The fact that it is being discussed so thoroughly augurs well for a constructive measure coming out of the committee. I think there might be a good deal said in favor of the relief being separate from the other matters-I mean in a separate bill-because there are so many considerations that weigh on the relief that do not apply to the other, and vice versa.

There is one particular feature that seems to me not to have been considered. I am very much interested in considering the need and the use of local resources in any Federal allocations, but the other consideration, not to go over what has already been covered, is the drying up of local resources which Federal appropriations for relief can bring about.

It is just as possible to pauperize communities and States as it is individuals, and our experience is that any automatic distribution of funds, whether to individuals or communities, dries up the resources that such funds are intended to supplement.

It goes without saying that the $300,000,000, while not quite a drop in the bucket, is far from being enough to meet the bill for relief in the coming months in this country. It would be a very valuable supplement, and we are indebted to our distinguished Senator for proposing as generous an amount, but we have, as you know

Senator WAGNER. Mr. Burns, if I may interrupt, I appreciate that that is not as much as we ought to appropriate, but I had in mind my objective of getting legislation.

Mr. BURNS. We hope that it will work that way. However much or little it is, it will be inadequate if it is not a decided supplement instead of a replacement, as it can well become, I am afraid.

I am now speaking from experience. We have seven States that have already made appropriations of State funds for relief, supplementing or replacing city funds, a situation that is analagous to the Federal Government supplementing State resources. To a considerable extent, we find those funds not supplementing, but replacing. We will take our own State, Senator Wagner

Senator COUZENS. What do you mean by "replacing"? Do you mean replacing private gifts?

Mr. BURNS. Both private and public. Our law is that the State fund is to furnish 40 per cent of what local public funds provide. It says nothing about private funds. The result is that in the community chests, which in New York State hold spring campaigns, Senator Couzens, largely, instead of fall campaigns, there has been a most decided decrease in the amount secured this spring, as compared with what our chests did last fall. That is true in the State of Ohio, among the spring chests.

Senator STEIWER. Is it due to the maladministration of the fund, or is it due to the fact that there is less money available for gifts? Mr. BURNS. Of course, there are many considerations, but these chest executives and boards tell us that there is an alibi-"What we are going to get from the State is not at all conditioned or dependent upon what the local community does. Therefore, why should we give? We are going to get it from the big State treasury.'

The Cincinnati chest, which is as strong as any chest in the country, we would ordinarily expect to increase 30 per cent. It fell 6 per cent, short of its goal, and they claimed the reason was that the Ohio State Legislature passed a relief bill the day their drive opened. I think

it is a good thing that Ohio passed the relief bill. Please do not misunderstand me in that respect. I think it should have been related better somehow to the resources of Cincinnati, so that it would have been an encouragement to the chest to raise money, instead of a palpable alibi.

The same thing is working in our public funds, Senator Wagner, Take New York. You know Mr. Lawson Purdy very well, the head of our charity organization society, and Mr. William Hodgson, the head of our welfare council. I talked with both of them yesterday. The 40 per cent from our State treasury that we supposed would supplement the appropriations New York City has been making for relief, does not supplement. It is put back into the general treasury of New York City. In other words, they are not helping one iota. Take my own county of Westchester, where there is a political consideration involved, so it was said: We would not apply, because it would give a Democratic State administration supervision over a Republican administration. You have heard of that. There is not any excuse for our getting funds from the State, except that they were available. Do you suppose that our county and our city officials could resist the public pressure that there was to apply for funds, no matter if there was an additional political condition? Not for a moment. They had to apply. Public opinion forced them to apply. This measure will work in exactly the same way. You will find that with money available, the States have to apply, and they do not have to put in a cent of money themselves under the provisions of this act. In other words, the State fund in New York, which I think was a decided step ahead, was not safeguarded adequately in this respect, because it did not take into consideration whether it would operate to dry up local resources. It has not supplemented New York City's funds. They go into the general treasury, so Mr. Purdy told me yesterday, and he is chairman of the board that administers it, as you know.

Senator WAGNER. Is it in your mind to suggest that these funds be only advanced to the States if they match the sums, or some such pro

vision as that?

Mr. BURNS. Yes. To be concrete, it seems to me we have a number of issues that are a little crisscrossing on that. It seems to me we have to have both discretionary funds and pro rata funds.

The CHAIRMAN. Clarify that point, please.

