Special Message to the Congress on Area and Regional Economic Development.

To the Congress of the United States:

The promise of America is opportunity for our people. It must therefore be a matter of concern to all Americans when any of our fellow citizens is denied the chance to build a full life for himself and his family.

Yet this is the condition of life for millions of our fellow citizens in areas of distress scattered across the continent.

At a time of instant communication and swift transport it is difficult to realize how varied are the regions of this country. Abundance and opportunity, progress and hope are, however, not evenly spread over the land. The same diversity of conditions which contributes to the richness of our society and culture, also bears with harsh inequality on those in stricken stretches of America.

A wide array of programs and weapons has been called into action to make sure no American is denied opportunity because of his race, or lack of education, or the poverty of his birth.

As our people more fully realize their human potential, we must be sure that the economic potential in all areas and regions is also realized. Indeed, in order to be fully effective, education programs, health programs, the programs of the war on poverty, and many other activities require complementary efforts to promote sound economic conditions and the proper physical environment.

Opportunity should not be closed to any person because of the circumstances of the area in which he lives.

Moreover the distress or underdevelopment of any part of the country holds back the progress of the entire nation. This has been one of the great lessons of the last thirty years. Region after region from the deep South to the far West has been brought into the mainstream of our economic life. The consequence has been increased vitality and strength, not only in those areas whose resources had been previously underemployed, but for the nation as a whole. Nonetheless, much remains to be done.

A growing nation cannot afford to waste those resources, human and natural, which are now too often neglected and unused in distressed areas. We cannot afford the loss of buying power and of national growth which flow from widespread poverty. Above all, we cannot afford to shut out large numbers of our fellow citizens from the fulfillment of hope which is shared by the rest. For that would be the denial of the promise of America itself.

The troubles and the potentials of depressed areas which contain approximately 27 million people vary widely. They are scattered across almost every section of the country. But they share certain common characteristics.

Nearly always their population growth is well below the national average, and often it is declining. Large areas in Illinois, Oklahoma, Arkansas and elsewhere have lost more than twenty percent of their population in the last decade, while America as a whole was increasing its numbers by almost as much.

This pattern of decline is a symptom of economic distress. For in these areas employment and income are far below the national average. Unemployment rates of ten to fifteen percent are not uncommon. In dozens of counties more than fifty percent of all families have annual incomes of less than two thousand dollars.

Worst of all, the distressed area is usually caught in a web of circumstances which block progress and lead to further decline.

Young people are forced to leave school earlier to help support their families, thus depriving themselves of needed skills and knowledge. Many young people must leave families and homes behind them in search of greater opportunity, stripping the area of badly needed skill and energy. Older men and women tend to stay on, clinging to the communities and friends which have been part of their lives and which enrich their existence.

As income goes down, these areas are less and less able to support schools, hospitals and other public facilities needed to train their people and otherwise equip them to meet the demands of modern life. They are often too poor to provide the public structures-from roads to water--needed to attract new business and new jobs. The result is a steadily mounting toll in human poverty and retardation of the nation's progress.

To break this downward spiral, to restore vitality and forward motion to America's distressed areas, I recommend a program of Area and Regional Economic Development--focused upon the economic needs of distressed areas and aimed at providing the conditions which can lead to growth. This program will be based primarily upon the experience of the Accelerated Public Works Program, the Area Redevelopment Administration, and the Appalachian Regional Development Commission.

The economic development of distressed areas, like that of a nation, is an enormously complex process. It requires work and cooperation from both public and private enterprise. It requires partnership between officials at every level of government--local, county, State and Federal. It demands attention to a wide diversity of development needs--from improved transportation and water supply to industrial incentives and public facilities. It means that the varied resources and abilities of each region must be harnessed in a concerted effort to build a solid economic base for increasing industry, bringing with it more jobs and higher income.

In this effort we build upon the invaluable experience of the experimental Area Redevelopment program carried on for the last four years.

First, ARA has shown that helping businessmen to expand or to build new plants, coupled with financial assistance to provide needed public facilities, can produce new jobs.

