4 months in a row. Equally disturbing, the current official forecasts of plant and equipment spending in the coming year indicate that this vital economic factor will not have the zest which the economists have counted on to lift business activity to full employment levels. While Government surveys indicate business investment will total $37 billion this year, the Chase Manhattan Bank's economic bulletin. currently argues that we need at least $45 billion to achieve true prosperity.

Personally I have every confidence that business activity, even housing starts, will rise as the year goes on, but I am not equally confident it will be sufficiently rapid and lasting to bring full employment. In this connection let me quote from the January report of the Council of Economic Advisers. In discussing the prospects for full employment they state:

An expansion that slows down prematurely is less likely to be lasting. A slowdown, or even an expected slowdown, in the growth of sales can diminish incentives to enlarge productive capacity and inventories. A decline in capital spending and inventory accumulation can convert a slowdown into a downturn. For this reason, prospects for a lasting expansion rest heavily on the vigor of the upswing over the next few quarters."

I cannot agree with those who fear that the impact of a public works program would not be felt soon enough to help in our present situation. As evidence, they erroneously cite the administration's estimates that the budget impact this year and next would be relatively small. What this overlooks is the fact that under Federal grant programs, the funds are not actually paid out until the end of construction, long after the peak level of employment has been reached.

The fact is that these projects would get underway promptly. The public works advance planning program created by the Congress back in 1944 was expressly designed to build up a "shelf" of local construction projects which could be started quickly in times of economic slack. Right now, construction projects worth $1.7 billion are fully planned and ready to go and another $900 million are being planned. A substantial part of these would be eligible for aid under the proposed legislation. I believe it is crystal clear that this program will move quickly once the Congress acts and our job is to put this legislation on the statute books as soon as possible to get the contracts and orders moving.

None of us who support the proposals for an immediate program of Federal grants for public works pretend for a moment that this will solve all our problems. At the same time, I am at a loss to understand the reasoning of those who say that unless one single proposal will eliminate all unemployment then we should sit back and do nothing. Clearly there are those who use these counsels of perfection. as a pretext for inaction and to hide their true motives-their outdated beliefs that economic distress is no concern to the Government. The record is perfectly clear that the Government has long since assumed a moral obligation to do what it can to make our private economy work well and provide employment opportunities for all of our citizens who want and need work. The Full Employment Act of 1946 stated this explicitly and not a year goes by without legislation that repeats and confirms this principle.

Unquestionably a program of Federal grants for State and local public works and authorization for accelerated Federal construction will create new job opportunities, not only on the construction site but in the factories which produce the materials and equipment essential to construction projects.

Let no one doubt that a program of Federal grants would produce a real net addition to employment. This is expressly called for in the bills pending before the committee and is the obvious intention of its supporters. Some who are not familiar with the workings of municipal government have worried unnecessarily that these grants would simply be used to finance projects that would have been started anyway. This concern is wholly without foundation since it is a simple matter for the agency administering the program to look at a community's current budge to see what projects and what expenditures are already planned. The grant then would be made only if it accelerated spending and employment on a current project or was to be used for an entirely new project which would otherwise

be deferred.

I respect fully urge this committee to provide even more in Federal grants than the $600 million contained in the administration amendment. This is particularly needed in view of the fact, obvious to all of us, that other steps which I believe needed will not be taken. In particular, the proposal to authorize an across-the-board temporary reduction in Federal income taxes which would be of greatest benefit to those in the middle and lower income brackets is not likely to be enacted at this session. For the lack of other desirable legislation, the public works bill which emerges from this committee will have to carry a large share of our efforts to promote full employment.

Fortunately, this legislation combines two goals of highest priority. First, it makes a direct and immediate attack on unemployment, and at the same time, it will help to overcome the backlog of needed public works projects.

Hearings and field investigations conducted by my Subcommittee on Housing have been brought home with full force to fiscal problem of local government and the need for additional community facilities. City after city has told us how its normal growth is hampered because it simply cannot afford the construction projects essential to modern municipal government.

