include land values. Secondly, the present requirement for the prior approval by city councils of the applications for public housing before they ever come to Washington.

Mr. Davern, in one terse word, gave his reason as being integration. I wonder if you would make, at least, a brief comment on those three reasons by quite different sources as to why we do not have applications for public housing and whether anything feasible can be done about it.

Mr. NATHAN. Unfortunately, on the third point, in our society we still fail to practice in full measure democratic principles and the rights of equality of all citizens.

Senator CLARK. I hasten to point out he said this was more of a problem in the North than it was in the South.

Mr. NATHAN. Yes, quite true. We have made very little progress toward solving this problem and making the goal of open occupancy housing a reality. Untill there is a very aggressive and positive leadership at the Federal level in terms of the whole problem of civil rights, I suspect we will continue to have blockages in the various communities. Take the District of Columbia: If, at the present time, we had a determination to move ahead here by local government, I suspect there would be tremendous conflict on this particlar issue.

I believe that we all need very positively to seek to bring about the understanding the public attitude and the environment which will permit us to have open occupancy in a very effective way. But there is still tremendous prejudice which blocks it.

With respect to the other procedures, of course, the cost of land has risen very substantially, and I think that an agency can set a price or value limit which, in relation to existing circumstances, can preclude any project from going forward. One could do this even in terms of the techniques, of valuation of Federal mortgage guarantee provisions. If one were to set ratios as a relationship to values which precluded the possibility of making loans, you could literally dry up the whole guarantee situation.

I myself feel, Senator Clark, that at the present time, there is in the national administration an antagonism toward public housing which precludes the possibility of getting sufficient applications and having them processed.

Senator CLARK. I think this is true, but I am beginning to suspect that there is not the educational effort being made at the local level to bombard the national agency with applications which would justify the Congress in increasing the authorization.

Mr. NATHAN. I think that is quite true. Undoubtedly subjects such as these before this committee for consideration bring very little response from the public. Of course, you have local political-sociological problems, too, in the sense that in many communities there is a great concern about slums and a great concern about the horrible circumstances under which some people live. But, then, there are others who do not see very well beyond the immediate days ahead and are concerned about low-cost housing being built elsewhere than in the existing slum areas. They somehow do not associate the horrible substandard housing of the present low-income families with the improvement that would occur by building low-cost housing. Their

desire for slum clearance is offset by the fact that they do not like to see this low-cost housing constructed in their own neighborhoods. They would prefer to see high-priced and very beautiful structures.

Senator CLARK. Mayor Dilworth pointed out almost everybody is in favor of public housing as long as it does not move in next door to them.

Mr. NATHAN. That is the real problem, and I do think, Senator Clark, we do have a real educational job to do. Basically, we do feel very strongly effort must be made to reinstate the public housing program at a higher level.

With respect to an issue that has already been discussed here this morning-lower middle income housing-we strongly support your bill, Senator Clark. Some very positive, unusual, distinctive measures will have to be enacted in an effort to reduce the carrying charges for the lower and middle-income families if we are going to provide housing for them.

Senator CLARK. Do you have any expertise with respect to the New York experiment on which Senator Javits' bill and mine is based? The Senator felt this has been quite a success up there. Do you have any information on that?

Mr. NATHAN. No, unfortunately, Senator Clark. I have not studied the New York experiment, but I do feel very strongly that what is at issue here, in essence, is some kind of mechanism which will make available funds at lower interest charges to certain income categories. As I say in the statement here, if this entails a subsidy, then we must have a subsidy.

Fundamentally, we are not going to get the housing for low-income and low-middle-income groups without some kind of a special effort on the part of the public, and this comes back to this interest rate problem. If we are going to allow housing to compete in the money market openly and directly with all other demands, then, I believe that we will not fulfill our housing objectives.

In a sense, this problem was recognized historically when the whole housing program was initiated. What are FHA and FNMA and other procedures, organizations, and techniques except mechanisms designed to provide some kind of a benefit, or added protection to the housing market in its access to the money market? I feel that high interest rates and the tight money policy had had many adverse consequences, and I think we have had high interest rates without price stability.

There are many, many measures that the Federal Reserve could have undertaken and many policies by which debt management by the Treasury could have been far improved. But, basically, I do think the fundamental problem relates to the need to provide some kind of special protection or special assistance, for the housing area in order to insulate it from these extreme fluctuations in interest rates and in some degree, from the tight money policy, in order to have adequate housing.

