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PUBLIC WORKS ACCELERATION ACT AMENDMENTS OF 1971 AND PUBLIC WORKS AND ECONOMIC DEVELOPMENT ACT AMENDMENTS OF 1971

MONDAY, MARCH 15, 1971

HOUSE OF REPRESENTATIVES,
SPECIAL SUBCOMMITTEE ON ECONOMIC DEVELOPMENT
PROGRAMS OF THE COMMITTEE ON PUBLIC WORKS,

Washington, D.C. The subcommittee met at 10:15 a.m., in room 2167, Rayburn Building, Hon. John A. Blatnik, Chairman, presiding.

The CHAIRMAN. The special subcommittee on economic development programs of the House Public Works Committee will please come to order.

First, we welcome those who have traveled quite some distance to be here with us this morning. Second, we appreciate the members also who have made a special effort, many of them shortening their weekend schedule of activities to be here with us.

The hearings will deal with possible ways, mostly those that have been tried before, of alleviating an economic situation which has plagued this country for more than 2 years.

Today we begin hearings on legislation to stimulate the Nation's economy and create new jobs under economic and employment conditions reminiscent of those confronting this Nation when the Public Works Acceleration Act of 1962 was enacted by the Congress. The Nation experienced 7 years of uninterrupted economic growth and development in the 1960's, but, unfortunately, that era of progress has been followed by 2 years of economic stagnation and decline.

In recent weeks, Congress has received the administration's economic blueprint for the coming 18 months, a blueprint that was optimistically conceived but has no basis in fact. The administration has proposed to us a target for growth, but has not bothered to provide the policies that we need to get there.

Ambitiously, the President's Budget and Economic Report forecast a gross national product of $1,065 billion for 1971, a rise of 9 percent over 1970. And on this target of $1,065 billion is predicated a deficit of $18 billion for fiscal year 1971 and $12.6 billion for fiscal year 1972.

If the economy falls short of these estimates, as many private forecasters expect it to, the fiscal deficit in 1972 will rise by $6 billion to about $19 billion, according to the Joint Committee on the Reduction of Federal Expenditures.

The administration's goal, while considered unrealistic by many private economists, still falls short of the legislative aims of the Full

(1)

Employment Act of 1946. For implicit in the President's blueprint is a 5-percent level of unemployment. Even if this ambitious forecast is realized, we will be further from our aims of full employment than we were 2 years ago when this administration took office. In the past 2 years, unemployment has almost doubled and the number of unemployed persons now totals 5 million. In January 1969, the rate of unemployment was 3.4 percent; in the past 3 months, it has averaged 6 percent.

If the administration's plan were to succeed—which I doubt, given existing policies——it will perhaps lower the rate to 5 percent. It would be a sad commentary on the state of our economy if we have to look forward to a rate of unemployment as high as, or higher, than 5 percent by the end of the year.

We should also remember that the drastic rise in unemployment since January 1969 has been accompanied by rampant inflation. During that period, consumer prices rose an average of 5.8 percent a year, compared to an average increase of little over 2 percent in the previous 8 years.

These unacceptable increases in inflation and unemployment took place in the context of a stagnating economy. The GNP in the first quarter of 1969 was at an annual rate of $908 billion, and at the end of 1970, the fourth quarter output of the economy was at the same level, if measured in 1969 prices.

In other words, the economy has been at a virtual standstill for the past 2 years—when we should have had an increase in real output of 9 percent. At the end of 1970, there was a gap of almost $70 billion between what we are actually producing and what we are capable of producing. As a result of administration policies, a fourth of our manufacturing capability has been forced into idleness.

Given the high unemployment, inflation and a generally stagnating economy prevalent as we entered 1971, the administration's forecast for growth loses the last vestiges of credibility. This shortfall in growth is confirmed by early evidence on the economy's performance in the first part of 1971. In the absence of any reasonable expectations for achieving this goal, some experts have suggested that the administration chose a target number only because it felt a need to show a declining deficit from fiscal 1971 to fiscal 1972.

We would perhaps even admire the economic policymakers of this administration for their ambitions if they had provided some underpinning for their new game plan. But both fiscal and monetary policy have remained essentially unchanged in the new budget and economic report. Monetary policy, while somewhat less restrictive than in 1969, is not yet providing adequate stimulus for economic growth.

In its fiscal policy, the administration has proposed some increase in spending, but not nearly enough to enable the economy to grow at a rate of 9 percent, which a $1,065 billion GNP implies. In fact, according to the President's Council of Economic Advisers, most of the increase will have to come from consumer spending. And reputable surveys of consumer sentiment give no support to this expectation on the administration's part. The lion's share of the increase in this year's budget comes from automatic social security increases, other relatively uncontrollable increases in existing programs, a rise in defense spending, and a new program increase in social security benefits that has more support in the Congress than in the executive.

The administration has prided itself on shifting national priorities. But an examination of this new budget reveals no such shift. Among the new program initiatives, funds for education, community development, and manpower training are insignificant. True priority decisions on the Federal Government's part have to be reflected in the budget.

Unemployment continues to be one of our most compelling problems; the prospects for 1971 according to most econmists, is that the rate of unemployment will remain at its present unacceptable level. And this

year, a significant number of men will be released from the Armed Forces; others will be looking for new jobs as employment in defenserelated industries declines. A sizable increase in worker productivity is predicted by economists in and out of Government.