Mr. BURNS. Something like this, Mr. Chairman. Say that 50 per cent of the fund could be used to replace up to 75 per cent of what commonwealths were actually expending themselves, but to supplement it, not to replace it in the first place. That is the trouble with the New York law. There actually would be that much in addition, and you would not be just letting the community out from under. I would include the privately contributed funds as well as the publicly appropriated funds, so that we would not have this alibi in our community chest campaigns. There is $100,000,000 involved in our community chest, which is more than a bagatelle, and we are naturally interested in it, in having this done in a way that will encourage rather than discourage. The other 50 per cent of it should be discretionary, on the basis of need shown and resources utilized. Does that answer your question?

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Senator WAGNER. Yes.

The CHAIRMAN. I think I get your point. Your point is that the provisions of the bill are all right, but there should be some additional conditions attached, as to 50 per cent of this fund, and that the other should be discretionary?

Mr. BURNS. Yes. I should not have a cent given except as it is matched in certain proportions by what communities already had done, both publicly and privately, for relief. I should also have discretionary funds, so that, if you please, our rich State of New York would not necessarily get an undue proportion compared with our resources. We are not at all sure that the States can meet their need with their resources, as compared with what that need is. Therefore, I think there should be a discretionary fund as well as a fixed pro rata provision. I predict that a bill like this, with all due respect to you all, will create a poormasters' lobby in this country that will make the pension lobby look like 30 cents. Any automatic distribution of funds from Uncle Sam's Treasury is a free invitation to go on getting it. Alongside that, the pension lobbies that have developed, it seems to me, will be insignificant.

The CHAIRMAN. In other words, we can make this bill more effective by imposing certain conditions?

Mr. BURNS. Conditions that require the actual contribution of the community.

The CHAIRMAN. I am very glad to have that angle, and I am very much inpressed by your statement.

Senator WAGNER. So am I.

Mr. BURNS. I have some figures here.

Senator WAGNER. Have you something to suggest as a draft? Mr. BURNS. Not as a legal draft.

Senator WAGNER. In substance?

Mr. BURNS. Yes. I think a study of the Rhode Island system would be interesting. You are dealing with advances, in effect, which, it seems to me, is very sound.

Senator WAGNER. Do you not think so?

Mr. BURNS. Yes. I think we can handle advances after the Rhode Island plan, and not in the way of lump sums handed out.

The CHAIRMAN. Do you want this statement printed in the record in connection with your remarks?

Mr. BURNS. Yes.

(The statement referred to is as follows:)

PROPOSAL FOR FEDERAL AID TO STATES IN MEETING EMERGENCY RELIEF NEEDS

OUTLINE OF PLAN

1. The Reconstruction Finance Corporation should be empowered to advance funds up to $300,000,000 to States, on terms that would make it possible for all States to qualify in spite of constitutional obstacles to borrowing.

2. An administrative committee of three qualified and experienced citizens should be appointed by the President or the Reconstruction Finance Corporation. This committee should be charged with full power and discretion in appropriating and administering the fund and should prescribe rules and regulations for original and continuing eligibility of States to participation in fund.

3. Small administrative staff qualified to prosecute inquiries and submit information to administrative committee as to need for relief in States,

extent of used and unused resources of States, and economy in administration of relief funds.

4. Advances to States to be authorized only on application by governors of States and on adequate demonstration of relief needs beyond the reasonable possibilities of the resources of States and their local subdivisions.

5. Fund appropriated to States to be set up in separate accounts and actually paid out to States as they continue to comply with rules and regulations of the administrative committee as to use of local resources and economy of administration.

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OPERATION OF PROPOSAL

To conserve and continue to the utmost the principles set forth by President Hoover on May 12 that responsibility for relief to distress belongs to private organizations, local communities, and the States. That fundamental policy is not to be changed."

The inauguration of relief from Federal resources can destroy local responsibility and must be safeguarded to the utmost to prevent this calamity. The automatic distribution of Federal funds on any pro rata basis would undermine such local responsibility, as the fullest possible use of local resources is not required.

The broad powers proposed are consistent with the broad power and discretion in the financial field already bestowed on the Reconstruction Finance Corporation. A special administrative committee of broad gaged and experienced private citizens would be required to give their entire attention to the project. The establishment of relief from Federal resources requires the judgment and attention of the Nation's wisest citizens in the field of relief.