As of January 31, 1965, the Area Redevelopment Administration had approved 548 projects of which over 300 were in rural areas. These projects have and will assist in the creation of over 115,000 jobs. According to a recent study, more than three out of every four persons now working on ARA-assisted projects were not working full-time prior to their present jobs. All of these jobs were in new, expanded or restored facilities.

Second, ARA has shown that the cost to the Government of creating these jobs is less than the cost of supporting these workers and their families through public assistance programs.

It has been estimated that, taking into account all outlays, the average non-returnable one-time cost to the Federal Government for each job is about $800. More than this is saved in not having to pay unemployment compensation and welfare benefits to persons employed as a result of ARA activities. The cost is made once--the benefits continue as long as the jobs last.

Third, ARA has shown that people in our communities will work together in economic self-help programs.

Under the Area Redevelopment program, more than 1,000 local committees have been formed to work on overall economic development programs. Some of the programs are producing dividends without any other Federal aid whatsoever.

Fourth, ARA has shown that counties can be advantageously grouped together to promote cooperation on problems of mutual economic interest.

Under the Area Redevelopment program some 75 multi-county programs have been approved. The counties of the Upper Peninsula of Michigan, for example, are tackling common problems with their own regional organization called UPCAP. The counties of Southeastern Ohio are jointly organized through Ohio University to assist in the growth of local industries. Northeastern Pennsylvania is working under the leadership of Wilkes College to plan and carry out an area-wide economic development program.

Drawing on this past experience we can now move ahead with a long-range program of Area and Regional Economic Development to assist in restoring economic health to distressed areas of America.

BASIC PRINCIPLES Under the new program three basic principles will guide our action.

First, we will devote maximum effort to providing the conditions under which our private enterprise system can provide jobs and increased income. It is up to private business to take advantage of improved conditions for making profits by expanding present businesses or starting new ones, thereby increasing opportunity for the people of the region.

Second, no Federal plan or Federal project will be imposed on any regional, State or local body. No area will be declared distressed by Federal decree. No economic development district will be designated unless the State and local people want it to be designated. No plan will be approved unless it also has the approval of State and local authorities. No programs or projects will be originated at the Federal level. The initiative, the ideas, and the request for assistance must all come to Washington, not from Washington.

Third, the Federal Government will seek full value from every dollar spent or loaned under this program. Every proposal will be tested to see if it offers substantial promise of increasing economic development commensurate with the Federal funds involved. Only if a project meets this test will it be approved. Over the years the increased economic activity stimulated by this program will return its cost many times to the Federal treasury.

ORGANIZATION FOR DEVELOPMENT A key feature of this new program is the proposal to group together distressed counties and communities in economically viable development districts. Planning and assistance will concentrate on the needs of the area as a whole, as well as on individual counties and towns. Moreover, for planning many programs it makes sense to work in terms of larger regions encompassing in some cases parts of two or more states.

This is merely the recognition of a simple fact. Neither distress nor the potential for development respects state, county or community boundaries. The economies of many areas are an organic whole. Just as many counties have declined together, they must advance together if they are to advance at all.

For individual counties and communities are often not capable of individual growth. Their industry must draw upon workers from other areas, and this means educated and trained workers must be available. Factories in communities in other counties can offer employment and rising income to their people. Large scale public facilities can be built most economically if they are designed to serve the needs of a large area. Many other Federal programs, such as assistance in the construction of hospitals, can be carried on more effectively if they are consistent with a genuine, region-wide program of development.

Often places which are not themselves in distress can with help and stimulation provide new jobs for the people of a surrounding distressed region.

Grouping counties together will permit assistance to be concentrated on those communities and industries whose rapid development offers the most hope for all the people of a region.

Thus we hope to work with regions which contain all the components of economic advance, unhampered by rigid boundaries.

The new organization for development will have four main components:

First, Redevelopment areas--the counties and labor commuting areas which are the basic units of the region, and where employment and income figures reveal conditions of distress and provide a measure of progress.