Senator CLARK. You are going to have to let education in under the tent, are you not?

Mr. NATHAN. I think that housing, by no means, is the only situation. I would include housing and education, and health, too. Fundamentally, in our society, we all believe in a free enterprise system,

and I certainly do. But there are deviations. For instance, one system of progressive taxation itself assesses taxes on the basis of ability to pay. Public education, schools, are another deviation from allowing certain services to be provided on a purely competitive basis. Senator CLARK. Hospitals.

Mr. NATHAN. That is right, and I think there are certain essential areas where one must deviate in some measure from allowing the open competitive market to determine where our resources flow. Basically, I would urge that we ought to now taken even more

Senator CLARK. Let me interrupt you to highlight that. I wish you would say that again because I thought that sentence really summed it up better than any I have heard. Please say it again.

Mr. NATHAN. Basically, what I am saying is that in order to get the allocation of our tremendous resources to certain very essential services such as health, education, and housing, it is necessary for the Government to take certain steps to insulate them from the harsh realities of the competitive money and resource market.

Senator CLARK. And to give them a priority.

Mr. NATHAN. Give them some order of priority or some sort of a differential which then permits them to compete.

Senator CLARK. This is even more important than the problems of more consumer goods, is it not?

Mr. NATHAN. Of course, I think, frankly, Senator Clark, we can increase our production quite substantially in the aggregate. Many of us who are very much concerned about economic growth are distressed by our rate of growth in recent years. I myself, for instance, find it very distressing to realize that in the 1952-53 boom, we had an average unemployment of about 134 million. In the 1956-57 prosperity, we had an average unemployment of 234 million. In the peak of the present prosperity, it looks as though we are going to have something like 32 million or maybe even more average unemploy

ment.

By the way, one can take a look at the studies of idle plant capacity in a fairly conservative publishing organization such as the McGraw Hill's in Business Week. We have fantastic idle plant capacity in the steel industry. Today, steel is a 70-percent operation; 30 percent of productive capacity is literally going down the drain. Automobile production has tremendous idle capacity. There are many areas that we can step up, I am convinced, by a constructive, positive, economic program; not by Government ownership and regimentation, but by a more vigorous and dynamic fiscal monetary credit policy on the part of Government. If we do we will have more production of consumer goods as well as housing and capital formation.

Senator CLARK. In all this, the Federal Government must take the lead, must it not?

Mr. NATHAN. There is no doubt the Federal Government must take the lead. This does not mean Federal Government ownership or Federal Government production. In the housing area, we do not need Federal Government to build. What we need, and I think the only argument is about degree, are instruments, mechanisms, procedures, and assistance, which will make possible the kind of private functioning in these areas which will achieve the objectives we seek.

Senator CLARK. It is pretty clear to you, it is not, that the resources of the cities and States are inadequate to meet this challenge? Mr. NATHAN. This is a problem I mentioned briefly in my testimony, too, Senator Clark. Most cities and States get their revenues from sales and property taxes. Sales and property taxes fall very heavily on the low-income groups, and they are not responsive to a growing economy. When prosperity comes and business rises and the national income increases, our Federal revenue rises disproportionately more than the increase in national income percentagewise, but State and local revenue do not.

These are very sluggish in their response, and I feel that while one cannot rely on States and local governments, even if you help them fiscally to do the full job, nevertheless, we ought to try to do something to help them raise the revenues. I testified before the House Ways and Means Committee recently and made a proposal which I hope will be seriously considered and which I think makes a great deal of sense. That is to allow a credit against the Federal income tax for State income taxes. This would not be a deduction, but a credit. It would not be an unlimited credit because, then, the States could take away all the Federal revenue. It would allow a credit against the Federal income tax for State or local income taxes, up to a certain amount per taxpayer or a certain percentage of his Federal

revenue.

I think this would do a great deal to help give to States and localities the opportunities to grab some of this revenue which is based on ability to pay and is responsive to boom and bust. This would give them more revenue to do the kind of job they need to do in health, housing, and education.

This, Mr. Chairman, and members of the committee, pretty well covers the general statements we wanted to make. I did not want to go into the specifics of any of the bills, but rather magnitude of the need, the fact we have the capacity to do the job, and I think with a considerable amount of added imagination and effort in the fiscal area of taxation and especially in the credit area, we can achieve the goals which this committee set and, I think, the higher goals which need to be set.

