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Mr. BAKER. This was an attempt to earmark a part of it before it

is all given away.

Senator NEUBERGER. It is still earmarking a specific Federal revenue for a specific expenditure?

Mr. BAKER. Yes, sir, and there is one other we approve of, and that is section 32 funds for agricultural purposes.

Senator NEUBERGER. That is all, Mr. Chairman.

Senator GORE. Senator Case?

Senator CASE. Mr. Baker, I was interested in your reply and in your statement that States have done some earmarking. Have you studied the State highway picture somewhat?

Mr. BAKER. Just some, not anything like as much as I would have liked to if I had full time to spend on that.

Senator CASE. Do you know whether the States are in a position to increase the funds they would have for matching increased Federal aid?

Mr. BAKER. The States of South Dakota and Arkansas with which I am the most familiar because of recent experience with them, I would say that South Dakota and Arkansas are not in a very good position. I would gather from what I read in the papers that even New York State, I understand they are having some budgetary problems that they inherited from the previous administration up there.

As I understand the picture in Oklahoma, they very badly need some Federal funds that do not have to be matched, to just fit into their part of the National Interstate Highway System.

Senator CASE. What about increasing on the primary system and the secondary system? Do they have funds for increased allotments. there?

Mr. BAKER. There is, in the case of Arkansas, unless they want to raise the rate on the regressive sales tax, there is not any more money to do anything with because every school has to work out a beer tax and cigarette tax and a few more special taxes. They need more money than any of those taxes are now raising. Highways work out of some other special revenue measure. They are all earmarked. If you do not get enough out of your cigarette tax to hire a mental therapy specialist you do not have enough mental therapy specialists.

The same with farm-to-market roads. Farm after farm in South Dakota and north Arkansas still can't get back and forth to town unless they ride a mule because the mud is knee deep certain times of the year. There are even parts of South Dakota that are in that fix, I understand.

Senator CASE. I know that there is pending in the State Legislature of South Dakota a proposal to drop some of the mileage from the so-called State system of mileage in order that the State itself would have enough revenues to match the increase of Federal aid that was provided in the Highway Act of 1954. Of course you are familiar with the fact that the Highway Act of 1954 increased the Federal aid funds by a couple of hundred million dollars?

Mr. BAKER. Yes, sir; and that was good except we did not quite approve of the formula by which it was distributed. For instance, as Senator Martin was pointing out, the highways back and forth across Montana, for example, are very important to national defense and security considerations. There is no reason why the people in Mon

tana, with their huge distances out there, should try to finance those mileages of concrete highways when it is primarily a border zone security proposition.

Senator CASE. Of course the Highway Act of 1954 did establish a 60-40 matching basis for the Interstate System where it had been 50-50.

Mr. BAKER. It would be much closer to being right at 80-20.

Senator CASE. We went as far as we could at the time. However, the point I am getting at I note in your statement you say, "We support S. 1048 as a step in the right direction." S. 1048 proposes to increase the amounts for all of these categories of Federal aid. I am wondering in view of the statement you made as to the condition of the States how you think the States will be able to provide the funds for matching increased Federal-aid allocations?

Mr. BAKER. We would hope, as you said a moment ago, as the climate of the Senate and the House improves, as there is every indication that it will, that this matching formula gets better and better. As you said, your 60-40 was the best you could do last year. Maybe next year that can be made a little more realistic.

Senator CASE. That 60-40, though, was on the Interstate System. It is not on the secondary system, which is the farm-to-market roads. Are you suggesting that we change the formula for matching on the secondary system?

Mr. BAKER. We would like for it to be. As a matter of fact, there is no reason, actually, that we see, why you need to ask the States or local communities to raise any great amount of these highway funds at all. We are all Americans, we all pay taxes to the Federal Government and the Federal Government presumably is doing things that we all want it to do.

If South Dakota, for example, is strapped for funds, and Arkansas is strapped for funds, there is no reason why-and if the Nation needs to have some highways and some farm-to-market roads in South Dakota, there is no reason why we should say that South Dakota cannot have any highways because South Dakota cannot afford to put up all of the money that New York State can to match the Federal funds.

