machine, a house, or life insurance, we are a Nation that operates on faith and credit and it has been demonstrated that the economies of that type system make possible those things which could not be possible on a pay-as-you-go basis.

Mr. SMITH. There is an advantage to have 50 cents a week to pay for a washing machine, otherwise I would never have an automobile or washing machine. There are some advantages also in the form of economies in paying for things by cash.

Mr. DU PONT. I am not saying that is the only way it could be done. Please do not misunderstand me. This is a program that will do it. We are paying today and we are not going. Under the present revenues we can go and attain our objectives within this period-I do not say exactly 10 years, it may be 11 or some other-without changing the structure.

Mr. SMITH. Let us go into the system of how the bond issuses meet the needs for the highways in the States. I know virtually every State in the twenties or the thirties went into a major bond issue to modernize their highways and bring fine highways within their States. With the exception of a few where for various reasons they could not increase revenues, did not all of those new bonds have to be issued in a great majority of the States to supplement the program before the life of the old bonds expired?

Mr. DU PONT. I think a majority of the States have gone into bond issues. There are only five States in the United States that have jurisdiction over all highways. You have countries and other political subdivisions which have issued bonds. I am sure more than half of them have availed themselves of credit financing for their needs.

Mr. SMITH. The point I meant, I know my State has and I am sure other States have found it necessary to issue additional bonds before the life of the first bond issued expired.

Mr. DU PONT. That is frequently due to expansion in the community.

Mr. SMITH. There is nothing wrong with it. They had to do it to get the highways. These States that issued bonds had no other facilities for getting revenue.

Mr. DU PONT. They could have raised gas taxes.

Mr. SMITH. You mentioned political impossibilities in New Jersey. You admit there are such things in various States.

Mr. DU PONT. I think that does occur.

Mr. SMITH. For instance, in my State of Mississippi, I think we have either the highest or the next to the highest gas tax in the country. We have had various talks about converting the gas tax to other purposes. In Mississippi we use the gas tax to build roads and even for a certain rural program they use beer taxes and various other types. We do not divert. We divert other revenues to the program. If we accept the fact that there is a limit to what you can chargeof course we could go ahead and make the gas tax 25 cents a gallonMr. DU PONT. I doubt it.

Mr. SMITH. Theoretically we could, but I doubt if we would. The only additional revenue, other than from different types of tax, that is the only way we could get new construction. I do not want to belabor you too much about financing. I understand we are going to talk to Secretary Humphrey about it. You admit that as far as setting

up the States as an example as to financing this program, the Federal Government has an entirely different way, and they have used it for quite a few ways for financing anything they wanted to do, other than by bond issues; have they not?

Mr. DU PONT. They have availed themselves primarily of deficit financing.

Mr. SMITH. What is the difference between bond isues and deficit financing? I will not go into it but it is a debt.

Mr. DU PONT. It is a debt.

Mr. SMITH. I buy a car and pay for it in 36 months. I still owe that debt even though I may be meeting my monthly budget. I still owe for that car. If I sold it without reference to that mortgage I could be put in jail for disposing of it, could I not? That is not the point.

Mr. DU PONT. This is self-liquidating. It provides for the liquidation of the debt.

Mr. SMITH. It is self-liquidating if all of these propositions work out. It is

Mr. DU PONT. No, sir. They do not issue the bonds unless revenue is enough to take care of it.

Mr. SMITH. Right. Foreseeable revenues.

Mr. DU PONT. That is right.

Mr. SMITH. They do not have the revenue on hand to take care of it? Mr. DU PONT. It is based on an estimate, just as the toll roads. Mr. SMITH. I want to go into details of how the individual program will work with each State. Basically as I understand it from your reading of the law and interpretation of it, and from other information, each State, under this program, if the bill becomes law, in Mississippi in the first year funds will be made available to build 10 percent of our interstate roads, our roads under the interstate system.

Mr. DU PONT. The present Federal-aid program continues on your primary and secondary uninterrupted, and for 10 years. That does not mean that Congress cannot increase that, or decrease it. They can do anything they want to. But so far as this program is concerned, it projects and assumes that the Congress will at least continue, and there is provision for that $6222 million.

Now when you come to the interstate system you forget about the previous matching formula and you pay what you now pay on your portion of the present grant of $175 million for the States. Mississippi currently is receiving $14.1 million. In order to match that $14.1 million you pay $13.1 million. In other words, you get a little more than 50-50.

