DEFENSE PRODUCTION ACT AMENDMENTS OF 1951

WEDNESDAY, MAY 9, 1951

UNITED STATES SENATE, COMMITTEE ON BANKING AND CURRENCY, Washington, D. C.

The committee met, pursuant to recess, at 10: 30 p. m., in room 301, Senate Office Building, Senator Burnet R. Maybank, chairman, presiding.

Present: Senators Maybank, Robertson, Frear, Douglas, Benton, Moody, Bricker, Schoeppel, and Dirksen.

The CHAIRMAN. The committee will come to order.

Mr. Gibson, do you desire to read your statement or have it made a part of the record? I presume the committee members have read your statement. Do you wish to high-light it, or what would be your desire?

STATEMENT OF EDWIN T. GIBSON, ACTING ADMINISTRATOR, DEFENSE PRODUCTION ADMINISTRATION; ACCOMPANIED BY JESS LARSON, ADMINISTRATOR, GENERAL SERVICES ADMINISTRATION; CHARLES KENDALL, GENERAL COUNSEL, DEFENSE PRODUCTION ADMINISTRATION; AND MATTHEW HALE, DEPARTMENT OF COMMERCE

Mr. GIBSON. I would like to, if I could, read the statement. I have with me Mr. Jess Larson, who is Administrator of General Services Administration: Mr. Charles Kendall, who is General Counsel for DPA, and Mr. Matthew Hale, from the Commerce Department. In the event that there are questions I am asked that I cannot answer they may be able to help me.

The CHAIRMAN. We are very glad to have them here.

I asked some questions yesterday for the record, and I do not know whether you had the opportunity to read them or not, but I requested Mr. Fleischmann to ask you certain questions on the certificates of necessity and tax amortizations, so that we could break them down regionally.

Mr. GIBSON. I have not been able to do that in time for today's meeting, Senator, since I saw Mr. Fleischmann late last evening.

The CHAIRMAN. I did not know whether you could or not, but the committee did want them for the record because we feel that unless these various tax-amortization certificates and certificates of necessity are granted in the different regions of the country, it would just tend to a greater concentration of industrial power in certain sections of the country. It was our understanding we wanted to disperse as much

as possible and we know in some instances you could not, but wherever possible you should disperse the so-called defense plants to which you gave certificates of necessity and certificates of amortization. But you have not had the time?

Mr. GIBSON. I have not had the time. Could I submit them to the committee in a statement later?

The CHAIRMAN. Yes. Do you have the hearing of yesterday?
Mr. GIBSON. I have not gotten them yet.

The CHAIRMAN. Suppose we do this, Mr. Gibson. When you are through testifying, or sometime later today, if you will, look at this record so you will get what I asked for and what Senator Bricker asked for. He asked for certain segments of industry and I asked for certain regions, and I think Senator Douglas asked for something. But you go ahead, sir.

(The information referred to will be found on pp. 241 and 247.) Mr. GIBSON. Mr. Chairman and members of the committee, I am Edwin T. Gibson, a New York businessman in private life, presently and since the resignation of General Harrison the Acting Administrator of the Defense Production Administration. I think it would be worth while to take a few minutes to describe the place of the Defense Production Administration in the organization of the Government for defense mobilization.

As you, of course, all know, the Defense Production Act of 1950 authorized the President to do a variety of things in the interest of national preparedness, with the understanding that the President would delegate those powers to appropriate subordinates for execution. We must look, therefore, to certain Executive orders of the President, rather than to the statute, for a description of the alphabet organization.

Starting at the top, the Office of Defense Mobilization, headed by Mr. Wilson, is charged with over-all direction of the program including both its expansion and its stabilization aspects.

Reporting directly to the ODM on the stabilization side is the Economic Stabilization Agency under Mr. Johnston and on the production side the DPA.

Certain other agencies are responsible directly to Mr. Wilson for the performance of Defense Production Act functions, notably the Department of Agriculture with respect to food, the Board of Governors of the Federal Reserve System, with respect to credit controls, and the Department of Labor with respect to labor supply.

