We come here as the spokesman for the workers most directly involved. Yet, I assure you, Mr. Chairman, that we are speaking as well for the welfare of all our fellow citizens and the progress of our country.

Mr. KUNKEL. Mr. Chairman, are we going to have a meeting tomorrow?

Mr. BLATNIK. Yes. We planned to meet tomorrow and also, if possible, on Friday morning. We have Members of Congress who are asking for time to appear.

Mr. KUNKEL. Are they going to be here tomorrow and Friday, the Members of Congress?

Mr. BLATNIK. We are checking on the schedule, Mr. Kunkel. We will know in a minute. Off the record.

(Discussion off the record.)

Mr. BLATNIK. The hearings are concluded for today and we adjourn until 10 o'clock tomorrow morning.

(Whereupon, at 12 noon, the hearing was recessed until 10 a.m. the following day, Thursday, April 5, 1962.)

STANDBY CAPITAL IMPROVEMENTS ACT OF 1962

THURSDAY, APRIL 5, 1962

HOUSE OF REPRESENTATIVES,
COMMITTEE ON PUBLIC WORKS,

Washington, D.C.

The committee met, pursuant to recess, at 10:10 a.m., in room 1302, New House Office Building, Hon. John A. Blatnik presiding.

Mr. BLATNIK. The House Public Works Committee will please come to order, resuming public hearings on Standby Capital Improvements legislation.

Our first witness this morning will be our friend and neighbor from the great Midwest country, the northern peninsula of Michigan, our colleague, the Honorable John B. Bennett.

Congressman, will you please take the chair and make yourself at

home?

STATEMENT OF HON. JOHN B. BENNETT, MEMBER OF CONGRESS FROM THE STATE OF MICHIGAN

Mr. BENNETT. Thank you very much, Mr. Chairman.

Mr. Chairman and members of the committee, I am appearing this morning primarily in support of a bill, a public works bill, H.R. 9895, that I introduced on January 25 of this year which would provide $500 million in Federal funds for immediate grants to areas of the country which had been certified by the Area Redevelopment Administration as depressed areas or areas of high unemployment or whatever the term may be. In other words, the program will be limited to those parts of the country that are most adversely affected at the present time, and have been for the past several years, with persistent and high unemployment.

The area redevelopment program is one for which I had high hopes insofar as its being able to do something for communities that were depressed with respect to stimulating and assisting existing industry and helping to bring in new industry, and, in general, providing capital funds for new plant equipment and what not, and thereby to provide new jobs. But the program has been in effect now for nearly a year and from my point of view it has been very disappointing insofar as actually doing the job that I think it was intended to do.

I will say very frankly that I was one of those who supported the bill. I have introduced in previous sessions bills of the same general nature which I think are necessary if we are going in some way or another to put economically distressed areas back on their feet.

I do not contend that this can be done with a $500 million public works program alone. But I do contend that something must be done

to assist areas such as the one I represent, and there are many other similar areas throughout the country, in their present period of distress. I have in mind a public works program which would provide Federal funds for projects such as street improvements and improvements to public buildings and up in my part of the country we have a lot of Federal forests and we need a lot of money to improve forest highways in that area-those kinds of projects which would make for permanent improvements in the community and at the same time would provide jobs for people who are unemployed.

I think the President's approach to this in his message to Congress in February and the proposal he made on March 26, has considerable merit and certainly ought to receive every possible consideration from this committee and from the Congress. But I would point out that if I understand his proposal correctly; that is, his $600 million proposal which would take effect immediately upon enactment, it does not provide for Federal grants, 100-percent grants, but rather provides for matching grants either by the State or by the locality which is affected.

Now, in speaking of my own area and in speaking for the State of Michigan for that matter, we just do not have any money to do any matching with a program such as this and none of the localities that are in my district would have any substantial funds to match this type of a program. Therefore, I think that while in the President's message he says something about areas that are exceptional cases where loans could be made available, from my point of view that would also be ineffective because to saddle a community that is as hard pressed as many of our areas are with a long-term loan that they would have to repay to the Federal Government would certainly not be beneficial to them. Frankly, I do not believe that they could repay it even if they agreed to do it, unless something unforeseen would come up in the future which would make their local tax situation look a lot better than it looks today or than it has looked for some time.

I recognize that this committee did not write the area redevelopment bill, but it seems to me that since the subject you are dealing with here is the immediate problem of trying to solve unemployment in these areas, you would have to consider the area redevelopment legislation and what it has done and what can be done with it to make it a better and more effective program.

First of all, I would like to call your attention to the report I have called an activities summary report from the Area Redevelopment Administration, which is dated April 2, 1962. Up to the present time, or up to April 2, they approved 112 projects from 28 States which involved 5,000 jobs and $9 million and 6,370 trainees. I have more than 5,000 unemployed people in several of the counties in my congressional district due to the drastic cutback in the domestic ironmining business in the past several years. But you can see from this report that having spent $9 million, or approved $9 million—and I do not know whether that has actually been spent but I assume it has been-but out of approximately $400 million that was appropriated nearly a year ago for the area redevelopment program, you can see that something is wrong. Either the law itself is wrong or is defective and it needs amendment or the administration of it is not effective. But certainly, these depressed areas have not received in the 9 or 10

months that the area redevelopment program has been in effect, any substantial benefits from the act.

