consider that debate as it deliberates on the most prudent management of Social Security.

I expect this hearing will begin a lively debate in this committee over how best to restructure Social Security in the interests of virtually every American, who will someday be a beneficiary.

Mr. Chairman, thank you for this opportunity to testify, and I look forward to working with you to enact independence for Social Security.

PREPARED STATEMENT OF SENATOR DONALD W. RIEGLE, JR.

I thank the Chairman for holding this hearing on public confidence in the Social Security system. Social Security has become an increasingly important program since its inception. In fiscal year 1989, it will comprise 21 percent of all Federal expenditures. In addition, 39 million people will receive benefits, and 120 million people will pay Social Security taxes. With so many people affected by one program, public confidence in its administration as well as its solvency is an important step in restoring overall faith in the Congress and the Federal Government.

Unfortunately, anxiety over the future of Social Security exists. The system's once widely-held reputation for efficient, quality service has been deeply damaged by persistent management difficulties and questionable policies. Furthermore, the threats of insolvency in the early 1980s and attempts to cut benefits, limit eligibility, and reduce the number of beneficiaries have eroded belief that the system will provide the benefits workers have earned. Something must be done to insulate Social Security from the perennial budgetary and political battlefield.

Clearly, there is a need to improve management and policy making at the Social Security Administration. In the past, SSA wrongfully terminated thousands of disability beneficiaries from the rolls. Excessive staff cuts have hurt service as have problems with the toll-free telephone service. The administrative appeals process sorely needs to be reformed. And with ten commissioners and acting commissioners in the last 15 years coupled with a number of major internal reorganizations, the necessary leadership to handle these problems has been lacking.

Under the existing administrative framework, it is an open question whether effective leadership will bring about the necessary actions and policies to restore the integrity of the Social Security system. Given the experiences of the past, however, it would seem unlikely. As a result, removing the Social Security Administration from political control. by making it an independent agency is an important step in solving many of these problems.

The idea of independence was endorsed in the 1983 report of the bipartisan National Commission on Social Security Reform. I have long supported efforts to remove SSA from the political and budgetary arenas and am pleased to be a lead cosponsor of the Chairman's bill, S. 216. While management practices could improve without independence, independence should stabilize leadership of the Administration and thus enhance improvement. At the same time, the present coordination between the various other programs administered by HHS and Social Security must be guaranteed if independent status is achieved. Likewise, accountability for policies and actions by the new independent agency must be retained.

I am pleased also to be a cosponsor of the Chairman's initiative with regard to earnings statements. SSA should be commended for its recent decision to provide personalized statements; however, it is important that all those who pay into the system be apprised of the status of their benefits as well as their payments. The statements would also provide the critical function of making people aware of the range and value of benefits for which they are eligible and have paid taxes. The provision of this information should have the beneficial effect of restoring a degree of confidence in the system.

Those of us who have savings or checking accounts or other financial assets receive regular statements of account status. These statements help to provide us an overall view of our financial situation and therefore be better prepared to plan for the future. Regular statements also allow us to verify the accuracy of our accounts. Regular statements from SSA would do the same for participants in the system.

PREPARED STATEMENT OF P. ROYAL SHIPP

Mr. Chairman, Members of the Committee, I am pleased to respond to your request to discuss the Report and the recommendations of the Congressional Panel on

Social Security Organization submitted to this Committee and to the House Committee on Ways and Means on June 12, 1984.

This Panel was established by Public Law 98-21, the Social Security Amendments of 1983, and was directed to undertake a "thorough study with respect to the implementation of removing the Social Security Administration from the Department of Health and Human Services and establishing it as an independent agency in the executive branch with its own independent administrative structure, including the possibility of such a structure headed by a board appointed by the President, by and with the advice and consent of the Senate."

P.L. 98-21 directed the Panel to report the findings of its study, together with any recommendations it considered appropriate, to the Committee on Ways and Means and to the Committee on Finance. In addition, the authorizing amendments specified that the Panel's study should consider:

ed;

• the manner in which the transition to an independent agency would be conduct

the authorities which would have to be transferred or amended in such a transition;

• the program or programs which would be included within the jurisdiction of the new agency;

⚫ the legal and other relationships with other organizations which would be required of an independent Social Security agency; and

• any other details necessary for the development of legislation setting up an independent agency.

