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to do so. Every year the Bureau of the Budget O. K.'s requests to the Congress for funds to the various departments, without the appropriation of which they couldn't engage in the business.
Do you want to say something, Mr. Condon?
The CHAIRMAN. While this is the committee having the widest jurisdiction of any committee in the House, and in the opinion of some of its members is the most important, there is no formality, no particular procedure which we follow.
Mr. Curtis. May I begin, Mr. Chairman?
STATEMENT OF HON. THOMAS B. CURTIS, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF MISSOURI
I want to commend the committee for the work it has been continuing to do in this field of Government in business.
As the chairman knows, I served on this committee in the last Congress and I was on the subcommittee, the Bonner subcommittee then, which was going into military procurement and supply, and other aspects of Government procurement and supply, and we went into this very same field, and I know Mr. Ray Ward, the counsel of this present subcommittee, did a great deal of the work on that committee, and the Harden subcommittee, whose activities I followed very closely, has been going into this subject further.
I am happy to see that Mr. Osmers has reduced this matter to bill form so that we can actually move ahead in this field.
The first thing I would like to state is to emphasize with figures the tremendous problem that we do have. I am going to quote from the Tax Foundation's bulletin, Facts and Figures on Government Financing 1952 to 1953, and on page 22, their Table No. 16–Estimated national wealth in current and 1929 dollars, and continued on those two pages, pages 22 and 23. Under the line of the year of 1929 public wealth was $43.6 billion and private wealth was $375.5 billion.
In 1948, which is the last column for which we have complete figures, although there are incomplete figures for 1951, public wealth was 126 billion; private wealth 671 billion.
For the year 1951, on the incomplete basis, we can see that the trend is continuing along the same lines.
Now, the significent figures are the ratios, and by taking the ratio of public wealth to private wealth in 1929 and 1948, for the last year-we eliminate any factor, dollar factor, as to the value of the dolar because it is purely ratio—the ratio will show private wealth to public wealth is 9 to 1. That ratio declines to 1948 to a ratio of only 5 to 1 and, as I again say, for 1951, on the incomplete figures,
there is an indication that it would be below the ratio of 5 to 1. In other words, in a period of some 20 to 25 years, the ratio of private wealth to public wealth has declined from a 9-to-1 ratio to a less than 5-to-1 ratio.
Our tax base essentially is the private capital investment because when public capital investment goes in there is no taxes on that and essentially our activity in this country is always going to be private capital investment as far as the tax base is concerned.
So, if we have a tax base roughly of 9, your tax rate can be 3, and you have a tax take of 27. If your tax base is only 5, you have to have a tax rate of over 5 in order to get the equivalent 27.
I think that indicates by figures exactly the tremendous field that this committee is digging into—in other words, how has the Government moved into the field of social endeavor, let's say, to the extent that a ratio of private to public wealth is reduced from a 9-to-1 ratio to a 5-to-1 ratio—and that is one thing I think, of course, we have to examine very carefully.
My own conclusions are, of course, that we have to move out, move Government out of these fields and get those endeavors back into the private enterprise field and back into the tax base.
If we do that, incidentally, we can reduce our tax rate, reduce taxes, and still have the wherewithal to carry on our defense program.
The second reason I think this field is very necessary to go into is simply on the basis of personnel, personnel practices.
Regardless of what the endeavor might be, whether it is making shoes or roasting coffee, human beings have to do the job, with what machinery they have. If private enterprise is doing the job, it is doing it under the personnel practices of private enterprise. If Government is doing it, it has to do it under the civil service system of personnel practices, which I submit is, at best, a compromise system because we, all of us, are aware of what can happen if spoils politics operates in the field of Government personnel practices; and for that reason all of us have been behind a system of civil service, but in adopting this method of personnel practices we sacrifice a great deal of efliciency.
We all are fan iliar with the problems we have in trying to run various enterprises through a personnel system of civil service, and I night say to those who are interested in the great American unions in this country--and I, myself, am deeply interested in them-I question their wisdom to encourage Government to go into these fields because just as soon as Government goes into these fields the personnel that has to do the work is immediately under civil service and, so, not under the great private-enterprise system where these men can be rren bers of unions, where a man has the basic right, the right to strike, because as soon as he is a Govern.y ent ex ployee that right to strike is considerably whittled down.
So, I raise this other question of the wisdom of Government moving into these fields.
Now, when our subcommittee in the last Congress had its final hearings one of the points I made a great deal of was the fact that these govern rental projects that the Government moved into had no accounting system where we could ever estimate what their cost was.
One of the things we examined in St. Louis, Mo., was this optical shop that the United States Army was running, the largest optical
shop in the world, and it was obvious, from questioning, that they had no idea what the costs were. In fact, I asked how they estimated the depreciation on machinery, and they said they didn't estimate it because they had to come before Congress under a different kind of appropriation in order to get new machinery when the old machinery had worn out.
We had the same situation when this committee went into the big field of coffee roasting, which was only an example of some of the enterprises that Government had gone into. We were unable to tell the cost because the accounting systems adopted in this instance by the United States Navy and other defense establishments were such that no one could tell what was being done.
Another big field that the military in particular had moved into was the distributive field. Apparently they had gone on the theory, as I have paraphrased it, that if you could buy a hammer or, say, a million hammers at 50 cents a hammer at the factory they would save 50 cents a hammer over buying a hammer at a dollar a hammer at the retail outlet where the particular defense base was where they needed the hammer, ignoring the tremendous American distributive system, which, in my opinion, is just as great and miraculous a thing as our mass productive system, of how do you get hammers from the factory out to the using unit; and again digging into that big field we found that the military establishments had no concept at all of the costs involved of transportation, warehousing, and all the tremendous details that go into distributing material from the factory to using units.