Senator DIRKSEN. Mr. Chairman, does Mr. Gibson want to be interrupted as we go along?

The CHAIRMAN. He said he would like to read the statement.
Mr. GIBSON. Whatever you wish, Mr. Chairman.

The CHAIRMAN. I asked him if he wanted to summarize it, but he said he wanted to read the whole thing through. Then we will go ahead as we usually do.

Mr. GIBSON. The responsibilities of the Economic Stabilization Agency are carried out through the Office of Price Stabilization and the Wage Stabilization Board. On the production side the Defense Production Administration has delegated responsibility for appropriate areas of development and control to the Secretaries of Commerce, Agriculture, and Interior, and to a Commissioner of the Inter

state Commerce Commission. Within the Departments the Secretaries have organized several units to carry out the operations, such as the National Production Authority in the Department of Commerce, the Defense Transport Administration at Interstate Commerce Commission, and the Defense Minerals Administration in the Department of the Interior. During the course of these hearings you have heard or will hear from most of the heads of the organizational units which I have named.

Returning to the Defense Production Administration, our agency was created and assigned its job by Executive Order 10200 on January 3. 1951. Briefly, the order delegates to the Defense Production Administrator the functions conferred upon the President by titles I and II of the Defense Production Act, requires him to direct the administration of the functions provided for in title III of the act and authorizes him to use the several administrative powers granted in title VII of the act. In addition the Administrator is designated as the certifying authority under the Internal Revenue Code with respect to emergency amortization of defense facilities. This broad grant of responsibility is limited as I earlier indicated with respect to the production and distribution of food and certain Federal Reserve Board assignments. There is included in the order a direction to use the several agencies of Government which I have already named in carrying out the Administrator's assignment and there are added certain specific responsibilities such as (1) the central programing function incident to the determination of defense production programs, (2) the provision of adequate facilities for defense production, (3) the determination of procedures and methods with respect to purchasing, contracting, specifications, and other elements of the defense production program. (4) the assembly of labor supply requirements of the production program for the use of the Secretary of Labor, and (5) the approval of voluntary agreements for defense purposes, which, incidentally, has not been delegated to the Acting Administrator, because under the law, in order to sign those agreements and make them, the officer must be an officer confirmed by the Senate, and, as a consequence, that particular authority has been delegated to Mr. Wilson, the Defense Mobilizer.

The President has asked and the Government witnesses before this committee are here to urge the extension of the Defense Production Act with certain strengthening amendments. Before acting on that request you are, of course, interested in knowing to what uses the act has been put in the 7 months it has been in effect. Various reports. both written and oral, have been made from time to time to appropriate committees of the Congress and I am sure that all the members of this committee have examined carefully such of those reports as were made available to you. It is entirely appropriate, however, that these hearings should supplement those various reports with a review of the entire operation.

I shall attempt a summary of the actions taken by the DPA which I think will demonstrate the need for the extension of the act and for the proposed amendments in the areas of DPA responsibility.

Title I of the act authorizes the President to require priority in the performance of contracts which he deems necessary to promote the national defense and further authorizes him to allocate materials and facilities to the same end. This authority is basic to the ecoLO!.

controls which assure that first things come first and that conflicting claims for limited supplies of materials and limited capacities for production are resolved in favor of the national defense and the maintenance of an essential civilian economy. Priority orders, limitation orders, allocation orders, scheduling directives, set-asides, and rationing all are based upon this legislative grant.

By use of title I authority the industrial machine can be converted from peace to war production. The output of a particular end product can be reduced or stopped and that of another end product expanded. The use of particular materials may be cut off entirely or it may be reduced in the production of some items and encouraged in others. The use of substitutes may be encouraged or required as the need demands. Notably, deliveries may be facilitated to some users and forbidden to others.

