which would be a prerequisite of the revenue-sharing benefits, or revenue-sharing grants, that they would provide for labor relations coverage similar to that under the Wagner Act-under the National Labor Relations Act-or parallel to it.

This would, of course, then establish a national labor policy for the States as against the chaotic situation which exists now in 50 different jurisdictions.

Thank you.

Mr. FOUNTAIN. Thank you very much for your statement.
Mr. Weiss?

Mr. WEISS. Thank you very much, Mr. Chairman. I want to commend these witnesses. It is refreshing to have testimony which seems to be related to the real America.

A lot of the rhetoric that we hear around here and that we have been hearing for the last couple of months seems to have no awareness at all and no recognition of direction in which the Nation's economy seems to be going. This is at the time when the game plan of the administration seems to be to throw millions of people out of work and making the lives of the people and their localities even more grim.

We, in Congress, are hell-bent on exacerbating that situation by eliminating whatever cushion or safety situation that may exist when a terrible occurrence undoubtedly will take place.

I hope your voices will be at least attracting some attention and, hopefully, they will be listened to.

However, at this point, there seems to be an inexorable tide against your voices.

Thank you, Mr. Chairman.

Mr. FOUNTAIN. Thank you, Mr. Weiss.

Mr. Lucy, you acknowledge that inflation is our society's most important problem. I certainly agree. You stated that the effort to balance the budget to fight inflation is "so much bunk." That view is shared by a lot of people. I think the President himself has said that balancing the budget, per se, is not going to stop inflation. Maybe we should have started in this direction a long time ago on a more gradual basis where the impact would not have been as severe. If that had been gradual, we might have done better. We have seen an increasing number of programs, an increasing national debt, and increasing interest on the national debt.

I have mixed emotions about a sudden balancing of the budget. Yet, I think there is merit to the position that as painful as it may be-and it is going to be painful if we balance the budget-that we have to accomplish it. We are concerned about many programs which I certainly voted for. I am hopeful that if the budget is balanced, those programs where the need is greatest will be hit the least. We hope they will have to make the least sacrifices. But I realize we will all have to make some sacrifices.

However, I do not think there is merit to the position that if we can balance the budget-and we have not done it yet-then we will have made a start. I heard yesterday that the Budget Committee has already added $15 billion to the 1981 budget. I do not know if that is true, but I think this indicates the problems we are faced with and the concerns of people about the impact of whatever action is taken.

What I am saying is that I do think there is merit to the position of the President that the American people, from all walks of life, are becoming concerned that the Federal Government really does not know how to keep its fiscal house in order. We have been spending too much money. In all probability, we have not taken a careful inventory of some of the older programs that were enacted many years ago with a view toward assessing whether or not we need them today. In many instances they make local and State governments spend money which they otherwise would spend in some other area.

The feeling is that if we restore the confidence of the American people to the belief that we can balance the budget, the psychological impact will be tremendous. I do not think government is the sole culprit. I think we, as citizens, have been enjoying a kind of prosperity that we did not necessarily have to enjoy. We could have done without some things. There are some things we would like to have, but we do not absolutely have to have them, and we can do without them. I am talking about all of us as citizens, both privately and collectively.

I have seen evidence of extravagance at local and State levels. When I talk about extravagance, I do not mean that these things are not desirable, but that maybe they could have been postponed until other obligations had been met.

I just got back from an Interparliamentary Union meeting in Oslo, Norway, where some 80 countries were represented in parliamentary debate. This was on a number of subjects.

I might add that we were fortunate enough to get on the agenda for debate and won it with a resounding vote-a resolution condemning Russia for its invasion of Afghanistan. Also, we condemned Iran's actions with respect to our hostages. This strongly suggested that the hostages should be released immediately. This was not just another organization, but one composed of elected representatives of all the Nations involved. There were, of course, a few that were not elected under the system of democracy to which we are accustomed.

In many of those discussions during the course of our meeting, we learned that many parts of the world are going through the same experience we are. Many are much worse off than we are.

