The CHAIRMAN. I was not sure, and I am glad to get the confirmation.

Therefore, you have an instrumentality whereby you can prevent those guilty of antitrust law violations from gaining any benefits from the Military Establishment's-the Naval Establishment's procurement, and it might be well to keep your eye on those sections and enforce them.

Secretary MATTHEWS. I agree with you, Mr. Chairman, I would be disposed to do that.

The CHAIRMAN. You see, it is one thing to make a declaration of policy, and it is another thing, as I said before, after you had concluded your remarks, to carry that policy out. And we feel confident that you will carry that policy out.

Secretary MATTHEWS. Obviously, it is the final result that counts. I agree with you, it is whatever the final action is, that is important. The CHAIRMAN. Therefore, it may not be necessary, as far as getting this dispersal of procurement contracts, to get any new legislation. You have all the legislation that may be necessary for that purpose. Secretary MATTHEWS. That could be.

The CHAIRMAN. You also mentioned, I believe, in your formal remarks, the provision of the Selective Service Act, which gives you another right-well, that is dependent upon the President's proclamation-another right to help small business-another way, rather, to help small business.

Now, what is the policy of the Department of the Navy with reference to Government-owned yards?

We have a large navy yard in Brooklyn, from whence I come.

Is it the purpose of the Department to contract the operations of those yards rather than to expand them and give more business to private enterprise?

Secretary MATTHEWS. Well, the policy, of course, is to maintain the yards and keep them functioning as well as we can under the appropriations received from Congress, and, at the same time, to do that without impairing the welfare of private business.

The navy yards or the establishments of the Navy itself are not sufficient to supply the needs of the Navy, and we must depend upon private enterprise, and we try to administer them in a manner so that we will protect the interests of the Navy and be as equitable as possible to private enterprise.

The CHAIRMAN. Any questions?

Mr. KEATING. Unless it is a matter of military security in some way, could you give us in general the extent of that navy yard activity? How many people are employed in the navy yards?

What is their production?

Secretary MATTHEWS. I cannot give you the exact figures on that, Mr. Keating. I can get them for you. I do not know whether that is a matter of security or not.

Mr. KEATING. How many of those navy yards are there?

Admiral BOYLE. Eleven or twelve major navy yards.

Mr. KEATING. All in the continental United States?

Admiral BOYLE. No; they could be outside, Pearl Harbor particularly.

Mr. KEATING. They are engaged in making certain munitions, I take it. I do not want to ask questions that are

Admiral BOYLE. They are engaged in overhauling ships largely. Mr. KEATING. Overhauling ships is their large interest?

Admiral BOYLE. That is right. There are certain ordnance plants and activities engaged in some phase of the manufacture of ammunition, if you are thinking of ammunition in terms of powder and bullets.

Secretary MATTHEWS. They are in addition to the navy yards. Admiral BOYLE. In addition to the navy yards.

Secretary MATTHEWS. Ordnance plants, and there are a number of those.

Mr. KEATING. Are they engaged in the manufacture of items in which private industry is also making corresponding or duplicate items?

Secretary MATTHEWS. Yes, I would say they are. They are engaged in manufacturing products which private enterprise could manufacture.

Mr. KEATING. What is the historical background for that as to why the Government is engaged in this manufacturing activity?

Secretary MATTHEWS. I suppose as the result of the Government's and the Military Establishment's research and development, they have to-well, the answer is that private enterprise could not supply everything that the Government needs, and the Government has to be sure that it can get it when it needs it and supplement it with private enterprise or to have the two supplement each other.

When it started, Mr. Keating, I do not know. I have not become that familiar with it.

Mr. KEATING. What extent of the military budget is involved in this maintenance of navy yards for the manufacture of products? Secretary MATTHEWS. I do not have that figure.

Mr. KEATING. I realize that this is a rather fundamental proposition, but what I am getting at is, what is the justification for maintaining navy yards at all so far as the manufacture of products is concerned? I can understand the ship repair part of the activity. What is the justification for the Government's being in that kind of business?

Secretary MATTHEWS. Well, what is the justification for it, Mr. Keating? I do not know. It has been established for a long, long time, long before I knew anything about the Navy.

