Mr. SCRANTON. Secondly, one other minor question which had to do with areas like my own where we have developed, as you know, community development corporations, nonprofit corporations, there are a great many in Pennsylvania. They are concerned about this bill because they are fearful that they will have to go through a great many steps to get approval of their applications, namely, through any local community committee, State agency, and so forth. It is my impression from what you said that if the State approves such an application from such a body this would do the trick; is that correct?

Secretary HODGES. Well, it would certainly expedite it a very great

deal.

Mr. PATMAN. We assume, Mr. Secretary, that you will be available to clarify any issue that should come up?

Secretary HODGES. Yes, Mr. Chairman.

Mr. PATMAN. And we will feel free to call you if we absolutely need you.

Any other questions, gentlemen, before we conclude?

Thank you very kindly.

Secretary HODGES. Thank you, Mr. Chairman.

Mr. PATMAN. We will meet Monday morning at 10 o'clock in this room, and Secretary Freeman, Secretary of Agriculture, will be our witness.

(Whereupon, at 12:05 p.m., the subcommittee adjourned.)

AREA REDEVELOPMENT ACT

MONDAY, FEBRUARY 27, 1961

HOUSE OF REPRESENTATIVES,

COMMITTEE ON BANKING AND CURRENCY,

SUBCOMMITTEE No. 2,
Washington, D.C.

The subcommittee met at 10 a.m., Hon. Wright Patman (chairman of the subcommittee) presiding.

Present: Messrs. Patman, Reuss, Vanik, Miller, St. Germain,. Moorehead of Ohio, and Scranton.

Also present: Mr. Spence, chairman of the committee, and Messrs. Kilburn, and Widnall.

Mr. PATMAN. The committee will please come to order. We have as our witness this morning, the Secretary of Agriculture, Mr. Orville L. Freeman. The testimony, of course, is on H.R. 4569, the area redevelopment bill. We are glad to have you, Mr. Secretary, and you may proceed as you desire.

believe you have a prepared statement.

Secretary FREEMAN. Yes, sir.

Mr. PATMAN. You may insert that in the record and talk about it as you want to or you can follow the text if you desire, whichever is your preference.

STATEMENT OF HON. ORVILLE L. FREEMAN, SECRETARY OF

ARGICULTURE

Secretary FREEMAN. You are very kind, Mr. Chairman, and members of the committee. If I may, I would prefer to insert the statement in the record and then perhaps to paraphrase some parts of it by way of emphasis, rather than by burdening this committee with reading it which I am sure you can do more rapidly and better than I can.

(The statement submitted is as follows:)

It is a distinct privilege for me to appear before you in support of H.R. 4569, the area redevelopment bill.

This legislation is needed by the people in agriculture at least as urgently as it is needed in the cities and towns-and, as I will show, for basically the same.

reasons.

The bill offers, in my judgment, the kind of help that is most needed at this time to carry forward the Nation's attack on chronic unemployment, underemployment, and underdevelopment.

As Governor of Minnesota, I testified repeatedly in support of Federal legislation similar to this, and I discussed the need for it with the people of Minnesota on many occasions. At that time, I was representing the interests of people. in mining, manufacturing, distributing, retailing, and other forms of nonfarm business as well as the interests of Minnesota agriculture. Now, looking at the

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problems of underdevelopment and chronic poverty from the point of view of the Secretary of Agriculture, I find it would be appropriate for me to reemphasize the same facts and same conclusions as before.

NEED: JOBS

The reason this is true is that the root of the trouble in agriculture is the same as in other parts of our economy: There are not enough jobs to go around. Unemployment is the basic cause of underemployment, the basic reason we have pockets of poverty in rural areas. This is a conclusion that is being impressed upon us more and more forcefully by scientific research as well as by observation on the part of nonscientists like myself.

Degree of underemployment

I asked our research people to calculate the amount of underemployment in agriculture from the data they have and tell me how much unemployment this represents. They compute it at 1,400,000. There is enough underemployment each year among workers 20 to 64 years of age who live on farms to equal a full year of unemployment for 1,400,000 workers. That is to say-if we did not have so many people underemployed in agriculture, the Nation would have roughly 1,400,000 more unemployed workers than are currently reported.

It is clear that unemployment and underemployment are basically the same condition. We need more jobs.

Since World War II, the Nation's economy has not grown enough to put to work and keep fully employed all of our people who want to work.

Already farm families get a third of their net income from nonfarm sources. Of every 100 farm operators, 45 did some work off their farms in 1959, and nearly a third of the operators worked off their farms 100 days or more.

However, representatives of 95 percent of the rural electric systems of the Nation report that there is need for additional work off the farms in the areas they serve. With the labor supply increasing and with technology making an hour of work more productive, we have permitted a situation to develop where demand has been outrun.

