U.S. COAST GUARD

The House report indicated that the appropriation approved for operati expenses for the Coast Guard, after allowing for a reduction of $4.5 million i the estimate, would support about one-half of the proposed program increase. As I indicated in my letter to the chairman, the reduction recommended wood result primarily in a drastic decrease in maintenance funds and prevent the making of essential repairs. It would cause further deterioration in plant and equipment and lead, inevitably, to greater costs in later years.

The 1962 budget estimates for the capital construction program of the Coas Guard contemplated some acceleration in the rate of replacement of overage and obsolete facilities. A large part of the shore plant of the Coast Guard is exe sively overage or obsolete in design. Similarly, operating vessels have been cotinued in use which are overage and poorly designed for present operations. These conditions have caused an abnormally high rate of expenditure for repairs. The projects we included in our 1962 budget program, as presented to the Congress, are urgently needed. Sooner or later these requirements will have to be met, and continued postponement merely means increased expenditures for these same purposes in the future. Our efforts should be directed toward the establishment of a sustained program of capital improvements and should avoid large fluctuations in annual appropriations. My request for the restoration of the House cut of $10,333,000 is directed to this end.

Our analysis of the Coast Guard retirement list indicates that the reduction recommended by the House in the item for retired pay would require the deferment of an estimated 110 man-years of voluntary retirements of qualified personnel. Unless the reduction is restored, it will be necessary to continue these individuals on active duty beyond their eligibility for retirement. This would have an extremely adverse effect on morale. The full amount of the request should therefore be granted.

As indicated in my letter to the chairman, the $200,000 reduction in the estimate for the Bureau of the Public Debt will be accepted without further protest. The remaining appropriations of the Department were approved in the House bill in the full amount of the budget estimate. I will be pleased to discuss these or any other matters in which the committee may be interested, or to answer any questions that the committee may have.

TREASURY DEPARTMENT-Continued

Comparative statement of appropriations for fiscal year 1961 and amounts recommended in House bill for fiscal year 1962-Continued

REQUESTED RESTORATION

Secretary DILLON. We are requesting a restoration of $33,796,000 of the House cut of $34,396,000. The reductions by the House were concentrated primarily in the Internal Revenue Service and in the Coast Guard, which I will cover a little more thoroughly. These two items accounted for over 90 percent of the reductions.

However, there are a number of other important reductions, which I would like to discuss. There is a résumé of these reductions attached to my statement. It is the last sheet of my statement.

OFFICE OF THE SECRETARY

As this statement indicates, there was a reduction of $233,000 in the request for the Office of the Secretary. This is a particular situation which we feel is highly important in carrying out my duties as Secretary of the Treasury, and particularly the duties as chief fiscal adviser to the President of the United States.

In the past there has not been in the Department of the Treasury any unit devoted to general economic analysis, and the Treasury has relied, to the extent that they have gone into this, on the Council of Economic Advisers or the Federal Reserve Board.

It is my opinion-and I discussed this earlier with Secretary Anderson, and he was in full accord that his experience had proved this-that this is unsatisfactory and that the Treasury Department, particularly the Secretary of the Treasury, should have a small but competent staff to advise him on general economic and financial trends, which are so important in determining the size of the budget, tax policy, and so forth.

The fact of the matter was that under Secretary Anderson there was really one man that did this whole job, and even the larger commercial banks in New York have very substantially larger staffs than the Treasury.

OFFICE OF FINANCIAL ANALYSIS

We did request for this particular operation the creation of a new Office of Financial Analysis, with eight employees in it, four professionals and four secretaries.

We also asked at the same time that the Office of the Secretary be allowed to have funds for some consultants which we could get to come in from time to time. We put in a request for 4 man-years of consultants' services. In the past the Office of the Secretary had what was effectively no provision for consultants. They had the equivalent. of one-quarter of 1 man-year, $3,000.

These would be consultants which we would bring in at the regular per diem rates paid consultants, which run up to $60.88 a day.

In addition to this particular Office, the other major reason for expansion is the President's desire and program of taking an overall look at our tax situation. That study is presently underway, looking toward recommendations for some sort of overall reform next year. We found that here again, because the Treasury had not made any overall efforts in the tax field for some years, that there was a real weakness, particularly in the Office of Tax Analysis, which handles the economic effects of any particular tax recommendations.

We have, therefore, made a recommendation for strengthening that Office by five professionals and two secretaries, or a total of seven, and. complementary to that, the strengthening of the revenue estimating unit by two professionals.

In addition to these positions, we have recommended a strengthering of the Office of the Tax Legislative Counsel by the addition of four professionals and two secretaries, and an increase of four in the Office of Debt Analysis.

This about covers the extra additions we have asked for, except for one special assistant for the Secretary of the Treasury. In the past few years at least, the Secretary did not have a special assistant, but! do find that most necessary.

CREATION OF EXECUTIVE SECRETARIAT

In addition, we have recommended the creation of an executive secretariat of four individuals, one director and two secretaries and a clerk, to keep better track of the operations of the Treasury Department, of our mail, of which in the past there had been no centralized control.

Finally, in the administrative office, we asked for a total of six new people, two of them management analysts, to conduct surveys in the field and examine our field operations, which is in effect carrying our management improvement program to the field. We feel that is very necessary. We also asked for a training officer.

This makes up the total of 43 additional positions which we have asked for.

POSITIONS REQUESTED

In addition to that, in the previous budget submitted by President Eisenhower, there was a request for funds to fill 15 positions which had been left vacant in the past because the funds had been needed elsewhere. These were positions that were really needed. There were some maintenance and administrative personnel in the building, various personnel of that type, which had just been let go because of the higher priority needs elsewhere, but that were really very much needed. They had also asked for two new professional positions. So this added up to a total of 60. The House has allowed us 30, and those will probably have to be used for filling positions which have long been vacant, which are really necessary to the extent of 15.

So it only allows a total of 15 new positions out of the 45 which we felt were necessary. We feel this would put the Secretary of the Treasury at a real disadvantage in the present complex situation of balance of payments, tax policy, and fiscal policy in advising the President in carrying out his responsibilities.

Therefore we earnestly hope that this committee will authorize the full request and restore the $233,000 reduction.

REDUCTION IN BUREAU OF ACCOUNTS

The second item about which I wish to speak for a moment is a reduction of $600,000 in the Bureau of Accounts. In this case, this reduction will have to fall entirely on the check writing, the actual processing operation of the disbursing operation. There will be, according to natural growth, some 18 million new items this year, a 6 percent increase.