To the Congress o f the United States:
     An efficient and dynamic transportation system is vital to our domestic economic growth, productivity and progress. Affecting the cost of every commodity we consume or export, it is equally vital to our ability to compete abroad. It influences both the cost and the flexibility of our defense preparedness, and both the business and recreational opportunities of our citizens. This Nation has long enjoyed one of the most highly developed and diversified transportation systems in the world, and this system has helped us to achieve a highly efficient utilization of our manpower and resources.
     Transportation is thus an industry which serves, and is affected with, the national interest. Federal laws and policies have expressed the national interest in transportation particularly in the last 80 years: through the promotion and development of transportation facilities, such as highways, airways, and waterways; through the regulation of rates and services; and through general governmental policies relating to taxation, procurement, labor and competition. A comprehensive program for transportation must consider all of these elements of public policy.
     During the last session of Congress, action was taken to place our Federal - aid highway program on a sounder fiscal basis. Initial steps were taken to improve the operations of our regulatory agencies through reorganization. A beginning was also made toward meeting the needs of our cities for mass transportation. By Executive Order, I recently assigned to the Department of Commerce authority for emergency transportation planning.
     But pressing problems are burdening our national transportation system, jeopardizing the progress and security on which we depend. A chaotic patchwork of inconsistent and often obsolete legislation and regulation has evolved from a history of specific actions addressed to specific problems of specific industries at specific times. This patchwork does not fully reflect either the dramatic changes in technology of the past half-century or the parallel changes in the structure of competition.
     The regulatory commissions are required to make thousands of detailed decisions based on out-of-date standards. The management of the various modes of transportation is subjected to excessive, cumbersome and time-consuming regulatory supervision that shackles and distorts managerial initiative. Some parts of the transportation industry are restrained unnecessarily; others are promoted or taxed unevenly and inconsistently.
     Some carriers are required to provide, at a loss, services for which there is little demand. Some carriers are required to charge rates which are high in relation to cost in order to shelter competing carriers. Some carriers are prevented from making full use of their capacity by restrictions on freedom to solicit business or adjust rates. Restraints on cost-reducing rivalry in rate-making often cause competition to take the form of cost-increasing rivalry - such as excessive promotion and traffic solicitation, or excessive frequency of service. Some carriers are subject to rate regulation on the transportation of particular commodities while other carriers, competing for the same traffic, are exempt. Some carriers benefit from public facilities provided for their use, while others do not; and of those enjoying the use of public facilities, some bear a large part of the cost, while others bear little or none.
     No simple Federal solution can end the problems of any particular company or mode of transportation. On the contrary, I am convinced that less Federal regulation and subsidization is in the long run a prime prerequisite of a healthy inter-city transportation network. The constructive efforts of State and local governments as well as the transportation industry will also be needed to revitalize our transportation services.
     This Administration's study of long-range transportation needs and policies convinces me that current Federal policies must be reshaped in the most fundamental and far-reaching fashion. While recognizing that a revision of the magnitude required is a task to which the Congress will wish to devote considerable time and effort, I believe the recommendations below are of sufficient urgency and importance that the Congress should begin consideration of them at the earliest practicable date. If direct and decisive action is not taken in the near future, the undesirable developments, inefficiencies, inequities, and other undesirable conditions that confront us now will cause permanent loss of essential services or require even more difficult and costly solutions in the not-too-distant future.

     The basic objective of our nation's transportation system must be to assure the availability of the fast, safe and economical transportation services needed in a growing and changing economy to move people and goods, without waste or discrimination, in response to private and public demands at the lowest cost consistent with health, convenience, national security and other broad public objectives. Investment or capacity should be neither substantially above nor substantially below these requirements - for chronic excess capacity involves misuse of resources, and lack of adequate capacity jeopardizes progress. The resources devoted to provision of transportation service should be used in the most effective and efficient manner possible; and this, in turn, means that users of transport facilities should be provided with incentives to use whatever form of transportation which provides them with the service they desire at the lowest total cost, both public and private.
     This basic objective can and must be achieved primarily by continued reliance on unsubsidized privately - owned facilities, operating under the incentives of private profit and the checks of competition to the maximum extent practicable. The role of public policy should be to provide a consistent and comprehensive framework of equal competitive opportunity that will achieve this objective at the lowest economic and social cost to the nation.
     This means a more coordinated Federal policy and a less segmented approach. It means equality of opportunity for all forms of transportation and their users and undue preference to none. It means greater reliance on the forces of competition and less reliance on the restraints of regulation. And it means that, to the extent possible, the users of transportation services should bear the full costs of the services they use, whether those services are provided privately or publicly.
     For some seventy-five years, common carriage was developed by the intention of Congress and the requirements of the public as the core of our transport system. This pattern of commerce is changing - the common carrier is declining in status and stature with the consequent growth of the private and exempt carrier. To a large extent this change is attributable to the failure of Federal policies and regulation to adjust to the needs of the shipping and consuming public; to a large extent it is attributable to the fact that the burdens of regulation are handicapping the certificated common carrier in his efforts to meet his unregulated competition. Whatever the cause, the common carrier with his obligation to serve all shippers - large or small - on certain routes at known tariffs and without any discrimination performs an essential function that should not be extinguished.
     Considerable research and analysis, going far beyond our present findings, will be required before we know enough about the costs and other characteristics of various forms of transportation to guarantee the achievement of these objectives in full. In the meantime, it is clear that the following fundamental reforms in our transportation policy are needed now.

