The most we can do at the present is to walk by faith and not by sight. When we have a bill which presents a fairly tenable theory of constitutionality, then is the time to enact the bill and thus find out what the Supreme Court thinks about it. I perhaps have been chastened in that respect, because I recently lost a case in the Supreme Court of the United States I thought I had every right to win. Mr. CROSSER. Any questions?

Mr. MONAGHAN. I notice this very interesting statement by the Court. It is closed with this statement:

Looking through forms of words to the substance of their complaint, it is merely that officials of the executive department of the Government are executing and will execute an act of Congress asserted to be unconstitutional; and this we are asked to prevent. To do so would be not to decide a judicial controversy, but to assume a position of authority over the governmental acts of another and coequal department, an authority which plainly we do not possess.

Mr. KRAUTHOFF. Yes; that is copied from the decision of the Supreme Court of the United States in the Mellon case. And it may be interesting to be reminded that what was written by Mr. Justice Sutherland, who has come to be regarded as one of the orthodox defenders of the Constitution. The Supreme Court, I understand, is divided into three types: Mr. Justice Brandeis, Mr. Justice Stone, and Mr. Justice Cardozo, usually are thought to be liberal in their conception of what the Congress may do, while Mr. Justice Van Devanter, Mr. Justice McReynolds, Mr. Justice Sutherland, and Mr. Justice Butler are thought to be very orthodox. Mr. Chief Justice Hughes and Mr. Justice Roberts seem to be open to conviction, one way or the other as the case may be, sometimes together, and sometimes separately.

Mr. MONAGHAN. I think that this statement very well states the case that the Supreme Court was never intended to have the power or authority to destroy an act of Congress, and article III, section 2, of the Constitution, clearly sets forth the power of the Court not to go into that extensively because we are here considering a bill, considering the one that they declared so rests, unquestionably, gives rise to the question as to whether the Supreme Court should have that autocratic power to declare an act of the people by their duly elected representatives and duly signed by their duly elected President, to be set aside rather than be interpreted; to be destroyed rather than decided in cases where facts are presented as to whether or not it applies, as to the particular case, to the particular people.

In other words, if the Supreme Court in a particular case thought that it was a mistake as applied there, they should have said that in this particular case the law does not extend or should not extend into this field of activity and not destroy the entire law, and with it the benefits that are incident to it.

Mr. CROSSER. Even as in this case, as a matter of opinion, they might have pointed out what was objectionable and not destroy the entire law merely because there were certain provisions that they thought were inconsistent with the Constitution.

Mr. KRAUTHOFF. I am very willing to concede that the N. R. A. case might have been written in about two sentences, and that is the power of the Congress of the United States is limited to regulate commerce among the several States, and that does not apply to

chickens sold in Brooklyn, N. Y., to a person living in the State of New York, and stop. But it is a good deal like telling a Congressman how much ground he ought to cover in his speech. He sometimes does not do what they think he ought to do.

Mr. CROSSER. Mr. Merritt, do you wish to ask a question?

Mr. MERRITT. No; I am satisfied with the Constitution as it is.

STATEMENT OF MURRAY W. LATIMER, CHAIRMAN OF THE RAILROAD RETIREMENT BOARD

Mr. LATIMER. My name is Murray W. Latimer, chairman of the Railroad Retirement Board.

The estimates of disbursements under the proposed railroad retirement bill are based on the latest draft of that bill which I presume you have been talking about here. It is not H. R. 8651, but the amended bill which provides for a maximum service credit of 30 years and retirement qualifications, and annuities of persons retired from the service of the carriers by reason of mental or physical inability to continue in the service. It refers to

Mr. MERRITT. Will you speak a little louder, please.

Mr. LATIMER. The estimates of disbursements which are presented in this statement are based on data collected by the staff of the Federal Coordinator of Transportation covering approximately 400,000 individual railroad employees on the following 13 railroads: The Atchison, Topeka & Santa Fe, Atlantic Coast Line, Baltimore & Ohio, Boston & Albany, Central Railroad of New Jersey, Chicago, Burlington & Quincy, Delaware & Hudson, Kansas City-Southern, Minneapolis, St. Paul & Sault Ste. Marie, Northern Pacific (western grand division), Oregon Shortline, Southern Pacific (Oakland division), Texas & New Orleans.

