1. Five are primarily coal-mining areas.

2. Three are primarily textile centers.

3. Eight have an industrial base too narrow to support a growing population on a year-around basis.

4. Three are suffering from cutbacks in the manufacture of autos, railroad equipment, and nonelectrical machinery.

Many if not most of the smaller areas show one or more of the same patterns: Inroads of competing products, exhaustion or depletion of natural resources, technological changes, insufficient industrialization or lack of adequate diversification. Since it has taken many years for this cycle to operate, it is cruel to those suffering the hardships of persistent unemployment in these areas to promise an overnight cure. Nor can their basic problem be solved with defense orders or public works financed by Government. What they need is a sound, long-term private enterprise program. Underdeveloped areas must attract investment for profit.

How can this be accomplished and what can the local, State, and Federal Governments do to help? This is the crucial question which must be resolved.

There is a school of thought in America that would correct the economic doldrums of particular areas with public works and tax abatements. Unless public works are needed to create useful assets in the area, however, they are of a made-work variety and are really tax abatements in reverse. It would be cheaper and more honest simply to subsidize the area and be done with it.

No unemployed worker wants to be paid for being idle or for temporary employment by made-work assignments. He wants a real job at steady wages producing a useful product or service independent of public bounty. He rejects a solution based upon war, unbalanced bdgets with their inevitable inflation, and the indefinite expenditure of public funds raised by taxation.

The President's program has self-help at its core. It is based upon experience in assisting the development of sound local and State programs. It recognizes that the interruption of that evolution would be a great disservice to these communities. Local efforts need to be supplemented, not supplanted, for very practical reasons. Here are

some of them:

1. The attitude of local residents with respect to existing industry or the desirability of particular kinds of new industry is fundamental. Businessmen hesitate to invest their own or other people's money where their venture would be in any way unwelcome. Particularly to achieve diversification through new industry requires a favorable attitude on the part of the workers, existing employers, and the local administration.

2. The community must have what is needed to support economic growth. No firm will locate in an area in order to rehabilitate it. Only when it appears that there are chances for profitable operation will it move. In particular cases this may mean that some public improvements are necessary to make the area capable of handling increased loads on water supply and sewage disposal plants. Local utilities and transportation facilities can play a key role in area development.

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3. The State's responsibility in community industrial development to overcome chronic local ills is also clear. Municipalities derive their powers from State constitutions and State legislation. State tax structures and such "legislated costs" as workmen's compensation and unemployment insurance rates and practices can attract or repel industries seeking environments favorable to profitable operation. For many years communities and State government agencies have been responding to these practical considerations in building development programs. Financing of new factory buildings, usually on some lease-purchase basis, has become an increasingly prevalent community industrial development device. And all but two States now have official agencies, such as State departments of commerce or development commissions, to promote industrial development and aid their communities in self-help programs.

In recent years these efforts have been supplemented in a number of States through the chartering of development credit corporations. It has been determined that in some areas there is no absence of capital. Rather there is a recognized need for the pooling of private financial resources to meet credit needs of small and new firms where local sources of loan funds are inadequate. There are, however, some areas of substantial and persistent unemployment where needed developmental work has resulted in heavy drain on local capital. Provision is included in the legislative proposal here under consideration for Federal assistance to such areas in the form of loans or guarantees to supplement available funds.

In the Department of Commerce, we have already undertaken a modest program of technical assistance which has been operating on a sort of pilot-plant basis. We are enthusiastic, and highly encouraged, by the methods, cooperation techniques, and the results of this program, which is carried out by our Office of Area Development. In cooperation with the States, this program has helped communities in their problems of establishing new industries based on local resources, of expanding existing industries by new product and market expansion information, by exchanging the successful experiences of various communities thruoghout the country in coming to grips with their problems, and by publishing self-help kits and industrial development aids. For example, a how-to-do-it publication on planned industrial parks has met with unusually favorable response, and a number of communities are now developing these parks, which are in effect the industrial counterpart of planned residential subdivisions. Other publications which have been directed toward meeting the needs of these communities are the "Community Industrial Development Kit” and the "Area Development Bulletin," which periodically bring together all the recent Federal information and programs that may be helpful to these areas, as well as detailed accounts of how other communities are meeting similar problems.

