Senator FERGUSON. Coming back to this proposition, and I have talked this over with you, but it appears to me that somehow we have got to get the public to understand we are not going into full mobilization because that is what is putting these prices up, an idea they are going to be on war orders the rest of their natural lives. This is the time that they can get these prices. Mr. WILSON. I could not agree with you more on that. I am afraid that I have even overstepped in a radio talk, just using that as a jumping-off place, when about a month ago I disclosed to a degree, it seems to me, to the people this was a program of maybe 3 years, looking ahead only 3 years. At the end of 3 years we ought to be able to be strong militarily. We have everything we need to fight an all-out war from that point on; we could maintain the service of supply for that war from the production lines of America; that the production lines were being established and so that we could greatly increase and accelerate the outpouring of the military end items, but we are not going to operate at full steam. In other words, where we might only produce 15,000 planes a year, the tooling was being provided for 50,000 planes a year in case there was an all-out war, and we needed them. Even that is an expensive proposition, to prepare for 50,000 planes and if God is good and we have peace, it may look foolish to have the ability to produce, to have the facilities for 50,000 planes and then not use them. I think that is cheap insurance to maintain our freedom. DISCUSSION OF PERCENTAGE OF PRICE INCREASES SINCE START OF KOREAN WAR Senator FERGUSON. How much would you say percentagewise prices have gone up in regard to the implements of war since the day before the Korean incident? Mr. WILSON. I don't know. In some lines they have gone up 50 or 60 percent. Senator FERGUSON. What about the metal and electrical goods? Mr. WILSON. In the metal goods you have one basic material-we know when the wage increase was granted in December. The price of steel generally across the board went up about 10 percent. Senator CORDON. However steel has gone up relatively less than any other single commodity used in the war, has it not? Mr. WILSON. I could not answer it. I would say it certainly has not gone through the ceiling as many have. Senator CORDON. Chiefly because we have a domestic production. Mr. WILSON. Take woolen goods where you are dependent on a foreign supply of wool. That has gone right through the roof. Forty-five cents a pound is the price, roughly, of the cotton that is entering in the military orders today. Senator FERGUSON. Has not Senator Cordon hit the nub of it, and where you have a civilian production they have to sell in the market through the civilians they cannot get as much from the Government and they do not increase their prices? Mr. WILSON. It may be on some things. Frankly, Senator-and I am going to speak from the other side-when I used to sell the Government, from the standpoint of making a profit, I would rather, as a manufacturer of hard goods, sell civilian than sell the Government. Senator FERGUSON. But there are certain companies where that is true, but there are a lot of companies that make really great sums out of the Government. You know that. Mr. WILSON. If I admitted that, then I might ask you, So why don't you legislators do something about it? Don't let them do it; I would not let them. I do not know why they are permitted to make very much money out of it. Senator FERGUSON. Here is the trouble: we go back to the days when some of these machine-tool makers put their children on the payroll at $25,000 a year. You do not get it away by taxes. Anytime you pass a tax law, then you have the evader of the tax law. How many of those people ever went to jail? We exposed that up in Michigan. The committee exposed it, but the Federal Government did not indict them. Mr. WILSON. I do not think it applies to the bulk of your production. It has been stated rather harshly, I think, that 100 or 200 companies did a tremendous percentage of the total business of supplying the Government its war matériel. Those companies have no opportunity that I know of to do that sort of thing. They are renegotiated and then what they have left is taxed out of them, and it should be. Please don't misunderstand me. Senator FERGUSON. You are dealing with a different kind of a company. I can show you on our renegotiation hearings where companies took $50,000 a year just for jewelry, for presents, and $150,000 for entertainment. And we talk about how we are going to keep these prices down. Every one of those dollars went into the price of these items. Senator FERGUSON. The Government cannot even prosecute them for doing it. We held the hearings. We brought the testimony out. Senator CORDON. You need television. Senator FERGUSON. The same people bragging about television were the ones who complained that it should not be used, that they were being pilloried by television. Mr. WILSON. Maybe my experience as an industrialist was different but I want to tell you that the renegotiation job that was done on the company that I was then concerned with was a masterful job. They took everything but the gold in our teeth. Senator FERGUSON. But the companies I am talking about were the ones that had influence in the White House. I could bring the record right in here and put it in this record. I realize what the company goes through that does not have the influence. It is like the gambler when he makes his tax return. They would not allow an honest man to put the same kind of a tax statement in. They would have many up before the court. Senator CORDON. Honesty is always penalized. Senator HAYDEN. Please proceed, Mr. Wilson, with the balance of your statement. TAX AMORTIZATION Mr. WILSON. The production of military equipment calls for increased supplies of raw materials and increased capacity for direct and indirect military requirements. In order to expand productive capacity, the Congress has authorized the use of accelerated tax amortization. Under this program, a large, medium-sized, or small business may seek to expand. The Defense Production Administration handles these aplications and determines whether the proposed expansion is beneficial to the defense effort. Senator CORDON. That word "beneficial" may cover a multitude of sins, like charity does. Right there is the biggest job, or one of the biggest we have in this program of expansion. If they would go a little bit further than generalities and identify particula benefits, I think the program can ha If they simply wave "Well, any production and for justified critici Mr. WILSON. I could largest amount of this t the facilities has been i in my mind that in spite we would have had, if w things, the answer as to cent amortization or 7: agree on. In spite of all of thos thing for America to do and aluminum because th would have a tremendous We will be able to keep time we will be able to prod it will help the over-all ta effort that you legislators E interests of the country. ROUTING INSTRUCTIONS Senator CORDON. I do n what the expansion in those inquiry determined not onl effort. They are the two pr all of these fringe or margir looked into. Mr. WILSON. They are bei is 100 percent, I would not sa some of them that are awfull to you. I think a good job c been awfully tough. TO TO SHELF BINGERS proo. Senator, I judge a little bit dustry because they are down' just smashing into me on the fair deal on the amount of a doing a pretty good job for the թե FROM P. V. O DUMMY LEATHER TITLES: COLOR SPECIAL INSTRUCTIONS: こ at COLOR BUCKRAM BIND BIND PAPER ruby Senator FERGUSON. That is usually the test. Appropriations Third Supplemental —......... 