Senator CASE. Do you think that we ought to increase the Federal gasoline tax?

Mr. BAKER. I think the Federal gasoline tax ought to be repealed, Senator Case.

Senator CASE. Then you think that the Federal Government should take over the entire load of building all types of roads and do it out of general revenues?

Mr. BAKER. Yes, sir. That is why I think this is a step in the right direction.

Senator CASE. That is all, Mr. Chairman.

Senator THURMOND. Where will the general revenues come from? Mr. BAKER. They will come from all the different sources of revenues and taxation laws of the Federal Government if you mean personal income tax, corporation income tax.

Senator THURMOND. How about the national debt now?

Mr. BAKER. The book is this thick [indicating], and I have not had a chance to read it.

Senator THURMOND. Are you concerned about the debt of the Federal Government?

Mr. BAKER. The debt can be reduced if we develop a full employment economy in this country. We can start cutting down on the debt and maintain full employment and have an expanded economy if we have courage enough to build highways and schoolhouses and raise minimum wages, reduce taxes on low-income consumers. We can have a big enough economy to pay enough corporate and personal income taxes and excise taxes on luxuries to more than balance the so-called conventional budget of the United States Government, and thereby start reducing the Federal debt.

If we are going to pass laws as we did last year, however, that relieve all the rich people from paying taxes, you cannot balance the budget that way, and the debt is going to keep pushing the ceiling up. I mean we are going to keep right on having that same problem.

Senator GORE. Are there any further questions, Senator Thurmond? Senator THURMOND. Isn't it a matter of fact that the States are in better shape financially, every State in the Nation, than the Federal Government, in proportion to their size and ability?

Mr. BAKER. No, sir. They are not. As a matter of fact I would be hard pressed to name one that meets the category or classification you just named.

Senator THURMOND. I can name one, anyway.

Mr. BAKER. Which one?

Senator THURMOND. South Carolina.

Mr. BAKER. Good.

Senator THURMOND. It is in better shape than the Federal Government today in proportion to the size

Mr. BAKER. Your average per person income in South Carolina, however, is extremely low.

Senator THURMOND. It is, and we are still in better shape.
Mr. BAKER. And your highway system-

Senator THURMOND. Is the best in the Nation.

Mr. BAKER. Does each farm have a road to it?

Senator THURMOND. Not each farm, but we have a pretty good farm-to-market situation.

Mr. BAKER. I am thinking of the people actually on the farm and doing farm work. That is what we are talking about. Your problem is a little different from Senator Case's. He has people with a much higher-because of past opportunities, a much higher income and a much higher standard of living. And they demand more of their State government than yours are able to do.

Senator THURMOND. Ours are demanding more and have furnished more. We are calling less on the Federal Government.

Mr. BAKER. I am not familiar, for example, with your rural schoolhouses. I have not seen them maybe in 10 years. I do not know how they would compare with Senator Case's, for example. Senator GORE. Had you concluded?

Senator THURMOND. Yes.

Senator GORE. Senator Bush?

Senator BUSH. You said something about they ought to decrease taxes and at the same time take over the whole load for the highway program.

Mr. BAKER. That sounds almost inconsistent, does it not?

Senator BUSH. I would say that is a very moderate appraisal of your statement. But you also were going to waive the gasoline tax and turn that back to the States. I think if you take that argument by itself that might be argued favorably, certainly it is open to reasonable debate. In general, what you are talking about is reducing Federal taxes all along the line and increasing Federal expenses for this purpose. Is that right? Do I understand you correctly? Mr. BAKER. Yes, sir.

Senator BUSH. What are you going to use for money?

Mr. BAKER. If you raise the national income to where personal and corporate income taxes and excise taxes on luxuries are your sole measures of revenue, if you raise national income enough to maintain an expanding full-employment economy, these taxes with a little heavier graduation, at the higher salaries and income levels, will bring in enough revenue to cover the increased expenditures that I am talking about, and also reduce the Federal debts.

Senator BUSH. Have you any figures that will demonstrate your opinion about this increased taxes?