Under this bill that we are considering Mississippi would get $3311⁄2 million, more than 100 percent increase. And instead of matching the $13 million you match $12.5 million. In other words, you are not being drained of your regular revenues, and can continue any regular State program together with the existing primary and secondary, and your interstate money is upped manyfold. In other words the whole grant to Mississippi would be $133 as against $14 million. And it would cost you $12 million as against $13.1 million.

Mr. SMITH. The money that we would get, the extra money Mississippi would get, would have to be used on the interstate system.

Mr. DU PONT. Yes, sir; but the interstate system is the primary system, to all intents and purposes, and you are relieved of spending

I

primary money on the interstate portion of the primary system. cannot tell you precisely how much that will be. You would have a good deal more money to spend to improve the primary system.

Mr. SMITH. It is granted we will have. What, in relation to the types of roads, improvements that will be made under this interstate system, that would mean an equivalent amount, presumably, available for the primary system, I mean extra money from the Federal Government when you consider the primary system within the State.

Mr. DU PONT. I could not tell you precisely other than to state this: Two years ago you had $25 million in the 48 States for the interstate system. Now you have $175 million. Since the war, over half the money has been spent on the interstate system. So you are relieved of all that expensive highway construction, to all intents and purposes, as the matching ratio is 90 and 10, and in addition you have exactly the same funds as you have today for the primary and secondary. But you are relieved of the expensive interstate jobs.

Mr. SMITH. You are relieved in some areas of the expensive.
Mr. DU PONT. The Interstate System-

Mr. SMITH. I agree with you overall.

Mr. DU PONT. When you are talking about 48 States you have to talk overall.

Mr. SMITH. But in relation to the reduction of urban funds, of the regular Federal-aid system, how would that be worked out?

Mr. DU PONT. In these figures, the figure of $14 million you now receive, that includes a certain amount of urban. Your urban allotment would be reduced whatever the ratio is of $100 million to $175 million. But you more than pick it up in the interstate. In the urban areas on the Interstate System, you get interstate money.

Mr. SMITH. The reduction is figured in proportion to the

Mr. DU PONT. Of 100 to 175 on the urban money.

Mr. SMITH. The additional help we would get under the Interstate System would more than make up that difference?

Mr. DU PONT. Yes, sir. I do not know whether it would be threeor five-fold, but many times.

Mr. SMITH. In relation to this overall, as you mentioned a minute ago, there is nothing in this program to prevent Congress from increasing or decreasing the regular Federal aid?

Mr. DU PONT. No, sir. You can double it or triple it or anything else, with or without financing.

Mr. SMITH. Let us consider some of the factors that have influenced the amount of Federal aid in the past. There have been things like the war and other demands upon us, to avoid deficit financing, which is increasing. One of the things that influenced the increase is the fact that we have all of this income from gasoline taxes which is not being used for road purposes. An effort was made last year to come up to something close to that, though it did not reach that. Mr. DU PONT. No; it approximates it.

Mr. SMITH. For the actual Federal-aid system it is considerably shorter, when you toss in forest highways and things like that. Mr. DU PONT. It is just under a billion dollars.

Mr. SMITH. Under this program what is it envisioned that Federal revenue would be above the cost of taking care of the bonds during the first 10 years?

Mr. DU PONT. $62212 million per annum.

Mr. SMITH. Do you think that that figure, at the time this program goes into effect, that the administration and Congress, both of them, while trying to encourage a balanced budget and nondeficit financing as you term it, will be inclined to step up the rest of the Federal-aid program?

Mr. DU PONT. I would not think so for these reasons, and this is purely an opinion: I think the roadbuilding capacity of a given State is going to be predicated on the engineering staff, and the contractors. It will be the engineering staff first. I do not think your State, and certainly very few of them, can go much beyond this program.

Mr. SMITH. In other words, the fact is that there might be an encouragement by Congress to cut back some aspects of the program? Mr. DU PONT. I have never seen that, other than in war time. Mr. ROGERS. Will the gentleman yield?

Mr. SMITH. On that point.

Mr. ROGERS. I want to develop this one point. You made the statement that you anticipate, under this plan, that you will spend about $2 billion a year for the next 10 years?

