Mr. SMITH. This will be processed by the Secretary of Agriculture and I assume he would insist on that.

Mr. CANNON. What arrangements have been made for purchase in the United States by foreign governments of agricultural products or foodstuffs?

Mr. SMITH. I know of none.

Mr. CANNON. During the World War, consolidated purchasing agencies representing all of the Allies took over the purchasing of agricultural products in the United States, to eliminate competitive bidding. One agency bought for all and as a result, with only one buying agency, in the market they procured supplies at the lowest prices. Is any such agency functioning in the United States at the present time, or has any such agency been suggested?

Mr. SMITH. There is no agency so far as I know. Of course the situation today is much different from what it was during the World War. We have surpluses in the most of these items. Also, as I understand it, in the last war we had a Food Administrator.

Mr. CANNON. Of course, we are also in a different situation; because, in that case, foreign governments were buying and financing purchases out of their own funds, whereas in this case the United States Government is both financing and purchasing out of United States funds.

Mr. SMITH. Right. And, therefore, I take it the policies pertaining to food procurement will be sound policies that did not disturb our price situation or production situation unduly as it concerns agriculture or consumers.

Mr. CANNON. Procurement will be under the control of the Department of Agriculture?

Mr. SMITH. I should say the Department of Agriculture would have a big hand in this-in the processing of all of these items.

Mr. CANNON. At the present time, there are vast quantities of cotton, millions of bushels of wheat, large quantities of corn, and a huge surplus of practically all agricultural products under the control of the United States, either through purchase or loans. Is it your impression that any requirements of agricultural products under this bill will be taken from those supplies now in Government warehouses, under Government title, or will they be bought in the open market? Mr. SMITH. That is up to the Secretary of Agriculture, but it would be my impression that a number of these items would be procured through Commodity Credit.

Mr. TABER. Within what time can you begin spending money out of this appropriation?

Mr. SMITH. Immediately.

Mr. TABER. Within what time will you require the last item of it? Mr. SMITH. Within 1942.

Mr. TABER. Mr. Smith, have the British asked for all of these articles?

Mr. SMITH. They have; sir.

Mr. TABER. Is it the feeling of the War and Navy Departments, and the President, that we should furnish these things to the British at this time?

Mr. SMITH. Yes; they are asking for them.

TESTING, INSPECTING, SERVICING, ETC.

Mr. WOODRUM. Referring to item (b), for testing, inspecting, proving, repairing, outfitting, reconditioning, or otherwise placing in good working order any defense article for the Government of any country whose defense the President deems vital to the defense of the United States, $200,000,000.

Tell us about that item, Mr. Smith? (Discussion off the record.)

INTERCHANGE OF APPROPRIATIONS

(See p. 61)

Mr. WOODRUM. The transfer provision is rather self-explanatory. That not to exceed 20 percent of any of the foregoing appropriations may be transferred by the President to any other such appropriation, but no appropriation shall be increased more than 30 percent thereby.

General Burns, do you regard that as an important part of this proposal, this flexible provision?

General BURNS. Yes, sir; we do.

Mr. O'NEAL. Is that sufficiently flexible?

General BURNS. I certainly think that is the minimum that we should have.

Mr. O'NEAL. Mr. Chairman, I would like to say that it seems to me, with regard to the flexible provision it ought to be more flexible than it is. I should like to see this $7,000,000,000 go where it would do the most good. I am afraid that provision is not sufficiently flexible. The general stated that to be his opinion, and if he feels very strongly about it, I would like to have him say something more about it. It struck me when I read it, from the way these estimates. have had to be prepared, that that is a very close margin on which to work.

Mr. LUDLOW. How was that percentage arrived at?

Mr. SMITH. Of course, it had to be arrived at in a somewhat arbitrary manner. As a matter of fact, we had it smaller in the beginning and raised it because, as you apply these percentage figures to these particular items, as they come out, you will see that you have obviously more leeway in the large items than you do in the small items. But no single item can be increased more than 30 percent. You might take a certain percentage of all the items and add to a particular item, in order to increase it.

Our feeling was in general that if there was to be difficulty anywhere, it would probably hit in one rather than in a number of places, and that this was probably adequate to handle it.

Mr. WOODRUM. It gives the right to increase any one article by 30 percent.

Mr. SMITH. That is right.

Mr. WIGGLESWORTH. You do have a lot of flexibility, anyway, in that you have not broken down these items very far.

Mr. SMITH. Within a single item, like ordnance, we have flexibility.

But this is to provide flexibility as between the categories.

Mr. O'NEAL. For instance, you would not have more than $200,000,000 on your repair item, irrespective of what the needs may be. Mr. SMITH. That is right.

RETENTION OR USE OF DEFENSE ARTICLES BY UNITED STATES

(See p. 60)

Mr. WOODRUM. Explain this proviso:

That any defense articles procured under the foregoing appropriations may be allocated by the President to any department or agency of this Government for the use of such department or agency.

I take it that if any article is ordered or manufactured for use by Great Britain and it subsequently develops that that article is needed for the United States Government, this provision would enable the President to allocate that article to such department or agency of this Government that has need of it?

Mr. SMITH. Yes, sir.

Mr. WOODRUM. Does that contemplate that there should be a finding that that was needed for defense purposes? That is what that would mean, would it not? In other words, you could not take food procured under the agricultural provision and transfer it to other purposes unless there was a finding that it was needed for our emergency defense, is that right?

Mr. SMITH. That is right.

Mr. WOODRUM. That is what that is supposed to mean.

MISCELLANEOUS SERVICES AND EXPENSES

Mr. WOODRUM. The next item is:

For necessary services and expenses for carrying out the purposes of said act not specified or included in the foregoing, $40,000,000.

