believe they are beginning to realize that their long-run aim cannot be directly achieved at this time, so their current proposals represent an effort to accomplish the desired result by indirection.

These current proposals are not new. The idea of minimum Federal benefit standards, with a Federal pooled reinsurance fund, was vigorously pushed before Congress in the early summer of 1939, just 5 years ago. As early as that, the Congress recognized the implicalizations of such a step for the integrity of State unemployment-compensation systems-and refused to sanction the move.

All sorts of dire consequences-ranging from insolvency of State funds to progressive deliberalization of State laws were prophesied at that time, if the Federal authorities were not permitted to intervene.

Subsequent developments have not borne out these predictions. No State fund has gone broke. The benefit provisions of State laws have been liberalized and extended.

The sudden conversion of industrial plants to war production, which resulted in heavy unemployment in industrial areas in early 1942, gave rise to a second effort to impose federally determined standards of benefit payments and benefit duration on State unemployment compensation laws.

The approach was different in 1942, since the plan at that time was known as war-displacement benefits and proposed to provide uniform Nation-wide benefits through supplementary Federal payments.

Again there was presented to Congress the prophecy that State funds would become insolvent and the claim that State legislatures had failed and would continue to fail to make adequate provision for unemployment benefits during the conversion period.

Congress again recognized that this proposal denied the right of State legislatures and State governments to determine the level of unemployment benefit payments in accordance with local requirements, local conditions, and local resources, and again this federalization move was defeated.

The dismal predictions which led to the war-displacements benefits bill failed to materialize. No State fund went broke. In fact, Michigan's fund, which was said to be in the most critical situation, increased during the year 1942. Benefit amounts were increased and duration was extended by Michigan and several other States, to meet the conversion problem. Succeeding regular legislative sessions continued this liberalizing trend.

History repeats itself in the present situation. We are hearing again the same old warnings of insolvency of funds and inadequacy of benefits, and even the proposed solutions are the same as those which the Congress refused to adopt in 1939 and 1942.

There is implied in these repeated efforts to secure congressional action in the field of unemployment compensation the unwarranted conclusion that State governments and State legislatures are not fitted to cope with their own problems in this field. When one considers the situation, it is rather startling to think that any group of Federal officials should come before Congress and say, in effect, "These State legislatures don't know what's good for their States, or what their citizens want. So let us tell you what's good for all States and all citizens, and you can pass a law accordingly."

It is needless to repeat now all those cogent arguments against these proposals which are printed in the hearings on the 1939 McCormack bill to amend the Social Security Act, and on the 1942 war-displacements benefits bill. They are still largely valid.

As it has disposed of similar propositions, we urge that Congress reject all proposals which have as their ultimate aim the federalization of unemployment compensation so that our legislators may proceed to deal with the heavier burdens in fields in which only the Congress can act.

(The following letter was submitted for the record by Senator Murray:)

Hon. JAMES E. MURRAY,

United States Senate, Washington, D. C.

MAY 19, 1944.

DEAR SENATOR MURRAY: The following comments are made in reply to your letter of April 26, 1944, in which you outline the need for some type of legislation to provide a means whereby States may pay adequate benefits to displaced war workers, thereby cushioning the shock of unemployment during the period of industrial reconversion.

The State of California is prepared to meet its liabilities under the existing California Unemployment Insurance Act through a present fund reserve of $535,000,000, accumulated by the collection of contributions from covered employers and workers. It is believed that all other States can likewise maintain a financially sound system of unemployment insurance by providing the necessary contribution income to maintain an adequate benefit structure.

Although unemployment is a national as well as a local problem, it is our opinion that the present Federal-State system is working effectively and any necessary improvements can be made within the existing structure. Civilian employees in Government shipyards, air bases, navy yards, arsenals, and other establishments operated directly by the Government constitute a group of considerable numbers in this State not now provided with unemployment insurance. The fact that unemployment is a risk affecting all workers at all times, and that the need for an adequate system of unemployment insurance legislation will be great even after the initial period of industrial reconversion has passed, leads the California agency to suggest that you give consideration to a program which would amend the Social Security Act and the Federal Unemployment Tax Act: 1. To extend coverage so as to include civilian Government war workers and ultimately all workers now excluded.

2. To provide minimum benefit standards with respect to the weekly benefit amount and its manner of computation, minimum duration of benefits, minimum qualifying wage, other conditions of eligibility, and maximum disqualification periods.

3. To provide with adequate safeguards for a system of reinsurance to strengthen the solvency of the various State funds.

4. To extend coverage in a manner which would permit the payment of benefits to workers on the basis of past earnings, even though they were not covered at the time such wages were earned, and to provide a method whereby contributions would be paid to the appropriate State unemployment compensation agency on all wages paid to governmental civilian war workers since December 7, 1941. An alternative method that should be explored would be to establish Federal participation in the financing of benefit payments to new workers brought into the system through the extension of coverage by providing that should the war end within 6 months the Federal Government would fully reimburse each State for any such payments; if the war should end within a year the Federal financial participation would be reduced 20 percent, and for each additional year that the war would last the Federal financial participation would be reduced another 20 percent.

5. To reimburse each State for any benefit payments made to honorably discharged veterans up to the maximum amount of unemployment insurance provided under the existing State law.