Illustrative of the effect of unemployment is that in fiscal year 1968, unemployment compensation benefits amounted to about $2 billion. In fiscal year 1971, these payments are expected to reach $5.5 billion. Yet late in the last session of Congress, the administration rejected a inanpower training bill that would have provided public service employment to thousands.

This administration has no contingency plans that can be implemented if the economy does indeed fall short of administration forecasts and unemployment continues to rise; no funded program to provide the millions now unemployed with job opportunities.

It is mandatory, therefore, that the Congress act to fill this vacuum. Today, we start hearings on accelerated public works legislation.

APW: BACKGROUND INFORMATION

On September 14, 1962, President Kennedy signed the Public Works Acceleration Act, which gave the economy a “shot in the arm" with public works projects. That act has two principal purposes :

(1) to provide immediate useful work for the unemployed in the eligible areas; and

(2) to open the areas for industrial and commercial development by improving public facilities. At the time the program expired on June 30, 1964, some $861 million had been invested in more than 7,700 public works projects.

The concept and intent called for prompt action, immediate jobs, development of public facilities, and low administrative cost. No new agency was created; rather, the available funds were allotted to already existing agencies which administered the funds and the projects in accord with the criteria established.

By June 30, 1964, this mission had been virtually completed.

SOME OF THE RESULTS

There were 7,769 public works projects involving the expenditures of $861 million in APW funds. Together with local matching funds and other Federal funds, total construction costs of these projects amounted to $1.7 billion. Of this total amount, 82 percent were allotted to grant-in-aid projects of States and local communities, 17 percent to direct Federal projects, and about 1 percent to administrative costs. These 7,769 projects were located in about 1,000 counties in the 50 States and 3 territories.

Number Geographic distribution of the projects was as follows:

of projects Urban redevelopment areas.

2069 Rural redevelopment areas..

4365 Metropolitan areas with high unemployment.

1335

Total

7769

Percent

48 13 13 12 18

Types of facilities built:

Waste treatment, water and sewer projects and other public

facilities Hospitals and other health facilities. Street and road construction and improvement. Public buildings.. Other types of construction projects---Coordinated by the Area Redevelopment Administration and channeled through existing Federal agencies we were able to clean up a substantial backlog of unmet community needs as well as a long list of urgently needed work in our national parks and recreation areas, helping to preserve our priceless heritage of natural resources.

We built over 1,500 sewage treatment plants, helping America keep pace in the battle against water pollution.

We built thousands of hospitals, nursing homes, community buildings, water treatment plants, et cetera, helping to make communities throughout this land a better place in which to live and work.

Not only did we make use of an investment in our natural resources but we restored dignity to men and women. I am sure that any father coming home from a day's work is a much happier man with a much happier family than one who comes with an unemployment public assistance check without having anything to show of a constructive nature. This was an intangible benefit which we cannot measure.

WHAT WE CAN DO NOW

This Nation again is at a crossroads. We can, with the same resolve of a decade ago, get this country on the move again. There is a backlog of applications involving nearly $6 billion of Federal funds from communities throughout the Nation to help build over 6,000 waste treatment plants, water and sewers, hospitals, nursing homes, public health centers, etc. These projects represent a total cost of over $13 billion of Federal and non-Federal funds. In addition, the President's Budget shows that as of June 30, 1971, there will be a backlog of $3 billion of Federal projects ready for construction.

Not all of these projects and grant-in-aid will be eligible under our proposed legislation since construction would be limited to areas having substantial employment. Also, they should be projects that can be started quickly and completed within 12 months from the time a contract is awarded or a grant-in-aid program approved.

With an updated accelerated public works program investing between $1 and $2 billion in Federal funds we can put people back on the payrolls, take them off the welfare rolls, off unemployment compensation, help protect our natural resources, stem the tide of pollution, and brighten our communities—both urban and ruraland help revive the sagging economy.

It was with this thought in mind that I introduced H.R. 5376. I was particularly pleased that so many of my colleagues joined as cosponsors of the legislation.

Title I of the bill would put people to work immediately by funding the backlog of local public works projects ready to be constructed.

Title II would authorize the continuation of the economic development programs as administered by EDA and the title V Regional Commissions established under the Public Works and Economic Development Act of 1965, at the existing levels of funding for 2 additional years. The regional commissions are now at the completion stage of presenting their regional economic development plan that has taken years of effort to produce. Authorizations for the economic development legislation expire June 30 and prompt action is necessary if these programs that were enacted to create new jobs for the unemployed are to continue.

Title III would authorize the continuation of the Appalachian regional development program that was enacted to help alleviate the unemployment and economic distress of that region of our country. The bill would authorize at the existing levels of funding this program for 2 additional years.

With the exception of the Appalachian development highway program this legislation would expire June 30 of this year.

The Special Subcommittee on Economic Development will hold hearings on titles I and II and testimony on title III will be received by the Subcommittee on Flood Control and Internal Development which will also start hearings this morning.

In the next few days, this subcommittee will hear from many distinguished experts. I must say that I have been greatly encouraged by the favorable response H.R. 5376 has received. I am certain that after the distinguished Governors, mayors, county managers, labor leaders, economists and public citizens state their views, we will be able to expedite consideration of this urgently needed legislation in the subcommittees and the full committee, and have this legislation before the House prior to the Easter recess.

Without objection, the text of H.R. 5376 will be printed at this point in the record and the other bills on this subject will be listed.

(H.R. 5376 follows:)

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