That is a matter of record.

Now, in that investigation it develops that while on the face of it we have many contracts awarded on a competitive basis, when you get one particular company, give one particular company the development contract for a new weapon in its very nature you are not giving much chance for anybody else to compete in a bid.

When you draw your detailed description of what it is you want in such a way as to fit one company and fit nobody else, you can advertise until you are blue in the face and it will not do much to bring about competition.

Now, let me say again that when these Defense witnesses kept saying Russia has this and Russia has that and you ask them why and they could not say, in 1956 I went to Russia. I had observed a good friend of mine in your body get kind of dragged around because somebody in the press said he had been sold a bill of goods.

So I tried to hedge. I told our folks I do not want to see a single top level Communist. I want to be with our representatives the whole time I am there. I want to go by automobile and train and I want to stop where I want to, and I want one of our top Americans to go with me the whole time.

REPORT ON TRIP TO RUSSIA

When I came back I filed a rather detailed report.

May I say, hedging again, I had our top people who had spent years in Russia working for our Government to go over it for accuracy so that I could not get out on a limb and be sawed off.

When I got back with that report notwithstanding I had the best men on our Appropriations Committee with me and our best men in Russia with me, I could not clear that; I could not get a single magazine, newspaper or somebody else to print it because it was bucking the public interest in continuing spending in my opinion.

Since then the situation has improved to some extent.

That my views may not be misunderstood, may I say in my trip over there the things that you could see, the trains and railroads, the lack of them, the lack of highways and factories, everything I saw was completely opposite to what our folks had led me to believe and I was on the Defense Appropriations Committee here and consider I was supposed to be telling us the facts.

When I came back I took pictures of things they said you could not see. Some of our very top people in our Government said that my report was invaluable and I had 120 pictures of things, many of which they said you could not even see.

Now, by that statement, I do not mean to say I came back believing Russia is not strong, but let us look at that two ways:

If Russia is not as strong as the proponents of our present level of defense spending say, if she is not that strong it is ridiculous to ruin. our economy with inflation.

On the other hand, if Russia is as strong as some of our people say she is, we certainly cannot afford to spend ourselves bankrupt and have a weak economy behind our frontline military.

I would just like to point out some things, they are not isolated, but I have many other duties, as we all do, and I have to do the best I can with this, but I would just like to cite to you some of the things

that in my experience on this committee have happened which lead me to believe that real defense needs have become a fairly minor part of our decision.

EXPERIENCE ON THE APPROPRIATIONS COMMITTEE

In my experience on this Appropriations Committee I have had the defense say that they continue to manufacture planes that would not fly so as not to have unemployment.

I have had before me on that committee a request for $160,000 per plane for the same kind of plane from the same contractor, a continuation of a contract, if you please, where they had asked us for $160,000 more per plane.

I said, "Now, I cannot go into the files on each of these cases, but will you bring before me the files so that I can see if you attempted to get that plane at the same price."

They stalled around and they finally said it was out at Wright Field, they would have to send for it.

I spent another 10 days and they still did not bring it. I raised the question and then they promised again.

They finally came up and said "Congressman, we are sorry to admit it. We have not tried to get that contract continued on its present level. We just estimated it would cost $160,000 more per plane."

I said, "Mr. Secretary, do you not know if they see in your budget you have listed this plane for $160,000 more per plane, that those folks are smart enough to ask for it?"

This investigation of procurement practices, and I insisted on the practice part, as I have said the Defense Department had stamped

secret on it.

Not even letting the Appropriations Committee see it. If anybody goes back to read it, it is a startling situation.

Last year, or 2 years ago, the budget approved $350,000 for a home for the Chairman of the Joint Chiefs of Staff. Hindenburg, or the Prussian generals, never had anything to equal it. It would duplicate about everything you have in the Pentagon.

Luckily, the Congress cut that out.

I am trying to show that we are getting where defense has very little to do with many of these things.

