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have cleared it up already in reply to my inquiries here, but I would appreciate it if you would go into that matter again and explain just exactly what is meant by the fourth criterion.

Mr. Jones. What we had in mind is this. If I may repeat, I will just read it again:

There must be a limit on the overall amount of insurance which can be written for any individual or any firm and the insurance should be limited in coverage.

On the first point, since this, so far as we can see it, probably should be a limited period of coverage in an experimental program, we thought that perhaps $250,000 to $300,000 should be the maximum limit of coverage. Something in that order. In other words, to get experience on as broad a base as possible with as many people as possible, but at the same time to have some kind of a limit so that we are not running what might be called a big business insurance type of operation.

Senator Bush. Mr. Chairman, may I offer an observation at that point ?

Senator LEHMAN. Surely.

Senator Bush. Most of the bills that I have seen, and I think the Senator's own bill, have a limitation. The Senator's bill has a limitation of $300,000. I think that is what that first sentence attempts to do. In other words, you are not going to have unlimited insurance there has got to be a limit. Senator Lehman's bill, I noticed, had a $300,000 limitation. Other bills which have been introduced heretofore in previous years have all carried limitations, perhaps within that figure. So I imagine that is what you must have had reference to. Mr. JONES. That is correct, sir.

Senator Bush. That the insurance is not unlimited, that there is a top limit.

Mr. Jones. That is right.

Now, on the coverage, I think perhaps I made that clear as I went along. Real property, yes, recognizing that there will be a very difficult problem of definition as to what is included in real property. And then business inventories. We would say that a farmer's crops, his potatoes which are stored against future sale, things of that sort, are very definitely business inventories or could be made so by definition.

And then that leaves pretty much the remaining problem of what you would do with the several categories of private personal property.

Someone asked us the other day, "Well, what would you do about a chicken farmer?" Well, we certainly would cover a chicken farmer, as we see it, because that is, in effect, his means of livelihood. His flock is his means of livelihood.

The furniture and equipment in a store or the furnishings of a hotel get you into other categories in which there are difficulties.

Senator LEUMAN. Well, I wish to say that Senator Bush's recollection of my bill is accurate. There is in the draft which I have submitted to the committee, which is now before us, a limitation of $300,000 on any property and an overall limitation on the governmental responsibility or liability of $2 billion.

Mr. Jones, did the Budget have any responsibilities in connection with handling flood relief?

Mr. JoNEs. Our responsibilities, Senator Lehman, were only those of a coordinating nature and to try to assure the agencies concerned that we would forthwith help them in any way that we could in contacts with the Congress, in obtaining authorizations to go ahead and do what was necessary, questions of interpretation-whether you could or couldn't use this money or that authority, things of that sort.

Senator LEHMAN. You made reference to the compensation that might be paid to farmers in connection with losses to their crops. Does that include growing crops or only the harvested crops ?

Mr. Jones. Growing crops as well.
Senator LEHMAN. How would you handle that?

Mr. JONES. I don't know. We have not talked that through with the agricultural people who have had experience under the present crop-insurance program.

I think it is not generally understood and recognized that the cropinsurance program is not available in every county in the United States. But insofar as it is available, there have been varying patterns of experience which I think would have to be pretty carefully studied before we could come up with a final pattern.

Under the spur of disaster you will get an awful lot of things started, and then the necessary followthrough and carrythrough becomes partly a matter of time and partly a matter of pushing away the things that you find you cannot do and concentrating on the things that you can do. That is what we are trying to do now.

Senator LEHMAN. Just one more question. You said in your statement that you had consulted with various departments of the Government. I do not know whether that was a formal consultation or informal. Are these criteria that you have outlined here the result of those consultations?

Mr. Jones. They are, sir. They are the criteria on which there is general agreement if an insurance system seems to be the answer.

Senator LEHMAN. Senator Bush?
Senator Bush. I have no questions, Senator.
Senator LEHMAN. Thank you very much.
Mr. JONES. Thank you, Mr. Chairman.

Jones Senator LEHMAN. I am going to change the order of the witnesses a little bit, and I am going to call on General Sturgis to testify.

