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Mr. Wilson has indicated and conceivably it is correct, that about all that can be done under existing law is to leave to the National Security Resources Board the determination of the location of Government-owned plants.

The National Security Resources Board has a clear mandate in the 1947 act directing the Defense Department to consider such factors as security, availability of labor, markets, transportation facilities, and other things.

In other words, it was the decision of the Congress that defense plants should be dispersed throughout the country.

I would like to say in that connection, Mr. Chairman, something that I am sure every Member of Congress doubtless would agree with, namely, that we never want to come to the point of giving to any bureau, or to any individual officer of the Government, the power arbitrarily to say, "This area or that area will be favored in the location of industries."

We certainly want as much free play of economic forces in the determination of those matters as it is possible for us to have, and yet, to consider primarily the Nation's security.

It is only as security considerations enter the discussions, and only as budgetary items, such as the expense involved in the building of housing for defense workers, where there is already congestion, it is only as those factors enter the equation that we have any right to say, as a legislative matter, that geography shall be considered.

Mr. Rains. Of course, the prime reason, I assume, would be security, wouldn't it?

Mr. Hays. Exactly. And I don't want to depart very much from that. In other words, where you regard such sociological factors as the movement of labor from one area to the other, with housingand I would regard that as a sociological item-it is only as it affects security of the Nation that we are entitled to weigh those influences.

I am pleased by this: that the National Security Resources Board is doing an excellent job. It is exploratory, but if I am correctly informed, those who are charged with this responsibility are not undertaking to favor one general area over another, and I wouldn't want anything I say to be interpreted as urging the power of the Congress to favor Arkansas, for example, over any other State.

I mention Arkansas only as it is typical of a disadvantaged area.

Four States in the Union lost population between 1940 and 1950, although we had a tremendous growth in the Nation's total population. Those four States were Oklahoma, Arkansas, and Mississippi in the South, and North Dakota, the only State outside the South has lost population.

Every State in the Union gained in population in its urban areasevery one of them.

But only a few States had any growth at all in the rural sections.

Now, that is important, because something is taking place in America that, if not arrested, will pile up problems for a later generation to solve.

You can see what has happened to our own institution, the Congress of the United States. Arkansas loses a Congressman. Some people wouldn't regard that as a misfortune. But California gains seven. And I believe that when you consider that at one time a thousand people every day were going into California, you create a

problem that is too much even for a State of its vast facilities and its capacity to grow.

I believe even a Californian with the greatest pride would admit that we have created severe problems in the State of California, by taking no notice, officially, of that kind of situation.

And if we are interested in economy, Mr. Chairman, we have got to consider it, because it was the State of California—its officials charged by the State government with responsibility for absorbing that population—that put it on the doorstep of the National Government and said, "Help us. We can't provide homes for these people."

So, to the extent that these problems are too much for State governments, where congestion exists, it becomes a national problem. That is the reason I call it to the attention of the committee.

Now, another thing that I want to say in tribute to the National Security Resources Board is that they are not thinking in terms of areas. They are thinking in terms of location of plants, even within heavily populated regions, if it is outside a carefully defined city area.

In other words, to be specific, it would be better, from the standpoint of the Nation's security, to have a plant, perhaps, located in New England, if it is outside of a congested Boston area, than to have it located, we will say, in the city of Little Rock, and I would agree, when you consider the potential dangers from bombing attack upon any portion of America, you can see that those things would have to be considered, and therefore New England would have no fears, from a properly worded mandate on this question, because there are still wide areas in New England where security considerations would lead to plant locations, and where New England might be favored over Little Rock or St. Louis, or Kansas City.

Under present conditions, however, I think it is true that the interior is not getting a fair break, and that it would be to the Nation's total interest to consider a directive to the executive agencies, that would lead to a dispersal of industry into the interior. New plants should go there, rather than to coast locations.

The areas that lost population were the Great Plains and the rural South. Only two States in the Old South, Virginia, and Florida, both coast States, gained population in excess of the national average.

The Great Plains was the area that suffered most.
Now, it is possible for us
Mr. Rains. Could I interrupt you, Mr. Hays?
Mr. Hays. Yes, sir, indeed.

