of our people have combined to magnify these needs. Public works acceleration to help reduce unemployment would provide a very important byproduct-a residual of public capital improvements which would reduce the serious accumulation of deficiencies in airports, urban redevelopment, community facilities, energy supply, transit systems, facilities to help prevent crime and juvenile delinquency, institutional care for dependents and aged persons, parks and recreation facilities, and other vital social services. Estimates of our requirements vary according to how complex a solution is sought and how rapid a remedy is contemplated. Regardless of the calculation, need for a staggering outlay is always indicated. Prof. Alvin H. Hanson has estimated that we need to allocate one-fourth of GNP, or roughly $125 billion a year to the public sector. A lower estimate made by Gen. John S. Bragdon, a special assistant to President Eisenhower, indicated that an investment of $160 billion over the next 10year period would be required just to take care of the backlog of needs and existing facilities. A public works program along the scale now being proposed will not satisfy all of these needs, but it will go a long way in meeting them. Such projects as will be constructed under its sponsorship might be expected to exert a powerful demonstration effect, showing what an enlightened body of citizens can accomplish and inviting imitation in other communities.

REQUIREMENTS FOR AN EFFECTIVE CAPITAL IMPROVEMENTS ACCELERATION PROGRAM 1. Experience of last three recessions demonstrates need for a continuing machinery and up-to-date shelf of plans

The attempts to accelerate public works during the last three recessions demonstrate that acceleration of capital improvement programs for countercyclical purposes entails specific objectives and functions that require continuing machinery and an up-to-date shelf of plans.

During the three most recent recessions the President, with the backing of Congress, has issued orders to the executive departments to accelerate currently authorized capital improvement programs. President Eisenhower, for example, issued such orders in the spring of 1958; President Kennedy did so on February 2, 1961. In neither case were there sufficient shelves of planned, quick-starting and short-duration public projects, especially on the local level, suitable to the particular recession. Both in 1958 and 1961, order were given for the preparation on a crash basis of exhaustive inventories of projects, authorized and to be authorized, which might be undertaken to bost the economy. In both instances the Executive Office was confronted with an extensive laundry list of projects of varying types, soundness, feasibility, starting time, and duration, running into billions of dollars. Some items reflected well-thought-out programs, but some were just "letters to Santa Claus." In any case, insufficient preparation had inhibited quick acceleration.

What is needed at the time economic conditions warrant acceleration is an orderly and systematic process for drawing upon a pipeline of needed capital improvement projects. Acceleration programs should be based on comparable guidelines judiciously applied. The guidelines to which I refer must be carefully developed through consultation and cooperation with agency planners. In this way programs and projects can best be selected to meet the need of the specific situation, according to the kind of project, its starting time and construction time, geographic distribution, and importance to regional needs and development. 2. Objectives and functions transcend responsibilities of existing agencies

The objectives and functions required for an effective capital improvements acceleration program transcend the responsibilities of the existing agencies. Acceleration planning requires an awareness of both the state of the economy and the status of planning for various capital improvement programs. It requires synthesis of the studies of economic growth and stability carried on by the Council of Economic Advisers with the planning for capital improvements by the various agencies. The development of capital improvement acceleration programs entails considerations of priorities that do not fall within the present responsibilities of the Council of Economic Advisers or the Bureau of the Budget, or the various agencies. Economic priorities, including regional economic conditions and the relative importance attached to alternative opportunities for capital improvement investments, assume special significance. Acceleration for a particular recession entails the art of balancing objectives as to the improvements most socially and economically desirable at the time, objectives as to the types of projects that would best stimulate economic activity and relieve unem

ployment, and objectives as to the starting time and duration of the projects. No existing agency has the responsibility or is equipped for presenting possible priorities of investments in projects ranging from community facilities and transportation to water resources, recreation, and land use.

What is needed, then, is continuing leadership to foster overall acceleration planning, to outline alternative goals, to assess employment possibilities, to analyze capital investment opportunities--all as a basis for presenting objectively the alternatives to assist the President and the Congress in balancing these objectives and deciding upon relative priorities. To be objective and look beyond the scope of existing programs, long-range acceleration planning must be separate from the planning for program development and construction.

