Well, in answer to that, I think the railroad business is somewhat unique by reason of many incidents which will readily occur to you and I am hopeful this might be considered on its merits, in view of the character and nature and incidents of the railroad business, without giving too much consideration to the broad question of how it might affect industry generally.

Mr. HALLECK. Do you believe that it is fairly probable that in the event a test should be made in the courts, that the legislation as it is now drawn and presented would stand some fairly good chance of surviving an attack as to its constitutionality?

Mr. FLETCHER. Well, without being other than serious-I have no purpose to be at all flippant-but, I should think I could answer that question a good deal better if you ask it after the Supreme Court has passed upon the constitutionality of the social-security law which is now pending, and which all think will be decided either next Monday or perhaps the week later, because it does have many features in here which are similar to those in the social-security law, particularly with respect to the constitutional aspects of the legis lation.

Mr. HALLECK. Of course, insofar as it represents an agreement between employers and employees it could, of course, be carried into effect; but in addition to the agreement, legislation is to be had to bring the Government into the picture.

Mr. FLETCHER. It is possible, of course, that this bill will be attacked by litigation. I do not say that all of the doors of opportunity in that direction are closed. I am sincerely of the opinion that it will not be attacked in the courts, because I cannot conceive of any interest that is likely to do it. The class I railroads of the country, as I have said to the committee, are agreeable to this bill. My understanding is that the smaller railroads, class II or class III railroads, speaking through their organization are all very generally in favor of the bill.

Some stockholder might conceivably attack the bill, but I doubt if he would do it against the earnest protest of the boards of directors and management. Nothing I can see would be accomplished by it. As a matter of fact, there is lacking the motitve or the interest to have this bill set aside. The condition that would be brought about in the railroad industry would not be better if this bill were set aside than if the bill were enacted.

So that rational people, if I may venture so strong a statement, would have no motive to attack the law.

Mr. HALLECK. Well, of course, I am very much in sympathy with the bill and hope that it passes and that it turns out properly.

Mr. FLETCHER. Well, nothing can be more desirable, in the esti mation of those of us who have given thought to it and who are entitled to consideration as thoughtful people, than to get peace in the industry so that there may be such harmonious relations between the men who do the work and the men who supervise the work as will lead to better conditions in general in the industry enabling it more effectively to meet the strong competition which confronts it, and provide greater capacity to serve the public.

Mr. MAPES. May I interrupt you there, Mr. Fletcher?

Mr. FLETCHER. Just a moment. I do not want to evade your question, Mr. Halleck, which I am afraid that you may consider I have done, when you ask me if I think the bill would stand some fairly good chance of surviving an attack in the courts.

That depends a good deal upon the question of whether you believe that Congress has the power to appropriate with one hand, without anybody having the right to challenge it, and to tax on the other hand without anybody having the right to challenge.

In other words, it would depend upon the ability of counsel to convince the court that this bill and the tax bill should be considered together as one plan, and I think the decision of the court in the social security law will throw a great deal of light upon that question.

Yes, Mr. Mapes.

Mr. MAPES. Looking at it purely from the standpoint of the Government, and the conception of a Government official that is to administer the law in the public interest without reference to personal interest, it seems to me that there are one or two provisions here that are a little unusual.

In the first place, the appointment of the Board. The President selects one member of the Board recommended by the management and one member recommended by the brotherhoods, and then on page 26, paragraph (c), the Board is authorized and directed to select two actuaries, one upon recommendation of the employees and the other upon recommendation of representatives of the carriers. I wonder if that might not bring about a situation of inharmony in the work of the Board and the staff and, from the standpoint of the public interest, create a situation that would be undesirable.

Mr. FLETCHER. In the first place, Mr. Mapes, that provision is in the retirement law as it stands now and they have been administering that law since early in the year 1936 with the members, one selected by the railroads, one by the employees, and one neutral by the President, and no inharmonies have developed so far as I know along the line you suggest.

I do not think there would be any difficulty along that line. If there has been probably Mr. Latimer can tell you about that.

