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and it is we who are to determine its material aid and relief programs, self- hungry, visiting those who are sick and course. In reality, the program belongs help efforts, and refugee assistance. caring for those who are in prison. to all the people of this hemisphere and These agencies are maintaining around As you know I have long been a the contributions which are required for 600 American citizen representatives stanch advocate of emphasizing the its success are much heavier for our overseas—at their own expense, sup- people-to-people approach to foreign aid, neighbors than they are for us.

ported by public contributions—and are which is a program of channeling aid I am proud that we are participating, employing between 4,500 and 4,800 local through voluntary associations to the but we must remember not to expect mir- personnel. This is a valuable voluntary

personnel. This is a valuable voluntary greatest extent possible. acles of maturity from an infant. In contribution to our total national effort This ground swell of voluntary activity consideration of the legislation before to help underprivileged people in de

did not develop overnight. The service us, I ask each of my colleagues to be veloping countries. I just hope that the of the American people to the needy is a patient, understanding, and firm.

American people, whose generosity is tradition based on belief in the dignity THE ROLE OF VOLUNTARY AGENCIES IN FOREIGN

making such effective work possible of man. It truly exemplifies the Judeo

through these voluntary organizations, Christian spirit of caring for the less Mr. HUMPHREY. Mr. President, be

will realize the necessity for providing fortunate, and sharing our own material fore we complete Senate action on the

similar support in behalf of the Agency blessings with them. This has been a foreign aid bill, I wish to comment on the

for International Development as the significant part of our American heritage work of our voluntary American aid partner in many of these oversea pro

partner in many of these oversea pro- from the days of frontier neighbor helpprogram. The American people, out of grams.

ing neighbor erect his log cabin or barn their generosity and compassion, are

Deep concern with the plight of the to the great present-day record of huge contributing a tremendous amount of efpoor, the homeless, the oppressed, has al

sums contributed overseas

overseas annually fort and money to a vast program of

ways been in the American tradition through voluntary associations and voluntary foreign aid. Unfortunately,

The typical American may be hard- foundations for the purpose of wiping too few people understand how closely headed, but is also warmhearted.

out crippling disease, improving educathis voluntary foreign aid is geared in Our people are mindful of the Biblical tional opportunities, and in other ways with our Government-sponsored pro injunction: “And now abideth faith, dedicating part of our material subgrams of economic development admin hope, and charity, these three; but the

hope, and charity, these three; but the stance to the cause of our fellow man's istered by the Agency for International greatest of these is charity.”

well-being. Development.

We seem to be aware that charity be World War I and its aftermath of huMy attention was called recently to a gins at home, but there it does not end. man suffering gave special impetus for pamphlet published by the Voluntary To learn the full story of this volun- giving aid to the distressed. Relief work, Foreign Aid Service in the Agency for tary foreign aid program rewards us with

tary foreign aid program rewards us with begun in 1914 following the invasion of International Development entitled a feeling of intense pride in Americans.

Belgium, was continued in the Central AID and U.S. Voluntary Agencies-A A few days ago, I read the 1962 report and Eastern States of Europe after the Growing Partnership.” That "growing of the commodities and funds sent

of the commodities and funds sent armistice, and continued throughout the partnership" theme exemplifies what abroad by the American people through famine in Soviet Russia in 1923. Congress had in mind in directing their voluntary agencies for the relief of

Voluntary effort was again stepped up through our Foreign Assistance Act that

distressed people. We are all familiar in the early years of World War II. In the services and facilities of voluntary

with these organizations, such as CARE, the wake of the Nazi invasion of Poland, nonprofit organizations be used to the Church World Service, Catholic Relief

a flood of emotional appeals to aid the maximum extent practicable in further

Services, and the American Jewish Joint victims engulfed the American people. ing the purposes of the act. Distribution Committee.

Hundreds of hastily organized war relief Let me read to you a forward in that

I was so impressed by what these committees developed as country after pamphlet from David E. Bell, the capable agencies are doing that I want to share

agencies are doing that I want to share country became involved in the conflict. Administrator of the Agency for Inter

the report with you. This report shows In order to maintain its neutrality, it benational Development: that the U.S. voluntary agencies regis

came necessary for the U.S. GovernThis pamphlet tells a story in which tered with AID, sent overseas during ment to regulate economic relations with Americans can take pride. Through these 1962 a total of more than $275 million belligerent countries. In 1939 Congress humanitarian activities the historical con

worth of commodities and funds. This passed the Neutrality Act. As a result, cern of Americans for their fellow men is demonstrated by effective action overseas.

is approximately 14 percent more than all American voluntary relief agencies, These American voluntary agencies have

during 1961. The commodities shipped with the exception of the Red Cross, pioneered in foreign assistance and we are

consisted of foods, including those made which has its own congressional charter, indebted to them for their initiative, for available to the agencies under Public were required to register with the Departtheir energy, and for their devotion.

