It is also notable that in carrying out these measures, the Federal Government customarily provided 80 percent of the cost, and in some instances 100 percent.

In various forms, direct rehabilitation assistance has been provided to the veterans of our wars on the principle that the damage to their careers caused by war service should be restored in part by direct payments from the Federal Treasury. Incidentally, about 10 percent of the beneficiaries of this bill will be veterans. Another analogy is the Philippine War Claims Act, by which private persons were indemnified for war damage.

It should be noted that if the full rehabilitation plan is adopted, including flood insurance, Federal aid in reconstruction would be a temporary measure even in the case of another disaster equal in destruction to the great flood.

First of the reasons for adopting the principle of helping 1951 flood sufferers achieve full productivity is the humanitarian one, which appeals with especial force to anyone who has seen the terrible devastation of the Kansas and Missouri Rivers. But that in itself would not be sufficient, perhaps, to warrant the appropriation here requested. There are compelling economic reasons, too. They may be summarized as follows:

1. While the grants to individuals may be considered large by those outside the flood area, the magnitude of the disaster is unprecedented. The damage is beyond the resources of the States and the communities, even if supplemented by the maximum of private charity from outside. Sober study of the problems confronting the people of the flood area shows that without some degree of what. H. R. 5259 calls partial indemnification, a large proportion of them never can get on their feet again, and even more could do so only after a long struggle in which their productivity, a part of the productivity which makes up our national strength, would be minimal. Therefore, it is to the national interest to aid their recovery. The Kansas Flood Advisory Committee puts it this way:

"The question might arise then as to why the people of a sovereign State would expect such assistance from their National Government. This disaster was one of national scope-and the Federal authorities in the Congress and elsewhere seem to agree that it is. The rains fell over several States without regard to State lines-the interstate streams and their tributaries crossed State boundaries without regard to state sovereignty * * *. No State or community of any State could cope with that sort of sudden blow with its own tax resources."

2. There is no such protection available for the victim of a flood as there is for the individual or business wiped out by storm or fire. Insurance can be bought by these latter; it is not written for floods. The risk has been so incalculable that the insurance companies, despite attempts in the past, have been unable to work out practicable policies. Millions of dollars were collected, for example, by thesufferers from last fall's big hurricane; flood victims collect nothing.

3. It will be well worth the money spent for the rest of the country to be able to get the products of this rich area. Many of the farmers, small-business men,. and home owners will be out of production next year, if not for years to come,. unless they get a grant. If they are not producing, it means less meat and cereals for the rest of us, fewer of the consumer goods produced here unless we divert other productive facilities to fill the gap, less income for those who live on the dividends and interest received from the flood area. This is how the cumulative effects of such a disaster are felt in remote places many months after the event.. 4. Changing times call for different methods of aid. In the 1937 flood, the Federal Government spent 7 percent of the total damage just for relief. Today, no such relief expenditures were necessary because the general economy locally and nationally is stronger. But production is needed now far more than it was then. Because the effects of destruction are felt in almost geometrical progres-sion, the costs of repairing the damage must rise in proportion. If 7 percent was justified in 1937, several times that much is justified now. The total direct aid provisions of this bill amount to less than 10 percent of the total property loss,. estimated at nearly $2 billion. It is sound economy to spend this money for productive purposes rather than emergency relief.

It may be argued that liberal loan provisions would make direct aid for recovery unnecessary. But even the easiest credit would be small use and nocomfort to the majority of the really seriously affected flood victims. Consider the case of the farmer, small-business man or home owner who has seen his entire property engulfed in the flood. If he is among the majority, he already has borrowed to build his house, buy or equip his farm, maintain his business. It does him no good to offer him another debt to pile on top of the old ones, unless he has some liquid capital to put under it as a foundation. One of the objectives:

of the direct assistance is to make him an acceptable credit risk, whether for a Government or a private loan.

