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of material. The work of processing applications has recently been greatly speeded up, with a consequent gain in the rate of achieving our sought-for plant expansion. Indeed, it is only by increasing our productive resources that we can hope to superimpose a military program on top of a civilian economy.
I wish to stress the importance of extending this act on a flexible basis suitable to meet the dynamic conditions which face us. In July 1950, I testified before the committee and urged that the authority be granted by the Congress in terms which would permit the greatest possible administrative flexibility in its administration. I pointed out that our productive and distributive system is so complex that authority which did not permit this flexibility would be likely to prove insufficient or to do more harm than good. If authority is granted in sufficiently broad terms to allow this administrative flexibility, actions to be taken by the Government can be tailored more directly to the immediate and varying objectives to be accomplished. In enacting the Defense Production Act of 1950, the Congress adopted this policy. Thus, in its report on the bill this committee stated that:
It is necessary that these powers should be broad and flexible because limited or restricted or partial authority might even prove insufficient to accomplish the desired end in a given situation or might do more harm than good by making it necessary to use a shotgun instead of a rifle in order to accomplish a single purpose.
In my opinion, experience in administration of the act demonstrates the policy to be a wise one. Let me illustrate what I have in mind. Because of the adaptable character of this act, we were able to promulgate regulations which prevent American ships and planes delivering materials to communistic China, although at the time this act was adopted it was not foreseen that its powers would have to be used in this manner.
It goes without saying that the defense powers must be exercised with discretion and caution and to no greater extent than is necessary. The proposed amendments to the act reflect the principle of flexibility and I urge that the Congress in considering amendments to the Act continue to follow this principle and grant this authority in broad terms allowing action to be taken which can be fitted precisely to the immediate purpose to be accomplished.
I am convinced that failure to extend the authority, as recommended by the President, would be disastrous, both to the national defense and to the sound operation of our economy.
The CHAIRMAN. Mr. Secretary, we thank you for your statement. There are one or two questions that I want to ask.
You say on page 2: The deficiencies will grow as the military procurement programs accelerate toward the attainment of the Nation's security goaland later on you say in connection with the controlled materials plan you have no idea, and you do not intend to put in any controlled material program beyond steel, copper, and aluminum. Do you mean the deficiencies you speak of are steel, copper, and aluminum?
Secretary SAWYER. Those, of course, do not represent all of the deficiencies.
The CHAIRMAN. I can understand, but I just want to find out why do you not put a controlled materials plan in for the others?
Secretary SAWYER. Because we are trying, as I have stated here in several places, to keep this control operation in as small a scope as possible.
The CHAIRMAN. I want to congratulate you on that. I just wondered if you did feel it would have to be extended.
Secretary SAWYER. We do not think so. We feel if these three materials are controlled by the controlled materials plan, so far as the defense effort is concerned, that would be enough. We feel that by other orders of the type which have already been used, we can probably accomplish the needed results in connection with other materials. There are some materials which are in short supply which are handled by only a few businesses or where we can deal with the flow of material and its distribution much more simply than we can with either steel, aluminum, or copper, but the main reason for confining the controlled materials plan to those three was, as I say, to hold down the whole control operation to a minimum.
The CHAIRMAN. I notice you established the Office of Small Business; everybody is for small business. Do you have any statistics on what have you really done for them, because, as I understand, speeches are made for them, including some by members of this committee, including myself. But I cannot find very many tangible benefits that small business has received. I know you are trying to do the best you can, and I congratulate the men that you put in the offices throughout the country, but are you getting anywhere with it through the defense organization? After all, the Army, Navy, or Air Force may have the right to let these contracts, but you do not have that right, do you, and you cannot do anything with them if they let contracts to nothing but big concerns !
Secretary SAWYER. We do not let the contracts, but I think we have furnished facilities to small business which, to answer your specific question, have been of great benefit. As you know, Mr. Chairman, even a year before the Korean War began, I had set up an agreement with the Department of Defense and the General Services Administration The CHAIRMAN. You had a meeting with this committee in order
a to set it up.