Law 480, clothing, textiles, and all kinds ment of State if they were engaged in the Through the Agency for International De of supplies--educational, vocational, and collection of funds from the American velopment and its predecessors, a firm and agricultural.

people for relief in belligerent countries. growing partnership between these voluntary

On March 13, 1941, the President ap

We find the agencies sent 45 percent organizations and Government has been fostered. While scrupulously observing the

more commodities and funds to Africa pointed a committee to examine the nature and independence of these private

in 1962 than in 1961, 37 percent more to whole problem of foreign war relief. groups, substantial Government resources Latin America, and 7 percent more to This committee's findings led to the eshave been made available to them to further the Far East. In only Europe and Near tablishment of the President War Relief

Control Board to regulate the oversea their activities abroad in the fields of ma East-South Asia were there decreases. terial aid, services to refugees, technical as President Kennedy recognized the

shipment of war relief supplies by volunsistance and self-help.

tary agencies. value of the voluntary foreign aid effort This partnership has a quality that Goy

This arrangement between the Government aid alone cannot achieve. It is a 1963, as Voluntary Overseas Aid Week. continued after the war. In May 1946,

when he designated the week of April 9, ernment and the voluntary agencies was force of enduring strength and fellowship that binds together our people and the In the official proclamation he said:

the Advisory Committee on Voluntary friendly peoples of other countries and fur I would like to emphasize that I do not Foreign Aid was established by direction thers and strengthens the peaceful objectives believe our assistance programs abroad, espeof the free world. cially those that involve the distribution of of the President “to tie together the gov

ernmental and private programs in the I want to commend the Agency for In

food, could possibly be effective unless we ternational Development and, particu

had the very wholehearted cooperation of field of foreign relief and to work with the voluntary agencies.

interested agencies and groups.” The larly, its Voluntary Foreign Aid Service,

This participation between the American committee is attached to the Agency for for stimulating this cooperative effort people and the National Government and the International Development. between the U.S. Government and the voluntary agencies, the various religious and

At present AID and the agencies regU.S. voluntary agencies which serve other charitable organizations, really repre- istered with the Advisory Committee are humanity overseas. Today 53 of these sents I think, the best aspirations of our jointly exploring ways of better coordiagencies are working with the Agency for country. I think it reminds us of the old nating their programs to achieve comInternational Development-AID—in injunction about feeding those who are mon objectives in the total U.S. effort.

This is in line with the congressional on the basis of a careful survey of the countries of oversea councils or coordimandate in the Foreign Assistant Act economic situation and the labor market,

economic situation and the labor market, nating committees made up of representof 1961:

has provided vocational training for atives from U.S. voluntary and GovernThe President, in furthering the purposes young men and boys to meet the press ment agencies, international organizaof this act, shall use to the maximum ex- ing demand for auto mechanics, welders,

ing demand for auto mechanics, welders, tions, local groups and the host governtent practicable the services and facilities carpenters, electricians, and for young ment. Such groups afford an opportuof voluntary, nonprofit organizations regis- girls to be trained in garment making. nity for an exchange of ideas and coopertered with, and approved by, the Advisory

Six voluntary agencies are carrying ative pursuit of common goals. Committee on Voluntary Foreign Aid.

on child feeding programs in 17 Latin One final trend is closer cooperation These voluntary agencies are carrying American countries under the “Opera between the Government and the volunon programs of material aid, services to tion Ninos” program of the Alliance for

tary agencies. A conference held in refugees, and technical assistance and Progress. The program is

is currently Washington in November 1962, arranged self-help projects. Material aid serves feeding more than 9 million Latin Amer by the American Council of Voluntary people in times of emergency-earth- ican children and by August 1964, an

Agencies for Foreign Service, is an examquake, filood, fire, typhoon, or famine, as estimated 11.5 million Latin American ple of this trend. Those attending inwell as during periods of dislocation children-or 1 out of 3—will benefit from cluded representatives from 21 Council caused by war and political oppression. "Operation Ninos.”

member agencies, 26 guest organizations, The agencies minister to disaster victims One voluntary agency, organized spe the Agency for International Developwith food, clothing, medicine, blankets, cifically to serve children, in keeping ment, the Advisory Committee on Voland other relief supplies, continuing their with its emphasis on working with fam untary Foreign Aid, Department of aid until the stricken are able to provide ilies rather than with the one child in State, Food for Peace, Department of for themselves.

the family group alone, has provided, in Health, Education, and Welfare, Office By registering with AID's Advisory addition to clothing and personal ar of International Housing of the Housing Committee, voluntary agencies receive ticles for the child, household utensils and Home Finance Agency, Inter-Amerfrom the U.S. Government Public Law and supplies from which the child's ican Development Bank, Intergovern480, foods plus reimbursement for over whole family benefits.