Two years ago the Fairchild Co., for various political reasons, in my opinion, with political help, let us put it, insisted that we buy $30 million worth of planes from Fairchild so as to keep the plant going.

We had the Air Force before our committee in a private meeting. It developed that the planes that would be manufactured there would have a British type engine and would have to be used in Europe because of the repair situation.

The Air Force admitted that they had sufficient planes; that they were using them, but they would be glad to have these new planes; they would have to find some place to put the planes they had; that they could put them over in military foreign aid; that they felt sure some country would be glad to have them.

Last year we were considering on our committee the abolishing of the curtailment of the Bomarc missile on the basis it would be obsolete before it really got anywhere.

Mr. Chairman, the Boeing Aircraft people who manufacture that, according to my information, took practically half the hotel space in

Washington. I do not say it in criticism. I just say we are in a situation that is highly dangerous.

I do not know why, but anyway, that missile is continued.

I do not know that it is bad to continue it, or that it should have been discontinued, but I am saying that pressures in there was the case of carrying on the contracts.

Last year we had before us the procurement of the Mace missile prior to proving that the Mace missile will work. You have read in the press and doubtless you have had it before your committee, where 18 top-level officers were entertained by the Martin Co. at a cost of some thousands and thousands of dollars.

We had this up in our committee a week or two ago.

The CHAIRMAN. This is the trip to Bermuda?

Mr. WHITTEN. That is right.

Now, that was at the expense of the company which was here attempting to obtain procurement contracts for an unproven missile. Now, in my questioning last week, the Department said they had prohibitions against procurement officers accepting any such thing, but, apparently, they have nothing to prevent the top level folks who decide on programs which call for the expending of the money, there is nothing in it to prevent them.

According to the press and the Internal Revenue Service, they attempted to charge this off as an expense of getting contracts.

If that in itself does not indicate that this trip was down there, I am not trying to smear these officers as such, but if Martin tried to charge it off as an expense of getting contract, it adds a little bit of thought that Martin not getting them down there would help a little.

Again we need big business in the Defense Department. It is a big thing. We have to have folks with big experience, but we know that we have folks out of the big business coming into the Defense Department.

Then it develops in the testimony this year, following our request last year, there are 18 pages of ex-military people working on those

contracts.

The CHAIRMAN. That is the ranks of Army colonel or Navy captain ? Mr. WHITTEN. Or above.

We have military running to a considerable degree the other end of it.

As I expressed in my prepared statement, it is hard to tell what is what and who is who.

Now, proceeding a little further, at the moment we are in a big controversy in the press about whether we have the B-58 or whether we have the B-70. The B-58 is manufactured by Convair.

The B-70 is by North American.

I am making no charge. But as mixed up as these things are, you begin to wonder whether it is more influence that one company has against another company.

Now, we have gotten ourselves tied to them and I am in the fortunate situation, I do not have any defense establishments in my district. It is not a sour grapes because they have not contemplated putting any in there, and I have not asked them to put any in there, but it does make it a little easier for me to see it objectively.

I have seen the Air Force approve putting an airfield in the worst of four locations, it costs more, and less flying time.

Along this line we have reached this point to where my good friend, the chairman of the Armed Services Committee, of the House, 2 years ago on the public works appropriations bill, military, announced to the Congress that there is something in this bill for everybody.

You know when you looked at it he had them listed by States so that everybody would know, I had better be careful about this vote.

Listen to this, Mr. Chairman: Last week the Secretary of the Navy testified before our committee that responsible naval budget officers throughout the Navy had estimated they needed $19 billion for the Navy this year.

That would represent a 60 percent increase.

Now, the budgeting process and the top echelon cut it back to about this year's level, about $12 billion.

But think of this: If the budget and the Congress had raised them 60 percent and did the same thing for foreign aid and Air Force and Army, there would not be a dime to run the rest of the country.

Now, in that same presentation they said, now we need all we can get because prices are going up 7 percent a year and have been for a number of years.

