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be amply justified if the improved quality and expenditious administration of Federal programs involved was realized, and thus produce economy in the form of larger return per dollar expended.

Mr. BENDER. Mr. Chairman, may I interrupt here. I have listened attentatively to all the things you have read and said. Now on that point, in connection with this business of economy, does not the gentleman feel that in this reorganization proposal of ours of last December, that economy was the principal item involved in such a reorganization that was stated in the first section of the reorganization bill, in that we should economize to at least the extent of 25 percent; does the gentleman have that in mind in connection with reorganization, is that not uppermost in the gentleman's mind? Apparently that is not uppermost in your mind

on the basis of the last paragraph or two that you read from your statement.

Mr. SMITH. First, let me say, that really completes my five points here.

Economy of course is naturally an importance issue, but we can get into some medicine-mixing here, it seems to me, on that issue. The real essence of these proposals is the organization of certain activities, and where you have sound organization, you increase efficiency and bring about economy.

Now, the words “economy" and "efficiency," I think have different meanings, but in any event, here is the large problem as I see it as Director of the Budget: For example, aside from the Army and the Navy, the cost of the Federal Government, or Departments of the Government is 2.3 billion—I mean, all of the Departments and independent agencies of the Government. Yet, the Budget for 1947 is in the neighborhood of 37 billion. Now, what I am saying is that if you want to look for large economies, you can get something out of the 2.3 billion, but obviously you can not concentrate 90 percent of your attention on that-you must look beyond the 2.3 billion, to the 37 billion.

I think that economy and efficiency are important. I think that the Reorganization Act of 1945 tends to promote economy and efficiency and that these plans will do that. As for getting any particular percentage, as I understand the act, it was the expectation of Congress that some such mark could be set, but it seems to me, that those problems can not be dealt with adequately here in connection with reorganization.

We have another objective. The real issues that yield economy, in the larger sense, it seems to me, are issues which have to do with the functions of the Government and with the actions of the Bureau of the Budget in general, and the President, and the Appropriations Committees of the Congress. It seems to me we can not get at those issues except in a corollary way in dealing with reorganization.

Mr. BENDER. In dealing with the first three plans, or other plans that the President might have in mind, would we accomplish the goal set out in H. R. 4128 ?

Mr. SMITH. Do you mean a reduction of 25 percent in each agency? Mr. BENDER. Yes.

Mr. SMITH. I do not think you would. I do not know what it would amount to.

Mr. BENDER. Then what is all this about? This is the beginning, this is the alpha of reorganization. It is the beginning. You read the first sentence and the last, and you will find that economy is the

watchword here and the reduction of expenditures and the promotion of economy and the reduction of at least 25 percent per annum. And unless we are engaged in that enterprise, what is this all about?

Mr. SMITH. Mr. Congressman, I insist that these plans will provide increased efficiency and economy. As Director of the Budget I will not commit myself to any particular percentage. That is my position, but it seems to me that the answer as to what this is all about is pretty clear, that there is something to organization, there is something to administration, and that organization arangements—because of the change in the functions of government, or because the country has grown and developed, or because interim adjustments have taken place during the war, of one kind or another—must be continually examined.

Here are a set of proposals which we feel add to the efficiency of the Government and the economy of the Government and certainly make organizational adjustments that should promote smoother operation of the Government.

The CHAIRMAN. Mr. Smith, in all your experience, can you tell if you have ever found any Government agency or independent agency that failed to protest when a change was being made? Mr. SMITH. Do you mean a change of organization?

The CHAIRMAN. A change of organization, yes. Mr. SMITH. I think there are such agencies. The general tendency of course—where organization questions are involved—is obviously unsettling, and people are uncertain of what the next moves may be. They are uncertain as to how plans affect them; but after the 1939 reorganization, I should say that most of the fears that arose then turned out to be unwarranted fears, and that the adjustments were made in a thoroughly satisfactory manner, looking at the Government as a whole.

The CHAIRMAN. I believe Mr. Pettinger said a few moments ago that many people were disturbed about the possibilities of losing their jobs under this reorganization plan. I am wondering how you can reduce administrative expense without cutting off jobs.