mental Committee for European Migrasea freight costs on these foods as well These examples indicate that the agen- tion, Pan American Union, and the U.N. as on their own relief supplies. It costs cies relate their services effectively to the Bureau of Social Affairs. about $4 million of U.S. Government conditions of life of the people they

The conference promoted an exchange funds to ship overseas an estimated $80 serve. They are flexible and imagina

of views on a possible expanded role for million worth of voluntary agency sup- tive. tive. They recognize the importance of

the voluntary agencies, specifically with plies. Thus, every dollar spent by the teaching and training people within

reference to U.S. voluntary agencies' Government to transport these supplies their own setting and seek ways of show

participation in the Alliance for Progress. is multiplied nearly twentyfold in terms ing people how they can improve their

While the trend is toward partnership of the value of goods delivered overseas way of living by helping themselves.

between the voluntary agencies and the to people who need our help.

If one looks closely at voluntary effort,

Government, it is a partnership of equals. Let us look at some specific ways in several new trends are apparent. The

The Government insists the agencies which the voluntary agencies are helping first of these is the development of

maintain their status as private indethe needy overseas and thereby strength- closer relationships with organizations pendent groups supported by the free ening our foreign aid and foreign policy. and institutions already present in the

gifts of the American people. Only as On a small island which was seriously countries where the agencies are work

such can they express the real concern overcrowded, the problem of assisting a ing. The voluntary agencies are unique

of the American people for those in need. great number of impoverished hungry ly suited to cooperative effort at this

The American Council of Voluntary refugees was staggering. Many of the grassroots level because of the person

Agencies for Foreign Service has perhaps refugees were able and eager to work but alized way in which their help is given. expressed it best of all: few found employment. Large numbers Another new development in voluntary were helped by an imaginative, practical foreign aid is the use of excess Govern

Because of the organic structure of these

voluntary associations, rooted in the good emental feeding project, made pos- ment property made available to reg

will of millions of constituents who support sible by an ingenious noodlemaking ma- istered voluntary agencies under the for them, the organizations in the voluntary chine devised by voluntary agency rep- eign aid legislation of 1961. Recently, sector have a twofold impact: On the people resentatives and manufactured on the excess metalworking, laboratory, elec overseas whom they benefit, and on the peoisland. The noodles are made from trical and electronic equipment, and of ple at home whom they represent. Out of Public Law 480 flour, cornmeal, and dried fice machines have been released to a

this arises a relationship between peoples of milk.

an abiding nature. voluntary agency for its vocational Refugees in a self-help work project training schools in Iran, Tunisia, Moroc It is through the voluntary agencies for relocated Koreans on the southwest co, and Israel. A quantity of excess wool Americans are finding expression for a coast of Korea had just staked out their and cotton clothing with an acquisition philosophy of concern central to our hard-won land reclaimed from the Yel- value of approximately $10 million is be American way of life, resulting in a low Sea by means of a dike they had ing made available by the U.S. Govern

ing made available by the U.S. Govern- unique mobilization of personal effort built, when a typhoon struck.

ment to certain voluntary agencies and and cooperation around the world to The typhoon breached the dike, the American National Red Cross for use serve the cause of freedom. threatening to destroy it and to flood in their programs in developing counthe precious land intended for rice for rice tries and for refugees and victims of

TRANSACTION OF ADDITIONAL planting. Instead of giving up in dis- natural disaster.

ROUTINE BUSINESS couragement, the refugees worked night Another trend is the growing awareand day to repair the dike.

ness on the part of voluntary agencies By unanimous consent, the following Kerosene-soaked rags on the ends of of the problems faced by people moving routine business was transacted: sticks made flares for their all-night- from rural to urban areas, paramount long labors. With no modern earth- among which is the search for a liveli

APPOINTMENT BY THE VICE moving equipment available, they used hood. picks and shovels, and carried earth to U.S. voluntary agencies are especially

PRESIDENT small railway cars in hods suspended well fitted to deal with these problems The PRESIDING OFFICER (Mr. from A-frames on their backs.

since similar shifts of population have INOUYE in the chair). Pursuant to a reThe refugees, working without wages, taken place in our history causing simi quest of the State Department that a were supplied through a U.S. voluntary lar hardships. Several agencies are de Member of the Senate be designated by agency with Public Law 480 cornmeal, veloping urban community services, co the Vice President as an observer at the flour, and cooking fats.

operatives, and housing programs to cope Food and Agriculture Organization of In a north African country, where with these problems.

the United Nations at the conference to unemployment is high and training fa Also apparent in voluntary agency ac be held in Rome, Italy, on November 16cilities are meager, a voluntary agency, tivity is the formation in developing

tivity is the formation in developing December 3, 1963, the Chair, on behalf

of the Vice President, designates the AMENDMENT OF FOREIGN ASSIST The President's proposals and the bill beSenator from Iowa [Mr. MILLER] to act

fore your committee appear to take a clear ANCE ACT OF 1961-AMENDMENTS

stand on these questions: in this capacity.


