The U.S. Should Spend What It Can Afford

THE HOUSING FIGHT

EVERYONE in Washington agrees that the U.S. should have a new Government housing program. But how much should the U.S. spend? And on what?

The Administration wants to spend $317.6 million in fiscal 1960, down sharply from last year's emergency expenditure of $1.1 billion. The Senate has upped the ante: it passed a bill raising expenditures to $505 million for 1960, obligating $3.6 billion in future years. House bills go even farther: they call for increasing expenditures to $957.5 million next year, obligating a total of $6.1 billion.

No one, least of all President Eisenhower, maintains that the Administration's program does all that is needed in U.S. housing. But many economists and housing experts agree that it is all the U.S. can afford at this time, considering the goals of a balanced budget and heavy commitments for national defense. Moreover, it is all the prosperous housing industry really needs to keep booming along at its present fast pace.

Last March, when Congress put through emergency help for building, housing starts were down to a rate of 918,000 annually. But now housing is steaming ahead at the rate of 1,350,000 starts annually with forecasts of a record $52.3 billion (up from $49 billion) in total construction for the year without any increase in Government spending.

The major differences between the Eisenhower Administration and the heavily Democratic Congress is on veterans' housing, urban renewal and public housing. The Senate wants to spend an additional $150 million on direct loans to veterans; the House bill calls for $300 million. The Administration flatly opposes both, argues that a better way to help the VA program is to boost the indirect rate ceiling on VA loans, currently pegged by law at 4 3/4%, which is too low to get veterans mortgage money, to 5 1/4%, where financing is more readily available. Congress has agreed to the boost but as part of packages that include the millions for direct loans.

On urban renewal, the Administration hopes to hold the line at $1.45 billion spread through fiscal 1965, but the Senate insists on $2.1 billion through fiscal 1964 and the House wants $1.5 billion through fiscal 1961 alone. The nation's planners agree that big-city slums should be eliminated as fast as possible, but so far the Federal Government has footed two-thirds of the cost. The Administration wants to cut its share to 50% by 1963. It thus intends to prod the states, which have done little spending so far for urban renewal. The Administration figures the states should then come in with more funds.

The Administration's strongest case is against additional billions for public housing. Though the Senate wants 45,000 more units by 1963, and the House proposes 190,000 more units without a time limit, builders and city planners agree that the U.S. already has more public housing authorized than it can digest. Money has been appropriated for 110,000 units on which work has not even started. In Philadelphia, for example, 10,000 units have been authorized over the last few years, and 5.000 of them are not yet under construction. Cities are having trouble with rising costs and finding suitable "intown" sites.. Says Cincinnati's former Mayor Charles P. Taft: "You cannot move people that fast."

What the Administration--and builders--do want is a vastly bigger FHA mortgage insurance program to avert emergencies such as the two last year when FHA almost exhausted its insurance authorization. The Administration wants to increase the authorization by $6 billion immediately, in fiscal 1960 remove the ceiling altogether. The FHA program has been so successful in helping private enterprise help itself that it has consistently bumped against the statutory ceiling. FHA does not cost the U.S. Treasury a penny, since the actual loans come from private sources encouraged by the Government guarantees; in fact, FHA has made money for the Government. The bills in Congress provide only for a $10 billion boost in the insurance ceiling through fiscal 1960, not for any financial reason but simply to keep more political control over FHA.

Perhaps the best argument against spending all that Congress wants is the strong likelihood that consumers may not be served by any more Government assistance. While the extra cash might result in more houses, the gain, as even some builders agree, could be nullified by a scramble for men and materials that would shoot up building costs, already climbing faster than the rest of the economy. In the last ten years building costs have risen 40%, v. a 20% rise in the general level of wholesale prices. If the Government embarks on a new spending program, estimates are that the costs, which have been stabilizing, will rise 5% next year.

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