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An illustration of this very point is to be found in the case of
the Industrial Mobilization Plan of 1939 which was criticized for failing
to anticipate political conditions accurately. "The Plan was a document. formulated for conditions unlike those which actually arose.
It presumed the existence of a state of war under which almost any
power could be had from Congress for the asking and under which a full-fledged war organization would have to be created. Neither of these
conditions prevailed, and until the war came, progress could be made
only as public opinion crystallized into decision."¹

**Current Status of the "Blueprint"-"Problem Approach" Controversy.**
The "blueprint" and the "problem and methods planning" techniques are
not mutually exclusive on all counts. Indeed, at the end of the "problem and methods planning" program, if time permits, there will of necessity be not just one "blueprint" but a series of "blueprints." The "methods planning" technique is advocated as a slower, surer, more realistic way of arriving at a "blueprint" that is thoroughly tested for economic, military, and political feasibility. On the other hand, even if the time period for working out the "problems and methods" were to be foreshortened, exactly the same technique would have to be used in any event, though refinements would probably not be possible. In a pinch _some_ answer is better than _no answer available_ because a perfected one has not been thought out or completely tested.

The prevailing national philosophy as exemplified in the current NSRB and Munitions Board mobilization planning is geared to the "problem and methods planning" approach. It is set forth clearly in NSRB Document 116, July 20, 1949:

"Realistic mobilization planning for war must be approached through the analysis of problems and issues rather than through the mere drafting of "blueprints." The blueprint approach gives primary emphasis to the preparation of detailed plans of operations, including drafts of executive orders, organization charts, regulations, instructions, and other administrative documents for directing the Nation's wartime activities. The problem approach seeks through analytical techniques, to identify problems, to separate their components, and to develop alternative solutions in order that appropriate executive decisions can be made in light of the circumstances at the time the decisions are needed.

"The problem approach to mobilization planning does not imply that drafts of orders, regulations and organization charts should not flow from the planning process. The analyses developed might include revised drafts of regulations used in the past war; but they would be placed within the framework of an analysis of the conditions under which they emerged, the difficulties encountered, and the problems that may be encountered in a future war or transition to war. The problem approach recognizes the fact that 'a mobilization plan' comprised almost solely of administrative directives and charts would be of limited value in an actual war situation. On the other hand, 'problem-analysis documents' will facilitate intelligent action and will expedite the drafting of regulations and directives.

¹/ Bureau of the Budget, *U. S. at War*, Washington, Gov't. Print. Off., 1946, p. 23.

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"Planning for war does not require that all wartime decisions or determinations be made in advance. With respect to controversial areas, at least, the approach should be rather to identify the critical problems, to suggest alternative solutions, and to indicate the merits and limitations of each alternative. Pushing for specific decisions in advance of need unnecessarily promotes controversy and may lead to undesirable compromise in the planning product. In any case, there is no certainty that wartime executives will accept peacetime decisions, or that present executives will not subsequently change their views regarding peacetime decisions. In short, planning should provide the basis for resolving issues rather than attempt to provide the final answers in advance."

But the advantage of somewhat detailed answers, such as those now being sent in on request from all government agencies to the National Security Resources Board for its own master planning, is that most of the reasonable alternatives will have been explored. The Industrial College of the Armed Forces has made exhaustive studies of all phases of economic mobilizations. These have been further supplemented by Munitions Board studies appropriate to its functions. Nearly every agency has some war mobilization responsibility or interest which bears on segments of economic planning for war. The danger is not from lack of planning, but from perhaps a lack of a sufficiently detailed set of alternative plans to fit differing levels of need or catastrophe, which an operating war agency called on to function in a crisis, might use as the basis for immediate action.

### e. Summary of Current Status on Controversial Organization Patterns in Mobilization Planning.

The National Security Act of 1947 firmly established the principle of **civilian control** in the **planning of economic mobilization**, but recognized the legitimate operating jurisdiction of the military over certain aspects of it. Such a dual system--necessary as it is--by its very nature continually raises the issue of which should predominate, and which will, in fact, predominate. In general, it can be concluded that the Munitions Board of the Department of Defense has direct responsibility over the military aspects of mobilization planning, subject always to review by, and coordination on the part of, the National Security Resources Board. The two agencies delineated their respective jurisdictions in a formal agreement in January 23, 1950.

On the matter of a **nuclear operating agency** as opposed to a **staff planning and coordinating agency**, the current preference of the Administration is for the continuation of the NSRB as a planning and coordinating agency at the highest possible staff level--namely, in the Executive Office of the President. As a Presidential staff agency, advisory in character, with a leadership function in the mobilization field, it is not considered appropriate for it to be an operating agency. However, as the public becomes increasingly alarmed over the international tension, more and more interest is evidenced in the training functions that could be being performed by an operating

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mobilization agency, functions which would not be performed by a staff planning agency and which may even be remote from the normal activities of the regularly established Departments. There is an articulate critical demand for an operating agency in stand-by form which could start war controls at a moment's notice.

Time, security, and convenience made imperative the unilateral approach rather than the early interallied approach to mobilization planning. However, the reasons for the unilateral approach seem less overriding as the mutual defense pacts are implemented organizationally. While a two-power control approach would be too limited, and a dozen or more nations control might not be as manageable, some middle ground is being sought. Actual formal agreements on interallied mobilization planning may not be necessary at this time. Estimates of combined requirements and combined resources within an informal framework can and will be made. The problem for the United States is how it can, while playing its full part under existing international agreements, at the same time retain a voice in mobilization planning which is commensurate with what its national contribution would be in the event of war: a voice, furthermore, which would be of sufficient authority to provide that vital leadership essential to a successful allied prosecution of the war. More progress has been made in the field of joint mobilization planning between Canada and the United States than between the U. S. and any other of the Allied powers.

The prevailing national philosophy as exemplified in the current NSRB and Munitions Board mobilization planning is geared to the "problem and methods planning" approach--which is not considered to be mutually exclusive of the "blueprint approach" on all counts. Indeed, at the end of the "problem and methods planning" program, if time permits there will of necessity be not just one "blueprint," but a series of "blueprints."

Assumption (B) thinking urges the need for such an array of "blueprints," preferably in an enacted legal form, but at least ready to apply as a first framework of war mobilization controls.

The question of the need for a separate skeleton or stand-by War Controls Agency, and what form it should take is still a matter of considerable agitation. Mr. Baldwin in the April 1950 Foreign Affairs article previously cited makes a severe indictment that may overstate the case: "The sad catalogue of errors of omission which involve the safety of the American people can be extended. The National Security Resources Board was established by the unification act as a key agency to dovetail military and civilian economic mobilization planning and to insure the wise use of the national resources in peace and war. It has been to a considerable degree shelved because of the jealousy of established government agencies. In planning for possible mobilization we are repeating today many of the egregious errors that handicapped our rapid utilization of our industrial might in the early part of World War II. The lessons of the past have been ignored as well as the threats of the future." The rest of this article shows that Mr. Baldwin is concerned not only with "shelving" the planning agency, but not having a "readiness" organization in action.

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CHAPTER IV. STAND-BY LEGISLATION

While there are some permanent laws on the statute books which would be useful for carrying on a war, these are not adequate for war necessities or even consistent. There seems to be no question about the importance of stand-by legislation for a war emergency. The question turns on

1. The appropriate nature and coverage of the legislation, and

2. The degree to which it should be enacted in advance of an emergency.

Mr. Bernard Baruch also speaks to this point.1/ He believes that the mobilization time lag could be reduced by at least a year--"a margin which might save the whole democratic world"--if we would only "put into law now a fully stand-by mobilization plan. These laws would not take effect immediately. But they would be ready to go into instant operation upon joint proclamation by Congress and the President. Price-less months would be saved. To wait until war has begun and bombs are falling before we begin to legislate is an invitation to disaster. Washington itself may be the target for destruction. . . . What this requires is well known. There must be an impartial selective service law; a readied civilian defense; the elimination of profiteering; the power to shut down less essential production to give military needs priority; rationing of scarce essentials; much higher taxes and ceilings on all prices, rents, wages, and other costs to prevent the inflation which could wreck any mobilization. . . .

"After World War I, I urged a similar stand-by mobilization program. Nothing was done. When World War II did break out, many wanted to 'wait and see' whether full mobilization controls were necessary. In the fall of 1941 the Administration brought forward a bill for piecemeal price control, which I warned would be ineffective. One veteran Congressman admitted, 'I know you're right, but I have to vote for the easy way.'

"The price-control law passed by Congress after six months' delay let wages run free and allowed farm prices to rise to 110 percent of parity--laying the basis for the inflation which has plagued us since. When this 'easy way' broke down, a general price freeze was belatedly ordered and an attempt was made to 'hold the line' against wage increases. The trial-and-error fumbling with varied alphabetical agencies finally gave way to the over-all agency with a single, responsible director recommended originally.

"The tragedy of it all was the terrible price of refusing to learn from experience. The war was needlessly prolonged by at least a year, swelling the toll of dead and wounded, and adding more than a hundred billion dollars to its cost.

1/ "To Prevent War," _Readers Digest_, February 1950. See also Appendix II for a description of these laws and their present status.

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Of course, this reasoning assumes both that such advance planning
could be politically accepted today; and with respect to World War II,
that better political leadership could have secured drastic war controls
at a much earlier date than happened then.

Statutory measures for carrying on economic mobilization in World
War I were confined to a few pieces of legislation--the Army Appropria-
tion Act of 1916 on which rested the National Defense Council's advisory
powers to coordinate the economic resources; the National Defense Act
of 1916, which was the basis for the mandatory orders controlling in-
dustry; the Lever Act making it possible to control food and fuels; the
Transportation Priority Act; the Espionage Act; the Trading with the
Enemy Act; and the Overman Act, an administrative unification authority.
There was, however, no regulatory authority over the whole of industry.
Rather was the war carried forward on the basis of voluntary coopera-
tion, with an occasional shotgun behind the door just in case--such as
the government's power to withhold fuel supplies from recalcitrant
industries. 1/ 

Statutory legislation for World War II was more extensive. More
over, some of it was enacted prior to the outbreak of the war, such as
the Army and Navy expediting statutes which made it possible to nego-
tiate military contracts on a cost-plus-fixed-fee basis, to pay in ad-
vance, and to obtain priority deliveries over existing civilian orders.
Other significant pieces of war legislation were the Lend-Lease Act;
the First and Second War Powers Acts; the Price Legislation Act; the
Stabilization Act; the War Labor Disputes Act; the Contract Settle-
ments Act; the War Contracts Negotiation Price Adjustment Act; the
Revenue Act; the War Mobilization and Reconversion Act; the Surplus
Property Act; the Trading with the Enemy Act; the Smaller War Plants
Act; the Requisitioning Acts; and the Small Business Mobilization Act. 

In World War II, unlike World War I, there was considerable man-
datory authority over industry when the voluntary cooperation method
failed to yield desired objectives. However, the major gap in legis-
lation was in the field of civilian manpower controls. 

In the event of a Third World War, presumably there would have to
be statutory provision for all of the areas controlled in World War II,
plus some in additional fields, depending on how drastic the initial
blow, and subsequently on the degree of acceleration of the war. Ci-
vilian manpower controls leap to the eye as a loop-hole that would
probably have to be plugged in some manner. The fields of censorship,
bomb damage, community facilities and the like, may well need to have
new or extended statutory authority. 

1/ See Appendices I and II for detailed descriptions of these Acts and their development.

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From among the many known areas that would require the enactment or reenactment of statutory authority for the exercise of controls, the following kinds of legislation are singled out for special emphasis.

### a. Proposed Legislation

1. **Legislation Establishing Wartime Administrative Machinery.** It would be necessary either to reenact Title I of First War Powers Act, known as the "Overman Act," or to replace it with some other similar act in order to give the President the authority to establish the wartime administrative machinery. Otherwise, existing old-line agencies would have the legislative basis for conducting the war in accordance with peacetime procedures. This has not been found satisfactory in either of the two world wars of the 20th Century by any of the allied or belligerent powers. The Overman Act does not clearly spell out the basis for a War Industries Board or a War Production Board--which were handled primarily by executive order in the previous wars. Perhaps it would be well to spell out in legislation such authority in the event of another armed conflict--though the authority placed in the President by the Second War Powers Act and the Overman Act was never successfully challenged in the courts.¹

2. **Legislation for Hiring Expert Personnel without Compensation.** In order to manage economic mobilization, it will be necessary for the government to employ emergency personnel--particularly from the ranks of industrial, professional and labor management. The "dollar-a-year" technique worked out in the last war was not a particularly satisfactory concession to the criminal provisions of the civil service which make it normally impossible for an employee to draw pay from industry and government at the same time. Legislation would be needed to make it possible for the government to hire expert personnel without compensation, unless the whole principle of "dollar-a-year" men is rejected.

3. **Legislation for Emergency Contracting.** In peacetime, procurement authority legislation is understandably concerned with many limitations and restrictions. While the military procurement agencies always have at their disposal the Armed Services Procurement Act, the authority does not extend to non-military procurement agencies, of which there would have to be some established to carry on certain phases of the war. Therefore, it would be necessary to set aside legislatively some of the established limitations on government procurement. This in a sense is negative, rather than positive legislation, but would be just as significant in either event.

¹ See Appendix II on this point.

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4. Legislation for Establishment of Government-Owned Corporations.
Various kinds of government subsidies are always required in the process of war-operating subsidies, material procurement subsidies, economic warfare subsidies, price subsidies for incentive reasons, stabilization subsidies and the like. While there are many peacetime subsidies resting on current legislation--such as, agricultural and merchant marine subsidies--these would not be transferrable to other fields generally. Therefore, extraordinary government corporations will probably be called for to make public contracts, to take losses, and to enter fields formerly reserved for private business. There is no such general authority available on the statute books today.

In the event of an enemy attack on our homefront, private insurance companies may well be unable to meet bomb damage or personal injury claims in wholesale fashion. It may well be that some extraordinary government insurance corporation would be desirable either to supplement private insurance companies or to reinsure them.

5. Legislation for Government Construction of Facilities. Private industry can hardly be expected to pay for the expansion of plant facilities in war beyond their true postwar needs. Therefore, the Government must have legislative authority to construct new war plants or to install war equipment in peace plants at government expense in furthering war goods production targets. A question arises as to whether some powers for emergency reconditioning or operating of present stand-by plants may be necessary. See conclusion, page 180.

6. Legislation Supporting Private Financing of Government Con-tractors.
If the Government asks industry to convert, to experiment, to concentrate its lines, and the like, it is only fair for the government to facilitate the financing of such extraordinary requests. However, in World War II, bank loans were guaranteed by the Government through the V-loan procedure, which rested on Executive rather than legislative authority. Another time, perhaps, it would be well to have a statutory basis for such government financing--either delegating such authority to the Federal Reserve Board or some special war-financing agency.

7. Legislation for Acquiring Real Property. Existing legislation concerning the government's right to acquire real property is full of restrictive limitations as a protection to private property and personal constitutional rights. These formalities have multiplied down through the years. The Executive would need to have a freer hand in acquiring real property for the business of carrying on a war than is currently possible. Legislation to this effect would probably have to be both positive and negative in character.

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8. **Legislation for Establishing Priorities and Allocations.** Legislation establishing the authority for the government to exercise priorities and allocations is an absolute necessity. World War II authority can be improved upon in several respects--namely, by authorizing priorities on the basis of performance of a contract rather than on the basis of deliveries under contracts in order to make the mandatory-order authority extend down through the prime contractor to the sub-contractors; and to widen the allocation authority so that it will be possible to allocate plentiful facilities to the production of a short material--something not hitherto covered outright in the allocation authority.

9. **Legislation Permitting the Executive to Seize Plants.** The Executive needs the ultimate authority of plant seizure over sub-contractors as well as over primes. Although the Government is seldom the contracting party in the latter case, the Government's interest in achieving that production is just as great as its interest in the production at the prime level. In World War II plant seizure was confined to strike-bound operations, and to failures to fill mandatory orders where the Government was the actual contractor. A general extension of this authority would simply spell out authority which the Executive had implicitly in any case, under conditions of all-out war. But it would be more than usually difficult to get passage of sweeping powers of this character prior to war. The selective service legislation actually contained limited seizure provisions, however, in its 1948 form.

10. **Legislation Providing Exemptions from Antitrust Laws.** When the Executive certifies that a program is necessary to carry on the war effort, it should be deemed to be a lawful program and therefore not in violation of the antitrust acts. Legislation to this effect would be desirable and indeed necessary if the war effort is not to be hampered.

11. **Legislation to Requisition Property.** It would be necessary for the Government to have authority to requisition property of all kinds. This presents no particularly new angles over the procedure followed in World War II. It would, however, be necessary to reenact that or similar legislation.

12. **Legislation to Control Imports and Exports.** Export control authority exists and indeed is used currently by the Government for controlling certain aspects of the Soviet-conducted cold war, but except for things like narcotics, import controls are non-existent. While these controls can be administered in somewhat indirect fashion as was done in World War II through the control of shipping space (the M-63 order of the War Production Board), it would be simpler to have outright import and export control

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authority in another emergency. Presumably, these might both be
tied in more closely to the chief priority agency than was the
case for exports in the World War II handled by the BEW and the
FEA.

13. **Legislation Authorizing Censorship.** Since censorship comes
very close to the issue of fundamental civil liberties in a de-
mocracy, the degree to which it is exercised should be legisla-
tively established if public opinion is to support it. In World
War I, censorship was exercised under Executive Authority. In
World War II, there was a statutory base under the Government's
exercise of censorship over communications between persons by mail,
telegram, and radio. Unquestionably, a reenactment of such legis-
lation would be imperative.

14. **Legislation for Price and Wage Stabilization.** In World War II
price and wage stabilization were controls exercised during the
course of the war, but not at its outset. Unquestionably, in
World War III both these types of controls would probably need to
be exercised not only at the actual date of a shooting war emer-
gency, but may well be needed if and when very heavy military
procurement gets under way. Otherwise, the precipitant inflation
that would result under such circumstances prior to an official
declaration of war might well be out of hand by that time. Al-
though price and wage incentives are recognized as production ac-
celerators, these are exceptions to the general need to hold down
inflation across the board. Provided prices, wages and profits
are maintained in reasonable balance and in reasonable separate
relationship to the total cost-of-living index, there can be
little argument on a class basis against the necessity for thor-
ough controls, thoroughly integrated, and thoroughly grounded in
legislation.

15. **Legislation for Financing a War.** Wars are financed by taxes and deficit financing. Normal peacetime legislation as amended might cover the rudiments of war financing in these areas early in the war period, except for certain kinds of taxes such as in the excess profits tax and the contract renegotiation authority. In World War II, the excess profits tax was a 95 percent tax at the upper limit and the contract renegotiation authority re-couped for the Government some, if not all, of the other 5 per-cent profits taken in conjunction with individual and corporate income taxes. The point is that in the area of profits stabilization, at least some kind of legislation would be needed.

16. **Legislation Permitting Tax Amortization on New Construction.**
One of the greatest incentives to private construction for war
purposes in World War II was special tax amortization on new con-
struction. The value of this kind of legislative aid to a war

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effort is well established. Its reenactment with pertinent adap-
tation to meet current needs would be desirable if no improvement
on World War II procedure is conceived. Delay in its enactment
exercised a very great slowing down of the initial phases of such
construction in World War II (1940).

17. **Legislation for Manpower Controls.** As has been stated earlier, and will be restated again, voluntary controls on employment were the only kinds used in World Wars I and II. These proved to be highly inadequate. The form such controls should take in another war is a highly controversial matter, but the fact that some controls would be needed is not controversial among those who have studied the subject. Alternatives to a "national service act" are "mandatory employment ceilings on plants" plus "employment only through government employment offices in shortage areas." In any event statutory grounds are needed to handle the manpower problem.

18. **Legislation for the Settlement of Wage Disputes.** In World War II an attempt was made to provide a means of settling labor disputes through the War Labor Board. However, enforcement authority was singularly absent. Such legislation in another emergency should probably provide the Board having jurisdiction over disputes, with the power of injunction.

19. **Legislation for Civilian Defense.** Whether another war would be a home front or a foreign shore war, some statutory authority would be necessary for carrying on a civilian defense program. Whether such a program should be carried on under military or civilian auspices is still somewhat controversial, but that controversy is less important than the necessity for having it authorized.

20. **Lend-Lease Legislation.** It would probably be necessary to provide a legislative base for foreign aid to Allies somewhat along the lines of the Lend-Lease Act of World War II. Such aid supplements the manpower and other resources of the United States by full development of the War potential of allies. It is limited by the limits of U. S. resources and by the comparative effectiveness of its use by allies.

b. Should Stand-By Legislation Be Enacted Now
Or Left "On the Shelf"?

One of the most debatable issues connected with the whole mobili-
zation controversy is whether the stand-by legislation should be enacted
in advance of the emergency or whether it should simply be kept on the
shelf until actually needed. This controversy was precipitated by the

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conclusion of the Task Force Report on National Security of the Hoover Commission: 1/

"The Committee recommends:

(d) That all stand-by legislation necessary to put economic, civilian, industrial, and military mobilization into effect promptly, when and if needed, and to confer all necessary powers, subject to Presidential authority, upon the Chairman of the NSRB in case of critical national emergency or war be completed, cleared, submitted to and acted upon, by Congress immediately on a stand-by basis, to take effect in such manner and at such time as the Congress may determine."

**Arguments for Advance Enactment.** Bernard Baruch, General Eisenhower, Ferdinand Eberstadt, the Hoover Commission, and the Brewster Committee of the 80th Congress, among others, strongly champion the "enactment now" school of thought. They note in their respective ways that in World War II several valuable years elapsed in war itself before some of the necessary stabilization measures could be put on the statute books, and that many things were done throughout the war by executive order that might better have had a legislative basis. Time would be even more precious the next go-round, and how very much would be gained if the button could be pressed that would set in motion decisions, rather than arguments. If the legislation is known in advance, the necessary organizational pattern for administration could be developed. So could the priorities, allocations, and stabilization orders. Industry as well as government could set its course for war. Those who favor enactment in advance believe that Congress would probably be stiffer in its devotion to the national interest in war prior to an emergency, knowing that the laws would not be used until later than it would be if the Members had to face their constituents the day after the laws were to come into effect. Or they urge that Congress might be bombed out of existence before war was declared; or that confusion might delay.

**Arguments for Legislation "On the Shelf."** On the other hand, it is said that no one can anticipate war needs very far in advance, and that mobilization theories made in a "pink cloud" peacetime atmosphere could never be a satisfactory "blueprint" in a red hot war. To begin with, a Congress that had leisure enough to worry about price controls, for example, would haggle and haggle until the compromise would be worse than no statute at all; whereas, if the full impact of war were felt, Congress would be willing to legislate sufficiently stiff controls. Again, a Congress of one predominant political complexion might enact legislation that would be anathema to a future Congress of

1/ Commission on Organization of the Executive Branch of the Government, Task Force Report on National Security, Appendix G, January 1949, pp. 20-21.

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a different political composition. Furthermore, it is argued that a President might find the idea tempting of using some of the emergency powers, if they were too handy. Moreover, industry might have plenty of time for thinking up loopholes in the controls if it knew in advance what the controls would be--particularly in the fiscal field. It is anticipated in some quarters that full time legal services might even be employed by industry in advance of any emergency for the sole purpose of making the most out of the legislation.

**Current Status of Stand-By Legislation for a War Emergency.** The NSRB does have stand-by legislation in draft covering items 1 to 19 discussed in this section, which its legal staff is constantly refining with the assistance and the scrutiny of government-professional legal advisory committees. It is applying certain criteria to each of the respective pieces of legislation it believes would be needed in an emergency to determine whether it would be in the national interest to have that particular piece of legislation enacted in advance. Illustrative of the criteria are the following:

1. Is the proposed Executive authority essential to mobilization?

2. Is it important that the authority exist within a matter of days or weeks after the outbreak of hostilities?

3. Is the statutory language adequate to the needs of the foreseeable economic, military, and psychological situations?

4. Is the power granted one which, for historical or other reasons, will be recognized by the people of the country as a mobilization essential?

5. Would the authority sought be so distasteful to the public generally or to special groups as to make it improbable that it could be enacted in usable form prior to an actual emergency?

6. Would publication of the legislation open the door to the adoption of practices and procedures substantially impairing its effectiveness?

