$2,000 from a private pension. Under my proposals, in neither case would the couple pay any tax whatsoever.

Furthermore, at present the maximum retirement income, on which the retirement income credit is based, must be reduced by the full amount of social security benefits. Under the new proposal, the $300 credit would also be reduced to take account of social security, but only half of the amount of such benefits would be used in calculating the reduction. Social security, railroad retirement, and other taxfree pensions would remain tax free.

These changes are of particular benefit to elderly persons in the low and middle income brackets. At present, an elderly person can be taxed if his income exceeds as little as $1,333. The new tax proposals raise this level so that no single person 65 or over would pay tax until his income exceeds $2,900. An elderly couple would pay taxes only on income over $5,788, as opposed to the current $2,667. These increases in exemption of income, combined with the lower rates now proposed, save as much as $284 in reduced taxes for a single person and as much as $560 for a couple.

Roughly half of the $320 million reduction in taxes paid by older persons which would be made possible by the new $300 credit would go to those with incomes below $5,000; 97 percent would go to those with incomes of less than $10,000. Of the total $790 million tax benefit which will accrue to the aged as a result of all tax recommendations, both reductions and reforms, approximately 90 percent will go to those three out of every four elderly taxpayers who receive income from employment or self-employment. I again urge that the Congress give favorable consideration to these tax provisions benefiting our aged citizens.

III. ECONOMIC SECURITY

1. Improvements in social security insurance.-The OASDI system is the basic income maintenance program for our older people. It serves a vital purpose. But it must be kept up to date.

My recommendation for financing hospital insurance under social security-by increasing the maximum taxable wage base, on which benefits are computed, from $4,800 to $5,200 a year-will automatically provide an improvement in future OASDI cash benefits for millions of workers, raising the ultimate maximum monthly benefits payable to a worker from $127 to $134, and for a family from $254 to $268.

For the average regularly employed man the social security wage base has become a smaller and smaller portion of his earnings, and his insurance against the loss of employment income upon retirement, death, or disability is thus declining steadily. Today only 39 percent of all regularly employed men have all of their earnings counted under the $4,800 ceiling. It is generally agreed that the earnings base needs to be adjusted from time to time as earnings levels rise, and the Congress has done so in the past. Raising the wage base to $5,200 will still only cover the total wages of about 50 percent of regularly employed men. This increase in the social security wage base is sound, beneficial, and necessary.

The entire relationship between benefits and wages, however, needs to be reexamined. As required by the Social Security Act, the Secretary of Health, Education, and Welfare will soon appoint an Advisory Council on Social Security Financing. I am directing him to charge

this Council with the obligation to review the status of the social security trust funds in relation to the long-term commitments of the social security program, and to study and report on extensions of protection and coverage at all levels of earnings, the adequacy of benefits, the desirability of improving the present retirement test, and other related aspects of the social security system. The results of the Council's work should provide a sound basis for continued improvement of the program, keeping it abreast of changes in the economy.

2. Improvements in old-age assistance.-In the fiscal year 1964 the Federal Government will provide grants to the States of about $1.5 billion under the old-age assistance program. I recommend three improvements in the equity and effectiveness of this program, in addition to the two medical payments changes previously mentioned:

First, under existing Federal law, States are permitted to require up to 5 years' residence for eligibility under the old-age assistance program. Currently, 20 States impose the maximum 5-year requirement, 3 States require fewer than 5 years but more than 1, and the remaining States require 1 year or less.

Lengthy residence requirements are an unnecessary restriction on elderly people receiving public assistance who would like to move to another State to be near a child or other relative. Others in need, not previously receiving such assistance, find themselves in a "no man's land," with no aid at all and no place to turn because they have not lived long enough in the State of their present residence. To insure that our Federal-State public assistance program can help all of our needy aged, I recommend that the maximum period of residence which may be required for eligibility be gradually reduced to 1 year by 1970. This change does not represent an expansion of the program or a significant cost to the Federal Government or any individual State; and it will simplify administration by eliminating many detailed investigations of residence.