(1) The President proposed to reduce the Mr. LAUSCHE LAUSCHE submitted

submitted amend aggregate tax liability of persons in the lowments, intended to be proposed by him,

est income bracket by 40 percent, with the BILL INTRODUCED to the bill (H.R. 7885) to amend further

relief gradually declining to 9 percent in the

highest income bracket. He recommended A bill was introduced, read the first the Foreign Assistance Act of 1961, as

to cut corporate tax liability by 8 percent time, and, by unanimous consent, the amended, and for other purposes, which

(lowering the rate from 52 percent to 48 persecond time, and referred as follows: were ordered to lie on the table and to

cent) but to advance payment dates and By Mr. MUSKIE: be printed.

thus to defer cash relief for several years. S. 2307. A bill to amend the emergency

Revisions approved in the House of Repreloan authority of the Secretary of Agricul

sentatives would not change these results ture under subtitle c of the Consolidated STATEMENT OF ROGER A. FREE

significantly. The aggregate tax liability of Farmers Home Administration Act of 1961 to

persons in the lowest personal income bracket authorize such loans in areas where credit

MAN, SENIOR STAFF MEMBER, would be reduced 38 percent from the presis not otherwise available because of serious THE HOOVER INSTITUTION ON

ent level, and of those in the highest bracket, economic conditions for farmers or ranchers; WAR, REVOLUTION, AND PEACE,

13 percent, with relief in the intermediate

brackets somewhere in between. to the Committee on Agriculture and For STANFORD UNIVERSITY, BEFORE

This means that H.R. 8363 as passed by the estry,

SENATE COMMITTEE ON FINANCE House would make income taxes more steeply (See the remarks of Mr. MUSKIE when he introduced the above bill, which appear un Mr. DIRKSEN. Mr. President, on

graduated and primarily augment consumer

purchasing power. der a separate heading.) November 6, Dr. Roger A. Freeman,

(2) The President did not propose to senior staff member of the Hoover In eliminate or reduce any of the major exclustitution on War, Revolution, and

and sions, deductions, or exemptions which now LOANS TO CERTAIN FARMERS OR Peace, Stanford University, appeared account for most of the vast differenceRANCHERS SUFFERING BECAUSE before the Finance Committee on H.R. $228 billion in 1960-between personal in

come and taxable income. Of the 16 strucOF SERIOUS ECONOMIC CONDI- 8363, the Revenue Code of 1963. Many members of the committee have com

tural changes with a revenue consequence TIONS mented on the statement made by Dr.

in the personal income tax bill approved by Mr. MUSKIE. Mr. President, I intro- Freeman.

the House, 8 would result in revenue

In view of the exceptional gains and 8 in revenue losses. The net duce, for appropriate reference, a bill to quality of the statement, I ask unani revenue gain would add an estimated 1.2 amend the loan authority of the Secre

mous consent that it appear in full in percent to prospective tax receipts; rate tary of Agriculture to authorize Farmers the RECORD.

changes would reduce revenues by 20 perHome Administration emergency loans There being no objection, the state cent. In other words, structural changes for areas where credit is not otherwise ment was ordered to be printed in the

would be relatively minor and not broaden available because of serious economic RECORD, as follows:

the tax base significantly, if at all. conditions.

(3) Amendments proposed in the Ways The Aroostook County, Maine, potato STATEMENT OF ROGER A. FREEMAN, SENIOR

and Means Committee and in the House

STAFF MEMBER, THE HOOVER INSTITUTION industry is in difficult financial straits.

itself which would have conditioned the rate ON WAR, REVOLUTION, AND PEACE, STANFORD

cuts upon restraints on increased spending Agriculturally, Aroostook is suffering UNIVERSITY, STANFORD, CALIF., ON H.R. 8363 failed by narrow margins. Thus H.R. 8363, from the economic disability of continu (REVENUE ACT OF 1963), BEFORE THE FI

as it now stands, reduces taxes but does not ous low potato prices, resulting from a NANCE COMMITTEE, U.S. SENATE, NOVEMBER require corresponding action on the expendinational oversupply. As an area of

6, 1963

ture side. substantial unemployment, industries In the course of the past 2 years a broad In my testimony I propose to discuss these and communities within the county have

consensus seems to have been reached that three major issues and shall try to evaluate received benefits under the Area Rede

what this country's economy needs is lower whether the provisions of the bill, as ap

