4. The exception, if any, of agencies from the operation of the legislation should be limited to the smallest possible number. 5. It should require presentation to the Congress of any reorganization plan under the procedures provided in the Reorganization Act of 1939. Sincerely yours, LINDSAY C. WARREN, Comptroller General of the United States. OFFICE OF THE POSTMASTER GENERAL, Washington 25, D. C., August 2, 1945. Hon. CARTER MANASCO, Chairman, Committee on Expenditures in the Executive Departments, House of Representatives. MY DEAR MR. MANASCO: Reference is made to your request for a report upon H. R. 3325, a bill to provide for reorganizing agencies of the Government, and for other purposes. While it is our conviction that this Department's activities and scope are such that it is necessary that all its functions be under a single managing head, we have no objection to the enactment of this measure. It has been ascertained from the Bureau of the Budget that there is no objection to the submission of this report to your committee. Very truly yours, Hon. CARTER MANASCO, ROBERT E. HANNEGAN, DEPARTMENT OF COMMERCE, Washington 25, D. C., July 13, 1945. Chairman Committee on Expenditures in the Washington, D. C. DEAR MR. CHAIRMAN: Reference is made to your communication of May 30, 1945, requesting the views of the Department with respect to H. R. 3325, a bill to provide for reorganizing agencies of the Government, and for other purposes. Inasmuch as the Bureau of the Budget has advised that the provisions of S. 1120 introduced by Senator Overton, June 7, 1945, seem to conform to the message of the President on this subject, I have no comments to make relative to H. R. 3325. Sincerely yours, Hon. CARTER MANASCO, H. A. WALLACE, Secretary of Commerce. DEPARTMENT OF AGRICULTURE, Chairman, Committee on Expenditures in the Executive Departments, House of Representatives. DEAR MR. MANASCO: This is in reply to your request of May 30, 1945, for a report upon H. R. 3325, a bill to provide for reorganizing agencies of the Government, and for other purposes. As you know, of course, the President has recommended the enactment on a permanent basis of legislation similar to the Reorganization Act of 1939. Among other reasons, this Department feels that a pressing reason for the enactment of such legislation is the situation which will be created when the authority of the President under title I of the First War Powers Act expires. Under the several Executive orders which have effected reorganizations in this Department pursuant to that authority, changes have been made, which, through the passage of time and because of the greater efficiency thereby enjoyed, should be made permanent or perhaps revised still further in the same direction. As a matter of fact some of the changes brought about by these orders, particularly the earlier ones, have by necessity become recognized through appropriation language and in other provisions of statutes or administrative regulations. Moreover, changes in the condition of the country, particularly following final victory and corresponding changes in the programs of this Department which are to be anticipated, may also make it most desirable for further organizational changes to meet such conditions. The Bureau of the Budget advises that it has no objection to the submission of this report. Sincerely, CLINTON P. ANDERSON, Secretary. Hon. CARTER MANASCO, TREASURY DEPARTMENT, Washington 25, D. C., June 26, 1945. Chairman, Committee on Expenditures in the Executive Departments, House of Representatives, Washington, D. C. MY DEAR MR. CHAIRMAN: Further reference is made to your letter of May 30, 1945, requesting the views of the Treasury Department as to H. R. 3325, a bill to provide for reorganizing agencies of the Government, and for other purposes. The Department believes that it would be highly desirable, and in the interests of sound management of the executive branch of the Government, that permanent legislation be enacted in broad and flexible form to require the continuing study of the reorganizational structure of Federal agencies and to permit the President to initiate such reorganizations or adjustments in that structure as may from time to time be considered desirable. As you know, the President in a special message to the Congress on May 24, 1945 (H. Doc. No. 199, 79th Cong.), requested the enactment of such legislation at an early date. H. R. 3325 departs from the type of legislation suggested by the President in two important respects. It would permit the Congress to nullify any action the President initiates by a majority vote of one House rather than of both Houses; and it would exempt a large number of Federal agencies from the reorganization authority. The Department believes that these changes would seriously weaken the proposed reorganization authority and might well defeat the desirable objectives of the proposal, and recommends that legislation along the lines of that suggested by the President be enacted rather than H. R. 3325. The Department has been advised by the Bureau of the Budget that there is no objection to the submission of this report to your committee. Very truly yours, D. W. BELL, Acting Secretary of the Treasury. The CHAIRMAN. Mr. Harold D. Smith, Director of the Budget, is our first witness. I understand you have a prepared statement? Mr. SMITH. I have. The CHAIRMAN. You