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will cost you to go through. My understanding was that this $60,000,000 was proposed to supply any deficiency. When you use the $60,000,000 and the $15,000,000 which has been provided for Procurement, can you not get through 1946 without a deficit?
Colonel Howse. Mr. Cannon, again, it is a matter of guesswork solely.
Mr. CANNON. Do you guess you can get through?
Mr. Cannon. How much would you guess you would have to have to get through?
Colonel Howse. The $156,000,000 figure was arrived at figuring that the war would last through 1946.
Mr. CANNON. That is, both wars, or merely the Japanese war?
Colonel Howse. Both wars. If the war is ended prior to that time the cost will necessarily be higher. We have no control over the rates or the quantities, or the points of origin of the surpluses.
Mr. ČANNON. The $156,000,000 will last through the war?
Mr. CANNON. On one front how much would it cost to carry you through 1946? On the Japanese front alone, how much would it cost?
Mr. McNAMARA. It would tend to make our estimates so far very conservative, because with that situation it would cost us so much
Mr. Cannon. How much do you figure you could get through the entire year 1946 with now?
Mr. McNAMARA. I do not think we have any factual data on which we can base an estimate.
Mr. Cannon. You should have brought that information up here. That is why we called you before us. There is no use to hold hearings if we are not going to get the information on which to base an appropriation.
Mr. McNAMARA. Mr. Chairman, we had a great deal of difficult getting the disposal agencies to even hazard a guess as to how much would be declared surplus to them. The armed services are not in s position at this time to even guess as to how much they will declare surplus, oi where it will be. It was only after great persuasion that we got them to estimate how much of a total might be declared surplus, as a minimum.
Mr. Cannon. As to those figures which you have as a minimum. how much might be declared surplus and how much would it take to carry you through 1946?
Mr. McNamara. On the basis of a continuation of global warfare. the amount would be $156,000,000.
Mr. CANNON. Global warfare means both the eastern and western fronts. You have no longer any western front.
Mr. McNAMARA. That is right. These figures were prepared
Mr. McNAMARA. It would be much more than that, because ths! would result in a declaration of more surplus, and more people tal handle more sales.
We were not satisfied to ask $165,000,000 because that was a guess
Mr. Cannon. You think you could get through with a two-front war with $156,000,000, or at least you made that estimate?
Mr. McNAMARA. That is right, plus $32,500,000 reimbursement to Government-owned corporations for their expenses in 1944 ard 1945.
Mr. CANNON. That was in the original Budget?
Mr. CANNON. $156,000,000 plus the $32,500,000 is in accordance with the supplemental Budget?
Mr. McNAMARA. That is correct. We are not making any change in our request at all.
Mr. CANNON. That $60,000,000 is merely a token appropriation?
Mr. McNAMARA. That is a way of expressing it, but I think there is little or no chance of going through the entire year on that.
Mr. Cannon. In the event of the discontinuance of the Japanese war before the close of the fiscal year 1946, it would be necessary for you to make a complete and drastic revision of your figures?
Mr. McNAMARA. Yes, sir; we would have to increase them all along the line because surpluses would start flowing in quantities that were not expected at the time of the preparation of this Budget.
Mr. CANNON. You, of course, are unable to say at this time how long the Japanese war will continue, so you are unable to give us any accurate estimate of what your Budget might be in the latter part of 1946?
Mr. McNAMARA. That is right. But, Mr. Chairman, it is only fair to state that the administrative portion of the Budget is a little more accurate.
Mr. Cannon. That is the $2,500,000 for administrative expenses. You think that is fairly accurate?
Mr. McNAMARA. Yes, sir.
Mr. McNAMARA. It depends on the scope and size of the reports that might be needed.
Mr. CANNON. With the $2,500,000 for administrative expenses you do not expect at this time to return for a deficiency?
Mr. McNAMARA. We hope not, on that portion of the Budget?
Mr. Ludlow. I think I can comprehend, with my limited vision, that you cannot know the magnitude or the flow of your job. You cannot know that.
Mr. McNAMARA. That is right.
Mr. Ludlow. What concerns me is this: Are you setting up machinery here that will dispose of this surplus expeditiously, efficiently, and economically?
Mr. McNAMARA. That is the machinery we hope to set up with the appropriation.
Mr. Ludlow. With that, you think you will be able to handle the job expeditiously, efficiently, and economically?
Mr. McNAMARA. I think that is a fair statement.
PRECAUTIONS TAKEN AGAINST IMPACTS ON PRIVATE ENTERPRISE
Mr. Ludlow. I wanted to ask what precautions you have taken to prevent any serious impacts on private enterprise in the disposal of the surplus. What are your standards along that line? I can readily see how in some ways the disposal of surplus would put some people out of business, that is, people engaged in private enterprise.
How are you regulating your outflow to prevent that disaster?
Colonel HOWSE. You can ruin certain types of business with the unregulated flow of surplus. A part of the act specifically declares that we do take precaution against that. That is one of the reasons we are asking for the personnel that was under discussion this morning in the various broad, general categories under consumers' and producers' goods categories and in the statistical reporting set-up, so we will have a continuing means by which a continuous disposal policy will be established.
You cannot say "Today sell shoes.” You have to say "Sell shoes at a certain price and sell so many in a certain area." Tomorrow you can operate in another direction and say "Sell shoes at another price," but in another area.
Mr. Ludlow. If you do not regulate it in that way you will do incalculable damage to legitimate business, either the shoe business or any other business.
Colonel Howse. We will injure the shoe manufacturer or the manufacturer of consumer goods if consumer goods surpluses are improperly disposed of.
But may I mention this more important thing, that if these industrial properties, plants, machine tools, and so forth are improperly disposed of, it may affect the basic economy of this country for the next 10 years.