In all these instances, the Department has developed cordial and practical working relationships with State development agencies and their counterparts at the local level. For example, an annual conference is held for these people where Federal officials and State officials discuss their common problems and arrive at ways and means by which their efforts to meet these problems can be geared together most effectively.

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This test program is subject to the criticism that there is not enough of it. The Department of Commerce is unable to meet demands for field consultation and for other requests which have been mounting for the services of this unit. For that reason, at the recommendation of the President and the Secretary of Commerce, we asked the last Congress to increase the appropriation for the Office of Area Development of the Business and Defense Services Administration from a level of $120,000 annually to a level of $370,000 annually. Unfortunately the Congress failed to appropriate the requested increase. I am sure that the members of the committee could not fail to be impressed by letters of appreciation which we have received from assisted communities and from members of the Congress of both political parties.

Several approaches to the problem have been tried by the Department. While most of these have been successful to the extent that they accomplished limited objectives or tested and explored various approaches, it is apparent now that a bolder approach is necessary if we are to provide the necessary assistance to the areas in their resolution of economic problems.

It can be seen from the above discussion that there has been a considerable growth of local programs assisted by State promotional agencies and by new private financing devices such as State development credit corporations. It can also be seen that Federal programs are designed to support and supplement rather than to duplicate or supplant this sound evolution.

Last October, while the President was still in Denver, he gave his approval to an enlarged program, particularly aimed at helping the areas of chronic unemployment, which had been developed by his Council of Economic Advisers. H. R. 8555, and identical proposals identified as the Areas Assistance Act of 1956, have since been introduced to carry out that enlarged program. These bills reflect the four principles set forth in the Economic Report of the President to govern Federal action in this field.

These bills are aptly fashioned to authorize the Federal Government to give special assistance to areas of substantial and persistent labor surplus. The proposed Areas Assistance Act of 1956 would also provide benefits to other areas. These include rural areas of lowincome or incomplete development and "one-industry" communities. For such areas which do not qualify under the standards as areas of substantial and persistent unemployment, an expanded program of technical assistance and on-the-spot consultation would be provided to assist in the development of manufacturing, processing, and service activities to supplement existing means of livelihood by increasing the productivity of the areas and achieving a more diversified economy. There are "one-industry" communities which need to work now on diversification to prevent future reverses in their economies.

Assistance and consultation for rural areas will be integrated with the broader rural development program which is spearheaded by the Department of Agriculture. Working with local and State organizations, assistance would be given to low-income and underdeveloped rural areas to enable them to establish rural industries, such as processing industries for local farm products and manufacturing industries serving local markets. These nonfarm opportunities for em

ployment would be provided either on a part-time or full-time basis to people who are struggling with uneconomic farm uits. The program will also strengthen farm activity by providing local markets for farm products.

Under the provisions of this act, the Secretary of Labor, using prescribed standards, would designate certain areas of substantial and persistent unemployment. Certain benefits thereunder are reserved for such designated areas. These include grants for technical assistance which will enable studies to be made of the resources and the industrial possibilities in such areas. These grants would be used to stimulate and help local and State organizations, including State institutions of higher learning, to assist their own communities in problems of economic development. For example, in the eastern Kentucky area, there has been a showing of certain natural salt brines. The extent and exact quality of these brines are not known. Intensive investigation may show that these brines are capable of supporting a chemical operation. Again, the aluminum industry is expanding. With few geographical exceptions, it is now cheaper in most parts of the United States to produce aluminum using coal as a source of electricity rather than developing hydroelectric power. This means that the surplus labor areas with coal fields such as those in the many States of the Ohio Valley now have new industrial potentials. Uncovering industrial possibilities such as these will enable the State organizations to build up a capital of knowhow and expertness which will become increasingly valuable to the communities of the State.

