Mr. LEW HAHN, FEDERAL SECURITY AGENCY, Washington, D. C., February 29, 1944. General Manager and Treasurer, National Retail Dry Goods Association, New York, N. Y. DEAR MR. HAHN: Thank you for sending me a copy of the resolutions adopted by the victory and post-war conference of the National Retail Dry Goods Association on January 13. I am interested to know what problems are occupying the attention of your members at this time, as reflected in the six resolutions adopted by the conference. We are, of course, particularly concerned with Resolution No. 4 on social security. The conclusions expressed in paragraphs A, B, and C are widely at variance with my own and those of the Social Security Board. I cannot believe we are altogether wrong and consequently I cannot help wondering how careful and thorough a study of this problem was made by the conference or by your members throughout the country. Increased social security, and the flow of purchasing power which would result from a comprehensive social-insurance system, should be of more direct interest to retailers than to almost any other business group. As Mr. Eric Johnston pointed out recently, social insurance has a place in a dynamic, changeful economic system just as surely as does business insurance. However successful we may be in creating conditions of full employment in the post-war period, we shall need a strong social-insurance system. In the immediate post-war period, such a social-insurance system could contribute more effectively to an orderly demobilization of industry than could any number of emergency measures. If the workers who are now engaged in war production are not to lose the protection earned by their present social-insurance contributions, immediate extension of coverage to groups now excluded is necessary. Many self-employed businessmen and farmers have indicated their desire to share in the old-age and survivors' protection of the present program. The provision of social-insurance credits for persons in military service will lose much of its value if large numbers of returning veterans find themselves in noncovered civilian employments. The need for additional protections-for disability and the costs of medical and hospital care has been emphasized anew by our experiences in recruiting for the armed forces and for war industries. Consequently, I find it difficult to understand how anyone who supports the principle of social security through social insurance can take the position that consideration of further extension and strengthening of the program should be postponed. I wonder whether your opposition to the scheduled increase in the present old-age and survivors' insurance taxes also stems from a general reluctance to support an adequate social-security program. The present contribution rates for old-age and survivors' insurance are far less than the cost of the benefits. In spite of heavy wartime demands on workers' incomes, organized labor supports the increase in the tax rates, because of its concern that the principle of contributory social insurance be maintained and strengthened. A similar position has been taken by a number of business groups, and by most persons who are working for a strengthened social-insurance system. The resolution also fails to indicate the considerations which led your group to oppose a national unemployment compensation system and a national employment service. In the face of much evidence to the contrary, I find it difficult to believe you are convinced that the present State unemployment compensation systems afford adequate protection to the community, as well as to workers and their families, against this Nation-wide risk. In view of your failure to recommend any improvements in the State systems, however, I assume this must be the case. I am told that Mr. Claude Williams, of Texas, addressed a meeting of your association, and the views expressed in your resolution are such as he urged. I cannot learn, however, that you have had presented to you the other side of the story. I would suggest that your parent organization and your various local groups reexamine the situation in their own States before resting upon the conclusion indicated in your resolution. My own conviction is that if we are to retain the advantage of free mobility of labor in a dynamic free enterprise economy, we need both a Nation-wide employment service and a strong national unemployment compensation system. On one point I believe your recommendation runs counter to the expressed opinions of the majority of State unemployment compensation administrators. The Interstate Conference of Employment Security Agencies has recently urged that the responsibility for providing unemployment allowances to demobilized service men and women be recognized as a responsibility of the Federal Government. Probably no more than half of the persons in military service will have come from employments covered by the State unemployment compensation laws. Protection of existing benefit rights under the State systems would result in most inadequate provision for our veterans. On the other hand, few States are willing to finance benefits for all veterans whether or not they had previous wage credits. If your association has made any special studies on social security problems or if you have available any statements indicating the considerations which underlie your resolution on social security, I should be most