science and invention already achieved into actual productivity. That is why we feel that, in doing this productive part of the job, it is enormously important to gear economic policy to the maintenance of a large and strong production base for the economy as a whole. Every economic policy, whether it be allocations, whether it be taxes, whether it be controls, should give heavy weight and account to the fact that in the final analysis production is what you are trying to get; production to service your armed forces, production to service your civilian economy, production to service your international programs, and production to service your mobilization base itself.

You have to use manpower and you have to use materials to build the plants that will produce more materials.

g thing shown this dart is that it breaks down that

ree types: durables, nondurables, and services. Ter the Dext year or two-getting back again to the Emoker rused— we will have to engineer rather Jumble consumpte, simply because we will not openince that much durables for the civilian popuand at the state time to service both the defense program and Casual mobilizes a buse as shown on chart 4.

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It is a mistake to think that the only reason for wanting to hak re fora durable consumption is to service the armed forces That is one important priority. But if that alone is done. ansoort is taken of cutting back on your consumer durables te vejer to service your production base, you gradually get a produc

t

hase which cannot carry your military program and your conCeremony. As a result, you have the triangle standing on its top gon its base.

f

In talking about the cut-back on consumer durables. I think you teed a rigoros program to service both industrial production and rots mers. In other words, if you cut back automobiles just enough to take care of the military program, you cannot at the same time expand your steel capacity. And if you do not expand your steel capety, you cannot see the way out, within a year or two from now, both to carry the military program and to supply consumers with durables inclu ling automobiles.

This shows that even after cutting back heavily on durables, when you lock at nondurables and services, you find that the total of conSumption for the economy as a whole can be more or less maintained. I say "more or less" advisedly. But it can be more or less maintained over the next year or two with a defense program of this size, and with an industrial mobilization program of this size, which I think is so important.

Now, there is a dual significance in that. The first significance is that statements that even if we must undertake a defense program of this size in the interests of national security-and I believe that we must, but I am not pretending to be an expert on that field-statements that we cannot undertake such a program without wrecking or destroying or impoverishing our economy would not seem to hold

water.

The CHAIRMAN. Now, may I interrupt there?

We are going to have less durable goods in the first half of 1952 than you had in 1949: is that right? Or is that the same amount?

Mr. KEYSERLING. It is about 30 billion dollars in the first half of 1951 and will drop by the end of the year to around 25 billion.

The economy as a whole has enormously increased its productive potential since 1949 and hence consumption expenditures are higher. In other words, the whole bar has increased.

The CHAIRMAN. This is 24.8 billion dollars in 1949, and will be even lower in 1952, back to about what it was in 1949. Then why is it necessary to cut back on your durables?

Mr. KEYSERLING. In 1952, if you did not have a defense program, and if you did not have an industrial mobilization program, you could have enormously more durable goods than you had in 1949.

The CHAIRMAN. But my point is that the amount in 1949 and 1952 is the same. What happened to the durable goods in 1951, for example? Is that tanks?

Mr. KEYSERLING. The durable goods that the Army buys are not in here at all. These are the durable goods that the consumer buys.

The CHAIRMAN. We have the same as we had in 1949.

Mr. KEYSERLING. We have more than we had in 1949.

The CHAIRMAN. Then why should we have to curtail?

Mr. KEYSERLING. Because the production now is much higher than in 1949. In other words, to answer the question specifically, the production for civilian use in 1949 was 24.8 billion dollars. The production for civilian use in the first half of 1951 was at an annual rate of about 30 billion dollars, which is more than 5 billion higher.

The CHAIRMAN. But we can't get copper wire, for example.

Mr. KEYSERLING. That is right; there are shortages even at the higher level of production.

The CHAIRMAN. Is copper a scarce material?

Mr. KEYSERLING. Oh, yes; definitely.

The CHAIRMAN. So those durable goods would include copper?

Mr. KEYSERLING. Yes; they include copper for consumer durable goods. But if you cut back more on consumer durables you would have more copper for more important things in these times. That is the point I was trying to make.

