Mr. MUIR. I have three of them here that would require a capital investment of $17,000,000; they are three plants in the chemical industry. I can not give their names until I get their permission. I do know that these plants are for the production of a material that would very materially help a large percentage of our population. That I know. And they would not compete with existing plants.

Senator COUZENS. Would it supplant some other material?

Mr. MUIR. It would not supplant some other material: it would increase the productive capacity of our farms in this country.

There are projects in one field for which $25,000,000 is needed. Again, I would have to get the permission of those companies to give you their names.

Another thing that came to me yesterday afternoon from our New York office is that the vice president of a large construction company, showed one of our editors a list of 20 industrial building projects that are held up at this time for lack of funds. I am not acquainted with the projects and do not have the amount of money involved, but he made the statement that every one of those projects would be undertaken immediately if they could get the funds, and they did not have the funds.

Senator COUZENS. I suspect that it is an alibi in some instances, like it is in the case of the people who do not pay their taxes.

Mr. MUIR. I suppose that is true, and the only thing to do is to remove that alibi and say, Go ahead and do it.

Now, the coal industry. That is an important industry. The coal industry should spend $260,000,000 for modernization of mines in order to improve the quality of coal and increase the efficiency and production without increasing the tonnage mined.

Senator COUZENS. How many men would that lay out of work? Mr. MUIR. May I go on? I am coming to that right here. Senator COUZENS. Very well.

Mr. MUIR. $125,000,000 of this sum should be spent for modern equipment for the preparation of coal, $50,000,000 for loading equipment, $10,000,000 for modernization of drainage and pumping and $75,000,000 for substitution of steel for wood timbering, which would increase the factor of safety. None of these expenditures would involve the replacement of men by machines.

I have left out a figure here of $110,000,000 for cutting machinery, which would definitely replace men, for the mechanization of the mines. I have left that out because I do not propose that money should be spent for that purpose, especially money loaned by the Government or that comes from a Government source.

Purchase of modern equipment actually makes work, because each order for improved equipment starts a chain of other orders, a wave of work required in the production, processing, transportation, installation, and sale of material and services that reaches back into the mines. It reaches all the way through the industry, and back into the mines. For example, we can use the machine tool industry to show how $50,000,000 urgently needed for modernization would stimulate employment and the purchase of materials. On the basis of 1929 wage scales, 25 per cent or $22,500,000 of this total would employ 13,961 men for one year. On the basis of present wages this same figure would increase the number who would be employed by at least 20 per cent. Materials would constitute 29 per cent of this

total, or $14,500,000, and other purchases 26 per cent, or $13,000,000; and indirectly would give employment to many thousand more men. If all of the $500,000,000 for which there is a need in this industry were available and expended, it would result in the employment of about 250,000 men.

Senator BROOKHART. That is a small fraction of the 8,000,000 that are out of work.

Mr. MUIR. Yes; but this is only one industry. This would also make possible shorter working hours, and it would benefit wholesalers and retailers, as well as manufacturers. They would all benefit from the wages paid these men, and so would the farmer, who would produce the food. And so I say it results in a progressive growth of employment.

Senator COUZENS. Would you approve of the Reconstruction Finance Corporation fixing the amount of return on this money on the amount of wages to be paid?

Mr. MUIR. I would not. I would set this up as nearly as possible as a private corporation, through a credit corporation, and I would fix it so that its debentures could be sold to the public as soon as there is a market again for stocks. This is merely a method revitalizing the capital industries where there is so much unemployment and so great a need for increased employment.

For instance, the manufacturing of such products as castings, rubber goods, wire, cable, and so forth, for the machinery builders would result in ordering raw materials and equipment from other sources, and the money would gradually flow to many States and cities. The next series of orders would also embrace about the same proportion of pay roll and salaries.

Similarly, in the textile industry, on the basis of their need for $200,000,000, 100,000 men would be employed directly, and indirectly many more.

Now, here is something else that I have not heard mentioned, and I know it is true because we are very close to it. The research departments of many manufacturing organizations throughout the country have ready for commercial exploitation new industrial equipment and many devices for the home, from which will undoubtedly spring new industries as soon as the capital for their development is available.

