recent poll in my state shows that about seven out of ten Iowa farmers are opposed to farm product cutbacks, with forty-four per cent of the general public specifically against elimination of the low interest REA loans. In one instance, 900 Iowan farmers, acting independently of any official organization, signed a petition urging reinstatement of the REA and other farm related programs. The same thing is happening in farm communities in other states.

In addition, much of the public is concerned, as are we in Congress, over the manner in which this program has been terminated by the Administration. The President's impoundment of funds appropriated by Congress for this program raises substantial Constitutional questions. When Congress judges a program to be in the public interest, it is beyond the President's constitutional authority to negate this Congressional policy. Reinstating the REA program will reaffirm the principle that only Congress has the authority to terminate a program created by it.

Beyond the constitutional implications, the Administration's decision to terminate this program demonstrates an unfortunate lack of concern for the continuing need to improve living conditions in our rural areas. Rural areas contain one-quarter to one-half of our poor people and nearly sixty per cent of our substandard housing. Demands for rural electricity are doubling every seven years. Elimination of the REA loan program will aggravate these conditions by causing higher bills for rural electric users and reduced service.

In terminating this program, the Administration asserts that REA cooperatives no longer need the benefit of special low interest rates. This may be true in some cases. However, abrupt termination of this loan program is not a sensible means of achieving a new REA financing policy. There are two reasons for this. First, many REA cooperatives are already moving towards alternative types of financing, including their own self-help credit institutions. But this new method of financing loans will take time to implement. An abrupt conversion to financing under the Rural Development Act, as proposed by the Administration, is not a reasonable policy. There are many uncertainties regarding the level of loan fund availability and the future cost of money which only a reasonable period of transition can resolve.

Second, there are still rural electric cooperatives in thinly populated areas, with little industrial base or growth, which cannot survive without this program. Private utility companies will not assume the high cost of service to these areas. REA cooperatives in these areas must have access to low interest rates. The Administration's actions show little apparent concern for the hardships which loss of service will cause in some areas.

The REA cooperatives have played an essential role in rural development in the past, and should continue to have an important role in the future. The Administration's decision to terminate the REA two per cent direct loan program will significantly affect the development of many rural areas. Neither the decision to terminate the program, nor the use of impoundment to do so, are in the public interest.

I urge this committee to take action to reinstate the REA loan program without delay.

STATEMENT OF HON. WILLIAM L. DICKINSON, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF ALABAMA

Mr. Chairman, I appreciate the opportunity to participate in these hearings on the REA two percent loan program. The people of the 2d District of Alabama have reaped many benefits from this program, and I am happy to speak in its favor.

I have always felt that the government should not be in competition with free enterprise, but this is a theory and a philosophy. The fact is that the government is and has been in competition for many, many years. In the case of REA loans, the government went into business to provide electrical services in places where no private firm could feasibly do so while still making a profit. As long as the need for REA exists, such as in Alaska, the Far West and other sparsely settled areas, I will continue to support it.

The leaders of many REA cooperatives were in my office recently and admitted there was no reason why many of the co-ops should not "rent" money the same as any other business, but some co-ops in sparsely populated areas cannot. These gentlemen assured me they are working toward independence

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from two-percent money, but they need time to work out of their present dependence.

In view of the oustanding success of the REA program, I believe it is only fair to extend the program for a limited time to give the co-ops time to adjust to a change in operation.

Thank you, Mr. Chairman.

STATEMENT OF HON. DAN DANIEL, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF VIRGINIA

Mr. Chairman, and members of the Committee.

I am most grateful for the opportunity to testify in support of the REA Direct Loan Program.

Few activities of the Federal government, over the past 35 years, have made a more significant contribution to the well-being of American farmers. Indeed, its contribution extends much further than the farm areas, because REA has made it possible for thousands of urban businesses to sell far more washing machines, refrigerators, deep freezers, electric fans, air conditioners, vacuum cleaners, stoves and other conveniences. In addition, millions of telephones: are in use today which could not have been connected prior to the advent of REA.

