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It affects the future integrity of the retirement system into which the employee is putting and will put a great deal of money, and it affects the payments that are going to have to be made on the debt, which again have a direct relationship to our economy and inflationary tendencies that may be cropping up. In all these ways, certainly, you cannot divorce the Federal employee from the overall economic situation.

In the last analysis, however, you come down to the fact that these employees are the ones for which we collectively, the Congress and administration, have a direct responsibility.

Senator NEUBERGER. We all have this responsibility though and we have the responsibility, if we do not raise their pay, of controlling what they pay for the cost of living. It seems to me we have one alternative or the other. I think we have a dual responsibility. I agree with you that we have this direct responsibility for their pay because it is fixed by statute and the Executive and the Congress jointly are responsible for the statutes. But, I also feel that we have an additional responsibility. If we do not raise their pay, we have the responsibility of putting on price controls controlling what they pay for the cost of living. I do not see how you can separate the two of them. I do not see how you can let their cost of living willy nilly go up and not raise their cost of pay.

Mr. MERRIAM. That is why I raised the question earlier, Senator, and we really come to a basic disagreement as to how you control inflation. We would say do it through other mechanisms.

Senator NEUBERGER. I do not see that is a point between us. You are not controlling inflation. That is a fact of life, ipso facto. I mean you and I won't argue. I am not an economist, I am not equipped to argue with you about the best means of controlling inflation. I have my opinions, you have yours. I am sure you have superior knowledge to that of mine. The fact remains, the cost of living is not being controlled. Isn't that the basic fact of all of this?

Mr. MERRIAM. No; I cannot agree with that. If you say the cost of living is going up, the figures which Mr. Kerlin cited, which I assume you will put in the record, that is a fact.

Senator NEUBERGER. Then I will phrase it differently. The cost of living is going up and it has been continuing to go up. These Federal employees have to encounter that. Mr. MERRIAM. That is correct. Senator NEUBERGER. Then how can we refuse to raise their pay?

Mr. MERRIAM. I think you come to the second part of our problem here, as far as the Executive is concerned, and that is the one to which Chairman Ellsworth addressed himself, namely, the fact that it is high time that we see if we could perhaps come up with something which could make order out of the many conflicting, sometimes directly conflicting, pay systems that we have, This, of course, is one of the major recommendations that the Cordiner committee made.

Senator NEUBERGER. To me, Mr. Merriam, I would not belabor the point. I think they are separate problems. I would not deny the desirability of synchronizing better or coordinating better the various levels of Federal pay. I would not deny that but I just do not see how in the meanwhile that you can ask a very substantial number of Federal employees to be unable to meet a minimum standard of living.

Chre, as far as thi. I think ben ho

Every time I look at these charts that run, for example, in U. S. News & World Report, they show at the very bottom of actual takehome pay in the terms of purchasing power, first at the very bottom, retired Federal employees and next, active Federal employees. Now, I do not know exactly how accurate these charts in U. S. News & World Report are but I have every reason to believe, unless they were substantially correct, they would be subject to very serious challenge and always at the very bottom in terms of purchasing power of their dollar, are retired Federal employees and at the next echelon, active Federal employees. I do not see how that can continue.

Mr. MERRIAM. That of course is what you are meeting about today and we can only give you our best recommendation and analysis of the situation as we see it. There are, in our opinion, sufficient reasons on both of these scores-inflationary tendencies and inequities and conflicts—to warrant recommending against an increase at this time.

Senator NEUBERGER. Well, we certainly disagree on it, I will say that about it.

Mr. Kerlin, do you have any more questions? Mr. KERLIN. Only one observation: A great deal has been said about the many pay systems in the Government. I think that has been overemphasized. Government has three basic pay systems: The postal pay system, Classification Act, and the wage-board system. Now, true, the Medical Division of the Veterans' Administration, the Foreign Service, and a few groups here and there are paid differently but basically we have three systems.

One-third of those are under the wage board and are paid wages in accordance with industry. Two-thirds of the Federal family's pay is fixed by Congress and those two-thirds, presumably, in accordance with the reports, have not kept pace. These little side systems do not have a great deal of influence as they do not have a great number of employees. That is all.

Senator NEUBERGER. Senator Morton, do you have any other questions of Mr. Merriam?

Senator MORTON. No; I have not. I suppose, Mr. Chairman, that your subcommittee will get figures so that we, instead of arguing here the way we are, we will know. We should have a chart or a graph or something. I remember the U. S. News article. I think we should get something directly from those concerned so we can approach this thing more intelligently.

(The chart mentioned above was subsequently submitted by E. C. Hallbeck and appears in his statement.)

I also want to say, sir, in view of Senator Langer not being able to be here, the minority member, Senator Carlson, asked me to sit in. I appreciate your courtesy, sir.

Senator NEUBERGER. We are sorry, of course, Senator Langer is not here but we are extremely appreciative of your presence and we are grateful to you for coming and sitting in with us.