Second, a problem of increasing proportions found among our needy citizens is the difficulty some have in properly handling the money which they receive from a public welfare agency. Of the more than 2 million recipients of old-age assistance, over half are 75 years or older, 1 in 3 is 80 or more, and 1 in 8 is over 85. One-third are confined to their homes or require help from others because of physical or mental disability and almost 9 percent are in nursing homes and other institutions. Among this group some lose their assistance payments through forgetfulness; others are defrauded by unscrupulous persons. Obviously many of these aged beneficiaries who are not in need of legal guardians, should nevertheless have help in handling their money; yet current provisions of the Federal law tend to make it difficult for States to provide necessary protective services.

I therefore recommend that the old-age assistance program be modified to permit Federal participation in protective payments made to a third party in behalf of needy aged individuals. This would be comparable to provisions adopted last year for dependent children. Third, many of our older people, with very limited income, live in rental housing which falls far short of any reasonable standard of health or safety. As mentioned earlier, among households headed by a person 65 years of age or over who live in rented housing, nearly 40 percent are in quarters classified as substandard. Yet they are frequently charged exorbitant rents for this housing.

It is estimated that old-age assistance payments presently going into payments of rent equal some half a billion dollars a year-a fourth of the $2 billion total that is expended in Federal, State, and local funds for all old-age assistance. These funds should not subsidize substandard housing. The establishment of State rental housing standards is long overdue. I therefore recommend that, as a condition for receiving Federal grants for old-age assistance, a State's plan must establish and maintain standards of health and safety for housing rented to recipients of old-age assistance. There is a precedent for such a plan requirement in the 1950 legislation which required the establishment of similar standards for institutions.

IV. EMPLOYMENT OPPORTUNITIES

The Nation's economic development, coupled with the growth of its social insurance and private pension plans, has brought to our aged deserved opportunities for leisure and retirement. While the number of persons 65 and over has almost doubled since 1940, only 13 percent are now in the labor force-half the 1940 percentage.

Retirement, however, should be through choice, not through compulsion due to the lack of employment opportunities. For many of our aged, social security and retirement benefits are not a satisfactory substitute for a pay check. Many of those who are able to work need to work and want to work. But, often knowingly and sometimes unwittingly, industrialization and related social and economic. trends have progressively limited the possibilities for gainful employment for many of our older citizens. The gradual decline in agricultural employment, for example, has reduced the traditional job opportunities which farming once provided for older persons. Employment in the expanding sectors of our economy is too often attended by compulsory retirement programs or by age discrimination practices. Older workers, if not protected by seniority, are among the first to be laid off-and men 65 and older are twice as likely to remain unemployed for 26 weeks or more as are other unemployed workers.

Denial of employment opportunity to older persons is a personal tragedy. It is also a national extravagance, wasteful of human resources. No economy can reach its maximum productivity while failing to use the skills, talents, and experience of willing workers.

Rules of employment that are based on the calendar rather than upon ability are not good rules, nor are they realistic. Studies of the Department of Labor show that large numbers of older workers can exceed the average performance of younger workers, and with added. steadiness, loyalty, and dependability.

In the Federal Government a number of steps are being taken to facilitate employment opportunities for older workers.

I am directing each agency to honor fully both the spirit and the letter of official Federal policy to evaluate each older applicant or employee on the basis of ability, not age. I am asking all Federal agencies to review their current policies and practices in order to insure that full consideration is given to the skills and experience of older workers. I urge all employers, private and public, to adopt a similar policy.

I have recommended that Congress increase the funds for the Federal-State Employment Service so that the strengthening and expansion of its counseling and placement services, started in the first

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year of this administration, may be continued. The public employment offices will continue to give special attention to promoting employment and employment prospects for older workers.

I have also recommended a substantial expansion in funds for the training programs under the Manpower Development and Training Act and the Area Redevelopment Act-both enacted within the past 2 years. The Secretary of Labor will launch this year a series of experimental and demonstration programs designed to assist older workers to make the best possible use of training opportunities in their communities and to test new classroom and counseling techniques. These efforts are only a bare beginning. Our Nation must undertake an imaginative and far-reaching effort-in both the public and private sectors of our society-for the development of new approaches and new paths to the employment of older citizens. This will require a sharp new look at retirement and personnel patterns, part-time work opportunities, restrictive pension plans, possible incentives to employers, and a host of other traditional or future practices. To give impetus to this nationwide reappraisal, I propose two immediate

actions.

