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The congressional policy is set out in S. 237 in section 3 (a), which reads: It is hereby declared to be the policy of Congress to provide for the taking of appropriate action to insure that there will be available a number of cargo aircraft adequate to meet the potential requirements of the United States * * * but not in excess of a number adequate to meet the military reserve requirements of the United States * * *."

To carry out the purposes of the bill the Aircraft Development Corporation would be created within the Department of the Air Force by section 4 (a) which provides: “The Corporation shall, independently of the Secretary of the Air Force, exercise the functions vested in it by or pursuant to law, except that budgeting, accounting, personnel, and related routine-management functions of the Corporation shall be performed under the supervision of the Secretary of the Air Force through such facilities as he shall designate or establish.” Among other things, the Corporation would have capital stock of $100,000,000, all of which would be subscribed for by the Reconstruction Finance Corporation; its management would be vested in a board of five directors appointed by the Secretary of the Air Force, by and with the advice and consent of the Senate, with com. pensation at the rate of $12,000 per annum.

The Corporation would be authorized “To employ such personnel as shall be necessary for the transaction of the business of the Corporation; to define their authority and duties; to require bonds for the faithful performance of their duties, the premiums on such bonds to be paid by the Corporation; and to fix and pay their compensation. Such compensation shall be fixed in accordance with the Classification Act of 1923, as amended.” It would also be authorized "To employ experts, advisers, and consultants, or organizations thereof, as authorized by section 15 of the Act of August 2, 1946 (5 Ú. S. C., sec. 55a); and to compensate individuals so employed at rates not in excess of $50 per diem, and to pay their actual and necessary traveling and subsistence expenses (including in-lieu-of-subsistence per diem allowances at a rate not in excess of $10) while so employed.”

The foregoing are the only provisions in the bill containing matters coming within the scope of the Commission's activities. Other than experts, advisers, and consultants, all personnel employed by the Corporation would be subject to the Civil Service Act and the Classification Act of 1923, as amended.

The Commission has no objection to the enactment into law of the bill insofar as it pertains to any function within the scope of the Commission's activities.

The Commission, in accordance with established procedure, has been informed by the Bureau of the Budget that there would be no objection to the submission of the proposed report, which is confined to the personnel provisions of the bill, to your committee. By direction of the Commission: Sincerely yours,

HARRY B. MITCHELL.

RECONSTRUCTION FINANCE CORPORATION,

Washington, March 23, 1949. Hon. EDWIN G. JOHNSON, Chairman, Senate Committee on Interstate and Foreign Commerce,

Washington, D. C. DEAR SENATOR JOHNSON: This is in response to Mr. Jarrett's letter of January 13, 1949, requesting our comments on S. 237, a bill to promote interstate and foreign commerce and strengthen the national defense by providing for cargo aircraft adaptable for postal, commercial, and military service, and for other purposes.

The bill would declare that it is the policy of Congress to insure that there will be available a number of cargo aircraft adequate to meet the potential commercial requirements of the United States but not in excess of a number adequate to meet the military reserve requirements of the United States. To accomplish this objective, there would be created within the Department of the Air Force a corporation named "Aircraft Development Corporation,” with a capital stock of $100,000,000. The primary functions of the Aircraft Development Corporation would be

(1) To make a continuing survey and study of the potential commercial and military reserve requirements of the United States for cargo aircraft;

(2) Within the limits of funds available to it, to purchases from manufacturers in the United States such number of cargo aircraft as may be necessary to effectu. ate the policy declared in the bill;

(3) To lease such aircraft, under the terms and conditions prescribed in section 7 of the bill, including provision for recapture, to citizens of the United States engaged in the transportation of commodities in air commerce; and

(4) To initiate and support research and experiments for the purpose of developing new and improved types of cargo aircraft.

The Reconstruction Finance Corporation would be affected only by section 4 (b) of the bill which provides that the capital stock of the Aircraft Development Corporation shall be subscribed for by the Reconstruction Finance Corporation for the United States. Since RFC would have no function under the bill other than to supply the new corporation with capital and since RFC would, in turn, have to borrow these funds from the Treasury and pay interest thereon, it is suggested that it would be simpler and more direct to provide that the capital stock of the Aircraft Development Corporation shall be subscribed for by the Secretary of the Treasury on behalf of the United States.

