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transportation primarily benefit one segment of the population or one geographic region at the cost of the taxpayers in general.

TARIFFS

To the extent that tariffs shield American producers from foreign competitors, such tariffs act as a subsidy to these producers. In this case, it is the American consumer paying a higher price than he would without the tariff who pays the subsidy, rather than the Government. Under the Buy American Act of 1933, procurement officers of the Federal Government are required to purchase goods produced in the United States unless their price exceeds the price of goods produced abroad by more than a specified percentage. These and other import restrictions, such as import quotas, undoubtedly are of substantial benefit to many domestic producers and thus might well be considered to amount to a subsidy. However, the quantification of the dollar amount of the "subsidi” involved in a particular tariff schedule is difficult, and calculation of a reliable estimate of the overall dollar benefit of tariffs to protected American producers in the aggregate that could be compared to other subsidies does not appear to be feasible.

DEFENSE CONTRACTS AND CONTRACTORS

handle all of the Government orders for jet engine mixes During the 3 years ended December 31, 1965, the 8,000-to used 78 percent of actual production time for commercial 17 advance approval while the majority of Government proc midspan blades was processed on the 4,000-ton presses. Al: tractor had used 10 machines, costing from $29,000 to $14 100 percent of the time for commercial work during the firs of 1966 without obtaining advance approval.

In another instance the Navy furnished a contractor an turret lathe costing $45,600 on the basis of the contractor' initial year saving of $25,000 in operating costs. The in revealed that during the first year the new lathe, witho approval, was used 513 hours, or 24 percent of the actual time, on Government rent-free work and chiefly for comm the rest of the time. Thus, the Government did not receive of most of the saving in operating costs. At the same time, ( rent-free werk, totaling 5,756 hours, was processed on five efficient turret lathes.

In addition, the report indicated that there was little or extended periods of a substantial portion of the equipmen of which there was a real need in other plants. Utilization tained by some contractors, the report included, were : adequate to indicate the extent and manner of use. Ren in some cases, were inimical to the Government's interests.

RESEARCH AND DEVELOPMENT

Both the letting of defense contracts and termination of such contracts despite provisions for renegotiation, often result in providing a return to contract holders that could be construed to involve a subsidy. With the stress on speed! in both cases, substantial subsidized returns to individual contraciors are inevitable. Even under current procedures, it does not appear possible to avoid entirely a subsidy element in the letting of lefense contracts. It should be stressed that almost always whatever subsidy effect results from defense contract performance is incidental :ind is not planned or anticipated in the course of negotiating such contracts. Current provisions to faror critical labor surplus areas, and to a limited extent small businesses, in the letting of defense contracts may be interpreted to have an economic impact comparable to that of a subsidy, although no direct subsidy is involved.

Closely related to the question of defense contracts is that of the improper use of Government-owned industrial plant equipment (IPE). A report submitted to the Congress in 1967 by the Comptroller General of the United States indicated that there was a serious need for the Department of Defense to improve its system of controls over Government-owned facilities, special tooling, and material in the possession of contractors. An investigation revealed that, in a significant number of cases, Government furnished IPE was not properly used from the Government's viewpoint. Some of the equipment was being used by contractors in their commercial operations without appropriate Gorernment approval and without equitable compensation to the Government. In these cases advance approval for such use had not been obtained, so that the designated Government authority had not reviewed and either approved or disapproved the manner in which it was being used.

For example, an 8,000-ton mechanical forge press costing $1.4 million was installed at a contractor's plant in late 1961 on the basis that the less efficient 4,000-ton presses, also Gorernment owned, could not

The Government has been rapidly increasing the amou it has been putting into research and development, especia tary purposes. Inevitably many of the firms receiving re development contracts have been able to derive substantial benefit from the results of this research. The Atomic Energ sion is authorized under the Atomic Energy Act of 1954 private activity directly by research and development con to do so indirectly by performing research itself on behalt firms and by adjusting its charges for nuclear fuel and it: for the plutonium "ash" produced by private reactors.

Small business as a whole has found it very difficult to effectively in the Federal Government's research and di program. Here again, the subsidy involved is incidental t purpose of these contracts, and not part of the intent of t ment programs for which these contracts are granted.

MINIMUM WAGE LEGISLATION

It is possible to argue that minimum wage legislation subsidy for those who as a result of such legislation, recei wage than they would otherwise. It is, however, importar nize that in some cases such legislation might result in of employment in marginal covered industries, and might c of workers from such industries to uncovered industries or < ful employment entirely. The amount of subsidy involved urable in any case.