Mr. DILWEG. Well, I am certain that you know this, but in committee reports Congress many times expresses its intent. Subsequently you may get in trouble as to an ambiguity in the law or something of that nature, but it is not uncommon for Congress to say to the administrative agency that this is our intent in back of the law, and we feel that we can accomplish it this way.

Mr. DORN. What would you say such a directive should state? Mr. DILWEG. In the main, I would say that the Governor should take a little more interest in the fact that we have 3,800 United States employees in the Panama Canal who certainly thought they would get action on the Company's recommendations, last fall, and have received nothing in the interim.

Mr. DORN. Doesn't it need a little more than that to implement the Booz-Allen report?

Mr. DILWEG. No; I don't think so.

Mr. DORN. How about the exemptions on the income tax?

Mr. DILWEG. They made their own suggestions on that and suggested that perhaps you can raise the rates of pay so that in effect the individual would get the 25-percent free of income tax, and I think they can do that. They can raise the base rate of pay down there.

Mr. DORN. Do you mean that this committee should suggest that the rate of pay of people in the Canal Zone be raised to take care of the income tax on the 25 percent?

Mr. DILWEG. No, I do not think so. If the company itself suggests the solution, there is no need for Congress to comment on that. Now we get to the third recommendation, that is the 50-percent reduction in rent and free transportation. I am sure that you know that the present administration is very much concerned about putting overseas pay, in most instances, in a general agency.

Mr. DORN. You want a 50 percent reduction in rents. My understanding is that there are some people down there such as pilots who make $15,000 a year. They are paying for very, very fine quarters something like $80 or $90 a month. I wish I lived in as good quarters. Do you think they should have 50 percent reduction in rent?

Mr. DILWEG. I do not think the pilots receive $15,000 a year nor do they get the 25-percent differential.

Mr. DILWEG. I do not think the pilots, under the present act, I do not think they get the 25 percent differential.

Mr. DORN. They would be affected, they live in the same Canal Zone quarters.

Mr. DILWEG. But you see the effect that you have on the average individual down there is that you subsidize

Mr. DORN. But I am trying to find out how you would differentiate. You talk in your report about people making $6,000 a year.

Mr. DILWEG. That is the average person.

Mr. DORN. But there are people employed by the Canal Zone who make $10,000 and more.

Mr. DILWEG. There are probably 100 pilots or less. I doubt if your statement of $10,000 or more would apply to very many of those people. I think that they struck an average here and of course that is the only way we can approach the matter, how the average person is being affected with so far as his income is concerned. When we talk about the local raters getting low rents, because they cannot pay

any more who pays that? It must come from some place and it must come from the operation of the Panama Canal Company.

When the Governor said, before an Appropriations Committee of the Civil Functions, that we have a problem with the local raters as far as taking care of them, hospitalization, medical care, many of them cannot pay. Where does that come from? It comes from a subsidized program. It cannot come from any other place.

Now, I think the witness who was here yesterday answered one of your questions when he said over here we pay for whatever we want. We do not have any preference between the man who makes $15,000 or $10,000 or $5,000 or anything else. We pay for our housing. But we realize that down in the Panama Canal Zone that their housing as far as costs is concerned exceeds our costs here by at least 25 percent.

Mr. DORN. I not only do not realize it, but my understanding from actual observation is different. The cost of their housing is at least one-half as low as our housing up here, particularly in Washington.

Mr. DILWEG. On a full recovery program with maintenance cost, overhead and so forth in each unit costs exceed 25 percent. Who is paying for it unless the individual does?

Of course they amortize the houses on the basis of 50 or 60 or 70 years, depending on the type of construction.

I happen to have a building corporation in Green Bay, Wis., and I know building costs. I was very much interested in going through these units. I agree with you. I think that some of those units down there are very livable but the cost is way beyond what we pay up here and my only answer as to why the cost is more is that in carrying out our relations between this country and Panama we buy anything that Panama produces down there, cement, tile, roofing, from Panama, so that the contractor is not at liberty to bargain for his materials. He must buy his materials from the Panama Canal Company who in turn buys those materials from Panama. I have no objection to that except as the individual has to pay through the nose for it.