Such help is not needed by the large corporations. In this connection, the different economic position of such companies as compared with small business and individual property owners should be noted, a difference which did not exist in the days of the previous disastrous floods. The large corporation has its risks spread over the entire country, writing off losses in the flood area against gains elsewhere. The little man has not such opportunity. Furthermore, many of the corporations are in a 72-percent tax bracket, so that they write off losses, with the Government in effect paying that percentage of the damage. It is almost as much as the direct aid proposed to the individual or small business. Furthermore, if one takes into account the changed conditions of American home owners, the program here outlined makes more sense than it might have done in 1937. Millions now have entered into the FHA-insured mortgage programs and other Government programs. The whole home credit structure depends upon the Government as it never did before. This is private capital insured by the Government. It is essential that this capital remain in the housing market. If private capital is discouraged, the blow to home owners will be felt all over the country.

Schedule of payments

The program here proposed is frankly discriminatory in that it is confined to those who cannot achieve economic recovery without direct financial assistance. Very large property owners who may have suffered losses 10 or even 100 times as large as the maximum aid proposed will not participate. As has neen noted above, these are able to finance their reconstruction from their own funds or from Government or commercial credit.

The maximum amount that will be paid to any one claimant would be $20,000. The maximum share of reconstruction expense borne by the Federal Government would be 80 percent, the same as the soil-conservation program. It is proposed that on the first $250 there would be no payment. This would seek to avoid a multiplicity of small claims difficult to handle, and for needy cases in this category, help can be obtained from private charity. After this deduction, 80 percent would be contributed to the first $10,000 of reconstruction, 60 percent on the next $10,000 and so on until the maximum of $20,000 is reached. It may be expressed in table form as follows:

These payments, it is believed, would enable the great majority of the flood victims to reestablish themselves, although not without sacrifice. It is admitted that the figures are fixed arbitrarily, but they were chosen because they provide the minimum basic assistance which is needed by 90 percent of those who are entitled to the Nation's help.

Limitations on indemnity

The purpose of this program is to restore the productivity of the region. Therefore, payments would be made neither on everything that had been lost in the flood nor to everyone who suffered losses, but only on that property which would be considered "productive plant." Strictly speaking, this is not an indemnity program, but a measure to restore productivity. Thus, farmers would receive payments (according to the schedule of discounts outlined above) to restore buildings, machinery, and the land itself, but not an indemnity for their growing crops or grain stored on the farm or personal effects. Businesses would be assisted in reconstruction or repair of buildings, machinery, fixtures, and the like, but not indemnified for inventory. Home owners would be paid to help them rebuild the house and replace utilities, but not for their furniture and clothing.

Also the bill restricts direct Federal reconstruction assistance to private property; there is no provision for financial aid of this kind in the case of any public property, State or local.

These limitations may be attacked as being too niggardly, just as the payments proposed may be considered by others as too generous. However, there are reasons for both which have appeared sound to those who devised the program. On the limitations to private property, as has been said, the purpose is to restore the productive plant. In the case of farmers, for example, it is the future production that the Nation needs; nothing can be done about the crops that are lost. The whole rehabilitation program is designed to help him get his land into crops for next year. Therefore, he needs assistance in getting a new house and buildings, new drainage ditches, new pumps, and other fixed machinery. He needs assistance in getting water drained from his land, sand and gravel removed, erosion checked. This will not recompense him for the loss of this year's crops, his furniture and clothing, and all the rest of his personal property. It would be pleasant to be able to do this, too, but it is not a necessity. The bill is confined to what in the opinion of those who helped to formulate its provisions are the necessities of the situation. What has been said of the farmer applies in much the same way to the home owner or the small business.

As for assisting States and municipalities, it was felt that the restoration of their property is the contribution they can make best to the rebuilding of the general economy of the region. As the President pointed out, it is desirable that the whole rehabilitation program should be carried out on the basis of joint participation by the Federal, State, and local governments. This is exemplified in joint road and education programs among others. However, some of the States would be prevented by their constitutional provisions from taking part in any program involving payments to individuals. Therefore, it might well be that they should bear their share of rehabilitation by putting their available resources into the restoration of public property.

Debt adjustment

It appears reasonable that creditors as well as debtors should share in the cost of the disaster. At the same time, creditors are entitled to a measure of protection. It should not be made possible, for example, for a man to collect an indemnity in cash and move halfway across the country leaving his debts behind him. It would seem fair, therefore, that debts on property which the Federal Government helps to rebuild should be compromised at a figure of 75 percent. In most cases, this is 75 percent more of their claim than many creditors now have any hope of collecting.