Underemployment in agriculture has become an increasingly serious problem since the end of the war. An increasing number and an increasing percentage of farm families are found in the lowest income group of the Nationthe lowest one-fifth. In the 1944-47 period, 40 percent of the farm operator families were in that group, but in the 1955-57 period more than 50 percent were in it. Another way to see this problem is to look at actual income figures. In 1959, only about 13 percent of the families in the Nation had incomes less than $2,000, but about 36 percent of the farm families had incomes under $2,000.

The people want to work. Underemployment in agriculture is due to the national shortage of jobs rather than to inherent characteristics of regions or people. Department of Agriculture and State college research people studying the problems of specific areas find differences, it is true. The history of an area and the origins and history of a group of people are reflected to some extent in the opportunities available and the way the people react to them; but the differences among areas pale into insignificance when you consider this unifying similarity:

The American people wherever they are, whatever their origins and history, want to work. They aspire to better things for themselves and their children. They take jobs when and where they find jobs for which they are qualified. They are ingenious in putting their resources to work to make and sell useful goods and in selling needed services.

This is true of the people in the areas that are short of resources and buying power, as it is in other areas, contrary to what some of us have assumed too easily in the past.

This was brought out in results of a recent study that was conducted in northeastern Texas. The incomes of people living in the open country but working on nonfarm jobs were compared with the incomes of people who were in the same age bracket, who had no physical disability to limit their earning capacity, who had basically the same education and other characteristics but who had only their farm income.

The farm people without any outside income earned (and this was the average for 1955) only $1,754. Their neighbors with nonfarm jobs made nearly twice as much, an average of $3,347. The farmers could have done the same work their neighbors were doing. They had the ability but not the jobs.

I am sure the same general facts would hold in all of the areas where this bill would apply. The people of these areas are in need of help because there are not enough jobs, rather than being out of jobs because they are handicapped or because of poor attitudes.

I am sure I do not need to support these conclusions for the benefit of the members of this committee. You know at least as well as I that among your constituents the qualities of good citizenship are found in all areas and all groups-not just those with the greatest advantages. However, I do want to get these facts on the record because people who have these facts can more easily see how H.R. 4569 gets to the heart of the problem of rural poverty and why it should be passed without delay.

KEY PART OF THE BILL CREDIT

The main thing this bill will do is to provide credit where it is most needed to start or expand useful, job-creating enterprises.

Credit is the missing keystone for the arch that can join the island of poverty to the mainland of prosperity.

Equally important, however, is the fact that this bill provides for the right kinds of credit-loans with technical assistance before and after the loans are made, vocational training, and grants for subsistence payments to people going through a period of training or retraining.

Why is Federal credit needed? It is natural to ask this question because it is natural to assume that private capital and private enterprise will move in and develop industry in areas that offer sufficient promise to justify investment. The trouble is that depressed areas do not compete strongly with places that are already better developed. In northern Minnesota, for example, we have locations where resources and high class manpower are available but where new industries would have to provide their own water purification plants, sewage disposal plants, and other facilities which are usually provided with public funds. Where business has been bad for a long time, the welfare load has gone up, and remaining business people are struggling to pay taxes which represent an increasing share of their income. The levy for welfare often exceeds that for any other purpose. I know of counties where it is more than 30 mills. This heavy tax load for welfare hurts the cause of schools, roads, fire departments, libraries, and other community facilities that require public funds, as well as churches and other privately supported institutions.

Where business is bad, many people get behind in repaying loans, the local bank funds are tied up, all credit gets tight; the very people who can best see the business opportunities of the area and would normally develop those opportunities become powerless to perform their natural function in the economy. On top of this, the areas that have suffered longest from chronic underdevelopment and poverty receive the first and hardest blows when employment falls off in other places. Typically, the people who lose jobs first in a business decline are those who are least trained and probably last hired, and those are more often than not the people who came from underdeveloped areas. They tend to go back where they came from, not only because their relatives are there but also because that is where it is easiest to find a place to live and produce a little food, where it is cheapest to get a few tools and a little land for farming until another job opens up. The land available is cheap to rent because it is poor, and the returns per hour of labor are bound to be low because the machines and materials for modern, efficient operations require a capital investment beyond the means of the operator.

Nor is that the end of the unfortunate sequence of events. The family that returns to the old home surroundings adds to the load on the local school and may, before the winter is over, add to the welfare load. Suppose the worker who lost his job and returned home is a little past the age bracket in which industry prefers to hire. He may never get away from the old home township again. If not, he will have lots of company because many of his friends and relatives are also in the upper age brackets and have either come back or were never able to get away.

Many of these people would have been hired if more jobs had been available. Others would have been attracted to employment elsewhere if the job market had been a little better or if they had happened to hear of a good job at the right time. Whatever the reason, they are there trying to make a living in an area that is short of resources, has more than its proportionate share of the