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Mr. WOLVERTON. Now, Judge, will you please look at page 30 of the bill.

And the only opportunity I have had to familiarize myself with the bill is during this morning while you and the succeeding witness were testifying

I find on page 30 the words “(f) section 904 (e) of the Social Security Act is hereby amended to read as follows:

The fund shall be invested as a single fund, but the Secretary of the Treasury shall maintain a separate account for each State agency

And so forth.

Now, what does that provide for insofar as investment of the fund is concerned? Would that enable the Secretary of the Treasury to invest these funds into Government obligations?

Mr. Hay. I think it would.

Mr. WOLVERTON. Then we would just be faced with the same situation that we are now faced with under the Social Security Act, would we not?

Mr. Hay. If they were made available from this fund, for this purpose, I should think that it would not result in any diversion of the fund; that is, as long as it was merely invested in Government obligations.

Mr. PEARSON. Would it not be necessary, Mr. Hay, in order to absolutely earmark these funds and keep them earmarked, to provide some penalty in this bill directed against any official who permitted the funds to be used except for this purpose?

Mr. Hay. That might be.

Mr. PEARSON. In the absence of some such provision, of that kind, there would not be anything to prevent the official from using the money

Mr. Hay (interposing). We might have such a provision. It is our intention to safeguard it.

Mr. PEARSON. It should be.

Mr. WOLVERTON. I am very strongly of the opinion that when a fund is collected for a definite purpose, there should be the same strict accountability on the part of the Government insofar as those funds collected for that particular purpose are concerned that there would be upon an individual who was entrusted with funds for a specific purpose, in which case he certainly would not be justified in investing those funds for his own purpose, and that is what this amounts to, if the charges which are being made with respect to this fund, the use of the Social Security fund, are correct.

Mr. Hay. Frankly, I think that the mere investment of these funds in obligations where the fund itself would thereby be receiving some interest would not be a diversion of the fund to other uses.

Mr. WOLVERTON. That would leave it to the Secretary of the Treasury or to the officials from the Railroad Retirement Board, for instance, and whose judgment would then prevail in these matters as a matter of administrative policy, whether they shall use these funds for governmental purposes or not. And I think it is unfair to the fund, as well as unfair to the people of the Nation as a whole, who have a right to know when we pass a measure of this kind, providing for the collection of funds for a specific purpose, whether they are to be spent as provided by the law itself or not.

Now, may I ask one further question, Mr. Hay.
Mr. Hay. Yes.

Mr. WOLVERTON. Is there any difference in the definition in this bill which fixes the scope of the bill and the definition which appears in the Railroad Retirement Act, for instance?

Mr. Hay. No; the coverage of the Railroad Retirement Act is identical.


Mr. Hay. The coverage under this bill is identical with the Railroad Retirement Act.

Mr. WOLVERTON. I have had brought to my mind a situation this morning in a letter written by a constituent of mine from New Jersey, which had no reference to this particular bill, but the difficulty that he was facing corroborates what has been said by the witness who succeeded you, in the difficulties that arise as to the responsibility of the State funds for particular services rendered in railroad work. This particular individual, as I recall it, has been out of employment for several months. He has made application to the Pennsylvania State fund, and he has not received anything as yet, and if I may use the expression, judging from his letter, he is just being sent from one official to another, to determine whether he is entitled to it or not. And I assume that his experience is the same as you have had in a number of other cases, which has prompted you to bring this legislation before this committee.

Mr. Bacus. That is very true. We get letters each day from individuals who are confronted with that same condition and who are trying to straighten out their situation. They run from one State to another, trying to draw benefits, and after doing so for a number of times, finally find themselves in a position where they are not eligible to draw any benefits, or where they are deprived of the full amount of the benefits which they should be entitled to receive if all of their services were computed on a single basis.

Mr. WOLVERTON. Well I hope you and the others, as I know the committee will, give some careful thought and attention to a provision to make certain, by the provisions of this legislation, that insofar as this fund is concerned, it will not be used for any other purpose.

Mr. Bacus. Yes.

Mr. CROSSER. That was the clear intention of the sponsor of the bill.

Mr. WOLVERTON. I know it was.

