The only thing excluded is the interest that was paid before it was completed.

Senator SALTONSTALL. That is my point. Now, by not charging interest while it was being constructed and putting it on the same basis as the TVA, you are setting up, as I understand it, a capital asset on the books of the Government as opposed to doing everything on a current basis and not having the Government set up any capital

assets.

Now, my point is this and I think it may be a very theoretical point: The TVA is entirely construction within the land domain and within the jurisdiction of the United States. The Panama Canal is constructed under a treaty through land that does not belong to us. Now, my only point is if you are going to do this it seems to me it should be made clear in the report, because I was just wondering whether the United States could have a dependable asset under the treaty in a part of the world where we have not complete authority over the land. Do I make my point clear?

Senator KNOWLAND. We have complete authority over the Canal Zone.

Senator SALTONSTALL. That is only on one side of the Canal, as I understand it.

Senator BYRD. All this bill says is in computing the tolls the interest during time of construction should not be charged in computing the tolls.

Senator SALTONSTALL. But on that theory, that is, on the theory under the TVA that you are building up a capital asset, and that that capital asset, just like you are building a house on your own land, it becomes a capital asset and increases the value of your property.

Senator BYRD. I do not believe the bill as drawn changes the capitalasset idea. This is just a method whereby tolls are computed. As a matter of fact, we have had this method for years and never paid anything to the Treasury. Where is the amendment that the House put in in regard to not charging interest during time of construction? Senator KNOWLAND. The fact remains that the Canal has been a great capital asset not only to the commercial life of the Nation but national defense, which permitted the fleet to move from the Atlantic to the Pacific through an area under our control, as far as the Canal Zone is concerned.

Senator BYRD. We do not charge under this bill the interest during time of construction. In other words, it is self-sustaining although it has great defense value, it is self-sustaining with that one exception. That is the only contribution made under this.

Senator SALTONSTALL. I do not question its soundness.

Senator BYRD. It is quite a long bill and I will get Mr. Chambers to read that section.

Mr. CHAMBERS. It appears at the top of page 18. It changes capital investment only to the extent of taking out from the sum on which interest has been paid or should have been paid under the old law by excluding any interest during construction, depending on whether you calculate it by simple or compound interest, it is $112,000,000 or roughly $125,000,000.

Senator BYRD. Read the amendment.

Mr. CHAMBERS. The amendment put in by the House appears at the top of page 18, subsection E of section 12, reading:

Capital investment for interest purposes shall not include any interest during construction.

Senator SALTONSTALL. My only point is-and I have not put it in as a criticism at all-is that that is changing the theory of bookkeeping when you put that in to say that a capital investment to the United States, it becomes an increase in the capital value of the United States and, therefore, should not be charged interest, the same way as the ᎢᏙᎪ.

My only question is you are doing that outside the continental limits of the United States. I do not say you should not do it, but I say you should make that point at least in your report because it has to be within the treaty.

Senator BYRD. This is the one instance I know of a governmental operation where that operation pays into the Treasury interest on the amount invested. TVA does not do it. Whatever profits TVA has made, as I understand it, they have used to expand.

Senator KNOWLAND. On none of the inland waterways do they pay interest.

Senator BYRD. Maybe Mr. Foley can answer that. On any of these activities-dams and other things-do they pay any cash contribution to the Government?

Mr. FOLEY. Not very much.

Senator BYRD. Do any of them?

Mr. FOLEY. Not any of them other than this one.

Mr. CHAMBERS. This amendment of the House was not in the bill as introduced. The Bureau of the Budget stated it was the official position of the executive branch that they were not opposing the amendment. They were perfectly willing to go along with it.

Senator SALTONSTALL. Mr. Foley, do you agree with my bookkeeping principle that the principle on which you do not charge interest during construction is because you are improving the capital value of the United States assets, so to speak? Am I not correct in that? Mr. FOLEY. I think that is a fair statement.

Senator SALTONSTALL. TVA, inland waterways, or at least the inland waterways are never set up as capital investments on the books of the country. The TVA is now set up as a capital asset; is that not correct?

Mr. FOLEY. Yes, sir.

Senator SALTONSTALL. My only point is you are setting up capital assets without the continental United States and whether or not you have that within your treaty powers.

Mr. FOLEY. I understand your point.

Senator BYRD. That amendment is the only thing in the bill that recognizes the military and defense features of the Panama Canal. It is self-sustaining in every other respect. If the Senator from Massachusetts would want to make that clear in the report, there would be no objection to it that I can see, that it does not affect the capital investment, except for the purpose of computing the tolls.

