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Mr. RIEHLMAN. May I make a comment, Mr. Chairman? The CHAIRMAN. Yes, Mr. Riehlman. Mr. RIEHLMAN. Even though you are not successful in that respect, Mr. Osmers, the fact that the committee has gone into this field and pertinent information is developed, and certain statistics brought forth, where we learn that there is a tremendous effect by the Federal Government going into business upon our private enterprise system, certainly that should stimulate some action on the executive part of the Government to move forward to eliminate, if possible, some of these activities.

Mr. OSMERS. In furtherance or in concurrence with what you said, Mr. Riehlman, I would like to point out the activities of the Committee on Government Operations, particularly through the Subcommittee on Intergovernmental Relations, has already had a very salutary effect upon the activities of the executive department along these lines.

Mr. PILCHER. Mr. Chairman, could I say one word right along there?

Mr. McCORMACK. Pardon me.

I didn't challenge anything said. I was just addressing my questions to the particular case that Congressman Curtis has had experience with, and as a part of his testimony that was very important as an indication, but I was wondering where in any of these bills it would meet a particular case like Congressman Curtis mentioned.

All right; I won't press that any further.
The CHAIRMAN. Mr. Pilcher.

Mr. PILCHER. I agree that we should go along with the witnesses, but in making up these bills, being on that Harden subcommittee, I have had something come up in the last 10 days I think would be interesting to the committee in view of writing these bills.

Now, down in my district at Albany, Ga., we have two small military units, Turner Airbase and a Marine base, less than 5,000 men in each branch, about 5,000 at the jet base and 5,000 at the Marine base.

They have three large banking institutions in Albany. The Turner Airbase is less than 5 miles from the center of town, with a big, wide military road running out to it. One of the banking institutions in the last 12 months built a new banking house. It cost a quarter of a million dollars. They put in three drive-in depositories and a 50 car parking space.

The jet base there decided they wanted a bank. So, they opened them up a bánk, at Turner Airbase.

As quick as Turner Airbase got their bank, the Marine base got jealous and said they wanted a bank out at the Marine base.

The banks down there didn't have a chance to bid on it, and they got up in the air, some of the other banks, and they wrote me. I took it up with the Air Force to know on what grounds they set up this, and I have a letter here from Brigadier General Kelly. He says:

The authority for the establishment of this type of service originated in an exchange of correspondence in April and May 1942 between the then Secretary of War and the Under Secretary of the Treasury. The agreement reached at that time has never been rescinded, and this is the basis for present-day negotiations,

Now, there is no excuse for two banking institutions. The military furnished the equipment and the building and everything. The Trease ury Department names the bank that is to operate it.


I understand-and I can't substantiate this; however, I have asked the Treasury-I told the Treasury Department that I understood this was true--that the Treasury Department even pays for the personnel, and I asked them 3 weeks ago to let me know if that was true, and they said they didn't think it was but they would investigate and advise

I haven't heard a word from them. I am told the Treasury Department even pays for the personnel in those banks. Since I have gotten into this I find there are banking institutions like that all over the United States at different military posts.

Mr. OSMERS. I think, Mr. Chairman, it is a very important subject for us to go into, and I am glad it has been mentioned here.

I would like to suggest, Mr. Chairman, if we could, if Congressman Curtis could be excused, we start hearing the other witnesses.

The CHAIRMAN. Have you finished, Mr. Curtis?
Mr. CURTIS of Missouri. Yes; I have finished.

The CHAIRMAN. I would like to thank you for coming here, and I want to say ever since you were the only member out of 435 in the House to discover that the total of appropriations must agree with the total of the items I have had the highest respect and admiration for your mathematical genius.

Mr. Curtiss of Missouri. Thank you very much, Mr. Chairman. The CHAIRMAN. Who is the next witness?

Mr. WARD. Dr. Willford King of the Committee for Constitutional Government.

Is he in the room?
Mr. KING. Yes, sir.

The CHAIRMAN. If you will, identify yourself and take as much time as you may deem necessary, nothwithstanding the 5-minute rule, which you notice is not observed by committee members.



