while cultivation of the cropped acreage may be expected to be more intensive. Moreover, stocks carried over into the 1957-58 season will reflect the large 1956 harvest, and reductions attributable to the 1957 soil bank will not be fully evident until 1958.

In view of the gradual rise in crop yields and the rising productivity of the land withheld from current cropping, the soil bank may be expected to restrain output successively less in 1958 and 1959 than in 1957. One attempt to meet this problem is being made by means of premium payments for holding the same land in the soil bank for successive years. Any actions that would diminish the Program's immediate impact must be avoided. In order that growers of corn may have the opportunity of participating on reasonable terms, recommendations will be presented to the Congress for legislation along the lines of the program favored by a substantial majority of the corn growers who voted in the recent referendum.

Price supports are a valuable instrument for moderating excessive fluctuations in prices and fostering stability in farm income. But experience shows that they can be so used as to fail of their purpose and cause numerous difficulties. The Administration has been gradually moving away from supports at high, rigid percentages of parity originally introduced for the purpose of stimulating output in wartime. As we make progress in the essential task of reducing our huge accumulated surpluses, we must make sure that statutory formulas do not operate to stimulate unneeded production and thus generate new price-depressing surpluses. The modernized parity formula seeks to adjust the relationship among parity prices of individual commodities according to changing supply and demand conditions in the recent past. But the 10-year base for these adjustments is itself distorted by exceptional demand conditions after World War II and during the Korean conflict, as well as by the levels of support that have been in effect for a number of commodities during some of these years. For certain commodities, notably wheat and cotton, parity prices as now computed under statutory formulas appear clearly out of line by any economic standard.

The Secretary of Agriculture has been investigating possible revisions of the parity formula, as required by the Agricultural Act of 1956. Not merely the parity formula but also its application needs significant improvement, and the concept of parity itself requires the closest scrutiny, if these devices are to make the desired contribution to a prosperous, balanced, and free agriculture.

The special needs of two sectors of the farm community have recently called for new Government programs. First, emergency aid has been given to farmers and stockmen in the drought-stricken regions of the Great Plains. Since the beginning of 1953, more than $800 million of Federal funds have been used for low-cost feed grain, subsidized hay and roughage, emergency credit, distribution of free food, cost-sharing in projects to control wind erosion, and support purchases of cattle products. In designated

counties, permission was granted to graze land placed in the soil bank. Benefits of a more permanent sort will be forthcoming from a program of conservation and land-use adjustments in the Great Plains, authorized by the Congress in 1956. The Administration will present recommendations to the Congress for further steps to deal with problems of land use and water shortage that have been accentuated by recent drought conditions.

Second, the Rural Development Program focuses on the 1 million farm families and 1,000 low-income counties in rural areas that have shared only partially in the general prosperity. The emphasis of this Program is on mobilizing local, State, and Federal agencies, private industrial and commercial enterprises, and civic groups in a joint effort to promote balanced economic growth in the communities involved. It is now in operation in some 50 pilot counties or trade areas. Progress will come in part through better farming, but education and vocational training, improvement of health and personal security, information on full-time job opportunities off the farm, and part-time farming supplemented by other employment, also have important roles to play.

AIDING LOCAL AREAS OF PERSISTENT UNEMPLOYMENT

The high employment levels of the last few years have facilitated economic adjustments needed to correct persistent unemployment conditions in various areas. Although the Federal Government makes its greatest contribution to the solution of local unemployment problems by following policies which promote stable growth for the economy as a whole, there are many ways in which it helps local areas with more or less chronic unemployment. In awarding Federal procurement contracts, preference has been given to businesses located in such areas. Also, defense facilities constructed in the areas are accorded special accelerated tax amortization privileges. Increased appropriations for the Office of Area Development in the Department of Commerce have made it possible to extend improved and augmented services to many such areas. The Department of Labor, through affiliated State agencies, has expanded community employment programs and services. But greater efforts are needed to help certain localities strengthen their economic base. In some cases the forces responsible for persistent unemployment are so strong and so varied that they will yield only to comprehensive measures taken jointly by private groups, State and local governments, and the Federal Government. To supplement the efforts of local and State groups, which in a number of areas have already achieved marked success in stimulating sound economic development, an enlarged Federal program of aid to areas of persistent unemployment was proposed to the Congress in 1956. The program provided for Federal loans to pay for part of the cost of purchasing and developing land and facilities for industrial usage, for grants for research to help communities evaluate their resources and needs for economic development, and for an expanded program of technical assist

ance through field consultation. In addition, the proposed legislation would assure better coordination of existing Federal programs so as to make them more useful in the revitalization of areas with longstanding unemployment. Under the proposed legislation an Area Assistance Administration would be established in the Department of Commerce to administer the expanded Federal services. The Congress is urged to enact legislation for this program, including the necessary appropriations.

IMPROVING HOUSING STANDARDS

Better housing and better neighborhoods are essential elements in the higher levels of living that our citizens continuously seek to achieve. A variety of Federal programs-including the insurance and guarantee of home purchase and improvement loans, insurance of loans on rental housing projects, and financial assistance to local governments for the rehabilitation of urban neighborhoods-aid citizens in realizing these ambitions. Two main principles guide the administration of these programs: they should strengthen rather than supplant private and local government efforts and should be limited to essential projects that citizens and business enterprises or local governments, by themselves, cannot adequately carry out. The soundness of these principles is manifested in the record volume of homes built by private enterprise in the last four years, in the improved quality of our stock of housing, in the more widespread ownership of homes, and in the progress in slum clearance and urban renewal.

