WASHINGTON NEWS BUREAU
POTOMAC
POSTSCRIPTS ROBERT G. GIBBS, Associate
Editor
Defense production passing "tooling up" stage and moving into production phase . . . Next two years constitute most critical period T F A truce is r e a c h e d in Korea, or e v e n -*• if peace is fully restored in that c o u n try, new aggressions are always possible a n y w h e r e along t h e broad perimeter of the Soviet empire, a n d any of these c o u l d lead to a global war. W e dare n o t slacken the p a c e of defense mobilization until t h e strength of the free world is sufficient to meet any attack." W i t h this w a r n i n g Charles E. Wilson, director of the Office of Defense Mobilization, states that t h e nation's defense p r o gram must go forward as planned. In his second quarterly report, entitled "Meeting Defense Goals—A Must for Everyone," Mr. Wilson states t h a t much has been a c complished in t h e past year in laying t h e I o n i z a t i o n for a rapid and steady growth of military and economic might. At least two more years of intensive effort a r e necessary, however, to reach present goals of military strength and productive p o w e r . T h e nation has nearly reached the current military m a n p o w e r goal of 3.5 million men, more t h a n twice the fighting force of one year ago. Over $10 billion w o r t h of goods has been delivered in t h e past year, leaving outstanding orders for military goods a n d facilities in excess of $32 billion. An additional $49 billion in orders is being placed at the rate of $ 3 . 5 S4 billion a m o n t h , and the delivery r a t e has tripled. T o t a l national production now equals the W o r l d War II peak. Notw i t h s t a n d i n g this progress, military p r o duction is still in t h e "tooling-up s t a g e , " a n d m a n y aspects of the program are b e hind schedule, * including such basic items as aircraft and tanks. One critical shortage is that of machine tools and other production e q u i p m e n t . A shortage of engineers, designers, and draftsmen is also a major bottleneck in expanding production. Mr. Wilson states that the United States can preserve its technical superiority over t h e Soviet Union only by mobilizing its scientific manpower resources. Successful defense mobilization, Mr. Wilson emphasizes, is dependent not only on t h e efforts of t h e United States but also on the efforts of other free nations. This is particularly true with respect to t h e nations of W e s t e r n Europe, the Middle East, Asia, a n d the nations of the W e s t e r n H e m i s p h e r e . Foreign aid has h e l p e d these nations during the past few years. President Truman has requested Congress to appropriate $8.5 billion to continue foreign military and economic aid d u r i n g t h e year which started J u l y 1. 2892
In view of t h e ambitious b u t t e r - a n d g u n s program which t h e nation has undertaken—that is, to maintain a high s t a n d a r d of living a n d still meet military manpower and e q u i p m e n t needs—Mr. Wilson states t h a t production and economic controls a r e vital. T h e Controlled Materials Plan is the basic program n o w being used to provide key materials—steel, copper, and aluminum—for munitions production and industrial expansion. In the area of economic stabilization, Mr. Wilson notes that inflation has been c h e c k e d in part through price-wage controls and consumer and real estate credit. However, national security expenditures, which n o w account for only 1 0 % of t h e national product, will rise to 1 5 % by t h e end of t h e year and will approach 2 0 % next year. Increased industrial expansion and production of munitions are creating consumer spending without increasing t h e supply of consumer goods. T h e resulting inflationary pressure will pose a serious threat to the defense program. F o r this reason Mr. Wilson strongly urges enactment of a strong Defense Production Act as t h e most effective instrument for controlling these forces. E x p a n d i n g E c o n o m y Is Basic Goal As Mr. Wilson explains it, military p o w e r in modern war d e p e n d s on t h e ability t o produce more powerful a n d effective machines than our potential enemies, to p r o d u c e more of t h e m , and to p r o d u c e t h e m faster. Although this may be accomplished by reducing the o u t p u t of goods for civilian consumption, in t h e long run a strong basic economy requires a relatively high rate of civilian production plus p r o d u c tion of all necessary military goods. This can be done by an over-all increase in production and productive capacity. I n t h e past year, industrial production has risen by over 1 2 % and over-all national production by about 9 % . T h e goal for the next two years is a 12 to 1 5 % increase in industrial production and 10 to 1 2 % in the gross national product. Definite goals have been set for expanding e a c h of t h e key basic industries by m i d - 1 9 5 3 . I n t h e chemical field, sulfur is a major h e a d a c h e . E v e n with the ann u a l increase of 700,000 tons n o w u n d e r w a y , increased d e m a n d will exceed production. Nitrogen is another chemical for which t h e T emand is increasing. E v e n C H E M I C A L
without considering nitrogen needs for munitions in the event of a global war, agricultural needs by 1953 are expected to exceed present annual production of 1,750,000 tons by 750,000 tons. O t h e r chemicals which are in short supply a r e sulfuric acid, hydrochloric acid, chlorine, sodium phosphate, glycerol, ethylene chloride, methyl chloride, ethylene glycol, acetic acid, acetic anhydride, methanol, and benzene. Expansion plans are expected to alleviate shortages of chlorine, benzene, a n d hydrochloric acid. Several n e w plants are being planned to produce synthetic fibers to be used as wool substitutes or extenders. W h e n operating, these plants should produce the equivalent of 225 million p o u n d s of wool each year. O t h e r major expansion programs are u n d e r way for metals. Steel ingot capacity, for example, is to be increased by 10 million tons by mid-1953 for a total annual production of 118 million tons. T h e goal for aluminum is 1.5 million short tons a year, which is almost double t h e 1950 rate. Other metals in short supply are scrap and pig iron, lead, tin, copper, zinc, and such alloying metals as cobalt, columbium, molybdenum, nickel, and tungsten. A 4 0 % increase in electric power output to a n e w high of 97 million kilowatts is being p l a n n e d to meet t h e needs of the aluminum industry, the atomic energy program, a n d other defense activities. G o v e r n m e n t Aids in E x p a n d i n g Production Mr. Wilson states that much of t h e necessary industrial expansion required for defense could not or would not have been undertaken vby private industry, at least at t h e time and place and in the form required. T o stimulate and speed u p such development, t h e Government is utilizing several incentives, including accelerated tax amortization, direct loans, loan guarantees, long-term procurement contracts, and standby purchase commitments. T h e tax amortization plan allows a write-off of a portion of a plant cost, for tax purposes, at an accelerated rate of 2 0 % per year rather than at the 2 0 - 2 5 year normal depreciation rates. As of July 1, 2310 applications had been a p proved covering proposed investments of $7.6 billion. Approximately 7 0 % , or $5.3 billion, has been allowed as eligible for rapid writeoff. Of the total $7.6 billion, a p proximately 6 8 % is for expansion of capacity of steel, aluminum, petroleum, a n d other basic materials; transportation, storage, a n d public utilities account for 21%; a n d plants turning out such finished products as aircraft, machinery, tanks, vehicles, and electronic e q u i p m e n t account for 1 1 % . Substantial assistance is being given through various types of loans. Direct loans n o w exceed $210 million. Credits totaling $515 million h a v e also been authorized to industry u n d e r the Government's loan guarantee program. AND
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