commerce going and coming is pretty small. It seems to me that what we need is a fleet which is more modern, more competitive, more efficient. It seems to me we need replacement for a lot of the overage ships which would come through a construction program of U.S. shipbuilding primarily, but I don't think we ought to exclude the option of building foreign if U.S. yards can't handle the amount of business that we need to replace large chunks of our fleet.

I think we ought to modernize a lot of our existing ships over a 5-year period, make them more efficient, put in some of these technological advances that have come to the shipbuilding industry. I think we ought to fix up our reserve fleet which is in pretty bad shape. I think this is the kind of program that we are looking for. It is a costly one and we have to balance those costs. We have to see where it is, but I do think that we are just not competitive.

Mr. MORTON. How do you compare those desires with the desire to build a supersonic transport as a matter of national policy, the matter of modernizing our fleet compared with building a supersonic transport for the air?

Secretary TROWBRIDGE. I hope it is not a matter of one or the other. I think both are important, and I hope we could do both. I think the supersonic transport as an element of your interest both from the balance of payments and technological point of view, and other elements, is a highly important project. Again it is a costly one.

Mr. MORTON. I couldn't agree more. I think it is highly important.

too.

Secretary TROWBRIDGE. We are faced again with some of these tough balancing decisions of where you put your money.

Mr. MORTON. There must be some overriding reason, Mr. Secretary. why the merchant marine is always low man on the totem pole as far as these priorities are concerned. I tried to get this out of the dean of the House yesterday. He has been around here a good many days. and he has seen policies come and go, and he has a very astute mind. Are we afraid to develop a merchant marine because of fear of labor difficulties? Do you think that enters into it? What is holding us down? Secretary TROWBRIDGE. I don't think it is a fear of that, Mr. Congressman, but it seems to me that it is an element in our competitive problem.

Mr. MORTON. We try to go to the moon, and we can go in space at the rate of about $4.9 billion a year in order to keep up with the Russians, and I think that was one of the basic platforms on which we operated in the development of our space program. $4 billion or $5 billion a year is 25 percent of all the money available for nondefense spending and spending for the cost of past wars. We have 89 percent of our total Federal expenditure going into our military posture and into the cost of servicing our debt on past wars, leaving 11 percent of all of our dollars on all other Government programs.

One-fourth of that is going into space. I cannot understand, knowing what is created in the way of jobs by a merchant marine building program, knowing what is created in the way of job opportuntities for a floating merchant marine, how we can in good conscience determine priorities which are as out of balance as the ones we are using now. This is the thing that I cannot understand. There must be some under

lying unadmitted reason that the merchant marine is pushed always down to the bottom of the barrel as far as appropriations are concerned and as far as the dedication of our total effort is concerned. I am trying to find that reason. I believe if we expose the reason, it would fall of its own weight. I am not concerned as to whom Mr. Gulick reports to, whether he reports to the President, whether he reports to you, whether he reports to Mr. Boyd. That doesn't seem to be the issue. What I would like to find out is why, with the maritime history that we have, with the necessity that we have to sell American goods all over the world in order to maintain this standard of living. and to correct the negative balance of payments, why do we say, "We are going to do this first, we are going to build a supersonic transport"--which I am for "we are going to spend this for space."

It was not as bad, I don't think, but pretty bad, under the Eisenhower administration. I think that the merchant marine began to sink after World War II. We began to have a confidence in the rust bucket fleet. We thought that the ships that were anchored in the Wilmington River and the James River were really a reserve fleet, and you know and I know that under modern circumstances they are not a reserve fleet. It has been difficult to reactivate them. They don't meet modern standards of any criteria that we have.

I would like to know what you think is the reason. I believe if we could find the reason, all the rest of this stuff would take care of itself as to how it is organized.

Secretary TROWBRIDGE. That is a tough question, Mr. Morton. The decline, sure, did start right after World War II in terms of the percentage of cargo carried. I might say under an independent agency from 1947 to 1950 it went down from about 60 to 47 percent, but I think that obviously somewhere along the line our competitive ability changed.

