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the effect that it is a much more painful period than on the upside portion of the war effort, during the expansion. The reduction and demobolization of Government is vastly more difficult. As Director of the Budget, I cannot deal with that subject in terms of any generalities. We have to take specific programs and analyze them for the whole Government and listen to all of the arguments. After all that is what the Appropriation Committee does. There is quite a check on what the Government does and does not do. The entire thing is battled out in our procedures and processes. Therefore, there is no mystery whatever to me, as Director of the Budget, as to how things get in the Budget or how they stay in the Budget.

I would say to you that you have the right to be disappointed if you pin too much hope on this procedure. After all, as I pointed out, this deals as a part of the total Budget, it substantially deals with only the 2 billion as against the 39 or 37 billion dollars. I would say that that is not insignificant, that we should do everything we can to improve the efficiency and administration of governmental agencies. I think this cooperative device between the Administration and the Congress, this particular device of the Reorganization Act of 1945, is the most ingenious and, from the viewpoint of both the administration and Congress, the most satisfactory way of developing reorganization plans.

Mr. Judd. You are in favor of Government reorganization if we pass that method? I am not disappointed in that act, except I am à little disappointed in this first set of plans under the act. Would you agree with Mr. Warren that this Government establishment just cannot survive at the pace it is going, and sooner or later it will tumble as the result of its own weight?

Mr. SMITH. I would say Mr. Warren was very colorful there. I think the Government did survive and it was very much larger during the war than it is now.

Mr. JUDD. Was it much larger outside of the Army and the Navy than it is now,'excluding the Army and the Navy?

Mr. SMITH. Oh, yes, I cannot give you the figures offhand, but I can get them for you. I mean in terms of personnel and terms of programs, and it is being demobilized.

This is a painful business, Mr. Congressman, of getting at reorganization. Every time you touch a function that has been carried on for some time, or touch an agency of Government-and I am something of a practical psychologist, I hope people get jittery, they get scared, they see all kinds of skeletons in the closet. Yet, I believe it is an effort we all have to make and we have to keep at it. I think this is an important subject of administration. There is something to improving arrangements in organizations. A bad organization often puts a strain on good people. I believe we make progress here and you frankly should not expect too much in the way of a monetary savings out of this program. That does not mean it is not worth while.

Mr. JUDD. It is reduction of functions and power, which is even more important than the money; how about that?

Mr. SMITH. Mr. Congressman, I am a realist. If the President were to present to the Congress a list of functions to be reduced I will guarantee you would have quite a struggle over it. Those functions have been debated.

Mr. JUDD (reading):

The President, given this authority, he will do this job fairly, efficiently, and fearlessly.

We had doubts, we knew that everybody cut off would holler. We are disappointed that there is not evidence that it is being done. We had a right to ask, it seems to me, for more drastic cutting than is asked for in these plans.

Mr. SMITH. I think you can get that, more particularly in other ways, which involve the legislation.

Mr. JUDD. What you are saying there is, if we want to cut it off, the one way to do it is to cut off the money in the appropriation ?

Mr. Smith. It would be reducing the function.

Mr. JUDD. You mean to pass individual laws with regard to each of these?

Mr. SMITH. Yes. It is very unfair to pass à piece of legislation, from the standpoint of the operating agency, and not provide for carrying it out. The Congress puts a new function upon the operating agency. That piece of legislation is not passed usually unless there is great pressure behind it and the Congress has scrutinized it carefully. Then the operating agency comes to the Bureau of the Budget and says, "Here is what Congress did, we must have some money, they say we must carry out these functions, and we need a certain amount of money to carry them out.” The Budget argument then gets narrowed down to how much is necessary to carry out that function. That is one reason I have been reluctant to be drawn into the policy questions here, because those are not my business, those are the business of the President and the Congress as to how much of this or that we do. Those issues, it seems to me, must be settled elsewhere. However, I still feel that even though you may feel that this is halting progress, from your point of view, I think it is substantial progress. It is the first time we have been able to do any. thing of this sort since 1939, and after all we have gone through a lot in governmental organization since 1939. We need a program of constant reduction and examination of not only our functions but the way they are carried out. I believe that you have before you something very important and some essentially sound.

Mr. Judd. I am forced, in that sense, to agree. I am just disappointed to find we are really back where we were, that we are not going to get the Government reduced and get functions abolished except as we do it through our Appropriations Committees. I am not blaming anybody; I am just recognizing a hard fact that is apparently before us.

Mr. SMITH. These three plans are the beginning. You may have others.

Mr. Judd. I have nothing further. .

The CHAIRMAN. Mr. Smith, could you have your attorneys in the morning to either have briefs submitted as to the legal questions asked, or have them appear in person, so we could have these questions answered before we continue?

Mr. SMITH. It will be handled either way you like.

The CHAIRMAN. The committee will stand adjourned until 10 o'clock tomororw morning.

