What we tried to do was second-guess them by analyzing most of the demand that came into the town for new plant space, and building a standard, 1-story, 14-foot clear building-14-foot ceiling height, all-masonery construction, all utilities, in a planned industrial district, so that we would have something which would be adaptable to most industrial uses.

They have done the same thing in Pottsville, they have done the same thing in Scranton, Wilkes-Barre, Hazleton, in Amsterdam, N. Y., in Lowell, Mass.

You can't do it by itself. It has got to be fitted in with a pretty carefully planned program, and with a good promotional effort, so that you don't just put up something and have it sitting there.

The CHAIRMAN. Do you think the provision in this bill requiring 15 percent of the loan to come from the local organizations is desirable?

Mr. BATT. No, sir; I do not. I think local participation is important, but the way this is written means that you would have to have the local government, or the State government, in the act, which is illegal in my State and in most States, to have public funds in a private enterprise, or you would require your community to collect money through a pass-the-hat operation, in tremendous amounts, and in a million-dollar building, you would require $150,000 of local

money.

The CHAIRMAN. It would be a condition precedent to getting public money or Government money.

Mr. BATT. I was kind of surprised to see this coming out of this administration, Mr. Chairman; in effect, you are putting pressure on the local government to get into business, which is kind

Mr. MUMMA. Wait a minute. That is a different level than Mr. Eisenhower ever approached it on. He wants to get back to the local level. There is money in Pottsville.

Mr. BATT. There is not a nickel of public funds in the Pottsville operation. That is all private funds.

Mr. MUMMA. There wouldn't need to be in this either.

Mr. BATT. There wouldn't need to be. I think this language could be improved because it says:

15 percent of such aggregate cost be supplied by the State or any agency, instrumentality, or political subdivision thereof.

Mr. MUMMA. Division.

Mr. BATT. Political subdivision. In other words, a city or county. Mr. MUMMA. It wouldn't prevent Pottsville, a corporate body, from raising the money.

Mr. BATT. No, sir. It says "or by community or area organization." Mr. MUMMA. That's right.

Mr. BATT. I wouldn't have any objection to permitting a community or area organization. I think that is sound, but I think that there are two points: One, the public language ought to be taken out. Mr. MUMMA. I think that is a matter of interpretation.

Mr. BATT. The public language ought to be taken out so you don't have your ciy investing in private plants.

Mr. MUMMA. In that Pottsville and coal-region situation it is a funny thing, a lot of that employment and diversification has been due to the coal companies who put their surplus funds-they mostly

all have surplus funds-into industry. The Lehigh Valley Coal Co. is going into the air-conditioning business. The Reading Coal & Iron Co. have gone into textiles. Up around Wilkes-Barre, I forget what they are doing.

Mr. BATT. Did they put them into those areas?

Mr. MUMMA. They put them in themselves, so they are trying. Mr. BATT. That is very encouraging. I hadn't heard that.

The CHAIRMAN. I would doubt the legality of municipalities investing in enterprises, and then I think because of the restrictions upon them they would be unable to do it because in most instances they are limited in their tax rate, investments and in their expenditures.

Mr. BATT. They are usually broke, sir.

The CHAIRMAN. They are usually broke. I don't think there would be much possibility of getting them into it.

Then when you make that a condition precedent to getting the loan from the Government, it throws the whole thing out.

Mr. BATT. Then, sir, I think you in effect force the communities to pass the hat and you penalize the communities which have enough ingenuity to get this money out of private banks, or private institutions, or as we may have succeeded in doing in a couple of cases, a group of small-business men acting privately.

I would hope that this provision either didn't stay or stayed in much modified form.

Mr. FOUNTAIN. If the gentleman will yield right there, do you think the language is broad enough to include local banks, building and loan associations, and other investment institutions?

Mr. BATT. I don't read it that way. I should think the language ought to include that, but it doesn't read that way to me now: "or by a community or area organization."

Well, I think what they are shooting at was an industrial development organization, and for those communities which don't have any, which had had really imaginative private investors, they are penalized,

it seems to me.

Mr. McVEY. Would you object to State aid in this situation?

