lU K-'ll ^ :.;;;! 66tli Congress, I HOUSE OF REPRESENTATIVES. | ^^^'^ • ■ :: 1st Session. I I No. Ul. "ill EXPENDITURES IN THE WAR DEPARTAIENT. July 28, 1919.-rOrdered to be printed. ' Mr. Graham of Illinois, from the Select Committee on Expenditures, in the War Department, submitted the following REPORT. »| The select committee of fifteen, appointed under the resolution of ijl the House of the 4th day of June, 1919, for the purpose of investi- 1, g'athig the contracts and expenditures of the War Department and j' for certain other purposes expressly stated in said resolution, have had under consideration certain of the ^lattei's committed to it by iJI said resolution and now present the folloVihg partial report: I Tne conunittee is continuing- its investigations of the matters and 'i things submitted to it by said resolution and will make further reports ' from time to time hereafter until it shall have completed its labors. The present high prices of food products and the need of the Gov- »>rnment for money suggests to your committee the necessity of a preliminary report relating' to the War Department's nonactivities ill the sale of the very large quantities of food supplies now held in torage in the United States. At the time of the signing of the armistice the Army was composed [■ approximately 8, 700, 000 men, 2,000,000 of whom "were in France, :i;ii and about 1,700,000 in continental America. An increase of this lijji force to 5,000,000 men had })een agreed upon by the War Depart- iill ment, and food for this enlarged army for eight "months in advance ■•" vras being contracted for and accumulated at the time active hos- ilities suddenly ceased. The demobilization of the Army began immediately upon the signing of the armistice, and 800,000 soldiers were discharged by Janu- ary 11, 1919. This demobilization continued at the approximate rate of 80,000 per week, so that on the 24th of May, 1919, 2,252,000 ."j of the soldiers had been discharged and were definitely out of the A service. m In view of the tremendous quantities of food the Government had '" on hand on November 11, 1918, and the demobilization of the armed f(U'ces, it at once became apparent that the War Department possessed an immense quantity of food beyond the needs of the Army. 2 EXPENDITURES IX THE WAR DEPARTMENT. ^ ?^ CXOl/ Actuated by this condition, Gen. Peyton C. March, Chief oi Staff, on November 30, 1918 (19 days after the armistice), issued an order authorizing the declaration of a surplus on all perishable food products. The next step was the declaration of surplus by the Quartermaster General ; and the last step was the sale of the surplus supphes by the Director of Sales. Notwithstandino; the authorization of surplus by the Chief of Staff on the 30th of November, no action was taken with reference to declaring a surplus until the month of May, 1919, or six months after the declaration was authorized. In the mean- time the food was deteriorating and becoming of less value to the Goveriunent, and the high cost of living for the American people continued. This inexcusable delay resulted in the spoiling of mil- lions of pomids of ham and bacon, to the great loss of the Govern- ment and the people, who were in need of the meat food products. The inactivity of the Goveriunent in the disposition of these food supplies was, and is, the result of a well-defined policy of the Secre- tary of War to withhold them from the domestic market and to pro- tect the interests from which these products had been purchased, with the ultimate intention of disposing of them abroad so far as circumstances would permit. . This policy finds expression not only in the testimony given to the committee by tlie officers of the War Department, but in documentary evidence as well. As an instance of such intention to prevent the American people from purchasing these products, the Quartermaster General's Department, through Gen. R. E. Wood, Quartermaster General, entered into an agreement with the canners' association that some 200,000,000 cans of canned vegetables would be kept off the domestic market durmg this season ; this agreement was subsequently extended by an order of the Quartermaster General adding these canned vegetables to the soldiers' ration in the expressed hope that they would be entireh" consumed and that none woiild be left for sale. This order would have resulted in a loss to the Government of millions of dollars to be derived from the sale of this suridus, as well as de- priving the American people of a large quantity of food. The purpose as shown by the testimony was to ]irotect the canners who had sold the produce, from competition with the governmental surplus. On July 8, 1919, the surplus of food stored in the United States over and above the needs of the Army was, as follows: Corn beef 824, 000. 000 Bacon 23. 000. 000 Hash corn beef 10. 000, 000 Roast beef 20. 500. 000 Fresh frozen meats and poultry 20, 000. 000 Canned vegetables 23, 000, 000 This surplus is constantly growing larger, because of the continued demobilization of the Army. In addition to these items, there is a surplus of millions of cans of fish and milk, and tons of sugar, coffee, and tea. It is utterly impossible to estimate the exact value of the tremendous quantity of food supplies m the hands of the department, a large portion of which is deterioratmg and becoming less valuable. During the eight months which has elapsed smce the signmg of the armistice only $12,000,000 of food supplies has been sold by the War AUS 2 1919 EXPENDITURES IN THE WAR DEPARTMENT. 3 Department in the United States, and a very large quantity of that sold was spoiled and unfit for the general market, otherwise it would not have been placed on sale. On July 1 1 of the present year, and after the war expenditures com- mittee was appointed, the director of sales issued to the press a publicity statement with reference to the sale of meats and vege- tables. This statement provides that meat and vegetables shall be purchased only by municipalities, and municipalities to pay the freight from the nearest warehouse, and to have 10 days in. which to make payment to the Government. This plan adopted by the Gov- ernment will not result in the sale of these products to any great ex- tent, for the reason that most numicipalities, under their charter, have no legal authority to purchase food products for sale. Many municipalities which have indicated a desire to purchase this food for the benefit of their people, have been met with the threat of injunc- tion on the part of the local dealers, which threat has been sufficient to prevent a purchase of the goods. This committee makes recommendation that these food supplies be sold without delay on the domestic market to the American people who, at great sacrifice, bought and paid for them, and the committee looks with disfavor on the policy of exportihg them from America to foreign nations for sale and consumption. The committee further recommends that plans be devised by the Secretary of War, through the War Department, for the early disposition of all surplus food products on the domestic market under a system which will grant to the American people the opportunity to secure the same for food purposes. The committee therefore recommends the adoption of the following resolution: Be it resolved by the House of Representatives of the United States of America, That the Secretary of War be, and he is hereby, requested to place on sale, without delay, the surplus food products in the hands, or under the control, of the War Department now stored in the United States, under such plan as will safeguard the interests of the Government and insure an opportunity to the people of the United States to purchase the same, directly from the Government. W. J. Graham, Chairman; James A. Frear, Clarence MacGregor, Royal C. Johnson, 0. F. Reavis, John C. McKenzie, Oscar E. Bland, Roscoe C. McCullougii, Walter W. Magee, Committee. Albert W. Jefeeris, VIEWS OF THE MINORITY. The undersigned members of the Select Committee to Imestigate Expenditures in the War Department respectful!}^ submit that the resolution proffered b., the majority, if it is to be in any degree helpful, must hase certain amendments modifying to a certain extent what we understand to be its meaning, and giving the assur- ance which should be given if the House deems it proper to make such a request as is therein embodied, of a readiness to cooperate in all things essential to enable compliance with it. The majority have not favored us m their report accompanying the resolution with any interpretation of its terms or explanation of its purport. Indeed, were its sponsors other than they are, it would be difficult to repress the suspicion that the resolution was offered, not so much in an effort to aid in the solution of one of the complex and involved problems following in the wake of the tremendous war brought to successful and sudden end by the force of our Nation's arms and aid the people in securing food, as it is to furnish an opportunity for a sinister criticism in an official report, primarily, of him who bore the stupendous burdens of Secretary 'of War during all the time from its beginning to its unstained, unsullied, and glorious end, and, second- arily, of such of his advisers as fall within the scope of their dislike. Without having an expression from them, we might, as we should have to do in any event, look closelj to the instrument itself for its interpretation. The resolution reads : Be it resolved by the House of Representatires of the United States of America, That the Secretary of War be, and is hereby, requested to place on sale, without delay, the surplus food products in the hands, or under the control, of the War Department now stored in the United States, under such plan as will safeguard the interests of the Government and insure an opportunity to the people of the United States to purchase the same direct from the Government. We take this to mean that the request is that plan, or plans, be immediately developed whereby the remainder of these surplus food products shall be sold directly to the consumers without any inter- vening agency, or agencies, save those of the Federal Government, otherwise we are unable to give intelligent construction to the words "direct from the Government," and the resolution requests the doing of nothing other than that which the department is now and has for some time been doing. Undoubtedly there are portions of these foods that may be so sold and distributed if the proper organization be established and proper agencies created. It has been suggested that the parcel post could be utilized, and agents of the Government could be distributed throughout the country for their handling and disposition of these goods. EXPENDITURES IjST THE WAR DEPARTMENT. 5 All will agree, we take it without hesitation, that if the Government itself attempts the disposition in this manner it should ])e general, and whatever of benefit may accrue should inure, so far as is humanely possible, to all persons and sections. It will, as of course, require for such a plan a large organization and will involve an expense impossible now to determine, and some delay in the distribution under such ])lan will be inevitable. We realize very acutely the conditions which exist to-dtiy with reference to the high cost of food products. In whatever may be done intelligently and justly to alleviate, even in slight degree, this condition we are anxious to cooperate, as we feel sure are the Secretary of War, his advisers, and subordinates. AH recognize that under the law itself, and in morals if there were no law, the interests of the Government must be safeguarded and that it is the duty of the Secretary to see that this is done so far as lies within his power. We feel, therefore, that if the House of Representatives is to re(^uest by resolution that present plans be changed and that sales be made only to consumers direct from the Government, rather than through municipalities or individuals or associations, to whom they are now being sold in quantities for resale to consumers, that the House should also by resolution indicate its willingness to do what it would have to do were it expressing itself in legislation, and say that it is ready to appropriate the funds essential to the organization and development of those plans. We, therefore, respectfully recommend that at the end of the resolution the proper punctuation be inserted and that there be added the words: and the Committee on Aporopriations of the House is requested to ascertain without delay and report to the House the sum necessary for the development and execu- tion of such plan. Unless the House shows a willingness to cooperate in this way the country will undoubtedly conclude that we are merely trifling with serious conditions and expressing a request in the hope that it may not be complied with, rather than in the hope that it will. Because all understand that the Secretary of War has no funds available for carrying out such a policy and only the Congress can provide these funds. We beg also to call attention to another phase which assuredly must challenge the attention of all reasonable men familiar with conditions. If this resolution of request were made law, and the Secretary were without power to sell other than to consumers, undoubtedly great embarrassment would ensue, because there are large quantities of these surplus food products so packed and arranged as that few consumers would desire to purchase a full package, and when opened the contents would deteriorate and it would eventuate in very heavy losses. We think it should be made clear, therefore, that in making the request, the House does not desire to go on record as wishing to interfere with the diseretioii of the Secretary to dispose of such products in some other intelligent and just manner. 