it ought to originally have been enacted; as the National Security Commission thought it ought to be enacted; as the States themselves indicated that they thought it would be enacted when they wrote provisions in their bills in contemplation of the enactment of this sort of a measure by the Congress of the United States.

And, who shall say that any man or group of men who come before the Congress of the United States with a plan to improve the socialsecurity program of this country is running counter to the program of the President?

No man under the American flag has greater respect for the President and the program of the President than I have; and I come as the spokesman of men who are friends and supporters of the President and his program, to challenge the statement that this is not in harmony with the program of th eadministration-come, tendering to the Congress and to the administration, a concrete, definite, plan to carry out an improvement of the program upon which the President's heart is set and to which the American people have committed themselves. The second great thing which this bill undertakes to do is to render simple, at least as simple as a thing in its nature rather difficult, can be, the administration of the unemployment insurance acts of the various States.

I referred to the complications yesterday.

I have offered a memorandum here which you will find brings before you concrete evidences of the complications that are now ensuing and that must continue to ensue.

We submit that the adoption of this plan will make the socialsecurity program more effective and workable within the various States of the Union and I submit that if we are to avoid coming ultimately to a Federal unemployment insurance program applicable to all industries, we must adopt the most practicable expedients to make the State plans workable. They are not workable at the present time with respect to the railroad industry and the inclusion of this industry in the general scheme of unemployment insurance in the States complicates the entire problem for the States.

Would anyone say that that is not in accord with the administration's program? Who would impute to any responsible representative of this administration the desire to see the States' program broken down because of the complications that are embodied in it under the systems at the present time?

The third thing that this bill proposes to do is measurably, not to any extravagant extent, as I pointed out yesterday, but measurably, to lighten the burdens of the railroads.

The railroads are asking in effect to be put on relief in this country. at the present time. They have all sorts of requests here for aid. I do not know whether they want to go on the W. P. A. or relief rolls, or not; but they have their particular form of relief that they want. They have shed tears that would augment the floods of the Middle West over the desperate financial conditions in which they find themselves. They have taught the pessimists of all ages how to speak in lugubrious terms over the plight in which they find themselves.

We now come with a measure calculated to assist the railroads to the extent of some $4,000,000, $5,000,000, or $6,000,000. It is a sizable sum; and we offer it to the railroads.

Is that not in accord with the President's program? Do the railroads want, by resisting this, to put themselves in the attitude of preferring to continue under the burden? Have they been burdened so long that they love the burden and resist the efforts of people to assist them?

This is in accordance with the President's program.

The fourth major thing that this will accomplish will be to relieve the workers measurably of confusion with respect to their rights, of inequities and inequalities that obtain under the existing plan. That, of course, is of interest and consequence to the men whom I represent. We want to see the money that is paid by the railroads used to the very greatest possible extent to pay benefits and not be expended in excessive administration costs; and for that reason we want a simple plan that will be the least expensive possible and that will redound to the greatest possible benefit to the men.

Who, in all America today, is more interested in assisting workers than the President of the United States? Will anyone say that a plan brought here that will bring a greater measure of relief to workers, railroad workers, or any other worker, is not in accord with the President's program?

After all, gentlemen, we are introducing this bill in the Congress of the United States. We are coming before the committee of the Congress that has the power to enact legislation, and I think ample power itself to determine whether the bill is in accord with the program of the President of the United States. May I say that so far we have not been called before the Budget Director or the Budget Bureau to explain this bill. We have not argued this to them. We did not request any hearings before them, because we thought we were entitled to a hearing up here in Congress and that Congress had some authority and some power and some ability to determine what was in accord with or what was not in accord with the President's program and what would be legislation beneficial to the social-security program-Nationwide, to the States, to the railroads, and to the workers.

Mr. EICHER. Mr. Chairman, may I ask a question?

Mr. CROSSER. Mr. Eicher.

Mr. EICHER. Mr. Hay, will there be any direct or indirect draft on the Federal Treasury in the operation of this bill?

Mr. HAY. It is our contention that this system we propose to set up shall be absolutely self-supporting. Of course, I realize that mechanical procedure exists by which we can establish that, but I want to say this: The tax that is levied, we think, is ample to support this program; and if it could be demonstrated to this committee or any other that we have prescribed here conditions that would constitute any draft upon the Treasury of the United States, we would be perfectly willing to correct it in the particulars so as to be sure that it is a self-supporting proposition. For that reason I cannot see why the Director of the Budget, the Director of the Bureau of the Budget, or the Treasury Department, should get all "het up" about this proposition at all.

I want now to make a few observations on the Treasury's comments on this bill; but I think, gentlemen, in order to expedite it and save the time of the committee, if you will allow me instead of going at length into this, to offer a memorandum that I have prepared which deals with this Treasury letter.

Mr. CROSSER. That may be done.

Mr. HAY. If I may do that, it will save your time, unless you prefer my making an oral statement covering my observations on this Treasury letter. Let me see for just a moment whether I have covered all of this.

Mr. MAPES. Personally, I regret that I have got to leave this hearing and go to another committee meeting, on a matter this committee is interested in.

