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legislation carrying powers to be exercised with discretion, so that the degree of action taken may be fitted to the need as it arises in the unforeseeable future.

Mr. Chairman, particularly in regard to the amendments of the act, as it was originally passed last summer, there are a good many technical matters with which I am not sufficiently familiar to comment, but in the large, or as to the large, over-all problem, I think we all realize that we have to have something of this nature, or we just can't go ahead.

When you get to matters of inflation, things like rent controls, and matters of that kind, that is beyond my intimate knowledge I can tell you in advance I can't comment authoritatively on that with any confidence, and I imagine that Mr. Wilson's Office of Defense Mobilization can give you the details.

There are some financial factors, of course, that would go to some other agency of Government.

The CHAIRMAN. Mr. Secretary, very frankly, this is the Defense Production Act, and I can speak only for myself, but I have great confidence, as you know, in you. What I want to find out is a few things from you, or those associated with you, and not from any other office.

In other words, now, you say we have spent $19 billion in 1951. We have appropriated $48 billion. Is the rest of that on authorization for the next year? If you can't answer-I wouldn't expect you to be familiar with details perhaps Mr. Small or someone else could, and I would appreciate it.

I know the other members of the committee have a number of questions to ask you, so I shan't take too much of your time.

For instance, you talk about rents. I want to know what the critical areas are where we ought to have rent control. I want to know who is going to determine the critical areas. Are you going to determine them, or who is going to determine them?

After all, we want rent control for the critical areas of this country, but frankly, it is a little difficult for the committee to determine what the critical areas are unless someone such as you tells us. We have been trying to find out for quite a while, and we have been unsuccessful I know that several of the Senators here are particularly interested in the last appropriation bill, as to which you testified before the Appropriations Committee and showed the tremendous waste of material in inflation cost. That is why we suggested that you could bring in anyone whom you would want, because we can understand that you can't be familiar with all the details. We do understand that you believe the impact is not going to be felt until next winter.

Secretary MARSHALL. That is correct, sir; and as to the matter of rents, not so much the control as the provisions that we are interested in, in those military installations where we have to have something in order to look after our people, there we are very directly concerned in our own local activities.

The CHAIRMAN. I appreciate that. I just brought that out as one thing.

I believe Senator Moody wished to ask you a question at the time when I inquired whether you wished to complete your statement first.

Senator MOODY. That $48 billion figure, Mr. Secretary-does that include the money spent for expansion of defense plants?

Secretary MARSHALL. To a certain extent, it does.

Senator Moody. But it doesn't include all of it, as a matter of fact?

Mr. SMALL. Only the ones we directly are concerned with.
Senator MOODY. What do you mean by that, sir?

Mr. SMALL. For example we put tools into a certain plant. It does not involve, as I take your question, these so-called defense supporting plants. It may include facilities where we have contracted for an item that is specifically and peculiarly military, like a bazooka facilities where the Government takes title facilities private industry cannot reasonably be expected to provide with their own funds. About 70-75 percent is for tools--very little is for bricks and mortar.

Senator MOODY. If the Government is building a plant, that is included, but if the Ford Co. builds a plant of its own, that is not included?

Mr. SMALL. No, sir; not if we do not take title.

The CHAIRMAN. Senator Capehart?

Senator CAPEHART. Mr. Secretary, you were Secretary of the National Defense when this bill was passed; were you not?

Secretary MARSHALL. I came in, I think, the 18th of September. Senator CAPEHART. You came in the 18th of September when? Secretary MARSHALL. Last fall.

Senator CAPEHART. Why wasn't the act immediately put into effect, and why did you permit this 20 percent increase in prices since the act was passed?

Secretary MARSHALL. That is an Office of Defense Mobilization problem which I can't answer you on.

Senator CAPEHART. Did you recommend when you came in that the act be put into effect, and that prices be frozen at that time? Secretary MARSHALL. No, sir; I did not. The Department may have taken some action with which I am not familiar.

Senator CAPEHART. Did you anticipate at that time that prices. would rise as much as they have?

Secretary MARSHALL. Yes; we did anticipate that. I know it was very early

Senator CAPEHART. This $38 billion that you say you will spend in the fiscal year starting July 1 of this year, and ending June 30 next year, is that, in your opinion, sufficient, sir?