may proceed to read it. STATEMENT OF HAROLD D. SMITH, DIRECTOR OF THE BUDGET, WASHINGTON, D. C. Mr. SMITH. In approaching the subject before you the message of the President, dated May 24, 1945, concerning the reorganization of executive agencies, and Mr. Manasco's bill, H. R. 3325-I should like to direct my remarks to three principal points. These points are (1) the need for improving the organization of the executive branch of the Government, (2) how such improvements may be effected, and (3) an evaluation of the provisions of H. R. 3325 and a definition of modifications in the bill which seem to me to be desirable and necessary in order to evolve the most useful legislation in this field. NEED FOR ORGANIZATIONAL IMPROVEMENT In discussing the need for improving the organization of the executive branch of the Government, I have in mind primarily the con tinuing activities of the Government, and also those relatively few war-generated activities which may continue after the war. That is where the major future problem lies, now that the fighting of the war is over and the war programs and war organizations are tapering off. I want to observe in passing, however, that our experiences in organizing for the war have greatly reinforced those earlier experiences which support the validity of good reorganization legislation. We have hard many criticisms of our war organization, and some criticism. has been warranted. However, as has been well said, this has been our best-run war. The accomplishments of this Government during the war have been monumental and historic. I think it is both true and significant, in relation to the subject under consideration here today, that those great wartime accomplishments came about, in no small part, by reason of the fact that the President could and didunder broad authority vested in him—take timely and rapid steps to organize war activities according to the evolving wartime require ments. In one sense, it seems unnecessary to demonstrate the need for improving the organization of the executive branch of the Government, as it relates to permanent activities and agencies. I refer to the fact that no one appears to be satisfied with the executive branch organization as it exists at present. Opinions may vary as to the remedy to be administered, but they apparently do not vary on the need for a remedy. I shall not undertake to identify those specific things which are wrong with the present executive branch organization, or to particularize in advance the specific things which should be done to correct the things which are wrong. Rather, I shall indicate some broad basic features which should characterize Federal organization in order that it may be effectively administered and efficient in the results achieved. First, the organization of the executive branch should be such as to facilitate the development and execution of consistent Federal programs. This requires the proper grouping of related activities and functions into organizational units which have suitable internal arrangements and staff facilities. Second, the organization should be such as to be capable of being managed effectively. To this end the number of separate executive agencies responsible directly to the President and the Congress should be reduced by placing some agencies within departments, or by combinding related agencies into a smaller number of new agencies, or both. Further, means of adequate supervision and coordination of the operations of agencies and activities which are now scattered should be supplied at a level below the President and the Congress and above the present level of such agencies. Third, the organization should be such that Federal operations will have a proper and consistent impact upon each individual affected by the various Federal activities. Fourth, the organization should be capable of change and such changes should be made when they are timely. Stated otherwise, neither Federal programs nor the emphasis of Federal programs is static; and the organization should be adapted rapidly to accommodate changes in programs or in program emphasis. Fifth, the organization should be such as to promote economy and minimize lost motion and inefficiency. This does not mean that executive reorganization is the sole key to the reduction of expenditures; on the contrary, the possibilities of relatively large reductions in expenditures lie almost entirely in the elimination or material reduction of large-scale Government programs or in the elimination of many of the smaller programs. Nor should my point be understood to mean that any given executive reorganization should be rejected if it does not produce a direct reduction in expenditures; on the contrary, it would be amply justified if it improved the quality and expedition of administration of the Federal programs involved, and thus produced economy in the form of larger return per dollar expended. However, executive organization being inevitably conducive to effici ́ency, it will, in ordinary circumstances, result in a direct reduction in expenditures. In summary, there now exist material hindrances to the development and execution of consistent Federal programs; to effective management and control of Federal agencies; to making the interrelationship of Federal programs and citizens effective, and convenient to the citizens; to the ready adaptation