Secretary MILLS. It might so result. In other words

Senator GORE (interposing). New York has one-tenth of the population in the United States. And it pays much more than one-tenth of the total taxes.

Senator BLAINE. But the States are going to pay all this money back.

Senator GORE. Yes, it is so stated. But you might just as well set that down in the Greek calendar.

Senator BLAINE. That is provided for in the bill.

Senator GORE. Oh, yes. My point is that if we pass this bill a State ceases to be a body politic and sovereign and becomes a department like the Departments of France. Now then, another point: This question of need is a question of fact. It would have to be determined on the basis of evidence as somebody's judgment. Isn't that true?

Secretary MILLS. That is absolutely true.

Senator GORE. And the question of resources is a question of fact that would have to be determined in accordance with the evidence by somebody's judgment.

Secretary MILLS. Yes.

Senator GORE. As a practical matter I do not think you can pass this bill through the Congress unless you base it on population. Senators are human beings too. They hesitate to vote for a bill that would permit any determination anywhere as against their State. Now, this population test is a fixed standard and everybody knows it. It is difficult for Senators to stand up against that pressure, to maintain perfect equality as to their States in the distribution of funds. Is it imaginable or is it to be assumed that any governor of any State would resist the pressure to ask for this money when the governors of other States are asking for it and receiving it?

Secretary MILLS. Why, it is inconceivable, Senator Gore. Every one of us who knows the real situation and the politics of the situation knows that when 5, 6, or 7 governors have applied, the pressure on the remaining governors is so irresistible that they would have to apply as well.

Senator GORE. This bill is drawn upon the thought of getting a part of the widow's mite.

Senator CoSTIGAN. Is this bill upon a sound standard, of taxpayer relief?

Secretary MILLS. I think you have one or two methods to employ: Either the Federal Government is going to administer this relief or else it has got to be willing to trust the State governments. I personally think that while we are doing an outrage to the most of the principles of the American form of government at one point or another, we might as well try to retain as much of them as we can, and if we are going to loan money to State governments, let us loan it to them and not have the Federal Government actually cross State lines and attempt to administer it.

Senator CoSTIGAN. Your bill imposes the obligation on the corporation of fixing certain conditions before the money is loaned. Secretary MILLS. That does not apply to the methods of relief. That applies to the financial terms.

Senator CoSTIGAN. It does not so apply.

125985-32-3

Secretary MILLS. No.

Senator COSTIGAN. Is there any reason why the States after borrowing the money should not appropriate the money to other objectives than relief of human misery?

Secretary MILLS. Oh, I think if a governor applied on the basis of need for relief of destitution and received funds for that purpose it is perfectly unthinkable that the funds would be expended for any other purpose. I can not believe that.

Senator CoSTIGAN. With reference to your suggestion that the States should be left uncontrolled in the distribution of the funds, do you intend by that suggestion to abandon the principle in the State aid act?

Secretary MILLS. I do not think this has anything to do with the State aid act. I think it is something brand new. We are not asking the States to match this. We are not setting up a standard by the Federal Government as a price for our assistance. We are simply saying this: Here is an emergency. It is conceivable that before the Congress meets again some State or some community might be faced with the situation where it could not take care of destitution. In response to that feeling and need of providing against that contingency we suggest that we create a fund of $300,000,000 so that the governor of the State can get that money and put it into the particular community affected and prevent that terrible situation. That is the theory back of this bill. Having adopted that principle we have simply sought to surround it with reasonable safeguards so that every State would not be compelled under probable pressure to come in and get this money whether it needed it or not. That is the only difference between Senator Wagner and myself. I think his bill is so set up that every State must come in. I think the suggested bill is so set up as to restrict that almost irresistible impulse. That is our real difference.

Senator COSTIGAN. My only purpose was to clarify your position. Secretary MILLS. And does that make it clear?

Senator CoSTIGAN. Yes, Is it not true, however, that all relief is based upon emergency conditions, and that it is desirable to maintain sound standards of administering relief.

So.

