Senator SCHWARTZ. The railroad companies pay 3 percent into this fund. That is 3 percent of what?

Mr. HAY. Three percent of the pay roll up to $300 a month. In other words, if a man earned $200 they pay 3 percent of that.

Senator MINTON (presiding). Three percent of whatever they pay out in pay roll?

Mr. HAY. Yes, sir.

Senator GURNEY. If a man gets more than $300 per month, then they do not pay 3 percent on that overage above $300 per month? Mr. HAY. No, sir.

Senator SCHWARTZ. Then during a period of depression the pay rolls are smaller and the 3 percent produces less money and the number of unemployed seeking benefits is greater?

Mr. HAY. Yes. All that must be taken into consideration by these experts who undertake to prognosticate what the cost is going to be. None of them can figure down to a gnat's bristle, to use a homely expression; but some of them are very accurate. I was rather surprised at the accuracy with which Mr. Latimer figured it, except that he went too high. He said that 3 percent was more than adequate, but it is more adequate than he thought. I think unquestionably my good friend Dr. Parmelee had one spasm after another about this 3 percent tax, thinking it would not be adequate at all. And I never will forget the lugubrious weeping and the flood of tears that Mr. Clements shed over the matter. Of course I only joke people I like. He saw gloom everywhere and visualized bankruptcy. I couldn't say he was wrong about it because I didn't know. Nobody knew about it. But we have actual experience now.

Senator GURNEY. The payments increase when we have a depression; we will all admit that. Unemployment is more extensive when we have a depression, and there would be more withdrawal from the fund?

Mr. HAY. That is true.

Senator GURNEY. Depressions are caused, many times, by industry not having enough money to operate with; and a larger tax tends to put the industry in less shape to continue unemployment benefits. In other words, if they have got to take out of the "kitty" all the time to pay into the fund that is not being used, then that adds to the depression and adds to unemployment.

Mr. HAY. That would be true, Senator. Of course in a period of depression, even if the tax remained the same, they would be paying in less than they would if they did not have high employment.

Senator GURNEY. That is what I am getting around to. It just gets back to the old basis of what are we going to use as a standard. Are we going to use as standard the 3-percent tax, or are we going to set as a standard a benefit schedule that the people need?

Mr. HAY. I should not say that as a mere matter of theory we could sit down here and say that people need so much, because they will live up to whatever amount is granted. We all realize that. Senator GURNEY. Yes. I do that myself.

Mr. HAY. I have done more than that. I have been consistent with a lot of other people in this country in living beyond my means. Senator GURNEY. I am very anxious to make the benefit schedule fair; I am very anxious to do that.

Mr. HAY. I am sure you are, Senator. I would say this, as a general proposition, and getting back to the question that was involved in our discussion here, that we would not, of course, want to draw out each year every dollar that is raised by taxes. We would want some reserve or surplus to carry over against what you have just referred to.

Senator GURNEY. It is so provided in my bill.

Mr. HAY. Yes. You have a provision for a reserve there, but as I view it, Senator, the vice of that provision is that it would immediately reduce it very perceptibly.

Senator GURNEY. But would always tend to leave a sizable amount to take care of any contingencies.

Mr. HAY. And then your bill has this vice, that in the sliding-scale proposition, that it gets us temporarily concerned with the matter of the maintenance of a certain tax rate or the reduction of a certain tax rate, rather than concerned about the adequacy of the benefits which we are to provide; and I think it would be a lamentable thing if we sent out over this country to the various States a message to the effect that Congress has found that the benefits that have been provided for do not require as much money as anticipated, and therefore we are going to reduce the rates.

Senator GURNEY. These bills do not reduce the rate of benefit. Mr. HAY. You do propose a reduction of the tax rate. I meant, to reduce the tax rate. The thing that I am insisting on, and I think we have come to the point already, is that we can do certain things that we feel are pretty well established. First, that a benefit schedule greatly in excess of the one now provided can be maintained by the 3-percent tax; second, the 3-percent tax is not unfair and unreasonable to be imposed upon the industries of this country.

This law

Senator GURNEY. Let me interpose a question, now. went into effect a year ago, and at the end of the year the railroads were proposing to increase the benefit 25 percent. That is quite fair. If they did not have to pay in 3-percent tax they would have that much more money left to operate with and to buy new cars and to create more employment. That is a little argument that I have thrown in here, of course.

