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systems and if not the integration of them, at least the coordination of all of them. Considering the 30 or more systems to which I referred it does seem that there can be at least a relationship set up so that when we do consider the matter of pay, then everybody in the Federal service is affected equally and properly. That was my contention, not that a pay increase bill would not affect quite a large number of peopleit certainly would. Speaking now technically from the standpoint of the Commission which, in this field of operation, it would make for better administration, better operation of the whole Federal personnel system if we could have this analysis made before further changes in rates were made.

Mr. CHUMBRIS. Could you anticipate how long it would take for you to make that survey and study and then have Congress change. the laws to coincide with what you are getting at?

Mr. ELLSWORTH. I could not estimate that. I think we can get the necessary analysis done within a matter of months, perhaps some time within 12 months. I do not know that for sure. I would certainly hope so.

transfusion while the patient is suffering

Mr. ELLSWORTH. Well, the Congress will have a good body of testimony as a result of these hearings and being a member of the body for some years I have a lot of confidence in the wisdom of what Congress may decide to do.

As I must point out again, my testimony this morning is purely from the technical Commission point of view.

Senator NEUBERGER. Thank you very much, Mr. Chairman. Thank you for your questions, Mr. Chumbris.

Mr. ELLSWORTH. Thank you very much.
Senator NEUBERGER. Thank you for being here.

Our next witness will be Mr. Robert E. Merriam, Assistant Director of the Bureau of the Budget. Acting only on my own responsibility, because I have quoted from this letter-and I feel that some of the drama and also some of the really critical circumstances revealed in this letter should be in the record-I am going to take the initiative and have the letters from the Portland physician and his patient included in the record. I will accept the responsibility for it. (The letters referred to are as follows:)

LOVEJOY MEDICAL CENTER,

Senator NEUBERGER,

Washington, D. C. DEAR SENATOR : It seems that in a country like ours it's something of a shame that the wife of a Government employee has to write a letter like this to her doctor, I'm sure you'll do all you can to help the postal workers get a fair pay scale: Sincerely,

BERNARD P. HARPOLE, M. D.

PORTLAND, OREG., April 12, 1957. DEAR Dr. HARPOLE: I am sorry we got behind on our bill to the extent you had to send us a reminder.

May I now, along with our remittance, ask a favor of you. It is in regard to bill No. S. 27, H. R. 2474, which will soon be before Congress. This bill is in regard to a salary increase for postal employees. We are urging our friends to

take a few minutes from their busy lives, as I well know yours is, and write a short note to their Congressmen telling them how important it is that we get this increase. The more letters they receive on the subject, the more likely it is that they will put it through.

We are not asking for an exorbitant amount, only enough to keep our standard of living on the same level as others who are doing comparable work. We feel that handling the mail is an important job, and should pay a salary high enough to attract capable, efficient workers.

It not only would help postal workers, but others as well. We like to buy new cars, clothing, freezers, take trips, and yes, even be able to see our doctor when necessary, just like everyone else. When the head of the house brings home 2 paychecks a month which add up to the grand total of $260 (take home) even a bill amounting to $8.50 can be quite a problem.

We all enjoy your monthly letter very much. Hope you haven't minded reading mine. We will be very grateful if you would give this matter some consideration. We sincerely feel the need is great, and the bill will be before Congress soon.

Sincerely yours,

Senator NEUBERGER. Mr. Merriam, we are glad to have you here today. STATEMENT OF ROBERT E. MERRIAM, ASSISTANT DIRECTOR OF

THE BUREAU OF THE BUDGET Mr. MERRIAM. Mr. Chairman, we are glad to respond to your invitation to state our position on general increases in pay rates established under the Postal Pay Act and the Classification Act.

Mr. Brundage, the Director of the Bureau of the Budget, is away from Washington and has asked me to convey his sincere regret that he cannot be here to present this statement in person.

As you of course know, the Bureau's recommendation on general pay increase legislation was embodied in the Director's letter of May 6, 1957, to your committee, wherein he stated that in the present eco

Nation's resources, actions increasing inflationary pressures should be avoided, and that general pay increases could not be recommended.

