They feel we have made changes in our appraisal of the situation with respect to the urgency for production and the urgency of the need for new appropriations. They think we are planning to spend less and to ask for less than we had done. This has been going on for nearly a year, now; it is 9 months. They think in their view that must reflect a continuing expression of United States wisdom in judging the international situation and what is required and they accordingly adopt a revised judgment that less is required. It is a difficult problem. I am not defending them in any sense, but I think we have a very difficult psychological problem, here.

Mr. VORYS. I wish to announce to the committee that there are 32 members who will be in town tomorrow morning and no doubt they will all be here.

The meeting is once more adjourned.

Have you any statement to make on possible nonmilitary expenditures or shall we handle that ourselves?

Mr. WOOD. I will handle that in the morning.

Mr. VORYS. Can the savings be shown by country? That pertains to the 378. That pertains to our committee records rather than the published records.

At any rate, we hope to go through the provisions of the bill and also the lead time on nonmilitary items. You have $1.8 billion and the prospect of $1.4 billion carry over, there. Now don't tell us that it takes 3 or 4 years to make an X-ray machine for the International Children's Fund, or whatever the explanation is for the heavy unexpended balance there.

Mr. WOOD. The figure in the MSA unexpended will be something over $1 billion at the end of this fiscal year and the unobligated will be practically zero with the exception of amounts for Spain and Italian aircraft which have been programed this year but will not be obligated until next year

Mr. VORYS. We are always sure with MSA that the unobligated will be practically zero.

Mr. WOOD. It has been.

(Whereupon, at 5:35 p. m., the committee adjourned, to reconvene at 10:30 a. m., Saturday, June 6, 1953.)

MUTUAL SECURITY ACT EXTENSION

SATURDAY, JUNE 6, 1953

HOUSE OF REPRESENTATIVES,
COMMITTEE ON FOREIGN AFFAIRS,

Washington, D. C.

The committee met in executive session pursuant to call in room G-3, United States Capitol, at 10: 40 a. m., Hon. Robert B. Chiperfield (chairman) presiding.

Chairman CHIPERFIELD. The committee will come to order.
Mr. Wood.

STATEMENT OF HON. C. TYLER WOOD, DEPUTY TO THE DIRECTOR FOR MUTUAL SECURITY

Mr. WOOD. Mr. Chairman, the main purpose, I take it, of this morning's session is to explain the provisions of the bill which is before you. For this purpose we have as our witness, Mr. Eichholz, General Counsel for the Director of Mutual Security.

Before introducing him, I think it might be useful to the committee to round out the testimony on the unexpended and unobligated balances by covering those items as they relate to the TCA and MSA programs. I think we can do that quite rapidly, partly because, as you know, the really large sums of money are in the Defense Department programs, and those were covered yesterday. The sums involved in the MSA, and the TCA, are relatively quite small.

Chairman CHIPERFIELD. Could you summarize it?

Mr. WOOD. I will try to summarize now, if I may, as to the TCA programs the point 4 program and programs of special economic

assistance.

The cumulative program authorizations by the Congress for fiscal year 1952 and 1953 total $531 million, for the authorized TCA programs. That is cumulative to the end of fiscal year 1953.

Of this total, $449,690,000 or almost $450 million had been obligated by March 31, 1953.

This leaves a balance unobligated as of March 31, of this year, of $81,600,000 roughly. Now, all of this amount, with certain exceptions which I shall mention in a moment, has already been, or is expected to have been, firmly obligated by June 30. The exceptions are as follows:

There is roughly $800,000 that has not been programed and will not be made available for any further program. It is also expected that there will be savings in personnel and trainees of about $2.5 million. These savings result from the fact that, first, there has been some

delay in finding, and placing on the payroll, certain of the necessary technicians and, second, there has been similar delays in obtaining trainees and putting them into training courses.

These two items will be savings in the sense that Mr. Rand used the term in his letter to you recently. They are not included in the figure which he used. This was primarily because these items had not, as of the time of writing that letter, been sufficiently developed. It is expected that the final figures on these will be developed before we go to the appropriations committees. These items will represent real "savings" in the sense that Mr. Rand used that term when he said that we were continuing to screen these programs in the hope of finding additional savings.

There is one other exception that I should cover. That exception relates to Burma, where, as of the moment, we find ourselves in the position, due to a request of the Burmese Government, of being unable to complete the programs which we had planned and for which funds had been set aside. While this situation could change, it is our present estimate that, although all the funds for the Burma program are now obligated, there will be deobligations of somewhere between $11 million and $13 million.

This will also represent a real "saving" in the sense that this term has been used. We cannot now, however, estimate the amount thereof accurately. We are now engaged in winding up this program, and we want to do so in an orderly way. We do not want to just cut off going activities and projects in an arbitrary fashion, and leave a lot of things hanging in the air.