Several steps taken since 1953 have improved the Government's housing and home financing programs. First, the Federal National Mortgage Association was reorganized in 1954 to provide for the use of private funds in this important facility. At the end of 1956, $15 million of the Association's capital was held by private investors and $770 million of its borrowed funds had been obtained in the private capital market. During the last year, the Association rendered notable service in assisting a home mortgage market that was subject to unusually heavy stress, and it continued to support certain special housing programs. Second, a Voluntary Home Mortgage Credit Program was established in 1954 to make private funds more readily available in remote areas and for minority groups, thereby reducing the need for direct Government lending. Through its services, over 26,000 loans totaling over $230 million have been placed with private lenders. Third, the Urban Renewal Program of 1954 broadened the earlier provisions for Federal aid to slum clearance by authorizing assistance for the conservation and rehabilitation of urban areas. By the end of 1956 about 250 projects in both small and large cities had been approved for execution or final planning, and an additional 191 projects were in more preliminary stages. Federal grants of $825 million disbursed or set aside for this purpose have been, or will be, augmented by local contributions to a total of about $1.2 billion. Through projects now in advanced

stages, more than 9,000 acres of slums will be replaced by 75,000 new housing units and by major industrial, commercial, and other facilities.

To encourage private investment in the rebuilding and rehabilitation of blighted areas and in the provision of homes for persons displaced by public programs, Federal mortgage insurance on favorable terms was made available for residential projects in urban renewal areas and for persons displaced from such areas. Other important changes in the Federal mortgage insurance programs included the equalization of downpayment requirements on new and used houses, which aids private construction by improving the salability of existing homes, and provisions to help meet the growing need for more adequate housing for the elderly.

Several legislative changes in Federal programs are needed at this time. The effectiveness of the Federal mortgage insurance and guarantee programs has been seriously reduced of late, and home building has been impeded, by ceilings on interest rates for Government-underwritten loans that are below competitive market rates for comparable investments. This condition has tended to diminish the flow of funds into the federally-sponsored programs on which large numbers of home purchasers and home builders depend for low-downpayment and long-maturity mortgages. It was partly corrected by administrative action in December 1956 when the maximum interest rate on FHA-insured home loans was raised from 42 percent to 5 percent. The Congress is requested to amend the Servicemen's Readjustment Act to permit a similar adjustment in the maximum interest rate on VA-guaranteed home loans. This action would improve the competitive position of veterans' home loans in the capital market, and increase the availability of credit for veterans desiring to exercise their right to benefits under existing legislation.

The Congress is also requested to review other restrictive ceilings on interest rates on Government-underwritten loans which are tending to defeat the purpose of encouraging private investment. Likewise, provisions controlling the interest rate on Federal loans for college housing should be amended to permit more frequent adjustments to the market yields on long-term Government securities, and to bring forth a larger participation of private capital in this rapidly expanding program.

To enable the Federal National Mortgage Association to continue purchases of mortgages in the secondary market, it is recommended that the Treasury subscription to the Association's capital stock be increased by $100 million. Under existing law, this would add $1 billion to the Corporation's authority to issue debentures and correspondingly augment its capacity to buy mortgages. The Congress will be requested to make additional authorizations for the purchase by the Association of mortgage loans under certain special-assistance programs.

Under legislation enacted last year, applications of World War II veterans for home loan benefits will not be accepted after July 25, 1958. The Con

gress may wish to consider changes in the Federal Housing Administration's home mortgage insurance program to ease the adjustments in home building and financing that are likely to accompany the expiration of these entitlements and to unify the mortgage insurance facilities available to veterans and

nonveterans.

The Voluntary Home Mortgage Credit Program, which has helped channel private funds into home loans in remote areas, should be extended beyond its scheduled expiration date of June 30, 1957.

Finally, the States can do much to improve the flow of funds into home mortgages. Outmoded foreclosure laws, which add unnecessarily to the risks and costs of mortgage lending, should be revised. Legal impediments to investment by out-of-state institutions in federally-underwritten home mortgages, which often result from undue restrictions on out-of-state corporations, should be removed. The investment of pension and welfare funds in such loans should be encouraged within prudent limits. The States are urged to give their early attention to these matters.

RAISING HEALTH STANDARDS

The Nation's material improvement has been accompanied by significant gains in health and life expectancy. Progress in diminishing disease, disability, and premature death has enhanced our capacity for work, for enjoyment of the fruits of effort and enterprise, and for discharge of the military obligations of citizenship. The struggle for better health and longer life is a continual one, however, and huge returns are still to be expected from relatively small outlays for additional research on crippling and killing diseases.

The contributions of the Federal Government toward the health of

our people range over a wide area. The Public Health Service, through the National Institutes of Health, is supporting a greater volume of medical research than ever before. A law enacted in 1954 broadened a FederalState construction program, to give greater emphasis to hospitals for the chronically ill, to nursing homes, and to diagnostic, treatment, and rehabilitation centers. In the same year, the Congress authorized expanded Federal support of a joint program with the States for restoration of the handicapped to more productive lives. In 1956, a three-year program of grants-in-aid was established for the construction of public and nonprofit health research facilities. The Water Pollution Act of 1956 provided for intensified pollution research, matching grants for construction of watertreatment works, and cooperation to resolve serious interstate pollution problems. In the same year, a program was enacted to help overcome the shortage of graduate and practical nurses and other needed health personnel. Another law provided for surveys to determine the extent and nature of illness and disability, to improve the information base for guidance of health research.