6 EXPENDITURES IIST THE WAR DEPARTMENT. We, therefore, suggest as a further amendment that after the word "delay," m hne — , all the remamder of the resolution be stricken out and the following inserted, to wit: under such plan as will safeguard the interests of the Government and insure an opportunity to the people of the United States to purchase the same direct from the Government such part of the surplus food products in the hands or under the control of the War Department now stored in the United States as is reasonably capable of being so distr buted and sold. The resolution in fuU, if the amendments we suggest shall be adopted, will then read as follows: Be it resolved by the House of Representatives of the United States of America, That the Secretary of War be, and is hereby, requested to place on sale, without delay, under such plan as will safeguard the interests of the Government and insure an opportunity to the people of the United States to purchase the same direct from the Government, such part of the surplus food products in the hands or under the control of the War Department now stored in the United States, as is reasonably capable of being so distributed and sold, and the Committee on Appropriations of the House is requested to ascertain, without delay, and report to the House the sum necessary for the develop- ment of such plan. So much for the resolution. Wo turn now to a discussion of the majority report, and at the outset feel compelled to call attention to the precipitate haste with which the majority report was railroaded into the House. Tlie hearings before House Subcommittee No, 4, on the subject of surplus food supplies of the Ai'my, were concluded at 4.45 o'clock p. m, of July 22. On the 24th of July, one day having intervened, the chairaian of the subcoinmittee submitted his report to the general committee. Only the members of the subcommittee had heard the testimony. The other 12 members of the committee have not even had an opportunity to read the testimony, because a large portion of it had not been printed. We are advised that it has not been printed yet. At the session of July 24, notwithstanding the minority members protested they had had no opportunity to read the testimon}', the majority report was adopted and the minority reserved the right to file a minority report. On the following day, July 25, Mr. Flood, actmg for the minority, presented the following letter to Mr. Graham: July 25, 1919. Hon. W. J. Graham, Chairman Select Committee on Expenditures in the War Department. My Dear Mr. Chairman: You will recall that when the question of reporting the resolution requesti"ig the Secretary of War to place on sale without delay the surplus food products in the hands or under the control of the War Department with the report accompanyi"ig it was up for discussion in the committee yesterday the minority challenged the accuracy of many of the statements in the report. Since the adjournment of the committee yesterday, I have conferred with several War Departmevit officials in connection with this matter, and have become satisfied that the statements in the report can not be sustained . The committee itself took no evidence on these questions, all the evidence having been taken liy Subcommittee No. 4. and I feel that there are a number of witnesses who have had control of the sale of these surplus food products who should be heard by the committee. I here point out some of the erroneous statements in the report which I believe an examiiia- tion of witnesses will show to have no foundation in fact. 1. On page 2 of the report this statement is made: "Notwithstanding the authoriza- tion of surplus l3y the Chief of Staff on the 30th of November, no action was taken with reference to declaring a surplus until the month of May, 1919, or six months after the declaration was authorized." EXPENDITURES IN THE WAR DEPARTMENT. 7 My information is that this statement is incorrect, and that foods were declared surplus as rapidly as the taking of inventories would permit in small quantities dur- ing months preceding the month of May, 1919, and certain quantities of surplus foods were sold prior to this time. 2. The report further states that in the meaiitime food was deteriorating and becom- ing of less value to the Government. I am informed that very little food was permitted to deteriorate, namely, 1,500,000 pounds of ham at Norfolk, which was awaiting shipment to France on requisition, and which was promptly sold when released from shipment. Any other items of deteriorated food are very minor and inconsequential in comparison ^\'ith the large (juantity of food available. It is my information that the Government has suffered no financial loss through the holding of these surplus foods, for the reason that markets have been stabilized to the e.xtent that the Government is recei\nng better returns from the sale of these foods than could possibly have been received in the earlier months of this year. 3. The report further states that "the inactivity of the Government in the dis- position of these food supplies was and is the result of a well-defined policy of the Secretary of War to withhold them from the domestic market and to protect the interests from which these products had been purchased, with the ultimate intention of disposing of them abroad so far as circumstances would permit." I had a conversation Avith the Secretary of War this morning, and he informed me that he had no such policy as indicated in this statement. 4. With regard to the i^aragraph beginning, "This policy finds expression not only in the testimony," etc., may I call your attention to the fact that this paragraph is in conflict with the preceding paragraph which states that the surplus stocks are to be held for export. This particular paragraph to which T call your attention states that Gen. Wood enters into an agreement with the canners whereby the canned vegetables will be kept off the domestic market and will be used as soldiers' rations. This paragraph goes on to state that in feeding these surplus vegetables to the Army the Government would lose millions of dollars derived from the sale of such vege- tables. Obviously, if theee A'egetables are required by the Army as rations the use of the vegetables in such a manner would not result in a loss to the Government, since the soldiers must be fed. I do not think the statement in the next paragraph that this action of the War Department was for the purpose of protecting the canners who sold their products from competition ■with the governmental surplus is a fair statement of the case. 6. I note the report says there are millions of cans of surplus fish. My information is there is no surplus of fish. All canned salmon has been turned back to the canners at cost to the Government. The reason for this was the fact that this Salmon did not come up to Government specifications and consequently the War Department compelled the canners to take it back at the price the Government paid for it. 7. I had taken up the question of sugar, which is greatly needed by the farmers now for their canning and preserving, and am informed that there was a surplus of sugar. I also ascertained that there was no surplus of coffee and tea as stated in the report. With regard to the latter part of this paragraph, I am informed that the War De- partment does know prettv definitely the total value of the surplus materials on hand, while there is very little, if ainv, food permitted to deteriorate, and that food is more valuable to-day than it would have been in the early spring had it been dumped on the market. 8. With regard to the statement made that only .|12,000,000 worth of food supplies have been sold, I am informed that this figure is incorrect, as large quantities of food have actually been sold but reports of sale have not been made to the War Depart- ment for the reason that considerable time must intervene between the date of making the sale and the time that the report passes through channels to the central record bureau. I am informed that the actual reports of sales are largely in excess of $12,000,000. 9. The committee report states that on July 11 a publicity statement was issued by the director of sales providing that meats and vegetables could only be purchased by municipalities. I am informed that, as a matter of fact, this publicity statement did not state that meats and vegetables could be sold only to municipalities, but was intended and did convey information having to do with the details whereby munici]xilities could obtain surplus meats and vegetables for sale; that it was not- the purpose of this article, nor has it been the practice of the director of sales, I am informed, to confine sales of meats and vegetables to municipalities. I am infomied that a number of sales have actually been made to wholesale grocers and other S EXPENDITURES IN THE WAR DEPARTMENT. concerns and to individuals, which represents a distribution of surplus foods through normal channels. In view of the many errors in this report, some of which I have pointed out above, I respectfully request that this report be withdrawn from the House and your com- mittee take evidence on the questions dealt with by this report, so that the facts in connection with the sale of these surplus food products can he ascertained and the proper report made to this House. And in this connection I would suggest that you siim.mon the following witnesses: Secretaiy of War r)aker; Col. C. G. Harvey, General Staff, Chief of the Requirements and Statistics Branch, Purchase, Storage, and Trafhc Division; Col. Clyde B. Crusan, assistant to Gen. PiOgers; Col. Morris Stayton, Assis^^ant Director of Storage; Col. Clarence R. Day, Assistant Director of Storage; Col. Julian R. Schley. Director oi Purchase; Mr. E. C. Morse, First Assistant Director of Sales; Maj. E. E. Squier, Chief Quartermaster Stores Section, Office Director of Sales; (apt. Clement. Chief, Sub- sistence Branch, Surplus Property Division, Office of Director Purchase and Storage; Maj. A. L. Mercer, Assistant Director of Sales. With much respect, I am, Very trulv, yours, H. D. Flood. Upon the presentation of this letter to the chairman he called a meeting of the committee for 4 o'clock p. m. on July 25 and laid before it the letter from Mr. Flood. The committee, by a strict party Tote, refused to comply with what the minority believed to be a reasonable request and rejected the motion to reopen the hearings and subpoena the witnesses named in the letter. Because of the distribu- tion of the work of the general committee among five subcommittees, upon each of which there are two majority members and one minority member, four of the minority members could not hear the testimony taken by subcommittee No. 4. and were denied the privilege of reading it before action was taken. With unseemly haste the majority rejjort was forced through the committee, the protest of the minority was disregarded, and their plain rights were ignored. In view of these facts the minority felt not only justified but com- pelled, in the interest of justice and fairness and for the information of the House, the ex parte statements of those whom we had re- quested should be called and placed upon oath. These have been obtained a,nd are filed as an appendix hereto, and we feel that every statement of fact presented by us is substantiated bv the testimony taken by the subcommittee and the documents so filed. In our judgment the majority report is so inaccurate in its state- ment of facts and so unjust in its inferences we feel a fair considera- tion of the subject matter can not be had without specific considera- tion of a number of the statements made in said report. DELAY IN DECLARING SURPLUSES. The report states: NotwithstandiTg the authorization of surpluses by the ( hief of Staff on the 30th of NoA'ember, no action was take'i with refere" ce to declari^'g a surplus until the month of May, 1919. or six months after the declaration was authorized. On the 1st of December, 1918, the day following the order that the surplus be determined, 178 officers were called to Washington and the special organization necessary to carry on this work was created. On the 17th of December these officers were sent to the various zone supply offices and camps throughout the country and assumed charge of the work in the various supply offices. EXPENDITURES IX THE WAR DEPARTMENT. 