The language of the bill in this matter is permissive, not mandatory. Obviously it is not feasible for a Federal agency to force a creditor to accept less than the full value of his debt. Nor would it be just to penalize a debtor by withholding his indemnity because his creditor refuses to forego the full payments to which he is entitled. So far as the restoration of his property makes the debtor a better credit risk, the creditor has less incentive to compromise his claim. Nevertheless, it is believed that, rather than be forced to take over property so badly damaged that it is far from the value of the debt, most creditors would be prepared to compromise on the basis suggested. The alternative for them would be to put thousands of farmers, home owners, and small-business men through bankruptcy, and then collect far less than 75 percent.

Local redevelopment programs

Some of the flooded districts probably should not be built upon again. This applies most forcefully to certain residential building, since industry for the most part needs the facilities already existing along the rivers and some of the richest farms are in the bottom lands. But in some cities, whole streets on which there is no industry have not a single house that can be repaired at a lower cost than would be needed to build a new one on a different site. These streets lie in the path of the next high water. In fact, some of them were seriously threatened again in September. It would be the height of folly to spend Government money to help the owners rebuild a house that would be washed away in a year or two-or even later this year. These sites would make admirable parks and playgrounds. Even if inundated, the damage would not be great and they could easily be restored.

Obviously, no agency in Washington could determine which areas should be cleared of residential housing. In each community, local authorities would have to decide that point, calling upon the expert knowledge of Federal personnel where desirable. The decision to turn a given area into a park would be that of the community; it might not be able to finance the change, and in many of the flooded cities certainly could not. This bill permits the Federal Government to help in the acquisition of the property.

State and local participation

The desirability of this approach has been mentioned. It is not only a principle of our Federal system, but is especially appropriate in the flood area. The indemnity program calls for a high degree of community responsibility. That can be acquired best if the citizens have a stake in the program. The taxpayers in the rest of the country would obtain a measure of protection by knowing that groups responsible for spending the money are to some extent matching the Federal contribution.

A flexible schedule of participation is desirable. The share of any community should be based upon the amount of damage, the assets of the community as measured in tax rolls, property assessments, etc. It would be desirable if the persons entrusted with the administration of the program were left with authority to work out the degree of participation on this basis. As has been said, some States are barred by their constitutions from joining in payments to individuals. Their share would then be in the field of public property rehabilitation.

Many of the communities have been so hard hit by the flood that their tax revenues will shrink and their expenses rise. They cannot afford at this time to help their own citizens rebuild. The Federal Government might well advance their share on easy terms, to be paid as the community recovers.

It is suggested that wherever the principle of participation applies, the State or local share should not be less than 10 percent, rising by agreement where damage is less or resources are greater.

Breakdown of payments

It is estimated that the reconstruction costs to the Federal Government would be divided roughly as follows among the various categories of claimants:

Farmers, $55,000,000.-Of this sum, a total of $20,190,000 would be used by the Department of Agriculture to carry out programs in the flood area which are a part of its regular work but which will need that amount more than the departmental appropriation now provides. This sum would be allocated as follows: On-farm assistance, through financial aid and technical services, to restore conservation measures and productive capacity of individual farms.

Emergency restoration of channel capacity in tributary streams and waterways affecting more than individual farms, and related

measures.

Grants to farm families, unable to obtain loans for livestock, repair
or replacement of essential farm equipment, household furniture,
etc..

Direct guidance and assistance to affected farm families through the
Cooperative Agricultural Extension Service ___

$16, 300, 000

1, 960, 000

1,750, 000

180,000

The on-farm assistance would be tailored to the needs of the individual farm as established by the farmer in consultation with his local county committee of the Production and Marketing Administration. Generally it will not exceed 80 percent of the cash cost of the necessary work, and the Government's contribution is about 30 percent more than the assistance provided under the regular agricultural conservation program. Farmers will furnish all the necessary labor. The remainder of this allocation, $34,810,000, would provide indemnities for fences and buildings, fixed machinery and immovable equipment.

