Dr. RATHJENS. I would certainly not build the prototype, and I think the whole thing, as I have said earlier and repeat again, I would delay the whole thing until the state of the art and the state of the economy is such that the venture looks attractive from the point of view of private capital.

At that point, I would argue, again, if the environmental problems— which I have not discussed, and which I don't really feel I want to discuss today-if they are not a serious impediment, then I would say, "Go ahead," but not until that time.

DISRUPTION OF WORKING TEAMS IN EVENT OF DEVELOPMENT POSTPONEMENT

Senator CASE. Following the other side of this thing, the argument is made that a great deal has been invested in the development of teams. I assume that means teams of men working in the contractor's service and perhaps in the service of the Government.

You have had a good deal of experience in this. The suggestion is that the destruction of these teams would present us with an irreparable loss.

I wish you would comment on that phase of it. Would they be destroyed? Would they be dismantled, or are there other ways in which their services could be substantially used? And the whole business, if you will.

Dr. RATHJENS. Well, I will comment on that.

There would certainly be a considerable disruption of those teams if we were to abandon this program at this time.

Now, it is the nature of the aircraft industry, or, at least, to the best of my knowledge, that it has been characterized by a great deal of mobility. People work at Boeing, when Boeing is the place to work, and then when things get interesting at Lockheed, they move down and work at Lockheed.

So there is that possibility of mobility, so that these people would not necessarily be lost to us if that particular program were cancelled. Now, this is a bad time for these people to move, however, because the whole aerospace industry is in a very bad state, so that there really is not that opportunity for them at this particular time as there has been in previous years to, say, leave Boeing and go to work for General Dynamics.

Many of the production people, I would think, would be perhaps less affected, because if one really looks at this problem, I think what you have to say is that if we go the SST, it is going to mean fewer sales of 747s, with any success at all.

There is going to be only so much air traffic, and when one talks about 150,000 jobs being involved, or something, I think that has to be taken in a rather careful perspective. It is true there may be that many jobs involved, but if you build it, people who are working on 747's are not going to be working, and if you don't build it, some of these people will be on 747's. That is largely the production group I am talking

about.

RESEARCHERS

Now let me turn to the R. & D. types. They are the people that perhaps we are more concerned about.

I guess I would say that you will lose some of those, unless you start some new aircraft, other new aircraft programs. And many of these people move from military to civilian programs. It was mentioned earlier that we are going ahead with some new military programs.

SUGGESTED ALTERNATIVE

My own feeling would be that if we really feel we want to preserve a more, a very strong areospace R. & D. capability, that it might be interesting at this point in time to look at some other kinds of aircraft that would have a greater benefit to the economy as a whole, and to the country as a whole, and I have in mind such things as a VSTOL aircraft, and some of these other technologies that have not been exploited.

Again, I would be very skeptical about Government subsidy there. I would think that one ought to be very careful about that. But if we really feel that we have got to take this, we have got to view this venture somewhat as, I hate to use the words, a WPA-type of venture, or a make-work kind of thing, then I would prefer to see the people working, we want to keep them in the aerospace industry, on those kinds of endeavors where there would be a greater payoff for everyone, and I would think VSTOL might be one example.

It is a long answer, but

Senator CASE. So there are feasible alternatives to the meeting of that problem?

Dr. RATHJENS. I think there are.

Senator CASE. Thank you.

Chairman ELLENDER. Senator Case, would you mind suspending for just a moment?

Senator CASE. I have finished, Mr. Chairman.

Chairman ELLENDER. Off the record.

(Discussion off the record.)

You may proceed.

Senator Case, you were through?

Senator CASE. Yes, sir.

FUEL CONSUMPTION AND STRUCTURAL WEIGHT: ECONOMY IN TREND

Chairman ELLENDER. Senator Inouye?

Senator INOUYE. Mr. Chairman.

Mr. Rathjens, I have been quite impressed with your statement, and especially the three points which I would like to have a reanalysis of at this time.

