annually over the next decade for benefits which would be bound to make it attractive for servicemen to leave military service after a short term. This would be especially regrettable because the measures designed to retain qualified personnel have begun to show the intended effect, as witnessed, for example, by an increase in reenlistment rates among first-term enlistees from 15 percent in 1955 to 30 percent in 1959.

We believe S. 1138 would tend to halt or even reserve this upward trend of reenlistments.

That the proposed readjustment assistance would have an adverse effect on reenlistments is illustrated by experience with the Korean GI bill. Air Force surveys when the Korean GI bill was coming into full effect showed that 40 to 45 percent of the personnel leaving service said they were doing so to take advantage of veterans' educational benefits. On this same basis S. 1138 could be expected to cancel out the incentives already offered for career service by encouraging service for periods just long enough to qualify for readjustment assistance benefits. Moreover, it can be anticipated that the new educational benefits would be of greatest attractiveness to those capable servicemen whom the Armed Forces need most.

(3) In addition to the foregoing factors affecting the military services and their manpower, S. 1138 has significant implications for education in America, and as such is open to a number of objections:

First, financial assistance would be based simply on an individual's military service and not on his need, aptitude, or ability, except to the limited extent that S. 1138 provides loans instead of grants for college students in certain cases of lower scholastic attainment.

Second, it will not direct Federal funds where they are most needed in the educational field. It will not significantly help with the problem of reaching many among the most qualified high school graduates who do enter higher education. For example, it is estimated that among able high school graduates, three times as many girls as boys fail to go to college, yet S. 1138 would assist boys almost exclusively. Furthermore, since assistance would be provided only on the criterion of military service, S. 1138 would not necessarily augment our resources of educational and vocational skills in fields critical to our national security and welfare. It would channel Federal funds into a new student assistance program, based on entirely different premises than, and competing for classroom space and Federal funds with, the highly desirable and successful programs authorized by the National Defense Education Act. We believe that first priority for additional Federal funds should be given to construction of college facilities, as has been proposed by the President, rather than to new student aid benefits.

Third, considering the many competing demands for Federal funds, the need for large-scale financial assistance to students such as would be authorized by S. 1138 is not evident. Financial assistance for qualified students is already available in substantial amounts through Federal, State, and private funds. Federal support has increased in recent years not only through the National Defense Education Act which will provide contributions for 100,000 loans in 1960, but also through support under governmental research project grants and special programs supported by the National Science Foundation, the Atomic Energy Commission, and the Public Health Service. State scholarship programs now exist in 44 States and private programs also provide substantial assistance. Hundreds of thousands of college students are thus aided in some measure through these various sources and they constitute a significant proportion of all students, particularly among those with ability and need.

Finally, it should be noted that the Federal Government already is providing substantial financial assistance for vocational training. The 1961 budget for the Department of Health, Education, and Welfare recommends $39 million in grants to the States for the promotion of training in agriculture, industrial trades, and similar skills. In addition, $9 million is proposed in appropriations under the National Defense Education Act for vocational training in skills vital to the national defense, and the Department of Labor also carries on a program for apprenticeship training. Federal-State-local government support for vocational training is now running well over $200 million annually, a significant part of which is spent for adult education in which ex-servicemen undoubtedly participate.

(4) The proposed home loan guarantee program for peacetime ex-servicemen which S. 1138 would create represents an unwarranted duplication of the general Federal Housing Administration loan guarantee program. The latter program

is available to ex-servicemen as well as to persons without prior military service and now has exceptionally low downpayment requirements of as little as 3 percent for purchase of houses in the lower price ranges. Nor do we believe it would be sound or equitable to provide direct Federal loans for peacetime ex-servicemen. Again, as in the case of the educational benefits provided by S. 1138, we do not believe this loan assistance is warranted as readjustment assistance because of the vast difference between peacetime and wartime service.

In summary, the Bureau of the Budget believes that the education and training and the loan benefits for peacetime ex-servicemen proposed in S. 1138 are not sound in principle. We do not think that military service in peacetime provides a sufficient or an equitable basis upon which to predicate eligbility for the extremely valuable benefits which this bill would confer. The proposed benefits are not needed for bona fide readjustment purposes, and they are not sound proposals for Federal action in their own right. The education and training benefits under the bill would in fact represent a vast program of Federal aid to education out of keeping with the principles which have hitherto guided the Federal Government in this important field. The proposed loan programs would duplicate unnecessarily the home loan assistance which is already available.

For these reasons, the Bureau of the Budget opposes extension of special educational and home loan benefits for peacetime ex-servicemen. While the President favors authorization of a program of vocational rehabilitation for peacetime ex-servicemen, sections 2 and 4 of S. 1138, providing the educational and home and farm loan benefits, would not be in accord with the program of the President.