1951 BLOCK e Doys are Mr. WILSON. I think so. They are hollering louder than some other segments of the economy now. I think that is a fair test. I might say we have not retreated from our position on any of them to date. Senator HAYDEN. Please proceed. Mr. WILSON. The certificates which are granted permit the depreciation for tax purposes over a 5-year period of whatever per 133 ITEM centage of the cost of the facility the Defense Production Administration authorizes. Under this program the capacity of industries supplying direct military requirements, such as steel, are being expanded. In order for this expanded steel production to become a reality, indirect, but nevertheless, essential productive capacity must also be expanded. Although coke ovens, refractories, and molybdenum may not be direct military supplies, steel cannot be produced without them. Through tax amortization plant expansion can be undertaken with a minimum of Government intervention and assistance and with maximum benefit to the mobilization effort. In this area we are establishing tentative goals of total output so that capital expenditures for expansion can be held within expected requirements. Then, too, we must avoid a capital expenditure program which, by its very size, would lengthen the construction period and conflict. with other important segments of the program. Although each new facility adds to the demand for materials in scarce supply, the expansion of facilities and provision for raw materials are very important to our long-range program. LOAN GUARANTIES Other aids to achieve increased defense production include the authority contained in the act under which certain agencies guarantee loans made to defense contractors by private and public financing institutions. These loans are primarily for working capital in order to aid performance under specific defense contracts. DIRECT LOANS Direct loans may also be made under the act for the expansion of capacity, the development of technological processes and the exploration, mining, and purchase of strategic metals and minerals. The Office of Defense Mobilization has established certain general policies designed to coordinate these aids to production. We believe that the administration of financial aids, such as tax amortization, guaranteed loans, and direct loans, must be conducted so that uniformity may be achieved and duplication prevented. Direct loans should be reduced to a minimum and should be available only as a last resort. Industry must not be permitted to integrate at the expense of existing capacity or in excess of available materials. SOURCE OF DIRECT LOANS Senator CORDON. Do you have in your organization a division set. up to make and service these direct loans, or are the loans made by some existing loaning agency of the Government? Mr. WILSON. We have an organization that is set up to make the decision what will be done, whether a loan will be granted, and so forth, no matter where the money comes from. Senator CORDON. I am speaking of a direct loan from the Government. It must come from the Government. The question is, what agency of the Government would do the mechanics of granting the loan and the further mechanics of servicing it after it is granted. 81646-51-2 Senator FERGUSON. I believe it is the RFC. Mr. WILSON. Yes. We would lend through them. Mr. BERGSON. That is not necessarily so. through NPA. Some of it is done Mr. WILDE. It is serviced and administered through existing Government fiduciaries, the NPA and the DPA which handles the money per se. Senator CORDON. What agencies of Government handle it? I asked the question because there is considerable criticism at the moment directed at the RFC. Mr. WILDE. On the loans it would be the RFC. CERTIFICATION OF LOANS Senator CORDON. If those loans are actually made by the RFC under authorization of the Defense Production Administration? Mr. WILDE. Certification. Senator CORDON. Then some agency of Government should remain, should those who believe RFC should be completely wiped out prevail, some other agency of Government then must be set up to service over the lifetime of these loans all of the thousand and one details that go with servicing credits of that character. Mr. WILSON. That is correct. Senator FERGUSON. When you say you would certify such a loan, you determine whether or not a loan should be made and the amount? Mr. WILSON. And based on the purposes that have been laid before us and what we think the Government requirements are. Senator FERGUSON. For defense production? Mr. WILSON. That is right. CONVERSION PERIOD EMPLOYMENT PROBLEM In the process of mobilization we are increasing production and at the same time avoiding all-out conversion. In this effort we seek to hold dislocations to a minimum and thereby avoid throwing hundreds of thousands of men temporarily out of work. So far we have progressed according to schedule and temporary unemployment during the conversion period has been slight. Unfortunately, this program cannot be 100 percent successful and there are and will be dislocations in some areas. In order to insure maximum defense production, it is essential to maintain a healthy and sound economy. If we build up our military supplies at an excessive rate, we might distrupt the economy to a degree that would seriously impede our ability to wage all-out war, if it should come. With the equipment we are ordering and with a sound and healthy economy the United States will be prepared to expand military production with sufficient rapidity to meet such an emergency. PRICE STABILIZATION Although the production program has been progressing fairly well, I cannot be quite as optimistic concerning our stabilization efforts. In order to maintain the strong economic base upon which we are building our mobilization program and to protect the dollars we earn or have invested, each of us must make sacrifices. These must, |