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1946 EXTENSION OF THE EMERGENCY PRICE CONTROL
AND STABILIZATION ACTS OF 1942, AS AMENDED
HEARINGS
BEFORE THE
COMMITTEE ON BANKING AND CUKKENCY
UNITED STATES SENATE
SEVENTY-NINTH CONGKESS
SECOND SESSION
ON
S. 2028
A BILL TO AMEND THE EMERGENCY PRICE CONTROL
ACT OF 1942, AS AMENDED, AND THE STABILIZATION ACT OF 1942, AS AMENDED,
AND FOR OTHER PURPOSES
VOLUME 2
MAY 2, 3, 6, 7, 8, 9, AND 10, 1946
APPENDIX I AND II
Printed for the use of the Committee on Banking and Currency
-85721
UNITED STATES
GOVERNMENT PRINTING OFFICE
WASHINGTON : 1946
C O M M I T T E E
ON
BANKING
A N D
C U R R E N C Y
R O B E R T F . W A G N E R , N e w York, Chairman
C A R T E R G L A S S , Virginia
A L B E N W . B A R K L E Y , Kentucky
J O H N H . B A N K H E A D 2D, Alabama
G E O R G E L . R A D C L I F F E , Maryland
S H E R I D A N D O W N E Y , California
A B E M U R D O C K , Utah
E R N E S T W . M c F A R L A N D , Arizona
G L E N H . T A Y L O R , Idaho
J. W I L L I A M F U L B R I G H T , Arkansas
H U G H B . M I T C H E L L , Washington
E . P . C A R V I L L E , Nevada
C H A R L E S W . T O B E Y , N e w Hampshire
R O B E R T A . T A F T , Ohio
H U G H A . B U T L E R , Nebraska
A R T H U R C A P P E R , Kansas
C. D O U G L A S S B U C K , Delaware
E U G E N E D . M I L L I K I N , Colorado
B O U R K E B. H I C K E N L O O P E R , Iowa
H O M E R E . C A P E H A R T , Indiana
DAVID DELMAN, Clerk
PHILIP LEVY, Counsel
II
CONTENTS
pagre
Statement of—
Bookman, Jules, assistant professor, New York University, School of
Commerce, Accounts and Finance
1632
Brown,4 Russell B., general counsel, Independent Petroleum Association of America, before the Senate Banking and Currency Committee.
1250
Clifford,, Arthur, representing the National Retail Lumber Dealers
Association
1381
Constantine, Earl, president, National Association of Hosiery Manufacturers, New York City
1499Costello, John M., general counsel, Los Angeles Chamber of Commerce, Los Angeles, Cali^:
1433
Dorset, W. S., president, Institute of Shortening Manufacturers,
Sherman, Tex
1478
Downs, James C., Jr., representing National Association of Real Estate
Boards, Chicago, 111
1187
Eccles, Marriner S., chairman, Board of Governors of the Federal
Reserve System, Washington, D. C
1613
Erikson, A. L., Office of Price Administration
1791
Farr, W. D., secretary of the Colorado-Nebraska Lamb Feeders As1344
sociation, Greeley, Colo
Garrison, Flint, consultant for the Wholesale Dry Goods Institute,
Scarsdale, N. Y
1349
Houghten, C. T., president, Good Luck Glove Co., Carbondale, 111
1526
Koppel, Arthur D., vice chairman, Metropolitan Fair Rent Committee, New York City
1488
Korn, Pbilip, national legislative chairman, Jewish War Veterans of
the United States of America, New York City
1157
LaRoe, Wilbur, Jr., general counsel, National Independent Meat
Packers Association
1231
Love, J. S., Jr., president, Mississippi Hotel Association, Biloxi, Miss. 1607
Mallon, W. L., president, National Automobile Dealers Association,
Newark, N. J
1259
Mason, A. H., vice president, Wells Lamont Corp., Chicago 111
1523
Moncharsh, George, deputy administrator for enforcement, Office of
Price Administration, Washington, D. C
1530, 1663
Montague, Joe G., attorney for the Texas & Southwestern Cattle
Raisers' Association, Fort Worth, Tex
1212
Page, Walter, evaporated milk member of the Dairy Industry Committee
1538
Pickell, Mark W., secretary, Corn Belt Livestock Feeders Association,
Naperville, 111
1160
Porter, Frank M., president, Mid-Continent Oil and Gas Association,
Tulsa, Okla
1256
Porter, Paul, administrator, Office of Price Administration, Washington, D. C —recalled
1707, 1744
Relis, Mrs. Matthew J., Congress of Women's Auxiliaries, .United
Public Workers, CIO
1297
Reynolds Quentin, president, National Council of Farmers Cooperatives and general manager of the Eastern States Farmers Exchange,
West Springfield, Mass
1397
