Mr. OECHSLE. State development credit corporations are spreading rapidly throughout the country, so I think in the not too distant future every State in the Union will have a State development credit corporation.

Senator SPARKMAN. How many are there now?

Mr. OECHSLE. There are in the neighborhood of 15 or more in the country. There is one in particular, in the State of Pennsylvania, where the State has put its own State funds in, and they are being very helpful in helping labor surplus areas and providing risk capital or equity capital for new businesses.

We just started one 3 years ago up in Massachusetts that is doing an outstanding job.

And, as a businessman, having built two businesses of my own over the years, my feeling personally is that if each State was on a competing basis with other States for new industries, and were, within their own State borders, building up the businesses within those States with the capital that comes out of those States from banks and insurance companies and businesses, that is the proper way to do it, rather than have taxpayers' money set up on a national investment basis doing the job.

I think the competition from State to State to get new industries in their various labor surplus areas would be much better helped if the State development credit corporations would do that financing.

Senator SPARKMAN. I raise one question as to that-and I admit that this may not be valid. I will not say it is a criticism; it is really a question, a doubt.

I notice you use the term over and over, "new businesses."
Mr. OECHSLE. And growing businesses.

Senator SPARKMAN. In other words, you would include existing businesses. I will tell you what I have been afraid of in the development of these State corporations, setting up these State development corporations. It was that their primary objective would be to reach out and pull some new business in.

Mr. OECHSLE. No, I think you will find, if you look over the history of the New England businesses, they have probably done more to help businesses within their State borders that are growing. That is one of the big problems.

Senator SPARK MAN. I will say we did have some good testimony from the Massachusetts corporation on the work they had done at Lawrence, for instance.

Mr. OECHSLE. Right.

Senator SPARKMAN. And, of course, you realize that this bill does not seek to eliminate the State corporations. It provides for tying right in with them.

Mr. OECHSLE. Well, it ties in with them, but it sets up a bit of a competition to them in some respects.

Senator SPARKMAN. We have discussed here ways of lessening or eliminating that competition. Nobody wants to destroy a good, going outfit.

Mr. OECHSLE. My experience over the years in building two businesses is that what businesses need today, particularly so-called small businesses and growing businesses, is equity or risk capital, or they need money to plow back as they grow, to buy new machinery, which

under our tax system at the present time, as Senator Capehart pointed out, is extremely difficult.

Senator SPARKMAN. Yes; I agree with you fully on that. And that is the reason that I, along with many others, the chairman of the full committee and others, tried very hard to get a modification of our tax laws this year when we were extending the corporate income tax, to do that very thing.

And for some reason I cannot understand why-a little, simple bill that would extend to business the privilege of rapid amortization on the purchase of used equipment, to bring it into line with the purchases of new equipment-I cannot understand why the administration would oppose that kind of a bill when it was recommended in the President's own report, the Cabinet Committee's report to the President, and endorsed by the President himself.

I do not mind saying to you that I often have a feeling of futility when we try to do something and run into these blank walls.

This idea of the national investment company was not mine originally. As a matter of fact, the original bill was not introduced by me; it was introduced by Senator O'Mahoney and I picked it up when Senator O'Mahoney had about 2 years' leave from the Senate. But the original recommendation did not come from me. It did originate in the Joint Economic Committee, and the Committee on Economic Development, I think, strongly pushed it.

Everybody seems to recognize the need, but when a bill is introduced there is objection to the form, and therefore they say, "Let us just not do anything."

If I gather the intent of what you say, it is that since we have the State organizations that are beginning to build up, let us not do anything; let us wait and see if they win out.

Am I fair in that conclusion?

Mr. OECHSLE. Well, I personally would prefer to see the job done by State development credit corporations rather than Federal.

Senator SPARKMAN. I do not mind saying to you that if we could get good organizations

Mr. OECHSLE. Rather than have Federal taxpayer's money put in Senator SPARKMAN. Get them widespread where they could do a job throughout the country, I would rather do it that way, too.

