local development company counterparts, would be territorial. Unlike local development companies, however, the local investment company should be a profitmaking enterprise, its funds composed of federally guaranteed private investment capital. There is no substitute for the hard business judgment of the private sector in evaluating the worthiness of a proposed small business venture. And I think that the local private investor belongs in the picture with this cooperative, maybe guaranteed, program of the Federal Government.

The Coalition for Rural America believes that national rural economic development policy should not proceed upon political judgments concerning economic matters. Our conviction is that control and management of the local investment company should rest in the hands of the private sector within a structure of Federal rural policy. The investment tax credit device has been utilized by this nation in a number of different contexts, both domestically and in developmental approaches abroad. The proposed Rural Development Incentive Act of 1971 would provide a system of tax incentives to encourage commercial and industrial tax credit obtainable by industry within the rural context.

The Coalition for Rural America would like to suggest that this committee also investigate the feasibility and consequences of a personal investment tax credit to be earned by private individuals by investing their private capital in rural areas. You have available to you statistics of the amount of money, for instance, going out of Appalachia into other areas, not being reinvested. I think we need to push to encourage investment of capital within our local areas. But that is an aside, and I think it is needed. The potential impact of such a program where the individual would have some tax incentive, I think, is a very important aspect to the involvement of rural America.

The Coalition for Rural America feels that before any new and sweeping rural economic development programs are implemented much more needs to be known about the relevance between rural and urban-and to me, this is one of the major aspects in terms of orderly population growth within our Nation.

These areas of research could conceivably extend from significant crossroads, recreational areas, to viable towns, to small cities, counties and even a regionalization of States. Why should I suggest the covering of such a diversity of areas? The answer I think is very simple. It's there that people live. And therefore, we must have a program that is sufficiently flexible to accommodate people and their lives, their desires, and allow the people to work with and determine our destiny and what is going to be the quality of our destiny.

Mr. Chairman, in your welcomed letter, you invited comment about any area wherein the Federal Government might not have responded constructively to the plight of rural America. So as I close, I would like to make reference to that. In this regard, I have chosen to emphasize my own long-time vigorous advocacy of the concept of revenue sharing. This concept is inherently fair, inherently sound and inherently wise. It is supported by the President, by the Governors of the States and by many others. Perhaps the perfect formula has not yet been found, but I urge diligent pursuit of the means by which significant revenue sharing can be effectuated, thus affording the flexibility, and I will repeat the word "flexibility," because I think

that is so important here so badly needed by the States to solve their problems through innovative and creative State leadership.

I am compelled to urge consideration of broad re-evaluation and reform in our Social Security and Welfare programs. In our desire to fulfill with compassion and sincerity our role as, we might say, our brother's keeper, regrettably-and I trust unwittingly-we have resorted to material solutions to highly personal problems, thereby overlooking that most precious of human traits-human dignity. So in terms of where can the Federal Government become involved, this is an area that I think it terribly important for further investigation. Finally, I hardly need to bring to your attenion both the economic and sociologic impact of the Federal Interstate Highway program on this great country of ours. That program has had tremendous impact on this nation of ours. What the future of the Highway Trust Fund is going to be, I don't know. I would be foolhardy to speculate. But I can tell you that the impact of that which has happened with the Federal Highway program to date can be expanded and do much for the goals of rural America.

But in my concern for the better life of all Americans, and as one who is deeply grateful for that which rural America has given to me and could readily give to so many others, it is my sincere hope that this distinguished committee will give serious thought to the comparable impact that Federal involvement in our secondary highway system could have on the making of rural America-these great and all too often misunderstood regions-a pleasant, dynamic aspect of this Godgiven bounty, the land that we love and of which we are so rightfully proud. It should be made more available to many, many people.

So, Mr. Chairman, my emotion and my deep feeling for rural America may have allowed me to talk too long. I would like to thank you for the opportunity to be here and to let you know that a transplanted Yankee who is now, for 20 years, as Congressman Hammerschmidt has pointed out, so totally happy in rural America, I am grateful indeed. Mr. KLUCZYNSKI. Thank you, Governor, for a great statement. Your testimony will be very helpful to the committee when we sit in executive session to issue a report to the Congress.

I have several questions to ask of you and time is running short, so I will have Mr. Roe, our Subcommittee Counsel, send these to your staff. I would appreciate the answers so we can have them for the record. You have had a lot of experience, you are a great man and, it is a pleasure to have you before this subcommittee. So if you will take care of this and get the answers, we will put them in the record. Mr. ROCKEFELLER. I would love to.