First, I recommend legislation to establish a new 5-year program of grants for experimental and demonstration projects to stimulate needed employment opportunities for our aged. The Federal Government through the Department of Labor would provide up to $10 million per year on a matching basis to State and local governments or approved nonprofit institutions for experiments in the use of elderly persons in providing needed services. They would be employed in such activities as school lunch hour relief, child care in centers for working mothers, home care for invalids, and assistance in schools, vocational training, and programs to prevent juvenile delinquency. Precautions would be taken to insure that no project would result in any displacement of present employees and that wages would be reasonably consistent with those for comparable work in the locality. Second, I have directed the President's Council on Aging, in consultation with private organizations and citizens, to undertake a searching reappraisal of problems of employment opportunities for the aged and to report to me by October 31, 1963, on what action is desirable and necessary.

In addition, voluntary service by older persons can both demonstrate their continued skill and provide useful activity for those retired from gainful employment but anxious to make use of their talents. Enactment of the National Service Corps recommended last week is urged again as a constructive opportunity for senior citizens to serve their local communities.

This program would provide an ideal outlet for those whose energy, idealism, and ability did not suddenly end in retirement. In the labor force in 1960, there were more than 61⁄2 million men and women 60 years of age or older. They included 126,000 public school teachers, 25,000 lawyers, 3,000 dietitians and nutritionists, 18,000 college faculty members, 12,000 social welfare and recreation workers, 11,000 librarians, 32,000 physicians and surgeons, and 43,000 professional nurses. Many of these people have now retired. Others are ready to retire or would retire if they saw further useful career activity ahead.

The Peace Corps, which has no upper age limit, has already drawn upon this reservoir of talent-and corpsmen in their sixties and seventies are today serving with distinction in Africa, Asia, and South

America. More are needed. The proposed National Service Corps. can also use retired men and women to good advantage. Retired teachers, for example, have the freedom which would enable them to travel with migrant workers who are not in a community long enough to enter their children in school. The patience that comes with age will be an asset in work with the mentally retarded and the mentally ill. This program can be particularly helpful to, and helped by, our older citizens.

V. HOUSING

Adequate housing is essential to a full, satisfying life for all age groups in our population. The elderly have special needs for housing designed to sustain their independence even when disability occurs, and to promote dignity, self-respect, and usefulness in later years. Yet millions of older people are forced to live in inferior homes because they cannot find or afford better. Nearly half of our people 65 and older, it has been estimated, live in substandard housing or in housing unsuited to their special needs.

In the past 2 years the Congress and the executive branch have taken major strides to assist in providing housing specially designed for the elderly. Under the three special programs administered by the Housing and Home Finance Agency-mortgage insurance, direct loans, and public housing-commitments have been issued for the construction of 49,000 units of specially designed housing for the elderly. This almost tripled the total investment in special housing for the aged aided by the Federal Government, raising it from $336 million at the end of calendar 1960 to $950 million at the end of 1962. The following steps are essential this year:

(a) Direct loan assistance.-The direct loan program for housing for senior citizens is rapidly using up all available funds under existing appropriations and authorizations. Moreover, no appropriation has yet been made to put into operation the new authority provided last fall to the Secretary of Agriculture to make loans for rental housing in rural areas for elderly persons and families of low and moderate incomes.

To expand the Federal contribution toward meeting the housing needs of senior citizens through direct loans I have included in the 1964 budget a supplemental appropriation for fiscal 1963 and requested a further increase of $125 million for 1964 in appropriations for the Housing and Home Finance Agency. I have also requested a supplemental appropriation of $5 million for 1963 to initiate the new rental housing program for elderly persons in rural areas and requested an additional $5 million for 1964. I urge favorable consideration of these requests.

(b) Group residential facilities.--For the great majority of the Nation's older people the years of retirement should be years of activity and self-reliance. A substantial minority, however, while still relatively independent, require modest assistance in one or more major aspects of their daily living. Many have become frail physically and may need help in preparing meals, caring for living quarters, and sometimes limited nursing.

This group does not require care in restorative nursing homes or in terminal custodial facilities. They can generally walk without assistance, eat in a dining room, and come and go in the community with considerable independence. They want to have privacy, but also