And, in the second place, as Mr. Harrison has pointed out, this is not without precedent, because when the Railroad Labor Board was created in 1920 it was provided that there should be a group of three men representing management, three men representing labor, and three men representing the public interests, so-called; and that board, while it did not abide beyond the year 1926, did not go out by reason of that fact, but by reason of other features that were not considered to be entirely satisfactory.

Mr. MAPES. Does that act provide that a member shall represent management, and a member represent labor; and that those members shall be appointed upon the recommendation of these groups?

Mr. FLETCHER. Exactly. The President has discretion in selection as between different people who may be selected by that group, but must be confined to nominees of those particular groups. In the adjustment board which sits in Chicago now, for the disposition of controversies arising under the interpretation of the contracts, the Railway Labor Act provides that they shall be chosen by the respective groups in equal numbers.

You see this brings me back, not to repeat, but again to insist that the Government in this particular matter stands here simply as a police officer without any calls upon the Treasury, and it certainly would seem to be fair even if you have to depart from precedent to allow the respective groups to be represented on this retirement board and in this actuarial set-up by men who will have in mind their particular interests.

Mr. BULWINKLE. Right there, may I ask Mr. Harrison a question? Where do you find the section in regard to the General Accounting Office?

Mr. HARRISON. It is at the bottom of page 19, commencing with line 21 and carrying through on page 20. Perhaps the provision you have in mind is covered by that language:

The Board shall from time to time certify to the Secretary of the Treasury the name and address of each person entitled to receive a payment under this act, the amount of such payment, and the time at which it should be made, and the Secretary of the Treasury through the Division of Disbursements of the Treasury Department, and prior to audit by the General Accounting Office, shall make payment in accordance with the certification by the Board.

Mr. BULWINKLE. Well now then, we will say that that will take care of the pensioners, but how about your audits or your administrative expenses, the Government being a stakeholder, the Government being a policeman.

Mr. HARRISON. I understand that under the regulations the General Accounting Department would audit all of the expenditures of this Board, either in payment of annuities, or death benefits, or administrative expenses.

Mr. FLETCHER. I think that would be covered, if I may contribute this

Mr. BULWINKLE. By the general law.

Mr. FLETCHER. By the general law, I was about to say. That is practically all I want to say on that.

In connection with the point I made a few moments ago, that all of these different provisions are interwoven and interrelated, I would like to caution against changing them until the committee has been fully satisfied that by making some change you have not disturbed some other feature of the act. I illustrate that by taking the two amendments which were offered by Mr. Harrison on yesterday.

One of those amendments, you will recall, changed the terms of the act so that if a man who was in the service of the railroad on the enactment date, to wit, August 29, 1935, dropped out of the railroad service, he might, when he reached the age of eligibility, presumably 65, we will say there are other conditions-but 65, go back and pick up his prior service.

Now, that is an addition to the cost of this; but it has been nullified and in fact overcome by another amendment which he proposed at the same time to the effect that if a man does drop out of the railroad service before he reaches the age of eligibility, he cannot get a pension until and unless he severs connection with the particular employment, with which he is engaged at the time he reaches the age of eligibility. As, for instance, if a man is 55 years old and he will say, "I have accumulated 30 years of service here with this railroad and I will quit now, and I will go to work for the steel company", to use Mr. Harrison's illustration, and he goes on with the steel company

until he reaches the age of 65, then he has got to quit that employment with the steel company if he wants to make a claim and be allowed a retirement allowance.

Now, that is an important feature, because the actuaries who have done a great deal of careful work on this bill believe that will overcome the additional expense which is brought about by making the change in regard to the requirement that he must be in the railroad. service at the time he reaches eligibility.

So if you undertake to change one of those, you have thrown the whole machinery out of kelter, and I assure the committee that the plans set out in this bill have been carefully considered by the most expert men whose services could be obtained, and they have worked it out here in a way which they think will be entirely protective to the Treasury, but changes in the law which nobody doubts the power of Congress to make, I hope will be very carefully considered to see that they do not throw some other feature of the law out of kelter and make the machinery rattle instead of work smoothly.

Mr. BULWINKLE. In other words, there should not be, so far as the committee is concerned, or Congress is concerned, there should not be any changes in any manner affecting the tax or the retirement features then?

Mr. FLETCHER. Well, I would not want to be so impudent as to suggest that to the committee.

