Mr. ELLENDER. Mr. President, there is no question that a close scrutiny and analysis of the military assistance program, whether it be made by a general, statistician, accountant, or economist, will reveal that the military assistance revised budget estimate for fiscal year 1964 can be reduced by $400 million, as I previously stated. I point out that both the Clay Committee and Secretary McNamara agree that a $1 billion military assistance program is adequate, and the only difference in their opinions is the precise point in time when this figure may be reached. Secretary McNamara feels that it cannot be attained before fiscal year 1968, and the Clay Committee feels that it is possible within the next couple of years. Regardless of what opinion may be the correct one, even if we are pessimistic and accept Secretary McNamara's view, if this goal is to be attained, it is absolutely essential that the authorization of new obligational authority for military assistance for fiscal year 1964 not exceed $1 billion. This is necessary because of the abnormal pipeline condition that presently exists in the military assistance program, and because of the considerable recoupments that will be made over the years because of the cancellations and changes in the program. I point out that we now have in the pipeline, unobligated, $1,500 million, as can be gleaned from the FAD Report No. 445 which I previously included in the RECORD. Mr. President, in the interest of having a sounder military assistance program, in the interest of getting greater efficiency in the financial and other management of this program, in the interest of fiscal sanity, and in the interest of the American taxpayers, I urge Senators to vote to cut the military aid program in the way proposed by me and as called for by the so-called Mansfield-Dirksen amendments. DEVELOPMENT LOAN FUND Mr. President, as I stated a moment ago, I submitted an amendment to cut the Development Loan Fund from $975 million, as provided in the so-called Mansfield-Dirksen amendments, as amended, to an authorization of $900 million for development loans for the fiscal year 1964 the same amount as authorized in the bill passed by the House. Legislation which already exists provides an authorization of $1.5 billion for each of the 5 fiscal years, 1963 through 1966, for development loans. I point out that these amounts have been modified by the Holland amendment which recently was adopted by the Senate, thus reducing the authorizations for 1965 and 1966 to an amount not to exceed $975 million. Nevertheless, the administration, even in its wildest dreams, could not take advantage of the past generosity of Congress; and it originally requested, for the fiscal year 1964, $1,248 million. The ink on this request was hardly dry when it was revised and reduced to $1,060 million by the executive branch. The House amended existing legislation by reducing the authorization ceiling CIX -1328 for development loans to $900 million. The Senate Foreign Relations Committee elected to leave the authorization for development lending as it is in existing legislation-namely, $1,500 million-notwithstanding the fact that the administration has only sought $1,060 million. Last year, when the development loan program was presented to Congress, the budget estimate totaled $1,250 million. This money was programed in the various regions of the world as follows: Africa, $200 to $270 million; Far East, $200 to $280 million; Near East and south Asia, $850 to $950 million; for a total of $1,250 to $1,500 million. Thus, the amount programed on the low side was $1,250 million, and on the high side $1,500 million, or an overprograming of $250 million. Of course, it is normal practice for the agency to engage in overprograming, both on the regional and country levels, and when funds are made available the program can be adjusted to fit within the available appropriations. Overprograming by about 10 percent of country loan planning figures is employed to provide guidance in terms of program priorities, while retaining flexibility regarding the screening and final approval of individual projects. Since there is on hand a huge backlog of loan applications and since the loan approval cycle involves a lengthy process of project analysis and screening of applications, it would seem that when Congress made a considerable reduction in the budget estimate of the fiscal year 1963, every dollar Congress appropriated 1963, every dollar Congress appropriated would have been obligated against the many loan applications allegedly hand. on Actually, Congress appropriated $975 million for the Development Loan Fund in the fiscal year 1963, which was a reduction of $275 million in the budget estimate. But notwithstanding this cut by Congress, as of June 30, 1963, $71,400,000 of the moneys appropriated for the Development Loan Fund remained unobligated at June 30, 1963. Thus, even though the agency overprogramed for its requirements, and even though Congress made a drastic cut in the appropriation, the agency was still unable to obligate all of the funds appropriated. I submit, Mr. President, that by making available more money than can be efficiently obligated by AID, Congress is aiding and abetting in the promotion is aiding and abetting in the promotion of waste and extravagance. I also point out that under the pending amendments offered by the Senator from Montana [Mr. MANSFIELD], for himself, the Senator from Illinois [Mr. DIRKSEN], and other Senators, a further obligation is imposed on the AID administrators; namely, to submit these programs, when