For many months the President has been following a policy of seeking to hold actual expenditures to an economic minimum and thus to avoid any unnecessary increase in competing pressures for money, manpower, materials, and equipment. All expenditure proposals by departments and agencies have been reviewed with that policy in mind. Of course, there are great areas of authorized Federal expenditure not subject to modification, but it is our policy to hold expenditures below the amounts estimated in the budget. We are keeping close watch on this situation.

As a part of our general concern for holding and reducing expenditures we have been watching the reports on Federal employment and payrolls. Between January 1953 and March of this year executive

cent. However, executive-branch-payroll expenditures have not decreased correspondingly since January 1953, but instead have actually increased. During the period pay rates were increased, by 7.5 percent under the Classification Act, as was mentioned a moment ago, and by 8.4 percent under the Postal Pay Act.

Also in this period various fringe benefits have been liberalized. Still other fringe benefits not included in payroll costs have also been

provided. I refer to such benefits as the new group life insurance program, the liberalized retirement program, the new unemploymentcompensation program. In view of these increases we have concluded that payroll expenditures should not constitute an exception to our general expenditure policy.

The President's state of the Union message urged leaders in business and in labor to think well on their responsibility to all the American people and to maintain a vigilant guard against the inflationary tendencies that are always at work in a dynamic economy operating at today's high levels. He urged business to avoid unnecessary price increases, and urged labor and management to hold wage increases to those reasonably related to productivity.

With this strong appeal to private employers and labor to exercise self-discipline, it seems obvious that we should consider seriously the effect of a general wage increase for Federal employees paid under statutory pay schedules. We understand from the Post Office Department that s. 27 would increase payroll expenditures under the Postal Pay Act by about $1 billion annually, and from the Civil Service Commission that S. 910 would increase payroll expenditures under the

Since total payroll expenditures under these statutory pay acts are currently running at an annual rate of about $7 billion, this proposed $1.75 billion increase would mean an increase of about 25 percent. We believe that added payroll expenditures of any such magnitude would create added economic pressures; directly, in the form of added demands for existing goods and services; and, indirectly, in the form of reducing, perhaps eliminating, whatever surplus might exist with which the public debt could be reduced. We believe these considerations of overall fiscal policy are compelling, and that they outweigh

Federal employees for a pay raise. This administration is fully aware of the need to attract and retain the best possible personnel to man the important operations of our Government today. We believe the fringe benefits and pay increases enacted within the last several years are important steps in reaching this goal.

The question of proper types and levels of Federal pay and benefits is a most complex one, as this committee is fully aware. With a total annual Federal civilian payroll expenditure rate in the neighborhood of $11. billion, we share an obligation to all the people to adjust the rate controlling that expenditure with as much consideration for the economic situation as we know how. Our recommendation to your committee is that increases in payroll expenditures made on a general basis will add unnecessarily to existing fiscal pressures in the national economy. I am authorized to state that the enactment of general increases in scheduled pay rates under statutory pay systems would not be in accord with the program of the President.

I appreciate this opportunity to make this brief statement.
Senator NEUBERGER. Thank you, Mr. Merriam.
Senator Morton?
Senator MORTON. No questions.
Senator NEUBERGER. Mr. Merriam, just several questions.

In your statement you used the word "self-discipline” in referring to the President's appeal to private employers and to labor. However, while he only asked these people to exercise self-discipline you are suggesting that we should continue the bulk, the majority of Federal employees, under controlled statutory power discipline with respect to their pay. Again, I say it just does not seem fair. It seems to me that the key to this whole thing is this: If the Government is not controlling inflation, and I am not voicing any criticism about that, we have had inflation for several decades now. If the Government is not controlling it and is just asking those outside the realm of Federal employment to exercise "self-discipline,” which is a very frail kind of discipline, considering the human animal, how can you continue our Federal employees under statutory discipline with respect to their pay?

Senator Morton read one type of letter from this postal supervisor who is concerned with about what has happened. I have read another type of letter about the actual anguish and hardship in good loyal American families under their pay scales. Now, those situations just cannot continue, can they, Mr. Merriam ?

