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year 1963 for the Interstate System (on a 90 percent Federal-10 percent local basis). Grants of $925 million are authorized for the primary, secondary, and urban highway systems for the fiscal year 1963 (on a 50 percent Federal-50 percent State basis). The Federal grants authorized for the Interstate System increase each year, reaching $3 billion in fiscal 1968 and continue through fiscal 1971.

(c) The Water Pollution Control Act authorizes Federal grants of $90 million in the fiscal ear 1963 to States and municipalities for water pollution control facilities. Federal grants of $100 million in each of the fiscal years 1964 through 1967 are authorized.

(d) The Federal Airport Act authorizes Federal grants of $75 million for airport construction in the fiscal year 1963 and an identical amount for fiscal year 1964.

(e) The Area Redevelopment Act of 1961 authorizes Federal grants of $75 million for public facilities in qualified redevelopment areas.

(f) The Hospital Survey and Construction Act authorizes $150 million for the construction of public and other nonprofit hospitals in each of the fiscal years through fiscal year 1964. The Medical Facilities Survey and Construction Act authorizes in each fiscal year through 1964 $20 million of grants for construction of public and other non-profit diagnostical treatment centers; $20 million for construction of public and other nonprofit hospitals for the chronically ill and impaired; $10 million for the construction of public and other nonprofit rehabilitation facilities; and $20 million for the construction of public and other nonprofit nursing homes. Similarly, existing Federal loan programs to assist local governments or educational institutions include the following:

(a) The community facilities loan program, as amended by the Housing Act of 1961, authorizes $500 million of low interest rate Federal loans to municipalities for community facilities (in addition to $150 million previously authorized).

(0) The college housing loan program, under amendments in the Housing Act of 1961, authorizes low interest rate Federal loans of $300 million in each of the fiscal years from 1961 through 1964 (an aggregate of $1.2 billion in addition to the previous authorizations of $1.675 billion).

(c) The Area Redevelopment Act of 1961 authorizes $100 million of Federal loans for public facilities in qualified redevelopment areas (in addition to $200 million for Federal loans for industrial facilities in redevelopment areas).

(d) The Watershed Protection and Flood Prevention Act authorizes low interest rate Federal loans by the Farmers Home Administration to municipalities, including water conservation, irrigation, drainage, and flood pre vention or control districts, to finance water supply reservoirs, flood control dams and reservoirs, irrigation lands and rural water supply and distribution systems. The maximum permissible is $5 million for any one project.

(e) The Consolidated Farmers Home Administration Act of 1961 authorizes the Farmers Home Administration to make or insure loans to municipalities, including irrigation, drainage, and water supply distrets

for soil or water conservation projects. Thus, in only these programs the Federal Government already has authorization for the fiscal year 1963 alone to make grants aggregating close to $6 billion for assistance to States, local governments and educational institutions for public facilities, and authorization to make loans aggregating over $1 billion in the fiscal year 1963 to municipalities and educational institutions for various forms of public facilities.

Furthermore, the proposed College Academic Facilities Act as it passed the House on January 30, 1962 (the bill also passed the Senate with amendments and is presently awaiting reference to a conference committee) would authorize Federal grants of $180 million for each of 5 years and Federal loans of $120 million for each of 5 years to institutions of higher learning for the construction of academic facilities.

These substantial authorizations for Federal grants and loans provide ade quate funds for the Federal Government to accelerate capital outlays by States, municipalities, and educational institutions at any time, if such action should

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.

a

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)

Amount

Maturity Net Interest
Range

Cost

Issuer

purpose

$

125,000 150,000 90,000 35,000 500,000

270,000 1,100,000 125,000

96,000 140,000 350,000 695,000

69,000 340,000 300,000 100,000 295,000 700,000 112,000 170,000 150,000 650,000 200,000

49,000 120,000 190,000 398,000 175,000 198,000 486,000

100,000 1,330,000 125,000 60,000 86,000 271,000 750,000 395,000 175,000 275,000 157,000 162,000 800,000 50,000 65,000 600,000 533,000 150,000 400,000 230,000 160,000

Maumee (Ohio) street and sewer
Parmingdale (N.Y.) water system
Wappingers Falls (N.Y.) water
Sudbury (Mass.) water district
Belleair (Fla.) sewer
Golden (Colo.) water
Radford (Va.) water and sewer
Westminster (Mass.) water
Britt (Iowa) sewer
Little Rock (Iowa) community school district
Spencer (Iowa) sewer
Dalton (Mass.) sewer
Oak Harbor (Ohio) sewer
Morris (Minn.) sewage
Greenville (Mich.) sewage
North Baltimore (Ohio) sewer
Perrysburg (Ohio) sewage
Medina (N.Y.) water
Buhl (Minn.) sewage
Strasburg (Va.) séwer
Medina (Ohio) waterworks
Medina (Ohio) sewage
Medina (Ohio) waterworks
Fairfax (Minn.) water and sewer
Liberty (N.Y.) water
Wells (Minn.) sewage
Bedford Hgts. (Ohio) sewer
West Carrollton (Ohio) sewer
New Windsor (N.Y.) water
Salem Hgts. (Oregon) water district
Enfield (N.C.) water
Bloomfield Hills (Mich.) sewer
St. Helens (Oregon) sewer
Wesson (Miss.) waterworks
St. Joseph (La.) sewer
Seaside (Oregon) sewer
Belleair (Fla.) sewer
Hazlehurst (Mi68.) sewer
Riverdale (N.J.) water
Winnsboro (La.) sewer district 1
De Quincy (La.) Imp. sewer district
Somerdale (N.J.) sewer
old Town (Maine) water district.
Granite Falls (N.C.) sewer
Bernice (La.) sewage
Cookeville (Tenn.) waterworks revenue
Blaine (Mian.) water
White Cloud (Mich.) sewage
Arden Hills (Minn.) sewer
Fuquay Springs (N.C.) sewer
Hugo (Minn.) waterworks Imp.

2-10 1-15 1-15 1-15 3-12 1-15 1-20 1-15 1-19 1-18 1-19 1-29 1-20 2-21 1-20 1-19 1-20 1-29 2-13 1-20 2-21 2-21 2-21 2-16 1-27 3-20 1-20 2-21 1-29 1-23 3-21 1-29 1-20 2-21 1-25 1-19 2-31 4-30 1-30 2-25 2-20 1-18 1-20 1-18 1-20 6-24 3-21 3-29 1-20 2.31 2-20

2.760 2.990 3.090 3.130 3.154 3.169 3.187 3.240 3.257 3.273 3.321 3.350 3.370 3.373 3.391 3.450 3.460 3.480 3.487 3.528 3.566 3.566 3.566 3.570 3.630 3.645 3.650 3.680 3.710 3.726 3.743 3.778 3.778 3.802 3.809 3.817 3.877 3.916 3.920 3.930 3.940 3.940 3.950 3.978 4.010 4.088 4.141 4,168 4,220 4.235 4.322

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