Mr. WRIGHT. The great concern growing rapidly throughout the country and being felt in the Congress is that interest rates have become so inordinately high that they not only are counterproductive of their ostensible purpose of curbing the growing cost of living but also that as the chairman has so ably pointed out, the high interest rates constitute an enormous drag upon economic growth.

As the chairman suggested, the report of March 21, reflecting the increase in the cost of living for February, indicates that living costs not only continued their upward spiral, but did so at an accelerated

pace.

During 1969 we had the most dramatic increase in interest rates in history, and they soared to the highest point they have achieved since the Civil War. Yet during 1969 prices rose by an average of 6.1 percent, and as the report cited by the chairman points out, they are rising now-or did during the month of February-at an average of 6.3 percent.

We feel that the enormous amount of money being siphoned away from the country's buying power by higher interest rates is constituting a very serious threat to the continued economic health of the Nation.

During 1969 the total amount of money paid out by Americans in interest alone on public and private debts, came to a staggering $120 billion-three times as much as the 1969 cost of the Vietnam war. For this amount we received nothing in the way of service, nothing in the way of additional highways, additional utilities, additional conveniences for the American public. It was dead weight.

I think it is interesting to compare this to the total amount of interest paid on all public and private debts as recently as 1952 when that figure was only $19.5 billion or less than one-sixth of the amount paid last year. It is intriguing to note that the total amount of interest on the national debt alone now comes to approximately $19.5 billion for this year or the total amount of interest paid on all obligations in 1952 by all Americans.

All Americans are hurt by extremely high interest. During the past year layoffs have occurred in many industries. Automobile production is down by 26 percent over a year ago. Unemployment is rising.

We feel that unless something is done and done very quicklyto roll back these interest rates, we are on the precipice of a very dangerous recession.

So, Mr. Chairman, that basically is the cause that we have to make to this committee today. We earnestly request that the committee will consider the statements presented by some 30 Members of the House. Some will be here throughout the morning to present their testimony in person; others are submitting formal statements for inclusion in the record.

Chairman PATMAN. The record will be left open for them to insert their remarks.

At this time the Chair will recognize Mr. Reuss and Mr. Alexander. Mr. REUSS. Thank you very much, Mr. Chairman.

I just wanted to inform the committee that we have in the back of the hearing room some very distinguished governmental visitors from my community of Milwaukee, Wis.: Supervisors Clinton Rose, Fred

Toppock, William Nagle, and Gerald Engle, accompanied by the charming Mrs. Engle.

As public servants of Milwaukee County they are very keenly concerned with the current high interest rates and as the gentleman from Texas, Mr. Wright, just made clear in his excellent statement, high interest rates impose a very particular burden on our agencies of local government, so I think it very fortunate that my guests have been able to hear your excellent testimony.

Thank you.

Chairman PATMAN. Thank you, Mr. Reuss.

Mr. Alexander.

STATEMENT OF HON. BILL ALEXANDER, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF ARKANSAS

Mr. ALEXANDER. Mr. Chairman, distinguished Members of the committee, I appreciate the opportunity to appear before you today to discuss a situation of growing and urgent concern to the people of the First Congressional District of Arkansas. This is the high interesttight money policy that has been in effect for the past 15 months in an effort to bring inflation under control.

The thesis that I would like to discuss with you this morning is that this policy has clearly become counterproductive and is now actually contributing to the problem that it was originally designed to solve.

It is a fact of economic life that additional costs are always passed along to the consumer. This is true when the cost of labor, new products, transportation or any other commodity or service increases. I contend that this principle is just as true in the case of money. The increased cost of money is just as inflationary as is a wage increase or an increase in the cost of steel or other raw materials.

Who ends up paying the costs of inflation? It is the consumer who is unable to pass along the cost since "the buck stops here." It is the small businessman who can pass along part of the increased costs of his products perhaps, but who must deal with the realities of life at the consumer level. There is a limit beyond which the consumer cannot be pushed, and the small businessman cannot afford to pass along all of his additional costs plus all of the additional increases that have been added at earlier levels of production before the manufactured items ever came to him. So, he winds up bearing part of the costs of inflation, including inflationary money, or else he reduces his manpower, or suffers the consequences and is forced out of business. Inflation, and inflationary money, also bears hardest upon the shoulders of those who must rely on fixed incomes.

The question upon which we must focus is whether a high interest rate policy is effective as a tool against inflation? And are the effects of such a policy now justified?

I am aware that some persons have tried to shift the emphasis to other points. Some have tried to suggest that the question is who is responsible for inflation. Others have tried to shift the issue to alternative methods of fighting inflation.

I suggest that those questions are both irrelevant. It makes no difference in the present context whether the Democrats, Republicans, Whigs, or Tories are responsible for inflation. The question which con

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cerns all of us is how to halt inflation. If a high interest policy was showing results, was effectively halting inflation, then I would not be here today.

The President asked us to extend the income tax surcharge in order to fight inflation. I supported the President's request because I want to see inflation brought under control.

The President asked us to produce a balanced budget in order to stem the inflationary cycle. I supported this effort and joined with other Members of Congress in helping to reduce expenditures in certain programs so that we could have a balanced budget.

In other words, I have supported the President when he asked for support in his war against inflation, in our war against inflation. In the case of his high interest rates and tight monetary policies, however, there is evidence that this policy is doing a great deal of harm while producing very little if any good. It is my contention that any Federal policy which does more harm than good should be reversed on the basis of logic, humanitarianism, good economics, and commonsense.

What is the evidence concerning this policy of high-cost money? The most dramatic evidence is the current economic situation. Economists tell us that it takes a year for economic policies to take effect. The high interest rate policy was begun 15 months ago and, yet, today we see continuing and growing inflation, increased unemployment, and threatening signs of a recession. Economists tell us that we are not in an economic recession according to their indicators, but I think there is little doubt that we have definitely entered a period of economic anguish.

