I am not suggesting for one moment that the military personnel or he civilians in the Military Departments understand this fully. There a big educational job to be done. We have just got to get at it. Senator YOUNG. Could you give me a reason why a general in the rmy would not answer a letter to a member of this committee? Secretary LOVETT. No, sir, I can not. The Secretary of the Army an probably answer that.

Secretary PACE. It depends on what general, Senator.
Senator YOUNG. I would say most of them.

DEFENSE PROGRAM TIMETABLE

Senator THYE. Mr. Chairman, there is one question in my mind nd that is a year ago we were giving consideration to the expenditures n the fiscal 1952 and 1953. After Congress readjourned that timeable was extended. What we expected to have been expended, completed and constructed in 1952 and 1953 was extended further n into the calendar years. I am right on that, am I not?

Secretary LOVETT. I think, Senator, you are referring to the 1953 udget; when the stretch-out was applied it affected the appropriations ery directly.

Senator THYE. You are not taking off the assembly lines the ompleted equipment as rapidly, even in the calendar year of 1952, s you had anticipated and expected when you first presented your udgetary request.

Secretary LOVETT. The effects of the reduction in appropriations nd in expenditures has not been fully felt, Senator. The material 3 coming off on the revised schedules. It is A-16 schedule on airraft. I believe in March deliveries were about 95 percent of schedule. Senator THYE. That is aircraft. Would that be true with tanks. nd such equipment as that?

Secretary LOVETT. It is my impression that the general rate of roduction is now coming into its first accelerated stage, Senator. Senator THYE. You are later in the calendar months than you had. inticipated when these appropriations were made. Secretary LOVETT. Yes, sir, but only in certain items.

Senator THYE. And your timetable is extended for 1953?
Secretary LOVETT. Yes, sir.

Senator THYE. And you are carrying a greater sum of actually inexpended funds at this time and your anticipation is for 1953 the unds that are not expended will be greater than you anticipated when your appropriations were first presented?

Secretary LOVETT. No, sir; they are about the same. My recollection is that the carry-over will be around $56 billion or $57 billion.. Senator THYE. All reports that I have read have been that your timetable was extended and what we had anticipated to be the timetable when these appropriations were made have moved on over into later years.

Secretary LOVETT. That is the result of the stretch-out, sir.

Senator THYE. If the stretch-out is made, does that mean there is a deferral of the actual expenditure?

Secretary LOVETT. Yes, sir.

Senator THYE. Therefore, you have a greater accumulation today than had been anticipated when the appropriations were presented. Secretary LOVETT. No, sir, because the stretch-out occurred before we presented the 1953 budget.

BUDGET BUREAU ACTION

Senator O'MAHONEY. Mr. Secretary, what Senator Thye has in mind is this, I believe: When you testified at our first hearing this year on the 1953 budget, you explained that after the Department of Defense had sent to the Bureau of the Budget its recommendation there was a cut-back of some $2 billion imposed by the Bureau of the Budget, and that resulted in making it impossible for you to receive the deliveries which you had previously planned in 1953; so that the stretch-out was the result of a failure of the Bureau of the Budget to provide the recommendation for the funds you had counted upon to pay for the deliveries which had been planned.

Secretary LOVETT. That is correct, except the cut by the Bureau of the Budget was in excess of $3 billion.

Senator O'MAHONEY. That did not result in an increased sum. Senator THYE. But were the deliveries ready? That is the question that seems to be uppermost in the minds of the people, and that the huge appropriations have been made and yet the timetable keeps being shoved into a later calendar month and calendar years.

Secretary LOVETT. The deliveries would not be ready in the long lead-time material for a minimum of 18 months. The material we are receiving now, as you can see by that chart, during fiscal 1952, is very largely the result of 1951 and prior-year obligations.

Senator THYE. But are the deliveries in 1952 as great as has been anticipated at the time these budgets were being developed, the authorization being developed and the appropriations made according to the authorization?

As I

Secretary LOVETT. Our expenditures are about the same. recall it, there is approximately a $1 billion difference between the first estimate of expenditures in fiscal 1952 and the final one. I think we now expect between $39 billion and $40 billion.

Senator BRIDGES. I was going to ask you to just repeat what you said there.

Secretary LOVETT. When we made the initial estimates of expenditures on fiscal 1952, it is my recollection-and I would like to correct this in the record if it is not accurate-that we guessed the expenditures would be around $40 billion. We are now spending what appears to be around $39 billion plus.

CARRY-OVER FUNDS

Senator BRIDGES. How much carry-over will that make you have at the end of fiscal 1952, June 30?

Secretary LOVETT. Would you like me to recapitulate the whole year's operation as to appropriations, expenditures, and carry-over? Senator O'MAHONEY. This would be new. Please do that. Secretary LOVETT. The unexpended appropriated amount carried over in fiscal 1952 from 1951 and prior years was $36.4 billion. In addition, there were balances of $1.7 billion carried over in the stock and revolving accounts which act as a sort of clearinghouse for transaction involving the direct appropriations. Now, the appropriations of new obligational authority for fiscal 1952, including the supplemental, amounted to $60.4 billion, plus $0.5 billion in additional capital

provided to stock funds to enable them to meet the needs of our expanded forces.

