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thorization of that 7,000,000 sheets of internal-revenue stamps. In addition thereto we printed 4,000,000 sheets of war-revenue stamps and 200,000 sheets of checks, drafts, and miscellaneous, amounting to $50,000. Then there has been an increase in prices after contracts had expired amounting to $23,000, and there is an item of offset, typographic, and power plate presses amounting to $52,000, making a total of $125,000.
The CHAIRMAN. How do you get the auditor to pass your accounts for payment for work done in violation of the law? I would like to know how that is done.
Mr. RALPH. The auditor does not audit these bills until they are paid and go into his possession. The auditor has not audited the bills for the expenses incurred in the work under this deficit. The bills do not go to the auditor until after they have been paid and the contract closed up. He does not audit any anticipated amount due on a contract when the contract is entered into.
The CHAIRMAN. Under whose direction was this increased work done?
Mr. RALPH. The Secretary of the Treasury, to meet an urgency.
Mr. Ralph. No, sir; at the time. It was about the time it was submitted to Congress.
The CHAIRMAN. What authority has ha to direct you to do work that the law does not authorize?
Mr. RALPH. None whatever. There is no authority other than that the needs of the Government and the demands of the Internal Revenue Bureau demanded that these things should be done.
The CHAIRMAN. That does not justify anybody in violating the law.
Mr. RALPH. I know it does not, Mr. Fitzgerald; but if we had not violated the law the Government would have been embarrassed very seriously.
The CHAIRMAN. Well, what about it! I think the practice that you have commenced and are developing in the bureau is an absolutely indefensible one.
Mr. RALPH. I do not think so.
Mr. RALPH. I wish to tell you that when I was up here I told you that I did not think there would be enough money, and you said to go ahead and bring in a deficiency. Then, if Congress does not act on the deficiency Congress assumes some responsibility for the embarrassment of the Government.
The CHAIRMAN. We assume all of it; but you nor any other oflicial of the Government has the right to do as he pleases.
Mr. Ralph. I am not doing as I please, Mr. Fitzgerald. I'am representing the Government's interests the best I can.
The CHAIRMAN. You are not, Mr. Ralph. You are not representing nor protecting anybody's interest when you do something that the law prohibits you from doing. The most important thing for officials of the Government to do, no matter how important their positions may be, is to obey the law.
Mr. Ralph. Well, suppose we assume that the Bureau of Engraving and Printing did not execute this work, what would be the result? Congress did not act.
The CHAIRMAN. You are not responsible for that.
Mr. RALPH. The Internal Revenue Bureau and the Government would be embarrassed very largely in the receipt of revenue.
The CHAIRMAN. Suppose it was embarrassed, that is not your business.
Mr. Ralph. Mr. Chairman, I do not want to be impertinent to you or personal, but when I have come before you with the Assistant Secretary of the Treasury, you have told me that the best thing that could be done would be to anticipate a deficiency.
The CHAIRMAN. On this item?
Mr. RALPH. I know you did not on this item. I did not say you did on this particular thing.
The CHAIRMAX. I do not think you ever spoke to me about this one.
Mr. Ralph. It was not on this item. It was absolutely not on this one.
The CHAIRMAN. There were other matters that came before me, and, after consulting with other people, I said that, because of the conditions that existed, if certain work was done, a recommendation would be made that an appropriation be made. Now, in acting in these matters, when there is no authority, the department ha gotten into the attitude of going ahead and doing as it pleases.
Mr. Ralph. No, sir; I did not go ahead and do as I pleased.
The CHAIRMAN. I did not say you did in that particular thing, but in this
Mr. RALPH (interposing). I had to execute the work as a matter of good business policy. On compensation and plate printing, I turned into the Treasury $200,000, because I did not execute all the work that I anticipated.
The CHAIRMAN. We have gotten to the point where Congress is either a part of the Government, and an important part of it, or that it does not amount to anything. It makes no difference whether we pass your estimates or not, you go ahead and do the work as you please.
Mr. Cannon. Mr. Ralph, you are a subordinate in the Treasury Department?
