relief purposes; whether he would call upon the great wealth of New York to meet the situation, or whether he will avoid that responsibility and come to Washington to get it. Senator GLASS. And do you think he would do that? Do you think he would rather come here as a mendicant State or levy taxes of which you speak? Secretary MILLS. I shouldn't want to speak of any particular governor, but human beings are human beings, and according to the experience of the last 10 years, and no one knows it better than you, Senator Glass, ever since we started this State-aid business, ever since we have had the Federal income tax, it has not been a question of mendicancy, but the States are here year after year trying to run pipe lines into the Federal Treasury for one purpose or another. Senator GLASS. Oh, yes. I have contended over and over again that human beings are human beings, and human beings in the employ of the Federal Government are not any better than human being not so employed. This so-called Federal aid is the biggest humbug on earth. You get money from the States and bring it on here and land it in the Treasury, and then you dole it back to them. That is the process. Secretary MILLS. Senator Glass, you and I are completely in accord on the matter of State aid. Let there be no illusions as to that. Senator GLASS. If we have to trust anybody, I would rather trust the governor of my State than to trust some Federal subaltern here in Washington to determine whether the State should have State aid or not. Secretary MILLS. But you should put your tests in the law. Senator WAGNER. That is the provision in my bill. All that has to be done is to certify as to necessity, and the governor of the State does that, and I am willing to trust his integrity. Secretary MILLS. I am not willing to Senator WAGNER (continuing). But you want a subordinate here in Washington and appointed by the Federal Government to determine the question. That is the difference between you and me. I want the governor of the State to do it. Secretary MILLS. I want the Congress of the United States to provide the test, and the test shall be, Has the State got adequate resources and does it actually need the money? Write that into the law. Senator BARKLEY. You would determine here in Washington the resources of a State. And suppose you find some State where the resources are out of all proportion to population and need, what will you do? Secretary MILLS. Which way? Senator BARKLEY. Either way. Suppose the resources of a State are less in proportion than the needs of the State, and less in proportion to population. Who would make that test? Secretary MILLS. If a State has exhausted its resources and can not take care of its own needs, then the purpose of this bill is to provide Federal funds. Senator BARKLEY. But the resources of a State may not be exhausted. I suppose until the taxing power is exhausted, and all the property is practically taken by the imposition of taxes, you would not give Federal relief? Secretary MILLS. Oh, Senator Barkley, you would apply your rule with reason. I do not believe there are but very few States in the Union that feel they actually need Federal funds for relief purposes. I say need. That is a very different question, as to whether we want to provide Federal funds directly for relief purposes. That is another issue. But we are dealing this morning with the question whether the States need funds; not whether we will have the Federal Government provide funds for relief purposes. If you change to that question then that is an entirely different issue and we will discuss it. If you are going to proceed on the basis that States have exhausted their resources and you are going to give Federal funds to States, then write it into the law, and say that is what you mean, and permit New York and Pennsylvania, great rich States, to come down here to Washington and get a part of this $300,000,000. Senator BARKLEY. Of course, as to your criticism of that section I find myself in harmony with some of your comments. That is, about the effect of public improvements, that in proportion to the amount of money expended very frequently it gives less actual employment to people than any other avenue of expenditure. But as I understand it we are going to make this sum available, your criticism is that it is distributed according to population, and you suggest that we write in here the tests, as to resources and need. Who is better qualified to pass upon the need of a State than its Governor? Secretary MILLS. Yes; and who is more unwilling to call his legislature in session to ask for additional taxes on his own people? Senator BARKLEY. Well, the governor of your State did do so, and asked for $20,000,000 and got it immediately. Secretary MILLS. Oh, no; he did not. But pardon me, I hate to have to contradict you. Senator BARKLEY. He got an increase in income taxes. Secretary MILLS. I happened to be in Albany when that situation arose, and the responsibility lies on both parties, the Republican Party, through the