Secretary WILSON. That is right. In this case I think it is a good thing to do. I am going to stand on it. We are setting things up to make sure that there is a minimum amount of interference in the program.

Mr. MAHON. I take it that you regard the question of the development of the intercontinental ballistic missile as of the highest priority in the Department of Defense?

Secretary WILSON. That is correct.

Mr. MAHON. What about you, Admiral Radford?
Admiral RADFORD. I agree.

FOREIGN AID

Mr. MAHON. We are now moving into a battle over foreign aid, foreign military aid and economic aid. The country will be filled with arguments as to what we should do. Should there be a long-range program, or should there be a short-range program, or should there be no program?

As Secretary of Defense do you have any respect, or what respect do you have for our so-called foreign aid program? Is it essential? Secretary WILSON. As the Defense Department, we have a direct responsibility for the military assistance part.

Mr. MAHON. Do you think it is any good? Is it worth having? Should we quit spending all this money on our military foreign aid? Secretary WILSON. I think we should spend what we have requested. I think that is the right level for it.

Mr. MAHON. Do you believe money spent in military foreign aid is money spent in the defense of the United States?

Secretary WILSON. I do. I would like to just make it clear that I am not completely familiar with all of the details of the economic aid program. The piece that we are responsible for in the Department of Defense is military assistance, which we think is a proper thing to spend money for as part of the defense of this country.

INCREASED UNIT COSTS

Mr. MAHON. Mr. Secretary, we have had staff investigators working under our direction in an effort to give us guidance and assistance, factual and otherwise, in these hearings, and they have been working on the military budget. We will present some of the findings and recommendations to you for your comment and we hope that by working together with you perhaps greater economies can be achieved. It is a little disappointing that the unit cost of everything we buy seems to be going up and that we have not achieved that degree of economy in the field of procurement that it seems to me we ought to achieve.

We had a lot to say about that last year and we will have more to say about it this year.

What we need is results and we are not getting results in cutting down the unit costs of defense items. Do you have anything to offer that would encourage us?

Secretary WILSON. It is difficult to prove or disprove what you just said because the products keep changing all the time and they get more elaborate and more technical. We can make more progress in the

efficiency of the article we are making and if we are doing more complicated things and more expensive things the cost goes up. I personally think that we are making a lot of progress, but it does not show up in less money for the reason that the products are getting better but more complex and more expensive.

Mr. MAHON. Moneywise I assume probably 85 percent of all defense contracts are negotiated cost-plus fixed fee type and that is not good.

Secretary WILSON. We are doing the best we can with it. If anybody has any good suggestions on some other way to do it I would like to hear them.

Mr. MAHON. You are a man from industry and an engineer and I have been hoping all along that with the businessman administration of defense procurement we could do a better job.

Secretary WILSON. We are doing a better job, sir. Our program has placed emphasis on improvements and new things and that in itself means additional expense. As I pointed out, it is a little difficult to handle. It is very difficult, if not impossible, to take these items on a bid basis. It is not like buying beef, where you can buy it on the open market from many different people that can sell it to you out of their packing setups. It is not like buying a number of other civilian-type commodities.

Mr. MAHON. The taxpayers pay through the nose a very high noncompetitive price for this stuff, Mr. Secretary, in the long-range defense program, and it seems unfortunate that we cannot get some competition-some of that free American enterprise.

Secretary WILSON. We have competition in it in different ways. We spend money to make sure we get some competition. We often ask three different companies to take a new concept of possible needs, let their engineers and people work up the very best approach they can, and we try to evaluate those products and do the very best we can with them to get the best deal for the United States. The profits on sales are from 2 to 4 percent, somewhere in that range.

Mr. MAHON. But that is not a very valid observation. The Governing furnishes a man a plant and a guaranty to order and he will make 3 or 4 percent on a multi-million dollar order.