Mr. SMITH. That item would cover, for example, the transfer of defense information. It would also cover any miscellaneous item.

Mr. TABER. That is simply an omnibus item that you can use for anything-travel expenses or to supplement any item that may be involved.

Mr. SMITH. Not traveling expenses. It might cover freight and transportation of articles.

Mr. POWELL. How did you arrive at the figure of $40,000,000? Mr. SMITH. Well, frankly, we made a rough estimate. There were not many details. It is more in the nature of a contingency item than anything else.

Mr. POWELL. It is actually a contingency item?

Mr. SMITH. Yes. In the setting up of this entire estimate, we used terminology similar to that in the appropriation bills that we now have and in turn tried to gear this estimate into the Lease-Lend Act and nowhere else in the estimate would there be any money for defense information. So we know that defense information, whatever that amounts to, would have to come out of this, plus any small items that would not come in any other place. It is really a contingency item.

ADMINISTRATIVE EXPENSES

(See pp. 38, 63)

Mr. POWELL. Mr. Woodrum has gone into the items C and D, $40,000,000 and $10,000,000, thoroughly. As I understand it now very definitely, you will not have to come back for any administrative

expense, any further administrative expense, or any further contingent fund.

Mr. SMITH. So far as I can see, that is true.

Mr. LUDLOW. How does this percentage for administrative expenses compare with the percentage in other Government operations? Mr. SMITH. It is considerably less, because you already have the organization and it is merely an extension of existing organizations.

SERVICES AND EXPENSES UNDER CATEGORIES (A) AND (B)

Mr. WOODRUM. Mr. Smith, referring to page 2, paragraph (a), in connection with the funds set out in those different categories, they are available for services and expenses, and that carries on down through those several articles. Now, when you get to (b), for testing, inspecting, and so forth, you do not have that provision for services and expenses. Should not that be in that paragraph also?

Mr. SMITH. Services and expenses were largely, under (a), in connection with procurement, transportation, and any other services such as storage, that would be necessary.

Mr. DITTER. The (b) item is entirely for repair, is it not?

Mr. SMITH. Yes.

Mr. DITTER. Outfitting and conditioning?

Mr. SMITH. Yes.

Mr. WOODRUM. You think we ought to put "services and expenses" in there?

Mr. SMITH. Yes; if there is any question.

Mr. CANNON. Mr. Smith, under what terms are these goods to be delivered, and under what terms are they to be delivered charged to the consignee?

Mr. SMITH. Under the entire bill, as I understand it, the terms would be fixed in the agreement.

Mr. CANNON. When will that agreement be drawn?

Mr. SMITH. There will be a whole series of them, as I can visualize the situation.

Mr. CANNON. That is a matter of negotiation?

Mr. SMITH. That is right.

Mr. CANNON. Under the terms of this bill they can be delivered gratuitously or they can be charged or they can be exchanged? Mr. SMITH. I would say yes.

AGREEMENTS FOR DISPOSITION OF DEFENSE ARTICLES

(See p. 43)

Mr. CANNON. Is it your impression that any of them will be delivered gratis, or are all of them to be charged? Is there to be an accounting?

Mr. SMITH. My understanding is that there is to be an agreement with respect to all of them.

Mr. CANNON. With any expectation of recovery?

Mr. SMITH. I think the agreement would include that.

Mr. CANNON. And the terms, the prices, are subject to negotiation? Mr. SMITH. The terms are such as the President may deem to be satisfactory.

ADMINISTRATIVE EXPENSES

(See pp. 38, 61)

Mr. WOODRUM. There is an item for administrative expenses, $10,000,000. Will you say something about that?

Mr. SMITH. That is as good an estimate as we can make. The safeguard on it is that we are establishing very definite procedures for scrutiny of the requests.

Mr. WIGGLESWORTH. The estimate is based on what?

Mr. SMITH. Well, it is a rough estimate based upon what our costs are in various departments at the present time.

Mr. LUDLOW. Is it based on a certain number of personnel?

Mr. SMITH. No. It is not built up in terms of so many personnel because we do not know what the job is

Mr. TABER. You expect to use and to pay personnel, do you not? Mr. SMITH. Yes. It is built on a percentage basis. For instance, under the commodity credit law at the present time there is a limit of 3 percent on administrative expenses. Assuming that some agricultural products are purchased through commodity credit, we ask them what that cost might be and they said possibly 1 percent, and somebody else said 2 percent. They pointed out that there would be some management or processing, and so forth.

Mr. WIGGLESWORTH. You have not made any estimate as to the increase in personnel in any department or agency involved, or any new agency that might be set up?

Mr. SMITH. No.

Mr. WIGGLESWORTH. You are not in a position today to tell us what additional all-over agency may be set up?

Mr. SMITH. So far as any all-over agency is concerned, the staff would, in the main, be made up of details from existing departments. For example, all of this material that would be released will have to go through export control. That will greatly increase their work. But as to how much it will increase their work, nobody knows, until the material begins to flow.

Mr. DITTER. How many new $10,000 jobs do you think will be set up in this administrative unit?

Mr. SMITH. I assume they have to be classified under the civil service.

Mr. DITTER. Will there be some undersecretaries and assistant administrators, and so on, in the different departments?

Mr. SMITH. I do not see it in that way. As a matter of fact, you cannot foresee the load very well in advance. It is our belief that the major part of it can be taken care of by existing organizations and certainly the extension of existing organizations. What would you say for the War Department, General Burns?

General BURNS. I think that is correct. I am quite sure the plan of the War Department is to take on this load with the existing set-up. This will require some additional personnel in the War Department. Mr. WIGGLESWORTH. You do not foresee any new agency set up to control this thing as a whole?

Mr. DITTER. I would like to have the Navy on record on that. There is an item in there for the Navy, I believe.