Organizations of labor and of busivelopment Administration and accel

proved by the House, are likely to have the ness, wide sections of the public, many hoped-for impact on the rate of economic erated public works programs. However, Members of Congress, and even most econo growth and on unemployment. the continuing and growing need for mists appear to concur in this general prop My conclusions may be summarized as farm credit still exists. The Maine of- osition. Most of the disagreements which follows: fice of the Farmers Home Administra- almost always arise when tax revision is pro (1) The tax cuts proposed in H.R. 8363, tion has done an excellent job in meeting posed concern the "how" of tax cuts more which are estimated eventually to total $11 the farmers' needs, but at present FHA's than the "whether.” They tend to focus on billion, will provide long-needed relief to credit extension capabilities are limited. the type of the suggested tax relief and on many persons. They will also give our econThis additional lending authority is es

the circumstances accompanying the action omy a “shot in the arm” but are not likely

rather than on the acknowledged fact that to stimulate the rate of economic growth as sential if the credit needs of the industry the American economy is not likely to de powerfully as a tax cut of that magnitude are to be met.

velop its full growth potential as long as it could if it were designed primarily to proSince I am certain that other agricul- is loaded down with its present tax burden. mote growth rather than serve other ends. tural areas are faced with similar diffi Disagreements may be grouped under three I question seriously whether the bill, as it cult economic conditions, I ask unani- major headings:

now stands, will have a major and lasting mous consent that the bill lie on the

(1) How should tax relief be allocated by impact on unemployment. table through December 1, in order that in the lower brackets so as to boost conincome classes? Should it be concentrated (2) Many improvements could and should

be made in our tax structure. But the most my colleagues may have an opportunity sumer spending? Or, should it aim primar- urgently needed tax reform is a sharp cut to join me in sponsoring the bill.

ily to stimulate incentives and investment in rates which ought not to be encumbered The PRESIDING OFFICER. The by more sharply lowering high personal tax at this time with other revisions. Some of bill will be received and appropriately rates in the medium and upper ranges and the structural changes in H.R. 8363 may referred; and, without objection, the bill by reducing the corporation tax rate? hinder rather than advance economic will lie on the desk, as requested by the

(2) Should rate reduction be linked with progress. Senator from Maine.

a structural reform broadening the tax base? (3) Cutting taxes at a time of heavy The bill (S. 2307) to amend the emer

Should we narrow or eliminate some or many budgetary deficits without commensurate

of the various deductions, exemptions, ex action to bring expenditures under firmer gency loan authority of the Secretary clusions or credits and thus recoup part of control may temporarily produce some of Agriculture under subtitle C of the the revenue lost by rate cuts? Or is the favorable results. But it will, in the long Consolidated Farmers Home Adminis- most urgently needed tax reform a lowering run, prove to be self-defeating. tration Act of 1961 to authorize such of rates which should not be jeopardized or (4) Some public purposes can be served loans in areas where credit is not other- delayed by tying it to other changes of a better by cutting taxes than by enlarging

expenditures. One example of this is higher wise available because of serious eco- highly controversial nature? nomic conditions for farmers or ranch

(3) Should a tax cut be accompanied by education which could be most effectively ers, introduced by Mr. MUSKIE, was re

corresponding action on the outgo side of the helped by the grant of tax credits for certain

budget or at least a restraint on future ex educational expenses and contributions. ceived, read twice by its title, and re- penditure growth? Or would a curb on pub This statement is divided into four secferred to the Committee on Agriculture lic spending nullify the economic benefits tions: and Forestry. of tax relief?

I. How should income taxes be cut?

- II. Should rate cuts be linked with tax Tax reform rather than tax reduction was more than modest rates. Nor do available reform?

the declared objective of the President's tax historical studies give us conclusive evidence III. Should a tax cut be accompanied by message of April 20, 1961. In proposing cer of a positive relationship between low taxes restraints on spending?

tain structural changes the President empha- and fast economic growth. IV. Can tax credits help higher education sized that the resulting revenue gains and Such comparisons, derived from inmore effectively than grants and loans? losses would offset each other, that "the tax adequate statistics which lack uniform conI. HOW SHOULD INCOME TAXES BE CUT?

system must be adequate to meet our public cepts, are admittedly crude. But even more

needs," and that it was necessary “to main refined analysis, wherever it is possible, The broad consensus that income taxes are too high is of recent origin. To be sure,

tain the revenue potential of our fiscal sys- yields no convincing proof of the growth

tem.” In his news conference of March 1, retarding effect of a heavy overall tax burbusiness groups and some economists have

1961, the President reaffirmed an earlier den. been contending ever since the end of World

statement that he would suggest sources of War II that excessive tax rates are repress

What the Government collects in taxes it ing economic growth. But numerous other

revenue to finance the new spending pro- usually spends and thus substitutes for the economists and labor unions have generally

posals he was sending to Congress. The spending which otherwise taxpayers would

President announced that he would submit have done. Whether investment by Governdenied it. About 10 years ago Roy Blough,

a more comprehensive tax reform program ment is as productive as by individuals or former Treasury official and member of the

to the next session of Congress and pro business—or more or less so—is highly conCouncil of Economic Advisers, wrote that

claimed his confidence in the existing tax troversial, with the answers more firmly "the pessimists who have continued to fore

system: "This message recognizes the basic cast the destruction of industry by high

rooted in political philosophy than in ecosoundness of our tax structure." taxation have been faced instead by an ex

nomics. It seems to me that at this stage of panding economy." 1 The late Randolph E.

