We recommend that State Farm Bureaus participate with other groups in the reexamination of needs and progress being made toward the creation of adequate highway systems within the States.

The Federal motor fuel tax should be terminated, leaving this source of revenue available to the States.

Federal motor fuel taxes originally were adopted to provide general revenue for the Federal Government. The concept has gradually developed, however, that all funds acquired by the Federal Government from this source should be devoted to highway construction. This concept was crystallized by the enactment of the Federal-Aid Highway Act of 1954 which set the amount of Federal appropriations for highways at the estimated level of Federal motor fuel tax collections. There is, therefore, no longer any justification for collecting the Federal gasoline tax on gasoline used for nonhighway purposes. Until the Federal gasoline tax is discontinued, we strongly urge the enactment of legislation to exempt gasoline used for nonhighway purposes from Federal taxation.

That is the end of the quotation from our policy resolution.

Our position relative to financing of highway construction stems primarily from our strong belief in the necessity of maintaining strong, independent, and responsible State and local governments, and our belief that the primary responsibility in this field can be appropriately and most efficiently undertaken by State governments.

We are for an expanded program of highway construction adequate for current and future needs of our growing population. The basis for our disagreement with respect to the Clay committee recommendations, and with other proposals to increase Federal participation in financing of highway programs, relates to the method of financing and the respective roles of State and Federal Governments.

It is our conviction that the tendency of the Federal Government to preempt sources of revenue and to expand Federal responsibility for functions that could be performed best by State governments represents a major threat to the maintenance of strong, independent, and responsible State and local government.

Unless the trend toward Federal preemption of tax income and the assumption of ever more comprehensive responsibility by the Federal Government is reversed, State governments are likely to become little more than administrative agencies for the Federal Government.

We are for the principle of States rights. The other side of the same coin is State responsibility. The two inevitably go together. States rights will not long survive the assumption by the Federal Government of responsibilities that can and should be undertaken by the States.

In each of recent years the total amount of money spent by all units of government for highway construction has reached a new peak. Total capital outlay was $2.3 billion in 1950 and $3.7 billion in 1954. In recent years we have seen some very impressive State highway construction programs which are making progress toward eliminating highway inadequacies. State governments have been assuming their responsibility for improving our highways.

In each of the next few years we can also anticipate a substantial increase in highway construction. State gasoline taxes are returning more revenue each year for highway construction. More Federal money will be available under the 1954 Federal-Aid Highway Act. The Clay committee has estimated, very conservatively we believe, that during the next 10 years the average expenditure for highway construction will average $4.7 billion per year based upon the current revenue program.

This committee will no doubt hear testimony to the effect that this steady increase in funds available for highway construction is not as significant as the figures would indicate because of the increased costs of labor and materials. These comparisons do not take into consideration the dramatic improvements in roadbuilding equipment and methods which have been developed in recent years. There is no reason to believe there will not be further progress in this direction in the years ahead.

The impact of technological progress in this field is indicated, as least in part, by the fact that highway construction costs as reflected by actual contracting have been declining during the past 2 years and are currently about 10 percent below costs at the beginning

of 1953.

The Clay committee proposes that we increase expenditures for highways during the next 10 years $54 billion above the anticipated level based on current financing programs, and that the Federal Government assume responsibility for about $25 billion of this increased expenditure.

The proposal that bonds be issued to finance the Federal portion of the expanded highway construction program represents, in our view, a highly questionable procedure. Dollars paid for interest on bonds do not build highways. The proposed finance procedures do not hide the fact that a gigantic spending program with borrowed money is involved. The fact that highway loans would not be included in the budget or charged as part of the National debt is fiscal fiction. The approval of any such proposal would remove a substantial share of annual Federal expenditures from congressional con

trol and review.

Senator GORE. Have you had an opportunity to examine the bill in order to answer questions as to the amount which might be removed. from Congressional control?

Mr. TRIGGS. I have not seen the new bill introduced yesterday, as I understand. I understand printed copies are not available. As I understand the proposal from press comments I think I can answer your question.