Mr. Ludlow. This is such an enormous undertaking that I wonder if anyone could have any idea how long it would take to work out the entire anticipated surplus?
Colonel HOWSE. Well, sir, after the last war when the amount of surplus was $7,000,000,000, it was still being sold clear on up through 1929 and 1930, and it is anybody's guess.
Mr. LUDLOW. After the last war retail Army stores were opened up all over the country to sell these different articles that were left over. Will there be a repetition of that in your program of disposal?
Colonel Howse. No, sir; there will not be, Mr. Ludlow. The experience of the governmentally owned and operated stores after the last war was a very sad one. It was found that the costs of doing business were beyond all proportion to private business. Various means were used, particularly for shipping parcel post free, anything less than 75-pound lots. When they got all through it was a very sad experience.
Mr. Ludlow. I did not understand that they were governmental stores. I thought they were private enterprises.
Colonel Howse. No, sir; they were two types of Army and Navy stores.
Mr. Ludlow. Following the last war?
Colonel Howse. Yes, sir; following the last war. One was the privately owned store that was called an Army and Navy store which came into being after the store that was operated by the Quartermaster Corps—which was a governmental operation, owned and operated by the Government-was discontinued.
Mr. Ludlow. They tapered off into private stores?
Colonel Howse. Yes, sir; they tapered off into private stores. It was a failure.
Mr. LUDLOW. Why was it a failure?
Colonel Howse. Because the cost of operation was unreasonably high.
Mr. Ludlow. Why did the privately owned stores fail? Did they not get their stocks at bargain prices?
Colonel Howse. No; I mean the Government units were discontinued as a failure.
Mr. LUDLOW. Because of the cost of overhead?
Colonel HowSE. Yes, sir; because of the overhead costs. That is another way of expressing it. Their expenses kept going up and their sales kept going down.
Mr. Ludlow. For years and years on almost every other corner here, and I assume throughout the country, there were stores for the sale of this left-over output of goods manufactured for the war. I remember shoes especially, and almost every conceivable thing. Now, did they buy the stocks at a pretty low price from the Government when they were taken over into private enterprise?
Colonel Howse. I think, generally, the sales were at a fairly low price after the last war. Certainly the history of the recovery does not indicate that other than low prices were obtained.
Mr. Ludlow. Mr. Dirksen, we all very cordially welcome you Mr. DIRKSEN. Thank you, Mr. Ludlow.
OTHER CONTRACTUAL SERVICES
(See p. 1219)
CONTRACTS FOR ENGINEERING STUDIES AND REPORTS ON PLANTS
(See p. 1219) Mr. TABER. Now, you are asking here for $800,000 for other contractual services.
Colonel Howse. Yes.
Mr. TABER. And how much money are you asking for out of the $60,000,000 for that same item?
Colonel HowSE. I would have to check that one up for you, Mr. Taber.
Mr. TABER. All right. What I want to know is: Is it proposed that in the Board you will have an investigation of a plant made where the operating agency has, itself, had the same kind of a survey made?
Colonel Howse. No; that is not proposed, Mr. Taber.
Mr. TABER. Then why is that carried as an item under the Board? Why is it proposed to carry it as an item in the Board, because I assume that the operating agencies have some kind of a survey made before they make a recommendation to you as to what should be done, and I should think they would have to do that in any event. That is, they would have to make a recommendation to you as to what should be done with a plant, whether it should be kept, or whether it should be disposed of as soon as they cease to use it; is not that right?
Colonel Howse. I think that is correct; yes, sir.
Mr. TABER. And in order to make that recommendation and have any idea of what it might produce, they have got to make a survey of some kind, whether it is by an outside engineering agency, or whatever you call it, or otherwise; is not that right?
Colonel HowsE. That is correct; yes, sir.
Mr. TABER. Why is it not true that they would, in every case, be obliged to make that kind of a recommendation with reference to every plant of any substantial size that is to be offered?
Now, frankly, if you had a plant that cost $25,000, I would think than an ordinary persons' judgment ought to be good enough on it after they had looked it over a couple of days, or something of that kind; is not that about it?
Colonel Howse. I think that is correct, Mr. Taber; yes.
Mr. Taber. And the amount of attention that plant might get, and the number of people going around to it, would depend upon what there was involved in it?
Colonel Howse. That is correct.
Mr. Taber. Some plants that had been used for a very unusual type
of thing might require quite a manufacturing expert to tell what, if
any, use they might be suitable for.
Mr. TABER. There is one plant I presume some study would be required on, this Willow Run plant. That belongs to the Government in one way or the other; does it not?
Colonel Howse. Yes, sir.
Mr. TABER. I understand Mr. Ford says that he does not understand what civilian use it might be adapted to. I have only seen quotations in the newspapers, so I do not know whether that is correct or not, but if he does not see what civilian use it might be adapted to, you probably would have a hard time finding something that it could be used for. At least that would be the ordinary fellow's judgment, I would think, and you.would have quite a problem to study there. But there would not be very many of those great big plants, would there, that would be comparable to that? Colonel HowsE. Mr. Taber, there will be many; yes. Mr. TABER. How many? Colonel HowsE. There are 1,600 plants. Mr. TABER. Not comparable to that.
Colonel Howse. No, but there are 1,600 D. P. C.-owned plants in the country that are separate integrated units. That does not include all of the many thousand, of so-called scrambled facilities where the Government has made an improvement to a particular plant that is owned by a private contractor.
There are about one-fifth of the total industrial resources of the country in Government-owned plants today. There are not many Willow Run plants.
Mr. Taber. There are many plants that are just as unadaptable as that?
Colonel HOWSE. That is correct.
Mr. TABER. You do not know whether there are a great many, but there are many?
Colonel Howse. That is correct.