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CATERPILLAR TRACTOR CO.,

Peoria, Ill., March 29, 1962. Hon. ROBERT H. MICHEL, Old House Office Building, Washington, D.O.

DEAR BOB : I am writing you in regard to the President's request for standby authority to initiate $2 billion in public works projects, and in particular, to his March 26 request for $600 million for allocation to local public works projects, on a 50–50 matching fund basis, over the next 2 years.

As you know, we have supported the use of Federal funds for projects clearly of an interstate nature. This includes the Interstate Highway System. It also includes degrees of Federal participation in certain activities in the field of water management such as flood control, reclamation, watersheds, and other means of upstream water conservation.

These positions, incidentally, are generally consonant with those of the U.S. Chamber of Commerce.

This of course does not mean we recommend your support of Federal aid to school construction, community sewage treatment plants, or local recreational facilities. On the contrary, we shall continue to urge you to oppose such measures. By the same token, we recommend your opposition to the President's new public works program.

This program seems to make no differentiation between projects that are national or interstate in character, and those that are local and therefore properly the responsibility of local government.

The basic issue seems to be whether Americans are ready to accept and endorse Federal control of local affairs. The fact that a community needs a new park is cerainly no justification for the Federal Government to cause it to be built or to pay for half of it. The result of such is Federal control, loss of local initiative, and as has been demonstrated in other fields, the causing of a community to actually defer plans for local improvements in the hope of securing future Federal aid.

Further, we do not believe the President should be equipped with broad standby authority to spend $2 billion in public works projects.

Certainly a degree of executive latitude is necessary-we believe, for example, such as is justified in the case of the Trade Expansion Act where the administration needs to equip itself with some basic bargaining authority. But if the President is to be granted an expanded public works program, the Congress certainly ought to have the right to approve in broad terms the projects for which the money is to be spent.

The question of the effectiveness of “pump priming" measures is of course basic to this whole subject. It was once held that Federal public works expenditures should be made during a recession in order to stimulate recovery. But it now seems to be widely recognized that the effects of such activity are often so delayed, they are of little real use in counteracting a recession. So the recommendation now seems to be that large public works expenditures should be made while times are good and business on the upswing, so that the next downward trend in the business cycle will either not occur, or will be greatly cushioned. We seem to be coming to a program for full-time Federal public works spending: In good times to avoid or postpone bad times, and in bad times to bring back the good.

At the very minimum, the result of such an approach is an ever-increasing Federal participation in local affairs and in the economy of our country. Sincerely,

W. K. Cox, Vice President.

INVESTMENT BANKERS ASSOCIATION OF AMERICA,

Washington, D.C., April 13, 1962. Re Proposed Standby Capital Improvement Act of 1962 (H.R. 10317) and Public

Works Coordination and Acceleration Act (H.R. 10113). To Members of House Committee on Public Works:

Since some members of the committee were not present at the hearing on March 30 when Mr. Cushman McGee testified on behalf of the Investment Bankers Association of America, there is enclosed a copy of the statement which Mr. McGee submitted to the committee.

A question was asked, whether municipalities in redevelopment areas or in areas of continuous substantial unemployment can finance needed public works without the Federal assistance proposed in the bills under consideration. To supplement Mr. McGee's answer and the information in the attached statement, we submit the following examples of recent financing by cities in such areas at very favorable interest rates :

(1) On April 10, 1962, the city of Birmingham, Ala., sold $5 million of waterworks revenue bonds (maturing to 1962) at a net interest cost of 3.2037 percent.

(2) On April 9, 1962, the city of Huntington, W. Va., sold $1,800,000 of sewer revenue bonds (maturing to 1981) at a net interest cost of 3.0992 percent.

(3) On March 27, 1962, the city of Detroit, Mich., sold several issues of bonds aggregating $20,985,000 (the longest maturing to 1988) at net interest costs ranging from 2.579 to 3.194 percent.

(4) On February 13, 1962, the Philadelphia, Pa., School District sold $12 million of school bonds (maturing to 1987) at a net interest cost of 3.07 percent.

