General CLAY. Yes, sir.

Mr. JONES. And there will be no addition to the Interstate System that will be from terminal to terminal? I mean by that from one defense plant to another.

General CLAY. Well, as long as it's done within the 40,000 miles that could be done. I don't think that is visualized. I think your present 38,000 miles, with your extensions you put in to tie in these cities, will pretty well use up the 40,000 miles.

Mr. JONES. Has the Civil Defense called to the attention of the Department of Defense the extraordinary needs that have arisen and the large growing communities that are not presently on the Interstate System?

General CLAY. I can't answer that. I don't know. The Civil Defense Administration did point out to us the necessity of tying in the Interstate System with the concentrated areas of population.

Mr. JONES. Are you familiar with the designation of the Civil Defense Administration to the various roads that are now to be used for the exit of people from these large communities that are not now on the Interstate System?

General CLAY. Yes, sir.

Mr. JONES. And they are playing a part in the defense transportation system as well as the Interstate System?

General CLAY. Yes, sir; but they are also eligible to receive assistance under the $75 million that would continue to be provided by Congress in the support of those cities not on the Interstate System. Mr. JONES. Did the Civil Defense Administration testify before your subcommittee as to the urgent need of highways in any particular location of this country?

General CLAY. No, sir.

Mr. JONES. That were not now on the Interstate System?
General CLAY. No, sir.

Mr. JONES. Would you have objection to the adding of all the taxable income from gasoline and excise tax to be used either on the primary, the interstate, or the urban system in addition to the amounts made available under the provisions of this bill?

General CLAY. I'd have to give you two answers for that, sir. The Secretary of the Treasury and the Treasury Department, with whom we worked very closely on this bill, was very desirous of limiting the income dedicated to this purpose to the gasoline tax, considering the excise tax as such a part of the general excise-tax program.

Mr. JONES. Do you think the road need at the present time would be sufficient justification for the increase of gasoline or excise tax in order to eliminate these traffic jams that exist on the interstate and primary system?

General CLAY. Yes, sir. I would prefer to see it done with a bond issue because I think the automobile user today is paying his fair share of taxes for the support of highways. I would therefore prefer to see it done within the present tax, but I would certainly rather have the highway program with an increased gas tax than no highway program at all.

Mr. JONES. I understand that. Now, would you advocate that we assume a Federal responsibility to the primary system and raise the gasoline tax in order to carry out the same program on the primary system as proposed on the interstate system?

General CLAY. I would be a little bit afraid it would be self-defeating in that the raising of the tax would perhaps make it impossible for the States who are proceeding with the raising of tax to raise the funds with which to match such program. It might be self-defeating. Mr. JONES. Now, General, there is just one other line of questioning I want to pursue. That is the equity in relation to the bill with respect to the assumption of the Federal responsibility to those roads that have been constructed by the State on a matching basis on the Interstate System, and the proportion of credit that the State would receive on those roads that are already constructed. Will you discuss that, please.

General CLAY. Yes, sir. I said we believe where States had used their bonding powers or through toll roads had built sections of the Interstate System according to the standards established for this system, in all equity if the Government took over the major responsibility for the completion of this system they should get some credit for the money they had spent. In the case of toll roads, we felt it wise to limit the amount.

Mr. JONES. How would you go about fixing some equity formula to reimburse the States?

General CLAY. On the toll roads we simply took the cost of the roads, exclusive of financing costs, as a maximum figure, and based on that maximum figure the depreciated value which would be the maximum to be paid under any circumstances. But to further limit it we arbitrarily recommended a ceiling of 40 percent for those roads built during the period 1947-51, and 70 percent for those built between 1951 and 1955.

Mr. JONES. Now, all the roads that have been built on the matching formula of the Interstate System would qualify as being in proper condition to receive equity payments.

General CLAY. Many of those roads that were financed by bond issues or by toll roads; yes, sir.