Siedel, Robert A., director, National Retail Dry Goods Association,
Washington, D. C
1302
Slotkin, Samuel, chief executive officer, Hygrade Food Products
Corp., New York, N. Y
1402
Small, John D., administrator, Civilian Production Administration,
Washington, D. C
1438
HI
IV
CONTENTS
Statement of—Continued
Smith A. A., first vice president, American National Livestock Association, Sterling, Colo
Smith, Patrick, J., attorney, Indianapolis, Ind
Vinson, Hon. Fred M., secretary of the Treasury, Washington, D. C.__
Weymouth, C. E., president, Texas & Southwestern Cattle Raisers
Association, Appearing for Joint Livestock Committee, Amarillo,
Texas
Williams, S. Clay, chairman of the board of directors, R. J. Reynolds
Tobacco Co., Winston-Salem, N. C
Wyatt, Wilson W., National Housing Administrator—Housing
Expediter, Washington, D. C
Yungclas, William H., president of the Iowa Swine Producers Association
Briefs, letters, statements, etc., submitted for the record:
Allboro Retail Fruit Association, Inc., letter
Amendments to the OPA, Gossett, Walcott, etc., submitted by
Mr. Vinson
Analysis of governmental expenditures for the fiscal year 1945, etc.,
table
California Fruit Growers Exchange, letter to Hon. Bourke B. Hickenlooper
Capper, Hon. Arthur, letter to Hon. Robert F. Wagner
Cash receipts from and redemptions of savings bonds during 1946,
table
Committee on Agriculture, House of Representatives, resolution
Congress of Women's Auxiliaries, letter
Cost absorption as it affects the textile and garment industries, by
Saul B. Sells
Deputy Administrator for Rent, Ivan D. Carson:
Statement on the testimony of J. S. Love, Jr., president of the
Mississippi Hotel Association
Statement with respect to the testimony of various witnesses before the Senate Banking and Currency Committee
Eastern Meat Packers Association, Inc., resolution
Eccles, Marriner S., statement before the House Banking and Currencv Committee
Elliott^ E. Glenn, affidavit of
Estimated decline in prices to the farmer for selected products after
World War I
Federal Register Order No. 4327, Sun-Ray Appliance Co
Federal Register Order No. 4345, Jamaica Machine Co
Flagg, J. T., prepared statement submitted to the committee
Greenville livestock, item from the Greenville News, Greenville, S. C__
Grocery Manufacturers of America, Inc., letter
House amendments, Congressional Record, April 17, 1946, submitted
by Mr. Jules Backman
Independent Petroleum Association of America, statement by Russell
B. Brown
Invoice before and after OPA regulations, exhibit 2
Johnston, Eric, telegram to S. Clay Williams of the R. J. Reynolds
Tobacco Co
Joint Committee of Organized Auxiliaries, letter and telegram
List of subsidies that have been terminated by OPA, etc
Pickell, Mark, letters submitted
Porter, Paul A.:
Analysis of OPA information expenditures
Analysis of Price Control bill passed by the House
Comment with respect to testimony of the petroleum industry
before the Senate Banking and Currency Committee
Dairy problem, statement by the OPA
Legal basis of cost absorption, statement by Administrator
Letter to Mr. William L. Mallon, president, National Automobile
Dealers Association
OPA Administrator Paul Porter's letters to Hon. Robert F. Wagner
OPA, letter to committee furnishing 1941 figure on production of
goods
page
1204
1516
1551
1222
1404
1579
1220
1298
1557
1575
1549
1824
1563
1228
1297
1772
1776
1777
1235
1613
1525
1554
1333
1335
1820
1236
1297
1650
1250
1387
1427
1301
1559
1162
1774
1749
1763
1766
1770
1757
1745
1709
CONTENTS
Briefs, letters, statements, etc., submitted for the record—Continued
Porter, Paul A.—Continued
Statement of the Administrator regarding testimony of National
Retail Dry Goods Association representatives, particularly
with respect to pricing of lawn mowers
Statement of Administrator, regarding the pig-iron industry
Statement on lumber pricing for the Senate Banking and Currency Committee
Statement on the testimony by W. L. Mallon, president, National Automobile Dealers Association