Mr. EICHER. My impression of Mr. Wolverton's inquiry, Judge Hay, is that it goes deeper than just to the mere process of physically earmarking the fund; it goes to the question of what is a fund?' What is the definition of "fund?” I take it the fund that may accumulate under this bill is what may be termed future or postponed buying power, when it gets into the form of investment; in effect it is a transfer of present buying power into what may be termed postponed buying power. Then the question arises as to how you are going to safeguard that fund—that future buying power—so as to make it available when it becomes necessary to use and distribute the fund.

If the Board decides that Government securities are safer than private securities I think we would all agree that there is no safer investment, at this time, for, after all, since Government securities are supported by the taxing power they will always be as safe as the sum of all the private securities in the Nation. So I do not see there is any alarm, any particular cause for alarm in Mr. Wolverton's query.


Mr. WOLVERTON. I am not speaking of the immediate situation creating any alarm, but I can readily visualize a condition that might be more alarming than any known at the present time.

Mr. Hay. Yes.

Mr. EICHER. This only refers to the investment of the funds for this purpose?

Mr. Hay. Yes; and so long as they are holding this as a special fund, with respect to the present buying power or the future buying power, there would seem to be little cause for alarm.

Mr. EICHER. Yes.

Mr. Hay. The only thing they can use the fund for, whether the present or the future fund, would be for the purposes stated in the bill.

Mr. EICHER. That is right; and that might result in a saving to the fund.

Mr. Hay. Yes.
Mr. EICHER. Through its investment in income-bearing securities.

Mr. Hay. I do not feel that the investment of the funds would mean a diversion of the funds from this purpose so long as the securities purchased are held in this particular fund.

Mr. WOLVERTON. No further questions, Mr. Chairman.
Mr. CROSSER. Are there any other questions of Dr. Bacus?

Mr. PEARSON. The exhibits that you are filing with your statement, I understand, substantiate the statement with respect to the methods of laws each State has in operation at the present time.

Mr. Bacus. Yes; that is right.
Mr. MALONEY. May I ask a question, Mr. Chairman?

Mr. Maloney. Mr. MALONEY. Dr. Bacus, do you think the present tax is sufficient to produce a fund to take care of your desires ?

Mr. BACUS. The tax under the bill?
Mr. Bacus. Yes; I believe it will be ample.

Mr. MALONEY. You have not taken into your calculation anything to show that under certain conditions that might not be true, have you? In other words, where the railroads would have considerably more unemployment than ordinarily?

Mr. Bacus. Well, the bill has been based, Mr. Maloney, on the assumption that railroad employment over a period of years will fluctuate.


Mr. Bacus. We have checked our actuarial calculations with Mr. Murray Latimer, chairman of the Railroad Retirement Board, one of the outstanding authorities on unemployment insurance in this country. Incidentally, I understand, Mr. Latimer has been requested to appear before your committee. We have assumed that railroad employment will in a general way fluctuate from year to year in the future as has been true over the period of the past 10 years, including both periods of good business and periods of business depression.

Mr. MALONEY. You think the tax is ample?
Mr. Bacus. We believe it is; yes, sir.
Mr. CROSSER. Any other questions?
Mr. MALONEY. No further questions.
Mr. CROSSER. We thank you, Mr. Bacus.
Mr. Bacus. Thank you.

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Mr. CROSSER. The next witness will be Mr. L. E. Keller, of Detroit, Mich.

STATEMENT OF L. E. KELLER, DETROIT, MICH. Mr. KELLER. Mr. Chairman and gentlemen of the committee, my name is L. E. Keller, 61 Putnam Avenue, Detroit, Mich.

I am a national officer of one of the railroad labor organizations, and I speak this morning in behalf of the 20 standard railway organizations comprising the railway labor executives' associations. I have better than 25 years' experience as a railroad employee and as a representative of railroad employees, and in the light of that information and experience, it will be my purpose to discuss some of the practical phases of this problem, and to discuss them in the light of the employees who are so thoroughly overwhelmed with the conditions they find themselves faced with under the 48 State laws.

Your committee, of course, is well aware of the fact that the railroads are operated by systems and are broken down into operating divisions, and that in no way whatsoever are those operations kept within State lines.