Mr. SMITH. I think there are some ways of doing it, but it is not altogether consistent to argue on one hand, it seems to me, about the size of the Federal Government and on the other hand about someone losing his job. It is inevitable, when you go into reorganization, that there will be some people who will be cut off of the pay roll; but that, in the main, has nothing to do with the merits of the case because those people might very well be eliminated from the pay roll either by personnel ceilings provisions, by legislation enacted by Congress, by the congressional cutting of appropriations, and so on.

The ČHAIRMAN. In Reorganization Plan No, 1, page 9, part V, there has been quite a discussion about extending functions of the National Housing Agency beyond the expiration date of the War Powers Act. Is there anything in that plan that extends any functions derived from the War Powers Act beyond the death of the War Powers Act?

Mr. SMITH. I would like to answer that categorically and say “No, there is not.” I would like to talk about it, since the issue is raised, in general, and then you may wish to explore that with the counsel of the Bureau of the Budget and the representatives of the Attorney General, because there are technical matters in here in reference to acts that I am not intimately familiar with.

The CHAIRMAN. In that plan, Mr. Smith, on page 11, section 507, the following is noted:

The following agencies are abolished: The Office of Federal Housing Administrator; the Federal Home Loan Bank Board, and offices of the members thereof; the Board of Trustees of the Federal Savings and Loan Insurance Corporation, and the offices of the members thereof; the Board of Directors of the Home Owners Loan Corporation, and the offices of the members thereof; the Office of the Administrator of the United States Housing Authority

And so forth. Now their functions are transferred to the National Housing Administration. The functions in section 505 of the constituent units are to be administered by the Federal Home Loan Bank Administration. Is that proper language to use when you say the Bank Administration or the Administrator?

Mr. SMITH. I do not know about the specific language. I am sure it was worked out carefully. However, these offices, as I understand it, are vacant now, under previous orders. This is perhaps a little confusing in that sense, because these are actually inactive offices. Here they are being abolished under the reorganization plan which, if adopted by Congress would completely eliminate them.

The CHAIRMAN. Do you not feel it is a mistake to abolish the Federal Housing Administration which was created by Congress to loan money to private investors to build their own homes and put it under an agency whose whole purpose is to perpetuate themselves in jobs by building houses at Government expense, Government-owned and Government-operated ?

Mr. SMITH. I do not believe that is the issue, Mr. Chairman.

The CHAIRMAN. Is it not natural, when Federal moneys are available, that the fellows who have charge of the programs of the National Housing Administration, or Authority, or whatever it is called, will use more of that money to build Government houses so they will have rent collectors and administrators in the lines of employees rather than to have self-liquidating projects like homes being insured by a Federal Housing Administration loan that they will pay out some day?

Mr. SMITH. Mr. Chairman, I do not think that could possibly be an issue here for the reason that all of those policy questions are dealt with in terms of legislation and in terms of appropriations. That is the question of the amount of money that is to be available for public housing. What that plan does, Mr. Chairman, is to take the existing situation with respect to housing and give it to the Housing Administrator who heretofore has been more or less in a position of a coordinator, and give him some additional supervisory powers.

The CHAIRMAN. I think that you will find that the one agency in the housing field there has met with public approval and met with the approval of Congress more than any other housing agency of the Federal Housing Administration. They are not putting the Government in business necessarily in competition with other people, yet we are abolishing that agency and putting it under an agency which believes in Government ownership of almost everything.

Mr. SMITH. I could answer you, Mr. Chairman, in part in terms of the criticism coming to me from those interested in public housing. They would take just the opposite point of view that you take, this is that the agency is dominated by the private interests.

The CHAIRMAN. The Federal Housing Agency perhaps might be so influenced, but not the National Housing Agency. Do you mean the Federal Housing Administration is dominated by private interests?

Mr. SMITH. Your point, as I understand it, is that if you put public housing and private housing and the whole housing program together, in which the Government has an interest, that the sheer results of that might be that the program might be overweighted on the side of public housing. I answer that by saying that I do not see how that has a bearing on it, because the administration gets a whack at that issue, and the Congress gets & whack at it in terms of appropriations and legislation.