I would like to point out one thing that I hope your committee will consider. It is one part of this act that I think is probably one of the keys to the fact that the program has been ineffective.

For the record, it is section 6 (b)-9-B. It is just a short paragraph and I would like to read it for the record. It provides that not less than 10 percent of the aggregate costs-and they are referring to the aggregate costs of the project-should

be supplied by the State or any agency, instrumentality, or political subdivision thereof, or by an Indian tribe or a community or area organization which is nongovernmental in character, as equity capital or as a loan repayable only after the Federal financial assistance extended under this section has been repaid in full according to the terms thereof and, if such loan is secured, its security shall be subordinate and inferior to the lien or liens securing such Federal financial assistance.

What that means in practical application is this: I will give you a specific example. In my hometown we have a pulp and paper company, and they would like to borrow $3 million, or in that neighborhood, to expand their plant capacity and to utilize some waste hardwoods of which we have millions and millions of cords and board feet up there for paper. In order to get this $3 million loan they have to get the local community, or some local organization in the community, to put up 10 percent of that amount, which, if we say it is $3 million, is $300,000. My hometown's population is less than 5,000 people. It is just a physical and practical impossibility for the people of a small community like that to raise $300,000 either through the city, or the village, or the county government, or by voluntary local community organizations that might be formed. The result is that under those circumstances the chances of the loan being approved are nil although the area redevelopment people are very enthusiastic about this particular loan. They feel it is the kind of a loan they would like to make because it is sound economically and it will provide jobs, and the prospects of repaying the loan look very good. So the ARA would like to make the loan and the company would like to have the money, but there is that bottleneck which is hindering, and probably will foreclose them from doing it which it has up to now. I assume from all of the information I have, this particular section will be responsible for this loan not being approved. There may be some States, and I understand Pennsylvania is one, which can put up money to help the local communities to loan money for projects like this, but in Michigan our constitution will not permit an instrumentality of either the State or any local subdivision of government to loan or borrow money to make loans to private enterprise.

So even if the State had the money, which they do not, or even if our localities had the money, which they do not, the law, or the constitution of the State would still preclude these instrumentalities from doing anything effective under this particular provision.

As I say, there may be some other cities or towns in Michigan and elsewhere that can loan or put up this money locally, but I doubt that there are very many as you can see from the fact that only $9 million has so far been approved for the projects out of this substantial sum that is available for these purposes. Something is wrong.

We all know that there are projects that want money and there is private enterprise that can use it. In my district, I can think just right offhand of four or five projects of private firms which would aggregate $10 or $12 million if they were approved. But none of them have been approved and I doubt seriously that any of them will be approved unless something is done in amending this act.

I recognize that this committee did not draft the act, but that it came out of the Banking and Currency Committee. However, since this public works program, in my judgment, is so closely related to the areas that the area redevelopment program is designed to assist, it should be your purpose to look carefully into the provisions of the Area Redevelopment Act and get the people if you haven't already done so get the people who are running that program up here to find out in what other respects it is deficient. Certainly, it is deficient in the manner that I have just described because that is a particular circumstance that I happen to be thoroughly familiar with in my own territory.

I personally believe that that provision ought to be taken out of the act completely, and if some local financing is required, they ought to leave it up to the borrower.

For example, in the case of the papermill that I have mentioned in my community, if they had to do so, I have every reason to believe they could raise the $300,000 or the 10 percent that would be required to be raised, but they cannot do it legally under this language. It has to be done by a local subdivision of government or some publicly created or civically or locally created independent organization. That provision has been a very cumbersome thing.

As to the public works phase of this, I would repeat again that I would urge the committee as soon as possible to pass some type of a public works program without any strings attached to it, and without any matching provision attached to it. I don't mean without any control attached to it. I would not want to see this money just thrown out of the window willy-nilly. I would want to see a working arrangement between the States and the Federal Government with some plans consummated for public improvements that are feasible, sound and sensible, and which will create employment.

I think this is an urgent matter, because while the recession, so called, is over, or has not affected many areas of the country, still in my area unemployment continues to be high. It is a very serious matter and it has been for a long time. In fact, in one of the counties of the district that I represent, there is approximately 20 percent of the entire work force unemployed. I guess there are other places in the country where that same situation exists and when it does exist something should be done. It seems to me that Congress has a duty to provide some kind of a program.

You can give these people welfare but that is not what they want. You can extend their unemployment benefits for a while but that is not the answer to it either. If you provide some money so that some worthwhile community projects can be constructed which will give employment and do something in a permanent way to benefit these communities, I think we will be softening this cost and taking care of the suffering and misery that persists in many areas such as mine, until