Sincerely yours,

MAURICE H. STANS, Director.

Representative OLIN E. TEAGUE,

SYRACUSE, IND., February 21, 1960.

Chairman, House Veterans' Affairs Committee,
House Office Building, Washington, D.C.

DEAR SIR: At the present time, public hearings are in progress on a bill to provide Treasury financed college scholadships for peacetime veterans. I am opposed to such a bill for several reasons, and respectfully request that your committee reject this bill. I am opposed to this bill, even though I am classified as a peacetime veteran serving in the U.S. Army, 1948-49, for the following rea

sons:

1. The cost of administrating such a program would be staggering. Present taxes are high enough, and the national debt increases constantly.

2. The original GI bill was given for service in wartime and subsequent readjustment to civilian life. Under the present terms of the bill under consideration, those persons who serve between January 31, 1955, and July 1, 1963, would receive almost identical educational benefits granted to veterans of World War II and the Korean war. The period of transition from wartime service to civilian life was much more difficult than the temporary transition of a peacetime serviceman. Supporters of this bill claim that the peacetime veteran is exposed to the dangers of war and therefore is entitled to these educational benefits. I recall that the threats of war and global tension were prevalent during the period I served in the Armed Forces. It's strange that no one considered the plight of these peacetime veterans and their readjustment to civilian life. Among the duties that go hand in hand of a good citizen is that of serving one's country in time of war without thought of monetary or personal gain. Evidently some people forget that some of our wartime servicemen died for their country-so that others may live free.

I can speak from personal experince that anything one has to work hard for is appreciated much more than something given free. If these peacetime veterans want a college education, let them work their way through college or save their money before going to college. Others, including myself, have done this without ill effects.

Sincerely yours,

EDWARD ADERKAS.

Mr. DORN. We are pleased to welcome before the committee at this time our colleague, Hon. Joseph Montoya, of New Mexico.

You may proceed, Mr. Montoya.

STATEMENT OF HON. JOSEPH M. MONTOYA, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NEW MEXICO

Mr. MONTOYA. Mr. Chairman and members of the committee, I appreciate the opportunity of appearing before your committee in connection with S. 1138, the so-called peacetime GI bill.

This bill provides needed legislation which appears long overdue. The thousands of young men whose career development is interrupted when they are drafted are deserving of assistance after active service with the Armed Forces. These men and women are a part of our defense effort and are entitled to reasonable education opportunities in order to compensate them in some measure for the opportunities which were missed because of service.

As you know, the legislation provides that three major types of readjustment assistance will be made available to post-Korean veterans. These are: First, educational and vocational training assistance; second, vocational rehabilitation training for veterans with service-connected disabilities; and third, guarantee and direct loan assistance for the purchase of (a) homes, including housing on farms, and (b) farmlands, livestock, and machinery to be used in farming operations conducted by veterans.

The bill is patterned closely after the forms of assistance provided under the GI bills for veterans of World War II and the Korean conflict. It would apply to veterans who first entered the Armed Forces after January 31, 1955, the date when the President ended the Korean program, and those who will be entering until July 1, 1963, when the compulsory draft is scheduled to expire.

The enactment of such a bill would have a salutary effect on veterans in New Mexico. I would like to point out that 37,000 World War II veterans and 12,000 Korean veterans from New Mexico received training of various types under the GI bills. It is estimated that some 20,000 New Mexicans will have served in the Armed Forces between January 31, 1955, and July 1, 1963, when the present draft law expires. Of these 20,000, an estimated 7,000 will take advantage of the training provisions contained in S. 1138, should it become law.

I believe it is the duty of the Government to deal fairly and honestly with those who served in a military capacity. I do not believe that in this respect there should be a marked distinction between those who serve during actual wartime and those serving during peacetime. In our era our Armed Forces are required to prepare for mobilization promptly and efficiently-whether peacetime or wartime, each trained veteran is an integral part of our defense effort.

We are all well aware of the benefits which the GI bill brought to the Nation as a whole in effect. This measure raised the average educational level of millions of veterans and this bill would accomplish no less. The need for scientists and engineers and others trained in the technical fields is unquestioned. This legislation would provide an education program for thousands of veterans who might otherwise never have an opportunity to continue their education. It would be a

travesty not to take advantage of the potential capabilities of the young veterans who throughout their lives could add so much to our progress and to our very defense.

Mr. DORN. Thank you, Mr. Montoya.

Mr. MONTOYA. Thank you, Mr. Chairman.

Mr. DORN. Mr. Driver, are you ready to proceed?