(5) On February 13, 1962, Los Angeles, Calif., School Districts sold $30 million of school bonds (maturing to 1987) at a net interest cost of 3.15 percent. On January 31, 1962, Los Angeles, Calif., sold $14 million of harbor department revenue bonds (maturing to 1986) at a net interest cost of 3.39996 percent. Respectfully,

GORDON L. CALVERT.

AMERICAN HOSPITAL ASSOCIATION,

WASHINGTON SERVICE BUREAU,

Washington, D.C., April 19, 1962. Hon. CHARLES A. BUCKLEY, Chairman, House Committee on Public Works, New House Office Building, Washington, D.C.

DEAR MR. CHAIRMAN : The American Hospital Association is interested in H.R. 10318, the Standby Capital Improvements Act of 1962, which your committee is considering. We are especially concerned with the provisions to make Federal grants and loans to accelerate capital improvement projects that are ineligible under existing programs. The renovation, modernization, and replacement of urban hospitals in areas of substantial unemployment is the particular activity we would like to discuss and encourage.

This association is a voluntary nonprofit membership organization. An overwhelming majority of the Nation's hospitals of all sizes, types, and locations, are members. They contain over 90 percent of the country's general hospital beds. Our objective is to promote the public welfare through the development of better hospital care for all the people.

In the past we have supported a variety of Federal programs dealing with general health matters and hospitals in particular. Renovation, modernization, and replacement of urban hospitals has been proposed by our witnesses in testimony before congressional committees. In those hearings, these points were disclosed :

Major emphasis of present legislation has been in rural areas. Their needs were greatest and hence their priority the highest. Left largely unaided, however, are the larger urban hospitals whose physical plants have deteriorated through age, exceptional utilization, and technical obsolescence.

A survey of hospital modernization needs was conducted by this association about 6 years ago. It indicated a need of at least $2 billion to modernize our older institutions. Only 2 years ago the Public Health Service released the results of its survey—2,255 American hospitals in need of modernization or replacement at an estimated cost of $3.6 billion.

The necessity for modernization is nationwide; at least 1,303 of the needy hospitals are located in metropolitan areas. Virtually all communities suffering from economic depression and substantial unemployment are represented. The largest hospitals, those of over 500 beds, and located in populous areas, show a need for renovation which is more than twice that of nonprofit hospitals in general.

Because existing law continues to require "special consideration" for "hospitals serving rural communities” as well as for areas “lacking adequate hospital facilities," modernization of urban hospitals must be assisted by other legislation, such as H.R. 10318, if it is to be accomplished in meaning

ful quantity. In many urban hospitals the plans are drawn and all is in readiness to commence renovation, modernization, or replacement. Only the money is lacking. Thus, in many of the economically depressed commi ties of the Nation, these projects would appear to qualify fully under the criteria of H.R. 10318, since they

(1) Can be initiated within a reasonably short period of time;
(2) Will meet an essential public need;
(3) Usually can be completed within 12 months after construction begins;
(4) Will contribute significantly to the reduction of unemployment; and

(5) Would not be inconsistent with locally approved development plans, in most instances. The loan funds also may be necessary in many cities where the institution or public body does not have readily available all of its share of the project's cost.

In supporting H.R. 10318, as it may apply to hospitals in areas of substantial unemployment, we respectfully suggest that,

Urban hospitals be made unquestionably eligible for participation in the standby capital improvements program irrespective of their present technical qualification for inclusion under the Hill-Burton program (Hospital Survey and Construction Act). The priorities under that law are such that the larger, older urban hospitals, with relatively few exceptions, cannot qualify for grants or loans to finance modernization, renovation, or replacement.

Where the Hill-Burton administrative machinery is to be utilized for hospital projects under the standby capital improvements program, the existing priorities should be waived so that rural preference will not prevent aiding the unemployed in the larger cities.

We have strongly supported the Hill-Burton Act and continue to do so. Therefore, we do not wish in any way to disrupt the integrity of the HillBurton program. However, where the Hill-Burton administrative mechanism alone is to be used to facilitate another Federal program, we do not

believe that the Hill-Burton priorities need prevail. We shall be pleased to provide any further information you might desire in this regard. We would appreciate the inclusion of this letter in the record of the hearings on H.R. 10318. Sincerely,

KENNETH WILLIAMSON, Associate Director.