Mr. RALPII. Yes, sir.
Mr. RALPH. The Secretary of the Treasury approved any recommendation upon my statement that it was necessary to print those stamps. Primarily I am responsible for the whole thing. The Secretary simply approved my request that I be authorized to anticipate a deficiency and submit the estimate to Congress. It was submitted in 1917, in May, and by the latter part of July, if Congress took no action in the matter, the business of the Internal Revenue Bureau would be seriously embarrassed if we did not execute this work.
Mr. Cannox. Those facts you reported and you made your estimate?
Mr. RALPH. Yes, sir.
Mr. Caxxon. Do I understand that prior to this time you took similar action touching other matters, in which, or in some of which, as the case may be, you came down here, as is frequently done, especially during these emergency times, and consulted with Mr. Fitzgerald, or with the committee, as the case may be, and went ahead violating the law ?
Mr. RALPH. Yes, sir.
Mr. CANNON. And that has been done in many cases during this period of emergency?
Mr. RALPH. Yes, sir.
Mr. Cannon. Now, as I gather from you, it was absolutely necessary, if the revenues were to be collected, that this printing should be done?
Mr. RALPH. Absolutely; yes, sir.
Mr. CANNON. That is all I want to say. I wanted to say that in fairness to Mr. Ralph.
Mr. RALPH. I am not an adviser of Congress, but Congress has passed—or the House has passed and the Senate is at work upon ita war-revenue bill, and there are certain stamps provided for under that bill. Now, I have no means of knowing whether that bill will be passed in 30 days or 60 days, but in the interest of good business policy and to meet the demands of the people there should be stamps placed in the possession of the Bureau of Internal Revenue, so that when the bill becomes operative, immediately on its passage, those stamps can be sold to the people who will use them. À part of this is brought about by that condition, or it is to the extent of the 4,000,000 sheets of war-revenue stamps that I had printed late in June, and they are being shipped now to the postmasters throughout the United States. They are being shipped to 59,267 postmasters.
Mr. GILLETT. What kind of stamps are those ?
Mr. Ralph. Documentary stamps and stamps for the Parcel Post Service.
Mr. GILLETT. You do not know whether the documentary stamps will be in it or not?
Mr. RALPH. I do not, but, as a matter of good business policy, I take it for granted, and we have the Secretary's order for them. In 1914, there was a great hue and cry throughout the country because the railroads and business men could not get documentary stamps for bills of lading, notwithstanding the fact that I had 85,000,000 stamps delivered before the bill passed, and they were in the possession of the Internal Revenue Bureau; but it was inadequate to meet the demands for the stamps, where, for instance, a railroad would buy a couple of million stamps at one time. This is in the interest of good business policy. That is all the defense I can make. I would be derelict in my duty if I did not anticipate these things. There is no provision in the bill to pay for these stamps, but the Senate and House might have passed that in a month, and if it became operative there would be no stamps for the people to do business with under that act.
Mr. GILLETT. I supposed that what was keeping your bureau busy was the liberty bonds.
Mr. Ralph. It was the liberty bonds largely. I dropped work, reimbursable work that I would have delivered to the Treasury, to carry on the liberty bond work, and as a result of that I have turned back into the Treasury of the compensation and printing appropriation $200,000. That was unexpended money that was appropriated, and it was turned back because of the fact that I did not execute all of that work. I would have been called upon to print it had we not been called upon to do this other work on the liberty bonds. Nobody appreciates what a task that is. There are 75,000,000 printing impressions to meet the demands for those $2,000,000,000 in liberty bonds. It is in excess of the number of sheets that we delivered to the Treasury in a year's work.