We are one of the most competitive countries in the world, but we sure haven't been competitive in maritime affairs. We haven't been competitive in the cost of building. We haven't been competitive in the cost of operating and the whole pay scale area is pretty noncompetitive, too.

What has come first in this process, whether it is noncompetitive factors of the industry or whether it is the position and the monetary Support of the Government, I think you probably could argue that back and forth, and I am not sure which reason would win out.

We are at this time, as I say, trying to reverse the process by a comprehensive program, one which would go after some of the objectives that I tried to outline when you asked me what I thought we ought to be doing, rebuild, modernize, use technology, try to get some competitive factors built into this, try to get some incentives worked

into it.

American business has worked doggone well with some incentives and under competitiveness. I hope we can work that in. It creates

a lot of help.

our merchant marine and a really forward-going shipbuilding proMr. MORTON. How broadly do you think this concept of modernizing gram is shared by the policymakers in this administration, by your fellow policymakers and by the President?

Secretary TROWBRIDGE. I don't think there is any argument on the end results. We want a strong merchant marine just as much as the members of the committee and the industry itself does. You will get differences from individuals as to the amount of commitment, the amount of priority they feel is necessary to get there.

Again you come down to these tough decisions of allocation of resources. They are not unlimited. We faced some tough ones and in the past made decisions which said, "All right. It is more important to put $5 billion into a space program. We don't have $5 billion to put into a merchant marine program." If that took place, those were the decisions made.

Mr. MORTON. I blame ourselves up here a little. I believe the Congress has failed in some instances to give the guidelines that we should give in the determination of these priorities. Perhaps we have not been insistent at the right levels on the development of the merchant marine. I think we haven't had the authorization vehicle to do that which we have in all other fields, in the field of space, in the field of military construction, in the field of our posture with the Federal Aviation Agency and other basic, fundamental functions.

We just don't do it in the merchant marine, and I think this has been one of the factors that has made the merchant marine suffer over the years as far as the thoughts of the Members of Congress are concerned.

I don't want to take too much time. The thing I get most out of your testimony is that you believe strongly, and I am convinced of it, and we have to turn the tide as far as revamping, rebuilding, and modernizing and bringing a new stream of ships into being.

Secretary TROWBRIDGE. I would characterize my feeling that way, too, but I would stress and emphasize that this is not purely a Government function. This has to come out of the industry and the labor side and the management and the Government working together to do it. I don't enjoy this reliance on Government. I think there is a bit too much of that, frankly, and I would like to see a little bit more just plain reliance on one's self.

Mr. MORTON. That is the most refreshing remark that I have heard a Cabinet officer make in 20 years.

Thank you very much, Mr. Chairman.

The CHAIRMAN. Mr. Secretary.

Secretary TROWBRIDGE. Yes, sir.

The CHAIRMAN. Have any of these problems been brought down to the White House, itself?

Secretary TROWBRIDGE. Yes, sir.

The CHAIRMAN, Does the White House actually know some of these things that are going on?

Secretary TROWBRIDGE. It is very aware of them.

The CHAIRMAN. Are they consulted?

Secretary TROWBRIDGE, Yes.

The CHAIRMAN. The committee is permitted to sit this afternoon. Secretary TROWBRIDGE. When you talk of the White House, I am sure you are meaning the Presidential aids and the President himself. The CHAIRMAN. The President, himself, not his aides.

TAT

Secretary TROWBRIDGE. He is very aware of these problems, the problems of the industry as well as the problems of putting together a program to try and solve them. We have sat in on any number of meetings at which he has been fully involved and aware of these difficulties.

The CHAIRMAN. Does he know the real situation that we are in? Secretary TROWBRIDGE. I believe so, Mr. Chairman.

The CHAIRMAN. That is all.

Thank you very much, Mr. Secretary.

Secretary TROWBRIDGE. Yes, sir. Thank you.

The CHAIRMAN. The committee will recess until 2 o'clock.

