If the necessary funds are obtained by direct appropriation as we recommend, the need for a new Government corporation would disappear. Any public borrowings necessary to fund appropriations would be obtained by the Secretary of the Treasury under existing borrowing authority.

On the question of indefinite appropriations such as would be established by S. 1160, we feel that the Congress should not as a general proposition authorize such appropriations. When collections are made available for expenditure on a permanent annual basis, congressional control of the expenditures and the activities financed. thereby are greatly weakened.

In 1934 Congress considered this question and passed the Permanent Appropriation Repeal Act. This act eliminated numerous permanent appropriations then in effect and provided that such appropriations be subject to annual consideration by the Congress. However, since 1934 many permanent appropriations have been authorized. A good example is the Fish and Wildlife Service of the Department of the Interior. Appropriations by the Congress during 1954 totaled $17 million. Total funds available for expenditure during the year amounted to $59.5 million. Permanent indefinite appropriations provided $36.5 million of the difference, or about 60 percent of the total.

These permanent indefinite appropriations are obtained from taxes on firearms, shells and cartridges, fishing equipment, sales of migratory bird hunting stamps, and income received from mineral leases, timber sales, grazing fees, etc.

The feature of the bill S. 1160 which may raise questions of legality is the financing method proposed.

Article 1, section 8, clause 1, of the Constitution gives Congress power to lay and collect excise taxes provided they are uniform throughout the United States. The Federal gasoline tax meets this requirement. There is, however, a constitutional limitation on the taxing power of the Congress.

That power may be exercised only:

*** to pay the debts and provide for the common Defence and general Welfare of the United States.

The question is then whether the revenue from the gasoline tax, or an equivalent amount properly may be appropriated in advance for use in meeting the obligations of the Federal Highway Corporation.

The only constitutional restriction on the duration of appropriations is that found in clause 12, section 8, article I, which declares that no appropriation of money to raise and support armies shall be for a longer term than 2 years. As we have indicated, the Congress has frequently made so-called permanent appropriations.

The following are current examples involving tax revenues: Appropriation of amounts equal to social-security taxes; appropriation of amounts equal to revenues derived under the Railroad Retirement Tax Act; appropriation of an amount equal to 30 percent of gross customs duty collections for use by the Secretary of Agriculture; appropriations for conservation of wildlife; appropriations to the governments of the Virgin Islands, Puerto Rico, and Guam.

The case of Cincinnati Soap Co. v. the United States (301 U. S. 308), decided in May 1937, involved a similar appropriation to the Philippine Government of future revenue from a processing tax on

coconut oil produced in the Philippine Islands, and the Supreme Court held that an otherwise valid tax might be bound to a valid appropriation of the tax revenues. The Court said that if the Congress chose to adopt the quantum of receipts from the particular tax as the measure of the appropriation, it saw no valid basis for challenging its power to do so.

Another question is the propriety of the purpose for which the tax revenues are to be issued. We do not think the legality of Federal appropriations for an Interstate Highway System can be questioned. It might be argued that the appropriated funds here involved are not to be used for the payment of debts of the United States, since the bonds are not legal obligations of the United States but merely of the Federal Highway Corporation.

In the Cincinnati Soap case mentioned, the Supreme Court had this to say as to what constitutes debts of the United States within the meaning of the constitutional provision:

*** It is conceded and indeed it cannot be questioned that the debts are not limited to those which are evidenced by some written obligation or to those which are otherwise of a strictly legal character. The terms "debts" includes those debts or claims which rest upon a merely equitable or honorary obligation, and which would not be recoverable in a court of law if existing against an individual. The Nation, speaking broadly, owes a "debt" to an individual when his claim grows out of general principles of right and justice; when, in other words, it is based upon considerations of a moral or merely honorary nature, such as are binding on the conscience or the honor of an individual, although the debt could obtain no recognition in a court of law (301 U. S. 308, 315).

Thus, even though the bond obligations would not be legal obligations of the United States, strictly speaking, and would not come within the Federal debt limitation, there is no doubt that they properly may be considered as debts of the United States within the constitutional taxing authority granted to Congress.

We think a future Congress would be free to reduce or repeal the Federal gasoline tax, which would automatically reduce or cut off the only important source of funds for meeting the bond obligations and would preclude or curtail the issuance of further bonds. As we have indicated, however, we think it would be unrealistic to assume that the Congress would permit bonds already purchased to be defaulted.