(Whereupon at 12:30 p. m., the committee adjourned to reconvena at 10 o'clock, Wednesday, June 5, 1946.)

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REORGANIZATION PLANS NOS. 1, 2, AND 3 OF 1946

WEDNESDAY, JUNE 5, 1946

HOUSE OF REPRESENTATIVES, COMMITTEE ON EXPENDITURES IN THE EXECUTIVE DEPARTMENTS,

Washington, D.O. The committee convened at 10 a. m., the Honorable Carter Manasco, chairman, presiding.

The CHAIRMAN. The committee will come to order.

We will resume the hearings on Mr. Pittenger's resolutions this morning. Yesterday, some legal questions were asked relative to plan 1, and the Director of the Bureau of the Budget advised the committee would have some attorneys to appear this morning to answer those questions.

Will the gentlemen who are going to testify please give their names to the reporter.

STATEMENTS OF GEORGE T. WASHINGTON, ACTING ASSISTANT

SOLICITOR GENERAL, DEPARTMENT OF JUSTICE; AARON LEWITTES, SPECIAL ASSISTANT TO THE ATTORNEY GENERAL; AND EDWARD G. KEMP, GENERAL COUNSEL, BUREAU OF THE BUDGET

The CHAIRMAN. You may proceed, Mr. Washington.

Mr. WASHINGTON. I understand a question has been raised as to the legality of part 5 of Reorganization Plan No. 1 relative to the National Housing Agency.

Section 5 of the Reorganization Act of 1945 imposed certain limitations upon the President's powers with respect to reorga zations under the act.

It provides in part, that no reorganization plan shall provide for, and no reorganization under this act shall have the effect of, continuing any agency beyond the period authorized by law for its existence or beyond the time when it would have terminated if the reorganization had not been made; or continuing any function beyond the period authorized by law for its exercise, or beyond the time when it would have terminated if the reorganization had not been made, or beyond the time when the agency in which it was vested before the reorganization would have terminated if the reorganization had not been made.

The question has been raised whether these provisions of the act are violated by part 5 of Reorganization Plan No. 1. By section 501 of that part the agencies and functions of the National Housing Agency established under the First War Powers Act by Executive Order No. 9070 "are consolidated to form a permanent agency of the same name.

By section 504, it is provided that the constituent units of the National Housing Agency shall be: (1) the Federal Home Loan Bank Administration, (2) the Federal Housing Administration, and (3) the Federal Public Housing Authority, with a Commissioner appointed by the President by and with the advice of the Senate at the head of each unit. Section 505 prescribes the functions of each constituent unit. These functions are existing functions, statutory in origin. Some are of permanent nature, while others are temporary in character, such as functions with respect to defense or war housing. Section 505, which reflects part 5 of the reorganization plan, is within the limitations imposed by section 5 of the Reorganization Act, and in particular, subsections 3 and 4, paragraph (a) of that section. Mr. WHITTINGTON. And you said it did not bring forward any of the matters temporary under that act; is that about what you say about the exceptions? Mr. WASHINGTON. Part 5 of the reorganization plan does not continue any agency beyond the period authorized by law for its existence, or beyond the time when it would have terminated if the reorganization had not been made. The part does not continue at all the National Housing Agency established under Executive Order 9070 which was issued under the authority of the First War Powers Act. What it actually does is to consolidate numerous existing functions related to housing into a permanent agency which is given the same name as the Housing Agency oft. by the Executive order. It is immaterial that the name of the new agency is the same as that of the old, although, in general, the functions and the organization of the new permanent agency are similar to those of the existing agency bearing the same name. Nevertheless, there are important differences. Under section 507 of the plan, several offices or agencies of the existing National Housing Agency are abolished; namely, the Office of the Federal Housing Administrator, the Federal Home Loan Bank Board, the Board of Trustees of the Federal Savings and Loan Insurance Corporation, the Board of Directors of the Home Owners' Loan Corporation, the Office of the Administrator of the United States Housing Authority, and the United States Housing Corporation. Part 5 of the plan does not continue any function beyond the period authorized by law for its exercise, or beyond the time when it would have terminated if the reorganization plan had not been made, or beyond the time when the agency in which it was vested before the reorganization would have terminated if the reorganization had not been made. The plan merely vests existing statutory functions in the three constituent units of the Federal Housing Authority established by the plan. It likewise vests in the National Housing Administrator certain statutory functions with respect to housing, some of which are of permanent and others are of temporary nature. The provisions of the plan do not in any way affect, or purport to affect, the nature of the functions vested in the National Housing Authority or the officers or constituent units thereof; nor does it in any way affect the life of such functions. The nature and longevity of the functions remain the same as they are at the present time. The plan does make permanent, of course, the consolidation of housing functions into the new National Housing Agency. This

being true, the housing functions which were transferred under title

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