Mr. GILLETT. What I do not quite understand is whether this lack of money was due to the fact that you were printing the liberty bonds, and whether, if you had not done that work, you would have had plenty of money,
Mr. RALPH. No, sir; we would have had a deficiency for materials, due to the fact that the prices have been advancing, added to the fact that we had so much work to do last year. Our annual contracts were not sufficient to meet the demands made upon them. For instance, take the contract for dextrin: The man who makes our dextrin has been furnishing it for less than 7 cents per pound, but when his contract expired I had to pay 10.5 cents a pound for it. I contracted for paper at 6.5 cents per pound, but when the contract expired the price was 11 cents per pound, and I had to buy it in the open market. There are a thousand other things like that in which the cost of materials has increased 100 per cent. That would have made it necessary for me to ask for more money, notwithstanding the fact that I had $200,000 unexpended to go back into the Treasury. If Congress would authorize the transfer of $125,000 from the compensation and plate-printing appropriation, it would cover this. We did not discharge any plate printers, because I am now employing everyone that I can get hold of in the country. I would take 200 men to-morrow. I have had the employers of labor throughout the country jumping on me and saving that I am ruining their business. Emplovers in Boston, New York, and Chicago are saying that I have taken plate printers away from them; but I did not invite them. I simply advertised through the Civil Service Commission and through labor organizations throughout the country, saying that we would give them 6 months' work, or maybe 9 months' work. It looks to be now like it would be 12 months' work. I did not use the money that Crngress authorized me to use in printing notes for the Treasury. We are in an embarrassing position there, but I hope we will get out of it successfully.
The CHAIRMAN. What materials have increased in price?
Mr. RALPI. I will say that linseed oil was bought last year under our contract for 78 cents per gallon, but when our contract ran out I had to pay $1.33 per gallon for it. That is just one thing. I had to buy 75,000 gallons for work in June. Millinet, which is a cotton cheesecloth, cost under our contract 30 cents per pound, but since then I have paid 45 cents per pound for it, and it is now 58 cents per pound. I bought steel plates for 37 cents per square inch, but I am now paying 51 cents per square inch for them.' Printers' blankets
have advanced in price 150 per cent, and muslin has advanced 75 per cent. All the way down the list the materials used in the bureau have increased proportionately in cost. I had to buy these materials subject to Congress authorizing an appropriation for them, and I am personally liable for it.
The CHAIRMAN. What is the exact deficit?
Mr. RALPH. Yes, sir. We knew that on the 2d of July, because we could not make a contract. We have an unexpended balance on compensation of $68,000 and on plate printing of $147,000, making a total of $215,000 that I expect to turn into the Treasury as an unexpended balance.
Mr. Canxox. I want to get this straight in my own head: Not having done all of the printing that would have been done under normal conditions, you were left with that amount of unexpended balance to turn into the Treasury, and you have had to do work in the way of printing bonds and other urgent matters beyond the amount of your appropriation ?
Mr. RALPH. Yes, sir.
Mr. CANNox. And not having the power to transfer funds from the appropriation for plate printers and from other appropriations to this specific work that you felt you were compelled to do, you went ahead, and the Secretary of the Treasury agreed with you as to that proposition!
Mr. RALPH. Yes, sir; that is right. I want to say that there was machinery which had to be purchased to carry on the bond work, and that could not be foreseen.
The CHAIRMAN. What work has not been done that it was anticipated would be done?
Mr. RALPH. I can not state specifically-
Mr. RALPH. Notes, silver certificates, gold notes, and miscellaneous.
The CHAIRMAN. I wish you would fix up a memorandum showing the amount of work in the various classes that was not done, but that was estimated to be done.
Mr. Ralph. Yes, sir. In addition to that, Mr. Fitzgerald, I reduced our stock of faces and backs, in order to get in a stock of bonds. You see we carry a large stock, about 25,000,000 sheets, that is in process of completion, and the 1st of July we had reduced that very materially, which increased the amount of unexpended money for plate printing.
MATERIALS AND MISCELLANEOUS EXPENSES, 1917.
Increase in limit.
7,000,000 sheets regular revenue stamps, 4,000,000 sheets war
revenue stamps, 200.000 sheets checks, drafts, and miscellaneous,
$50, 000 Increase in prices after contracts had expired.
23, 000 Offset, typographic and power plate presses_.
52,000 Estimate submitted May 31, 1917