     Our system of intercity public transportation - including railroads, trucks, buses, ships and barges, airplanes and pipelines - is seriously weakened today by artificial distortions and inefficiencies inherent in existing Federal policies. Built up over the years, they can be removed only gradually if we are to mitigate the hardships that are bound to arise in any program of far-reaching adjustment.
     As an initial step, I am requesting the Chairmen of the Civil Aeronautics Board, the Interstate Commerce Commission and the Federal Maritime Commission to meet at frequent intervals to discuss regulatory problems affecting the various modes of transportation and to seek coordinated solutions in the form of legislation or administrative action that will improve the regulatory process.

(A) Equal competitive opportunity under diminished regulation.

      (1) Bulk commodities - At present, the transportation of bulk commodities by water carriers is exempt from all rate regulation under the Interstate Commerce Act, including the approval of minimum rates; but this exemption is denied to all other modes of transportation. This is clearly inequitable both to the latter and to shippers - and it is an inequity which should be removed. Extending to all other carriers the exemption from the approval or prescription of minimum rates would permit the forces of competition and equal opportunity to replace cumbersome regulation for these commodities, while protecting the public interest by leaving intact the ICUs control over maximum railroad rates and other safeguards (such as the prohibition against discrimination, and requirements on car service and common carrier responsibility). While this would be the preferable way to eliminate the existing inequality, Congress could elect to place all carriers on an equal footing by repealing the existing exemption - although this would result in more, instead of less, regulation and very likely in higher though more stable rates. Whichever alternative is adopted, these commodities are too important a part of carrier traffic to continue to be governed so unequally by Federal rate regulation.
     (2) Agricultural and fishery products - An exemption similar to that described above, and now available only to motor carriers and freight forwarders, relates to agricultural and fishery products. This exemption from minimum rates should also be extended to all carriers. Here, too, the ICC should retain control of maximum railroad rates and certain other controls to protect the public interest in those areas where there is no effective truck or water carrier competition to keep rates down.
     The combined effect of extending these bulk and agricultural exemptions will be to reduce drastically and equalize fairly the regulation of freight rates in this country. Freed to exercise normal managerial initiative, carriers will be able to rationalize their operations and reduce costs; and shippers should consequently enjoy a wider choice, improved service and lower rates.
     (3) Intercity passenger rates - The traveling public, like the commercial shipper, is also uninterested in paying higher rates to subsidize weak segments of the transportation industry. Chronic over-capacity and deficits can be ended in the long run only in an industry made fit, lean and progressive by vigorous competition and innovation. But this is not possible as long as Federal agencies fix uniform minimum rates for passenger travel. I recommend, therefore, that the Congress enact legislation which would eventually limit the control of intercity passenger rates to the establishment of maximum rates only. In the case of the airlines, it may be preferable to initiate this program on a gradual or temporary basis under existing authority.
     To prevent the absence of minimum rate regulation under the above three proposals from resulting in predatory, discriminatory trade practices or rate wars reflecting monopolistic ambitions rather than true efficiency, the Congress should make certain that such practices by carriers freed from minimum rate regulations would be covered by existing laws against monopoly and predatory trade practices.
     While the above three recommendations relate to the most critical - and controversial - problems of unnecessary or unequal regulatory curbs on transportation, other changes in the Interstate Commerce Act and the Federal Aviation Act are needed consistent with these same principles. I recommend that legislation be enacted to:
     (4) Assure all carriers the right to ship vehicles or containers on the carriers of other branches of the transportation industry at the same rates available to non-carrier shippers. This change will put the various carriers in a position of equality with freight forwarders and other shippers in the use of the promising and fast-growing piggyback and related techniques.
     (5) Repeal the provision of the Interstate Commerce Act which now prevents a railroad from hauling cargo it owns. The need for this provision, which goes back to the days of oppressive railroad monopoly, has largely passed; and its current effect is to handicap the railroads in competing with other modes of transportation. The antitrust laws can insure protection against the possible abuse by a railroad of its dual status as shipper and carrier.
     (6) Direct the regulatory agencies to sanction experimental freight rates, modifications and variations in existing systems of classification and documentation, and new kinds or combinations of service.

