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the Government representatives, within a year we will be outproducing Germany and almost all of the rest of the world. It is a marvel to me as to what is being done under existing conditions in southern California.
Mr. PATTERSON. I agree with you that they have done a fine job, but right there again there is a shortage of machine tools today.
Senator DowNEY. Mr. Patterson, I have seen statements from the War Department that within 1 year our assembly lines would be turning out more planes than can possibly be used under existing conditions.
It may be necessary to create a military dictatorship under which the Army has the power to destroy almost any manufacturing business in the country in order to speed the manufacture of airplanes. If that is necessary for our defense, then I would be for it; but I look with a great deal of trepidation upon this bill.
Let me ask you this, Judge Patterson, as a matter of law, if in some manufacturing plant the Government would go in and take say a third of the machinery, commandeer it, and that would prevent the operation of that business employing 100 or 200 men, as I understand it under this, they may only be paid for the value, the actual value of the machines taken.
Mr. PATTERSON. That is my opinion, too; the value of the article requisitioned.
Senator DOWNEY. In other words
Mr. PATTERSON (continuing). Collateral effects, I do not think, would be taken into account.
Senator Downey. And that would make the remaining part of the machinery of no value to him.
Mr. PATTERSON. That is true today, if you condemn land or real estate for a post-office site, I think you just pay for the value of the land.
Senator DOWNEY. I do not think so. I think you are entitled to your consequential damages.
Mr. PATTERSON. They would be here, perhaps.
Senator DowNEY. No, here very clearly it would indicate that you are entitled to the value of the machinery. If you have a piece of real property, and half of it is taken, you are entitled to consequential damages as the result of the taking to the remaining half, at least in California.
Mr. PATTERSON. I do not think that that is true under the Federal law. I have had plenty of cases of the taking of real estate by eminent domain when I was on the bench. They appraised the property just like any other property. Of course if the property has a valuable plant on it they would have to give the value of the buildings.
Senator DOWNEY. Yes; but you are not doing that. If you take a man's manufacturing plant, and pay for it, however injurious that might be to the community to destroy that particular business that would be one thing, but destroying his own business and maybe paying him 25 percent of the value of this machine is another.
I would like to make this further comment, Mr. Chairman, and then I am through.
I look with horror upon what is going to happen in southern California after this war emergency is over, when we wake up from this
hysteria that now engulfs us and we have absorbed these small businesses, and hundreds and thousands of our men are working in these defense industries, and then they stop. I would say in Southern California we are going into a far worse condition, if those events take place, and we have that to guard against, than anything we otherwise expect, and I do think that this is a long step toward military dictatorship which might produce most injurious consequences in my own State.
Now, if it is necessary for our national defense, I understand every: thing has to give way to that, but I am not yet convinced of that myself. Senator LODGE. Mr. Chairman.
The CHAIRMAN. I want to make this statement in pursuance to what the Senator from California (Senator Downey) has stated about the requisition of property. I assume that he has in mind, as one of the features of the effect, the destruction of business. For instance, a man might have had a machine tool in his shop for 20 years. The Government takes that property, and the result thereof is that the business that he has built up over 20 years is destroyed.
You have in mind the fact that the Government probably would not compensate him for the good will of his business.
Senator DowNEY. That is right; might only take a third of his machines, but destroy his whole business. Mr. Chairman, let me say this. I know whereof I speak. I say that within 24 hours after this law becomes effective there will be many machine shops and small manufacturing industries destroyed in southern California. it, and I am prepared, if necessary, to show the committee that already out there on the Pacific coast many of these big industries are looking with jealous and longing eyes at the machine-tool industry of the smaller units that they want badly to take over. If that is what we want done, if that is necessary, that is one thing; but let us frankly face it.
This bill creates a military dictatorship under which probably tens of thousands of small businesses in the United States will be ruined by the taking over of their materials and machines. That is the very purpose of the bill. And, it will affect hundreds of concerns in southern California.
Mr. PATTERSON. Well, that is a prediction, sir. I do not anticipate, as I have said already in answer to questions by Senator Lodge I think, that the bill will be actually used to any great extent. However, we want the power so to do, that is true.
