Evening star. [volume] (Washington, D.C.) 1854-1972, 1940-08-24
Defense Commission
Maps Plan 10 Speed
Arms Production
Contracts Enabling Firms
To Borrow for Plant
Expansion Proposed
BY tie Associated Press.

By tie Associated PRESS.
The Defense Commission handed
Congress a new legislative problem
today with its announcement of a
plan for accelerating munitions pro-
duction by extending to manufac-
tIrers contracts on which they may
borrow money for plant expansion.
Commission officials said it would
be possible to step up airplane and
other material orders substantially
as soon as legislative authority was
granted for these contracts and
Congress had acted also on a supple
mentary defense appropriation and
two other pending proposals for re-
taxing present profit and tax restric-
tons on manufacturers.
Other developments in the Ma
tons fast-moving defense prepara-
tons included:
A conference between President
Roosevelt and the six American
members of the joint United States
Canadian Defense Board, which was
named Thursday. The White House
meeting is preliminary to the full
boards first session in Ottawa Mon
day.
May Discuss Destroyers.
While creation of great naval
and air bases in Newfoundland
area may be the initial concern
Of the Joint group, it is believed
that the currently hot" prob
lem of transferring some so over
age destroyers from American to
British or Canadian service may
be discussed at today's consulta-
ton.
Indications that the President
would sign at an early date legis-
lation for mobilizing $4,000 men in
the National Guard and Army Re-
serve units. 1t was expected that
the first group called out would
number $4,000 officers and men with
other units to be modified later.
Announcement that contracts had
.'been signed for $500 of the 4.2OO
planes for which funds were avail
able on July /.
Announcement that the War De-
partment has undertaken program
to provide housing and recruiting
shelters for BIT ,309 men at "a Army
posts.
Reimbursement Planned.
The Defense Commissions new
plan for expanding production ia
cilitieS is based on a contract in
which the Government agrees to re-
imburse manufacturers in five an
nual installments for the cost of
building new factories or additions.
On this Federal promise-to-pay a
manufacturer could borrow from his
bank the actual cash for construc-
ton.
Present law prohibits a Govern
ment contractor from assigning
rights under his contract to an
other. Officials explained that
legislation was needed to remove
that barrier before the plan could
be put into operation.
John D. Biggers, chairman of the
commissions Committee on Taxa
ton and Finance, said at a press
conference yesterday that the new
contract system was but one-fourth
of the whole program for speeding
up war equipment production. He
declared that final congressional
action on these three other items
was essential:
1. The $5,018,012, 957 supplementary
defense appropriation carrying funds
for more planes, tanks and other
arms. Approved by the House, this
bill is awaiting Senate action.
Profit Limit Suspension.
2. Suspension of the Vinson-
Trammel laws limitation of to 8
per cent on profits under Govern
ment airplane and warship con-
tracts. This proposal is before the
House Ways and Means Committee.
3. Permission for manufacturers
to deduct from taxable profits, in
figuring their income taxes each year
for the next five years. 20 per cent
of the cost of additional facilities
necessary to fill defense orders. A
part Of the same bill as the Vinson-
Trammel suspension, this proposal
also is pending in the House COM
mittee.
AS outlined by Mr.. Biggers and
other commission officials, defense
production plants are grouped
roughly in three categories:
Those are new plants, such as gun
powder factories, the output OF
which obviously would not be needed
In normal times; factory expansions
to make products for which there
would be an uncertain demand in
time OF peace; and factory expan-
sions to make extraordinary quanti-
ties of normal" goods to meet Gov
eminent requirements.
Government Building Plants.
The new plants Of the first type,
Mr.. Biggers said, are being built
by the Government, but operated
privately, on management fee
basis. The "bankable contracts" he
said, are necessary to interest pri-
vate capital in supplying the addi-
tional facilities which fall In the
second category.
Expansions of the third type, he
continued, might be put through
without the help of the special con-
tracts, but the manufacturers should
be entitled to deduct the cost from
their taxable income on the pro-
posed f1ve-year basis.
In explaining how the new con-
tracts would work out, Mr.. Biggers
said the Government would deter
mine the need for the article to be
produced and arrive at an equitable
price" for 1t. The Government