Secretary WILSON. We took about $500 million of advances from the aircraft industry and are trying to make them operate on more of their own capital and not get so much advance capital from the Government. They have their problems in the business. I would not say that we cannot finally do a little better. You usually can with anything if you work on it real hard.

Mr. MAHON. Thank you very much, Mr. Secretary. You have heen very helpful to us.

WEDNESDAY, JANUARY 25, 1956. Mr. MAHON. The committee will come to order. We will proceed with the interrogation of Secretary Wilson.

MILITARY DEFENSE ASSISTANCE PROGRAM

Mr. SHEPPARD. Mr. Secretary, there was expressed a difference of opinion last evening relative to the appropriations that are presently

under consideration by the committee and the funds being requested for the European military defense assistance program. I think that you expressed your views relative to that in passing. My friend and colleague, Mr. Wigglesworth did.

I would like to clarify my thinking upon that issue by asking you the following question, if I may, sir:

At the time your office, and your associates with you, of course, are considering your budget requirements and the military strength that is a component part of the money requirements, do you, or do you not, consider the potential of the military strength you anticipate you will have in Europe?

Secretary WILSON. I think that I recall saying that there was a part of it that the Defense Department had no responsibility for, and I think that I said that I took no position for or against the specific amounts requested for economic aid, although, as far as I know, it is desirable also. I am not close enough to it, and it is not my responsibility. We think the budget that we are requesting for military assistance is a proper one, and it is worthwhile, and we will get a military advantage from it that is in proportion to its cost.

Mr. SHEPPARD. I understand your statement, but again I would like to address myself to this: When you are considering the military strength which you ask for in your budget, is the anticipated strength emanating out of the European countries that are receiving military aid a component part of your consideration? In other words, if you are going to have 10 million men in military service in the continental United States, are you adjusting the figure to 10 million because you have potential access to 3 million over there, 2 million over there, or somewhere else? Do I make my position clear, sir?

Secretary WILSON. Yes. I think that I understand your point. In considering our worldwide problem, the answer to your question is, "Yes," we do take into account our allies and the position we might have in various parts of the world.

Mr. SHEPPARD. As a consideration of the funds allocated for the military aid program, I have been led to believe that there were commitments on the part of those countries receiving the military aid wherein they would supply so many military bodies. Is that a correct assumption on my part, or an erroneous one?

Secretary WILSON. It is substantially correct. It is a little different in different countries. Sometimes the commitment is a very formal one; sometimes it is not. Most of the countries would be willing to support more people if we would provide additional aid.

Mr. SHEPPARD. In other words, if you had no assistance program in existence in Europe, would you confine our military stature to its present requested amount, numerically speaking?

Secretary WILSON. Perhaps you had better state that question again. Mr. SHEPPARD. The reporter will repeat the question."

(Question read.)

Secretary WILSON. I do not think that I can answer that question. because it assumes some condition that does not exist. I would have to know what the threat was, what our allies were doing on their own and what the whole condition was to be able to answer the question. (Discussion off the record.)

Mr. SHEPPARD. When you were considering the military budget which is presently before the committee for its consideration, did you

and the Joint Chiefs of Staff consider the amount of military assistance you can draw upon if an emergency develops, or did you not? Secretary WILSON. The answer is that we do.

Mr. SHEPPARD. Very well. Then, in doing so, the military assistance program is obviously a component part of the dollar aspect that you are presently presenting to the Congress.

Secretary WILSON. It is closely related to it.

Mr. SHEPPARD. If you did not have any military assistance program emanating from the European countries, is it not rather obvious you would have to increase the stature of our own?

Secretary WILSON. It would depend upon the world commitments we had and what the world situation was.

The reason that I cannot give you a simple answer to that is because I would have to conceive of another situation existing in the world, and what we would do then.

Mr. SHEPPARD. I can only construe your answer to mean—and I have no criticism-that as of the moment, and with the present international conditions that prevail, we are not dependent upon the military assistance program for giving us assistance, if assistance is needed tomorrow, next week, next month, or within the duration of this budget?