While the House-passed version of the 1983 amendments called for a study of the "feasibility" of an independent agency, the Senate version and the final Bill specified clearly that the Panel's study should concentrate on "implementation" of an independent Social Security agency.

Consistent with the instructions of the law, the Panel did not weigh the merits of independence for the Social Security Administration as compared to its continued presence in the Department of Health and Human Services. Though the Panel's recommendations presumed independence, they should not be interpreted as an endorsement of it. Nor did the Panel endorse retention within the Department of Health and Human Services.

The law setting up the Panel and calling for its study also specified the professional qualifications of the members. The Chairmen of the Senate Committee on Finance and the House Committee on Ways and Means were instructed to select a three-member panel to be chosen “. . . on the basis of their integrity, impartiality, and good judgment, from individuals who, as a result of their training, experience, and attainments are widely recognized by professionals in the fields of government administration, social insurance, and labor relations as experts in those fields."

Panel members selected by these Committee Chairmen filled admirably these demanding criteria laid down in the law. Elmer B. Staats, formerly Comptroller General of the United States, selected to be the Panel's Chairman, brought to this study a lifetime of work in high level public service and a degree of personal bearing and respect seldom matched. The Panel's two other members complemented the Chairman, and each other, forging together a strong, interdisciplinary team with the ability and experience needed to deal with the complex issues involved in setting up an independent agency for Social Security. Professor Martha Derthick of the University of Virginia, is a widely respected political scientist and author of several wellknown studies of government agency and program management, including an excellent analysis of policy making in Social Security. Arthur E. Hess brought to the Panel experience gained during a career of top-level management in the Social Security Administration. Mr. Hess directed the Social Security Administration program divisions that implemented the Disability Insurance and Medicare programs. He capped his career with appointments as Deputy Commissioner and Acting Commissioner of Social Security.

These three panel members met completely the rigorous requirements specified in the law. Furthermore, they approached their task with enthusiasm, energy, and a sense of common purpose. It was clear from the beginning that this would not be a panel that rubber-stamped staff analysis_and_recommendations. In fact, the staff was hard pressed to keep up with them. The Panel agreed unanimously on its recommendations, and its report reflected the ideas and the language of the Panel members themselves to a degree unusual in studies of this type.

Now, Mr. Chairman, I would like to begin my discussion of the Report itself by describing briefly how the Panel went about its task. First it agreed on criteria to guide analysis of options to be considered and issues to be resolved in setting up an independent Social Security agency. Then the Panel held six public meetings and

heard from 53 expert witnesses as a means of gathering information, advice, and comments on proposed criteria. The full list of those witnesses is included in the appendix to the Panel's Report. They included former Secretaries of Health and Human Services, Commissioners of Social Security, officials from other agencies and departments, including the Office of Management and Budget and the General Accounting Office, experts in public administration, representatives from national organizations representing labor and the elderly, and Social Security employees themselves.

In addition, the Panel received reports, analyses, and studies from its own staff, the General Accounting Office, the President's Private Sector Survey on Cost Control (the Grace Commission), the Congressional Research Service, the National Academy of Public Administration and private contractors.

The Panel did not lack for information, nor did it lack opinions and ideas about how best to establish an independent Social Security agency. Indeed, although the Panel's charter was to develop an implementation plan for creating an independent agency, extensive testimony was presented bout the advisability of making the Social Security Administration independent. Given the Congress' clear mandate, however, the Panel's Report only addressed what-in its judgment—was the best course for the Congress to follow if it decided to make the Social Security agency an independent entity.

GENERAL CONCLUSIONS

Before listing the Panel's recommendations, let me note some general conclusions about Social Security operations based on testimony from expert witnesses and the reports available to the Panel. Information available to the Panel years ago painted a rather dismal picture of the state of Social Security program operations. Some of the Panel's recommendations reflected this assessment. Recent testimony from the Social Security Administration, supported by statements by the General Accounting Office, suggested that management changes implemented during this period may be showing improved operational efficiency in some areas.

There is no way to know, of course, whether a more contemporaneous account of operational baseline information would have lead to different recommendations. The Panel's report did emphasize that if an independent agency were established, its recommended structure would promote optimal operational effectiveness and efficiency.