We have been advised by the Bureau of the Budget that they have no objection to the submission of this report to your committee. Sincerely yours,

HARLEY HISE, Chairman.

EXCERPT FROM LETTER OF CIVIL AERONAUTICS BOARD DATED May 24 S. 237: To promote interstate and foreign commerce and strengthen the national defense by providing for cargo aircraft adaptable for postal, commercial, and military service, and for other purposes.

This bill would provide for Government financing of research and development work on new designs of cargo aircraft adaptable for auxiliary military uses, as well as Government acquisition of a pool of cargo aircraft to be leased to private operators.

The Board would fully endorse legislation providing for Government financing of research and development work on new designs of civil transport aircraft, of both cargo and passenger types, adaptable for auxiliary military uses, but the Board does not favor use of the Government corporation device to implement any such program. Moreover, the Board believes that the provisions relating to the establishment of a Government pool of cargo aircraft are unnecessary and undesirable at the present time.

DEPARTMENT OF STATE,

Washington, October 11, 1949. Hon. EDWIN C. JOHNSON, Chairman, Committee on Interstate and Foreign Commerce,

United States Senate. MY DEAR SENATOR JOHNSON: Reference is made to a letter of January 13, 1949, from Mr. Edward Jarrett, clerk of the Senate Committee on Interstate and Foreign Commerce, requesting the comments of this Department on S. 237, a bill to promote interstate and foreign commerce and strengthen the national defense by providing for cargo aircraft adaptable for postal, commercial, and military service, and for other purposes.

This bill has been studied from the standpoint of foreign affairs and in this connection reference is made to paragraph (b) of section 7 of the bill which appears on pages 8 and 9. This paragraph provides that, during the period when the cargo aircraft provided for in the bill may be under lease to United States citizens for use in the transportation of commodities in air commerce, not less than 75 percent of the personnel employed by the lessee in connection with its operations of such leased cargo aircraft shall be members of the Reserve components of the armed services of the United States. Since the term "air commerce" as used in this bill means interstate, oversea, or foreign air commerce as defined in the Civil Aeronautics Act of 1938 as amended, it is understood that the requirement that 75 percent of the personnel be members of the Reserve components of the armed services of the United States would apply in cases when the aircraft might be operated into and through foreign countries. It is believed that such foreign countries might object to operation of such leased aircraft into and over their territories if the requirement concerning membership in the Reserve components of the armed services of the United States were imposed.

It is recognized that the training obtained by such members of the Reserves in operation of such aircraft could be very valuable to the national defense of the United States. It is also believed, however, that use of the aircraft in foreign commerce would likewise be of benefit of this country and, therefore, it is suggested that in order to prevent opposition to the use of such aircraft in foreign commerce the requirement in paragraph (b) of section 7 be amended by the addition of the words "interstate and overseas” after the word “in” in line 25 on page 8 of the bill, thus limiting the requirement to operations within the United States, its Territories, and possessions.

In order that the committee may have the benefit of the Department's views prior to the adjournment of Congress, we have not waited for clearance by Bureau of the Budget. Sincerely yours,

ERNEST A. GROSS,

Assistant Secretary (For the Secretary of State).

TREASURY DEPARTMENT,

Washington, March 20, 1950. Hon. Edwin C. JOHNSON, Chairman, Committee on Interstate and Foreign Commerce,

United States Senate, Washington, D. C. MY DEAR MR. CHAIRMAN: Further reference is made to your letters of January 13, January 18, and July 25, 1949, requesting the views of the Treasury Department on S. 237, S. 426, and'S. 2301, bills to provide for civil transport aircraft adaptable to military service.

These three bills, while differing in plan of accomplishing desired results, would declare it to be the policy of Congress to provide for the development of transport aircraft to meet domestic and international commercial requirements of the United States, at the same time meeting military reserve requirements with respect to such aircraft. The bills would establish boards or a corporation authorized to develop such a program.