Home owners, $60,000,000.-This is calculated on the basis of estimated damage to urban and rural residential property. Reconstruction aid is likely to run to 80 percent of the total damage. It would be distributed among approximately 40,000 owners, very few of whom have any financial resources with which to rebuild.

Industrial and commercial, $75,000,000.-Since the bulk of the damage in this category was inflicted upon large property owners, many of them with millions of dollars of loss each, the number of claims for reconstruction help would be relatively small as compared to the farmers and home owners. It is estimated that 5,000 businesses would need help. Payments on the formula suggested, therefore, would amount to a little more than $15,000 each on the average. Administrative procedures and costs

"To administer the program," said the President in his August 20 message, speaking of the whole flood rehabilitation program, "I expect to establish a Flood Disaster Administration as a small policy and control body, with operating functions placed in existing Federal and State departments and agencies."

It is contemplated that this new agency would be within the framework of the Executive Office of the President. It would set over-all policies, allocate funds within the provisions of the law, assign operating functions to the appropriate existing agencies. It would include advisory committees appointed by the Administrator. In connection with the direct rehabilitation program, FDA's functions would be

To establish procedures for receipt, review, and adjudication of indemnification claims.

To set up a system of validations in the field to determine restoration costs of all property subject to indemnity.

To make arrangements for utilizing existing field organizations of other agencies or private concerns to receive and process indemnity applications.

To recommend arrangements for State and local participation, including loans to allow these State and local bodies to assume their part of the financial burden.

In working out the details in the field, responsibility for the direct rehabilitation measures on farms would be assigned to the Department of Agriculture. Its county committees of the Production and Marketing Administration would be able to handle applications. The Housing and Home Finance Agency, working with State and local groups, would have responsibility for the applications made by owners of residential property. The Reconstruction Finance Corporation would have responsibility for the claims of commercial and industrial property owners, again in cooperation with appropriate State and local groups.

Actual handling of applications and payment of claims might be worked out in cooperation with local banks. Final control of these programs, of course, would remain with the FDA.

The actual increase in Federal personnel would be small, requiring no significant percentage of the total funds appropriated for the program. In addition to the FDA, it would be necessary for the Federal agencies concerned with actual operations to add some temporary workers in the field. These and the staffs of the FDA would not be necessary after June 30, 1952, and in many cases would be dispensed with earlier. After that date, the liquidation of FDA's responsibilities could be assigned to permanent agencies of the Government.

Since the objective of the program is restoration, formulas for determining restoration costs of destroyed and damaged property will have to be established by the FDA and its advisory groups. In doing so, consideration will be given to such items as assessed valuation, present market value, normal depreciation and any compensation received by claimants from other sources.

The principle

II. THE LOAN PROGRAM

The wisdom of liberal loan provisions has been recognized by Congress in the establishment of the various Government lending agencies. The flood emergency calls for both an increase in the funds available and some flexibility of operations which would not be justified in the normal routine of these agencies. Congress already has recognized the justice of this latter point in authorizing 100 percent Federal Housing Administration insured mortgages in hardship cases. This might serve the purpose for our proposed residential lending program.

If owners are to obtain direct help in rebuilding, it might be asked why they would need easy credit, too. A little study of the loss figures shows that the cash forthcoming from the Government will far from meet today's replacement costs for the destroyed property. The owners in most cases must borrow the difference. All the agencies concerned will need additional funds and will have to revise some of their procedures. The RFC disaster funds, for example, are both limited and incapable of being used in participation with local commercial banks. Prudence dictates that every credit facility should be used. The resources of the commercial banks should be available in cooperation with the RFC or other Federal lending agency in this emergency.

Breakdown of loan funds

It is estimated that the $160,000,000 requested for this program-all of which will eventually be recovered by the Government-will be allocated as follows: Farm credit, $30,000,000.-This would be used for disaster loans to farmers who are unable to obtain credit from other sources for replacing or repairing their buildings, equipment, household furnishings, and replacing livestock, as well as providing essential operating expenses.

The Department of Agriculture's revolving fund under Public Law 38 had a balance of $13 million as of July 1. This, plus an anticipated collection of $19