That being said, in its 6 months of study, the Panel was impressed by Social Security's far-flung and complex operational and policy responsibilities. As they listened to witnesses and read about Social Security operations, certain themes were consistently repeated:

-There was wide-spread desire and expectation for the policymaking process for Social Security to be balanced. Both the President and the Congress are wellserved if the long-range implications of policy proposals are clearly and effectively taken into account in the policy formulation process; and -There was considerable evidence 5 years ago that the Social Security Administration, once considered one of the best-managed and most efficient agencies in the Federal establishment, no longer provided the quality of public service that the American people had come to expect and believe they have paid for with their contributions to the system.

Neither of these conclusions came as a surprise to the Members of Congress in 1984. The operational problems of the Social Security Administration had been widely discussed in the mass media in previous years, including the Social Security Administration's difficulties in modernizing its aging computer system, acquiring modern, accessible office space, and so on. These problems were dealt with in numerous reports of the General Accounting Office. Concern over the policy formulation process had been heightened in the late 1970s and early 1980s, due in large part to the financial difficulties of the Old Age, Survivors, and Disability (OASDI) programs. Efforts to reduce program outlays in those years, thought necessary to bring funding for the programs into balance, led many observers to believe that proposals were advanced to reduce benefits or tighten eligibility without adequate consideration of the long-term nature of the benefit obligations earned under Social Security.

EFFECT ON PUBLIC CONFIDENCE

During public hearings held in the early months of 1984, the Panel heard descriptions of a perceived decline of public confidence in Social Security. Furthermore, the Panel's Report refers to statistical survey data that tended to confirm this. Because

advocates of an independent agency for Social Security have argued that a change of organizational form would improve public confidence in the Social Security programs, the Panel sought to weigh the possible effects of various organizational changes on public perceptions. The Panel concluded that public confidence depends primarily on the fundamental financial soundness of the programs and on the public's belief that necessary program changes will be made with due regard for the immediate and long-term effects of those changes on the benefit structure.

Nevertheless, the Panel also concluded that organizational arrangements, particularly in the way they promote strong and stable agency leadership, are significant and do influence how policy is made and the efficiency and effectiveness of program management. Therefore, consistent with the legislative mandate, the Panel concentrated on developing an organizational plan for an independent agency that would provide an appropriate policy formulation process as well as strengthened management capabilities. The Panel concluded that if the Congress decided to create an independent Social Security agency, the recommendations could lead to efficient and effective program management-that this agency could, assuming continued strength in the program's financing, help to improve the public's view of the agency and the programs.

POLICYMAKING AND ADMINISTRATION FOR SOCIAL SECURITY

In considering a plan for an independent agency, one difficult issue the Panel faced concerned the policy formulation process. The Social Security Amendments of 1983, which authorized this study, directed the Panel to consider the possibility of establishing a bipartisan board with executive authority for the agency. According to those who testified in support of such a board, its primary advantage would be to create a forum for balanced deliberation of policy proposals, ensuring that full consideration be given to the effect of policy changes on current beneficiaries, those nearing retirement age, the working population, the disabled, and even the young and others who are or may be dependent on the program in the distant future. The Panel concluded that this policy perspective is essential for the OASDI programs; the President and the Congress must have objective and comprehensive analyses of the full range of policy options in the legislative decisionmaking process. Thus, one of the centerpieces of the Panel's plan for an independent agency was a recommendation to establish a permanent, bipartisan advisory board with six-year overlapping terms, to institutionalize the role now filled intermittently by advisory councils and ad hoc national commissions. The Panel considered that with the diverse, distinguished membership and strong charter that it proposed, both the President and the Congress could be assured that policy advice and analysis from the agency would be balanced, comprehensive, and far-sighted.

The Panel did not believe, however, that it would be appropriate for this Board to have command authority over the agency as a whole. In the Panel's view, strong management of very large and complex organizations requires the concentration of responsibility and authority in a chief executive-a single official capable, ideally, of providing energetic and decisive leadership.

While few would dissent from this principle as applied to operational responsibility, differences of opinion do arise over how best to organize for executive policy formation, which in our Government includes both the preparation of proposals for congressional action and the exercise of executive discretion in interpreting legislative intent.

