Social Security Revision

The first witness is Mr. Charles E. Sands. Is Mr. Sands present? Then we will come back to him later and see if he has come in. Mr. Daniel J. O'Brien?

STATEMENT OF DANIEL J. O'BRIEN, FIRST VICE PRESIDENT, AMERICAN HOTEL ASSOCIATION

Mr. O'BRIEN. Yes, sir.

The CHAIRMAN. Áll right, Mr. O'Brien. Come around, if you please, sir. You may have a seat. You represent the American Hotel Association?

Mr. O'BRIEN. That is correct, Senator.

The CHAIRMAN. You are an officer of that association?

Mr. O'BRIEN. Yes; I am vice president.

The CHAIRMAN. We would be very glad to have you identify yourself accurately for the record and proceed. We will be glad to hear you on this bill.

Mr. O'BRIEN. Mr. Chairman and gentlemen of the committee, I am Daniel J. O'Brien, of Toledo, Ohio. I am representing the American Hotel Association, whose member hotels in every State have approximately 75 percent of the hotel rooms of the country.

While most individual hotels are relatively small business establishments, as compared with great manufacturing industries, our total effect upon the Nation's economy is substantial, we frequently are referred to as the seventh largest industry of the United States. I am humble as I appear before you to testify upon a bill which runs 201 pages, to which the House Ways and Means Committee devoted itself for 6 months in 1949. However, our American Hotel Association has really given a great deal of thought to this entire social-security program, and we are anxious to pass on to you the problems which this program would present to us, if this bill were enacted in its present form.

We hotel men in America do not oppose social security and employee benefits to every employee. It does not follow, therefore, that any criticism of an individual portion of H. R. 6000 is in any sense an indictment of the principal objectives of this legislation. There are, however, an increasing number of employers who are now providing their employees with a greater degree of security, and more numerous health and welfare benefits, than ever before. These include vacation pay, holiday pay, year-end bonus, pension plan, hospitalization and medical plans, old-age and survivors insurance, disability insurance, life insurance, unemployment insurance, workmen's compensation, recreational activities and facilities, free meals, free work clothes, et cetera. These are over and above all cash wages, and constitute a very substantial cash outlay.

The question arises as to whether the increasing assumption of employee security and responsibility by the Federal Government would mean the ultimate abandonment of all private plans. Many of the benefit programs which are today offered to employees of individual hotels, are a part of the contract between the employer and the bargaining labor organization. I am sure considerable time would be required to switch over entirely to a Federal program of social security, if it were ultimately decreed that the Government should underwrite all employee occupational hazards.

I recall the great mental anguish with which I personally had to cope, when as a young man I debated the wisdom of paying a relatively substantial portion of my income for self-protection in the form of insurance. Those insurance premiums might have meant that my family could not make desired or necessary personal expenditures until the insurance had first been paid. I do feel earnestly that if there is any one thing to our system of incentives in America, it is based on the fact that as individuals, we have an obligation to try to provide some degree of security for ourselves and our loved ones. That incentive must be retained or the individual heights of performance to which American workers have always risen, will have been sacrificed in the years that lie ahead.

I am not sure I am ready to admit that the program which is herein contemplated is an insurance program. I am afraid that it is more in the nature of a relief program, which could be modified and distorted, from time to time, in response to pressure and from political spokesmen, or spokesmen from strong employee groups.

May I give an example of what I mean? A few years ago, the House Ways and Means Committee entertained legislation which proposed supplementing State unemployment compensation payments, and extending the period in which such compensation is available. Now, it could be that these proposals might have had soundness, even from an actuarial standpoint. But the facts remain that the Ways and Means Committee itself concluded, after extensive hearings on these measures in past years, that such a proposal as would increase unemployment compensation to $25 a week for 26 weeks, would actually put a premium on idleness. Members of the committee themselves expressed the belief that some unskilled employees would be slow to report for duty on some job if they could draw adequate unemployment compensation springing from their release from an earlier job. In that sense, the proposals did embody a principle of relief, and were not strictly based upon insurance principles.

I feel strongly that whatever is undertaken in the social-security field should follow closely the best accepted principles of insurance and, above all things, should be based upon an actuarial formula.

I am just an ordinary American, who has served both as employee and employer, and I do regret to observe that there are employees who are guilty of absenteesim, and who are quite willing to extend themselves to the maximum of their ability, physically and mentally, if provisions are made for their welfare without working. The Department of Commerce has heretofore published estimates of the total number of employable persons who are seasonal or occasional workers, and who seem to have no desire to be gainfully employed the year-round.

When World War II struck, England was paying a dole of 25 shillings to a married man with one or two children. As an unskilled worker, that man could earn only 30 shillings if he worked a full workweek. So, in spite of the fact that England was fighting for its very life, it took a year or two before those persons who were enjoying a dole could be diverted to the nation's work force. Here in America we must never destroy the personal initiative and the personal responsibility of our own people, no matter where they work.

I note that a proposal was made to the Ways and Means Committee, in connection with its hearings last year, to the effect that the mounting social-security program in the United States should be brought under the jurisdiction of a joint committee, comparable to the Joint Committee on Internal Revenue Taxation. It was urged that this committee be made up entirely of technical people from the Treasury, and from congressional committees. And it was emphasized that this committee would see to it that the program was administered as an insurance program on a sound actuarial basis. Businessmen generally would have more confidence if such an approach were used.

The very fact that Government bureaus develop into such monstrous agencies frightens the layman. I do not know whether it is true or not, but I have read on several occasions that the Veterans' Administration today has 1 employee for every 15 war veterans, living and dead. If any such multiplication of staff people was practiced in the case of the social-security program, something like every fourth family would have to be on the Federal pay roll to administer the program. Adherence to strict insurance procedure might minimize the temptation to make a social agency out of this department of Government. This, we fear, could easily defeat the altruistic purpose toward which we should all address ourselves: namely, a competent insurance program which is workable and practicable.

The Commissioner for Social Security has testified that administrative costs of the program have been held to 3 percent. If we are to launch out into untried fields, a limit on maximum administrative and operating costs should be set forth, to insure the actuarial soundness of the entire program. The Nation's employers and employees dare not risk possible future insolvency of this fund.

Let me now enumerate for you some of the problems which this bill poses for the hotel business. H. R. 6000 provides that an employee's income, arising from tips, shall be made taxable for socialsecurity purposes.

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Social Security Revision: Hearings Before the Committee on Finance ..., Part 3