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The above defines a policy which in reality has been in effect since the passage of the act.

THE NEW BUDGET

It is desired to summarize how this new budget was built up.

Last June, in order to expedite the digestion of the appropriations already made, the five United States agencies which procure the lend-lease materials and services were asked to program their funds, on which over-all limitations had been set, as to items, quantities, and countries and to do this in consultation with the countries to be aided. They were also asked to submit estimates for the additional funds they thought to be necessary to procure justifiable items which could not be purchased with existing funds.

In due course the five agencies submitted their recommendations and stated in substance that existing funds were inadequate to meet justifiable needs under lend-lease and asked that an additional appropriation of several billions of dollars be provided as promptly as possible.

These requests have been the subject of lengthy discussion and study by representatives of Great Britain, China, the Bureau of the Budget, and the various United States agencies. Modifications have been made to meet changing circumstances. This budget, therefore, is the joint work of all interested parties.

It is believed the needs included are real and that they are fully supported by the United States agencies concerned as well as by the countries involved.

The agencies are responsible for defending in detail their parts of this budget.

Incidentally, it is to be noted that lend-lease budgets are particularly troublesome and difficult to build. The ideas of five United States agencies must be coordinated with the ideas of the several foreign countries involved.

This budget as it is tentatively developed at this date (September 12, 1941) definitely does not and is not intended to meet all the justifiable needs of the countries to be aided. It is only intended to cover commitments that should be made prior to March 1, 1942, when additional funds should be provided. Furthermore, it is built around the assumption that a substantial part of the needs will be met by transfer from the reservoir of orders already financed through regular appropriations of the Army and Maritime Commission and that in due course the law will be changed to permit this.

Delivery-time factors considered in arriving at the proposed budget are as follows:

(a) Through May 31, 1942, on simple military and industrial articles and on services available on a pay-as-you-go basis.

(6) Through December 31, 1942, on agricultural items to cover deliveries from the 1942 harvests, for which implied commitments will have to be entered into prior to December 31, 1941.

(c) Through December 31, 1942, on military and naval items requiring considerable productive effort and forward planning.

(d) Through June 30, 1943, on complex military and naval items requiring long-term development of designs or facilities, or both.

It is appreciated that two important questions must be answered: (a) Why are these additional funds required now? (6) What does the future hold forth with reference to lend-lease appropriations? In answer to these questions, my conviction is as follows:

As time goes on and we analyze the munitions and supplies needed by ourselves for safety and by our friends for a victorious war effort, we realize more and more that the stocks required are colossal. The curve seems to be an ever-ascending

The main enemy is now, and for several years has been, devoting the effort of approximately one worker out of two to the war effort. He is now aided by the semislave labor of many millions in the subjugated nations.

The enemy's effort must be outmatched to achieve victory and must be equaled to achieve even a stalemate. The production of England plus British orders in America plus lend-lease orders already provided for are not sufficient even with full Russian assistance. As this latter decreases, British needs increase; and, conversely, the more Russian assistance can be strengthened the better it is for England and the other actual or prospective enemies of the Axis Powers. Even the funds included in the new budget are far from sufficient to achieve equality in munitions power.

England has apparently realized this for some time, for when the original appropriation legislation was being discussed she submitted estimates of needs that were very much larger than the appropriations finally made. Furthermore, lend-lease

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has had to finance so-called spot purchases, or the day-to-day emergency needs that the fortunes of war create, and they have been very substantial. In the field of food, the yearly requirements as now supported by the Department of Agriculture have proven to be some three times as great as the amounts provided for in the first appropriation act. The oil requirements as supported by the Navy and the Oil Administrator are more than double the amounts provided for in the first act. Navy requirements also greatly exceeded amounts authorized. The same is true in almost every category of the act and in the case of each cognizant United States agency:

The reed for additional appropriations is now pressing as existing funds are all quite fully programmed and allocated to agreed-upon projects and there are not sufficient funds available to finance the commitments for emergency needs that should be made prior to November 1 next.

The argument can be advanced that even though existing funds are allocated they are not fully obligated and that necessary shifts can be made in the program in order to care for items of high priority. This is possible, but to change programs is very wasteful of time and effort. It should only be resorted to as a rare exception. At best, it can only postpone action on the items of lesser priority. In the interests of effective results, it is important that reasonably sound decisions be executed without modification and delay.

It is also important to realize that the earlier our industry can be committed by contract to specific tasks the earlier will we obtain deliveries. The task of transforming appropriations into contracts is at best long and troublesome. The quicker it is started the quicker it can be finished, but it cannot be started .until after appropriations are made. Even if our sights should be set too high, which is not the case, it is safer to reduce speed than to try to accelerate it.