Well, prices going up 7 percent means 7 percent inflation. It is in logarithm, I guess it would be, but it takes a fellow with just a little arithmetic knowledge to know that if your inflation hits you at the rate of 7 percent a year in about 20 or 25 years your money will not be worth anything.

The CHAIRMAN. I do not know about the specific items to which these officers were referring, but the truth of the matter is that the wholesale price level is now only approximately 20 percent higher than it was in the period 1947 to 1949.

The general wholesale price index has been comparatively steady in the last 2 years so that the asserted inflation, so far as the general price level is concerned, has not occurred.

Now, it is true that there has been a great increase in the price of manufactured goods and a decrease in the price of farm products. But the evidence that we have been developing these last few months is that the increase in prices has been greatly exaggerated.

Mr. WHITTEN. Well, be that as it may, that was his testimony and, of course, he was discussing the expenditures by the Defense Department and behind that may be lax contracting, failure to get competitive bids, paying too much on cost plus.

May I go back to this Martin Co. situation where they had these 18 officers. In that case for one reason or another, Congress went along with making a procurement contract, we went along with it, against my vote, may I say, but in connection with my statement earlier that according to the press the Internal Revenue Service refused to allow this as a part of the cost of obtaining the contract. The Secretary agreed that unless this particular expenditure was identified that it could easily be under their contracting procedures counted as part of the cost which in turn would lead to a larger profit to this company. May I say I have pretty much written you a book already and I could write another book on each page.

I realize that there are a lot of other factors, such as you mention, about the overall price increase and inflation and things of that sort, but, of course, I happen to handle agricultural appropriations on the

House side and I think that the biggest reason you do not have inflation is that every time other things go up, certain folks say, "Well, just take the price out of the raw materials."

So I think the inflation situation would have been much greater if we had not passed it back in the price of the income to the manufacturers of the raw materials.

The CHAIRMAN. We asked the Library of Congress to prepare the table on the proportion which military prime contract sales formed of total company sales. I will ask consent that it be inserted in the appendix.

I will say that the case of the Martin Co., the $400 million which they had awarded to them in fiscal 1958, formed 99.2 percent of their total business. So that this is a firm which is almost exclusively a military supply firm.

Mr. WHITTEN. This question has always worried me, Mr. Chairman. I used to be a fairly good student of history and within the time that I have I still have an interest in it, but if I understand my history correctly, in Japan and in Germany, this involvement of defense spending with the domestic economy certainly was a contributing factor. There we had leaders who were for aggression.

Fortunately, we do not have it here. But getting your economy tied up to defense spending where everybody is afraid to cut a defense contract because of temporary unemployment there, when we reach that kind of place it becomes more and more serious. I think it was a real factor in those cases.

Here is a question-you know I am more trained at asking questions than answering them, but there is one I would like to submit to the committee here, not to press you for an answer: We had an investigation last year on the number of planes that were stationed at various Air Force bases for the personal convenience of the officers. That means that they did use them on business.

The report shows that they used them for a whole lot of other things. About 75 percent of the trips are listed under the name of proficiency flying. That is a kind of Mother Hubbard expression. But the page in our report by our investigators on behalf of the Congress is stamped secret on the page that lists how many, and where.

So I guess I was having a little fun out of this, but I am going to take the chance and release something I do not have approval to because he did not give me any answer on it so I think I am privy to it.

In that report it shows that we have 27 airplanes at the Air Force Academy in Colorado for the convenience of the professors. Understand, they do not teach flying there. Flying is taught at flying schools.

I asked General White: "General, when you tell the American Congress that it would ruin us if Russia learned that we had 27 planes out there for the convenience of the air instructors out at the Air Force Academy, I am sure you honestly believe it would ruin us, but will you explain to me why it would ruin us with Russia if they did know it?" I will say this for General White: He did not attempt to justify that, but it is illustrative of how hard it is to get these facts out.

Now, behind all of this thing of getting defense where it is just about half of what we are doing is this: Most all the military people I