Dead Centre

Last week the U. S. defense program resembled a great locomotive, ready to go. Steam was up, in the shape of plans made and contracts drawn--$11,000,000,000 worth. But so far this giant locomotive had not yet turned a wheel. Its drive-rods were at dead centre.

The National Defense Advisory Commission so reported to the President last week. The distinguished commissioners did not like to have to say it. Neither did the President like to hear it--especially with Wendell Willkie gibing on that platform and offering to take the throttle. The people certainly did not like it, after hearing their military men on the danger of war and the gaps in U. S. preparation. Everybody looked around for a whipping boy.

Whose Fault? Nearly everybody blamed Congress, which still fiddled with conscription, carped at voting the second half of the $11,000,000,000, held up legislation vital in safeguarding and stimulating defense production. Army and Navy officials whose testimony was published last week did indeed put most of the blame on Congress. They also distributed a little elsewhere, by inference put some on themselves.

Typical were the difficulties and explanations of the Army and Navy air chiefs. Army Air Corps Major General Henry H. ("Hap") Arnold had orders placed to complete a force of 5,500 planes by October 1941, had the money for 4,200 more, now asked for funds to run his total this year up to $2,295,000,000. The Navy's Rear Admiral John Henry Towers had 1,746 useful aircraft on hand, 2,489 on order, money for 1,478 more, now asked $550,000,000 for 4,028 additional planes. Congressmen logically wanted to know why the money already voted had not been contracted, how the Army and Navy expected to use any more.

Said unhappy "Hap" Arnold: "We have not placed the contracts [for 4,200] . . . due to the fact that the industry feels that there are so many uncertainties, unknown quantities that they have to contend with. . . . The Vinson-Trammell [profit limitation] Act has something to do with it; taxes; uncertainties with regard to labor. ..." Said Rear Admiral Towers, recalling that Congress had cut the allowed profit on Navy contracts and Army aircraft contracts from 12 to 8%: "There are two reasons. The reduction in . . . profit . . . has made it very difficult for the aircraft manufacturer to place subcontracts [which] work out about 5% net profit . . . it just does not interest [the sub-contractor]. . . . The other and major reason, however, is the lack of definite legal provisions under which they can . . . carry out this contract. They do not know where they stand."

In short, defense production would be held up until Congress 1) put up a reason able excess-profits tax on all industry, instead of the present limitations on some defense contracts; 2) assured manufacturers that new plants built for defense would not be taxed after defense business stopped. Last week Congress continued to dally with these measures. But Messrs. Arnold, Towers and fellow officers made it painfully plain that there were still other reasons for delay.

One was that the Army, the Navy, and the British Purchasing Commission were tangled in each other's hair. Present profit limitations apply to all Navy equipment and Army aircraft, but not to other Army items. Results: 1) the Navy could not place some contracts because the Army could offer manufacturers a higher profit; 2) some manufacturers preferred to do business with the British, or even with private customers, who put no limitations on profits. If this was correct, Mr. Roosevelt's Defense Commission had not done so well at clearing up such conflicts as was generally supposed.

Army and Navy officers themselves caused some confusion. "Hap" Arnold had to correct previous, erroneous testimony by the Chief of Staff (that contracts had been let for the 4,200 unordered Army planes). The Navy's chief shipbuilder, Rear Admiral Samuel M. Robinson, testified that, despite difficulties, "we have been able to go ahead with our shipbuilding program . . . we are not being held up." He was contradicted next day by Rear Admiral William Rea Furlong, who told the same Senate sub-committee that the shipbuilding program had been seriously held up ("progress has stopped on the procurement of materials that go into the ships"). Two of his examples: U. S. Steel Corp. had postponed construction of a $4,000,000 mill to make Navy steel; subcontractors refused to make 144 anti-aircraft guns (for 28 new destroyers). Reason: "There is much more business in the country than they can take on without being subjected to [profit] provisions."

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