We are very glad to see you, General.
General Sturgis, of course, is the Chief of the Corps of Engineers.



General STURGIS. Mr. Chairman, Senator Bush, I only learned of this hearing on Friday afternoon, so I have made some notes over the weekend. I have no prepared statement. I do not even have copies of the notes I have made. But I hope I am able to answer your questions and at the same time give a basis for the Corps of Ěngineers' interest in this program.

First of all, sir, I would like to say that since 1937 I personally have been familiar with and participated in flood-control programs all over the l'nited States. I was in the Ohio River Basin in 1937 as a cap

tain in that great disaster, and, therefore, I feel reasonably familiar with the subject of flood control.

However, as to flood insurance, in the first place, sir, I have not had an opportunity to examine or review the proposed legislation, and, in the second place, as has been brought out by Mr. Jones previously, flood insurance commercially has been practically nonexistent so that I haven't had very much contact with it in our business.

However, since the determination of flood-control structures in any valley to reduce or ameliorate floods involves the number of such structures, their location and their size and characteristics, and also since that work depends upon many things of an engineering nature, such as meteorology—of course we work with the Weather Bureaurainfall and runoff data, and many allied characteristics of topography, climate, soil, and vegetationSenator LEHMAN. May I ask, Can you hear the general?

Thank you very much. I wasn't sure that people in the back of the room could hear you, General.

General STURGIS. Yes, sir. I am, therefore, aware from long experience of the very great complexity of our problem. As I shall

. indicate later, it is evident to me, since flood insurance must reckon on not only all these complex factors in the question of the production of floods and their characteristics but also on many other variegated and numerous factors, it is going to be a very difficult and complex problem.

In that connection, of course, I am sure a great deal of information will be expected from the Corps of Engineers, and we shall be prepared to give it because we have voluminous information on floods since we were put in the flood-control business by Congress by the Flood Control Act of 1936.

Actually, our first major experience in floods began in 1927 with the great flood on the lower Mississippi of that year. The lives lost then were about 200, and some 600,000 families were rendered homeless. The property damage in the dollar of that day was $250 million, and in today's dollar it would therefore represent something nearly 3 times as much or about $750 million.

That was direct damage and it does not include the indirect losses which would be about a billion dollars more.

The current estimated cost of the project for the alluvial valley of the Mississippi River is about $1.3 billion. It is now about 68 percent, or roughly two-thirds, complete. It has carried very serious floods both in 1937 and in 1950 without damage. In other words, it has fully performed its mission.

Turning to some of the other floods, in the upper Ohio River flood, in 1936 direct damage of $200 million was caused, and in 1937, about $108 million.

In New England, the 1936 flood caused damages of $113 million, and in 1938, $70 million. We have no estimate for 1955 as yet. Shortly after the occurrence of the flood, some very "horseback“ estimates totaling about $1.6 billion that had been received locally were used. We stated that they were not our estimates but the best we could collect from State and local agencies. However, they did not include indirect losses.

Furthermore, as I said
Senator LEHMAN. That is for 1955?

General STURGIS. The 1955 flood, yes, sir. The August 1955 flood. However, that figure of $1.6 billion is subject to revision after actual engineering study and investigation because following our normal practice after any major disaster flood, we put engineers into the field to assess the direct and indirect damage, and it will be several months yet before we have that figure.

Senator LEHMAN. May I interrupt you? Do I understand that figure that you have given of $1.6 billion of damage, direct damage, was confined to the damage that occurred in the Northeastern States ? Or does that include disasters, flood disasters, in other parts of the country?

General STURGIS. If I understand your question, you have asked whether that was the August flood in the Northeastern States alone?

Senator LEHMAN. Yes.

General STTRGIS. The answer is yes. However, I'd like to reiterate and emphasize that that is not the Corps of Engineers' official figure. We won't have such an official figure for several months yet because we actually are going out into the field in our normal way after every disaster flood with organized engineer field parties who assess the damage.