The Rural Electrification Administration, working in cooperation with more than 1,000 cooperatives, has done a fantastic job of transforming rural America-and that job is still continuing. Each year more areas are covered with new service and millions of Americans are continuing to receive electric service that could not have been made possible without this program.

Thus, the question arises, as to the wisdom and propriety of the announcement by the Administration, on December 29, 1972, that the direct loan program would cease. This decision was made without warning and its impact on rural areas was immediate and shocking. The cooperatives were not only caught off guard; they suddenly began to wonder why so important a step was taken without some opportunity for them to be heard. During the intervening weeks-between the December 29th announcement and the commencement of these hearings-many people have been active. Much has been done— and I commend this committee for the forthright manner in which this issue has been handled.

I have had an opportunity to talk with some of the leaders of several electric cooperatives and I am convinced that they seek both an immediate solution to the dilemma with which they are confronted and a long-term approach to the future financing of this program. These are reasonable men, who are profoundly concerned about the government's budgetary situation, but who are also deeply troubled by the precipitious way in which the termination was announced. They believe, as I do, that the government has an obligation with respect to the continuation of the program during this current fiscal year and for the commitments that already have been made.

At the time the cut-off was announced, many co-ops had loan applications pending with REA. A large number of these groups had made commitments of their own in the expectation that the government would approve their applications. Millions of dollars had been so commited-and now these co-ops are in the position of having expressed faith in an institution which no longer exists. This is not fair-and I feel the situation should be rectified.

In my opinon, some way should be found to provide a guaranteed loan program through the mechanism of the REA, with a graduated interest rate, based on the needs of the individual co-operatives. I trust that this committe will continue to consider this carefully and applaud your efforts in that direction.

STATEMENT OF HON. DON FUQUA, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF FLORIDA

Mr. Chairman, members of the Committee, I welcome this opportunity to testify in behalf of the many bills which have been introduced to reaffirm the intent of Congress that the rural electrification and rural telephone loan authority made available by the Rural Electrification Act of 1936 is mandatory

in the amount appropriated each year. As a co-sponsor of this legislation and one who represents a predominately rural farm and non-farm district, I want the committee to know of my unwavering support for and interest in the activities of our rural electric cooperatives.

The difficult thing for me to comprehend is that while I am standing here the people at the Department of Agriculture and the Office of Management and Budget are dismantling the REA loan program. It is incomprehensible to me that we are in a position of having to pass each bill twice. I was just here asking this committee to reaffirm the congressional intent in the Rural Environmental Assistance Program and now we are having to do the same thing for the Rural Electrification Act. We are talking about federal law-federal law which was passed not too many years after I was born and which has been, and still is, good law. I have expressed concern about the questionable constitutionality of executive impoundments of funds authorized and appropriated by the Congress. I still feel that the President is usurping congressional prerogatives by wholesale impoundments and I will continue to oppose him in these actions. But we are not confronted with mere impoundment when we talk about the REA loan authorization. We are dealing with an executive branch which refuses to faithfully execute the laws of the land and which has blatantly ignored the very clear directive of the Congress. The President has, unless we take affirmative action, vetoed a federal law which has been on the books for 36 years and which has been one of the most beneficial programs for the rural areas which has ever passed the Congress.

The President has proposed that the needs of our rural electric cooperatives can be met by utilizing authority given in the Consolidated Farm and Rural Development Act. Then we learn that the legal counsel of the U.S. Department of Agriculture is of the opinion that there are serious legal and practical reasons why this authority can not be used. Not only can it not serve the very real needs of the cooperatives because of a lack of money, but because the law specifically precludes such use in certain circumstances. And then comes the cruelest cut of all. The President, in a press conference and safely past the November elections, indicated that the reason he was gutting the REA was that 80 percent of the two percent loan monies is going to country clubs and dilettantes. In a letter to the junior Senator from South Dakota, our former colleague and a member of this committee, the Acting Admnistrator of the REA indicated that the only way such information could be secured would be to canvass all REA borrowers. I think that the Acting Administrator might well remind his boss of this fact so that the President might not repeat this calculated attempt to deceive the American people while trying to secure their support for an indefensible position. There was good reason for the Congress to pass a program making available two percent loan funds. There are good, sound reasons for maintaining these loans for certain borrowers and I support the maintenance of such a program. But if the President disagrees with me, and it appears that he does, he can stay within the parameters of the Constitution and within the boundaries of our system of checks and balances which have been developed over a period of nearly two hundred years and come to the Congress with his proposal. My ten-year-old son has had enongh instruction about our system of government to know that the President proposes and the Congress disposes.

