for another purpose. We would have liked to have had some assurance that when the production of titanium dioxide, for instance, might reach a certain figure, we could have some hope that thereafter we might come back into the picture and get some titanium dioxide, or that the allocations might be lifted. Is it not possible-not today, perhaps, but far enough in advance of that day-to give small businesses and big business the hope that when a certain production goal is reached there is some chance the material will be available for general use?

Secretary SAWYER. You have my promise right now that the decontrols will be applied as rapidly as they can be; but, as I understood you—and I certainly did not intend to misconstrue what you said— I thought what you were suggesting was that we undertake a study now of the date at which we could decontrol a certain commodity.

Senator BENNETT. As I say, that was a poor expression on my part. But I am concerned with the fact that American business should not have to put up a political fight to get controls lifted. We should have assurance when we go into this process that when conditions are right the controls will more or less automatically be removed.

Secretary SAWYER. You have my promise, as far as my controls are concerned, that that will happen, and my own feeling is that we need worry much more about getting rid of new agencies than we do about getting rid of controls. As a matter of fact, I think the American people are pretty likely to insist on decontrol as soon as the occasion justifies it. But, regardless of that type of pressure, which I think will be adequate-and I can speak only for my own Department; I will not need a study to tell me these industry committees are meeting all the time, and if they come in and demonstrate that controls are no longer needed we will get rid of them or we will reduce them. Senator SCHOEPPEL. Do you not, Mr. Secretary, agree with me that it is a pretty good thing to write into all of these emergency measures complete cut-off dates?

Secretary SAWYER. You mean as to the life of the law?

Senator SCHOEPPEL. Yes, and I think our great laxness in protecting a lot of the things we are falling into now has been due to the fact that these old emergency measures went on and on and on, and we have to go through legislative channels and a lot of other difficulties to get them off. If we could take it strictly on the basis of putting a stopgap in there with opportunity for review, that is the best incentive possible for a reevaluation of the necessity of a lot of these things. Do you not agree with me, sir?

Secretary SAWYER. I quite agree, and we have a very good example of it in connection with export control.

Export control has been on for specified periods, not permanently at all, but it has worked, apparently. The Senators think so, and the House committe thinks so; and, as far as I know, without objection it is going to be renewed. But at least the Congress has the opportunity to look it over, so to speak.

The CHAIRMAN. I feel the same way about it, when we rewrote in committee the Defense Production Act of 1950 last year that you voted for, Senator. We not only limited the date of it but we gave the Congress the right to strike out any section of that bill they wanted to without the President's approval or disapproval, and I think that

is one of the first bills ever written around here that carried all that to protect the business people.

Secretary SAWYER. Well, perhaps you answered the question of the Senator that you have the power to stop it whenever you want to.

Senator BENNETT. That does not answer it completely, because the Banking and Currency Committee is now wrestling with the question of whether it should continue an agency that was set up for 1 year, in 1932, in an emergency, and after 19 years we have not had the courage to face it and cut it off, and there have been many times in those periods when its life was questioned.

Secretary SAWYER. I said a moment ago, Senator, that I thought much more profit might be derived from terminating the life of a temporary agency than talking about controls. Of course, I do not have any idea what agency you are talking about, but that applies to all temporary agencies, as far as I am concerned.

Senator BENNETT. The problem is, as a newcomer to the Senate, I am learning fast that there is no such thing as a temporary agency. The CHAIRMAN. We did away with the OPA after the last war, Senator. You, Mr. Secretary, did away with import controls last year, before the pertinent law expired.

Secretary SAWYER. And I might say we took the controls off of tin, for instance, although we did not have to. I think our record, Senator, is pretty good on decontrolling as rapidly as we can.

Senator BENNETT. You are satisfying me with your expression of policy that you are concerned with eliminating the controls on a specific area when they are no longer needed, and that is what I am concerned with. I am really concerned with the fact that it would not require specific action of Congress to stop these processes once we start them.

