The Peanut Scandal

"This will make the Dixon-Yates deal look like peanuts," cried Massachusetts' Democratic Representative John W. McCormack. What Floor Leader McCormack was shouting about were Air Force contracts to pay $240 million yearly to American Telephone & Telegraph Co. and its manufacturing company. Western Electric, to cover the cost of building and operating a nationwide telephone circuit for the U.S. air defense system. Congress had not been informed of the "secret" deal, said McCormack, and after the contracts were signed. Comptroller General Joseph Campbell refused to approve them.

On closer investigation, McCormack seemed to be talking through his political hat. The Air Force had developed the SAGE (for Semi-Automatic Ground Environment) system under President Truman as a sort of electronic umbrella for the entire nation. President Eisenhower had ordered SAGE adopted as quickly as possible. SAGE would cost the Air Force $5 billion over the next ten years. Of this amount, almost half would go to A. T.

& T. for building and operating the communications network. When SAGE is finished in three to five years, electronic brains will be able to assemble data on incoming enemy bombers, advise regional defense commanders whether to attack with jet aircraft, guns or guided missiles.

Though McCormack said that Congress had not been informed, the fact was that Congress had appropriated $297,500,000 for SAGE, and since May the Air Force has officially notified congressional committees five times of its progress.

But Comptroller General Campbell ruled that the Air Force-A. T. & T. contracts were technically out of order, and should have been specifically approved by Congress. Campbell later agreed to review his own decision when the Air Force pointed out that it had neither the manpower nor the equipment to install the nationwide communications network, and that it would be cheaper to have it done by private industry.

As every Congressman knew, the SAGE air defense system was vital to national security--but worthless without communications lines. Thus there seemed little doubt that after the political shouting died, Congress would go ahead and give the contract its approval.

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