Senator SPARKMAN. Thank you very much. We always are glad to have you.

Mr. NATHAN. Thank you for the opportunity.

(The prepared statement of Robert R. Nathan follows:)

STATEMENT OF ROBERT R. NATHAN, VICE CHAIRMAN, AMERICANS FOR DEMOCRATIC

ACTION

Mr. Chairman and members of the subcommittee, my name is Robert R. Nathan and I appear today on behalf of ADA, as vice chairman of that organization. I appreciate the opportunity to testify before your subcommittee to present ADA's views on housing and urban renewal.

From its inception, ADA has been deeply concerned with the problems of housing and urban development. Our concern has deepened as the problems have become more acute: the population has grown, the existing housing supply has deteriorated, the slums have spread. We seem to make no progress toward fulfilling the goals set by Congress itself.

You have had the benefit of considerable testimony from individuals and organizations who have concerned themselves specifically with housing problems for many years. We would associate ourselves in most instances with the specific proposals of the spokesmen for the National Housing Conference. Rather

than repeat many of the particular recommendations included in that testimony, I would like to deal more generally with the very serious problems facing the country in this crucial area.

No serious-minded and responsible leader or citizen can help but conclude that measured against our tremendous production resources, we are failing, by a substantial margin, to meet the needs for decent housing of our people. We glory in having reached a gross national product of $500 billion. True, prices have risen and $500 billion worth of goods and services in present-day dollars is substantially less than 500 billion in 1950 or 1940 dollars. Nonetheless, the level of actual output on a total and a per capita basis is certainly high enough not only to justify but absolutely to require that we take major steps to eliminate our slums, to replace all substandard housing and to formulate a program which will assure decent housing for our rapidly growing population.

Individuals with foresight have been talking for many years about the need for 2 million new housing units annually. This level was tossed aside as visionary by some, but the blatant facts now clearly demonstrate that we need at least-and I emphasize at least-2 million housing units a year if we are going to use our resources intelligently and constructively in relation both to our capacity to produce and to the needs of our population.

There will be some 30 to 40 million more people in the United States 10 years from now. We need over a million units a year for the net addition in families. Beyond that, we need at least a million units a year if we are to replace less than 2 percent per year of our existing housing facilities. Such a rate of replacement assumes an average utilization of housing of 50 years. In terms of our present productive capacity, we ought to envisage a program based on a 50year life of housing units. Actually, this would not be achieved because there are so many millions of truly substandard units today that we could not possibly replace all of these and most houses over 50 years old.

I emphasize these figures principally because of the fact that we have never truly established realistic goals. These goals are desperately needed if we are going to have a program which is both ambitious and feasible. The time is long past due for candidly assessing the values of decent housing against those of the added gadgets and luxuries which our growing productivity has brought for a limited but growing proportion of our population. Almost every study dealing with sociological problems today emphasizes the fact that decent housing is an essential prerequisite to orderly, and peaceful, and healthful existence.

The old principle of "trickle-down" of course does have some meaningful application in the area of housing. As families move up in the income scale and are financially able to afford higher priced housing, facilities are made available for those at lower income levels to improve their living arrangements. However, it has been demonstrated convincingly that for practically all of our citizens in the truly low income category and for most of those in the lower middle income category, this trickle-down approach is hopelessly inappropriate. It cannot possibly serve to meet the needs of these millions of families.

provide adequate What is most rebeen so seriously Unless and until

The principle of Government participation in seeking to housing for our people has been established for many years. grettable is the fact that the application of this principle has lacking in imagination, in magnitude, and in implementation. realistic goals are set and sufficient appropriations are made available, we will continue to have slums and we will continue to suffer all of the consequences— social, political, and economic-which derive from widespread substandard housing.

The

In essence what we need is a much enlarged public housing program. proposal in S. 3509 to reinstate the low-cost public housing authorization of the 1949 act is the bare minimum which this committee and this Congress should legislate. The public housing program ought to be geared to needs not to some predetermined budgetary limitation which bears no realistic relationship to what our capacity to produce can support.

Public housing of course is by no means the only answer. This program is geared only to those at the really low income levels; we need new approaches for those in the low-middle income levels who are not served by public housing or by private builders. For this reason, we strongly urge your favorable consideration of S. 1342, introduced by Senators Javits and Clark. Unless low interest rate financing is available for these families, we will never make significant progress toward providing them with the housing which our economy can well afford.