Memorandum of Disapproval of Bill Authorizing the Payment of Subsidies to Producers of Lead and Zinc.

I HAVE WITHHELD approval of H.R. 8860, "To stabilize the mining of lead and zinc by small domestic producers on public, Indian, and other lands, and for other purposes."

H.R. 8860 authorizes lead and zinc subsidies based on the difference between market prices and a price of 17 cents per pound for lead and 14½ cents per pound for zinc. The subsidies would be paid on the output of mines producing not more than 2,000 tons annually of each commodity.

The problems of our lead and zinc miners have caused me concern for some time. To help solve these problems, the Administration has taken administrative actions and has twice proposed legislation which the Congress did not enact. Thereafter, in October of 1958, I reduced imports by imposing quantitative controls.

Now the Congress has enacted H.R. 8860, but unfortunately it would harm rather than help the lead-zinc industry. It would negate the progress of recent years, increase the problems of lead-zinc producers, subject the market to instability, and burden our taxpayers with unsound subsidies. Apart from the fact that the appropriations authorized by the bill would be completely inadequate to pay the proposed subsidies--with the result that the bill's intended beneficiaries could be misled into production for which they would not receive the promised subsidies--the bill has these fatal defects:

First, H.R. 8860 would intensify the industry's problems by generating substantial additional production at the expense of other miners' jobs. Its subsidies would induce the opening for full-time production of many mines which are not now operating, some of which have operated only intermittently in the past. The substantial additions to supply would depress lead and zinc prices and thus cause cut-backs and lay-offs of mine workers in the unsubsidized mines.

Second, the subsidized production induced by this bill would complicate, even frustrate, programs now in effect that are gradually bringing the production and demand of these commodities into balance. As a result of existing import controls and continuing international cooperation, the volume of imports is at the lowest levels, and constitutes the smallest percentage of total lead-zinc in supply, in nearly a decade. This has made it possible during 1959 for domestic lead and zinc producers to reduce excess stocks and to increase mine output. While consumption of these two metals has been at disappointing levels, the domestic industry should, with increased demand, again move rapidly forward to normal and stable operation at reasonable prices. The depressed prices that would result from the subsidy program would represent a backward step. A lasting solution can best be achieved through a world-wide balance of production and consumption, and that is the object of past and current international consultations.

Third, approval of H.R. 8860 would generate demands for equal treatment and similar subsidies from other producers of lead and zinc as well as producers of many other minerals. Such a system of subsidies would make a substantial portion of domestic mining totally dependent on federal appropriations and would thereby lessen incentives for the technological improvement vital to the continued health of American mining.

For these reasons, I am compelled to withhold my approval of H.R. 8860.

DWIGHT D. EISENHOWER