Mr. BATT. No. If a State has a program, particularly some program like the State development credit corporations, if all the New England States and about half a dozen others throughout the country, a couple in the South, a couple in the West, and I would think there is a great advantage in involving the State in it.

Mr. McVEY. I would think so, too, because our Federal debt is $276 billion and the State combined debts is only $11 billion.

Mr. BATT. I would hope that the States could be involved, but again, sir, the State development credit corporations are private money. They are set up under authority from the State legislatures, but it is private banking funds, so there are ways to involve the State without involving private money.

Mr. MCVEY. I see no objection to their being involved in money, however.

Mr. BATT. Well, sir, I would doubt-I don't know what the limitations are in most State constitutions. Again, in my State, the State couldn't under its constitution invest in private enerprise. I would hope that any State participation would come through a State development credit corporation, if that were possible. Generally speak

ing, there are, as you know, those State development credit corporations are set up to take nonbankable risks for promotional purposes, and they have been I think a great success.

The CHAIRMAN. In a highly depressed area the lending institutions are often in trouble because their notes are over due and their businesses are not proceeding as usual. I don't see any reason to put any condition in there that they have to get local loans.

Mr. BATT. I think it would be much more effective, sir, if you didn't have that provision. In other words, it wouldn't tie the hands of whomever you are going to ask to do this job.

The CHAIRMAN. We are looking for relief.

Mr. BATT. It is a tough enough job, and I think that would limit its effectiveness.

Mr. BROWN. Would the gentleman yield to me?

Mr. BATT. Certainly, sir.

(Off the record.)

Mr. ASHLEY. At the present time I take it that it is true that most of the efforts that are being made are being made by your industrial development organizations and committees. That is true throughout the country, I presume, isn't it?

Mr. BATT. Yes, sir.

Mr. ASHLEY. What is your experience in that connection? Do you find that in a community such as Toledo, for example, it is possible to properly fund and finance your industrial development committee to relieve a situation such as existed in Toledo up until quite recently; that is, when we were considered a chronic surplus labor area? Mr. BATT. Mr. Ashley, I think the answer to that is: It has been possible in Toledo, and at the same time, with the same breath I would say that Toledo is utterly unrepresentative as far as the areas we are talking about this morning, because this is a normally prosperous, wealthy community, with a lot of private resources of all kinds, technical help as well as financial.

At the same time, I would have given a great deal to have had a State development credit corporation, such as North Carolina has, such as the New England States and New York have, in Ohio, to help us with those smaller developmental corporations who do not have ten years of earnings behind them, so that they are a good risk for the insurance companies and the banks and the normal, the regular standard channels of financing. I would have loved to have had a development credit corporation, and I hope we can get one. in Ohio.

Mr. ASHLEY. You feel that in the distressed areas about which you are speaking this morning, that Government assistance of the character set forth in the Douglas bill is essential, but you would, I take it, remove that 15 percent limitation?

Mr. BATT. Yes.

I think, just in answer, sir, if I may, to Mr. Brown's point, too, in Georgia you have, sir, a very excellent program of technical assistance which is administered, as I understand it, by the Georgia Power Co. One of the most imaginative of any utilities programs in the country exists there, so your smaller communities have a lot of help available to them that is not available to many other communities throughout the country, particularly where these areas are

located. We don't have that situation in southern Illinois, for example.

Mr. MUMMA. Do you know anything about the industrial development in York, or Lancaster, Pa.?

Mr. BATT. Yes, sir.

Mr. MUMMA. What do you attribute to that?

Mr. BATT. York is the cream puff of industrial development in the East.

Mr. MUMMA. What do they have that somebody else doesn't have? Mr. BATT. They have got, first of all, a fabulous location, adjacent to the eastern markets, but in a smaller town. Industry likes to locate in smaller towns, and there is a great movement away from the larger industrial centers, so York is adjacent to the enormous markets of Baltimore and New York without being in them. Secondly, it has got a fine German-American population.

Mr. MUMMA. Pennsylvania Dutch.

Mr. BATT. Pennsylvania Dutch, who are exceedingly stable people and the employers love them.