These data covered: (1) Date of birth and complete employment history of each individual employee on the railroad from which the records were secured, and, where available, employment on other carriers; and (2) annual earnings (available for approximately half of the employees each year) for the period 1924 to 1933, inclusive.

Records were secured from all employees on the payroll as of July 1, 1934, July 1, 1929, and December 31, 1933. From these data were constructed rates of withdrawal from carrier service, covering various causes and periods, rates of retirement, rates of mortality, and salary scales.

The detailed method of constructing these rates and the making up of the basic tables upon which the estimates were predicated need not be described here. Suffice it to say that the work was performed under the direction of competent actuaries of recognized standing and that standard actuarial practices were followed.

Mr. CROSSER. Mr. Latimer, would you speak directly to us; we are having difficulty hearing you.

Mr. LATIMER. As the basis for the particular estimates incorporated in this statement, the service tables were based on experience of the period 1925 to 1928, inclusive. For salaries and wages to be received in the future the salary scales of 1929, lowered by 5 percent, of course, were used. For that part of annuities to be based on 1924-31 salaries and wages, the actual salaries and wages of that

period were the basis of the estimates. The actual results were not very much different from what they would have been if we had assumed that there were no retirements prior to the age of 65 and all employees would retire at the age of 65.

Disability rates were constructed from the experience on the group life insurance plan (including payments for total and permanent disability) in effect on railroads. The rates of retirement for age 65 (with a set-back for ages under 65) were those occurring 5 years later under voluntary railroad pension plans, while the rates for age of 65 to 70 were scaled up so as to remove all employees from service at the age of 70. It may be said that the disbursements under these various assumptions as to retirement are not materially different from what they would have been under the assumption that no employees were retired on annuity under age 65 except for disability and that all employees remaining in service until age 65 were retired then.

We have assumed that the present railroad employment is approximately 1,100,000 persons, and will remain constant, and that employees who retire, die, and separate from the service will be replaced by employees at the same age as were new employees in the period 1924-29.

On the question of future pay, after some considerable study, we finally took the individual pay basis of 1929 and we lowered that by 5 percent. Now, at the present time would mean a pay roll of approximately $2,100,000,000 a year as compared with an actual pay roll of $1,600,000,000, and consequently we have given the figures here on both the basis of the present actual pay roll and the pay roll on the assumption that individuals will soon get back to the 50 percent under the 1929 level.

That is, for future service.

For prior service, insofar as it has an effect on these annuities, and it will have considerable effect for a good many years, the 1931 average was used.

There are three changes in the present proposal as compared with the Railroad Retirement Act which have an effect on the companies and the employees under the Retirement Act. Under the Retirement Act the employees, term employee, was defined as a person in active service of a carrier, not actively in service of the carrier, and those who had been in such service for 1 year prior to the enactment date of the bill.

The new bill defines an employee as

each person who at or after the enactment hereof is in the service of the carrier, or who at or after the enactment hereof is in the employment relations to a carrier.

Now, it is rather difficult to deal with a matter of that character, because there are no actual statistics of the number of those having an employment relationship to a carrier; but taking the number of persons furloughed in the last 5 years, and taking those persons who had in more years service at the time of furlough seemed to be a reasonable way to approach the number who had rights to reenter the service. That number approximates 100,000.

Mr. MARTIN. May I ask you a question there?
Mr. LATIMER. Yes.

Mr. MARTIN. You estimate the number of railroad employees at the present time at 1,100,000.

Mr. LATIMER. That is not an estimate. That is the actual count. Mr. MARTIN. Does that include those who may be termed as having an employment relation, but not actually in the service?

Mr. LATIMER. No, sir; that is the point I am trying to deal with

now.

As I say, we finally arrived at the conclusion that a fair basis of estimate would be that those employees who had an employment relationship to a carrier was the number of persons who had been furloughed after completing 10 or more years of service in the last 5 years. Now, that number, less a certain amount of mortality, approximates 100,000.

Mr. MARTIN. That would be in addition to the 1,100,000?