Senator CAPEHART. May I say this: I think here is our problem, not this specific bill or not this specific subject, but how far are we going and when are we going to quit having the Federal Government get into everything in America and ruin the American private enterprise system?

I think that is the big problem: Where do we quit? How far do we go, and when do we begin to stop?

You have an uprising now on the part of the taxpayers against terriffic Government expenditures, and yet each and every one of these things requires more expenditures and more money.

I think the problem that we have to decide-and I think that maybe the people will have to decide it themselves, and I think they will-is how far do we go? How far can we go with putting the Federal Government into new venture after new venture, one right after the other? They may be good things in themselves temporarily or permanently, but are you not just breeding a continuation of Government

controls and Government corporations and Government projects until the time will come when you have no private industry left?

That, I think, is the problem we have to face. If the American people want that sort of thing, then we will have to give it to them. But I do not think they do.

Senator SPARKMAN. I want to read from the report of the President's Cabinet Committee on Small Business. That is my bible on small business. I think they did an excellent job. Of course, they substantially picked up the recommendations that the Select Committee on Small Business had made 2 or 3 years earlier. Nevertheless, I think the Cabinet Committee did a fine job.

I quote the Cabinet Committee, one of whom was the Secretary of Commerce, Mr. Weeks. Talking about the impact of Federal taxation on small business, it says:

"The impact of this development"-referring to Federal taxation"has been especially severe on small business. Such concerns have

little or no occess to public markets for capital.'

Now, here is something to keep in mind. May I say we have had rather complete testimony from the State corporations. The biggest one in operation today is the one in Massachusetts.

Mr. OECHSLE. That is right.

Senator SPARKMAN. Their total capitalization is $760,000. How much equity capital are they going to be able to supply?

Mr. OECHSLE. They have made pretty close to 10 or 11 million dollars in loans in the last 22 years.

Senator SPARKMAN. Of the 6 corporations that have actually made some progress, the 6 New England corporations—and that is where the progress has been primarily made-have received 806 applications for loans, and have approved 253, for a total amount of $17,770,000. There is not much equity capital involved in that, in six States.

In just a hasty calculation, it looks to me like those loans average about $50,000. They are not going to build many businesses or buy much new equipment or even used equipment for that kind of money. Certainly we all recognize that this is no new experiment that is proposed in S. 2160, because many of our Government-established agencies are operating today quite successfully on this. There is the great savings and loan association business throughout the country through the Home Loan Bank Board.

Mr. OECHSLE. Do you not think, Senator Sparkman, that is a little different? When they make a loan on private property they get a mortgage on it, and that house has certain values.

Senator SPARKMAN. Oh, certainly.

Mr. OECHSLE. When you lend money to a business, you are gambling on the ability of that individual to make a successful business out of it.

Senator SPARKMAN. Yes, of course, it is different.

Mr. OECHSLE. It is different.

Senator SPARKMAN. Yes, there is a difference. I did not say they were on all fours, but analogous.

The same thing is true with the great, widespread farm-credit activities, and many others that we could name. Even the Federal Reserve itself was set up on more or less this basis to start with, and

the Federal Deposit Insurance Corporation, and many other such activities as that.

So I listen to my friend over here about Government participation in business, but somehow or other I do not run from it when we are working on a program that is so analogous to these others that have worked so well and are working so well, and he certainly would not check them in any way.

Senator CAPEHART. Of course, that is just my point. Where do we stop?

Senator SPARKMAN. I want small business taken care of, given an opportunity to get access to equity capital before we stop.

Senator CAPEHART. I think if we rearrange the tax laws, that will permit small business to plow their profits back into their business and we will do everything that small business needs and wants us to do. We will really do something for them that will be beneficial.

Senator SPARKMAN. You understand I am for the tax relief, and I am not a new convert to it. I have been advocating that. I set up the hearings in 1952 that went all over the country and made a very careful and a very helpful study on taxation.

