United States. Congress. Senate. Special Committee.

Post-war economic policy and planning. Joint hearings before the special committees on post-war economic policy and planning, Congress of the United States, Seventy-eighth Congress, second session, pursuant to S. Res. 102 and H. Res. 408, resolutions creating special committees on post-war economic (unit 6) online

. (page 24 of 49)
Online LibraryUnited States. Congress. Senate. Special CommitteePost-war economic policy and planning. Joint hearings before the special committees on post-war economic policy and planning, Congress of the United States, Seventy-eighth Congress, second session, pursuant to S. Res. 102 and H. Res. 408, resolutions creating special committees on post-war economic (unit 6) → online text (page 24 of 49)
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Mr. Palmer. I am Edward P. Palmer, chairman of the construction
and civic development department committee, Chamber of Commerce
of the United States. I am an elected director of the chamber alid
appointed to the chairmanship of this committee by the president of
the chamber.

The CoeAiRMAX. What is your business?

Mr. Palmer. My business is that of a construction contractor in
New York City.

The Chairman. You have a prepared statement, do you?

Mr. Palmer. I have a prepared statement ; yes.

The construction and civic development departm'ent committee, of
which I am chairman, is one of nine department committees of the
Chamber of Commerce of the United States which are broadly repre-
sentative of major fields of business interests.

The Chamber of Commerce of the United States is a federation of
businessmen's orfjanizations, including both trade associations and
chambers of commerce. It has niore than 2,000 orp:anization members.
These organizations have an underlying- membership of 761,000.

The construction and civic development department committee of
the national chamber is composed of representative men from the
major fields of construction — designing, contracting, and building,
manufacture and distribution of materials and equipment, mortgage
finance and real estate.

Through the deliberations and recommendations of this committee,
the construction industry has been able in recent years to develop con-
structive leadership in working out solutions to the problems which
affect the common interest of professional and business interests in this

In considering the part of construction in our national economy, it
is important to keep in mind that privately financed construction has
heretofore made up the larger part of our construction activity. In
the twenties, when total new construction ran to an annual volume
of 10 billion or more, privately financed construction made up two-
thirds of more of that volume. Publicly financed construction, com-
monly known as public woi'ks. made u]j the other third or less.

Public works, so defined, included all construction financed by Fed-
eral, State, county, and municipal funds. This relationship changed
during the early depressions years but, by the latter part of the
thirties, privately financed construction still accounted for 60 percent
of the total.

Important as the contribution of public works has been and will be
to the industry, and hence to the national economy, it is evident that
measures to encourage privately financed construction are even more
important to any forward-looking ]:)ublic policy having to do with
this industry. Recommendations in this regard are included later in
this presentation.


NoAv, what are the reasonable expectations as to construction's part
in our postwar economy ?

It appears that permanently, that is to say after the urjjent work
necessarily postponed durin<? the war has been done, we should not
count upon tlie industry to provide more than 10 to 15 percent of the
total national income and em]:)]oyment. Traditionally, this means
public work at ^y^ to 5 percent of the total national income and employ-
ment. There is a dancrer that ex])ansion beyond the limits mentioned
will lead to pyramid buildin<>: for which older civilizations have been
so universally condemned. Obviously, we must look beyond construc-
tion for the ^reat bulk of postwar employment.

What I wnll now present to you are the recommendations of the
national chamber's construction and civic development department
committee with respect to the handling- of public works, and their
relation to the rest of construction.

While these proposals are in general accord with present chamber
policies in this field, it is our intention to present them in the near
future to the chamber's organization membeis for their further consid-
eration and action.

The recommendations have been grouped under seven headings, as
follows :

1. Responsibilities of Federal, State, and local governments.

2. Achieving State and local government liscal Independence.

3. Improving pnblic-works appropriation and other procedures.

4. Obtaining economy in public-works construction.

5. Ailvance planning of needed public works.

6. Measuring construction activity.

7. Revising Federal tax policies to stimulate private construction.

1. Responsibilities of Federal, State, and local governments. —
Traditionally we have financed our public works through the tax
power of that government agency administering the completed project.
But, as a result of various stresses and pressures, we have lately modi-
fied this traditional rule in two directions. Local government juris-
dictions have tended to look more to State governments for assistance
in financing their public works. States and localities have tended to
look more to the Federal Government for aid.

We have drifted so far in these directions that it is time to take
our bearings. This is especially true of Federal aid to State and local

We should improve our procedures for determining what public
works we need and can afford. In that connection, we need to estab-
lish rules defining which government level should finance each of the
various classes of public works essential to an active economy. It is
as necessary for the States and communities to agree to these rules as
it is for the Federal Government.

To take our bearings we must have some guiding principle. This
should be based on our traditional practice.