Whereas good operational management, in the Panel's judgment, requires considerable autonomy-that is, the concentration of power in a responsible official-good policymaking requires the blending of competing views and the balancing of different perspectives on policy questions: Only to a limited extent can this balancing and blending take place within a single executive agency-the Social Security agency in this case. It is necessarily a far more inclusive process, engaging the President and Congress, who, by reason of having won elections, are responsible for making the most important decisions about public policy.

It should be a responsibility of the Social Security agency's top manager to develop and preserve its capacity to contribute to policymaking with advice, information, expert analysis, and the kind of judgment that is informed by the experience of program operations. Along with the ability to recall experience: what is often called institutional memory, and an important responsibility to look beyond the immediate future, these are the distinctive contributions that administrative agencies make to policy. The organization and leadership of the Social Security agency should, in the Panel's judgment, be designed to make these contributions to the President and Congress as promptly and vigorously as possible. The Panel concluded that an organization headed by a single executive would be able to fix responsibility for policy

advice. It would provide expert information, practical judgments, and a long-range view on policy questions more expeditiously and clearly than would a multimember deliberative body, which would be vulnerable to indecision, dissension, and diffusion of responsibility.

A form of organization designed for deliberation, representation, and adjustment of different viewpoints, as a multimember board would be, is appropriate to head an agency which has received an extraordinary delegation of broad adjudicatory and rulemaking power. The leading examples are the Tennessee Valley Authority, a public corporation created in 1933 to develop the Tennessee Valley, and the various independent regulatory commissions, which have broad powers to make and interpret rules-in effect, to act on behalf of the legislature and the executive—in their respective areas of jurisdiction. Congress, however, has made no comparably broad delegation to the Social Security agency. In the Panel's judgment, only if such a Congressional delegation were made, in effect substantially granting legislative powers for policymaking to an independent Social Security agency, would a multimember board be logical as a policymaking form.

As a form for administration, the Panel concluded that a multimember board has serious disadvantages in that authority would be diffused and policy and administrative roles can be confused. The assumption that the board would confine itself to policymaking and leave administration to a chief executive officer assumes incorrectly that the two spheres of activity can be clearly differentiated in practice, and it overlooks or unwisely discounts the danger that the chairman of the board and possibly other board members would involve themselves in administrative matters properly the responsibility of the chief executive officer. The Panel concluded that the Social Security program was urgently in need of strong direction and should not be exposed to the risks of contention between board members and the chief executive officer over who would be in charge. Such contention could exacerbate and prolong precisely those administrative problems that a reorganization should be designed to prevent.

Finally, the preeminent position of the chairman of a board would tend to diminish the stature of the agency's chief executive officer and make it more difficult to attract the type of strong and capable administrator necessary to resolve the agency's serious management problems.

Accordingly, the Panel recommended that an independent Social Security agency be headed by a single administrator in whom authority would be clearly and firmly lodged. At the same time, the Panel recommended establishment of a permanent, bipartisan advisory board with a strong, affirmative charter to ensure that the Administrator, the President and the Congress receive the best possible advice about policy changes in the Social Security programs and about the level of public service for beneficiaries. A board, structured as the Panel proposed, would help to protect the Administrator from partisan political pressures.

The Panel placed great importance on these recommendations. To resolve the Social Security Administration's perceived operational problems, a strong administrator was seen to be vital; on the other hand, an advisory board would be necessary, in the case of an independent agency, to provide an appropriate policymaking apparatus that could assure decisionmakers and the public that policy was being made in an evenhanded, bipartisan manner. The Panel recommended that the advisory board consist of nine members, no more than five of whom could be of the same political party. The President would appoint five members (no more than three of whom could be from the same political party), and to encourage bipartisanship and provide for congressional participation, the President of the Senate Pro Tempore would appoint two members (one from each party) and the Speaker of the House of Representatives would appoint two members (one from each party). All board members would be confirmed by the Senate and would serve six-year, staggered terms. The President would designate the chairman. Meetings of the board would be held at least bimonthly.

The Panel believed this advisory board could accomplish many of the objectives advanced by supporters of a full-time executive board. In particular, the advisory board would:

carry forward the important symbolism of bipartisanship that was conspicuously successful in the work of the 1983 National Commission on Social Security Reform;

• help produce a more deliberative decisionmaking process;

• institutionalize the quadrennial advisory councils and minimize the need for ad hoc commissions; and

• become an important repository of institutional memory.

Specific functions of the advisory board, recommended by the Panel, would be to: