Dr. COLM. Mr. Chairman, I understood your first question is how would the public works program stimulate the whole economy. Mr. FALLON. The entire economy. Dr. COLM. Yes. Of course, the first effect is there where the money is spent, and where people are hired who were unemployed before and construction is probably the area where we have relatively many unskilled labor employed, so it can be of direct help. Second, there are lots of offside expenditures. When you have a big construction program, you have orders for new construction machinery, you have orders for construction material, and very often these factories producing the material and the machinery are located somewhere else away from the location where your first impact is. That is the offside effect. Third, we have the phenomenon whenever you raise unemployment and earnings, you have what we call in our economic jargon the multiplier effect because the people who got back on employment, on the paroll, they are spending, they are buying at their grocer, they pay their debts, and thereby through this channel also the effect of the spending, of the original spending, is multiplied and spread over a larger area than the location of the original spending. We are estimating that for $1 million spending we are creating about 115, 120 jobs, on the side and off the side, and as a very rough rule of thumb, we say the same number of jobs is again created through the multiplier, through the spending of these people on consumption goods, through the fact that some factories have a higher rate of employment, and so on. So we come, including the multiplier effect, to about perhaps 200 to 250 jobs created by $1 million spending. Mr. FALLON. Thank you very much, Doctor. Any more questions? Doctor, in behalf of the committee we appreciate your presentation here this afternoon which will be very valuable for the members to read in the record. Thank you very much. Mr. COLM. Thank you very much. Mr. FALLON. General Cassidy? STATEMENT OF MAJ. GEN. WILLIAM F. CASSIDY, DIRECTOR OF CIVIL WORKS, OFFICE OF THE CHIEF OF ENGINEERS Mr. FALLON. General, I want to welcome you here on behalf of the committee and to congratulate you on your recent promotion. General CASSIDY. Thank you, sir. Mr. FALLON. I hope that doesn't prevent you from coming back here again. General CASSIDY. No, sir. I think I shall probably be before the committee again this spring. Mr. FALLON. The information that you supply to us on the rivers and harbors and flood control is just about as valuable as this committee can get. So we certainly hope there is nothing to deter you from returning. General, would you give the reporter your full name and title, please? General CASSIDY. Mr. Chairman and members of the committee, I am Maj. Gen. William F. Cassidy, Director of Civil Works, Office of the Chief of Engineers. I have been authorized to express the views of the Secretary of the Army, as well as those of the Chief of Engineers, on the two bills which the committee has before it today. The Secretary of the Army has submitted to your committee a report covering both H.R. 10113 and H.R. 10318. In this report he expresses the views of the Department of Defense in the following words: As indicated in the congressional findings in section 2 of the bills, the primary ultimate objective in the case of each bill is to promote maximum employment, production, and purchasing power through stimulation of the economy by inaugurating capital improvements when high levels of unemployment indicate the beginning of a recessional pattern. The Department of the Army fully supports this worthy objective. H.R. 10318 is identical to the legislation which the President submitted to the Congress on February 19, 1962. The Department of the Army, on behalf of the Department of Defense, recommends favorable consideration of H.R. 10318 as a desirable measure to combat the serious economic problems of (in the words of the President's message of that date) "repeated downward turns in our economy which diminish both national strength and individual opportunity." The civil works program of the Department of the Army is made up, in the main, of major resources development projects. The planning and construction of such projects usually requires several years. Since the kind of program which would be authorized by the proposed bills is intended to accelerate employment very quickly, and to bring it to an acceptable level over the relatively short period of 12 months, it is obviously not intended to constitute the means by which the Federal Government would accelerate its long-range resource development programs, should that also become necessary in order to restore the Nation's economy. In other words, the proposed legislation would not affect, to a major degree, the main body of the civil works program; that is, the long-range resource development component thereof. Nevertheless, the Department of the Army would be able to make a very substantial contribution toward the attainment of the short-range objective of these bills by accelerating certain phases of that program. An inventory of the possibilities indicates that during the 12 months of a capital improvement acceleration period this Department could effectively utilize, in connection with its civil works program, about $85 million in the construction of small projects and the improvement of existing major projects. A considerable proportion of this amount would be used to provide the additional facilities urgently needed as a result of the spectacular growth of the recreational load at civil works reservoirs. Another large item would be the construction of small flood control and navigation projects. There would also probably be opportunities for acceleration of the completion of major projects previously placed under construction. This accelerated program could be carried on without rendering it impossible for the Corps of Engineers to accelerate the long-range resource development component of the civil works program, should that also become necessary and provided for in other legislation. With respect to the military construction program of the Department of Defense, authorizations and appropriations are now substantially in balance; consequently, the passage of this legislation would have no substantial effect until additional authorization is provided. Within the limits of any existing authorization the Department of Defense could accelerate both going construction and new starts which would have an immediate effect on unemployment. In addition to the authorized construction projects, there is always some backlog of repair projects which can be accomplished quickly provided additional funds are made available to the maintenance and operations account for this purpose. In addition to the construction programs currently authorized and financed, the potential for replacement construction and deferred repair work of the Department of Defense is more than sufficient to absorb the ull amount of $2 billion specified in H.R. 10318. As you may know, the Department of Defense is trying to plan 5 years in advance, but, in view of our advancing technology and shifting world situation. the execution of such plans will be subject to change which may affect our base structure and location. Consequently, any substantial acceleration of military projects could result in waste. We believe that the proper policy for military projects would be to limit acceleration of construction to those projects already authorized and financed and to limit the application of the new program to a reasonable amount of deferred repair items. The Chief of Engineers concurs fully in the views expressed by the Secretary. He recognizes the need for, and appreciates the importance of, the proposed standby program and short-term work projects. Experience during the depression of the thirties demonstrated that the initiation of such a program is one of the first steps the Nation should take when the economy begins to decline. That experience also indicated, of course, that if the decline is not immediately checked it might be desirable to take long-range contracyclical action. It is at this point that our civil works program would come to the fore. But it is not necessary, in our opinion, to provide for such long-range action in the legislation you are now considering. It is generally agreed that legislation to make possible initial shortrange action is essential in any event. The fact that these bills do not comprehend everything that the Nation will need to do-should it find itself confronted by a major recession--does not lessen the need for providing a means of giving the economy a sudden, but powerful, impulse. Moreover, we already have a large backlog of authorized resource development projects which could quickly be converted into a contracyclical program of long-range projects by simply stepping up appropriations to the extent required. Or if additional legislation should be found desirable for this purpose, it may be separately developed and considered. In this connection, I am able to assure you that our civil works program provides a remarkable opportunity for quickly initiating a contracyclical program of long-term resource development projects. Our present backlog includes 277 authorized projects which have not been started. The estimated cost of these projects totals about $4 billion. Our backlog also includes 439 projects under way but not. completed. It will require an additional $4 billion to complete these projects. In addition, we shall have submitted to the Congress, in time for consideration during the present session, reports proposing new proj ects, the aggregate estimated cost of which is roughly $3.5 billion. Hence by the time the present session of Congress is completed we may well have a backlog of authorized work that will cost about $11.5 billion to complete. Of course this does not mean necessarily that our backlog will be of this magnitude when, at some future time, it may become necessary to initiate a contracyclical program of long-term public works. But it does serve to indicate that there will probably exist at that time an ample shelf of authorized projects which could be started with little delay. These projects include, as you know, major works such as dams, reservoirs, waterways, harbors, power installations levees and similar engineering structures. Returning now to the short-term program envisioned by the bills you are considering, I should like to call your attention to the special importance of providing for advance planning of programs of projects that could be carried out during a capital improvement acceleration period. Should legislation of this type be enacted it will be necessary for the Federal agencies to seek appropriations for such advance planning. This advance planning will enable us to considerably improve our preliminary estimate of the amount of short-term work we might accomplish in connection with our civil works program. The Department of the Army considers that a battle against economic depression should be waged with all of the intensity and power that the Nation would devote to repulsing a military threat to its existence. You may be sure, therefore, that we shall discharge to the best of our ability any role the Congress may see fit to assign us in the program you are evolving here today. Mr. FALLON. Thank you very much, General. Mr. BLATNIK. I have no questions, except to comment on a statement on page 5, in the concluding paragraphs of your remarks, General, calling our attention to the need to provide for advance planning of programs and projects. That is one of the drawbacks or gaps that exists currently. By the time the economic indicators show that there is a downward trend, an economic decline into or toward a recession, about that time even if Congress would attempt to accelerate the programs, if Congress decides to give the authority to the President to do so, they never have been able until the present to get any adequate program underway because of the lack of advance planning. It is extremely important that we provide for planning in these different categories so we have an on-the-shelf list of projects as to the type of project, the cost of it, the economic aspects, and whether it is a high manpower utilization or largely machine-type project. I am glad you mentioned that because it is absolutely essential in relation to whether the Congress retains the authority to make a decision if and when an acceleration of such public works shall be undertaken or whether the administration be given that authority. It is essential that we do have the on-the-shelf list of projects, particularly small ones, that could be gotten underway quickly. But you would agree that that has been a big handicap so far in not having sufficient money in advance planning of projects. General CASSIDY. That is correct, sir. Mr. BLATNIK. We appreciate your statement, General, on behalf of the corps. Mr. BALDWIN. Mr. Chairman-General Cassidy, could you tell the committee what amount, if any, of the funds we have appropriated last year and in previous years for civil works projects of the Department of the Army have not up to date been obligated? General CASSIDY. We are about 8 months through the current fiscal year. We are coming into the new construction season. At the present time out of almost $1 billion appropriated last year, we have $279 million unobligated. Mr. BALDWIN. Would you be in a position at this time to comment as to whether any portion of that sum would still be unobligated as of July 1, 1962? General CASSIDY. There will be a portion unobligated at the end of the fiscal year. Our schedule of obligations is such that we always hope to obligate all of the funds available to us, but since we are dependent upon weather and other conditions, we usually wind up with an unobligated balance. Mr. BALDWIN. Could you do anything to speed up the obligation of those funds to meet the need that the administration has stated in its message of Monday as urgent? General CASSIDY. Yes. By making-funds that are unobligated at this time of the year have been programed. There is a schedule for their obligation. We could attempt to speed up that obligation but generally it is tied into other things, into weather in the North, into the efforts of the local people to procure real estate and to be ready for us to go ahead. So each year when we ask the Congress for money, we have a definite schedule for the use of that money during the year. Mr. BALDWIN. Now, let me ask a related question. I think it is important to get as accurate a picture as we can as to where your full-scale, long-range projects would fall under this bill, H.R. 10318. Supposing you had, for example, a major flood control project, sometimes on these major rivers you have one that involves several dams along major streams where we appropriate large sums for that purpose each year. Or suppose you have a dredging project involving a fairly long channel. I notice on page 9 of the bill, section 8 (a) (1), one of the qualifications for any program under this act is that it can be initiated or accelerated within a reasonably short period of time. And then under the same subsection (a) (3): If initiated hereunder, can be completed within 12 months after initiation. Now, I would like to know as accurately as you can estimate whether you feel many of our fairly sizable public works Corps of Engineers projects, flood control and harbor dredging, are of such a nature that you could take portions of them and accelerate them so that if a bill. of this type were passed, would we actually be able to devote a fairly constructive portion of the funds allocated in the bill to the type of projects in which this committee has over the years had a great interest? General CASSIDY. The major number of our projects do not fit in under the conditions of this bill. They are not susceptible of an acceleration that would bring them in within the time frame. We do have going work, going contracts, which could be accelerated, some of those. Those would be selective. We do have small projects, small dredging projects, small harbor projects, which are ready to go and on which the engineering is relatively simple such as small levee projects, where we could design, let a contract, have them underway, and completed in 1 year. We also have the projects under $400,000 which may be authorized by the Chief of Engineers, flood control projects. And there are some of those that could be brought in under the terms of this bill. But generally the civil works program of the corps does not fit into this 1-year limitation. Mr. BALDWIN. One other question. Since you, I guess, will be the only representative of the Department of Defense to appear before us, |