the $175 million, they would continue contributing throughout the life of this project.

Senator KUCHEL. Then in the table on page 21, the $25 billion which would be made available by the Corporation would be added to put the billion dollars for existing interstate highway construction and a billion dollars for extended interstate highway construction?

General CLAY. It would roughly be matched by contributions by the States in urban areas in the amount of $2 billion which they could make under the present program over the same 10-year period.

Senator KUCHEL. What would those $2 billion of State expenditures represent actually? Would that be right-of-way, for example?

General CLAY. It could be right-of-way, engineering costs, or other things; but the purpose of our language and our recommendation was that we did not want to relieve the States of any responsibility that they now had; and now to get this $175 million a year, they are required to provide an amount, roughly, of 40 percent of the total, which is somewhere in the neighborhood of $108 million a year.

Therefore, over this 10-year period the States, in accordance with the degrees they would have participated in the $175 million, would still provide $108 million a year toward costs of the Interstate System. Over the 10 years that is a little more than a billion. Senator KUCHEL. I see. Thank you very much.

Senator GORE. Have you concluded?

Senator KUCHEL. Yes, sir; and, Mr. Chairman, Senator Hruska is not a member of this committee, but he is intensely interested in the subject.

He is here, and I wonder if he might be permitted to ask some questions?

Senator GORE. I have heretofore accorded the Senator that permission or that privilege, and would be happy to do so today. However, I refrained from asking any questions in the beginning in order that the members of the subcommittee would have an opportunity, and I did have 1 or 2 questions that I would like to ask first, if I may.

General Clay, you have recommended giving credits to States to the extent that they have constructed segments of the interstate roads up to accepted standards. You justify that on the basis of equity. I would like to read you a letter that I received previously from a constituent of mine. It is addressed to me.

I keep noticing articles in the papers indicating that there may be enacted a Federal-aid school-building program. Here in Sullivan County we would have no objection to such a program if the same is broad enought.

We have just completed a school-building program which has called for an expenditure of approximately $6 million We received some aid from Federal because of the defense workers in our area; however, we issued, on our own, $4,525,000 school bonds, and used our State capital outlay funds, too. As of now we barely have enough classrooms for our 15,000 students, and we expect 600 additional students next September 1, 1955.

Now, the reason for this letter: In the event an aid program is enacted by Congress, there should be a provision in same to take care of those counties who have already made expenditures in bringing physical facilities up to the required level. Perhaps Federal assumption of outstanding bonds issued by the counties could be provided. If there isn't something done, we counties who have attempted to solve our problems will be discriminated against.

(The letter referred to is as follows:)

Hon. ALBERT GORE,

BLOUNTVILLE, TENN., January 21, 1955.

Senate Office Building, Washington, D. C.

DEAR SIR: I keep noticing articles in the papers indicating that there may be enacted a Federal-aid school-building program. Here in Sullivan County we would have no objection to such a program if the same is broad enough.

We have just completed a school-building program which has called for an expenditure of approximately $6 million. We received some aid from Federal because of the defense workers in our area; however, we issued, on our own, $4,525,000 school bonds, and used our State capital outlay funds, too. As of now we barely have enough classrooms for our 15,000 students and we expect 600 additional students next September 1, 1955.

Now, the reason for this letter: In the event an aid program is enacted by Congress, there should be a provision in same to take care of those counties who have already made expenditures in bringing physical facilities up to the required level. Perhaps Federal assumption of outstanding bonds issued by the counties could be provided. As I recall, the State of Tennessee, in about 1930 or thereabouts, assumed county road bonds as of a certain date. If there isn't something done we counties who have attempted to solve our problems will be discriminated against.

Thought I had better call this to your attention in the event legislation is considered along these lines.

Thanks, and if there is anything locally that I might be able to help you with please feel free to call upon me.

Sincerely,

HOWARD R. POSTON.

Senator CASE. Mr. Chairman, is not that the reason for the credits on the existing toll roads in this bill?

Senator GORE. I thought the general would see the obvious application. You in your report, which I read again this morning before coming to the office, base your recommendation on equity.

You could make the same argument for reimbursing the States for all of their expenditures on the interstate roads, and it would fit the

same case.