Senator LEHMAN. The reason I ask that question is because the figures that you have given representing the tentative investigation by the Corps of Engineers of $1.6 billion are so greatly at variance with figures that were given out I think by the Department of Commerce and which were carried in some of the papers this morning showing, as I recall it, about $500 million for the entire northeastern area. That, of course, is a tremendous variation in the two figures.

General STURGIS. Well, I would say, sir, that the $1.6 billion is not even a tentative figure by the Corps of Engineers. We stated in the press and publicly that based on our contract with governors and local people, we were putting their figures together, which mounted up to $1.6 billion. Now, on the estimate that I saw in the paper this morning from the Department of Commerce, I am not prepared to answer how they got that figure. I do not know whether it includes indirect damage, which is very great. You remember, a few minutes ago, sir, I indicated that the lower Mississippi indirect damage in dollars today would be about $1 billion, against a direct damage of $750 million. So I am not able to verify that figure either. All I wish to say, sir, in that connection, is the Corps of Engineers will not have an official figure or even a tentatively official figure for several months. It is a very large problem. We have literally scores of engineers in the field investigating damages as we normally do in connection with the occurrence of any flood, because we have to know what damage is direct and indirect, but not secondary damages, in order that we can evaluate the economic merit of remedial structures.

Senator LEHMAN. Have you any figures as to the average loss the period of say 15 or 20 years that has come from flood damage?

General STURGIS. You mean for the Nation, the total! I do not have that with me, Senator. But if I may, I might give you some figures. As I said, on the lower Mississippi, in 1927, the damage would be about $750 million, actual physical damage, and about $1 billion in indirect damage. In the Ohio flood of 1936, the direct damage was $200 million. In the Ohio disaster of 1937 it was $408 million. In the



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1951 Missouri flood, the direct damage was $523 million, and in 1932, $121 million. The Columbia River 1948 flood had a direct cost of $110 million.

Now, in addition, of course, to the direct damage which I have given, there is very material indirect damage, and I am not counting secondary damages. For example, if a given factory is destroyed and put out of business, I do not count the resulting loss of trade to groceries or pharmacies and so forth that are not damaged. Those secondary damages are not included, but only direct damages, and what we call indirect. For instance, take that magnesium factory in Putnam in the recent flood. Of course, they go out of production for a long period of time, and until that production is restored or absorbed elsewhere throughout the country, there is very definite indirect loss to the economy,

Now, sir, before this New England flood occurred, the potential flood damage in the United States, assuming that we never had built any flood-control structures, was $910 million average per year. While that does not give you the total you requested, Mr. Chairman, it gives you some idea of the average annual losses through floods without any protection.

Now, with the protection from the structures that have been built in the flood-control program since 1936, and including the Mississippi project from 1927, we have reduced that figure from $910 million a year to $420 million a year. In other words, we have saved annually $490 million of damage.

Senator LEHMAN. That figure of $420 million, as I understand it, does not include indirect damage. That is only the real damage.

General STURGIS. These figures I am giving you include indirect and direct damage, which is the real damage, but not secondary damage.

Senator LEHMAN. May I ask you this, General. Is it true that the Corps of Engineers, when they plan flood-control works, act merely to contain the flood based on past recorded heights, or do they do more than that?

General STURGIS. Well, it is a very complex problem, Senator. Of course,

we take the past historical record. But what we call the design flood is not necessarily the highest flood of record, because a study of other watershed close by might indicate greater storms than those of record might occur. So we take all those factors into consideration. And of course, sir, in determining the design flood, we work extremely closely with the Weather Bureau. The design storm we finally set up is as a result of probabilities and actual data that have been worked up between us and the Weather Bureau.

Senator LEHMAN. If you had been authorized to undertake floodcontrol work on the rivers in the northeastern district that were involved in this disastrous flood, would you, in your opinion, have contained the particular floods that came in August?

General STURGIS. I am prepared, if I may, sir, in just a few minutes, to cover that particular subject.

Senator LEHMAN. Very well.

General STURGIS. I mentioned that we have projects in operation that will prevent $420 million average annual damage nationwide out of the potential $910 annual average damage. In addition, we have under construction, or authorized for construction but with no money

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