STATEMENT OF HON. ABRAHAM KAZEN, JR., A REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS

Mr. Chairman I am pleased to join the bipartisan support for H.R. 3614, a bill familiar to the distinguished chairman and members of this committee. It is a simple reaffirmation of Congressional intent that funds made available for REA loans each year shall be fully obligated each year.

The Rural Electrification Program of our government has been one of the pillars of our national life. Congress through the years has declared its desire that this program be continued, providing low interest loans to extend light and power to homes and communities insufficiently attractive to the private utilities. All across this land, men have banded together in co-operative efforts that aimed to make rural and small-town life better by making light, power, and telephone service more widely available.

These men are honest citizens. They have displayed this quality most recently when they petitioned, through their national organization, for continuance of the 2 percent loans. I call attention to their resolution which recognized that some electric co-operatives may be able to pay more than 2 percent, while others could not afford higher interest payments. Their resolution went on to say that once the loan procedures of the REA Act of 1936 are reinstated, they will negotiate in good faith on changes needed to improve the Act's budgetary impact.

The REA co-ops, under this legislation, would continue their services, and in turn would negotiate interest rates based on the ability of borrowers to pay. Let me stress here what I believe to be the service they offer. I believe it is service important to all consumers, all citizens. I do not have to explain to this committee that farm work is hard, that hours are long and rewards often very modest. Even with modern advances in technology, we are seeing people leave the farms at a rate of half a million a year over the past ten years. Our nation faces a genuine energy crisis in the loss of labor that produces food and fiber, and every citizen has a stake in that energy shortage.

If farm life cannot be maintained attractive and rewarding, the out-migration from the rural areas will increase. Not only will we have less production for our consumer needs, but we shall have multiplication of urban problems of crime, congestion and pollution.

One final point: all of us are aware of the huge national debt and the need for sound investment of every tax dollar. It is important to remember that the REA program is not a hand-out plan, but rather a system of government loans. Certainly the national government needs the strength that rural electrification provides on our farms, and all we ask is that a tested and successful program of obvious merit be maintained.

I am pleased to be a co-sponsor of H.R. 3614 and urged a favorable report from this committee.

STATEMENT OF HON. GUNN MCKAY, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF UTAH

Mr. Chairman, I appreciate the opportunity to present my views in support of the Rural Electrification Act loan programs. Since the President announced on December 29 that minimum loan rates for rural electricity and rural telephone loans would be withdrawn, he has drawn severe criticism from many quartersand with good reason.

The cancellation of preferential loan rates to rural electric cooperatives is alarming both as an expression of the administration attitude toward rural people of this nation, and as an illegal encroachment on the powers of Congress. Rural Electric cooperatives have performed a valuable and essential service to this nation-and continue to do so today. Their efficiency and success have been made possible by the availability of low cost capital. To raise the cost of money at this time is a disservice to those in rural areas who will pay more for their electricity or do without altogether-and to the nation as a whole. For these reasons, I believe it is incumbent upon us to reinstate the 2 percent loan program. The Congress chose to add to the existing programs of federal assistance to rural people by passing the Rural Development Act of 1972. It was the clear intent of Congress to supplement the support for rural areas. That the President would respond to Congressional mandate by signing that bill into law and shutting down the REA program is almost beyond my comprehension. To claim

that the Rural Development Act is a legal basis by which the demise of the REA can be accomplished is either foolishness or a calculated effort to mislead the American public. The Congress did not intend the Rural Electrification Act and the Rural Development Act to overlap in their jurisdiction, and the Administration is running into some critical legal questions in attempting to use one program to fulfill the requirements of another.

The availability of REA 2 percent loans is essential to the well-being of thousands of people living in sparsely inhabited areas of my own state of Utah. There are six REA borrowers in Utah. These are non-profit, locally-owned cooperatives that provide 3,572 miles of line to 9,678 users. As of July 1, 1972, the REA program in Utah, since its inception, had used only $28,609,599. Of this money, $13,729,064 had been repaid.

The cooperatives have a proud record of repayment of their debts and have demonstrated an ability to use federal assistance to good advantage. Many electric cooperatives have paid off their indebtedness in full. Others have found nonfederal sources of funding-particularly the National Rural Utilities Cooperative Finance Corporation. As a matter of fact, last year more than half the funding that went into REA was non-federal.