The members of the committee are entirely familiar with the use of this authority in World War II, and I refer you to the statement of the Administrator of the National Production Authority for more detail concerning its use in the present emergency. I do want to emphasize, however, that title I is of first importance to economic mobilization.

Title II of the act authorizes the President to requisition supplies and related facilities for the national defense if he is unable to secure them by agreement on reasonable terms. The authority has been delegated to the DPA and is exercised by other agencies of the Government with DPA approval when circumstances require. We are firmly of the conviction that this particular authority need be used very rarely if a real attempt is made to secure the supplies on a fairvalue basis.

However, there are occasions when recalcitrance and exorbitant demands threaten the national interest, and such cases would no doubt arise more frequently in the absence of this statutory authority. Occasionally, also, conflicting claims of title make it legally impossible for the Government to acquire ownership without the requisitioning device.

Authority to requisition effectively supplements the priorities and allocations power. When goods are held for sale in the ordinary course of business a priority order will channel them into defense use, but when goods are held as an investment or for the use of their owner it may be necessary to resort to their requisition. Equipment and supplies in great demand may in some cases be held in inventory against the possibility of increased prices. If the defense program requires it, such inventories may be taken over under this title for fair compensation.

Although rarely used, the requisitioning authority is nevertheless of great importance. Like the jack each of us carries in his automobile it may happily go unused, but when needed it is badly needed. As a deterrent to hoarding and profiteering and as an emergency device of great usefulness, this authority should be continued in force.

Title I authority, as I have stated, is exercised by the various defense administrations within the regular departments under delegation from DPA. Correlation of the use of priorities and alloactions authority by several different agencies is of course of first importance and some difficulty. No purpose is served in channeling scarce con

struction materials into the building of a plant if the raw materials for production or the chemicals and fuel for the production processes cannot be spared from other more important uses. The obvious necessity for this coordination explains the assignment by the President of the central programing function to a single agency from which all the operating agencies receive guidance in the performance of their respective responsibilities.

With respect to the programing activities specified in Executive Order 10200, it may be helpful if I describe briefly our general objectives and the organizational structure through which this part of our job is directed. It is clear that the implementation of our defense production efforts requires consideration of the imbalances between supply and demand which are produced by this extra load on our supplies and facilities.

Our objective in the central programing operation is to set such standards and general levels of production in the various segments of the economy as will produce a balance between supply and the essential and permitted usage of materials or products which would otherwise be in short supply. In developing plans for bringing supply and demand into balance, it is, of course. Lecessary to assemble an initial statement of requirements for the various segments of the economy, for military production, for construction, public utilities, for other civilian activities for export, and so forth, and compare the total of these requirements with the estimated supplies of the materials and products under review. With defense production and other abnormal demands superimposed upon the normal requirements of the civilian economy, the initial picture is almost inevitably one of imbalance. This has to be resolved by determining appropriate levels of production in the nonmilitary fede which will save enough material to bring the supply-and-demand posture into balance. A fat percentage cut the 100 tary fells would not ordinarily be an appro priate some she with the various segments of the economy ertain items need to be pushed ahead at or above historical levels To the extent this is true, of course, other items must of necessity be rained even more to adhiere a bale

The kinds of decisions involved in this central programing activity cut across a wide mure of interests and are bound to have important reperomssions. The rarity of these decisions calls for as comprebersive a review OF CEL PERSOCably be had and our present concept of the operan STUTE (Itensite intergeary consideration,

In the first place, Tations exercite and depammental agences of the Govermem are asked to submit statements of required Late rials and procure for designated areas of the economy. These re quirements are then submited to the organizational mits of the National Production Authority or other appropriate ageunes for review by the penque must enter via respen to the supply situation in the feld der eonateration Tumse Lgences are expected to invite al other interested agencies to solaborante in tile review so as to insure a broad considering of the rarion issues and probleme wUR CITE to be resolved Inna propesis for bringing supply and demand Ito balance are then subject to renew by the Defense Pros wet los Adminlerno ani ne amid the geter plan that this rever include participation by a nen gensy grow, the Program Asjat