Mr. KING. Thank you very much, Mr. Chairman.

I am an economist for the Committee for Constitutional Government, 205 East 42d Street, New York City. I am here representing the committee.

I find that I agree most heartily with the views expressed by the chairman just after I came in.

I am not in a position to suggest techniques for improving the situation. Members of Congress know so much more about that than I do it would be folly for me to try to instruct them on that.

Being an economist, I am merely going to state a few of the fundamental economic principles which seem to me to apply to this whole situation.

Governmental ownership and operation of the principal means of production is the fundamental feature of socialism. In recent decades, our English cousins have been experimenting extensively with that economic system. If we are wise, we will profit by their experience.

Britain adopted socialism not primarily on account of any Marxian influence, but mainly because such reasonable intelligent writers as Morris Hillquit and H. G. Wells had convinced the thinking people of England that it was folly to allow their nation longer to suffer from the waste and heartbreaks brought about by ruthless, unbridled, planless competition. These writers and others of their persuasion showed clearly how a carefully planned society, operating under the guidance of the nation's ablest scientists and organizers, could bring order out of chaos, and greatly increase production and human happiness.

So their advice was followed, and the British Government took charge of that nation's major industries, but production did not forge ahead. Peace and harmony did not result. Clearly, something had been overlooked by the architects of the new order. What?

The answer is that the proponents of socialism failed to take into account a number of fundamental facts, among which are the following:

1. Governments are usually controlled not by scientists but by politicians who are interested primarily in remaining in power—not in problems of industrial output. They are, therefore, far more likely to respond to pressure from powerful production-restricting groups, such as cartels, or labor monopolies, than they are to listen to the advice of efficiency experts.

2. The human brain lacks capacity to grasp all the problems connected with a great industry like manufacturing, trade, or agriculture. Under free competition, industries are operated by millions of entrepreneurs, each something of an expert in his limited field.

3. When Government engages in enterprise, the complexity of its task makes necessary the adoption of multitudinous rules and regulations. The inevitable result is that operations become entangled in a web of red tape.

4. The altruism of human beings is limited, and, hence, when the average man has the opportunity of choosing between arduous effort on behalf of the common weal and leisure, he tends to choose more leisure and less toil.

5. The typical individual is far more concerned about his own property than he is about possessions belonging to that abstraction known as government; hence he is not inclined to worry greatly about losses accruing to government as long as they do not affect his own pocketbook or endanger his hold on bis job.

The above reasons explained adequately why government should confine its activities strictly-to those things which cannot be effectively handled by private enterprise.

I am in no position to add anything to the facts unearthed by congressional investigators concerning the tremendous waste and huge burdens imposed upon the taxpayers by the inefficiency of government as a producer. The most that I can hope to do is to emphasize some of the underlying factors responsible for this waste and inefficiency. I believe I can do this best by citing certain instances, some of them trivial, which I have experienced, or which have been especially called to my attention.

Between 1917 and 1920, I was employed in South Carolina as a statistician in the United States Public Health Service, reputed at that time to be one of the most efficient of all Government bureaus. Our work happened to require the use of a particular type of crosssection paper. I knew where we could obtain an adequate supply for $5; but I was assured by our office director that unless crosssection paper was obtained from Kauffel & Esser, who had none suitable for our purposes, it could be gotten only by advertising for bids. It was suggested that the easy way to get it was to have Kauffel & Esser make a special plate and print the paper. This would cost perhaps $200.

Eventually, however, we advertised for bids, this costing far more than the cross-section paper and secured it after several weeks of delay. Needless redtape.

Another instance of redtape connected with this same project was that, when any of our assistants wished to take the 30 days of vacation to which they were entitled, we had to get special permission from Washington, despite the fact that no one in the Washington office knew anything about the duties of our assistants, or when they could be spared most conveniently.