There is scarcely a town or city of any size in our country which has a fully adequate level of community facilities, such as water and sewer systems, hospitals, libraries, public buildings, streets and sidewalks, and the like. For too long now public investment has been a stepchild to our economy. It was necessarily put on the shelf during World War II; it was seriously impeded by materials shortages in the late 1940's; it was again restricted during the Korean war; and since then, it has been repeatedly stifled by recurrent periods of tight money. Meanwhile our rapidly growing population and the upgarding of public services demanded by our citizens have put crushing pressure on the ability of State and local governments to finance their day-to-day needs. We must all pay tribute to the vigorous efforts that municipal officials have devoted to the task of financing the needs of their citizens but the fact remains that local government, with its limited revenue and borrowing resources, cannot bear the entire burden and Federal financial aid is necessary.

The concern of those who claim that this proposal will unbalance the Federal budget is, in my judgment, badly misplaced. Whether or not we achieve a balanced budget depends primarily on the level of business activity which determines the flow of Federal revenues. A few years ago misguided efforts to balance the budget by slashing expenditures contributed heavily to the disastrous 1958 recession which resulted in a deficit of $12 billion-the largest peacetime deficit our country has even known. The economic stimulation provided through Federal grants for public works will result in greatly enhanced Federal income. Not only will these grants have a multiplied effect as States and local governments put up their share of projects costs, but inevitably private investment will be attracted by the availability of public works, and the increased purchasing power will generate higher levels of business investment and employment throughout the economy. Moreover it would be shortsighted to key all of our economic decisions to 1 fiscal year. The benefits of this legislation will be felt not only in fiscal 1963 but in the years after that and in the long run will undoubtedly more than pay for themselves.

A program of Federal grants at this time would, in real terms, actually cost little or nothing. Whatever dollar figure is put on the bill the economic facts are that we have idle men and idle industrial capacity going to waste. Acceleration of public investment now would not mean taking anything away from private demand. In fact, it would increase private demand, and clearly there is a large margin in the American economy to filfill the needs of both without strain. It is indeed regrettable that we have unemployment and excess capacity at the present time but it would be unforgivable if we failed to take advantage of the current slack to provide permanent and needed increases in our national wealth.

The Congress has voted in the past for American aid to our foreign allies for the construction of their public works; we cannot in good conscience do less for our own citizens. We can only meet our responsibilities as a world power by remaining strong and prosperous here

at home.

The choice we face is not whether to invest in public works or avoid any expense at all because unemployment itself exacts a heavy toll. Even apart from the human suffering of those walking the streets seeking work, there is the outright dollar cost of unemployment compensation which amounted to $4.7 billion in the last fiscal year alone and will be another $4 billion this year. In contrast, the incomes generated by employment-creating programs will add to the tax revenues of every level of government. The most important dollar cost of all, however, is the production lost through unemployment. In spite of the gains over the past year it is estimated that our current rate of national production is fully $28 billion below capacity. If we can close that gap it will means more goods and services for all of us and a stronger and more prosperous America. In recognition of the need to utilize idle manpower and help the unemployed by the most direct possible route, the bills now pending before the committee wisely direct this aid to areas suffering most seriously from unemployment. The three types of communities made eligible are those which have experienced at least 6 percent unemployment over the past year, those with longer term chronic labor

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surpluses which make them eligible under section 5(a) of the Area Redevelopment Act, and rural counties eligible under section 5(b) of that law. These criteria are well chosen and I am sure that I speak for many in expressing deep regret that it required so many years to get the Area Redevelopment Act on the statute books. Had that become law when it was first passed by the Congress in 1958, we would now have a program in full stride with a long record of achievement. Many communities which have suffered so badly in recent years would now be making their full contribution to the Nation's growth and output. Unfortunately it was not until last year that this program got underway. I think the progress it has made has been very commendable but, of course, it was never intended as simply a quick shot-in-the-arm solution to local economic problems. Its basic purpose is a fundamental long-range redevelopment of these depressed areas. This was made perfectly clear in the provision in the law that required each community to analyze its needs and resources and formulate an economic plan for redevelopment. Already over 300 communities have done this and I feel that these studies in themselves are a major step forward. However present national economic circumstances call for more immediate aid. Area Redevelopment Act provided a limited amount of local grant and loan authority for local public works but those funds were narrowly restricted by the requirement that a project aided must directly increase long-term employment opportunities. It cannot be used for the basic community facility needs of these areas which, in most cases, have languished for years because of the special financing problems which depressed areas face.