Mr. HAY. Of course the railroads do realize that these benefits are too low at the present time. As I said, we are agreed on two things. One is that we have more money than we need to support the benefits as they are, and, second, that there ought to be a liberalization of the benefits.

Now, to sum up finally. I think, looking at it from the broader aspect and that is what this Congress and the Representatives in this Congress should consider even more than we consider it-you have to consider, I think, what will be the effect of your action upon the great program of unemployment insurance in this country; and I think it would be a grave mistake for Congress to enact a measureand I refer now to such a measure as Senator Gurney has introduced here, which has the merit of proposing liberalization to some extent but which would have the effect of injecting into this whole unemployment insurance program not so much the question of what benefits should be provided, but what tax rate should be provided. I think that when we have a reasonable tax rate existing, regarded not only by the Government but by the States of the Union as reasonable,

then we ought to provide a schedule of benefits that will be as great as can be maintained, and of course no greater. We want a solvent system, not an insolvent one.

This final word, and then I am done. I know that you gentlemen are getting down toward the closing days of the session; and I know you have had some things to consider here that have taken a lot of time and that have brought about more or less controversy and confusion. I have come, at the instance of the Railway Labor Executives Association, the gentlemen who speak for the railroad men of this country. They are a unit on this proposition. Every organization of the 20 that constitute this great association is back of this bill; but I feel that I am more particularly and essentially the representative of the men, all over theis country, who ar engaged in the railroad industry and who in the coming year will suffer that affliction from which every true American shrinks, that of unemployment.

It is for those fellows that I make this appeal; that there be prompt and immediate action on the part of the committee to the end that this bill may be enacted at this session. Both the railroads and the men agree that there should be a liberalization; both agree that this $125,000,000 and more should not lie around in the Treasury of the United States and not go out as benefits to the men. We do not want all of it spent, but if the bill which we have proposed here is enacted at this session of the Congress there will be from $15,000,000 to $25,000,000 more put into the hands of unemployed men and their families for their support and to spend with merchants and others who have perhaps been carrying them, than there will be if this bill is not enacted.

I sincerely appeal, not so much for my sake or for the sake of any men who are sitting in this room at the present time, but for the poor devils out over this country who are going to be unemployed, many of them, thousands of them, and who should enjoy this money. From their standpoint and from the standpoint of the general business situation I think there should be a prompt enactment of this bill.

That is our presentation. After the railroads have been heard and Mr. Latimer perhaps called by the committee, I may want a few moments later, but that is all that I care to present at this time.

Senator GURNEY. Mr. Hay, how much money has it taken this last year to pay benefits?

Mr. HAY. Is there anyone from the Retirement Board here who can answer that question?

A VOICE. About $15,000,000.

Senator GURNEY. In a full 12 months' period?

Mr. HAY. For the full 12 months.

Senator GURNEY. The amount necessary under your bill, then, would be $31,000,000 or $32,000,000?

Mr. HAY. The amount necessary under our bill would be what figure, Mr. Latimer?

Mr. LATIMER. An estimate of 115 percent.

Senator GURNEY. A hundred and fifteen percent more than $15,000,000?

Mr. LATIMER. No; that would not apply to a year like the present, or at least to a year of depression. If the fiscal year 1940 should be repeated in 1941, the additional amount would be between $10,000,000 and $12,000,000.

Senator GURNEY. What is coming in per year now under the 3-percent tax? As I understand, about $20,000,000 per year is coming in under the 3-percent tax?

Mr. LATIMER. About $60,000,000.

Senator GURNEY. You have a cushion left of $30,000,000 a year under the 3-percent tax, even though your bill were enacted?

Mr. HAY. That is right.

Senator GURNEY. There is $126,000,000 on hand now, and you are going to add to it at the rate of $30,000,000 a year?

Mr. HAY. That would depend upon the kind of year we have. But I would like to have you put those questions, if you will, to Mr. Latimer.

Senator GURNEY. I will. But what I am getting at is the general proposition that the payments have been made in the last 12 months. Last year was not so good. Things are getting a little better, and the payments in the future may not be so great as they were in the last 12 months. So we are going to keep on adding to the reserve fund, under your bill.