While I was still employed in South Carolina, the United States Public Health Service was authorized to investigate the amount of sickness occurring in different occupations in the factories of the United States. As, at that time, I was 1 of the only 2 statisticians employed by the Public Health Service, I was asked by the Research Director to come to Washington and see what was being done. When I investigated, I found that the project had been assigned to three different men, each of whom was diligently recruiting a force of clerks, and none of whom understood the requirements of the study. Fortunately, I succeeded in getting the project established. Here we have án example of some official setting up a research project in a field of activity concerning which he was entirely ignorant.

During the depression of the 1930's, I was teaching at New York University, and, in addition, looking after an Illinois Bell Telephone Co. statistical inquiry employing more than a dozen workers. My secretary spent only 2 or 3 hours per week keeping all the office records called for by that study.

Then I was asked to supervise also for the Works Progress Administration a study of occupational morbidity and mortality in New York City. Assistants were hired for this project. By the time some 20 had been employed, it took two clerks full time merely to keep the office records which we were required to send to Washington in quintuplicate. Another example of useless red tape.

At the end of the first month, the WPA workers were, of course, anxious to be paid. My chief assistant-an unusually brilliant young man-went to headquarters with the payroll data. He was told to submit it in different form. This he did. After a few days' delay, he was told another form was necessary. This process was repeated four times, and nearly a month elapsed before the employees were actually paid.

Eventually, we discovered that making up the payrolls was a duty of the headquarters staff, and they had palmed it off on my assistant. One more instance of governmental inefficiency and waste. ,

During World War II, in one of the Government bureaus at Washington, one of the subordinates decided that he would prefer to take a job with a private concern in Washington. He notified his superior officer that he had accepted this new position, and hence would be leaving at a specified date. His superior immediately said, “Does your new position require you to work on Saturdays?”...

The young man said “No.''

Well, then,” replied his chief, "why not come into the office on Saturdays and we can keep you on the payroll here?"

This arrangement was completed, the young man drew his weekly salary, as usual, and his chief retained the prestige that goes with having a large force.

Since the money to pay the young man's salary did not come out of his superior's pocket, why should that gentleman worry about the expense?

During World War II, my son, Hugh, who was in the Air Force, was stationed at Guam. When the war ended, large numbers of trucks and other supplies were loaded on ships, taken out to deep water and dumped overboard. This was done despite the fact that the people of Guam could use these things to great advantage, and that the inhabitants of the Philippines, not far away, were in dire need of transportation facilities to replace those which had been destroyed during the war. Moreover, ships were lying idle in the harbor at Guam which could have been used to transport these valuable goods to places where they could be utilized.

This destruction may well have equaled in value the lifetime income of the officer who ordered it, but he did not have to pay the cost and getting rid of the supplies saved him the trouble of accounting for them. He felt that his position was safe.

When my son returned from Guam and told me what had been going on, I notified not only the officials of the War Department, but also the congressional committee investigating waste, and told them that my son was ready to testify concerning the matter if so requested; but nothing was done about it. The money did not come out of the pockets of any of the officials concerned. None of them lost his job.

These examples which have happened to come to my personal attention could, I suppose, be duplicated thousands of times in the experiences of different individuals. They serve to illustrate why Government activities are so wasteful, and why, therefore, Government should perform only those particular functions which cannot be assumed by private enterprise.

According to the June 1954 Clover business letter, the National Association Business Men, Inc., report that, at the present time, the Federal Government is competing with private enterprise in 25 types of manufacturing and 44 other fields of activity. Action of Congress which will effectively result in cutting down such governmental encroachments is certainly in the public interest.

The CHAIRMAN. Thank you, Doctor, and we are very happy indeed to have your statement.

Mr. KING. I appreciate very much your courtesy in listening to me,

Mr. Dawson of Illinois. I would like to ask the doctor a question about his statement.

I was interested in the experience of your son, Hugh, on Guam, where there were lots of materials left after the war and there were empty ships standing in the harbor that could transport them back here to any place. What if big business brought pressure to bear not to bring any of the stuff, the trucks and other things used in the war, back to America because it would mean competition to them or slow up their production, or it would glut the market; what would you say in that instance?

Mr. King. I would say that I happened at that time to be on the advisory consulting committee of the economist for the National Association of Manufacturers, and that topic came up definitely as to

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