namely, to submit these programs, when they are in excess of $500,000, to the Corps of Engineers for approval. If the Corps of Engineers does a good job, it will take a much longer time in order to properly place this money for projects properly place this money for projects all over the world. Mr. President, as I pointed out a few days ago, there is no earthly reason why we should begin-as suggested by the administrators of this program-a large aid program in Africa. Africa is a great continent. It is filled with numerous natural resources that are awaiting development. Those resources are not controlled by us. They are not in our hands. They are not in the hands of the natives in Africa. Those resources are owned and controlled by European countries-Britain, France, Portugal, Spain, and other countries of Western Europe. As I have pointed out many times, if Africa is to blossom out and expand economically, it will be necessary that the resources in that country be utilized in order to assist the people there. In order for the population of Africa to develop economically and make a good showing, it will be necessary that the resources of Africa be developed first for the benefit of the people there. How would that be done? I would that be done? By the construction of roads, schools, colleges, and the like. The money we are now placing in Africa is money put down a rathole. It is used to maintain a few groups that are trying to remain in power. There is no question that many newly created countries there will never be successful unless they find a Santa Claus. I do not wish Uncle Sam to be that Santa Claus, for the simple reason that Africa is not within our sphere of influence. If our dollars are to be spent in order to assist America, let us spend them where they will do us some good; namely, to the south of us. I am strongly in favor of developing South and Central America. I am glad that the AID administrators have virtually accepted the recommendations made in my report of 1958 when I returned from South and Central America. In countries to the south of us there is a golden opportunity not only to develop resources for the benefit of the people there, in the form of roads, schools, colleges, and other facilities, but also to provide the necessary raw materials to feed our hungry mills here. As everyone knows, our iron resources are Mesabi Range in Minnesota will be alextremely limited. I understand that the most depleted in about 15 years. The remaining ore in our country grades from 25 to 30 percent iron, whereas the mines America produce ore in which the iron now being exploited in South and Central content is 68 percent. I am sure that the day will come when steel mills in the United States will not be able to compete with a concern in another country where the iron ore content is 68 percent. That is why in the past I have been in favor of developing South and Central America. They are good neighbors. If the decision were left to me, I would try to find some way by which our own economy could be meshed with the economies of South and Central America. In the long run, it would pay us to do so. Let us leave Africa to the Europeans, because all sorts of natural resources there-copper, gold, diamonds, uranium, and timber-are owned and controlled lock, stock, and barrel, by the Europeans. It is up to the Europeans to utilize those great resources, to develop the country and to assist the people who inhabit that great continent. By making more money available than can be efficiently obligated by AID, Congress is aiding and abetting in the promotion of waste and extravagance, as I indicated a while ago in the case of the military aid program. Why was the agency unable to obligate the reduced amount of money made available by Congress in fiscal year 1963? The reasons are enumerated in the justifications that have been presented to the Congress. I would like to give the Senate these reasons on a country-by-country basis, but in so many instances I am precluded from doing so because the data are classified "secret." They are labeled secret and, of course, we cannot give that information to the American people. However, I feel I can make the point clear by reading some of the reasons into the RECORD and deleting the name of the particular country and/or project. was This language is found on page 2 of the amendments, beginning on line 16: (b) Section 611(a), which relates to completion of plans and cost estimates, is amended by inserting before the semicolon at the end of subparagraph (1) a comma and the following: "and, in any case in which such estimate of cost and the feasibility of such estimate of cost exceeds $500,000, until the project have been approved by the Corps of Engineers, United States Army, or by a reputable United States private firm of engineers". That is a fine provision. Some of us have tried-I, particularly, tried-to put such a provision in the bill in the past, but to no avail. There were many instances in which roads were merely surveyed from an airplane traveling over woods, or marsh, or jungle. Then it would be said, "This road in Vietnam or in some other country in Vietnam or in some other country might cost so many millions of dollars." That was the way the situation was handled, not only in Asia, but also in South America. In the past, we have embraced many programs which were not well con 1.: Loan applications were not received for any of the above projects, and thus the amount programed for completely eliminated from the develop- sidered. ment loan program. In other words, we expected them to run in and put in applications as they were supposed to under the act of 1961. They did not do so. However, we had However, we had program money for them. 2. Expectations for loan applications in for fiscal year 1963 have not been met. In addition, AID criteria for completed loan applications have not been met for any of the applications which have not been received. Therefore, the fiscal year 1963 lending program has been substantially reduced. 