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there, but it is going to be probably a question of distribution that we have to watch out for. Don't you agree with me to the general proposition?
Secretary Marshall. I don't know about the general details. I am interested in what you have said.
The CHAIRMAN. Senator Moody.
Senator MOODY. A number of witnesses come before this committee and advocate the removal of all price and wage controls, in effect, a failure to renew title IV of the act. I gather from your splendid statement here you feel that would have a disastrous effect on the program for making the Nation strong, and I would like you to tell the committee what you think the effect would be if that were done.
Secretary MARSHALL. You have introduced the factors regarding that of cause and effect. The cause, I do not know enough about in detail. The effect I see.
Senator Moody. I would be glad to have you tell us what the effect would be.
Secretary MARSHALL. I would say if these prices go on up, the effect on the defense program gradually approaches the point of being disastrous, because the money ceases to buy the desired quantities of matériel. If it goes on much further, we are involved in tremendous sums in order to get matériel which previously could have been obtained for a smaller sum, and that is serious to me. It is always a matter of debate as to just how we justify our budgets. Now, if we are involved in a rapidly changing situation as to what the dollar will buy, then we have a serious situation on our hands, it seems to me. We are getting, or I am now getting into broad economic questions which I am not qualified to testify about, but I do know that if our costs continue to rise, then we have a very serious problem as to how we finance what appears to be necessary in the next few years.
Senator Moody. As I understood your previous estimate, your costs have gone up roughly 20 percent in the last year; is that correct?
Secretary MARSHALL. That is right.
Senator Moody. Has that resulted in cutting down the number of weapons you could obtain?
Secretary MARSHALL. It has definitely cut down the number of weapons and planes and war material of that character we had calculated on having, on being able to buy.
I would say this: that this present struggle that we are engaged in, cold or hot war, or whatever you wish to call it, takes many forms from the standpoint of our opponents. One is to embarrass us as much in an economic way as they possibly can. It is conceivable they might play their hand purely on the basis, one way or another, unless we do it ourselves, of getting to the point where we might, say, break our backs economically. That is one way for the Soviets to win.
I have been just as much concerned about that as I have been about the actual development of military power, and of course, that is related to the buying power. That is one reason that I was so intensely interested in the manpower bill, because unless we had something like universal military training—and I have never heard of any other substitute-I thought we were doomed to a financial impossibility, and we couldn't hope for the continuance of the appropriations that would be necessary to maintain the power that we must have in the coming years.
I think economically the same thing applies.
Senator Moody. Do you feel that one way we might break our back economically would be through a sharp inflation of prices?
Secretary MARSHALL. I would assume so. I am not an expert on that matter. As a broad general proposition that would appeal to the ordinary man, I would say that was a fact.
Senator Moody. It was also testified here that the price of meat was subnormal. I don't know whether your military buyers would agree with that; certainly most housewives would not agree with that.
I believe you said you had the statistics there as to how much the increased prices of meat have cost the Defense Department, and I would like to have those in the record, if you don't mind.
The CHAIRMAN. We have placed all that in the record, I might say, Senator.
Senator Moody. I would like to have one specifically.
Secretary MARSHALL. Between May 1950 and May 1951 the actual invoice cost of meat items purchased by the Department of Defense has increased more than 31 percent.
(The following was submitted for the record:) DEPARTMENT OF DEFENSE PROCUREMENT OF MEAT DURING FISCAL YEARS
1951 AND 1952 It is estimated that the Department of Defense will have purchased 680 million pounds of meat during fiscal year 1951 at a total cost of approximately 412 million dollars. During fiscal year 1952, meat purchases are expected to increase to 940 million pounds as a result of the increase in the size of the Armed Forces.
During fiscal year 1951, the Department of Defense was unable to obtain sufficient quantities of carcass beef and it was necessary to procure a higher-thannormal proportion of the more costly boneless beef. The fiscal year 1952 procurement program contemplates increasing the proportion of less-expensive carcass beef and decreasing the proportion of boneless beef, on the assumption that the necessary quantities of carcass beef will be available.