legislature, and the governor, as the executive of the State of New York. They did not ask for taxes but issued bonds. Senator BARKLEY. I am not speaking of it in a partisan sense. Secretary MILLS. Senator Wagner knows what happened. Senator BARKLEY. I understood from the press that the Governor of New York asked for an increase in income taxes of $20,000,000. Secretary MILLS. He recommended an increase in income taxes in the beginning to meet a general deficit, but when they actually came to the point where to get $20,000,000 for unemployment, neither the legislature nor the governor stood up. They wouldn't impose the taxes. Senator BARKLEY. Well, at least they Washington. did not come down here to Secretary MILLS. They issued bonds. Oh, if the telephone line to Washington had been open, they might well have been down here, gentlemen of the committee. Senator BARKLEY. Well, I did not know that the telephone wires were cut. Secretary MILLS. Well, you know what I mean. Senator WAGNER. I am not going to get into a controversy with the Secretary, but I will say that I think that statement unwarranted. Secretary MILLS. Well, Senator Wagner, did they put on a tax, or did they make a bond issue? Senator WAGNER. They provided for a bond issue. But that does not mean they did not have the right to accept the alternative. Secretary MILLS. And it does not follow that they would not have come to Washington and asked relief if they could, because it is the easiest way. Senator WAGNER. That is a matter of opinion, as to whether the future taxpayer ought to provide some of this relief. Senator GLASS. And that is just what we have been doing in Washington, taking the easiest way. We have issued billions of dollars of debentures, and are proposing to issue additional billions of dollars, and we are not levying taxes. Secretary MILLS. We are levying $1,125,000,000 in taxes, to the everlasting credit of the Senate, which voted $285,000,000 more of taxes without question day before yesterday, thus levying the biggest tax bill ever levied in peace time. I think that credit ought to be given to the Congress. Senator GLASS. Well, we thank you for that. [Laughter.] Secretary MILLS. The Senator knows that it was not intended in a patronizing way and that his sarcasm is not justified. [Laughter.] Senator GLASS. So is your vehemence before the committee. Secretary MILLS. Well, this is a very important matter. Senator GLASS. I know, but Senator BLAINE (interposing). In this national emergency I assume from what you say that you do not contend that the relief of unemployment and distress is not a national responsibility; or you do contend that it is not a national responsibility, but is a State and local responsibility. Your contention is fundamentally that. Secretary MILLS. I have the historic American conception. I must state that that is where I start from. Senator BLAINE. You start from that point. Secretary MILLS. Which is the historic position in this country. Senator BLAINE. And if the proposition were made to afford direct relief through the Federal Government to the unemployed and those in distress you would state that upon the same conception. Secretary MILLS. I would, sir. Senator BLAINE. And Senator COUZENS (interposing). Knowing the existing limited market for the sale of municipal and State securities, would you be opposed to the Reconstruction Finance Corporation lending to the States with such issues as security? Secretary MILLS. Lending to the States? Senator CoUZENS. Yes. Secretary MILLS. And taking State bonds as security? Senator COUZENS. Either State or their own municipal bonds. Secretary MILLS. For relief purposes? Senator CoUZENS. Yes. Secretary MILLS. No. Senator COUZENS. You would not object to that? Secretary MILLS. No. I think that is in the bill which I talked of. The suggestion which has been made and which seems to me to be sound and wise, is first, to provide for any emergency. It is clear that no one, no matter what his theory of government may be, when it comes to actual starvation is going to stand on a question of principle. You understand, Senator Blaine, that that qualification has to be made, that as far as I am concerned government and principles of government go when you are actually faced with the problem of starvation and the relief of destitution. Senator BLAINE. Then sometimes you can rise above principle. Secretary MILLS. Well, if you want to put it that way, I will say yes; I can rise above principle. And even then, Senator Blaine, I may not have a very good average. But I think you ought to provide an emergency fund so that under any circumstances none of these local and State relief funds could fail and people be faced with starvation and destitution. There ought to be an emergency fund. Now, my conception of an emergency fund is to create a fund of $300,000,000 and to loan that to States where that emergency exists. And when you loan it you loan it on the credit of that State, and therefore I think you are naturally fully justified in accepting State securities