The advantages of approaching this problem along the lines suggested above are: 1. A more permanent solution to the problem of providing adequate protection against the risk of unemployment insurance for every unemployed worker. 2. Each State will be able to adopt a program best designed to meet its own peculiar economic conditions and social developments, as the Federal legislation would merely establish mainimum standards; and

3. If the Federal Government pays contributions on wages paid to war workers since December 7, 1941, no additional financial burdens would be placed on the Federal Government. On the other hand, if the alternative proposal made in item 4 above were adopted, the extent of the Federal financial participation would be reduced each year that the war continues.

These suggestions are made for your further consideration.
Sincerely yours,

HOMER W. BUCKLEY,

POST-WAR ECONOMIC POLICY AND PLANNING

THURSDAY, JUNE 1, 1944

UNITED STATES SENATE,

COMMITTEE ON POST-WAR ECONOMIC

POLICY AND PLANNING,
Washington, D. C.

The committee met at 10 a. m., pursuant to adjournment, in room 312, Senate Office Building, Senator Walter F. George (chairman) presiding.

Present: Senators George (chairman), Hayden, Vandenberg, Austin, and Hawkes.

Also present: Mr. Scott Russell, counsel for the committee.

The CHAIRMAN. The hearing will come to order, please. Mr. Sperry.

STATEMENT OF TOM C. SPERRY, OF TOLEDO, OHIO, CHAIRMAN, SOCIAL SECURITY COMMITTEE, NATIONAL RETAIL DRY GOODS ASSOCIATION

The CHAIRMAN. Mr. Sperry, you are the chairman of the social security committee of the National Retail Dry Goods Association? Mr. SPERRY. Yes, sir.

The CHAIRMAN. Well, sir, you may proceed to discuss this question now under consideration by the committee.

Mr. SPERRY. Very well, sir. My name is T. C. Sperry, secretarytreasurer of the Lamson Bros. Co., Toledo, Ohio, and I am appearing here today as chairman of the social security committee of the National Retail Dry Goods Association, which is composed of more than 7,000 department stores and specialty ready-to-wear stores, large and small, located in every State of the Union.

It is our understanding that the purpose of this committee is to explore the possible problems arising in the post-war period and develop techniques now as to how to meet those problems.

Our organization has had an active committee on social security since the early part of 1935, which, as you know, antedates the passage of the Social Security Act. Our committee has continuously endeavored to study the entire subject of social security from the broad view of the general welfare of all the people. Because of our long-standing interest in social-security matters, we consider the purpose of this committee to be worthy in every way and deserving the wholehearted support of every citizen of our great country.

In approaching this over-all problem there is one basic principle which appeals to our committee as fundamental, namely, existing facilities for meeting the post-war problems should be explored to

ascertain if they are adequate. If in some respects it is found that they are inadequate, then, by all means, the deficiencies should be corrected, but without wrecking existing programs and creating an entirely new structure.

4

Most of the statements before your committee to date have centered around the subject of unemployment compensation. Our organization, from the start in 1935, has taken a definite position on some of the points involved, and perhaps our thinking might be more readily covered by simply giving you our official action and an exchange of correspondence with Paul V. McNutt, the Administrator of the Federal Security Agency.

At its thirty-third annual convention the National Retail Dry Goods Association passed resolutions dealing with many phases of social security. Our position, as shown by these resolutions, is consistent with the resolutions passed at previous conventions. In order to conserve the time of this committee, I ask permission to file these resolutions.

The CHAIRMAN. You may do so for the record.
(The resolution submitted by Mr. Sperry is as follows:)

NATIONAL RETAIL DRY GOODS ASSOCIATION

RESOLUTION NO. 4 SOCIAL SECURITY

(a) The National Retail Dry Goods Association favors congressional action to freeze the old-age insurance tax rates to 1 percent. The old-age insurance funds now are far in excess of the estimated needs of the present and the near future. (b) The association does not favor the extension at this time of the Federal social-security program as proposed by the Wagner-Murray bill, and takes the position that discussion of the advisability of extending this program should be postponed until after the restoration of peace.

(c) The association opposes any further degree of federalization of the unemployment insurance compensation system and urges the return of the employmentoffice system to State control as soon as practicable.

(d) The association favors every proper consideration of the welfare of those who will be mustered out of the armed forces which will enable them to regain their places in civilian life, and favors the payment of a reasonable mustering-out sum by the Federal Government. Such payments should be made from funds appropriated for that purpose by the Congress. They should not be made from the social-security funds.

The States should protect the benefit rights of all those who left civilian employment to enter the armed services and they should be entitled to unemployment compensation until their accumulated rights have been exhausted.

Mr. SPERRY. Shortly after these resolutions were passed, a copy was sent to Members of Congress and to Mr. Paul V. McNutt, who, in turn, commented upon them in a letter to Mr. Lew Hahn, the executive head of the National Retail Dry Goods Association. Mr. Hahn then replied at some length. Because we consider the views expressed in the letter of the Administrator of the Federal Security Agency as representative of those who would centralize all social security matters in Washington and federalize the entire program, we consider it in order that this committee be given the information contained in Mr. McNutt's letter as well as Mr. Hahn's reply. We ask permission to insert them in the record in their entirety.

The CHAIRMAN. You may insert them in the record. (The letters referred to follow:)