In the last analysis, of course, the President will have to make the executive department's policy decision as to whether to ask the Congress for advance enactment, or whether simply to hold the measures in the top drawer. Congress may, of course, decide to enact any legislation it chooses on its own initiative. The President would have two alternatives. He could ask for broad authority to act in an emergency. This he has so far been denied in the current legislative debate on

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b. Civilian Participation in Direct Support of Military
Operations

(1) Aircraft observer systems

(2) Auxiliary anti-aircraft activities

(3) Auxiliary patrols for military purposes

2. Advance Measures for Minimizing the Effects of Enemy Attack

a. Fire prevention measures

b. Protective shelter and construction

c. Measures to prevent mass hysteria, panic

d. Protective concealment

e. Prior evaluation of personnel

f. Police protection measures against panic, looting, riots, etc.

g. Dispersion and relocation of facilities and personnel

h. Preventive medical measures

i. Operation of detection instruments and services

j. Stockpiling of supplies and equipment

3. Measures to Alleviate, Control, and Repair Damages After
Attack

a. Medical and health services

b. Decontamination

c. Fire fighting

d. Rescue and evacuation

e. Feeding, clothing and sheltering

f. Restoration of facilities and services

g. Bomb reconnaissance and disposal

h. Demolition

i. Removal of debris and salvage

j. Mutual Aid

k. Martial Law

The two areas of civilian defense that are most controversial so far as public attitudes are concerned, and which, therefore, warrant special consideration are

1. Dispersion and Relocation of facilities and personnel; and

2. The proposed establishment of active defense organizations by the states for training purposes, prepared and equipped to meet the problems of enemy attack, and to be ready against any weapon that an enemy could use.

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(1) Plant Dispersion and Relocation.

The National Security Act of 1947 takes cognizance of the vulner-
ability of the Nation's concentrated industrial and population patterns
and instructs the NSRB to consider "the strategic relocation of indus-
tries, services, government and economic activities, the continuous op-
eration of which is essential to the Nation's security."

This national policy so widely accepted as to have a legislative
base reflects the hazards of an atomic age, and the over-concentration of
an industrial technology. The answer to both has been government encour-
agement, but voluntary private implementation, of deconcentration of in-
dustry and deurbanization of population which over a period of time are
alleged to yield, if not absolute security, at least partial industrial
protection, and in any event better working and living conditions. The
term "dispersion" refers to the short-term rearrangement of certain
highly strategic industries for urgent security reasons. The term "re-
location" refers to the normal rearrangement over a long period of time
of plant expansions or replacements.

The assumption that safety lies in space is based on the calculation
that the production problem involved in manufacturing atom bombs or
other superexplosives, makes it unlikely that a potential enemy could
afford to expend them on cities less than 50,000 in population or on con-
gested industrial areas of less than five square miles. It is believed
that locations less than three miles from potential target centers con-
stitute serious vulnerability. ¹/ The Government has pointed out the de-
sirability of an insulation of at least twelve miles of space from
strategic targets known to be such things as oil refineries, oil storage
facilities, paint and chemical plants, power plants, water systems, key
establishments of the Armed Forces, dams, bridges, major air bases and
air supply centers, railway, water, and other transporation facilities,
truck plants, steel mills, aluminum plants, shipyards, aircraft factories
and the like. Despite the obvious advantages of deconcentration of in-
dustry and deurbanization of population, sociological and political dis-
advantages are bound to arise from any large-scale effort to disperse or
to go underground. Yet atomic warfare might force more radical decisions
if it were considered a strong probability. But at such time as this
conviction carried weight enough to get action, probably the time would
have run out for such a massive and time consuming and expensive shift.

1/ For an official explanation of this policy, see "National Security Factors in Industrial Location," National Security Resources Board, Washington, D. C., September 1948. This was, of course, written before the H-bomb appears to have entered into the spatial calculation. The question of radius may have to be reconsidered. But, if the figure of a fifty mile diameter of destruction, which has been seriously put out, has any validity, then the relocation program has been perhaps not implemented on the basis suggested in 1948. This shows some of the difficulties of long-range planning in such a rapidly shifting world of military techniques.

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**Arguments for Dispersion and Relocation.** Those who favor either the immediate dispersion of certain strategic industries, or the long-term relocation of industrial expansion and replacements, do so for two major reasons--national security and national welfare.

The now familiar cliché that "there is no known military defense against the atomic bomb itself except space" drives home the meaning of vulnerability. While defenses against the carriers of superexplosives are in readiness, defenses against explosions themselves are not. Underground shelters are of at least limited use. Massive concrete bunkers may be of some protection, if sealed off from atomic contamination as well as other after-blast effects. But to be really safe in protecting vital industries, the Nation must resort to space as a weapon. It is argued that the concentration of 80 percent of the aircraft industry in Seattle, Los Angeles, and Long Island, for example, is a glaring example of strategic vulnerability which it is in the national interest to deconcentrate as soon as possible.

Living and working conditions are said to be superior outside the huge metropolitan concentrations. Modern production is said to be better in single belt line operations on a single floor, stretched out in space. Dependence on skilled labor, heretofore considered relatively immobile, is said to become less with improvement in semi-automatic machine tools, and simplified manufacturing processes. The cause of international peace is said to be furthered if enemies can be deterred from aggression because the economic potential is so gridded over the vast expanse of the United States that it would not be possible to cripple productive capacity.

The following quotation from Hanson W. Baldwin (Foreign Affairs, April 1950) will serve to summarize the critical attitude toward the Administration's present policy:

"Although our cities and industries are logical targets for an enemy's atomic bombs, we have made little or no progress toward their defense. Complete dispersion of cities is impossible, for both economic and political reasons. But the Strategic Bombing Survey, with the ruins of Hiroshima before the eyes of its authors, outlined practical measures which could reduce the vulnerability of our large cities. A revision of city building codes to require earthquake-type construction and to set limitations on the height of buildings would reduce damage and casualties. Few communities in the United States have made such revisions. Shelters provided effective protection for people in Japan. Not even experimental shelters have been constructed in the United States, however, and new subterranean structures - subways, sub-basements, cellars, etc. - have been built without thought for the new hazards of the present age.

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"The most elementary care for public safety among those responsible for city planning would foster a gradual process of dispersion.

"Green belts" should be provided in the suburbs of growing towns and cities; industrial areas should be more clearly marked off from residential areas; hospitals and police and fire facilities should be decentralized. Above all, the density of population in the central sections of great cities should be reduced....

"Not even a start has been made - except on paper - toward most of these perfectly practicable and realizable goals. Conditions which would be very dangerous in the event of sudden disaster not merely are not being rectified; they are growing progressively worse. New York, for example, is busy creating modern housing and new office structures which greatly increase the density of population.

"The same must be said of the dispersion of American industrial facilities. Dispersion is not impossible with wise guidance, but it has progressed like the frog trying to get out of the well - one jump up and two down. A single illustration will be sufficient. The Chance Vought Aircraft Division of United Aircraft Corporation, which makes important Navy fighter planes, moved, with the encouragement of the Government, from crowded and vulnerable Stratford, near Bridgeport, Connecticut, to Dallas, Texas. In the recent so-called 'recession,' Bridgeport was declared an area of acute unemployment, and backed by the state and federal governments the city has been trying (with some success) to persuade new industries to settle there. These include another aircraft company and an important rocket-engine company. Recent attempts to move the bulk of Boeing's aircraft production from Seattle, Washington, to Wichita, Kansas, aroused a political furor."¹

**Arguments Against Dispersion and Relocation.** Those who oppose the idea of strategic dispersion and economic relocation do so on political, economic, financial and psychological grounds. Localities having thriving industries naturally object to pressures which will deprive them of the political advantages thereby entailed. Economically, they fear the depression of "ghost towns." Psychologically, they allege that this is "war scare" propaganda--undemocratic in inception. They argue that "static defenses" are valid alternatives to dispersion. Moreover, they allege that in a highly industrialized age, all areas are vulnerable. They contend that it is economically not feasible to pull up stakes where there are readily available raw materials, labor, fuel, transportation facilities, sub-contractors, and distribution outlets--in order to put down roots where these necessary accoutrements are scarce. They argue that the government carries on conflicting policies so that it is itself of two minds. They point to the Federal Trade Commission decision, supported

1/

"Strategy for Two Atomic Worlds," pp. 387-388.

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by the United States Supreme Court, making illegal the "basing point"
system which has resulted in concentrating the related segments of
industry on the one hand, while on the other hand that same government
advocates their deconcentration. Repeal of the "basing point" interpre-
tation by Congress for defense industries may solve this difficulty. But
even if management and government see eye-to-eye on deconcentration, this
view believes that labor has a different kind of dynamics--the human re-
luctance to be uprooted from family, friends, and familiar environment.
Moreover, they point out that normal pressures tend to decentralize pop-
ulation and industry in any event, and that the government steps out of
turn in trying to accelerate the process, in a kind of "back to the farm"
exhortation which is unpalatable to rural and urban dwellers alike.

An estimate of the cost of a true de-urbanization program has been
presented by Hanson W. Baldwin:¹

"There are some 200 cities in the United States with popula-
tions of more than 50,000 persons. A modest 'questimate' of the
cost of decentralizing these urban areas, and of breaking them up
into dispersed towns of no more than 50,000 persons each, is about
$300,000,000,000. Such 'de-urbanization' would mean, of course,
a basic change in our entire social, economic and political system:
the enormous implications of it stagger the imagination. To be
executed effectively such a plan would require the endowment of
government with powers of compulsion so enormous that the 'garrison
state' would no longer be a figure of speech. The political, eco-
nomic and psychological problems of such a measure are so major that
forced and compulsory de-urbanization can safely be termed 'impos-
sible,' at least in peacetime."

In short, the opponents claim that the cure is worse than the
disease.

Current Status of Plant Dispersion and Plant Relocation. In
carrying out its legislative responsibilities, the NSRB has followed
the general rule of "economic feasibility" in the matter of dispersion
and relocation, and has placed its major emphasis on the long-term prob-
lem rather than on the short-term expediency. It has kept in the fore-
front of its considerations the Nation's overall policy of building a
vigorous and expanding national economy. It has not attempted to dictate
to industry and labor on the soundness of deconcentration and de-urban-
ization within a given geographic area, not between geographic areas--
except in the case of concentrated highly strategic production. This
policy of regional "in-shifting" was clearly spelled out in a statement
by John R. Steelman, acting chairman, NSRB, on October 7, 1949, which
reads:

1/ Hanson W. Baldwin, *The Price of Power*, Harper and Bros., 1947, p. 253.

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"The question has been raised whether the Pacific Coast or other parts of the country are being excluded from Government contracts because these areas are considered to be less secure from a military point of view.

"This is not the case. There is no area of the country which has been determined by the Federal Government to be less secure for defense production than other areas. It has been determined that the military security of industry and the public depends in part upon the proper dispersion of physical facilities within a geographic area, but not upon the geographic areas as such. If a situation arises where we have all our production in one area, as was the case in heavy bombers, dispersion obviously must be considered."

Specifically, the Administration has followed the principles enumerated below:

1. Above ground dispersion of product, plant, and population in strategic industries is to be encouraged by the Department of Defense where overwhelming security considerations are present. Underground installations are considered economically justifiable only in the case of a few highly strategic facilities.

2. Gradual relocation of concentrated industries is to be encouraged by the government as a whole when obsolescence or expansion would be required in any event over a period of years, not only for reasons of national security, but also for reasons of national health and welfare.

3. Plans will be made by the government for the relocation of government activities, records, and personnel in the event of another emergency, particularly as the Nation's Capital might be considered a desirable target by an enemy.

4. Except in the case of government-owned facilities, the government will rely on voluntary relocation and dispersion by industry and labor.

(2) Civil Defense--Active Versus Inactive Local Organizations.

A report to the Office of the Secretary of Defense by Russell J. Hopley in June 1948, entitled "Civil Defense for National Security" alleged that the "missing link" in the American defense structure was civil

1. Official civil defense planning for the District of Columbia was publicly set in motion by a letter from Gordon B. Young, Brigadier General, U. S. Army, Engineer Commissioner to the D. C. Board of Commissioners to the D. C. Board of Commissioners, February 10, 1950.

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defense. It touched off a controversy of major proportions by advocating a peacetime organization of new governmental units superimposed upon existing state government units, "trained, prepared and equipped in advance to meet the problem of enemy attack and to be ready against any weapon that an enemy may use."

**Arguments for the Activation of Local Defense Units During Peacetime.**
Arguments supporting the immediate activation of local civil defense units run as follows. England's civil defense organization trained for four years in advance of its use, and this accounted for much of the success of Britain's home defense at a crucial time in her history. Japan, on the other hand, made no such preparations on the assumption that they would not be needed. As a result, many died in Tokyo and other cities even before Hiroshima and Nagasaki who could have been saved. Germany was only partly prepared on her home front civilian defenses. Even the minimum preparations made by the United States in World War II were useful. They reduced the number of crimes during blackouts; made possible auxiliary police and fire protection when the ranks of those forces were depleted by the draft; and enhanced the public sense of responsibility in the prevention of forest fires. Many other useful tasks, such as first-aid, were performed by the ten million people who were enrolled in Civil Defense in World War II.

But the potential hazards of a Third World War do not permit the minimum, last minute approach to civil defense that was possible in World War II. Only advance training in the disciplines of modern detection, in spreading alarms, in minimizing radioactivity following bomb damage, in understanding protections against contamination of food, water, and pestilence, mass evacuation techniques, large-scale incendiary fire controls, can meet the need.

Finally, the advance training of some 15,000,000 civilians would provide a ready corps of relief workers for peacetime as well as wartime disasters. It would serve to educate the general public in things useful in the normal course of family life, build a mutual-aid psychology, establish public confidence against panic reactions, extend an appreciation of government problems in general to millions of people who would otherwise not have an opportunity to participate in government, and provide the added moral armament that comes through the assumption of voluntary disciplines.

Again a quotation from Hanson W. Baldwin's *Foreign Affairs* article (previously cited) for April 1950 will serve as an example of the critical (B) attitude:

"Most important, there has been little progress - again except on paper - toward the development of an adequate civil defense program. Civilian defense measures might be said to have saved Britain during the blitz of the last war, and certainly they minimized casualties. If an atomic war should occur, the fact that adequate civilian defense had been organized in time might mean the difference between ruin and survival, victory and defeat.

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"In New York State, the Special Committee to Study the Military Law has issued a report (the outlines of which have been approved by Governor Dewey) reproaching the federal government for the administrative red-tape and procrastination that have snarled civil defense planning. It pointed out that some 27 different federal agencies participate in one way or another in civil defense planning but that there has been no real centralized direction or coordination. The report proposed the development of an integrated and well-rounded civil defense plan for New York State, but emphasized that impetus and direction to state efforts must come from Washington.

"A thorough study of the problems of civilian defense was made by direction of the late Secretary of Defense Forrestal. The program which resulted, the so-called Hopley plan, though open to criticism in several particulars, was a master blueprint for a reasonable degree of civilian security. Yet virtually none of the measures it recommended has been accomplished. Its major recommendation was for a centralized civilian defense authority in Washington. This has been emasculated by President Truman, who, on the recommendation of Dr. John Steelman, ordered the various functions of civilian defense spread around among a number of different government agencies."¹

*Arguments Against the Peacetime Activiation of Local Defense Units.* The recommendations of the "Hopley Report" on advance activation of local civil defense units have not been adopted. Arguments against this form of "readiness measure" are geared primarily to a congenital national attitude that is predisposed against universal civil defense training, even in a voluntary form no less than against universal military training, and to the tremendous financial burden that would have to be assumed.

It is argued that much legislation on the part of the Federal, state, and local governments would need to be passed before such a defense program could function; that its estimated cost, on a recurrent as well as on an initial basis, no matter how low, would add sizeable burdens to already overburdened government budgets; that the people who most ought to be trained can ill-afford the time in the competitive peacetime world unless the emergency were to be more overtly acute; that interest in the program could not be sustained unless it were constantly put to use on peacetime relief projects; that intensive, accelerated training under emergency conditions is far more effective, provided the basic plans have been thoroughly and soundly conceived, and that in the last analysis the rapid expansion of existing welfare agencies could always be relied upon. Finally, the democratic attitude of mind is said to rebel against the further extension of military concepts into civilian life. The public allegedly prefers not to be continually exposed to the horrors of super-explosives, chemical, and bacteriological warfare. This is a consideration aimed at lessening the scare-effects of so much horror talk about atomic warfare, H-bombs, etc.

¹/ Hanson W. Baldwin, *op. cit.*, pp. 388-389.

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**Current Status of Civil Defense Planning.** A Presidential decision, contained in a memorandum of March 3, 1949, to the chairman of NSRB, reads, "Under present conditions the essential need of the Federal Government in the area of civil defense is peacetime planning and preparation for civil defense in the event of war, rather than operation of a full-scale civil defense program." Thus, the Federal Government will continue its civil defense activities on a planning and preparation rather than implementation basis. It will furnish information, guidance, and assistance to the states and through them to the local communities. It will coordinate its plans with its continental neighbors, particularly Canada. It will try to reduce the need for the use of resources for civilian protection so as to increase the capacity for offense. It will continue to encourage state and local governments to enact legislation creating civil defense planning agencies. Inventories of medical and related professional personnel, health supplies and facilities are in process. Studies are being made of how housing and community facilities problems were met in the bombed areas of England and Germany. Nucleus training programs in the radiological aspects of atomic energy, in the detection and measurement of radiation, in biological, chemical, and conventional warfare will be carried on in limited fashion by appropriate agencies of the Federal Government in an effort to interest professional and trade organizations in the rudiments of civil defense.¹/

### b. The Role of Small Business in Mobilization Planning.

Congressional interest in the protection and promotion of small business enterprise is well known, and, indeed, reflects a national attitude as is exemplified by the following clause in the Armed Services Procurement Act of 1947.²/

"It is the declared policy of the Congress that a fair proportion of the total purchases and contracts for supplies and services for the Government shall be placed with small business concerns."

The law also requires, with 17 exceptions, that contract awards be made on the basis of formal advertising and competitive bidding, where small business does have a better opportunity to compete--rather than on the basis of contract negotiations where small business is somewhat at a disadvantage.

That the Defense Department itself believes that it is actually taking into account the needs of small business is indicated in the Second Report of the Secretary of Defense for the Fiscal Year 1949:³/

1/ The Atomic Energy Commission and the Department of Defense, at the request of the NSRB, have published certain educational pamphlets of importance in this field--viz., "Damage From Atomic Explosion and Design of Protective Structures," 1950, and "Medical Aspects of Atomic Weapons," 1949.

2/ P.L. 415, 80th Congress, Sec. 2 (b).

3/ pp. 86-87.

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"A small business policy, together with a program and related projects, was established by the Munitions Board. This policy re-states and amplifies many of the practices of the departments in their efforts to assist small business, and points up the objectives of the Military Establishment to help small business, wherever practicable, to participate in the military supply program."

Nevertheless, the fact that 70 percent of the military procurement in fiscal 1949 was made on the basis of *negotiation* rather than on the basis of *advertising*, and the fact that only 27.2 percent of the reported value of military procurement during that year came from small business firms employing less than 500 persons, has aroused public and congressional interest again in the proper role of small business in current procurement, therefore, in a mobilization planning effort. While minor issues concern open bidding as opposed to contract negotiation in procurement and prime contracting to small business versus sub-contracting to small business, the major issue is small business versus large business on efficiency in war production.

*Arguments for Maximizing the Role of Small Business in a War Effort.* It is maintained that the American way of life, indeed, the very rudiments of democracy itself, are to be found in the tradition of healthy, competitive, small and independent business enterprise. In the event of a war, it is alleged that the broader the base of the production machine, the less vulnerable will that effort be. To rely exclusively on the highly concentrated, few in number, major industries which are bound to be targets for enemy action, would be to prejudice the potential of the war effort. The diversity of small plants makes possible more flexible procurement and production; saves the necessity for expansion of facilities at larger plants; takes advantage of available manpower in non-congested areas; reduces the strain on transportation, housing and municipal services; and utilizes non-migratory managerial, supervisory, and technical personnel.

Moreover, the real difficulties involved in maximizing the role of small business are said to stem from faults in the procurement system rather than from the deficiencies of small business itself. Then, too, it is argued, that there is a real potential for small business in the area of *essential civilian production*.

In World War II, it is charged, small business was not used enough. Large plants were made even larger while small plants disappeared through neglect. Production bottlenecks and population congestion pyramided needlessly and placed unnecessary strain on the home front. The whole trend is said to have left the Nation greatly overconcentrated economically in the postwar era, from which it has never recovered--to the great detriment of the American way of life. The Smaller War Plants Corporation revealed the facts to the Senate Small Business Committee¹ that

1/ *Economic Concentration and World War II, Report of the Smaller War Plants Corporation to the Special Committee to Study Problems of American Small Business, United States Senate, 79th Congress, 2d Session, Senate Committee Print No. 6, Washington: Government Printing Office, 1946, pp. 32-33.*

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large firms produced 70 percent of the total war output, whereas, plants employing 500 workers or less obtained less than 30 percent of the total war production, in all prime and subcontracts, whereas, this same business group had produced about 62 percent of all manufacturing values in 1939. Since the wartime ratio of military procurement has continued throughout the postwar era, it is argued that a further concentration of procurement in the event of another national emergency would literally see the extinction of the free enterprise system in the form of competitive, diverse small business.

**Arguments for Not Exaggerating the Role of Small Business in a War Effort.** Those who tend to minimize the role of small business in a war effort do so on the assumption of the greater speed and efficiency of production that is alleged to come from the concentration of procurement contracts. They make the argument of *convenience* in obtaining large quantities of material from a few large corporations, with a minimum of legal, and other red tape. They claim that the large companies who have been subcontracting for years have weeded out the inefficient smaller firms as the government itself could never hope to do in the time at its disposal.

Efficient small business is a necessary supplement, they claim, to big business. Big business encourages this sort of sub-contracting, of necessity and favors the growth of the efficient little fellow. Indeed, in war, they allege, big business can take the load of government contracts and of keeping up with red tape and regulations off the backs of its smaller suppliers by serving them more efficiently than any agency centered in Washington. It can help mediate war controls to the little man.

They allege that greater distribution of contracts produces less, not more, goods; uses manpower inefficiently; multiplies administrative difficulties in shopping for parts and components; and complicates procurement beyond bounds of reason. While they admit that the "trickle-down" method of subcontracting may delay production, they claim that the "trickle-in" method of awarding primes to small units would be even slower. It is argued that if procurement contracts are dispersed too widely, deliveries will be uncertain, quality will not be uniform, and the administrative difficulties in reporting, accounting, and coordinating will be infinitely increased. Moreover, bitter partisan arguments are alleged to develop in the localities over the awarding of government contracts, and valuable time is said to be lost in contested awards. Furthermore, the very difficulty of reaching small business and the expense of advertising in mass media such as newspapers is prohibitive in cost to the taxpayer if pressed too far.

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Again, small manufacturers cannot afford the time or money to travel frequently to Washington or to military field offices. They are baffled by the complexity of the Government. They cannot afford the expense of elaborate accounting procedures. In short, it is alleged that small business does not have the know-how, the integrated machinery, nor the engineering ability to handle prime contracts for complicated war mechanisms. Moreover, because it is not consulted in the developmental stage of the determination of Federal specifications as is big business, the smaller plant operators are quite unfamiliar with the required characteristics until bidding time, so are at a great disadvantage even in bidding, to say nothing of producing commodities purchased by the Government on federal specifications. On the same line it is urged that the difficulty of obtaining standardization as to design, characteristics and interchangeability of component units and parts is greater for small business.

The opposition to small business in war argues that in time of peace small business does have an important, respectable role but that in time of war the Nation can ill afford the role of "wet nurse" to any segment of the economy. Moreover, the very cost of the administrative problem involved in carrying forward a small business program is alleged to be self-defeating.

In summary, it is argued that small business should be encouraged to make the best contribution to the war effort that is consistent with the national interest in the consumption of labor, materials, equipment, and the relative cost of production. Civilian supply, which must remain an important item in war, can be left more largely to small business, on this analysis.

**Current Status of the Controversy over the Proper Role for Small Business in Mobilization Planning.** The President's Budget Message for Fiscal 1951 sets forth the Administration's attitude with respect to the future of small business:

> "Since the war we have substantially strengthened our anti-monopoly program, but continued improvement is essential. I have asked the Secretary of Commerce, in consultation with the Attorney General, the Federal Trade Commission, and the Council of Economic Advisers, to develop recommendations for increasing the effectiveness of this program. A major aspect of this study will be the development of methods to facilitate establishment of small businesses, to promote their stability and growth, and to remove obstacles to their survival as independent competitive enterprises."

The NSRB is professedly neither pro big business nor pro small business in its mobilization planning efforts. It is endeavoring to determine the facts with respect to the actual contribution that small business can be expected to make to another war effort. It is developing a small business program with the aid of an interagency government

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committee and a Small Business industry task committee. It has cooperated with the Department of Defense in the establishment of a Central Military Procurement Information Center which will facilitate the solution to the problem of small business contacts with the Government.

The issue is of such political and economic significance that the creation of some recognized sector of war mobilization, either as part of an Office of Civilian Supply along the lines set up in Canada in World War II, or separately as in the smaller War Plants Corporation may be flanked as in World War II by congressional committees. The question of the organizational relation of any such special organizations to the overall agencies and committees charged with carrying on and scrutinizing war mobilization becomes a matter of great importance.

