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Dr. SMITH. I would agree with that. It would indeed. Mr. ASHLEY. I was interested, too, in the remarks that you made with respect to the necessity for increased activity in our public sector, generally the views expressed by Galbraith and other economists.

Dr. SMITH. I think Ken Galbraith is one of the most amazing economists, and while economists never agree completely with each other, I think that his most recent book is a provocative thing which should start the wheels going around generally for all of us, especially those who are interested in public policy.

Mr. ASHLEY. I would like to ask you just one or two questions. You said—and I don't see how it is possible to disagree with it—that it may perfectly well be necessary for us to restrict our private expenditures in order to take care of some of these matters in our public economic sector, which are of such pressing importance.

Now, to do this, we would simply have to raise taxes, isn't that correct?

Dr. SMITH. No question about it. We are going to have to raise taxes and we are going to have to raise them significantly. By the prospect of raising taxes, of course, you cut down on what the average individual has left for expenditures in the private sector of the economy.

I am a high taxer for many reasons. You know, it is an amazing thing, I get people calling me all the time, and they want me to talk occasionally, as far as education is concerned: “What are we going to do about education, the teachers shortage?"

Businessmen call me up and ask me this. They, above all, should know. They shouldn't have to ask me.

We ought to try one thing we have never done before. If you want to help the teacher shortage, try paying them. This will do an amazing thing as far as the number of teachers coming into the profession is concerned.

I have a young man right now who I think is one of the top drawer Ph.D. candidates in the country; I think he is a real fine, able young man. We are hoping he could stay there, and the engineering college is hoping he can stay there, because engineers take certain courses in economics and he has a background of engineering and economics.

Well, we can offer him, I think, the top salary, when he graduates, about $4,000 for a starting instructor for 10 months.

Well, an engineering firm the other day came along and offered him $8,800.

I just wonder which one he is going to take. I am already looking around for his replacement. So this suggests that I have a pretty good idea.

Other than that, we have more students per teacher throughout the country.

Natural resources are similar to education in that it is everybody's business and nobody's business.

I would like to point out a distinction. This isn't a question of the Government getting in somewhere where they do not have a tradition of being there. These are areas that are the oldest, as far as tradition is concerned, and go clear back to the first Continental Congress of the United States.



them up:

These are the areas where we have said traditionally we will make purchases collectively and not privately. And these are the areas that are falling behind. "The very basic areas areas, such as creation of a park, creation of a water supply, schools, roads. These are the very basic collective purchases. And í say they are too important to be relegated to the role of waiting until we have a depression to build

I think if you come to that you come to the very harsh fact, and you have got to be straightforward enough to say so, that if we are going to do all these things, we are going to have to pay for them.

As somebody said, all economics can be summed up in the fact that there is no such thing as a free lunch. I suspect this is essentially true, and if we are going to have these facilities we are going to have pay for them. And the only way I know to do it is by taxes.

You can tell I am not running for a thing, because I can't conceive of anybody voting for me on that platform.

Mr. WIDNALL. Will you yield?
Mr. ASHLEY. Yes.

Mr. WIDNALL. I was interested in a statement which you made which does not apply to this bill. You spoke about this brilliant young man that you would like to hire but you could only offer him $4,000.

Is that because the amount that you can offer is limited by classification, and not according to ability ?

Dr. SMITH. No; it isn't a question of classification. This boy's abil. ity-if we could offer him the most expensive job that all his professors had, we couldn't come up with that salary. It isn't a question of classification in that sense. It's a question of what the people can do in terms of their own economy through State taxes and through State support. I think, relatively speaking, they are doing better and better with each passing year.

I just don't think probably, that State universities, as such, are going to be able to carry, the load unless you have large, wealthy States like New York, Michigan, Minnesota, California, and so forth.

These are outstanding State universities in States with lots of re

Mr. WIDNALL. I was most interested in reading in the paper the other day that Russia had decided that they weren't going to pay Ph.D.'s so much because they are Ph.D.'s, but they are going to pay them according to their ability to teach.

Dr. SMITH. This is a very good idea. I am for that.

Mr. WIDNALL. It was a rather interesting change, and I think could be applied in some other instances.

Dr. SMITH. I think it could be applied to a very great extent. I was in the Government for a while, and I suffered like everybody else. It took me 2 or 3 years to get over my Ph.D., and after I did, the hiring of others in the Government never disturbed me. I was interested in what they could do.

I think the Ph.D. has become a union card with American universities. If you are going on to teach, it's something you ought to have. It is considered not necessary in other areas.

Mr. SPENCE. Are there further questions?


If not, Dr. Smith, you may stand aside, and we thank you very much for your very excellent statement.