Secretary SAWYER. Senator Schoeppel has given the idea. You just give this law certain life, and at the end of that time, regardless of what anybody may wish, if you do not renew it, the controls end. It is just that simple.

Senator BENNETT. I do not trust my fellow Senators that they will always remove it; so, I have got to trust you administratively. Secretary SAWYER. Well, I trust the Senators.

Senator BENNETT. I am through, sir.

The CHAIRMAN. I have nothing further to ask.

We appreciate your appearance here, Mr. Secretary, and again thank you for the information you have given us, and we look forward to receiving that little memorandum from you. We hope we might do something for small business.

Secretary SAWYER. Thank you very much, Mr. Chairman.

The CHAIRMAN. We will recess now until 10: 30 tomorrow morning, when we will hear Mr. Fleischmann, and tomorrow afternoon we will hear Secretary Tobin.

(Whereupon, at 4:45 p. m., the committee recessed until 10:30 a. m. of the following day, Tuesday, May 8, 1951.)

DEFENSE PRODUCTION ACT AMENDMENTS OF 1951

TUESDAY, MAY 8, 1951

UNITED STATES SENATE,

COMMITTEE ON BANKING AND CURRENCY,

Washington, D. C.

The committee met, pursuant to adjournment, at 10:30 a. m., in room 301, Senate Office Building, Senator Burnet R. Maybank (chairman) presiding.

Present: Senators Maybank, Robertson, Sparkman, Frear, Douglas, Bricker, Schoeppel, and Bennett.

The CHAIRMAN. The meeting will come to order.

Mr. Fleischmann, please.

STATEMENT OF MANLY FLEISCHMANN, ADMINISTRATOR,
NATIONAL PRODUCTION AUTHORITY

The CHAIRMAN. I want to say that I am very much distressed and sorry that Senator Capehart entered the hospital yesterday afternoon. and will be absent for some time. I know the committee will want to send their deepest sympathy. In the meantime I have told his administrative assistant to be here so that he can keep the Senator advised. The Senator wanted the record to show his sickness and his absence.

Mr. FLEISCHMANN. Mr. Chairman, if it meets the wishes of the committee, I would like to confine myself at the outset to those provisions of the amendment which have to do primarily with the priorities and allocation power, as that is the subject on which I have been most strenuously concerned during the past month.

I would like to make this very brief statement which I prepared for incorporation in the record, after which I think it would be most useful if I answered questions which the committee may have.

The CHAIRMAN. That will be quite all right, Mr. Fleischmann. You may proceed in your own way.

Mr. FLEISCHMANN. The bill which is before this committee makes no amendments of importance with respect to the priority and allocation powers granted the President by title I of the Defense Production Act, 1950. These powers are basic to any rearmament program, and their lapse, even for a few days, would certainly have a farreaching and adverse effect on the progress of the present program. Generally speaking, in times of scarcity many industrial concerns prefer to devote a large portion of their limited facilities and materials to the production of goods for their civilian customers. Under the Defense Production Act, however, all American industry is required.

to meet the needs of the mobilization program first by regulations applicable to all and having the force of law. If that law should lapse, patriotic motives might keep the rearmament program on schedule for a brief time, but it can be confidently predicted that our present military production goals could not be met over any substantial period. Any mobilization program must have the following primary objectives:

1. The first objective is the completion, on schedule, of the direct military program, including the guns, tanks, and aircraft needed for ourselves and our allies. In order to meet these schedules, American industry has been required to accept all defense orders, and, in addition, to channel materials and components to this program in preference to less essential needs.

2. No rearmament program can be restricted to production of munitions of war alone. Such a program requires increased industrial activity of many additional kinds. For example, we need more ships, more freight cars, and more machine tools to turn out jet engines. At the same time, we need to keep up the manufacture of farm machinery to cultivate and harvest the increased crops which are an essential part of any mobilization program. These vital supporting industrial needs are second in importance only to the prime military requirements.