Within slightly over a year, however, the our economic knowledge the proposition that Paul, former General Counsel of the Treasury

tax structure fell from grace. In his tele the overall level of taxation (other factors Department, told the Joint Economic Com vision address of August 13, 1962, the Pres- being even) has a negative impact on the mittee of Congress in 1955:

ident charged that our tax structure “is a rate of economic growth is a hypothesis, “Certainly, history fails to support argu

drag on economic recovery and economic which many of us believe to be correct but ments that high taxes have a ruinous effect

growth, biting heavily into the purchasing which so far we have been unable to prove. upon the economy. I do not like high taxes

power of every taxpayer and every consumer.” Most likely there is a level beyond which myself, but I am obliged nevertheless, to

The rates, the President said, "are so high taxes become injurious to the economy. But admit that work and investment incentives

as to weaken the very essence of the prog we do not know just what that level is. have remarkably survived the high taxes of

ress of a free society-the incentive for addi Taxes in the United States have shown the last 20 years, and that venture capital

tional return for additional effort." Four a consistent tendency to grow, not only in is not lacking today after a long period of months later, speaking to the Economic Club amounts but also in proportion to the high taxation.”

of New York, the President stressed "the ac economy, as table I shows: He cited approvingly a statement that

cumulated evidence of the last 5 years that "the higher our taxes go, the more we have our present tax system, developed as it was

TABLE I.-Governmental revenues (Federal, left for investment and consumption,” and during World War II to restrain growth,

State, local) in the United States, selected asserted that "the bark of our individual inexerts too heavy a drag on growth in peace

years, 1902-62 come tax is much worse than its bite.” 2

time-that it siphons out of the private econThe AFL-CIO proclaimed as recently as omy too large a share of personal and busi

Percent of ness purchasing power—that it reduces the

Fiscal years

Billions September 1960 in its handbook on Federal

net national financial incentives for personal effort, in

product taxes that “the period of high taxation that

vestment and risk taking." has prevailed for the last 20 years has also

1902 What happened between 1961 and 1962 to


9.0 been a period of very high income, sayings



14.0 and investment, indicating that there has change from praise of the tax structure to



17.3 been little if any loss of incentive." outright condemnation? The hopes which 1942


21. 3

1952. had been held and the forecasts voiced for


31.8 In his bestseller "The Affluent Society," 3

1962_ a faster rate of economic growth and declin


34.1 John Kenneth Galbraith advanced the proposition that the level of taxation should ing unemployment failed to materialize.

Gross national product (GNP) which had Source: U.S. Bureau of the Census, "Historical Sumbe substantially raised: "The community is affluent in privately produced goods. It is been predicted to reach $571 billion in 1962


of Governmental Finances in the United States,

1959; U.S. Bureau of the Census, "Summary of Governpoor in public services. The obvious solution fell short of that goal by $16 billion. Un

mental Finances in 1962," 1963; Survey of Current is to tax the former to provide the latter

employment which had been close to 4 mil Business, July 1963, and supplement, National Income, by making private goods more expensive,

lion, or 5.5 percent of the civilian labor 1954; (national product for fiscal years 1902 and 1922: force, in 1959 and 1960, did not fall below

Raymond W. Goldsmith Associates, “A Study of Savpublic goods are made more abundant." The

ing in the United States," vol. III, Princeton University Galbraith thesis was expanded in books by

those levels. A growing number of econ Press, 1956). Francis M. Bator of MIT, Frederick C.

omists came to suspect that taxes were

partly or largely to blame for the unsatis In the fiscal year 1962 the revenues of all Mosher of the University of California, David Demarest Lloyd, and others. Alvin H. Han

factory performance of the economy. But governments in the United States--Federal, sen, emeritus professor of political economy

much uncertainty remained: Is the damage State, local-equaled 34.1 percent of the net being done by the sheer magnitude of

national product, 38 percent of the national at Harvard, wrote in his book "Economic Issues of the 1960's" 4 only 3 years ago: "If amounts extracted from the private econ

income, 39 percent of the personal income. we are to meet at all adequately our growing

omy or by the nature of the tax system, by This truly is a large share but it is no larger the types and rates of taxes?

than in several countries whose national public needs, we shall, I believe, need higher taxes.” Does the size of the tax burden repress

product has been showing much higher rates

of growth than we have been able to achieve. The demands neither for higher nor for

economic growth? lower taxes were able to rally broad support.

