ployed, 3,000,000 or 4,000,000; it was not too severe. But we had this many and we still have shortages of steel supply.

I think that the President as a result of this bill ought to get another 10,000,000 or 15,000,000 or 20,000,000 tons of steel capacity. The industry ought to give him this many. If they do not, I think the Government ought to do it.

Senator CAPEHART. Do you think the 5-year amortization plan might well do it?

Mr. NATHAN. I do not know whether it would be enough, Senator. In some industries that are highly competitive, I think it would be. In some industries that are not so competitive, I am not so sure it would. I think it would be, too many of the people are fearful of excess capacity in the postwar period.

Do not forget that the last time we had the 5-year amortization program in steel, the Defense Plant Corporation had to build some of the steel mills, and later sold them to private industry.

So I feel that that is perhaps one of the most important factors we can undertake now, is to get this bill through in terms of incentives for additional production so that we get more steel capacity, more aluminum capacity, more copper smelting facilities, whatever we need that are the bottlenecks, so that our total production can go up.

I might say this, if our total program does not go above 30 or 40 billion dollars, then it is my judgment that the chances of doing it without price control and rationing will be a lot easier if we step up production than if we leave it where it is today.

So we urge this bill and especially this increase in production facilities that are made possible by the bill.

Senator CAPEHART. I do not think there has been any argument against that.

The CHAIRMAN. We appreciate very much your presence here. There is one other thought I would ask that I have talked over with the Secretary of the Treasury about, and the chairman of the Finance Committee, Senator George-knowing your large and extensive experience in the last war-and that is this amortization with which this committee is going to try and raise some amortization for the extension of additional plants.

On the basis of what happened in the last war, do you for productive capacity in this country, believe or not believe in some form of amortization to speed up the development of plants?

Mr. NATHAN. I think accelerated amortization is highly desirable. Senator CAPEHART. I introduced that bill in 1948, and we introduced it again. It is now before the Senate Finance Committee. All they have got to do is drag it out and pass it.

Mr. NATHAN. I think it is highly desirable.

The CHAIRMAN. I appreciate that.

Mr. NATHAN. But I would just like to leave this one major point, and I think that to think of control and how far you have to go to control in the abstract without tying it into the fiscal policy— The CHAIRMAN. You have go to.

Mr. NATHAN. It does not make any sense; because if, for instance, the taxes are not increased substantially and credit restrictions-The CHAIRMAN. If you have to have control, you have got to have over-all control, as Mr. Baruch said-wages and everything.

Mr. NATHAN. Unless taxes are raised very substantially and excessprofits taxes

Senator CAPEHART. If you are going to raise taxes and cut down production-if you cut down credit, you will cut the production.

Mr. NATHAN. That is right, sir. For instance, we are producing now at a rate of about 8,000,000 cars and trucks a year. We cannot produce 8,000,000 trucks and cars a year and 1,500,000 houses a year and everything else and still put on a $20,000,000,000 or $30,000,000,000 defense program on top of that. That means some of that has to be reduced. How are you going to do it? Are you going to do it either one way, by arbitrary directives, and say that only 5,000,000 cars next year, or only 3,000,000? Or the other way is to cut down demand by making people pay a larger percentage in cash and taking away more money in the form of taxes.

I would much rather see that broad approach taken than price control, because I think it is a much easier one to administer. It is much fairer.

Senator CAPEHART. The only danger is, if you keep it in balance, will you still generate enough business here to pay the taxes?

Mr. NATHAN. I think that with the increase in spending of $30,000,000,000 to $40,000,000,000, a profitable goal under the defense program, you will have, I think, enough business to keep it going. After all, Senator, if you do not have enough demand to keep the economy going, you can cut taxes quickly. Our taxes can be flexible.

Senator CAPEHART. It takes lots of argument in the Senate to get that over.

The CHAIRMAN. Thank you, sir.

Mr. William E. Umstattd, the president of the Timken Roller Bearing Co. Would you come forward, please?

STATEMENT OF WILLIAM E. UMSTATTD, PRESIDENT OF THE TIMKEN ROLLER BEARING CO.

