ECONOMIC ISSUES IN MILITARY ASSISTANCE TUESDAY, FEBRUARY 2, 1971 CONGRESS OF THE UNITED STATES, Washington, D.C. The Subcommittee on Economy in Government met, pursuant to call, at 9:35 a.m., in room S-407, the Capitol, Hon. William Proxmire (chairman of the subcommittee) presiding. Present: Senators Proxmire and Percy; and Representatives Conable and Brown. Also Present: John R. Stark, executive director; Richard F. Kaufman, economist; George D. Krumbhaar, Walter B. Laessig, and Leslie J. Barr, economists for the minority. OPENING STATEMENT OF CHAIRMAN PROXMIRE Chairman PROXMIRE. The subcommittee will come to order. This morning we continue our hearings into the military foreign assistance program. We have had some very interesting revelations in connection with the program. We had some difficulty determining how big it was. Nobody seemed to know. And we did determine that it was far bigger, seven or eight times bigger, than was reported in the budget. Among the most shocking revelations was the disclosure that is shocking to me and to Senator Fulbright and to Townsend Hoopes who was in charge of the program to a considerable extent in the Johnson administration, that the food for peace funds generated by food for peace were mandated for military purposes, and were, of course, part of the program. And we had considerable discussion of that by various witnesses. But we fortunately have this morning a man who can speak with more authority on this than anybody we have had so far. And few people in Government can speak with as much knowledge and understanding of the program as can Senator George McGovern. Senator McGovern was administrator of this program, I understand, in 1961 and until July of 1962. Senator McGOVERN. That is correct. Chairman PROXMIRE. He has been known as an outstanding expert in foreign policy. I do not know anybody in the Senate whose judgment on foreign policy has been more clearly confirmed by historical developments. He is a man of great courage and understanding. He is a man who has also served on the Agriculture and Forestry Committee for a number of years, and knows the food for peace program from both the executive branch standpoint and the legislative standpoint. Senator McGovern, we are honored and happy to have you here. You may proceed in any way you wish. STATEMENT OF HON. GEORGE MCGOVERN, A U.S. SENATOR FROM THE STATE OF SOUTH DAKOTA Senator MCGOVERN. Thank you very much, Mr. Chairman, for your generous words about me personally. And let me commend you for opening up this subject that should be very carefully viewed by the Congress of the United States and by the country. I am most grateful for your invitation to appear at these hearings. I am convinced that a full and complete understanding of our foreign military assistance programs is necessary if Congress is to reach wise foreign policy judgments. The information you have extracted thus far illustrates that our access to such knowledge is inadequate at best. I am especially concerned by the testimony you have received in regard to the food for peace program. As you know, I was privileged to serve as Director of that program for 18 months at the beginning of the Kennedy administration. I do want to point out, Mr. Chairman, that my function there, under an Executive order from the President, was to make a maximum effort, in his words, to narrow the gap between abundance here at home and near starvation abroad. In other words, my job was as an expediter to find out why we had surpluses accumulating here at home at a time when people were starving to death overseas. The actual administration of the program remained in several departments of the Government, the Department of Agriculture, the Department of State, the Foreign Aid Agency. And it was administered whenever an agreement was proposed with a particular country through an interagency committee involving some 90 different departments of the Government. They would sit around in a room like this and pass judgment on the various aspects of each agreement that was made with a foreign country. All agencies that had any relationship to the program sat in on these meetings, including the Department of Defense, the Department of the Treasury, the State Department, Agriculture, the Budget Bureau, Commerce, and everyone that had any interest in any part of the program. The actual negotiation in the field would, of course, be carried on by the State Department. But before one of those agreements was signed off it had to be approved by this interagency group. So far as I know, that is still the procedure that is followed. In any event, I retain the conviction that for all of our wealth, we have no greater international asset than our ability to produce unparalleled quantities of food, and to share that abundance and that ability with the two-thirds of the world's people who are threatened with hunger and malnutrition. I have always thought that was the best and most effective form of foreign assistance that we can give. Closely related to that, of course, is the matter of population control assistance, which is of equal if not greater importance. But the two are very closely related. For all of our military and political concerns, the most critical fact of life on this planet in the remainder of this century will be the size of the gap between food and population. If we can close that gap we will have discovered an important key to peaceful development in countries now in turmoil. If we cannot, then all the weapons we can invent will not make this world a safe place in which to live. Your earlier hearings, on January 4, focused on the use of Food for Peace counterpart funds for military purposes. These funds are generated through the concessional sales provisions of the law. That law has been on the books since 1954. It