The conflicts in planning between the agencies charged with different responsibilities have led to waste, duplication, reduction in multiple benefits, and delay in constrution of projects. Machinery that would assist in working out these conflicts early in the planning stages would assure that more projects would be ready to go when necessary. Each of us can think of specific examples of such conflicts in our States and communities. The following are just a few of the many publicized conflicts: preservation of wetlands versus drainage; highways versus parks; community facilities versus Federal water rights; flood control versus flood plain zoning versus urban renewal; upstream versus downstream programs; rural versus urban watershed problems; water resource development versus recreation and fish and wildlife; highways versus rapid transit versus urban renewal; various urban development projects versus urban open-space preservation.

Equally serious are the broad gaps and lags in current planning activities. At present, no machinery exists for identifying emerging needs for new and different kinds of capital improvements. Technological improvements, population growth, urbanization, and other economic and social changes require new and modified types of public facilities.

Also, existing agencies find it difficult to relate their programs to such changes. Each agency has authorities and responsibilities to perform certain functions. An established agency has a healthy but vested interest in strengthening its authorized and assigned functions. It is in no position to examine critically these functions in the light of new and changing requirements. It has neither the authority nor the capability to take the initiative in assuming additional functions, in drastically modifying its functions, or, above all, curtailing obsolescent functions. In addition, jurisdictional problems and power struggles often preclude the orderly expansion of an agency's activities to meet changed requirements-e.g., the legitimate jurisdictional problems in the expansion of programs for outdoor recreation and urban transportation.

The planning programs of the various agencies have evolved historically to meet specific requirements: irrigation to develop the West. highways to get the farmer out of the mud, and more recently, urban renewal and urban planning assistance to aid in the development of our cities. With the expansion of our cities and urban highways far into the countryside, critical problems arise which can only be solved through the closest cooperation among all types of planning for our cities, for our highways and other transportation systems, for our natural resources and land use, and for our outdoor recreation opportunities. Urbanization has brought critical shortages of living space that intensify competition in the location of facilities.

Early identification of new and modified needs would permit all levels of government to initiate steps toward meeting requirements in an orderly manner. Early action would forestall lengthy delays, the piling up of backlogs and pressures later for hastily conceived and often inefficient crash programs.

To be effective, a capital improvements acceleration effort must tap the vast reservoir of needed State and local improvements. A 1960 survey showed that State and local governments had scheduled completion of planning between July 1960 and December 1961 public works projects which alone would have an estimated construction cost of $21.7 billion: $9.1 billion for State projects and $12.6 billion for local. These needed capital improvements are especially suited to the employment objectives of acceleration to offset economic declines or stagnation. Yet, in the past, the lack of suitable shelves of plans for ready-to-go projects, statutory debt limits, and conflicts and gaps in planning have all thwarted effective acceleration (let alone maintenance of normal levels) of State and local capital improvement programs. In the absence of such possibilities, people press for less suitable Federal projects.

To meet these problems machinery is vitally needed at the State and local level to lay down general guidelines to help coordinate the diverse programs for highways, water resources, recreation, urban planning, etc. The machinery at the Federal level would furnish an example and leadership to State and local governments in their effort to develop and strengthen coordinated planning.

The following summary of the coordination problems facing California are repeated throughout our land:

"State and Federal agencies without areawide land-use plans to guide them, without coordinated State or Federal policy to guide them, put in their freeways, great conservation works, waterways and ports, air transportation systems as, individually and separately, they see fit.

"Hearings held on State responsibility for public works, conservation, beaches and parks, air and water pollution, and water development brought out the necessity for strong planning at the State level and brought forth demonstrations of local support.

"The lack of adequate supporting funds for the State office of planning is almost incomprehensible in light of the fact that California will spend some $55 billion on public works programs in the next 20 years." 1

Conflicts and gaps in planning are multiplied in the case of the many State and local jurisdictions. These block the efforts of the States and localities to accelerate projects which would be particularly effective in providing jobs for victims of adverse economic conditions.