CHAMBER OF COMMERCE OF THE UNITED STATES,

Washington, D.C., April 16, 1962. Hon. CHARLES A. BUCKLEY, Chairman, Committee on Public Works, House of Representatives, Washington, D.C.

DEAR MR. CHAIRMAN: The Chamber of Commerce of the United States urges the Congress not to relinquish its authority to review administration proposals for public works projects, as provided for in H.R. 10113, H.R, 10318, and similar bills. The chamber recommends that the House Public Works Committee table these proposals to grant the President standby authority to spend up to $2 billion for the following reasons:

1. The ability of Congress to control Government expenditures would be seriously weakened.

2. The current fiscal outlook requires spending restraint.

3. Federal funds would be utilized to finance projects that are the responsibility of State and local governments.

4. Massive public works spending programs have not been effective in combating economic recessions. 1. Congressional control of the purse.—The constitutional provision that "No money shall be drawn from the Treasury but in consequence of appropriations made by law * * *” clearly fixes not only the authority of the Congress with respect to Federal expenditures but also its responsibility. However, over the years, many methods of circumventing the appropriations process and weakening congressional control of the purse have been devised. Such devices as back

door spending (authorizations to expend public debt receipts) have removed huge amounts from the appropriations process to be expended largely at the discretion of Federal agencies.

A Treasury report ("Combined Statements of Receipts, Expenditures and Balances of the U.S. Government”) states that the amount owed to the Treasury by various Government agencies permitted to borrow from the Treasury was $33.4 billion on June 30, 1961. Since that time, passage of such legislation as the Area Redevelopment Act and the Housing Act of 1961, among others, have greatly increased the power to borrow from the Treasury. It is estimated that the current amount owed to the Treasury by Government agencies is nearly $36 billion.

The bills before you do not propose financing public works programs by the customary back-door spending method. Rather, they would transfer authority from other executive department funds. But there is little actual difference as far as congressional spending control is concerned. The amounts, up to $2 billion, which the President could utilize would be transferred by him from other programs with the understanding that Congress could later restore the funds. Congress would be placed in an after-the-fact position and, presumably, would feel obliged to restore funds it had previously authorized.

The national chamber is strongly of the opinion that continuous and critical review of our Government activities and spending authorizations by Congress, the executive branch, and the people is required in order that taxes and the debt may be reduced. The chamber views the proposals before you as contrary to this principle and, as such, a threat to sound national fiscal policy.

2. The current fiscal outlook.-The Secretary of the Treasury has announced that the administration will ask Congress to raise the temporary debt ceiling to $308 billion before the end of the present fiscal year. This will be the third request for an increase in the debt limit within a single year and, if granted, would permit an increase in the temporary debt ceiling of $23 billion above the permanent debt ceiling of $285 billion. While figures of this magnitude are difficult to comprehend, it should be noted that last year, when the U.S. debt stood at $290 billion, Representative Charles R. Jonas, Republican, of North Carolina, advised Members of the House of Representatives that the combined debts of all the rest of the free world stood at $197 billion. This was $93 billion less than the U.S. debt.

As to fiscal 1963, the razor-thin surplus which the President estimated in his budget document is now widely believed to be overoptimistic. It probably will turn out to be a deficit. When the Secretary of the Treasury testified before the Senate Finance Committee on April 2, he stated that the administration was still hopeful that a budget surplus for 1963 could be achieved. However, the staff of the Joint Committee on Internal Revenue Taxation has estimated that, even at the expenditure level estimated in the budget, a deficit of nearly $4 billion is likely for fiscal 1963.

The official estimate for the 1962 deficit is $7 billion and there are indications it may go higher.

Because continued deficit financing is a threat to the strength of the dollar both at home and abroad, restraint is required in Federal expenditures and serious attention must be given to the problem of first halting the pattern of continuous debt increases and then making provision for debt reduction.