Senator Downey. Mr. Chairman, let me make this further comment: In the event of a man who has machinery that is available for defense purposes that he is not using in nondefense industry, he is happy to sell it. Now, men are not just storing and wasting machinery. They are glad to sell it. The only machines that would have to be considered under this are machines that are being used by men in their own business.
Mr. PATTERSON. Unfortunately there are a great many machines that are not being used now that are being held for high prices.
Senator DOWNEY. Mr. Chairman, so far as that is concerned-
Senator DowNEY. I would make no objection to the commandeer, ing of machines that are not in use over any permanent period of time, of course.
Mr. PATTERSON. People hoping to get orders or something like that do not like to or do not want to part with their machines.
Senator DOWNEY. From the Federal Government?
Senator DOWNEY. Well, there are many small businessmen in southern California hoping to get orders from the Federal Government, when the Government has already committed itself to the policy of restricting its orders to the bigger corporations. There is no doubt about that.
Senator Hill. Now, let us make that clear.
The Senator from California-and I know that he is absolutely honest and sincere in his statement-says that the Government has the policy of restricting its orders to the bigger companies. Is that true, Mr. Secretary?
Mr. PATTERSON. It is not true with the War Department, but I think that the Senator mentioned the Navy.
Senator DOWNEY. The Maritime Commission and the Navy have expressly taken that position in writing, I think. At least they have notified my office of it very clearly and very precisely, and I have conferred with the leading members of both departments who say that that is their policy.
Mr. PATTERSON. General Wesson, Chief of Ordnance, War Department, informed me theot her day that out of 1,400 prime contracts entered into, well, within a period of some months, I do not remember exactly, down to May 15, over 21,000 subcontracts had resulted from those 1,400 orders.
Senator LODGE. That is very good.
Mr. PATTERSON. I happen to know that Pratt & Whitney Co. up in Hartford, who make airplane engines, have over 700 subcontractors for that one plant.
The Boeing Co. at Seattle-I have seen the map of the sources where their parts come from, and they stretch interminably right across the United States.
Senator JOHNSON of Colorado. Colonel, I saw that map also, Mr. Secretary, and this was out in Colorado—we do not have very many even small industries, but such industries as we do have are tremendously interested in subcontracts and they have been having a very difficult time getting them.
Mr. PATTERSON. I did not make these statements that I have just made with the idea that we have achieved perfection. There is a great deal to be done yet.
Senator JOHNSON of Colorado. I think your policy has been a correct policy in trying to farm out these subcontracts. I only hope that it will be perfected.
Mr. PATTERSON. I promise you it will be pursued with vigor.
Senator Johnson of Colorado. Well, that is very encouraging, and I am mighty glad to have that statement.
Senator Hill. I am gratified to hear that statement, too.
In that connection, I know that the committee will be interested in knowing, does it lie, so far as the War Department's contracts are concerned, does the matter lie entirely in your hands, or does the 0. P. M. have a certain amount of authority with reference to this policy and these subcontractors?
Mr. PATTERSON. They have a good deal. Of course they are committed to the same policy that we try to pursue and we have their aid in carrying it out.
They have a section up there in the Office of Production Management that is supposed to, and does, promote as many of the orders of the smaller sort and subcontracting as possibly can be done. They have cooperated very thoroughly along that line with us. They have, of course, the approval of our purchases. We clear all important contracts with the Division of Purchases under the direction of Mr. Nelson, in the Office of Production Management, but they do not initiate any of those.
Senator LODGE. Mr. Secretary
Senator DOWNEY. Senator Lodge, may I make one further statement and then I will be through.
Senator LODGE. Go ahead.
Senator Downey. I want to say I am today asking Senator Truman if he cannot hold a meeting in Los Angeles to investigate this very issue we have been discussing here. It is my opinion that there is a vast reservoir of labor in Los Angeles untouched; vast capacity of machine tools untouched; vast number of skilled' labor, architects, untouched, all of which could be used to promote our shipbuilding program, particularly, and especially our airplane industry.