This year Utah needs $1,135,000 for the operation of the REA program. Part of this money must come from the federal government, as it has in the past, or prices of electricity will go up as increased costs are passed on to the consumer. Plans to extend service to areas that do not have electricity and telephones will, in many instances, be abandoned. Elsewhere, small electric companies, unable to compete, will go out of business.

Mr. Chairman, I have received letters of appeal from electric cooperatives and concerned citizens in my state who were taken by surprise by recent Administration action. They now face serious financial difficulties in providing electric power.

The problems that confront the Raft River Cooperative in Malta, Utah are typical. That company has recently completed a $20,000 plan of service study which concludes that new substations and tie lines are needed immediately in order to continue to provide even adequate service to customers. This will require new capital outlay. All of the feasibility studies have counted on the availability of funds both from REA and CFC. Now, with no prior notice, REA funds dry up, and a $20,000 study is rendered useless. The cooperative has made commitments to farmers who have already put down their wells, prepared the land and purchased expensive sprinkler systems in anticipation of increased service.

Leon Bowler, manager of The Dixie Rural Electric Association in Beryl, Utah, informed me that operating revenues for his cooperative in 1971 amounted to $16,973. If the interest rate on their loans had been 5 percent their interest costs would have been increased by $21,738. Even though that cooperative has the highest retail rate for electricity in Utah, with that kind of interest, they would have lost money.

Dixie Rural was organized to meet the needs of an area so sparsely populated that no utility was interested in serving it. Members of the association have paid the highest cost for power of any other group of consumers in the state. Because of the availability of electricity, the area has been able to grow and the tax base has expanded significantly. Now Dixie Rural is experiencing tremendous growth and will continue to need new capital. At the same time, they are making plans to move from REA financing to private CFC financing.

These cooperatives, along with 1,000 other electric cooperatives aruond the country, have depended on REA for over 35 years. The 2 percent loan program for REA and for the rural telephone bank are not hand-outs to special interest groups. They are a means of bringing electricity and telephone service to people of rural areas who could not afford these services without some initial lowinterest capital. It is wrong to raise the interest rates on loans to the cooperatives that brought electric power to the farms when no private corporation would do it. We can not allow these companies to be gobbled up by larger utilities just when many are getting on their feet and achieving independence from government assistance. And we can not impose higher rates for telephone and electricity on rural people who already pay 20 percent more for these services than their urban brothers and whose average incomes are significantly lower.

Mr. Chairman, REA loans are not a loss to the federal government. They are loans repayable and repaid. I urge the Congress to take action to restore the 2 percent loan program of the Rural Electrification Act.

STATEMENT OF HON. WRIGHT PATMAN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF TEXAS

Mr. Chairman, I had fully planned to personally appear before your Committee to re-affirm my support for the 2% loan program of the Rural Electrification Administration and to urge the passage of legislation which would require the REA Administrator and the Office of Management and Budget to carry out the full intent of Congress. However, the doctors last week ordered me to enter Bethesda Naval Hospital for treatment of a throat ailment which has caused continued hoarseness and I, therefore, must submit this statement for the record. It is essential that the Congress speak out unequivocably on the issue of REA 2% loan money. The President has challenged the Congress-and the American public-on a wide variety of fronts, but few cases are more clear-cut than this blatant move to wipe out the REA Act by administrative fiat.

The dictatorial manner in which the President and his aides have moved to destroy the REA program is startling. But even more amazing-and infinitely more frightening-is the realization that we have a President in the White House who apparently understands nothing about rural areas, small towns, and the great farming areas of the nation. That is what happens when the nation selects its leadership from some fast-moving Wall Street law firm which doesn't know one end of a cow from the other.

If the Congress had any doubts about the need to take up this issue and act forthrightly to protect the REA program, they were wiped out by the President's news conference on January 31. At that time, the President of the United Stateswithout one shred of evidence-charged that 80% of the REA loans were going to "country clubs" and "dilettantes."

This was a false statement designed to delude the American public about the true nature of this rural program and to inflame and encourage opposition to the continuation of 2% loans. This is a shocking misuse of a Presidential press conference and it was so far out of line that the President's own Secretary of Agriculture-who isn't given to disagreements with the White House-had to come back the next day with the statement that the President had been wrong in his claims about "country clubs" and "dilettantes."