The

I hope the committee will bear in mind the somewhat differing circumstances of the three types of eligible areas. In particular, I believe that the rural areas which qualify under section 5(b) will undoubtedly be hampered in coming into this program simply because the communties are small. These rural areas generally have the longest record of low incomes, unemployment and underemployment. I hope that the committee will make up for the lag which these areas will undoubtedly experience by setting aside some definite amount of the grant funds to be held available for rural areas.

Mr. Chairman, I am especially pleased of course that many areas in my own State of Alabama would receive the aid they need under the proposed program. Three-fifths of our counties and the cities of Anniston, Birmingham, Gadsden, Jasper, Mobile, and Talladega would benefit directly by the new jobs which the bill would provide. Finally, I want to express my personal feeling that the time has come when the Congress should establish a permanent and continuing program of Federal grants for local community facilities to supplement the present loan program. Such aid has long been needed and is well justified. Even after further recovery we should see to it that the needs of our towns and cities, particularly smaller ones, are not pushed aside entirely by other demands. Local public works deserve a high priority and should not be turned on and off completely because of other economic developments.

Mr. Chairman, may I commend you and your committee for your hard work on this legislation. The problems with which we are faced are vital and pressing and I am confident that a substantial program of Federal grants for local public works will be approved on the floor of the House.

The CHAIRMAN. Thank you very much, Congressman Rains.

STATEMENT OF HON. GEORGE M. RHODES, A REPRESENTATIVE IN THE Congress FROM THE STATE OF PENNSYLVANIA

Mr. Chairman, distinguished members of the committee, the most important problem facing the Nation today is that of unemployment.

Despite the upturn in our economy as a whole, there are still an intolerably large number of areas across the Nation where 6 to 10, and, in some cases, even 14 percent of the working force is unemployed. That such a situation exists in the world's most prosperous and abundant nation is shameful and disgraceful. Something must be done.

Both of the bills before the committee, H.R. 10113 and H.R. 10318, if enacted, will help to guard against recession and unemployment in the future. To reach this same end, I joined with the able Senator from Pennsylvania, Joseph S. Clark, in introducing similar public works legislation in the last session of Congress. My bill is H.R. 7578, to which I call your attention.

To meet our present needs, Mr. Chairman, I urge the committee to give every consideration to the President's letter of March 26, asking for the immediate authorization of a $600 million capital improvements program in the Nation's depressed areas which have failed to share fully in the recent economic recovery. In the State of Pennsylvania, 426,000 persons, or 1 out of every 11 working men and workmen, are still unemployed. In Schuylkill and Northumberland Counties, both of which have been attached to my district, economic distress and unemployment are most serious problems. In these two counties, and in hundreds of similar areas throughout the Nation, millions of Americans live without hope for their families, without confidence in their country or their elected officials who represent them in the Nation's Capital.

There are those who cynically refer to all public works programs as wasteful spending or "pork." Nothing could be further from the truth. A public works program not only restores worth and dignity to the individual, it serves to create real wealth in new capital plant and equipment.

The last massive public works program was undertaken during the early years of the New Deal. Any objective study of that program stands as a tribute to its soundness and benefit to the entire economy. In the first 4 months of that program, 40,000 schools were built or improved, 12 million feet of sewer pipe were laid, 469 airports were built, 529 were improved, 255,000 miles of road were built or improved, and 3,700 playgrounds and athletic fields were built or improved. What fair and just person can refer to such accomplishments as "pork" or wasteful spending?

Since that last major effort to put our jobless back to work and care for the Nation's public needs, there have been two major wars, four economic recessions, and the staggering costs of peacetime defense. For years, pressing public needs have taken a back seat to more important defense and private charges. Because of this, there is a widespread shortage of classrooms, hospitals, clinics, public buildings, parks, and recreational areas.

The problem of unemployment is not a sectional one but a national one. It is not a political or partisan problem, but a bipartisan one. No civilized nation can complacently sit by while millions of its fellow citizens lack the opportunities and means to earn their fare.

Certainly, no one believes that one public works program by itself will solve the Nation's unemployment. However, if the immediate and long-term proposals are adopted along with the administration's tax reduction, investment, and other proposals to stimulate our rate of economic growth, we, as a nation, will have begun on the long road to full employment and production.