We are satisfied that the country as a whole is back of the President's program. Editorial comment on the President's tax program has been received from 140 daily newspapers in 36 States. The count of editorials as of Monday, June 1, today, was as follows: Supporting the program, 102; critical, 11; noncommittal, 27.

I urge, therefore, that the tax be extended without modification for 6 months and that we then get rid of it once and for all. In the meantime, we will devote ourselves to further reducing current expenditures so that the reduction in individual income taxes for all the people can justifiably be made a reality. Then all of our efforts will be used in developing a better tax structure under which the elimination of many of the inequities and injustices for all taxpayers, both corporate and individual, can be made at the same time as the excess-profits tax expires. In that way justice and fair dealing can be done equally and contemporaneously for all.

Thank you, Mr. Chairman and gentlemen, for this opportunity to appear before you. I will gladly attempt to answer any question.

The CHAIRMAN. Mr. Secretary, I want to thank you very much for your testimony. I think you made a fine case from your point of view. That is what we would naturally expect. I know from what you have said that you think the excess-profits tax is a bad tax. But, with your permission, I would like to explore your views on the subject just little further. You do believe, do you not, that the excess-profits tax tends to limit the growth of production both for civilian and defense purposes?

Secretary HUMPHREY. Both what?

The CHAIRMAN. For civilian and defense purposes.

Secretary HUMPHREY. I think the excess-profits tax very definitely tends to limit the growth of small companies.

The CHAIRMAN. And you also believe, do you not, that it tends to prevent business expansion and increases in the standard of living for all?

Secretary HUMPHREY. I think it does, Mr. Chairman.

The CHAIRMAN. I think you have been very frank about your condemnation of the excess-profits tax.

Secretary HUMPHREY. That is correct. I don't want to defend it at all. I don't believe it is a proper form of taxation.

The CHAIRMAN. Just what assurance can you give that this will not be extended again?

Secretary HUMPHREY. I can only give my own assurance and the assurance of the President that we will oppose any further extension of this tax beyond December 31. He has said so, and I have just said so now. That is definite administration policy.

The CHAIRMAN. I think you will agree with me, and I am not sure but what you covered it, but you do believe that when the excessprofits tax rate is added on to the normal and surtax rate it encourages extremely wasteful business practices?

Secretary HUMPHREY. I agree to that; yes, sir.

The CHAIRMAN. Am I correct in understanding from your testimony that you feel that the so-called excess-profits tax is one of the worst forms of taxation that can be imposed upon American business?

Secretary HUMPHREY. I think it is a very undesirable form of tax.

The CHAIRMAN. I understand Senator Taft was quoted as saying the other day that the excess-profits tax was a vicious tax. Do you agree with the Senator?

Secretary HUMPHREY. Yes; I think I would say the same thing. The CHAIRMAN. Any questions on this side?

Mr. Jenkins will inquire.

Mr. JENKINS. I want to ask one question. On page 7 of your statement, you say:

It will give us time to get control of the budget.

You say:

It will help in the maintaining of a sound dollar. It will make it possible for tax reductions and revisions affecting every one to take place at the same time next year.

Do you really think that just a continuation of this excess-profits tax bill will do all of those things?

Secretary HUMPHREY. Mr. Jenkins, I did not say it would do them all. I said it would help in all, and the billion dollars that this will save will be a very great help in all of those things; yes, sir. It does not do it alone, but it helps very materially in each one of those accomplishments.

Mr. JENKINS. I got the impression that you meant that the continuation of this law would adjust the financial standing so that you could balance the budget better. But, as I understand you now, you mean this: If this bill will bring in $800 million, it will be to that extent only that it will balance the budget?

Secretary HUMPHREY. I think to both extents, Mr. Jenkins. I think it brings in in round figures nearly a billion dollars in money, and I think it shows a fair way of dealing with taxpayers. It does not single out a small group for early treatment ahead of the rest of the group. It puts all taxpayers into the same basis, and it shows a determination of the administration to move forward. I think, if the administration has the courage to come in here and ask you gentlemen to extend this tax, it is the firmest good-faith showing that we are determined to balance this budget and to accomplish sound economy.