3. State and local projects.—Implicit in the proposed legislation under consideration by your committee is the presumption that there is a Federal responsibility to make grants and loans for State and local capital improvements. The chamber does not share this view, and believes the Federal Government's activities in the public works field should be limited to those programs that are clearly a Federal responsibility.

The argument is often put forward that many communities are desirous of instituting capital improvements but are incapable of financing them. This contention has been effectively countered by the evidence presented to this committee on behalf of the Investment Bankers Association of America. Based on the actual lending experience of its members, the association concluded that the financing of public facilities by State and local government is presently at a record level and construction by local governments tends to operate automatically on a contracyclical basis which fosters increased construction in recession periods.

In addition, the point is often made that the possibility of receiving Federal aid sometime in the future can act as a strong deterrent to the inauguration of necessary State and local capital-improvement programs that otherwise would be started promptly. The legislation you are now considering could be such a deterrent.

4. Accelerated public works spending as an economic stimulus.-Although experience has demonstrated that public works construction cannot be efficiently adapted to relief operations or to stimulate the entire national economy effectively, such proposals are constantly made.

Following the recession in the national economy starting in the latter part of calendar year 1957 and lasting into calendar year 1958, a significant study was made by the Bureau of the Budget. This study resulted in a staff report entitled "Federal Fiscal Behavior During the Recession of 1957–58." The report is a comprehensive analysis of the many antirecession actions taken by the executive branch or Congress or both in an attempt to assess their effectiveness as factors in combating the 1957-58 recession. In transmitting the report to the President, the then Director of the Budget Bureau, Maurice H. Stans, emphasized a major conclusion of the study. He commented :

“The fiscal actions of the Government which gave the biggest boost to the economy in 1958 were the built-in stabilizers, such as automatic decreases in income tax revenues and automatic increases in unemployment benefits which took effect under existing law without the need for policy action by either the executive branch or the Congress * * *.

In considering a huge expansion of federally financed public works programs, it is important that the proposals be viewed in relation to existing programs and those proposals contained in the President's 1963 budget. An examination of the Federal budget for 1963 discloses proposed expenditures for civil public works at an estimated $6.5 billion. This amount represents a record expenditure level for these programs. In addition, the administration is requesting approximately $1.6 billion for national defense public works, which in combination calls for total expenditures for civil and defense public works in 1963 of more than $8 billion. These figures are cited to illustrate that Federal public works activities are presently a very considerable portion of the Federal budget and proposals to increase greatly the expenditure level of these programs should be viewed accordingly.

THE PRESIDENT'S AMENDMENT Subsequent to the introduction of the proposed legislation under consideration, the President addressed letters to the chairmen of the House and Senate Public Works Committees on March 26 recommending approval of capital improvements programs in economically depressed areas. This was proposed as an amendment to H.R. 10318 and other identical bills. This program would involve additional spending authority of $600 million. The chamber believes this proposed amendment by the President is subject to the same criticisms voiced above, with two modifications:

(a) The depressed area public works proposal would not avoid the appropriations process. However the disposition of the funds as to location and amount would be quite discretionary with the President and would represent a very real relaxation of congressional review of this type of program.

(6) The amendment applies to localities which have been designated as redevelopment areas or areas of substantial unemployment. This type of Federal activity does not get to the heart of the problem of unemployment in a given area any more than it does on a national basis. Proposals that the Federal Government solve depressed area unemployment problems appear to be based on the premise that national legislation can revoke the laws of economics, and the facts of geography, scarcities of natural resources, locations of markets, the desires of consumers, or the skills and personal will of workers.

For the reasons stated above the national chamber again urges the House Public Works Committee to table H.R. 10113 and H.R. 10318 and also the proposed Presidential amendment.

I would appreciate your making this statement a part of the record of your hearings on these bills. Cordially,

THERON J. RICE, Legislative Action General Manager.

STATEMENT OF THE NATIONAL AssociATION OF MANUFACTURERS The National Association of Manufacturers is pleased to have this opportunity to express its thinking regarding the President's proposal for the Chief Executive to have standby authority to accelerate capital expenditures as an anti

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