Mr. KEATING. I realize, Mr. Secretary, that you are

Secretary MATTHEWS. I think maybe I misled you in what I said. We are not manufacturing a lot of items that private enterprise could manufacture or produce. I suppose that we could have all our ships repaired by private enterprise or private shipbuilding companies, too, but we have the establishments, and in times of emergency they are very vital and very essential. I think it would be imprudent to do away with them altogether.

Mr. KEATING. And in your commendable zeal to do a good job for the Navy you are always asking for more money to increase the appropriations for all of these navy yards.

The thing I am getting at is, is this a branch of activity where we could justifiably and without injury to the national defense reverse the trend toward more and bigger appropriations with respect to that?

Secretary MATTHEWS. I would have to, first of all, determine what you mean by "asking for more appropriations." I do not think we are asking for more appropriations insofar as these yards or shore establishments are concerned. We are in the process of reducing them.

Mr. KEATING. What is your comparison today and 20 years ago in what you asked for your navy yards?

Secretary MATTHEWS. I do not know what the comparison of that would be.

Mr. KEATING. Well, I would be willing to wager that it is considerably greater today.

Secretary MATTHEWS. I would be willing to wager that in any department of the Government the requests today are very much more than they were 20 years ago. I think in 1906, the entire national budget was about $700,000,000.

Mr. KEATING. I realize that, and I am not happy about the trend, and I am inquiring whether this-whether the Navy, whether our Government is in a field of activity from which in an orderly fashion they could well withdraw to the advantage of everyone.

Secretary MATTHEWS. There are two things that you are touching on: First of all is the increased appropriations for the Military Establishment and the Department of the Navy; that is one thing, and I think that is just a matter of evolution, and whatever the national security requires at the present time, and nobody wants any more than is necessary for that purpose.

Then, there is the question that you have suggested also as to whether or not in what we do produce and what we do require and procure for the Navy, for instance, we give to private enterprise everything that we can, or whether we are building up an institution here, a governmental institution, that produces things which private enterprise could produce, and deny private enterprise the opportunity and the benefit of having the chance to produce those things. I do not think we are.

I can get a study for you of that question if you want me to, and provide it for you. I assure you that insofar as I am concerned, I want to know that, too, because I do not think we are very far apart with respect to our ideas on that question.

Mr. KEATING. In other words, you share my view that the Government should curtail undue and unnecessary competition with private enterprise.

Secretary MATTHEWS. I do, indeed.

Mr. KEATING. And if the situation today-which I realize you have hardly had time to study, along with your many other problems-if that situation discloses that there is a tendency to have our Government get into a line of activity of manufacturing which is unduly competitive with private industry, you would take steps or endeavor to take steps to reverse that trend?

Secretary MATTHEWS. That would be my position; yes.

Mr. KEATING. Thank you.

The CHAIRMAN. Mr. Secretary, I do not know if you have any present information on the operations of post exchanges and naval stores. There is no doubt that the operation of post exchanges and naval stores is in competition with private retail establishments.

I recognize that in the various outlying communities that there is not too great a degree of competition, direct or otherwise, amongst retail establishments.

Post exchanges and naval stores may be essential, but do you not think that there has been too great a growth? Do you not think that there has been too much merchandise bought by and sold by those naval stores and those post exchanges?

Secretary MATTHEWS. Mr. Celler, that is something that I could not express an opinion on because I have absolutely no knowledge of what has been bought or to what extent these post exchanges operate in the Military Establishment.

The CHAIRMAN. Would it be your opinion that if these exchanges could be diminished in number, that would help private enterprise? Secretary MATTHEWS. I do not know as to what extent. It would, possibly, benefit the local dealer in the community.

The CHAIRMAN. That is what I mean.

Secretary MATTHEWS. Of course, the manufacturer is engaged in private enterprise, too, but he is not affected, because as far as he is concerned, it does not make any difference who the retail dealer is. I know this as a civilian, Mr. Chairman, from my observation of the Military Establishment, that very frequently the private business interests take advantage of any opportunity that they have to exploit the members of the armed forces.