Mr. JENKINS. I thought from that paragraph that you were conveying the impression that besides the $800 million it would give you some encouragement or give you some chance to balance the budget in addition to that.

Secretary HUMPHREY. As I just said, I think that the fact that we will do that is a most complete demonstration, forceful demonstration, that we could make of our determination to balance this budget and to establish a sound economy and stop inflation.

Mr. JENKINS. That is all, Mr. Chairman.

The CHAIRMAN. Mr. Cooper will inquire.

Mr. COOPER. Mr. Chairman.

Mr. Secretary, I would like to ask a few questions for information. It is not my intention to indicate my position at this time. I believe you will agree that the purpose of public hearings is to secure information for the benefit of the committee.

Secretary HUMPHREY. That is right.

Mr. COOPER. What do you think of providing a new general relief section similar to section 722 of the World War II excess-profits tax law?

Secretary HUMPHREY. Mr. Cooper, I am opposed to any amendments for this short period of time. I think that, if you were to put in an amendment such as the 722 amendment, you might very well open up a mass of cases that might take more income or a large part of the total income that the tax would provide during this period, and that the very purpose of taking this step would be defeated. More than that, I think, if amendments are once started, you can't make a good tax out of it no matter what you put in; you cannot make a good tax out of it.

I think it would be a great mistake to attempt to patch it up for a 6-month period when you are simply finishing up what is the logical period for this tax to cover and to then close it up.

Mr. COOPER. I believe it is fair to state that the present excessprofits-tax law includes more relief provisions than were ever included in any excess-profits-tax law in the past.

Secretary HUMPHREY. I think that is true.

Mr. COOPER. If there should be a disposition to extend the excessprofits tax, and at the same time include a number of additional relief provisions, my purpose in asking the previous question was to get your advice to the committee as to whether it would be better to not include a number of additional relief provisions, but if it was thought advisable that some relief should be provided that the provision of section 722, which in effect confers discretionary authority on the Commissioner to provide certain types of relief when they are found necessary, whether that course would be better than to attempt to include a number of additional relief provisions in the act itself.

Secretary HUMPHREY. Mr. Cooper, I would be very strongly opposed to any amendment of any kind. I do not think it should be amended at all. I think that you have this tax in force for what is really an improper length of time. You have a calendar-year tax, which for some reason that is not before us now, was cut off on July 1. All that means is that that tax is in effect today for the entire 12 months but you cut the rate in half by making it a July tax-expiration date instead of a December 31. What we are asking for and what I think is the right thing for the country to have, is to have the full rate for the full year on the tax that now exists and that by so doing you will not be starting out giving relief to a small group of taxpayers 6 months ahead of the time when you give relief to all the taxpayers. I think all the taxpayers are entitled to consideration at the same time, and I do not think you should pick out a favored few and give them a particular advantage.

Mr. COOPER. That is certainly a very clear statement of your position, Mr. Secretary.

In that connection, I invite your attention to a statement made by you on page 3 of your prepared statement. It is the last sentence in the fourth paragraph there. I quote:

In the present situation it does not seem fair to let the first reduction benefit only a relative small group of corporations at least 6 months ahead of any relief for any other taxpayer.

When I heard you read that sentence I was just reminded of a statement in a press release made by me on February 16, 1953, when H. R. 1 was favorably reported by this committee. If I interpret the thing correctly, I feel complimented that your statement is very similar to the statement I made at that time. I will quote from this statement I made at that time. I will quote from this statement that I issued on February 16, 1953:

Chairman Reed has given assurance that the emergency excess-profits tax will not be renewed upon its expiration June 30. Obviously, it would be unfair to continue beyond that date the present income-tax increases imposed in 1951. The Democrats oppose any policy that would benefit big business at the expense of the average taxpayer, many of them in the lower income bracket.

I endeavored to point out at that time that I thought it would be unfair to extend that nature of relief for a certain group of taxpayers and not at the same time give some measure of relief to individual taxpayers, many of them in the lower income brackets. So when you use the word "fair" here, it impressed me that we were thinking somewhat along the same line.