It is suggested, therefore, that we accept this basic principle :

The Federal Government will finance only those public works Avhich
lie within its jurisdiction or fields of direct responsibility. All other
public works will be financed by State and local governments.

I recognize that there is nothing absolute about this principle. Ma-
chinery for impartial and careful ascertainment of the facts will be
necessary to make it workable. What constitutes the responsibility


of. the Federal Government and the responsibility of the States and
localities is a relative matter and can be resolved only in the light of

Congress shonld have at its disposal objective analyses before it
embarks upon any public-works grant-in-aid program. The only
way a democratic society can prevent the settlement of important is-
sues by pressure groups or through just plain drift, is to provide the
means' for public discussion and debate on the basis of impartially
ascertained facts.

Congress should set up machinery for this purpose. This might
possibly be set up cooperatively with the States and communities in
connection with some appropriate agency to advise Congress on Fed-
eral-State-local jSscal relations.

2. Achieving State and local government fiscal independence. —
There are many things which the Slates and comnumities can do to
plan their fiscal policies and administer their financial affairs so as
to be in a position to meet their responsibilities. The most effective
postwar plans consist primarily of present efforts and accomplish-
ments in reducing State and local debts, establishing cash reserves,
strengthening administrative organizations, and surveying State and
community needs.

There has been commendable and encouraging activity along these
lines. The States and their local governments are in a better position
today than tliej^ have been in several j^ears to resume the time-honored
practice of financing their own public works.

But over and abo\'e what the communities and States can and should
do themselves, there is another need. It is for cooperative considera-
tion and action in dealing wisely with Federal, State, and local fiscal

Congress should, thei'cfore, take steps now to revise our tax struc-
ture so as to insure that the policies of the Federal Government do
not unduly hamper the ability of the States and local governments
to achieve fiscal independence. Progress toward this important goal
can only be made step by step. It w411 require public education as well
as the development of new attitudes on the part of both Federal officials
and State and local oflicials.

The impartial assembly and study of the facts is as necessary for
effective action in obtaining better intergovernmental fiscal relations
as it is in determining the responsibility for financing needed public
works. The tw^o matters are closely related. For that reasoUj a
recent recommendation of the JMimicipal Finance Officers' Association
is of great interest. It should be given careful consideration by

These finance officers of cities urge that steps should be taken now
to create some Federal agency for the primary purpose of advising
Congress on Federal, State, and local fiscal relations. Tliey further
urge that this same agency should be used to coordinate the many
Federal grants-in-aid and shared taxes already in effect, as well as to
leport upon new proposals.

The American Municipal Association and the Council of State Gov-
ernments have both also recognized the need for some appropriate
organization to cope with the troublesome but highly important fiscal
relations of the Federal and State and local orovernments. In addi-


tion, tliis whole problem was carefully analyzed by the Committee on
Intergovernmental Fiscal Relations, which submitted a lengthy report
to the Secretary of the Treasury in 1948. What is now needed is
action by Congress.

3. Imjwoving fiiblic-worJcs appropriation and other procedures. —
Connnittees of Coiigress within their staff resources are making pains-
taking study of proposed appropriations for Federal public works.

Congressional scrutiny of separate proposals for Federal expendi-
tures for public works should be broadened to include careful con-
sideration of the over-all relations between ])roposed Federal expendi-
tures for public works and total expenditures and revenues.

A major reform which Congress could effect in this connection would
be to improve its appropriation procedures so as to insure in every
case, not only careful scrutiny of separate proposals but also carefiil
consideration of the over-all relations of the sum total of proposed
expenditures to the sum total of anticipated tax revenues. There is
great need for appropriation procedures which will require consid-
eration of the whole budgetary situation.

In the field of Federal public works, the President has taken an
important step which Congress should follow up. He has requested
the Federal agencies to submit their proposals for public works to
the Bureau of the Budget for scrutiny before their submission to
Congress. The Budget Bureau, according to the Director's state-
ment to the Colmer committee in May 1944, has not at present the
staff, funds, and machinery to examine critically the proposals sub-
mitted to it in accordance with this Presidential' oixler. This should
be corrected.

It is important that there should be a central place in the executive
branch of Government for consideration of the over-all relationships
of proposed Federal expenditures for public works before their sub-
mission to Congress.

If this were matched by similar over-all consideration by Congress,
with the help of a joint staff for its Appropriation Committees, we
would be better assured than we are at present that needs and costs
and taxpayers' ability to pay were being given the consideration they

Finally, the example of the Public Roads Administration, in its
insistence upon the determination of needs and costs through traffic
and engineering surveys before it will approve the expenditure of
Federal highway funds, should be more widely followed by other
Federal agencies.

In this highway field we have an additional check of the utmost
importance. The States must match the Federal-aid funds dollar
for dollar which places a responsibility on them also for the efficient
expenditure of highway appropriations.