In the event the subcommittee is to favorably act on S. 1160, we recommend that several provisions of the bill be considered for amendment.

1. Consideration should be given as to whether the powers of the Corporation are too broad. We would recommend that the legislation be more restrictive as to the functions and duties the Corporation is to perform. Also, consideration should be given to limiting the life of the Corporation to a definite date.

2. Section 105 (d) is contrary to many of the existing statutory restrictions on the investment of trust funds. For example, the unemployment trust fund can only be invested in interest-bearing obligations of the United States, or in obligations guaranteed as to both principal and interest by the United States.

If the purpose of section 105 (d) is to permit investment of these and other trust moneys in bonds of the Federal Highway Corporation, existing statutory restrictions on the investment of trust funds should be declared inapplicable to avoid any possible conflict.

3. Section 208 dealing with right-of-way acquisitions should be clarified as to the source of funds for payment of the property acquired. The section provides that the Federal Government will pay 95 percent of the appraised value or the actual cost, whichever is lower, but the section is silent as to who pays the additional 5 percent. It is assumed that the 5 percent will be paid by the State. We think the section should so provide and also make it clear as to whether the State advances the 5 percent to the Federal Government prior to the payment for the property, or whether the Federal Government may pay 100 percent and then be reimbursed by the State for 5 percent. Senator SYMINGTON. Thank you, Mr. Campbell. Have you any further comments that you would like to make?

Mr. CAMPBELL. No, Mr. Chairman. I think the statement covers our views completely.

Senator SYMINGTON. Senator Martin.

Senator MARTIN. Mr. Comptroller, I listened with a great deal of interest to your statement. I wish you would elaborate just a little further relative to the limitation that you would suggest as to the work of this Corporation, as mentioned on page 7 of your statement, paragraph 1.

Mr. CAMPBELL. Senator Martin, Mr. Robert Long, Director of our Audit Division, is here, and he is thoroughly familiar with the corporate audit procedure. I would like him to answer.

Senator MARTIN. That is perfectly agreeable. What we want is information.

Mr. CAMPBELL. I would like to have him discuss that.

Mr. LONG. The point of our comment there, Mr. Chairman, is simply this: We feel that wherever possible, in the establishment of any corporation, the Congress should spell out as distinctly as possible the powers or the duties which the corporation is to perform.

As the chairman will recall, there have been a number of corporations that have been formed to perform specific functions and as the years went by, they became engaged in many programs that were not intended or desired by the Congress.

We feel it is desirable, therefore, for the Congress to spell out as specifically as possible what functions the Corporation should perform. Also we feel it would be desirable to provide specific tenure rather than permitting it to have succession for perpetuity.

Senator MARTIN. Relative to article 1, section 8, on which the courts have ruled certain things, do you feel that the Congress would have a right, provided that we would agree that it is a sound policy, to appropriate a cent of the gasoline tax, we will say, for the period of these bonds?

Mr. CAMPBELL. Senator Martin, Congress could. We would not favor it.

Senator MARTIN. I understand. I mean just regardless of that. Mr. CAMPBELL. We think that Congress would have the right to do that.

Senator MARTIN. Then it is our duty as Congress to determine whether or not it would be a good policy. If we would decide that the policy of paying for these roads through the creation of this Corporation and these bonds would be legal, then we have to determine whether or not that is a sound policy, is that it?

Mr. CAMPBELL. That is correct, and I might go on to say that, of course, Congress could also later change its mind and repeal the provision.

Senator MARTIN. I am not going to ask this question, but, Mr. Chairman, this is a matter we should consider.

The general has very carefully discussed the matter that Congress would feel that this was, but it might not be a direct obligation, a moral obligation of the Government to pay these bonds.

I think the same conclusion could be reached that Congress would consider it a moral obligation probably not to repeal the law making the 1-cent gasoline tax payable for a 30-year period?

Mr. CAMPBELL. Yes; I think that is correct.

Senator MARTIN. Have you given any consideration to that?

Maybe this is just aside, but the other day I think I asked the Secretary of Commerce the question as to whether he thought it might be advisable to charge a toll on vehicles passing over the Interstate System.