Mr. DORN. I can only tell you that I cannot say that the only people who make over $10,000 and who pay for very fine quarters about $100 or less a month, that their rent should be lowered-I can only say that I do not agree with you.

Mr. DILWEG. The formula as to whether you should lower their rents or not is not the basic question here. The question is what was the inducement that brought me down to Panama? Has my United States of America carried out its contract with me, and I do not care whether you do it by reducing rents or anything else.

Mr. DORN. They have been there longer than 2 years, most of the people you are talking about, and their contract is long since up. If they care to return to the States and get another job, they can. Mr. DILWEG. At a cost.

Mr. DORN. No; no cost at all. The Government will pay for their return transportation.

Mr. DILWEG. If their term is 2 years, that is right.

Mr. DORN. Most of these people have been down there longer than 2 years.

Mr. DILWEG. May I put a question to you? What would you do under the same circumstances? You would come back here. I would. I do not like the climate personally. I do not understand why anybody would live down there. But I did go through the entire operation down there. I was amazed to see what a wonderful engineering feat these engineers did 50 years in advance of their time. Mr. DORN. Those men who did those tremendous feats are now on the pension rolls and perhaps should have increased pensions, but that has nothing to do with the people down there now.

Mr. DILWEG. You still need competent people, adequately compensated, and the Governor has said that to Congress.

After all, how far is Guatemala from the Canal Zone? Don't we need United States citizens operating a very vital operation in the zone? And don't we have to consider not just accounting practices but the human element that must enter into it? Those factors are something that are more or less inherent and I know that you were down there and I think you informed me you married your present wife who is from the zone, is that right?

Mr. DORN. That is right.

Mr. DILWEG. And you also informed me that you liked it. Well, I cannot quite agree with you on that. After all, the zone is only 50 miles in length and 10 miles wide and it is very much like living on a ship. You kind of get all upset. Some of my very best friends are on the Appropriations Committee and they took a crack at this report, but when they have to go to the minor aspects to do that-but you do not get at basic things I do not think it is right.

Mr. DORN. Getting back to the housing proposition. Mr. Munro said he did not feel that there should be a housing cost based on percentage of earnings. What is your opinion about that? My feeling is that since so much of the housing is alike, that those who make more should pay more, those who make less should pay less.

Mr. DILWEG. Well, I think he also said that you have to come down there and have got to wait your turn for the better housing. You come down as a freshman and you take the composite unit.

Mr. DORN. But on the old-type housing, there should be a sliding scale also gradually as this older-type housing is replaced by the newer-type housing, it could be made a general, one scale. You can have, in my opinion, for each type of housing, a scale so that the person who is earning $4,000 and $5,000 or less would be paying less. Mr. DILWEG. But you have no choice. It is first come first served, and you cannot own your own home.

Mr. DORN. I do not think you follow what I am telling. You are driving at

Mr. DILWEG. I know what you are driving at.

Mr. DORN. Say that there are three types of houses, good, better, and best, or somebody might term them "good," "worse," and "worser.' There can be a sliding scale on the best type of housing on a certain percentage of salary. There can be a sliding scale on the next grade of housing and there can be a third sliding scale on the next grade of housing.

So that your lower income could pay proportionately lower. Your higher income who are occupying the same kind of housing who would have to pay a little bit more. Do you disagree with that system?

Mr. DILWEG. I do not disagree with that, but I am trying to follow you, if you do not mind. I think Mr. Newman from the General Accounting Office said they were very much concerned with how much water and extra costs went into the general housing picture that caused the rent to go up.

I think Mr. Eckert who testified said that what we would like to know from an accounting picture is what this house cost; period. And if the charge to the individual os $200 and he cannot pay it, cut them in half or give him more differential.

Mr. DORN. I do not believe in looking at the rent problem from the accounting angle, but on the houses' original cost.

Mr. DILWEG. But that is what they do.

Mr. DORN. I realize that.

Mr. DILWEG. If you will bear with me for a moment, I went over to a private little city over there, and I cannot think of the name where the oil companies had built some houses. But they put up twice as much house for less money.