Mr. UMSTATTD. My name is William E. Umstattd. I am president of the Timken Roller Bearing Co. We manufacture steel, roller bearings, and rock bits.

As a preface to this statement I am to make, I will say this-perhaps I am taking your time unnecessarily.

The CHAIRMAN. We are glad to have you.

Mr. UMSTATTD. I left Ohio last night in a country at peace. I have been here since 10:30 this morning in a country that is at war. I have heard you mention the World War II and the present war on a couple of occasions. My statement was predicated upon a country at peace.

The CHAIRMAN. I hope we have peace. The only reason I did not mention world war III, I said I hoped there would be no world war I. But I did refer to World War II.

Mr. UмSTATTD. I am appearing before your committee today to give my views as an American businessman concerning Senate bill 3936 introduced by Senator Maybank which is sometimes referred to as the Defense Production Act of 1950.

At the outset, I want to make it clear that as a businessman I feel sure that American business is extremely anxious on a voluntary basis

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to make every conceivable effort to see that the production of defense materials is made available to the Armed Forces in such quantities as are necessary to provide for the adequate defense of the United States. In the battle against aggression, no effort can be spared and no steps taken which will endanger the safety and the security of our country.

I am going to discuss only the sections of the bill that seem to me to affect American manufacturing. These are titles I, II, and III. I do not propose to discuss the portions of the bill that deal with credits or commodity speculation.

Our country is not at the present time engaged in any war. We have been advised by the representatives of the executive branch of the Government on several occasions over the past 2 weeks that the situation in Korea is one of a police action.

The CHAIRMAN. You know why that is done, do you not?

Mr. UMSTATTD. No, sir; do not.

The CHAIRMAN. Because of the United Nations.

Mr. UмSTATTD. Senate bill 3936 seeks to impose controls of such a drastic nature on business that I am apprehensive that the real purposes to which the energies of American business should be dedicated at the present time will be to a very substantial extent defeated.

In the first place, the language of the bill in section 201 is so broad in its character that for all practical purposes it gives the President of the United States life and death control over every business activity of American citizens. But as of the present time there has been no showing or attempt to show, so far as I have been able to determine, that American manufacturers are not in a position to supply on a voluntary allocation basis all the materials that are required for the Armed Forces of the United States.

I might insert parenthetically that most certainly this applies to our company. We have not received orders that we are not able to take care of. We can take care of everything on the books.

Senator CAPEHART. Mr. Chairman, will you yield?

The CHAIRMAN. Certainly.

Senator CAPEHART. Would you say that there are 100,000 or 200,000 or 500,000 businesses in the United States that would be willing to accept defense orders tomorrow if the Government would tell them what they wanted and when they wanted it?

Mr. UMSTATTD. I would say that of the customers we have on our books, some ten-thousand-odd customers and I am in fairly close touch with the bulk of those-all of them would be able to and would gladly accept defense orders.

Senator CAPEHART. If they knew what the Government wanted? Mr. UмSTATTD. If they got the orders, they would fill them; yes, sir. That is my opinion.

Senator CAPEHART. There is in my office each day wires, letters, and telephone calls, "How and where can we get Government business?"

Mr. UMSTATTD. Our salesmen are confronted with the same thing. They are asked if we have any avenue of approach in Washington where defense orders can be secured.

The CHAIRMAN. Of course, unfortunately, real defense orders will not really start until we appropriate the $10,000,000,000. It is an unfortunate thing to have to spend that money, but the appropriation

has not as yet, as you know, been made. And only defense orders can be purchased under the appropriation bill that we have got now, which carries some 1512 billion dollars for the armed services. That has not passed the Senate yet. We are talking about it now. have been talking about it for a month.

We

Mr. UMSTATTD. The President is given authority by the bill to requisition any equipment, supplies, or manufacturing facilities which he may deem necessary for the national defense. While everybody is anxious to do everything possible and necessary to assist the Government in supplying the Army, Navy, and Air Force with all materials necessary for their needs, it seems to me to be an extremely dangerous and unwise step to place in the hands of the President a blank check, so to speak, without there having been any prior showing of necessity for taking the drastic steps proposed by the bill.