Based on current meat prices, and reflecting the roll-back in beef prices scheduled to become effective July 1 and August 1, 1951 under Ceiling Price Regulation 24, the Department of Defense meat procurement program for fiscal year 1952 is estimated to aggregate approximately 569 million dollars. If beef prices were to remain at current levels rather than reverting to the levels set in Ceiling Price Regulation 24, the cost of meat to the Department of Defense would be increased by about 19 million dollars, raising the cost of the fiscal year 1952 meat procurement program to 588 million dollars.
The CHAIRMAN. Any further questions, Senator.
I think all of us agree, Mr. Secretary, with what the Senator from Indiana said about the desirability of spreading these contracts, among small businesses to the greatest degree possible. As you know, there has been a good deal of complaint from businessmen, and others coming in before this committee, about the complexity of doing business in an emergency economy.
The chief burden of this complaint has been that things are too complex, and that they couldn't operate properly unless they were given a free field to run in, as it were.
I am wondering if we should limit by law, or try to write into the law, as the Senator suggests, a series of regulations as to the extent to which you would have to subcontract. Do you feel that would be a practical proposition, or would it hold up your production.
Secretary MARSHALL. Off hand, I don't think it is a practical proposition, and I would imagine we would get into delays, if not almost an impossible situation.
But as to the complexities, I agree. Most everything that I have been concerned with in Government for pretty nearly 50 years has been filled with complexities. A good many of those are given rise to in order to protect the interests of the people in relation to the Government, but it gets us into a very difficult state of affairs.
I was talking to Mr. Lovett, the Deputy Secretary of Defense, about this several times this winter. As I recall our last conversation, they had succeeded in cutting down some of the procedures from 20 or 30 steps down to about 10, in an effort to simplify the business of negotiating contracts.
Always our procedures are complex, and they are expensive for that reason. We deal in armies, for example, more or less on an individual basis. Our records about the individual are very complete, and must be very much up to date. That costs money.
Yet I suppose you might say that in relation to our view as to the dignity of the individual, we insist on that being the procedure, but it takes time, and it takes money, it introduces red tape, and we need sympathy.
Senator Moody. General, I have a statement here from Richard Kraft, director of the office of defense production of the Ford Motor Co. Among other things he is talking about this effort of Ford and other automotive plants to subcontract. He cites here the experience of one automotive firm which was asked by the Army to produce four different types of cannon. He says that only 12 parts of the 4 weapons were actually produced by the automobile company, the remaining 757 parts came from shops and factories in 137 different firms in 58 cities in 12 States.
I assume that is a good example of what Senator Capehart is talking about, and the sort of thing that some of us at least on this committee would like to see extended. I hope that you will use your great influence in spreading this out because of the necessity of protecting the small business.
Secretary MARSHALL. The broader the base the better we are off, of course, in the future. There was a time in September, October, and November, when we had to move with the greatest possible speed, because our deficiencies were so great and so serious, and the necessity for filling them immediately undoubtedly caused us to take action where we could get quick results.
The broader the base, the better off we are now, aside from its economic impact.
The CHAIRMAN. Mr. Small, do you have any trouble buying textiles?
Mr. SMALL. We have had a great deal of trouble buying textiles, particularly wool, during the period of the strike.
The CHAIRMAN. How about cotton?
The CHAIRMAN. Don't you think that should be exempted from title IV, since there is an abundance on hand, you have a big crop in prospect, and there is a surplus and mills are curtailing to a certain extent.
My information is from your Department that you haven't got the funds to buy cotton goods.
Mr. Small. Our consumption of cotton textiles is only a small proportion of the national production.
The CHAIRMAN. If that was eliminated, it wouldn't have any effect on the national defense.
Mr. SMALL. I don't think our take is controlling, Senator.
The CHAIRMAN. Do you think it would affect inflation in any other way?
Mr. SMALL. Yes; I do.
The CHAIRMAN. In what way? I was told here this morning that it had gone down some 15 percent since last fall. Do you find lower bids?
Mr. Small. If you like, Senator, I will ask Colonel McDaniel from the Quartermaster to give you the exact data on it.
While he is coming up, Senator, may I ask permission to insert in the record—I don't want to take time to read it in the record now, an exact answer to Senator Schoeppel's question on condemnation?
The CHAIRMAN. Without objection, it will be placed in the record. (The information referred to follows:)
Question. Why do you need the additional condemnation power sought in the amendments? Don't you have sufficient authority now?