Supplementary statement by the OPA on MAP
Maximum Price Regulation No. 188, opinion accompanying revised
Order No. 3 under § 1499.159e
Methods used by northern retailers in computing sales prices on a $40
southern yellow pine item, etc,
National Association of Real Estate Boards, Chicago, 111., proposed
amendment to H. R. 6042, in the Senate
National Automobile Dealers Association, additional data, etc
National Distributors of General Merchandise, Butler Bros., invoicesNational Independent Meat Packers Association, letter to OPA
New passenger-car sales, by States, 1941-45—New-car registrations
and deliveries under rationing, table B
New York Journal-American, item on drug crisis laid to OPA
bungling, etc
New York Journal-American, item on meat racket cuts vital drug
supply
Number of franchised passenger-car dealers, as of January 1 of each
year, table A
Office of Economic Stabilization, letter to Hon. Robert F. Wagner
Office of the Secretary of the Tresaury, tables
OPA, document No. 54254, hand lawn mowers
OPA, Food Enforcement Division, letter to Mr. LaRoe
Paid employees in the executive branch in the continental United
States on March 31, 1946, table
Passenger-car registrations, table C
Penalties imposed on the lumber dealers in the southern-pine area
since August 11, 1943, exhibit 3
Post VJ-day production of selected basic materials compared with
production for 1941, table submitted by John D. Small
Price increases on lumber since January 1945, table submitted by
Mr. Wilson Wyatt
Proposed amendment to Emergency Price Control Act of 1942, etc__
Scudder Grain & Live Stock Co., letter to Mr. Clinton P. Anderson-Selected items short in the civilian economy, table submitted by Mr.
John D. Small
Sells, Saul B., Assistant Director, Consumer Goods Price Division,
letter to Hon. Eugene D. Millikin
Service Lumber Co., Inc., Rolling Fork, Miss., letter to Mr. H. R.
Northrop, also tabulation
Small Business Committee of the United States Senate, conclusions of
recommendations, memorandum
Stephens, Royal C., Netcong, N. J., letter to Senator Robert F.
Wagner
Strauss, Anna Lord, president, League of Women Voters, telegram-_
The F. & N. Lawn Mower Co., Richmond, Ind., letters.. 1308, 1309,
United States Department of Agriculture's figures showing number of
cattle available
Vickers Petroleum Co., letter and report to Hon. Arthur Capper
Western States Meat Packers Association, statement by E. F. Forbes__
Williams, S. Clay, letter to Hon. Eric Johnston, president, United
States Chamber of Commerce
V
Page
1769
1747
1764
1753
1741
1324
1395
1195
1273
1358
1247
1270
1819
1818
1269
1829
1578
1320
1246
1577
1271
1392
1466
1600
1522
1348
1461
1771
1391
1249
1158
1159
1315
1233
1824
1211
1426
VI
CONTENTS
APPENDIX I
(Printed in order of their appearance)
National Association of Real Estate Boards, Calvin K. Snyder, secretary,
letter
Analysis of charts presented by Mr. Downs, on behalf of National Association of Real Estate Boards, etc
Proposed amendment to H. R. 6042 in the Senate
National Association of Real Estate Boards, Calvin K. Snyder, secretary,
letter
National Association of Manufacturers, Robert Wason, president, letter,
supplementary statement and comment
,
Porter, Paul A., Administrator, OP A, letter to committee with respect to
premium-price plan
United States Senate, Committee on the Judiciary, Homer Ferguson,
letter with statement by Seddon L. Etherton, president of the Detroit
and Michigan Property Owners Association
Independent Petroleum Association of America, letter and enclosure
American Hotel Association, letter
OPA, Goeffrey Baker, Deputy Administrator for Price, letter
OPA, Paul M. Green, Deputy Administrator for Accounting, letter
National Association of Hosiery Manufacturers, Earl Constantine, letter
National Automobile Dealers Association, W. L. Mallon, letter with additional data
Mallon, W. L., president of the National Automobile Dealers Association,
statement before the House Small Business Committee