Senator BRIDGES. Say that again, please.

Secretary LOVETT. Indirect appropriations carried over from 1951 and prior years was $36.4 billion. The appropriations and new obligational authority granted us for fiscal 1952, the bill you passed last fall, plus the pending supplemental, is $60.4 billion. The total available for expenditure in fiscal 1952 is, therefore, $96.8 billion. Charges to appropriations in 1952 we estimate at-to be conservative in this-$39 billion. Estimated value of funds which will lapse at the end of fiscal 1952 are $400 million, which will leave unexpended appropriation amount carried over into fiscal year 1953 of $57.3 billion.

Now, approximately $2 billion of that sum represents unpaid amounts for pay and allowances of military personnel, civilian payrolls, and for goods and services delivered prior to June 30, but which had not been paid for. The balance represents the value of the outstanding contracts, and I think this is the point, Senator Thye, that you were asking about: virtually all the balance of approximately $55 billion represents the value of the outstanding contracts; that is, undelivered items for aircraft, ships, tanks, fire control, radar, spares, spare parts, ammunition, and so forth, most of which will not be delivered until fiscal year 1953 and fiscal year 1954, and in certain of these items later years.

Senator O'MAHONEY. Mr. Secretary, before I called the committee for a meeting yesterday to discuss the agenda, General Moore brought up a slide rule which I think illustrates this apparently complex problem better than anything I have seen. It shows how the contract writing, the acquisition of materials, the construction of the item, and the delivery of the end item is necessarily long drawn out. I would like to have each member of the committee see this rule. Senator Bridges saw it yesterday. This is the set now for January 1952. It shows that in the period from January through the second quarter of 1952 the contracts are made with moneys that had been previously appropriated.

Following making the contract period, there is a period for the acquisition by the manufacturer of steel, aluminum, carbon, copper, and other materials that go into the manufacture of the end items which are to be purchased. Then follows the time when these materials, having been purchased by the manufacturer, are delivered to the mills of the manufacturer. Then follows the period during which the particular weapon is manufactured.

Now, these take various times from January 1953 down to April or June 1955, according to the nature of the end object. The longest period is required for the delivery of ships and of aircraft. A very long period is required for electronics, for construction, for guided missiles. Lesser time is required for ammunition, for tanks, for field wire, and the like.

I would like to hand this down to Senator Saltonstall and Senator Thye, so they may see how the operation works. It explains visually how an appropriation made in one fiscal year may not be expended until some years afterward.

APPROPRIATION LAPSES

Now, of course, appropriations lapse. Mr. Secretary, what is your understanding of the period within which an appropriation lapses when it has not been expended?

Secretary LOVETT. It differs in certain classifications of items, Mr. Chairman; but, except for the continuing-type appropriation for aircraft, ships, and public works, we usually have the obligational authority for the year and then the expenditure authority continues for 2 years succeeding that, so that there is a total period of 3 years during which the funds are available. The following chart shows the period of availability of funds granted and requested for fiscal years 1951, 1952, and 1953.

(The chart referred to follows:)

Analysis of new obligational authority by period of availability
[Thousands of dollars]

Includes pending fiscal 1952 supplemental of $1.457 million.
Excludes proposed fiscal 1953 supplemental of $3,500 million.

* For transfer to the military departments, to be available for the same time period as the appropriation to which transferred.

DEFINITIONS

One-year appropriation: Available for incurring obligations only during the fiscal year in which appropriated and available for expenditure for a 3-year period including the year in which appropriated. Multiple-year appropriation: Available for incurring obligations for a definite period in excess of 1 fiscal year and available for expenditure for an additional 2-year period.

No year appropriation: Available for incurring obligations for an indefinite period of time and remains available until expended.

Senator O'MAHONEY. At the end of the third year, if not expended, the appropriation lapses?

Secretary LOVETT. Yes; but we have extra time on the very long lead-time items like aircraft, ships and public works.

Senator O'MAHONEY. Congress gives you power to review the authority.

Secretary LOVETT. By and large they lapse after that third year, without action by Congress.

CARRY-OVER FUNDS DURING WORLD WAR II

Now, Senator Thye had asked a question which I think can be made clearer if we can use some comparable figures in World War II, our experience then; in other words, the carry-over into the succeeding fiscal year as compared with the amounts actually expended in that succeeding year. I will make the table available in full, but a few instances I think will clear this thing up, because this is not a new experience, Senator Thye. This always happens in the long lead-time items.

In fiscal 1941 the carry-over from the previous fiscal year was $2 billion, and the new obligational authority was approximately $25 billion. That made a total of $27 billion available for expenditure. The expenditures were $6 billion. Consequently, the carry-over into 1942 was $21 billion. The 1942 new obligational authority was $96 billion. The total, therefore, of carry-over plus new obligational authority was $117 billion, but the expenditures were only $23.6 billion, and the 1942 carry-over into 1943, in consequence, was a little over $93 billion, and so on down through the war experience, as shown in the following table.

(The table referred to follows:)

94846-52-14