interested to see them. I should also be glad to know the outcome of any further consideration you and your members may give to these problems. Sincerely yours, PAUL V. MCNUTT, Administrator. NATIONAL RETAIL DRY GOODS ASSOCIATION, The Honorable PAUL V. MCNUTT, Washington, D. C. DEAR MR. MCNUTT: In my letter of March 14 I advised that I was forwarding a copy of your letter of February 29 to members of our social security committee in order to obtain their reactions. This has taken some time, but I have received them and am herewith passing them on to you. Our organization has had a social security committee 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 of the people. We have made it a point from time to time to have speakers at our various conventions who have presented all sides of this subject. Many of our members, and particularly those of our social security committee, have attended numerous meetings at which members of the Social Security Board and its staff have spoken. We are, therefore, familiar with what you term "the other side of the story.' After all, Mr. McNutt, you do yourself and your colleagues an injustice in assuming that despite all you and the Social Security Board have done to present your side of the story through Government releases, magazine and newspaper articles, talks over the air, and on public forums, that any of our members who were at all interested in social security could possibly fail to be continuously exposed to the arguments for "your side of the story." Very frankly, we are not sympathetic to the insinuation in your letter that our conclusions may have been predicated on ignorance or on lack of a "thorough study of this problem." We have given careful consideration to all of the arguments advanced by you, and we still do not agree with you nor with the Board. In the short space of a letter it is not possible to write a treatise on the many reasons for our attitude on the various phases of social security covered by our resolutions, nor is this necessary because you and the Social Security Board are undoubtedly thoroughly familiar with our reasons. We propose, therefore, to discuss only briefly each of the resolutions on social security adopted by us, copy of which was sent to you and resulted in your letter to us. RESOLUTION NO. 4-A This resolution has to do with freezing the old-age insurance tax rate at 1 percent. Our association for many years has gone on record as opposing the collection of moneys for general Government purposes under the guise of social security. This position has also been taken by other organizations and by Members of Congress. We suspected that the present urge for increasing the tax to 2 percent had in it the motive of obtaining more revenue. Our suspicion was confirmed by the comments of the President, in his veto message of the 1943 revenue bill, when he pointed out to Congress that its failure to permit the increase to 2 percent materially reduced the general revenue. There have been many arguments advanced both pro and con in 1egard to the proper way to finance this long-range program. We believe that an election year, the Government's need for revenue, and a high level of wages throughout the country are factors which are not conducive to an atmosphere wherein a calm and realistic solution to this complicated problem can be reached. In your letter you state, "The present contribution rates for old-age and survivors' insurance are far less than the cost of benefits." The implication in your statement is that the present contributions to the fund are not sufficient to cover the present benefits. You know and we know this is not correct. If your statement were correct, how could the balance in this fund have increased to a point where it now exceeds $5,000,000,000? The present tax rate, as you well know is now producing more money than was originally estimated for a 2-percent rate. The balance in the reserve at the close of the last fiscal year was sufficient to pay benefits at the 1942-43 fiscal year rate for a period of about 29 years. In the last fiscal year, the receipts were more than five and one-half times the benefit payments. Certainly, on the basis of those figures no one can correctly maintain that the present contribution rates are "far less than the cost of benefits." RESOLUTION NO. 4-B With reference to the Wagner-Murray bill, we believe the introduction of this bill in Congress was not timely. The first objective for all of us should be to win the war. This bill involves many subjects of a controversial nature which in our opinion should not be injected at a time when we really need a single and united purpose. In our opinion, it is unfair to ask any congressional committees to hold hearings on this bill at this time. These hearings would be very lengthy and in all probability would develop considerable bitterness. The cost of the proposed changes as outlined in this bill would be terrific and there is considerable doubt in the minds of many of us as to the sufficiency of the proposed 6-percent tax on both the employee and the employer. As a matter of fact, according to the information available to us, no one agrees with this bill in total, not even the Social Security Board. The United Automobile Workers of the Congress of Industrial Organizations went on record in their Detroit meeting that they were opposed to the pay-roll tax as outlined in this bill and favored having the entire