The CHAIRMAN. Is it not regular procedure for the Budget to be submitted through the National Housing Administrator to you, to be submitted to the President and transferred to Congress, so if the Administrator of the National Housing Authority is unfriendly to the Federal Housing Administration his budget, when submitted to you, will be cut down quite a bit? They know just about how much money they can get out of Congress. · Mr. SMITH. Would this not be a question with any top administrator?

The CHAIRMAN. That is true, and that is one of the things that I fear in this particular plan. I fear that it gives the Administrator of the National Housing Administraticn, of necessity, if he was a good Administrator and would build a lot of houses, that he of necessity believe in Government ownership of homes.

Mr. SMITH. I think it would be difficult to produce evidence, Mr. Chairman, that would show that kind of favoritism. I think that there are a good many safeguards there. The point I would regard as being much more important is that, in the alternative, you would have a separate agency interested in housing, unrelated to other housing programs of Government. It is my observation as Director of the Budget that in such a situation agencies inevitably suffer and that their chances of getting their programs adequately considered in relation to all the other programs of the Government are much better if they are brought much closer to the center of administration. In any case, the National Housing Administrator, reporting to the President, could easily bring the important issues that are involved here right to the center of the administration of the Government. To me that is important.

The CHAIRMAN. Would this situation be similar: Suppose that the Reconstruction Finance Corporation were operating some public power unit. A privately owned power unit came in to borrow money from the Reconstruction Finance Corporation. Would they not want to tend to increase the holdings of public power and cut down the loans to a private power interest? Mr. SMITH. That is entirely possible. The CHAIRMAN. Is it not natural ? Mr. SMITH. Depending upon the people who are dealing with the issue, that would apply; but that is assuming that there is no central policy of the Government with respect to these matters. It seems to me that where essential policy is developed you easily put your :

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The CHAIRMAN. In that plan, Mr. Smith, on page 11, section 507, the following is noted:

The following agencies are abolished: The Office of Federal Housing Administrator; the Federal Home Loan Bank Board, and offices of the members thereof; the Board of Trustees of the Federal Savings and Loan Insurance Corporation, and the offices of the members thereof; the Board of Directors of the Home Owners Loan Corporation, and the offices of the members thereof; the Office of the Administrator of the United States Housing Authority

And so forth. Now their functions are transferred to the National Housing Administration. The functions in section 505 of the constituent units are to be administered by the Federal Home Loan Bank Administration. Is that proper language to use when you say the Bank Administration or the Administrator?

Mr. SMITH, I do not know about the specific language. I am sure it was worked out carefully. However, these offices, as I understand it, are vacant now, under previous orders. This is perhaps a little confusing in that sense, because these are actually inactive offices. Here they are being abolished under the reorganization plan which, if adopted by Congress would completely eliminate them.

The CHAIRMAN. Do you not feel it is a mistake to abolish the Federal Housing Administration which was created by Congress to loan money to private investors to build their own homes and put it under an agency whose whole purpose is to perpetuate themselves in jobs by building houses at Government expense, Government-owned and Government-operated!

Mr. SMITH. I do not believe that is the issue, Mr. Chairman.

The CHAIRMAN. Is it not natural, when Federal moneys are available, that the fellows who have charge of the programs of the National Housing Administration, or Authority, or whatever it is called, will use more of that money to build Government houses so they will have rent collectors and administrators in the lines of employees rather than to have self-liquidating projects like homes being insured by a Federal Housing Administration loan that they will pay out some day?

Mr. Smith. Mr. Chairman, I do not think that could possibly be an issue here for the reason that all of those policy questions are dealt with in terms of legislation and in terms of appropriations. That is the question

of the amount of money that is to be available for public housing. What that plan does, Mr. Chairman, is to take the existing situation with respect to housing and give it to the Housing Administrator who heretofore has been more or less in a position of a coordinator, and give him some additional supervisory powers.

Thé CHAIRMAN. I think that you will find that the one agency in the housing field there has met with public approval and met with the approval of Congress more than any other housing agency of the Federal Housing Administration. They are not putting the Government in business necessarily in competition with other people, yet we are abolishing that agency and putting it under an agency which believes in Government ownership of almost everything.

Mr. SMITH. I could answer you, Mr. Chairman, in part in terms of the criticism coming to me from those interested in public housing. They would take just the opposite point of view that you take, this is that the agency is dominated by the private interests.

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