The Rate Of Military Deliveries

Abstract

There has been a great deal of criticism of military deliveries. Much of it is possibly justified. It is always possible to find something that has been done wrong. But the sum total of military deliveries has been increasing steadily. It will continue to do so because of the volume of contracts already let. The funds already obligated for goods not delivered exceed $50 billion. Only recently the Defense Establishment has been entering into obligations at an annual rate of almost $60 billion a year. Another $40 billion are on hand but not yet obligated. The total expenditures for national security will reach somewhere between $57 and $60 billion in 1952 dollars next year, with the peak rate occurring in the third or fourth quarter. (The actual range will be a little above this since prices should average a bit higher.) This compares with a second-quarter 1952 annual rate of $49.9 billion and a preliminary third-quarter 1952 figure of $50.8 billion. Because, for obvious reasons, relatively few figures can be released in detail, concerning backlogs of military orders, it is necessary to rely for our public projections on general statistics, which conceal facts about deliveries of specific categories. I can give you a good illustration, however. For instance, the backlog of aircraft orders was about $3 billion on June 30, 1950. It reached $5 billion about the end of 1950 and has now reached nearly $15 billon. New orders during the last quarter totaled $2,300 million, net sales a little less than $1,600 million. The backlog increased $750 million in this quarter alone. This is illustrative of what is happening in the field of military production and why there is reason for confidence about the volume of deliveries in 1953 and the support that this will give to the general economy. Though the recent rate of letting contracts may decline somewhat in the near future, it will not decline enough to flatten out the delivery rate projected here for 1953. The letting of contracts has exceeded deliveries. The two curves will begin more nearly to equal each other in the future. Contracts cannot exceed deliveries forever. This fact is important to remember whenever we wonder whether the present high rate of activity for military purposes can endure. But contracts have already been let which make at least the volume projected here almost inevitable, irrespective of what happens this November, or what happens in the Kremlin in the next year. This is important to note since recent thinking in Washington raises the possibility that there might be changes in procurement policy which could elevate or lower the aggregate of security outlays over the next few years, depending on which, if any, alternative approach is adopted. You may be seeing some speculations about these matters shortly. I want only to stress again that, whatever happens here, the impact on procurement during 1953 will be imperceptible; hence, the figures shown will not require to be changed on this score.