Second, Economic Development districts--Organizations of distressed areas-generally multi-county in nature--which will work together on common problems and can sustain economic growth once the development process is started.

Third, Action planning commissions for regions--multi-state regions where comprehensive, long-range economic planning can be carried out by joint Federal-State Commissions, to solve economic problems too large or difficult to be dealt with on a local basis.

Fourth, Economic development centers-the places where resources can be most swiftly and effectively used to create more jobs and higher income for the people of the surrounding area. These centers may or may not themselves be distressed. Successful development is frequently easier to achieve when a number of activities are located in a single community large enough to offer the advantages which flow from size itself. Clusters of industry tend to attract other industry. And such clusters offer the prospect of increased economic activity and improved economic health of the entire area.

To implement this design for development I recommend that the Secretary of Commerce be given authority to: (1) designate redevelopment areas on the basis of data relating to unemployment or income; (2) work with States to organize multi-county economic development districts; (3) include in such districts economic development centers not otherwise eligible for designation as redevelopment areas; and (4) invite and encourage States to establish multi-state regional action planning commissions to prepare long-range action programs to improve the economic growth of the region.

This program, national in scope, is intended to aid those areas most in need of assistance throughout the country. Accordingly, it is necessary to provide objective criteria to determine those areas qualified for assistance under the program, and thus the bill contains measurable standards for eligibility based on either unemployment or median family income statistics. Qualifying unemployment data would be the same as in the Area Redevelopment Act. In addition, counties could qualify if the median family income is less than 40 percent of the national median.

Indian areas would be designated after consultation with the Secretary of the Interior.

When there has been a sudden plant shutdown or closing of a military installation, the Secretary would be authorized to designate areas for assistance if he determines that the area can be expected to become eligible within three years unless assistance is provided.

The program will contain standards which ensure that aid is concentrated on areas of real need, and that it is being distributed on an objective basis.

INSTRUMENTS OF DEVELOPMENT Our experience with various forms of assistance under ARA and the Accelerated Public Works program has shown us ways to improve our techniques and our tools for providing economic growth.

DIRECT GRANT PROGRAM I recommend a direct grant program for development facilities related to economic development and matched at 50 percent of the cost of the project. In addition, because of the long-term economic depression in many of the depressed areas, I am recommending authorization of supplementary grants to help the most needy communities to meet their matching share of Federal grant-in-aid programs. Additional Federal assistance up to 80 percent of the net project cost would be made available to communities unable to take advantage of regular Federal programs because of their inability to raise the required local share. These supplemental payments to needy communities would be limited to programs assisting in the construction or equipment of development facility projects, including those eligible for 50 percent grants under this proposed legislation.

An annual authorization of $250,000,000 for grants for development facilities and supplemental payments is being requested.

LOAN PROGRAMS The existing ARA program of loans for land, building, machinery and equipment has provided loans at 4 percent interest, of up to 65 percent of the cost of the project for industrial or commercial facilities. As of January 31, 1965, 396 projects have been approved under this program amounting to an investment of $ 173,000,000 in ARA funds.

Private capital has participated with the Federal Government to a great extent in these projects. All told, approximately $127,000,000 has been invested in these projects from all non-Federal sources, of which some 300 private banking institutions have invested more than $40,000,000.

Nevertheless, we need to do more to encourage greater utilization of private capital in redevelopment projects. To this end, I propose that the Secretary of Commerce be authorized to reimburse approved borrowers two percentage points of the cost of interest to them for up to ten years on money borrowed from private institutions for expansion or establishment of plants in redevelopment areas in accordance with the development programs.

This proposal will stimulate greater use of private capital in recovery and development. Moreover, it avoids tying up large blocks of Federal funds over long periods of time. The Federal government's share of these new contracts during any one year would be limited to $5,000, 000. This would facilitate and encourage $250,000,000 of private investment annually in depressed areas.

I am also recommending that authority be granted to guarantee working capital loans up to 90 percent. These guarantees would be available to supplement other financial assistance under this program.

The present ARA program of low-cost 40-year loans for development facilities would be continued largely unchanged under the new program.