Thank you so much, Mr. Merriam. This is not a partisan question. We are trying to get the facts and do what is fair.

I would just like to say for the record, I am informed by Mr. Kerlin, we do have permission to sit during the session of the Senate, which is now meeting and which began at 11 o'clock.

Our next witness will be Mr. Abe McGregor Goff, General Counsel of the Post Office Department. We will be glad to hear from you. Mr. Goff is a former distinguished member of the Congress, as is Mr. Ellsworth, who testified earlier and we are going to try, if we can, to recess around noon or very shortly thereafter. STATEMENT OF ABE MCGREGOR GOFF, GENERAL COUNSEL, POST

OFFICE DEPARTMENT; ACCOMPANIED BY E. J. WALSH, ASSISTANT COMPTROLLER, POST OFFICE DEPARTMENT

Mr. GoFF. Mr. Chairman, I have some prepared statements here which I will be glad to have distributed.

Senator NEUBERGER. Mr. Goff, we are glad you are here. Will you begin.

Mr. GOFF. Senator Neuberger, as chairman of this committee, I regard it as a privilege to appear before this subcommittee to present the views of the Post Office Department with respect to S. 27, a bill to increase the rates of compensation of officers and employees in the field service of the Post Office Department.

In his report to you, the Director of the Bureau of the Budget advised that legislation increasing generally the salaries of Federal employees was not within the program of the President. Attached to that report was a tabulation of the bills pending before the Senate to which the report specifically related. S. 27 was one of those included in this tabulation. The representative of the Bureau of the Budget, Mr. Merriam, has testified before you and has restated this position.

In view of the position of the administration, the Post Office Department will confine its comments to the cost of this bill. We believe that there is in the Congress the executive department, and throughout the Nation, a movement which is designed to reduce, rather than increase the cost of Government and that you will be interested in learning these cost figures.

This bill proposes to increase the basic compensation of all postal field employees covered by the Postal Field Service Compensation Act of 1955 which was approved June 10, 1955, except for the position PFS-20. The increases are to be made retroactive to January 1, 1957.

The bill proposes to replace completely the salary schedules provided for the postal field service employees, rural carriers, and postmasters at offices of the fourth class. It increases substantially the basic compensation for all employees in all positions and levels except the top level PFS-20.

It proposes to reduce the number of automatic steps in tht PFS, that is, postal field salaries; FOS, fourth class; and RCS, rural-class schedules from 7 to 4 for all positions except PFS-20, which is presently a single salary position.

With the Postmaster General's report to you dated May 8, 1957, there was transmitted a table showing the estimated annual increase in the cost of operating the postal service under this proposed bill.

I respect fully request that the report and the attachment he inserted in the record at this point.

Senator NEUBERGER. Without objection, it will be included.

(The above-mentioned document follows:)

OFFICE OF THE POSTMASTER GENERAL,

Washington, D. C., May 8, 1957. Hon. OLIN D. JOHNSTON, Chairman, Committee on Post Office and Civil Service,

United States Senate, DEAR MR. CHAIRMAN: Reference is made to your request for a report on S. 27, a bill to increase the rates of basic compensation of officers and employees in the field service of the Post Office Department.

This measure proposes to increase the basic compensation of all postal field employees covered by the Postal Field Service Compensation Act of 1955, approved June 10, 1955 (39 U. S. C., secs. 1951–1038). The increases would be retroactive to January 1, 1957. The proposed new schedules provide substantial increases in rates for employees in all positions and levels except PFS-20.

In his report to the committee on this and other general pay legislation, the Director of the Bureau of the Budget advised that the enactment of general pay increase legislation would not be in accord with the program of the President.

It is estimated that the additional per annum costs of this bill to the Post Office Department would approximate $1,039,093,000 beginning with the fiscal year 1958. The additional costs from the effective date, January 1, 1957, to June 30, 1957, would approximate $505,348,000. No additional man-year requirements would be involved. For your information there are attached copies of a schedule which gives a detailed summary of the costs of this legislation. This report has been approved by the Bureau of the Budget. Sincerely yours,

MAURICE H. STANS,

Deputy Postmaster General. SCHEDULE NO. 1.-Conversion of salary schedule of Public Law 68 to S. 27, postal

field service employees

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SCHEDULE No. 2.-Conversion of salary schedule of Public Law 68 to 8. 27, rural

carriers

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SCHEDULE No. 3.—Conversion of salary schedule of Public Law 68 to 8. 27, 4th

class post offices

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Mr. GOFF. The total estimated increase in cost of this bill from January 1, 1957, to June 30, 1957, is $505,347,211. The total increase in cost to the Department for the fiscal year 1958 and each of the following years will be at least $1,039,092,828.

Mr. Walsh, who accompanies me here, Assistant Comptroller, of the Department, is prepared to answer any question which may go into the detail of these figures. In general, however, you will find from our schedule that the average annual increase for each rural carrier will be $1,731; for all postmasters at fourth-class offices $861. How

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