Therefore I cannot tell you today just how much this saving will be, but the present estimate is from $11 million to $13 million.

Chairman CHIPERFIELD. Is the reason for discontinuing that program in Burma, the political and military situation?

Mr. Wood. The reason was, to be perfectly frank with you, that the Government of Burma, due to the political situation, came to the conclusion that it did not wish to continue to receive aid from the United States. It is related to the rather complex situation in Burma.

We have, in response to this request of the Government of Burma, taken steps to terminate our assistance to Burma.

That, then, is the situation with respect to unobligated balances in the TCA programs. The items which I have mentioned specially are not only likely to represent unobligated balances at the end of the year, but also savings.

In the case of Burma, it may well be that we would show obligated funds which later, after the end of the fiscal year, would be deobligated and thus would become savings.

Are there any questions at this point?
Chairman CHIPERFIELD. Mr. Vorys.

Mr. VORYS. What is your unexpended balance?

It was $1.8 million nonmilitary on March 31. What is it now? I would like to ask you another question: On military hardware, we have a very plausible explanation for long-time carryover in lead time. Explain to us why there should be any lead time in the nonmilitary part of this program?

Mr. Wood. In the first place, there is always, of course Mr. Vorys, some pipeline. It does take time to hire technicians and to to get them out there after training them. It does take time to program the

funds which Congress makes available, to decide for what precise purposes they will be used, to take on the technicians, and to place orders for necessary supplies. Those are the major reasons for the existence of a pipeline.

Largely it is a matter of getting funds obligated and putting them to work in connection with the development of the program.

Mr. VORYS. When I last went over the figures, it appeared to be that the nonmilitary spending program for fiscal year 1954 was just $400 million under the carryover that you are going to have on June 30, so that it would appear if we wanted to implement a nonmilitary program for fiscal year 1954, we would need to appropriate $400 million in addition to the military figure.

The unexpended balance on June 30 would come within $400 million of equaling your proposed expenditure for the fiscal year 1954. Why then should we appropriate more than $400 million?

Mr. Wood. The answer is that you have continuing programs and developing programs.

If you appropriated only the amount which you would spend in fiscal 1954 you would come to the end of fiscal year 1954 with no pipeline whatever and you would cut off the program.

Mr. VORYS. But we are not talking about indefinite pipelines in the field of economic aid. We are talking about decreasing pipelines with the objective of eliminating spending.

I understand that in the military aid field we have possibly a longcontinuing program, but I thought that we were tapering off rapidly our nonmilitary programs.

Mr. WOOD. We have been, and for this reason the carryover in the Mutual Security Agency program is, and has been, constantly declining, in the last several years. That is not true of the point 4 and the special economic aid programs, as I think you know.

Chairman CHIPERFIELD. I think you should separate those two. Maybe TCA is a continuing program, but certainly special economic aid is not.

Mr. VORYS. If it is special, it is a one-shot proposition. There is not any such thing as "special-regular" economic aid.

Mr. WOOD. The executive branch feels that it will be necessary the case of these particularly crucial areas, such as India, Pakistan, the Arab States, Israel, and Iran, to do something more than provide only the regular point 4 aid and to do so probably not only for this one year, but for several years in the future.

You will recall the testimony on India in that respect, and you will also recall the similar testimony on the Arab States and Israel. Therefore, I do not think you could plan your request for new obligational authority even in that area, on the assumption that all of this special economic aid would be cut off immediately at the end of fiscal year 1954.

Now the Congress may decide that it wishes to adopt such a policy and the executive branch would, of course, have to accept such a decision. We would hope, in view of the importance of dealing affirmatively with these crucial areas, that Congress would not so decide. If, however, Congress made such a decision you would not expect that you could do this job over a period of several years, even with special economic assistance, merely by appropriating this year an amount by which the forecast expenditures would exceed the unexpended balances.

Now I think the best way to get at this problem is to divide it into two separate categories, the MSA program, and the TCA program. I think probably the best way to proceed now is to ask Mr. Lawson, who is the director of the budget division of the Mutual Security Agency, to set before you the unobligated and unexpended balances and the savings expected to be achieved in the Mutual Security Program.

Could I ask Mr. Lawson to do that, and then we will return to the unexpended balances story on the TCA program as soon as our expert witness on that subject arrives.

STATEMENT OF GEORGE W. LAWSON, DIRECTOR, DIVISION OF THE BUDGET, MUTUAL SECURITY AGENCY

Mr. LAWSON. With your permission, Mr. Chairman, I would like to work from one of the charts in your book.

(The chart referred to is as follows:)