Of critical importance is the establishment of a focal point of contact with the Federal Government for consultation in planning and acceleration of capital improvements, especially with respect to the relationships of Federal policies and programs of all kinds, rural and urban, to those of the States and localities. Direly needed at present is some overall coordinating machinery to consider the impact of the whole gamut of Federal programs on the capital improvement goals, plans, and programs of the States and local governments. This machinery must be at the Executive office level in order to encompass the whole spectrum of Federal agencies and programs-highways, airports, urban planning assistance, water resources, outdoor recreation and fish and wildlife, area redevelopment, to name only a few. With the power of these programs to have impact on communities goes the obligation to assure that the total impact of all these separate actions is consistent with local objectives.

3. How H.R. 10113 would meet these requirements

The Public Works Coordination and Acceleration Act creates the necessary machinery for:

(1) Keeping the President and the Congress advised on the status of public works construction, planning, and those public works needed to meet our national, regional, and community growth and economic development. (2) Encouraging and suggesting methods by which the public works planning policies of the various instrumentalities of the Federal Government and the instrumentalities of State and local governments can be coordinated to insure maximum effectiveness and efficiency in public works construction.

(3) Keeping in readiness a public works acceleration plan should a public works acceleration period be proclaimed by the President.

CONCLUSION

In conclusion it may be worthwhile to point out that the proposed legislation meets a criticism that has been often made against public works as a policy to combat recession. Public works, it is said, require a long time to plan, and a long time to execute. It is in the light of this criticism that the proposed machinery in the Public Works Coordination and Acceleration Act has much to recommend itself. At present time no coordinated inventory exists of National, State, and local projects for public works acceleration. No general procedure has been developed to finance such projects and to get them started. If we would wait with these preparations until an emergency develops, valuable time would be lost, and coming too late, the measures designed to cope with it would lose much of their effectiveness. By creating the machinery of execution and developing administrative and financial procedures before the onset of the emergency, we can hope to be able to cope with it more adequately.

1 "California Tomorrow," "California-Going, Going-" by Samuel E. Wood and Alfred E. Heller (Sacramento, Calif., 1962), pp. 54, 60, and 61.

Mr. AUCHINCLOSS. Mr. Chairman.

Mr. FALLON. Mr. Auchincloss.

Mr. AUCHINCLOSS. I would like to make a very brief statement. No one can quarrel with the objectives of this legislation. It is not only our duty but indeed our ardent desire to do whatever is possible and proper to enable men and women to earn money by working and thereby contribute to the economy and growth of our country. There are no politics in that idea-it is just commonsense.

What we must apply ourselves to in the light of past experience is the study of what is the best way to attack and solve this problem for the benefit of all. We must not only be mindful of the necessity to provide constructive jobs but we must also remember that the financial economy of our own country is involved and unless it is operating on a sound financial basis our whole security may become weakened and we lose our dominant place at home and abroad.

Opportunities for the jobless to work must be prompt, they must be constructive, and they must not sharply increase Government spending in the years to come when it is quite possible that our economy may be under the strain of inflation. It is a complex and intricate. problem, and requires the study and advice of many in and out of Government. I trust ample time for deliberation and consideration may be given by the committee to this measure so our conclusions may be sound and beneficial to the country as a whole.

May I add that I am reluctant to agree with the suggestion that the President of the United States be given sole authority to implement and administer such a program. Unemployment is a matter of great concern to all sections of our country and the people's representatives in Congress, as provided by our Constitution, have a great responsibility in a matter of this kind and can contribute much to the planning and operation of such a program for relief. Our country was founded as a nation controlled by representative government, and we should keep it that way.

Thank you, Mr. Chairman.

Mr. FALLON. Are there any other statements from the members? If not, we will go on with our first witness, Dr. Walter Heller, Chairman of the Council of Economic Advisers.

Dr. Heller.