In the same category of benefits reserved for these designated areas are loans by the Secretary for the purchase or development of lands or facilities for industrial usage, for the construction of new factory buildings, for rehabilitation of abandoned or unoccupied factory buildings, or for the modernization, or enlargement of any existing buildings for industrial use. Funds made available in this manner may not be used to assist establishments relocating from one area to another when such assistance will result in a substantial detriment to the area of original location by increasing unemployment. The program should not result in a robbing of Peter to pay Paul. The role of the Federal Government with its concern for the Nation's welfare as a whole will thus, in our opinion, contribute materially to stabilizing competition between these areas for businesses.

Under the proposal, Federal lending will proceed hand-in-hand with participation by private, State, and local organizations. The Federal Government may lend up to 25 percent of the total estimated cost of the individual projects, and it is necessary that State and local community organizations participate on at least a 15 percent basis subordinate to the Federal loan. A typical arrangement under this act would have a private insurance company lending 60 percent on a first mortgage basis with the Federal Government lending 25 percent on a second mortgage basis, and the remaining 15 percent of local and State funds taking a third position. An overall program for the economic development of the area must be prepared locally and a finding made by the State or any appropriate agency, instrumentality, or local subdivision thereof that the project for which the Federal loan will be made is consistent with such an overall program. By

such provisions as these, the Congress may be assured that the program will be carried out on a cooperative basis because of belief in the project and support of the project by participants on the State and local levels.

Other benefits which are especially fashioned for assistance of designated areas by provisions of this act would include community facilities benefits such as sewerage and water distribution and other benefits under the Housing Act and studies and assistance by the Secretary of Labor. Representatives of these agencies will explain in some detail activities to be performed by them under the bill. In summary fashion, it should be said that this act, in addition to new programs therein authorized for the Department of Commerce, would bring related activities of other agencies to focus on the economic problems of the designated areas on a priority basis. This technique will assure the maximum assistance from the minimum Federal expenditure with coordination by the Secretary of Commerce either by certification of need by the Secretary or by the use of an advisory board with representation from all interested agencies.

This act would assign major responsibility for activities therein authorized to the Secretary of Commerce. We believe this is proper and wise. An organization set up outside of an existing department to administer the program would be contrary to a sound trend in Government organization which has been recognized for over 15 years, contrary to the expressed views of this administration, the three preceding Presidents of the United States, and of both Hoover Commissions on Organization of the Executive Branch of the Government. I refer to the policy against the establishment of independent agencies to carry out programs closely related to the main purposes of existing departments or agencies.

This act would, therefore, in the interest of efficiency and in the interest of assuring Cabinet consideration of problems which may develop in the administration of the program assign responsibility for administration to the Secretary of Commerce. For over 50 years this departmental Secretary has been charged with responsibility to foster, promote, and develop foreign and domestic industry of this country. In light of this major purpose of the Department of Commerce and its experience in this field, it clearly appears proper from the standpoint of sound government organization to locate the proposed related program in the Department of Commerce. There would thus be a focal point to which our citizens, local officials, and the Congress may turn for assistance in the resolution of difficulties sought to be achieved by the program authorized.

The activities of the Administrator of Housing and Home Finance Agency under the amendments to the laws in this field would be tied into actions to be taken by the Secretary of Commerce, and the activities of the Secretary of Labor and the Secretary of Commerce, and the activities of the Secretary of Labor and the Secretary of Health, Education, and Welfare under this proposal are closely related to the major purposes of their departments. Their designation to perform these activities by the proposed bill does not, therefore, deviate from the principle sought to be carried out.

The Secretary of Commerce would be authorized to use the available services and facilities of other agencies of the Federal Government on a reimbursable basis to avoid duplication of activities and mini