was renewed by title I of the 1966 Act. That title authorizes the sale of American agricultural commodities in exchange for foreign currencies. Title III of the 1966 Act provides that the funds realized through such sales are deposited to the credit of the United States, and that they can be used for certain specified purposes, among them to finance U.S. expenses in the recipient countries, including the cost of running an embassy, or to develop new markets for our farm commodities. In most of these agreements a certain portion is set aside to pay for promotional programs designed to increase the sale of United States farm commodities; or to promote economic development, which is frequently the largest share of the currencies that are set aside; to finance educational exchange programs, including the Fulbright programs; and then the part that you were interested in, to assist "in the common defense." As compared to total military assistance costs of $204 billion in 1970, the amount traceable to food for peace programs is relatively small, about $108 million in Fiscal 1970. But this is not significant, since 1954, when the act first went on the books, a total of $1.6 billion of funds generated by Food for Peace has been used for military support, or to use the language of the law, "common defense" purposes. Let me stress that that is not a new procedure. The same essential provisions were in the basic Food for Peace law, Public Law 480, when it was first adopted in 1954. In calendar year 1956, for example, some $187.8 million was used under the common defense provision. Now, that does not suggest to me that the committee's concern is unjustified. On the contrary, I think we have the most compelling of reasons for making changes in the administration of these funds. It is an open question whether foreign countries generated by food for peace should be used for military assistance at all. I think that is a question that ought to be considered, whether you should use one dime in a program that is called Food for Peace for military assist ance. In that connection, Mr. Chairman, as you know, there have been news stories over the weekend about a mysterious memorandum being circulated in the Pentagon or somewhere else in the Government, implying that it would be very embarrassing to me and to other Senators who have been critical of our military assistance program if it can be shown that back in 1961, when I was affiliated with this program, that we were using a portion of funds generated by food for peace for military assistance. There is just one observation I want to make on that. I would like to think that around this Government we have a right to change our views slightly in ten years. I do not think there is anything written into the spirit or the letter of democracy that requires that a person think exactly the same in 1971 that he thought in 1961. People who hold to that view may be responsible for some of the difficulties that we are in today. It can, in any case, be argued persuasively that the label food for peace funds is inaccurate, since the foreign currencies involved are earned through that program rather than allocated to it. In the usual transaction we sell American foodstuffs to the recipient country and we take that country's currency in exchange, including in the transaction self-imposed limitations on our own right to use that currency. Without these restrictions we would presumably be free to use those funds for any purpose we saw fit in the country with which we were dealing. A good share of the reason for the limitations on the use of the funds is the fact that unrestricted use could severely damage the monetary system of the recipient country. At the same time, however, I personally deplore even the slightest hint of a connection or the slightest confusion of approach between military assistance and food for peace. If that is an inevitable result of the law as it now stands, then the law ought to be changed, and we ought to limit all funds connected with this program to nonmilitary purposes. In addition to an improved appearance, it seems likely that an amendment to that effect would also serve the committee's interests in achieving the efficient and sound administration of military assistance programs. And that, of course, is why I want to commend the Chairman especially for these hearings to try to bring some degree of control over military assistance, some congressional accountability. But there is a broader question involved here. And that is the ability of the Congress to identify and control the future military involvements of the United States. And I know that is a concern that the Chairman and members of this committee especially share. If there is one lesson we have learned in Vietnam, it is that limited commitments have a way of growing. I do not think anyone_ever intended when we first started offering limited assistance in Indochina that many years later we would be involved in the kind of massive warfare that is still raging in that part of the world. And if Congress is to have any meaningful role at all to play, I believe we must exercise continuing positive control over military assistance programs. There are several billion dollars in foreign currencies presently on deposit to the credit of the United States as a consequence of past food for peace agreements. Mr. Chairman, as you know, I was invited here only late yesterday, and I did not have time to look up those figures. But they are available, I am sure, either at the Department of Agriculture or the Department of State, because those funds accruing to the credit of the United States are not subject to the appropriations process, and they run to a considerable number of billion dollars. They are, in effect, beyond congressional control, and are only— |