Secretary HUMPHREY. I think my feeling, gentlemen, about this is just this: When I first came down here early in the spring, last fall and early in the spring, I hoped that we could be back of House bill No. 1. Nothing could have been better from my point of view than to have been able to come into this meeting today and say to the chairman, "Mr. Chairman, the administration is 100 percent behind your bill No. 1.”

That would have been a happy conclusion, it would have been a fine conclusion for everyone, and if the facts had justified it I think that everybody would have been pleased. The difficulty with it is just this: As we met, and you gentlemen will recall as we met from time to time during this early spring, I took the position that the administration could make no commitments until it first learned the facts, that what our desires might be was one thing but that until we found out what the facts were we could not commit ourselves, we had to find out what cuts could be made, how nearly we could come to balancing the budget, and what expenditures we had to provide income for. those facts developed, we got farther and farther from this desire to join in in support of House bill No. 1. We found that we simply could not make the cuts in the expenditures that were required to balance the budget or to see our way clear toward a balancing of the budget at this time, and take on an additional large reduction in income. As those facts came together, we found that the delay in cutting security, military and other expenses, that we could not cut, make cuts in the security program of a sufficient amount to eliminate this $11 billion deficit that was proposed by the preceding budget. Eleven billion dollars was just too much to be cut in so short a time without taking some chance in affecting security. We did not feel justified in taking a chance when it came to the security of your country. When it comes to just cutting expenditures of a department, I think we could swing a broad ax and cut it to any extent that was desired, and would not hesitate for a moment to do so. I have had to cut expenses in business a number of times, and I have not hesitated to cut expenses to do what was required to cut them and bring them down.

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You have to get them down before you can start out on a sound basis. As that relates to governmental departments, just as it relates to any of the ordinary civilian activities, there was no reason why we could not take a chance and just slash them down. If we slashed them down too far nobody would be particularly hurt. We could build them back again in a comparatively short time if we found we were not rendering the service required. But when you deal with cutting the security of your country, when you are aware, as you all must be, and a lot of you know a lot about this, that you can have a Pearl Harbor in America, that we have overhanging us a war in Korea that is now going on, that you have a threat that no country has even faced before in the history of the world, never has the chance for annihilation of as great number of people at one fell swoop existed in the history of the world as exists today.

When you face that condition, you cannot take a chance in just slashing billions of dollars off a program that has been already devised and is under way, too many billions of dollars. You have to be very sure of what you are doing when you make those cuts. As time went on we gave more and more careful thought as to what could be done, how much the budget could be cut, and we came up with this program which I believe is the proper program to be adopted at this time. That cuts our budget $42 billion. That leaves us with a deficit of $6,600 million. To pass House bill No. 1 would add over $2 billion to that deficit.

I do not believe that your committee or any other committee under the circumstances that we now find existing wants to run up that deficit to that extent, and put us right back on to the inflationary merry-go-round, which is where we would be.

On the other hand, as against putting our deficit up from $6.6 billion to about $8 billion, which House bill No. 1 would do, if we extend the excess-profits tax we reduce the deficit from $6.6 billion to $5.6 billion. In other words, the difference between the two courses of procedure is a deficit of nearly $9 billion as compared with a deficit of about $5.5 billion. That is a big difference in your deficits. With a $52 billion deficit, with hard work and more knowledge, and more study and more planning, and more efficiency and better management, we have a good chance to keep reducing that $52 billion down. If our world situation does not worsen, if we do not run into worse war threats than we are facing today, we have a very good chance, by 14 months from now, to get that deficit sufficiently reduced so that we are on an even-steven basis by the time we get to the end of the fiscal year of 1954.

Of course anything could happen in Russia tomorrow that could upset everybody's calculations. But you cannot plan on that. You have to plan on a status quo with respect to world affairs. World affairs can be upset, and when and if they are upset then we will all have to make new plans on a lot of fronts, not only on this one.

So with a $5.5 billion deficit, we have a very good chance to begin to get ourselves into balance and to look forward and to justify giving the individual tax reduction on January 1, when it is scheduled to come in. Unless we had made the savings we have made, and unless we can make further savings in expenditures and see our way clear to bringing income and outgo into balance, not too far ahead of us, a tax cut to the individual on January 1 is just a paper cut.