4. Ohtaining economy in pnhlic-ivorl's construction. — Competitive
contracts should continue as the accepted basic procedure for secur-
ing economy in public constrution and should be more widely used.

Over the years, we have learned that economy in public "construc-
tion can best be secured through competitive contracts with private
construction enterprise and not through hiring day labor or resorting
to work-relief methods. Experience has denionstrated that this pro-
cedure secures better performance in shorter time and at lower cost.


It has the great advantage of enabling Congress, or a State legisla-
ture, or a city council, to lind out just how nuich the improvement has
cost. It puts the whole operation in a goldfish bowl and is thus an
automatic brake on extravagance in design or wastefulness in con-
struction methods.

The Federal Government should set an example to the States and
localities by the more general adoption of the contract method of
public construction.

5. Advance planning of needed piihJic works. — There was recent
authorization by Congress in the War Mobilization and Reconversion
Act of Federal' loans or advances to local and State governments to
finance surveys and preparation of plans and specifications for needed
public works. The purpose is to insure that this work will be ready
to let by contract promptly as soon as the materials and labor become

These loans or advances must be repaid when the construction w^ork
is undertaken. It is not contemplated that there will be any Federal
funds later for this construction work. There is no present intention
to revive as a permanent activity the Federal Government's emergency
public works program of the' thirties. On the contrary. Congress
has expressly declared that tlie making of these advances does not "in
any w^ay commit the Congress to appropriate funds to undertake any
of the projects so planned."

This policy should be adhered to by the Federal Government and
accepted by the States and communities.

These authorized Federal advances for blueprinting State and local
public works should be made the basis, as is contemplated by the
Federal Works Administrator, of a cooperative undertaking wnth the
States to prepare a shelf of useful public works for the transition

I think we can agree that the Federal Government and the various
State and local governments should plan ahead as far as practicable
the engineering and financing of their own proper public works.

I think we can further agree that they should schedule their ex-
penditures for these needed improvements over a period of years.
Finally, they should release these public works, as far as practicable,
at times when private construction work is slack.

Each State could and should assemble material from its various
local government agencies and take leadership in encouraging advance
blueprinting and timing of needed public works. The Federal Gov-
ernment in turn could clear information with the -18 States and pro-
vide additional leadership for forehandedness in this field of public
works administration.

Congress has already placed the responsibility for this forward
public-works planning in the Federal Works Administrator. Con-
gress has also provided for rigid exclusion of "made w^ork'' projects by
requiring that no advances may be made except for projects which
conform to an over-all State or city plan approved by a competent
State, local, or regional authority, covering a metropolitan area.

This cooperative Federal-State-local experience with planning
ahead for the transition period of public works ought to throw valu-
able light on the future possibilities of timing public works so as to


release them, as far as practicable, when private construction work
is slack.

In this connection one difficult problem of timing local public works
should be mentioned. It is the problem of timing the financing as
well as the execution of public works. It deserves thoughtful study
on the part of the States and communities and the Federal Govern-
ment. If slack work in private construction, for example, requires
the compression of a blueprinted public-works program of a com-
munity from 5 years into 3 or 2 years, the city, or State, may find
itself unable to finance the speeded-up program because anticipated
revenues cannot similarly be telescoped, or debt be wisely undertaken.

6. Measuring constncction activity. — The problem of getting a
reasonably stabilized construction activity in an expanding economy
reaches far beyond public works. Two-thirds or more of the con-
struction volume in an active period is private work. It will not be
possible to develop and to agree upon practical activities looking to
stabilization of construction unless we have currently available basic
data regarding construction activity, both private and public.

The Federal Government should assemble this information in one
place, without duplicating tlie functions now ];erformed by other
Government agencies or seeking to monopolize the gathering of in-
formation now reported by private agencies and by trade associations.

The information required covers the total volume of construction
and of construction employment from month to month and also the
totals classified according to the type of construction— private, public,
commercial, farm, industrial, residential.

This information would be obtained as at present, from the con-
struction industry and from Government agencies. It should include
analyses of the prospective volume of construction, vrhich may be indi-
cated by the permits and the construction contracts which have already
been executed. The information should be broken down by individual
areas and localities.

An immediate use of construction market data is to enable the
diverse elements which make up the construction industry, from pro-
ducer of raw materials, nianufacturer, and distributor to designer,
contractor, builder, and financing agency, to plan wisely and ag-
gressively to provide needed civilian construction as fast as war pro-
duction is curtailed.

A long run use of construction market data is to assist the business
concerns in this field progressively to expand their markets and to
do so, as far as practicable, with a view to mitigating the extreme
fluctuations of construction activity.

The vrar has brought about considerable improvement in the prompt
reporting of construction data. This information has been prepared
primarily for use of the War Production Board in administering
various construction and related control orders. This activity will,
no doubt, be sharply curtailed during the transition period and elimi-
nated \vith the end of the war.

