I believe it was Mr. Zeidler, mayor of Milwaukee, and he brought out the fact that the reason they could not carry the program through in Wisconsin was not because they did not have the taxable property and so forth, but because there was constitutional limitation on the State of Wisconsin.

Now my contention is that the States, if they have these problems, should get rid of their constitutional limitations and take on the job and do it. Any State can use this argument to shift its burdens to the Federal Government if we let them do it. I do not see why we should let them do it. Therefore, I would like to register an objection to that assumption of yours. I know they say they cannot legally or constitutionally meet their problems. But I do not accept their say-so, or the say-so of the Conference of Governors or Mayors, whoever it might be.

Mr. KING. I think it was an assumption for the purpose of argument. I do not concede it either.

Mr. NICHOLSON. I want to go one step further with Mr. Kunkel's statement, Mr. Chairman. If the States are too poor, the money comes from the individuals in those towns or cities or States, and everything additional that we put on them comes out of those same people. There is no such thing as the Federal Government. The Federal Government is composed of 48 States which contribute to the running of the Government.

The CHAIRMAN. If there are no further questions, you may stand aside, Mr. King. Thank you for your testimony.

We will next hear from Mr. Halvorson. Identify yourself and proceed.

STATEMENT OF LLOYD C. HALVORSON, ECONOMIST, THE NATIONAL GRANGE

Mr. HALVORSON. I am Lloyd Halvorson, economist for the National Grange, with headquarters at 744 Jackson Place NW., Washington, D. C.

Mr. Chairman and members of the committee, at no time would the Grange support subsidized housing that has for its major or prime purpose greater equality of housing conditions among the people. We feel that any housing legislation and any administration of a program must be careful not to give the people the impression that the Government will look after them and that they do not have to strive to look after themselves.

We must also realize that subsidized housing, to some extent at least, is only a palliative to deep-lying social ills. We should seek and place our major efforts on giving everybody an opportunity to acquire productive abilities and to use his abilities in a remunerative job that will enable him to buy and pay for his own house.

This, however, is not enough, for we know that some people with adequate incomes live in indecent, unsafe, and unhealthy dwellings. Therefore, we also need education and public encouragement in order that people will spend their income so as not to create or allow conditions of social menace. We also need laws to help prevent slum conditions from developing.

If some people prefer primitive housing to hard work and a sensible expenditure of income, they should be allowed that choice as long as a social menace is not created. If a social menace is created or threatens, it should be corrected by putting the responsibility upon the individual to the greatest extent possible before public subsidy is given.

The general philosophy of the National Grange, therefore, as to the role of Government in such matters as housing is as follows: We believe that decent standards of housing are to some extent a humanitarian consideration, but probably of greater importance is the significance that housing has to citizenship and social progress.

We know that inadequate housing conditions can endanger the lives of the people living in them and especially the lives of infants and children. Also, inadequate housing conditions tend to breed diseases that become a public health hazard to all the people.

When we think of the number of people who handle our food, who drink from the same water fountain, and who touch the same objects on public conveyances, we can see how a breeding ground for disease can spread out.

Inadequate housing tends to destroy morals and morale and to breed delinquency and crime. To say the least, it is probably quite difficult for a child living in slums to grow up to be an upstanding citizen with a zest for self-improvement and better living.

To the extent that subsidized housing is necessary to provide a minimum for safety and health and to the extent it will provide for social progress and betterment, we are for it. We can undoubtedly afford to meet some of our most urgent housing needs, but we must be careful not to lose incentive for reliance on one's own efforts to earn enough to pay for his housing out of his earnings, and also we must be careful not to make our tax burden too stifling.

FARM HOUSING

From the standpoint of inability to pay for housing from earnings, farmers are and have been in a worse situation than urban workers; for, over the past 29 years, farmers have had labor earnings that have been about two-thirds that of industrial wage workers.

