjournment of the last meeting.

Mr. JOHANSEN. That is correct, Mr. Chairman.

Mr. DAVIS. Mr. Johansen, do you have additional questions?

Mr. JOHANSEN. Yes, Mr. Chairman, I do; and out of deference to the chairman's request, I will try to proceed just as quickly as possible with two or three.

STATEMENT OF HON. JOHN W. MACY, JR., CHAIRMAN, CIVIL SERVICE COMMISSION-Resumed

Mr. JOHANSEN. Mr. Macy, my first question might be termed a problem in arithmetic, and if I might just make a very brief preliminary statement and then ask you to address yourself to it, I would like to do that.

It is my understanding that after the 3-year cycle, the total increase in cost of the administration's pay program will be $1 billion a year,

is that correct?

Mr. MACY. I believe the exact amount is $1,058 million.

Mr. JOHANSEN. I have seen the figure attributed to the Morrison plan, which estimated that the increased cost of that plan would be about $1,850 million. Do you have any knowledge as to the accuracy of that?

Mr. MACY. It is my understanding that that is the accurate figure for the two bills, one bill calling for salary increases for postal employees, and a second one amending the Classification Act with increases for employees covered by that act.

Mr. JOHANSEN. Taking a hypothetical situation of the first full fiscal year after the 3 years of increases, if in that year we should be so unfortunate, say, with an $80 billion budget, to have a $5 billion deficit, would it be in your judgment an accurate statement. to say that $1 out of every $16 therefore was financed through deficit financing?

Would that be a reasonably accurate statement?

Mr. MACY. Yes.

Mr. JOHANSEN. In that event then, should that contingency develop, one-sixteenth of this billion-dollar increase, or $62,500,000 of the increase, would have to be financed through deficit financing. That is accurate, isn't it?

Mr. MACY. In using the proportions as you have cited, it is.

Mr. JOHANSEN. And if we paid 4-percent interest on that amount of the deficit financing for the pay increase, we would be paying something like $2.5 million a year just for the deficit portion of just the pay increase, would that-assuming my arithmetic is accurate, would that be correct?

Mr. MACY. Assuming it is correct, that would be correct.

Mr. JOHANSEN. And, of course, those figures are substantially higher on a $1,850 million increase, which would become, as I understand it, effective immediately or even retroactive to January 1.

Mr. MACY. That is correct.

Mr. JOHANSEN. The proportion of deficit would be $114 million, and the interest would be $4.6 million.

I just wanted to get this cost arithmetic into the record. Mr. MACY. As you cited, the administration's proposal would not be fully effective for a full fiscal year until the year ending June 30, 1966.

Mr. JOHANSEN. That is right, I allowed for that.

Now I have many questions, but I would like to limit myself just to one other out of deference to the chairman's request.

This program of the administration relates to comparability; as I understand it, that is the basic premise.

I wonder if comparability is always valid, having in mind two possible situations. One, of course, is the built-in competition, particularly for scientists and engineers, which is aggravated in some instances by cost-plus contracts. In other words, then we are accepting as a basis of comparability a Government-subsidized competition, isn't that correct, insofar as that happens?