Carson, Ivan D., Deputy Administrator for Rent, statement on the eviction problem
Oil-Heat Institute of America, Inc., letter and enclosures
Livestock and Meat Industry, statement filed by Paul Porter, with the
committee
International Association of Garment Manufacturers, statement
Sells, Saul B., Assistant Director, Consumer Goods Price Division, OPA,
letter and data
Extension of price control—Small business statement
Moore, A. Harry, former Governor and United States Senator from New
Jersey, representing various textile industries of the State, statement
Bowles, Chester, letter to Hon. Robert F. Wagner, chairman
Flanders, Ralph E., letter to Hon. Robert F. Wagner, chairman
Monsanto Chemical Co., William M. Rand, president, letter
Tufted Textile Manufacturers Association, R. Carter Pittman, president,
letter and enclosure
United Home Owners of Illinois, Sigmund J. Dryanski, president, resolution
Committee investigated buying, selling, and handling of grains by CCC,
etc
Independent Petroleum Association of America, letter, also copy of letter
to Hon. Robert F. Wagner in regard to testimony of Mr. Paul A. Porter_
American Rights Protective League, Inc., Pasadena 4, Calif., letter
Morgenthau, Hon. Henry, Jr., former Secretary of the Treasury, text of
his commentary over WMCA, Wednesday, April 24, 1946
National Retail Furniture Association, Leo J. Heer, vice president, letter
and enclosure
Textile Fabrics Association, W. P. Fickett, president, letter and copy of
resolution
—
Better World Foundation Fellowship, Ruskin, Fla., statement of Henry
J.Sutton
Baker Ice Machine Co., Inc., statement of Sterling F. Smith
Detroit & Michigan Property Owners Association, statement on rent
control by Seddon L. Etherton
Ramsey Sportswear Co., Inc., letter on percentage profit control
Seaman, Clarence A., statement
Hvgrade Food Products Co., letter from Samuel Slotkin
Allboro Retail Fruit Association, Inc., letter from Edward A. Hausman__
Pillsbury Mills, Inc., statement by Edward H. Mirick
Page
1835
1835
1836
1837
1837
1839
1841
1853
1858
1859
1860
1861
1861
1865
1878
1879
1880
1889
1895
1895
1897
1901
1902
1911
1912
1917
1918
1919
1923
1924
1926
1931
1932
1933
1934
1936
1938
1940
1941
1942
CONTENTS
VII
Page
National Grain Trade Council of St. Louis, statement of Robert C. Woodworth
1944
Board of Trade of the city of Chicago, statement of Harry C. Schaack
1945
National Association of Commodity Exchanges and Allied Trades, Inc.,
statement by J. O. McClintock
1947
Robinson Milling Co., Salina, Kans., statement by Ed Morganstern, president
1951
Jay-Day Dress Co., statement by Jack Davis, president
1953
Retail Tobacco Dealers of America, Inc., letter by Eric Calamia
1958
People's Lobby, Inc., statement by Benjamin C. Marsh 1
1959
Grocery Manufacturers'of America, Inc., letter by Paul S. Willis
1959
Interstate Printing Corp., letter by Osum Fort
1960
Seabord Refining Co., Ltd., telegram
1961
Lowell, Geoige, letter to Hon. Homer Ferguson, telegram and statement
to the committee
1961
General Federation of Women's Clubs, letter
1966
National Electrical Manufacturers Association, telegram by R. L. White,
president
1967
Eagle-Shawmut Mine, letter by George W. Clemson
1968
Caslin, M. C., telegram
1968
Hosiery Wholesalers National Association, Inc., letter by Leo Guzik to
the committee
1969
Hosiery Wholesalers National Association, Inc., letter by Leo Guzik to
OPA
1971
Baker, Geoffrey, deputy administrator for price, letter to Mr. Leo Guzik_ 1979
Institute of Boiler and Radiator Manufacturers, statement
1979
Blake, Dana P., letter to committee
1984
National Association for the Advancement of colored people, statement
1985
by Leslie S. Perry
Landon Putty Works, two letters from C. J. Landen
1986
APPENDIX II
Statements submitted by industry in response to a letter by the Chairman
of OPA Industry Advisory Committee, at the invitation of the Committee on Banking and Currency. (Printed in alphabetical order.)
