to which I have already referred in another connection, contemplate that residential and commercial structures should preempt an estimated 39.9 percent of total fixed investment, coming up close to the 1961 ratio, but running very far above the critically depressed 1968 ratio. Looking at these ratios in conjunction with my later data reveals (1) how disparately little Federal help these types of activities have been receiving, by way of tax and subsidy assistance, relative to their magnitude and vital importance, and (2) the basic goals set are incompatible with adverse treatment of housing and real estate at this time. Achievement of these goals involves stimulation of practically all types of housing. The entire housing market and supply (with perhaps some exceptions at the top of the luxury market) is a seamless web. Construction of almost any type of housing adds to the supply and reduces the shortage. Construction of any type of housing helps to meet the great problem of housing's contribution to needed economic growth and employment in future. Construction of housing for middle-income groups exerts some upward shifting of housing use, and thereby reduces the pressures upon occupancy of unsatisfactory housing, as well as ameliorating somewhat the need for the construction of low-cost, lowrent housing, which involves the largest public costs. In addition, it is most unrealistic and damaging to draw a sharp dividing line between housing and other forms of commercial construction or investment in real estate. Cities are not made up of houses alone. Urban deterioration is not limited to housing. Community facilities, stores, quarters for the occupancy of those rendering professional services, and even some aspects of industrial construction in urban areas, are intimately connected with the solution of the housing problem. They are intimately connected with employment opportunity. Many of these facilities and services are incorporated in the same structures as the housing units. Moreover, if we are to develop the large-scale ventures which are essential to successful urban renewal, we need increasingly, and on an enormous scale, to promote the entry of large-scale enterprises who combine housing ventures with the other types of ventures which I have mentioned. Similarly, there is little or no merit in the argument that, if real estate investment other than housing is further curbed, there will be more investment funds available for housing, and especially low-cost low-rent housing. In the first place, the funds now going into these other aspects of real estate investment are too small, not too large, and this even works against adequate housing development. In the second place, even if funds were turned away from these nonhousing forms of investment, they would not go in large measure into housing, and certainly not into low-rent low-cost housing, but rather into less urgent forms of investment. ROLE OF HOUSING IN FULL EMPLOYMENT AND FULL PRODUCTION Adequate stimulation of housing and related urban commercial construction is also of central importance to the whole problem of employment and investment opportunity in the years ahead, as technological trends affect relative employment opportunities in various sectors. Chart 6 carries only through 1966 an analysis of this problem, and I have not had time since receiving your invitation to bring it further up-to-date. Even so, using the period 1947-1949 as a base where the ratio of employment to production is regarded as 100, and then comparing 1966 with 1947, the ratio dropped from 106.8 to 38.8 in agriculture; from 102.9 to 52.9 in all manufacturing; from 99.7 to 62.6 in iron and steel; from 108.3 to 54.3 in motor vehicles and other transportation and equipment; and from 96.6 to 43.4 on the railroads. These trends have been continuing, or even accelerating, since 1966, and they will not abate in the future. Chart 7 is highly significant, even though I have not redeveloped it since 1967. Within the perspective of my balanced model for economic and social development, the chart indicated tremendously different goals for increases in civilian employment from 1967 to 1970. These goals range from increases of 67.5 percent in contract construction (reflecting our tremendous needs for housing and urban development), 36.7 percent in government at all levels (reflecting the fact that, due to technological trends, the net increase in employment during recent years has been in this area, and reflecting also the great increasing need for public services), and 33.3 percent in the services generally, to only 12.1 percent in manufacturing, and only 10.7 percent in wholesale and retail trade. Agricultural employment is trended downward at 13.5 percent. CHART 6 RATIO OF VOLUME OF EMPLOYMENT TO PHYSICAL VOLUME OF PRODUCTION (1947-1949 Ratio of Employment to Production = 100) Chart 8, consistently with the previous chart, portrays goals for changes in the distribution of employment from 1967 to 1977. To illustrate, employment in contract construction is budgeted to rise from 5.1 percent to 7.0 percent of the total, in government from 15.3 percent to 17.2 percent, and in the services generally from 15.3 percent to 16.8 percent, while employment in manufacturing is budgeted to decline from 25.2 percent to 23.4 percent, and in wholesale and retail trade from 20.2 percent to 18.5 percent. I must emphasize with all the force at my command that these projections of mine are not mere forecasts, based upon past trends. They are goals for balanced economic development and for meeting priority needs. Past trends cannot be accepted in full; they must be modified greatly by positive policies. Under these conditions and in accord with these goals, if the huge increases in employment we need are not to come in the form of building pyramids and leaf-raking, they must come very largely in immense increases in those types of goods and services where the unmet needs of the country are so immense that the expansion of output in such sectors can and should far exceed the rate of technological progress. Among these lines of endeavor, housing and related aspects of urban construction have the highest priority in the employment-opportunity context. I estimate that, in the decade ahead, housing and related aspects of urban construction should bear the task of absorbing almost half of those displaced by technological trends in other sectors. NATIONAL POLICIES HAVE SLIGHTED HOUSING AND RELATED URBAN CONSTRUCTION Despite the urgency of these goals for housing and related aspects of urban construction, and despite congressional and other declarations of intent to double the annual rate of housing and construction in the years ahead, national policy has moved in diametricaly the opposite direction. Appropriations have not been made in magnitudes in any way compatible with these brave goals. The policy of tight money and rising interest rates, as I have already indicated, has had devastating effects, and I will deal with this policy in more detail later in my testimony. The recent so-called tax reform legislation, while it did much to hand out bounties to those not in need of them, dealt with depreciation and related problems in ways which placed further restraints upon the stricken industries of housing and related urban construction. Further, even before this tax legislation was enacted, housing and related urban construction were being seriously shared out and discriminated against in the allocation of Federal assistance. Chart 9 shows the value of depreciation and depletion, in dollar terms, as expressed in corporate income tax rates. In 1966-and the choice of any other year would yield practically the same results-the total value of depreciation and depletion allowances so expressed was $43.1 billion. Of this value, 45.7 percent related to manufacturing; 22.5 percent to transportation, communication, and electrical, gas, and sanitary services; 7.9 percent to wholesale trade; 7.2 percent to the service industries; and only 5.8 percent or $2.5 billion to real estate. Taking into account also that these data relate to all depreciation and depletion, and not merely to that portion affected by special concessions or allowances, it must be manifest that the absolute and relative size of any recoupments the Government may achieve through the recent depreciation allowances in the case of real estate will be picayune relative to the damage done. Chart 10 portrays the dollar value of Federal subsidies, as distinguished from tax concessions. For the fiscal years 1964-1969 inclusive, the average annual cost of the specified key subsidy program of the Federal Government came to $6.7 billion. Of these 57.7 percent went to agriculture; 12.7 percent to health, education, welfare, and labor; 10.5 percent to air transportation; 8.9 percent to maritime; 7.3 percent to nonspecified categories; and only 2.9 percent to housing. In the fiscal year 1969, with the total subsidy figures estimated at $8.2 billion, only 6.8 percent went to housing. Even in this year, the allocation to housing was strikingly small. Chart 11 should dispose of any erroneous notion that the real estate industry is "in clover," and should help to dispel the idea that the desire to take action against the relatively few who have been getting away with tax-avoidance excesses should have been translated into 1969 tax action which hurt and penalized the industry as a whole, as it labored already under the tremendous burden of rising interest costs and other disadvantages which I have already depicted, |