That is one reason those are not being utilized, because of the policy of the Maritime Commission and of the Navy in restricting their contracts to only a few large companies, knowing of this other vast reservoir, and that issue cuts in very direct on the purpose of this bill, and if Senator Truman can go out there, I think that after he holds his hearings, within the next 10 days or 2 weeks, I can come back with very concrete and detailed information on that for this committee.
Senator JOHNSON of Colorado. On that point, Senator Downey, do you not think that it would be to the advantage of the Government to let the contracts to the large companies, provided they sublet the contracts to the smaller companies and utilize the smaller companies in that way and that that is the proper way for a small industry to get into the program?
Senator DOWNEY. And, I think that this bill is going to do just the opposite. Instead of the large companies letting the work out to the small companies, they will want to hold the profits and hold the business too, and they will go right out and take not only the machines and the business, but the personnel.
Mr. PATTERSON. Of course, that has been discussed. It was brought out in discussion here in 1917 and 1918 in connection with comparable control to that which has been brought out here in this emergency, and, so far as I know, it did not have any of the disastrous effects that have been mentioned here.
Although no one of those bills was anything like as broad as this, the 17 added together I think covered a great variety of materials and supplies.
Senator Lodge. That is a point that I wanted to ask you about, Mr. Secretary.
Here, for instance, is an excerpt from the Food and Fuel Administration Act of August 10, 1917.
Sec. 12. That whenever the President shall find it necessary to secure an adequate supply of necessaries for the support of the Army or the maintenance of the Navy, or for any other public use connected with the common defense, he is authorized to requisition and take over, for use or operation by the Government, any factory, packing house, oil pipe line, mine, or other plant, or any part thereof, in or through which any necessaries are or may be manufactured, produced, prepared, or mined, and to operate the same. Now, it seems to me that that is so far superior to this.
I was trained in the philosophy that you ought to think out legislation, ought to think out exactly what you wanted to do, and formulate the language specifically for that purpose, and I am for anything that is for national defense, and will support anything that will promote our defense; but I am a little bit startled by a grant of power that is so tremendous that you cannot tell whether it will be used to do what Senator Downey suggests, or use it to do just the opposite, or can be used.
Mr. PATTERSON. Why not say, useful for military supplies or materials. If it came down to a pinch and to any particular machine tool, and we depended upon that machine as to whether troops in the field should be supplied or whether it should be continued to be used in nondefense industries, I would not myself have the slightest hesitancy in making a choice as between those two, never.
Senator LODGE. That is just it. Can we not have a bill that lists all of the things that you want, or do you not know what you want?
Senator Hill. May I see that quotation, Senator?
The CHAIRMAN. I am very much interested in that language. I have not read it. It seems to me that that language is
Senator LODGE. Very broad.
Senator Hill. Let me see. It seems to me that that language is just about as sweeping as this bill before us.
Senator LODGE. We were in war then.
Senator Hill. I understand that. After all, I cannot quibble over the question as to whether we are at war or not at war, as the situation stands today. That is just my opinion. The Senator may have some other opinion.
Senator LODGE. I do not think there is any question as to whether we are at war or not at war. Congress has not declared war.
Mr. PATTERSON. An unlimited emergency has been declared. Senator LODGE. That is correct. Mr. PATTERSON. And the importance of equipping the Army is fully as real and fully as urgent.
Senator Lodge. Nobody will go along with you any stronger than I will in equipping the Army. I want to see the Army equipped.
Senator DowNEY. May I intervene to ask a point of information? The CHAIRMAN. Yes.
Senator DOWNEY. Judge Patterson, I understand that you indicated it as your opinion that under this bill that if a corporation had a subsidiary corporation which it owned through the ownership of 100 percent of its stock, that a military authority could go right in and take over the stock of that corporation or that subsidiary corporation?
Mr. PATTERSON. If necessary for the national defense.
Senator DOWNEY. And then turn over that stock to some other corporation that the Army officers might direct?
Mr. PATTERSON. Of course, you are bringing up cases of extreme abuses, I think, which I am sure would not occur.
Sentor Downey. Well, I am just endeavoring to do what I can to find out.