cost paid by general taxation. In view of all these differences of opinion, it certainly would seem to be sensible to defer consideration until it can be done calmly and judiciously. In connection with your comment on the Wagner-Murray bill, we find another sentence which does not altogether agree with the facts. You say, "If the workers who are now engaged in war production are not to lose the protection earned by their present social-insurance contributions immediate extension of coverage to groups now excluded is necessary.' To the uninformed reader, this would mean that unless some bill like the Wagner-Murray bill extending coverage generally, were passed, all war workers would lose the benefits which they have earned. We feel sure that even if coverage is not extended, millions of present workers will not only not lose a penny of their present benefits but will have greatly increased benefit rights by reason of increased earnings. RESOLUTION NO. 4-C This resolution deals with the federalization of our State unemployment compensation systems. The National Retail Dry Goods Association has consistently opposed the federalization of State unemployment compensation for the following reasons: 1. We strongly believe in the democratic process wherein the States and the various local units have a definite function in our governmental system and where they can exercise authority on matters of local interest and concern. 2. In addition to the democratic consideration, we believe the best interests, both social and economic, can be served by avoiding complete domination from Washington. We in private enterprise are just as much opposed to a monopoly of all governmental power in Washington as Government is opposed to monopoly in industry. 3. The original unemployment-insurance program was conceived with the idea of social and economic benefits to the country as a whole. We are extremely fearful that a federally controlled and dominated program could easily be motivated by political rather than economic and welfare considerations. 4. We are not convinced that all ability and wisdom resides in Washington. In fact, we doubt the human capacity of any one man, or bureau, to administer justly and efficiently so vast a program. 5. We believe there is a very definite advantage in having the unemploymentcompensation program under the control of the States, thereby permitting each State freedom to experiment with various plans so as to obtain the one best suited to its particular needs. 6. We believe the States, on the whole, have done a very remarkable job. In fact, Arthur J. Altmeyer was of the same opinion when he told the State administrators in October 1938, "The Board is of the opinion that a national system would have broken down under the initial impact of the administrative difficulties which you have been able to surmount with such a considerable degree of success." In another speech in March 1940 he said: 16* * * the Social Security Act is in its essence a cooperative Federal-State plan whereby the Federal Government enables the States to operate more effectively and on a Nation-wide scale. In so doing, it maintains a proper administrative and constitutional balance between the National Government and the governments of the 48 States. * * * "This cooperative Federal-State attack on national problems may not appeal to those who believe in a strongly centralized government, or to those who prefer to work out in advance a nice blueprint of the law and its administration. However, those who appreciate the vast geographical expanse of this country, the variation in conditions throughout the country, and the desirability of permitting the States to enact laws which meet their particular needs and which meet with the approval of interested groups within a State, will agree that the plan laid down in the Social Security Act is more realistic and in harmony with the traditional American way of meeting our social problems. "In fact, it is inconceivable that a law which affects so intimately the daily lives of our people could be administered from Washington. No law could be written which would take into full account the variation in the conditions and circumstances existing throughout this country, nor could any one person or group of persons in Washington direct the administration in such a way as to take into full account the circumstances of the individual case. The inevitable result would be that decisions would be made in Washington that did not take into account all of the facts. Moreover, because of the tremendous scope of the application of the law, it would be necessary to reduce to a minimum the discretion of persons in direct contact with individual cases. This would result in a large volume of detailed rules and regulations, all of which spells bureaucracy.' We could not have presented our case in more expressive language than Mr. Altmeyer has thus done. 7. Federalization would terminate experience rating which places the emphasis on employment rather than on the mere payment of unemployment compensation benefits. 