Secretary MARSHALL. As the matters stand at the present time. Senator CAPEHART. And you will have spent $19 billion on June 30 this year, the fiscal year ending June 30?

Secretary MARSHALL. We will actually come to the settlement on that basis.

Senator CAPEHART. The Congress has appropriated $48 billion up to this time, and they have before them $60 billion dollars, making a total of $108 billion for the 2 years; the year 1951 and the year 1952. You are only going to spend $57 billion, $19 billion this year, $38 billion next year, or a total of $57 billion, which leaves $55 billion that you will not need cash for. If that is correct, why is it necessary to appropriate the additional $45 billion?

Mr. SMALL. First, Senator, it is necessary to appropriate it in order to make the contracts. Take, for example, your 1951 money. There will be a delivery of, say, close to $18 billion during the fiscal year 1952 out of 1951 funds, and in 1953, there will be a delivery, we antic ipate, of around $15 billion, still out of 1951 funds.

Senator CAPEHART. Wouldn't it be just as practical, then, to authorize rather than appropriate the money? Aren't we sort of fooling the people a little bit when we talk about $60 billion, when we are only going to spend $38 billion?

Mr. SMALL. I don't think so, Senator. I think we are being more realistic with people.

The CHAIRMAN. If the Senator will yield, I would suggest this: We went through this matter of contract obligations for so long in the Appropriations Committee and found ourselves with a headache every year. I had people here this morning talking about cutting the budget here and there. As a matter of fact, the civil service retirement fund, and all the pensions, are millions of dollars behind because we haven't kept it up year by year.

As I understand what you are going to do, you are going to have all of this money spent for future delivery, rather than to make contracts, for which a future Congress will have to appropriate; is that correct? Mr. SMALL. We are asking for money that we can go out and obligate

The CHAIRMAN. The Atomic Energy Commission did the same thing, making contracts 2 or 3 years ahead. We were going to cut the budget, they had the obligation to pay when the material arrived. I just want the record to show that.

Senator CAPEHART. Then in reality we have two budgets, a cash budget of $38 billion, and an authorization budget of $60 billion or more, but the impact on production, in America, will only be $38 billion, not the $60 billion.

Mr. Small. It will not be the $60 billion.

Senator BENTON. Part of that $22 billion is salaries.

The CHAIRMAN. Let's get this straight: You say it won't be in the 1952 budget, but will not certain corporations, or whatever you wish to call them, who have contracts with the Government, have the allocation of steel and those things to take out of the general pot? Mr. SMALL. Yes; he is talking about the $60 billion, which includes everything, including salaries, services, and so on.

The CHAIRMAN. But the Senator is talking about $38 billion. You say that that was things you were going to acquire. How much is salaries over that $38 billion, in the military establishments? We haven't got that.

Mr. SMALL. Out of the

The CHAIRMAN. $62 billion.

Mr. SMALL. The procurement portion of the 1952 budget is $49.4 billion, including $6.1 billion for MDAP. The balance is for pay allowances, et cetera, which are explained in the request for appropriations. Senator CAPEHART. That is physical things.

Senator Benton. Out of the 60.

Mr. SMALL. Out of the 60.

Senator Benton. The spread is $11 billion instead of $22 billion. The CHAIRMAN. Go ahead, Mr. Small, and explain it for the record, because it is very important.

Senator CAPEHART. The budget we have before us is $60 billion. Mr. SMALL. That is correct for the Department of Defense. Senator CAPEHART. And $8.25 billion for foreign nations, both military and ECA, that is $68.25 billion.

Mr. SMALL. That is right.

Senator CAPEHART. You said a moment ago you are going to spend $38 billion for soft and hard goods. Now, where is the $48 billion; does that include salaries?

Mr. SMALL. In the 1951 appropriation the $48 billion includes everything for the Department of Defense. If you include MDAP it is $52.8 billion. In the 1952 request for appropriations of $60 billion for the Department of Defense only $43.3 is for procurement of physical things, only a portion of which will be delivered during fiscal 1952. The balance-or $17 billion-includes such items as pay and allowances, transportation, telephone, and telegraph, et cetera, which are broken down in detail in the request for appropriations. Out of the MDAP request for appropriation $6.1 billion is for procurement of physical things.