None of those countries uses a tax system

Many observers hold it to be self-evident similar to ours. This suggests the question Many economists, and probably a majority that taxes whose total amount equals a large

whether the tax tructure, the type of the at the time, agreed with Harvard economics and increasing percentage of a country's major taxes employed, could have a more professor, Arthur Smithies, who told the national income or product retard economic powerful impact on economic trends than Joint Economic Committee of Congress in growth. The proposition is most plausible: 1957 that "the problem in the tax area is tax

the aggregate amounts collected. The greater a share of their income individreform rather than tax reduction." 5 uals and businesses must surrender to the

Does the type of tax structure affect the tax collecter, the less they have left for con

rate of economic growth? 1 Roy Blough, “The Federal Taxing Proc sumption and investment. Also, taxes are The American tax system is like no other ess," New York, Prentice-Hall, 1952, p. 464. costs of production, and when recovered in in the world. All industrial countries levy

2 Randolph E. Paul, "Erosion of the Tax prices, lower a country's competitive stand a graduated personal income tax but none Base and Rate Structure," Federal Tax Policy ing

leans on it as heavily as the United States. for Economic Growth and Stability, papers But empirical proof for a negative correla The mainstay of public treasuries in most submitted by panelists appearing before the tion between the size of the tax burden and

countries is a general consumption tax and Subcommittee on Tax Policy, Joint Economic the rate of economic growth is hard to come

this is particularly true in the rapidly growCommittee, 84th Cong., 1st sess., 1955, pp. by. Germany, France, Italy, Japan and sev

ing European economies. Personal and cor297 ff. 3 Boston, Houghton Mifflin Co., 1958. eral other countries bear taxes which in porate income taxes tend to be important but

secondary sources of revenue. This does not 4 New York, McGraw-Hill, 1960. proportion to their national income are at

prove that heavy income taxation necessarily 5 "Federal Expenditure Policy for Economic least as high as ours or even higher. Yet,

results in slower economic advance and that Growth and Stability," hearings before the their economy has been growing at a much

growth could be speeded up by a shift to conSubcommittee on Fiscal Policy of the Joint faster rate. On the other hand, we see many sumption taxes. But it does nothing to Economic Committee, 85th Cong., 1st sess., countries which levy relatively light taxes weaken the suspicion that our economic ills 1957, p. 354.

but seem unable to expand economically at are not entirely unrelated to reliance on ex





tremely heavy income taxes in the United marginal taxation makes people work less. But business and professional income adStates over the past 20 years.

This means that a shift away from graduated vanced only $5.5 billion. In his 1963 tax message the President de- income taxation may promote greater effort, The picture may be even clearer when exclared that "the largest single barrier to full but that making income taxes more progres- pressed in relative terms in the following employment of our manpower and resources sive may have the opposite effect.

table: and to a higher rate of economic growth is The proponents of steeper progression the unrealistically heavy drag of Federal in- base their case on noneconomic grounds. TABLE III.-Economic trends between 1956 come taxes on private purchasing power, Robert J. Lampman, economics professor at and 1963 (1st half, seasonally adjusted) initiative, and incentive."

the University of Wisconsin, told the Joint During World War II the United States Economic Committee in 1959:

[In percent) was the only belligerent nation not to im "The principal argument for an egalitarian pose a major consumption tax. Instead, it tax policy is that its favorable consequences,

Increase or

decrease in pushed its income tax rates to near-confis in terms of social and political conditions,

percent catory levels. This decision, which also outweigh the unfavorable consequences, in meant that we would raise a lesser share of terms of an undesirable possible slowing of the war costs through current taxation than the rate of economic progress.” 6

Number of unemployed.

+49 our allies, was not rooted in economic con Talking to the American Bankers Associa Unemployment rate.. siderations but in the governing political and

tion in February 1963, Paul A. Samuelson, social philosophy. That philosophy coneconomics professor at MIT, took a similar

In actual In constant tinued to dominate policy through the post- position and stated that, for example, re

dollars dollars war period and resulted in the rejection of placing graduated net income taxes by inall proposals to establish a more even balance direct taxes such as Federal excises or value

Gross national product.. added taxes "represented too stiff a price to between the major types of taxes which are


+22 Personal consumption..

+37 now used in other countries throughout the pay for some extra growth.”?

Labor income and transfer free world.

The economic considerations underlying


+40 To be sure, an unplanned gradual adjustthe tax revisions in H.R. 8363 deem inade Business and professional in

come... quate aggregate demand to be the major

+16 ment has been taking place. Between 1944

Corporate profits..


- 1 element responsible for unsatisfactory ecoand 1962 receipts from income taxes in the

Expenditures for new plant United States doubled, from all other taxes nomic expansion and high unemployment,

and equipment.