8. If it is advisable to federalize unemployment compensation, why not federalize other State functions, such as workmen's compensation, education, policing, etc.? You state in your letter that the conclusion expressed in our resolution on federalization is at variance with your own and that of the Social Security Board. We feel that the mere fact that you and the Board are in agreement is not necessarily conclusive, nor that it is the proper conclusion. We have good company in our position opposing federalization of unemployment compensation when we find that the following are also opposed to it, namely the Conference of Governors (Asheville, June 24, 1943), the American Legion, the Interstate Conference of Employment Security Agencies. We favor the return of the employment offices to State control as soon as practicable. We realize the Federal Government considered the taking over of these offices as a war necessity. Immediately after this necessity disappears we believe that the employment offices should be returned to the States, if for no other reason than to indicate good faith on the part of the Federal Government. We also believe the States could have done as good a job, and possibly a better one, as has been done by the Federal Government. We are reliably informed that in at least one State during the operation of the Employment Service by the Federal Government, they have never succeeded in exposing more than 10 percent of the unemployment compensation claimants to the millions of job opportunities existing during the past 2 years. At one time, they were not exposing more than 2 percent of unemployment compensation claimants to job opportunities. Many of the reasons which apply to our opposition to federalization of unemployment compensation apply also to the employment offices. We are sure that employment is more of a local than a national problem and, unless the Federal Government proposes to regiment labor and force it to move from place to place, its mobility, in our opinion, is greatly exaggerated. A recent survey reported in the public press by Anne Reed Burns of 100,000 migrant shipyard workers at Portland, Oreg., shows that only 24 percent are of definite intention to leave Portland when their present work ceases. Of the balance, 21 percent will remain in Portland whether or no, 31 percent will remain if they have a job, and 24 percent are undecided, If such a large percentage of former migrant workers have decided to attach themselves to a local labor market, the entire problem is obviously more local than national. RESOLUTION NO. 4-D This resolution deals with the veterans. Insofar as the veterans are concerned, we believe Congress should make adequate provision for them. However, the program for the veterans, both as to administration and financing, should remain separate and distinct from the social security program. Our resolution regarding the benefit rights of those who leave civilian employment to enter the armed services called for no penalty or no loss of rights because of this move. You unquestionably are familiar with the fact that most States already have taken the appropriate action to protect these rights. Throughout your letter there is a note of incredulity that our resolutions failed to agree with your viewpoint. You seem to imply that we are not in favor of social security or friendly to it. We question whether those who talk glibly of the all-inclusive objectives of social security without sufficient consideration of methods, procedures, or costs, are the real friends of social security or whether real friendship does not come from those who want full consideration given to proper procedures, administrative details, costs, and finance. As retailers, there is one more point that we cannot pass without challenge. You state, "Increased social security, and the flow of purchasing power which would result from a comprehensive social insurance system, should be of more direct interest to retailers." Following your line of reasoning, we, as retailers, should favor larger doles and bigger and better Government sponsored Christmas trees. No, Mr. McNutt; our resolutions did not "stem" from selfish motives to promote our own individual gain. We have always attempted to approach this subject from a broad social point of view, with the objective the greatest good for the greatest number. Sincerely yours, NATIONAL RETAIL DRY GOODS ASSOCIATION, (For the social security committee.) Mr. SPERRY. The resolutions of the National Retail Dry Goods Association and the resulting correspondence deal with the importance of extending and strengthening the entire social security program. Since you are presently concerned with the problems of human demobilization in the immediate post-war period, and since old-age insurance problems are not immediately pressing, we are limiting this statement to unemployment compensation and particularly to the proposed federalization of our present State unemployment compensation systems. The National Retail Dry Goods Association has consistently opposed the federalization of State unemployment compensation for the following reasons: 1. We strongly believe in the democratic process wherein the States and the various local units have a definite function in our governmental system and where they can exercise authority on matters of local interest and concern. Senator AUSTIN. Excuse me. May I interrupt the witness for a question? The CHAIRMAN. Yes, Senator Austin. Senator AUSTIN. You have just spoken generally in opposition to federalization of State unemployment compensation. I want to ask you just one broad question. Perhaps you cannot answer it, and perhaps you can. The question is whether your organization has considered and formed any opinion upon the possibility of a plan of Fed |