Mr. HAY. Thank you very much, Mr. Mapes.

Mr. MAPES. I will read your testimony in the printed hearings. Mr. HAY. Any questions I think you might want to ask me, I will ask myself.

Mr. MAPES. All right.

Mr. HAY. If I may just take a moment, Mr. Chairman, I will see if I can, agreeable with my conception of how this ought to be presented, dispense with an oral statement further and leave it to you to read in the wee small hours of the morning, or at any other time.

I think I can conclude by offering this memorandum, Mr. Chairman, supplementing my statement with respect to the Treasury letter and which I think you will find is a complete answer to any of the arguments made by the Treasury. As I said to the Congressman a moment ago, we propose that it shall be self-supporting. Because of the incidents of railroad employment and unemployment, which I mentioned, we think that although the benefits are slightly more liberal than under the State plans (insofar as you can figure out what benefits employees have under State plans) the tax we propose although saving the railroads $1,200,000 per year will be adequate to support this plan.

We want to thank the committee for your indulgence.

Mr. CROSSER. Are there any questions?

Mr. HAY. And with the offer of the memorandum, we thank you. (The memorandum referred to is as follows:)

STATEMENT OF THE RAILWAY LABOR EXECUTIVES ASSOCIATION IN REPLY TO THE LETTER OF APRIL 26, 1938, TO THE CHAIRMAN OF THE HOUSE INTERSTATE COMMERCE COMMITTEE FROM THE ACTING SECRETARY OF THE TREASURY

We were surprised to have introduced into the record at the beginning of the hearings yesterday on the Railroad Unemployment Insurance bill (H. R. 10127) sponsored by our association, a letter from the Acting Secretary of the Treasury which consisted of two main parts. The most important part was the concluding paragraph reading as follows:

"This Department is advised by the Bureau of the Budget that the proposed legislation would not be in accord with the program of the President."

The second part consisted of criticisms of some features of this bill from the point of view of Treasury policy, and other criticisms of the bill from points of view which, to our mind, are not properly within the competence of the Treasury.

With respect to the first matter, the Railway Labor Executives Association requests this committee to ask the Bureau of the Budget:

1. Whether the President has seen this bill,

2. With what program of the President, or with what part of the President's program this bill is not in accord,

3. In what respects this bill is not in accord with such program.

The bill is clearly in accord with the President's recommendations for the relief of the railroads since its major effect on the railroads is to effect a cash saving to them of about $5,000,000 a year.

This bill is clearly in accord with the President's social security program because: A. It is in accord with the recommendations of the Federal Coordinator of Transportation (74th Cong., 1st sess., H. Doc. No. 69, January 1935, p. 76).

B. It is in accord with the recommendations of the President's Committee on Economic Security (74th Cong. 1st sess., H. Doc. No. 81, p. 15).

C. It is in accord with the exemption employers and employees covered by the Carriers Taxing Act and the Railroad Retirement Act from the coverage of titles 2 and & of the Social Security Act.

D. It is in accord with the intentions of the legislatures which enacted the State unemployment compensation laws because practically every such law provides for the exemption from coverage of workers subject to an unemployment compensation law enacted by Congress, and authorizes and directs the administrator to cooperate with any Federal agency administering such a Federal unemployment compensation law.

Our association and the membership of our several organizations is therefore completely at a loss to know how and why this bill can be said to be, "Not in accord with the program of the President." We are inclined to suspect that this language could be translated to mean, "Not in accord with the opinion of some unknown student of social security in the Bureau of the Budget.'

Our association therefore respectfully asks this congressional committee whether we should adjourn the present hearings and petition for a hearing before the Bureau of the Budget.

The main body of this letter, as indicated above, consists of certain criticisms of the bill which can be summarized and answered as follows:

*

*

*

1. "Possible serious consequences from a fiscal standpoint and otherwise * of removing the better risks from our system of social insurance * * or of making provision for greater benefits than present enacted revenue provisions will sustain."

The Treasury wisely admits that it is not within its competence really to discuss this policy.

It must be admitted that the railroad industry is a slightly better than average unemployment insurance "risk." It is for this reason that we can propose slightly more liberal benefits to railroad workers at substantially less cost to the railroad employers, but there can be no fiscal consequences and no "serious effect upon the financial stability of the various State funds" except in those States which have a completely pooled fund without merit rating. Since every State unemployment compensation law, with two exceptions, either now provides or has under contemplation a system of merit rating by which the contribution rates of the better risks will be reduced according to some measure of their employment experience, this argument of the Treasury's is completely fallacious.

The Treasury provides no evidence to support the contention that the bill makes "provision for greater benefits than presently enacted revenue provisions will sustain.

2. The Treasury is worried about the constitutional question involved in the transfer proposals and the adverse action of States to the correction of methods proposed.

Again the Treasury admits that it is the Social Security Board and not the Treasury which is competent to comment upon this policy. We submit further that it is probably within the jurisdiction of the Department of Justice rather than the Treasury to worry about constitutional issues, especially when the Treasury has presented no evidence that there is any constitutional issue involved. These proposals are exactly no more and no less constitutional than the provisions of title 3 of the Social Security Act, which the Treasury may remember the Supreme Court has already passed on.