(The information follows:)

RESPONSES TO QUESTIONS SUBMITTED BY THE SUBCOMMITTEE TO THE HONORABLE WINTHROP ROCKEFELLER, FORMER GOVERNOR OF ARKANSAS

1. From your experience as governor of Arkansas, what do you feel contributes most to industrial development in rural areas?

In industrial development for rural areas, one must start with what the possible new industry will produce and the specific, precise elements that it will need-water, power, transportation, communication, and raw materials.

The Arkansas industrial Development Commission, in the days when I was chairman, did an inventory of every community in the state of 2,500 or more. What did they have in terms of manpower, water, transportation, facilities, etc.? In the process of presenting these various towns to industry officials, we dis

covered two additional ingredients for our inventory: recreational and cultural opportunities. The proximity of these latter two elements is particularly important to those coming with a re-locating company and become important as the horizons are broadened for those working in the plant.

One factor that has been particularly advantageous to Arkansas is its central location. New plants locating in our state are less than twenty-four hours by truck from seventy-five million persons-an excellent and economical market potential.

Low-paying, labor-intensive factories came to our state first. During my years as governor, we sought higher-paying industry. Growth of the durable good industries resulted purely and simply from two things: one, we identified the type of industry we would want and went in search of it; two, we created task forces in specific fields of industry. As an example, we have a task force on metals that has studied the potential of bringing more forging to the state. The aluminum industry gets a major portion of its domestic bauxite from Arkansas' earth-but only a fraction of it has been processed within our state. We are now correcting the problem.

These task forces are comprised of specialists within an industry who can win the confidence of other specialists. When a company is moving toward expansion, we can present a package designed for their particular product.

In short, industrial location requires determining your resources, deciding the kinds of industry you want and need, and forming groups that can discuss the particular problems of each specialized industry.

2. Would you like to comment on the "new communities" program administered by the Department of Housing and Urban Development?

The concept of new communities is an extremely exciting one to me. Particularly, I would like to see more research and effort directed toward true nonbedroom new communities. That is to say, I should like to see us locate areas of probable future growth-areas still nearly virgin and build strong new cores for future cities.

I believe with our corporate expertise as a nation we should be able to prevent the ill-planned, mushroom suburban cities. With long-range planning, we can create instead sensible, liveable new cities.

3. On page five of your statement you talk about "cosmetic changes in organization charts of Federal agencies." Is it possible that the President's proposed reorganization is merely "cosmetic"?

I have been impressed with the President's re-organization program-particularly with some of the later clarifications and re-structuring.

Nevertheless, no re-organization program within itself will solve the problems of our government. The issue to which we must address ourselves is the determination of our basic national goals and priorities. Too often we feel that simply moving a program from one department to another will solve a problem; but this will solve nothing unless our total bureaucratic structure is built upon a wellarticulated national policy. Programs must reflect policy, not establish it.

4. On page six of your statement you mentioned that a national commitment must go beyond policy and programs and extend itself into the very lives of individuals. Would you explain this in more detail?

When I said that a national commitment must ge beyond policy and programs, I was expressing the concern that all too often our federal commitments have not arisen from the people. Rather, they have resulted from positions to which certain officials think our nation should be dedicated. It is absurd to create national commitments that have little indigenous understanding or support.

Mr. KLUCZYNSKI. The Chair would like to announce that due to pressing business on the floor this afternoon, we will have to adjourn the hearings by 12:00 o'clock noon or as soon as possible thereafter. Each witness is requested to summarize his written statement within 15 minutes. The full statement will be placed in the hearing record. Again, I want to thank you Governor, for that splendid testimony. At this time, I will yield to the gentleman from California, Mr. Corman.

Mr. CORMAN. Thank you, Mr. Chairman. I appreciate the shortage of time. Yet it is a rare opportunity to have a witness who has had

such wide experience and one who has touched on two very important matters that Congress is attempting to deal with.

First, as to revenue sharing. As you know, the Ways and Means Committee has reported out a bill in which the lion's share of the money will bypass the States and go directly to the cities and towns and villages of the country. It seems to me that any such plan weakens the opportunity to use revenue sharing as a means of giving the States some incentive to innovate the reforms of which the Governor has spoken. Would you care to comment as to the advisability of our bypassing the States with the major portion of revenue sharing?

Mr. ROCKEFELLER. For now over 8 years, I have taken a strong position that this bypassing of States is wrong. I feel that the State and local governments ought to get closer together and not come solely to Washington. So my concept of revenue sharing is that wherein the State government and the local government can work out basic programs together.