Senator GORE. If you have not had an opportunity to actually see the bill I will not ask you as to specific amount.

Mr. TRIGGS. The determined efforts of the Congress to accomplish a balanced budget would be rendered ineffective by the proposed program.

Senator KERR. May I ask at that point: Your conviction is that a balanced budget is more important either than an adequate system of highways or, as you said awhile ago, that the considerations of sound fiscal policies are more important for the Federal Government and more compelling than the reduction of deaths and injuries on the highways?

Mr. TRIGGS. Sir, we consider that the maintenance of a sound dollar is one of the imperatively necessary things that must be done in this country, and that this will result in the maximum welfare of all the people; that we jeopardize our free-enterprise system by chronic deficit financing, by discouraging thrift, and by discouraging private investment. We believe there is danger that we will do this. Senator KERR. And that is the primary consideration of your message here?

Mr. TRIGGS. It is a major factor: yes. Other ones, as I have indicated, are the derogation of State's right, responsibility, and authority, which are also involved.

Shall I continue?
Senator KERR. Yes.

Mr. TRIGGS. An expansion of Federal expenditures in this field. would create pressures to expand Federal appropriations for other purposes, thus deferring indefinitely any hope for balanced budgets or tax reductions. The continued spending of borrowed money by the Federal Government must inevitably, if experience is any teacher, result in a continuing decline in the value of the dollar

Senator KERR. You said that the last 2 years had seen continued spending of borrowed money by the Federal Government; did you not?

Mr. TRIGGS. No; I do not know that I made that comment. comment was that costs of highway construction have declined.

The

Senator KERR. That is what I thought. It seems to me that this statement is in conflict with your primary position.

Mr. TRIGGS. I do not think so, sir.

Senator KERR. You are aware that we had the largest peacetime deficit in the history of our country for the fiscal year ending June 30 last year; are you not?

Mr. TRIGGS. Yes, sir.

Senator KERR. And you are aware

Mr. TRIGGS. I am not sure it was the largest. I understand it is large.

Senator KERR. If there is any doubt in your mind about it you remove it and enlighten me; won't you?

Mr. TRIGGS. I was not questioning your statement, Senator. I just did not happen to know so I should not testify to that point.

Senator KERR. And you are aware that we are facing a substantial deficit this fiscal year?

Mr. TRIGGS. Yes, sir.

Senator KERR. And yet you said back over there that during that time the cost of construction of highways has gone down 10 percent. Mr. TRIGGS. Within an overall price level picture you can have departures from that general trend. We do have many departures. You can have the general price level going down.

Senator KERR. You are aware that the price of farm commodities is down about 25 percent: are you not?

Mr. TRIGGS. We certainly are, sir.

Senator KERR. Then it looks like at least momentarily the onset of what you have referred to as a basic and inviolate principle of economics, that the spending of borrowed money and running of a deficit. results in continued decline in the value of the dollar, is not applicable at this moment?

Mr. TRIGGS. This does not always happen during a short period, sir. Senator KERR. You are aware that for the 7 years prior to the 2 just passed, the Federal Government had an overall surplus in its fiscal position, are you not?

Mr. TRIGGS. A surplus?

Senator KERR. Yes.

Mr. TRIGGS. Are you speaking of the cash consolidated balance?

Senator KERR. I am talking about the cash consolidated balance, or the financial reports of the Treasury, that for a period of 7 years prior to the 2 just passed, that there was an overall surplus in the Federal Treasury.

Mr. TRIGGS. I did not know that this was a fact, Senator. I would not be surprised. I know that the cash consolidated budget has been much closer to balance than the budget itself, than the administrative budget.

Senator KERR. And that the reports figured on the same formula for the fiscal year ended last year and this year showed such a very substantial deficit, and yet you tell us the price of roadbuilding is down and you and I know the value of farm commodities is down, and, generally speaking, the dollar seems to be buying more at the same time deficit spending is increasing. How do you account for that?

Mr. TRIGGS. My purpose in raising the issue so far as the costs of construction were concerned was to indicate that there is a technological development here, together with other factors, that is affecting the cost of construction despite the increasing level of wages and of materials.