(B) Consistent policies of taxation and user charges.

     The same accidents of circumstance that have molded our transportation regulatory policies and programs have largely determined specific transportation taxes. As a result, inequities have developed and in some instances have persisted for many years.
     (1) Transportation excise tax. I have already recommended repeal of the 10 percent passenger transportation tax. This tax, a vestige of World War II and the Korean War, has undoubtedly discriminated against public transportation in favor of the automobile. I again recommend repeal of this tax to improve the competitive position of intercity railroad and bus passenger transportation systems, which generally are not publicly supported, and to clear the way for an equitable system of user charges for aviation.
     (2) Aviation. For commercial airlines, I have suggested (a) continuation of the 2 cents-per-gallon net tax on gasoline and extension of that tax rate to all jet fuels; and (b) a 5 percent tax on airline tickets and on air freight waybills. By delaying until January 1, 1963 the effective date of all proposed changes as they affect aviation - including the repeal of the passenger tax for the airlines - ample time will be allowed for review by the Civil Aeronautics Board of any tariff adjustments that may be required by the carriers to recover the cost of user charges on fuel. The ticket and waybill taxes will be passed on directly to ultimate users.
     For general aviation, such as recreational flying and company planes to which ticket and waybill taxes would not be applicable, a fuel tax of 3 cents per gallon is recommended as a minimal step toward recouping the heavy Federal investment in the airways.
     All of the above taxes - in effect user charges - will recover only about half of the annual cost of the Federal airways system which is properly allocable to civil aviation. Total airways costs, which are approximately $500 million annually, have risen steadily in the past decade and will continue to grow as airways facilities and services are improved to accommodate future air traffic. Repeal of the 10 percent passenger tax as it now applies to aviation should not become effective, therefore, until the recommended user charges are in force for all segments of civil aviation.
     (3) Inland waterways. Also in the interest of equality of treatment and opportunity, the principle of user charges should be extended to the inland waterways. A tax of 2 cents per gallon should be applied to all fuels used in transportation on the waterways. The recommended effective date, January 1, 1963, will allow time for review by the Interstate Commerce Commission of any adjustments that may be necessary in common carrier rates. This deferral is recommended even though the bulk of inland waterways traffic is carried by unregulated rather than regulated carriers.
     The new tax should include an exemption similar to the current exemption from taxation accorded to gasoline and ships' supplies for vessels employed in the fisheries, foreign trade, or trade between the Atlantic and Pacific ports of the United States or between the United States and any of its possessions. Vessels in domestic trade using facilities and routes similar to those engaged in foreign trade, and vessels in coastal trade which are too large to use the intracoastal waterways, should also be exempted.
     This Administration recognizes the responsibility of the Government to maintain and improve our system of inland waterways. Over $2 billion of Federal funds has already been invested in capital improvements. Expenditures for operating and maintaining the waterways are about $70 million annually, even though only a small fraction of the traffic consists of common carriers which serve all shippers and the general public. The users of the waterways include some of the largest and financially strongest corporations in the United States today, and it is surely feasible and appropriate for them to pay a small share of the Federal Government's costs in providing and maintaining waterway improvements.
     (4) Income taxes. Another effort to improve equity in taxation is being taken by the Treasury Department, which is reviewing the administrative guidelines now governing depreciation rates in the transportation industry. The objective of this Administration will be to give full recognition to current economic forces, including obsolescence, which in their impact upon the lives of depreciable assets may affect quite differently the different modes of transportation and, therefore, their competitive relationships. In addition, I recommend that the Internal Revenue Code be amended to increase from 5 to 7 years the period during which regulated public utilities, including those in transportation, can apply prior year losses to reduce current income for tax purposes.

(C) Even-handed Government promotion of inter-city transportation.