Secretary MILLS. It seems to me I think consistent with meeting the emergency it is desirable right along to maintain sound standards, as well as we can for the use of the public funds. After all we are but trustees. We are not dishing out our own money. are dishing out the people's money and in so doing we ought to surround it with every safeguard.

We

Senator COUZENS. There are two things I should like to ask: You spoke a while ago of spending the taxpayers' money. Is that quite accurate, or are we in fact using the taxpayers' credit?

Secretary MILLS. When you say his credit it means ultimately that you take his cash.

Senator CoUZENS. That is true. It is the Reconstruction Finance Corporation, is it not?

Secretary MILLS. Not to-day.

Senator COUZENS. If this money is to be loaned for the Reconstruction Finance Corporation

Secretary MILLS (interposing). I would not loan the money to them necessarily.

Senator COUZENS. I am talking about loaning it through them. Secretary MILLS. Oh, through them?

Senator COUZENS. Yes.

Secretary MILLS. Yes.

Senator COUZENS. You are lending it through them.

Secretary MILLS. Yes.

Senator COUZENS. You are not in fact using the taxpayers' money but his credit.

Secretary MILLS. Yes.

Senator COUZENS. It is the common belief that the Reconstruction Finance Corporation is a nonpolitical organization, is it not?

Secretary MILLS. Well, I will say that I have sat there I won't say every day because I have not been able to be there every day. But I have been there a good part of the time, and I haven't detected one bit of evidence of politics in the decisions of that board, on either side. And I have been in politics for twenty years and I qualify as an expert. [Laughter.]

Senator COUZENS. I think I can say also that I have sat in many committees of this Congress in which there has been no more politics than in the Reconstruction Finance Corporation.

Secretary MILLS. Well, you have not had as good an opportunity to observe that body as I have. That is a bipartisan body. Neither Republican nor Democrat on that board have I seen play either partisan politics or personal politics.

Senator COUZENS. Of course the Secretary knows just as well as anybody else that politics are played outside the regular meetings. I do not admit that the board of the Reconstruction Finance Corporation is any more free from politics than this committee.

Secretary MILLS. It is not free from political pressure, but that is very different from yielding to that pressure. And I certainly have not seen any evidence whatever of any yielding.

Senator CoUZENS. Of course not. You do not have to see it if you do not want to.

Secretary MILLS. Well, I have no incentive not to see, and I can say with complete frankness that no one has attempted to bring political pressure to bear upon me, and I have not been visited by distinguished members of the Senate or the House of Representatives or outsiders with a view to making loans.

Senator COUZENS. And I am not charging that.

Secretary MILLS. And if that has happened to other members, I certainly know nothing about it. All I know is that this is the system adopted. Committees have been set up in different cities and in different districts that are quite competent committees and with competent chairmen. Recommendations come up with the approval of a committee. It then goes to the examiners' committee, and I hope they are caged in so that no one can get at them. Then if an application passes the examiners' committee, it goes to a review committee, and then if it passes them it comes up to the board. If you can tell me after all these checks how anyone is going to come in. and exercise political influence in the granting of loans, I do not know. And I have not any evidence from anywhere of such a thing. I do not say that a man from a particular section of the country,, who sees great distress in his section and who knows the consequences of that situation, who feels that the failure of a great institution

with many ramifications will bring distress to the particular section of the United States from which he comes, hasn't a greater interest, perhaps, than I might have if I did not come from there. But that is not politics, Senator Couzens.

Senator COUZENS. Very well; but I want to make plain that I did not bring the subject of politics into this question at all.

Secretary MILLS. I thought that was your question and that I was replying to it when I said the Reconstruction Finance Corporation was free from politics.

Senator COUZENS. Well, I want to say that I do not think that it is any more free from politics than other bodies. And I want to say this, that I did not bring this question of politics into this hearing. the Secretary himself stated that all these State applications or State requests would be subject to political pressure, and that the decisions would be based upon the matter of politics.