STATEMENT OF DR. WALTER HELLER, CHAIRMAN, COUNCIL OF ECONOMIC ADVISERS; ACCOMPANIED BY KERMIT GORDON, MEMBER OF THE COUNCIL OF ECONOMIC ADVISERS; DAVID E. BELL, DIRECTOR, BUREAU OF THE BUDGET; AND ROBERT C. TURNER, ASSISTANT DIRECTOR, BUREAU OF THE BUDGET

Dr. HELLER. Mr. Chairman, before presenting my testimony on the standby capital improvements bill, I have a letter from the President to the chairman of the House Public Works Committee and the chairman of the Senate Public Works Committee, proposing an amendment to that bill to deal with the problem of an immediate capital improvements program limited to redevelopment areas and to other communities which have been designated as areas of substantial unemployment for 12 months or more.

This letter, with your permission, I should like to read to the committee. It proposes a $600 million capital improvements program, the $600 million being obligational authority; and the expenditure pattern under that as proposed, as the letter points out, would be $25 million in fiscal year 1962, and $350 million in fiscal year 1963, and the balance early in fiscal year 1964.

With your permission, I would like to read this letter and enter it into the record.

Mr. FALLON. You may go right ahead.

Dr. HELLER. This is from the White House, Washington, March 26, 1962. It is addressed to the Honorable Charles A. Buckley, chairman, Committee on Public Works, House of Representatives, Washington, D.C., and reads a follows:

DEAR MR. CHAIRMAN: I am transmitting herewith a draft of proposed legislation which would authorize immediate initiation of a $600 million capital improvements program in those sections of our country which have failed to share fully in the economic gains of the recovery from the recession of 1960-61. This proposal is in the form of an amendment to the proposed Standby Capital Improvements Act of 1962, which I transmitted to the Congress on February 19 and which has since been referred to your committee as H.R. 10318 and other identical bills.

The proposed Standby Capital Improvements Act, together with the recommended standby temporary tax reduction authority and the pending bill to strengthen permanently our Federal-States system of unemployment insurance, would constitute a new and powerful arsenal of weapons to combat the recessions which periodically sap the vitality of our economy. The waste and distress which characterize these periodic recessions can and must be abated. Passage of the recommended legislation will make possible timely and effective action to reduce the severity and duration of future recessions.

Our present problem is not, of course, one of nationwide recession. We have been making a strong recovery from the recession of 1960-61. Gross national product rose from $501 billion in the first quarter of last year to $542 billion in the last quarter. Industrial production has risen 12 percent over the last 12 months. Disposable personal income per capita has passed the historic $2,000 milestone. Unemployment in the last year has declined from 6.9 percent of the labor force to 5.6 percent, and the number of persons at work has increased by more than 1 million over a year ago. The recovery still has considerable distance to go before full employment is restored. But, despite the fact that our economic performance of the last 2 months has fallen below expectations, we look for a strong and continued expansion throughout the year and into 1963.

Although we do not today face a problem of general recession, the two recessions of the last 5 years-interrupted only by a short and incomplete recovery— have left in their wake serious problems of prolonged large-scale unemployment and economic distress in hundreds of communities in all sections of the country. The roster of these communities include large cities, smaller cities, and rural areas. The causes of their troubles are manifold-exodus of industry, displacement of labor by technological change, excessive dependence on declining industries, influx of jobseekers, changing weapons requirements in military procurement, and chronic rural poverty. Whatever the cause, the results are the same high and persistent urban unemployment or rural underemployment. Continued economic expansion for the Nation as a whole will in time help to restore the prosperity of many of these areas. But their needs are urgent now, and further help should not be delayed until another recession threatens the whole economy.

There are 852 localities which have been designated as redevelopment areas under the Area Redevelopment Act of 1961, and a further 106 communities which have been designated for 12 months or more as areas of substantial unemployment. These 958 localities account for 38 percent of our population. In these areas, taken together, 1 out of 13 members of the labor force is unemployed, and the average unemployment rate is 33 percent higher than in the rest of the country.

Most of these areas are eligible for assistance under the Area Redevelopment Act of 1961. Although the area redevelopment program is less than a year old,