Mr. Rains. Wasn't there some report put out by the National Resources Planning Board, bringing out the fact that from a security standpoint, a great circle centering around Kansas, was the safest place in the country for the erection of plants? Do you have any information on that?

Mr. Hays. I am not sure that I can identify that with an official release.

Mr. PATMAN. May I make a suggestion there. I think Mr. Rains refers to what was called the magic circle.

Mr. RAINS. That is right.
Mr. PATMAN. It is quite an interesting chart.

The CHAIRMAN. What power would the Federal Government have to amend the situation with respect to dispersal of industries. How far would it go? I think it is highly desirable, but I am wondering

how far the Federal Government could go in giving a mandate to. industry to operate in certain areas.

Mr. MULTER. We might not be able to do it by mandate but certainly we could do it by direct persuasion. These companies wanting to expand facilities are getting certificates of necessity. We could say, "Well, the Government is going to help you to create additional installations, and this is where you go if you want these benefits.”

The CHAIRMAN. If they are Government-owned, of course, that is different. Suppose there is a plant now in existence in a certain area, and the plant bids on a contract and gets it. I don't think you could by mandate order an existing plant or an existing corporation to establish a plant elsewhere.

I think it is highly desirable to do what you want to do, and I am for it, but I was wondering how far the Government could go.

Mr. Rains. Mr. Hays apparently has reference to those plants that might be provided under this act, to be built by the Government.

The CHAIRMAN. I see.

Mr. Rains. I can see no reason why the Congress, with respect to security, could not have that mandate.

The CHAIRMAN. Oh, yes, sir: if the plants are Government-owned, there would be no doubt about it.

Mr. Hays. I am grateful to Mr. Rains for clearing that up, because, Mr. Chairman, I am referring to the experience with your tax amortization procedure, to show you that without criteria, you get further congestion.

The CHAIRMAN. I have no doubt about that.

Mr. Hays. If you are going to have Government determination of plant locations, in other words, if you are going to direct the agency to do as we did in the early part of World War II, to build Government plants, then you should have criteria, and as I understand it, the Joint Committee on the Economic Report, will propose, or will recommend, that the committee embrace such a provision in this bill.

And that was what I wanted to endorse, and that is why I am here.

The CHAIRMAN. I was merely asking for information. I am not at all opposed to what you desire. It is highly desirable.

Mr. Hays. I am glad the chairman brings that out. My statement probably was not clear on that point.

Now, as to the magic circle, or the Babson circle, as we sometimes call it, I think Mr. Babson has done a great deal of good in dramatizing that problem, and just to show you that the problem still exists, a study shows that of the 2,000 tax amortizations, certificates of necessity, that have been issued, only 20 of them are within that Babson circle. Although it includes such populous states as Missouri, part of Iowa, South Dakota, Kansas, Oklahoma, and a part of Louisiana, and a part of Texas.

So it is obvious that something needs to be done, particularly if Government money is to be poured into plant locations.

Again, to help make out the case for the National Security Resources Board, I would like to point out

Mr. BUFFETT. Mr. Hays, do you have a chart of the magic circle? Mr. Hays. I can prepare one.

Mr. BUFFETT. I think we ought to have it in the record at this point. I think it would be helpful.

Mr. Hays. Well, I called it the Babson circle, because it was his suggestion, and it was based obviously on security considerations, not anything else, because Mr. Babson would have no reason, from the standpoint of chamber of commerce affiliations, to be favoring that area.

Mr. PaTMAN. I hope Mr. Buffett's request is granted, because that is a thought-provoking instrument of Mr. Babson.

Mr. Hays. And if I am wrong about the 20 plants, I will correct it, but my information is, from a private source, that 20 out of the 2,000 are within the Babson circle.

Mr. RAINS. Mr. Hays, there are some other considerations which I think you ought to give thought to, which I think ought to be corrected in some way.

Mr. Wilson, in testifying before this committee, in his first appearance, when I questioned him with reference to these facts, stated that the real reason for it up to that date, that he concurred in our idea that there should be a dispersal of industry for security and the other reasons you mentioned, but he stated the real reason was, that these present plants being built for defense, were being built by private industry and that it was natural that they would want to concentrate them around other plants they had, and in locations where there were other plants making certain articles which they would use.