Of the suggestions I made at the time of our last committee hearings one was that we do get proper accounting systems so we know what it is costing us.
That is the No. 1 thing.
Then, No. 2, there should be a place where industry, private enterprise, could go and complain to the Government and say, "We could do this cheaper," and then have their case heard.
As it is presently set up, business, small or large, has a difficult time knowing where to go to register their complaint. If they go to the military establishments, they actually are going before a group that you might say has a special interest in preserving their own situation.
I am going to conclude my remarks by pointing out exactly that situation.
In St. Louis, Mo., a small concern which had been manufacturing 24 twin-mount gun shields for the Navy, and done a very good job, suddenly found out that the Navy had withdrawn, the Bureau of Ordnance had withdrawn, a request to bid on an additional 24 of these units; and I inquired into it in their behalf and found out that the reason was that they were turning the work over to the Naval Gun Factory.
As I pointed out, this St. Louis organization already had the dies and the patterns, the jigs and the know-how to make these, and it was obvious that the Naval Gun Factory, which was not making them, was going to have to spend a lot more money in order to be set up to do it.
The answer, gentlemen, that the Assistant Secretary of Navy, Mr. Fogler, gave in his letter to me of June 22, 1954–and I have
turned this file over to the committee; so they have it—was that they needed this work at the Naval Gun Factory in order to keep the Naval Gun Factory going.
The CHAIRMAN. Would the gentleman yield there?
Mr. Curtis of Missouri. No. I am or the Ways and Means Committee.
The CHAIRMAN. That is right. Mr. Curtis of Missouri. The Ways and Means Committee has the job of trying to figure out how we are going to get the taxes to do all these things.
The CHAIRMAN. We would be interested in your telling us how the Naval Gun Factory could get the money.
Mr. CURTIS of Missouri. I went into that, as the chairman knows, and the committee knows, in our last Congress, and the interesting thing is that the Military Establishment has gotten these tremendous funds through the maintenance item in their budget.
The CHAIRMAN. Did your local factory contribute to that fund?
Now, here is the final payoff on this particular situation in the gun factory,
Mr. McCORMACK. When did that happen?
Mr. CURTIS of Missouri. This is current. The date of the Assistant Secretary of the Navy's letter is June 22, 1954.
. This isn't one administration over the other. Mr. McCORMACK. Please, now, don't be suspicious of me.
Mr. Curtis of Missouri. This is a battle, I might say, against Federal bureaucracy, which I think is entirely apart from either political party, and both political parties should be deeply concerned.
Mr. CONDON. Aren't we setting up more bureaucracy under the Osmers bill to battle bureaucracy? We establish a 4-man board, or their deputies, which obviously means deputies since the 4-man board have many other duties and probably won't be able to serve in person.
We are going to set up a staff for them; set up administrative hearings. We are going to allow the Secretary of Commerce, the Comptroller General, the Director of the Bureau of the Budget and the Secretary of the Treasury to cut back to the Department of Defense instead of putting the responsibility on the Secretary of Defense.
Mr. CURTIS of Missouri. I am inclined to agree with the gentleman's observation, that the best way to solve problems isn't to go creating something new, but instead make that which you have function properly.
Now, that is a very basic view I have.
Mr. CONDON. I wonder if you have any comment about a bill which will give to the Secretary of Commerce, the Comptroller General, the Director of the Bureau of the Budget and the Secretary of the Treasury the right to tell the Department of Defense they have got to cut something down.
Mr. Curtis of Missouri. I think on this basis, yes; on the basis, as I understand the bill, it is simply a procedural thing, so that if you have proper accounting systems in the Military Establishment, and these companies come forward with their accounting system and they present to the Board that they can do it cheaper, that is the sole finding, how it can be done the cheapest, so it is the least cost to government and to our society.
That is the point.
Now, at present the businesses of this country have no place to go it they want to present their case, except to the Military Establishment, itself.
Now, that is the case I have here at hand of the Department of the Navy.
The CHAIRMAN. They came to their Congressman?
The CHAIRMAN. Do you think it is proper for them to come to their Congressman?
Mr. Curtis of Missouri. They had to. The CHAIRMAN. And exert pressure on a Government agency? Wasn't that what McCarthy did?
Mr. Curtis of Missouri. I don't exert pressure, if the gentleman please, except the pressure-I hope I don't-of logic and facts.
The CHAIRMAN. I do it every week.
Mr. Curtis of Missouri. I try to present that sort of pressure; yes, presenting the logic and facts, but I respect the right of the executive department to make its own decision and I do not try to interfere with that decision, except to the extent, I again say, of logic and facts.
This St. Louis concern had already presented this matter to the Navy and didn't even get an answer. At least I got an answer on a high level, but the answer, you will note, is that they want to continue to run their Naval Gun Factory even though this is a more costly proposition; and what I meant to add, which I didn't have a chance to add, is that St. Louis is one of the critical unemployment areas of this country, and we have even gone so far in Congress to try to encourage—and I have not been in favor of this, incidentallymilitary contracts and other contracts to be let in unemployed areas, where there is gross unemployment, to try and equalize it. I am against that for other reasons, but
Mr. McCORMACK. You know the fight on that. The Senate put on an amendment in the last 2 years and there has been a lot of difficulty in that.
Mr. CURTIS of Missouri. Yes.
Mr. McCORMACK. I agree with you in that proposition, that reasonable consideration should be given to those labor distress areas, within the justifiable limits. I look eye to eye with you on thet.
Mr. CURTIS of Missouri. But the only reason I mention the specific case, though, is to try and bring home the fact that at present, without