2. Add to the danger of inflation by curtailing the production of consumer goods, thereby fostering black markets.

3. Create unemployment in communities where war jobs no longer provide employment for the whole working forces.

4. Weaken the civilian economy further because replacements cease to be available for essential products that wear out.

Insofar as the production of civilian goods does not interfere with the war, such production should be encouraged. The American public is determined to win this war, and needless delay in increasing production of consumer goods when materials, plants, and manpower are clearly available could only injure morale by fostering the impression of inefficiency in the direction of the war effort.

Reconversion of industry to the production of necessary civilian goods can be furthered by the adoption of the following principles:

1. Relaxation of restrictions on the use of scarce materials after adequate supplies and stock piles have been assured for the needs of the present war period. 2. Modification of limitation orders on the manufacture of consumer durable goods when the War Production Board finds that materials, plants, and manpower are available to make them. Necessities would be given preference over

luxuries in the relaxation of restrictions.

3. Price controls should be withdrawn gradually, but any continuing price control should be flexible enough to permit manufacturers and distributors of civilian goods to earn a reasonable return. Under such flexible control, every effort shall be made to lower costs and prices through the expansion of sales volume.

(The following was submitted by Mr. Kefauver:)

STATEMENTS OF HON. FRANCIS BIDDLE, ATTORNEY GENERAL; DONALD NELSON, CHAIRMAN OF WAR PRODUCTION BOARD; FREDERICK C. CRAWFORD, NATIONAL ASSOCIATION OF MANUFACTURERS; AND ARTHUR G. DREFS, CHAIRMAN OF THE COMMITTEE ON CONTRACT TERMINATION DISPOSAL, NATIONAL ASSOCIATION OF MANUFACTURERS, BEFORE WAR CONTRACTS SUBCOMMITTEE OF SENATE MILITARY AFFAIRS COMMITTEE PROBLEMS OF MOBILIZATION AND DEMOBILIZATION UNITED STATES SENATE,

WAR CONTRACTS SUBCOMMITTEE OF THE

COMMITTEE ON MILITARY AFFAIRS, Washington, D. C., Tuesday, April 18, 1944.

The subcommittee met at 10 a. m., pursuant to adjournment, in room 318, Senate Office Building, Senator James E. Murray (chairman) presiding.

Present: Senators Murray, Kilgore, and Austin; and Representative Kefauver, a member of the Committee on the Judiciary of the House of Representatives.

Also present: B. M. Gross, staff director.

Senator MURRAY. The hearing will come to order.

We are very glad to have you with us, Mr. Attorney General. I am sure you will be of great help to us in the consideration of this legislation, which is now before the committee; we are looking forward to your views on these problems relative to the necessity for legislation in the field of war mobilization and in the post-war adjustment, especially in connection with this problem of the disposal of property in the post-war period.

You have a prepared statement, I presume?

Mr. BIDDLE. Yes.

Senator MURRAY. You may proceed in your own way.

STATEMENT OF HON. FRANCIS BIDDLE, ATTORNEY GENERAL OF THE UNITED STATES

With your permission, Senator Murray and Senator Austin, I will read the prepared statement and make comments on it as I go along, so as to have it seem less formal than if I merely read it.

Senator Murray's letter inviting me to testify before the committee asked several specific questions about setting up a central agency to deal with problems of industrial demobilization. These questions, and a number of others that are raised by bills now pending before this committee, relate to matters in which the Department of Justice has a direct interest. On November 9, 1943, I testified about contract termination, before your subcommittee. I think, therefore, it is unnecessary to discuss that subject again. I welcome this opportunity, however, to give you my views on the issues raised by Senator Murray's letter.

Senator Murray, I have a copy of my testimony before that committee which, if you would like for your convenience, I will simply mark it as a reference. I am not going back over what I have already testified with respect to termination.

Senator AUSTIN. Has that ever been printed, Senator Murray?
Mr. BIDDLE. Yes; it is printed.

Senator MURRAY. I believe it might be well to make it a part of this record here.'

Mr. BIDDLE. Very good.

Senator MURRAY. So I will ask the reporter to have this incorporated in the record.

Mr. BIDDLE. It can be incorporated without reprinting, I assume? Senator MURRAY. Yes.

(The document referred to appears in pt. 5, pp. 341 to 368, inclusive, of these hearings; or it may be found on the same numbered pages of the consolidated print of the hearings, pts. 1 to 5.)

Mr. BIDDLE. There can be no doubt as to the necessity of our making plans now for the demobilization period. I think it particularly encouraging that the committees of Congress are now giving careful attention to these problems. No one should underestimate the importance of this work. But when we consider establishing demobilization agencies that will begin to operate immediately, we should remember that we are still at war. We may hope that the war will not continue much longer, but we must not assume that it is going to be over quickly. We cannot act as if we were now at peace or were going to be at peace next week or next month or even next year. Although we may now make plans and form policies for dealing with contract termination and the disposition of surplus property, we cannot now make decisions in those fields as if peace were here. Now, and for a considerable period of time, we shall have to make decisions more with an eye on the success of our military effort than on the exigencies of the coming peace.

We should also remember that existing agencies are now actually engaged in conducting the war. It is doubtless desirable to set up an agency to deal with economic demobilization, but in so doing we should interfere as little as possible with the operations of these war agencies. There are also existing agencies considering and dealing with some questions of economic demobilization. For example, there are the Joint Contract Termination Board, the Surplus War Property Administration, and the Retraining and Reemployment Administration. The policies and operations of these agencies and of the war agencies are now coordinated by the Office of War Mobilization subject to the direction of the President.