9 On Docomber 31 the taking of the inventory began throughout the United States. A physical count was completed in 10 days. The inventories covered 16 zone supply depots, 3 Army reserve depots, 4 large terminals, and over 200 posts. One hundred and eighty thousand different items were reported. Ten thousand peo]ile were engaged in the work. The inventory and lists for use in declaring surpluses were completed on the 30th of April. Wlien the armistice was signed, supplies for the Army were being gathered from all the productive sources of the country. Ware- houses were hUed, countless thousands of cars were on the way to the ports, property was accumulated at the wharves. The Quarter- master Department had over 15,000 contracts outstanding, involv- ing a money value of $1,800,000,000, The amount of supplies eventually received under these incomplete contracts required months for determination, because it involved the determination of the amount of property, including where percentages of the products of factories were commandeered, the cancellation and partial cancellation of a vast number of contracts, the final valida- tion of informal contracts, and also the rejection of supplies not con- forming to specifications. Accurate inventories had to await the determination of these uncertain quantities. The uncertainty as to the amount of surplus of various materials was further intensified by the possibility that military operations might be resumed and that the total amount of men to be rationed has several times been materially reduced since last November, due to the fact that demobilization proceeded more rapidly than anticipated, and also that the size of the permanent Army fixed by the department last January was in June reduced materially by Congress. In many instances accurate inventories required repiling of sup- plies. In others the inventories sufficient for Army purposes lacked details necessary to be supplied in order to declare surpluses and inform the trade of what was offered. The food supplies, vast as they were, were in the aggregate only a small proportion of the materials to be inventoried. Surpluses were declared and sales made of some food supplies as early as February 12, 1919 (bearings, p. 94), but a surplus in meats, the principal food product, was not declared until the 26th of March, and as finally revised, not until the 1st of May. Instead of consuming six months as stated in the report, the actual time was five months and one day. It must be borne in mind that it was about February 1 before Gen. Pershing advised that it was unnecessar}^ for the forwarding of additional meats to A. E. F., and that shipments had been con- stantly made up to that time (p. 94). These facts are a sufficient refutation of the statements of the majority report that "no action was taken." ALLEGED DETERIORATION BY DELAY. The report further asserts : This inexcusable delay resulted in the spoiling of millions of pounds of ham and bacon to the great loss of the Government and the people. The evidence does not sustain this charge. The effective general answer to this charge is that out of the first $12,000,000 worth of food supplies sold, including the supplies to 10 EXPENDITURES IN THE WAR DEPARTMENT. which the criticism is directed, the Government received over 85 per cent of the cost to the Government. Tiiere was evidence (p. 9) that 2,000,000 pomids of bacon sold at Baltimore was deteriorating but the Government sold it for 28f cents a pomid. Tliis price was larger than the Government had been offered at an earlier date for bacon (p. 20). The only other instance of deterioration in meats shown by any substantial evidence was 1,487,905 pounds of sugar cured hams at Norfolk, Va. This meat was ordered to Norfolk for overseas ship- ment, where it arrived in January, February, and March. The inspector's report made a few days prior to the' sale states that the hams are — Sweet and sound, but surfaces are affected by mold, and that if reconditioned at once there would be no loss from trimming, as mold in its present condition can be removed by thoroughly washing and cleaning same (p. 29). This ham was sold for 20 cents a pound (p. 6 1) . The evidence as to meat shows — The meat is sound to-day and very palatable (p. 2(1 \ Mr. Hare, the Director of Sales, says : I do not want to get the impression out that we are trying to sell canned stuff that is not good, because I think they are (p. 2(5). Also: My belief is that the vast majority of all our canned stuff is in excellent condition and we will find a market for it fp. 35 \ In this connection we protest against the injury to the finances of the Government that is now b(3ing suffered because of the unwar- ranted charges that these food products are not in good condition. Such reports have a strong tendency to hamper the Government in the sale of these goods to the best advantage. There is no evidence of 'millions of pounds" of ])acon or ham hav- ing been spoiled, and obviously it must have been in condition to meet the requirements of the pure-food law. POLICY OF GOVERNMENT IN SALE OF FOOD SUPPLIES. The report states that: The inactivity of the Government in the disposition of these food supplies was and is the result of a well-defined policy of the Secretary of War to withhold them from the domestic market to protect the interests from whicb these products had been pur- chased with the ultimate intention of disposing of them abroad so far as circumstances would permit. The policy of the War Department in the disposal of surplus sup- plies has changed with changing conditions, but there has never been any secrecy about it, and it has constantly been well known to the public. Mr. Hare was appointed Director of Sales in January, 1919, and on the 27th of that month he gave out a statement (p. 50) in which, in substance, the policy to be pursued was defined as follows: 1. So as to disturb the industrial conditions of the country as little as possible and to obtain the best returns for the Government. 2. Surplus property is to be transferred to another War Department bureau if it can use the same. 3. To sell surplus property to another Government department if needed before the- same is put on the market. EXPENDITURES IN THE WAR DEPARTMENT. 11 4. In general, Avhere there is any considerable surplus property it is desired, where practical, that an attempt be made to dispose of this material to the original manu- facturer or vendor in order that he may distribute the same to the trade. 5. The last-mentioned method failing, it will be advisable where practicable to approach the local board of trade or chamber of commerce or similar organizations to see if it will not be possible to dispose of this surplus property to the dealers in that class of material in that particular locality v. here the surplus is located. 6. If a deal is not consummated by any of the above methods, the Government will then be at liberty to dispose of it to the public at large. Dealers having had goods commandeered protested that a distinc- tion should be made in their case and that they should have the opportunity of taking the goods back at the price paid b}^ the Gov- ernment if they so desired. The Director of Sales disa])proved this policy (p. ,51'). The director declared the goods were commandeered at a fair profit to the producer and that under the plan tliey suggested the party from whom they were conmiandeered would take them back onh^ if the present market price was higher than the comman- deered price; that as the Government could not compel the dealer to take them back if the commandeered price were higher than the market price, it would obviously be "a one-sided arrangement" to permit such a course. The packers offered the use of their distributing facilities and to act for the Government in selling canned meats at prices dictated by the Government, the,y to be "paid the exj^ense involved. This oft'er was rejected (p. 22). Air. Hare testified that when it was found the packers w^ould not pay a decent price "we said we are through with you" (p. 27). Throughout the war it was the announced policy of the Govern- ment to confer with the trade in the line of industry affecting the war to secure its cooperation and support in the production and delivery of supplies required for the prosecution of the war. Most w^ar in- dustries were worked to their capacity. Tlie same policy was pursued in reference to the producers of food materials. In the main the efforts of the industries were commendable, patriotic, and effective. At the beginning of the w^ar the canners were called into conference. Representatives of the War and Navy Departments attended each annual convention of the National Canners' Association and ur^ed a maxunum production of canned vegetables. The association itself engaged in a publicity campaign to that end. Enormous pro- duction was obtained for the season of 1918. The seasotial pack for 1918 was complete at the signing of the armistice. I^arge amounts had been delivered or were in course of delivery to the Government on contracts. Government orders,' of course, have been f(n- Army consumption. As usual, the local trade had been provided for by advance orders. There was a comparatively large pack of canned com and canned peas, and especially of tomatoes for the season of 1919. Less than one-fourth of the canned tomatoes, for instance, remained in the hands of the canners on the 1st day of January, 1919, the great bulk of the pack having gone into the hands of the wholesalers, jobbers, and retailors, with a view of supplying the domestic market. The prices of these goods had been fixed by the Government. The whole- sale dealers had been restricted in their profits on a percentage basis of the turnover. With these conditions confronting the canned vegetable trade, the Government was forced to determine its course in disposing of its surplus vegetables, having in mind the best return 12 EXPENDITURES IIST THE WAE DEPARTMENT. to the Government and the effect of the Government's pohcy upon the general industry of the country. Wliile fundamentally the duty of the responsi])le othcials of the Government was to sell at the prices and at the times that would bring the best returns to the Government, the responsible officials justly took into consideration the situation of the industries and labor of the country. On the 4th of June, 1919. Mr. Hare, the Director of Sales, appeared before the Military Affairs Committee of the House and gave a statement of '' everything that we have done to date." He further said: I shall appreciate it very much, if it is agreeable to the chairman, to get any advice from the committee that they may care to offer. In response the chairman of the committee stated: I have seen accounts in newspapers suggesting that this stuff ought to be put upon the market and be sold for what it will bring. That would probably result in selling it for a very low figure. Wliat effect would it have upon those thousands of small tradesmen throughout the country who carry on their shelves the commercial canned stuff, and what would be the result to business in general if you were to carry out such a policy? After some discussion the chairman further stated: Answering your question and speaking for myself alone, I think the people of this country will expect you to get the most money you can for the commodity. (Hear- ings, Army appropriation bill, pp. 469, 471.) Unquestionably an immediate sale to the highest bidder of all the supplies would have meant a sacrifice of the Government's interest, as the returns would have been nominal. It seems apparent that from the standpoint of Government revenues a plan permitting a gradual absorption of the Government's supplies was the preferable course. We also believe that the trade of the country had a legitimate interest in the situation that to a large degree was not inconsistent with the duty of the officials to secure the most favorable returns to the Government. In this connection, it should be barne in mind that the Government had surplus properties following the war aggregating nearly $2,000,- 000,000. The mere statement of the fact makes it apparent to an^^one having only a meager idea of business conditions follow- ing the war that justice to the Government and the trade alike require that these goods be disnosed of on a plan of gradual absorp- tion instead of forced sales. The Government, that had encouraged and secured the cooperation of the industries in the production of its war necessities, could not in common fairness immediately turn around at the conclusion of the war and demoralize prices and market conditions which the Government's own activities had created and drive the price of stocks in the hands of merchants below the price the Government had fixed. The policy of the Secretary of War is clearly stated by himself in his letter addressed to Hon. H. D. Flood, published in the appendix to this report. WITHHOLDING OF CANNED VEGETABLES. In this connection the report refers to — An agreement with the Canners' Association that some 200,000,000 cans of canned vegetables would be kept from the domestic market during this season. On the .6th of last December, Gen. Wood, Acting Quartermaster Gen3ral, wrote a lettsr ti a rsprasntibiva of t.is Natimal Cinners' EXPENDITURES IN THE WAR DEPARTMENT. 