### c. Manpower Controls

The purpose of any labor mobilization program is the protection of the public interest--as that is determined by the predominant political philosophy. The protection of the private interest in a democratic ideology is at some point always in the public interest. But if at any time the two should come into conflict, it is axiomatic that the public rather than the private interest must prevail. Axiomatic, too, is the assumption that in a democracy, compulsory service--either military or civilian--is out of character, an alien philosophy, to be adopted as an evil necessity only on rare occasions. However, if three times in one generation a democracy resorts to compulsory service willingly or reluctantly, it is to be wondered whether the accommodation can be considered a temporary phenomenon, given a world in which transport and communications facilities bring the clash of unsympathetic political systems to the point where democracy has to depend for its defense on might rather than on persuasion. But in an age when individual liberties are held in such high esteem by a large part of the human race, the universal soldier, conscripted both for and against the very liberties for which he dies, becomes the anachronistic answer to his own and his Nation's security. In time of war or immediate threat of war, there is no popular doubt about the necessity for conscripting individuals for military duty. But doubt has been expressed in many quarters as to whether, in the absence of an immediate threat--no matter how real or how permanent the threat--a peacetime draft of manpower is warranted. The question has been raised by a large sector of American opinion as to whether a wartime draft of civilian labor on the home front would be justified or, indeed, necessary. Between these two issues lies the main controversy over Universal Military Training.

In time of war, "national attitudes" tend to give way to the needs of the hour, but the needs of the hour must be convincing, indeed, to permit serious consideration of such controls as the conscription of civilian labor for production behind the fighting front.

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In time of peace, "national attitudes" often prevail, even over se-
curity imperatives, self-defeating though such democratic prerogatives
could be.

The sections immediately following attempt to present the pro's and
con's of compulsory service, either on a <u>Selective</u> basis for military
duty, or on a <u>National</u> basis for civilian as well as military duty.

(1) National Selective Service (Peacetime Draft Legislation).

The first task of any labor mobilization program, once it is agreed
that there must be one, is to divide the available manpower between mili-
tary and civilian requirements.

Public Law 759, approved June 24, 1948, more popularly known as the "Selective Service Act of 1948," recognized that there might be a need to divide available manpower, and provided for the compulsory registration of males at the age of 18; for 21 months of their service in the armed forces between the ages of 19 and 25; for the maintenance of a Selective Service agency; for the possibility of mandatory controls over industry if voluntary controls should fail; and for Presidential determination of when the peacetime draft should be used. This law, in operation for a period of three years, is due to expire on June 24, 1950, unless renewed. This is a major issue before Congress.

The "peacetime" draft has been the shotgun behind the door, so to speak--the weapon to be used if voluntary enlistments did not yield the desired results. Actually, voluntary enlistments (with the statute on the books for use at need) have met the quotas of the Armed Services in recent months; and what is more, the quotas themselves are being reduced. Nevertheless, in view of the imminence of the expiration of this law, the Administration has requested its reenactment for a period of three more years,¹/₇ as an important "readiness measure" for national security.

Secretary of Defense Johnson told the House Armed Services Committee on January 20, 1950, that "The extension of the Selective Service Act will cost $4 million per year, and that the maintenance of the records that are required to be kept by the Selective Service System $6.7 millions more per year."

The congressional debate over extension has become involved with a
philosophical discussion as to whether it is or is not democratic to have
such a law lying around in time of peace; with the controversy over civil
rights, a rider to the proposed extension law having been offered to in-
sure no discrimination on account of color, race or religion; on whether

1/ S. 2861, January 13, 1950, and H.R. 6826, January 17, 1950, "A Bill to Extend the Selective Service Act of 1948 (62 Stat. 604)."

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the Congress or the President should have the right to call up the draft;
and finally, on whether Universal Military Training would not be a better
substitute.

Arguments for Selective Service (Peacetime Draft Legislation). Argu-
ments in favor of the peacetime draft law on the statute books in stand-by
condition relate to its contribution to the national security in time of
crisis. It is argued that since the crisis of "cold war" that might get
"hot" is apparently to last indefinitely so the need for the shotgun be-
hind the door becomes indefinite. If military requirements were suddenly
to be increased, it would not be possible to meet them without the stand-
by legislation. It cannot be improvised. The machinery has to be kept
oiled, so to speak, on a stand-by basis. Even in peace, voluntary en-
listments are augmented by the very existence of the compulsory law.
Moreover, it is said that since public funds are appropriated for the weap-
ons of war--planes, ships, tanks--money should be appropriated for the
maintenance of manpower to run them. This is alleged to be insurance,
with cheap premiums, that the Nation can ill afford to abandon. Indeed,
General Bradley testified that the $10.5 millions involved would buy
"more actual preparedness, dollar for dollar, than from any like amount
we might spend in any other way."¹/ He continued by saying that the
mere presence of the draft act on the books probably "was worth several
divisions in added strength around the council table. . . . In fact, I
have been informed that our passage of the Selective Service Act two
years ago had a more salutary effect on the Russians than almost any-
thing we did."

Finally, it is said that so long as we serve this clear notice of
intent on would-be aggressors that we mean security for our way of life
at all costs, not just peace at any price, they will be deterred from
risking an aggressive war and our potential allies will be reassured.
Should we fail to renew it, it would be a blow to the spirit of the North
Atlantic Pact, other member nations of which are also maintaining such a
law against considerable political opposition. Failure to keep such
machinery would be a serious blow to the morale of the West.

An important statement on behalf of extension was made by General
Lewis B. Hershey, Director of Selective Service, before the Armed Serv-
ices Committee of the House of Representatives, selected excerpts of
which are herewith given: 2/

"The presence of a Selective Service Act not only is one of
the many factors which go to preserve the peace, but constitutes an

1/ Hearings on H.R. 6826, House Armed Services Committee, January 20, 1950.

2/ *Congressional Record*, Appendix January 26, 1950, A-567.

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insurance policy which contains many other benefits. In cost it is less
than one-tenth of 1 percent of the Federal budget for survival. Like
insurance it must be bought before the time when its benefits become due.
Once that day arrives the favorable insurability has been lost. It is
only in peace that we may buy at minimum rates the protection which may
well be the difference between peace and war."

"It is no small task to register and classify the 50,000,000 of our manpower as we did in World War II. It requires a machine which covers the entire United States. It requires organization; it requires training; it requires teamwork; it requires a morale which comes with a feeling of esprit de corps for an organization in which all of its members can take a well-deserved pride. Such an organization is not built overnight. The Selective Service Act of 1940, which was passed in September, did not produce men at the rate of 400,000 a month until October of 1942. Fortunately, it was not called upon for this rate of production earlier.

"It will remain controversial as to the date that this produc-
tion level could have been achieved by the Selective Service System or-
ganized under the Act of 1940. It is my considered judgment, based upon
every inquiry that I can make of our historical experience, that when we
have said that 4 to 6 months would be required to organize and train a
system, imbue it with its objectives and its ideals, while at the same
time registering several millions of people and running them through this
recently organized system up to this point where it was capable of pro-
ducing even 300,000 a month, this estimate I believe to be in error on
the side of optimism, rather than the contrary. I fear that we should
inevitably find ourselves consuming at least a year to reach the produc-
tion level of 500,000. There is no experience that we have had in this
Nation that could lead us to any other conclusion.

"It is one of the strange experiences of life that we pay the premium on our life insurance when we live, and certainly we would not be wise to criticize our insurance policy at the end of 2 years from its purchase date because we had spent our premium then and still had not collected because we are still alive. Protection we pay for, and one of the commodities bought is the absence of war. It is the same with the fire department or the police department. Do we ask as we pay each week or each month the individual fireman whether or not he has attended a fire that particular pay period, and then abolish his job, close up the fire house because it has not been used?

"We are content with the policemen when there is no crime.
How ridiculous it would be to ask each policeman on stated occasions
whether or not he had shot a citizen during that period, and if his an-
swer was "No" ask him to turn in his badge and get his pay at the office,
because obviously if he was killing no one, there was no need for his
services.

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"Selective service, like the Armed Forces, performs its duty just as much when it succeeds without its use, as when it is forced to rescue a war that is already in existence, a war generated by circumstances before the Selective Service could influence those circumstances."

**Arguments Against the Extension of the Selective Service (Peacetime Draft) Legislation.** Arguments against the extension of the Selective Service Legislation are legion, and are singularly unrelated to a common central theme. For example, it is argued that it is undemocratic to have a statute like this on the books in a peacetime democracy; that the law has been on the books for two years and is not now being used; that the administration of the law costs money and since this is an economy year, here is one service that could be dispensed with; that this form of service is at the expense of the Reserve Corps; that American boys prefer to volunteer anyway. It should enforce civil rights for persons of different race, religion, and as written it does not do so. Again, it is maintained that the President should not have the power to declare the emergency that would call up conscription--that is a right which Congress should exercise.

Other arguments in opposition to the extension of the service are summarized in a "Memorandum On National Legislation of Interest to Religious Groups," issued by the Friends Committee on National Legislation.¹

"The amount (being spent on the Selective Service System) is half of all that it is proposed that the United States should spend on the United Nations, six U.N. specialized agencies, and <u>sixteen other international</u> organizations combined.

"Canada and Iceland do not have peacetime conscription. England's conscription is for eighteen months and France, one year. Only Portugal of the Atlantic Pact Nations requires 22 months of military service, or longer than the 21 months liability for men inducted under the 1948 Selective Service Act. . . . The 1948 Selective Service Act gave the President broad powers over industry and over the use of steel.

"Some of the members of the Committee (House Armed Services Committee) have been proposing a stand-by system, whereby registration and classification would continue, but providing that only Congress could order induction. About the only difference from the present would be transferring authority for induction from the Army to the Congress. It would still retain the principles of peacetime conscription so out of character with American traditions, maintain a set-up for continuing propaganda for conscription in all states, continue the unsettling effect on high schools, colleges, and employment because of its psychological effect on men of draft age, retard serious efforts for disarmament, and waste the taxpayers' money. . . . A great many of those conscientious objectors convicted under the wartime Selective Service system for violation because of conscientious reasons still have not had their civil

1/ Washington Letter No. 71, February 1, 1950, issued by the Friends Committee on National Legislation.

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rights restored. . . . The issues posed for conscientious objectors in the compulsory registration provisions of the postwar system remain a direct challenge to religious freedom."

## Current Status of Selective Service (Peacetime Draft) Legislation.

The President's position with respect to the extension of the draft and universal military training is set forth as follows in the Budget Message for Fiscal 1951:

"Extension of authority for selective service, for which I plan to submit legislation, is vital as a positive demonstration of our resolve to maintain the strength of the free world. With it we will retain our ability to expand our armed forces rapidly in an emergency and will also insure adequate replacements to maintain the required strength of our active forces.

"The extension of selective service authority will provide a temporary solution to the military manpower problem of the active forces, but will leave unsolved the problem of trained manpower for our reserve forces. I point out again the necessity of a program of universal training if we are to provide on a continuing basis sufficient numbers of men for the reserve forces, adequately trained to use effectively the increasingly complex machines of war."

"The total personnel assigned to combat forces will be the greatest since the completion of the demobilization following World War II, although the amounts recommended for 1951 will provide about 3 percent fewer officers, and enlisted personnel on full-time active duty than at present. In 1951, it is planned to continue the organized units of the reserve forces at approximately the strength which is expected to be achieved by the end of the current year, but with better equipment, facilities, and training."

Although the Administration did submit legislation for the extension of the Selective Service Act of 1948, it has not submitted either legislation or budgetary funds for Universal Military Training this year. Presumably, the latter issue is a political impossibility given the current national attitude which manifests even a reluctance to maintain the peacetime draft in a stand-by readiness. The Administration agreed to compromise the outright extension of the 1948 Selective Service Act which it had requested, by offering to accept a provision that no man actually would be drafted under the extension without the specific prior approval of Congress unless the President was confronted with a sudden emergency requiring that men be brought in instantly.

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(2) National Service Act (Wartime Draft of Civilian Labor) Versus
Alternative Manpower Controls.

Civilian manpower authority in some degree is _in general_ accepted in time of war. However, the _specific kind_ and degree of manpower controls to be employed are not an equally foregone conclusion. Present schools of thought about manpower controls for a future war split in two main groups: (a) those favoring the compulsions and penalties approach of a National Service Act from the start; and (b) those favoring controls that maximize the voluntary drives of the individual, but channel them in an orderly, guided pattern. Both approaches claim for their methods more success in achieving what is the common goal of each--namely, the greatest production results.

Perhaps the choice between them might in the actual event of all-out
war depend upon the temper of labor and the public. In the case of a
degree of national danger greater than any heretofore experienced, more
direct and sweeping manpower controls might prove necessary and therefore
acceptable. Planning should probably include both alternatives on a
carefully thought out basis, for use as needed.

There is no agreed definition of National Service since this prin-
ciple has never been on the United States statute books, though legis-
lation to this effect was introduced into Congress in February 1943, and
again in February 1944.

Broadly speaking, National Service where exercised has involved
governmental authority to assign both workers and employers to given
tasks; to hold them to those tasks, or to reassign them at will; to re-
cruit new workers and new employers; to prohibit their efforts in non-
essential production; and to maximize their efforts on behalf of essential
production. In this country, National Service as debated in the wartime
Wadsworth Bill was more restricted to measures necessary to utilize man-
power effectively. In those instances in which the principle has been
applied--as in the case of Britain and Germany in World War II--it has
been accompanied by governmental authority over community facilities in
order to free workers and employers as much as possible for the demands
of greater production.

The British achieved the system of compulsions and penalties in-
volved in National Service in almost a single sentence, to wit--that
each individual owes his person and his property to the service of His
Majesty (the Crown as the symbol of national unity and ideals) in time of
war.

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Arguments in Favor of National Service (Wartime Draft of Civilian Labor. The case for a National Service Act at the start of a war effort is the case of necessity that production must come first if survival is at stake. The rationale is the rationale of the democratic procedure. Thus, it is argued, that since the government arbitrarily assigns manpower to the military pool in the first instance, and then arbitrarily assigns manpower within the military pool in the second instance, that it is only fair that the principle of equality of sacrifice should be borne also by the residual civilian pool. The gap between men in uniform and those out of uniform is alleged to have always been bad for morale. The soldier resents the freedom and the higher wages of the civilian, and the civilian feels guilty about his security and comfort. "The duty to work and the duty to fight would make soldier and worker equals."

The new weapons potentials make it unrealistic to assume the easy, manageable conditions of World War II, where in retrospect there was plenty of time as well as plenty of manpower, compared with the probabilities that would face the country in the event of another world engagement. This time controls must be prompt; they must be complete; they must be integrated with production and stabilization controls from the beginning. As a nation we are the last to be content to rest our security on outmoded administrative procedures. In short, to hold on uncompromisingly to a question of rights just on principle, may result in the loss of those rights permanently.

Again the Government is alleged to be in the best position to balance the interests of the worker and the employer jointly against the interests of the Nation as a whole, certainly in time of war, though not necessarily in time of peace. It is argued that the legal rights of both will be better protected than either alone when left to the comparative bargaining fortunes of each in free competition.

Even the very discussion of such authority is said to be salutary as an inducement to exhaust in debate all other proposed controls while there is still time to spend on debate. But it should always be remembered that if there is no such direct legal power on the books in stand-by form, devious methods of indirect control will have to be contrived by the government in an emergency which will never be really adequate.

The perfect example that such drastic controls can work in a wartime democracy without affecting the democratic attitude of mind is to be found in Britain's successful experience with a National Service Act in World War II.

A national service scheme need not direct every individual to each job. There is no reason it should not take a form like that of Britain's act, directing manpower to certain essential occupation types of industrial production, farming, transportation, etc., rather than to specific jobs. This would carry further the experience of the last war, and would,

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if coupled with compulsory legal powers, draft exemptions, and incentives, be a more manageable administrative scheme, it is argued, than individual selective service mobilization of all workers. But the borderline cases of civilian essentiality present grave difficulties in any case.

*Arguments Against a National Service Act.* Those who oppose the idea of a National Service Act claim that it is undemocratic and probably unconstitutional for the United States; that it will inhibit production rather than enhance it; that it is an oversimplification of the job to be done; that administratively it is not feasible; and that it is unnecessary because there are better alternatives that touch the mainspring of American effort in voluntary cooperation.

In extension of the reasons given above, it is argued that in a National Service Act the fundamental legal rights of an individual are jeopardized--for example, in such things as the right to work where, when, and for whom one pleases, and the equivalent right of the employer to hire whom he pleases. There are said to be very material differences between conscripting for the armed services, and conscripting for the benefit and profit of another individual--in this case, a private employer. A situation where an employer makes money on the forced labor of an employee approximates slave labor which is prohibited by the Constitution. 1/

Regardless of how one might argue that a National Service Act would control both employer and worker, the fact of the matter is that the real bite would be on the worker. The businessman can produce one item as well as another as long as his earnings are vouchsafed and his financial losses covered as they would be, but it may be a personal hardship of the most acute nature for a worker to have to stay on a job for which he considers himself unfit and in psychological conflict. Even if the employer must cease producing something unessential and has to go out of business, the worker loses his livelihood along with the producer's loss of business, and his particular training may not again be utilized. So the employer loses an investment in money, but the worker loses an investment in skill and experience--a much more personal kind of loss. But mostly war production is more profitable than peacetime production, if only because the output will be at peak volume. The employer reaps profits from what he is compelled to produce, but the worker will in all probability not share commensurately in the increased profits. Nor can the worker even receive the postwar emoluments given to the soldier, such as pensions, bonuses, hospital privileges, attractive insurance, and job preferences.

Moreover, if it is increased worker productivity that is desired, that occurs under free choice, not under compulsion. Indeed, inefficient as democracies are alleged to be, they have in the end been more efficient

1/ For an excellent legal analysis of various manpower control devices, see Bernice Lotwin and Reginald G. Conley, "Some Legal Aspects of War-time Labor Mobilization," *Law and Contemporary Problems*, Vol. IX, Summer 1942, No. 3, pp. 438-462.

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than dictatorships in war because their economic output, resting on
voluntary cooperation and the competitive drive, has always yielded a
greater productivity than the labor of a dictatorship. Indeed, com-
pulsory service, while it might assure the direction of production in
given categories, would inhibit it in the end. Proof of this is to be
found in the experience of National Socialism in Germany where produc-
tivity declined despite controls, compulsions, and fears. In short,
just merely moving people around or preventing them from moving around
does not make them produce. What is really wanted is their production,
not the authority to try to make them produce.

To be sure, if the government plans to take over all industry and
run it, then labor has fewer grounds for complaint about discrimination
than if only the worker were compelled to take a job and stay with it.
But who would advocate that drastic an approach to production? One
has only to remember the experience of the government in running the
railroads, the telegraph and telephone facilities, to realize that the
cure is worse than the disease. Moreover, "the right of a worker to
quit and the corresponding right of an employer to discharge, consti-
tute primary factors in the shaping of their employment relationship.
Nevertheless, deprivation of the right to quit and the right to dis-
charge in effect leaves the relationship without a rudder." 1/ But,
assuming that the government would have to control materials and facili-
ties--thereby indirectly controlling the employer and the employee--and
even granting that it might do a good job, it would not have to worry
about protecting these inorganic things the way it would really have to
worry about protecting labor. That job in itself would consume more
manpower than it would conserve by the compulsion technique. Not only
would the government have to assign jobs, but it would have to supervise
hours, wages, working conditions.

At the peak of World War II there were over 12 million men in the
Armed Services. Their skills were never used to the full because ad-
ministratively it was impossible to match their individual skills against
appropriate niches. Suppose that the administrative job should be in-
creased to the proportions of having to find appropriate niches for 50-
60 millions. How utterly impossible it would be to handle. There would
never be enough men skilled enough in the one job of placement, to say
nothing of the magnitude of the training job that would ensue. And the
record keeping involved in handling even a portion of a 50-60 million
persons operation staggers the imagination and the public purse--just in
the comparative terms of the record job undertaken by the Veterans' Ad-
ministration on one-tenth the number. No, it is argued, it is a gross
oversimplification to assume that all the government has to do is to
assign a man to a niche and that's an end to the problem. On the con-
trary, it would be the beginning of a series of problems. Furthermore,

1/ *Ibid.*

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how much simpler it is for the government to control employers who are
much fewer in numbers than to try to control the mass of the workers.
The latter get controlled indirectly in any event, but in a much easier,
more painless way.

And after all, what is the point of compulsory service in the last
analysis? Most people not only have to work for a living, but they want
to work, and especially under the stimulus of a patriotic motive. Only
a few congenital idlers are recalcitrant. And if it is to garner those
few into the ranks, it would scarcely be worth the effort and expense
because they would probably not be good producers anyway. This is the
heavy artillery approach to the blue-jay game--highly inappropriate.

Even assuming that the administrative burden is not altogether im-
possible--such is the view of those who say that there is a tendency to
exaggerate the administrative burden--on substantive grounds, if not on
procedural, the case against National Service is argued as incontrover-
tible. Every time the government makes an individual assignment, it
must follow through with a long series of safeguards. It has to be sure
that the job is not sub-standard as to health and safety; that there are
housing facilities available; that previous seniority and pension rights
are not sacrificed; that workmen's compensation is available; that there
are medical facilities within reach; that the hours of work are not too
long and other similar safeguards. It is at this point that both the
substantive and the procedural problems get out of hand.

Moreover, if the situation is serious enough for the government to
have to put direct controls on labor as well as on employers, it would
have to do many things that would be far more serious--such as, comman-
deering private housing, establishing communal nurseries, feeding des-
titute peoples, and the like. Under these circumstances compulsory
labor control would be accepted without much question. But short of such
disaster conditions, it does not make sense in the light of other avail-
able alternatives that capitalize on the voluntary cooperation motive,
such as

(a) Employment ceilings that tell employers and workers alike that they may employ so many men, but not exactly which ones;

(b) Labor Priorities which indicate the needs for manpower without determining specifically who should go where;

(c) Displacement of workers and employers in non-essential pro-
duction which is still an impersonal approach leaving plenty
of latitude for voluntary choices in reemployment;

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(d) Public Employment Offices in shortage areas which make it possible to refer kinds of skill, as distinct from particular persons, to and from congested areas;

(e) Job simplification, discharge, and upgrading as placement techniques which give the employer and the employee wide latitude in personal choice.

In brief, the alternatives stimulate both employer and employee to work out their own problems on a mutually agreeable basis, rather than to have to live with them on a mutually disagreeable basis. 1/

Current Status of Proposals for Manpower Controls in the Event of War.

There is no official government position on the form that manpower controls would take in the event of another emergency. There are, of course, studies on all conceivable controls in this, as in other areas of mobilization planning. There is a consensus on the part of the civilian agencies against the application of a National Service Act, and there is a predisposition on the part of the military agencies in favor of such an Act. Because of the predominant legal position of the civilian authorities, presumptively the National Service approach would not be sanctioned short of the direst kind of disaster. To the extent that such a disaster did occur, it seems unlikely that the "safeguards" mentioned above would be able to be applied along with individual or group assignment. However, if a long pull on the labor supply ultimately required governmental "assignment" powers, the "national attitude" against conscription would probably compel a system of safeguards, and perhaps even inducements and rewards, as an accompaniment to any system of compulsions and penalties. Moreover, family housing and community facilities probably could not be ignored as areas for government concession. In any event, any system of manpower controls which would maintain civilian morale as well as war production requirements; which would minimize administrative burdens on the government; and which would not jeopardize economic stabilization through its financial cost; would seem to offer a sounder approach to manpower controls than one which rested solely on the basis of compulsions

1/

It should be noted that most of these arguments are addressed to the "indoctrinal assignments" type of manpower national service act and not to direction to essential types of occupations, with a wider latitude of choice.

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VI. ACTUAL DEFENSE MEASURES
INVOLVING THE APPROPRIATIONS OF PUBLIC FUNDS

The vital center of a mobilization planning effort, of course, is to be found in the actual "readiness measures" reflected in the national budgetary balance sheet. These are the areas where the government must invest money in return for a degree of security which it deems necessary in a given international climate. These are the rock-bottom fundamentals which would be nonexistent or which would be inadequately existent for war emergency and without which a war effort could not long be sustained--namely, the striking air arm; the transporting power of a merchant marine; the capacity of a railroad system; the network of highways; the number of airports and airways; the maintenance of rubber production on which a modern war effort moves; the electric power to carry an industrial war production load; the petroleum industry to fuel the war and the home economy; the steel industry to support offensive and defensive firepower; the strategic materials stockpiled for use in the production of weapons of war; the status of research and development that keeps a technology in forward position.

To be sure these are in any event the backbone of a modern peace-
time economy such as that of the United States. Their health and
strength is of great significance to the welfare of the nation in peace
as well as in war. But it is the marginal increment over and above the
normal capacity--that increment which either fills a sudden demand or is
able to expand its potential quickly enough to meet the demand in short
order--this is the margin for attention in terms of mobilization plan-
ning. This is the very core of the "readiness program." How much we
mean business in the world--our security business--is illustrated in
the following sections dealing with the backbone of the mobilization
planning skeleton.

a. Aviation

(1) The "48 Versus the 70" Group Air Force.

