has increased our expenditures like the Wages and Hours Act, probably no other one thing?

Admiral LAND. So far as the South is concerned, I think I would have to answer that in the affirmative. I think that is one thing that would be more responsible for the increase in the South than anything else.

Mr. LAMBERTSON. It was an act passed for the subnormal worker, the sweatshop fellow; that is what it was passed for; and now just at the beginning of a great war with this time and a half, and double time for holidays and Sundays, it is a terrible situation.

Admiral VICKERY. The facility contracts come under the BaconDavis Act, which says the prevailing rate of wages in the locality will be paid. Now, ships do not come under that, because they are not public works; but under the Alabama drydock contract, where we had bid prices and had taken and made the contract for the construction of those facilities at the bid price, then the labor union came in and said, because the Bacon-Davis Act applied, that the wage level must be put up to the prevailing wage, and they submitted data to show that in the building trades down there the wage level was up to a certain amount and we had to increase the cost of the contract to pay the prevailing wages that had not been paid on ship-facilities class of work before, and it made quite a jump in it. And we have had the same thing to do in many of those facility contracts.

Mr. LAMBERTSON. They made the Bacon-Davis Act apply where it never applied before?

Admiral VICKERY. You see, we have never built facilities before; we have only built ships, and ships are not under the Bacon-Davis Act. Mr. LAMBERTSON. But they have made the prevailing wage apply? Admiral VICKERY. That is correct.

Mr. LAMBERTSON. Clear beyond where it ever applied in cantonments and other things?

Admiral VICKERY. That is correct.

Mr. LAMBERTSON. They have gone 200 or 300 miles to get the prevailing wage?

Admiral VICKERY. That is correct.

Mr. WIGGLESWORTH. How about the personnel to operate these new ships? Are we going to train additional men for them?

Admiral LAND. We are doing our best to expand the training program. We are going to expand it with the shipbuilding program, and I think no step has been left unturned to do it, and we have the complete facts and figures and quantities. We have these various schools for the unlicensed personnel, the school for the licensed personnel, and the cadet schools, and they are being aided and abetted very materially by those States which have merchant-marine academies. The thing is well in hand. How close we will come to meeting it, I do not know, but we are pretty confident we will. We might have to do it by making a number of short cuts, decreasing the courses, and so on, but we are doing the best we can with the tools we have, and I think it can be safely said that we will meet the construction program with personnel as well trained as it is possible under the circumstances to train them.

UNIT COST OF SHIPS

The CHAIRMAN. Admiral, I was a little bit uncertain about the unit cost. Did I understand you to say that the unit cost for the new program is based on the unit cost for the current program?

Admiral LAND. As Admiral Vickery was testifying he talked about the number of man-hours required to construct a ship, and the unit cost is based on the man-hours, and the contract is also based on that, with a bonus and a penalty-a bonus for reducing the number of hours and a penalty for exceeding them; a bonus for early delivery and a penalty for a delayed delivery. In other words, we put incentives in there to meet the schedules.

The CHAIRMAN. How did you arrive at this exact figure; what was the basis upon which you made the computation?

Admiral LAND. It is based on experience in general shipbuilding and after computations made in the Technical Division, the Construction Division, and the Finance Division as to the ship's cost, and it was very carefully worked out and generally agreed upon about 11 months ago when we first started the liberty program. It is not a perfect job, but is a pretty close and accurate estimate based on the experience and knowledge of the Maritime Commission and all the costs that we had.

The CHAIRMAN. I do not think I made myself quite clear. You are building 1,476 ships under this new contract; are you not? Admiral LAND. Yes.

The CHAIRMAN. What is going to be your unit cost of those ships per deadweight ton, and how did you arrive at that figure? Did you base it entirely and do you expect to base it on the unit cost of the ship which you are building under your current program?

