place the money that was borrowed from the obligated authority for that specific purpose-that is what this is, is it not? Mr. BELL. It seems to me that is an accurate description of it. Yes, sir. You understand, the reason for it is because of the difficulty of anticipating. It would be quite possible if the Congress preferred to vote the $2 billion as a standby appropriation. It seemed to us that Congress would be unwilling to do that. They would not know how much would be drawn on and at the time the President wanted to use these funds it would be important to move quickly under the assumed conditions of the beginning of a recession, and it might very well be that Congress was not in session at that time. Consequently, the alternative would then be either to ask the Congress to vote $2 billion standby appropriation, to be drawn on possibly at some later time to an extent unknown, and at a time unknown, or else to give the President authority, as this bill would do, to trigger the action immediately by drawing on unobligated balances. That is essentially it. Mr. KUNKEL. Well, all I wanted to do was just be sure that we all understood what we were doing. I wanted to be sure that I understood it. Mr. BELL. Right. Well, it would work just as the forestry system now works or the military program that I referred to. The CHAIRMAN. Thank you very much, Dr. Heller, and, Mr. Bell, your associates, Mr. Gordon and Mr. Turner, for coming before the committee this morning. We appreciate very much the information that you have given. Mr. HARVEY. Mr. Chairman, I wonder, before these gentlemen leave, if it would be understood that they would answer although I consider it much better to do it here questions in writing to us because I know some of us have not exhausted some of the questions we have? The CHAIRMAN. I am sure that if you would write any one of these gentlemen any questions that you would desire to have them answer, they would be glad to do it. Mr. BELL. Yes, sir. The CHAIRMAN. And if it would be necessary at a later date I am sure they would be glad to come back. Mr. BELL. That is correct, sir. The CHAIRMAN. Thank you very much. STATEMENT OF HON. ARTHUR J. GOLDBERG, SECRETARY OF LABOR; ACCOMPANIED BY HAROLD KUPTZIN, CHIEF, AREA LABOR MARKET SURVEYS; SEYMOUR WOLFBEIN, DEPUTY ASSISTANT SECRETARY OF LABOR; AND SAMUEL MERRICK, CHIEF, OFFICE OF CONGRESSIONAL LIAISON, DEPARTMENT OF LABOR The CHAIRMAN. Could we have order, please? Mr. Secretary, I want to apologize on behalf of the committee for keeping you waiting 35 or 40 minutes. Our members want to know a little bit about what is happening to the finances of this country, and the questions were prolonged a little bit. I want to say, on behalf of the committee, further that we appreciate your coming up here this morning to give us your knowledge on just exactly what this standby legislation does. Have you read the President's letter to the committee? The CHAIRMAN. You may proceed, Secretary Goldberg. Secretary GOLDBERG. Mr. Chairman, and ladies and gentlemen of the committee: I appreciate very much this opportunity to appear before you in support of the administration's proposal. I fully understand that you have had a very busy morning, as I have had also since I testified before another committee of the Congress. The CHAIRMAN. I understand, Mr. Secretary, and we are sorry to have kept you waiting. Secretary GOLDBERG. Mr. Chairman, with your permission, I would like to offer my prepared statement for the record and summarize its comments. The CHAIRMAN. If there is no objection it is so ordered. (The prepared statement of Secretary Goldberg is as follows:) STATEMENT OF ARTHUR J. GOLDBERG, SECRETARY OF LABOR I appreciate the opportunity to appear before this committee today in support of the administration's proposal, the Stand-by Capital Improvements Act of 1962 as well as the administration's additional recommendation for immediate action in this area which Chairman Heller of the Council of Economic Advisers has already described to you. The standby proposal is embodied in identical bills introduced by the chairman of this committee as H.R. 10317, by Congressman Blatnik as H.R. 10318, and by Congressman Powell, chairman of the Committee on Education and Labor, as H.R. 10303. As you know, some 16 years ago, in 1946, the Congress declared in the Employment Act that it is the continuing policy and responsibility of the Federal Government to use all practicable means, consistent with other essential policy considerations, to promote maximum employment, production, and purchasing power. In the four major recessions which this country has experienced since that time, the Congress has conscientiously endeavored to promote this policy and to meet these responsibilities through many programs aimed at maintaining the highest levels possible in these areas. The administration's proposal for standby authority to initiate and accelerate capital improvement programs when certain specified levels of employment occur in the future is a recognition that the Government must be ready to move promptly to get the economy moving rapidly back to the goals set forth in the Employment Act of 1946. The proposal for authority to begin such programs now at the present level of unemployment is a recognition that, since we did not have standby authority when needed, we must take prompt and effective action now. Let me review very briefly with you some of the current and past developments which lead us to believe that both of these steps are necessary. Let us look for a moment at the dimensions of the unemployed. It is a fact that the economy has been moving toward higher levels of employment and lower levels of unemployment during the past year. Our latest figures indicate a record level of 65,789,000 people employed in this country in February 1962. Total employment is well over a million higher than it was a year ago; total unemployment is well over a million below what it was a year ago. The factory workweek is a full hour above a year ago and for those who do have jobs, earnings are at record levels. While we welcome this progress, there is one major set of returns which we believe makes it essential that the President be given immediate authority t initiate and accelerate capital improvement projects as well as the standby authority requested earlier. I refer to the fact that there are still 4,543,000 people unemployed in this country. Even more importantly, 1,400,000 of them are classified as long-term