A technical dispute exists as to whether or not the country has at
the present time 42 instead of 48 air groups. A further question is
raised as to the nature of air groups and the peculiar sacredness of the
70-group conception. But practically all of the major problems connected
with current mobilization planning are illustrated in the one controversy
about the proper size of an "Air-Force-In-Being." On the one side it is
argued that the conception of an expanding productive economy with dis-
tribution for social services does not permit the several billion dollar
additional expenditure necessary to maintain a 70-group Air Force, gen-
erally taken as a symbol of a military preparedness economy. There is
a tendency to array the legislative branch as in favor through its

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authorizations of a larger Air Force, as against executive control over
the degree of preparedness which went so far as to put into escrow and
transfer to the budget of the following year about three-quarters of a
billion dollars appropriated by Congress for the immediate creation of
a larger Air Force.

Sometimes the argument is made that the issue also involves the
question of a contest for greater emphasis on the air arm of the serv-
ices as against the conception of a greater balance between the three
services. All these interpretations are over-simplifications of the
real issues involved. It is by no means established that a very much
larger Air Force and an aircraft industry capable of more rapid and wide-
spread expansion through the use of more productive facilities would be
incompatible with an expanding and productive economy. It is at least
arguable that it is an alternative to increased measures for dealing with
unemployment and politically a possible alternative to other forms of
extended social security. It is a matter of choice in terms of priori-
ties for the use of the national income in terms of effort and sacrifice.
Nor are the other issues suggested in any way clear cut. The executive
branch appears to be in the process of revising its own estimates as to
the degree of expenditure necessary for preparedness measures in air
strength. The question of whether or not the three services are in bal-
ance must be assessed against strategic plans for prospective warfare.
Adequacy for such plans rather than allocations on some other basis
should obviously be the test.

There are three main reasons for regarding the problem of the size
of the Air Force and the rate of its modernization and replacement as
parts of economic mobilization planning today:

(1) The strategic concepts that have been shown to govern the alternative assumptions (A), (B), and (C) are most clearly brought out in the decision as to the present size of the Air Force.

(2) The aircraft industry needs a large base of facilities re-
search, trained engineers and workers to operate efficiently
and to expand rapidly.

(3) The choice of prototypes by remaining forever a matter of research and development may produce a depleted and deteriorated Air Force and industry for a few years. The United States might in this respect repeat the tragic experience of France before World War II.

- 108a -

Because the "lead time" and "flow time" factors<sup>1</sup> in the production of modern airplanes range from two to nine years, decisions made in this area today are more nearly mobilization planning decisions than military readiness actualities. To drive home that point one has only to grasp the fact that no planes used in World War II were designed after Pearl Harbor because the time from drawing board to flight status bridged the period from prewar to postwar. That "lead-time," "flow-time" pattern lengthens, not shortens, as aeronautical science advances in the jet age.

The "48 versus 70 group"<sup>2</sup> controversy has plagued both the 80th and the 81st Congresses--from 1948 to 1950--and remains an uneasy compromise that bids fair to continue being attacked by the "too muchers" and the "too littlers" alike.

1. "Lead time is the elapsed time from receipt of government approval and 'go-ahead' on a new model until volume production on that model is reached."

"Flow time is the time required in a plant to build an airplane from the date materials are ordered until the completed airplane is ready for delivery." Definition given by Robert E. Gross, president of the Lockheed Aircraft Corporation in *Armed Force*, December 3, 1949, p. 12.

2. "A 'group' generally speaking is the largest possible aerial unit that can be efficiently handled. The group is used as a unit. It moves as a whole. As nearly as possible it is independent in training, medical care, supply, maintenance, and transport." *U. S. News*, April 30, 1948.

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The President's Air Policy Commission<sup>1</sup> (the Finletter Commission of 1948) and the Congressional Aviation Policy Board of 1948<sup>2</sup> agreed that a 70-group air force was a minimum requirement for the security of the United States. The Congress subsequently incorporated the 70-group objective in legislation. Yet the Executive preference for an air force balanced at 48-groups actually prevails. Moreover, despite a 70-group objective, the 59 groups-in-being in 1948 were scaled down to 48 groups in 1950. For an understanding of how such a situation came about and how it can continue to exist, a brief historical review is in order.

Even before there was a separate Air Force, and immediately at the conclusion of the war, the Armed Forces had established while General Eisenhower was Chief of Staff the 70-group Air Force as an accepted goal. After the separate establishment of the Air Force the Report of the Chief of Staff, U. S. Air Force, to the Secretary of the Air Force June 30, 1948, set the stage for the public controversy:

> "Among the factors to be considered when determining force requirements is air-power-in-being adequate for the initial defense of the United States and for a prompt retaliatory air offensive directly against the aggressor's capacity to wage war."<sup>2/</sup>

In January 1949 the House Armed Services Committee held hearings on H.R. 1437, A Bill to Authorize the Composition of the Army of the United States and the Air Force of the United States, and for other purposes, Title II, Section 201 of which specifically provided for the 70-group force, viz.:

> "The United States Air Force shall have an authorized strength of seventy Air Force groups and twenty-two separate Air Force squadrons, supplemented by sixty-one Air Force Reserve Groups, together with necessary supporting and auxiliary units."<sup>4/</sup>

It was assumed that if begun in 1949 the 70-group air force should be achieved in 1952. At the "level-off" rate, it was estimated by the Defense Establishment that it would add 3 billion dollars to the annual budget above the cost of a 58-group air force when all the compensatory balances across the board were calculated. It would also require 12 Army divisions instead of 10 if ground support were to be provided and if the Army were still to be able to undertake its primary defense missions. Even with 12 divisions, the support would be capable of "only minimum emergency, one-shot missions."

The debate that ensued during the course of this bill in both the House and the Senate turned on the critical issues of the size of the supporting ground forces, the size of the budget, and the relationship

1. Survival in the Air Age, A Report to the President's Air Policy Commission, Washington, D. C., January 1948.

2. National Aviation Policy, Report of the Congressional Aviation Policy Board, Congress of the U. S., March 1948, U. S. Gov't. Printing Office.

3. Italics supplied by the author.

4. Italics supplied.

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of air power to universal military training and the peacetime draft. On the latter point, it was argued that if we had adequate air power--1.e., a 70-group force-in-being--that we would not need a large standing army. The result of that thinking was that the United States today has neither universal military training, an adequate stand-by selective service system, nor a 70-group air force-in-planning, much less in-being. The Congress favored 70-groups, no universal military training, and a limited peacetime draft. The President wanted a 48-group air force (despite the fact that there were 59 groups then in existence) plus universal military training and an adequate selective service system. As has been indicated, the Congress in the end voted overwhelmingly for the 70-group objective, limited selective service, and no universal military training. However, the Congress itself could find funds for implementing only 57 groups in fiscal 1950. It was at that point that the President put in escrow the funds for implementing the Air Force above 48 groups. Even Secretary of the Air Stuart Symington, long committed to the 70-group objective, posed the dilemma and accepted the lower alternative in his congressional testimony, under the pressures of an economy drive and the political facts of life:

> "The Air Force and I, personally, have testified that we believe the 70-group program is the right program. The President in effect approves this because he authorizes us to have this legislation. Nevertheless, he does not feel that because of other world commitments it is possible at this time to have the money appropriated beyond the 48-group program and therefore the Air Force, which only sees that part of the program peculiar to the Military Establishment, supports the over-all program."1/

> "Anybody against us could win in two ways. The first would be in a battle, and the second would be by forcing us to spend more money than the country could afford, getting into deficit financing. Although naturally we are going to have less bases if we have 48 groups instead of 70, with the premise that our part of the show is only a relatively small part, we are glad to support the 48-group program."2/

Even though the Air Force has been the principal victim of the economy drive, it still commands a larger share of the budget than any of the other services as is indicated by the division of the 13.7 billion dollar obligatory authority in the military fiscal 1951 budget:

Air Force $4.4 billion
Navy 3.9 billion
Army 4.0 billion
Stockpile 1.4 billion

1/ Hearings on H. R. 1347, *Ibid.*, p. 156.

2/ *Ibid.*, p. 182.

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**Arguments in Favor of a 70-Group Air Force.** Arguments in favor of a 70-group air force rest on the assumption that Soviet aggression is probable unless deterred by stronger armed strength than we now possess; that economy in the short-run means greater waste and expenditure in the long war; and that the Executive has acted improperly in failing to carry out the mandate of Congress.

One of the most effective arguments for preparing against the So-
viet aggression through air power was made by Representative Carl Vinson
of Georgia, in a speech on the floor of the House of Representatives in
April 1948, which may have turned the tide of that body in favor of the
70-group objective as much as any single speech that was made. Represen-
tative Vinson listed the following reasons why the United States had to
rely on air power:1/

After pointing out that we could not hope to rival Russia's army
in numbers because it now totals 175 divisions, including those of the
satellite countries, whereas even at the peak of World War II, U. S.
divisions totalled only 89, he said, "We must accept serious numerical
inferiority to Russia in ground forces, at least at the start of any
conflict."

Moreover, he pointed out that although the U. S. Navy is greater
today than the combined naval forces of the rest of the world, and while
we had to maintain this superiority, "we must recognize that Russia has
not traditionally been a naval power, and largely due to its economic
self-sufficiency does not need naval force for the protection of any
life lines of supply. In surface naval forces, Russia is not a threat
at present. In sub-surface forces, there are indications of considerable
expansion which call for appropriate counter-measures on the part of
this country."

"It is in the air that we are capable of competing with
Russians and they are capable of competing with us. Preponderance of air
power is in the balance. It is in the air that the decisive struggle is
likely to take place. The lesson of World War II, re-emphasized by every-
thing that has taken place since, is: you cannot lose a war with air
supremacy and you cannot win a war without it."

"In the event of a war, it is the Air Force which will be
first into action, performing three missions, some in cooperation with
the other two Services. These are: defend the United States against
attack by weapons of mass destruction and against air-borne invasion by
ground forces; protect our overseas bases, and so far as able, protect
those countries into which we are now pouring billions of dollars to
help them resist. . . . and deal blows against enemy concentrations of

1/

Reported in Aviation Week, April 26, 1948, p. 13.

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One of the strongest arguments presented takes the line that at best wartime aircraft production can expand at a snail's pace, but the larger the peacetime procurement base, the more rapid the wartime expansion. A larger Air-Force-In-Being is the most obvious answer to the problem of expandability after M-Day.

Two vital considerations affect this argument that more production of combat planes now is the only answer to stepped-up power in the next five to ten years: the first is the serious attrition rate as well as obsolescence of our stock of World War II planes. The second is the extremely long time it takes in aircraft to get a designed plane into real production--four or five years in some cases. Plane orders for new types now will in many instances produce results on any large scale only as late as 1955.

The then Secretary of the Army Kenneth Royall, testifying on behalf of the 70-group bill before a congressional committee, pointed out the desirability of long-range planning for the total objective. "The sensible thing is to plan by a span of years, and not merely from crisis to crisis."

Finally, it is argued that the Congress of the United States is the appropriate body for establishing the national policy, and that having done so as in the case of the 70-group, air-force objective, it behooves the President of the United States to carry out that policy, not to defeat it.

**Arguments Against the 70-Group Air Force.** The arguments against the 70-group air force are largely that the war is not imminent; that air power is only part of the overall power; that such a force is too costly; that it would require long-range procurement planning which is not legally possible; that aeronautical science is moving so rapidly that it is unwise to settle on a very large force until science stabilizes the proper types; and that the determination of size is in any event more appropriately an Executive function than a legislative function.

With respect to the imminence of the war, it has been assumed that time is on our side in economic potential; that our military lead in Air-bombs and the H-bomb is still a decisive deterrent; that in any event there would be various warnings of trouble so that we would not be caught by surprise.

The official views of the limitations of air power were presented to the House Armed Services Committee by General Omar T. Bradley, Chairman of the Joint Chiefs of Staff, as follows:

1/ Hearings on H.R. 1437, *Ibid.*, p. 95.

2/ Hearings on H.R. 1437, *Ibid.*, pp. 117-118.

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"Apparently there has been a tendency in this country during the last couple of years to place almost our whole dependence for defense on air power and our possession of the A-bomb. I wish that I could agree that such a concept is sound. I believe most of us agree that the first step to be taken in case of hostilities is the launching of a powerful strategic bombing effort. Only a very few of the people in the services believe that such an offensive would in itself be decisive and end the war. We all agree that the threat of such an offensive is a leading deterrent to war. We all agree that it would greatly affect the ability of any possible enemy in their later efforts in the war. Most of us believe that after starting this concentrated strategic bombing effort that many more steps toward winning the war would be necessary.

"For example, we must protect vital installations in the United States against hostile attack. We must remember that strategic bombing is a two-edged weapon and we know that strategic bombing is being developed by some countries which did not have such a weapon during the last World War. We must hold with ground troops those bases from which effective bombing could be brought against our vital industrial areas. Even then it may be impossible to prevent isolated cases of air attack. We must hold with combat ground troops bases from which our strategic bombing can be brought against enemy targets. All of the required strategic bombing cannot be done from the United States even though I appreciate that such bombing could contribute materially to the strategic bombing effort. Finally, if we are eventually to bring our great strength to bear against any possible enemy, we must be prepared to do it with ground troops as well as air. If in placing too great a reliance on air power alone, we lose all areas or footholds from which we might bring our great power to bear, we would, in my opinion, be faced with a very long period of hostilities. And of course, in order to do these things we must have a Navy that will keep the sea lanes open. I cannot express too strongly my feeling that in our efforts to find an easy solution to defense we may find ourselves facing the possibility of a very long, costly, and maybe disastrous war in any future emergency."

General Marshall also testified that air power could not do the necessary job alone, and that in his opinion universal military training and the peacetime draft were more important than the 70-group air force.

Even the announcement that the Soviets had successfully made an atomic explosion did not change the picture in General Bradley's views. "We have anticipated it for four years, and it calls for no change in our basic defense plans."

Presidential opposition seems to rest primarily on the cost factor-- i.e., that it is not just the additional billions in the current expenditure that have to be evaluated, but also the "level of expenditures which can be supported in subsequent years." The point about expenditures is

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that if one arm of the defense establishment is extended, compensatory budgetary extensions must occur across the military board in order to maintain a "balanced" striking power. In the concept of "balance" there would be additional requirements for men, materials, and equipment; higher maintenance, operating, and replacement costs. As General Bradley says, "Remember we must protect the bases from which they (the air groups) operate. We must furnish them housekeeping services. There is no use having enough planes to go to five bases if we do not have the troops to hold but three." It is alleged that the money just is not available for more than an air force balanced at 48 groups.

Moreover, the President has suggested that it is misleading to measure air power in terms of the number of groups; that a better measure would be the number of planes and the number of men to support them.

The Bureau of the Budget has taken the position that the Executive should determine the size and the composition of the air force on a year-to-year basis, and that this is a proper executive function and an improper legislative function.

Again it is noted that this country should not, and indeed cannot, very well prepare for defensive war with the Soviet until it can master the production of jet-propelled heavy bombers of great speed and long range. It is argued that the current types of bombers available will be completely outmoded by 1953 and that it would be a grave error to head into a 70-group force on that basis.

Finally, it is pointed out that there are constitutional and statutory prohibitions against committing appropriated funds beyond the two-year period of any particular Congress, so that no really long-term procurement would be possible in any event.

**Current Status of the 48-70-Group Air Force Controversy.** The President is committed to a 48-group air force as is indicated in his Budget for Fiscal 1951:

"My recommendations in this Budget provide for balanced land, naval, and air forces. In order to avoid the creation of forces involving commitments over a period of years beyond what we could reasonably expect to provide, I have had placed in reserve certain authorizations for the current year which were provided primarily for the expansion of the Air Force. These recommendations for the Defense Department for 1951 contemplate substantially the continuation of the revised 1950 program.

"It is contemplated that the active Air Force will be organized into 48 groups and 13 separate squadrons, approximately its present strength. The Air National Guard and the Air Force Reserve will be organized into 27 groups and 25 base wings, respectively. A total of

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8,800 airplanes, from trainers to heavy bombers, will be operated by the active Air Force, and in addition 3,400 by the Air National Guard and the Air Force Reserve.

"Procurement of complete aircraft will require expenditures of 2.1 billion dollars in 1951 for approximately 2,300 airplanes, compared with 1.7 billion dollars for approximately 2,300 airplanes in 1950. The change in average unit cost reflects the increasing complexity and cost of individual airplanes.

"The recommendations in this Budget will provide for new contracts to be made in 1951 totaling 2.0 billion dollars, compared with 1.9 billion dollars in 1950. This contemplates that 851 million dollars of 1950 authorizations being held in reserve will be applied against requirements for aircraft to be contracted for in 1951.

"Approximately 3.3 billion dollars of unexpended authorizations contracted for in 1950 and prior years will be carried forward into 1951. This carry-over, together with the contracts to be made in 1951, will provide 5.3 billion dollars of complete aircraft to be delivered and paid for in 1951 and subsequently. Under present procurement plans it is estimated that, in addition to the 1951 deliveries of 2,300 airplanes, approximately 3,100 airplanes will be delivered in 1952 and later years from authorizations provided prior to that time."

More recently, Defense officials have claimed that they have the equivalent of a peacetime 70-group air force despite the economies in budgets that have been effected.¹/ This is still disputed by military experts of the Press.

## (2) A Merchant Marine of the Air.

The effectiveness of a modern air arm and of much of the ground forces is dependent to a growing degree on air transport for the most rapid tactical use and for support. "To git thar fustest," in Bedford Forrest's phrase, may be more important than to "git thar with the mostest"; though both are important. An air arm depends on transport such as made the Berlin Airlift and wartime ATC miracles possible.

Two major mobilization planning measures in the field of air transportation (as distinct from air combat forces) are before Congress at the present time. To date the legislation has taken two forms:

1/ *New York Times*, Sunday February 26, 1950, p. 1, "B-29 Units Doubled, More B-36's Sought; Army Power Grows."

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(a) Proposals for the establishment of an Air Merchant Marine under a government corporation. (S. 237 - Johnson, Colo.; and H.R. 448 - Kennedy, Mass.)

(b) Proposals for the development by the government of a national prototype¹/ for jet air cargo planes for commercial and military auxiliary purposes. (S. 426, S. 2301 - Brewster, Maine; H.R. 73 - Hinshaw, and H.R. 141 - Beckworth.)

Sponsors of an Air Merchant Marine policy propose the establishment of an "Aircraft Development Corporation" either in the Department of the Air Force or in the Department of Commerce, with a capital stock ranging from $6,000,000 to $250,000,000 (depending upon how much the Administration will sponsor and how much the Congress will appropriate for this purpose). The Corporation would conduct a continuous survey of the current and potential requirements for commercial and military reserve cargo aircraft. The Corporation would endeavor to procure enough cargo planes at any given time to remedy the national deficiency in supply. The Corporation would then lease these planes out to private operators at attractive rates. A large percentage of the private operating personnel would automatically become members of the reserve components of the Armed Services of the United States. Arrangement would be made for the recapture by the Government of profits in excess of stipulated amounts so that the whole project in time might be self-supporting and nearly self-liquidating as to original investment. In the event of an emergency the Government would have recapture rights on the equipment itself, and the personnel would be immediately transferred from the reserve components into the active forces, thus minimizing the time required for actual military operation. In addition to maintaining in operation a fleet of cargo planes, the Corporation would also be responsible for initiating research and for developing new prototypes of larger and improved transport planes, including jet models.

Sponsors of the simple "prototype" approach have confined their interest to having the Government "sponsor the design, development, testing, tooling, construction, and modification of prototype jet transport and cargo aircraft intended primarily for commercial use, but adaptable also for auxiliary military service." The Beckworth Bill would appropriate $50,000,000 for this purpose.

While the Department of Defense has an interest in cargo planes,

1/ Settling on a "prototype" is deemed to be essential because the problem of getting a type of plane suitable for military use (reinforced for carrying trucks, tanks, guns) and long overseas hops imposes different and more expensive specifications than for ordinary commercial freight. Mass production requires *one* acceptable type rather than several for efficiency and lower cost.

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they assign other programs a higher priority in the light of limited
funds even for combat planes.

**Arguments for an Active Air Merchant Marine.** The President's Air Policy Commission (the Finletter Commission of 1948) and the Congressional Aviation Policy Board have both recommended legislation establishing an active Air Merchant Marine. Aircraft manufacturers, labor unions, air freight companies, freight forwarders, and defense-minded citizens have all supported it. The Government's experience with the Berlin Air Lift pointed up sharply the importance of such a merchant marine in an emergency. "Operation Vittles" as the Berlin Lift was called, "was the Nation's first important peacetime use of air power as an instrument of national policy. Although carried on by a military organization, 'Vittles' achieved its purpose--defeating the land blockade of Berlin--without the use of military force."¹ Here was a requirement for carrying cargo only 200 miles, from Frankfurt to Berlin, and even so it was a considerable undertaking. How much more of a task would it be if the lift had to traverse the Atlantic Ocean. And how absolutely impossible with our large wartime requirement for four-engined planes as compared with their limited availability. Chairman Howard of the Munitions Board testified January 31, 1950, before the Senate Commerce Committee that cargo planes were the number one deficit of all transportation equipment which would be needed for M-Day. It has been pointed out that "the logistic yardstick in World War I was the foot soldier's 2 1/2 mile per hour pace; in World War II it was the 30 miles per hour of the 2 1/2 ton truck; in World War III it will be the block-to-block speed of the cargo plane."²

Sponsors of such legislation quote General Dwight D. Eisenhower's statement that "our ability to act in the first 60 days will be determining." They note that it would take more than 60 days to load, assemble escort, and convoy a group of merchant ships across the ocean, and that an Air Merchant Marine, readily available and trained would be of inestimable value. They point out that the U.S.S.R. now has five times the number of submarines with which Germany started World War II and they urge that we not put all our chips on ships.

Advocates also note that the Government is already committed to
the principle of a merchant marine adequate for defense and that the
Maritime Commission is the prototype of the kind of agency envisaged for
an Air Merchant Marine. The Maritime Commission provides construction
and operating subsidies for ships, has recapture rights on both earnings
and equipment, and has a legislative mandate to see that the United
States fleet is adequate for moving a substantial portion of the normal
foreign trade of the U. S. and for national defense purposes. What is
asked is a similar agency for the Air Merchant Marine, that will bear
the same relationship to the Department of Defense.

1/ Annual Report of the Secretary of the Air Forces for the Fiscal Year 1949.

2/ Lt. Col. Edwin F. Black, "Air Merchant Marine," *Air Transportation*, January 1950, p. 24.

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Proponents for this scheme observe that here would be no heavy ex-
penditure of taxpayers' funds for a "handout" in the first place, only
to be tied up in a "mothball" fleet in the second place. Not only would
the equipment itself be "working out the bugs" under the active merchant
marine concept, but the crews would be constantly training--would in fact
be in the armed reserves ready for instant duty if, as, and when an emer-
gency arose. In short, it is argued that a cargo plane is both a "sword
and a ploughshare." 1/

Moreover, the advocates of the Air Merchant Marine state that there
will be quite enough commercial cargoes available to warrant a sizeable
number of cargo planes. In fact, the large untapped air cargo potentials
give an economic reason, in addition to the defense reason, for expanding
our cargo fleet. These potentials might also reduce the airline subsidy
burden on the Government.

In recent testimony before the Senate Committee on Interstate and
Foreign Commerce, Major General Laurence S. Kuter, Commander, Military
Air Transport Service, U. S. Air Force, spoke to this point: 2/

"The unique characteristics of air transportation make possible the development of new markets of travel and commerce which can be developed through no other medium of transportation. Thus, the speed of air transportation has provided new outlets on the East Coast for perishables grown on the West Coast; it makes possible a ten-day vacation in Europe or South America. Air coach travel is now possible. The certification of helicopter operations points to a possibility of extensive air commuting. The exploitation of these and other potentials of commerce and travel provides a means of achieving an expansion of the industry without impairing the ability of other transport media to meet defense requirements through undue diversion of traffic.

"Some of the potential air markets now opening to civil air transportation are of greater military significance than others, due to the greater adaptability to military wartime use of particular types of equipment and facilities. Thus, because of our strong military requirements for long-haul freighters, the Department has shown a particular interest in the development of the domestic and especially of the international air cargo market."

1/ Langdon P. Marvin, Jr., "Air Merchant Marine," *Air Transportation*, January 1950, p. 16.

2/ Testimony of Major General Laurence S. Kuter, Commander, Military Air Transport Service, U. S. Air Force, Before the United States Senate, Committee on Interstate and Foreign Commerce, Washington, D. C., January 31, 1950. Hearings on the Investigation of the Financial Stability and Operational Efficiency of the Airline Industry.

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In the absence of any official data to the contrary, and no funds earmarked for such a requirements-supply survey, it is urged that legislation is necessary even to determine the facts. Meantime, it is observed that "the 16 certificated domestic airlines showed an operating profit of close to 28 million during the first 10 months of 1949, as well as a 14 percent increase over preceding year in revenue-passenger miles flown. By the very nature of American competitive enterprise the commercial air potential is there. What is needed are the planes to develop this potential."¹/

Unfortunately the profitable air freight operations in domestic transportation require a transport plane with heavy pay load and not much range without refueling. This type would not be useable for long hops to distant theaters. Therefore, development of a new type suitable to overseas operations is a prime defense need.