Mr. BULWINKLE. You are just answering my question.

Mr. FLETCHER. But I would like to say this: Maybe it would not be entirely wrong to suggest that before any changes are made the parties who understand all of this thoroughly should be given an opportunity to be heard.

Mr. BULWINKLE. It is not my intention to make any changes along that line. I just wanted to bring out that fact.

Mr. FLETCHER. Now, on the question of cost which must concern this committee, although not officially, you will recall, and I may talk about the tax bill I suppose with impunity, unless my friends on the other side object-the bill originally provided for a basis of taxes which began at 5 percent of the pay roll, half and half, distributed half and half among the men and management, and it rose to the point where it became 7 percent at the end of a certain period.

Now, by reason of certain representations made by the Treasury Department, who doubted whether that would yield an amount of money necessary, those amounts have been increased to 52 percent to begin with, and by graduations to 71/2 percent, which I understand will yield something more than 7 percent on the average.

Now, those amounts of taxes, Mr. Chairman, are those to which the railroads have agreed. That is the thing that the average railroad president must carefully consider in connection with the question of his expense, just what is going to happen to him in the next 1, 2, or 3 years, along that line, and I certainly would feel grievously disappointed if any changes were made in the bill which made it necessary to change that tax rate, if that is what you mean, Major Bulwinkle. Mr. BULWINKLE. I mean, involving the tax or the benefits received. Mr. FLETCHER. Oh, yes, sir. There is no suggestion I know of about the benefits being changed. That would require a resubmission. of the whole matter to all of the boards of the railroad world, which

would mean delay and possibly failure to agree, and our hopes and expectations would not be fulfilled, those hopes being that this might pass through Congress as a result of this agreement, which I think really marks a departure in labor relations which some of us have some little pride in.

Mr. BULWINKLE. It is not my intention to propose any amendments. I just wanted to clear that up.

Mr. FLETCHER. Unless there are some other questions which suggest themselves to the committee, I apologize for taking up so much of your time.

The CHAIRMAN. Mr. Fletcher, this bill contemplates building up a reserve beginning with the first year?

Mr. FLETCHER. If you mean by that that we are going to collect more the first year than we are going to disburse the first year, yes; it will collect, of course, a great deal more the first year than they expect to disburse the first year, and so on. For many years that will follow.

The CHAIRMAN. That reserve, I understand you to say, will continue to accumulate for a good many years to come?

Mr. FLETCHER. There will be more money in the Treasury to the credit of this fund than is necessary to meet the obligations for possibly 20 years or more.

The CHAIRMAN. I presume that the actuaries have taken into consideration the possible effect of depressions in the future that would result in a reduced number of employees and therefore contributors.

Mr. FLETCHER. Yes; I think that has been given consideration. Of course, that is a matter which is on the knees of the gods and it may not be possible to make any very accurate determination of that fact, but, generally speaking, those things have been taken into consideration.

The CHAIRMAN. Well, it is believed that this plan will take care of conditions that can be reasonably anticipated of that kind?

Mr. FLETCHER. It is hoped so, and it is believed so. Of course, it must be borne in mind that this scheme is always in the breast of the Congress. If situations develop which indicate that it is not working satisfactorily, it would be changed by additional legislation which would either increase the revenues or decrease the expenses. The CHAIRMAN. We will have to assume, I take it, that that may be within the possibilities of the future.

Mr. FLETCHER. Of course, it is possible.

The CHAIRMAN. We may have to adjust it under different conditions, possibly.

Mr. FLETCHER. No one is here suggesting that it would be within their power or inclination to try to bind the action of subsequent Congresses, and, as Mr. Harrison said, and I confirm what he said, the understanding is here that the entire burden shall be borne by the industry in equal parts.

The CHAIRMAN. Thank you, Mr. Fletcher.

Mr. FLETCHER. I would like to ask Major Bulwinkle to look at this amendment which some of my friends have prepared, and see if it meets with his views.

Mr. KENNEY. Mr. Chairman-

The CHAIRMAN. Mr. Kenney.

Mr. KENNEY. Mr. Fletcher, has the appeal been withdrawn in court where the old bill was brought in question?