1989
1946 EXTENSION OF THE EMERGENCY PKICE CONTROL
AND STABILIZATION ACTS OF 1942, AS AMENDED
T H U B S D A Y , M A Y 2, 1 9 4 6
COMMITTEE
UNITED STATES SENATE,
ON B A N K I N G AND C U R R E N C Y ,
Washington, D. C.
The committee met at 10 a. m., pursuant to adjournment on
yesterday, in room 301 Senate Office Building, Senator Robert F.
Wagner (chairman).
Present: Senators Wagner (chairman), Barkley, Bankhead, Murdock, McFarland, Taylor, Fulbright, Mitchell, Carville, Taft, Butler,
Buck, Millikin, Hickenlooper, and Capehart.
Present also: Senator Moore.
The CHAIRMAN. The committee will come to order and on behalf
of the committee I want to announce we have got to limit our hearings
somewhat, because we must end this week end. So I hope those who
are testifying will recognize that fact because we may have to limit
them to not more than 20 minutes.
I received a telegram from a group known as Representatives of
Businessmen for OPA Committee which I would like to read. This is
a telegram to me [reading]:
NEW
YORK
17,
N.
Y.
Representatives of Businessmen for OPA Committee would like right to testify
before your Senate committee on retention of OPA without crippling amendments. Organization formed last June during similar crisis and dormant but not
disbanded since. Is composed of large and small businessmen throughout country, including Donald Nelson, Spryos Skouras, R. S. Avery of Avery Adhesives,
Clarence Avildsen of Republic Drill & Tool, Charles Duell of Duell Sloan &
Pearce, Irving Geist of Joan Kenley Blouses. Please wire immediately when we
can be heard and how mcuh time we can have so we can notify the members who
will testify.
BARRY
BINGHAM,
Publisher, Louisville Courier Journal.
MORRIS
ROSENTHAL,
Ex Vice President, Stein Hall Co.
WALLACE
THORSEN,
Wallace Thorsen Organization Businessmen for OPA Committee.
STATEMENT OF PHILIP KORN, NATIONAL LEGISLATIVE
MAN,
JEWISH
WAR VETERANS
OF THE UNITED
CHAIR-
STATES
OF
AMERICA, NEW YORK CITY
Mr. KORN. I am appearing on behalf of the Jewish War Veterans
of the United States of America. As the oldest war veterans' organization in America, composed only of persons who served in the military or naval forces, second only to the G. A. R., we wish to lend the
voices of all our posts and auxiliaries throughout the land in behalf of maintaining OPA without relaxation of its controls in any
form.
1157
E X T E N D PRICE CONTROL A N D STABILIZATION ACTS OF 19 4 2 1158
The stability of our Nation's economy requires the retention of price
controls. If we are to avoid inflation and keep prices within the reach
of millions of veterans and their families, no relaxation of control can
be permitted at this time.
The veterans of this war have survived a holocaust of death, the
like of which no man has ever before seen. They have earned the
right to the necessities of life; the right to be able to purchase such
necessities without inflated prices. This cannot be accomplished unless price control is retained; unless prices are kept in check.
Congress bears the responsibility of seeing that millions of veterans
are not relegated to the position of the forgotten hero, who after completion of his heroic task shall be subjected to the terror of inflation
and the chaotic state sure to follow.
The veteran has the right to expect Congress to fulfill its obligation to him, his family and the community. This the Jewish War
Veterans of the United States of America firmly believe can best be
accomplished by retaining the OPA without modification of prices or
relaxation of controls.
We strongly urge that you expend every effort to retain the OPA
for the economic security of our country.
I also desire to submit for the record a statement from Mr. Royal C.
Stephens of Netcong, N. J., suggesting certain amendments.
(The statement referred to is as follows:)
NETCONG, N .
SENATOR ROBERT F .
WAGNER,
J., April SO, 1946.
Chairman, Banking and Currency Committee,
Senate Office Building, Washington, D. C.
H O N O R A B L E SIR: I urge that your committee now holding public hearing on the
extension of the OPA law add the following amendments:
1. It is the legislative intent of the Members of Congress who are the elected
representatives of the sovereign American citizens, that the OPA Administrator
shall protect the constitutional rights of all American citizens by directing that
all foreign-made goods or materials that are now sold in the United States, regardless of their cost, shall not be permitted to be sold for a higher price than
the OPA Administrator allows the same kind of American-made goods to be
sold for here in the United States.