Secretary WILSON. I do not think that is a correct assumption.

Mr. SHEPPARD. If a crisis arose that required military operations within the coming fiscal year and you would have no assistance emanating from the European countries, would you consider this budget adequate under any conditions that require military operations?

Secretary WILSON. If we had the same commitments, I would not think the budget would be satisfactory. But, of course, we might not have the same commitments if we did not have our military assistance program, and NATO, and our relations with Korea, and so forth.

Mr. SHEPPARD. Mr. Secretary, we have those things so that they must be a component part of our consideration.

Secretary WILSON. They are. When you ask me the question that way, they are. But when you try to put it on the basis of assuming that we did not have any military assistance programs and did have those commitments, we would then have to have a bigger budget ourselves..

Mr. SHEPPARD. That is correct.

Secretary WILSON. If we had the same problems that we faced in the world, but less assistance from allies, we would have to have a bigger budget ourselves.

Mr. SHEPPARD. This budget is formed on the premise of the problems that prevail throughout the world; is that correct?

Secretary WILSON. Both the military assistance budget and our own budget are designed to take care of the problems as they exist in the world today.

Mr. SHEPPARD. So the military assistance program, I interpret from your answer, is a component part of this budget. While it may not be literally in dollars as such, it is the foundation upon which you are making your request here, and under the presently existing commit

ments.

Secretary WILSON. They are undoubtedly tied together.

1

Mr. SHEPPARD. That is my point.

Secretary WILSON. Am I getting into a jurisdictional dispute of the Congress whether you ought to be thinking about the thing in the total, or a piece of it somewhere else?

Mr. SHEPPARD. We will take care of that aspect of it ourselves. Secretary WILSON. Thank you. I do not want to get into that. Mr. SHEPPARD. I do not want to put you in an untenable position. (Discussion off the record.)

EUROPEAN COUNTRIES RECEIVING MILITARY AID

Mr. SHEPPARD. My next question, in order to satisfy my mind pertaining to the present budget, is going to be directed to the gentleman who I assume you have brought with you because of his interest in the European aid program.

Secretary WILSON. That is right.

Mr. SHEPPARD. How many European countries are receiving military aid?

Mr. GRAY. The NATO countries are all receiving military aid, plus Yugoslavia and Spain, who are not members of NATO. The NATO organization includes Turkey, for example.

Mr. SHEPPARD. May I say this to you, sir-if you consider any of your answers to my questions embarrassing, you may take your answers off the record, but I want my questions left on the record. Can you list the countries that are presently receiving military aid?

Mr. GRAY. The European countries are Belgium, Denmark, and now that the Federal Republic of Germany has come into NATO, it will be in the picture; France, Italy, Luxembourg, the Netherlands, Norway, Portugal, Spain I mentioned, although not in the NATO framework; and also not in the NATO framework is Yugoslavia.

Mr. SHEPPARD. But those countries that are not within the framework are nevertheless receiving military assistance?

Mr. GRAY. That is correct.

Secretary WILSON. I would like to add a point to that. Our expenditures over there are in two forms. One is what we call infrastructure; in other words, when the NATO group decide to do something involving common facilities, then they proportion the expense, so to that degree we contribute our share to the whole NATO program. Then, in other cases we are providing military assistance in varying amounts to the individual countries. So just to make it clear, that is where the money goes as far as NATO is concerned.

Mr. GRAY. I should include Greece and Turkey.

Mr. SHEPPARD. With regard to the military contribution of those countries and our agreements with those countries that are receiving military aid, how many of them have lived up to their commitments as of the present time?

Mr. GRAY. As you know, sir, there is an annual review in NATO which results in some shifts of commitments, sometimes up and sometimes down. I suppose that it would not be accurate to say any country has finally and completely reached the force goals whiel have been established by NATO. They are all working toward them This is in no sense said to be a completed project, but they are constantly in the process of building. There is to be, beginning the 20th of February, in Paris, a rather comprehensive military review