If we adopted this policy in road legislation, you can see where the Senator from Tennessee would be at least encouraged to take such a position with respect to aid to schools and the same thing with hospitals.

You know, General, my father used to give me some very good advice. He still does, even though he is quite advanced in age. He used to say, "Son, always start from where you are at."

I am not sure that we won't have to do that with respect to a schoolconstruction program and a program of aid-to-highway construction. else we will discriminate. There must be a starting point, however, and I think a very good starting point is where we are, leaving off the "at."

General CLAY. Senator, you have some very sage remarks there, but it is a very difficult and complex question to answer. It is like one of these "Have you stopped beating your wife" things.

Senator GORE. I did not mean to accuse you.

General CLAY. In point of fact, what you would have is this, and this is the thing we shall face: (1) A long continuing lot of Federal participation in road-building programs during which time the Federal Government has borne a portion or share of the cost of all highways. Also the Federal Government and the Congress itself, a few years ago, authorized Federal appropriations to be used by the States to service and retire bonds which were issued, for the purpose of en

couraging States to issue bonds for the construction of these highways; a very definite incentive in money available to service these bonds. Now to say to these people, we have got to start from scratch, and you have got to go ahead and meet those obligations on your own did not seem fair and equitable.

You have some 1,400 or 1,500 miles of toll roads now authorized to go under construction, and if you came up to the Congress with the proposal that the United States undertake to pay the cost of these highways but without reimbursing these people if they went ahead, you would have stopped all that construction, and you would have delayed that many miles of active highways coming into use in the United States.

We believe that the need for highways was much greater than that, and it was much better to let them go ahead, and we put a proviso that it could only be used on the Interstate System, and they would only be reimbursed if they came up to our standards.

I must admit that starting from scratch is a very clean and healthy way to do things; but starting at scratch here, in our opinion, would have delayed the construction of very important highways.

Senator GORE. Would you not apply the same reasoning and the same fair play and equity to your counties whose needs have been greatly increased by the location of a defense establishment? They have burdened themselves now to their limit. They are expecting more children next fall than they can provide for.

If we are to start a Federal aid program for school construction, would it not be fair to take up the bonds of those people and reimburse them in order that we not discriminate against them when by the bill we would provide aid for an adjoining county which had not so burdened itself?

General CLAY. That is very difficult to answer, sir. As far as I know, there is not a Federal program for financing school programs, but there is a Federal precedent of building roads since 1916 on the one hand, while on the other hand you have the Federal Government embarking on a new program which it has never taken part in before.

After it has embarked on this, it may create some method of reimbursing these counties who have tried to meet the problem themselves.

In any event, in our program, to have done that, in my opinion, would have stopped the construction of all such highways now being constructed, whether through tolls or through the issuance of State bonds, on the Interstate System, until Congress had acted on this bill. I think that would have been very bad.

Senator GORE. If the Government is to adopt a policy of reimbursing States for expenditures on interstate roads in certain areas up to certain standards, ought we not in the case of Oklahoma, where under the plan you might leave a 2-lane road instead of a 4-lane road— would it not be equitable to reimburse them for their expenditures on a 2-lane road if it is up to 2-lane standards?

What I am trying to illustrate, General, is if we start going back and reimbursing counties and States for their development, because in March or August, the Federal Government has adopted a different plan, we will create a grab bag without bottom.

General CLAY. Senator, let me put it another way: if you were asking me would I rather have a highway program without reinburse

ment than no program at all, then I would tell you definitely I would rather have a highway program without reinbursement than have no program at all, but I am sure that the highway program with reimbursement will give you more highways in the long run, because the money which the States would get for these roads, they must spend for other roads.

Senator GORE. Does your plan not also recommend, and the bill have provisions, whereby the States could take this money and retire their bonds?

General CLAY. That was not a recommendation of our committee. That has been added into the bill as it has been drafted, and on the theory, I believe, that by and large the Federal Government prefers free roads rather than toll roads to the full degree that it is practical and realistic.

Senator GORE. Since this was not a recommendation of your committee, does your committee now recommend it?

