REASON ADDITIONAL APPROPRIATION IS REQUESTED NOW

Senator THOMAS. And the reason you are asking for this new appropriation is that you have no more funds which are unobligated. Mr. STETTINIUS. When we left the office this morning we had approximately $600,000,000 of lend-lease requisitions that should go into the works that can't because the funds are not available.

HOW ESTIMATES OF NEEDED APPROPRIATIONS ARE MADE

Senator LODGE. What procedure do you follow in order to arrive at these figures? How do you arrive at the decision that you are going to spend so much of that for aircraft?

Mr. STETTINIUS. That is the result of long, long negotiations between the foreign governments and the War Department and the Navy Department and the Maritime Commission and the Department of Agriculture and the Treasury, with our own experts, as to the production facilities, as to what can be produced, and what portion of it can be allowed to go to another country and what portion of it we can keep. It is a matter of strategy that General Marshall and the members of his staff go into. Then we come up with an end figure that the President reviews, and the program is made up. When General Marshall and some of his aides appear before you, Senator, I think you might want to put that question to them specifically, because, after all, 21⁄2 billion of this 6 billion we are discussing now is to be handled by the War Department.

Senator LODGE. When you speak of negotiations with foreign governments, why should we negotiate? Why should we not decide it ourselves?

Mr. STETTINIUS. Well, we do. It is on their request.

Senator LODGE. And we decide?

Mr. STETTINIUS. Yes, sir; absolutely so. We decide. A better word would be consultation, rather than negotiation.

Senator MCKELLAR. Does the President have to go into each one of these items?

PRESIDENT HAS AUTHORIZED LEASE-LEND ADMINISTRATOR TO MAKE ALLOCATIONS AND TRANSFERS UP TO $300,000,000

Mr. STETTINIUS. The President has delegated to me the power up to $300,000,000; and I should like to put a copy of that delegation into the record, if you desire, as I did in the House.

Senator ADAMS. No; we take your word for it.

Mr. STETTINIUS. Thank you.

Senator MCKELLAR. I thought that might put a load on the President which would be pretty hard to bear.

Mr. STETTINIUS. Yes, sir.

COUNTRIES WITH WHICH CONSULTATIONS WERE CARRIED ON RELATIVE TO ADDITIONAL LEASE-LEND APPROPRIATION

Senator BROOKS. When you talk about our experts, and of going into the matter with these foreign countries, so far as these appropriations are concerned, with the experts of what countries have we had discussions?

fense articles. For example, if you curtail automobile production or refrigerator production by X percent, and those plants get defense orders, by using their floor space and their heavy machinery and multipurpose tools, there will be a corresponding increase in the proportion of our productive capacity used for defense.

Senator BROOKS. Assuming now the rate is a billion dollars a month, and there has been a great deal of expansion.

Mr. Cox. There has been a great deal of expansion, but very little conversion.

Senator BROOKS. But very little conversion?

Mr. Cox. Relatively, in terms of the whole picture.

Senator BROOKS. And assuming you could push it up to 18 billion, which is a billion and a half per month.

Mr. Cox. I think the figures of O. P. M. are that the factory production for defense should run closer to 50 percent than 15 percent. It is in the House testimony.

Senator BROOKS. I realize it; but I wanted to ask you.

Mr. Cox. We are not experts on the productive capacity of the country. The information I am giving you is in part what the O. P. M. has gone into in great detail.

Senator BROOKS. How long do you anticipate it would take to convert our productive capacity to an 18-billion-dollar rate? Mr. Cox. It is already at an 18-billion-dollar rate.

Senator BROOKS. It is now?

Mr. Cox. Yes, sir.

Senator BROOKS. That isn't 15 percent, then; it is more than 15 percent, isn't it?

Mr. Cox. The estimate for this fiscal year's defense spending is 18 billion, it being now at about a billion three a month and going up at an ascending rate for this year. That judgment is in large part based conservatively upon the conversion that has been thus far effected. But the figure the O. P. M. talked about is in terms of factory production and, of course, our national income consists of not only the production of goods but the rendition of services, which have nothing to do with factory production.

Senator BROOKS. Let us talk about factories. They produced, up to today, about a billion dollars a month?

Mr. Cox. The latest figure, I think, is a billion three.

Mr. STETTINIUS. I think the figure in the House testimony was a billion dollars a month.

Senator BROOKS. A billion a month.

Mr. STETTINIUS. And it might have changed since then.

Mr. Cox. The daily Treasury statement gives the cash expenditures. Mr. Knudsen testified as to the daily expenditures as of the the date he testified, and then projected it. And the latest estimate was sent to the Congress by the Budget Director.

ESTIMATED RATE OF EXPENDITURE FOR 1941, 1942, AND 1943

Mr. STETTINIUS. Senator Brooks, the estimates are, at the present time, for 1941, 12 billion; 1942, 18 billion; 1943, 30-making a total of 60.

Senator BROOKS. If we produce 12 billion in 1941 and 18 in 1942, that is 30.