Mr. MERRIAM. Well, Mr. Chairman, that is a 2- or 3-part question. Let me see if I can answer it one part at a time.

First, with reference to the latter part, unquestionably each and every one of us here would agree that we can point to areas in which there are inequities in a pay system-here, and in private industry, and in every other pay system—on this I would stipulate we all agree. And it is, therefore, a fact flowing out of that that you can always demonstrate some real problems which arise.

As to the general question which you ask, I have to state that your outline of the situation is something of an over simplification for this reason: In the first place, we would not accept the fact that there is inflation running wild in the country today

Senator NEUBERGER. I did not say it was running wild; I said it was continuing.

Mr. MERRIAM. Well, you may put it as you will. We think that many of the steps which this administration is taking are very important and are very effective steps in trying to reduce whatever inflationary tendencies there may be. Some of these steps I know you disagree with, but this is a part of the way in which we do business in a democracy. I refer particularly to some of the money policies of this administration which in our opinion have been very important steps in holding back inflationary tendencies, so I cannot agree with your assumption that there is any inevitable continual spiraling of wages and prices and prices and wages.

Senator NEUBERGER. You, yourself, used the phrase "self-discipline." In other words, the President's appeal asked for self-discipline. Does the administration

Mr. MERRIAM (interposing). As far as the question of wage and price controls are concerned; yes.

Senator NEUBERGER. You would not deny that the prices and wages in private industry have an impact on the cost of living that is encountered by Federal workers and their families, would you? Mr. MERRIAM. Not at all.

Senator NEUBERGER. In other words, the only point I am making is that there is no control over the prices which the Federal worker must pay for the necessities of life; is that not true? There is no statutory control?

Mr. MERRIAM. There is no direct price-control system; yes.

Senator NEUBERGER. And the cost of living is continuing to rise and has been continuing to rise for a substantial period of time; is that not correct?

Mr. MERRIAM. Well, we have to get the actual figures. I am sorry I do not have those here either, but they are a matter of record. I simply want to make the point that this administration would like to make it clear that cost-of-living increases have very markedly slowed down, and we are hoping that our policies will be able to eliminate them.

Senator NEUBERGER. I do think it would not be to any advantage. I would be glad to argue with you in some other form for various policies for controlling inflation but it seems to me that is not the issue here. The issue here, as I see it, first off, Is the cost of living continuing to rise ?

Mr. MERRIAM. Are you asking me that question? Senator NEUBERGER. Yes. Mr. MERRIAM. I would have to give to you the figures from the Bureau of Labor Statistics. I have not seen them the last month or two. There have been increases; there is no question about it.

Senator NEUBERGER. It is my understanding, and again I am just going by memory which is certainly no better than yours, I saw a survey in the New York Times some weeks ago that the cost of living had continued to rise and that it had been going up month after month for a substantial period of time, not running wild, I never use that phrase. If I am mistaken, the record will prove which of us is correct about that, but I did say it was continuing to go up and has been doing so.

Now, if that is a correct statement, how can you keep the lid on the pay received by these Federal employees?

Mr. KERLIN. Mr. Chairman, would you ask the staff if the cost of living has gone up?

Senator NEUBERGER. Do you have the actual statistics?

Mr. MERRIAM. It is a matter of record. I am not trying to argue that point. I thought we might as well put the figures in the record.

what I have been reading in the press, week after week, is accurate.

Mr. KERLIN. The Bureau of Labor Statistics announced that the cost of living last month reached a new alltime high. The previous alltime high had been reached the month before. The previous alltime high, the month prior to that.

Senator NEUBERGER. I would assume Mr. Kerlin's statement is substantially correct. It seems to me that is the crux of this problem. We won't argue about the various means of trying to control inflation because leading economists of the country seem to be in some disagreement on that. The point I am getting at is how can the Bureau of the Budget and the Civil Service Commission ask this committee and the Congress not to grant pay increases to these Federal employees, when their cost of living is going up and has continued to go up, and is now at an alltime high and has been steadily advancing. I just do not see how, in fairness and equity, that request can be made.

Mr, MERRIAM. I think you have to divide the answer into several parts, as I have done in my statement. If you want me to reiterate

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