The above amendment will then place the OPA official rulings in line with the
fourteenth amendment of the Federal Constitution. The fourteenth amendment
reads as follows:
"No State shall make or enforce any law which shall abridge the privileges or
immunities of citizens of the United States; nor shall any State deprive any
person of life, liberty, or property, without due process of law; nor deny to any
person within its jurisdiction the equal protection of the laws."
Mr. Chairman, the policy of OPA Administration in refusing to place a price
ceiling on foreign-made goods is clearly denying the equal protection of the laws
of the United States to American citizens as the OPA Administration officials are
required to do in their oath to uphold the fourteenth amendment to the Federal
Constitution.
Now, Mr. Chairman, are there any foreign treaties that have been ratified by
the United States Senate that require that foreign-made goods shall be permitted
to be sold in the United States for any higher price than are American made goods
allowed to be sold for here in the United States?
2. As a rider to the bill, the following:
It is the legislative intent of the Members of Congress that all profits shall be
done away with for the duration of all future wars, in the following way:
A. The day war is declared all prices of goods and rents shall be pegged as they
are on that day.
B. All wages shall be pegged as they are at that day.
C. All officials and employees in plants making war materials shall be paid the
same rate of pay as a like rate of pay of those in the armed forces of the United
States, as they are on that day.
E X T E N D PRICE CONTROL A N D S T A B I L I Z A T I O N ACTS OF 19 42 1 1 5 9
D. The Federal Government, shall pay for all war materials at the price of
materials as they are on that day.
It is further legislative intent'of the Members of Congress that this proposed
rider to the bill shall remain the permanent law of the land.
Now, Mr. Chairman, as a long-time friend of Congress, I call your attention
to the following benefits to both the taxpayers and the Members of Congress if
you adopt the above-proposed rider to the bill.
Congress would be free from the necessity of spending hours of time in passing
legislation to create at all future wars a Price Administration and a War Labor
Board, free the Members of Congress from the need to raise taxes to run the
boards, free the Members of Congress from the need to listen to Royal C. Stephens
and other interested citizens 011 legislation regarding labor or price control, and
above all, Congress would be underwriting a social security law that would go a
long way to keep United States out of future wars.
Mr. Chairman, I am informed that since Congress had indicated they are going
to relieve the American people from a lot of unfair rulings by the National Price
Administration, just last week Mr. Louis H. Budd, Jr., OPA administrator of
Sussex County Price Control Board since 1942, resigned his position effective
within a week at the conference of OPA officials held at Newark, N. J., when
Mr. Budd was told by the State OPA officials that under a new ruling he would
be expected to produce a minimum of 15 docket cases every month. "Docket
cases" is the OPA term used for violations. Mr. Budd informed that the national
office "has selected a minimum of 15 docket cases per month as an arbitrary figure
below which a board should not fall and still be able to justify its existence."
I now request your committee to subpena Mr. Louis H. Budd, Jr., of 24 Church
Street, Sussex County, N. J., who last week resigned as OPA administrator of the
Sussex County Price Control Board which is located at Newton, N. J., and request
him to tell your committee of some of the unfair and un-American and unconstitutional rulings of the National Price Administration, and at the same time
request Mr. Paul Porter, OPA Administrator, and Mr. Chester Bowles, the former
OPA Administrator, to be' present and listen to Mr. Louis H. Budd reveal some
practical information that will make them more efficient in handling OPA affairs.
In conclusion, I wish to submit for the record a letter from Mr. Harold B
Simmons, a Democratic justice of the peace, and a veteran of World War No. I
from Bryam Township, Sussex County, N. J., to the Newark Evening News
under the date of Saturday, April 27, 1946, that expresses the feelings of the
American citizens of Sussex County over Mr. Louis H. Budd resigning as administrator of the price control board of Sussex County, N. J.
Very truly yours,
Netcong, N. J.
ROYAL
C.
STEPHENS.
I would like also to include two telegrams in regard to this matter.
Senator R O B E R T F . W A G N E R ,
Chairman, Senate Committee on Banking and Currency,
Senate Office Building, Washington, D. C.:
The national board of the League of Women Voters at its meeting here today
voted unanimously to urge your committee in the interest of the welfare of the
Nation to report out constructive legislation extending the Price Control Act for
1 year without the extremely dangerous amendments passed by the House. We
shall appreciate your bringing our position to the attention of the committee.