The CHAIRMAN. Could you suggest an amount here so we can have a record to carry to the cent that 96 Senators can read and understand, if you do not mind? $38 billion goes for hard and soft goods, as the Senator suggests, and some $11 billion goes for future deliveries. How much is salaries, where does the rest of the money go? That is what the committee wants to know.

I understand, I have heard so much testimony as to where it goes, but I think for the record, for the other Senators to see, if we could have detail where the $69 billion will go, if you will give us that in detail, it would be helpful.

Senator CAPEHART. What I am trying to find out is exactly how many dollars' worth of materials, physical things, will be used, actually used and delivered-not contracted for-in the fiscal year of 1952, because that is what will have the impact upon our national

economy.

Mr. SMALL. I will see if I can give it to you, and very simply.

In fiscal 1952, we expect deliveries of hard goods amounting to $31 billion. That $31 billion consists of $24 billion plus for the Department of Defense, and about $7 billion, a little less than $7 billion for MDAP. Soft goods, $5 billion, construction $2.1 billion, and therefore you have not got in there salaries, to pay the troops, and all the other housekeeping items like travel, light, telephone, and telegraph, and so forth.

Senator CAPEHART. Salaries of course are not physical things, that is labor. Then the figure of $38 billion is the amount of physical things that will be taken out of the domestic economy and transferred into the military during the next fiscal year.

Secretary MARSHALL. Senator, it seems to me there is a little confusion here.

The CHAIRMAN. That is what I want to clear up. There is $38 billion going to be delivered, is that correct?

Senator BENTON. And contracts for $49.4 billion.

The CHAIRMAN. That is what I want to get clear.

Secretary MARSHALL. The statement is the total deliveries in the fiscal year 1952 we expect to be over $38 billion, that is deliveries. The CHAIRMAN. What is in the pipeline?

83762-51-pt. 1-51

Secretary MARSHALL. There are more things in the mill affecting our economy than that. We will say the things that are going to be delivered in the next month, the first month of 1953 fiscal year, which is the summer of 1952

Senator CAPEHART. But you had that same situation at the beginning of this year, and while they do not particularly balance each other, because you are going to get more at the end of this year

Secretary MARSHALL. Where I think there is a little confusion, certainly in my mind, is, you are talking about the cash necessary, and then talking about the effect on our economy.

The effect on our economy is not purely the dollar, but it is also in the orders and demands that are in addition to this $38 billion worth of deliveries, which are in the mill. It has the same effect on our economy.

Senator ČAPEHART. It has effect on the price, but not necessarily an effect on the production. It has effect on the price to know that there is much to be had in the future, but it does not upon the production.

I was trying to find out what we were going to take out of the domestic economy in the next fiscal year, because that and that alone is the only thing that affects or has an impact upon our domestic economy, our civilian goods, other than the fact that if there is billions and billions contracted for for the next year, it has an effect, of course, upon the price, and might well have an effect upon shortages. Mr. SMALL. Senator the undelivered portion of the contracts does affect materials as well as price. The figure I have given you, Senator and maybe I can clear up a little of this misunderstanding. The figure that I have given you for $38 billion plus includes the price we pay for those things that are delivered to us.

Senator CAPEHART. I understand that.

Mr. SMALL. The things that we have in the mill, in the making, are drawing on our steel, copper, and aluminum, but part of those things, even greater in amount, if you like, to what is delivered during fiscal year 1952, will be delivered at a later date, but the impact of those things that are going to be delivered in 1953 in terms of steel, small motors, and what have you, will be felt in fiscal 1952, will be taken out of the civilian economy in fiscal 1952 in substantial degree. Senator CAPEHART. You certainly have to take it into consideration, there is no question about that, but I am trying to get the exact amount you are going to draw out of the economy in fiscal 1952.

Mr. SMALL. I can give it to you in terms of metal, if you like, in terms of steel or copper or aluminum. We are going to take, in terms of steel during fiscal 1952 for direct munitions-I am not talking about defense supporting programs-I am not talking about railroads, or anything else like that only munitions-about 15 percent of the total steel in the country will go into munitions. That gives you a measure of the impact.

Senator CAPEHART. What are you going to take that is going to be controlled, or where you are going to issue directives, such as allocation of farm machinery, boxcars, locomotives, and other things where you are directly concerned-what percent of steel are you going to take for those items?

Mr. SMALL. All of the steel we get in the Department of Defense is by allocation. Take, for example, in the third quarter of calendar

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