- 2. Statistical means exist for the advance determination and preparation of integrated programs of public works required to stabilize the economy; and the volume of such public works employed must be sufficient to offset the decline in the volume of private construction activity.
- 3. It is important that the Federal Government reaffirm as a permanent policy the principle of cooperative provision of needed public works as a stimulus to & waning private economy, in order that private investment initiative may predicate its plans on the assurance of continuity in the public practice of this policy.
Construction expenditure associated with economic health.—In consideration of these fundamental precepts and the data previously examined, the Committee concludes that an expenditure for all classes of construction and maintenance work, private and public, approximating 15 percent of the national income is a condition associated with the economic health of the country. The ratio should probably not be permitted to rise materially above 15 percent, and any substantial decline below that figure should be regarded as a danger signal and remedied by immediate increase of construction activity, by public stimulation when and to the extent necessary.
In the light of this suggestion it is interesting to observe what occurred from the beginning of the depression onward. In the 4-year period 1927 to 1930, immediately preceding, the total construction program had involved an average annual expenditure of 17.5 percent of the national income, of which 13.2 percent was for private constuction and 4.3 percent for public construction, with maintenance included in each figure.
In the first 4 years of the depression, 1931 to 1934, the average annual expenditure for private construction and maintenance dropped sharply to an amount representing only 7.0 percent of the national income, a decline equal to 6.2 percent of the national income. To restore the total construction and maintenance ratio to 15 percent would have required an increase in the total public expenditure by an amount equal to 3.7 percent of the national income. In the 4-year period the average construction and maintenance expenditure of the Federal Government was actually increased over the amount expended in the period 1927-30 by an amount equal to 1.1 percent of the national income. Of this increase, as shown by table 24, 0.3 percent was supplied by increase of Federal-aid highway expenditures and 0.2 percent by work-relief expenditures on highways. The remainder of 0.6 percent was made up of 0.4 percent for other Federal construction expenditures exclusive of work relief and 0.2 percent in work-relief expenditures, But, at the same time that the Federal Government was increasing its expenditures by the amount of 1.1 percent of the national income, expenditures for construction and maintenance by the States and their subdivisions were reduced by an amount equal to 0.5 percent of the national income, so that the net increase was only 0.6 percent of the national income, as compared with the 3.7 percent increase that was needed to compensate for the decline in private expenditure and restore the total construction and maintenance program to 15 percent of the national income. As a result, the total program dropped to 11.9 percent of the national income, and the national income dropped from an annual average of more than