Senator KERR. If your basic premise that the spending of borrowed money must inevitably result in the continuing decline in the value of the dollar is found to be untenable and not substantiated by the facts, would you think the committee would be justified in disregarding your recommendation based on that premise?

Mr. TRIGGS. It is questionable. I certainly doubt that the committee would find this to be a fact.

Senator KERR. All we have to do is to examine your testimony. And it would seem to me that we would be convinced of it.

Mr. TRIGGS. The fact is, as you have pointed out, Senator, that during the past 7 years we have not had deficit financing in terms of the cash consolidated budget. Therefore, national fiscal policy has not had a great influence on changing the value of the dollar.

Senator KERR. But we have had deficit financing on that basis for the last 2 years. We have increased the debt limit; we have increased the national debt. That means that we have been spending borrowed money, does it not?

Mr. TRIGGS. We can spend some deficit borrowed money in relatively small amounts without

Senator KERR. Is the increase in the national debt of about $12 billion an insignificant amount?

Mr. TRIGGS. No. It is beginning to get into the significant realm. I do not want to leave the impression, either, that we are for balanced budgets under any and all circumstances. There are conditions under which we believe that it is sound public policy to engage in deficit spending, to apply some anti-inflationary factors to the economy. Senator KERR. Thank you very much.

Mr. TRIGGS. I left off at the top of page 4.

The continued spending of borrowed money by the Federal Government must inevitably, if experience is any teacher, result in a continuing decline in the value of the dollar; that is indirectly taxing those who can least afford being taxed, and jeopardizing the basis of our private competitive enterprise system by discouraging thrift and private investment.

Historically, the function of building roads and highways has been considered the primary function of State and local governments, with just enough Federal assistance to further the development of an integrated highway system. The Clay Committee proposal would put the Federal Government in the highway construction business on a major scale. We believe it would be unrealistic to assume that at the end of the 10-year period the Federal Government will cut its highway expenditures to present levels. On the contrary, it would appear to be more realistic to assume that at the end of the 10-year period, a new program, involving the expenditure of still more borrowed money, will be before the Congress.

In the long run "he who pays the piper calls the tune." Inevitably, as Federal expenditures for highway construction increase, the Federal Government will come to impose its objectives, its regulations, and its requirements upon the States, thus further diminishing the autonomy of State governments and encroaching upon the management of State fiscal and construction programs.

It may be argued that the States are unable to finance a program of the scope needed to bring our highways up to modern standards. We do not believe this argument is valid. The States obtain their revenues from the same taxpaying pockets as the Federal Government. Any fiscal problems of State governments stem primarily from the fact that the Federal Government is monopolizing sources of tax revenue. Each additional expenditure by the Federal Government increases the fiscal difficulties of State governments. Each time the Federal Government assumes a new or enlarged responsibility, this diminishes the ability of State governments to assume the responsibilities they should undertake. This is the process by which independent State government is gradually extinguished.

Despite the fiscal problems of State governments, it is nevertheless a fact that the financial picture of State governments is good, compared to that of the Federal Government. The most recent report of the Bureau of the Census with respect to State finances is for fiscal 1953. At the end of fiscal 1953 the total indebtedness of the 48 States was $7.8 billion, and State revenues in that year exceeded expenditures by $1.1 billion. On the other hand, the status of the Federal debt, the fact that the Federal budget has been in the black only 3 years out of the past 22, and that there is no immediate prospect that the situation will be changed, are all well known to you.

Not only will an expanded Federal program of highway construction reduce the participation of State governments in highway construction programs in the future————

Senator KERR. Are you not aware of the fact that the Clay report made very specific that they not only were not recommending a reduction in the amount of money to be spent by the States but that the basis of their program was that the States would spend no less in the future than they now spend?

Mr. TRIGGS. This is a hope. There is nothing in the bill itself to compel the States to do so.

Senator KERR. I thought you said you had not read the bill?

Mr. TRIGGS. I read the Clay report. That was a misstatement. There is nothing in the Clay Commission report that would compel the States to do so.