Replies to your letters have been withheld pending the report of an ad hoc committee on development of prototype transport aircraft, appointed by the Air Coordinating Committee, in order that the position of the Treasury Department relating to this matter could be coordinated with that of the Air Coordinating Committee. On November 17, 1949, the Air Coordinating Committee approved a recommendation of the ad hoc committee that legislation be drafted for later consideration by the Air Coordinating Committee and submission to Congress. Inasmuch as present indications are that the proposed legislation to be drafted will vary in several important features from any of the bills now before your committee, the Treasury Department recommends that consideration of any proposed legislation relating to this subject matter be deferred until such time as proposed legislation approved by the Air Coordinating Committee is before your committee.

Advice has been received from the Bureau of the Budget that bills now pending before the Congress which would authorize Federal financing of the design and development of prototype aircraft would not be in accord with the program of the President. Very truly yours,

E. H. FOLEY, Jr., Acting Secretary of the Treasury.

DEPARTMENT OF COMMERCE,

Washington, July 25, 1949. Hon. Edwin C. Johnson, Chairman, Committee on Interstate and Foreign Commerce,

United States Senate, Washington, D. C. DEAR MR. CHAIRMAN: This letter is in further response to your communication of January 18, 1949, requesting the comments of the Department of Commerce on S. 426, a bill to provide for the development of civil transport aircraft adaptable for auxiliary military service, and for other purposes.

There is attached a copy of a report setting forth in detail the views of the Department concerning this proposal. For the reasons there stated, the Department is unable to recommend the enactment of S. 426.

We have been advised by the Bureau of the Budget that there is no objection to the submission of this report to the committee. Sincerely yours,

MATTHEW HALE (For the Secretary of Commerce).

REPORT OF THE DEPARTMENT OF COMMERCE ON S. 426, TO PROVIDE FOR THE

DEVELOPMENT OF CIVIL TRANSPORT AIRCRAFT ADAPTABLE FOR AUXILIARY MILITARY SERVICE, AND FOR OTHER PURPOSES

S. 426 would direct the Secretary of Defense to survey the national need for aircraft types designed primarily for commercial air service, which are also adaptable as auxiliary military transports, and to recommend the operating and utility characteristics and specifications of such aircraft. A Civil Air Transport Evaluation and Development Board would be established to assist the Secretary in recommending such specifications. The Secretary would be authorized to provide funds for this development and the sale of aircraft so developed would be subject to certain specified restrictions.

The Department of Commerce has in the past supported measures such as S. 426 which had as their objective the dual purpose of pron.oting air commerce and meeting the needs of national defense. Our support has been predicated upon our conviction that, in view of the substantial sums required for the development of new type aircraft, the manufacturing industry was unable to provide out of private capital the prototype development necessary to produce a more efficient type of transport. It was a point of view which was shared not only by other agencies of the Government, but was supported by statements made before the President's Air Policy Commission by responsible representatives of the manufacturing industry and by the ultimate findings of that Commission and the Congressional Aviation Policy Board.

While we have no doubt that at the time these reports were issued the support of the Federal Government in the development of new type transport aircraft was thoroughly justified, the circumstances during the ensuing year have changed materially. We are now informed that the manufacturing industry generally does not need and does not wish the financial support envisioned in the subject legislation. The financial condition of the industry has improved, largely as a result of the increased tempo of the military procurement program, and at the present time it appears more probable that private capital could provide for the development necessary to produce new, more efficient, transport aircraft. While we recognize that much remains to be done in bringing into regular commercial use new aircraft utilizing the newer, more efficient engines and fuels, nevertheless we feel that many of the objectives of the proposed prototype program are being realized through a combination of the military procurement program, existing federally sponsored research programs, and through the initiative of private enterprise.

In view of the foregoing, this Department does not feel that it can recommend the enactment this year of S. 426 from the point of view of commercial or economic need. However, if the military were to determine that the program envisioned in S. 426 is a necessary part of our over-all military preparedness program, this Department would support the legislation on that basis. In addition, we recognize that the possibility exists that the aircraft manufacturing industry may again find itself in the same financial condition which was described so forthrightly before the President's Air Policy Commission, a circumstance which would be very likely to come about if the military procurement program were to be reduced substantially below its present level. It is our opinion that if this were to happen the entire question should be reexamined.