Insofar as the future is concerned, it must be realized that we have quite definitely pledged to England all aid short of war. The steps that are being taken from day to day indicate that America favors the same policy with reference to the various countries that fight the Axis Powers so long as they continue to fight effectively.

Our obvious objective is the ultimate defeat of the Axis Powers. This cannot be done without munitions superiority. Unless some other method is followed, we must therefore be prepared to provide adequate munitions through lend-lease until victory is assured and this will obviously mean continuing huge appropriations. Sincerely yours,

J. H. BURNS,
Major General, United States Army,

Executive Officer. The CHAIRMAN. We have with us this morning Mr. Stettinius, the Lend-Lease Administrator, and also Mr. Philip Young, acting executive officer, Division of Defense Aid Reports.

It was my understanding that the first statement would be made by Mr. Young; but if you prefer to make your statement first, Mr. Stettinius, the committee will be very glad to hear you at this time.

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STATEMENT OF EDWARD R. STETTINIUS, JR., LEND-LEASE AD

MINISTRATOR, ACCOMPANIED BY PHILIP YOUNG, ACTING EXECUTIVE OFFICER, DIVISION OF DEFENSE AID REPORTS

Mr. STETTINIUS. It makes little difference to me, sir. My statement is very, very short, and I think you can dispose of me in a few moments.

Mr. Chairman, I think all of you gentlemen are familiar with the fact that I have been Lend-Lease Administrator for only a very few "weeks. Consequently, I am coming before your committee well armed with assistants. These men-Mr. Young, Mr. Cox, and others—will be glad to furnish you with all the detailed information that you may want during the course of these hearings and to answer any questions raised during your consideration of the President's request for the additional lend-lease appropriation.

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I want to say, Mr. Taber, that General Burns is in Moscow at the present time, but he left a statement which I think would contribute a great deal to your deliberations on this subject.

Mr. Young, who, I understand will follow me as a witness, is as familiar as anyone with the entire lend-lease procedure, even General Burns. Mr. Cox also is here and he is thoroughly able to give you any information that might be required.

Mr. Ludlow. When did you assume the duties of the office of Administrator?

Mr. STETTINIUS. Approximately 10 days ago, Mr. Ludlow.

Even my very short connection with the lend-lease program has made me terribly aware of its importance to our national security and our way of life. I am glad of this opportunity to make a short preliminary statement concerning the workings of the program, and I shall keep myself available to you throughout these hearings.

On March 27, slightly less than 6 months ago, the Congress appropriated $7,000,000,000 to carry out the purpose of the Lend-Lease Act. As of this morning, $6,437,071,079-92 percent of the total 7 billion-had been allocated by the President to the Army, Navy, Maritime Commission, Department of Agriculture, or Treasury Procurement Division for the procurement of specific materials and services for the countries we are aiding under the lend-lease program.

The Lend-Lease Administration is not a procurement agency; it is coordinating and expediting agency. Neither the Congress nor the President favored the creation of a new agency whose functions would overlap those of the present procurement agencies. So the responsibility for the actual procurement of lend-lease articles was placed in the hands of the War, Navy, Agriculture, and Treasury Departments, and the Maritime Commission, and the Lend-Lease Administration was set up with the responsibility of centralizing and coordinating the program.

The Lend-Lease Administration carefully scrutinizes the official request of the foreign government to make sure that the article requested is lend-leasable and essential for the war effort. If it is, and the production of the article can be efficiently geared into the other phases of our defense program, the funds for it are allocated to one of the procuring agencies.

Up until now, the President has had to pass individually on every dollar allocated under the 7 billion appropriation. This placed a heavy burden upon his time. He has now authorized me to make allocation of funds up to $300,000,000 and to transfer articles up to a like amount. I have also been authorized to make necessary adjustments in allocations and transfers previously authorized. The President will, however, retain close supervision over the program. He will continue to determine what countries are to receive lend-leas aid and he has asked me to give him a report once a month, perhaps more frequently, on all allocations and all transfers made under the lend-lease program.

As I said in the outset, we are not a procurement agency. Representatives of each of the actual procurement agencies are going to testify before your committee during your hearings and they will outline the details of their operations and what they plan to do with the funds that are now being requested. I understand that Secretary Wickard is to testify this morning and that he will outline the

lend-lease agricultural program, which I like to think of as the American farmer's answer to the Nazi challenge to their liberty.

The Congress and the President have determined that our national policy shall be all possible assistance to the countries resisting the aggression of the Axis Powers. We must plan ahead so that the flow of planes and guns and tanks to the gallant men and women fighting against Hitlerism is assured without interruption.