I think there is an obligation to protect them in that respect, and I would not hesitate, if it were necessary, to protect the members of the armed forces from such exploitation, to encourage or develop post exchanges.

The CHAIRMAN. We all agree with that, of course.

Secretary MATTHEWS. Of course, that is a thing that can be subject to abuse, too.

The CHAIRMAN. It takes careful supervision.

For example, I read this morning a copy of a statement made by one of our colleagues with reference to complaints offered by retail liquor dealers of the District of Columbia, who complained that the right to sell liquor in officers' clubs in and around the District of Columbia was being abused, and that nonmilitary individuals were able, through officers, to buy their liquor at much reduced prices at these officers' clubs.

If that is the case, and the citizens are able to purchase liquor and wines at the officers' clubs, it certainly would bear looking into.

Secretary MATTHEWS. Mr. Chairman, of course if that condition exists it is reprehensible, and ought not to be permitted, and it is being looked into at the present time.

The CHAIRMAN. You have been made aware of that?

Secretary MATTHEWS. Yes; that is being investigated. I have not been investigating it but the

The CHAIRMAN. But the Department has

Secretary MATTHEWS. But the Military Establishment has been, and is looking into it now.

Mr. KEATING. Are Reserve officers able to buy liquor in post exchanges?

Mr. MICHENER. The gentleman is a Reserve officer. [Laughter.] Secretary MATTHEWS. Are you asking for any special reason? [Laughter.]

Mr. KEATING. Just a general matter of information.

Secretary MATTHEWS. I do not know. I do not know what the regulations are about buying liquor.

Mr. MICHENER. Does the same rule apply to liquor as does to gasoline?

Secretary MATTHEWS. You mean the sale of it or the handling of it? Mr. MICHENER. Any PX or any ship stores?

Secretary MATTHEWS. I do not know.

Mr. MICHENER. If I might want to buy gasoline, my friend might want to buy liquor

Secretary MATTHEWS. I would think that the same rule ought to apply to whatever the commodity would be that would be sold at these establishments, in the military set-up.

Mr. MICHENER. Well, the real distinction between the purchase of gasoline and the purchase of liquor is that the fellow who purchased the liquor for a friend could purchase a quart and carry it away, and the fellow who purchased the gasoline has to drive his own car up there and get his gasoline at the PX.

The CHAIRMAN. There is even a greater inducement because some taxes on spirits are waived when it is sold to officers at officers' clubs. Secretary MATTHEWS. I did not know that.

Mr. MICHENER. Well, that ought to be remedied, ought it not? That is true.

Now, liquor is not a necessity, although some people might think it is, but if there is a waiver of taxes on liquor sold by the Government to the employees of the Government, that condition should be remedied, should it not, Mr. Secretary?

Secretary MATTHEWS. Well, my associates here tell me that there is no waiver of the tax in officers' clubs for the sale of liquor.

Mr. MICHENER. That is one less question we have to wrestle with. Mr. BRYSON. Mr. Chairman, I would like to make this observation: Outside of the District of Columbia complaints are filed by the several States and municipalities where there are military establishments that officers are permitted-I am not charging that they sell liquor there but officers are permitted to have access to liquor in the officers' clubs on the military bases. Of course, where the officers get their liquor at officers' clubs they do not have to pay the State tax, which is oftentimes higher than the Federal tax. But the enlisted men must go off the reservation to get their liquor. Of course, the liquor they get is subject both to Federal and State taxes.

Secretary MATTHEWS. Of course, if that is the case it is discrimination which ought not to be permitted.

Mr. DENTON. Is there not a statute which prevents the sale of liquor on an Army post?

The CHAIRMAN. Not in officers' clubs.

Mr. DENTON. Was there not a Fort Sill case right on that?
Mr. BRYSON. It is done whether or not there is a statute.

The CHAIRMAN. If there are no other questions, we are very grateful to vou, Mr. Secretary, and your aides, for your remarks this morning. We do indeed hope that that policy which we thoroughly endorse will be carried out by the Department. It will be most helpful in the work that we are trying to do here.

Secretary MATTHEWS. If I can succeed at all, that will be one of the things I will try to do.