13 Association, which was given publicity at the time, declaring- in sub- stance that the surplus of canned vegetables would not be placed on the market during ''this season." However, the fact is that canned vegetables were sold, beginning in February, and the Wood policy ;^'as wholly abrogated on the 23d day of "May, 1918 (p. 310, 55) *Vind offers of sales and sales of canned vegetables have proceeded lince that date. i In so far as the majority report intimates that the public has been deprived of the opportunity to buy canned vegetables of the Govern- ment since that date, it is erroneous. A reference to the record will show that the chairman of the subcommittee making this report {elicited evidence showing that on the 20th of June competitive bids were opened on a portion of these canned vegetables. Bids calling for the sale of these vegetable supplies as well as canned meats were issued, beginning in May. Over 1,500 bids were opened on the 20th ' of June. ORDER MAKING ADDITIONAL VEGETABLES RATIONS. The report criticizes an order of the Quartermaster General adding canned vegetables to the soldier's ration. It is asserted: This order would have resulted in a loss to the Government of millions of dollars to be derived from the sale of this siu'plus, as well as depriving the American people of a large quantity xjf food. No such results followed the making of said order. On the 17th of March, Col. Davis, of the Quartermaster Corps, wrote a letter to the president of the Canners' Association, stating that acting in line with his suggestion, canned peas, corn, squash, and string beans would be added to the ration list, which has always contained canned tomatoes. The effect of this order was not to add to the rations or to waste any food ])roduct, it simply furnished our soldiers a greater variety of vegetables without adding to the total quantity they received. It provided for the consumption of the vegetables the Government had, and to that extent relieved the Government of the necessity of replacing that quantity of foodstuffs by purchases in the market. It did not diminish the food supply of the country one pound. It was an advantage to the Government and an advantage to the soldier, as it gave him a more varied ration, and which he could not have obtained except at the expense of his mess fund. The declara- tion that it resulted in a loss to the Government of millions of dollars is without the slightest foundation in fact. The statement that it deprived the American people of a large quantity of food is equally groundless. The report fiu'ther states that the purpose of the above order ''was to protect the canners who had sold the produce from compe- tition with the governmental surplus." As a matter of fact the 1918 pack had practically passed from the hands of the canners before the order was made. The order had the effect of contributing to the stabilization of the market and relieving the Government of the necessity of a forced sale. 14 EXPENDITURES IN THE WAR DEPARTMENT. OTHER SURPLUSES. The report states — There is a surplus of millions of cans of fish, and milk and tons of sugar, coffee, and tea. We are reliably informed that the fact is there is no surplus of fish and that the quantities of fish which would have constituted a siu-plus were rejected and returned to the packers, because it did not conform to Government requirements. There is a small surplus of milk, only 680,000 cases, and to date there has been declared a surplus of 52,000,000 of sugar, all of which has been turned over to the United States Sugar Equalization Board and is being dis- tributed to meet the needs of the American people. There is no surplus whatever of coffee or tea nor is any anticipated. (See letter of A. L. Mercer, assistant director of sales, in appendix to this report.) SALES TO MUNICIPALITIES. The report charges that the Director of Sales has issued a publicity statement ''that meat and vegetables shall be purchased only by municipalities," they to pay the freight and have a 10 days' credit. There is no evidence whatever that the department has in any way limited the sale of food products to municipalities, and the fact is that it has not. This method of sale was simply adopted as a means of giving to the consumers of the country an additional opportunity, with the help of municipal officers, to take advantage of the Govern- ment's ofl'erings in small quantities, which on account of the lack of a retail distributing system the Government has been unable to furnish directly to the small purchaser. Evidence taken before the subcommittee and in the record shows that for many weeks past and at the present time the Government has been pursuing independent methods of sale both by bids and direct sales to purchasers other than miuiicipalities. This fact is estab- lished by the records of sales, advertisements in hundreds of news- papers and circulars distributed throughout the country by thousands. In this connection the report further states: Many municipalities which have indicated a desire to purchase this food for the benefit of their people have Been met with the threat of injunction on the part of local dealers, which threat has been sufficient to present a purchase of the goods. The plan of the department permits the consummation of the sale to the consumer without the necessity of municipal funds being used. The 10-day credit was extended to permit the municipalities to reimburse themselves from the retail sales before being required to transmit the cost to the Government. Any threats of injunction that may have been made against municipalities have undoubtedly been inspired by profiteers, who would like to handicap the Government in making an advantageous sale of these goods as well as deny the consuming public the benefit of the Government's plan. H. D. Flood, Finis J. Garrett, Frank E. Doremus, Clarence F. Lea. EXPENDITUKES IN THE WAR DEPARTMENT. 15 Appendix to Minority Report. War Department, Washington, July 26, 1919. Hon. H. D. Flood, House of Representatives, Washington, D. C. Dear Sir: My attention lias been called to the statement contained in a report of the Select Committee on Expenditures in the War Department, with reference to the disposition of the surplus food supplies held by the War Department. I have also your request that I advise you what my policy in this matter has been and is. On the 11th of November, 1918, when the armistice was signed, a suspension of hostilities took place. Under the terras of the armistice, a resumption of hostilities was made possible and a more or less prolonged period followed during which there was, from time to time, suggested the possibility of the armistice being denounced. Nevertheless the War Department disc(mtinued the transportation of foods to Europe, discontinued the mobilization of further forces in this country, and began at once a progressive demobilization of men. It suspended existing contracts for the procure- ment of supplies and took all possible steps to l)ring about a reduction of war expendi- tures. In the meantime, vast quantities of supplies already manufactured were in hand and a continued stream of deliveries from manufacturers and producers daily increased the stock of tlie department. These supplies were of practically every nature; foodstuffs, clothing, implements, machinery, vehicles, thousands of items, some ha^'ing little usefulness in civil life by reason of their special adaption to Army use, many of them being equally A^aluable for peace-time and war-time usefulness. The data in the hands of the department with reference to the speed with which demobilization could be effected were neces- sarily speculative. How large an Army should be retained, and for how long, required to be carefully determined. The situation in Europe, the rapidity with which trans- portation home could be supplied, industrial conditions in the United States, were all elements to be considered. As a result, it was not possible instantly to place upon the market for sale to the general public the supplies held in storage by the depart- ment. It was necessary first to make an accurate forecast of the Army's needs; second, by proper inventory and examination to determine quantities on hand; and, third, to devise methods of disposing of these commodities which would take into consideration the perishable nature of some of them and the effect of their sale upon producers of raw material and labor conditions in the country. It will be recalled that the country was at the moment called upon to readjust itself industrially and commercially. The major part of the industrial force of the Nation had been sum- moned to the making of war supplies. Its resumption of peace-time occupations required markets for the products of labor. The commerce of the country was under a system of war conditions involving price fixing and centralized distribution, so that if, at such a period, the War Department had inconsiderately tendered its A-ast accu- mulations of supplies to the public consumption while it was demobilizing its indus- trial and military forces, there would inevitably have resulted, perhaps, a momentary cheapening of the market price of certain commodities, but a concurrent and com- plete paralysis of industry, whereby the producers of raw material would have been discouraged and the manufacturers of finished products unable to resume peace-time occupations. In December I directed that three principles be followed in the disposal of the Army surplus : 1. The disposal of supplies, as far as possible, through other Government agencies and relief commissions. 2. To take up with the original producer who furnished the article to the Govern- ment the question of repurchase, in order that niater'ials mi;..ht be distributed through their original and customary channels. 3. To offer the remaining surplus in the best market or to the public at large with full publicity. This policy I stated in a letter to the Hon. William E. Borah, of the United States Senate, in a letter, December, 1918, a copy of which letter I herewith inclose. From tliat time until now I have conferred fre juently with those immediately in chan:e of the sales of these products. Careful surveys and resurveys of the Army's probable needs have been made, surplus was dclared, and efforts made to devise effective ways of placing our sur]ilus on the market, avoiding, wherever possible, their disposition to speculatcrs. The War Department did not have and has not the means of building a widespread retail system of sale and distribution for these prod- ucts. It would require an elaborate and costly organization, reaching over the entire 16 EXPENDITURES IN" THE WAR DEPARTMENT. country. Much progress has been made in effecting sales. Of that, however, the Acting Director of Sales has informed you in detail. With the considerations above stated in view, I can only summarize by saying that it has been and is the policy of the department to sell its surplus in tlie best markets and as speedily as possible, relieving the burden upon the Public Treasury by securing as ade^iuate" a price as we can and avoiding the incidental disturbances which unconsidered action would cause. So far as foodstuffs are concerned, I have given my personal attention to the devising of ways to place the Army's sucjjIus of foods in the hands of consumers at the lowest possible price in order to relieve, even if but temporarily, Uie high cost of li\dng, an object with which I have the deepest sympathy. Respectfully, yours, Newton D. Baker, Secretary of War. War Department, Purchase, Storage and Traffic Divlsion, Office of Director of Sales, Washington, July 26, 1919. Hon. H. D. Flood, House Office Building, Washington, D. C. My Dear Mr. Flood: At the request of the Secretary of War I have collected certain data with reference to the subsistence situation in the Army since the signing of the armistice. This report covers the following principal points: The attitude taken by the director of purchase at the time of the signing of the armistice, the reasons for any delay in declaring food surplus, as well as evidence bearing out the fact that there has been no financial loss to the Government because of the apparent delay. I l])elieve you will find this report complete, but will be glad to furnish you with any fmther information which you may d.sire. By authority of the director of sales. Sincerely, E. (". Morse, First Assistant. War Department, Purchase, Storage and Traffic Division, Office of the Director of Sales, Washington, July 26, 1919. Memorandum for Mr. E. C. Morse, First Assistant Director of Sales. 