It is alleged that under the "prototype" proposal, no new transport planes could be produced until 1956, when the prototypes will be completed, and that this is the very period during which we would be most vulnerable. We can and should move forward with prototypes too, but not at the expense of an immediately assembled air cargo fleet that would bridge the current deficiency. In short, it is urged that the Air Merchant Marine legislation will give a maximum of protection at a minimum of cost to the taxpayers. This legislation is needed because "today we are proportionately less prepared for the air support of our friendly countries than on Pearl Harbor day when we did not know the value of air power, atomic warfare, or jets and guided missiles."²/ We must start with existing types of planes until the newer types become available.

**Arguments Against the Creation of a Government Air Development Corporation.** Opponents of the idea of a government Air Development Corporation claim that if national security is at stake, it would be far better to have a reserve cargo fleet in mothballs where they will be available in fine condition at a moment's notice, than it is to rely on an active fleet that would be under contract all over the world when they were most needed at a specific place. They claim that there is not enough business at the present time for existing air cargo lines, and that the private operators would be even more handicapped by added competition. It is further argued that a Government development corporation in this field will bring aviation more and more under Government control, when exactly the opposite is what the country most needs. It

¹/ Lt. Col. Edwin F. Black, *Ibid.*, p. 25.

²/ Captain C. H. Schildhauer (Ret.) "Air Merchant Marine, " *Air Transportation*, p. 17.

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is alleged that the creation of another Government agency in this field would duplicate the Civil Aeronautics Board and other existing Government agencies. Finally, it is alleged that the creation of a fleet from existing types of equipment would really tend to restrain the development of new prototypes because the existing investment would always drag on any attempt to build improved types.

**Current Status of the Proposal to Provide a Merchant Marine of the Air.** Secretary Symington, in testifying before the Senate Committee on Interstate and Foreign Commerce, January 30, 1950, stated, "We were informed last Friday, by the Bureau of the Budget, that legislation providing for the expenditure of Government funds for the development of prototype transport aircraft is not in accord with the program of the President."1/

However, there appears to be no objection to a limited program (under 10 million dollars) for operation and service testing (by the Air Force) of commercial prototypes, provided a satisfactory and feasible program (production responsibility entirely in the manufacturers) can be formulated, and provided the responsibility for the program is in a civilian agency.

No official Administration statement has been made as yet about the proposed Air Merchant Marine legislation. Both Under-Secretary of Defense Stephen Early, and Secretary of the Air Force Stuart Symington presented a deficit picture on transport aircraft to the Senate Committee on Interstate and Foreign Commerce, and testified that the deficit is serious but not so serious as compared with certain other deficits, particularly in combat equipment. The official Department of Defense position is that in the "priority of deficits" with which it is faced, that for cargo transport planes is not by any means the major deficit.2/

In a Report to the President by the Secretary of Commerce on "Issues Involved in a Unified and Coordinated Federal Program for Transportation" (known as the Sawyer Report) the following yardstick for judgment on the promotional activities of the Federal Government on behalf of transportation which will be adequate for defense purposes, offers some insight into the problem of a Merchant Marine of the Air:

"In the case of promotional activities, except in special cases where national defense considerations are urgent, the proper test of any activity is whether it results in a new or improved or more economical transportation service which is really needed."3/

The exception for national defense should be noted.

1/ *Ibid.*, January 30, 1950.

2/ *Ibid.*, January 30, 1950.

3/ A Report to the President on "Issues Involved in a Unified and Co-ordinated Federal Program for Transportation," From the Secretary of Commerce, December 1, 1949, p. 11.

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b. Shipping

(1) Subsidies for the Merchant Marine.

The current world shipping situation is characterized by an over-
supply of dry cargo tonnage for peacetime needs, a tanker equilibrium,
and a shortage of passenger vessels. The decline in the volume of
world trade since 1947 accompanied by the postwar rehabilitation of
the merchant marines of the world, has resulted in the continued with-
drawal of surplus tonnage, a sharp decline in tramp freight rates,
which will probably ultimately be reflected in lower conference rates,
a rise in construction and operating costs due primarily to a univer-
sal rise in wage levels--all of which add up to a decline in total
shipping earnings and a tendency for a greater degree of state support
on the part of maritime nations, including the United States.

Upon this highly competitive economic supply-requirements picture
must be superimposed an equally competitive political picture. New
maritime nations have arisen since the war--such as Israel, India,
Pakistan, and certain Latin American countries. The nationalization
of the fleets of some of the older maritime nations such as Argentina's
has presented formidable competitive difficulties. The impetus given
to the re-entry of the German and Japanese maritime industries for
reasons of political economy and economic self-sufficiency has further
intensified the competitive position of all maritime nations. Most
significant of all is the emergence of the United States with a major
surplus of tonnage which it has been reluctant to withdraw from the
high seas for replacement in the coastal service from which it largely
came before the war.

The postwar problem known as "the dollar gap" in the balance of
payments accounts of the non-dollar countries, has resulted in efforts
to require the use of the distressed nation's flag vessels in order to
save scarce dollars--a practice highly discriminatory in character.

Moreover, under the imperative rationale of national defense, more
preferential discriminatory practices have developed in order to
capture a definite share of the world market for a given flag registry.
These in turn have bred their retaliations so that the general tendency
in a deteriorating world shipping picture has been to legislate larger
and larger shares of foreign trade to national flag vessels--the net
result of which is to hamper international trade in the long run, but
to maintain auxiliary defense equipment in readiness in the short run.
The issue is reduced to an evaluation of the necessity for promotional
and protectionist tactics for immediate national security as against
the desirability of eliminating discriminatory practices in the in-
terest of closing the dollar gap and eliminating the barriers to in-
ternational trade in a longer-term concept of national security.

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The national policy of the United States, as expressed in the philosophy of the basic Merchant Marine Act of 1936, as supplemented by postwar legislation, has been to move from an original policy of simple regulation into a policy of protectionism, and from there to promotion- alism for the U. S. Merchant Marine--all under the defense rationale. This has largely been accomplished through the device of construction and operating subsidies which place American shipbuilders and American ship operators on a parity with foreign operators since it generally costs less to build and operate ships under foreign flags.

The more that economic pressures tend to force high-cost U. S. construction, repairs, and operations out of the world shipping market, and the more that other nations legislate and finance their fleets into it, the more inclination there is on the part of Congress to achieve the long-sought objective of having at least 50 percent of all United States foreign trade move in U. S. flag vessels. Legislation currently up for renewal, or proposals just recently initiated by the Congress, tend to seek the achievement of this goal by:

1. Continuing the 50-50 Flag Rule (requiring 50 percent of U. S. procured and financed trade to move in U. S. vessels, and the other 50 percent being free to be moved in foreign flag vessels) in ECA, MAPK, and any other emergency legislation.

2. Perhaps extending the 50-50 rule to permanent legislation covering all U. S. foreign trade--not just that portion publicly financed.

3. Reducing the eligible trade-in age on ships from 17 to 12 years which would among other things, support more replacement construction.

4. Attempting to hold U. S. owned vessels under U. S. flag registry which would tend to continue jobs for U. S. maritime labor.

5. Attempting to reduce the U. S. intercoastal share of the upkeep of the Panama Canal by lowering tolls for U. S. intercoastal vessels.

6. Balancing the U. S. Merchant Marine by vessel type, which would among other things put the U. S. seriously in the passenger trade for the first time in its history.

7. Increasing construction subsidies in order to keep the U. S. on an equal competitive basis with foreign ship construction.

8. Extending construction and operating subsidies to tramp shipping for the first time in U. S. history.

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The Maritime Commission's summary of this Nation's maritime position appears in its most recent Annual Report to the Congress:¹/

"The current maritime position of the United States reflects the retrenchment from war and postwar expansion and the joint efforts of the Government and the industry, during the 1949 fiscal year and since, to build a modern American Merchant Marine closely integrated into the economy of the Nation as a private enterprise and designed as part of the national defense system. To the extent that Government regulation and assistance are required to achieve this purpose, the Maritime Commission has used every means at its disposal to effectuate the national maritime policy expressed in the Merchant Marine Act of 1936 to foster the development and encourage the maintenance of a Merchant Marine adequate for both trade and defense."

Inasmuch as the promotional aspects behind the Merchant Marine, in the form of proposals for increased and wider spread subsidies, are more in question from domestic budgetary and foreign policy points of view, than are the protectionist devices, such as the 50-50 rule (which bear down more indirectly and less objectionably on the taxpayer) the pro's and con's on subsidies are presented below as illustrative of the larger contest between the economics of the industry and its defense and foreign policy aspects. This is in essence a problem in mobilization planning.

The Sawyer Report summarizes the shipping subsidy cost to the Government as follows:²/

"Both construction differential and operating differential programs were interrupted as the result of the second World War which produced a huge construction program for Government account on the one hand and resulted in the commandeering of ships on the other. Accordingly, data available on the scope of these subsidy programs are subject to unusual distortions arising out of the war period and do not reflect the experience of normal times. Construction differential subsidies absorbed by the Maritime Commission during the 6-year period from 1939 to 1945 totaled nearly $179 million. Since the war the program has been resumed to a limited extent because of the availability for purchase of a fine fleet of ships built directly by the Government for its own account during the war period. However, the cost of construction

1/ United States Maritime Commission Report to the Congress For the Fiscal Year Ended June 30, 1949, U.S. Government Printing Office, Washington, 1950.

2/ A Report to the President, "Issues Involved in a Unified and Co-ordinated Federal Program for Transportation," From the Secretary of Commerce, December 1, 1949, p. 12.

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differential subsidies on contracts awarded or proposed during the fiscal years 1949 and 1950 is estimated to total $48 million. Operating differential subsidy payments in the years before the war ranged from $3 million to $13 million a year. The payments are now being resumed and current estimates suggest that the yearly total will reach over $18 million."

Apart from economic problems, the penetration of communists into key positions in some maritime and stevedoring unions is a matter of concern. The unions themselves are, in many cases, making a fight on clearing up this situation.

*Arguments For Increased Ocean Shipping Subsidies.* It is maintained that the importance of shipping in national security should not be underestimated, as is illustrated by the conclusions of the U. S. Strategic Bombing Surveys, viz:

> "The war against shipping was perhaps the most decisive single factor in the collapse of the Japanese economy and the logistic support of Japanese military and naval power. . . . At the time of the surrender. . . total seaborne traffic in steel ships was only 7.8 percent of the peak movement of October 1942. . . Japan was, in the spring of 1945, virtually isolated. The raw materials basis of her economy had been cut off."¹

> It is argued that the United States must never again be caught "with its tonnage down" as was the case on December 7, 1941, and all during World War II where even the Allied pool did not provide enough capacity. The years between two major World Wars were lean and unproductive for the U. S. Merchant Marine. It is said that they will be lean again if the Congress does not protect them.

The *Report of the President's Advisory Committee on the Merchant Marine* "faced the inevitable conclusion that a (modern, efficient) merchant fleet and (an effective and progressive) shipbuilding industry are indispensable to national security and would have to be maintained even should there be no other benefits accruing."² Moreover, the *Harvard University Study* on postwar shipping problems pointed out that the controlling factor about shipping was national security, and the report accepted, therefore, the necessity for subsidies. This study said in part:

> "Two World Wars have shown, however, that qualitatively and quantitatively any peacetime shipping and shipbuilding activity in the U. S. for the purpose of furnishing a water-borne transportation system, even with compromise modifications for defense, will

1/ U. S. Strategic Bombing Survey, *Report WAJT*, pp. 3-6.

2/ *Report of the President's Advisory Committee on the Merchant Marine*, Washington, D. C., November 1947, p. 2.

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fall far short of the country's national security requirements. Compromises should not be made, therefore, in connection with the needs of national security, which should be carefully examined and defined as clearly as possible. "1/

"For example, even if private operators in the United States had carried all the foreign water-borne commerce of the United States before the war together with the domestic water-borne commerce, they still would have employed considerably less than half the merchant ships used by the United States in World War II."2/

Another argument made by proponents of increased subsidies is that there will be much greater losses from submarine activity in World War III than in World War II, because already the Soviets are said to have five times as many submarines as had Hitler at the beginning of the war. This points to the desirability of adequate shipping since replacement of losses during an actual war is time-consuming.

It is also argued that contrary to general opinion, the total cost of shipping subsidies is really very small compared with other forms of subsidy undertaken by the Government--agricultural, for example.

"During the period from 1916 to 1947 the Federal government spent over 16.5 billion dollars for the development of its merchant marine. These expenditures have related primarily to the requirements of the first and second World Wars. Shipbuilding programs have accounted for 14.4 of the total 16.5 billions spent, while construction and operating differential subsidies have amounted to 359 million dollars."2/

As indicated earlier, the combined construction and operating subsidy cost to the Government is running at about $60 millions per year--some part of which will probably be recapturable by the Government when the ten year profit is calculated. This is a mere drop in the bucket of a $42 billion budget.

The point about having the proper perspective on the cost of shipping subsidies is further driven home in an article in Fortune Magazine:

"In the twelve years 1934-46, it (the shipping construction subsidy) amounts to only 2 percent of the total of more than 13 billion expended in subsidies of one kind or another to American business and agriculture, and the amount paid specifically to

1/ The Use and Disposition of Ships and Shipyards at the End of World War II, a Report Prepared for the United States Navy Department and the United States Maritime Commission by the Graduate School of Business Administration, Harvard University, June 1945, p. 23.

2/ Ibid., p. 30.

3/ Transportation and the National Government, Vol. II, "The Provision of Facilities and Regulation of Transport Enterprises," by Charles L. Dearing and Wilfred Owen, Brookings Institution, Washington (1948), (unpublished), pp. I-110, I-111. Prepared for the U. S. Commission on Organization of the Executive Branch of the Government.

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equalize the operating costs of American shipowners with their foreign competitors was less than the Commodity Credit Corporation spent to support the price of American cheddar cheese." 1/

Moreover, the Maritime Commission's right to recapture profits above a certain margin makes the operating subsidies at least practically self-liquidating. For example, the Maritime Commission's first recapture in 1947 returned over 65 percent of the subsidies paid out in the preceding 10-year period.

If one accepts the assumption that a merchant marine to be adequate must be "balanced" just like any other element of military power--airpower, firepower, manpower--there can be no denying the necessity for subsidizing the construction of passenger vessels. We never had a United States passenger fleet at all, so we are badly out of balance on that score. Secretary of Defense Johnson insists on an emergency troop-carrying capacity of 900,000. Even if Government-owned passenger vessels are added to privately owned passenger vessels, current U. S. capacity would total only about 400,000. With the world shortage of passenger vessels, we cannot rely too heavily on the equipment of our allies, even assuming it were safe to do so, which it may not be.

Again, it is argued that the best justification for shipping subsidies is to be found in the retention of skilled labor in shipyards. In war the building program becomes exceedingly important, and if the required skills have been allowed to be dispersed and to get out of training, then the wartime construction problem is very difficult indeed.

Finally, it is noted that the Maritime Commission recently made a study of the aids given to shipping by other governments and found that of 15 maritime nations, 11 provide shipbuilding aid; 12 provide ship operations aid. On construction the aids took the form of special tax considerations, loans, cheap interest rates, and outright grants. This is the kind of growing competition which the United States has to meet by additional subsidy offsets.

## Arguments Against Increasing the Merchant Marine Subsidies.

Opposition to an increase and an extension of ocean-shipping subsidies is many-sided. On the defense count it is said that the multilateral security provided through the European Recovery Program, the North Atlantic Pact, and the Military Aid Program is greater than any unilateral security we could develop on our own because it is more widely dispersed and is voluntarily at our disposal in a pool arrangement. If the war is to be fought on our homeland, ships will not be so important. If it is to be fought elsewhere, the Allied pool, counting in the large U. S. Government laid-up fleet left from World War II, will be more than adequate. The President's Advisory Committee on the Merchant Marine of 1947 and other studies indicate that our real needs

1/ "The Shipping Men," Fortune Magazine, March 1949.

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for defense purposes are somewhere in the neighborhood of 11,000,000 dwt tons. The privately owned active American merchant marine today is 14 million dwt., plus 2.5 million dwt. more of U. S. owned tonnage under the Panamanian flag, as well as 23 million dwt. more in the laid-up reserve of the Maritime Commission. So, to talk about subsidizing more tonnage seems an exaggerated argument. Moreover, the Russians are obviously not going anywhere because they have no merchant marine at all and for us to swell the world's existing surplus against a nonexistent phantom fleet seems wasteful indeed.

On economic grounds, if we must close the dollar gap, not only as a short-run stability measure, but also as a long-term aspect of security that comes with having friendly allies, we should not add to the difficulties of dollar earning capacity by increased subsidies. We have gone so far as to make tariff concessions on behalf of the dollar gap objective, and they were more politically dangerous to undertake than would be a reasonable exercise of restraint about the matter of wholly new subsidies. In fact, the whole trend to promote the U. S. Merchant Marine on security grounds runs squarely afoul of our long-term economic foreign policy objectives of letting comparative national efficiencies work themselves out in open competition.

So far as the impact on the taxpayer is concerned, while it is true that the operating subsidies for fiscal 1949 were only $38 million, the Maritime Commission finds that it must raise this to $47 million for 1950 and to $60 million for 1951. So it goes. More leads to more. Not only are more companies coming in for aid, and not only are subsidy costs inflating, but competing forms of transportation within the United States demand compensatory subsidies. And foreign nations take offset measures. All of this winds up in an international subsidy race which is self-defeating in the end.

Even the administration of existing subsidies has been questioned by the Comptroller General and by the House Committee on Expenditures in the Executive Departments.¹/ When the General Accounting Office audited the Maritime Commission's operations for fiscal years 1947-48 and 1948-49, it concluded that subsidies on certain passenger vessel construction were "excessive" due to "irregular procedures, inaccurate calculating and unjustifiably liberal interpretations of the law."²/

1/ "Inquiry into the Operations of the Maritime Commission, with Particular Reference to Allowances for National Defense Features and Construction-Differential Subsidies Under Title V of the Merchant Marine Act of 1936, as Amended, Based on the Special Report of the Comptroller General." (House Report No. 1423, 81st Cong., 1st Sess.)

2/ Special Report - "Construction-Differential Subsidies and Related National-Defense Allowances Granted by the United States Maritime Commission," submitted by the Comptroller General of the United States to the President of the Senate, July 11, 1949.

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Finally, the argument that we need troop-carrying capacity is ex-
aggerated in the light of the alleged superior ability of air transport
for this kind of movement.

Current Status of the Controversy About Ocean Shipping Subsidies.

It is generally accepted that security factors control the size of the merchant marine. It is also agreed that it is difficult to determine the exact line of demarcation between commercial and defense subsidies under the present system. Three alternatives are possible--subsidies for the differential between peacetime requirements and wartime requirements--or the maintenance of a stand-by fleet--or both. At the present time the United States does both. With respect to the pending congressional proposals to increase and to extend ocean-shipping subsidies, the President's Budget Message for Fiscal 1951 is in point:

"I am seriously concerned by the increasing cost of these (merchant marine) subsidies and by the potential cost of new subsidies now being advocated. Our national security requires an efficient nucleus of merchant shipping and shipbuilding, adequate to permit such expansion as may be required by a future emergency. However, to limit the burden on the taxpayer, this subsidy program should be held to the minimum level that will satisfy national defense needs. In determining this level, full account must be taken of the availability of vessels from friendly nations in the event of an emergency. The existence of the North Atlantic Treaty provides a framework within which joint international planning of shipping mobilization may proceed. The entire subject of Government aid to the merchant marine is now under active study by the executive agencies concerned. Until such studies are completed, we should proceed cautiously with existing subsidy programs and should avoid commitments for any major new programs. The Budget for 1951 has been developed on that basis."

The President had requested the Secretary of Commerce on August 30, 1949, to prepare for his consideration a report "outlining the major policy issues which need to be resolved at this time in order to achieve maximum effectiveness and consistency of Federal programs in the transportation field." On December 1, 1949, the Secretary of Commerce submitted his Report to the President on "Issues Involved in a Unified and Coordinated Federal Program for Transportation," which throws some light on the approach of that study to the shipping subsidies issue:

"Decisions with respect to subsidies for both international air and shipping services should be consistent with the general foreign policy of the Government." 1/

1/

A Report to the President, "Issues Involved in a Unified and Co-ordinated Federal Program for Transportation," Secretary of Commerce, December 1, 1949, p. 33.

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(2) St. Lawrence Seaway Project.

The proposal to make the St. Lawrence Seaway navigable from the Atlantic Ocean to the Great Lakes has been under discussion for a century and a quarter. Early emphasis was on improved navigation. Later emphasis was on the hydro-electric power that could be obtained. Most recently its advocates have been unwilling to separate their support for the joint power and navigation aspects. Indeed, the present Administration has asked the Congress for both or none. More and more is the case shifting from economic to national defense grounds, particularly because of the importance of making Labrador's iron ore easily accessible to the United States steel industry in the light of the dwindling reserves of the Minnesota Mesabi Range;¹/ and also because of the importance of power to the Canadian aluminum industry. Relocation of much of the United States steel industry might be involved if offshore ores had to be imported by rail.²/

Geographically, the problem is confined to the navigability of a 120-mile stretch of the waterway between Prescott, Ontario and Montreal, 40 percent of which is through canals. Two major hydro-electric projects are involved.

It is alleged by advocates and opposition alike that every geographic region in the country will be affected favorably or adversely by it. The commodities most concerned would be iron ore, grain, coal, and aluminum. Industries primarily involved would be power, steel, shipbuilding, mining, and agriculture. Transportation services in competition would be the railroads, the inland waterways, the Great Lakes carriers, and the ocean-going merchant marine. Intertwined throughout the whole historic controversy has been a major debate over private versus public ownership and operation, though this issue has somewhat declined in importance as public ownership in many fields has become accepted.

Combined navigation and power project estimates (both of importance for mobilization planning) range between a billion and a billion and a half dollars. Recently the Government's position has shifted from a Government-financed public works kind of project to a self-liquidating project through shipping tolls and power charges. Indeed, both the Canadian and the American executives are now committed to the self-supporting, self-liquidating principle.

1/ Various guesses as to the exhaustion of the higher grade ores of the Mesabi are made. It is certain that they have appreciably dropped in exploitable volume and that they will be unavailable in any adequate amounts within the next ten years and at present rates of exploitation, will be depleted dangerously within fifteen or twenty years. Imports would prolong the life of this deposit which is in itself a national stockpile.

2/ An alternative movement of iron up the Mississippi by barge, from Venezuelan (Orinoco) sources is now possible. But the Illinois River would bottleneck heavy-volume shipments.

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Joint action on the part of both the United States and Canada is, of course, required if the project is to go forward. Two separate treaties on the subject submitted to the U. S. Senate in 1932 and 1938 respectively, having failed to obtain consent to ratification, resulted in the Executive's resorting in 1941 to an Executive Agreement with Canada, to be supplemented by subsequent implementing legislation not necessarily requiring a two-thirds vote of the upper house. This tactic has given rise to considerable debate on both the constitutionality and the feasibility of proceeding under the relatively loose, and, it is alleged, not truly binding form of international arrangement known as the Executive Agreement. However, the Supreme Court has upholding the legally valid character of such agreement in the U. S. The only other question would be the question of whether the danger of repudiation by either government is politically greater than in the case of a treaty. The legal value is the same.

*Arguments For the St. Lawrence Seaway.* Those who favor the St. Lawrence Seaway Project do so for three major reasons--that it is needed for the normal economic growth of the United States and Canada; that it is needed for the national defense of both Canada and the United States; and that it will benefit international trade as a whole.

In support of these reasons, proponents of the Seaway point out that industrialization of the agricultural Middle West will be strengthened by opening up the heart of the continent to world trade through cheap transportation in and out of the area; that the Seaway would be even more important to the interior than was the Panama Canal to the East and the West Coasts.

It is said that the Lake steel industry will be rescued from disaster and the country's defenses secured if an easy connection (via the St. Lawrence) can be made with the iron ore reserves of Labrador and other foreign ores, because it is a known fact that the Mesabi reserves on which we have depended are becoming exhausted. Use of other domestic ores (such as taconite) not only requires expensive rebuilding or new facilities, but raises costs and decreases steel output per ton of ore to a degree that would reduce wartime output at capacity very seriously.

It is pointed out that the presently available power in New York, New England, and certain Middle Atlantic states is inadequate for current requirements, to say nothing of requirements anticipated in the process of normal growth, much less for the burden that would be imposed in the event of a war emergency. Because this would be the largest and the cheapest source of hydro-electric power on the continent, new customers in abundance would come forward through the inducement of cheap rates. And in an emergency the aluminum industry of

1/ See *U. S. vs. Curtiss-Wright Corporation* (1936), 299 U.S., 304, and *U. S. vs. Belmont et al. Executors* (1937), 301 U.S., 324.

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Canada which contributed greatly in World War II to allied requirements for this commodity, along with other important industries, would not be curtailed for lack of power.