Admiral LAND. No; these costs are going to be higher, as I indicated, for the reasons I indicated-a lot of overtime, and so on; but, based on our experience as to the actual cost of ships which were analogous to these we had the finished cost of a number of the C-type of ship, and we took that, checked the number of man-hours and the actual cost of the wages, and brought it up to the component parts, and this 513,000 hours, or whatever the average was, was taken, and we made that the basis of cost of the Liberty ships.

Admiral VICKERY. We have curves of the wages, and we have seen we have had to pay rising prices up to 24 percent.

The CHAIRMAN. The curve would show an upswing?

Admiral VICKERY. Yes, sir; and these estimates are not based on the cost which we paid; we have increased this cost of the various ships and these estimates to cover what we found was the rising cost in there.

The CHAIRMAN. Based on actual experience?

Admiral VICKERY. Yes, sir.

The CHAIRMAN. Thank you, Admiral Land. You have given us a very satisfactory justification, as you always do.

Admiral LAND. That is very kind of you, sir; I appreciate your patience.

FRIDAY, FEBRUARY 13, 1942.

OFFICE OF LEND-LEASE ADMINISTRATION

(Doc. No. 618)

STATEMENTS OF E. R. STETTINIUS, JR., ADMINISTRATOR; PHILIP YOUNG, ASSISTANT DEPUTY ADMINISTRATOR; OSCAR COX, GENERAL COUNSEL; CLAUDE R. WICKARD, SECRETARY OF AGRICULTURE; LESLIE A. WHEELER, DIRECTOR OF FOREIGN AGRICULTURAL RELATIONS; EDWIN W. GAUMNITZ, ASSOCIATE ADMINISTRATOR, SURPLUS MARKETING ADMINISTRATION; CLIFTON E. MACK, DIRECTOR OF PROCUREMENT DIVISION, TREASURY DEPARTMENT; BRIG. GEN. GEORGE R. SPALDING, OFFICE OF CHIEF OF STAFF, UNITED STATES ARMY, AND LENDLEASE ADMINISTRATION; COMMANDER PAUL HENDREN, OFFICE OF NAVAL OPERATIONS; COMMANDER HAROLD J. WALKER, OFFICE OF NAVAL OPERATIONS; REAR ADMIRAL EMORY S. LAND, CHAIRMAN; AND WILLIAM U. KIRSCH, BUDGET OFFICER, UNITED STATES MARITIME COMMISSION

DEFENSE AID BUDGET ESTIMATE

The CHAIRMAN. Mr. Stettinius, we have before us an estimate requesting a total of $5,430,000,000 additional for lend-lease purposes shown in Document No. 618:

To enable the President, through such departments or agencies of the Govern-1 ment as he may designate, further to carry out the provisions of an act to promote the defense of the United States, approved March 11, 1941, there is hereby appropriated $5,430,000,000, to remain available until June 30, 1943, and to be expended at the direction of the President for the purpose of carrying out said act and for each and every purpose incident thereto.

I believe we have previously granted you $12,985,000,000 for this purpose.

Mr. STETTINIUS. Yes, sir.

The CHAIRMAN. And that would make a total of eighteen-and-someodd billion dollars?

Mr. STETTINIUS. That is right.

GENERAL STATEMENT

The CHAIRMAN. We would be glad to have a statement from you. Mr. STETTINIUS. Mr. Chairman, I shall be as brief as possible in the introduction, in order to conserve the Secretary's time so that he may go. You have had distributed to you, in this blue cover which you have before you, the detailed break-down of the approximately 512 billion dollars we are requesting in this new direct lend-lease appropriation. We also have representatives from each of the five procurement agencies and other agencies of the Government who are concerned in these matters, in order that the members of the committee may put any questions to us this morning, or during the day, that you desire.

I have a prepared statement that has been distributed to each one of you gentlemen, and I shall call attention to the important paragraphs. Before starting, however, I should like to call attention to the fact that of the last $6,000,000,000 you appropriated in October, the amounts that are comparable to what we are requesting now were approximately $4,000,000,000 to cover a period of 5 months. This amount of money, the 512 billion dollars of similar items, is to cover 10 months' operations. I want to impress that on your minds at the start, because of that important comparison.

