Dear Mr.----------:
     All thoughtful citizens agree on the obvious desirability. of avoiding or lessening the repeated downward turns in our economy which diminish both national strength and individual opportunity. Equally obvious is the importance of the Federal Government's role and responsibility - as an employer, a consumer, a source of credit, an example to State and local governments and a stimulus to the rest of the economy. This general responsibility was recognized by the Congress in the Employment Act of 1946; and it has been specifically exercised by a variety of Congressional actions and expenditure authorizations in the recessions which have continued to plague us since the enactment of that landmark legislation.
     Experience has shown that the timing of these Federal actions, both Executive and Congressional, can make a substantial difference in the severity and duration of any particular recession. The authorization or acceleration of special programs or expenditures - including those for capital improvements or community facilities - implemented only after the normal legislative processes, may be too late to achieve an ameliorating effect on the recession sufficient to justify the increase in budget expenditures.
     Despite the large number of people currently unemployed - a problem this Administration is attempting to meet through legislative proposals now before the Congress - recovery from the 1960-61 recession is proceeding in a satisfactory manner. This is, therefore, an appropriate time to prepare our defenses against future economic fluctuations, with a view to benefiting from the lessons of the last recession and those that preceded it.
     I am transmitting with this letter a draft bill - the Stand-by Capital Improvements Act of 1962 - which is designed to provide the Federal Government with an invaluable anti-recession tool. This proposal would provide stand-by authority to the President to initiate a temporary expansion in Federal and Federally-aided public works programs, and to make Federal grants and loans for State and local capital improvements, whenever unemployment rises sharply and the standard indicators of economic distress reveal that extraordinary action is required to reverse a serious economic decline.
     Recognizing the desire of the Congress to set the most precise guidelines for this kind of administrative action, the bill permits this stand-by authority to be exercised only when "triggered" by a formula suggested after the most careful consideration and reference to past unemployment statistics. This formula - which would have signalled, at a date early enough to make action helpful, each recession our Nation has suffered since World War II but would not have resulted in any false recession warnings - provides that the program would become operative when seasonally adjusted unemployment has risen in 3 out of 4, or 4 out of 6 consecutive months by a total of at least one percentage point, and after a determination by the President (in case this has resulted from a major strike or other special factor) that use of the stand-by authority is necessary to achieve the objectives of the Employment Act of 1946.
     This $2 billion emergency program would, once put into effect, (1) permit a $750 million increase in direct Federal expenditures for projects previously authorized by law including resource, conservation and other Federal public works; (2) authorize $750 million matching grants to State and local governments for capital improvement programs; (3) authorize a $250 million loan program to State and local governments otherwise unable to finance their share of the costs of projects for which Federal grants are authorized; and (4) provide an additional $250 million to be allocated to each of the preceding three programs as circumstances warrant. All of these projects must meet essential public needs, must be capable of early initiation and of completion within 12 months, must contribute significantly to reducing unemployment, and must not merely replace existing public expenditures.
     Virtually every community in the Nation has a backlog of needed capital improvement projects. Certainly that is true of the Federal Government. An acceleration of these projects - all worthwhile in their own right - is a wise and proper method of increasing employment and expenditures at times when such action is urgently needed to help stabilize our economy.
     Also enclosed is a section-by-section analysis of the proposed bill, prepared by the Housing and Home Finance Agency. A letter identical to this one is being transmitted today to the Speaker (President of the Senate).
     As I pointed out in my State of the Union address last month, the time to repair the roof is when the sun is shining. I urge the Congress to give prompt attention to this vital legislation, as insurance against a rainy day that we can hope will not recur, but which experience teaches us we must be prepared to meet.
            Sincerely,