Mr. BAKER. They will be released shortly; yes, sir.

Senator BUSH. You have? Of course you speak about the expansion of the economy. The economy has been expanding pretty rapidly in the last 2 years.

Mr. BAKER. Unemployment increased.

Senator BUSH. In the last 2 years, I think they have been the highest years of employment that we have ever had as a 2-year period. Mr. BAKER. No, sir.

Senator BUSH. And the gross national product has been on the average of the 2 years higher than any peacetime year although I wonder sometimes about the peace. Nevertheless the figures seem to bear that out. The President's economic report, I suggest, substantiates what I have just said.

Mr. BAKER. The President's economic report substantiates the fact that 1954 was a year of recession, and that 1955 is expected to be 3 percent better than 1954.

Senator BUSH. How will that compare with 1953?

Mr. BAKER. 1955 will be almost as good as 1953, although there are 5 million more people living in the United States in 1955 than there were 2 years ago, and although productivity per man-hour will have gone up about 7 percent in the meantime. So instead of having 1.8 million unemployed as we had in 1953 there will probably, if we do not do something, if this Congress does not get the administration off dead center by next fall, we will probably have 5 million unemployed instead of only 4 million. That is the way it looks to us at the moment.

The automobile production is running about a half again the rate that can be sustained by sale. That means they are not going to have to start producing as many. They are going to have to cut down.

Senator BUSH. What is your authority for that statement about automobile production?

Mr. BAKER. The Wall Street Journal and the National City Bankthe Economic Letter of the National City Bank.

Senator BUSH. Do you mean we ought to be making 10 million cars instead of 5?

Mr. BAKER. No, sir. They say the way to sustain the economy at the moment, that the automobile manufacturers are producing cars at about a half again greater rate than they are going to sell, meaning that sometime in April, May, June, July, they will have to start laying off workers and closing up production lines, which is going to make a great big bulge in unemployment at the time they start laying off their people. Steel will then again have to slow down.

You remember last summer steel was producing at 59 percent of capacity and the same month they were doing that they raised the price of steel $1 a ton. If the farmers did that there would be what? About two-fifths of the people in the United States would starve to death if the farmers were to cut down production to only 58 percent of capacity and raise the prices. About two-fifths of the people in the United States would starve to death if that kept up very long.

Senator BUSH. I do not see what that has to do with it. The farmers will not do that.

Mr. BAKER. No, and the rest of the people in the country will not let them do it. We let the steel companies do it.

Senator BUSH. I do not think that is comparable at all.

Senator GORE. We have three State highway officials waiting to testify, and it is now a quarter to 11. I do not mean to cut you off, Senator Bush.

Senator BUSH. Not at all.

Senator GORE. We thank you for your testimony.

Mr. BAKER. I appreciate having had the opportunity and courtesy of the committee.

Senator GORE. Thank you very much. We appreciate your contributions.

As a preliminary to the testimony of the president of the State highway officials, Mr. Whitton, of Missouri, will be heard.

Senator SYMINGTON. This is Mr. Whitton, an outstanding man from our State. I take great pleasure in presenting him to you and to the committee.

Senator GORE. Thank you.

Mr. Whitton, I understand, has some charts which will serve to prepare the way for the testimony to come by the other two officials.

STATEMENT OF REX WHITTON, CHIEF ENGINEER OF THE MISSOURI STATE HIGHWAY DEPARTMENT

Mr. WHITTON. Mr. Chairman, Senator Symington, and gentlemen of the committee, my name is Rex Whitton, chief engineer of the Missouri State Highway Department. I am appearing as a member of the legislative committee of the American Association of State Highway Officials. As your chairman has told you, I am going to present some charts that will help explain some of the statements made by Mr. McCoy later on.

Two basic yardsticks for measuring highway needs are the number of motor vehicles registered and the mileage they travel. Here we see in this chart over the years we have recorded constantly more vehicles and more miles of travel. The top line, this top line here, represents the number of registrations of vehicles by the millions through the years. The bottom line represents the miles they traveled through the years. Naturally it corresponds rather closely.

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