First, you contend that the SST would be uneconomic, especially when you consider its fuel consumption and the structural weight. This brought to mind the inquiry that I have been conducting privately with airline executives as to the most economical aircraft in existence, and almost unanimously they advised me that the most economic aircraft is the DC-3, because from the standpoint of fuel consumption, in relationship to structural weight, it is about onetenth the cost of the 727, about one-tenth the cost of the DC-9. But yet, no one seems to want to fly the DC-3.

Would that analysis be applicable to the 747, 707, vis-a-vis the SST?

i

Dr. RATHJENS. Well, I would hate to fly the DC-3 from here to Europe.

Senator INOUYE. I am talking about the short runs, because the DC-9 is a short run plane, also.

Dr. RATHJENS. I just have not looked at the very shortrun aircraft problem to the extent of being able to comment on that.

Senator INOUYE. Would you take a DC-3 from here to New York, if you had a choice of a DC-3 and a 727?

Dr. RATHJENS. No, I will not. I would much prefer to go in the 727. Senator. INOUYE. Even if the DC-3 is considered the safest aircraft that the aircraft industry has ever come up with?

Dr. RATHJENS. There are circumstances where I think I would prefer to fly in a DC-3, and there are circumstances

I recollect flying from here to New York in an Electra, because with an air controller strike you could not fly jets, and I could have flown on that day in a DC-3.

But in general, I think I prefer the jets, to tell you the truth.

Senator INOUYE. Don't you think it would be reasonable to conclude that given a choice between a 707 and SST, some of the folks might prefer the SST?

Dr. RATHJENS. I am sure they would. But I think that-In fact, I probably would, myself, if I did not have to pay a surcharge, and my own preference is to avoid landings. If I were to go from here to London, I think I probably would.

If I were going to go from the west coast to Japan, again no surcharge involved or anything, I think I would prefer to go nonstop in a 707 or a 747, to stopping in Hawaii.

That is a personal preference for avoiding landings.

Senator INOUYE. Actually, right now, we are paying a surcharge for flying on the jet planes, are we not, as compared to the prop planes? Dr. RATHJENS. My understanding is-and I could be wrong in thisthat in fact there are considerable economic advantages in flying the jets, and that if we were flying prop planes now, DC-3s, 6s, 7s, the airlines would either be charging higher fares, or be in even worse financial straits than they are right now.

GOVERNMENT LOSS OF INTEREST AND DESIRABILITY FOR PRIVATE FINANCING

Senator INOUYE. The last item I would like to touch upon, you have contended that since the direct money returned to the Government for its investment would be unfavorable, in fact, we would lose a billion dollars, you say, therefore we should not go through with this, and secondly, as a supporter of private enterprise you feel that this should be totally financed by the private sector.

OTHER GOVERNMENT SUBSIDIES

I wish to make an observation at this time, that in our transportation industry, railroads and ships, the Government is constantly making investments with no direct money returned. There are our ship construction subsidies, our railroad subsidies, et cetera.

Philosophically, you feel that this is bad?

Dr. RATHJENS. Yes, and no. I feel that in some of these areas it is probably the only way to do it.

I believe that, of course, the Federal Government subsidizes the airline industry, too. They subsidize those small carriers that run between smaller cities. They subsidize airport construction.

And to some extent I think that probably is desirable, but I will just reiterate that I think it is a mistake for the Federal Government to be getting into a new area of subsidization in financing the development of aircraft that are being developed strictly for civil use.

Senator INOUYE. If we followed your rule that if the private sector found it uneconomical to invest in a certain venture, the Government should not involve itself

Now, I have been told by several bankers that they would not be involved in ship construction, and therefore the Government finds it necessary to get involved.

Bankers have advised me that they would stay clear of railroad construction, and now we have one of the railroads on the verge of bankruptcy, and so we find ourselves being involved.

This seems to be the rule, and not the exception. Do you think that your rule should be applied to all other investments that the Government might be tempted to make?