3. The Treasury "is opposed to the collection of taxes (or contributions) * * * by any other agency than the Treasury Department," and fears "unnecessary duplication of facilities and functions."

Apparently it has not come to the attention of the Treasury that there already exists unnecessary duplication of facilities and functions under the present Federal-State unemployment compensation program. In my yesterday's testimony reference was made to a few of these State administrators who have already vigorously criticized the present duplication.

We know further from our own experience with the Carriers Taxing Act and the Railroad Retirement Act that there is irritating and expensive duplication of functions between the Treasury and the Railroad Retirement Board, the nature of which we shall be glad to elaborate if time permits.

The Treasury does not call attention to the fact that its sole function under the Carriers Taxing Act and Railroad Retirement Acts is to deposit the monies and write the benefit and annuity checks. Everything else of any consequence is performed by the Railroad Retirement Board or the Interstate Commerce Commission.

The Treasury has not seen fit to point out that it has not been required to use its far-flung facilities for tax collection in the effort to collect the carriers' taxes

from the few large and responsible taxpayers involved. They are undoubtedly necessary for the discovery of and the collection of taxes from, corner groceries and fly-by-night employers. They are probably of little assistance in the discovery of interstate railroads, most of which are reasonably well known.

4. "The Treasury is also opposed to the proposal that a special fund be established for meeting costs of administration. There is no apparent reason why 10 percent of the amounts collected under the bill should not be covered into the general fund of the Treasury, as are the similar receipts now collected under title 9 of the Social Security Act."

The reason is perfectly apparent, although public protest against the alleged misuse of Social Security taxes may not have come to the attention of the Treasury. The reason is two-fold. First, Social Security taxes should be used solely for Social Security purposes. We are opposed to the present situation under which the Treasury collects about $70,000,000 or $80,000,000 a year under title 9, while there is appropriated only $40,000,000 a year for the administration of State unemployment compensation laws. Second, all the available evidence indicates that the costs of administering unemployment insurance vary from year to year in accordance with the volume of employment and unemployment, from about 8 percent to 13 or 14 percent of contributions. We have no confidence that the Treasury or the Bureau of the Budget can predict the volume of unemployment 13 months in advance. We know that the Social Security Board in December could not predict the volume of claims to be expected on January 1, 1938, and that neither the Social Security Board nor the Bureau of the Budget was particularly successful in estimating the costs of administering unemployment compensation in the States even for the first quarter of 1938. The 23 States which began to pay benefits on January 1, 1938, were allotted by the Social Security Board (not counting Wagenot-Peiser and State and local funds) $11,559,900 (Social Security Bulletin, April 1938). If this rate of expenditure were continued for the year, it would amount to between 12 and 13 percent of the estimated collections in these States. If the cost of administering unemployment compensation in 1939 should continue at the same level, it would amount to about $90,000,000 per year, which is more than twice as much as the amount recently appropriated in the Independent Offices Appropriation bill for this purpose.

Attention is called to the necessity of passing House Joint Resolution 676 presented to the President the day before yesterday because the Bureau of the Budget and the Social Security Board and other associated agencies had underestimated the cost of administering unemployment compensation during the first half of this current year; and to the fact that on May 12 the New York Times quoted Commissioner Andrews of New York State as saying that their funds for the administration of their unemployment administration program would be exhausted by May 15. Attention is also called to the memorandum of March 28 sent to all State unemployment insurance administrators by R. Gordon Wagenet, Director of the Bureau of Unemployment Compensation of the Social Security Board, saying that the Board would ask the Treasury to pay only 50 percent of the approved budgets for the quarter ending June 30, 1938, pending passage of a deficiency bill (New York Times, April 4).

The volume of business in most Governmental agencies is reasonably constant and can be predicted with reasonably accuracy. Under the Railroad Retirement Act, for example, it is possible to estimate in advance the number of workers who will attain the age of 65 years and within reasonable limits those who will become permanently disabled in any given year, and to estimate the cost of handling their claims, although, of course, even in the case of retirement insurance an exact knowledge of the age distribution does not make possible a precise estimate of the numbers who will retire within any 12-month period.

It is impossible to make any such estimates of the volume of claims under any plan of unemployment insurance or relief. There is no possible basis on which to estimate a budget for unemployment insurance 18 months in advance of the period for which it is to provide. Even the estimates made by the Social Security Board and the several States in December 1937 of the volume of unemployment compensation claims in the first quarter of 1933 proved to be far too low. Furthermore, the expenses of administering unemployment compensation will be heaviest during periods of business recessions and at the very times when the Government as well as industry is pressed with demands for economy. It would be unrealistic to expect any agency, despite the needs of its program, to escape the general pressure for decreased expenses. The unemployment insurance program might then be hamstrung during the very period for which its protection was devised. Because of the pressing need of the unemployed, delayed unemployment insurance benefits, resulting from even temporarily inadequate administrative appropria