I may say, in passing, that I am a member of both the Contract Termination Board and the Surplus War Property Administration. As you know, they are coordinated under the War Mobilization Administration, of which Mr. Byrnes is the head.

I think it might be unwise by legislation or to press with legislation the executive technique that has already been set up. I do not mean to say that you are simply going to approve the technique, but careful consideration should be given to the careful meshing of the war agencies and of the demobilization agencies under the new legislation that I do think very important to pass as promptly as possible.

We have found it unwise, while we are at war, to freeze organizations or administrative struqtures. Much freedom of choice and

elasticity of action is necessary so that we can correct unsatisfactory situations and deal with sudden emergencies. Congress recognized this necessity if the fist and second War Powers Acts and in other war legislation. It is desirable while we are at war to retain this freedom of choice and this flexibility of organization.

In other words, it seems to me, gentlemen, that you may have a war condition at the same time as very substantial steps are taken in demobilization, so it is a problem of synchronizing the two, the war effort and the demobilization effort.

With these general remarks as a background, I shall now consider some of the questions that Senator Murray raised in his letter. One question raised is whether there should be a central demobilization agency and, if so, what powers and responsibilities it should possess. I have no doubt that it would be desirable to have some central authority control and coordinate the policies and, to a lesser extent, the operations of the different agencies that deal with demobilization. As I have said, this is done for the war agencies by the Office of War Mobilization under the direction and control of the President. To the extent that the bills before your committee propose to set up similar machinery to deal with demobilization, I think their purpose is a good one.

For the reasons I have given, however, I think it desirable that any new organization be fitted into the existing structure of existing agencies so that while the war is on their operations will be disturbed as little as possible. Furthermore, the need for central control of policy and procedure does not mean that we need to set up a huge new agency to deal with demobilization. So far as possible it seems to me desirable that actual administration and operations should be carried on by the departments and agencies that now exist, subject, of course, to supervision and control by some central authority. In other words, we should centralize authority and decentralize administration and operations.

Let me emphasize that that seems to me the core of the problem. The agencies have been dealing with the war production and the war effort, and it seems to me that they should be the administrative and operating groups fit to deal with the demobilization. They having made the contracts, I think they should unmake them and distribute the property, not only because they are familiar with the problems involved, having dealt practically with them, but because any attempt to centralize operations is going to be hopelessly slow in what is essentially a problem, in particular with respect to personal property, of very speedy getting back into the flow of ordinary peace economy the war goods, and that is the essence of this thing, a central policy, a central general policy and decentralized operations.

In dealing with the problems of demobilization we should have some of the same discretion and freedom of choice that was necessary for carrying on the war. If the administrative structure, as first set up, is too rigid; if it is frozen while the war is still going on before we have had much experience with the new problems that will arise, the results may be unfortunate.

Senator Murray's letter asked about the scope of the demobilization agency's powers. The problems of manpower demobilization, the allocation of materials for civilian production, price and wage stabil

ization, contract termination, the disposition of surplus property, and reconversion financing are all interrelated. For this reason, the authority of the central agency should extend to the policies and operations followed in all these fields.

The letter also asks whether the top policy board of the agency should include representatives of business, labor, and agriculture. I doubt the wisdom of this proposal. Administrative and practical difficulties are likely to arise when representatives of avowedly private interests are given official status in a Government agency. If it is thought desirable to have informal and advisory representation of the interests of business, labor, and agriculture on the policy board, that can be done by including representatives of those departments of the Government that are charged with special responsibilities in these fields, such as Labor and Commerce. Of course, the policy board should consult with representatives of business, labor, and agriculture, and obtain from them any views, suggestions, and information that they may care to offer.

Advisory committees representing private interests will be one valuable source of information and advice, but we should remember that this is only one of many methods of securing assistance of private groups. The problems that will face us are so important that avenues through which advice and assistance may be received should not be restricted. Provision should be made so that any group which feels that its interests are being neglected may present its grievances or suggestions to the Government.

In my experience I have had a good deal to do, particularly in the fields of labor, with administrative groups that were made up of representatives of labor and industry. Now the tendency of any such representation is to diversify the points of view instead of unifying them. It seems to me, therefore, it is a mistake in Government agencies charged with administration and enforcement and responsibility, to set up a group which necessarily has divergent points of view on any specific problem, rather than to deal with it by simply hearing its advice and suggestions, in other words.

Moreover no advisory committee or other private group, representative of special interests, should have authority to determine national policy or to carry out a program. That authority should be vested exclusively in public officers who are responsible to the President and the Congress. This principle should be strictly adhered to if advisory committees are to be used in connection with demobilization.

Senator Murray's letter also asked what directions as to policy Congress should give the executive agencies to guide them through the demobilization period. Later in my statement I shall deal with several specific policy questions. I am in favor of Congress prescribing in general terms certain policies that agencies should follow in the demobilization period. I am in favor of this because I believe that under our system of Government it is the responsibility of Congress to determine the policies that should be followed in any matter as important as industrial demobilization. I say the Congress, meaning the Congress and not the Executive.

I am in favor of it for another reason: I think that there will be better administration if executive agencies are given clear directions by Congress as to the policies it wants followed.