as collateral. Senator COUZENS. I want to go further than that. I want a provision whereby securities of municipalities, securities which are locally issued, may be used as security from the States rather than State bonds themselves. I understood you to say that you do not object to that. Secretary MILLS. Well, that is a new proposition. Senator COUZENS. Let me give you an example of what I mean. For instance, in Detroit the debt service can not possibly be taken care of at the end of the fiscal year, at the end of this month, and the banks won't take care of the debt service. So assuming that the Governor of the State of Michigan applied to the Reconstruction Finance Corporation for $20,000,000 loan, and put up Detroit's securities for the loan, would that be agreeable to your view? Secretary MILLS. Provided the State guaranteed their payment. Senator COUZENS. Well, of course. Secretary MILLS. And providing further that if the State did not make good on the obligation we would reimburse ourselves ultimately from the State aid grants, which I am afraid Senator Glass is not going to succeed in abolishing. Senator COUZENS. And I am not in disagreement with that. Secretary MILLS. It was nothing uncomplimentary to you, Senator Glass. Senator GLASS. I know that, for nothing that I have said or could say would be uncomplimentary to you. Secretary MILLS. I simply said, Senator Glass, that I very much feared you would not succeed in abolishing grants of aid to the States. Senator GLASS. I am afraid not. Secretary MILLS. And as long as they exist they constitute a security for the loans to the States, always providing the Congress does not in the meanwhile relieve the States of the obligation, which is a contingency to be considered. Senator GLASS. Yes. Senator GORE. As to the matter of reimbursement, do you think Congress would relieve the States? Secretary MILLS. I am inclined to think they may. Senator WAGNER. I suggest that when we have this emergency facing us throughout the country we ought not to spend our time going into any matter of mistakes made twenty years ago. Let us talk about the concrete situation now before us. What I understood was before us was this matter of aid, and not any question of particular language. But you are talking about loans now. I do not think there are more than three States, though, in the United States today that have the power to lend money from the Federal Government. Secretary MILLS. Senator Wagner, can I submit what I would suggest, because of course no one could have considered that problem without considering the constitutional limitations, particularly as they would apply to our own State of New York? What we would suggest first, is that if a State is in a position to borrow it would borrow and furnish its own bonds as collateral. Secondly, if it is not in a position to borrow because of constitutional limitations, it means in effect that the people of the State have to authorize borrowing. Senator WAGNER. Yes. Secretary MILLS. That the governor when he borrows would certify and agree that he would at the earliest practicable moment call the State legislature into session and take such steps as would permit them to borrow under their constitution. That if they failed to take those steps, then the Federal Government should reimburse itself from the State payments of grants in the future. In other words, we want to keep this from beginning to end in the form of a loan to a State that actually needs it, and impress upon them the fact that we expect them to repay it, instead of a $300,000,000 hand-out. Senator WAGNER. And that is definitely done in this bill that we propose, that it is self-liquidating. Secretary MILLS. It is self-liquidating as far as the Federal Government is concerned. It will liquidate about $300,000,000 in a very few months. But as to getting it back, no. Senator WAGNER. Your provision is that the States are to pay. Secretary MILLS. If we agree in principle, why can not we tighten up the language? Senator WAGNER. What else do you want? I provide that beginning next year one-fifth of the issue is subtracted from Federal aid until the entire amount is liquidated. Secretary MILLS. If you want to know what I object to, I will tell you. Senator WAGNER. Yes; I do. Secretary MILLS. First, I object to distribution on the basis of population. The idea itself is the first thing I object to. And, second, are the resources of the States sufficient to meet these needs? And further, I think this should be kept on a loan basis from beginning to end. Senator WAGNER. Isn't it an advance? Secretary MILLS. And in the third place, you should only resort to the device of advancing funds against future State aid as a final resort. Make it the only means Senator WAGNER (interposing). It is ample, plain, and definite. Secretary MILLS. Either is simple, plain, and definite. Senator WAGNER. The other is adequate. For instance, there is nothing here Senator FLETCHER (interposing). Mr. Secretary, you want the question of need determined here in Washington? |