3.- -: There has been a delay in re ceipt of the Government of — 's financial feasibility study for the airport. The anticipated loan application for the road has not been received. The planned school construction loan will not be ready for final decision until fiscal year 1964 due to the absence of data from the Government. 4. — Reductions in this country's program are due to the fact that certain elements of the program originally planned will not be ready for financing until fiscal year 1964. And yet we have provided for these countries. : Reductions have been made for the following reasons in this country: 1. Slower than anticipated drawdown of the fiscal year 1962 loans. 2. Deferral of a completed loan to pending an overall supports survey by the World Bank. 3. Increased interest of private investors in some of the industries for which development loans were contemplated. 4. Delayed completion of feasibility studies on which loan applications would be used. I could go on, Mr. President, with reason after reason submitted in the agency's own justifications to Congress, accounting for why the Development Loan Fund could not obligate the reduced funds made available by Congress, but I feel the above illustrations make the point very clearly, and further emphasis would only burden the RECORD. As I stated a while ago, there is a new provision in the so-called MansfieldDirksen amendments which would further delay these applications, since the approval of the Corps of Engineers would be required on those of large amounts. I remember the Rama Road. We started with the assumption that the cost of the Rama Road would be about $5 million. We have now spent in excess of $15 million and the road is not yet complete. Mr. LONG of Louisiana. Mr. President, will the Senator yield? Mr. LONG of Louisiana. Mr. President, will the Senator yield? Mr. ELLENDER. I yield. Mr. LONG of Louisiana. Is it not true that in practice, not only in this country but also in practically all other enlightened countries, no one would undertake to build a project unless he had a firm estimate of cost? Mr. ELLENDER. If he were responsible for the money spent, the Senator is correct. Mr. LONG of Louisiana. The only conceivable reason why a person would not obtain a firm cost estimate before undertaking a project would be that somebody else was paying for it, and therefore it would make no difference what the cost might be. Mr. ELLENDER. The Senator is correct. rect. That has been the difficulty in the past. That is why so much of the money has been wasted, in my judgment. Mr. LONG of Louisiana. Of course, if U.S. money is U.S. money is to be used to pay for it, assuming that the applicant does not accept the responsibility of obtaining a firm cost estimate, I am sure the Senator would agree with me that we should assume the responsibility of seeing to it that there is a firm cost estimate. Mr. ELLENDER. That is why in the past several years we have insisted that Mr. ELLENDER. I yield to my col- studies be made. The pending amendleague. Mr. LONG of Louisiana. Is it not true that any engineering firm or construction firm offered the opportunity to bid on construction of a highway such as that, would insist that it have the opportunity to go onto the land itself and take test borings to see what kind of foundation was beneath the land and whether adequate materials could be found nearby, in order to reduce the cost of hauling the fill and the material, to arrive at a firm estimate of the cost of building a road of that character? Mr. ELLENDER. There is no doubt about that. I cannot see that they could ment contains the provision that I have read, which is that if a project involves in excess of $500,000, the Corps of Engineers must examine it and make a finding as to its feasibility. That is a good thing. This will inure not only to the benefit of the taxpayer, but also to the benefit of countries which will borrow the money for various projects. put on the development loan program Mr. President, unless the brakes are and the amount authorized for 1964 is cut back to the amount authorized by the House, I fear that loans will be made to many countries that really do not qualify under the criteria that have been established for development loans, and that funds will be obligated solely for the balances without regard for the objecpurpose of reducing the unobligated tives to be obtained. Mr. LAUSCHE. Mr. President, will the Senator yield? Mr. ELLENDER. I yield. Mr. LAUSCHE. The remarks of the Senator from Louisiana are directed at the amendment now before the Senate. It cannot be done overnight. I know I cannot for the life of me see why Mr. ELLENDER. Yes. Mr.LAUSCHE. Am I correct in stating that the purpose of the amendment is to reduce the suggested authorization of $975 million to $900 million, conforming to the figure adopted by the House? Mr. ELLENDER. The Senator is correct. That is the purpose. I ask: Should we be making threefourths of 1 percent loans, with a 10-year grace period and 40 years to repay, to a country whose GNP has risen 10 percent per annum over the past several years-from $734 per capita