Can the President seriously say that the Congress has been unwilling to study and restudy the two percent loan program? Have not the electric cooperatives demonstrated a good faith effort in securing additional capital by establishing their own National Rural Utilities Cooperative Finance Corporation? And I might say that many of our cooperatives in Florida have borrowed from the CFC at the going rate of 7 or 72 percent. The point is, is that the Rural Electrification Act is not subject to change by the President. The Congress is responsible for such changes if a demonstrated need has been shown. I will not stand by and allow an essential program of this nature to be eliminated by executive fiat.

The President has not been so adverse to lending billions of tax dollars to foreign governments at two percent interest rates. His most recent proposal, of course, would be to give, not lend, over $7.5 billion to the government of North and South Vietnam for the reconstruction of that land. And yet, here we have hard working Americans who are providing a service to rural citizens which no one else is willing to undertake. The most unpalatable part of the whole thing is that the President is hiding all of these facts under the cloak of fiscal responsibility. The same President who has sent budget requests to the Congress con

taining greater deficits in the last four years than the combined deficits of Presidents Eisenhower, Kennedy and Johnson. The same President who has signed into law budgets adding over $100 billion to the federal debt.

My constituents are willing to take their fair share of cutbacks in federal spending. But they are not prepared to carry an inordinate and unjust share of this burden, and this is exactly what the President is asking of our rural areas. I was sent here to represent the best interests of my constituents and I will work every day to insure that their viewpoints are made known.

This committee has acted responsibly and with dispatch in response to the President's recent actions against rural America and I wholeheartedly commend their efforts. I respectfully urge this committee to report this measure before the President goes on the media and tells the American people that he has eliminated our jobs as well. Thank you for providing me this opportunity to express my support for our rural electric cooperatives and the valuable service they perform.

STATEMENT OF HON. HAROLD T. (BIZZ) JOHNSON, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA

Mr. Chairman, on December 29, 1972, the Administration announced that three days later, January 1, 1973, the provisions of the Rural Electrification Act would no longer be carried out. After 36 years of successful operation, the program of direct loans to rural electic systems was to be ended, while no replacement program was to be put into operation.

The Norris-Rayburn Act of 1936 established the terms and conditions of the rural electrification program, and the Pace Act of 1944 made even more explicit the provisions of the original act. The appropriations committees of both houses of Congress have annually reviewed and evaluated the objectives of the rural electric program. From time to time, they have recommended changes in program funding, and Congress has gone on to vote on these proposed changes. Yet, Congress has refused repeatedly to change the basic terms of the 1936 Act as amended. Indeed, Congress has repeatedly urged the Administration to cooperate to a much greater extent than it has in the past.

What does the termination of this program mean? Naturally, it suspends all Federal funding for nearly 1,000 rural electric systems for an indefinite period. It suspends for weeks and months ahead any type of rural electric loan program for our Nation's rural areas. It means that should any other program be substituted in the future for the rural electrification progam, such as the establishment of the necessay machinery to make rural electric loans under the insured loan program provided in the Rural Development Act of 1972, as the Administration has proposed a substitute for the REA direct loan program, interest rates will increase from two percent to five percent on the Federal portion of rural electric loans. Finally, it means higher electric bills for 25 million rural electric

consumers.