     To achieve a better balance of Federal promotional programs:
     (1) I urge favorable consideration of legislation proposed by the Civil Aeronautics Board last year to make the domestic trunk air carriers ineligible for operating subsidies in the future. These carriers provide more passenger miles of transportation service than any of the other common carriers; and, while they are experiencing temporary over-capacity and have recently sustained financial losses, they have bright prospects for long-run growth and prosperity which should make them permanently independent of Government support.
     (2) With respect to other aviation subsidies, the Congress has limited to $6 million the funds available in fiscal 1962 for the payment of operating subsidies to the three certificated helicopter services; and the Appropriations Committees have requested the Civil Aeronautics Board to prepare a schedule for the termination of these subsidies. I endorse this position and seek the extension of this principle. I am asking the Board to develop by June 30, 1963, a step-by-step program, with specific annual targets, to assure sharp reduction of operating subsidies to all other domestic airlines as well, within periods to be established by the Board for each type of service or carrier. Rigorous enforcement of the Board's "use-it-or-lose-it" policy and further development of the Class Rate Subsidy Plan which the Board initiated in January 1961 with the cooperation of the local service carriers would clearly facilitate this objective. The development of single airports to serve adjacent cities, or regional airports, is also clearly necessary if these subsidies are to be eliminated and if the Federal Government and local communities are to meet the nation's needs for adequate airports and air navigation facilities without excessive and unjustifiable costs.
     (3) The Federal Government is a major user of transportation services. To assure the greatest practical use of the transportation industry by government, I am directing all agencies of the Government, in meeting their own transport needs, to use authorized commercial facilities in all modes of transportation within the limits of economical and efficient operations and the requirements of military readiness.
     (4) I also recommend that the Post Office Department be given greater flexibility in arranging for the transportation of mail by motor vehicle common carrier.
     (5) Last year the Congress extended until June 30, 1963, the authority by which the Interstate Commerce Commission has been guaranteeing interest and principal payments on emergency loans to the railroads for operations, maintenance, and capital improvements for which the carriers cannot otherwise obtain funds on reasonable terms. A similar law by which the Government guarantees loans for aircraft and parts being purchased by certain certificated air carriers will expire this year. Since the Department of Commerce is already a focal point for Government transportation activities and since, in the interest of program coordination and consistency of policy these activities should be further consolidated, I recommend that the railroad loan guarantee authority, and the aviation loan guarantee authority if it is extended, be transferred to the Department of Commerce. These problems are not regulatory in nature and are clearly separable from the chief functions of the Interstate Commerce Commission and the Civil Aeronautics Board, and can be acted upon more expeditiously by an executive agency.

(D) Protection of the public interest.

     (i) Mergers. A great resurgence of merger talk has occurred in the railroad and airline industries in the last several years, and major mergers have been proposed in recent months in both industries. The soundness of such mergers should be determined, not in the abstract, but by applying appropriate criteria to the circumstances and conditions of each particular case. This Administration has a responsibility to recommend more specific guidelines than are now available and more specific procedures for applying them.
     Accordingly, I have directed the formation of an inter-agency group to undertake two tasks: first, after proper consultation with interested parties, to formulate general administration policies on mergers in each segment of the transportation industry; and second, to assist the Department of Justice in developing a Government position on each merger application for presentation before the regulatory agencies. This group will consist of agency representatives designated by the Attorney General, the Secretary of Commerce, the Secretary of Labor, the Chairman of the Council of Economic Advisers, and the heads of other agencies involved in a particular case. Under the Chairmanship of Commerce, this group will examine each pending merger in transportation on the basis of the following criteria and others which they may develop:
     (a) Effective competition should be maintained among alternative forms of transportation, and, where traffic volume permits, between competing firms in the same mode of transportation.
     (b) The goals of economical, efficient, and adequate service to the public - and reduction in any public subsidies - should be secured by the realization of genuine economies.
     (c) Affected workers should be given the assistance to make any necessary adjustments caused by the merger.
     (2) Through routes and joint rates. For many years some regulatory agencies have been authorized to appoint joint boards to act on proposals for intercarrier services; but they have taken virtually no initiative to foster these arrangements which could greatly increase service and convenience to the general public and open up new opportunities for all carriers. I recommend, therefore, that Congress declare as a matter of public policy that through routes and joint rates should be vigorously encouraged, and authorize all transportation agencies to participate in joint boards.
     (3) I have requested the Secretary of Defense and the Administrator of General Services to make the fullest possible use of their statutory powers, and I urge the enactment of such additional legislation as may be necessary, to encourage experimental rates and services - to explore every promising simplification of rate structures - and to encourage the development of systems that will make rate ascertainment and publication less costly and more convenient. These experiments will be pilot studies for a more general simplification of rates and for the application of new kinds of service to transportation in general.
     (4) I am requesting the National Conference of Commissioners on Uniform State Laws, in cooperation with the Interstate Commerce Commission, to develop and urge adoption of uniform State registration laws for motor carriers operating within states but handling interstate commerce. The Congress should, consistent with this effort, give the Interstate Commerce Commission authority to enter into cooperative enforcement agreements with the various States, covering both the economic and the safety aspects of highway transportation.
     (5) I recommend that all common carriers, including freight forwarders and motor carriers, be required to pay reparations to shippers charged unlawfully high rates.
     (6) Finally, I recommend that the civil penalty now imposed on motor carriers for failure to file required reports be substantially increased; that the same civil penalty be imposed for violations of safety regulations and for operating without authority; and that the safety regulations of the Interstate Commerce Commission should be made fully applicable to private, as well as to common and contract carriers, so as to clarify the ambiguous situation prevailing at present.