Answer. Under the present act authority is provided for the requisitioning of materials needed for national defense and also for productive facilities used to manufacture materials needed for the national defense. This does not give the Government any authority to condemn or requisition property that may be needed for command installations, barracks, etc. With the large public works construction which the Congress has authorized, adequate condemnation authority is needed to meet those cases where unreasonable delays in securing property for command facilities, for instance, would impede our mobilization effort. It is true that there exists condemnation authority on the books today. However, the existing condemnation authority is not sufficient to prevent unreasonable delays. Possession of condemned property, under existing authority, is only awarded after formal order of the court, which often means delays of a year or so. Moreover, some of the existing condemnation authority, such as the 1917 statute, while still on the books, can only be utilized during war or when war is imminent, a finding which it is doubtful a court may be induced to make at this time. In addition, the 1917 condemnation authority only extends to the Army and Air Force, and strangely enough, does not extend to the Navy which, of course, needs condemnation authority equally as much as the other military departments. In support of our request for condemnation authority, I might refer to the fact that the condemnation authority requested here is the same as the Congress authorized under the Second War Powers Act during World War II. I have been reliably informed that there was not one single case in which the Government took possession of condemned land which was not later fully sustained by the court as a fair and appropriate use of the authority which Congress had granted. I have no less confidence that the same fairness of procedure would prevail if this Congress were to grant a condemnation authority which we request in this bill.
Senator BRICKER. I have that letter from you, Mr. Small, and the suggestion that was made. You can either amend this act to include your facilities, camps, and the like, under the present law, or you can amend the basic condemnation law. You can either include them under this law with requisition authority, and utilize them as long as you want them, or we could amend the basic condemnation law to give you immediate possession, and that is all that you would desire.
Mr. SMALL. As you will recall, we did want to bring the Navy in under the power, where they are not now in.
The CHAIRMAN. The Defense Department's.
Senator BRICKER. There is no question about it. I think that can be worked out without difficulty.
The CHAIRMAN. I think the committee wants to give the national defense establishments whatever they need.
Colonel, what about the situation. in textiles? I understand there the inventories are growing, the price has gone down, and you gentlemen haven't got funds to buy them.
Colonel McDANIEL. The textile situation is looking better from the standpoint of receipts on our contracts. We have just gone through a period where we had a great deal of difficulty in getting production due to the closing of the wool plants, and so forth.
The CHAIRMAN. We know about the wool situation. We had an executive session here with the stockpiling officials, and others, and we know the condition that existed in the wool markets, but what about cotton?
Colonel McDANIEL. The cotton textile program is beginning to catch up with our needs.
The CHAIRMAN. Hasn't it already caught up?
Colonel McDANIEL. They have not caught up as yet, due to the procurement lead time, but we expect to have them caught up within another month or two.
The CHAIRMAN. You mean by "procurement" your procurement?
The CHAIRMAN. They have an abundance of them, but you think you will catch up within a month?
Colonel McDANIEL. We will catch up within a month or two.
The CHAIRMAN. What about the next year's budget; are you going to have a large demand?
Colonel McDANIEL. We will have a demand which is comparable to the demand in the fiscal year 1951; yes.
The CHAIRMAN. How much in dollars and cents was that, if you know; or yards, either one?
Colonel McDANIEL. Our total—I don't have the cotton broken out, but I will furnish them for the record.
(The information referred to follows:) Hon. BURNET R. MAYBANK, Chairman, Committee on Banking and Currency,
United States Senate. DEAR SENATOR MAYBANK: During the Department of Defense hearing before the Senate Banking and Currency Committee, on May 29, 1951, you requested a statement for the record relative to the production requirements of cotton, cotton textiles, and duck and webbing. The enclosed statement is furnished for your information and inclusion in the record of the testimony.
The dollar figures included in paragraphs D and E of the enclosed statement represents the estimated value of:
(a) The cotton, textiles, and duck and webbing which the industry furnishes for manufacturing of end items. (These figures specifically exclude the additional manufacturing costs relative to assembling end items which require the cotton products produced by the cotton textile manufacturers.)
(6) The actual and estimated deliveries from the cotton industry during the fiscal year 1951 and fiscal year 1952. I trust that this letter adequately answers your query. Sincerely yours,
FRANK PACE, Jr.,