I was dumbfounded by the prices when I paid for some of the nominal meals equivalent to a hamburger at one of our fast food places. Incidentally, we found a McDonald's in Brussels on the way back. I enjoyed a good American cheeseburger there and some frenchfried potatoes.

But many other countries are going through the same inflationary process. It seems to be worldwide. Not only are we going to have to get our house in order, but the whole world is.

There is merit to some of the criticism that has been leveled at the sudden balancing of the budget, which is resulting in some cuts. However, all of us must be prepared to tighten our belts somewhat.

Let me ask this question. Has your organization made any in-depth study and developed an approach which you have recommended, or will recommend, to the President and the Congress for fighting inflation?

Mr. Lucy. Certainly, Mr. Chairman. Let me say this. Let me comment on your prior statement. We recognize that inflation is one of

the most critical problems that we are faced with. I agree with you that it is a worldwide problem.

However, the attack on inflation cannot be perceived as a onefactor or a one-facet attack.

There is the question of the budget. You put it well. It is designed for psychological impact. Probably what has led us to the point where we need that psychological boost is the political rhetoric that gives the impression that the budget is out of balance as a result of programs that are supportive of the less fortunate of our society.

I suspect that that is where we are coming back from. I think that when people say the Federal Government has lost its ability to deal with its household that that reflects a lack of knowledge of exactly what the Federal Government happens to be.

To balance the budget, if you are going to move in that direction, clearly means you are going to have to balance it out of those discretionary areas of the budget where you can do it which are the particular areas that affect people.

I think the whole question of fighting inflation is a two-pronged program. Clearly we have to do something with regard to the spending, but at the same time we have to do something about economic policy.

We have suggested that a stronger and more firm posture be taken with regard to economic controls. I don't think wage controls and price controls in and of themselves will work to deal with inflation, but controls over the entirety of economic activity will stabilize inflation probably to the point where we can then take a look at positive steps in addition to that.

What we have is political rhetoric that plays well in Peoria but the impact of it in terms of the well-being of our country is what I suspect you and your colleagues need to measure.

As we discuss revenue sharing, we talk about the fact that particular kinds of responsibilities that are shared between State and local governments will have to be reduced or some other means of paying for them will have to be brought about.

That is one-half of the equation. To attack inflation, certainlyinterest rates, dividends, profits-all of these are factors in the economic picture that nobody wants to address.

As we look at the whole question of what has been taken out of the economy, the energy community I think is doing pretty well, and little concern has been expressed for the kinds of profits that have been reaped there. I think all of these are approaches that can

be made.

A short answer to your question is yes. We have suggested to the administration and certainly in testimony before various congressional committees that perhaps we ought to be looking at an overall economic control as opposed to just trying to simply control wages.

The history of the last few years has certainly indicated that wages are chasing prices and not the other way around.

Mr. FOUNTAIN. I agree with you. I don't think anyone ought to get the impression that we have inflation solely because of the cost of these programs. A combination of factors have brought on inflation. The action of the OPEC countries in connection with oil has had a

tremendous impact. Everything is affected by the cost of oil, including transportation, food and clothing. Many people do not realize that many of their clothese are made from petrochemicals.

It is unfortunate that when a decision is made to do something that you cannot look back in the past and recoup what you have lost. There is $15 billion worth of military equipment in Vietnam, or thereabouts, which could be used for our own defense purposes now. It was considered too expensive to bring back and, of course, under the circumstances it could not have been brought back.

However, I think you are right. These programs are not the total reason for inflation. They simply are part of the total picture.

Mr. LUCY. May I just add this, Mr. Chairman?

Mr. FOUNTAIN. Certainly, we are seeking a viable solution. We cannot go on increasing and increasing the national debt. We have to come to a day of reckoning. Otherwise there would not be any jobs that pay anything, and people will not have any economic power. We would be bankrupt. Go ahead, Mr. Lucy.