Secretary MILLS. Oh, Senator Couzens, I did not mean politics in the narrow sense. I did not mean politics in the sense that we ordinarily use the term of party politics or personal ambitions or running for reelection. I meant that public pressure would come from the people of the States who would ask: "If State XYZ is getting Federal grants, why should we pay taxes to relieve our unemployed? Let us get it from the Federal Government." That is the kind of pressure that would be put on a governor. That is what I want to protect him against.

Senator COUZENS. That was why I wanted to get your definition of politics. I did not inject the word "politics" into this discussion. Secretary MILLS. Well, I was not using the word "politics" in the

narrow sense.

Senator FLETCHER. I understand, of course, the main problem we are all after is to find employment for people who want employment. That is one of the things. Now, your objection to this public building program, public works program, is that it won't employ enough people to justify the appropriation.

Secretary MILLS. Exactly. And, on the other hand, by unbalancing the Budget, it will undo a great deal of the hard work you gentlemen have accomplished.

Senator FLETCHER. What plan have you to take its place? These public-works propositions are all authorized by the Congress, being passed upon by committees and favorably reported showing that the work ought to go on when we adopt projects. Why not go on with that work even if it only gives 53,000 people employment?

Secretary MILLS. Because you unbalance this Budget by at least $300,000,000.

Senator WAGNER. And that is what I can not understand, Mr. Secretary.

Senator GLASS. May I ask this question. Your proposed substitute to the Wagner bill, so called, does not seem to be available. Secretary MILLS. Here it is.

Senator GLASS. I recall in the course of your remarks you stated that the Federal authority should require that applying States have first exhausted all their own resources before they could get any of this aid. Would or would not that involve the duty upon the Reconstruction Finance Corporation to inquire as to the State having exhausted its indebtedness, and also its rate of taxation, and would

it not ultimately determine whether or not that State should impose additional taxes upon the people of the State before they could get any relief under your plan?

Secretary MILLS. Yes, if you wanted to push the test to the extreme limit. But I do not contemplate going into such great detail as that. I do not think it would work that way. You have to assume that a man will do business on a reasonable basis in such an emergency. You would have to assume that we would sit across the table with the governor of a State, as we have sat across the table with Representatives from every section of the country and would deal with the situation perfectly frankly. To me it is not a bit a troublesome question. A man with a reasonable knowledge of Government and the needs and resources of a State could determine very readily whether they actually needed to come around and ask, or whether it was an attempt to shift a burden. It wouldn't bother me personally at all. I am assuming that you are dealing with it on a reasonable basis. I can see a lot of lawyers and legalists sitting around a table and saying: "We have got to take the resources of each county, and the rate of taxation, and the wealth of the State, and so on." If you were to push it that hard it would become ridiculous, of course.

Senator GLASS. I relied on either the text of your bill or your remarks, in which you stated that a State must first have exhausted its ability to take care of its own people, that they ought to use all of their own resources before they receive this assistance.

Secretary MILLS. Take a State where you say the legislature would not meet for four years. There it would clearly, unless it could call the legislature into session at once, have exhausted its resources. There if it had in its constitution an absolute prohibition against borrowing for this purpose, they would have exhausted its resourcse because you could not necessarily compel the State to amend its constitution, and under those circumstances you would loan under section (b) and expect to reimburse the Federal Government from ultimate state-aid payments. I am assuming that the law will be administered by reasonable men, because I do not know of any government that will function if it is not administered by reasonable

men.

Senator GLASS. Well, I would want to know whether they would reason my way or not as to whether it was reasonable. And I suppose other people would want to know the same thing. Take my own State, and as I recall they have as a public indebtedness, $22,000,000. I should think under your bill it would be the function if not the absolute duty of the Reconstruction Finance Corporation to inquire as to the indebtedness of the State, as to its rate of taxation, and as to the reasonableness of requiring that State to impose special taxes in order to take care of its indigent rather than to get any part of this fund.

Secretary MILLS. I do not think we ought to tell them whether they ought to impose a tax or whether they ought to borrow. That is their business. But we ought to be able to determine whether they have actually done anything or are prepared to do anything about it, or whether they are simply lying down in applying to the Federal Government. I still believe in the doctrine of State sovereignty. I still believe in the federal form of government. I still