My own belief is that the answer to the increased efficiency of industry lies in shorter working hours, more leisure, a fair rate of pay, so that leisure will make possible consumption of other goods and services, and I believe one of the important things is the development of new industries. I know there is awaiting capital the development of home talkies and television, and air conditioning in the home. This is all very important from the standpoint of employment.

Now, the specific capital needs in this brief survey of some of our industries totals over $1,000,000,000. I do not mean to imply that if all of this credit were available it would be utilized immediately by industry. As a matter of fact, it would not be. My point is that the industrial consumers of capital goods have lacked credit for so long that the demand for its utilization would in many cases have to be re-created.

One of the things that is true in this country, is the fact that we have always had to create demand. As the chairman knows, we created

demand for automobiles. We have created demand for practically everything. We have always had the ability in this country to promote new uses and stimulate demand for new products when funds were available.

Senator BROOKHART. Up to 1920 we had depressions; six of them in 50 years, and then agriculture created the conditions that brought us back. The land was sold to settlers at $1.25, but we gave it to the railroads for nothing and they sold it for $8 or $10. And they maintained the buying power of agriculture, which was more than one-half of the buying power of the country, and is still one-third of the buying power. But since 1920 the land values have gone down and are still going down and the buying power is reduced, and they can not help to bring back this era of buying. How are you going to help that? Mr. MUIR. Senator, I am not in a position to solve the agricultural problem.

Senator BROOKHART. This is not an agricultural problem; it is quite as much an industrial problem as an agricultural problem.

Mr. MUIR. The agricultural situation must be taken care of. As you stimulate employment, the people will have money, and one of the most effective ways to do this is to furnish money for capital needs, and as you get the money into the hands of workers, you are going to have a general rise in the prices of commodities and that, of course, will help agriculture too.

May I go on with this?

Senator COUZENS. How much more have you?

Mr. MUIR. About 10 lines.

Senator CouZENS. Go ahead.

Mr. MUIR. I said that the industrial consumers of capital goods have lacked credit for so long that the demand for its utilization would in many cases have to be recreated. That is the task of the manufacturers of these capital goods. Without credit available it has proved an impossible undertaking, as the record of their present volume of business will show.

I can testify to that. I have talked with manufacturers all over the country. Those who are trying to sell, and those who would buy. Here is a man who would like to put new equipment in his plant, but he can't get the money to do it; he can't get it from the bank. And other men say they can't find the credit. So I say this: If this credit is made available, its utilization will be a challenge to these manufacturers to exert that high degree of intelligent salesmanship which has carried us out of every previous depression. If this effort should fail, the Government has lost nothing, as the Reconstruction Finance Corporation will not be called upon to make the loans. In other words, my point is that this is an experiment. If it succeeds it will partially, at least, solve the problem that you gentlemen are here wrestling with. It will start us back to prosperity. If it fails you have lost nothing through it.

Senator COUZENS (presiding). Are there any questions by the Senators? [After a pause.] If not, the committee will stand adjourned.

Senator TOWNSEND. Are we going to have an executive session? Senator COUZENS. At 2.30, when the chairman comes back. (Whereupon, at 1.10 o'clock p. m., the committee adjourned.)

UNEMPLOYMENT RELIEF

MONDAY, JUNE 13, 1932

UNITED STATES SENATE,

COMMITTEE ON BANKING AND CURRENCY,

Washington, D. C.

The committee met at 10 o'clock a. m., pursuant to call, in the Interstate Commerce Committee room, Capitol, Senator Peter Norbeck (chairman) presiding.

Present: Senators Norbeck (chairman), Brookhart, Goldsborough, Couzens, Watson, Steiwer, Barbour, Gore, Fletcher, Wagner, Barkley, and Bulkley.

The CHAIRMAN. The committee will come to order.

You are here, Mr. Woolley, in the interest of what measure?

Mr. WOOLLEY. The Barbour bill and subjects pertaining thereto.

STATEMENT OF CLARENCE M. WOOLLEY, CHAIRMAN OF THE BOARD, AMERICAN RADIATOR & STANDARD SANITARY CO., NEW YORK, N. Y.

(Transcript not examined by witness)

Mr. WOOLLEY. Mr. Chairman and gentlemen, I have prepared a short statement, and if I may ask the chairman for the privilege and the courtesy to be extended of permitting me to read it, and then have you ask me questions afterwards, I should appreciate it. Is that permissible?

