GENERAL STATEMENT

The magnitude of our Mutual Security Program and the continuing and repetitious character of requests presented to the committee for this purpose have caused the committee members to give this bill especially serious and thoughtful consideration. Accordingly, a review of our foreign aid program to date and an analysis of our prospects for the future are appropriate.

There is no precedent in history for the generous treatment accorded by the United States people to the peoples of the world. Following World War II, the war-devastated areas of Europe were economically prostrate. Vast undeveloped and sometimes overpopulated areas of the world were prostrate. Unrest was widespread. Multiplying the problems resulting from these conditions was the studied effort of atheistic communism to extend its domination over these troubled areas and, as a corollary to that, there was the problem of caring for the millions of refugees who fled Communist oppression.

The United States was impelled by a desire to assist both our friends in battle and our defeated foes. We were also impelled by a desire (1) to improve these nations economically and thereby to permit the survival of free institutions, and (2) to secure for ourselves free allies in the maintenance of world peace. Beginning with fiscal year 1946, Congress has appropriated vast sums of money for this general purpose. Since that time, and exclusive of the amount named in this bill, Congress has provided a total amount in excess of $50 billion for these purposes. If this amount of money could be placed in a repository and handed out at the rate of $1 million per day, the fund would still not be exhausted in the year 2098. This is money which someday must be repaid by American taxpayers.

The committee is gratified to note that progress has been made. The economy of Europe produces approximately 138 percent of its prewar counterpart. Certain progress has been made in undeveloped areas and a military machine capable of resisting aggression is in the process of formation in Europe. More progress would unquestionably have been made had the conflict in Korea not come about.

There is some question in the minds of the committee members whether our assistance has always been administered intelligently and economically. Some question also exists whether the recipient countries have in all cases utilized this aid to their full advantage. The rapidity of recovery on the part of some nations as compared with the faltering progress of others forms part of the basis for this uncertainty.

The committee feels that an improverished America would not be able to achieve the goals of world stability and national security. It believes that the most valid criterion in determining the extent of foreign aid must be the judgment as to whether, in the light of all other factors involved, the economy of this Nation can remain strong with this constant drain on its resources.

The committee has noted that the deficit in the United States budget for the fiscal year just completed exceeds the total budget of most of the countries receiving aid. It feels that the United States must remain financially sound since the threat of Communist aggression may remain over a period of many years.

It appears that even though the vast sums of money spent on foreign aid have not always been productive, yet the goals we established in 1948 have been largely reached and even surpassed. The committee feels that the nations of the free world are now able to take up a more proportionate share of the common burden.

In the light of these developments the committee believes that some reduction in foreign aid appropriations is in order. In arriving at the actual amounts appropriated, the committee considered all available sources of information, not only a communication from President Eisenhower, and the mass of material presented by the Mutual Security Agency, but also voluminous material developed by the committee itself. In addition, the committee has drawn on its accumulated experience in dealing with this appropriation for a number of years.

PROGRAM AND POLICY

While it is beyond the scope of this document to catalog every detail involved in this vast outlay of money, the committee feels an obligation to set forth a few comments relating to the program and some of the motives which compel the action which it has taken.

The committee concurs in the judgment of the President that this program is not a "give-away" program. It is a necessary defense expenditure in much the same sense that our military spending constitutes defense expenditure. However, the committee feels that in view of the progress made to date, in view of the 8.8 billions of dollars in the "pipeline" en route to Europe, as well as the large unobligated balance we are making available, and collaterally in view of the great deficit in our own national budget, some reductions and economies are mandatory and will not sacrifice the objectives of this program.