Mr. DORN. Then you are criticizing the present Army management. Mr. DILWEG. I do not think I can criticize that because I also pointed out to you that there are some diplomatic things that come into the picture that I have no control over or should comment on. Mr. DORN. I do not think that had anything to do with Panama at all.

Mr. DILWEG. If we should pay to help Panama's economy that takes 25 percent more.

Mr. DORN. I do not think that affects the building costs.

Mr. DILWEG. That is like discussing religion, we will both go away with the same idea, I guess. I know what you are driving at.

Mr. DORN. Which up here would cost you $225 a month, you ought to pay proportionately. If you are going to cut the rent in half it will cost $125. Now they are paying about $100. If that is occupied by a man earning $6,000 a year, let him pay $60 or $70 a month rather than the present figures.

Mr. DILWEG. I can pay that $225 a month, but I will own that home in 20 years. I cannot own that home down in the zone. Mr. DORN. I am talking about rental prices and not mortgage prices and paying off mortgages and taxes and interest.

Mr. DILWEG. That is one thing that we got to consider in the zone and that is if I want to own a home I cannot. You and I pay rent here in Washington and we say so what. But there are people who would like to own their homes. There are people who would own those homes in 20 years. When he is through there he must leave the Canal Zone.

Mr. DORN. Those are things I realize.

Mr. DILWEG. Those are the little things that get me kind of upset when we make certain inducements to the people to go to these places. We know that Congress changes every 2 years and a new administration may have new ideas, but we have a very vital operation down there and I think that the Panama Canal is a little bit different than general overseas services, be it in Saudi Arabia or Africa or any other place.

I think that people who are intensely interested in their job and are doing a good job should not have financial troubles or they cannot work efficiently.

Mr. DORN. Do you mean that they have financial troubles down there, these people making $5,000 and $6,000 a year?

Mr. DILWEG. There are many people in the zone that could not take their vacations because of these various things that happened in the last couple of years: taxes, subsidy in some instances, medical charges, and so forth. That is what they informed me. That is hearsay. I cannot be positive about that, but they so informed me. By the way, I am taking too much time and doing too much talking. I think the very honorable gentleman to my right who has had some experience in tropical climates can give you some idea of what it means to live in the Tropics. My good friend Emmet was in the Philippine Islands approximately 2 years and I think the committee would be interested in knowing what the practice was there with respect to climate. I think the Philippine climate is somewhat comparable to the Panama Canal.

Mr. DORN. Of course the United States gave the Philippines their independence.

Mr. DILWEG. Yes, and our showcase of democracy is still there, but this does not change the climate.

Mr. DIES. I feel that the Panama Canal is a very vital operation and I feel that it is essential that we maintain it with a maximum of American citizens. I do not agree with the policy of substituting noncitizens in that great project. I think it is cheaper in the long run to pay 2 or 3 times as much and have American citizens there than to substitute noncitizens.

Furthermore, I think that you have got to offer some good inducements to get people to go there and do the maximum work. I do not think anybody would choose the Panama Canal in preference to someplace in the United States. There would have to be some reason to go there. There might be a fellow here or there who might go there for the adventure, if you like that sort of thing, but I do not think that generally a man with a family would want to go there unless he had some very good inducement to do it.

With that premise, what I am interested in is how to reach this thing, how to go about it. They have inducements for the people to go there for the oil companies.

I

Mr. DILWEG. That is one of the major problems in the zone. work for the Panama Canal Company and pay taxes. Right next door to me my neighbor works for Esso Oil for 18 months or more and pays no taxes. I do not take the position that these people should not pay taxes, but my fellow American should also pay or I should receive the same treatment.

Mr. DIES. I am trying to clarify some things in my own mind. The Booz-Allen report undertook to recommend certain things that ought to be done to make this service more attractive to the employee, is that right?

Mr. DILWEG. That is right.

Mr. DIES. All of those things could be done by administrative action. There is nothing in the recommendations of the Booz-Allen report that would require congressional legislation, is there?

Mr. DILWEG. I probably would have to differ with you on that. Mr. DIES. I don't know. I have never read the report.

Mr. DILWEG. I was thinking of the matter Mr. Dorn brought up on the 25 percent tax free differential. We now have a limitation