Mr. Schultze of the Bureau of the Budget will then be our witness. (Whereupon, at 12:10 p.m., the subcommittee recessed, to reconvene at 2 p.m., the same day.)

AFTERNOON SESSION

Mr. ASHLEY. (presiding). The committee will come to order. Our witness this afternoon is Mr. Charles L. Schultze, Director of the Bureau of the Budget.

Mr. Schultze, you have a prepared statement. You may read that or insert it in the record and proceed in any manner which you choose. STATEMENT OF HON. CHARLES L. SCHULTZE, DIRECTOR, BUREAU OF THE BUDGET

Mr. SCHULTZE. Thank you, Mr. Chairman. It is a fairly short statement. I can read it rather quickly.

I am pleased or at least I am trying to convince mystelf I am pleased to be here in response to the chairman's invitation of June 25 to present the views of the Bureau of the Budget on H.R. 159 and similar bills to create an independent Federal Maritime Administra

tion.

While the bills before your committee vary somewhat, they would fer to it the functions now vested in the Secretary of Commerce by generally create a new agency headed by an administrator and transReorganization Plans No. 21 of 1950 and No. 7 of 1961 and administered by the Maritime Administration of the Department of

Commerce.

The administration is strongly opposed to the enactment of these

bills.

of the Department of Transportation, the President outlined the In his message to the Congress on March 2, 1966, urging the creation compelling advantages for consolidating the promotion, safety, research, and investment functions of the Federal Government's transportation activities into a single Cabinet-level department. He cited the waste and lack of policy direction resulting from the scattering of transportation functions among a host of departments and inde

pendent agencies.

instrument of Government-the Department of Transportation. tive functions of our transportation agencies in a single coherent His solution then was, and remains, the coordination of the execu

83-195-67-9

Other Presidents, Members of Congress, congressional committees and private groups had previously stressed the need for gathering our transportation programs together. For example, President Truman, in proposing the transfer of maritime operating programs to the Department of Commerce in Reorganization Plan No. 21 of 1950, cited as a prime objective, obtaining "the needed coordination with other activities of the executive branch."

Consolidation, not fragmentation, is the direction we should follow. The advantages of encompassing all transportation programs in a single department are numerous and important.

The various forms of transportation are not isolated from each other, but closely related. And ever more so as time and technology go forward. How efficiently we transport goods across the ocean, for example, depends in part on how efficiently we move them across the dock from truck or train to shipboard. Just as the forms of transportation are interrelated, so must be Federal policies for transportation. We ignore this fact of life only at the peril of ineffective and conflicting policies.

Research, development, and sophisticated systems design are the hallmarks of progressive American industry. That research and sys tems design is growing exceedingly complex. Consolidation of transportation activities into a single large unit of Government makes possible the creation of resources and capabilities for research direction which would never be available to small, fragmented independent

units.

Consolidation of transportation activities in a Cabinet-level department provides a voice for the transportation industry, and its various segments, in the highest levels of Government. It provides a strong influence for transportation in all of the policies of the Federal Government which affect the Nation's transportation systems and its various components. This simply cannot be done by a small independent agency.

The safety aspects of transportation need unified attention. There are common elements in safety measures for all forms of transportation. This unified approach can only be achieved through a consolidated approach.

It is precisely because of these benefits that we believe the bills now before the committee represent a step backward. Fragmenting our con sideration and solution of transportation problems is bad practice for all forms of transportation.

The House Government Operations Committee summed up the situa tion well in its report on the Department of Transportation:

The maritime phase of our transportation system does not exist alone and br itself ***. It is obvious that such objectives as uniform packaging and crating and the most efficient inland transportation can only be achieved through cl coordination with the maritime industry. In addition, we believe that when th problems of all other modes of transportation are being put under a Departmen whose purpose is to foster their growth, improve their efficiency and strength them economically, any major phase of our transportation industry which is out of this Department would suffer because it would not have the same vigoro Cabinet-level push behind it.

Many groups in our community seek to have independent agenc established within the executive branch which can act as advocate