The coal industry, it is argued, rather than being cut off from markets through the inroads made by more electricity, will actually benefit by increased demands for coal that will occur as industrial expansion on many fronts is made possible by the growth of the whole region. This is illustrated in the case of the TVA where coal consumption increased rather than decreased as a result of the power project.

Lake shipbuilding and ship repair facilities will be a useful supplement to coastal sources if they have an outlet to the sea. On the other hand, coastal yards could build boats for the Great Lakes. Since the coastwise laws of the United States prohibit foreign vessels from engaging in trade between American ports, there would be no danger of cheap labor foreign competition invading American port or coastal operations.

Short-term losses to ports that might result in the shift of grain movements from rail to water would be more than offset in the long-run by the general economic improvement to those places that would result from the general enhancement of international trade.

The waterway would be open during the peak grain and ore movement season and would alleviate the recurrent car-shortages which are always followed by idle equipment in the wintertime. Whatever losses the rails might suffer in coal and grain movements will be offset by the greater movement of new and finished products that would occur with increased national and international trade.

This particular route to Europe would provide a thousand miles more of sheltered water than the present routes from Atlantic ports.

Because the projects can be made to be self-supporting and self-liquidating as in the case of the Suez Canal, the taxpayer is protected.

Finally, it is pointed out that this measure has bipartisan support as is indicated by the fact that every President since 1920 has recommended to his Congress that the St. Lawrence Seaway project be undertaken. The most enthusiastic supporters in the Presidency have been Herbert Hoover, Franklin D. Roosevelt, and Harry Truman.

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**Arguments Against the St. Lawrence Seaway Project.** Those who oppose the project do so principally because of its cost; its vulnerability to attack in time of war; and its competitive effect on other geographic areas and other industries.

These major arguments are underpinned in many ways. For example, it is noted that the original estimated cost of similar projects like the Panama Canal, the Suez Canal, and the Chicago Sanitary Canal turned out to be very much less than the actual final costs. So, too, would it be with the St. Lawrence project. It could not be self-liquidating because of the difficulty of agreement on the proper basis for tolls. If they were placed high enough to cover costs of operation and maintenance, the volume of traffic would drop and offset the anticipated revenue. If they were placed low enough to entice traffic, they would never yield enough even to cover operation and maintenance much less to amortize capital investment. Moreover, correlative costs such as port improvements that would be necessary all along the line have never been included, yet presumably these would have to be borne from Federal taxes. Again, the seaway would be icebound for five months a year, but the overhead would run for twelve months. The locks and tortuous channels would make the transit time exceedingly slow and would send insurance rates and pilotage charges sky-rocketing to the discouragement of the traffic and the diminution of any potential revenue.

It is observed that such an artery, if navigable, would become a strategic target of the highest importance to a potential enemy and that its value in wartime would speedily be reduced by enemy activity. Even in World War II enemy submarines penetrated the Gulf of St. Lawrence. How much easier would it be with guided missiles, and atom bombs, to destroy a lock, or a power plant, or some other strategic facility.

The agricultural Middle West would be opened up to a flood of foreign goods made available through cheap transportation. This would inhibit industrialization rather than facilitate it. Indeed, it is even conceivable that foreign farm products might come in on cheap transport to compete with the native production of the Middle West. After all, grain prices are set at Liverpool, and the farmers would never benefit from the transport earnings outbound. Those savings would go to the grain buyers abroad.

Atlantic ports such as Portland, New York, Boston, Philadelphia, Baltimore, and Norfolk would lose business as would also Gulf ports like New Orleans. Buffalo, Niagara, Erie, and Montreal would lose their large main revenues which they derive from the grain terminal and transshipment business.

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It is also argued that there is sufficient transportation at the present time for all the national and international trade that we have. The construction of the Seaway would duplicate existing capacity and render it useless, particularly railroad equipment. The materials consumed in this construction might be put to better use, housing for example. The railroads would lose the grain and coal carrying business which is very profitable to them. They would have to maintain equipment all year round, adequate to meet the winter load when the Seaway would be icebound. Their rate structures would be completely disrupted.

Even if the shipbuilding capacity of the Great Lakes were to be available for the construction of ocean-going vessels, delivery could not be made during the five winter months when the Seaway would be icebound. So any lead-time would be offset.

Finally, it is argued that while the Federal Government and a few state governors in the vicinity may be in favor of this as another public project, the range of private interests opposed to it is overwhelmingly coercive. This opposition includes the Lake Carriers Association, the Maritime Association of the Ports of Boston, New York, New Orleans, etc.; the Propeller Club of the United States; the United Mine Workers of America; the National Association of Manufacturers; the American Merchant Marine Institute, and the various railroad associations.

**Current Status of the St. Lawrence Seaway Project.** Probably the most dramatic statement made on behalf of the St. Lawrence Seaway was made by Harry S. Truman to the Canadian Parliament on June 11, 1947, which said in part:

> "The St. Lawrence project stirs the imagination of men long accustomed to majestic distances and epic undertakings. The proposal for taking electric power from the river and bringing ocean shipping 2,400 miles inland, to tap the fertile heart of our continent, is economically sound and strategically important.

> "When this program is carried out, the waterway that is part of our waterway will more than ever unite our two countries. It will stimulate our economies to new growth and will speed the flow of trade."¹/

This is the essence of the Democratic Administration's past and present policy, the most recent reiteration of which is to be found in President Truman's Budget Message for 1951:

> "I repeat most emphatically my previous recommendations for approval of the Saint Lawrence waterway and power project. Authorization of the seaway, with its related power facilities, is a matter of urgency for our peacetime industry and our national security. In particular, each succeeding year reduces further our domestic reserves of iron ore, and increases correspondingly the importance of the seaway as a means of economical access to the proven ore deposits in Quebec and Labrador."

¹/ For full text see Department of State Bulletin, June 22, 1947, pp. 1210-1213.

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These ore deposits in Canada are in considerable part manganifer-
ous, and there are unproved manganese deposits also of considerable
extent. Taken together, these deposits might also reduce in consider-
able measure dependence on overseas manganese supplies.

The St. Lawrence Seaway Project is sometimes compared as a defense
measure with the problem of the Trans-Isthmian Canal. Without consider-
ing the problem of constructing an entirely new canal as an alternative
to the Panama Canal, the improvement of the Panama Canal itself has been
urged as a matter of the greatest strategic necessity. In 1939 the con-
struction of a third set of locks was authorized. These locks were to
be 140 feet wide, 1200 feet long, and provide a navigable depth of 45
feet. They were then estimated to cost $277,000,000. Work was started;
but in 1942, after an expenditure of over 75 million dollars, it was sus-
pended because the project could not be completed before the end of the
war and because both men and materials were more pressingly needed else-
where. The recent report of the Governor on means of increasing and se-
curing the Canal estimates the present cost of completing the Third Lock
project, to provide locks 200 feet by 1500 feet, to be $1,143 million.
However, present locks are 110 feet by 1000 feet. There are important
strategic factors to be considered in terms of both +he use and the de-
fensibility of the Canal and the major burden of future war effort on the
use of shipping. A question is raised by the proponents of Panama Canal
Improvement as to its comparable importance in terms of the St. Lawrence
Seaway Project and others calling for increased national expenditures
for transportation purposes.

c. Public Highways for Defense Needs

Although the network of public highways throughout the country
represents about a 50-billion dollar investment over the past quarter
century, the Federal Government has contributed only about 20 percent of
the cost. 1/ In this area of the total transportation system of the coun-
try, the Federal Government plays a much smaller role than it does in
aviation and shipping, for example. Indeed, highways cost the Federal
Government annually about one-third of the cost to the Government of avi-
ation and shipping.

The Federal grant-in-aid system was inaugurated by the Federal-Aid
Road Act of 1916 with the establishment by the Federal Government of the
principle of granting funds to states for use on certain designated high-
ways, provided the states agreed to match the funds, to accept uniform
standards on roads, and to meet certain engineering and materials speci-
fications required by the Federal Government. While the Federal Govern-
ment puts up as high as 50 percent of the cost, pressures are strong for
having that percentage raised.

1/ Charles L. Dearing and Wilfred Owen, *National Transportation Policy*, the Brookings Institution, Washington, D. C., 1949, pp. 105-121.

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The program has been administered for the Federal Government by the Public Roads Administration of the Federal Works Agency, and by the National Park Service of the Department of the Interior, and by the Forest Service of the Department of Agriculture, inasmuch as public lands, national forests, national parks, and Indian reservations are involved as well as the interstate connecting commercial highways.

The importance of public highways in time of war does not need to be labored, particularly if the war is carried to the home front.

For purposes of priorities in the allocation of Government attention and funds, the Highway system of the country has been divided into the following categories:

1. <u>The National System of Interstate Highways</u>

"The National System of Interstate Highways is that system of highways designated in accordance with the Federal-Aid Highway Act of 1944 (Public Law 521, 76th Congress) limited to 40,000 miles in total extent and so located as to connect by routes, as direct as practicable, the principal metropolitan areas, cities, and industrial centers, to serve the national defense, and to connect at suitable border points with routes of continental importance in the Dominion of Canada and the Republic of Mexico." 1/

2. "Other Highways of Strategic Importance."

These are "existing highways other than the National System of Interstate Highways which because of their strategic location and points or areas served would potentially become major highway transportation lines of communications in the defense of the United States. . . . As weapons and methods of warfare change there will be a significant change in the strategic importance of a relatively small mileage of connecting highways not a part of the National System of Interstate Highways. These other highways should be identified and given equal priority in design and construction within practical economic limits. The total mileage of 'other highways of strategic importance' as foreseen at this time will not exceed 2,500 miles." 2/

1/ "Report of the Secretary of Defense on Highways for the National Defense to the Commissioner of Public Roads," March 11, 1949. Section 2 (2).

2/ Ibid., Section 2 (3).

In August 1941 a member of the Army General Staff stated that there would be no need of an Alaska-Canada highway unless we lost control of the Alaska Gulf. The Army had no interest in the proposal then. Yet in February 1942 the Army embarked on an expensive project to provide communications along such a route. A bill, H.R. 7890, has been introduced to provide for completion by the United States of the Inter-American Highway from Mexico to Columbia. Should these highway projects be included for consideration under the head "Public Highways for Defense Needs"?

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3. Federal Aid Primary System

4. Federal Aid Secondary System (the so-called "feeder system.")

5. Local Roads (farm-to-market, rural free delivery routes, school bus routes, and the like.)

Involved in a program of strengthening public highways for defense are such things as widening narrow roadways, providing essential by-passes, improving urban ingress and egress routes, eliminating dangerous grade crossings, providing adequate clearances in underpasses, strengthening bridges, improving streets and roads that service important war plants, ports, terminals, providing access roads to military establishments and airfields, mines, national forests, and even undertaking advance stockpiling of emergency bridge materials.

In a "Report of the Secretary of Defense on Highways for National Defense to the Commissioner of Public Roads, March 11, 1949," the following principles and needs were elaborated:

"In the improvement of this 'connected system of highways interstate in character,' it is considered important that wherever feasible there be incorporated in their design and construction the controlled or limited access principle. This is considered important to preserve the effectiveness and efficiency of the system by preventing ribbon development with direct access and cross traffic, which will ultimately create excessive congestion, and to make possible the exercise of a high degree of control over its use for high priority and/or military traffic in event of an emergency."

1/ *Ibid.*, Section 2 (6).

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"'Circumferential highways' are highways circumferential in character with respect to the center of the metropolitan areas which are extensions of or connections with urban arterial highways of the National System of Interstate Highways and for other principal rural highways and which serve as many as possible of the transportation terminals, industrial, metropolitan, and residential areas for the efficient flow of large volumes of traffic. . . . The National Military Establishment considers that urban arterial highways should be given equal consideration in their development to the highest practical standards with the National System of Interstate Highways and other strategic highways.

"Methods of modern warfare require the rapid movement of military forces through or around urban areas and may require movement of much of its civilian population and industry. Air attacks directing missiles of extreme reaction can render highways in areas with concentrations of tall buildings and structures of little use.

"Circumferential routes in large cities are potentially of greatest value to national defense from the standpoint of the movement of cargo and personnel by highway transportation when located in the outer development adjacent to smaller buildings and serving as many as possible of the transportation terminals and industrial areas.

"'Radial highways' are those important urban extensions of the National System of Interstate Highways or other principal rural highways which approach the metropolitan and business areas along radial lines.

"'Radial highways' so constructed as to serve efficiently the local civilian economy and with appropriate connections to circumferential highways will, it is believed, serve effectively the national defense.

"In the construction of the above referred to radial and circumferential routes, it is important that they incorporate the controlled or limited-access characteristics or have wide rights-of-way which would make possible the exercise of priority in their use and in event of bombing would reduce to a minimum the rubble that would fall on at least a portion of the traveled way." 1/

1/ *Ibid*, Section 3.

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"'Defense service roads' are roads that normally exist and are open for use, but because of the size or weight of vehicles or traffic volume generated by or the layout of a defense facility, industry, or military installation, may have to be reconstructed, relocated, supplemented, or otherwise improved from the boundary of such installation or area to a suitable highway, railroad, or waterway. ... Experience of World War II would indicate that only a small percentage of this type of highway requirement can be determined and construction justified in advance of a national emergency. However, during the early part of the last war, plans and funds were not available for immediate action when definite locations and potential traffic information were available. In some cases plants were completed before plans were made for highways to service them. There resulted unnecessary production delays and expense in providing adequate highway facilities. ... A preliminary survey indicates that there are an estimated 100 miles of this type of service road installations of the National Military Establishment which now or will in the next three years need improvement. ... In event of mobilization, there will be an estimated 2,500 miles of improved service roads required."¹/

"'Access roads' are roads that are potentially required but normally do not exist, the construction of which is required to provide access by highway transportation from a suitable highway, railroad, or waterway to material resources or processing points not available from the peacetime economy."²/

"'Installation roads' are roads or streets within the boundary of a military installation or industrial site which are controlled, constructed and maintained to serve the facilities and traffic within that installation or industrial site. ... The cost of construction and maintenance of installation roads is included in the funds appropriated for construction and maintenance of buildings and other facilities. Actual construction and maintenance is provided for by contract, installation personnel and facilities, or Military Establishment personnel and facilities."³/

The Public Roads Administration and the Department of Defense consider the accumulated requirements of the defense highway program to be of such importance as to warrant the most serious consideration by the Bureau of the Budget and the Congress. The truth of the matter is that in a war, roads are, or have been, considered expendable in the light of higher priorities for men, materials, and equipment. Whether

1/ *Ibid.*, Section 4.

2/ *Ibid.*, Section 5.

3/ *Ibid.*, Section 6.

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that would be true in a home front war is not clear. But the lesson of
World War II was that not only construction but also maintenance was
curtailed, with a consequent deterioration of the road systems that
has not yet begun to be remedied.

In 1948 the Congress asked the Public Roads Administration for a
current appraisal of conditions and deficiencies of the general high-
way system. 1/ The States cooperated with the Federal Government in a
mile-by-mile analysis of the physical condition of the interstate high-
ways system which resulted in the first accurate evaluation of this
system that the country had yet had. The result was a somewhat stag-
gering financial estimate of the requirements for remedying deteriora-
tions and deficiencies, which was presented to Congress on June 30,
1949:2/

"The estimated cost of improvements proposed is approximately
$11,266,000,000, of which $5,293,000,000 is for sections of the
system within the urban areas of cities of 5,000 or more popula-
tion, and $5,973,000,000 is for rural sections. These costs are
estimated on the basis of prices of construction work prevailing
in 1948. They may be lowered by a decline of prices in the
future. . . . As improvements are undertaken, ample provision
should be made for the increased traffic that may be anticipated
in a period of 20 years. This will increase the costs as esti-
mated, but not greatly."

It was, of course, realized that 11 billion dollars could not be
appropriated all at once. While it would be desirable to have the
benefits as soon as possible, the Public Roads Administration esti-
mated that if $500,000,000 were appropriated annually for a period of
twenty years, this would be the absolute outside limit of time in which
to do the job. The agency suggested to the Congress that it needed

1/

Federal-Aid Highway Act of 1948, June 29, 1948. "Section 2, The Commissioner of Public Roads is hereby directed to cooperate with the State Highway Departments in a study of the status of improvement of the National System of Interstate Highways, designated in accordance with the provisions of Section 7 of the Federal-Aid Highway Act of 1944; to invite the cooperation and suggestions of the Secretary of Defense and the National Security Resources Board as to their indicated or potential needs for improved highways for the national defense; and to supplement, not later than April 1, 1949, the report dated February 1, 1941, entitled 'Highways for the National Defense' (Seventy-Seventh Congress, First Session) to reflect current conditions and deficiencies."

2/

Highway Needs of the National Defense, House Document No. 249,
81st Cong., 1st Sess., U.S. Government Printing Office, Washington,
1949, p. 3.

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permanent legislative authorization, plus a permanent defense highway fund that could be used for emergency anticipated, construction and repair needs in war or peace, and for stockpiling highway and bridge repair equipment and requested that it be permitted to authorize Federal payment for war-necessitated construction up to 100 percent of the cost.

The following persuasion was offered for the urgency of this undertaking in a letter from the Commissioner of Public Roads to the Administrator of the Federal Works Agency of May 27, 1949, transmitting the results of the Federal-State Survey of needs.1/

> "In much the same manner as our great rivers gather to themselves the flow from innumerable other streams and their tributaries, the interstate highway system receives and must carry about 20 percent of the total vehicle-mileage generated by more than 41 million motor vehicles. The system of interstate highways comprises only 1-plus percent of the total of public roads and streets. The high percentage of total traffic reflects its peacetime use. This same limited system of major roads is clearly indicated to constitute the routes essential to defense needs. Any complacency we may have as to the present adequacy of these major roads to serve in peace or in war is shattered by the evidence presented."

### Arguments For Expediting the 11 Billion Dollar Road Program.
Arguments for moving forward with the 11 billion dollar program at a greater rate than the expenditure of half a billion dollars per year will permit, involve the current condition of the roads, the new strain that would be put upon them in a war emergency, and the increased growth of the economy even in peacetime.

The depreciation and obsolescence of the roads that accumulated during World War II left the system in a relatively poor state. For example, it is pointed out in the Federal-State Survey conducted in 1949 that the average age of the roadways was found to be 12 years; the average age of their roadbeds, 17 years; and that even after 10 years of a 20-year program of rehabilitation and replacement, the surfaces on the unreconstructed portion of the system would then be 20 years of age, and their roadbeds would be 25 years old.

In the meantime the total highway traffic is increasing. For example, it increased from 333 billion vehicle-miles in 1941 to 4000 billions in 1948, a rise of over 20 percent.2/ Registration of motor

1/ Letter from Thomas H. MacDonald, Commissioner of Public Roads to Maj. General Philip B. Fleming, Administrator, Federal Works Agency, Washington, May 27, 1949.

2/ See Statement of Thomas H. MacDonald, Commissioner of Public Roads Independent Offices Appropriation Bill for 1949, Hearings Before the Subcommittee of the House Committee on Appropriations, 80th Congress, 2d. Session.

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vehicles increased 17 percent during the same period (from 34 million to 40 million). Even more significant the number of trucks and buses-- heavy road users--increased 57 percent during the period (from 4,900,000 to 7,700,000). Over and above all that, maintenance requirements increased 56 percent in the same time bracket.

Moreover, since the war the Nation's industrial capacity has greatly increased--18 1/2 billions in 1948 as compared with 13 1/2 billions in the peak war construction year of 1942. This industrial expansion has an almost immediate impact on the use of the highway system.

President Truman himself has summarized the future situation as follows:

"... future demands will inevitably be greater as business traffic continues to expand, as our population grows, and as we build roads to reach needed resources now relatively inaccessible. Furthermore we must reconstruct important stretches of road which were not built to carry heavy traffic safely and at reasonable speed."¹/

It is also pointed out that World War II experience indicates that freight and passenger road traffic tend to concentrate in heavy duty vehicles in order to conserve manpower, equipment, and gasoline, and that this extra heavy duty wear on the roads needs to be anticipated and prepared for if lives are not to be lost, equipment wasted, and costs increased. It is said, for example, that "If in 1948 rural sections of the system had been improved as proposed, 1,400 lives lost in traffic accidents might have been saved. If in the same year the proposed improvement of urban sections had been completed the savings of travel time alone thereby made possible, valued at a cent a minute, would have amounted to approximately four-fifths of an annual installment of the capital cost estimated, amortized over a period of 20 years."²/ To defer the program needed for the future, would be to risk additional lives, time, and money.

Proponents of an accelerated road program call attention to the fact that the Government is encouraging a plant relocation and deurbanization movement and that as this gets under way, there will be more need for a better road system since there will be more dependence upon it.

Again, it is pointed out that if we had to transport heavy ordnance equipment on a home front battleground, which we never have had to do since the Civil War, that the roadbeds for the most part, even

¹/ Message of the President, *Congressional Record*, Vol. 94, Pt. 1, 80th Congress, 2d Session, p. 1228.

²/ *Highway Needs of the National Defense*, Ibid., p. 3.

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on the best parts of the system, would not be adequate. And that if
atomic warfare should reach the home front, it would be very important
not to be prevented from rushing supplies, aid, wrecking equipment,
and personnel into the damaged areas by a limited road system that was
inaccessible through bomb-damage or contamination from radioactivity.

Arguments Against Accelerating the Expenditure of Funds for the Road Program. On the other side of the ledger, it is argued that the funds just are not available for expenditure in larger amounts if the Government is not to increase deficit financing. Even if they were available, it is noted that the objective of the Government is to obtain a self-supporting highway system as soon as possible, and that putting in more and more federal funds does not help to get the financial operation in balance. Moreover, it is not just the initial outlay that must be calculated. Maintenance and repair for an indefinite future are substantial financial deterrents at best. Again, it is observed that an increase in grants-in-aid is always accompanied by an increase in Federal inspection personnel, and that this augments Federal bureaucracy when the objective is to reduce it.

Furthermore, it is maintained that the Federal Government ought
to do a compensatory public works job when private employment falls
off, not when private employment holds up as it has since the war.

Again, it is said that half of the peacetime vehicle-mile traffic
(truck, bus, and automobile) is urban in any case. That being so, the
highway problem is really primarily a local problem and the municipalities should find ways of meeting it out of their own budgets. It is also said that whenever the Federal Government makes grants-in-aid, there are always some localities that get away with evasions of Federal requirements because the Federal Government deals with them only through the states and there is alleged to be opportunity for them to slip through that noose, local politics evolving as they do to such a considerable extent around the highway funds.

Finally, it is observed that motor fuel and manpower will both
probably be short in the event of another emergency and that these two
factors alone would reduce the burden on the highway system immeasurably.
And by that time it is believed that air travel will also have taken
considerable traffic off the highways.

Current Status of the Defense Highway Program. Although the plans
for defense highway needs are thoroughly developed, and although the
program has Administration backing in principle, funds for implementing
it have not been requested much above the 1950 level because of the
effort to economize. The President's Budget Message for Fiscal 1951
is self-explanatory:

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"The Federal Government should continue to assist States in developing an adequate national highway system: Federal expenditures for this purpose are estimated at 507 million dollars in 1951.

"Federal grants to states for public works have also been generally limited to the necessary costs required to carry forward continuing construction programs, primarily those for highways, airports, and hospitals.

"Although these programs make important contributions to the development of our economy, over-all budgetary considerations make it impossible to proceed with them as rapidly as we should like. The 1951 Budget recommendations have been held as close to the 1950 level as program commitments would allow."

"Apart from the emergency relief programs during the depression, this will be the highest annual level of Federal highway expenditures to date.

"All of the Federal-aid funds thus far authorized have been apportioned to the States, and new authorizing legislation is therefore required during the present session of the Congress. I recommend that such legislation provide an annual Federal-aid authorization for the next 2 years of 500 million dollars, an increase of 50 million dollars above the current level. Within this total, increased emphasis should be placed upon the Interstate Highway System, a limited network of routes which is of greatest national importance to peacetime traffic needs as well as to our national defense. The recommended shift in emphasis, and increase in program level, should permit a satisfactory rate of improvement for this System."

### d. Synthetic Rubber

The synthetic rubber issue is controversial on at least two major counts:

1. Domestically, the problem revolves around the proper disposal of Government-owned plants to private industry.

2. Internationally, the problem revolves around the degree to which this Nation's dependence on natural rubber can be reduced without jeopardizing foreign relations and foreign policy. This involves controversy over the amount of synthetic consumption to be underpinned by controls.

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In peace or war the Nation moves to a considerable extent on rubber-tired transport. Moreover, literally fifty thousand other rubber items contribute to the peacetime standard of living and to the mobility and mechanization demanded in war. A modern war requires enormous quantities of rubber. National security necessitates a dependable and adequate supply of this strategic commodity. A million ton annual synthetic rubber capacity was reached in the United States during World War II at a cost of about $700,000,000, half of which is still in production, practically all the remainder in Government stand-by control, available for reactivation within a short time if needed.

Postwar competition between natural rubber and synthetic rubber is as real as predictions said it would be. Consumer preferences tend to favor natural rubber, except recently in the case of butyl tubes, but legislation provides minimum mandatory consumption standards of synthetic in the total public interest, at least until June 30, 1952.