1. As you requested, I am submitting a complete report on the canned meat and vegetable situation. You asked me to determine the status of contracts, the reason for delay in reporting surplus, and whether the Government lost in dollars and cents retm-n because of the apparent delay. 2. Attached market Exhibit A is a statement from Col. Julian L. Schley, director of pm'chase, which explains the contract situation. Attached, marked "Exhibit B," IS a statement from Col. Norris Stayten, assistant director of storage, which explains some of the difficulties in obtaining inventories and consequent reports of surplus. 3. . Having by way of these memoranda explained the problem confronting the War Department in obtaining complete inventories and of knowing accurately what the requirements would be, your attention is invited to the fact that surplus canned meats were declared beginning in January and running through to March 26, when the surplus meat figures were given us in reasonably correct form . On May 5 a conference was held, at which time the surplus figures were corrected as follows (the present fig- ures are also given) : Commodity. May 5. Present. Bacon Pounds. 47,000,000 38,000.000 36,000,000 20,000,000 Pounds. 91,178,f)71 Roast beet 49,323.768 Corned beef 53,231.216 Corned-beef hash 37.314,995 Total 141,000,000 231,048.650 EXPENDITURES IN THE WAR DEPARTMENT. 17 These meats cost the Government average prices as follows: Bacon issue, ser. 8, crates per pound . . $0. 40' Bacon issue, ser. 10, 12-pound cans do 46 Beef, roast, 6-pound cans per can. . 2. 70 Beef, roast, 2-pound cans do 82 ' Beef, roast, 1-pound cans do 51 Beef, roast, 12-ounce cans do 35 Beef, corned, 6-pound cans do 2.09 Beef, corned, 24-ounce cans do 70 Beef, corned, 1-pound cans do 45 Beef, corned. 12-ounce cans do 38 Hash, corned beef, 2-pound cans do 48 Hash, corned beef, 1-pound cans do 28- 4. It is next ad\dsable to present to you the efforts made to sell as havins; par-' ticularly to do with the statement that it was oiu* desire to export all our foodstuffs rather than to place them on the American market. To discuss nothing but canned vegetables for the moment, your attention is called to a letter written on December 6 to the American Canners' Association by Gen. Wood, then director of purchase and storage. This letter stated that canned vegetables would not be placed on the American market during the canning season. This letter was written upon the urgent request of the American Canners' .\ssociation. claiming that if the Government's- surplus canned vegetables were immediately placed on the market it would stop' jobbers of canned vegetables from placing orders with the canners. which in turn; would react upon the farmers, who would not plant vegetables and thus workmen be- thrown out of work. Orders are placed by jobbers in January. February, and March for the coming crop. These orders are iised as a basis of credit with banks by canners. Crops planted are predicated upon these orders placed with canners by jobbers. At this time it was anticipated, in any event it was generally thought by canners and farmers, that we had a considerably greater surplus than it later developed we actually had. This was having a rather demoralizing effect upon the market. 5. It was assumed by Gen. Wood's organization, in view of the fact that it was proposed not to place surplus stocks of vegetables on the American market so quickly, that it might be best for the Government to develop foreign markets, particularly in view of the food requirements of European nations. The purchase and storage organization thought that in ^'iew of the need for food it would have to be supplied either by American jobbers or from Army reserve stocks. In any event, it was thought this demand, however met, would have the same influence" upon price and that the Government's problem was to move the surplus in accordance with existing economic conditions, to realize the best return for the Treasury. 6. In endeavoring to develop a foreign marlcet, purchase and storage was imable to secm-e from the sale of this surplus the price it was thought these foods should bring. This was largely due to the fact that in the early months of the year no credit arrange- ments could be made by foreign governments which would satisfy the Atnencan bankers. Attention is also called to the fact that purchase and storage endeavored to interest representatives of foreign governments in the purchase of certain surplus canned vegetables, but was unsuccessful largely because of the matter of credit. 7. When we began to get reasonably correct inventories of surplus, it was realized that our surplus was not as great as was anticipated. It was further realized that jobbers had already placed their orders, that the canning season was apjiroaching and that in- view of the world-wide demand for food, the time had come when the Government's surplus could be placed on the market without interfering with market conditions to the extent of reducing the year's pack, and to bring the dollars and cents return. Therefore, Gen. Wood's letter of December 6 to the canners, and which was written before the director of sales was appointed, was abrogated on May 23. On June 3, as indicated above, a reasonably complete and accurate report of surplus vegetables was received by the sales organization. 8. In the next place the statement is made that large quantities of these vegetables deteriorated because of delay. Your attention is invited to the fact that canned goods are supposed to keep for a considerable period. Any swells or deterioration in canned vegetables should become evident in 90 days and the manufacturers agree to replace defective goods if the defects present themselves within a period of approximately nine months, or before June 30 for the previous year's pack. As a matter of fact, no canned vegetables deteriorated or at least have been sold on a deteriorated basis of price. Newspaper articles to the effect that our vegetables are deteriorated have inter- fered more than any other one thing with, the sale of vegetables at a good price. H. Kept. 171, 66-1 2 18 EXPENDITURES IN THE WAE DEPARTMENT. 9. Had the War Department placed its surphls vegetables on the market in the early spring, we would have suffered a sacrifice in jirice because of the fact that speculators expected to buy Government surplus at a greatly reduced figure. The people cer- tainly could not have benefited had a speculator been able to get hold of this surplus, and otherwise should this surplus have been placed on the market at this time the canners and the producers would not have proceeded with normal plans for the 1919 crop. As a result of this fact there would have been a great shortage in canned vegetables, which would have forced the price considerably higher than it is at the present time. 10. It has never been the intention of the Secretary of War to export these canned vegetables as against placing them on the American market. It is our policy to sell our surplus in the best market that we may place in the Government Treasury the maximum dollars and cents return with the idea of lessening taxes that rnucli. It naturally follows that where there is a good American market we would most certainly sell in that market rather than export. 11. With regard to canned meats, certain small quantities were reported surplus up to March 26 and until May 5, when a very complete and comprehensive report was submitted as to that date. Obviously, this report was not absolutely accurate in view of the difficulty in obtaining inventories and in view of the rapidly demobilizing Army in France and in this country. 12. On May 5 a meeting was held with the meat packers as similar meetings have been held with the producers of various commodities, with the idea of receiving benefit from their knowledge and experience in the industry. If you will refer to the minutes of this meeting, you will observe that the meat packers suggested that our meats were not standard commercial goods in the standard commercial package altogether suitable for resale. You will further find in the minutes a statement to the effect that these meats might be exported to good advantage. Attention was called to the fact that the bacon is of a special Army cure. Therefore, this particular bacon was represented as being not altogether suitable to meet domestic demands and difiiculties might present themselves in attempting to export this particular commodity. You will further observe that the meat packers offered to dispose of this surplus on behalf of the Gov- ernment, returning to the Government the full dollars and cents return from the sale of this surplus, less whatever their operating expenses might be. 13. After considerable discussion it was determined best to attempt to dispose of these meats in this country by sealed bid, thereby p?rmitting all possible purchasers to obtain these commodities. In formulating this policy we had in mind the thought that the American public, ha\'ing -virtually paid for these canned meats, were entitled to benefit were there any benefits to be received by the sale of these meats in this country. It was not deemed expedient to export until domestic markets were ex- hausted, neither was it deemed expedient to sell through the packers, owing to the fact that the packers are being criticized by the general public. 14. There was never any agi-eement with them to withhold canned meats from the market. Any seeming delay in placing meats for sale is the result of the difficulty in obtaining accurate inventories and reports of surplus, our desire to aid in stabilizing industry with good wages to workmen, together with our keen desire to obtain the maxi- mum dollars and cents return from the sale of canned meats by placing on the best markets at the most opportune time. 15.. As in the case of vegetables there were rumors current in the early months of this year to the effect that our surplus was considerably greater than it later proved to be. Consequently stock growers were in communication with us, as was the Farmers' Grange, requesting that we dispose of our surplus meats in such a way as to affect : stock growing as little as possible. Attached, marked "Exhibit C," a're copies of ^ certain telegrams received by this office. The economic solution of the problem is to 'be found in the fact that there is a certain amount of surplus which the market must : absorb. In view of the termendous demand for foodstuffs from abroad there is ob- viously a market for this surplus. It then becomes a question of placing the surplus on the market in quantities over a period of time so as to disturb economic conditions as little as possible and avoid a panicky condition. The foregoing thoughts explain the reasons why we have been in no haste to indiscriminately dump siu-plus meats on the market regardless of consequences. 16. Again statements have been made in publicity articles to the effect that millions of dollars worth of surplus meats have been allowed to deteriorate. The only case of this kind which has come to our attention is 1,500,000 pounds of ham which was de- livered to Norfolk upon requisition from the American Expeditionary Forces in Octo- ber. Of the 12,000,000 pounds of ham requisitioned the Army was only able to secure 6,000.000 pounds, of which the 1,500,000 pounds at Norfolk was a part. Shipments were made from Chicago during the months of January, February, and March. This .ham remained in Norfolk until the requisition from the American Expeditionary EXPENDITUKES IN" THE WAR DEPARTMENT. 19 Forces was canceled, at which time the Surplus Property Di\'ision of the office of the Director of Purchase and Storage was advised of the cancellation. Consequently, on May 18 each surplus property of each zone office was telegraphed to offer this meat for sale. Sales on the whole lot were consummated on June 2 at a price of 20 cents per pound and sold by sealed bids to Harris Bros., of Chicago. 17. In stating that this meat was deteriorated, attention should be called to the fact that it was slightly moldy and required reconditioning to put it into first-class salable condition. Ob'viously, this meat could not have been in poor condition or the pure-food law would have prevented its resale. There is no question but what we sacrified somewhat because of the unpresentable condition of this meat. We paid 40 cents per pound for it and the market price at the time of sale was 35 cents per pound. Your attention is further called to the fact that this market price as quoted represents the price at which the packers sell to the dealers under guaranty. We can not hope to sell our surplus at the full market price for the reason that we expect cash and do not extend any guaranty. So far as we know no other meats have deteriorated or have been sold in a deteriorated condition. 18. Your attention is invited to the fact that we have a surplus of 680,000 cane of milk. As you appreciate this but represents a drop in the bucket in so far as the daily production of milk is concerned. This commodity does not deteriorate rapidly. 