Standby Capital Improvement Act of 1962

be deemed necessary and desirable. Accordingly, it is unnecessary and undesirable to adopt the additional program proposed in H.R. 10317, H.R. 10113, or similar bills.

(4) The most effective stimulus in a recession would be a reduction in Federal personal income taxes

In the event of a recession, certain so-called built-in stabilizers, principally the automatic decrease in income tax revenues and the automatic increase in unemployment benefits, operate without action by either the executive or legislative branch of the Government. However, if an additional stimulus to the economy is needed, we believe that the most immediate and most effective device would be a reduction in individual Federal income taxes, which would operate immediately to increase spendable income. This device would have the great advantage of operating to invigorate the private segment of the economy, which would need the greatest stimulus.

In this connection, it should be noted that the staff report by the Bureau of the Budget, previously cited, regarding "Federal Fiscal Behavior During the Recession of 1957-58," rated the major contracyclical policies employed in the 1957-58 recession. It stated that the so-called built-in stabilizers had the greatest relative economic impact and, indeed, that they had the additional advantage of good reversibility when the recovery period began.

CONCLUSIONS

(1) State and local government financing of public facilities through bond sales continues at record levels.

(2) Financing through bond sales and construction by local governments operate automatically on a contracyclical basis, increasing in recession periods. (3) Existing Federal financial assistance programs already provide substantial funds to accelerate capital expenditure programs of the Federal Government and local governments.

(4) The most effective stimulus in a recession would be a reduction in Federal personal income taxes.

Consequently, we submit that it is unnecessary and undesirable to adopt H.R. 10317, H.R. 10113, or similar programs authorizing additional Federal financial assistance to States and municipalities for the construction of public facilities.

Mr. DAVIS. Are there any questions over here?

Mr. Dooley?

Mr. DOOLEY. No questions. I would simply like to commend the witness, Mr. McGee, on a very meticulously prepared and knowledgeable statement. It is certainly an inspiring statement to many of us on the Republican side, especially, to hear this very fine presentation, and from a source so knowledgeable. We are very grateful to you, Mr. McGee, for the way you have prepared this whole presentation. Mr. MCGEE. Thank you, Congressman Dooley.

Mr. BALDWIN. Mr. Chairman.

Mr. DAVIS. Mr. Baldwin.

Mr. BALDWIN. I would like to say, Mr. McGee, the information you have attached to your statement I think will be most helpful to the committee when we go into executive session to consider this whole problem.

Mr. MCGEE. May I say that the association has endeavored very faithfully to present information accurately and comprehensively. We have our data compiled on IBM cards and if you need further information we will make every effort to get you anything you need and which we have available through the run of the cards.

Mr. HARVEY. Mr. Chairman.

Mr. DAVIS. Mr. Harvey.

Mr. HARVEY. Mr. McGee, I also want to compliment you on this very thorough statement. I think it is well prepared and very well documented.

I would like to say I certainly agree with you, insofar as your philosophy is concerned, that tax cuts are a sounder way of accomplishing this, as you have expressed it here. In my judgment not only are they more immediate than any public works project could possibly be, than even the best planned public works project, let us say, but they also have the advantage of being noninflationary as well, in that we do not have the Federal Government's bidding for the same concrete, lumber, and materials as are necessary for the people building houses, and so forth.

That is not to say that there should be no role at all for any sort of a public works program as we started out in this committee to consider strictly to avert a recession. But somehow, and I know the chairman will understand me when I say we seem to have digressed somewhat from where we got the President's message when we started out, because we are considering now a sort of long-range project for depressed areas. I was interested myself recently to look over the list of the depressed areas, and I came away with a conclusion, and I wonder if you would verify it.

For example, in Pennsylvania and in the other States that have these depressed areas they still have the best of credit insofar as the financing of public works is concerned.

Mr. MCGEE. They have good credit, sir.

May I amplify that by a factual remark? You have referred to Pennsylvania, Congressman, and I can say I know of no instance in that State where it has not been possible for a municipality to obtain the sale within the last year of any bonds that it has offered by reason of market conditions or lack of credit ability.

I would like to illustrate this point further by something which just happened in the last 2 days. Congressman Harvey is from Michigan, and thus I would like to refer, if I may, to the State of Michigan. The city of Detroit offered $20,985,000 of bonds for sale on Wednesday, and it obtained interest rates which ranged from 2.579 percent up to 3.19 percent. The reason for the variation in those rates is it offered bonds of different maturity range, and the longest issue was that of a school isue of $10 million, on which the average interest rate was 3.194 percent.

Detroit is in a redevelopment area. It is a so-called depressed area. The situation is that municipalities from the so-called depressed areas are able to go out into the open market and sell bonds.

Frankly, I do not know of any single case in the United States where an investment dealer has condemned any municipality as being of unfavorable credit standing because of being classified on the Federal list as being in a redevelopment area.

Mr. HARVEY. I appreciate that information. I see you have Baraga County Hospital listed in Michigan. That would be on the Upper

Peninsula.

Mr. MCGEE. I am a former Michiganite myself, so I know a little bit about the geography of the State. Let me turn to appendix B. I was not born in the Upper Peninsula, as you were, Congressman. Let me see; which of the issues did you identify?

Mr. HARVEY. I see on your list here Baraga County Hospital at the top of list B-30. That was the only one I saw from the Upper Peninsula, however.

Mr. MCGEE. That is right. They sold $190,000 of bonds at 2.587 percent. That is not a particularly populous county, is it, Congressman?

Mr. HARVEY. I am not too well acquainted with it in the last 20 to 25 years, but I would say that the population is low up there. If I would estimate it I would say probably it is in the neighborhood of 10,000 to 20,000-in that bracket. Between 10,000 and 20,000. It is one of the smaller counties in Michigan certainly.

We certainly thank you for your testimony, Mr. McGee. I have not had a chance to look this over yet, but it appears to be very thorough and well documented and I look forward to it.

Mr. MCGEE. Thank you.

Mr. HARVEY. Thank you, Mr. Chairman.

Mr. DAVIS. He has certainly done his lesson well to turn quickly and answer the questions which have been addressed to him. So we are very grateful to you, Mr. McGee, for coming down here. Mr. MCGEE. Thank you, Mr. Chairman.

Mr. DAVIS. Without any objection, this very long list of issues of State or municipal bonds sold in 1961 will be made a part of the record.

Mr. MCGEE. I am much obligated, sir, and thank you very much, sir.

(The appendixes attached to the statement of Mr. McGee are as follows:)

Partial List of New Issues of Bonds

Sold by Municipalities with Population under 10,000
For Water or Sewer Facilities

During the First Three Months of 1961 (January

March)