+7 almost quadrupled. The President's proand regard a lag in personal consumption to Government purchases:

Defense. be the primary weakness. Personal con


+24 posals would further slow down the growth



+55 of income tax collections, while other taxes sumption now accounts for almost two-thirds are likely to continue increasing at a rapid

of GNP, government purchases of goods and rate.

services equal over one-fifth, and domestic Source: Economic Indicators, October 1962, and 1962 investment and net exports the remainder.

supplement. The significant difference between consumption and income taxes is not the base

Tax cuts in the low brackets, it is held, will

Expressed in constant dollars, labor inon which they are levied but the fact that

strengthen the purchasing power of families the former are more nearly proportionatewhich are most likely to spend their tax sav

come increased 25 percent over the past in some cases regressive-while the gradings quickly. This in turn will cause mer

7 years and personal consumption 21 percent. chants to increase their orders and manufac

But business and professional income grew uated income tax is progressive. The printurers to enlarge their productive facilities.

only 3 percent, corporate profits declined 1 ciple of progressive income taxation is now employed by every industrial country and Thus more money in the pockets of low

percent, and investment in new plant and is presently not in question. But the sched

income persons will spur the economy to equipment shrank 5 percent. Government faster growth.

purchases for defense expanded 24 percent ules which have been in effect in the United

and for civilian purposes 55 percent. States over the past 20 years push progres

Some believe that Government expendision to an extreme which has had a deletures should also be stepped up, and a group

If the economy is to be stimulated by terious effect on incentives, investment and of economists suggested in a statement sub

Government then it appears that such action economic growth. While the proposals of

mitted to the Secretary of the Treasury last ought to focus on the sectors which have

July that stimulating aggregate demand the President and the provisions of H.R.

been stagnating, business profits and pro8363 would tend to deemphasize the relative “can be done by reducing revenues, by in

ductive investment, rather than on conrole of income taxes in our fiscal system,

creasing Government expenditures, or by sumption which has continued to expand. some combination of the two." 8

Some observers in recent years have comthey would also make the personal income tax more steeply progressive than it now is,

The President declared in his tax message

mented sarcastically on what they called as table II shows. that he did not, at this time, recommend to

the "trickle-down" theory. What we are

faced with in the demand to give priority raise demand by increased Government ex

to a boost in consumer purchasing power, it TABLE II.-Reduction in aggregate tax liabil- penditures and thought that the proposed

tax reduction would provide the needed ity by income brackets in the President's

seems to me, is a "trickle-up” theory, and stimulus. proposals and in H.R. 8363 1

if the laws of physics have any validity then The premise of the tax cut proposed in

we may assume that a liquid is much slower [In percent)

H.R. 8363, that the major economic lag in in trickling up than in trickling down. recent years occurred in consumption ex

Consumption versus investment Adjusted gross income President's H.R. 8363 penditures, is not borne out by the record. The President's Economic Report, January class proposals

A review of developments since 1956—the 1963, discussing the disappointing trends in

year before the rise in unemployment began 1962, recognized that "it was therefore the 0 to $3,000.


--38.3 that still plagues us suggests that con failure of expenditures other than consump$3,000 to $5,000.


-26.2 sumption as well as Government spending tion to rise as far as had been expected that $5,000 to $10,000.


-19.9 $10,000 to $20,000.

expanded materially while business profits -15

-16.4 $20,000 to $50,000.

held down the rise in incomes and in turn -12


and investment lagged. Between 1956 and $50,000 and over. -12.6 1963 (first half, seasonally adjusted) per

consumers expenditures” and that “the error sonal consumption went up $100 billion,

then was in the area of business investment, Total.


Government purchases $45 billion. Corpo-

which fell about $8 billion short of the level rate net profits increased less than $3 bil that had been expected for the year 1962," 1 Excluding capital gains revisions.

lion; business investment increased $2.4 (p. 15). It is unfortunate that neither that Source: "President's 1963 tax message, hearings be. billion but, if expressed in constant dol report nor the 1963 tax message drew the fore the Committee on Ways and Means, H.R. 8363, lars, actually declined. 88th Cong., 1st sess., 1963, pt. I, p. 28; “Revenue Act of

obvious policy conclusions. 1963," report of the Committee on Ways and Means, to

Over the same period labor income grew A comparison of trends in the United accompany H.R. 8363, H, Rept. 749, 88th Cong., 1st

$90 billion, transfer payments $18 billion, States and the countries of the European sess., 1963, p. 17. and the total disposable income $107 billion. Economic Community (EEC) throws light

on the relationship between growth in conI do not propose to discuss the philosophical and political considerations underlying

6 "Income Tax Revision,” panel discussions

sumption and in investment. Between 1950 the design of the pending revisions. But a before the Committee on Ways and Means,

and 1961 (the latest year for which these review of their economic implications ap

House of Representatives, 86th Cong., 1st statistics are now available) GNP grew 40 pears essential. sess., 1959, p. 1198.

percent in the United States, 82 percent in * Proceedings of a symposium on economic the EEC countries (in constant prices). The What causes economic lag?

growth, sponsored by the American Bank EEC countries had very little unemployment; It is now widely recognized in economicers Association, ABA, New York, 1963, p. 89. some encountered labor shortages. The theory that the effects of average taxation 8 Daily CONGRESSIONAL RECORD, Sept. 30, significant shifts in economic shares are make people work harder and the effects of 1963, p. A6118.

shown in table IV.

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