In other words, transportation enters into it, freight rates enter into it, and so forth.

So one of the things that strangles the so-called magic circle, in that section, as well as the South, are the freight rates, which have been cutting us out for all these years, isn't that a fact?

Mr. Hays. Yes, sir; that certainly is important.

Now, I am referring at some length, and I don't want to impose on the committee, to the National Security Resources Board because I believe it would reassure the country to know that political influences have been discounted, and are at a minimum. I think it might surprise many people, who think of political influences as tremendous, to know how little they have had to do with policy, and that is good.

For example, the location of the huge bomb plant in South Carolina, near the home of the gentleman from Georgia, was certainly a surprise to many people, and it was completely free from any influence by the South Carolina delegation, for example.

Mr. Rains. I understand it was a total surprise to the Congressman in whose district it was located, and he had not heard about it until they put the announcement on his desk.

Mr. HAYS. Mr. Riley has already stated publicly that he did not know about it until the day it was announced.

Arkansas was disappointed because we thought it would be located in our area, and I think we took our defeat there in a sportsmanlike way, because it was revealed that it was the factor of water, chemically pure water, in South Carolina, that determined it.

Mr. Brown. Until 3 hours before it was announced, no one knew where it was going to be. That was due to the analysis of the water of the Savannah River.

Mr. Wolcott. Possibly the reason they didn't announce it before the time they made up their mind to do it was because they feared there might be objections raised.

Mr. Hays. Another illustration, Mr. Chairman, would be the location of the sand plants in Idaho. That was discussed on the floor of the House the other day. It is the natural advantage of having these rare earths located there which would take processing plants to Idaho.

I mention this because I certainly want to fortify the point that political considerations must not enter into matters of location. Those are things to be determined for security reasons. I have mentioned the population angle, because I feel that these trends in population need to be considered from the standpoint of the Nation's over-all interest, that congestion piles up problems for the country.

And among the things that I see the National Resources Board considers, in this splendid publication issued in 1948 called National Security Factors in Industrial Locations, an excellent statement, among other factors that they consider are, location of production materials, labor, sites, industrial fuel, transportation facilities, market, distribution facilities, power and water, living conditions, laws and regulations, tax structure, and climate.

I should think that something like that could be carried over into the new bill.

Mr. Rains. Who put that out?

Mr. Hays. The National Security Resources Board. It was issued in September 1948, and I was referred to it by Mr. Wilson, himself, who felt that we in the Congress should have some knowledge of that they are doing. It is a sound nonpolitical, nonpartisan evaluation of this problem.

They bring out, for example, that the destruction of life at Nagasaki was only one-half as great as at Hiroshima, although the population of Nagasaki is greater than Hiroshima, and the difference is explained by terrain. And why shouldn't our Government agencies consider a factor like that in locating plants? Here is a set of statistics that would certainly be a guide in location decisions.

Mr. Rains. Does the gentleman have in mind a suggestion as to the type of amendment he would like to suggest?

Mr. Hays. If I am correctly informed, the Joint Committee on the Economic Report has a staff that has been exploring the matter, and I would suggest that it follow pretty much the statement in the 1947 act on Defense Department operations.

Mr. Rains. You would suggest that Mr. Patman check into that? Mr. PATMAN. Along with the gentlemen from Alabama.

Mr. Hays. If they have the staff to do it. I hope the committee will not regard me as derelict in not having some specific amendment to suggest. I am speaking generally.

Mr. WOLCOTT. The Joint Committee on the Economic Report has a very active staff. And they have started receiving letters from my veterans' groups back home denouncing me for being in favor of reduction of veterans' benefits.

Also, as most of us did, they received newspapers protesting against the control of advertising fees. We tried to find out where it came from, and finally we found out that the staff of the Joint Committee on the Economic Report had issued a staff report, in which we all got the credit for it.

Mr. Hays. Mr. Chairman, I have presented this picture to the committee solely for the purpose of urging that the bill include a

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