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Mr. SPEIRS. No, because, speaking from my own experience as a negotiator on the national level for several years, the incentive for collective bargaining will be removed when you resolve the issue for the parties, and you would do so by your proposed additional financing which is the real issue between the parties. Moreover, a closely related issue is the recommendation by the Commission on Railroad Retirement that the railroad retirement system be restructured. This means a restructuring of the benefit formula, particularly from the standpoint of dual benefits, and this would certainly affect the cost of the program so that 712-percent additional tax may be too high. Obviously, the parties must negotiate both the benefits and cost issues simultaneously, and the cost issue can be solved only after the benefit issue has been agreed upon. By determining for them the cost issue, the bill would take away from the parties the incentive for collective bargaining on the benefit issues, as I see it.

Senator HATHAWAY. The incentive is that if no agreement is reached, then the 7.5 percent will go into effect, and that is simply, as I have mentioned, a fallback position.

Mr. SPEIRS. One party or the other might be willing to accept that as a solution, and therefore would have no incentive to bargain on any

other issue.

Senator HATHAWAY. If they are, we will change the provisions, because it was intended to be a penalty on both. To the best of our knowledge, to date, at least, we think that neither side would like that provision. If you have a better suggestion, we would be happy to accept it, or at least happy to think it over.

Mr. SPEIRS. I am sure the parties know that Congress would act at the expiration of 12-month period if they fail to agree, and that this, in and of itself, should certainly act as an incentive. Therefore, it is my own suggestion that Congress not act in this area at this time.

Senator HATHAWAY. It seems to me from reading the Congressional Record of last year that that was what was indicated last year, also, and the recommendation was not forthcoming this year to Congress, so it really did not provide much of any incentive, did it?

Mr. SPEIRS. I do think that the parties made tremendous strides in reaching the agreement that they did reach, and I believe that they are equally intent now to continue their negotiations with a view to putting the system on a sound financial basis, from now on.

I believe that until 1970 railway labor and management have always met their responsibilities in financing the system. One of the reasons that additional financing was not furnished in 1970, 1971, and 1972 was that, in 1970 there was created a Presidential Railroad Retirement Commission to study the whole system, and it was anticipated that this Commission would come up with specific recommendations in the areas of benefits and financing, which, of course, they did not do. Mr. QUARLES. May I respond?

Senator HATHAWAY. Certainly, Mr. Quarles.

Mr. QUARLES. As Mr. Speirs stated, he and I have both been negotiating at the national level, in my particular case, for a period of over 10 years, and I believe that there has been more statesmanship in collective bargaining in the last several years in this industry than at any time during my experience as a national negotiator for 10 years. I

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collective bargaining in March of this year, and which is the basis for H.R. 7200, is clear evidence of their awareness of the financial difficulties the railroad retirement program is confronted with, and I am confident that they will come up with an agreement, a negotiated agreement, so that this problem will not find its way to the doorstep of the Congress.

With reference to the proposal that the negotiators should keep minutes of their meetings, I think it is important to have in mind that in such negotiating sessions, here is a team of men representing one side and another team representing management on the other. Often after a free exchange of ideas there appears to be an agreement on some issue, but then, even with the services of the National Mediation Board, there is a legitimate reconsideration on the part of one or the other side. The next morning, however all the negotiations have changed and the parties come up with a negotiated agreement. In all such instances the keeping of minutes would be a deterrent rather than an aid to the negotiations. I think this certainly could be kept in mind irrespective of what you may do.

Senator HATHAWAY. We have another problem here, too. If we do not have a provision as incorporated in this section, we run the risk of a Presidential veto.

The administration is not too happy with the House-passed bill because there was no provision for financing the system. This would probably be enough, although I can't say that with any basis of having talked with administration officials. It would seem to me to be enough to satisfy the administration that next year, finally, there will be a provision for funding the system.

Senator HATHAWAY. Senator Schweiker?

Senator SCHWEIKER. Thank you, Mr. Chairman.

Mr. Speirs, you say on page 7 that you feel confident that by July 1, 1974, if not before, representatives of railroad labor and management will recommend to Congress a plan that not only meets the policy, but will fully support it.

I hope you are right. I have been on the committee 411⁄2 years, and that sounds familiar, and I have heard it every year, and I wonder what gives you reason for optimism this year.

It seems to me we have been optimists for the last 3 or 4 years without fruitful result. So why your optimism now?