The bill contemplates broad and unlimited powers of allocation and priority. Admittedly some priority system is necessary to provide scarce materials for use of the Armed Forces. Is it necessary to provide without limitation for a supreme control over every product of American industry? The burden of controls alone is a heavy one on business, and use of such a system is not to be resorted to in the absence of necessity.

I direct your attention to the provisions that authorize the President virtually without restriction to establish corporations to engage in practically any type of business. Through the medium of these corporations, it would be possible for the President to involve the Government in the operation of virtually any type of business without further consultation with Congress. I think we all realize that if the Government once engages in business in competition with private companies, it is extremely difficult to ever separate the Government from such activities.

The CHAIRMAN. You do not mind being interrupted?

Mr. UMSTATTD. No, sir; I do not.

The CHAIRMAN. You feel that way, and I know a lot of people feel that way. But the thought of further consultation with Congress, I presume you refer to the $2,000,000,000 and the extension of RFC or some other corporation.

I just wanted to mention this for the record, and I trust you understand that I just wanted the people to understand that they cannot spend any of this money. This is just a stand-by authorization until the Congress further appropriates it. And a lot of the troubles today, we have been debating so much about communism around here, which is the most terrible thing, which ought to be stamped out.

We have had this appropriation bill up-we started on it in February. We have not got around to it yet to pass it. I do not blame anybody for it, but that is the situation we are confronted with.

As you suggested, I hope the Senate will get through this appropriation bill and get it to conference, so at least the armed services will know what money they are going to get, because we have got all sorts of provisions in the bill for this, that, and the other, and nobody has ever determined what is going to be done.

It is somewhat the fault of Congress and somewhat my fault-I am not naming anybody individually. But those are the circumstances we are up against.

Mr. UMSTATTD. I think it would be very helpful.

The CHAIRMAN. It would be very helpful if the people would know what the appropriation bill was going to be.

Mr. UMSTATTD. I might mention a practical occurrence in World War II. There was a lull between the placing of orders for military purposes and the cessation of building for civilians. During that time the Ordnance Department asked us if we would make shells. We did. We made millions of shells. But when the orders commenced to come in for our regular product, the Army, I think rather short-sightedly, took the view that we were shell makers instead of bearing makers and steel makers, and we had quite some time shaking that thought out of their mind.

The CHAIRMAN. I do not doubt mistakes were made in the Second World War, and probably will be made in this police action-whatever you want to call it. For your good and for everybody's good, as soon as Congress does get through with the appropriation bill and the Army and the Navy know what is going to be necessary to carry out this other appropriation bill, the better off everybody in the country will be. I think you will agree with me on that.

There is nothing worse than delay and the people not knowing where they stand.

Mr. UMSTATTD. And I can assure you that our company will commence to manufacture defense goods immediately. I might insert an observation there that I have gained from my contact with our British affiliates. We have some 6,000 men working in England. They are not going to be denationalized. They will be nationalized from now on.

The CHAIRMAN. That I regret. But, of course, in the last war when we had somewhat similar powers to extend plants and businesses, the Smaller War Plants Corporation was set up. Most of it was done and I trust it will be done in this war-by private industry.

I mean the different aluminum factories were all built by private people the Government had, and then resold to the private people; and the same thing happened to the big steel mill in Utah. I just suggest those things. I am hopeful that that might be the policy that will be followed in this war.

Mr. UMSTATTD. I think you will get more efficiency if it is followed. Senator CAPEHART. I think we will have to change this bill, however, if we do that, because there is nothing in the bill that requires that the Government, once they take possession of a facility, has to return it to the original owner.

The CHAIRMAN. Senator I have every idea, along with your good help, to put this into War Powers No. 2. I said that the other day. My friend from Ohio whom I had the pleasure of meeting this morning with Senator Taft, also feels that way about it.

Senator CAPEHART. There is nothing in the bill that says the new corporation, after the emergency is ended, will be liquidated.

The CHAIRMAN. That is right. And when I introduced a bill, you remember what I said on the Senate floor, that it would be introduced and the proper hearings would be held. It was introduced by request.

Senator CAPEHART. I know; I understand that. When the bill was handed to you as chairman of the committee, you felt obligated to introduce it. We all understand that. And it is no reflection on you personally.