in 1959 to $853 per capita in 1962? dollar of development "soft loan" money available to Israel. Yes, Israel is the country that has achieved a very rapid rate of economic growth. Its GNP has risen 10 percent per annum over the past several years, and it is anticipated that this growth will be maintained. Its per capita output already exceeds the levels attained by some European countries, and it is comparable to many of the industrial countries of the world. As I just pointed out, its per capita GNP has risen from $734 in 1959 to $853 in 1962. Israel's present level of annual investment approximates 25 percent of its gross national product, which rate, I believe, is exceeded only by Japan. I might add that our own country's rate is running at about 15 percent. Mr. President, I am not opposed to lending money to Israel, but the economic facts of life make it clear that our loans to Israel should be made only on a businesslike basis, and not through the soft money route which has been set up for aiding the truly underdeveloped countries of the world. At this point, Mr. President, I would like the record to show how generous we have been with Israel since the country came into existence and, therefore, I request that the schedule I hold in my hand covering the status of loans we have made to Israel through December 31, 1962, be inserted in the RECORD at this point. There being no objection, the schedule was ordered to be printed in the RECORD, as follows: Food for peace-Continued Title I, sec. 104(e). "Cooley"-Con. The United Saran Plastic Samson Tire & Rubber Co., "Rassco" Rural & Sub- Near East International Assamin (1954), Ltd.. "Shemen" Israel Oil Indus- Avia Hotels, Ltd.... Dan Hotel Corp.. Batey-Mamgu roth Le-Israel. Export-Import Bank. State of Israel.-_--_-. Housing materials. Port development... Telecommunications equipment. Industrial development.. Jan. 19, 1949 Mar. 9, 1949 Mar. 16, 1949 Mar. 23, 1949 Sept. 7, 1949 Oct. 26, 1949 Water supply distribution facilities, Feb. 20, 1958 208, 925,000 70, 000, 000 9, 535, 243 25, 000, 000 5, 000, 000 5, 464, 757 20, 000, 000 24, 200, 000 70,000,000 188, 524, 713 97, 317, 697 47, 354, 725 6, 578, 702 16, 836, 578 3,588, 610 3,670, 489 13, 172, 938 3,025, 007 91, 207, 009 46,756, 297 22, 645, 274 2,955, 995 21, 242, 037 312 3,021, 594 312 8, 163, 421 1,410, 133 1,794, 267 7,721, 995 31 1, 494, 813 31 6,827, 061 5,722, 441 21, 174, 993 4,339, 125 ANN Mr. LAUSCHE. Mr. President, will a businesslike basis. For the administhe Senator yield? Mr. ELLENDER. I yield. Mr. LAUSCHE. The Senator from Louisiana is aware of the fact that the Lausche-Mundt amendment has changed the law with respect to the interest rates that are to be charged. Mr. ELLENDER. Yes; I am aware of that fact, but Mr. LAUSCHE. I believe the amendment is moving in the proper direction. Whether it has gone far enough, I am not certain; but the amendment of which I speak provides that three-fourths of 1 percent interest shall be chargeable only for the first 5 years, and thereafter the rate of interest shall be not less than 2 percent. Mr. ELLENDER. Yes; I am familiar with that amendment. As the Senator has said, it is in the right direction. It is written in the act that the AID administration should, under no conditions, lend money, except on a businesslike basis, to countries that are able to pay or that are not underdeveloped. The The purpose of development loans is to assist underdeveloped countries. That is the main purpose of the fund. We have made loans in the past to Israel and other countries, in large quantities, on trator to take the soft money route by making loans to Israel on the basis of three-fourths of 1 percent interest, with a 10-year grace period is shameful, to say the least. Mr. LAUSCHE. I concur in what the Senator from Louisiana has said. The rule which has thus far been in existence is neither reasonable nor just namely, to make loans at an interest rate of three-fourths of 1 percent, to be repaid in 40 years, with a grace period of 10 years in which no amortization takes place. Interest was paid in the first 10 years. I concur completely in what the Senator has said. I repeat, the amendment moves in the right direction. Whether it goes far enough, I cannot say. Mr. ELLENDER. I agree with what the Senator from Ohio has said. In my opinion it does not go far enough, particularly with regard to loans to the countries that are capable of repaying. As I pointed out the other day, in studying our programs abroad, I learned studying our programs abroad, I learned that efforts are being made to amend Public Law 480 in the pending bill, which I think is wrong. I believe that consideration of proposed amendments of the act should be left to the Committee on Agriculture and Forestry. In connection with Public Law 480 loans, the threequarters of 1 percent interest requirement and the 10-year grace period has been used, in reloaning proceeds from sales. In many instances we have sold surplus commodities at world prices and lost considerable sums. In some countries we have even sold at unrealistic exchange prices, so that another 25 or 30 percent were added to our losses. To assist those people to a greater extent, we are now permitting them to borrow the proceeds from the sales at threequarters of 1 percent, payable in 40 years, with 10 years' grace. I am hopeful that the Senate will vote for the amendment, in which I ask that all references to Public Law 480 in the act be deleted. It is the hope of the Committee on Agriculture and Forestry to revamp Public Law 480. We expect to hold hearings on