unemployed—that is, continuously jobless for 15 weeks or longer. I want particularly to point out that among this group there are approximately three-fourths million workers who have been continuously jobless for 26 weeks or more—a figure, incidentally, which has remained unchanged over the year despite a rising employment level. A brief review of who these long-term unemployed are, I think, will underscore the point we wish to make. We are particularly concerned by the fact that fully one out of every four of our long-term unemployed represents older men 45 years of age and over, whose reemployment will hinge in significant part on the stimulus to job growth generated by the kind of programs we are recommending here. By the same token, we are concerned with the fact that while only 5 percent of the American labor force is unskilled, triple that proportion-15 percentof the long-term unemployed are unskilled workers. Here again, many of these persons would find their reemployment opportunities significantly enhanced by the kind of programs we are discussing today. The problem in the construction industry is similarly portrayed by the unemployment rates that reach us each month. Here, too, we find that in February 1962 about 5 percent of all the workers in the United States were in the construction trades, but 14 percent of all the long-term unemployed are represented by construction workers. Thus, no matter how we analyze the statistical rates, by age, by occupation, by industry, the message is clear: There are a significant number of people represented by these figures who are experiencing the intractable human problems posed by very long periods of continued joblessness. In considering the kinds of programs we are discussing today, I think it is also of some importance to underline the fact that the last decade has seen a rising level of unemployment after each recession, and even during recovery periods. Let me cite just a few figures to illustrate this point: In July 1953, just prior to the 1953-54 recession, the seasonally adjusted unemployment rate in this country stood at 2.6 percent. This recession was then followed by substantial improvement, but in July 1957, just prior to the 1957-58 recession, the seasonally adjusted unemployment rate stood at 4.2 percent. After this particular recession, the unemployment rate fell again, but in May 1960, just prior to the 1960-61 recession, the seasonally adjusted unemployment rate was 5.1 percent. Thus, each succeeding business cycle of the past decade has left us with a higher rate of unemployment, even at the peak of the prosperous period. The fact of the matter is that in the last 52 months there has been only 1 month when the unemployment rate fell below the seasonally adjusted mark of 5 percent. That month, incidentally, was February 1960, when the rate was 4.9 percent. It is for these reasons that we believe that unless prompt and effective action is taken to promote employment opportunities for the significantly substantial number of workers who are currently unable to find jobs, we will not move ahead rapidly enough to achieve the goals of maximum employment in this country. These, then, are the factors with which we must cope at the present time. In confronting these factors, it is our determination that they shall no longer continue to exist; that this shall not be true after this or any future recession. We do not intend to live with these disquieting and lingering pockets of unemployment and these dual measures are, when combined, one of our arsenal of weapons to combat and prevent the conditions plaguing us in the past. As a means of increasing employment opportunities quickly in the hundreds of communities throughout our Nation which have not shared fully in its recent progress toward recovery, the President is asking that we initiate as soon as possible a $600 million capital improvements program. This program would extend through fiscal 1964 and would be operative in areas eligible for assistance under the Area Redevelopment Act and in communities which have been designated for 12 months or more as areas of substantial unemployment. If this legislation is enacted promptly, some expenditures under the program could be made during this fiscal year. The much needed assistance provided by the program could thus have immediate effect. Under this proposal, funds could be allocated for Federal capital improve ments projects in the areas I have described and for grants and loans to eligible States and localities for improvement of community facilities. Federal grants to States and localities could be for as much as 50 percent of the cost of a project, and even higher in some exceptional cases. The program would also make loans available to those communities which would otherwise be financially unable to meet promptly their share of project costs. As would be the case under the standby proposal, projects under this program would be limited to those which could be initiated or accelerated in a reasonably short period of time and completed within 12 months after initiation. Other limitations of the standby bill I shall mention later would also apply. Included among the State and local capital improvements authorized under this program would be such projects as water supply improvement; sewerage systems and water pollution control; construction and improvement of public buildings, such as hospitals and civil buildings; and road, street, airfield, and port improvement. Examples of Federal projects and programs would include conservation activities to improve our public land, water, timber, natural resources, and construction or improvement of laboratories, research and training facilities, and other public buildings. Although the overall economic impact of a $600 million program is in itself significant, its effect in particular areas can be most telling. Pockets of unemployment exist in hundreds of localities throughout the country, and the creation of jobs in such localities could have an impact far out of proportion to the total size of this program. In addition to the primary employment opportunities such a program could create, I think it is also important to consider that its secondary and tertiary employment effects could be even more impressive. The legislation we are now recommending takes into account and will move from the vantage point of the excellent measures already passed by the present Congress which are also aimed at reducing the number of unemployed. I