NEW PROGRAMS AND UTILIZATION OF FUNDS APPROPRIATED

The committee has noted the tendency to apply dual standards in describing past expenditures. On the one hand, Mutual Security Agency has justified expenditures of funds appropriated by stating that it was following congressional mandate; on the other hand, it has stated that when good judgment dictated a line of action contrary to that directed by the Congress it has withheld expenditures. In order to clarify this point the committee recommends that in the future when new programs appear desirable, or when congressional directives appear to be unworkable, the Mutual Security Agency should consult with the Foreign Affairs Committee of the House of Representatives, the Foreign Relations Committee of the Senate, and the Appropriations Committees of both Houses of Congress prior to to any action which will commit this Nation to any policy or line of conduct.

In this connection, the committee notes that it has reviewed the material presented by the Mutual Security Agency relating to its new Industrial Development Program. The committee disapproves of program and feels that it is conceived on an unsound and unrealistic basis. It is the direction of the committee that no appropriated funds should be utilized for this project or for any similar program.

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EUROPEAN PAYMENTS UNION

The European Payments Union was designed as an intra-European bank and clearinghouse which would accomplish currency converti bility by underwriting trade between member countries. The United States Government has, after an initial outlay of about $350 million, continued to make up deficits of the member countries so that it has paid overall for this project a sum in excess of $900 million. The objective of increasing intra-European trade and thereby strengthen ing the economies of the various countries is unquestionably worth while. The European Payments Union has contributed greatly to attaining this objective. However, the committee notes that ir making up deficits of the member countries the United States Gov ernment loses all control over money thus expended. While on the basis of present information the committee defers recommending statutory restrictions, yet it urges caution in approving such expendi tures and will follow closely all such transactions in the future.

COUNTERPART EXPENDITURES

According to existing legislation much of the foreign nonmilitary aid must be matched by the local currency of the recipient country Ninety percent of this local currency is designed to be spent on project within the country, proposed by the other government and subject to veto by the Mutual Security Agency. The other 10 percent is use for administrative purposes and for creating a stockpile of strategi materials. The committee feels, however, that much of the 90 per cent portion of the local currency expenditure has been utilized either directly or indirectly, as support for the budget of the recipien countries. The committee feels that a project by project approve of counterpart expenditures prior to commitment by the foreig government would not only be of greater long-run benefit to the recip ient government but would permit the counterpart projects to b specifically identified rather than having the funds commingled wit the budget of the recipient country.

LISBON-TYPE AID

A review of the Lisbon-type aid by the committee results in th feeling that this expenditure of over $400 million in fiscal years 195 and 1953 in France is unwise for two reasons: First, the statutor authority is at best vague; second, it does not permit postaudi The committee has received assurances that this type expenditure w be discontinued. The committee concurs in this stated policy of th Mutual Security Agency.

ADMINISTRATION

The President has recommended the placing of all foreign a operations in one agency. It is the hope of the committee that t new Foreign Operations Administration will soon be so organized th it will be a single unit eliminating the duplicating service groups that a more coherent presentation of any remaining problems will possible at the next session of the Congress. The committee also fee that this elimination of duplicate facilities will permit economies personnel which appear to be greatly needed in these organization

OFFICE OF THE SPECIAL REPRESENTATIVE IN EUROPE

The committee concurs in the action of the Mutual Security Agency in removing from this regional office in Paris any coordinating or supervising functions. The committee feels, however, that the 40 percent cut in personnel envisaged by the Mutual Security Agency is far too modest. The committee feels that an office, the sole function of which is to represent the United States in regional organizations, should be able to satisfy its obligations with a fraction of the 650 personnel contemplated for the office and it expects the agency to reduce the number of employees in this office to a number commensurate with its new limited function.

PERSONNEL

The Congress has in the past appropriated money to permit the Mutual Security Agency to pay higher wages (supergrades) primarily to attract competent men from private industry. Information available to the committee indicates that less than 10 percent of these supergrades have been used for this purpose or are now occupied by competent men from private industry. While the committee hesitates to recommend the imposition of ironclad restrictions on these positions, it does feel that the preponderance of Government personnel elevated to these positions constitute an inconsistency with the intent of Congress and it suggests a rigid review of this situation by the Director and by the Civil Service Commission.

