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Mr. KOCH. Isn't it true that the purpose of this report was not to state your political view or our political view, but rather to show that certain matters or certain things have occurred in our political life, and you point out that the foundations urged that that be done? Let us assume, so that there will be no getting into argument, that what they recommended was all right. Let us not get into that argument. But say that they sparkplugged it and that the people in the Government who, like everybody else, likes to go to experts to ask what do you think about what planning should be done, have gone to those 5 or 6 associations and the question arises, Who are they to call the signals when neither you nor I elect any of them? There is that question. If they advise political activity or political programs, there is a serious question on the matter of good government. Who is this fourth power? We have the congressional power, the legislature, the judicial, and the executive. But might there be a fourth power here that is not responsible to the people and not elected by the people? Is not that the point that really you wish to mention, and not your political view?

Mr. MCNIECE. That is right.

Mr. HAYS. Yes, but you have just come as close to proving that point as it would be to sit here and say that because I attended Duke University for one semester that university is responsible for anything or everything I say in these hearings. That is just how close you have come in this whole case to proving any connection whatsoever between the foundations and what has happened in this country in the last 20 years.

As a matter of fact, some of our own witnesses, one of them yesterday very plainly said that he didn't know whether the foundations had caused it or the foundations had been pushed along by the irresistible force of the times, or words to that effect. I put it in a more simple analogy and said, "In other words, Doctor, it is a question of which came first, the chicken or the egg, and you don't know." And he said he didn't."

Mr. MCNIECE. There is one thing to say about that. Effect does not precede its cause.

Mr. HAYS. What do you mean to imply by that?

Mr. McNIECE. I mean to imply that we have documentation which shows the gradual development of this movement in this country. I might say that in no case in even the slightest detail were we associated in any way, nor did we know the nature of the documented testimony that was produced by Mr. Sargent.

Mr. HAYS. If you are going to bring in Mr. Sargent, let me say as far as Mr. Sargent is concerned, I will submit his testimony to any impartial jury, and if you can find one valid thing in it that anywhere remotely resembles the truth, I would like you to point it out to me. I will go on to say this to you. I have made an analysis of Mr. Sargent's testimony and over 600 times he mentioned names of people or organizations which he implied were wrong, and he pretty well covered the waterfront.

Mr. MCNIECE. I heard the testimony.

Mr. HAYS. If you don't want to take my word for it, I suggest you read the editorial in the San Francisco Chronicle, a very, I might say, conservative Republican newspaper, which says in effect that if this committeee had taken the trouble to find out as much about Mr. Sar

gent as Californians already knew, and about how his testimony that he gave here had been discredited in California, they would not have wasted 3 days listening to him.

Mr. McNIECE. That was an editorial comment, wasn't it?

Mr. HAYS. That is right.

Mr. McNIECE. That may answer its own question.

Mr. HAYS. It answered it good enough for me.

Mr. MCNIECE. I have seen some editorials, one in particular from California, that was quite the contrary.

Mr. HAYS. I don't know what paper it is from, but I will put the San Francisco Chronicle as being a pretty reputable paper.

The CHAIRMAN. I don't think this is the time to either characterize or evaluate Mr. Sargent's testimony.

Mr. HAYS. I will promise that anything I have said today, Mr. Chairman, will be mild to the evaluation I will give in the minority report. That will be a printed document.

The CHAIRMAN. Do you have any questions?

Mr. KOCH. No, Mr. Chairman.

Mr. WORMSER. No, Mr. Chairman.

Mr. HAYS. I have a lot more questions, but frankly as far as I am concerned, I don't think the thing has much relation to what we are investigating, and I am willing to go ahead on to the next witness.

The CHAIRMAN. It is almost 12 o'clock. We will stand in recess until 2:30 in this same room.

(Thereupon at 11:45 a. m., a recess was taken until 2: 30 p. m., same day.)

AFTER RECESS

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Mr. GOODWIN (presiding). The hour to which the committee stands recessed has arrived, and the committee will be in order. Mr. Wormser.

Mr. WORMSER. I think Mr. McNiece finished reading the supplemental report. He has this report, Economics and the Public Interest, parts of which are narrative and parts of which are statistical. Do you think it necessary to read any part of that, Mr. McNiece?

Mr. MCNIECE. I am perfectly willing to abide by the wishes of the committee. Certainly it would be in my judgment useless, as well as boring and time consuming, to attempt to read all the statistics that are in these 20 tables or so that I have got in here.