Secretary SAWYER. Yes. And under that arrangement the prospective procurement activities of the military services and the GSA were broadcast throughout the Commerce offices, and in turn by them through many channels to small business. We had some months ago, I think, as many as 3,000 outlets, and now we have a great many more.
In connection with our effort to decentralize this whole control program we have set up a number of offices in addition to the regular regional and district offices of the Department of Commerce.
The CHAIRMAN. I understand there was a supplemental appropriation before the Appropriations Committee last week in which you asked for considerably more money, as I understood, to help in these new small-business offices or in the existing offices where you would have men who would know something about small business to try to help with the contracts.
Secretary SAWYER. The chief objective
The CHAIRMAN. I want to congratulate you. Do not misunderstand me, but I want to know what the Defense Department has done about this thing.
Secretary SAWYER. There has been a tendency, since the Korean War began, and the Military Establishment has been faced with the terriffic need to build up its matériel and its manpower, and so forth, to resort more to negotiated contracts than they did prior to that time. However, we are working with the military, all branches of it, in an effort to see that so far as possible so-called negotiated contracts can be utilized in dealing with small-business men, and also to see that wherever possible the old type of bidding permitting small business to come in is utilized.
I feel that we have made a very substantial contribution, although it is extremely difficult to tell just how substantial it has been. I could come in with specific instances to you, and I am sure you know about them personally. I want to say, however, in all fairness, that small business is today far from getting what it wants, or what it should have.
The CHAIRMAN. I am glad to hear you say that “what it should have," because every bit of the testimony I have seen before the Appropriations Committee on these contracts with the Army and Navy bears out what you say, what small business should have it does not have.
Secretary SAWYER. I agree with that.
The CHAIRMAN. We just want to try and help, because every business firm you can keep is a great asset to the country, whereas so many in these smaller communities who do not have the direct contracts from the Army and Navy are folding up, as they are in my State and other States.
Secretary SAWYER. There is no doubt about that.
The CHAIRMAN. How can you do more for them under this law? Can you suggest some legislation we can consider, because this is the committee charged with legislation for small business. I would like to get your idea on it, because I know you have tried to help, and I know you have helped-do not misunderstand me. I know we have met, together with representatives of the procurement offices of the Army, the Navy, and the Air Force nearly a year ago, and you started these Commerce offices and tried to help. I think, like you, that we have not helped enough, and I would like to know, after your experience of almost a year, if you can suggest some amendment to this law that the committee can write, because everybody on this committee wants to do it in the interest of small business.
Secretary SAWYER. I think probably you could do something that would be of help. Some time ago I asked the men in my Department to accumulate for me information on what had been done for small business in World War II and how effective it had been.
The CHAIRMAN. We had the Smaller War Plants Corporation that a subcommittee of this committee handled. We want to get some legislation instead of hearings.
Secretary SAWYER. I know that there is that urge to move in on a Smaller War Plants Corporation. I had the statistics gathered with reference to what had been accomplished, what it cost, and so forth. At one time there were 2,800 people employed in the Smaller War Plants Corporation, and it took quite a while to get its activities under way. I do feel that if the Congress and the committee feel, and I think it might be a wise move to make, that an especially active
operation in addition to what we are doing in Commerce needs to be set up
The CHAIRMAN. How can you set it up? That is what I want to do legislatively in this committee which is charged with the duty of considering legislation dealing with small business?
Secretary SAWYER. I think you can set it up, and I think its authority to make suggestions to the military
The CHAIRMAN. You will have to do more than make suggestions.
Secretary SAWYER. I do not know that I would suggest that anyone be allowed to go so far as to issue orders to the military.
The CHAIRMAN. Oh, it could not do that. Secretary SAWYER. The other suggestion that has been made of which I doubt the feasibility is that a certain percentage of orders must be given to so-called small business. I think, if we can, I would be very glad to discuss with my staff the specific wording
The CHAIRMAN. I wish you would and submit it to this committee for my consideration and for the committee's consideration, because I know you have done a lot; I know you have tried to do more than you have done.