It takes time and it takes planning to produce great quantities of bombers and tanks and ships and large armaments. It takes time to expand plants, to locate materials, to get tools, and to train workers.

The second lend-lease report just filed with the Congress shows how much time is consumed in translating appropriations into allocations, allocations into contracts, and contracts into armaments. The aid from the first appropriation will now grow steadily larger and larger. But it must be supplemented in some instances and we must now begin to plan for the time when aid under the first appropriation bill will begin to go down hill.

This appropriation will permit us to get on with the job of producing the tools of victory. It is one more step along the road toward munitions superiority over the Axis Powers. It is one more good investment in the safety of our country.

The countries with whom we stand will one day be ready to launch great offensives. We must be ready to furnish them with the tools of liberation. When we face that great day, this nation must not offer “too little,” “too late.”

Mr. WOODRUM. Mr. Stettinius, the present lend-lease proposal is simply an extension or expansion of the present program; is that correct?

Mr. STETTINIUS. That is correct, Judge Woodrum.

Mr. WOODRUM. It is based on the policy set out in the legislative enactment known as the lend-lease act, followed by the appropriation we made some months

ago. Mr. STETTINIUS. In March.

Mr. WOODRUM. This is merely providing for additional amounts under the same type of categories, being an extension and expansion of that program.

Mr. STETTINIUS. That is correct, sir.

Mr. WOODRUM. It does not contemplate any change of policy or any change in the authorizing law which Congress passed.

Mr. STETTINIUS. That is correct, sir.

AMOUNT OF CURRENT LEND-LEASE APPROPRIATIONS ALLOCATED

Mr. SNYDER. Mr. Stettinius, in your formal statement I notice that you said thatAs of this morning, $6,437,071,079—92 percent of the total 7 billion-had been allocated by the President to the Army, Navy, Maritime Commission, Department of Agriculture, or Treasury Procurement Division for the procurement of specific materials and services for the countries we are aiding under the lend-lease program,

That means that it is in the hands of those various agencies, but does it mean that they have allocated it?

Mr. STETTINIUS. That is, you ask have they used it?
Mr. SNYDER. Yes.

Mr. STETTINIUS. No; it does not mean that. Mr. Philip Young is in a position to answer any questions of that kind that any member of the committee might like to ask.

Mr. SNYDER. You said you had not been in your present position long, but in your judgment, as you have seen the picture in the short time you have been Administrator, you think it most essential that this $5,000,000,000 be placed on the table, as it were, so that you can back up these $7,000,000,000 already allocated, in order to put it in the avenues which are drained first.

Mr. STETTINIUS. I think it is essential that it be done as promptly as Congress can possibly do it.

Mr. Ludlow. I would like to ask you one or two questions.

This amount is to be disbursed in exactly the same way as a recent appropriation for the same purpose.

Mr. STETTINIUS. Yes, sir.

TRANSSHIPMENT OF LEND-LEASE ARTICLES FROM RECIPIENTS TO OTHER

GOVERNMENTS

Mr. Ludlow. In the summary in the report on the lend-lease legislation, sent to Congress in March, that is, the first report, I notice there is this language:

Protection of our national interest is specifically provided for in the act by requiring any nation to which defense articles or defense information is transferred to obtain the consent of the President before turning them over to any other foreign nation or anyone not an agent, officer, or employee of such government.

I want to ask if you can tell us how much transshipment there has been, if any, of lend-lease articles from the recipients to other governments.

Mr. STETTINIUS. I am not in a position to answer that, but Mr. Young is. He is present, and I understand will be the next witness.

NOTE.--This information has been furnished to the chairman of the subcommittee on a confidential basis.

SET-UP FOR LEND-LEASE ACCOUNTS

Mr. Ludlow. What is the set-up for keeping lend-lease accounts? As I recall, from former testimony given to this committee, you have a fiscal unit in the Division of Defense Aid Reports.

Mr. STETTINIUS. We have, sir.

Mr. Ludlow. It is contemplated that the details of these various transactions shall ultimately be made public?

Mr. STETTINIUS. Ultimately; yes, sir.

Mr. Ludlow. I can see the reason why they should not be made public at this time.

Mr. STETTINIUS. I think it is apparent that to make them public at the present time would not be in the interest of the defense effort.

Mr. LUDLOW. In other words, what I am trying to get at is this: A detailed record is being kept of all these lend-lease transactions?

Mr. STETTINIUS. A complete record of all the transactions is being kept, and will be made public at the proper time.

Mr. LUDLOW. At the proper time it will be made public?
Mr. STETTINIUS. That is correct.

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