It seems to me the Federal Government should make some contribution to the defense value of the Panama Canal, not compelling the

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users of the Canal to pay everything, including the military value of it. That is only computed at this very small amount of 10 cents, and it is self-sustaining to the extent of the balance.

This would add 10 cents to the tolls in the event it was necessary to compute this in the formula upon which the tolls are fixed. You would have to charge $1.05 a ton instead of 95 cents.

Senator GURNEY. It seems to me that the benefit to our national security since the completion of the Canal and up to date fully justifies us in knocking off that 10 cents.

Senator BYRD. I can see the point the Senator from Massachusetts is bringing out, that this is not to be accepted as a precedent, except the mere method of fixing the tolls.

Senator SALTONSTALL. If Mr. Chambers would let me do it with Mr. Foley, I might add two or three sentences to your report to make it clear.

Senator BYRD. Surely.

Senator KNOWLAND. There is only one thing on which I have a slight mental reservation. I do not want any implication that we do not have, or intend to keep, full and complete jurisdiction over the Canal Zone area there or that that is some territory upon which we do not have full and complete jurisdiction.

I do not want even the slightest implication to interfere with what is the established fact as far as the Canal Zone itself is concerned. Senator SALTONSTALL. I do not either.

Senator BYRD. It may be covered by existing treaty about capital assets outside of the territory of the United States.

Mr. CHAMBERS. Mr. Chairman, just for the record, the capital assets outside the continental limits have been in existence since the inception of the Canal. What they are doing at this late stage is saying that we are not going to charge interest on the national-defense part of it. That is the sum and substance of it, not changing the treaty at all.

Senator BYRD. Doing it only for the purpose of fixing the tolls. It is satisfactory to me to make that clear in the subcommittee report also providing we do not surrender any jurisdiction. I suggest when Mr. Chambers prepares the report that he consult the Senator from Massachusetts and the Senator from California as well as Mr. Foley. To go further on this Panama Canal bill, for the purpose of the record, I want to show that the passage of this bill is estimated to bring in new revenue of 5 cents a ton on 28,000,000 tons, which would be about $1,400,000 of new revenue. We will not lose any revenue.

S. 4088

Senator BYRD. Next is S. 4088, a bill to amend section 61 of the National Defense Act, as amended (32 U. S. C. 194), for the purpose of providing authority to the several States, Territories, the District of Columbia, Puerto Rico, Virgin Islands, and the Canal Zone to organize military forces and to provide for pay and allowances, travel, arms, ammunition, uniforms, equipment, medical, and other military supplies as deemed necessary to enable such forces to execute their internal security missions within or without their respective States and Territories, and for other purposes.

(S. 4088 is as follows:)

[S. 4088, 81st Cong., 2d sess.]

A BILL To amend section 61 of the National Defense Act, as amended (32 U. S. C. 194), for the purpose of providing authority to the several States, Territories, the District of Columbia, Puerto Rico, Virgin Islands, and the Canal Zone to organize military forces and to provide for pay and allowances, travel, arms, ammunition, uniforms, equipment, medical, and other military supplies as deemed necessary to enable such forces to execute their internal security missions within or without their respective States and Territories, and for other purposes.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That section 61 of the National Defense Act (32 U. S. C. 194), as amended, be further amended to read as follows: "(b) Under such regulations as the Secretary of the Army may prescribe for the organization, including the composition thereof, strength, qualifications for appointment or enlistment and standards of training, instruction and discipline, the organization by and maintenance within any State, Territory, District of Columbia, Puerto Rico, Virgin Islands, or the Canal Zone, of such military forces or cadres thereof, other than the National Guard, as may be provided by the laws of such State or Territory, is hereby authorized as part of its organized militia in addition to the National Guard, to serve only while any part of the National Guard of the State, Territory, District of Columbia, Puerto Rico, Virgin Islands, or the Canal Zone concerned is in active Federal service, except that at any other time, cadres of such military forces may be maintained. "(c) The Secretary of the Army shall provide for the arming and equipping of such forces and cadres and for their subsistence and pay and allowances of their grades, and the number of assemblies for drill and instruction and the number of days of field training shall be determined by him. He is authorized to issue in his discretion to the several States, Territories, District of Columbia, Puerto Rico, Virgin Islands, and the Canal Zone such arms, ammunition, uniforms, equipment, medical, and other military supplies as may be available from Federal sources upon the requisition of the governors of the several States, Territories, District of Columbia, Puerto Rico, Virgin Islands, and the Canal Zone: Provided, That all military property, arms, uniforms, and equipment issued to the States, Territories, and the District of Columbia shall remain the property of the United States and be disposed of or replaced in accordance with the provisions of section 87, National Defense Act.