Secretary SAWYER. We have not done all that we should do, or can do; I am quite frank to say that.
The CHAIRMAN. I know. The military knows you know it and I know you know it, but what can we do about it. We can legislate in this bill. It is more important to do something in this bill for small business than in any other bill, and you are the one that knows more than anybody else about it, to my way of thinking.
Secretary SAWYER. I would be very glad if you wish, Mr. Chairman, to make a specific suggestion to you dealing with this general over-all subject of the Smaller War Plants Corporation and whether or not it should be completely a separate institution.
(The letter referred to will be found on p. 109.)
The CHAIRMAN. We can put an amendment in this law to try to utilize all of this experience you have had in dealing with the problems of small business,
I do not have any further questions, except I do want to congratulate you on what you have done on stopping the shipments to Communist China through the export laws. I only wish you could use your influence upon our good friends in England.
Secretary SAWYER. We have tried, and I think to a certain extent we have accomplished that, although it is not all that I hoped we could do.
The CHAIRMAN. You mentioned certificates of amortization and certificates of necessity. Mr. Fleischmann will be here tomorrow.
Secretary SAWYER. I do not think anybody knows all the answers, and I doubt whether he does. I do not know all the answers, but I do feel this, Mr. Chairman, that we should not back away from the original decision to encourage the increase in plant capacity, and, while there has been some criticism of these certificates of amortization and certificates of necessity, I myself think we have done exactly the right thing. There may have been some cases where they should not have been granted. I do not know of any.
The CHAIRMAN. I am not suggesting that. There are a whole lot of questions that I want to ask, because I have seen some of these
people. People asking for these things say it does not do them any good, so I have had the staff of the committee prepare a long statement covering every phase of certificates of necessity and tax amortization. I wanted to put that in the record tomorrow, and, of course, I know, as you do, that amortization certificates have been issued for some 512 billions worth of facilities, but why would business say it does not do any good and then come and ask you for amortization certificates for $17,300,000,000 worth of facilities!
(The memorandum referred to will be found on p. 120.)
Secretary SAWYER. The total I think is that; and the figures which I have given here which apply to the NPA are somewhat smaller.
The CHAIRMAN. I understand. I mean the total requested—the $17,300,000,000.
Secretary SAWYER. Yes; it was very large.
Senator BRICKER. I want to commend the Secretary upon his presentation. I think it is an excellent one. I think there are just two or three questions I would like to ask in connection with it.
In the first place, on page 3, in the second paragraph, in connection with some of it is not essential”—that is, the plant expansion, new buildings and we may have to screen the use of resources for such purposes, as well as their use for consumers' products.
Do you not now have full authority and are you not screening the use of materials for all building purposes?
Secretary SAWYER. Yes. All I am arguing here is we should have a continuance of the authority.
Senator BRICKER. No additional authority is needed over that?
Secretary SAWYER. I think not. I am quite sure I am right about that. You might ask Mr. Fleischmann. The point is we have hesitated, first, on principle, because, as I said to the chairman a moment ago, we want to put as little control as possible upon the economy; and, secondly, because if you stop large-business operations, for instance, you throw people out of work, you throw out of gear a man's business plans for a year or two ahead, and we have tried not to do that until we were at the point where we felt it was necessary, and all that I meant here was that it may be necessary to stop some building of apartment houses or office buildings, or that sort of thing, because the materials are needed elsewhere.
Senator BRICKER. At the top of the page you say: Such a rate will represent 15 percent or more of our total National outputthat is the allocation to defense productionand clearly will require an increasing diversion of capacity and materials from civilian to defense industries.
At what time do you think in our program, if you have made any estimate, will we be able to substantially take care of the domestic demands along with the war production demands?
Secretary SAWYER. I think Mr. Wilson, who testified here this morning, is perhaps better qualified to answer that question, but I should say about a year or so from now we ought to be in pretty good shape to do that, that is, over-all. Of course, there will be areas and activities where the demand will undoubtedly increase.