General CLAY. I could not speak for my committee, but as far as I am personally concerned, I would personally prefer to see all of the money spent on building new highways rather than on retirement of toll-road bonds.

Senator GORE. The bells have already sounded, Senator Hruska. Senator HRUSKA. Why do you not just complete yours? I will defer to you.

Senator GORE. It would be impossible for me to complete mine. You go ahead.

Senator HRUSKA. Thank you, Mr. Chairman. In line with your suggestion or the advice that you got from your father "Start from where you are at," and the substance of the letter you received from your constituent, that perhaps this thing ought to be, in the case of school construction, pressed back to include a concept of bonded indebtedness of school districts.

May I suggest the consideration of that? In my home city of Omaha, there was a school district program, which was based upon current revenues and an added tax levy for the benefit of the school district.

Would it not be a legitimate avenue of procedure, if you want to put it that way, for the school districts to say we have, at considerable sacrifice to the people living now, built the school building, and we think we should be reimbursed for it. If you are going into the school program now, should you not consider the existing plants?

That bears on this general proposition.

General Clay, one of the first questions propounded to you this morning was whether or not the program which you envision here and which you propose here might be affected by inflated values 10 years from now or 5 years from now or 15 years from now.

You stated that in reaching the conclusion which you stated, that in general you have, and that you were quite optimistic there would be no great inflation-in that connection did your committee, in reaching that conclusion, consider the possibility of programs just like that which is suggested in the letter from Senator Gore's constituent?

Did you consider that type of thing? Did you consider this possibility further: That is this will serve as a precedent for financing this type of revenue bond in Federal fiscal affairs; and if that method will be applied to housing and hospitals, perhaps, and to schools, and so

on, that maybe we will have a factor in Federal financing which will result in an inflated dollar, an inflation which is not contemplated on the basis of only one resort to revenue bonds of this type; to wit, for highways?

General CLAY. Quite obviously, Senator, we have no inflated values in our estimates. They are based on present costs.

As to whether or not we are going to have an inflationary policy in the 10 years ahead, I certainly consider that you are far better qualified to answer that than I am.

I feel certain that our own program is not inflationary if it is done on a self-liquidating basis. These bonds are paid off on a definite application of revenue. It is not inflationary.

It is inflationary only when you issue bonds and do not provide the revenues to pay for them, and so our plan is not inflationary. In fact, as to whether or not other appropriations and other succeeding governments are going to bring about inflation over the next 10 years, I cannot say. I do know from the published announcements of Treasury with respect to its application of money controls. its efforts to balance the budget, that we perhaps can look ahead to a period in which we have a reasonable stability.

How long that stability will last, I hesitate to judge. I personally am confident that we have at least 10 years ahead of us in which we are not going to have any runaway inflation, and I feel reasonably sure that with a self-liquidating program, we can build these roads, and they will so encourage the utilization of the automobile, and the increased number of automobiles on the roads, that it will be the greatest single factor you can make against inflation, and so I am absolutely convinced that this is an antiinflation measure as it is.

Senator HRUSKA. Of course, General, when you say through a selfliquidating project, heretofore, particularly up until 1954, there was not any such thing as linkage between gasoline tax and roadbuilding. Senator GORE. It is not in the 1954 act.

Senator HRUSKA. Except that the amount returned by gasoline tax is now devoted to roadbuilding purposes.

If we are resorting to a revenue bond issue for the purpose of making this completely self-liquidating, why not extend that policy to schools and hospitals, and so on, and maybe you should apportion all the general revenues through bond issues and have them self-liquidating.

General CLAY. As a matter of fact, Senator, I cannot answer that. I know of no place right now where you have a direct tax which is as closely associated with the user as you do here and which your precedent has been more and more approaching; that is asking that the tax be made available for road improvements.

It was because of the various acts passed by the previous Congresses, and the matching of the funds by the State and Federal Governments, that we felt caused this tax to be placed in a slightly different category than any other that I know of.

It was because of that that we felt we could make it applicable to the servicing and retirement of the bonds and thus to make this a selfliquidating project.

I personally am convinced that is sound. If the Federal Government could carry that out, I think it would be a very good and whole