TREASURY AND POST OFFICE DEPARTMENTS APPROPRIATION BILL, 1944 FRIDAY, FEBRUARY 19, 1943 UNITED STATES SENATE, SUBCOMMITTEE OF THE COMMITTEE ON APPROPRIATIONS, Washington, D. C. The subcommittee met, pursuant to adjournment, at 10:30 a. m., Hon. Kenneth McKellar (chairman) presiding. Present: Senators McKellar (chairman), Hayden, Green, Maybank, Lodge, and White. Senator MCKELLAR. The first item this morning is on page 4 of the bill. Mr. Paul, you would like to be heard on that? Mr. PAUL. I would like to make a short statement, Senator. Senator MCKELLAR. Senator George, you would like to make a statement? Senator GEORGE. I would, Mr. Chairman. I have another committee meeting. Senator MCKELLAR. We will hear you, then, Senator. TREASURY DEPARTMENT STATEMENT OF HON. WALTER F. GEORGE, A UNITED STATES SENATOR FROM THE STATE OF GEORGIA RESTORATION OF CERTAIN ITEMS CUT IN HOUSE Senator GEORGE. Mr. Chairman, I wish to speak with reference to two or three of the reductions that were made on the floor of the House. I do not know how your docket is arranged or what the page number in the bill is. REDUCTION MADE IN FOREIGN FUNDS CONTROL The committee has already heard Mr. John Pehle, I believe. Senator GEORGE. On Foreign Funds Control appropriation? Senator GEORGE. Which was reduced on the floor of the House from $4,100,000 to $3,100,000? Senator MCKELLAR. That is right. The estimates are for $4,350,000. Last year they had $5,000,000, and the committee reported $4,100,000, and the House reduced it by $1,000,000 to $3,100,000. 63 83242-43--5 WORK OF FOREIGN FUNDS CONTROL DOES NOT OVERLAP OTHER AGENCIES: Senator GEORGE. I merely wish to say this, Mr. Chairman, on that point: This Foreign Funds Control appropriation is not used for the same purposes, nor is it overlapping with the Alien Property Custodian. They deal altogether with different matters. VALUE OF WORK The Foreign Funds Control is really the only agency directly combatting the Axis on the economic front, to use a military term, and it has tremendously important work. It is not merely a holding organization or agency. It is an affirmative accounting agency trying to prevent the use of Axis funds that may have been segregated and concealed here, in Central and South America, and all of the neutral countries, and it is a job that requires highly trained and highly experienced men. Now, the details of it I am sure Mr. Pehle went into, and I think it would be a very great mistake to weaken our efforts on that front, because if we permit the use of Axis funds, that may, through certain neutral countries, be often converted into actual active German propaganda and other activities, why, we have a pretty serious situation. Senator MCKELLAR. Senator George, while Mr. Pehle was on the stand we asked him to make a thorough examination of just what work he had to do and with the lowest amount that he could perform that work, and he very promptly said that he would be glad to do it, and he is going to report back to the committee what he finds. He made the impression on me--I do not know how he struck the rest of the committee-that he was a very, very efficient man and was. very desirous of being helpful in regard to reductions. He had put in smaller claims than they had last year. Senator GEORGE. That is true. Senator MCKELLAR. Which gave him additional standing, I think,. with the members of the committee. With that situation, do you think that what he reports will be necessary, honestly necessary? Senator GEORGE. I do, Mr. Chairman. I think his report to you will disclose what you might call the irreducible minimum with which he can do an effective job, and it is quite an important job. It is more important, I think, than we are likely to think of when we are thinking: so much in terms of actual military operations. RESTORATION REQUESTED OF AMOUNT ALLOWED BY HOUSE COMMITTEE Senator WHITE. May I ask, you are urging we restore the amount. approved by the House Appropriations Committee? Senator MCKELLAR. That is what he urged. Senator GEORGE. Yes. Senator MCKELLAR. That is what he urged. Senator WHITE. Do you think that what he is urging is fair? Senator GEORGE. Yes; I think that you can rest on the final statement that the Treasury, through Mr. Pehle, will give to you, and if he reduces that any below that, why, of course, you can accept that. Now, there are two other items that I wish to especially speak of, because they directly affect the work of the Senate Finance Committee and the Ways and Means Committee of the House. They are small items, but they are very important items. REDUCTION IN AMOUNT FOR DIVISION TAX OF RESEARCH The item for personal services for the Division of Tax Research, of which Mr. Blough is the head, was reduced by the House from $163,760 to $116,000, a reduction of $47,760. Senator WHITE. Where does that appear? The CLERK. On page 4. Senator GEORGE. Now, that is a relatively small reduction. Senator MCKELLAR. Before you leave that, Senator George, of course, we all realize that there should be research, but we have so many research experts and statisticians for the Government, I am just wondering if you think it is necessary to keep this present number of research employees constantly at work in order to do your job? Senator GEORGE. I will speak on that. Mr. Blough and Mr. Paul are present. Mr. Blough, of course, can give you the exact number of people and their salaries, but I want to speak of the services that this Tax Research Division in the Treasury is doing. It is the only agency, I take it, that can be commanded by and can serve promptly and efficiently the needs of the Ways and Means Committee and of the Finance Committee, in helping them in framing all tax legislation. I mean in reaching conclusions. Senator MCKELLAR. Giving you the figures and facts? WORK OF DIVISION It is a hard-working division. It is not a useless division by any means and it is directly connected with in a vital way the whole warfinancing program of the Government. That is to say, of the Treasury, and the item is not large. This is the Research Division which is vital and necessary if the committees are to function. There is no duplication of this work. The nearest approach to similar work is the work that we