APPENDIX: LETTERS FROM GOVERNMENT AGENCIES Page MOBILIZATION AND DEMOBILIZATION PROBLEMS APPENDIX NAVY DEPARTMENT, Washington, August 14, 1944. Hon. J. E. MURRAY, Chairman, War Contracts Subcommittee, United States Senate MY DEAR MR. CHAIRMAN: The proposed substitute introduced by Senator Johnson to the bill S. 2045 to provide for the disposal of surplus Government property and plants, and the draft bill included in the July 21, 1944, report of the Surplus Property Subcommittee of the Special Committee on Small Business, were referred by your subcommittee to the Navy Department with a request for views thereon. The common purpose of the proposed substitute bill (herein referred to as S. 2045) and the draft bill, is to provide for the disposal of Government war surpluses. The two proposals, however, differ in many basic matters, as will be indicated later in this report. This Department strongly opposes the enactment of S. 2045 as a measure which is unsound in principle and which would not permit the effective and orderly disposal of Government war surpluses. The principal objection is to section 11 (a) which, with a few limited exceptions, prohibits the disposal of durable property until 5 years after the termination of the present war. Every consideration of sound public policy points in the other direction. War surpluses are great national assets. Except for items which should be held as a reserve against future emergencies, surpluses should be disposed of in such a way as to meet the needs of the public and to secure maximum realization for the Treasury. Of course, there should be no "dumping" of surpluses, and disposal should be conducted with care to avoid harmful effects upon American industry and employment. It is the view of this Department that our economy will be able to absorb most of the available surpluses without substantial injury to labor or industry, and with considerable benefit to the public and the fiscal position of the Government. S. 2045 would even prevent the sales to the public of badly needed surplus goods during the war and in the period immediately following in which the shortage of such goods would create consumer hardships and increase the risk of inflation. Whether any industry would benefit from a prohibition of surplus property disposal for 5 years, or any period, is extremely doubtful. The more widely held view is that maintenance of surpluses in undiminished amounts for an extended period would constitute more of a threat to business prosperity than an orderly program for feeding the surpluses into our economy at such a rate as will permit them to be absorbed without harm. As an exception to the prohibition of disposal of durable property, section 9 permits the disposal of surplus "common supplies" (defined as small tools, hardware, and nonassembled articles useful in the manufacture of more than one type of product) until 6 months after the end of the war, "through the regular trade channels at not less than 75 percent of the replacement cost." The requirement that sales must be through regular trade channels would make it possible for existing trade groups to monopolize distribution of such surpluses, and prevent the Government from receiving fair prices for its sur pluses. While distribution should normally be through established channels, a blanket requirement to this effect would be against the interests of the Government. As to the requirement that the price shall be not less than 75 percent of costs, this figure seems to be entirely arbitrary and might nullify the authority to dispose of such supplies with respect to many of the items involved. Warehousing and maintenance of war surplus goods even under the best of conditions of rapid disposal consistent with orderly marketing may be expected to create problems and entail considerable expense. A requirement that durable goods shall be retained over a 5-year period would manifestly increase greatly both the problems and the expense to the Government of warehousing and maintaining these goods. In addition, most durable goods may be expected to decline in value and the value of many articles, through obsolescence, reduced to their value as scrap. There are a number of other seriously objectionable features in S. 2045, which will, however, be mentioned only briefly. (a) Section 3 (c) fails to grant authority for the transfer of surplus property from military agencies to civilian agencies, but only permits transfers in the reverse direction. During the period of large property disposals, most of the flow would, of course, be from the military agencies to the civilian. No reason is apparent why the civilian agencies of the Government should be barred from the use of the surpluses of the military agencies. (b) Section 11 (e) requires that all property classed as obsolete or scrap should be permanently stock-piled for national defense purposes. Stock piles should be accumulated on the basis of a careful appraisal of quantitative and qualitative needs, and after a comprehensive study of the best methods of acquiring the required quantities, rather than through any such blanket procedure as that specified in the draft. (c) Section 11 (f) prohibits war contractors from disposing of their own termination inventory, other than through manufacture. This would prevent the normal distribution and utilization of materials by industry, through normal commercial channels. Such a requirement might be a serious drag on reconversion. Aside from the question of the wisdom of this provision, its legality seems doubtful. (d) Section 15 prohibits any Government agency to produce, in competition with private industry, any articles for civilian or military use "in facilities acquired by the Defense Plant Corporation." Such a requirement would apparently make it impossible for the Government to produce vital war supplies in plants financed by the Defense Plant Corporation. |