In northeast Arkansas we have situations where small businessmen are laying off employees because they are caught in a squeeze play between consumer purchasing power, increased inventory costs, and increased costs of money. In northeast Arkansas I have been personally told of conditions where parents are unable to send their children to college because of the cost of borrowed money, even though their children show great promise and have the ability and desire to develop to their full capabilities.

The economy in northeastern Arkansas and throughout the country has also been brought to a screeching halt by the tight money conditions that have been created. It is almost reaching the point in our region where there is no discrimination in the shortage of funds. When banking and savings and loan institutions have had their funds dried up or put in reserve, there is no one to whom local businessmen can go for credit. This is the factor that has led to a halt in the housing construction. This is the factor that has led to a serious challenge to business continuation. This is a factor that must be eliminated so that we can once again begin to attack the vital problems of housing, job opportunities for our unemployed, and the orderly continuation of regular business.

We used to say that some medicine was so bad you would forget what you had taken it for. It seems to me that this is the situation we have come to in the case of our economic policy. In the case of high interest rates, the medicine hurts so bad that we can't feel the pain of inflation. Some people may view this as a beneficial thing to do for the citizens of this country, but I cannot agree.

What do we want to accomplish by the consideration and passage of this resolution?

I received a letter a few days ago from a banker in Arkansas saying that inflation was bad, but that economic policy in the hands of politicians was even worse. I do not disagree with that statement. This is the reason we have offered a House concurrent resolution. It does not say that interest rates must be lowered at a particular time or in a particular way. It does not say that the interest rates must be at a particular level. It does not legislate economic policy.

What it does is say to the President and to his economic advisers that the American people should have the right to express themselves on economic policy and how it affects them and their lives. It does say that the effects of a policy on the American people should be considered, and that the American people have the right to express themselves through their elected representatives in the Congress. This resolution does say that the American people have examined this policy and found it wanting.

To me, it would be a callous attitude to say that the American people have the right to protest inflation but that they have no right to protest the methods being used to bring it under control. The very lives of the people of this country are affected by every economic decision made in the halls of Washington or the corridors of New York. Are we to say then to our people that it is none of their business what these decisions will be or how they will be made? Are we to say to them that they lack the knowledge to have an opinion on the economic policies which can mean prosperity or poverty for them?

Our people understand that, not only are they paying more for the items which they must buy and which are necessities to them, but they are also having to pay more for the money with which to buy these inflated items. The American people can see where inflated money costs are hurting them, and they cannot see where this policy of our Government is helping them.

I suggest to the members of this committee that a policy of high interest rates has outlived its usefulness. The people of northeast Arkansas feel that they have the right to express themselves on this issue. I think that the people of the other 434 congressional districts in this country have that same right. I suggest that they can be heard through the passage of this resolution.

Chairman PATMAN. Thank you, Mr. Alexander.

I will ask Mr. Adams and Mr. Gibbons to take places there at the table. You can stay there because after you get through the members of the committee will want to interrogate you.

Just keep your seats, each one of you, and lean forward and speak into the microphone, if you will.

All right, Mr. Adams.

STATEMENT OF HON. BROCK ADAMS, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF WASHINGTON

Mr. ADAMS. Thank you, Mr. Chairman and members of the committee.

This country is in a recession because the figures will indicate that for the last two quarters, in other words, the last quarter of 1969 and the first quarter of this year when the gross national product is ad

justed for inflation will indicate there has been a decrease in production.

In other words, attempts by the administration to stop inflation has succeeded in stopping the economy while prices continue to soar. As a result of the policy of high interest rates, tight money and a failure to adhere to wage-price guidelines, this country has the highest rate of inflation in history other than at the beginning of the Korean war.

This inflation is not a result of insufficient supply or excessive demand. We are presently using only about 82 percent of our industrial capacity and I don't know of a single economist in America who has said there is a shortage of the supply of goods. Demand is not outrunning supply.

And, parenthetically, our policies of surtax and high interest rates reduce demand further. This is not classic inflation caused by demand outrunning supply or with a bidding up of prices. This is inflation caused by an increase in costs of money and an increase in the cost of basic supplies produced by industries adhering to uniform prices, the industries in the so-called administered price area.

Even small businessmen must borrow in order to finance their inventory and often for their other expenses in their business. The high interest rates charged to these businessmen are added to the cost to the consumer. Now, this consumer has already been hit by the highest interest rates paid by manufacturers and others involved in the transportation and production of goods. The price paid for money is the key factor in the end cost of a product.

As the economists say to us, "This is one of the most pervasive costs." Pervasive costs being one that will always have to be added to the cost of a product, and will be directly inflationary. As the price. goes up for each item that you use in basic production, you will have price inflation.

The refusal by the Federal Reserve Board to make additional money available or to lower the interest rates on rediscount, creates an additional threat to the problem of supply and demand.

As the population has increased and the demand for more goods per person has increased, more money is needed to handle the larger volume of business. When no more money is available, then you have the production of goods and services being cut back to meet the money supply available.

In other words, if the money isn't there to produce the goods and to do the basic financing, production must be cut back to the money level; they follow as night follows day. In time this will reduce the supply of goods and then you will begin to have classic inflation and this is now beginning to happen.

I might mention, for example, that where this will first be seen is again in the administered price area, automobile production being one of the most classic. In that industry you do not have price competition to a significant degree. In other words, everyone is rising and falling with the price level at approximately the same time so when costs increase in that industry and the demand is low, which demand is now, because high interest rates don't allow people to buy cars as they did; the only answer is to lay off people. That is beginning to happen in the country, so, unemployment is on the rise and it will start in