Mr. LUCY. I was going to say this. As we look at the Federal budget itself as a factor in, let's say, economic planning, and you look at those parts of the budget that exist as a reaction to congressional legislative programs which are excluded, I suspect, from the ability of the President to alter, then you have really only two pieces left. You have that piece that is the defense side, and the domestic program side. And, at least most studies show that defense spending is the most inflationary kind of spending.

Everyone is concerned with security, and so if you make that part of it sacrosanct even to the extent that you are increasing it by some real figures, then we are down to that piece of the budget that we can cut. In the estimation of many it is not what causes the real problem in terms of governmental spending.

I am not an economist, so I cannot say exactly what will work. But we do know that we have never experienced the levels of inflation that we have now. At least by all indications, what we are proposing now is not working now. This would lead me to believe that we ought to at least take a look at some other alternatives. Theoretically, the decontrol program was supposed to generate profits that would go back into domestic exploration which would cause a reduction in prices. That is not quite the case now. I think we have seen the entire energy community simply taking advantage of the situation, and taking out what profits they can.

We would certainly institutionally work with any responsible group in terms of developing something that at least has a chance of working. Right now we have nothing.

Mr. FOUNTAIN. I am delighted that we do not have the full responsibility, but these are important things for us to get out on the table. Mr. Cantor?

Mr. CANTOR. Let me emphasize and reinforce a point that you made a few moments ago, Mr. Chairman, about balancing the budget in such a sudden fashion.

We should also keep in mind from an overall economic policy standpoint that the current 1980 deficit is about $36 billion and the new budget proposals of the President are not for a balanced budget, but entail cutbacks to achieve a surplus of about $16 billion.

In an economic sense we are talking about a swing in 1 year of over $50 billion in Federal economic and job creating stimulus to the economy at a time when you pick up the newspapers every day, and particularly this morning and last night, when it is pretty well clear that we are entering a recession.

The only doubt is how severe and how long it is going to be.

When you graft this type of austerity in an aggregate sense onto 20 percent interest rates, and onto an outlook that is very, very dismal, and look at the specific cuts in terms of types of people that they will hurt, I really am hard pressed to see any even psychological advantage to any attempts to balance the budget.

Mr. FOUNTAIN. Let me supplement what I said. One of the questions which the more responsible people mentioned at the conference I attended, which was addressed to Americans was this: They were undecided about the extent to which they could depend on us, not just in times of confrontation and the possibility of war, but in terms of coordination with regard to economic problems, for example. We do not sell all our products within America, of course. There is a free trade situation in which we compete with each other all over the world.

However, there is a concern about us overseas. When we look at our balance of payments we see it is in bad shape. It has leveled off, however. That concerns our neighbors. I do not know whether the OPEC countries have used the argument about conservation primarily as a stick, or whether they are sincere. I hope they are sincere about it. And I would hope that in that area we would use the potential which we have in this country-in my opinion we have it-to be completely independent of imported oil. We have all sorts of resources like coal, wood, and synthetics. Every municipality in America could produce methane gas, for example. However, there has to be a collective effort all over America, not just the passing of laws which say they hope somebody does it. To what extent the Government would have to get into it, I don't know.

Mr. Lucy?

Mr. Lucy. The real impact of the elimination of the States' share of revenue sharing might come to this. The National Governors' Association said that 40 percent of the States' share was funneled through to the cities.

If you start from the city level and recognize that the economic base of the cities is where it gets the bulk of its revenues, then without the ability to maintain that you have a problem. I am talking about industry and the corporate community-types wanting to exist in a local community and they want certain amenities provided before they will locate in a city to give it an economic base. So, to withdraw a goodly portion of State funds which will not allow many communities to do those kinds of things is sort of a double whammy. One, it loses the money, and second it loses the service. As a result it cannot attract stable industries or businesses that would provide jobs which are constantly being lost as a result of the deteriorating situation.

We would urge the committee to take a serious look at not only the immediate impact at the State level but the trickle-down impact at the county and city level as a result of the denial of those funds for their support.