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The CHAIRMAN. Very well.

We will proceed now to hear the next witness, the Director of the Bureau of the Budget, Mr. Schultze.

Will you come forward, please? Do you have a prepared statement?

Mr. SCHULTZE. I do, sir. Copies have been submitted to the committee.

The CHAIRMAN. We welcome you, and you may proceed, either to read your statement or highlight it-just proceed in your own way. We are very glad to have you, because it is apparent to the Chairman that this bill will require a lot of illumination.

Mr. SCHULTZE. I hope I can provide it, Mr. Chairman.

The CHAIRMAN. Thank you.

STATEMENT OF CHARLES SCHULTZE, DIRECTOR, BUREAU OF THE

BUDGET

Mr. SCHULTZE. Mr. Chairman and members of the committee, it is a privilege to appear before this committee to speak on behalf of S. 3010, a bill "To establish a Department of Transportation."

In his transportation message of March 2, 1966, President Johnson urged the Congress to establish a Cabinet-level Department of Transportation. The President stated:

We must secure for all our travelers and shippers the full advantages of modern science and technology.

We must acquire the reliable information we need for intelligent decisions. We must clear away the institutional and political barriers which impede adaptation and change.

We must promote the efforts of private industry to give the American consumer more and better service for his transportation dollar.

We must coordinate the executive functions of our transportation agencies in a single coherent instrument of Government. Thus policy guidance and support for each means of transportation will strengthen the national economy as a whole.

To reach these goals, we must modernize and streamline executive branch organization. Today, transportation responsibilities are widely diffused throughout the Government. The lack of central leadership significantly handicaps the development of unified transportation policies and a fully effective execution of Federal transportation programs.

The idea of a Department of Transportation is not a new one. As early in 1874 a proposal for a Bureau of Transportation was introduced in the Congress. Through the years many Congressmen and other distinguished individuals and interested groups have proposed bringing together the diverse transportation activities of the Federal Government.

In recent years, a task force of the 1949 Hoover Commission recommended a Department of Transportation. The Commission itself recommended combining the Government's major transportation activities, although within a Department of Commerce and Transportation. In 1961, President Eisenhower, in his final budget message, recommended creating a Department. Also, in that year a special study group of the Senate Committee on Commerce made the same recommendation.

If we look behind these recommendations, we find certain common and compelling factors which have led to the conclusion that a Department of Transportation is both a desirable and a necessary step. Present organizational arrangements constitute a major barrier to the development of sound and consistent national transportation policies.

Transportation is a key factor in economic growth and national security. Transportation touches every citizen. Some 20 percent of our gross national product is directly or indirectly linked with the transportation industry. About 14 percent of total civilian employment is in transportation. Nearly 18 cents of every tax dollar is contributed from transportation sources. The Government itself spends billions of dollars on various modes of transportation.

Despite this vital role of transportation in the Nation's welfare and security, transportation responsibilities within the Federal Government have been fragmented among many agencies. Unlike other areas of national concern, the President and the Congress cannot look to a single official with Cabinet status for the development of coordinated and consistent transportation policies.

Federal activities have a great impact on the Nation's transportation system. Yet, under current conditions we have no satisfactory means for developing national transportation policy. What we have is a separate policy for each mode of transportation. Unless the needs of each mode of transportation are evaluated within the context of the Nation's overall transportation requirements, we may produce serious imbalance in our transportation sysetm. Undue emphasis may be placed on certain modes, while others-rail, for example-may be neglected. We urgently need organizational arrangements through which transportation needs and programs can be evaluated as a whole and coordinated national transportation policies developed.

Existing and projected Federal program involve large investments in different transport modes. For example, this year we expect to spend $5 billion on our highway system, $879 million for aviation, and $740 million for our merchant marine including the Coast Guard. We must begin to make more explicit evaluations of the benefits of such investments upon the transportation system of the Nation as a whole. This cannot be done when responsibility for the individual elements is scattered through many departments and agencies.

Let me turn to safety responsibilities of the Department: Creation of the new Department will strengthen the Government's safety programs for all forms of transportation. Last year over 49,000 people were killed in motor vehicle accidents, 1,300 in aircraft accidents, 1,500 in ship and boat accidents, and some 2,300 in accidents involving railroads. Millions were injured in transportation accidents, principally in those involving motor vehicles. Property damage and man-hours lost in automobile accidents alone are estimated at several billion dollars.

This fearful toll must be reduced. Under the proposed legislation, for the first time a single Cabinet officer will be responsibe for a comprehensive attack on transportation safety problems. This will ensure the necessary top-level Government attention to this critical problem.

Improved programs will result from these new organizational arrangements. As the President stressed in his transportation message

Each means of transportation has developed safety programs of varying effectiveness, yet we lack a comprehensive program keyed to a total transportation system. Proven safety techniques in one means have not always been adapted in others.

Within a single Department, however, the interchange of safety research results between transportation fields will be much easier and more complete. Research in air safety, for example, may well produce findings of use for those working in automobile safety research.