By the way, Mr. Oechsle, I would like to go back to this idea, too, and I want my friend here and he is a very good friend to work with; we have worked together very nicely-to listen to this.

There is no taxpayers' money involved in S. 2160. We do not propose to use taxpayers' money or Government money to do that underwriting.

Mr. OECHSLE. But they do get some special treatment; do they not? Senator SPARKMAN. I am not talking about that tax. I am talking about the capitalization. You said it was using the taxpayers' money for the purpose of these things.

Goodness knows, talk about getting tax benefits, lots of businesses are getting tax benefits today, are they not, big businesses?

Mr. OECHSLE. Yes.

Senator SPARKMAN. In fact, we are hearing a good bit now about this latest benefit that was given to the Idaho Power Co. Mr. OECHSLE. That is out of our field.

Senator SPARKMAN. I know, but, as I say, I just happened to think of that one. I am not charging you with the responsibility for any

of them.

But the only underwriting of this is done through the Federal Reserve, and the Federal Reserve is free of taxpayers' money. It worked itself out. It was set up by taxpayers' money and it worked itself out to private capital.

Senator CAPEHART. I want to say about the Idaho Power, it was

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Senator SPARKMAN. I do not care to get into that.

Senator CAPEHART. Well, I want to say this. I am 100 percent sold and always have been, and I have introduced I do not know how many bills to permit 5-year amortization on the part of big business and little business, not only for new facilities but for used facilities, disregarding the war effort or any other effort.

There is another way that you can really help small business. Permit small business to amortize its facilities over a period of 5 years or even less; both new and used facilities.

There you really help the little fellow, because he can then go to his bank and borrow money to buy new equipment to build a new factory or to build an addition to his factory. He can borrow it from the bank because he can repay it with savings over the first 5 years of normal taxes. After 5 years, of course, he will be paying more taxes. If you want to really do something for him, give the little fellow the right to amortize his facilities, new and used, over the first 5 years that he owns them.

Mr. OECHSLE. In his initial growing stage?

Senator CAPEHART. Yes.

Mr. OECHSLE. It is the first 5 years in any new business that are tough, there is no question about that. I know that from personal experience.

Senator SPARKMAN. By the way, I want to say I am informed by the staff that there would be no loss of revenue by reason of any provision in this bill.

Senator CAPEHART. What do you mean by loss of revenue?

Senator SPARKMAN. Well, he raised the question about tax benefits, and I said a while ago it might be an indirect benefit, but I am told there would be no loss of revenue.

But I do not want to get away from this point that you have just made. As a matter of fact, I have said many times that I would like to see us adopt a policy of giving all businesses, not just a few that are picked out, the right to amortize their property any way they want to within certain reasonable bounds.

Senator CAPEHART. I am 100 percent for it, always have been.

Senator SPARKMAN. I think it would mean revenues for the Government.

Senator CAPEHART. Of course, we did change the tax laws to permit them to amortize

Senator SPARKMAN. New facilities.

Senator CAPEHART. The first year, I think, it is 40 percent, and it is a sort of graduating scale up to 5 years. It is much better than the old one, but I would like to be even more liberal in that respect in the present law.

Senator SPARKMAN. So would I.

Senator CAPEHART. Under the Defense Production Act, or, rather, under the ODM

Senator SPARKMAN. Defense Production Act.

Senator CAPEHART. The Defense Production Act, of course. They issued these necessity certificates such as they did in Hells Canyon. That, of course, is in connection with war work.

Senator SPARKMAN. That is where you pick them out. It is supposed to be in connection with defense work.

Senator CAPEHART. They have issued some 21,000 since we passed the law in 1950, and I think during World War II they issued something like 42,000.

Senator SPARKMAN. But let me get back to this. By the way, I note your comment about Senator Thye's bill, S. 1789.

Mr. OECHSLE. Yes.

Senator SPARKMAN. You comment favorably on that bill and the fact that the turning point seems to be that it does not do away with the Loan Policy Board.