I have a similar request from the chairman of the committee, Senator Hill, and Senator Morse has asked me to ask some questions on his behalf.

This is by way of explanation to you, Mr. Chairman, and to the press, as to why I am here. I am afraid, Mr. Secretary, I have a good many questions, despite the fact that I am not a member of the subcommittee.

I would like to assure you and your associates, sir, that anything I may say is not in any way personal at all, that I have the greatest respect for all of you as individuals dedicated to the cause of education. It merely happens that at the moment, subject to being convinced by you, I take a rather dim view of this bill. But I want to assure you again, and Mr. Richardson and Mr. Derthick, that I suspect at least that one or more of you would have liked a little better plan than this if you had your own way, but being loyal members of a team, you of necessity have to answer signals when the captain calls them.

Now, Mr. Flemming, would you mind turning to your formal statement? I call your attention to the paragraph in that statement, which says that "other plans are being considered by this committee. And I assume that you would include among those other plans S. 2, the bill introduced by Senator Murray on behalf of himself and a number of other Senators, which is called the School Support Act of 1959. Is that correct?

Secretary FLEMMING. That is correct, Senator.

Senator CLARK. And your opposition to that bill is based at least in part, if not in whole, because it would, as you say, unbalance the President's budget for 1960. Is that correct?

Secretary FLEMMING. In part. That is correct, yes.

Senator CLARK. You say that you are opposed to deficit spending by the Federal Government. Do you know anybody in the Senate of the United States who is not opposed to deficit spending?

Secretary FLEMMING. I think, Senator, you would be in a better position to evaluate that situation than I would.

Senator CLARK. I am going to make the categorical statement, and ask you if you care to deny it, that there is not a single member of the United States Senate who favors deficit spending. I assume that you would have no personal knowledge that that was an incorrect statement, would you?

Secretary FLEMMING. I have no personal knowledge.
Senator COOPER. Would the Senator yield?

I would have to disagree with that categorical statement of yours. I would say that the action of the Congress speaks much louder than what we say about it. Right now we have started toward deficit. spending.

Senator CLARK. This must be a matter on which the distinguished Senator and I would disagree. I have felt strongly on this point, and I think the House, too, has the political guts to balance the budget in a time of relative prosperity despite enormous unemployment.

Senator COOPER. I will say to the Senator that he has urged programs to do that, too.

Senator CLARK. I thank the Senator for that. My view is that we will raise the necessary revenues to balance the budget.

And my question to you is: If we do that, would you not agree that to adopt S. 2 instead of your plan would have no significant inflationary effect?

Secretary FLEMMING. In the first place, Senator Clark, I am afraid. that I would have to take issue with the premise.

Let me back up and say this, that as between the position that you have taken as to the views of the members of the Senate and the position that has been taken by Senator Cooper, of course I would hope that you were correct. But on the basis of the trend up to the present time, it seems to me that I could not do anything else but concur with Senator Cooper's point of view. I do not see any significant evidence up to the present time of efforts, that is, efforts that have any reasonable prospect of success, to increase revenues.

Senator CLARK. You have been around Government quite a while, Mr. Secretary. Have you ever seen a tax bill come out of the first 6 weeks of a new Congress?

Secretary FLEMMING. No.

Senator CLARK. And you never will in your lifetime, will you? Secretary FLEMMING. They come out toward the end of a session. Senator CLARK. And they come out when we know a little more about how much we are going to appropriate and spend than we do right now, do they not?

Secretary FLEMMING. I cannot help but observe, however, Senator, that tax bills originate in the House of Representatives, and the chairman of the Ways and Means Committee, if quoted correctly in the newspapers over the weekend, has indicated that there is not going to be any general increase in taxes.

Senator CLARK. The chairman has said there will be no decreases in taxes and that the whole Federal revenue structure needs to be revised and looked into, has he not?

Secretary FLEMMING. That is right.

Senator CLARK. And I think it has been established by now that there are certain existing tax loopholes that could be closed without any inequity whatever, which would raise anywhere from $4 to $9 billion of additional revenue. I do not know whether you agree with that or not.