As a further example, the proposed bill would transfer to the Department the Interstate Commerce Commission's motor carrier safety activities affecting some 120,000 carriers operating close to 2 million motor vehicles. At the same time, the Department will be responsible for the new highway safety programs proposed by the President. As a result of the transfer, motor carrier safety activities will benefit directly from the research results and experience developed by the Department. With the new Department the Secretary will have the authority and resources to make a determined attack upon one of the Nation's most menacing problems-automobile accidents. In addition to providing a clear departmental focus for transportation safety responsibility, the proposed legislation would establish a National Transportation Safety Board. Under several statutes the Federal Government has the responsibility of determining the cause or probable cause of specific accidents. The most important of these relate to aircraft, although similar findings are made by the Coast Guard and the ICC. Under the bill now before the committee these functions would be exercised by the proposed National Transportation Safety Board. The Board will consist of five members appointed by the President, with Senate confirmation. As a result of the Board's findings, made on an impartial and independent basis, necessary accident prevention actions can be taken. With transportation safety responsibility concentrated in the new Department it will be possible for the first time to move toward an effective allocation of resources so as to obtain the greatest return in safety for each dollar expended. There are additional advantages to the Department:

In addition to the improved coordination of Government activities. and strengthened safety programs, there are other important reasons for the creation of a new Department of Transportation. Among these are:

IMPROVEMENT AND COORDINATION OF TRANSPORTATION SERVICES

For the first time, the various segments of the transportation industry will be provided with a single authoritative source of information and policy advice on national transportation needs and objectives, and on the role which the Government hopes the industry will fulfill in meeting the transportation needs of the economy.

IDENTIFICATION OF SOLUTIONS TO TRANSPORTATION PROBLEMS

At the present time, significant information gaps make it difficult or impossible to estimate the full impact of the Government's policies and programs. For example, the impact of any substantial change

in the rules of ratemaking, upon carriers, shippers, and the general public can only be surmised. Detailed studies are needed as a basis for making constructive recommendations on regulatory and other aspects of transportation policy. Again, large information gaps exist in demographic and economic data for metropolitan areas and for subregions such as the northeast corridor without which comprehensive analysis of transportation problems in such areas is difficult, if not impossible. In the absence of such studies, judgments as to appropriate public investments, and any necessary changes in law and administrative procedure, can be made only on a conjectural basis.

It seems probable that systematic information collection by the department will be able to fill many of these gaps. Coordinated research and analysis directed toward identification of alternative solutions can make a major contribution to modernizing the Nation's transportation system.

COORDINATION AND REORIENTATION OF RESEARCH AND DEVELOPMENT ACTIVITIES

Federal programs for research and development in transportation are characterized by large differences in effectiveness, reflecting differences in funding and in the number and caliber of personnel engaged. The great differences in effort on various types of transportation research can be seen by the fact that we are spending over $40 million annually on highway research and planning but only $11 million on highway safety research and only $10 million on mass transit research of which almost all goes into tests and demonstrations of available technology. Once again, a comprehensive overview of research and development should help to identify promising research areas and produce significant improvements in the allocation of research funds. In addition, the effectiveness of channels of communication available to bring research findings to the attention of industry and to bring the needs of industry to research agencies will be expanded and improved.

Now, what are the characteristics of the proposed department?

No exact criteria have ever been prescribed for determining when departmental status is merited. The Congress generally has applied certain pragmatic tests in considering proposals to establish new executive departments. These tests have related primarily to the permanence, size, scope, interrelatedness, and above all, to the national significance of the programs to be administered by the proposed department. Departmental status has been given to those agencies which (1) administer a wide range of programs directed toward a common purpose of national importance and (2) are concerned with policies and programs requiring frequent and positive Presidential direction and representation at the highest levels of government.

I think that there can be no doubt that the Federal Government's transportation programs meet these tests. The programs to be carried out by the new department are of national significance and represent a major element in the budget of the Federal Government. Clearly, many of the issues concerning the nature and scope of our national transportation system require careful review and delibera

tion by the President, acting on the information and recommendations of a Cabinet level officer.

The magnitude of our transportation programs is clearly shown by the fact that the new department would be among the largest in the Government with over 94,000 civilian and military employees and a budget of over $6 billion. I believe that the President, the Congress, and the public will be better served if leadership over disparate transportation programs now scattered throughout the executive branch is clearly vested in a single individual of Cabinet rank.

I know that committee members are keenly interested in the costs which may result from the establishment of the new department. There is no doubt that there will be additional costs associated with organizing at the departmental level to insure that the Secretary can effectively administer his responsibilities. The creation of a competent staff to enable the Secretary to act on problems common to more than one form of transportation is a necessity if the benefits of bringing agencies together into a department are to be realized.

The development of the required staff to exercise the necessary departmental oversight and to provide support functions may result in additional costs of some $5 million. These costs are estimated before taking account of the savings which can be provided to the Nation and to the Federal Government through the new department. They are equal to less than one-tenth of 1 percent of the cost of Federal transportation programs.

The savings which the new department can achieve are of two kinds. First, the department can provide more effective Federal programs through better planning, research coordination, and execution. Each Federal transportation dollar should, therefore, get more results. The Nation's shippers and travelers will realize savings through an improved transportation system.

Second, in addition to these expected long-range program benefits, there are a number of possible specific short-run management savings which will more than offset added costs. The bringing together of a number of separate agencies provides an opportunity for combining a wide range of administrative and service elements such as printing, personnel management, space, property management, payroll, and automatic data processing facilities. Existing resources can be combined in varying degrees on a departmental basis to serve constituent agencies of the new Department.

As an example, the elements of the Department presently own or lease over 40 computers. There should be possibilities for immediate economies through sharing computer time. The prospects for longtime savings through coordinated or consolidated computer operations are excellent. A computerized departmental payroll system alone would probably save significant sums.

Some program support activities also seem to offer fruitful areas for coordination and savings. Aircraft maintenance is one possible example. FAA currently operates a fleet of 110 aircraft while the Coast Guard has 160. The total aircraft-maintenance cost for both agencies exceeds $38 million per year. While the use of similar types of planes between FAA and Coast Guard aircraft fleets is not great at the present time, there are considerable potential savings in terms of mutual support and better utilization of facilities.

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