Thirdly, it has got a lot of community leadership. They have got a real imagination on the part of a few community leaders there, and Fourthly, they have got a particular combination of a share of lunin, and if you had a share of lunin in every one of these sections, you wouldn't have the problem.

Mr. MUMMA. They are not over the whole country.

Mr. BATT. That is right.

There are a couple of other points on this loan I would like to make. One is the $50 million provided in the administration bill is too small. The Douglas bill is much more adequate in that regard, and I would like to direct your attention, if I may, to this chart.

(The chart referred to appears at p. 132.)

This is an effort to estimate the capital investment required in the 17 major chronic labor surplus areas, to reduce unemployment to 3 percent of the labor force, which means in effect full employment.

We started here with population. I want to acknowledge a_great deal of help. This study got started when I was back in the Labor Department, as an effort to measure the entire size of this problem, and I want to thank the Office of Program Review and Analysis of the BDS for their help in this.

This is their latest revision, dated July 29, 1955. Here you have in column 1 the population of these areas. It comes up to about 4 million people, and the labor force, a million and a half, and the unemployed, 190,000, which comes to about 121⁄2 percent of the labor force on the average.

But notice those percentages, running all the way from 6 to 22 or 23 percent of the labor force.

Unemployment insurance under column 7, annual payments, are running around $136 million a year.

We

Now, I arrived at my $200 million estimate by doubling these figures. These figures are only for the 17 major chronic areas. have no figures for the 48 minor areas, and I am assuming that the 48 minor areas will be about as a big problem as the 17 major areas. This is a very crude assumption, but I think it is a fair one.

The unemployment insurance, then, for both the major and minor areas is running us about $270 million a year, and if you were to reduce that unemployment in these areas to the national average, you would save yourself $200 million a year, which I say is a subsidy. It is paid out and never seen again.

We are talking here about loans which come back to you, so it seems to me it is an awfully good investment.

Now, the number of jobs required to balance the labor force we estimate to be 144,000 in these areas alone.

Now, one manufacturing job generally creates a trade and service job, so we divide that by two. We find 72,000 jobs are needed in manufacturing.

Now, on the next page, column 10, the capital investment required in manufacturing and here we figured about $15,000 per job-runs to about $1 million, pardon me, $1 billion. That includes both the brick and mortar and the machinery. Generally, the brick and mortar are only a quarter of the total investment involved, and of course you are asking, you are depending on your private manufacturers to invest and underwrite all the machinery, so they have got by far the biggest investment in this thing. All you are talking about helping is the brick and mortar, which is sound.

Now, under column 11, then, for buildings alone, less machinery, you come to a figure of $271 million, and the loan capital required you can estimate at two-thirds of that, column 12, at $181 million for. your major areas $181 million total loan capital; double that to get the minor areas in, and it brings you to about $360 million, and from that I assume that $50 million, which is the Government figure, the administration figure is too low, and the Douglas bill figure is much more realistic; that is, with a $100 million of Government loans in there or guaranties, you ought to be able to generate $4 for every $1, or about $360 million needed.

So much for this chart.

I think it is an unusual-it is the only effort I have heard of to try to measure this darned thing arithmetically, and it is a crude one, but I think it may be of some use to your committee, and you may want to include it in the record.

The administration bill providing $50 million is too small; 20 years is too short a term, and 25 percent is too small participation. I can do better out of an insurance company.

The CHAIRMAN. What are the provisions of the Douglas bill?

Mr. BATT. The Douglas bill is 663 percent for 40 years. I think that is far more realistic than 25 percent for 20 years. We can get 66% percent for 25 years out of the most conservative insurance company in the United States for good risk.

Mr. MUMMA. Don't you think in the insurance company the element of safety enters into that?

Mr. BATT. You are right, sir.

Mr. MUMMA. There would be less safety in the Government loaning the money. They would take a chance, while the insurance company will give you a hundred percent, if you have a triple rating.

Mr. BATT. Not on a mortgage. On a pure less-back, they would. I would like to see the larger participation, sir, because you are talking about creating in any given town-let's take Duluth-Superior, Minn.,