Mr. LATIMER. Yes, sir. As I say, that is somewhat of a guess, because we do not have an actual count.

Now, comparing that with the Railroad Retirement Act, the carriers testified in the Railroad Retirement Act case in the year preceding June 27, 1934, the effective date of the act, 146,000 persons had left the service of whom only approximately 60,000 were expected to return. Those were persons who were expected to return—were persons who were furloughed and had the right of recall.

Mr. MARTIN. Now, what part will that 100,000 be made up of men who have seniority rights?

Mr. LATIMER. All of those.

Mr. MARTIN. And hold their seniority rights, having been separated from their employment, but not in actual service, due to a slackening of work; is that right?

Mr. LATIMER. That is the estimate of the total number of such persons who are not included in the 1,100,000, who are on furlough or leave of absence and who do have the right to reenter the service. That is the estimate which I gave here for those particular persons who have employment relationship to a carrier.

Mr. MARTIN. And that is what that 100,000 is made up of.

Mr. LATIMER. Yes, sir. And what I am trying to do is to compare it with the Railroad Retirement Act, and the final conclusions we reached is that if this 100,000 estimate is approximately correct, that that change in the retirement system would have practically no measurable effect on the cost.

That is the first difference between the retirement bill and the Retirement Act.

The second difference is that for persons who entered the service after the enactment date and who were not in employment relationship on the enactment date-prior services not being creditable, if there were any

Mr. MARTIN. Now, that refers to

Mr. LATIMER. The service prior to the effective date is not taken into account and calculated in the annuity, even though there was some prior service. That is, where the men came back and had no employment relationship on the enactment date.

Mr. MARTIN. If they have no employment relationship on the date the act goes into effect and thereafter are employed, you mean they cannot couple such employment up with former employment? Mr. LATIMER. That is right.

Mr. MARTIN. And that is not taken into consideration in their pension period.

Mr. LATIMER. That is correct. That is the way the bill now stands. In the Retirement Act that was not the case. They could count both prior and future service irrespective of their status on enactment date, but our calculation is as to the cost for the bill, and I am now trying to explain what the difference in our calculations are. We had assumed that after these 1-year service people were taken back in the service, if they were, the carriers, instead of hiring these older men, would go back and hire new employees, because of the fact or by reason of the use of prior service in calculating the annuity there would be a penalty-that is not quite the right termbut let us call it that, the semblance of a penalty, for rehiring these older employees.

So that is the reason in classifying or considering our figures, we take no account of that difference, so that explains that.

Mr. MARTIN. Do I understand you rightly to mean that in depriving a former employee of the right to couple up his past employment with his future employment, you are, so far as possible, preserving or protecting his right to get reemployment which he might not otherwise get, a new man being preferred to a man who could couple up his past employment to establish a pensionable status; is that right?

Mr. LATIMER. I would rather have Mr. Krauthoff answer that question, because after all, he drafted that section.

Mr. MARTIN. Do I make that clear?

Mr. LATIMER. I believe, my own personal opinion is that probably would help in that direction.

The difference in the actual costs from the figures which are presented here, come down finally to the difference in death benefits. Under the retirement act there was refunded to the employees who died, who would die, the amount of their premiums, plus 3 percent, less any annuity payments received. Under the new bill the death payment to the beneficiary is payable only to persons who are entitled to receive annuity or actually receive a death benefit of onehalf year's annuity.

For the present employees that increases the death benefits. For future employees it decreases it.

The result is a slight reduction in the cost of the new bill as compared with the Railroad Retirement Act.

In the years up to 1965, the maximum difference, I believe, is $2,000,000 a year.

As I say, that is the maximum difference. The next 30 years, according to our calculations between the new retirement bill and the Railroad Retirement Act, is $2,000,000

Mr. CROSSER. More, or less?

Mr. LATIMER. Less.

I will present this statement here, and I shall not read the complete tables.

Mr. KRAUTHOFF. Did you state, Mr. Latimer, what the expense of this bill as now proposed would be for the fiscal year ending June 30. 1936?

Mr. LATIMER. From 35 to 40 millions by the end of the year, including administrative expenses.