     I have previously emphasized to the Congress the need for action on the transportation problems resulting from burgeoning urban growth and the changing urban scene.
     Higher incomes coupled with the increasing availability of the automobile have enabled more and more American families, particularly younger ones with children, to seek their own homes in suburban areas. Simultaneously, changes and improvements in freight transportation, made possible by the development of modern highways and the trucking industry, have reduced the dependence of manufacturers on central locations near port facilities or railroad terminals. The development of improved production techniques that require spacious, one-story plant layouts have impelled many industries to move to the periphery of urban areas. At the same time the importance of the central city is increasing for trade, financial, governmental and cultural activities.
     One result of these changes in location patterns has been a change in the patterns of urban travel. Formerly people traveled mainly along high density corridors radiating to and from downtown. Today traffic patterns are increasingly diverse. Added to traditional suburb-to-city movements are large crosstown flows which existing mass transportation systems are often not geared to handle. Also, the increasing use of automobiles to meet urban transportation needs has resulted in increasing highway congestion, and this has greatly impeded mass transportation service using those highways.
     This drastic revision of travel patterns in many urban areas has seriously impaired the effectiveness and economic viability of public mass transportation, which is geared to the older patterns. A steady decline in patronage and a concomitant rise of unprofitability and financial problems have occurred. This has been particularly true of rail commuter and street car services limited to particular routes by fixed roadbeds.
     To conserve and enhance values in existing urban areas is essential. But at least as important are steps to promote economic efficiency and livability in areas of future development. In less than twenty years we can expect well over half of our expanded population to be living in forty great urban complexes. Many smaller places will also experience phenomenal growth. The ways that people and goods can be moved in these areas will have a major influence on their structure, on the efficiency of their economy, and on the availability for social and cultural opportunities they can offer their citizens. Our national welfare therefore requires the provision of good urban transportation, with the properly balanced use of private vehicles and modern mass transport to help shape as well as serve urban growth.
     At my request, the problems of urban transportation have been studied in detail by the Housing and Home Finance Administrator and the Secretary of Commerce. Their field investigations have included some 40 metropolitan and other communities, large and small. Their findings support the need for substantial expansion and important changes in the urban mass transportation program authorized in the Housing Act of 1961 as well as revisions in Federal highway legislation. They give dramatic emphasis, moreover, to the need for greater local initiative and to the responsibility of the States and municipalities to provide financial support and effective governmental auspices for strengthening and improving urban transportation.
     On the basis of this report, I recommend that long-range Federal financial aid and technical assistance be provided to help plan and develop the comprehensive and balanced urban transportation that is so vitally needed, not only to benefit local communities, but to assure more effective use of Federal funds available for other urban development and renewal programs. I recommend that such Federal assistance for mass transportation be limited to those applications (1) where an organization, or officially coordinated organizations, are carrying on a continuing program of comprehensive planning on an area-wide basis, and (2) where the assisted project will be administered through a public agency as part of a unified or officially coordinated area-wide transportation system.

(A) Long-range program.

     Specifically, I recommend that the Congress authorize the first installment of a long-range program of Federal aid to our urban regions for the revitalization and needed expansion of public mass transportation, to be administered by the Housing and Home Finance Agency. I recommend a capital grant authorization of $500 million to be made available over a three-year period, with $100 million to be made available in fiscal 1963. Only a program that offers substantial support and continuity of Federal participation can induce our urban regions to organize appropriate administrative arrangements and to meet their share of the costs of fully balanced transportation systems.
     This Federal assistance should be made available to qualified public agencies in the form of direct grants to be matched by local, non-Federal contributions. For rights-of-way, fixed facilities, including maintenance and terminal facilities, and rolling stock required for urban mass transportation systems, grants should be provided for up to two-thirds of the project cost which cannot reasonably be financed from expected revenue. The remaining one-third of the net project cost would be paid by the locality or State from other sources, without Federal aid. The extension and rehabilitation of existing systems as well as the creation of new systems should be eligible. In no event should Federal funds be used to pay operating expenses. Nor should parking facilities, except those directly supporting public mass transportation, be eligible for Federal grants. While it is expected that the new grant program will be the major Federal support for urban mass transportation, it is important to have Federal loans available where private financing cannot be obtained on reasonable terms. I therefore recommend removal of the time limit on the $50 million loan authorization provided in the Housing Act of 1961. Federal loans would not be available to finance the State or local one-third contribution to net project cost.
     Although grants and loans would be available only to public agencies, those agencies could lease facilities and equipment or make other arrangements for private operation of assisted mass transportation systems. The program is not intended to foster public as distinguished from private mass transit operations. Each community should develop the method or methods of operation best suited to its particular requirements.
     A community should be eligible for a mass transportation grant or loan only after the Housing Administrator determines that the facilities and equipment for which the assistance is sought are necessary for carrying out a program for a unified or officially coordinated urban transportation system as a part of the comprehensively planned development of the urban area.
     The program I have proposed is aimed at the widely varying transit problems of our Nation's cities, ranging from the clogged arteries of our most populous metropolitan areas to those smaller cities which have only recently known the frustrations of congested streets. There may, however, be some highly specialized situations in which alternative programs, for example, loan guaranties under stringent conditions, would be better suited to particular needs and the Congress may, therefore, wish to consider such alternatives.