I might state that the objective of the report is to follow up the recommendations, as they were enumerated this morning, of the National Planning Board, the National Resources Committee, and the National Resources Planning Board, which lasted through about a decade of time, from about 1933 to 1943, approximately. That was all covered this morning. There were specific titles and captions which I mentioned and followed by reading excerpts under each of them at some length. The statistics in this economic report, which I do not believe it is feasible in a hearing of this type to repeat, merely bear out in caption and in the trend of expenditure-if I may so state it-over the period of years, they support or agree with to a very, very great extent the propositions and suggestions that were brought out in this morning's manuscript which I read.

Mr. WORMSER. What are the sources of those statistics, Mr. McNiece?

Mr. MCNIECE. The sources of the statistics, I think I can say conclusively are governmental reports of one type or another. Most of them are summarized in the large statistical annual put out by the Government Printing Office, in which statistics are assembled from the various executive departments, such as the Census Bureau, the Department of Labor, Department of Commerce, Treasury Department. They affect virtually all phases of our operations. I think we have, if you are interested in seeing it, a copy of the manual in the office from which these statistics have been taken.

Mr. GOODWIN. It is your belief that they should be made a part of the record, is that right?

Mr. MCNIECE. I think they should be made a part of the record. Mr. GOODWIN. In the absence of objection

Mr. WORMSER. I think it was stated this morning they would be made a part of the record.

Mr. HAYS. I don't know whether they were or not, to tell you the truth.

Mr. GOODWIN. In the absence of an objection, the reading of the statistics will be waived and it will be understood that they will become a part of the record.

Mr. WORMSER. This entire document, Mr. Goodwin, please.
Mr. GOODWIN. That refers to the document.

Mr. KOCH. The only remaining question then is this. This morning Mr. McNiece thought it might be helpful for him to read only a part of the script in that document, and I think he is now raising the question whether even that is necessary. I think he would like to have an expression from you two gentlemen whether you feel that would be helpful or not.

Mr. GOODWIN. Let us get an expression of the opinion of the witness whether he feels it would be helpful to have it read or made a part of the record without reading.

Mr. MCNIECE. There are some things here which I thought this morning it might be well to include perhaps in the reading of the record, though I don't want to do it at any waste of time on the part of any of us.

Mr. HAYS. If this is going to be inserted in the record en bloc, there is no point as I see it of reading sections into the record twice, unless you want to emphasize them, and you can do that by just underscoring them.

Mr. MCNIECE. I have no desire to get it into the record twice. It is merely a matter of emphasis that might promote better examination or cross-examination. I have no desire to prolong the reading of this at all. Part of it, as I have said previously, definitely does not lend itself to a narrative form.

Mr. GOODWIN. Then in the absence of objection, the reading of the material to which the witness is now referring will be waived with the understanding it is made a part of the record. Is there objection? Mr. HAYS. No.

Mr. GOODWIN. The Chair hears none. (The statement referred to follows:)

PREFACE

Over the past 50 years sweeping changes have occurred in this country in the functions and activities of the Federal Government. Some of these changes are to be expected as a result of increasing population, industrial, and commercial growth and our greater participation in world affairs.

By no means have all of the changes resulted from the foregoing causes. On the contrary other deviations have occurred which are totally unrelated to changing requirements of Government and which in fact have not been considered as functions of Government under our Constitution and its enumerated powers.

Among these is the increasing participation of the Federal Government in education, slum clearance, nutrition and health, power generation, subsidization of agriculture, scientific research, wage control, mortgage insurance, and other activities. Most if not all of these were politically conceived and depression born. They represent new ventures in our Federal Government's activities.

Most, if not all of these newer activities of Government are recommended in one place or another in publications of socially minded committees of Government and of reports by various educational groups, social science and others, supported by foundation grants.

They are so foreign to the conception of our Government of enumerated powers as we have known it under the Constitution, that the departure has been referred to as a "revolution" by one of its proponents who will be quoted later. While the groundwork for these changes has been underway for a long time, the real acceleration of progress toward these objectives began about 20 years ago. Since then, the movement has grown apace with little or no sign of slowing down.

The word "revolution" is commonly associated with a physical conflict or development of some sort accompanied by publicity that marks its progress one way or another. Not all revolutions are accomplished in this manner. The lower the social stratum in which a revolution originates, the noisier it is likely to be. On the contrary a revolution planned in higher circles by some segment of people at policymaking levels may be very far advanced toward successful accomplishment before the general public is aware of it.