Dr. RATHJENS Not necessarily.

The case is made-I don't happen to believe it, or at least I believe it is overstated-that the Federal Government should subsidize the shipping industry because of military need. If one believes that, I think there is a case. If one believes that that is essential, then there is a case for that kind of subsidization.

I don't believe that that case is particularly valid in the case of the shipping industry, and I certainly don't believe it is a valid argument for subsidizing aircraft like the SST.

But there may be reasons, national security or other reasons for Federal investment in programs that the private -enterprise would not touch.

Senator MAGNUSON. Including MIT.

Dr. RATHJENS. Including MIT.

Chairman ELLENDER. The Senator from Hawaii has the floor.

POSSIBLE PURCHASES BY U.S. AIRLINES OF CONCORDE

Senator INOUYE. I have one final question, sir.

I believe I am correct in contending that in our economy people do make bad investments, even if they find that the cost is high. We buy 727's instead of DC-3's, and I am certain that several of the airline companies who have placed their bids or options or whatever you call it to buy the Concorde will purchase them.

Now, if your position prevails with this committee and with the Senate of the United States, the American SST will not be flying. But what would your view be if the Concorde is flying across our country?

Dr. RATHJENS. If it does not produce an environmental hazard. either in terms of meteorological effects or in terms of excessive noise. it would not bother me at all. I might even want to ride on it.

I would not be prepared to pay much of a surcharge to ride on it, and I certainly would not care to invest my money in any airline that bought them in large numbers in the expectation that I would get a very good return on that investment.

But it would not bother me to see them flying.

OBJECTION TO USE OF PUBLIC FUNDS

Senator INOUYE. It would not bother you to see a British-French job flying, but it would bother you to see an American one flying?

Dr. RATHJENS. It does not bother me at all, again, if there are no environmental problems, and if I am not going-if somebody else will pay for it, and I mean somebody other than the American taxpayer. If the Chase-Manhattan Bank and various insurance companies decide that this is the kind of a venture that makes sense, considering the state of the art, and they want to go into partnership with Boeing or some other firm and produce and develop the aircraft, I would say that is fine, and leave it for the Government to take its traditional role here in certification of the aircraft and regulation. That is all right with me. I have no objection to that.

I object to paying it, I object to subsidizing it, and paying taxes for it.

I particularly object to this kind of a venture where, in fact, 1 or 2 or perhaps 5 percent of the American public will ever fly in the thing. If I think about my own life pattern, and I fly a great deal more than most people, I cannot imagine in the last year, or the last 3 years, that if SST's had been in existence, they would have saved me more than 5 or 6 hours' flight time.

On the other hand, investment in a decent rail transportation system between here and New York, or improvements in highways, any one of a number of other areas, could have saved me a great deal more money, a great deal more time, and money at less investment cost, and would save a lot of other people similarly.

I think that if there must be public investment in these things, we ought to put it in those kinds of endeavors where there is the greatest benefits for large numbers of people.

Senator INOUYE. Thank you very much.

Chairman ELLENDER. Any further questions?

Senator PERCY. Mr. Chairman.

Chairman ELLENDER. Senator Percy.

Senator PERCY. I would have four or five questions I would like to ask. I would be very happy to have Dr. Samuelson go ahead, and then either one of them could answer the five questions.

If you would prefer that I put them to Dr. Rathjens, I certainly will.

Chairman ELLENDER. Well, it is up to you.

If you want to ask them to Dr. Samuelson, you might wait and let him.

Senator PERCY. All right.

Chairman ELLENDER. Any further questions?

We thank you very much, Doctor.

WITNESS' EDUCATIONAL AND PRACTICAL EXPERIENCES

Senator PERCY. Is Dr. Rathjens going to be excused now?

Chairman ELLENDER. Yes.

Senator PERCY. Well, I would rather ask my questions now, then. Senator PROXMIRE. Would it be possible, Mr. Chairman, to have