(B) Emergency aid.

     Time will be required by most metropolitan areas to organize effectively for the major planning efforts required. Even more time may be needed to create public agencies with adequate powers to develop, finance and administer new or improved public transportation systems. Meanwhile, the crisis conditions that have already emerged in some areas threaten to become widespread. Mass transportation continues to deteriorate and even to disappear. Important segments of our population are thus deprived of transportation; highway congestion and attendant air pollution become worse; and the destructive effects upon central business districts and older residential areas are accelerated.
     In recognition of this serious situation, I also recommend that the Congress, for a period of three years only, authorize the Housing Administrator to make emergency grants, (a) where there is an urgent need for immediate aid to an existing mass transportation facility or service that might otherwise cease to be available for transportation purposes, (b) where an official long-range program for a coordinated system is being actively prepared, and (c) where the facilities or equipment acquired under the emergency grant can reasonably be expected to be required for the new long-range system. This emergency aid should not exceed one-half of the net project cost. Upon completion of an acceptable area-wide transportation program within three years, these emergency projects, if a part of the ultimate system, should qualify for the balance of the regular Federal assistance available under the long-range program.

(C) Role of highways.

     Highways are an instrumental part of any coordinated urban transportation program, and must be an integral part of any comprehensive community development plan. Accordingly, I have requested the Secretary of Commerce to make his approval of the use of highway planning funds in metropolitan planning studies contingent upon the establishment of a continuing and comprehensive planning process. This process should, to the maximum extent feasible, include all of the interdependent parts of the metropolitan or other urban area, all agencies and jurisdictions involved, and all forms of transportation, and should be closely coordinated with policymaking and program administration.
     Progress has already been made in coordinated transportation planning for metropolitan areas through the use of funds made available under both Federal highway and housing legislation. To increase the effectiveness of this effort, I recommend that the Federal-aid highway law be amended to increase the percentage of Federal funds available to the States for research and planning. Legislation will be submitted to effectuate this change and to provide that (a) these funds should be available for planning and research purposes only; (b) the funds be matched by the States in accordance with statutory matching requirements; and (c) any funds not used for planning and research lapse.
     In addition I recommend that the Federal-aid highway law be amended to provide that, effective not later than July 1, 1965, the Secretary of Commerce shall, before approving a program for highway projects in any metropolitan area, make a finding that such projects are consistent with comprehensive development plans for the metropolitan area and that the Federal-aid system so developed will be an integral part of a soundly based, balanced transportation system for the area involved.
     Highway planning should be broadened to include adequate traffic control systems, parking facilities, and circulation systems on city streets commensurate with the traffic forecasts used to justify freeways and major arterial roadways. Provision for transit and highway facilities in the same roadway, permissible under present law and already tested in several cases, should be encouraged whenever more effective transportation will result. Moreover, I have requested the Secretary of Commerce to consider favorably the reservation of special highway lanes for busses during peak traffic hours whenever comprehensive transportation plans indicate that this is desirable.
     To permit the State highway departments greater flexibility in the use of Federal-aid highway funds to meet urban transportation needs, I further recommend that the Federal-aid highway law be amended to permit more extensive use of Federal-aid secondary funds for extensions of the secondary system in urban areas.
     I have asked the Secretary of Commerce and the Housing and Home Finance Administrator to consult regularly regarding administration of the highway and urban mass transportation programs, and to report to me annually on the progress of their respective programs, on the needs for further coordination, and on possibilities for improvement.

(D) Relocation assistance.

     Last year in a message to the Congress on the Federal-aid highway program, I called attention to the problems of families displaced by new highway construction and proposed that the Federal highway law be amended to require assistance to such families in finding decent housing at reasonable cost. The need for such assistance to alleviate unnecessary hardship is still urgent. The Secretary of Commerce has estimated that, under the Interstate Highway program alone 15,000 families and 1,500 businesses are being displaced each year, and the proposed urban mass transportation program will further increase the number of persons affected.
     To move toward equity among the various federally assisted programs causing displacement, I recommend that assistance and requirements similar to those now applicable to the urban renewal program be authorized for the Federal-aid highway program and the urban mass transportation program. Legislation is being submitted to authorize payments of not to exceed $200 in the case of individuals and families and $3,000 (or if greater, the total certified actual moving expenses) in the case of business concerns or non-profit organizations displaced as a result of land acquisitions under these programs.

