Remarks to Key Officials on the Budget for the Military Functions of the Department of Defense.

[Released May 3, 1951 Delivered April 27, 1951]

FOR THE LAST several weeks many of you gentlemen have been involved in an intensive effort to develop the military budget for 1952. That budget represents one of the most significant programing jobs that this administration is going to place before the Congress this year. It is the major reason for our asking the Congress and the country to go along with many emergency actions.

I am most anxious that each one of you share the personal concern which I have about this military program and about the importance of carrying it through in an orderly and effective way. I have stated many times that in this limited mobilization situation inflation is a major enemy. The way we administer this program can do a lot to help spread inflation or to help restrict it and to turn the inflationary spiral. It is because the administration of this military program is of such major importance in our stabilization effort and in our worldwide program that I have called you together.

Passage of this budget will place tremendous procurement and spending authority in the hands of the Department of Defense and the three services. The schedules call for $34.7 billion in hard goods from 1952 appropriations in addition to $27 billion already available--a total of $61.7 billion for equipment for our own forces. To this will have to be added the military construction program and the equipment needs of our allies. Again, I repeat that this is going to place a particularly heavy management job on the entire executive branch to see that we buy wisely--buy what we need--put what we buy to good use--and do the whole job in a way that does not weaken our basic economy.

The fiscal controls which we normally use to keep many of our operations under scrutiny aren't sufficiently precise to meet our needs during this period of intensive mobilization activity. We have all recognized that the accomplishment of this military program is going to have a major impact on the economy. Broad adjustments in the economy have to be made to handle it and that is the basic job of the Office of Defense Mobilization, the Defense Production Administration, and the rest of our emergency agencies. But these agencies cannot help by working on a dollar basis--they have to work with the specifics of materials, facilities, and end items.

The services must establish effective supporting control systems to manage both the personnel and the production and procurement areas included in this dollar budget program. Again, you all recognize this. But one of the main reasons for my assembling this group is to emphasize the importance of giving this matter immediate attention and starting, in a systematic way, a regular process of watching and knowing how well we are doing our procurement and production job, particularly on the critical military items, and what effect it is having in the economy generally.

Specifically, before this money becomes available for expenditure, we must have accomplished the following two actions:

a. Creation by the Department of Defense of a system to control the requirements for and check on utilization of civilian and military personnel. I want the Budget Bureau to review this system and help in its establishment. We must prevent any hoarding of manpower in this program.

b. Detailed programing in the Department of Defense of the dollars for procurement and production based on procedures which insure the production of important long-lead-time military items and hold down on the procurement of short-term easy-to-get items in order to build up our production facilities on a balanced basis.

Mr. Wilson is going to be responsible for seeing that this facilities expansion and production job is done--and that the Defense Production Administration and other mobilization agencies play an active and appropriate part in this process. In this respect, it is recognized that the Department of Defense has the primary responsibility to organize its programs and procedures. But in order that these large programs can be integrated into the economy in an orderly manner, and effective stabilization be accomplished, the mobilization agencies must participate actively in the programing and scheduling job.

I'm going to be even more specific. I understand that there is agreement among the Office of Defense Mobilization, the Defense Production Administration, the Defense Department, and the Bureau of the Budget that the following steps are feasible and should be accomplished before this money becomes available for expenditure:

a. Establishment of specific, realistic production schedules covering items comprising at least 70-75 percent of the dollars for hard goods items.

If we are going to keep a healthy mobilization base and avoid severe, unnecessary jolts on the economy we must be sure that we don't move ahead too far on the relatively easy items and that the timing of our procurement is related to real requirements.

The dollars that have been provided for these hard goods items are based on objectives which are going to be very difficult to reach. We don't want to be blocking ourselves on production matters by bidding up prices or by needless competition among ourselves. We are going to be in this a long time. The military--in their own best interest-must manage this job better than they did in World War II and better than they are set up to do it now--because it is a long-range job--it isn't a quick up and quick down affair.

The Department of Defense has to have the machinery to establish for itself the priorities in its program--this means that the Joint Chiefs have to be ready to give their advice on what is most essential, and the Munitions Board and the mobilization agencies have to know where and what the program is at all times. It is a problem of getting our resources behind the most important items and programs. For example, if there are insufficient electronic items for all scheduled production, who gets what is available?

To try to do the military job and accomplish the necessary supporting production, the mobilization agencies are instituting the controlled materials plan. We want to make this plan work. I know from World War II experience that a controlled materials plan cannot work unless firm production schedules have been established. This is an additional reason for doing this job now.

b. Establishment of definite policies under which instructions can be given to the procurement officers, so that the whole range of soft goods and unscheduled items--for which there is more than 5 billion in this budget--can be bought in an orderly manner.

I want to stop the business of buying huge amounts of items common to the economy by some procurement officer down the line merely because he feels he has a directive to obtain everything he needs for 2 years in the next 2 months.

Also, I want to be sure that we set up proper inventory control systems so that inventories can be checked before we buy and so that we know what we have when we need to use it. Again, each one of you has a big stake in this matter of trying to demonstrate that the Government can carry out the kind of program envisioned in this budget without taking numerous, unwise actions.

c. Establish a control of the major special procurement programs, such as facilities, tools, lumber, petroleum, wool, and cotton goods, on as firm a basis as possible.

I know that much good work has been done on these programs. They are particularly sensitive, however, and need constant attention and improvement.

If, during the next 2-3 months, the Department of Defense and the mobilization agencies can work together to firm up the procurement and production program in the three areas I've outlined we will have made the first step toward getting set to manage this dollar program well.

All of us should recognize the differences between the present situation regarding procurement and production and that which prevailed during World War II. Now we are not aiming at a full war economy--we are trying to maintain a high readiness status for a long period--we are trying to develop greater economic strength both here and abroad--we have to plan our present job to do all these things and still meet the military goals--which are high.

I want again to stress the importance of doing this job well. It will require the close working cooperation of the Defense Department and the mobilization agencies. From a dollar standpoint this is nearly three-fourths of our governmental effort. I am going to try to follow closely how we are set up to perform this major job. I'm going to ask Mr. Wilson, Mr. Lovett, and Mr. Lawton to give me a report 2 weeks from today as to the steps that have been put in motion to make the reviews I've listed--and to set up a system which will let us keep the procurement and production job under dose control.

Both the Defense Department and the mobilization agencies--the Office of Defense Mobilization, Defense Production Administration, National Production Authority, etc.--could profit from these reviews in that together you are getting a better understanding of the job ahead of you and steps that need to be taken to accomplish it. I am sure that you in the Defense Production Administration and the National Production Authority will find that you have a big job ahead of you to make 'possible the realization of our military production goals.

Another reason for undertaking this kind of a review and scheduling operation on an urgent basis is that we will have to use such a system to prepare our 1953 budgets and to review the progress of this program in October and November. In other words, you should establish a system now so that the production schedules are always available to be reviewed and to furnish the guide for financial requirements. You should not look upon this as a one-time operation which will not have further utility.