Mr. JONES. Not toll roads. I am talking about those roads constructed on the Interstate System under the former laws and the present laws.

General CLAY. Yes, sir.

Mr. JONES. So all of those will meet the conditional requirements. that would be expected.

General CLAY. Yes, sir.

Mr. JONES. So we know that those roads will either qualify for 40 or for 70 percent.

General CLAY. That is right, if they meet the standards. There were very few built in that period that actually meet the standards. Mr. JONES. How much do you estimate it would take to reimburse the States for that?

General CLAY. It's very difficult without a more complete survey than we have to say, sir, but my general opinion is that of the 40,000 miles of the Interstate Sysctem about 2,000 miles have been built to standards, so your limit would be the cost of those 2,000 miles. That's about all.

Mr. JONES. According to the year in which they were constructed. General CLAY. Yes, sir.

Mr. JONES. And the toll roads would be examined to see what condition they were in and whether or not they could qualify for reimbursement.

General CLAY. Yes, sir.

Mr. JONES. To the various States or whatever the corporate entity that operates within the States.

General CLAY. Yes, sir.

Mr. JONES. You said earlier you were of the opinion that if this bill were passed there would be the disposition on the part of the State governments not to construct_toll roads, and I assume that by the construction of the Interstate System it would relieve most of the congestion; therefore there would be no further need for toll roads. Now, wouldn't you think that the increase of traffic on the primary systems throughout the country is going to be so great and the fixed amounts that would be paid by the Federal Government on a matching basis will be such that it will increase the demand for toll roads? General CLAY. If I made the statement that I felt there would be a decrease in toll roads, I should have confined it to a decrease in toll roads on the Interstate System. I think definitely there will be a decrease in toll roads on the Interstate System.

Mr. JONES. Because the Federal Government is going to construct them.

General CLAY. That is right.

Mr. JONES. Therefore, under the existing law or the law proposed here there could not be any toll roads.

General CLAY. Well, there could in theory. A State could decide to use a toll road on the Interstate System to get its money to build its primary road you are talking about without charging tolls on it.

Mr. JONES. Yes, I understand that, after you have redeemed it. General CLAY. That is right.

Mr. JONES. After you redeemed it and paid what it might be worth. General CLAY. In addition to that, as you know, the Congress wrote into its last legislation a provision which has enabled many States to accelerate their program through bond issues by stating that the money made available by the Federal Government to a particular road could be used in the retirement and servicing of the bond issue for that road.

Mr. JONES. Yes. By the same token the increase in the 1954 act encouraged bond issues in a great number of States to be in a position

General CLAY. That is right, encouraged those bond issues by making the Federal money available to help service the bonds that were so issued.

Mr. JONES. Do you expect it would be necessary for the States to reexamine their fiscal policy and increase their bonding indebtedness to participate in the $2 billion that would be required from the States to match the funds under this provision?

General CLAY. In some States it will probably require either further bonding or tax revenue to be able to do it.

Mr. FALLON. We have 50 minutes, and I think maybe we can change the procedure. Instead of jumping around, we can take the committee in order and hope any member who has questions of General Clay can complete them by 12 o'clock. I will call on Mr. Dondero.

Mr. DONDERO. General, I have only one question in mind. There has been criticism directed to this program in view of the fact that after 10 years there will be apparently no work done on the interstate system for the following 20 years which would, of course, be the life of the bonds. Have you any comment that you want to make in regard to that?

General CLAY. Yes, sir. I think that is like saying the United States is going to stand still. Ten years from now let us hope we are not making the great expenditures for defense that we are making at the present time. Let us also remember 10 years from now we will have added $150 billion a year to our gross national economy, that even with substantial reduction in taxes our national revenue will be far greater than it is now. To say that because you are committing these funds to this purpose now that there won't be a greater availability of funds from the Federal Government to spend on roads 10 years from now is to my mind having very little faith in the growth and economy and population of the United States.

Mr. DONDERO. Would you mind telling this committee how long your committee worked on this program?