These direct loans and loan guarantees would be available to firms where their activities promise to create increased long-term employment.

An annual authorization of $170,000,000 is recommended for a revolving fund, which would include direct loans for commercial and industrial facilities, loans for development facilities, and reserve for working capital guarantees.

The present requirement in the Area Redevelopment Act that State or local public agencies provide 10 percent of the cost of industrial projects, and that local investors must wait until the Federal loan has been entirely repaid before receiving repayment of principal, has worked a hardship on many needy communities. Accordingly, I am recommending that this requirement be reduced to 5 percent of the project cost and that repayment be concurrent with repayment of the Federal loan. In exceptionally needy cases, the Secretary of Commerce would be authorized to waive the 5 percent requirement. However, in no case will there be a waiver of the requirement that at least 15 percent of the total project cost be invested as equity or on a lien subordinate to that of the Federal investment.

SPECIAL ASSISTANCE It is not enough to simply help finance projects. These projects must be part of a comprehensive plan to build a viable economy. To do this we must provide technical assistance and encourage the formation of development organizations large enough to hire trained people to prepare comprehensive plans and carry them out. For these purposes, I am recommending the following new types of assistance:

--Grants and technical assistance to Regional Action Planning Commissions to enable them to prepare long-range regional economic development programs within the context of overall industrial, transportation, recreation and other natural resource planning. An annual authorization of $15 million is proposed for this purpose.

--Grants and technical assistance to multicounty economic development districts for formulating overall economic development plans.

--Additional Federal grants of 10 percent for development facility projects which are part of an approved district development plan, as a special incentive to encourage communities to work together.

--Federal grants and loans for designated economic development centers in order that economic development districts will have resources sufficient to sustain their growth.

For the last two purposes I am recommending an authorization of $50 million. To allow ample time for the States to prepare well thought-out action programs, no projects would be approved under this authorization until one year after enactment of the legislation.

FEDERAL GOVERNMENT ORGANIZATION This enlarged and redirected program of economic development will be administered by the Department of Commerce, which has also been responsible for the existing experimental program. The legislation I am proposing would create the position of Economic Development Administrator in that Department. The functions and powers of the existing Area Redevelopment Administration would be transferred to a successor organization to be created by the Secretary of Commerce to administer the new Act.

Many other federal programs also can contribute to the economic development of distressed areas. It is essential that these programs be closely coordinated to make sure resources are used with maximum effectiveness in reaching the common goal of a higher standard of living for the people of these regions. Therefore, I have directed the Secretary of Commerce to work closely with interested departments and agencies in achieving a coordinated federal effort. It is especially important that this effort be carried forward in close cooperation with the Office of Economic Opportunity.

The anti-poverty program will help people improve their ability to obtain and hold a job. This program is designed to increase the number of jobs available to those who want to work. Obviously both efforts are essential to the future growth of distressed areas. I intend to see that they work closely together toward the common objective.

CONCLUSION There are three important things to remember about this program. First, it is designed to extend opportunity to those now deprived of a full chance to share in the blessings of American life. As such it has a call upon the moral conscience of every citizen.

Second, it will benefit all Americans. The experience of the last thirty years has shown conclusively that the increasing prosperity of any region of this country increases the prosperity of the nation. We have truly become a national economy. Higher incomes for the people of Illinois or Arkansas mean increased markets for automobiles from Detroit and steel from Pittsburgh. Poverty in one area slows progress in other areas.

Third, the job can be done. We have the resources and the skill to extend American abundance to every citizen and every region of this land. This program will help give us the instruments to match our determination to eliminate poverty in America.

The conditions of our distressed areas today are among our most important economic problems. They hold back the progress of the nation, and breed a despair and poverty which is inexcusable in the richest land on earth. We will not permit any part of this country to be a prison where hopes are crushed, human beings chained to misery, and the promise of America denied.

The conditions of our depressed areas can and must be righted. In this generation they will be righted.

LYNDON B. JOHNSON

The White House

March 25, 1965