Mr. SPEIRS. Well, I think that by their March agreement the parties have demonstrated their good will and desire to resolve the issues between them. I am particularly encouraged by what they have accomplished to date in the way of a settlement. They are well aware that this matter must be settled, and the best way to settle it is among themselves. They are the people who finance this system, and it is their system that they are concerned with. I believe that they are also aware that Congress will settle their issues for them if they do not because these issues must be settled in order to protect the annuitants under the system. Based by my experience and dealings with both sides over the years, I feel confident that they will come up with a joint recommendation to the Congress before the end of the 12-month period. Senator SCHWEIKER. I certainly felt in the conference last year, in our testimony last year, that that same kind of logic prevailed at that point, and what new element do you see that is going to prevail next year that hasn't prevailed in the last 4 years?

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Mr. SPEIRS. I think the one element that has come into the situation now that probably didn't prevail before, seemed to be the good-faith collective bargaining and the sincerity on both sides. I think, before, there seemed to be a different atmosphere, and every dispute, whether it was wages or rules, or whatever, seemed to find its way into Congress before it was settled. Now, I believe the spirit of the parties is entirely different. I think their attitude toward collective bargaining has changed and I think there is a new and improved trend toward collective bargaining in the railroad industry; and this is very encouraging. I, myself, in some 15 years of negotiations, have on several occasions found our disputes going to Congress. This, however, is one big dispute in which the parties are showing the proper spirit and a desire to settle.

Senator SCHWEIKER. Do you have anything to add to that, Mr. Cowen?

I would be interested in hearing your opinion. I have heard this every year for the 4 years I have been sitting up here.

Mr. CowEN. I am encouraged by the March 7th agreement. I didn't sit in on the meetings, but I have discussed what progress has been made with representatives of both groups informally, and there seems to be more of an appreciation of the problem than there has been in the past. Whether the appreciation will result in an agreement, I am not in a position to really say. I am encouraged.

Senator SCHWEIKER. It seems hard to understand why, just having gone through a year with all these same pressures and facts and circumstances, why, if they could not do it last year, why we would expect them to have it done this year?

Mr. COWEN. As I said, the main reason for my encouragement seems to be a greater appreciation on the part of both parties as to what the problems are, and where they have to go.

Senator SCHWEIKER. That is all I have.

Mr. QUARLES. Senator Schweiker, may I respond?

Senator HATHAWAY. Let me get one question in.

You do support section 121 of S. 1867?

Mr. CowEN. Is that the one which adds the 3.75 percent on each side the 712 percent?

Senator HATHAWAY. That is correct.

Mr. COWAN. Yes, I do.

Senator HATHAWAY. Thank you.

Mr. QUARLES. Senator Schweiker, I think that there has been more of a display of statemanship even in the past year, as I understand the collective bargaining agreement consummated on March 7. In addition to the problems that H.R. 7200 was taking care of, involving the railroad retirement program, this negotiated agreement also took care of the wage problem, which certainly had not found its way to the doors of Congress. This, I think, is a good indication that these parties recognize they have responsibilities to negotiate the areas that are now giving them problems without having to bring them to the Congress. You know, you give a dog a bad name, he carries it a long time, and I have been testifying before this committee when the railroads were out on strike and both Senators and Congressmen have said, "Now, we want you fellows to get together and keep these things away from the Halls of Congress." Well, both parties have certainly done it in this particular instance, and this, I think, shows the recognition of their responsibility. I believe if you gentlemen will give them the lati

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tude they need to solve this complex problem-which the Commission on Railroad Retirement says is the most complex retirement program in the country-these people will come up with a negotiated agreement which will put this program on a sound financial basis. I am confident that they will do so.

Senator HATHAWAY. If you have confidence, why are you opposed to 121? If you know they are going to come up with a solution sometime next spring, and you know from us, that we will do everything possible to implement the agreement they come up with, why does 121 bother you?

Mr. QUARLES. Having been in negotiations, Senator Hathaway, I think it would be a deterrent, a cloud over their head. They do not need this provision in your bill to indicate to them what action this body will take if they don't come up with a negotiated agreement.

Senator HATHAWAY. I think the only purpose of 121 is to put the burden of coming up with an agreement upon the employers and the employees, and as Senator Schweiker pointed out for the last 412 years that he has been on the committee, and maybe prior to that, we have had promises that next year they would come up with some kind of an agreement, and they have not. We have simply provided extra incentive to come up with that agreement.