Many of the class I railroads employ men to perform services that take them daily over State lines. A situation of that kind was briefly referred to in connection with the run between Washington and New York on the Pennsylvania Railroad, and we find these train and engine service employees working daily on runs that take them into five States and into the District of Columbia.

But the movement from State to State is not restricted to train and engine service groups as would probably be assumed by those who are not thoroughly familiar with the full situation. The maintenance-of-way employees represent something like 20 to 25 percent of the entire group, and many of these employees move from State to State as a regular routine performance of their duties. All of the major railroads and most of the smaller railroads operate in several States. As an example of this, the Santa Fe operates in 10 States; the Chicago, Burlington & Quincy in 11 States; the Milwaukee in 11; the Northwestern in 9; the Louisville & Nashville in 13; the Missouri Pacific in 8; the New York Central in 11; the Pennsylvania in 13 and the District of Columbia ; the Frisco in 9; and the Union Pacific in 13; and so it goes.

Even such small lines as the Carolina, Clinchfield & Ohio operate in four States; the Georgia & Florida in three; the Gulf, Mobile & Northern in three; the Nashville, Chattanooga & St. Louis in four; and the Oregon Short Line in five.

I want to say that seniority rules apply throughout the industry because it is a thoroughly organized industry, and agreements have been entered into between the employees and representatives of the carriers, and these agreements contain rules governing seniority and promotion, and under those seniority rules the overwhelming majority of the employees are covered by seniority districts which may readily take them into two or more States in the performance of their jobs.

Some of these agreements that we have with the railroads extend the seniority district or territory to the entire railroad system. Usually seniority is restricted to an operating division, but in both cases, State lines are completely disregarded.

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Now, as a practical situation, let me give you one illustration that should be typical of the many conditions that exist. On the Louisville & Nashville Railroad the seniority rule for many so-called bridge and building crews extends over the entire system, which embraces 13 States. Now, let us say that the bridge and building gang consists of 10 carpenters, 3 or 4 of whom live in Kentucky, 2 or 3 of whom live in Tennessee, 2 or 3 live in Alabama, and 1 or 2 live in Louisiana. They are brought together in one gang. They may work, and oftentimes they do work in any or all these 13 States because the seniority rule embraces the entire system, which runs in 13 States.

Now, where are you going to make heads or tails out of State laws if we have situations like that on the railroads with no such bill as we are proposing here? As a practical reasonable, common-sense thing, we feel as railway employees that we must have a bill of this kind if we are ever going to know where we are going or where we are coming from in this whole field of unemployment compensation, and there is just not any other way out of it as we see it.

Now, in the train and engine service groups for the year 1937 there were 236,275 employees. There, again, we have some 20 to 25 percent of the total group. These are principally conductors, engineers, brakemen, and firemen. Their service embraces so-called runs within their seniority districts, which require them to perform service regularly in several States. Now, how are you going to make heads or tails out of a situation with 48 different States in a situation like that which the employees are faced with every day in the week?

The character of this industry is such that Congress, we think, quite wisely, has found it desirable to enact separate legislation to cover railway employees in the past. Congress enacted the National Labor Relations Act relating to other industries, and gave us the Railway Labor Act, which has been praised throughout the entire country as a splendid piece of legislation.

Congress gave us a separate railroad retirement act. Ever since the days of the Adamson Act, the Hours of Service Limitation Act, and so forth, the Congress has followed a policy of dealing with railroad employees under separate legislation. We feel that in this particular question here it is doubly essential that Congress do likewise, not only because of the particular nature of the industry itself or for reasons that inspired Congress to enact separate bills in the past, but because we have an intolerable and overwhelming situation here, which just cannot work out any other way. The character of the service, as well as these precedents justify separate treatment of railway workers. The character of service in the railroad industry is so interwoven and interdependent, and State lines are so completely disregarded, that legislation such as is proposed in this bill is fully justified. It will set up uniform and standard unemployment compensation benefits. It will reduce the bookkeeping and clerical work which will otherwise be required of the carriers if we remain under 48 different State laws. It will simplify and harmonize the situation all round in such a way as to make it more desirable from the viewpoint of both the employees and the employers.

With the permission of the committee, we will file for the record a list of railroads, together with the States in which each of the roads operates for the purpose of indicating the extent to which railway employees, under service requirements, may be called upon to work in more than one State.


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