General CLAY. We worked on this report for approximately 4 months.

Mr. DONDERO. How many men on the committee?

General CLAY. Five of us.

Mr. DONDERO. That is all, Mr. Chairman.

Mr. FALLON. Mr. Dempsey.

Mr. DEMPSEY. General, you spoke about financing. Having in mind just what you said, in the State of New Mexico the legislature convened in January. They provided for no additional gasoline tax but authorized a bond of $20 million to be added to the expenditure for the highway program. I think many of the States are doing the same thing.

General CLAY. It is a capital expenditure, sir.

Mr. FALLON. Mr. McGregor.

Mr. McGREGOR. I have no questions.

Mr. FALLON. Mr. Smith.

Mr. SMITH. General Clay, in relation to this discussion that you had with Mr. Dondero and Mr. McGregor a few minutes ago about the allegation that this program would bring new power to the Federal Government, even though it's perhaps not as strong as setting up a dictatorship or control of 38,000 miles of road, wouldn't it add considerable new power to the Federal Government over this 38,000 miles of road?

General CLAY. No, sir. I don't think that it does in any way other than the additional power that comes to the Federal Government from its ability to grant or allocate funds. The provision with respect to the Federal Government taking over the acquisition of right of way is only exercised at the request of the States. There is no inherent authority given to the Federal Government to do anything that it is not doing now with respect to the road system.

Mr. SMITH. Well, what about the power this highway authority would have to arbitrate disputes between the States? Isn't that a new power?

General CLAY. Actually, that is not a new power because at the present moment it's a power that resides in the Bureau of Public

Roads. The governors of the States, several of them at least, asked if it were not possible, if they really reached a deadlock on a location or something, to appeal to another agency with respect to the Interstate System. So it's not a new power. It's a power that resides with the Federal Government today.

Mr. SMITH. It's a power in a sense, but with further Federal authority. The Bureau of Public Roads is going to be responsive to this five-man board.

General CLAY. My guess would be that the board would be more responsive to the Bureau of Public Roads because it would depend upon the Bureau of Public Roads entirely for its engineering advice and technical advice. I would like to say this, sir: I don't worry about that provision at all, but the reason we put it in was that the governors felt that an appeal agency was helpful to the States rather than harmful.

Mr. SMITH. Well, I think you mentioned a basic example of Federal power in this. For 38,000 to 40,000 miles of road, 98 percent of the money has got to come from the Federal Government instead of 60 percent. There is obviously more Federal power control there, isn't there?

General CLAY. Except that the Congress reserves the right to establish this 40,000-mile system and give to the Bureau of Public Roads the full right to designate its location even though the money came in large part from the States.

Mr. SMITH. Yes, and all this money heretofore to take care of any part of the Federal aspect of matching on this program has come through annual appropriations and by annual authorizations of Congress, whereas under this program we would just hand it to your committee, wouldn't we?

General CLAY. Except that they can't allot it except on a needs basis, within a total mileage already having been determined. Mr. SMITH. We concede the fact.

General CLAY. They can't make any changes. But as far as the bill is concerned, there is no evidence in that bill that it would increase the power of the Federal Government. Of course, philosophically, I can't say any time you gave a great allocating power to the Federal Government it doesn't increase its power. Obviously it does during the time you have that money.

Mr. SMITH. Wouldn't this be perhaps the greatest allocating power in the way of Federal money that has ever been given by a Congress to any

General CLAY. Yes, sir; to meet the greatest domestic problem the Government has ever faced.

Mr. SMITH. It would be the most far-reaching example of such action by the Congress in handing over to an executive branch or an instrument or arm of the executive branch fiscal control. General CLAY. Other than in war times.

Mr. SMITH. Oh, there are certain

General CLAY. Other than in wartime it would certainly be the largest amount of money that the Congress had ever made available to an executive agency; yes, sir.

Mr. SMITH. The greatest delegation of power in the history of the country.