We have had occasions that are perfectly ridiculous. Nobody in the bureaucracy in Washington, and I include my good Republican colleague, John Paul Hammerschmidt, can be as close to the problems as that person who is charged with the responsibility of the administration of the programs. Therefore, when you talk about revenue sharing, reluctantly, I accept some of the concepts which allow municipalities, counties, and smaller elements of government to participate directly. But at least, we are moving in the right direction. Hopefully, a distinguished body like this body will find the flaws in what I am afraid is going to exist and ultimately will correct them. Mr. CORMAN. Thank you, Governor. I keep hoping that we will not legislate in that field this year in the hope that we will do a better job next year. I appreciate your advice.

The other problem with revenue sharing is, as you know, we are in substantial deficit at the Federal level this year, yet we are going to finance revenue sharing in one of three ways: Either by cutting other programs, increasing taxes, or by further increasing the deficit. Would you have any suggestions as to which of those three would be the better course?

Mr. ROCKEFELLER. Can I work backwards?

Mr. CORMAN. Oh, yes, sir; we often do.

Mr. ROCKEFELLER. I can start by saying that I think we have so many local human problems that we need to cope with that they ought to have top priority. And I am not smart enough to suggest to you whether it is more important to go to the moon or do this, that, or the other thing. I do know that we have problems here and that is why you are gathering together here to deal with local home problems. So I would put my top priority on local home problems and then I am not smart enough to tell you how to cut down in the other areas.

Mr. CORMAN. Governor, I suspect you are considerably smarter than those of us who have to make the decision.

Just one final question: You have mentioned the dilemma of attempting to get capital investments in rural areas. It seems to me that the great problem with our tax structure has been that over the years in an effort to direct the investment of capital, we have given tax incentives and once given, they are hard to reverse. As you know, in 1926, we were afraid all of our Model T's were going to run out of

gasoline and we gave some rather substantial incentives to the oil industry. Then we found out we were not building enough apartment houses, so we gave further incentives. All down the line we have done that. Now the suggestion is that we give further tax incentives for investment in rural areas. Yet in doing so we are eroding our tax base even further.

I wonder if you think we might successfully get capital investment in rural areas if we eliminated all these tax incentives and just left it to the sound judgment of the businessman to put his capital where it will do him the most good?

Mr. ROCKEFELLER. I could agree with you on the idea; I do not think all of the growth of rural America is going to relate to tax advantages in this, that, and the other. We had a very interesting meeting of the Coalition for Rural America where it was pointed out that if you were a small town banker, you could make 18 percent financing automobiles, but you could only make seven percent, even with a guaranteed federal loan, on financing agriculture. I think this is an area that we need really to look very carefully into.

We need free enterprise involved. But free enterprise is going to follow the best return. And what we are looking at now is how do we get maybe an equity involvement in rural America, an equity we have lost? We have lost equity in the sense that people are moving off the farms, people who are buying or leasing apartments. We have lost a tremendous number of those people who are equity owners.

I would hope that as a result of these hearings, we would find a new way of getting people interested in equity involvement in this tremendous undeveloped land of ours known as rural America.

Mr. CORMAN. Yes, sir. My point is that the tax code is in a real sense governmental interference with the investment of capital, because in doing so we almost insure greater returns in some kinds of investment than in others. I suspect that is one of the reasons why capital investment in rural areas has dried up. We have given too many incentives in the tax code to other kinds of investments. Would your purpose be served if we just eliminated all of those artificial incentives and left it to the sound business judgment of a man as to whether he is going to put his money in apartment houses or oil wells or new plant expansion or agriculture?

Mr. ROCKEFELLER. Eugene caught that oil well comment.

Actually, as far as I can see, what we need to work back toward is. getting more people involved in the responsibility of ownership, equity. There are 30-some odd million people in the United States that have securities of some sort. But that is way, way off. They do not go to the actual meeting of the stockholders or this, that, or the other. When you come back to rural America, you can begin to evolve a philosophy that will get people, owners, in on the growth of our nation. The securities, I do not think, are the answer. I think there it has to be some way where, as I mentioned, like the investment corporation under Small Business, where there is actual ownership and somebody who lives there in that community is watching that enterprise.

Mr. CORMAN. Thank you very much, Governor. I appreciate your

response.

Mr. KLUCZYNSKI. Mr. Stanton, any questions?

Mr. STANTON. I just have one observation. Your testimony struck home to me, because my district is about 80 percent rural. Your ob