(E) Mass transit research and demonstrations.

     Further, I believe that progress will be most rapid and long lasting if the Federal Government contributes to economic and technological research in the field of urban mass transportation. These research activities should be an integral part of the research program described later in this message. Important parts of this program should be carried out by the Housing Administrator directly, through contract with other Federal agencies, private research organizations, universities and other competent bodies, or through the allocation of funds to local public agencies for approved programs.
     To facilitate this approach, I recommend that the $25 million authorized last year for demonstration grants be made available for broad research and development undertakings, as well as demonstration projects, which have general applicability throughout the nation. That amount, plus an additional $10 million from the proposed capital grant funds for each of the years 1963, 1964 and 1965 should suffice for these purposes. These funds, together with research funds available under the Federal-aid highway program, can contribute to substantial advances in urban transportation.

(F) Interstate compacts.

     Finally, since transportation in many urban areas is an interstate problem, I recommend that legislation be enacted to give Congressional approval in advance for interstate compacts for the establishment of agencies to carry out transportation and other regional functions in urban areas extending across State lines.

     We should endeavor, to the maximum extent feasible, to (a) gear international transportation investment to the requirements of our peacetime international trade and travel, and (b) provide incentives to users that will channel traffic to those forms of transportation that provide desirable service at the lowest total cost. The most critical problems associated with these policies are in the national defense area. Determinations must be made as to whether the number and types of ships and aircraft adequate to meet long-range peacetime needs are also adequate to meet probable military emergencies, and if they are not, how best to meet these additional requirements.

(A) Merchant marine.

     In the Merchant Marine Act of 1936, the United States Government made a new start on the vexing problems of the American merchant marine in the face of repeated failure to improve its condition both before and after World War I. Subsequently, other aids in the form of cargo preference legislation, various "trade-out," "trade-in," and tax incentives devised to stimulate new construction, and a mortgage insurance program with up to 87½ percent Federal guarantees were added to the arsenal of protection against the industry's exposure to low-cost foreign competition.
     In spite of these aids, subsidies required for both construction and operations under the 1936 Act have steadily increased. Operating subsidies will rise from $49 million in 1950 to over $225 million in 1963. Ship construction costs in U.S. yards are now approximately double those in Japanese and German yards. For this reason and because of an acceleration of the program beginning in 1956 to replace war-built cargo ships, Federal expenditures for new ship construction will rise to a postwar high of $11.2 million in 1963.
     At my request, the Secretary of Commerce has undertaken a study of the current problems of the American merchant marine. This review will involve such specific issues as the state of coastal and intercoastal shipping and the costs of service to our noncontiguous territories. It will also consider more fundamental questions of long-term adjustment: Are the criteria adopted in 1936 as guides to the establishment of essential trade routes and services relevant for the future? Are there alternatives to the existing techniques for providing financial assistance which would benefit (a) the public in terms of better service and lower rates and (b) the operators in terms of higher profits, more freedom for management initiative and more incentive for privately financed research and technological advance? What research and development efforts are most likely to increase the competitiveness of our merchant marine? Can defense readiness requirements be met adequately by greater reliance on the reserve fleet and the ships of our allies under NATO agreements? Would a smaller reserve fleet be adequate? Are the international arrangements pursuant to which world shipping operations are carried on conducive to the stability of the industry, fair but effective competition and adequate service?
     I have also asked the Secretary of Defense to provide the Secretary of Commerce with estimates, under a range of assumptions as to military emergencies, of what active and reserve tonnages of merchant shipping should be maintained in the interest of national security. In addition, I have established a Cabinet level committee, chaired by the Secretary of Labor, whose study will include the flags of convenience and cargo preference issues. When the findings and conclusions of these studies become available, I shall send to the Congress appropriate specific recommendations concerning our maritime program.
     In the meantime, I have directed the Secretary of Commerce to implement fully Section 212(d) of the Merchant Marine Act of 1936, for securing preference to vessels of United States registry in the movement of commodities in our waterborne foreign commerce; and I have directed all executive branch agencies to comply fully with the purpose of our cargo preference laws.
     I have also recommended a stepped-up research program for developing ways and means of increasing the competitive efficiency of our merchant marine and related industries. Of particular significance in this effort will be the application of the principles of mass production, and the standardization of ship types and ship components, for reduction in the cost of new vessel construction. Also, I am urging that sound development in technology and automation be applied to merchant shipping as rapidly as possible, fully recognizing and providing for the job equities involved, as a major program for enhancing the competitive capability of our merchant marine.