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Such a committee would institute inquiries as to economy of administration and extent of resources in all State relief operations. This would correspond to the provision of the Reconstruction Finance Corporation requiring that every applicant for a loan under this act shall, as a condition precedent thereto, consent to such examinations as the corporation may require for the purposes of this act and that reports of examinations by constituted authorities may be furnished by such authorities to the corporation upon request therefor." Seven States have established considerable relief funds for suplementing resources of local communities. The plan is drawn from the best features of these seven States plans as the principle of Federal aid to States is analagous to State aid to local communities.

Rhode Island was the first State to propose such a plan and the only one that has embodied the practice of advances from a central fund to local funds. The Rhode Island plan obviates the difficulty of outright loans with lump payments which gives no power to a central authority to make sure that principles of local responsibility and economy are continuously applied.

Illinois has the strongest citizens' commission for administering its $20,000,000 fund. The methods of administration in this proposal are drawn from Illinois as that State is operating a most satisfactory plan.

In short the plan embodies the features already tried out by States whose plans correspond most nearly to the requirements of Federal aid to local relief.

Mr. BURNS. Rhode Island was the first State to get up a plan. They did not enact it as soon as we did in New York, but they got up a plan of advances from the State to communities on community responsibility. It is the nearest analogy to your proposition. They set up these funds in the State treasury, and they are given to these communities only as these communities come across with their own resources in addition, so that it is not kissing it good bye and letting the communities off. You have somewhat the same provision in New Jersey, except that it is not on a loan basis. It is very important. Otherwise, it dries up your resources. We are going to need, in this big partnership, all that both partners can do. Both members of the team have to pull their end of the load, or it will not be pulled.

Senator BARBOUR. That substantiates to a great extent what the Secretary of the Treasury said this morning.

Mr. BURNS. It substantiates it somewhat, but it adds quite a different point. This drying up of local resources in communities is an additional consideration I wanted to urge. It has happened wherever we have had poor relief laws.

The CHAIRMAN. The point is that the drying up is not due to a lack of resources on the part of the community.

Mr. BURNS. That is and will be true.

The CHAIRMAN. It is due more largely to their attitude toward the proposition?

Mr. BURNS. It is human nature. If there is some free and easy money to be had, we take it.

The CHAIRMAN. Thank you, very much.

STATEMENT OF BENJAMIN C. MARSH, ON BEHALF OF JOINT COMMITTEE ON UNEMPLOYMENT

Mr. MARSH. Mr. Chairman and gentlemen of the committee, I am appearing on behalf of the joint committee on unemployment, consisting of about 16 national organizations, on behalf of the principles of the Wagner bill.

I have prepared here a statement showing the excessive productive capacity in the major lines of industry in the United States, from 1929 down to date. I did not dare put in the automobile industry, because it makes such a terrible picture, and, therefore, I refrained, but I would like to file this for the record, with your permission, as I have only a few minutes.

(The statement referred to is as follows:)

With about 10,000,000 unemployed and many more on part time, and the American people unable to buy what the factories and farms produce to-day, it is obvious that two or three million people will for some time have to be employed in nonprofit undertakings, and only Government credit or gift can finance them.

The real problem is not how to balance the Budget, but how to stabilize the Government, which is now in a very tottering equilibrium because of the concentration of wealth and income.

The Wagner bill though imperative, is only a stop-gap, for the Federal Government must spend at least $4,000,000,000 a year, obtained by taxing wealth and property, in public works, road building, housing, and community projects for several years.

America is tragically and wastefully overplanted.

Even in 1929, the steel industry operated at only 60 to 80 per cent of its normal capacity.

Shipyards of the country in 1929 could handle 50 per cent more than they

did.

The machine tool industry from 1919 to 1929 operated at about 65 per cent of its capacity, and in August, 1930, at only 60 per cent.

Tin plate operated in 1930 at about 70 per cent of capacity.

The hardware fittings industry in 1929 operated around 50 per cent, the manufacturing gas industry at about 66 per cent.

The coal industry operated in 1929 at about 71 per cent of capacity, which was better than the average for the preceding seven or eight years.

The lumber industry in 1930 operated several months at less than half of capacity.

All refineries in 1929 operated at about three-quarters of their rated productive capacity.

The cotton textile industry in 1929 had an excess capacity of 35 to 40 per cent, The woolen industry in 1929, 1930, and part of 1931, operated at less than 50 per cent of its capacity.

The shoe industry had a capacity about two-thirds more than its production in 1929.