Secretary FLEMMING. I am not a tax expert at all, Senator, but I assume that any major revision, such as the chairman of the House Ways and Means Committee has talked about, would take, as a minimum, 2 years. At least, I have never seen a major revision of the tax structure take place in any less time than that. So it would seem to me that that prospect is one which we would have to look to the future to realize. And it would not affect the 1960 budget.

Senator CLARK. I just want to suggest, in leaving this subject, that perhaps the wish is father to the thought, that this whole business of inflation is a red herring drawn across this trail, a sort of an obeisance to a folk lore of obsolete Federal budgetary procedures utilized for preventing the remedying of the obsolescence in the public sector of our economy, and I for one in determining what kind of an educational bill we should pass would certainly pay very little attention to this scare headline in your statement that if we pass a good bill like S. 2, we are going to contribute to inflation, because I believe that the Congress has the guts to balance this budget.

I honor you and your associates for feeling differently about it, but I want to make it categorically clear that I think this business of crying "inflation, inflation, inflation" every time we proceed to remedy an essential lack in our domestic or foreign posture, is making me, and I think a good many other Members of the Congress, a little bit ill. And I suggested also raising a straw man which is very, very easy to knock down. As I said before, there is nothing personal about this, and I want to give you every opportunity to reply to what I am sure you think is a pretty extreme statement.

Secretary FLEMMING. Senator Clark, I just simply say this, that on the basis of my own observation I think that this issue of inflation is a very real issue, as one thinks in terms of the welfare of our Nation. Senator CLARK. Do you not think your concern is shared by the Members of the Congress?

Secretary FLEMMING. I am sure that there are many Members of the Congress who share that concern. I noted, for example, some months ago that the majority leader of the United States Senate expressed his concern over what inflation could do the welfare of our Nation. I just simply, on the basis of the evidence that I have listened to, have come to the conclusion that certainly from a psychological point of view an unbalanced Federal budget, in a period such as we are going through at the present time, does make a contribution to inflationary pressure.

Senator CLARK. I agree with you 100 percent, and I think practically everybody in Congress does, too. And it is for that reason that I get a little tired of all this talk.

Secretary FLEMMING. Then the only point at which we differ is whether or not present trends are going to lead us to an unbalanced budget. You have the feeling that although expenditures may be stepped up in certain areas, that step-up will be matched by increased revenues, and that therefore the Congress will give the Nation a balanced budget. As I have indicated, I just have not seen evidence which would lead me to believe that if expenditures are stepped up in any material way there will be a step-up of revenues to balance that out. So this paragraph to which you refer proceeds from the premise that if there are sharp step-ups in expenditures in particular areas, that will lead to an unbalanced budget.

I understand your point of view, that you do not think it will, but I just do not agree on that.

Senator CLARK. And, of course, if the premise is wrong, the conclusion is also incorrect, is it not?

Secretary FLEMMING. If the premise that this will yield an unbalanced budget is wrong, then it seems to me we have to proceed from there and take a look at some of the substantive issues that are presented by these other proposals.

Senator CLARK. Now, if we were to get a balanced budget by raising additional revenues, would you still object to S. 2?

Secretary FLEMMING. I am sure that I would have some objections to it, but, Senator Clark, I think that is an awfully big "if," and one that I personally cannot accept. I think I have already indicated, in response to one of Senator Cooper's questions, that, for example, I would have a very real question about including the salary provision in legislation of this kind. My feeling is that we should concentrate on the construction side at this point.

Senator CLARK. Now, Mr. Flemming, would you mind turning again to your prepared statement? And I notice there the sentence that reads:

The Federal Government would undertake to assist in construction programs totaling $3 billion over a period of 5 years at the rate of $600 million a year. However, as I read the bill and the message, I come out with the conclusion that the Federal contribution could be no more than $300 million a year. Is that not right? I mean, the Federal grant authorization, let us put it.

Secretary FLEMMING. The Federal Government would pay a debt service charge on $300 million. In other words, half of the $600 million. However, we would not pay that half unless the State was willing to make a commitment to cover the other half; so that in effect the plan would result in the underwriting of $600 million worth of construction.