(B) International aviation.

     An interdepartmental committee, headed by the Administrator of the Federal Aviation Agency, and including representatives from the Department of State, the Department of Defense, the Department of Commerce, the Civil Aeronautics Board, and the Bureau of the Budget, was established at my direction last July to undertake a study of U.S. international air transportation policies and problems. This study is presently under way, and will be completed by late summer. Concurrent with this policy study, the Bureau of the Budget is conducting a study of the organizational structure within which Government agencies carry out activities concerned with international aviation. Once these studies have been completed and evaluated, an Administration policy on international civil aviation will be enunciated, with responsibilities assigned to the agencies involved according to statutory requirements.

(A) Labor relations.

     Technological advance in transportation must be explored and developed if we are to meet growing requirements for the movement of people and goods. New equipment often requires new skills, sometimes displaces labor, and often requires retraining or relocation of manpower. An over-all reduction in manpower requirements in transportation is not inevitable, however; and the new Manpower Development and Training Act will help those transportation workers in need of new jobs or new skills.
     For the long-range benefit of labor, management and the public, collective bargaining in the transportation industry must promote efficiency as well as solve problems of labor-management relations. Problems of job assignments, work rules, and other employment policies must be dealt with in a manner that will both encourage increased productivity and recognize the job equities which are affected by technological change. The Government also has an obligation to develop policies and provide assistance to labor and management consistent with the above objectives.

(B) Research.

     To understand the increasingly complex transportation problems of the future, to identify the relationships of social, economic, administrative and technical factors involved, to translate scientific knowledge into transportation engineering practice, to weigh the merits of alternative systems, and to formulate new, improved and consistent policies - we need information that can evolve only from a vigorous, continuous and coordinated program of research. Yet, in the field of transportation where we have many unfulfilled opportunities, research has been fragmented, unsteady, inadequate in scope and balance.
     Scientific and engineering research will bring to all forms of transportation the benefits of new high strength, low cost and durable materials, compact and economical power plants, new devices to increase safety and convenience - improvements which have characterized the development of jet-propelled aircraft. Experiments in the maritime field have resulted in the development of a nuclear powered merchant ship, the N.S. Savannah, which has already begun test cruises, and a hydrofoil ship, the Dennison, which is nearing trial runs. Transportation on land, as well as in the air and on the seas, can benefit from accelerated scientific research.
     Economic and policy research will improve knowledge about the functioning of our transportation system as a whole and about the interrelation of the major branches of the industry. It should consider the new demands for transportation, the changing markets and products being handled, and the need for speed and safety. For instance, such research can consider the handling of freight as a system beginning in the shipper's plant and ending with the delivery of goods to the very doors of his customers - using new packaging, containerization and cargo handling methods that will take full advantage of new economies and convenience.
     Taking advantage of new techniques that would provide convenience and efficiency, we must consider the impact of different forms of transportation investment on economic development; we must combine and integrate systems to take advantage of the maximum benefits of each mode of travel; we must now consider the nation's transportation network as an articulated and closely linked system rather than an uncoordinated set of independent entities.
     Just as a transport system must be built and operated as a whole, the different areas of transportation research must be, coordinated within an over-all concept. With the advice and assistance of the heads of the principal Federal agencies concerned with transportation and members of my own staff, the Secretary of Commerce is undertaking a broad evaluation of research needs in transportation and of the appropriate methods to meet these needs. I look to the Secretary of Commerce to develop a comprehensive transportation research program for the Government for later consideration by the Congress. Once such a coordinated and policy-oriented research program is under way it will produce a flow of information of the kind that we must have to implement a comprehensive public policy on transportation.
     Improved statistics for private and government use are also urgently needed. The 1963 budget repeats a request made by the previous Administration for funds to prepare for a Census of Transportation. This census will make an important beginning to supplying these much-needed data. I urge early favorable action on this request.

     The troubles in our transportation system are deep; and no just and comprehensive set of goals - which meets all the needs of each mode of transportation as well as shippers, consumers, taxpayers and the general publican be quickly or easily reached. But few areas of public concern are more basic to our progress as a nation. The Congress and all citizens, as well as all Federal agencies, have an increasing interest in and an increasing responsibility to be aware of the shortcomings of existing transportation policies; and the proposals contained in this message are intended to be a constructive basis for the exercise of that responsibility.
     The difficulty and the complexity of these basic troubles will not correct themselves with the mere passage of time. On the contrary, we cannot afford to delay further. Facing up to the realities of the situation, we must begin to make the painful decisions necessary to providing the transportation system required by the United States of today and tomorrow.