Natural rubber is better in many end products, such as surgeons gloves, etc. A substantial portion of consumption is well over statutory security needs. Fluctuations in the cost of natural and synthetic rubber have occurred since the war; but at the present time natural rubber is considerably higher than synthetic rubber, and in some types for some uses the synthetic rubber is preferred to the natural.

The Rubber Act of 1948 sets forth the prevailing national philosophy with respect to this strategic commodity:

"Sec. 2. It is the policy of the United States that there shall be maintained at all times in the interest of the national security and common defense, in addition to stockpiles of natural rubber which are to be acquired, rotated, and retained pursuant to the Strategic and Critical Materials Stock Piling Act (Public Law 520, Seventy-Ninth Congress, approved July 23, 1946), a technologically advanced and rapidly expandible rubber-producing industry in the United States of sufficient productive capacity to assure the availability in times of national emergency of adequate supplies of synthetic rubber to meet the essential civilian, military and naval needs of the country. It is further declared to be the policy of the Congress that the security interests of the United States can and will best be served by the development within the United States of a free, competitive synthetic rubber industry. In order to strengthen national security through a sound industry it is essential that Government ownership of production facilities, Government production facilities, Government production of synthetic rubber, regulations requiring mandatory use of synthetic rubber, and patent pooling be ended and terminated whenever consistent with national security, as provided in this Act."

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Because of major difficulties in disposing of plants, and a legislative prohibition against disposing of the plants basic to the strategic production of certain quantities and types prior to June 30, 1950, the Government continues to own them. They continue to be, however, operated by private industry as agents for Government. Arguments pro and con turn on the advantage of Government *operation* (ownership already existing in fact) over the advantage of private *ownership* (operation already existing in fact). The general argument, however, has been advanced that it is better to keep, in these times, a non-successful operation under lease by Government, on the one side; whereas the other argument urges the advantages of combining private ownership with private operation.

Government controls on the consumption of natural rubber raise the issue of whether international security is better effected through satisfied friendly allies or through unilateral defenses. Arguments pro and con turn on the *degree* of mandatory consumption controls on synthetic, and the time during which they are to be enforced.

**Arguments For Private Ownership of Synthetic Rubber Plants.** Basic American philosophy rests on the assumption of a free, competitive private economy. Democracies are more efficient in war than dictatorships because they obtain maximum production from voluntary efforts. Government owns the plants that make the synthetic rubber--the first step. Industry owns privately the plants that convert the rubber into end products. The hope of private enterprise is to get increased activity in improving end items with corollary effects to improve basic materials. Ultimate prices to consumers are said by proponents of private enterprise to be lower under private ownership and free competition. It is argued that efficiency of operation plant by plant, is likely to improve under free enterprise. Incentives for new patents and, therefore, new markets are said to be stimulated. It is argued that commercial advertising and product promotion and product improvement would expand existing markets, find new uses, and strengthen the industry generally.

**Arguments For Government Operation of Synthetic Rubber Plants.** On the other hand, it is argued that the national security requires a larger industry than peacetime consumption would warrant private industry's maintaining under present circumstances. Research and rapid expandability are heavy financial undertakings--perhaps beyond the bounds of industry's purse. Moreover, it is said that the Government can facilitate the proper degree of plant dispersion geographically, can adjust production costs over a greater number of plants, and can provide a higher degree of readiness expandability. Plant security can be provided more fully under Government control. Again, the Government can obtain efficiencies and economies from a completely integrated synthetic rubber industry which would be impossible under a nonintegrated private system. Centralized overall control can be counted upon to attain total production objectives, despite individual plant failures, disaster, or labor difficulties.

The main argument against Government operation is the basic compatibility between *mandatory* use requirements and private ownership.

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**Arguments For Elimination of Mandatory Requirements for Consumption of Synthetic.** National security involves not only domestic invulnerability, but also the good will of friendly allies. It is argued that if we do not purchase natural rubber from our friendly allies, because of the mandatory requirements for minimum consumption of synthetic rubber, potential enemies will do so, thereby tending to alienate our allies. The natural rubber producing countries badly need dollars which the rubber trade could give them were there no arbitrary barriers to consumption. This item is, for example, the largest single dollar earner for the Commonwealth countries. Tax dollars for overseas aid might be reduced if normal trade in natural rubber were to be resumed. Restrictions established by the United States above the accepted minimum for a security industry breed direct or indirect retaliatory restrictions on the part of other countries and tend to negate a basic tenet of U. S. foreign policy--i.e., the lowering of trade barriers.

**Arguments Against Elimination of Mandatory Requirements for Consumption of Synthetic.** For technological reasons a certain percentage of any future war requirements for rubber should come from natural rubber--from stockpile, current imports, domestic production of guayule. The major percentage (about 85 percent) can be synthetic rubber. Synthetic plants represent an existing investment. Increased stockpile procurement beyond that now contemplated would represent a new and large outlay compared with the cost of maintenance of existing synthetic plants. Stockpile supplies at best could never meet long-range war requirements if for no other reason than that rubber deteriorates, and must be rotated. If stand-by facilities were not maintained, it would take too long to construct new plants upon the outbreak of war.

In order to keep the going industry improving its product and keeping the "know-how," it is necessary for the Government to require by law that the consumers of rubber use an arbitrary percentage of synthetic through specifications in rubber products to overcome their preference for natural rubber. The larger the active industry, the easier it is to expand it to meet requirements in war, and to obtain technological advances in time of peace. Even a minor deviation in the consumption of certain types of synthetic rubber, assuming no controls upholding the minimum security level, would endanger national security by the abandonment of synthetic capacity. An alternative argument stresses the assertion that mandatory controls need be kept only on a stand-by basis, with an experimental period of allowing the natural forces of market to insure what would be the "natural production of synthetic rubber."

Alternative methods of assuring synthetic consumption, and therefore synthetic production, are (1) tariff on natural rubber imports; (2) subsidy of synthetic rubber, (3) mandatory purchase of synthetic rubber; and (4) specification controls on rubber products. The latter is the Government's preferred alternative--the one that has been tested during the war and has been continued in the postwar period. It is also argued that taking into account what could naturally become the "hard core" of voluntary consumption, a total of 200,000 tons of mandatory use of general purpose rubber would be the amount necessarily maintained by legislative enforcement of specification controls. The present rated capacity of synthetic plants (owned by the government) is 600,000 tons.

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**Current Status of Synthetic Rubber Program.** The primary objective of national policy is to move toward private, competitive ownership and operation as rapidly as possible and to the maximum extent possible within the legislative limits to be prescribed by the Congress upon the expiration of the current Rubber Act on June 30, 1950. The Executive has recommended to the Congress¹ that the disposal program should guarantee continuation of safe production levels; should give reasonable protection to the interests of small business; should be geographically dispersed; should discourage monopolistic controls; should be equitable as between consumers of rubber, and as between the related reclaim and natural industries; should take into consideration the effect on foreign producers; and should return to the taxpayer a fair and reasonable amount of the original investment (about $700,000,000).

Moreover, national policy should at all times equate unilateral security with multilateral security. In this respect specification controls on rubber products in the United States should be terminated as soon as the synthetic industry is able to dispense with such arbitrary supports and to stand on its own feet in competition with natural rubber. Plants not necessary for peacetime production should be put in stand-by status if possible, but not until use of synthetic is firmly established on going economic grounds.

The House Armed Services Committee has before it a bill to extend the Rubber Act of 1948 without essential change until 1953. 2/

## e. Research

### (1) The National Science Foundation.

The decade of the 1940's witnessed the growth of the movement for a National Science Foundation.

The postwar idea of such a Foundation stems from separate but comparable conclusions reached in 1945 by a Subcommittee of the Senate Military Affairs Committee under the chairmanship of Senator Kilgore, and by the Office of Scientific Research and Development, at that time under the direction of Dr. Vannevar Bush. The motivation behind the proposal for a National Science Foundation was the wartime realization of the shortage of scientific personnel for advancement of the Nation's technological frontiers. This is a security measure of considerable importance. 3/ With prewar Europe's basic research now virtually extinct, and with the Soviet

1/ Synthetic Rubber, Recommendations of the President Transmitted to Congress, January 1950.

2/ H.R. 7579, 81st Congress, 2d Sess., March 6, 1950, "A Bill to Extend the Rubber Act of 1948," Referred to House Armed Services Committee. See also House Report, Armed Services Committee, on "Extending the Rubber Act of 1948," for details of the rubber program at the present time (March 14, 1950), and Hearings (February 20 through 27, 1950). 81st Congress, 2d Session.

3/ See *Science the Endless Frontier*, Report to the President on a Program for Postwar Scientific Research by Vannevar Bush, Director of OSRD, U. S. Government Printing Office, 1945.

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Union's emphasizing its own _basic and applied_ research program in the postwar era, United States leadership in technology was threatened by the deficiency of its _fundamental_ research program, and by a shortage of trained personnel in its _applied_ research.

An inventory and analysis of the Nation's governmental research facilities is to be found in The Report of the President's Scientific Research Board of 1947¹ under the chairmanship of Dr. John R. Steelman. This report recommended (a) that the United States should double the amount currently being spent on research, and (b) that the number of scientists and technicians trained in colleges and universities should be increased. This would require at least an expenditure of 1 percent of the national income on research.

The accepted concept of a National Science Foundation embraces a permanent Federal Government agency that would evaluate, develop, and coordinate the total scientific research program of the Nation; that would determine the appropriate role to be played by Government in it; that would see to the proper division as between basic and applied research; that would maintain a register of scientific and technical personnel; that would plug the deficiencies and impediments to a well-rounded national effort; that would promote and finance research in the basic sciences, national defense, medicine and health; that would grant scholarship and fellowship aid and train scientific personnel in the national interest; and that would encourage the exchange of information among scientists.

Research in the United States is carried on by three different kinds of scientific organizations:

(a) Government research and development laboratories, including those of the Armed Forces;

(b) Universities and colleges (public and private) and philanthropic organizations;

(c) Private industrial laboratories.

The National Science Foundation would coordinate Government research and would promote and finance private research in the universities and colleges and industrial foundations and philanthropic establishments.

Dr. Frederick L. Hovde goes to the root of the matter:

¹/ Science and Public Policy: A Program for the Nation, A Report to the President by John R. Steelman, Chairman, The President's Scientific Research Board, 1947, 5 volumes.

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"While endless debate turns about the pros and cons of the ownership and use of knowledge, I believe several things are quite clear. First, we agree that the public interest is always paramount and in the long run is controlling; second, that basic scientific inquiry and knowledge must be disseminated and free for everyone regardless of its sponsorship, and third, that in the administration of ownership, the equities of the participating parties in the discovery must be recognized in justice and fairness to all--the individual, the institution, the sponsor, and the public.

"The world produces but few who possess genuine creative ability, but there are probably enough such people if we could find and select them early and see to it that these precious assets are trained and given the opportunity to create. I firmly believe there are just as many superior individuals who are lost to effective national use as are trained in our universities today. They are lost mainly in the jungles of poor family and community environment in both the city and the country. They must be sought, found and given the chance to develop." ¹

Arguments about variations in the bills before Congress turn on the fields to be covered--i.e., the proper kind of administrative arrangement (the degree of public control to be exercised, responsibility to the President and Congress or autonomy); the patent practices to be followed; to whom and in what proportions the financial grants should be made; whether the social sciences shall be included or excluded; and whether the FBI should evaluate the information which it now hands to employing agencies for the latter's own clearance decisions.

**Arguments For a National Science Foundation.** Arguments for the Science Foundation are political, economic, and financial in character. Politically it is observed that the Soviet Union has a major research and development program underway, and that it behooves us to spend as much if not more on our effort, if only to keep our technological lead in this age of tension. Moreover, before the war the United States excelled in applied research, but did little in the way of pure research since it could rely on the product of Europe's basic research. However, the war wiped out the European lead in pure research, and therefore, the United States is forced to initiate its own fundamental research as well as to apply it from now on. Since pure research is nonprofit making, industry will neglect it for the remunerations of applied research. Again, it is alleged that the universities and philanthropic foundations have been more concerned with mass dissemination of knowledge rather than with its basic creation. So it is of necessity

¹/ "The University's Role in the Nation's Research," Frederick L. Hovde, *Chemical Engineering*, January 1949.

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the problem of Government to promote and finance the area of pure re-
search. Moreover, the Government must, of course, be responsible for
the area of military research because of its secret nature, because
it is not particularly useful to industry, and because it is always
expensive.

Advocates of the National Science Foundation point to the fact
that Government support for agricultural research has been very pro-
ductive--more than paid for itself--and that the same thing could be
expected from such support in other fields.

It is pointed out that total Federal expenditures for research
are running at an annual rate of about a billion and a half dollars,
excluding atomic energy, and it is said that this should be handled
all in one piece as a total balanced project, not as an uncoordinated,
piecemeal arrangement.

And finally it is argued that there is no incompatibility between
Government-supported free research and security safeguards for pro-
tecting national defense.

Arguments Against the National Science Foundation. Arguments
against the National Science Foundation have to do principally with
the ownership, use, and administration of research.

Those who oppose such a government foundation claim that it will
stifle private initiative; channel it in arbitrary directions; make it
subject to political controls. They claim that in no time at all FBI
investigations will be required for scholarship holders as was done in
the case of the Atomic Energy Commission's nonclassified predoctoral
fellowship program which the National Research Council of the National
Academy of Sciences declined to administer. On the other hand, it is
also argued that certain of the sponsors of the successive measures in
Congress have been active in organizations listed as subversive by the
Government. Representatives of the National Patent Council have ob-
jected to any proposal that would change the status quo on patent pro-
cedure. It is also claimed that science now has all the money it needs
for military research, in the appropriations for the Research and De-
velopment Corporation and the Atomic Energy Commission. Finally, there
are some critics who allege that to set up such a foundation may tend
to emphasize and even substitute research for readiness measures.

Current Status of the National Science Foundation. The Presi-
dent's Budget Message for Fiscal 1951 sets forth the Administration's
position with respect to the National Science Foundation:

"The Government is investing hundreds of millions of dollars
in research--primarily in applied research in the military,
atomic energy, and health fields. We must consider, however, not

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only the ways in which the great reservoir of scientific knowledge already at our disposal can best be utilized, but also the best paths to follow for the discovery of further basic knowledge. To this end we urgently need a National Science Foundation to stimulate basic research and to assure an effective balance among the Federal research programs. By developing a national research policy and by formulating a truly national research budget it should be possible to relate the activities of public and private institutions in a concerted effort to advance the frontiers of knowledge. The Budget provides 500 thousand dollars for the initial administrative expenses of the proposed National Science Foundation, in the expectation that the Congress will enact legislation, already passed by the Senate, to establish it."

Senate 247 was passed by the Senate in 1949. House Bill 4846 was passed by the House in 1950. At this writing a Conference Committee has just succeeded in reconciling discrepancies between the two bills. The security provision contained in the Conference Report is of crucial importance in the effort to keep the advantages of free science, yet establish adequate provisions to protect secret and classified scientific projects. To lose the support of scientists is to lose the cold war. No aspect of psychological warfare has been more successful from the Russian point of view than filling U. S. scientists with alarm about the future freedom of science in this country, to the degree that many have refused to work on secret projects for the defence of the United States. What the future freedom of science would be if Moscow controlled the world does not seem to alarm some scientists who are deeply troubled by the mote in our own eye. Scientists have seemed to be particularly vulnerable, perhaps because of lack of political sophistication, to the forming of "front organizations" with worthy names and Moscow strings. The model formula on security in the new act, therefore, is of the greatest possible importance to our success in the cold war. 1/

1/ The bill as reported from conference eliminated provisions of the House amendment (1) requiring reports from the FBI "evaluating" the loyalty of applicants for employment or scholarships and (2) precluding from consideration any person who has ever been a member of a "front organization" listed by the Attorney General. The new security provisions of the bill are, briefly, as follows: (a) Security provisions of the Atomic Energy Act to apply where activity of the Foundation involves restricted nuclear energy data (FBI investigation and report on the "character, associations and loyalty" of the individual before he is given access to such data); (b) The Foundation to establish its own security requirements in activities relating to the national defense, except in the case of such activities with respect to which funds are transferred from the Department of Defense to the Foundation, in which case the Secretary of Defense is to establish security requirements; (c) FBI investigations and

(note continued on following page.)

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reports are required before access is given to information or
property as to which access restrictions are established under;
(b) The Foundation is then to determine, on the basis of the
FBI's findings, whether access is to be granted; (d) Loyalty
oaths and affidavits are required of holders of Foundation schol-
arships and fellowships. House Report No. 1958, April 26, 1950.

f. Power

(1) The Columbia Valley as a Case Study.

The proposal for a Columbia Valley Administration may serve as a
major example of administration thinking on the development of hydro-
electric power to meet planned defense needs. The location of war
industries of certain types was found, during the last war, to depend
on available power. The TVA proved most useful. Prospects of future
overall power shortage is a basic part of the Administration's concern
with planning for economic war mobilization. The defense planning as-
pect of the CVA involves two distinct phases: (a) a substantive phase.
This is the ultimate development of a power, irrigation, reclamation,
resources conservation, and recreational grand plan; and (b) a pro-
cedural phase. This has to do with a reorganization of the present
Federal Government functions in the Pacific Northwest.

At the outset if should be clearly understood that the legisla-
tion sponsored by the Administration currently before the 81st Con-
gress has to do only with the Federal Agency reorganizational
procedure. It is not concerned with the subsequent substantive aspects
of the plan of the future. The discussion that follows endeavors to
separate the procedural and substantive objectives.

The Columbia Valley Administration Development Program. Some idea
of the possibilities of the Columbia Valley may be found in the pros-
pectus (covering its general importance) prepared by the Department of
the Interior in 1947:1/

"The Columbia River Basin is the heartland of the Pacific Northwest. The lifeblood of the basin is its water resources, which must be more fully directed into useful channels to attain needed economic growth of the region. These water resources must be made to irrigate more land, turn more turbines, and carry more commerce. Unless now wasted water resources are so employed, the Pacific Northwest

1/ The Columbia River, A Comprehensive Departmental Report on the De-
velopment of the Water Resources of the Columbia River Basin for
Review, Prior to Submission to the Congress, U. S. Department of
the Interior, February 7, 1947, p. 15, p. 23.

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will fall short of its potential contributions to the Nation's economy and may be faced with stagnation brought about by further depletion of the region's forests and exhaustion of its richer ores."

"The 238 projects in the plan would provide irrigation water for 5.36 million acres of land, including 3.84 million acres not now irrigated. Diking and drainage works would increase the utility of 565,500 acres. From 50,000 to 70,000 new farming opportunities would be provided by these land developments. The projects would also facilitate the establishment of industries requiring large blocks of power and the widespread, beneficial use of power in rural and urban areas by provision, at low cost, of 55.6 billion kilowatt-hours of firm electric energy and 9.1 billion kilowatt-hours of secondary energy annually. Inland water navigation would be expanded, and the menace of heavy destruction from floods would be removed."

"Construction costs of the comprehensive plan of development presented in this report, at 1940 price levels, would aggregate somewhat more than $3,500,000,000, including the cost of a transmission system, estimated at about $1,000,000,000. Much less than this total outlay would be required at any one time inasmuch as substantial revenues from projects constructed early in the development will be realized before construction is undertaken on deferred projects. These construction costs, unavoidably based in many cases upon preliminary and incomplete information, are tentative, and are subject to modification as further investigations are completed. Operation, maintenance, and replacement costs are estimated at approximately $60,000,000 annually. They are based on past experience in the operation of power and irrigation systems, and in the case of navigation and flood control, on determinations of the War Department. Total annual costs, including an allowance for amortization of the entire investment of $3,500,000,000 in 50 years with interest at 3 percent on the outstanding balance, would be approximately $200,000,000 or about two-thirds of the monetary value of annual benefits subsequently presented."

These projects must be viewed against the background of the Columbia River Basin where farming (including livestock ranching) overshadows all other industries, and where lumbering and mining are next in importance.

The CVA proposal is in many ways comparable to the TVA and in many ways different from it. The comparison, however, is inevitable, recruiting as it does friends and foes alike on the basis of support or opposition to the TVA.

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One of the congressional sponsors of CVA legislation says "the approach taken in 1949 with respect to the Pacific Northwest was materially different from the approach taken in 1933 with respect to the Tennessee Valley area" on the assumption that each regional proposal must be designed to meet the requirements of the region for which it is intended. 1/

The CVA would cover a much larger territory than the TVA--
270,000 square miles covering six states, as against TVA's 41,000
square miles most of which is in one state. Other basic differences
between the two can be found in the fact that CVA would have greater
power authority (in stand-by facilities, in stringing transmission
lines, in setting rates, in buying privately-owned utility systems,
and the like) than the TVA. On the other hand, the CVA would not
have the powers of the TVA in land and mineral conservation. Moreover,
the CVA would be forbidden to interfere with existing state water-
rights laws.

Federal Agency Reorganization in Pacific Northwest. The Federal
Government's proposal for the establishment of a Columbia Valley Ad-
ministration was formally made by the President to the Congress in a
Special Message of April 13, 1949. 2/

"I recommend that legislation be enacted reorganizing certain Federal activities in the Columbia River Valley to the end that the Federal Government may play a more effective part in the development and conservation of the resources of the Pacific Northwest."

Since that time four Administration bills have been introduced
into the Congress to give effect to the request, but none so far has
been able to run the gauntlet of controversy which this issue has
precipitated.

The Federal agencies now operating in the Pacific Northwest that
would be reorganized and coordinated under the CVA plan would be the
Bureau of Reclamation, the Bonneville Power Administration, the Army
Engineers (except for the latter's channel and harbor work in tidal
waters) National Park Service, National Forest Service, Soil Conserva-
tion Service, Bureau of Mines, and Fish and Wildlife Service.

1/ Henry M. Jackson, U. S. Representative for Washington, "The Proposed Columbia Valley Administration," *Public Utilities Fortnightly*, November 24, 1949, Vol. XLIV, No. 11.

2/ Message from the President of the United States, Requesting the Establishment of a Columbia Valley Administration, April 13, 1949, 81st Congress, First Session, House of Representatives, Document No. 158.

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In short, CVA is first a Federal agency reorganization measure, secondly a hydro-electric power authority, thirdly an irrigation project, fourthly a resources conservation measure, and finally a recreational development measure.

Major controversial features of the CVA turn on States rights versus federal powers; the constitutionality of "regional government"; and private versus public power development. Although the Executive agencies are interested in concentrating attention on first things first, which in this case means the agency reorganization, and the legislation sponsored asks for no development funds, the controversies surrounding reorganization seem to become inextricably bound up with the controversies over development projects. Therefore, the arguments pro and con given below are not clear-cut arguments on the merits of the legislation itself. However, the reader would do well to keep in mind the fact that the reorganization bill is controversial largely on the issue of States rights versus Federal authority. It is also well to bear in mind the fact that while the security implications for the development program are very great, the security aspects of reorganization are also exceedingly important to the Federal Government.

*Arguments in Favor of the CVA.* An extension of the remarks of the Hon. Hugh B. Mitchell in the *Congressional Record* of January 6, 1950, highlights the major reasons why the CVA is needed.¹

"(a) Power shortage: With 42 percent of the Nation's hydroelectric potential, the Northwest is the only region in America with a power shortage.

"(b) Unemployment: This lack of power, when it is potentially here to burn, has helped to create an unemployment three times the national average in the region.

"(c) Flood control: Every year raging floods destroy lives and property throughout the Northwest. Yet no adequate system of flood control exists, nor has one been proposed by the existing Federal agencies.

"(d) Erosion: With 100,000,000 tons of topsoil going down the Columbia every year, the Pacific Northwest is the second most critical area in the Nation for erosion, according to the U. S. Soil Conservation Service. Yet scarcely anything is being done about it."

1/ *Congressional Record*, January 6, 1950, Extension of Remarks of Hon. Hugh B. Mitchell on the CVA, A-67.

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Of these arguments, only the first is immediately and directly
vital from a defense point of view.

Henry M. Jackson, U. S. Representative from Washington, and an-
other sponsor of CVA legislation, said in its behalf: 1/

"Existing agencies of the Federal Government at present are
engaged to a substantial degree in the generation, transmission,
and disposition of electric energy within the region.

"But the problem with which the CVA proposal deals is much
more than a problem of power: it is a problem of carrying out more
efficiently the Federal Government's responsibility pertaining to
conservation and development of all our natural resources. It is
a problem of achieving balance among the various phases of these
functions--between power and the other important phases, such as
irrigation, soil conservation, fish and wildlife conservation."