Specifically, I would like to indicate our policy on public assistance in agricultural housing. When a farmer mortgages his farm to build a house, he does an entirely different thing than when a city worker borrows to build his home. The former mortgages his home, his business, and his job; whereas the laborer mortgages only his home from which he can move, if the mortgage is more than he can stand, without affecting his job and income in the least.

If a farmer puts too much value in his home when he needs it in the farm for working capital to enable him to increase his productivity and income, he finds that when he cannot pay and the mortgage is foreclosed, he loses his home and his job. In fact failure to place his loan funds in production purposes rather than in living purposes has caused the loss of not only the higher living standards he sought but all possibility of earning this higher standard.

Another vital consideration that must not be overlooked in loans to farmers as contrasted to nonfarmers is that due to soil depletion and erosion and the advance of mechanization, there are vast heavily

settled farm areas where a large proportion of farms are too small to support a desirable rural standard of living.

It is highly important that loans not be made to build homes or even outright building grants be made where the farm is too small for a sound economic unit of operation. To do so would not be rural slum clearance but rural slum perpetuation-an entirely different proposition than that which prevails in towns.

Housing must be predicated either on a size of farm that makes possible a reasonable earning power or a situation where supplemental nonfarm employment income is sufficient to increase earnings to the level where the house can be supported and in time paid for.

Section 401 (b) of H. R. 4009 defines a farm as a parcel of land capable of producing $400 worth of produce at 1944 prices. We wish to call to the committee's attention the following table taken from census data.

Thus we see that in 1944 nearly a million farms produced less than $400 worth of commodities. Inasmuch as title IV deals with inadequate farms, as well as adequate farms, it seems illogical to exclude from the provision of the bill many if not most of the inadequate farms.

I have been told that nowhere in the bill are these farms with less than $400 worth of produce provided for or covered. This is a gap which this committee will probably want to correct. The farms with less than $400 worth of produce are not farms in the sense of commercial family farms, and on this basis do not belong in title IV, but at the same time, these small farms are frequently in the country and would quite probably be neglected if put under urban housing.

I might add that making loans to part-time farmers has probably fallen to the Farm Credit Administration to a larger extent than to Federal Housing Administration financing. The so-called prudent investment loans made by the Farm Credit Administration have been quite satisfactory.

Section 402 provides loans for housing on adequate farms. There appears to be no limit on the percentage of the housing cost that can be borrowed. We wish to emphasize that putting a man in debt above his ability to repay is not a favor but a grave injustice.

Anyone who has lived in a farming community knows of many cases where a farmer bought more than he could pay for and, of course, the result was bankruptcy with all its heartaches and embarrassment. It is much wiser for a farmer to live simply and to some extent in crude housing as long as health is not jeopardized, rather than go into heavy debt.

His peace of mind and his long-run chance of success will be much greater. It should always be remembered that a loan for rural housing is a loan on the whole farm, and a farm gives a farmer his job.

We also believe that when a man signs a note he is placing his honor and integrity as security as much as the property. We believe that nothing should ever be done to break down the integrity of an individual in his promise to pay. We would be opposed to section 402 if we believed that the intention was to grant indefinite extensions and to cancel indebtedness on the borrower who had simply borrowed more than he could ever hope to repay. It would be much better to subsidize housing directly than to do it in a way that destroys honor and integrity in a promise to pay.

For these reasons, we believe that section 402 must be administered with sound underlying principles and with great care, and we hope Congress will closely scrutinize the operations from year to year.

For what it might be worth as a safeguard, we suggest that section 402 (a) be amended to include the following provision:

No loan shall be made which will make the combined indebtedness of the borrower exceed 100 percent of the normal agricultural value of the farm unit, plus such additional normal value as attaches to the dwellings as a residence for readily available off-farm employment.