A plan may be formulated with some objective in mind, agreement reached, organization effected, and action begun initially with a minimum of publicity. Such a program has been in progress in this country for years. Originally, the thought of such a revolutionary change was probably confined to very few people the organizers of the movement. With the passage of time and under the influence of the growing emphasis on the so-called social sciences, the Federal Government began to push forward into areas of activity formerly occupied by State and local government and private enterprise.

As an indication of this trend, a statement may be quoted from regional planning, a report issued by the National Resources Committee in June 1938. "More than 70 Federal agencies have found regional organization necessary and there are over 108 different ways in which the country has been organized for the efficient administration of Federal services."

Arrangements of this type facilitate the gradual expansion of governmental action and control through executive directives as distinguished from specific legislative authorization.

Much of this planning was done with the aid of social scientists in Government employ and of outside individuals or groups with similar ideas and objectives. Many of these were directly or indirectly connected with educational organizations who have and still are receiving very substantial aid from the large foundations.

Some of these activities were undertaken under the guise of temporary aid during depression but they have been continued on an increasing scale as will be shown in the ensuing report.

Evidence indicates that a relatively large percentage of foundation giving was originally in the form of grants to endowment funds of educational institutions. There has been a sizable shift in later years from grants for endowment to grants for specific purposes or objectives but still through educational channels.

As far as the economic influence on Government is concerned, the results were manifested first through the planning agencies. The recommendations made by these groups finally evolved into more or less routine matters in which Congress is now asked to approve each year a series of appropriations to cover the cost. These various classes of expenditures are listed and discussed in the

ensuing report. Charts are included at the end. In a number of cases, trends are shown for the greater part of this century.

It should be understood that not everyone who has assisted in furthering these objectives is guilty of conscious participation in questionable action. Those who have studied these developments know that many well-meaning people have been drawn into the activities without knowledge of understanding of the final objectives. A well-organized central core of administrators with a large number of uninformed followers is standard practice in such organized effort.

ECONOMICS AND THE PUBLIC INTEREST

INTRODUCTION

This report is made for the purpose of showing the nature and increasing costs of governmental participation in economic and welfare activities of the Nation. These were formerly considered as foreign to the responsibilities, particularly of the Federal Government.

The nature of these recent activities is briefly described and data shown in tables 1 to 8. The results are shown annually in these tables since 1948 in order to indicate the generally increasing trends in recent years.

Tables 9 to 16 and charts 1 to 12, together with the accompanying data sheets from which the charts are constructed, afford some measure, both volumetric and financial, of the effect these activities have had on national debt, taxes, and personal income of the people.

Finally, the conclusion is drawn that the financial integrity of the Nation will be jeopardized by a continuation of the policies which may be ineffective in the end as far as their stated objectives are concerned.

INDEX OF TABLES

Table 1. New permanent housing units started in nonfarm areas.
Table 2. Federal contracts awards for new construction.

Table 3. Federal food programs.

Table 4. Federal expenditures for promotion of public health.

Table 5. Federal expenditures for social security and health.

Table 6. Federal expenditures for vocational education.

Table 7. Federal educational expenditures.

Table 8. Federal funds allotted for education for school year 1951.

Table 9. Government civilian employees per 1,000 United States population.

Table 10. Government civilian employees versus other civilian employees.

Table 11. Departments and agencies in the executive branch.

Table 12. Ordinary Federal receipts and expenditures.

Table 13. Comparative increases in taxes and population-excluding social security taxes.

Table 14. National income versus total Federal, State and local taxes.

Table 15. National income and national debt per family.

Table 16. Comparative debt and income per family.

Table 17. Gross national product and national debt.

Table 18. Gross national product, Federal debt and disposable personal income. Table 19. Percentage of gross national product-Personal versus governmental purchases.

Table 20. Price decline 8 years after war.

REVOLUTION

In the 20 years between 1933 and 1953, the politicians, college professors, and lawyers, with little help from business, wrought a revolution in the economic policies of the United States. They repudiated laissez-faire. They saw the simple fact that if capitalism were to survive, Government must take some responsibility for developing the Nation's resources, putting a floor under spending, achieving a more equitable distribution of income and protecting the weak against the strong. The price of continuing the free society was to be limited intervention by Government. [Italics added.]

The foregoing statement is the opening paragraph in an article by a Harvard professor (Seymour E. Harris, professor of economics, Harvard University in the Progressive, December 1953) as printed in a recent issue of a magazine and as included in the appendix of the Congressional Record of February 15, 1954.

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