refer, for example, to the enactment last year of the administration's Area Redevelopment Act and the passage a few weeks ago of the Manpower Development and Training Act. With these measures already law, we believe that our present proposals, added to measures now being considered by the Congress, such as the Youth Employment Opportunities Act, the unemployment compensation proposal and the administration's tax proposals, will provide a set of related measures all calculated to increase the rate of our economic growth, provide new job opportunities, and alleviate the effects of unemployment. I should like now to discuss briefly the capital improvements standby authority which is embodied in the administration's proposal. This is another measure which the Federal Government must have ready at hand, and is one of several proposals presented by the President in his Economic Report as a comprehensive program to strengthen the economy against recession. The administration believes that this several-sided program is needed to counter trends of economic downturn before unemployment and other dislocations assume more serious proportions. In addition to the standby capital improvements authority provided in the administration's proposal now before this committee, the President has also requested other measures to counter trends toward recession, including an expansion and improvement of the unemployment compensation system, covering more workers drawing higher benefits over a longer period of time. I shall not endeavor to discuss these latter proposals in any detail. However, I think it is important to note that adoption of these measures will provide desirable and needed flexibility in countering recessionary trends. The administration's proposal to provide the President with standby capital improvements authority would authorize him to proclaim capital improvement acceleration periods when the seasonally adjusted unemployment rate has risen by a specified amount over certain specified period. During these acceleration periods he would be given authority to spend up to $2 billion for the initiation or acceleration of capital improvements projects. Under this program, the President would be authorized to commit up to $750 million for direct Federal expenditures; $750 million for grants-in-aid to State and local governments; $250 million in loans to State and local governments otherwise unable to meet their share of project costs; $250 million to be distributed among the three categories just mentioned, as he might deem appropriate. The most serious criticism which in the past has been leveled at public works as a means for countering recessionary trends is that they are initiated too slowly and their completion requires too long a period of time. I do not believe the administration's proposal is susceptible to such criticism. This is due to the fact that the $2 billion potentially available under this program may be authorized for use only on projects and segments of work which— (1) can be initiated or accelerated within a reasonable period of time; (2) will meet an essential public need; (3) if initiated hereunder, can be completed within 12 months after initiation; (4) will contribute significantly to the reduction of unemployment; and (5) is not inconsistent with locally approved comprehensive plans for the jurisdiction affected wherever such plans exist. A capital improvement acceleration period and the authority to initiate new projects would terminate automatically within 12 months unless extended by joint resolution of the Congress and could be terminated at any time by the President. No funds provided under the act could be obligated after termination of a capital improvement acceleration period, and no new period could be proclaimed for 6 months following the date of termination of a prior period. Other spokesmen for departments and agencies directly responsible for administering Federal and federally aided capital improvement programs will testify in detail concerning administrative aspects of this proposal. I shall therefore not attempt to describe in detail the manner in which a capital improvements acceleration period would be put into effect. However, I think it is significant to note that the unemployment criteria for triggering programs under this proposal is so designed that in each of the four recessions we have experienced since 1948, if this proposal had then been law, the Presidential authority could have been invoked within 4 months after the previous cyclical peak and well before the trough of the recession. The first impact of orders, contracts, and expenditures under the program would have been felt within 1 or 2 months after the authority was invoked. I believe that the triggering mechanism contained in this proposal is well designed and while rigorous enough to prevent untimely and premature activation is not so restrictive as to prevent benefits of the program to be enjoyed in time to have maximum effect. As the President pointed out in his Economic Report, the major impact of the program would occur when a stimulus is needed to arrest economic decline and support recovery which would not be delayed until private demands are already pressing hard on the economy's capacity to produce. Mr. Chairman, I believe there is a real and urgent need for both the immediate and the standby capital improvements authority the administration is requesting in these proposals. I hope and trust that the Congress will move promptly to enact this much-needed legislation into law. AREAS OF CONTINUED SUBSTANTIAL UNEMPLOYMENT' FEBRUARY 1962 FORTY MAJOR AREAS Alabama: Birmingham, Mobile. California Fresno, Los Angeles-Long Beach, San Bernardino-Riverside-Ontario, San Diego, Stockton. Connecticut: Bridgeport, New Britain, Waterbury. Florida: Miami. Indiana: South Bend, Terre Haute. Kentucky Louisville. Louisiana Baton Rouge, New Orleans. Massachusetts: Brockton, Lawrence-Haverhill, Springfield-Chicopee-Holyoke. Missouri: Kansas City. New Jersey: Jersey City. Newark. New York: Buffalo, Utica-Rome. 1 Areas which are not designated as redevelopment areas, but which have been classified continuously as areas of substantial unemployment over the past year (March 1961February 1962). Unemployment in areas classified as areas of substantial unemployment usually represents 6 percent or more of the local labor force, discounting seasonal or temporary factors and where the outlook gives no indication of improvement in the near future. |