The CHAIRMAN. I understand now. Those durable goods are not only copper, steel, and things we are short of, but they are everything. Mr. KEYSERLING. These black bars in chart 5 represent total consumer purchases of durable goods: automobiles, hard goods, refrigerators, and television sets.

By the first half of 1951, that was approximately 5 to 6 billion dollars higher than in 1949. The point that this makes is that we cannot do the defense job and continue consumer durables at about 30 billion dollars. They have to be cut back.

Even when they are cut back to 24 billion or 25 billion dollars-and that will be a cutback big enough to enable us to do other things-we will not be really strapped or wrecked. At that much lower level we will still be as high as we were in 1949, which was a pretty good year, and we will be much higher than we ever were before the war.

That merely illustrates that due to the real growth of the economy, we can, with a wise reassignment of our resources, do this job, and have enough not to live in the luxury we would if we didn't have the defense program, but certainly to get by on a good, high standard.

Senator BRICKER. The only thing that will cut that anticipated half of 1952 durable goods below what it was in 1949 or 1948, certainly, will be the increased population so there will be less per individual.

Mr. KEYSERLING. There will be less per capita. It would be cut further if the defense program should need to be expanded still faster,

The CHAIRMAN. This is 24.8 billion dollars in 1949, and will be even lower in 1952, back to about what it was in 1949. Then why is it necessary to cut back on your durables?

Mr. KEYSERLING. In 1952, if you did not have a defense program, and if you did not have an industrial mobilization program, you could have enormously more durable goods than you had in 1949.

The CHAIRMAN. But my point is that the amount in 1949 and 1952 is the same. What happened to the durable goods in 1951, for example? Is that tanks?

Mr. KEYSERLING. The durable goods that the Army buys are not in here at all. These are the durable goods that the consumer buys. The CHAIRMAN. We have the same as we had in 1949. .

Mr. KEYSERLING. We have more than we had in 1949.

The CHAIRMAN. Then why should we have to curtail?

Mr. KEYSERLING. Because the production now is much higher than in 1949. In other words, to answer the question specifically, the production for civilian use in 1949 was 24.8 billion dollars. The production for civilian use in the first half of 1951 was at an annual rate of about 30 billion dollars, which is more than 5 billion higher.

The CHAIRMAN. But we can't get copper wire, for example.

Mr. KEYSERLING. That is right; there are shortages even at the higher level of production.

The CHAIRMAN. Is copper a scarce material?
Mr. KEYSERLING. Oh, yes; definitely.

The CHAIRMAN. So those durable goods would include copper? Mr. KEYSERLING. Yes; they include copper for consumer durable goods. But if you cut back more on consumer durables you would have more copper for more important things in these times. That is the point I was trying to make.

The CHAIRMAN. I understand now. Those durable goods are not only copper, steel, and things we are short of, but they are everything. Mr. KEYSERLING. These black bars in chart 5 represent total consumer purchases of durable goods: automobiles, hard goods, refrigerators, and television sets.

By the first half of 1951, that was approximately 5 to 6 billion dollars higher than in 1949. The point that this makes is that we cannot do the defense job and continue consumer durables at about 30 billion dollars. They have to be cut back.

Even when they are cut back to 24 billion or 25 billion dollars-and that will be a cutback big enough to enable us to do other things-we will not be really strapped or wrecked. At that much lower level we will still be as high as we were in 1949, which was a pretty good year, and we will be much higher than we ever were before the war.

That merely illustrates that due to the real growth of the economy, we can, with a wise reassignment of our resources, do this job, and have enough not to live in the luxury we would if we didn't have the defense program, but certainly to get by on a good, high standard.

Senator BRICKER. The only thing that will cut that anticipated half of 1952 durable goods below what it was in 1949 or 1948, certainly, will be the increased population so there will be less per individual.

Mr. KEYSERLING. There will be less per capita. It would be cut further if the defense program should need to be expanded still faster,