19. In so far as surplus fish is concerned, your attention is invited to the fact that approximately 32,000,000 cans of salmon was turned back to salmon canners at cost. The reason being that the salmon did not come up to Government specifications and we required them, therefore, to take back these goods. 20. To date there has been declared surplus a total of approximately 52,000,000 pounds of sugar, all of which the Army has turned over to the United States sugar equalization board, branch of the Food Administration, for distribution throughout the United States. In this connection you are advised that offers have been made for this surplus sugar by exporters at prices in excess of 2 cents per pound above that at which the sugar was being allocated by the sugar equalization board in this country. The sugar has been handled in this manner owing to a sugar shortage in certain sec- tions of the United States. This sugar is being sold by the qualization board for the account of the Government at 10.0879 per pound, which represents the actual cost to the Army. In view of the fact that America imports considerable sugar, we considered it advisable to take care of the American markets before exporting. 21. Your attention is called to the number of publicity articles which have appeared to the effect that we have millions of pounds of tea and coffee. This infor- mation is absolutely contrary to fact for we have absolutely no sm-plus tea or coffee , nor do we anticipate having any. 22. Sales of flour total approximately 70,000,000 pounds, on practically all of which cost to the Army has been recovered. Most of the flour sales above referred to have been made to the United States Food Administration Grain Corporation and to the Navy and Marine Corps, at cost. At the time of the lifting of the regulation requiring the use of certain percentage of flour substitutes in the manufacture of bread, the Army had left on hand a considerable amount of flour substitutes. Owing to the fact that everyone in the trade from the miller down to the retailer, and even the house- holder, were stocked up with flour substitutes, there was absolutely no demand for these substitutes for human consumption and it has been necessary to develop a market among the feed manufacturers in the country. Naturally some of these substitutes have deteriorated on account of hot weather and storage conditions, but this deteriora- tion has not affected the price obtainable for these for the manufacture of cattle and chicken feed. 23. In disposing of these surplus foods in this country, we were face to face with the practical question of distribution. We have neither the personnel nor the time necessary to sell these foods direct to the consumer on a retail basis. Our limited personnel and our desire to expedite the sale as promptly as possible to take advantage of the present market conditions necessitated that these foods be sold in reasonably large quantities. As a result of the foregoing thought, we decided that it was advis- able to give municipalities an opportunity to purchase surplus meats at approxi- mately 20 per cent below cost and vegetables at cost, the idea being that municipalities could in turn sell these foods at cost to the people, thereby helping out somewhat with the high cost of living. 24. It is our thought that considerable quantities of canned foods can be sold to ad- vantage through municipalities, as we are receiving a number of inquiries from them, as covered by Exhibit D attached, possibly tlii-ough large department stores, who are willing to dispose of Government surplus at the same price which they pay for these stocks and the balance to be sold on the American market at a fixed price set, or at this same price for export. 20 EXPENDITURES IN THE WAR DEPARTMENT. 25. For your information we are attaching a tabulated report of sales of surplus subsistence or food, marked "Exhibit E," as our records indicate to date. Your attention is invited to the fact that reports of sales do not come to rest in the office of the Director of Sales until possibly two or three weeks after the sales are made. Conse- quently this report is not absolutely complete to date, but it will give you a complete and comprehensive idea of the classes of commodities being sold and the period over which these sales have been made. Below is a digest taken from the weekly report of sales made by the Surplus Property Division as follows: Week ending — Sales per week. I Per- Sales to I centage date. I recov- ery. April 19 . Apr. 26.. May 3 . . . May 10.. May 17.. May 24.. May 31 . . June 7 ... June 14.. June 21.. June 28. . July 5... July 12.. July 19.. 8197,926 991,296 924,165 1,472 ,301,560 582,920 258,516 677,691 765,167 384,858 ;, 778, 227 179,033 29,568 ,485,740 SI, 257, 849 2,249,145 3,173,310 3,174,782 4,476,342 5,059,262 5,317,778 5,995.469 6,760,636 7, 145, 494 10,923,721 11,102,7.54 11,132,322 12,618,063 Per cent. 102.09 100.84 100.58 100. 4S 100.4 100.3 100.34 94.8 99.2 98.7 90.9 89.5 89.3 85.7 ' All sales made to Apnl 19 included. The following sales have been or are being made, but reports of sales have not reached this office: Sugar, $4,570,000; bacon, $2,242,900; corned beef, $1,668,750; canned vegetables, $2,600,000, canned tomatoes, $3,000,000. Total, $14,061,650. There- fore the grand total sales of subsistence to date amounts to $26,679,712. This very clearly establishes the facts in our minds that sales are being made just as rapidly as possible and as conditions warrant. The grand total surplus subsistence in pos- session of the War Department as of July 12 amounts to $123,703,504, a part of which has been recently declared surplus. For your information we have received not less than 85.7 cents on the cost dollar on all surplus foodstuffs sold to date. 26. On July 9 a publicity article was issued to the effect that the War Department would sell surplus food to municipalities. On July 11 a second statement was issued amplifying the first to the extent that this article explained the method whereby municipalities could obtain surplus food. This article went on to state that munici- palities might have 10 days' credit, thereby permitting cities to obtain surplus foods, sell them, and return the proceeds to the Government in those instances where the city charter would not permit an outright purchase. This publicity statement did not state as issued from this office, nor was it intended to imply that food would be disposed of entirely through municipalities. 27. As an illustration of the truth of this statement we want to call to your attention the fact that in May it was decided to offer for sale in the United States by advertise- ment and sealed bids all surplus canned meats. About 20,000 circular letters, gi^-ing information regarding this sale, were sent to all State, municipal, and charitable institutions, as well as dealers, jobbers, and exporters. In addition to this, news- paper advertising was used. Bids were received and opened June 20. Abstracts thereof were made and submitted to the Secretary of War with recommendations that all be rejected' due to the fact that they did not show an adequate recovery. The Secretary approved these recommendations and authorized sale of bacon and canned meats at not less than certain minimum prices, also to municipalities in not less than carload lots at prices approximating 80 per cent of the original cost. 28. Likewise, of our total quantity of canned meats we have sold approximately 5,000,000 pounds of bacon at a price above the minimum price set by the Secretary of War at which bacon and other meats, on which a minimum price was s,et, could be sold to purchasers such as Louis Leavitt, of New York; Kurtz-Wilson, commission mer- chants, of Baltimore; and W. S. Sawrie & Son, meat dealers, of Nashville, Tenn. These parties have purchased the total of 5,000,000 pounds of bacon, having been sold out of our entire surplus. 29. Likewise, final determination of surplus canned vegetables was arrived at June 3 and instructions were immediately given to offer same for sale in the United States EXPENDITURES IN THE WAR DEPARTMENT. 21 by advertisement and sealed bids to be opened June 30. Due notice of this was given not only by newspaper advertising but by circular letters to all State, municipal, and charitable institutions, and dealers, jobbers, and exporters, as a result of which 1,572 different bids were received from all zones throughout the covmtry. 30. These bids were forwarded to Washington by each zone, where a master abstract was made and recommendations of awards prepared, which was submitted to the Secretary of War and approved by him. The bids on canned vegetables were received as a whole from the leading wholesale grocers throughout the United States, as well as department stores and retailers. As a whole, the bids received were not of a specula- tive character and no speculative bids were accepted. 31. The following table shows the quantities of vegetables disposed of by sealed bids recently opened and the balance remaining for sale : Recommended sales. Left from offering. To be declared surplus. Total available surplus. Corn, cans, 17,442,890 Peas, cans, 6,439,316 Beans, stringless, cans, 351,955 Beans, baked, No. 1 cans, 3,262,890. Beans, baked, No . 3 cans, 13,416,310 Beans, baked, No. 2 cans, none 1,611,951 4,224,383 1,894,801 92,496 52,464 (1) 12,749,803 13,943,959 1;,054,0M 5,853,216 1,178,095 833, 289 14,361,754 18, 168, 342 2,948,865 5,945,712 1,230,559 833,289 1 None. 32. The foregoing report has been presented in great detail that you may have m your possession the facts as I find them. I want to advise you that I feel personally indebted to Col. Schley, Col. Stayton, Maj. Squier, and Capt. Clement for their splendid assistance and invaluable cooperation in obtaining the facts embraced herein. A. L. Mercer, Assistant Director of Sales. Exhibit A. War Department, Purchase, Storage and Traffic Division, Office of the Director of Purchase and Storage, Washington, July 26, 1919. From: Director of purchase. To: a. L. Mercer, Assistant director of sales. 1. Probably never in the history of the world has a production approached that which was obtained in this country and which was at its height in November of 1918. Based on requirements furnished by the General Staff, purchases of foodstuffs were 'n progress for 5,000,000 men, for the coming year. Many manufacturers of commer- cial articles had been persuaded to transform their plants into production of war materials, and their commercial production of commodities not needed for war had been reduced to an absolute minimum. 2. Relative to canned vegetables and fruits, attention is invited to the fact that these are seasonal products and that allotments of the possible output of the country for the use of the military forces was made by the Food Administration a year in advance and covering the requirements for a year. Of the 1918 pack, this resulted in reservations for the Army of 45 per cent of the tomato pack, 25 per cent each of the peas and corn packs, and 15 per cent of string beans pack. It so happens that, in the early part of November, the canning season had just closed and therefore the canning of the allot- ment for the coming year was practically completed and the delivery of these goods to the Army was at its height. 3. On November 7, immediately upon the receipt of the rumor in this country that an armistice had been signed, telegrams were sent from the office of the director of purchase to suspend all purchases except food, forage, and other necessary articles, until further orders. On the same date telegrams were sent from the Subsistence Division to stop all purchasing of canned vegetables and canned and dried fruits allotted by the Food Administration. The object of this immediate action was to stop promptly the tremendous production of war material which had been developed during the war. 22 EXPENDITURES IN THE WAR DEPARTMENT. 4. An order was issued by the director of purchase on November 9, directing that all purchases for immediate needs be first referred to his office for approval and. that all orders and contracts which had not yet been placed be submitted to his ofhce for action. The piu-pose of this order was to place in the hands of the director of purchase, himself, complete control of further production in order to be certain that it would not exceed the needs of the Army imder the changed conditions. 5. The purchase service then proceeded to inspect the outstanding contracts in order to determine which should be canceled immediately and which should be permitted to continue. In the case of food stuffs and forage, it must be remembered that the Army was still in existence in sj.)ite of the armistice and that the men and horses had to be fed. The purchase of perishable food stuffs, therefore, which were being bought from time to time and not stored for future consumption, as in the case of canned goods, was continued and was tapered off as demobilization reduced the requirements. 