The Bureau of Foreign and Domestic Commerce of the Depart-
ment of Commerce proposes to set up a construction division to as-
semble in one place basic construction industry data. This division
F-hould become an impartial source of information both for the con-
struction industry and for Federal and State and local government


agencies concerned with construction. It should be of help to both
legislative and executive agencies in dealing with the complex problems
of advance planning and timing of useful public works.

7. Revising Federal tax policies to stimulate frioate const niction.—
Kevision of the Federal tax structure should incorporate provisions
which take account of private construction as a great potential force in
obtaining economic, expansion and stability.

The heart of the problem of private construction, as of the other
capital goods industries, is found in deterrents to investment. One
of the important obstacles to a freer flow of savings into productive
enterprise and investment in homes is likely to be found in the tax

Specifically, as far as the Federal Government is concerned, we urge
that provision should be made for accelerated depreciation, for de-
ferred maintenance, and for the reserves needed for the postwar

Provisions for the carry-forward of net operating losses and other
suitable recognition of the principle of averaging incomes over a
period of years, say at least 5 years forward, can make an important
practical contribution to effecting more reasonable stability in con-
struction activity. That is a highly important objective. Congress
should give consideration to the extension of the carry-forward pro-
visions of the tax laws, and provide for speedier grants of refunds.

After the war, substantial reduction of the burden of taxation
will be more conducive to employment and economic development than
any elaborate system of partial or complete exemptions or other un-
usual incentive devices. We must face the fact, however, that if high
rates by reason of absolute Government necessities^ are to continue in
the postwar period, some expedients may be necessary as, for instance,,
preferential treatment of new capital investments.

One important means to stimulate immediate planning on the part
of private investors has been pointed out by the American Society of
Civil Engineers, the American Institute of Architects, and other pro-
fessional and busiess organizations in the construction field.

It is that provision be made for clear recognition of the costs of
planning for postwar construction as current operating expenses.
This would tend to overcome a natural hesitancy on the part of private
capital to spend money for planning at this time for construction
which cannot be undertaken until some future date.

The American Society of Civil Engineers estimates that the plan-
nmg now of $5,000,000,000 of private construction work might in-^
voive an early loss in Federal taxes of not more tJian $75,000,000..
That amount of construction, if carried out in a period of 1 year,
would furnish employment for approximately 2l^ million men on
the site and in the manufacture and distribution of needed building
materials and equipment. The immediate tax loss is small in compari-
son with tliese gains and would be more than offset by new taxable-
income created.

Mr. Gilford. I want to leave. I would like to ask one question.
Do you want us to vote FHA more authorization under title 6?

Mr, Palmer. FHA ; yes.

Mr. GiFFORD. You want the Government to stand back of more;
private building under title G?


Mr. Palmer. Yes.

Mr. GiFFORD. You think that is necessary ?

Mr. Palmer. Yes,

The Chahoiax. Dr. KapLan, do you have any questions?

Dr. Kaplax. I have one short question. I realize the time is short.

Mr. Holclen, in his testimony, mentioned the necessity for some
agency to iron out the difficulties of the taking over of a tax progi^am
by the Federal Government which crowds the State and local govern-
ments. There is a reference in this statement of Mr. Palmer's to it,
but Mr. Palmer's statement calls attention to the fact the committee
on intergovernmental fiscal relations, which was appointed for that
purpose, did submit to the Treasury a very comprehensive report on
this verj^ question.

Now I notice that ]Mr. Palmer's report says what is now needed is
action by Congress. I wish Mr. Palmer would elaborate on that, and
perhaps Mr. Holden, as to just what action is expected of Congress
at this tinie in connection with the recommendations that have been
made on intergovernmental fiscal relations, particularly as it may
affect the construction program ?

The Chairmax. All right, Mr. Palmer.

Mr. Palmer. The recommendation of that report is along the same
line that we recommend, namely, a joint effort on the part of the
Federal Government and State governments to accomplish the result of
achieving fiscal independence on the part of State and local govern-

In other words, what we have suggested is substantially what that
committee on intergovernmental fiscal relations thought should be

Dr. Kaplax. You are not suggesting a specific program of what
Federal taxes you want lowered or eliminated in order to make room
for State and local taxes?

Mr. Palmer. No, sir; we are not submitting a tax law here.

Dr. Kaplax. This report you have referred to is probably the most
comprehensive report that has been made so far on the question of
intergovernmental fiscal relations.

Online LibraryUnited States. Congress. Senate. Special CommitteePost-war economic policy and planning. Joint hearings before the special committees on post-war economic policy and planning, Congress of the United States, Seventy-eighth Congress, second session, pursuant to S. Res. 102 and H. Res. 408, resolutions creating special committees on post-war economic (unit 6) → online text (page 24 of 49)