Dr. SMITH. Thank you, sir.

I did want to place one emphasis, too, that in my review-I think we would support the amendment suggested by Mr. Callison, and we urge that on the committee's attention.

Thank you very much, and I appreciate the opportunity of testifying.

Mr. SPENCE. Thank you.

That concludes the testimony this morning, and we will recess, to reconvene tomorrow morning at 10 o'clock.

(Whereupon, at 11:10 a.m., the subcommittee adjourned, to reconvene at 10 a.m., Friday, April 24, 1959.)

aggregate amount not to exceed $1 billion to finance the construction or improvement of community facilities for water, sewer, public hospitals, and nursing homes or nonprofit hospitals.

The Federal loans, with maturities up to 40 years, could be made at an interest rate determined under a formula in the bíll (which at present would be 27. percent) if the loan cannot be obtained from other sources on equally favorable terms and conditions.

The bill would also authorize an increase of $50 million (from $48 million to $98 million) in the funds for advances to public agencies under section 702(e) of the Housing Act of 1954 for planning a reserve of public works.

(1) The volume of municipal financing for construction of water and sewer facilities reached a record high in 1958. The sale of municipal bonds to provide long-term financing for the construction of water and sewer facilities reach an all time high in 1958 when the sales of such bonds aggregated over $1,085,300,000.

In the preceding year, 1957, the sales of such bonds aggregated over $1,009,900,000.

This high level of financing for water and sewer facilities has continued this year when the sale of such bonds in the first 3 months (Jan

( uary-March 1959) aggregated over $294 million.

The picture for hospitals and related institutions financed through the sale of municipal bonds is much the same. The total sales of such bonds in 1958 aggregated over $212,435,000, compared with the sale of over $135,200,000 of such bonds in 1957, and a high level of such bond sales is continuing this year with an aggregate of over $28,400,000 sold in January and February.

These facts demonstrate that municipalities are obtaining the financing for growing programs of construction of water and sewer facilities and of hospitals and related facilities without the Federal assistance proposed in H.R. 5944.

The bill proposes to include in the declaration of policy a statement that The Congress finds that in many instances municipalities or other political subdivisions of States, which seek to provide essential community facilities, are unable to raise the necessary funds at a reasonable cost.

It appears that there is no factual basis for such a statement with regard to those municipalities which have attempted to obtain financial assistance of the type proposed in the bill through the sale of their bonds.

During the 6-month period from July 1 through December 31, 1958, when over $507,500,000 of municipal bonds were sold to finance water and sewer facilities, the amount of such bonds offered but not sold was only about one-half of 1 percent of the bonds sold.

Now, if I may digress from my statement for a moment, Mr. Chairman, I would like to supplement that a little more specifically.

Mr. SPENCE. You may.

Mr. CALVERT. In reaching the percentage, that of the bonds offered during that 6-month period less than one-half of 1 percent of those offered were not sold, the less than one-half of 1 percent was made up of only 11 issues of bonds aggregating around $1,443,000.

Since our statement was prepared, we have checked into some of those 11 issues and find that 5 of those issues, aggregating over



FRIDAY, APRIL 24, 1959



Washington, D.C. The subcommittee met, pursuant to adjournment, at 10 a.m., in room 1301, New House Office Building, Hon. Brent Spence (chairman) presiding.

Present: Mr. Spence (presiding) and Messrs. Brown, Reuss, and Ashley.

Mr. SPENCE. The committee will be in order.
We will resume hearings on H.R. 5944.

Mr. Gordon Calvert of the Investment Bankers Association is our first witness. We are glad to have you with us, Mr. Calvert. . If


have a statement you may read it without interruption, and then subject yourself to interrogation.

Mr. CALVERT. Thank you. That will be fine, Mr. Spence.
Mr. SPENCE. You may proceed.



Mr. CALVERT. My name is Gordon L. Calvert. I am municipal director and assistant general counsel of the Investment Bankers Association of America. With me this morning is our research director, Mr. Frank Morris.

The Investment Bankers Association of America is a voluntary unincorporated trade association of investment banking firms and securities dealers who underwrite and deal in all types of securities.

Our association has over 800 member firms engaged in one phase or another of the securities business in the United States and Canada, including about 100 commercial banks.

Our members have, in addition to their main offices, over 1,500 registered branch offices. The underwriting and distribution of State and municipal bonds in the United States are done by firms which, with a few exceptions, are members of our association.

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H.R. 5944, in the proposed Community Facilities Act of 1959, would authorize Federal loans to municipalities and other political subdivisions of States, including public agencies and instrumentalities, in an

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