The request for funds before you, in the amount of $5,430,000,000, is based on the lend-lease requirements of our allies for the remainder of the calendar year. It is intended to cover commitments which have to be entered into before December 31, 1942. This estimate does not include military and naval matériel for our allies. Provision has been and is being made for such military and naval matériel in the appropriations for the War and Navy Departments.

LEND-LEASE FUNDS TODAY

We are urgently in need of this appropriation.

Last October the Congress granted us sufficient funds to meet commitments which had to be entered into before February 28-the end of this month. These funds are now about exhausted.

Practically all of the total $12,985,000,000 appropriated to lend-lease to date has been allocated for procurement. As of the close of business on February 12, 1942-yesterday-$12,224,692,979 had been allocated. The remaining balance, largely composed of the agricultural reserve, will be allocated within the next 2 weeks at the present rate. In fact, we have already been forced to delay the approval of a number of requisitions in order to be sure not to run out of money before we could obtain an additional appropriation.

LEND-LEASE PROGRESS SINCE THE LAST REPORT TO CONGRESS

Our aid to lend-lease countries is increasing sharply month by month. Lend-lease aid as of November 30-the closing date for our third lend-lease report-amounted to $1,202,000,000. This constituted an average of about $141,400,000 per month for the first 812 months of the program. The aid in the last 3 months of that period was $207,000,000 in September; $225,000,000 in October, and $283,000,000 in

November. Lend-lease aid has mounted steadily since then. The December lend-lease aid amounted to $338,000,000. In the past month of January, it was $462,000,000, bringing the total of lend-lease aid to more than two billion dollars. This increase must and will continue.

THE ROLE OF LEND-LEASE IN THE WAR

The major point of overriding importance to us as Americans— a point that I want to make unmistakably clear-is that this is a world war that stretches across every ocean and every continent. Every man fighting the Axis wherever he may be-in the central part of China, or the island of Java, in New Britain, at Rangoon, in the Leningrad area, or the Crimea, in Libya or Iran-any man who is manning the guns of ships of the sea and the controls of ships of the air are integral parts of our forces. The lend-lease program is our mechanism for making available the supplies necessary to strengthen these nations, to serve them as though they were our own, to serve our own as well, and thus to bind together into a united whole all the free peoples of the world—fighting or not-who are resisting Axis aggression.

Australia, New Zealand, the Dutch East Indies, China, India, and Burma are America's front line in the Pacific, sustained in part by lend-lease aid. In the next 10 monts the Lend-Lease Administration hopes to provide tremendous impetus to the production abroad of mílitary weapons and to the general preparedness of these allies. Trucks, road-building machinery, locomotives, tracks, ties, and so forth, will put their transportation facilities in fighting shape. Radios, receiving sets and sending stations, telephones, wire and electrical equipment will bolster their communication system for the war effort. Raw materials, tools, generators, machine oil, and countless other types of supplies and equipment will expand their own production of military

weapons.

Here are a few examples of what this type of aid can do.

Australia, in spite of sending over a half-millon men into her armed forces out of a total population of some 7,000,000 people, has her own plane- and tank- and gun-building program. Our studies, made together with the Australians, revealed that if we provided certain processed steel and a relatively small number of tools and some component parts and other supplies, Australia's output of planes and tanks and guns would be tremendously stepped up, at practically no expense to our own.

Similarly, lend-lease can make a contribution toward solving shortages in critical materials such as rubber. We find that by supplying such items as sulfur and tire molds to tire factories in Indian, Australia, and South Africa (these factories already exist), we can appreciably increase the tire output of these factories using their own supplies of raw rubber there on the ground. We can thus reduce the number of tires which would otherwise be allocated from the United States. The results are an increase in total Allied production of war matériel, a tremendous saving in shipping space and time-consuming transportation so vital to the united war effort.

Lend-lease activities have and continue to assist our armed forces all over the world. The air-ferrying service across the Atlantic to the Middle East, created last summer and operated with lend-lease