of existing organization to changing circumstances; and to efficient and economical operation. These shortcomings indicate that substantial organizational improvements are needed. HOW SHALL ORGANIZATIONAL CHANGES BE MADE How can these improvements in the organization of the executive branch of the Government be brought about? Except for variation in detail, there are only three methods. The first is by act of Congress; the second is by Executive action under suitable grant of authority; and the third is by joint Executive and congressional participation, the initiative being in the Chief Executive. The purely legislative method has much to commend it, in the abstract. However, its desirability, for the purpose now under consideration, is conditioned by the range of things feasible of accomplishment under it. It would be fair and correct, on the basis of past experience, to conclude that the achievement of necessary modifications in the structure of the executive branch of the Government, on any substantial scale, through ordinary legislation, is extremely difficult, if not almost impossible. A number of Members of Congress have expressed the same conclusion in the past. A committee of the House of Representatives stated the following in 1938: Repeated efforts during the last 17 years by the Congress to enact the detailed reorganizations have proved to be futile (H. Rept. No. 2033, March 30, 1938, Select Committee on Government Organization, p. 13). These conclusions are not surprising in view of the nature of the problem and the character of work required to solve it. That work involves a great amount of detail. It involves a comprehensive analysis of administrative problems and of the administrative implications of a proposed change; for example, an adjustment affecting one agency will often entail a series of questions with respect to the 76600-45- -2 respective roles and functions of other agencies. The alternative of separate and independent legislative measures for different problems cannot be effective in dealing with what is inherently a unitary problem. My point is illustrated by a statement made by Senator Bankhead, as follows: Ninety-six men in this body and 435 in the other body can no more work out an intelligent, effective reorganization program than Congress can work out the freight rates of every commodity to every station in the United States (Congressional Record, vol. 83, p. 3752). All things considered, therefore, it would seem to me that the ordinary legislative method is not the most happy choice for the particular purpose now under consideration. The second method I have referred to is that wherein the Chief Executive takes definitive action. Such authority was conferred on the President under the Overman Act, passed in 1918, as well as under title I of the First War Powers Act, 1941. In both instances this authority was subject to the condition that the steps taken by the President would, upon the expiration of the act, revert to the status existing before the President acted in each case. It is, I believe, imperative in time of war that provision exist for rapid action by the President under this type of authority. Generally similar authority was conferred on the President under the act of March 3, 1933. This power expired 2 years later. Actions taken under this act were not subject to reversion on the expiration of the act. Executive orders of the President, issued under this act, were required to lie before Congress for 60 days before becoming effective, but there was no express provision for action by Congress. The principal things accomplished under this authority were the consolidation of procurement, public buildings management, investigatory, claims prosecution, and disbursement functions, and the abolition of a number of agencies (Executive Order No. 6166 of June 10, 1933). This latter method, including a requirement that an order of the President lie before the Congress for a period of 60 days before becoming effective, has substantial merit. However, I do not advocate it in the present circumstances, since it appears to me that a better method is available. This preferable procedure is that of joint executive-legislation action, under which the Chief Executive initiates steps which may be nullified by the Congress. This was the method of the Reorganization Act of 1939. Under this act, which became inoperative in 1941, the President was authorized to submit reorganization plans from time to time for the consideration of Congress. Each plan was required to lie before the Congress for a period of 60 days, whereupon it became effective unless the Congress should first pass a concurrent resolution to the contrary. The novel feature, and perhaps the most significant feature, of the 1939 act-which was evolved wholly within the Congress itself-was the parliamentary procedure governing the handling of a plan submitted by the President and of any concurrent resolution introduced for the purpose of disapproving the plan. A prominent effect of this parliamentary procedure was to insure that the proponents of any plan could bring a resolution of disapproval before the Senate or the House of Representatives, as the case might be, for vote before the plan took effect. Extensive results were achieved under the Reorganization Act of 1939. Notably, a substantial number of independent administrative |