do through the Joint Committee Staff, which is a congressional committee, and that work is very limited. They have not the facilities. They have not the staff, the personnel. They do not have the trained men. They have good men, but they have so few of them and their time is taken up with doing the work that the committee puts on them. Their work is directly in connection with framing and formulating. REDUCTION IN AMOUNT FOR OFFICE OF TAX LEGISLATIVE COUNSEL Now, there is another agency down there in the Treasury, and that is the Office of Tax Legislative Counsel. That was reduced from $90,165 to $74,700, a reduction of $15,465. This legislative counsel was formerly headed up by Mr. Tarleau, whom most of you know. He was down there in the Treasury for a number of years, and he rendered the committees of the Congress in the formulation of legislative bills, measures, invaluable services, and likewise his services were invaluable to the Treasury itself. Now, Mr. Surrey has succeeded Mr. Tarleau. He was with Mr. Tarleau and he has succeeded to the head of that department. VALUE OF DIVISIONS TO CONGRESS These are two relatively small items, the reduction of $47,000 in one case and $15,000 in another, but these are two vital agencies in the Treasury having to do with war financing. They are particularly serviceable agencies or divisions to the Congress itself in the preparation and study of all tax questions and in the preparation of tax bills. In fact we could not very well get along without the assistance of those people. Now, our Joint Staff, as I have said, has a limited number of people and that staff, of course, represents primarily the legislative branch up here in studying tax problems and the formulation of tax measures, by the Ways and Means Committee and the Finance Committee, and these committees could not well get along without the fullest cooperation and constant services of both the Divisions of Tax Research and of the Legislative Counsel in the Treasury-and I can speak very frankly because these gentlemen are always on hand and tax legislation now consumes a greater part of the full year. They are called from the Treasury every day. They sit with the committees and they are required to get, and do get, on a moment's notice, material, figures, and proposals which would necessitate long delays if we were dependent upon less experienced men and men who were not constantly engaged on this work. Now, I think beyond all doubt that it would be just penny-wise to cut down the appropriations for these divisions, unless these gentlemen who head them could indicate that they could receive some cut, without interfering with their functions; but if they have got to sacrifice any of their activities-in other words, if their work should be slowed down for a single week during the whole year, the loss to the Government would be very much greater than these two little minor savings in these agencies. Indeed, if the work of the Ways and Means Committee and the Finance Committee was slowed down on account of their inability to furnish us immediately information needed, or delayed our request for a single day, it would often cost the Government as much as would be saved by these two slight appropriations, and I know these gentlemen, these divisions, have functioned well, and I am quite sure that no member of the Finance or Ways and Means Committees would for a moment think that there should be any reduction which would reduce their efficiency, render them less able to promptly comply and to meet all of the requirements of the committee, to say nothing of the work which they constantly do in the Treasury itself, year in and year out; week in and week out, even when the committees are not considering tax legislation or tax matters. So I hope that there will not be these minor reductions here. QUESTION AS TO REASON FOR REDUCTIONS MADE BY HOUSE Senator MCKELLAR. Do you know what prompted the House, Senator George, to make the reductions? Were they made in the committee or on the floor? Senator GEORGE. Those were made on the floor. Mr. PAUL. No, Senator; these were made in the subcommittee. Senator MCKELLAR. No reason is given at all for it. They were made in the committee. Mr. PAUL. They were made in the committee, Senator. Senator GEORGE. Yes; these were made in the committee. The reduction in the Foreign Funds Control was made on the House floor. Mr. PAUL. I would say that one of the reasons perhaps was some confusion as to the functions of these two divisions. We might not have gotten across at that time fully the real story. Senator MCKELLAR. Heretofore they have been paid from appropriations for the Internal Revenue Bureau? Mr. PAUL. That is right. ADDITIONS TO STAFFS OF DIVISION OF TAX RESEARCH AND OFFICE OF TAX LEGISLATIVE COUNSEL Senator MCKELLAR. Have additions been made to the staffs of these two agencies? Mr. PAUL. Some additions were made about December 1941, right at the time of the beginning of the war, but these appropriations which were passed by the Budget and cut by the Appropriations Committee are the same as last year. Senator GEORGE. There has been no substantial difference? Mr. PAUL. No increase. Senator GEORGE. No increase in either one of these services. Senator MCKELLAR. Is that all you have, Senator George? Senator MCKELLAR. We are very much obliged to you for your state ment. Senator GEORGE. I am very glad to have been privileged to appear on these items. There are other matters in the appropriation bill which Mr. Paul may wish to speak of, but Mr. Blough and Mr. Surrey are both here and they can give you any information that you wish about their respective Divisions. Senator MCKELLAR. While we are on that question, we will hear these gentlemen about it. Do you wish to be heard? Mr. PAUL. Yes; I would like to be heard. DIVISION OF TAX RESEARCH AND OFFICE OF LEGISLATIVE COUNSEL STATEMENTS OF RANDOLPH E. PAUL, GENERAL COUNSEL AND TAX ADVISER TO THE SECRETARY OF THE TREASURY; ROY BLOUGH, DIRECTOR, DIVISION OF TAX RESEARCH; AND STANLEY S. SURREY, HEAD OF OFFICE OF TAX LEGISLATIVE COUNSEL, TREASURY DEPARTMENT Mr. PAUL. I would like to make a brief statement and then I would like to have Mr. Blough, of the Division of Tax Research, and Mr. |