Senator CLARK. Of which only $300 million could come out of the Federal treasury. Is that not right?

Secretary FLEMMING. Well, not $300 million; of which the debt service charge for $300 million would come out of the Federal treasury; that is correct.

Senator CLARK. In the first instance to be repaid by the pauperized school district if it could get enough money out of the bottom of its pocket to repay it.

Secretary FLEMMING. If the situation changed drastically either during the life of the bond issue or during the 10 years following, then there would be some repayments. Of course, I think, Senator, I should emphasize the fact that the only kind of situation we are thinking of is this and I am sure you would agree with me--that a school district should be classified properly. So a school district needy today and a year ago may be so situated, because of later developments in that district, that no one would any longer classify it as a needy school district. For example, if we go down to Texas, they mgiht strike oil in one of these needy school districts, and that might change the situation drastically.

Senator CLARK. And in the State of Pennsylvania they might get a plant of the United States Steel Corp. However, our minds are in accord, are they not, that no more than half of this $600 million a year program can come out of the Federal Government?

Secretary FLEMMING. No more than half of the debt service charges for the $600 million program would come out of the Federal Government. That is right.

Senator CLARK. So as far as the Federal Government is concerned, this is a maximum of $300 million a year, and not $600 million a year; right?

Secretary FLEMMING. Yes, except that we are proposing a program which, if it is going to operate, would involve $600 million, because we are not going to put up our half unless the States put up their half. So we are going to have a total program of $600 million.

Senator CLARK. I do not mind your saying that, if that is what you are saying; but I want to ask you now if you have disseminated this blue sheet I have in my hand title "U.S. Department of Health, Education, and Welfare, Office of Education, Allocations to States Under

Total Allocation of $600 million"? Has that been handed out by your Department?

Secretary FLEMMING. I assume that it has. And might I say this: The bill as submitted does make it necessary for the Commissioner to allocate $600 million among the States.

Senator CLARK. Of which $300 million must come from the States. Secretary FLEMMING. Of which the debt service advances for $300 million must come from the States. That is right. No doubt about it.

Senator CLARK. Now, has this sheet been given to the press?

Mr. DERTHICK. I think not, Senator. It has just been released up here this morning to the committee.

Senator CLARK. But it will be released to the press, will it not? Secretary FLEMMING. The press is certainly entitled to it. It was prepared for the purpose of discussing the bill with the committee. So it is available.

Senator CLARK. Now, on this sheet the allocations are broken down by States, are they not?

Secretary FLEMMING. Right.

Senator CLARK. Perhaps you can get a copy of the sheet before you, Mr. Flemming. Mr. Richardson has one there.

Secretary FLEMMING. O.K.

Senator CLARK. The allocation is broken down by States, is it not? Secretary FLEMMING. That is right.

Senator CLARK. I call your attention to Pennsylvania, where the figure "$32,044,849" appears.

Secretary FLEMMING. Right.

Senator CLARK. And I ask you whether it is not a fact that Pennsylvania itself would have to put up at least $16 million out of that $32 million?

Secretary FLEMMING. They would have to put up the debt service charges for $16 million out of the $32 million. That is correct.

Senator CLARK. And there is nothing in this sheet which would indicate that, is there? As a matter of fact, is it not a fair assumption for a reporter to make that the whole $32 million would be put up by the Federal Government?

Secretary FLEMMING. But, Senator, let me put it this way: This table was prepared because of the fact that we felt sure that the members of the committee would be interested in knowing how we would allocate the $600 million that is called for in our proposed bill. And this was prepared solely for that particular purpose. The bill, if you have read it, says that we are to allocate here is the way it reads:

For each fiscal year during the 5-year period beginning July 1, 1959, and ending June 30, 1964, such amounts, not to exceed $600 million as may be specified for such year by appropriation or other law shall be allocated by the Commissioner among the States on the basis of ***.

And then it goes on to describe how it should be done.

Senator CLARK. Yes. And there is not a word in that section and not a word in the table which appears above it in the Congressional Record which would lead anybody reading the bill to think that the States would have to put up half that money, is there?