"(d) Members of the State staffs, including a United States property and disbursing officer, of the several States, Territories, District of Columbia, Puerto Rico, Virgin Islands, and the Canal Zone may be ordered to active Federal duty and assigned to serve with the military forces thereof without affecting their status as officers of the National Guard or of the National Guard of the United States.

"(e) Such forces as provided herein may be called into the service of the United States as provided by Public Law 33, Fifty-seventh Congress (32 U. S. C. 81a, 81b, 157), and shall be governed as provided in section 101, National Defense Act. Unless such forces are called into the military service of the United States, no person shall by reason of his membership in any such unit be exempted from military service under any other provision of Federal law. Service in any of the units or the forces herein provided shall not at any time be considered to be Federal service, but shall be deemed to be State service unless called into the active military service of the United States. Such forces and the National Guard of the several States in their State status may serve without their State boundaries as may be required in the performance of their missions pursuant to agreements made by the governors of the respective States and no further approval of Congress of such agreements shall be necessary.

(f) No hospitalization, medical, and surgical care in hospitals and at their homes or other benefits shall be provided from Federal sources for any member of such State military forces or cadres thereof, unless such member is in the Federal service, except that the provisions of the Act of June 15, 1936 (49 Stat. 1507), as amended, shall apply to officers, warrant officers, and enlisted men of such State military forces or cadres thereof who suffer personal injury or contract disease in line of duty while en route to or from or during their attendance at field training or exercises.

"(g) The National Guard Bureau is charged with administering approved Department of the Army policies, other than those relative to training for the

forces herein provided and with promulgating Department of the Army directives and regulations applicable thereto, including those relating to training.

"(h) The National Guard Bureau shall be the channel of communication between the Department of the Army and the several States, Territories, the District of Columbia, Puerto Rico, Virgin Islands, and the Canal Zone on all matters pertaining to the forces herein provided and shall at all times be the office of record for the Department of the Army in all matters concerning sach forces.

(i) Any unexpended funds heretofore appropriated for the support of the Army National Guard is hereby made available for the support of the State military forces as provided by this Act."

Senator CHAPMAN. The subcommittee, composed of Senators Hunt, Saltonstall, and myself, considered that bill. The bill had been introduced by the chairman of this committee, Senator Tydings.

We were confronted, in the first place, with the same obstacle that confronted us in the matter of seeking speedy enactment of the universal military training bill, the fact that the House of Representatives did not expect to take up such a measure at an early date, that they were about to recess and go home, there was no chance to consider that.

Also we considered the fact that there probably will come to us very soon a rather elaborate proposal for civilian defense establishment which is closely related to this subject.

We recognized the necessity for establishing some kind of a State guard to take the place of the National Guard units that are rapidly being called into Federal service.

In considering the bill that has been introduced, we found that it differed substantially from the State Guard bill that was in effect during the recent war. One thing provided in it was that the State guards would be paid by the Federal Government and also that they would be subject to call to active Federal duty.

In the bill that was the law during the war, and which expired in 1947, it was expressly provided that they would not be subject to call to Federal duty and there was no provision for pay by the Federal Government. It did provide for furnishing equipment and supplies. Considering the practical impossibility of having any new measure studied by the committee in the House and enacted at any early date, and the changes proposed in this bill that made it different from the one that we had heretofore worked with, your subcommittee concluded that the best solution of it in the interest of the early establishment of some kind of a State guard, without waiting until we come back here with both Houses ready to act, the best plan would be to reenact the bill that we worked under during the war.

We have written such a bill, striking out everything after the enacting clause and inserting the substance of the law that was in effect during the war, with certain minor changes not affecting it substantially, but just to provide what we deemed to be better drafting. We make that report and recommend its adoption.

Senator BYRD. In other words, the proposition is where the National Guard has been inducted into the national defense and the Governor believes there should be a substitute for that National Guard within the State, this bill would give them the power; is that right? Senator CHAPMAN. We think it is necessary, in the interests of internal security, to have some kind of State guard, and in view of the fact that there is no possibility of enacting very much of a changed