This is an apology that should have been made to the entire nation and to every citizen who lives in small towns and rural areas by the President himself. My District is covered by the lines of rural electric cooperatives and my constituents are hard-working, tax-paying Americans and they deeply resent being called "dilettantes" by the President of the United States in a national press conference. I challenge the President-or his illustrious Secretary of Agriculture—or his REA Administrator-to come down to the First District of Texas and point out these "dilettantes" who he charges have been receiving 2% loan money. I will be glad to take them on a tour myself. In fact, I think it would do the President and his so-called agricultural advisors a great deal of good to see one real rural area and maybe then they wouldn't depend so much on the slick public relations statements they are handed.

The pure economics of the situation are that rural electric cooperatives and telephone cooperatives require 2% money to exist. and to carry out the broad functions which they have been assigned in their rural communities. These cooperatives took up a job that the private power companies did not accept because of the cost and difficulties involved and the Congress recognized that this would require low interest, 2% money if it was to work.

Today, the supporters of the President's "Eliminate R.E.A." program say that 2% money is no longer needed because the lines have been stretched out across the country and 98% of our farms are electrified. These statements are made by persons who either are abysmally ignorant about the process of rural electrification or who desire to mislead. Today, as these cooperatives strengthen their systems to meet the growing needs of rural areas, the requirements for low interest loans are greater than ever.

The abandonment of a 2% loan program would mean the end of many small rural electric cooperatives. Many would be made vulnerable to raids and takeovers. Many, if not most, would be forced to raise power rates and this could have a highly destructive impact on the economies of rural areas all over the nation. Many of these cooperatives simply cannot survive on the 5% money which the Administration talks about now. But even the 5% figure could be fleeting. The President, himself, mentioned 7% in his press conference statement of January 31 and there has been loose talk about "the cost of money" as the criteria. So we

really don't know what the Administration ultimately plans to do on this interest rate question. It says the first stop is 5%, but the next stop may be 7, 8 or 9%. It is anyone's guess, if we allow them to wipe out the REA 2% programs.

In reality, the 2% loan program administered by REA since 1936 has been one of the best bargains that the Federal Government ever got under any circumstances. First of all, these loans are being repaid by the rural citizens themselves. The delinquent loans and the defaults have been infinitesmial by any standards applied to either governmental or private projects anywhere in the world at any time.

I was in the Congress when the REA Act was passed and I have been here to support and vote for the amendments to strengthen this Act. The Congress, in effect, entered into a contract with these rural people who were willing to organize their own cooperatives to supply themselves with electricity. In return for this 2% money, the Congress said that the rural cooperatives would have to take on the job of stretching their lines to the remotest areas and to provide service at cost.

The rural people carried out their end of the bargain. They are still carrying out their side of the contract. Now the President says that the Government unilaterally intends to tear up the contract and to wipe out the hard work that these rural people performed to keep their end of a very tough bargain.

We would be infinitely better off as a nation if we had received similar returns for all of the massive subsidies and tax favors which have gone to big businesses and banks over the years. These business subsidies and tax write-offs have been outright gifts to the business sectors and there have been no repayments of loans in this area, even at 2%. Strangely, President Nixon has very little to say about these items.

In addition to the requirements to provide area coverage in return for 2% money, the rural electric cooperatives through the years have taken on new tasks in the form of rural development projects. In many areas of the nation, rural electric systems serve as the catalyst for pulling together community interests to revitalize rural areas, to develop industry, to provide new jobs and to make their areas a liveable place. Without the rural electric cooperatives, many of these rural development programs would have fallen flat on their faces and we would have been faced with worsening conditions in rural areas in many states. They have taken up Federal and state development programs and have provided the local leadership and spark so necessary for such projects.

The result has been a stimulation of the rural economy-a stimulation which has created new tax-paying businesses and which has brought new personal income on which the Federal Government has reaped its taxes. So in addition to repaying their REA loans in a very timely fashion, the electric cooperatives have taken up the burden of rural development and have stimulated new tax sources which far exceed any of the interest payments which the President now talks about.

Mr. Chairman, I sincerely hope that the legislation to restore the integrity of the REA 2% loan program will have the support of the Members of Congress from the urban areas. This, too, is their concern. Many of the problems existing in our urban communities today are the results of the migration of large numbers of rural citizens who come to the cities in vain hopes of finding jobs. This has created new problems for urban areas already lacking adequate housing and job opportunities.