In your study have you given any consideration to that problem? Mr. CAMPBELL. We have, Senator, and we feel that is a matter of policy which is entirely up to Congress.

Senator MARTIN. You do not think there would be anything legally against a policy of that kind, we will say—maybe you might not call it a toll-you might levy it as a license fee on, we will say, trucks and buses of a certain size?

Mr. CAMPBELL. We have not gone that far in our studies of that problem, sir.

Senator MARTIN. As far as you have gone, would there be anything against that from a legal standpoint?

Mr. CAMPBELL. I cannot comment on that. I would like to have Mr. Keller answer that.

Mr. KELLER. I believe the 1916 Highway Act, specifically precludes any aid for toll roads. I believe I am correct on that. Of course, to follow a toll policy would require an amendment of the 1916 act.

Senator MARTIN. There was a grant made to the Pennsylvania Turnpike. I think there was a grant there, and it was pretty sizable. I believe it was 38 percent that the eFderal Government made. It was a pretty sizeable amount, but I think it was 38 percent.

Mr. Chairman, this is cleared up more from a legal standpoint that we we have so far had, which I have been terribly worried about, whether we could legally do it; but I believe from this statement that we can legally do it.

Then it is a question to the Congress to determine whether it is a proper policy.

Senator SYMINGTON. Do you have any further questions?

Senator MARTIN. If you do not care, Mr. Chairman, I hate to take the time, but we are having an executive session of the Finance Committee this morning, trying to lay our plans for that reciprocal trade bill and GATT and so forth before us, and if you do not care, I would just like to ask about two more questions.

Senator SYMINGTON. If I may say, I am not quite sure that I agree that the Comptroller General's statement declares the proposed program legal. Unquestionably, inasmuch as we have had such varying testimony from at least two Cabinet officers, and from the distinguished

chairman of the Finance Committee, the question of legality is further muddied at least, if not settled the other way, I refer particularly to the decision rendered in the Cincinnati Soap v. United States cause, referred to by the Comptroller General.

If this is the law, then either these bonds are a direct obligation of the United States or they are not.

My impression is that they are a direct obligation based upon the opinion of the court in this decision. That could be changed, of course, by legislation with the promise that the legislation would be declared constitutional if it was litigated. Is that correct, as you see it?

Mr. KELLER. If I may answer that, Mr. Chairman. In the Cincinnati Soap case, and in several other cases in the Supreme Court, the Court recognizes the principle of a moral obligation. The fact that there is no legal remedy or other way the obligation can be discharged does not stop it from being an obligation of the Government.

The Court takes the position that collection is purely procedural. I think with your highway bonds, if it is specifically provided that the Government is not guaranteeing the bonds and they are not legal obligations of the Government, you might preclude a judgment; but the moral obligation, following the Cincinnati Soap case, is still there. The fact that the Government does not choose to be sued or there is procedural defect, does not discharge the obligation.

Senator SYMINGTON. The Secretary of Commerce testified that in his opinion it was not even a contingent obligation. The Secretary of the Treasury felt that it was more than a contingent obligation, that it was a technical obligation.

The chairman of the Finance Committee testified that he thought it was a disingenuous bill, and it was illegal. He gave as justification for his opinion an opinion by the chief of the Senate legislative counsel, Mr. Simms, that it was illegal; so there are quite a few differences of opinion with regard to its legality and its propriety among the various witnesses from the Government that have appeared before the committee.

Senator Martin, I believe you had some other questions.

Senator MARTIN. If you do not care, Mr. Chairman. From this statement you have gone into this very carefully. Do you know of any precedents in the State where they have general State authorities or other plans of raising money like they had down in Virginia, like up in Pennsylvania, New York, and New Jersey?

I will mention those four States. I think the first one is probably the Delaware River Bridge, which would be probably 30 years ago, and then the Holland Tunnel came along about the same time and now the Pennsylvania Turnpike, and along about 1934 or 1935, a general State authority for building hospitals and schools and things of that kind.

In your search, have you found any place where there has been a default and then what has been done by the State in which these authorities have been created?

Mr. CAMPBELL. We have not checked that, Senator Martin. I personally have had some experience in that sort of thing, and I never have heard of such a default. There is the case of the Triborough Bridge Authority bonds. They have sold at a great discount at times, and they have sold at premiums.