It would be very easy under present conditions of cost to lend so much for house construction that the combined indebtedness of the borrower was more than equal to the value of the farm, buildings included. A $5,000 house does not always add $5,000 to the value of a farm, and may add substantially less to the normal agricultural value. There are many examples in our farming communities where the earning capacity of the farm cannot support the cost of the buildings.

To make a loan that would raise total indebtedness to more than 100 percent of normal agricultural value not only would make repayment unlikely if not impossible, but would also encourage a man to drop it all after a few years for he would have no equity to lose.

We note that section 402 (a) in considering the earning capacity of an applicant recognizes income from other sources as well as income from the farm in evaluating the ability of an applicant to repay the loan. We believe this should be qualified by specifying "other income reasonably available to anyone in like circumstances.' A man who is on a pension or annuity has other income but if he dies the income is not reasonably available to the next owner as would income from nonfarm employment, for example.

What we have said regarding sound lending under section 402 also applies to section 403 with probably even more force because the possibility of excessive debt and prostitution of credit is greater. As noted above, section 402, in considering the earning capacity of an applicant, recognizes income from other sources as well as income from the farm in evaluating the ability of an applicant to repay the loan.

We believe that section 403, which deals with inadequate but potentially adequate farms, should also take into account the opportunities for man to secure reliable off-farm employment reasonably available to anyone who might own the farm. In other words, it is possible for an inadequate farm to become an adequate part-time farm if an industry should locate in the area. We believe, however, that no consideration to opportunities for off-farm employment should be given until it was definitely established that an industry will locate or expand in the area.

Section 404, we believe, should be looked upon as a relief measure primarily. If it does not make sense to build houses in the dead of a

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desert for stranded but able people, then it does not make sense to repair houses for people living on farms that have no chance of being made adequate, or that do not provide facilities or opportunities for a man to make a living by working.

To build or repair houses in such locations would tend to assure the continuance of an unsound economic condition. Clearly such a situation calls for a program of vocational training and migration to job opportunities, and in this, the Government should be able to help just as much or more than in housing. In order to assure that section 404 will not have the effect of perpetuating uneconomic conditions, we suggest that the following sentence be added at the end:

No loan or grant shall be made under this section unless the Secretary finds that it is not possible for the family to relocate in a more favorable income yielding situation.

We like section 405 provided it is not used as a means of escaping the results of overlending. Again we wish to say that if a man must have a better house than he can afford, it is better to give a direct subsidy than to prostitute credit.

Section 406 is in line with our usual concept of the role of Government and will do much to make adequate housing available to all farmers at a figure they can afford. We hope that this section will be given greater emphasis. This section recognizes that farmers will in some cases build their own houses or at least do their own contracting. Because of this, I trust that it is the intent of the committee that this bill will enable the Secretary to make construction loans to farmers. As this committee knows, a construction loan usually proceeds the final loan.

We believe that sections 407 and 408 are very desirable and appropriate.

We note that S. 1070 as passed provides $25,000,000 for section 404 whereas this bill provides $12,000,000. Because we are of the opinion that section 404 should be primarily a relief measure, we believe that as long as job opportunities exist, expenditure under section 404 should be held to a minimum.

Mr. MONRONEY (presiding). Thank you, Mr. Halvorson.

Are there any questions?

Mr. MITCHELL. I would like to ask a question.

Mr. MONRONEY. Mr. Mitchell.

Mr. MITCHELL. In Mr. Mason's statement on the farm section, he says:

With the authority to make grants and loans goes the authority for the Secretary of Agriculture to dictate directly how the farm shall be operatedand then he goes on, down below, to say—

This is the old technique of bribing the individual into accepting governmental regulation which could not be applied directly by the governing authority.

In view of the fact that you are representing a farm organization, could you comment on that?

Mr. HALVORSON. Well, we feel that if loans are to be made to what are called inadequate farms, there naturally will have to be some provision that that farm will be made adequate, and we think that it is desirable to have some provisions requiring the farmer to make these necessary economic adjustments so as to get an adequate farm and be able to pay for his house.