Mr. DU PONT. It will be $212 billion.

Mr. ROGERS. I believe Senator Gore has suggested almost $2 billion. Mr. DU PONT. His is $1.6 billion.

Mr. ROGERS. It varies in that amount by what?

Mr. DU PONT. $500,000 for the interstate, and the rest is a stepup. Mr. ROGERS. Thank you.

Mr. DU PONT. The States, the list I gave you indicates that 26 say they cannot match the Gore bill. There is one thing that disturbs me about the Gore bill and that is this: If we merely increase the present categories, you have no standards, there is nothing in there so far as control of access, and those requirements I think are absolutely essential. If you do not have them I think you might as well forget about an Interstate System.

Mr. ROGERS. Thank you.

Mr. SMITH. The revenue that you seek through this program to take care of the 10-year program, you count for a 30-year period? Mr. DU PONT. Those are the bonds, to be issued for that retirement period.

Mr. SMITH. You plan on getting highway tax money for a 30-year period to retire that?

Mr. DU PONT. That is correct.

Mr. SMITH. Does that not mean that for that 30-year period you are going to have pressure for limitation on the rest of the program? Mr. DU PONT. No. The way I think that will work out is this: At the end of 10 years, when this system presumably will be completed or substantially completed, there will have developed need for additional feeder routes and so forth, and I believe that at that time it will be perfectly logical to consider increasing some form of revenue. This morning we were talking about devising some means of taxing trucks. If we have an expanding economy and our citizens have more and more benefits, which of necessity are provided by State and Federal Government, we are going to have to pay more taxes.

I think that would be a logical time to augment the feeder roads, whatever you want to call them. As I see this situation the highways.

are the circulatory system to the body economic. Precisely the same as the circulatory system of a human being. At present our heart is getting kind of weak and it needs some fixing up. We have to get it in shape. It is the crux of the circulating system.

Mr. SMITH. In other words, you need some pump priming?
Mr. DU PONT. You have to get it in shape to work.

Mr. Ray has to leave. This morning there was some question about the legality of some aspect. If you want to ask that question now, Mr. Dondero, I believe. I do not like to interrupt but he has to leave. Mr. DONDERO. I do not recall at the moment.

Mr. RAY. If I may be excused, Mr. Chairman, I will depart. Mr. FALLON. Thank you, Mr. Ray, for coming. We are going to try to terminate this meeting at 4:30. At least I have to terminate it at 4:30.

Does anybody have any questions of Mr. Ray?

Mr. BECKER. Not Mr. Ray. I have a couple for Mr. du Pont.
Mr. FALLON. Are you finished?

Mr. SMITH. No.

Mr. BECKER. Mr. Chairman, might I interrupt? If we are going to interrupt at 4:30, can Mr. du Pont come back tomorrow?

Mr. DU PONT. I will come back at any time.

Mr. FALLON. General Clay will be here tomorrow.

Mr. BECKER. Some of us are entitled to a little time.

Mr. DU PONT. I will be back. General Clay's statement I am sure will not take too long.

Mr. FALLON. General Clay will be here tomorrow. If there is any time left and Mr. du Pont can come back we can continue with that tomorrow.

Mr. BECKER. We will not have much time tomorrow, Mr. Chairman. Mr. FALLON. You will have 2 hours. The House goes in session at 12 o'clock. I doubt that we can get permission to sit during the debate tomorrow because of the legislation on the floor.

Mr. DU PONT. My time is available to you gentlemen any time, individually or jointly.

Mr. FALLON. Let us continue for the next 10 minutes and see what happens.

Go ahead, Mr. Smith.

Mr. SMITH. In other words, to continue the present program beyond the interstate system, you raise the possibility that it will be necessary to get supplemental revenue?

Mr. DU PONT. I think it is inevitable with a growing country that we are going to have increased Federal taxes, by the generation of more population. As our needs increase I think it is inevitable. This does not disturb me particularly any more than it would disturb me to buy a house and have a mortgage and if my earning capacity increased, as our country is, to assume further responsibility as my family grew.

Mr. SMITH. The question arises in my mind that if we are to set up this program that has to be paid for in 20 years, if we are not more or less freezing the supplemental program which to a large part of the country is more important than this interstate program?

Mr. DU PONT. No, sir. I think that is a thought to be concerned about but not unduly. After all, the States now are responsible for