Mr. STETTINIUS. That is right.

Senator BROOKS. And we have appropriated and authorized about 60 already.

Mr. STETTINIUS. That is right, sir; another 30 for 1943.

DEFENSE APPROPRIATIONS TO DATE

Mr. Cox. The total appropriations, as I understand it, exclusive of this pending request, are between fifty-three and fifty-four billion

dollars.

Senator BROOKS. That excludes, also, the authorization of the R. F. C. to make loans?

Mr. Cox. That is right.

Senator BROOKS. And that is a 6-billion possibility?

Senator ADAMS. They will have a loaning capacity of practically 8 billion, with the billion and a half yesterday. They now have six and a half.

Mr. Cox. But the loaning capacity of the R. F. C. is distinct from the purchasing capacity of the Army and the Navy, for example, because the R. F. C. procedure is an interim and temporary financing procedure. The only point I am trying to make is that in terms of the over-all money available for defense, you can't add the R. F. C. authorizations to the other to get the total because the R. F. C. wil acvance money with which to put up a plant, with an agreement on the part of the Army or the manufacturer or the purchaser to amortize it in the purchase price of the article or by some other means. You can't add those figures and total them. It does augment, to some extent the amount available for defense procurement, but it would not be accurate for this purpose to add the figures.

PERCENTAGE OF PRIOR LEND-LEASE APPROPRIATION DEVOTED TO PRODUCTION OF MUNITIONS OR MATERIALS PECULIARLY ADAPTED TO BRUTE REQUIREMENTS

Saver Brooks. The thing I am trying to get at is the urgency of for appropriation at the present moment in relation to our productive exparty and the load we have put on it. In the last hearing, I was voo that gut of the 7 billion there would be only about 3 percent of 200.00000 that would be devoted to the production of munitore or simples that were peculiarly adapted to the British requireAl via mag would be spent for the same type and kind tors of defense materials that we ourselves can use. Is

**

Me Cox That is mstantially true.

Seco boa. Then if we have a productive capacity in 1941 of 12 9. o *d we have a productive capacity in 1942 of 18 billion, tama & socotive capacity in 1943-of what? Thirty billion.

X POYARD IN PRESENT APPROPRIATION CAN BE SUPER-
TAPORED ON PRESENT DEFENSE PROGRAM

Førster Packaa. That would about use up what we have approSans that trie? Do you know of any reason why we 25 aread with our present program, and then, if necessary,

1

allocate out of that material produced for ourselves to some other country, rather than put this additional load on top of our own defense material? We can't produce them both at the same time, can we?

Mr. Cox. I think we can.

Senator BROOKS. You think we can. That is the first point. On the second point

Mr. Cox. I think you ought to ask Mr. Knudsen and the Chief of Staff whether the quantity is adequate for their purposes.

Senator BROOKS. I thought you, as Administrator, Mr. Stettinius, should be asked. I can't be here tomorrow, and that is why I am anxious to know why we couldn't appropriate that money necessary for those especially built units for our defense materials, and continue to produce our own; and then, if they need them, allocate them out to others because we can't produce all we have allocated until 1943 or the beginning of 1944 anyway, can we?

Mr. Cox. I think we can.

Senator BROOKS. How?

Mr. Cox. Mr. Stettinius and his experts got from Mr. Knudsen and the Chief of Staff of the Army and the Chief of Naval Operations of the Navy the technical information relating to both production and military strategy-fields in which they are experts. For one illustration, a 4-engine bomber cannot be produced overnight. Previously several aircraft companies had been making the 4-engine bomber. Some time ago the motorcar companies were awarded contracts for the production of a 4-engine bomber or its parts. As an illustration, Ford in one of its plants has used a great deal of its heavy machinery and tools, previously used in automobile production, for the manufacture of a 4-engine bomber and its engines. That involves a long period of planning and construction. But what we have had enter into the picture is a degree of conversion that hadn't previously existed, and which is doubtless going to step up the dollar amount we will spend in the future for defense articles. When you try to forecast, as of today, what the production of heavy bombers will be in 1942 or 1943, you are making an informed guess. But that is what it is, and the best informed judgment of the men who know most about it, as we got it, is that these articles can be produced without undue interference with the rest of our program.

Senator BROOKS. For instance, we have allocated here over $2,000,000,000 that hasn't yet been obligated, and you have $4,000,000,000 obligated but not produced. So you have still to produce, over the $1,000,000,000 production a month, today, to impose on that productive capacity $6,000,000,000, practically, haven't you, that isn't yet in actual production?

Mr. Cox. Yes; but that is production of several kinds. In the first place, Mr. Wickard will tell you about the production of agricultural products, which amount to a billion dollars. That is a different kind of production than for a .30-caliber rifle. Mr. Knudsen's testimony went to those things which required factory production, which is his particular field; and Mr. Wickard's testimony went to the production of agricultural products, whether cheese or hogs. Their informed judgment was that all the funds could be absorbed into the productive capacity of the United States and the goods to be purchased with the funds could be produced before 1943, with one or