In my own State of California, the number of consumers per mile of line averages 2.3 for REA borrowers and 38.6 for power companies. At the same time, the amount of revenue to be received per mile of line was estimated at $540 for REA borrowers and $3,567 for power companies. Rural telephone loans totaling $31.2 million in California have built some 19,000 miles of line and brought telephone service to over 135,000 rural subscribers. This basic service would have been unavailable to people in areas like those in my Congressional District if it were not for the direct loan program. Total state-wide loan needs for the State during fiscal year 1973 were estimated to equal $404,050. With the $595 million appropriated by Congress for fiscal year 1973, California would have had no problem in meeting these loan needs.

What are the reasons for the termination of this program? The Administration has stated that the Consolidated Farm and Rural Development Act of 1972 provides very broad authorities to make guaranteed and insured loans to finance all types of community development programs. I do not agree. Had Congress intended to alter the rural electric program by the passage of this act, it would have expressly done so.

The Rural Electrification Act established a direct loan program to finance any qualified entity that would provide electrical service to consumers in rural America. In return for access to these long-term, low-cost loans, rural electric systems had to undertake to serve all located within their assigned service areas

no matter how few and far between they were. Nationwide, rural electric systems average only 3.9 consumers and $849 gross annual revenue per mile of line.

As business and industrial companies move to or start up in rural America, and as suburbs spread out, rural electric systems naturally connect up more new meters per mile than ever before, but still the national average density remains small. Contrary to what the Administration states, country clubs get no REA funds-only electric utility systems do. To qualify for REA loans, systems must promise to extend their lines to the isolated locations within their territories without special charge. The rural electrification program is a necessity for rural development and this means for all people in rural areas that require central station electrical service.

There is no doubt that meaningful Federal participation must be continued in the rural electric program if we are to meet the needs of a growing nation. This requires the immediate restoration of the rural electric direct loan program, which the Administration has eliminated without prior consultation with the Congress or the 1,000 rural electric systems throughout the country and the unfreezing of the supporting program funds already appropriated by Congess. Both the Humphrey-Aiken Bill before the Senate, S. 394, and the Denholm Bill before the House, H.R. 2276, seek to do so.

I urge Congress to vote favorably on these bills and to require the Administration during this fiscal year to execute those programs which have been terminated, suspended, or greatly reduced by administrative fiat. Time is of the essence; until such action is undertaken, we will continue to hamper the successful development of rural America.

Thank you.

STATEMENT OF HON. BOB JONES, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF ALABAMA

Mr. Chairman, I am most grateful to you for this opportunity to express my total support for H.R. 2276 and related bills such as H.R. 3653 to restore the Direct Loan Program for rural electric cooperatives.

You have my most earnest endorsement in your work to reverse the Administration's efforts to end this program which has been so helpful in bringing rural America into the mainstream of activity.

The arbitrary and unwarranted action by the Administration requires denunciation in the strongest terms. We should be remiss in our responsibilities if we did not attempt to alter this action by the Administration.

The Rural Electric Administration has been an important factor in the rural development of the counties which have elected me to the Congress.

This is an area of rapid growth yet the growth has been distributed between rural and urban areas. Industries are seeking location in the northern part of Alabama because of the pleasant climate, plentiful water supply, good transportation system, the skilled and willing people, and the prospects of adequate electric power much of which is dependent upon rural cooperatives. Because community leaders have sought proper facilities in rural areas, agriculture and farming are still significant factors in the economy of the area. Through the constant efforts of the rural electric cooperatives, people are able to live in peaceful rural areas to farm or to commute to nearby industry.

The latest census reports indicate out-migration has been reversed throughout the counties. In all of this development, the availability of electric power has been an important factor yet the growth has also placed on the cooperatives a heavy burden to extend lines and improve service. The Direct Loan Program is of great importance to this effort if consumers are to continue to be served at the lowest possible cost.

In view of the frequently stated national objectives for population dispersal, the termination by the Administration of the Direct Loan Program for rural electric cooperatives is an absurdity.

In view of the long-standing requirement that rural electric cooperatives provide service to rural and sparsely populated areas, the termination by the Administration represents a unilateral breach of faith by the government.

It is my hope that you may be able to give timely consideration to these proposals and report legislation to reverse this unwarranted termination of the Direct Loan Program. You have my complete support in your endeavors.