Mr. HAY. 1939, so I am reminded, was an improvement over 1938. Of course, I think, Senator, that the questions you have asked and the answers you have received indicate clearly that the benefits as we ask for them in this bill would be amply financed by a 3-percent tax. I am sure that we all want to get at the same thing.

Senator MINTON (presiding). Do you wish to be heard at this time, Mr. Latimer?

I

Mr. LATIMER. I have a statement that is being prepared now. did not expect to come on at this time. I should prefer to wait until I get my statement finished.

Senator MINTON. Very well. You have concluded your statement, Mr. Hay?

Mr. HAY. Yes, sir.

Senator MINTON. Dr. Parmelee, the subcommittee will hear from

you.

Mr. FARQUHARSON. Mr. Chairman, my name is J. A. Farquharson. I am the national legislative representative of the Brotherhood of Railroad Trainmen. May I ask if it will be permissible for the Brotherhood to make a statement, not at this time, but at a future time, later this afternoon, if that is possible.

Senator MINTON. Certainly.

Mr. FARQUHARSON. Thank you.

STATEMENT OF J. H. PARMELEE, DIRECTOR, BUREAU OF RAILWAY ECONOMICS, ASSOCIATION OF AMERICAN RAILROADS, WASHINGTON, D. C.

Mr. PARMELEE. Mr. Chairman, my name is J. H. Parmelee. I am director of the Bureau of Railway Economics of the Association of American Railroads, located here in Washington, D. C.

I may say that I was one member of a committee of railroad representatives which conferred with representatives of labor in 1938 at the time the original railroad unemployment insurance bill was under consideration by the Congress, and I was again a member of a committee of railroad representatives which conferred with railroad labor in connection with the conferences recently held, to which Mr. Hay

has referred. So that for a period of more than 2 years I have been rather constantly engaged from time to time in making studies of the Insurance Act, of its working, and of its prospects.

Before I enter on a discussion of S. 3925, the bill introduced by Senator Gurney, which we are supporting here at this time, I would like to make one or two comments on some things that Mr. Hay has just said to the committee. One has to do with some questions asked by Senator Gurney. Mr. Hay made this statement about the tax rate: He said it was far better to be concerned with the benefits than with the tax rate. In other words, the suggestion was that the railroads, if they had an opportunity to reduce the rate of pay-roll tax which is now charged, and could stabilize their employment, that that would be a bad thing for the employees.

Our position and I shall refer to it later in my general statementis that the best thing that could happen to railroad employees would be such a stabilization of employment as would give them regularized employment instead of increased benefits because of unemployment. That is a point that we are going to make a considerable feature of, and I refer to it now because it answers, as I see it, the remark which Mr. Hay just made.

Mr. HAY. I do not want to interrupt you, but you clearly misunderstood me. I did not take the position that to stabilize would be a bad thing. My point was that the effect of the amendment would not be that of stabilizing it, as you contended. I did not mean to make the other statement, if I did.

Mr. PARMELEE. We are in agreement, then. I think, Mr. Hay, that stabilization of employment would be a good thing for railroad employees.

Mr. HAY. Yes; or for anybody else—particularly lawyers.

Mr. PARMELEE. Correct. Mr. Hay made a further suggestion, although he stated specifically that he was not making a charge against the railroad management. He suggested that the railroads might so organize their forces under S. 3925, if it were enacted, as to push certain men down below the $150 rate.

A somewhat similar suggestion was made during the hearings on the original unemployment-insurance bill before the House Committee on Interstate and Foreign Commerce, 2 years ago; the railroad representatives at that time resented that statement very strongly, and we resent any such suggestion at this time. In the first place, any effort by railroad managements

Senator SCHWARTZ (interposing). Mr. Hay's observation was that it presented a possibility. He did not charge that it was actually done Mr. PARMELEE. There was a suggestion there, Senator; and I want to point out that, in the first place, any such effort, deliberate or otherwise, on the part of railroad managements would be both stupid and inefficient operation; and I do not believe that railroad managements can be accused of being either stupid or inefficient. We resent even the suggestion, Senator, that the railroads would deliberately so shift their employment as to bring men in and drop them out, and bring them in again and drop them out, and deliberately put them in a class where they would not be eligible for unemployment benefits.

Senator MINTON (presiding). I do not think anyone would want to give that impression of the management of railroads, and I do not think Mr. Hay would want to leave that impression, because I think