As a corollary to the practice mentioned in the foregoing paragraph, information available to the committee indicates that some occupants of important posts within the Mutual Security Agency have few of the qualifications that should be required for such positions. The committee suggests and recommends a review and evaluation of incumbent personnel, considering both the qualifications of the incumbent and the requirements of the position.

INDUSTRIAL INSPECTION

The committee has noted with concern that MSA has expended vast sums of money but has made little or no effort to adequately supervise the activities into which this money was placed. In industrial projects alone over $600 million has been approved since 1948 for 143 industrial projects, costing a total of $2,250,000,000. As of January 1, 1953, MSA had instituted no systematic plan of progress reporting or field checks for these projects.

The committee feels that sound administration of any funds demands careful periodic inspection of any project into which those funds are placed.

OFFSHORE PROCUREMENT

The committee has noted with interest and with consternation the extremely involved process of arriving at the awarding of contracts in the offshore procurement program. The committee feels that the responsible officials should place highest priority to the simple procurement objective of securing the best price possible consistent with the ability of the bidder to perform. It is recognized that some consideration must be given to the distribution of these contracts among

S. Repts., 83-1, vol. 3-52

the various nations in Europe. However, it appears to the committee that too much emphasis has been placed on awarding these contracts in areas where political objectives are desired or where a balance-ofpayments problem exists.

SUMMARY OF APPROPRIATION ACTION

The

The total revised budget estimate was $7,321,738,256, of which the new appropriation requested was $5,138,922,277 and the unobligated balance was $2,182,815,979. The House allowed a total of $6,196,688,179, of which the appropriation recommended was $4,438,678,000 and the unobligated balance was $1,758,010,179. The Senate committee has allowed $6,745,318,202, of which the recommended appropriation is $4,562,653,811 and the unobligated balances are $2,182,664,391. This is a total decrease from the revised budget estimates of $576,420,054 and an increase over the House of $548,630,023. Of the appropriations recommended, this is a decrease from the estimates of $576,268,466 and an increase over the House of $123,975,811. Of the unobligated balances recommended, this is an increase over the House of $424,654,212. The House in this bill recommended that $1,758,010,179 of the unobligated balances as of June 30, 1953, be continued available. In limiting the unobligated balances to this figure, the House effected a cut in the program of $424,654,212, the greater part of which is in military assistance. The executive branch requested that all unexpended balances of prior appropriations be continued available for the same purposes during fiscal year 1954 This request covered both obligated and unobligated funds. House dealt only with the unobligated portion of this unexpended balance, clearly specifying the extent to which, if any, the unobli gated balance in each separate appropriation account should con tinue to be available. However, it failed to deal with, or even te mention, the obligated portion of the unexpended balances. This failure, in the case of the Mutual Security Program, creates a very peculiar and difficult problem. As a part of the normal operation of the Mutual Security Program, funds which have been obligated are frequently deobligated and then reobligated for the same or sim ilar purposes. These deobligations are part of the customary proces of doing business, and they normally reflect the kind of changes in program detail that are continuously required in the conduct of any large business; and particularly one embracing the kind of activitie involved in the Mutual Security Program. They may represent, fo example: a change in specifications for items ordered, a downward adjustment in the price of items ordered, a shift from wheat to ric in an MSA program, a decision to substitute a new model for an ok model in the MDAP program, etc. However, this process of deoblig gation and reobligation in fiscal year 1954 or fiscal year 1953 or prio funds cannot take place unless Congress specifies that unexpende balances of prior appropriations will continue available in fiscal yea 1954. If no such provision is made and there is a deobligation, th funds covering the obligation lapse and must be returned to the Treas ury. In other words, under the House bill, MSA must suffer reduc tions in its programs, or alternatively, repeatedly and consciousl carry on activities and deliver commodities and military equipmen which, in the light of most recent information, will not be the activ