Still other supporting arguments that:

"An authority will have the power to engage in activities es-
sential to a full development of the resources of a region which
are not now the concern of any agency at all. Among these are
soil-erosion control, topsoil rebuilding, provision of terminal
facilities, development of new industries, and the like." 2/

"Someone must decide the present conflict of interests be-
tween navigation and irrigation as well as power. An authority
such as CVA can make these decisions for the benefit of the
region as a whole." 3/

Arguments Against the CVA. Arguments against the CVA play down the defense angle and suggest that the project is less important for defense than for politics. The opponents claim that it would deprive the states of powers, leaving them entities in name only; that local governments would be deprived of their legitimate local tax revenues; that regional authorities are not provided for in the Constitution; that this would be a form of extreme State Socialism; that water and power rightfully the heritage of one state, could be diverted to other states for political reasons; that the Federal Government would be competing directly with private business and industry; that the corporation proposed would be a monopolistic bureaucracy independent of constitutional checks and balances; that it would adversely affect the salmon industry; and that it is unfair of the Department of the

1/ Henry M. Jackson, "The Proposed Columbia Valley Administration," Public Utilities, November 24, 1949, Vol. XLIV No. 11, pp. 756-761.

2/ "C.V.A.--Its Background and Issues" *Congressional Digest*,
January 1950, pp. 10-12.

3/ *Ibid*.

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Interior to use its multi-million dollar budget to propagandize the
peoples of the Northwest in favor of the CVA.

Raymond Moley has taken up the cudgels against the CVA as point-
edly as anyone in the following manner: 1/

"Since the Columbia Valley is dependent on water and its uses for power, irrigation, navigation, and the maintenance of lumbering and wild life, the autocracy of the CVA would mean power of life or death for every economic, political, and financial activity. Through plenary governmental powers the CVA could and would become the owner of vast property and would be free to develop, distribute, lease, and dispose of that property without let or hindrance. It could at will rearrange highways, railways, bridges, mills, and electric-light plants, publicly or privately owned. It would make and distribute electric power and water without control by state or local regulation.

"Since its huge properties would be removed from the reach of the taxing authorities of the state and local governments, those agencies, thus impoverished, would become mendicants dependent upon the C.V.A. In lieu of taxes, that administration would be authorized to dole out payments to such state and local units of government. It would have such great discretion in such doles that it is hard to see how state and local governments would retain a shred of independence. So that there could be no nonsense in the courts, the bill specifically says that 'the determination by the (C.V.A.) of the necessity of making any payments and of the amounts thereof shall be final.'

"The C.V.A. would determine the size of farm units that should be benefited by vital irrigation or flood protection. It would give or sell newly reclaimed land in such units as it might determine as 'economic.' We would have to go back hundreds of years to find a parallel to such serfdom.

"The C.V.A. could operate with unlimited funds a wide variety of businesses exempt from the restraints that states have set up for the control of competition.

"The C.V.A. would start with a fund in the Treasury of the U. S., appropriated without strings by Congress, and it could dip into that fund practically at its own discretion. But after a

1/ Raymond Moley, "Death Sentence for State Government," *Newsweek*, August 15, 1949, p. 84.

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while it would be receiving huge sums from its own operations.
It could literally play with hundreds of millions of dollars.
And it could make its profitable power and irrigation business pay
for almost any activity that might occur to the directors.

"In the battle to come, the opponents of this plan will be smeared as tools of the power interests. The erstwhile important power interests have been left far behind in this drive for statism. It is not only private enterprise that is prescribed in the C.V.A. It is the public's control of its own government."

**Current Status of CVA Proposal.** The President's Budget Message for Fiscal 1951 reiterates the Administration's desire to proceed with the reorganizational aspects of this project.

"I have already recommended that the Congress authorize the consolidation of a number of Federal activities in the Pacific Northwest into a Columbia Valley Administration, and provide for its proper integration with other Federal agencies and with State and local responsibilities. In other areas also we should be alert to the opportunities for better administrative arrangements, building on successful experience in the Tennessee Valley and elsewhere, and adapting organizational patterns to the particular circumstances of different regions."

Congressional hearings are being held on various measures proposed from time to time in legislative form on one phase or another of the project. The Administration sponsored Bills, H.R. 4286, and H.R. 4287, April 14, 1949, and S. 1631 and S. 1645, April 19, 1949, are still in the Public Works Committees of the House and the Senate respectively. There are no Administration bills before the Congress involving funds for the developmental aspects of the CVA.

1. Funds have, of course, been made available for the substantive development of the Columbia Basin, in particular, power. The 1951 Omnibus Appropriation Bill provides additional funds on the basis of budget requests that include: Bonneville Power Administration, Bureau of Reclamation (Hungry Horse Project and Columbia Basin Project), Corps of Engineers (McNary Lock and Dam, Chief Joseph Dam, Lucky Peak Reservoir, Lookout Point Reservoir, Detroit Reservoir). The total for these projects only for 1951 amounts to $199,250,000. Thus far the Bureau of Reclamation has expended about $320,000,000 for these features, the Corps of Engineers over $145,000,000. It must not be implied, therefore, that the development of hydro-electric power itself in the Columbia River Basin absolutely requires a Columbia Valley Authority; though it is urged by the administration that such an authority would greatly simplify and make more efficient the existing power developments, as well as future planning.

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g. The Stockpile Program

The accumulation of a national stockpile of strategic and critical materials has become a national policy as a result of raw materials shortages in two world wars. Stockpiling is, of course, only one of the means by which the raw materials position of the nation is reinforced. Perhaps equally important alternative methods are to be found in research and development for substitutes and synthetics; in simplification of design that will conserve scarce materials; in standardization of specifications that will minimize waste. Even were the new approach to the materials problem completely conceded--namely, that on the basis of German experience in World War II few materials are absolutely indispensable, it would still be an insurance measure of great importance at this stage of our technology to stock the time, money, manpower, and efficiency in advance of an emergency that is represented by a national stockpile. That is why this program has a firm legislative basis, a definite budgetary niche, a wide inter-agency administrative procedure, the participation of industry advisory committees, and a definite relationship to the whole defense rationale.

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There is nothing particularly controversial about the stockpile program as such, unless it be the adequacy of objectives if the United States lost most of its overseas sources of supply in a long war. Controversy turns on the rate at which it is to be accumulated, involving as it does a total outlay of approximately 3 billion dollars for the acquisition of 71 materials to bridge a deficit between wartime requirements and available wartime supply. Since "balance" among all elements of a security program is a basic requirement of current national policy, the issue becomes a challenge on two counts-- (a) whether the current rate of procurement does not in fact result in an underbalance of this segment of the security program, or (b) whether it would not be the better part of wisdom to achieve the total stockpile goal as soon as possible without regard to temporary overbalances in this aspect of the total security program. This is particularly true for a few of the most critical materials.

The stockpile program evolved from an Army General Staff list of scarce materials compiled in 1921, through the Stockpile Act of June 7, 1939, expanded during World War II, and reenacted as a postwar national policy in the Stockpile Act of July 23, 1946, even though there appeared to be no immediate threat of war.¹/ Experience with the raw materials deficiencies had been sufficiently bitter in the recent war to produce this new departure of a preparedness policy even in the absence of a known threat. As the possibilities of Soviet hostility became clearer, the policy of stockpiling took on greater urgency.

The following criteria are used in determining what materials are to be stockpiled:

1/ The following legislation builds up the National Stockpiling Program:

*   **Harbord List, Army General Staff, 1921**
    *   1938 Naval Appropriations Act, April 28, 1937
    *   Public Law 117, 76th Congress, June 7, 1938
    *   Public Law 361, 76th Congress, August 9, 1939
    *   Public Law 387, 76th Congress, August 11, 1939
    *   Public Law 442, 76th Congress, March 25, 1940
    *   Public Law 664, 76th Congress, June 25, 1940
    *   Public Law 667, 76th Congress, June 26, 1940
    *   Public Law 784, 77th Congress, May 28, 1941
    *   Public Law 457, 78th Congress, October 3, 1944
    *   Public Law 520, 79th Congress, July 23, 1946
    *   Public Law 395, 80th Congress, December 30, 1947
    *   Public Law 472, 80th Congress, April 3, 1948
    *   Public Law 793, 80th Congress, June 28, 1948
    *   Public Law 759, 80th Congress, June 24, 1948
    *   Public Law 152, 81st Congress, June 30, 1949
*   **Section 416, Agricultural Act, 81st Congress, October 31, 1949.**

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1. They must be essential for the common defense. This means for industrial production for military, war-supporting, and essential civilian requirements. There are naturally degrees of essentiality.

2. They must be insufficiently available in the United States.

3. They must be capable of reducing or eliminating a dangerous and costly dependence on some foreign nation.

4. They must be storable.

Because the American economy is primarily a minerals technology, the stockpiling program is geared heavily to minerals and metals, running the alphabetical minerals lexicon from antimony to zircon. Alloys for steel, such as manganese, chromite, vanadium, tungsten, molybdenum, rutile; nonferrous metals such as copper, lead, and zinc; tin, nickel, and bauxite (for aluminum) are all of special importance. However, selected fibres (sisal, hemp, abaca), commercial oils, medicinals, insecticides, tanning agents, and even spices are also represented.

Materials are deleted or added as technology advances. For example, since 1945 optical glass, kapok, tung oil, natural rubber latex, and rapeseed oil have been dropped from the program, whereas chemical grade chromite, aluminum metal, and (crocidolite) asbestos have been added to it.

In time of peace, the stockpile program in the total national interest takes into account such things as cost (where less expensive manganese is stocked instead of the more expensive ferro-manganese for example); various methods of financial procurement, such as "spot purchases," purchase contracts for delivery over a year or more, and long-term developmental contracts; various methods of obtaining supplies, such as rubber, fibres, commercial oils, and pyrethrum.

Not only must the stockpile program be balanced with relation to the whole military program, but each element within itself must be balanced. For example, procurement policies must take into account the desirability of having some stocks on hand for all materials on the list, rather than having the goals completed for several, and none on hand at all for others. They must take into account time and distance factors, so that procurement from relatively remote foreign sources in which there is an exclusive world supply is accelerated until the goal is in sight, at the expense of procurement from closer, safer sources. These are the "procurement curves" for each material which result in a balance among the materials on hand and readily available, and a balance in the spread of financial outlays in order not to disrupt the market. Development policies, though not necessarily procurement policies, must also take into account the legislative mandate to "Buy American" wherever possible in the interests of domestic producers.

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At least 16 executive agencies and 11 congressional committees are involved in various aspects of the stockpiling program, such as the formulation of policy, appropriations, exploration, development, procurement, research, and intelligence.

The National Security Resources Board advises the President concerning the coordination of military, industrial, and civilian segments of the program. 1/

The Munitions Board and the Department of the Interior formulate stockpile objectives, and then through an Interagency Stockpiling Committee, develop the procurement programs.

In the event of shortages for current industrial consumption and for stockpile, the Department of Commerce indicates how much should be designed for current consumption, and how much should be set aside for stockpile.

The Bureau of Federal Supply of the Department of the Treasury does the actual procurement and storage except in the case of tin and abaca which are handled by the Reconstruction Finance Corporation. The Export-Import Bank may make long-term development loans as was done in the case of iron ore in Canada, on strategic and critical materials.

The Department of State is concerned with the foreign policy aspects of availabilities, access, procurement, and development of strategic and critical materials.

The ECA is required through techniques specified by law, to obtain strategic and critical materials from the participating nations.

The Commodity Credit Corporation is authorized to exchange surplus agricultural commodities for strategic and critical materials.

The General Services Administration is authorized to accept strategic and critical materials in lieu of rental on war plants leased to private interests.

The Bureau of the Budget reviews the impact of the stockpiling program on the economy as a whole.

The Research and Development Board conducts research on substitute materials and estimates the potential drain on strategic materials of possible new weapons.

1/ N.S.R.B. Document 99, January 5, 1949.

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The Central Intelligence Agency is responsible for the collection of world-wide information with respect to availabilities and production of essential materials.

In addition to the broad policy problems which are handled by the Interagency Stockpile Committee on which are represented the major Executive Agencies having stockpiling interests, there are 12 Commodity Committees which handle the technical problems of the materials in question. Then there are 12 Industry Advisory Committees and 28 Sub Committees, which advise the government on matters of purchase, sale, care, and handling of materials. These 475 industry representatives are chosen with regard for all segments of the industry in mind, and with further regard to representation from the geographical pattern of the industry.

The Munitions Board's semiannual Report to the Congress on the Stockpiling Program of January 23, 1950, states that:

> "The stockpile is now in the middle of its fourth year of a projected five-year program. Yet it is still many years away from completion. . . . The rate of stockpiling, one of the most significant aspects of the program, is now in effect a matter for congressional determination. Availability of materials for purchase has ceased to be as important a limiting factor for most materials as is the availability of funds with which to buy them."

No special effort seems to be made to disperse stockpiles of minerals as a protection against contamination, in case of atomic attack on the facilities where they are now stored near their point of use. This may be a suggestion of excessive caution, in view of the long delay that would be involved in building new or restoring bombed facilities, but the question deserves study, along with the vulnerability of foreign sources of supply to sabotage or political loss.

### Arguments For Accelerating the Stockpile Program.
Arguments for accelerating the stockpile program are security and economic arguments. The security arguments have to do with the desirability of obtaining an adequate inventory of raw materials in advance of an emergency; in the savings in time, money, and transportation that also come from stockpiling in advance.

On economic grounds, acquisition of new materials from foreign sources tend to provide dollars to other nations, and this in turn contributes to the closing of the dollar gap--an important part of current U. S. foreign policy.

1/ Stockpile Report to the Congress, Munitions Board, January 23, 1950, pp. 23-24.

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The daily cost of World War II has been set at about half a billion dollars. At this rate the total stockpile after completion would only have represented about a week's expenditure.

The fundamental arguments for the stockpile itself are the same arguments that underpin the desirability of its acceleration. These are set out officially in the Report to the Congress by the Army-Navy Munitions Board in 1948, in part as follows: 1/

> "...The strength of the Axis Powers was derived to a large extent from the stockpiles of vital raw materials accumulated in the years preceding the outbreak of hostilities. Likewise, the limited ability of the United States to satisfy its military requirements in the early days of our participation in this war can be substantially attributed to the small stock piles of strategic and critical materials acquired prior to Pearl Harbor.

> "...At the beginning of war, shipping becomes a serious problem, available ships being immediately needed for the distribution of personnel and supplies as required by the armed forces. At the same time, the requirements in raw materials to meet the needs of our war industries are greatly expanded. A diversion of shipping in order to import those materials is a net loss to the war effort in those cases where this could have been obviated by stockpiling such materials in peacetime.

> "Another compelling reason for stockpiling lies in the fact that at the outset of war we are likely, by reason of enemy operations, to be denied access to the principal world sources of many strategic materials. . . . As another example, we note that, in the winter of 1942-43, substantial tonnages of bauxite from the Guianas were lost due to submarine sinkings; these losses, in turn, threatened to curtail aluminum production, placed an additional burden upon domestic mining facilities, and drew labor from other important war production.

> "Since the major portion of raw materials essential to the production of munitions, particularly minerals, are not subject to deterioration through storage, acquisition and stockpiling of these materials prior to war will make available larger amounts of shipping space to move such commodities as coffee, sugar, palm oil, cocoa beans, copra, and other important seasonal or perishable items.

1/ Report to the Congress by Army-Navy Munitions Board (hearings before the Subcommittee on Mines and Mining of the Committee on Public Lands, House of Representatives, 80th Congress, 2nd Session, Pt. 5, Committee Hearing No. 38, May 3 and 6, 1948, p. b84.

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"Obviously, the necessity for importing extraordinarily large tonnages of raw materials vital to the munitions program, under the most hazardous conditions, imposes heavy responsibilities on the Navy in escorting such movements and, in consequence, reduces the availability of fleet units for direct military operations.

"Acquisition of supplies from foreign sources is hampered by rapidly rising prices, increased shipping and insurance costs, and trade barriers. Furthermore, our enemies during a war are actively engaged in preclusive buying.

"Adequate stockpiles of strategic and critical materials at the outset of hostilities permit a more effective form of governmental control of supplies than would otherwise be the case.

"Acquisition prior to a war of materials of grades and qualities not economically available in this country also makes possible the greater use during an emergency of certain lower-quality domestic materials which would otherwise not be usable by our manufacturing industries, and which can be mixed or blended with the high-grade materials from the stockpile.

"Another obvious advantage of prewar stockpiling is a more efficient utilization of labor and equipment.

"The domestic production of certain minerals and metals in this war has increased beyond all previous records, and our reserves have been depleted at an alarming rate. Unless new reserves are discovered, therefore, our country in the future will be even more dependent upon foreign sources than it has been in the past, and to a large extent, stockpile goals must therefore be raised.

"Moreover, during the last two major conflicts, this country has been fortunate in having access to large foreign sources of raw materials in friendly countries. A different alinement of nations in a future war, involving enemy control of different geographic areas, might drastically curtail the movements of such materials into the United States."

*Arguments Against Accelerating Stockpile Procurement Now.* Arguments against accelerating the stockpile objectives at this time are financial, economic, political, and technological in character.

It is argued that money just is not available over and above what has already been appropriated; that if the government were to descend on the world market with a great demand, prices would rise inordinately, and that the cost of storage, protection, and interest on the public debt incurred are important financial items to be taken into account.

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Economically it is said that the production of materials for stockpile "is contingent upon overcoming the natural reluctance of private industry and foreign governments to produce for American stock pile in addition to world consumption. This reluctance is based upon the fear of sizeable stocks overhanging the world market which, if liquidated at will, might place the control of world prices in the hands of the United States Government. It cannot be assumed that dollars alone will coax production into the American stockpile where that same production, if liquidated, could result in much greater dollar losses to the foreign governments at a later date."¹

Politically it is argued that domestic producers would resent the
competition from a world market upset resulting from the government's
accelerated activities in foreign markets. This resentment it is be-
lieved would culminate in additional congressional efforts to enforce
the "Buy American" principle--which would in part contravene the con-
servation efforts of the Government.

Technologically, it is argued that we are less dependent on specific raw materials today because of the advance in synthetics, the progress being made in standardizing specifications, in simplifying design and in developing substitutes. German experience in World War II is cited in point. Germany had insufficient supplies of copper, petroleum, nickel, tin, and rubber, yet she was able to carry on a six year war against three strong industrial nations by means of synthetics, conservation, and reducing requirements for critical materials in specifications.

**Current Status of Stockpiling Program.** It is estimated that the total cost of the stockpile when completed will be 3.2 billion dollars, assuming materials prices at the close of fiscal 1949. As of December 31, 1949, the Congress had appropriated $1,065 million of cash and $470 million of unliquidated contract authority, a total of $1,535 million of authorized obligations to carry out the Stockpiling Act.

The objective is a five-year achievement which began in 1946 and which should have brought the program to completion in 1951. There are on hand materials for about one third of the current objectives. As of January 31, 1949, the ECA had contributed $37,216,000 worth of materials to the stockpile and had outstanding commitments for $18,606,000.

The President's Budget Message for 1951 indicates once again the
Administration's attitude with respect to this program:

1/ "ECA and Strategic Materials," Report of the Joint Committee on Foreign Economic Cooperation, January 14, 1949, p. 40.

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"The stockpile program will provide the means for augmenting the supplies of materials expected to be available to us in time of emergency. Accelerated progress toward present objectives will be made during the year since available supplies have increased somewhat, partly as a result of orders placed previously to en-courage new development.

"I recommend 500 million dollars of new obligatory authority for this program in 1951. This amount when added to the authority already available will provide total authority for deliveries in 1951 and later years of 1.1 billion dollars. Expenditures are expected to rise from 580 million dollars in 1950 to 650 million dollars in 1951.

"The recommended new obligatory authority will bring the funds for the stockpile to within 729 million dollars of the present total objective of 3.3 billion dollars. By the end of 1951, 65 percent of the stockpile will be delivered, and an additional 13 percent will be under contract for delivery after 1951. We will be nearer to our goals for the materials the supply of which would be the most susceptible to interruption, than for the stockpile as a whole."

### h. Synthetic Liquid Fuels

When the United States was cut off from supplies of natural rubber from the Far East in 1941, it undertook the development of a $700,000,000 synthetic rubber industry. Because the United States may again be unhappily dependent upon vulnerable foreign sources of supply for liquid fuels, and because its own natural sources are becoming more difficult of access and more expensive to produce, the United States may once more be on the threshold of a new synthetic industry--this time for liquid fuels. The magnitude of this industry in its initial commercial stages is conceived to be in the neighborhood of that of the synthetic rubber program, but if it were to become a full fledged industry, the total cost would be many times greater. The difference is that whereas there was no opposition to the establishment of a rubber industry under wartime needs, there is considerable opposition to the establishment of a synthetic liquid fuels industry in time of peace.

The genesis of the latter no less than that of the former goes back to World War II. In the middle of the war period Senator Joseph C. O'Mahoney introduced S. 1243, "A Bill authorizing the construction and operation of demonstration plants to produce synthetic liquid fuels from coal and other substances in order to aid the prosecution of the war, to conserve and increase the oil resources of the Nation, and for other purposes." This bill became law in April 1944, and the Bureau of

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Mines began a five-year research and pilot development program on an initial outlay of $30,000,000. This program, together with private research and development, has indicated the possibility of undertaking a synthetic liquid fuels industry on a commercial basis. Each year succeeds in narrowing the differential cost margin between the sales price of the natural and the synthetic product. Also, the Government is currently conducting a Nation-wide survey to determine the most advantageous areas in which synthetic fuel plants could be located.

The Department of the Interior in February 1950 laid out the problem as follows: 1/

"Approximately half of all the fuel energy used in the United States is now provided by oil and natural gas. A persistent and rapid growth in energy demand during the last three decades has been absorbed largely by the liquid and gaseous rather than solid fuels. In 1948 the energy provided by coal was substantially the same as in 1920. Meanwhile, the use of oil and natural gas each has increased fivefold.

"On a per capita basis, the change is more significant. Coal consumption has dropped from about 6 tons per person to 4-1/2 tons, while oil has increased from 4-1/3 barrels to 14-1/3 and natural gas from 7,500 cubic feet to about 35,000.

"These facts would have only academic interest if the United States had unlimited supplies of all fuels. However, while the Nation's reserves of coal are adequate to meet our needs for centuries, those of oil and natural gas appear limited. It is obvious, therefore, that the security of our liquid-fuel position would be greatly enhanced if the supply could be based on an increasing degree on solid fuels, such as coal and oil shale, which make up more than 95 percent of our fuel reserves, instead of natural oil and gas. In addition, this would create new employment and help to stabilize the market for coal, which may be facing comparatively bleak prospects in the near future unless its position with respect to other fuels is improved."

In May 1949, the Bureau of Mines published a forecast of oil requirements for the United States which showed that even under peacetime conditions, the demand for oil in 1975 would be between 2 and 2-1/2 times the present demand. The Department of the Interior estimates that it will take five to ten years to develop significant capacity. Therefore, inasmuch as the United States has become a net importer of oil, and inasmuch as the per capita use is increasing, with reserves of

1/ Synthetic Liquid Fuels, Annual Report of the Secretary of the Interior for 1949. 4 Parts. U. S. Department of the Interior, February 1950. Part I, p. 1.

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natural becoming more difficult and more expensive to obtain, the Gov-
ernment is inclined to believe it desirable to favor the development
of this industry. It admits that there are other ways of increasing
the supply of fuel oil such as increasing imports, greater secondary
recovery, and the development of tideland oil, but the Department of
the Interior believes that the development of a synthetic liquid fuels
industry would be the safest and surest of all. While private indus-
try as well as Government has been working diligently on synthetic pro-
duction, it has been inclined to stay within the confines of a research
and pilot plant program, whereas the Government is pressing for commer-
cial operation as soon as possible. The Government does not propose to
undertake the establishment of such commercial operations itself. It
proposes only to finance the private ownership and operation of such a
program.

The synthetic liquid fuel program involves the production of oil
from natural gas, shale, and coal:1/ and alcohol and other liquid fuels
from agricultural residues such as corncobs, cottonseed, oat, and rice
hulls. Of these, oil from shale is closest to a stage of commercial
utilization. Coal hydrogenation has an important long-term future in
synthetics. Natural gas appears to be too important in its own right
as a gaseous fuel to permit much use as a base for synthetic liquid
fuel in the near future. The agriculturally-based synthetics for al-
cohol and other chemicals are making rapid advances.

A Government shale oil experimental mine and a pilot plant are in
operation in Rifle, Colorado. A shale oil research laboratory operates
at Laramie, Wyoming. A coal research laboratory, and a coal hydrogen-
ation plant have been established at Bruceton, near Pittsburgh, Pennsyl-
vania, and a coal hydrogenation plant has been established at Louisiana,
Missouri. An experimental plant for the production of liquid fuels
from agricultural residues has been established at Peoria, Illinois.

The 80th and the 81st Congresses have had various bills before them proposing to authorize Reconstruction Finance Corporation loans to private industry up to $700,000,000 for the establishment of three commercial synthetic fuels plants. In his Annual Report for the Department of the Interior for 1947, Secretary Julius A. Krug estimated such an industry full blown would cost about 9 billion dollars, and would require about 16 million tons of steel.

Many technological difficulties remain to be overcome, but in the
Annual Report of the Department of the Interior for 1949, Secretary
Oscar Chapman said that a synthetic liquid fuels industry "is sure to
come."

1/ See "Synthetics: The Great Oil Reserve," Fortune Magazine, May 1948.