That certainly should not hurt them in any way if, as I said, you have a great deal of faith that they will come up with something. Mr. SPEIRS. Can I comment on that, Mr. Chairman?

Senator HATHAWAY. Certainly.

Mr. SPEIRS. Reaching back on my experience, I look at that provision of the bill in the same way that I would on a provision for compulsory arbitration. In other words, if the cost issue is going to be arbitrated, then neither party should be given an advantage over the other in advance of the arbitration. The disadvantaged party would be compelled to negotiate with a club over its head. What the parties have to negotiate involves costs based on a restructuring of benefits which may very well create a reduction in costs; but your tax proposal makes no allowance for this possibility. This is an added reason why I believe it would be better to let the parties come up with their joint recommendation, and if this doesn't meet the desires of Congress, then Congress should impose whatever would be necessary. This in my opinion, based on my experience as a negotiator, is the way the problem should be handled.

Senator HATHAWAY. Well, we are not saying that we are necessarily wedded to the 7.5-percent tax.

Say the July 1 deadline is the one that prevails, then we are going to be in a real time-bind as to what we can enact.

But you can be sure that we are going to work on some other alternative if labor and management do not come up with some kind of agreement by next year.

We are saying in effect, that if you don't report by March 1, then Congress will enact some way of financing the system, and if Congress bogs down and does not finance the system, then come January 1, 1975, the 3.75 percent on each would be imposed. That does not seem to me to be harmful to the negotiations.

Mr. SPEIRS. Well, I think I have stated my views.

Senator HATHAWAY. I think you have.

Thank you very much, gentlemen, all three of you.
Mr. Dennis?

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STATEMENT OF C. L. DENNIS, INTERNATIONAL PRESIDENT, BROTHERHOOD OF RAILWAY & AIRLINE CLERKS, IN BEHALF OF THE CONGRESS OF RAILWAY UNIONS & RAILWAY EXECUTIVES ASSOCIATION

Senator HATHAWAY. Mr. C. L. Dennis is the international president of the Brotherhood of Railway and Airline Clerks.

Mr. Dennis, you have a prepared statement which you may read or summarize for the committee. Would you identify the gentlemen who are sitting with you at the table?

Mr. DENNIS. Yes, Senator. This is Ned Davis, counsel for our brotherhood, and Les Schoene, attorney representing all of the unions involved in this problem, the CRU and the RLEA, and I also am speaking for all unions except two, the International Association of Machinists and the Sheet Metal Workers International Association. They are the only two unions that have not signed agreements with the management on this question. They represented at the beginning that they pulled out, and so did some five railroads, the so-called bankrupt railroads, except the Erie-Lackawanna, which is in bankruptcy, but they elected to stay in.

I want to summarize my statement. I want my statement to be put in the record.

Senator HATHAWAY. Without objection, the full text of the statement will be placed in the record at the conclusion of your testimony.

Mr. DENNIS. I want to say this. Mr. Spears and Mr. Quarles representing labor and management, I think they did an excellent job of setting forth the positions of labor and management to this committee.

I have worked as hard as the dickens, I will say, on this question, and so did Bill Dempsey, and I don't think there is any question in my mind as to who is to get the credit. It is the committees that were involved in this matter. We not only handle the pension question, but we handled wages for an 18-month period.

We handled health and welfare, we handled job stabilization. We set it aside completely. We took care of all of these issues. Vacations, we set them aside. We handled every possible problem confronting the industry, and we tied these all in together in a collective-bargaining agreement which was the first time that all of labor and all of management got together 3 months prior to the July 1, 1973, deadline, gentlemen.

Now, I believe we can do the same thing again. I think it is essential that we do. I recognize the need to give you gentlemen time next year in 1974. I am willing to work day and night on these problems, and I think that we have to spend more than 1 day a month. We have to spend 5, 6, 7, 10, 20 days a month on some of these problems that we must settle between now and July 1, 1974, because we have all these same problems that will come up again as of December 31, 1974wages, vacations, health and welfare, dental care, eye care. All of these problems are involved in the railroad industry, just like in any other industry, and they must be handled, and they must be settled.

But our primary thrust is pensions, and this will receive top priority. Now, with that, I am going to skip all of the folderol here, but I want to say that while I was on the Railroad Retirement Commission, we met on 18 to 20 different sessions, all-day sessions, sometimes a 2-day session, and management had a man there, and we fought, but we worked out some problems.