3. The third essential objective of the mobilization program is the expansion of the Nation's capacity to produce basic materials, such as steel, aluminum, and chemicals. The expansion program is now well under way, and if it is completed on schedule the period of scarcity will be comparatively brief, unless a general war should break out. This expansion program has been supported by priority action taken under the Defense Production Act. It is certain that this vital industrial expansion will be delayed many months if the authority to require preferential treatment for the program should lapse. 4. The demands of military production and the supporting programs which I have mentioned necessarily cut down the amount of certain basic materials available for civilian use. In a free scramble for this reduced supply of material, great inequalities in distribution inevitably appear. Accordingly, Congress has wisely provided in the Defense Production Act that such materials must be equitably distributed among civilian users after the essential military and industrial demands are satisfied. No such power to control the distribution of materials would exist if the priority and allocation powers now given by the statute should lapse.

5. As a corollary to the point just discussed, the power to provide for an equitable distribution of scarce materials is particularly inIdispensable to the goal of maintaining small independent enterprise during the mobilization period. Any mobilization program inevitably places particular burdens and disadvantages upon small business concerns. In the first place, they are not able to compete for the largest prime military contracts, such as tanks and airplanes, because of their limited physical, financial, and technical resources. Second, in a free competitive market, when the available supply is greatly reduced, the small concerns inevitably receive less than their fair share because of the superior purchasing power and customer relations of the larger concerns. In order to counteract this tendency,

the National Production Authority has placed limitations on the use of scarce materials, applicable to large and small producers alike, and in addition has placed many scarce materials under allocation so that the rights of all segments of American industry may receive equitable treatment. This is particularly important in a mobilization period which may extend over many years. Equitable distribution of this kind could not be assured without the priority and allocation power of the Defense Production Act.

To summarize, the reenactment of the Defense Production Act prior to its expiration date is essential if the Nation is to continue its mobilization program and attain a balanced production of munitions of war, supporting industrial needs, expansion of basic productive facilities, and equitable distribution of the balance of materials for civilian production by American business, regardless of size or economic power. The CHAIRMAN. Mr. Fleischmann, I wanted to ask you what is the desire of the administration insofar as the Commerce Department is concerned, or the NPA, in connection with the applications for certificates of necessity and tax amortization? Of course, the tax amortization law, you know, was written by the Finance Committee, and all we are charged with is the responsibility for certificates of necessity. I had prepared quite a statement about certificates of necessity and I did not know whether I would read a part of it here this morning or place it in the record or wait until Mr. Gibson comes up. I understand Mr. Gibson-is he more responsible for it than you are?

(The statement referred to will be found on p. 120.)

Mr. FLEISCHMANN. It is this way, Mr. Chairman: Mr. Gibson is acting head of DPA

The CHAIRMAN. I just want to know which is best, because we want to follow your wishes to get down to this, and if this is what you want, if you want to leave it to Mr. Gilbson, we will do it that way.

Mr. FLEISCHMANN. Mr. Gibson does have the present responsibility for fixing policy on tax amortization. I have the responsibility for carrying it out in portion and making recommendations to DPÅ. I will be very glad to answer any questions that I can.

The CHAIRMAN. I have some broad general questions, and I just want to you sent me these restricted books that contain $17,800,000,000; is that right?

Mr. FLEISCHMANN. I do not know what the books are, sir, I did not send them.

The CHAIRMAN. They are applications up to date for the certificates. That is approximately correct.

Mr. FLEISCHMANN. It is in that neighborhood.

The CHAIRMAN. They have granted about $51/2 billion; is that right? Mr. FLEISCHMANN. I do not know, because that is in Mr. Gibson's shop.

Senator DOUGLAS. It is 4.8 billion, is it not-that is, as of April 26, it is 4.8 billion.

Mr. FLEISCHMANN. I think that is substantially correct, Senator. The CHAIRMAN. That is only for NPA. I have the whole thing here.

What I was getting down to was this, and, of course, I do not presume the committee would desire to go into each one, but what I wanted to see, very frankly, was how much improvement you had made in