TABLE 4.-Interest on Federal Public Debt in relation to national income and Federal budget receipts, 1870-1950

Sources: Treasury Bulletin, September 1950, and the Midyear Economic Report of the President, July

TABLE 5.-Computed interest charge and computed annual interest cost on Federal securities, by types of issue, 1946-50

Source: Computed from Treasury Bulletin, September 1950.

NOTE-The amounts of computed annual interest charges shown here differ from the actual expenditures for interest for a number of reasons, including (1) interest charges on series E and F savings bonds are computed at average rate of return (2.90 percent and 2.53 percent, respectively), whereas expenditures include additions to redemption values each year, which are smaller in the early years and larger in the latter years of the life of these bonds, (2) expenditure before fiscal year 1950 for issues other than savings bonds do not include interest accumulated but not paid, whereas those for 1950 include $225,000,000 accumulated in previous years; (3) variations during year in amounts of different types of issues outstanding and in coupon rates.

TABLE 6.-Military procurement price trends

Since the spring of 1950, prices have risen markedly, particularly after the start of the conflict in Korea. The Bureau of Labor Statistics' wholesale price index is now at an all-time high, reaching a level of 171.7 on November 28, a rise of 12.3 percent since April 1950 and an increase of 2.5 percent during the past 2 months. Many basic raw materials have increased in price to an even greater extent than have finished commodities, including a number of key commodities used in the manufacture of items required by the armed services, as shown by the following table:

Due to the existence of fixed-price contracts for many items, the rise in basic commodity prices was not fully and immediately reflected in procurement prices paid by the armed services. However, the increase in general price level is being felt more and more by the armed services. With the exception of meats, the price of which has dropped seasonally during the past 2 months, and a few other scattered items, higher prices are being encountered in an ever-increasing number of items. These price rises are becoming increasingly wide-spread despite efforts to reduce costs wherever feasible by simplification of specifications and substitution of materials. The recent steel industry wage and price increases will undoubtedly lead to further increases in the prices of many military procurement items.

One of the key commodities affected by the Korean conflict has been aviation gasoline. Preliminary screening of offers for delivery of aviation gasoline starting in January 1951 indicates the following price increases per gallon for normal production:

However, normal production is not adequate to meet current armed services needs for aviation gasoline. Consequently, part of the aviation gasoline supplies of the armed services are being derived from marginal production, utilizing materials, plant facilities, and transportation practices that are not economical under normal conditions. As a result, premiums of varying amounts are being paid for the supply increments furnished from marginal sources, ranging from 5 to 45 percent, depending upon the particular circumstances involved.

It must be recognized that it is difficult to compare prices at different times for much of the matériel procured by the armed services because of changes in quantities involved, changes in specifications, changes in manufacturing methods and processing techniques, resort to marginal producers or methods, existence of price redetermination clauses in contracts, etc. Direct price comparisons can best be made on relatively standard-type items that are subject to little change in specifications. Such a list of representative items, indicating procurement prices applicable to each of the services and to the Armed Services Petroleum Purchasing Agency, is contained in the attached table.