The Bureau of the Budget has been consulted and has advised that there is no objection to the submission of this report.

EXCERPTS FROM LETTER FROM CAB DATED MAY 24, 1949 S. 426: To provide for the development of civil transport aircraft adaptable for auxiliary military service, and for other purposes.

This bill, like S. 237 above, would provide for Government financing of research and development work on new designs of civil transport aircraft adaptable for auxiliary military use.

While the Board favors the general objective of S. 426, it does not approve of the means which this bill provides for accomplishing the objective, and urges instead the favorable consideration of legislation in the form presented to the last session of Congress as represented by H. R. 6501 as amended.

DEPARTMENT OF THE AIR FORCE,

Washington, June 15, 1949. Hon. Edwin C. JOHNSON, Chairman, Committee on Interstate and Foreign Commerce,

United States Senate. DEAR MR. CHAIRMAN: We refer to your recent request to the Secretary of Defense for the views of the National Military Establishment with respect to S. 426, Eighty-first Congress, a bill to provide for the development of civil transport aircraft adaptable for auxiliary military service, and for other purposes (prototype aircraft bill). The Secretary of Defense has delegated to this Department the responsibility for expressing the views of the National Military Establishment.

The purpose of this bill is to provide for the development by the National Military Establishment of prototype civil air transport planes which could be converted to military uses in time of war.

The position of the National Military Establishment in respect to subject bill is under study and when its views have been developed they will be communicated to the Bureau of the Budget and to the Congress.

The National Military Establishment has no comment to make with respect to this bill at this time, and it is doubtful that a position thereon will be developed in time for consideration by the present session of the Congress.

This report has been coordinated among the Departments and Boards in the National Military Establishment in accordance with procedures prescribed by the Secretary of Defense.

The Bureau of the Budget has been consulted and advises that there is no objection to the submission of this report. Sincerely,

W. STUART SYMINGTON.

UNITED STATES CIVIL SERVICE COMMISSION,

Washington, D. C., February 23, 1949. Hon. Edwin C. JOHNSON, Chairman, Committee on Interstate and Foreign Commerce,

United States Senate. DEAR SENATOR JOHNSON: Further reference is made to your letter of January 18, 1949, requesting a report of the Commission's views on S. 426, a bill to provide for the development of civil transport aircraft adaptable for auxiliary military service, and for other purposes.

It is noted that S. 426 declares it" to be the policy of the Congress that in the interest of national security the Federal Government should promote the employment in air commerce in as large numbers as possible of more efficient transport and cargo aircraft; and, to this end, sponsor the design, development, testing tooling, construction, and modification of prototype transport and cargo aircraft, intended primarily for commercial use, but adaptable also for auxiliary military service.”

The Secretary of the Air Force is designated to carry out the provisions of the bill, consulting with the Civil Air Transport Evaluation and Development Board appointed for that purpose. The Board is to be composed of one representative designated by each of the following agencies: The United States Air Force, the United States Navy, the National Advisory Committee for Aeronautics, the Civil Aeronautics Administration, the Civil Aeronautics Board, and such other agencies of the Federal Government, concerned with aeronautics, as the Secretary may, from time to time, determine. In addition, the Secretary is authorized to establish an industry advisory committee composed of not less than six members appointed by the Board with the approval of the Secretary Members of this committee may be designated without regard to the civil-service laws or the Classification Act of 1923, as amended, and shall receive compensation not in excess of $50 per day.

The bill further provides that the Secretary is authorized, subject to the civilservice laws and the Classification Act of 1923, as amended, but without regard to any provisions of law limiting the number of civilian personnel which may be employed by the Department of the Air Force, to employ and fix the compensation of such personnel as may be deemed necessary to assist the Board and the Secretary in carrying out their respective functions under this act.

Although the Commission's general policy is to oppose exemption of positions from the classified civil service, due to the particular relationship of the committee to the Board, and the extremely technical and comprehensive nature of the duties

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