6. The outstanding contracts might be divided generally into two classes: First, those for articles not needed because of the cessation of hostilities; and second, those which would be needed. Contracts for articles not needed may again be diidded into two classes: First, those which could be terminated immediately; and second, those which could not be terminated immediately. This second class includes contracts the imme- diate cancellation of which would have disrupted the industry, doing material damage to the contractor, to the farmer, and to labor. The tremendous production of war materials which the country had entered into had acquired a momentum which could not, in the case of some classes of supplies, be stopped at once without doing irreparable damage to the industries of the coimtry. Production was stopped as quickly as it was possible to do so, in the opinion of those in charge at the time, without seriously damaging the industries of the country. 7. Every effort has been exercised since the armistice to prevent piu-chase of articles already in the possession of the Army and such piurchases have been made only in case of great emergency or where shipment of articles already in stock would have involved a greater expense than the additional procurement, and in such cases the purchase was confined to immediate needs.. 8. The outstanding contracts of the Quartermaster Department at the time of the armistice niunbered approximately 16,000, involving a total monev value of $1,800,000,000. 9. Machinery was immediately set up for negotiating termination proceedings and for the consideration of the claims which naturally arose out of the cancellation of these outstanding contracts. This work is progressing satisfactorily. J. L. Schley, Colonel of Engineers, United States Army, Director of Purchase. Exhibit B. War Department, Purchase, Storage and Traffic Division, Office of the Director op Purchase and Storage, Washington, July 25, 1919. Memorandum for Mr. A. L. Mercer, assistant director of sales. In compliance with your request for information as to the delay in declaring food surpluses, the following is submitted: The first point to be considered is that on NoA^ember 11, the entire production of munitions and food supplies of this country can be likened to an enormous engine, that was built to go in one direction only, with no brakes or reverse for stopping. On November 11, when the hostilities ceased, due to the signing of the armistice, the first task that confronted the authorities charged with the supply of the Armj' was to bring this enormous engine to a stop the best way they could. The enormous produc- tion built up was caused by the fact that those in authority had to go on the assump- tion that the war would last for years, and in no way could slacken up until the armis- tice was signed. It was impossible to stop at once the forward tendency of this engine. As it was gradually brought to a standstill, the problem became one of rebuilding, so as to reverse the process, and dispose of the vast amount of stores that had accumulated. Due to the speed of production and inherent confusion accurate record of the amount and location of this vast quantity of stores was not possible. It was therefore neces- sary before any attempt could be made to dispose of surplus stocks that a complete inventory had to be taken in order to determine our stocks. For this purpose, it was EXPENDITURES IN THE WAR DEPARTMENT. 23 decided that rather than trust to the usual inventory required by Army Regulations, due to the greatness of the problem involved, that a special organization be set up for the purpose of taking this inventory as of December 31. For this purpose 178 officers were called to Washington on December 1 , and received instructions in the methods to be used in taking this inventory. On December 17, this body of officers was sent to the various zone supply offices and camps. An officer was designated by the commanding officer of each post and military station for the purpose of taking the inventory at his station. These officers were assembled in the zone supply office of their zone for the purpose of receiving the instructions from the officers sent from Washington, mentioned above. On Decemlier 31 this inventory started throughout the United States. The physical count M^as completed in 10 days at all posts, stations, and depots. These reports were then brought to Washington and consolidated. When it is considered that this vast quanty of P. & S. supplies were scattered throughout the country in 16 zone supply depots, 3 Army reserve depots, 4 large port terminals, and from 200 to 300 posts, it is obvious that the task of determining the amount and location of these supplies was a problem in itself. To illustrate, there were some 180,000 different items to he counted, reported, and consolidated. To do this, it took approximately 10,000 people to com- plete this work. Inventory was completed on April 30 and a list prepared for the use of declaring surpluses. Naturally the time involved changed the condition of some of the stocks, princi- pally sul)sistence items. A system of monthly stock reports, continuing from Decem- ber 31 on, enal)led this list to be made of value. The above involves only the articles handled by the Purchase and Storage Service and was exclusive of our property in France. Instructions of Gen. March, issued on November 30, to dispose of surplus perishable foods in the possession of the War Department were obeyed as rapidly as information could be obtained as to their location. For your information, it has never been con- sidered that canned vegetables and meats were of a perishable nature. In fact, they have always been considered articles to be kept for from one to two years. Any deterioration taking place in these articles usually takes place within 90 days. Aside from the article of smoked ham. which somewhat deteriorated in storage at Norfolk, there has been practically no deterioration of food supplies in the Army. It is safe to say that the total loss from all causes, which includes spoilage of individual cans of canned goods, the loss through leakage and breakage throughout all the com- missaries in the country averages approximately $13,000 per month. This is a remark- ably good shoAving, when it is considered that the average amount of subsistence- stores handled during a month runs considerably into millions of dollars. Your attention is also invited to the fact that the Army program, as announced giving the rate of demobilization was considerably greater in actual practice. This continued to increase the amount of surplus stocks of these food supplies, and made it difficxilt to obtain accurate data upon which to declare surpluses. One point to be considered in the time elapsing between the signing of the armistice and the actual declaration of surplus food supplies is the fact that'an armistice did not necessarily mean a cessation of hostilities. In fact, on several occasions between the signing of the armistice and the actual signing of the peace treaty by the German Nation it looked as if hostilities might be resumed, and while this will probably be answered by the statement that we were demobilizing men, your attention is invited to the fact that to recall the men would be a comparatively easy task, when compared with the task of obtaining food, if we had gone blindly about selling what might be con- sidered surplus. It was absolutely necessary that these surpluses be accurate whea making this declaration, for it would have been fatal had hostilities been resumed, and no food available for the Army necessary to continue overseas. I believe the above explanation gives the reason for the ap])arent delay in the declaration of surplus food supplies on the part of the War Department. From the above it can readily be deduced that there was no way in which this declaration could be hastened, except by bl'ndly selling food that may have been, needed by the Army had conditions changed. There is one other point that occurs to me. That is, that in order to enable articles of food to be placed upon the market, there is certain commercial information that must be obtained before any selling organization can dispose of the same and that this information was never made a matter of record by the War Department, as it was not a selling organization. For instance, a can of bacon was a can of bacon^ irrespective of as to by whom it was packed or by what brand it was commercially known. NoRRis Stayton, Colonel, Quartermaster Corps, Assistant Director of Storage. 24 EXPENDITURES IN THE WAR DEPARTMENT. Exhibit C. [Telegrams resales canned vegetables received by director of sales' office.] Brooklyn, N. Y. C. W. Hare, Director of Sales, Munitions Building, Washington, D. C: Having no reply to my letters 9th and 13th, am uncertain regarding recent develop- ments in sales surplus canned vegetables. Understand canners conferring with you to-day wholesale grocers have stated to you in detail their opinion regarding the distribution of these goods. Can only add without question the sale of the surplus tomato stock at this time will have a disturbing effect upon the market, probably more so than the sale of other vegetables. Will appreciate information as the situation develops. Wholesale grocers of the United States are greatly interested in this matter both financially and for economic reasons. Walter B. Timm.s. Denver, Colo. C. W. Hare, Director of Sales, United States Army Munitions Building, Washington, D. C: On March 17 this year and under direction of Gen. Rogers, of the United States Army, a letter was written emljodying in it that there would be no canned vegetables dumped on the market. Canners in the United States have relied absolutely upon this letter and have gone ahead with acreage for this year. It is very disastrous to canners. now if you allow Army goods to go on the market at less than reproductive costs or until domestic market will consume them. We feel it imperative to ask that you withhold the tomatoes until they are needed for the domestic market. The Colorado Canners' Association. Hurlock, Md., June 17, 1919. W^illard G. Rouse, Care Col. Glover, Surplus Property Division, Munitions Building, Washington, D. C: In my judgment, the Government should sell tomatoes on hand and relieve the cloud hanging over the business. Have talked other canners who approve plan. I pack about 50,000 cases yearly. Roland Webster. Baltimore, Md., June 17, 1919. WiLLARD G. Rouse, Care Col. Glover, Surplus Property Division, Munitions Building, Washington, D. C: If stock of canned tomatoes carried by Army to be sold, we favor of disposing of them immediately. Roberts Bros. Dover, Del. WiLLARD G. Rouse, Care Judge Covington, Evans Building, New York Avenue, Washington, D. C: By all means, Government should dispose holdings immediately if do intend to redeem promise not to dispose of them. We packed last year 135, 000 cases tomatoes. If held until later menace will have very serious effect on operations for coming season, and we shall not attempt more than one-third. Views of neighboring packers •coincide with ours. C. M. Scott Packing Co. Salisbury, Md., June 17, 1919. WiLLARD G. Rouse, Care Col. Glover, Surplus Property Division, Munitions Building, Washington, D. C' By all means insist on War Department selling surplus stock tomatoes before canning season. All canners here want this stock sold at once. J. D. Elliott. EXPENDITUEES IN THE WAE DEPARTMENT. 