STATEMENT OF W. J. DRIVER, CHIEF BENEFITS DIRECTOR, VETERANS' ADMINISTRATION (ACCOMPANIED BY FRED B. RHODES, GENERAL COUNSEL; TIMO T. F. DALEY, ASSOCIATE GENERAL COUNSEL; RAY BLAND, DIRECTOR, LEGISLATIVE PROJECTS; ALFRED T. BRONAUGH, ASSISTANT DIRECTOR, LEGISLATIVE PROJECTS; W. G. GUNDLACH, ASSISTANT DIRECTOR, VETERANS' REHABILITATION AND EDUCATION SERVICE; FRED H. BRANNAN, PRINCIPAL ASSISTANT TO ASSISTANT DIRECTOR FOR PROGRAM ANALYSIS; AND PHIL BROWNSTEIN, DIRECTOR, LOAN GUARANTY SERVICE)

Mr. DRIVER. Yes, sir.

Mr. DORN. We are delighted to have you, as always. We appreciate your friendliness, enthusiasm and courtesy. It is always a pleasure to have you.

And I think we have general counsel Fred Rhodes here for the first time. We welcome you Mr. Rhodes.

You may proceed.

Mr. DRIVER. Thank you, Mr. Chairman. I have a statement, which, if it is agreeable, I will read, sir, into the record.

The bills presently being considered provide for readjustment assistance to persons who served in the U.S. Armed Forces during peacetime.

Such legislation enacted to date has had the underlying purpose of extending education and training, loan guaranty, and similar benefits to veterans whose normal activities were seriously disrupted by wartime service. The VA does not recommend favorable consideration of legislation which would extend these benefits as a reward to peacetime ex-servicemen not subjected to the hazards and deprivations inherent in wartime service and who do not face an urgent need for assistance in their social and economic adjustment to civilian life. To place them on a part with wartime and combat veterans would not be justified. Not only would the time-honored position of the combat veteran be impaired by granting equal benefits to the peacetime ex-serviceman-but the economic demands on the Nation to provide these benefits to this group would be out of proportion to the obligations arising from their service and need.

And I might say this is with no intent to downgrade the service of these men, and certainly not their need.

If I may take a moment at the beginning, I would like to briefly describe the veterans' benefits which are now available to persons who serve during peacetime. The most important of these are

(1) Compensation for service-connected disability;

(2) Payments to survivors for service-connected deaths;

(3) Hospital and medical care for service-connected disorders. and hospital care for non-service-connected conditions if the exserviceman also has service-connected disability;

(4) Housing assistance for veterans with loss of lower limbs from service-connected causes;

(5) Insurance for the service disabled;

(6) Burial allowance (if the ex-servicemen also has a serviceconnected disability); and

(7) Unemployment compensation.

The benefits proposed for peacetime ex-servicemen by some of the bills are identical with those afforded the World War II and Korean veterans. Other bills provide benefits which differ somewhat in scope but are still significantly similar. Using S. 1138-the Senate passed bill-as an example, we note many of its important aspects are nearly parallel to the benefits extended to veterans of wartime service. For example, under prior readjustment programs the basic service requirement is fixed as a period of 90 days on active duty; under the proposed bill the period is 180 days. The loan assistance program excludes eligibility for business and insured loans and provides for payment of a loan guaranty fee of one-half of 1 percent of the loan amount but otherwise provides the type of program most wartime veterans received. The loan feature of the readjustment training section of the bill will apply only to college trainees. Others will enjoy the benefits granted to veterans of wartime service.

In my discussion of the major provisions of these bills, I would like to elaborate on the reasons for VA's recommendations on the extension of benefits traditionally reserved for wartime veterans, to those with peacetime service.

Home and farm loan guarantees.

The VA cannot recommend favorable consideration to the granting of loan benefits to peacetime ex-servicemen.

The concept of a loan guaranty program for wartime veterans arose from circumstances which developed from World War II and which are not present in the situation faced by the peacetime ex-servicemen. These circumstances establish a need for assistance for World War II veterans in their readjustment to civilian life. Some of this need was met by the loan guarantee program.

Each day the Armed Forces were discharging thousands of returning veterans. Many of them had served from 3 to 5 years in the Armed Forces. They were returning to their families-families which in many cases were established during their period of service. They were "new" civilians in competition with the rest of the citizenry for the housing slowly becoming available to relieve an unprecedented housing shortage. Those veterans who desired farms or businesses had to face the competition of others for the money available for investment in those enterprises. Most veterans had not been able to accumulate substantial savings. The conventional mortgage money available with "one-third down" was useless to them. In the homeloan field the FHA financing then available was requiring a minimum of 10 percent down. This was a financial obstacle which most veterans could not overcome.

So the loan guaranty plan was devised to eliminate the need for substantial downpayments in these financing endeavors of veterans.