that subject next year. The time has come to amend the act. We can then take care of the situations that are sought after in the pending bill. Mr. LAUSCHE. Mr. President, will the Senator yield? Mr. ELLENDER. I yield to the Senator from Ohio. Mr. LAUSCHE. I point out that in discussions in the Foreign Relations Committee some suggestion was made that there be a mandatory rate of 2 percent, but, following a discussion, it was determined that a floor of 2 percent should be fixed-meaning that the administrator should charge a rate of interest commensurate with the ability of the borrowing country to meet its obligation, with an interest rate of 2 per cent or over. Mr. ELLENDER. That is the way I would interpret the amendment. I point out that in addition to loans amounting to $527 million, we have also made available to Israel economic grants totaling $352 million. In connection with the schedule of loans I have just included in the RECORD, I would like to direct the attention of Senators to two development loans we made to Israel in March and July of 1962. They aggregate $45 million and were made on terms of 40 years repayment, with a 10-year grace period, and bearing interest at the rate of three-fourths of 1 percent. And I might reiterate that more development loans are contemplated for higher than the amount appropriated in Israel in fiscal year 1964. I cannot emphasize too strongly, Mr. President, that too much money was appropriated for the Development Loan Fund in fiscal year 1963, and unless Congress reduces the amount authorized in the current bill to the amount allowed by the House or even lower, if the Senate could be persuaded to do it—the same thing is going to happen in fiscal year 1964. As Senators know, the Agency for International Development is presently opternational Development is presently operating under a continuing resolution which permits them to obligate funds at the lowest of the following pro rata rates: First, the amount appropriated in fiscal year 1963; second, the amount contained in the budget estimate for fiscal year 1964; third, the amount allowed in the House appropriation bill; or, fourth, the amount allowed in the Senate appropriation bill. Since we have neither a House nor Senate appropriation bill, and since the budget estimate for fiscal year 1964 is 1963, the agency is currently operating at the same pro rata rate it had for fiscal year 1963. Thus, in the first quarter of fiscal year 1964, ending September 30, 1963, a flash report from the Agency for International Development covering the status of fiscal year 1964 allotments and obligations indicates that a total of $754,121,160 is available for all types of economic assistance. Of this total amount, the Development Loan Fund has available for the first quarter of 1964 a total of $278,527,370. And what has the agency been able to obligate out of the Development Loan Fund in this first quarter of fiscal year 1964? The answer, Mr. President, is a total of $10,600,000 actually obligated by the Development Loan Fund for the first quarter of fiscal year 1964. These data are set out in the flash fiscal report I hold in my hand, and I request that it be placed in the RECORD at this point. There being no objection, the report was ordered to be printed in the RECORD, as follows: EXHIBIT A.-AGENCY FOR INTERNATIONAL DEVELOPMENT Flash report-Status of fiscal year 1964 allotments and obligations-Global summary by appropriation as of Sept. 30, 1963 Mr. ELLENDER. Mr. President, what facts must be presented to the Senate to show that it will err if it makes available $160 million more than the amount allowed by the House to the Development Loan Fund? There is a preponderance of evidence buttressing the House allowance. In fact, the evidence justifies cuts below the amount allowed by the House. If the flash report on the status of 1964 allot ments and obligations were the only evidence, it alone would be sufficient. But there is the other evidence which I have already presented to the Senate. We must discourage the programing of development loan funds when firm applications are not on hand. We must have a loan program that is not based on expectations for loan applications. We must not appropriate funds when program. 1,000,000 1,000,000 21, 990, 306 41,050,000 10, 600, 000 51,650,000 132, 331, 381 2,000,000 2, 000, 000 76, 239, 691 feasibility studies for projects are not facts in connection with the military aid I urge Senators to vote for it. Mr. LAUSCHE. Mr. President, I commend the Senator from Louisiana for his He is worthy of praise, and I extend to excellent presentation of this subject. him that praise on the basis of his general approach to the subject. Mr. ELLENDER. I thank the Senator. Mr. MORSE. Mr. President, I join the Senator from Ohio in commending the Senator from Louisiana for his very able speech, in which he has brought out what I consider to be some of the shocking I believe the RECORD ought to be clear that in due course of time the Senator from Louisiana will be offering amendments dealing with the military aid program, in which he will seek to reduce the authorization for that part of the program. The RECORD ought to be very clear that the amendments will be offered, some by the Senator from Louisiana and some by other Senators. should like to state that I will support Mr. LAUSCHE. Mr. President, I the amendment now pending before the Louisiana [Mr. ELLENDER). Senate, offered by the Senate from AMENDMENT NO. 307 Mr. LAUSCHE. Mr. President, I send to the desk an amendment which, if adopted, would strike from the bill lines |