25 Preston, Md., June 17, 1919. WiLLARD G. Rouse, Care Col. Glover, Surplus Properly Division, Munitions Building, Washington, D. C: By all means sell immediately the Government tomatoes if they are to be sold before December, 1919. Other packers think same. W. M. Weight. Federalsburg, Md., June 17, 1919. WiLLARD G. Rouse, Care Col. Glover, Surplus Property Division, Munitions Building, Washington, D. C: All Government tomatoes should be sent Em-ope if sold. This country should be used to stabilize prices slightly above present level. Our houses pack 107,000 cases. S. D. & R. W. Messenger. Preston, Md., June 17, 1919. WiLLARD G. Rouse, Care Col. Glover, Surplus Property Division, Munitions Building, Washington, D. C: Majority of canners we talk to think Government should hold goods until January 1 if only 2,000,000 cases now. Probably Government can dispose of considerably more by that time at much higher price than they can obtain at present time. Fiu-ther- more, if Government goods put on market now there is no ciuestion that some of them will be unsold when our new pack comes on. Sold on sealed bids will uiidoubtedly sell at below to-day's market and utterly demoralize prices from now through packing season. N. H. FooKS & Co. Seapord, Del., June 17, 1919. WiLLARD G. Rouse, Care Col. Glover, Surplus Property Division, Munitions Building, Washington, D. C: If it is the intention of the Government to sell surplus stock tomatoes, we think sooner this is done the better for the business. These are also the views of H. P. Cannon & Son, Bridgeville. We usually pack about 70,000 cases. Greenabaum Bros. (Inc.). Ridgeley, Md., June 17, 1919. Wm. G. Rouse, Care Col. Glover, Surplus Property Division, Munitions Building, Washington, D.C. Would advise unloading canned corn and tomatoes at once. Swing Bros. East Newark, N. J., June 17, 1919. WiLLARD G. Rouse, Care Col. Glover, Surplus Property Division, Munitions Building, Washington, D.C. It is my judgment the Government should sell surplus tomatoes at once. I believe this action will be to the best interests of the packing business. I pack usually about 100,000 cans. Urge Government to sell. Chas. Webster. Dover, Del., June 17, 1919. WiLLARD G. Rouse, Care Col. Glover, Surplus Property Division, Munitions Building, Washington, D. C. By all means Governnaent should dispose holdings immediately if do intend to redeem promise not to dispose of them. We packed last year 135,000 cases tomatoes. If held until later, menace will have very serious effect on operations for coming season, and we shall not attempt more than one-third. Views of neighboring packers coincide with ours. CM. Scott Packing Co. 26 EXPENDITUKES IN THE WAR DEPARTMENT. Salisbury. Md., June 17, 1919. Wn>LARD G. Rouse, Care Col. Glover, Surplus Property Division, Munitions Building, Washington, I). C: Think Government goods should be sold immediately. Other packers have same opinion. J. Cleveland White. Philadelphia. Pa., June 17, 1919. WiLLARD G. Rouse, Care Col. Glover, Surplus Property Division, Munitions Building, Washington, D. C: We feel that if the Government must sell their surplus stocks of canned goods in this country that it should be done at once, as a continual cloud is hanging over the entire canning industry, which produces anything but a healthy condition. We usually pack about 150,000 cases per year. Talbot Packing & Preserving Co. Dover, Del., June 17, 1919. WiLLARD G. Rouse, Care Col. Glover, Surplus Property Division, Munitions Building, Washington, D. C: Evidently the same sense of moral justice which prompted a zone price of one ninety five for Maryland against a zone price of one eighty seven for Delaware will govern, so what difference does it make what the "goats of the war," the packers, think would be equitable? We fail to see any equity, justice, or law by which a country, which went abroad to make the world safe for democracy, can autocratically commandeer for a specific purpose, in a great many instances at less than actual cost, and then use these commandeered goods to put these same industries out of business. James F. Allee, Jr., President Liberty Brand Canning Co. Vienna, Md., June 17, 1919. WiLLARD G. Rouse, Care Col. Glover, Surplus Property Division, Munitions Building, Washington, D. C: The Government last year stimulated production and took the goods by allotment at bare profit over cost. We think it distinctly unfair and grossest bad faith to sell these goods in any manner calculated to break this year's market and ruin packers' business, probably for several years; packers not only ones affected. All farmers and foremen in packing districts would be damaged. Government should market at this time only such quantity as can be absorbed without upsetting stability of market conditions. Every effort should be made to find export market and lay foundation for future export business. Balance should be reserved at least 12 months or until required to make up scarcity. Winfield Webster & Co. Kansas Lr^e Stock Association, July 15, 1919. Hon. Charles Curtis, Hon. Arthur Capper, Hon. D. R. Anthony, Jr., Hon. Edward C. Little, Hon. Philip P. Campbell, Hon. Homer Hock, Hon. James G. Strong, Hon. Hays B. White, Hon. J. N. Tincher, Hon. W. A. Ayres, Washington, D. C. Dear Sirs: I am writing you regarding the much talked of Government-owned meat. We have made some investigation regarding this matter and find there is quite a supply of frozen beef in storage in this country that was purchased by the Government during the war for shipment abroad. We also find there is a considerable quantity of canned meats owned by the Government. We have noticed through the press tliat the Government is offering quantities of this meat in this country for sale and that the bids for same aggregated from 25 to 50 per cent of the actual cost of the meat, and it appears that there have been a few sales made of this product at these reduced prices. EXPENDITURES IN THE WAR DEPARTMENT. 27 To our mind there are only two ways of disposing of this meat by the Government: First, if it is to be disposed of in the United States it should be handled through some Government distributing agent in the cities where the population is composed of employees of manufacturers, etc. In other words, we feel that if the Government is going to make a sacrifice of the prices of this Government-owned food that it should make the sacrifice direct to the consumer and thereby give the laboring people and poorer people an opportunity to buy this food at the reduced price. It is e\'ident that if this meat is sold to packers or to traders that it will not reach the consuming public at a price commensurate with what the Government received for same and therefore would be to no advantage to the consuming public but a great disadvantage to the producers of meat products. Second, if the Government can not arrange to distribute this meat in line as above indicated and will necessarily have to sustain a material reduction in the cost price that they should make arrangements to export these products to feed the hungry people of foreign countries. By shipping this product out of the country it will be surely to the advantage of the meat producers of the country. The farmers and producers in the United States responded patriotically to the call of the Government for increased production and the consumers of meat also responded to the demands of the Government for conservation in the eating of meats. This of course on account of the war. Now that the war is over the Government surely should lend every aid and assistance possible to the purchaser in protecting him against the slaughter of the prices of his product. It is oAddent, however, by turning loose in the markets all the Government supplies they may have had in store when the armistice was signed would not be safeguarding^ the producers' interests. Speaking for the members of the Kansas Live Stock Association and also as a mem- ber of the National Producers' Committee, I protest against the War Department selling to packers, traders, or distributors of meat of any kind the supply of meat owned by the Government at this time. I earnestly urge you as the representatives of Kansas in Congress to use your influence in this matter in safeguarding as best as possible the producers of beef and mutton of our State and in fact the producers of the entire country. Yours, very truly, J. H. Mercer, Commissioner. Exhibit D. War Department, Purchase, Storage and Traffic Division, Office of the Director of Sales, Washington, July 25, 1919. Memorandum for Mr. Mercer. Subject: Sales of the canned meats and vegetables to municipalities and negotiations inaugurated by the cities for such supplies as reported by surplus property offices. 1. At the request of Mr. Morse, Col. Nixon sent telegrams on July 22 to the 18 surplus property officers detailed to the zone supply offices and depots at which supplies of canned meats and vegetables are available, asking a report on sales made to date to municipalities and an enumeration of the cities by which negotiations had been inaugurated. 2. Appended is a summarization of the reports received from the surplus property officers at the following posts: 3. Boston, July 23. No canned goods shipped to date to municipalities. Negotia- tions are underway with 14 New England cities. (Names not given.) Facts relative to these negotiations are embodied in letter en route to Washington. 4. Baltimore, July 23. Sales to municipalities to date are as follows: Baltimore: One hundred and fifty cases roast beef, 175 cases corned beef, 200 cases corned-beef hash, 100 cases pumpkin, 15,000 cans tomatoes, 15,000 cans peas, 13,600 cans corn, 11,300 cans pork and beans, 2,100 packages cornstarch, and 60 gallons sirup. District of Columbia: Two hundred cans bacon, 4,000 cans baked beans, 2,000 cans corn, 2,000 cans peas, 6,000 cans tomatoes, 100 dozen cans corned beef, 100 dozen cans roast beef, and 100 dozen cans corned-beef hash. Cumberland Md.: Eighty cases bacon, 300 cases tomatoes, 200 cases corn, 25 cases corned beef, 4,000 packages cornstarch, 50 cases peas, 50 cases pork and beans, 50 cases pumpkin. 28 EXPENDITURES IN THE WAR DEPARTMENT. Altoona, Pa, : Five tons bacon, 200 cases tomatoes, 200 cases corn, 200 cases peas, and 100 cases pork and beans. 5. Negotiations are now being conducted by that office with the cities of Pitts- burgh, Pa.; Reading, Pa.; Scranton, Pa.; Bradford, Pa.; Latrobe, Pa.; Butler, Pa.; Allentown, Pa.; Keyser, W. Va.; Suffolk, Va.; and Frederick, Md. The quantities embraced in these negotiations approximate 25 carloads. 6. The Baltimore office is also in communication with approximately 50 other cities, by which definite negotiations have not yet been inaugurated. 7. Philadelphia, July 23. No canned goods stored in that zone. Inquiries from municipalities received at Philadelphia are referred to Washington. 8. Columbus, Ohio, July 23. No canned goods have been shipped to municipalities. No negotiations are in progress. 9. Atlanta, Ga., July 23. The following goods have been sold to municipalities: Three thousand pounds bacon, 706 1-pound cans roast beef, 2,200 2-pound cans roast beef, 2,000 2-pound cans corned beef hash, 1,600 No. 2 cans corn, 3,000 cans hominy, 2,200 No. 2 cans peas, 3,600 No. 3 cans sweet potatoes, 75,000 No. 2 cans tomatoes, and 11,000 No. 3 cans tomatoes. Negotiations are being conducted with the mayors of Pittsburgh, Pa.: Mobile, Ala.; Florence, S. C; Greenville, S. C; Daytona, Fla.; and Gainesville, Ga. No defmite quantities have yet been specified for by these cities. 10. Omaha, Nebr., July 23. No canned goods have been sold to municipalities No bids have been received from municipalities. 11. San Francisco, Calif., July 23. No sales of canned goods have been made to municipalities. No negotiations are reported. 12. New Orleans, July 23. No goods have been shipped to mimicipalities. None are being negotiated for. Inquiries have been received from Bii'mingham, Ala., and Houston, Tex. 13. Jeffersonville, Ind., July 23. No negotiations with mimicipalities have been inaugurated. No canned goods in storage at this depot. 14. Newport News, Va., July 24. The following sale has been made to the city of Newport News: Thirty-two cases corned beef. 15. St. Louis, Mo., July 24. No goods have been sold to municipalities. No negotiations are now being conducted with cities. Several inquiries from cities have been received. 16. New Cumberland, Pa., July 23. No canned goods have been shipped to munici- palities. Negotiations for approximately 10 carloads are now being carried on with the cities of Wilkes-Barre, Scranton, Harrisburg, York, Pittsburgh, Jolmstown, and Warren, Pa. 17. According to the incomplete report received by the Surplus Property Division from zone supply offices and depots, sales to 6 municipalities have been consum- mated; negotiations are being carried on -with 37 other cities; and inquiries as to the commodities offered, the quantities available, and the prices asked have been received from 52 additional commimities. Six of the zone supply offices and depots to which Col. Nixon addressed his telegram of inquiry have not yet responded. Included in this number is the Chicago zone supply office. I am unofficially advised that Chicago has received numerous inquiries from central western elites. B. A. Mattingly. Acting Chief Sales Promotion Section P. S.^ — -Baltimore reported to-day (Saturday, July 26) by telephone that, in addi- tion to the sales reported in the telegram of July 23, it has consummated sales with the cities of Wilmington, Del., Pittsburgh. Pa., and Allentown, Pa., and is now negotiating with 30 of 40 other cities. The surplus property officer at New York reported to-day that he has begim negotia- tions with 10 cities, the names of which were not given . EXPENDITURES IN THE WAR DEPARTMENT. 29 Exhibit E. Recapitulation of sales and transfer of subsistence by months. February 1207, 330. 85 March 9.1, 195. 16 April 1, 869, 602. 33 May 1, 904, 445. 76 June 4, 568, 677. 36 July 604, 835. 40 Grand total 9, 246, 086. 86 This tabulation has been hiuriedly prepared and is not complete. Attention is directed to the fact that the bases of our records are formal reports received through channels after sales are consummated, and that due to the limited personnel and tremendous quantity of such reports covering all items same are not finally entered on oiu records until two or three weeks after sales are finally completed . We, of coiu*se, get informal reports which show that the total of sales of foodstuffs according to our records of July 19, are $12,618,063 on sales which have been made, of which official report has not been received, amoimting to $14,061,650, a total of $26,679,712. 30 EXPENDITURES IN THE WAR DEPARTMENT. 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