The development efforts of rural electric cooperatives has helped reverse and reduce this out-migration and has allowed millions of rural citizens to remain on the land and in small communities. I hope that our urban Colleagues will realize that the fight against poverty and the fight to provide adequate housing, and public facilities, must be attacked nationwide and that it cannot be segmentized. If the rural areas are allowed to slip back economically, as the President suggests through this new REA program, then the cities too will suffer. And on the other side of the coin, if the urban areas cannot solve their problems, the rural communities will feel the impact. The fight against the President's effort to turn back the clock on this nation's economic and social progress must be waged by urban and rural Congressman together. And nothing would hurt our mutual causes more than to allow ourselves to be split into regional factions.

All of us, whether we come from small towns, or big cities, are deeply concerned about food costs. The President professes to share this concern but he must know that higher power costs in farming areas and in areas which process

agricultural products can only result in higher prices in the marketplace. If the President doubles the cost of delivering electricity to the farm and the processing centers, you can rest assured that this will be reflected in every product on the grocery shelves.

In addition, the development efforts of electric cooperatives have provided many jobs in rural areas which have allowed farmers to supplement their incomes. Thus, many farmers are able to continue to produce food on their family farm because they are able to make a liveable wage in some development activities which have been promoted by their local electric cooperative. This means more food produced and it means that local farming units can survive. This is beneficial to all of us who are interested in seeing a plentiful food supply at reasonable costs.

The President is masking his attack on the REA program and other economic and social programs behind a false call for "fiscal responsibility." It is, of course, fiscal irresponsibility-not responsibility for the Federal Government and the nation to postpone needed projects. It is absurd to think that we can abandon our rural areas without paying a very heavy price for years to come. This will not save money; it will cost more money.

The same thing is true in other areas. We know that we ran up huge and unnecessary costs because we too long neglected the obvious need to clean up our streams and to end pollution. Now we are faced with spending billions of dollars that could have been saved had we acted sooner. Yet we have a President who says postpone and leave these hard problems for some future generation. It is equally absurd for anyone to claim that they are acting in a responsible manner when they suggest that we can postpone the education of our youth or that we can put off providing low and moderate income housing for good, hardworking American families.

Procrastination and postponements can be very costly in the long run and it is very, very wrong for this Administration and this Congress to dodge the hard issues and leave all the solutions for future generations. We have a responsibility to take a hard look at the needs for the nation and find the means of meeting them. We cannot do this through immature talk about arbitrary budget ceilings that are devised by some narrow-minded accountant under a green eye-shade at the Office of Management and Budget. We cannot reduce the greatness of this nation to a cash register mentality.

And every time I hear the President talk about "fiscal responsibility" and saving the taxpayers' money, I think back to the early summer of 1970 when virtually the entire Cabinet was racing through the corridors of the Capitol and the boardrooms of the big eastern banks seeking aid for their favorite welfare case the Penn Central Railroad.

Back then, we didn't hear a word about "fiscal responsibility." Penn Central just wanted the money and the Congress was supposed to play dead and provide it. As you know, we didn't go along with this and the railroad was finally forced to face its own responsibilities and go into trusteeship.

Later, we investigated this case and we found out that the Federal Government would have taken a severe loss had it engaged in what the President and his Cabinet wanted us to do. In fact, I am convinced that we would have lost anywhere from $750 million to one billion dollars if we had undertaken the Nixon plan to bail out the railroad and its highly questionable management.

Someday, perhaps, the President will explain how his desire to bail out these big corporations with tax money squares with all of this propaganda about the Administration's desire to save money.

Mr. Chairman, I have joined with my Colleagues in the sponsorship of H.R. 3615 which would require that the funds appropriated by the Congress for the REA program be fully obligated each year. I know that there have been a number of similar bills introduced and I urge this Committee to act favorably on this legislation and to take whatever other steps are necessary to require the President to live up to the intent of the REA Act and to assure the continuation of a badly-needed 2% loan program.

STATEMENT OF HON. J. J. PICKLE, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS

Mr. Chairman, members of the Agriculture Committee, again I come before you with admiration for the speed and seriousness with which you have acted in getting various agricultural programs re-instated.