The CHAIRMAN. We have no objection. You may proceed to read your statement, and we will ask questions afterwards.

Mr. WOOLLEY (reading):

I assume that the object of the legislation before this committee is to put the unemployed to work. That is what the country wants. There seem to be two broad methods by which this can be accomplished. The first consists in removing obstacles which have been standing in the way of business confidence. Every day workers are being turned away from jobs because the business men of the country are uncertain as to the future. Congress has the power to remove some of those uncertainties and has already taken important steps in this direction in the passage of beneficient legislation which I do not need to review. Some further steps which are essential are the definite completion of the work of balancing the Budget and the removal of the fear of unwise legislation. No unfortunate legislation has actually become law. You gentlemen in Washington have stood as a bulwark to protect the country against unwise proposals which have flooded in from every side. If confidence can be restored many of our problems will take care of themselves through the normal operation of the business and financial machine. Our principal hope for prompt recovery lies in getting the powerful normal agencies at work.

But I think we are all now agreed that in this emergency we must in addition seek unusual means of finding employment for idle workers. Before discussing particular proposals I want to state one general principle, which is that Government funds should be used as the primer to start the pump rather than as the

main source of supply. If we try to accomplish our task solely with Government money we are doomed to failure, for the Government can not sell enough of its securities to provide a sum adequate to cure the unemployment problem by direct use of funds, and any effort so to do would be so destructive to the bond market, upon which the normal forces of business rely for their financing, as to create more difficulties than it would cure.

There are, it seems to me, four principal avenues through which Government money may be applied to this problem of unemployment. They are:

1. Public construction.

2. Private building construction.

3. The Railroads.

4. Projects of private corporations.

1. Public construction.-There is, I believe, coming to be general agreement that certain forms of public construction may well be stimulated by loans by the Reconstruction Finance Corporation. These forms are what may be called productive public works like toll bridges, toll roads, waterworks, or other projects which carry within themselves the facility for repaying the loans. Senator Pittman some weeks ago submitted a list of such projects. There is a considerable number of these which could be used effectively as means of creating employment. Loans for these enterprises could be made by Reconstruction Finance Corporation to public bodies. As fully as possible these public bodies or the security market would be called upon to provide a part of the funds so that Government money would be used in accordance with the principle above noted, as a means of priming the pump.

If I might be permitted, Mr. Chairman, to say that I happened to be in Santa Fe a few weeks ago attending a meeting, and it was there that I got this idea of the priming of the pump. The president of a company there stated thatd uring the postwar period, when cattle out in that country had become almost worthless, a high official of the War Finance Corporation happened to come along. They were in a terrible state of fear and panic about the cattle situation, cattle being their main item of production; and the representative of the War Finance Corporation said, "Now, if you men in this room will organize a corporation with $2,000,000 of capital, the War Finance Corporation will loan you $20,000,000." Well, do you know, just that thought or feeling that there was money available somewhere cleared up the whole situation. They put up their $2,000,000 and went on their way rejoicing, and there was no need to use any Government money. Senator BROOKHART. Over in Iowa they put up $25,000,000 but cattle went down; they did not go up.

Mr. WOOLLEY (continuing reading):

A second type of public works, concerning which some difference of opinion has I believe arisen, is construction of buildings, roads or other projects directly by the United States Government. The two principles bearing upon this question seem to me, first, that the National Budget should, of course, be completely balanced, and there is a question how far the general principle of pay as you go, which the National Government has always followed, may be impinged upon and the Budget still considered balanced. The second principle is that Government money should be used economically and, as far as possible, as a means of getting other money to work. Again it is a question of priming the pump rather than supplying the water.

These two important_principles seem to suggest that public works carried through directly by the Federal Government are less effective and desirable than the use of Government funds as a means of putting other funds and credit to work.

2. Private building construction.-I am convinced that private-building construction, particularly the construction of homes, offers the most advantageous field in which small amounts of Government money would be effective in em ploying large numbers of people in practically every department of the national business organization. It has been said that we have a housing surplus. First let me suggest that housing is very different from wheat. When there is a surplus of wheat in one place it creates a universal surplus of wheat, but in the