A N N A L O R D S T R A U S S , President.
Hon.
CLAUDE
PEPPER,
Senate Office Building, Washington, D. C.:
OPA should be specifically prohibited from controlling or limiting rents on
FHA financed war housing projects which are or have been in distress as result
of less than 75 percent occupancy or foreclosure and which are not in critical
areas. Urge amendment to any extension of OPA authority. Please refer to
Senate committee or joint committee. Regards.
BROWN
The
CHAIRMAN. N O W
we will proceed with Mr. Pickell.
WHATLEY.
E X T E N D PRICE CONTROL A N D S T A B I L I Z A T I O N ACTS OF 19 4 2 1160
STATEMENT OF MARK W. PICKELL, SECRETARY, CORN BELT
LIVESTOCK FEEDERS ASSOCIATION, NAPERVILLE, ILL.
Mr. P I C K K L L . I am Mark W . Pickell. I live at Naperville, 111.,
31 miles west of Chicago, and feed out about 60 head of cattle and 150
head of hogs annually. My office is in Chicago where I am executive
vice president of the Illinois Cattle Feeders Association and secretary
of the Corn Belt Livestock Feeders Association.
The Corn Belt Livestock Feeders Association was formed by the
T-Bone Club of Colorado, the Nebraska Livestock Feeders Association, the Kansas Livestock Association, the Missouri Livestock
Association, the Iowa Beef Producers Association, the Illinois Cattle
Feeders Association, the Michigan Cattle Feeders Association, the
Indiana Cattle Feeders Association, and the Western Ohio Livestock
Feeders Association.
I have put around at your desks a little booklet showing our position
and the names of the organizations forming the Corn Belt Livestock
Feeders Association are given there on the flyleaf of page 2.
We are the feeders' organization from Colorado through to Ohio.
I would like the first thing this morning to give you just by some
letters and telegrams some of the views of the men on the feeding ot
livestock. Here is one from Mr. Warren H. Monfort, president of
the T-Bone Club of Colorado, a man who feeds about 15,000 head
of cattle a year. He says [reading]:
The mess we predicted when there is fast getting worse, from here it looks
hopeless, but maybe tlie Senate has more in sight than I dare hope. Should the
dry weather continue a while longer we could face the gravest situation this country has ever had. The black markets could not possibly be controlled. Two
more wreeks and beef in this country will nearly all be gone. I sometimes feel
that to have tried and lost will be the best thing that can happen to us, for I
believe we are on the edge of a national calamity as for food and whoever sins will
be blamed for the disaster.
WARREN
H.
MONFORT.
Here is a letter from Horace L. Witty, of Pleasant Plains, 111.,
which is just west of Springfield. I have never gone down there in
normal years but what I have seen at least 15,000 head of cattle in
the dry lots. It is one of the biggest cattle feeding sections in the
State of Illinois. He says [reading]:
I normally feed about 1,500 cattle each year, but due to OPA regulations and
ceiling subsidies and all other restrictions I have been forced to discontinue my
feeding.
I have no cattle on feed at present; do not expect to put any in lots as long as
we have ceilings on them. I hope that you can impress on the Senate the importance of removing all subsidies and ceilings as soon as possible and let production
be resumed on more normal basis.
Here is a telegram from Robert Munderloh, president of the
Nebraska Cattle Feeders Association of Beemer, Nebr. He says
[reading]:
We are still opposed to OPA on livestock, subsidies and ceilings, and are also
opposed to the Government going into the black market on corn.
Here is one from a gentleman, I suppose he is about the average age
of you gentlemen, he lives at Macomb, 111., a very substantial citizen
out there in a big cattle-feeding district. His name is H. G. Sperry.
He says [reading]:
E X T E N D PRICE CONTROL A N D STABILIZATION ACTS OF 19 4 2
1161
I am a farmer and cattle feeder, as a rule feeding 300 to 500 head but am now
down to 200, and when they are gone I will quit unless OPA quits subsidies and
ceilings; then there might be a chance to break even if no better.
Now the Government has gone to buying corn.
I have fed cattle and hogs all my life, but am going to quit until OPA quits
trying to run my business.
Here is one that brings up a point—it is from a feeder at Stronghurst, 111. That is out in the western part of the State, quite a heavy
cattle-feeding section. He says [reading]:
I have another reason why I would like to stay in the livestock feeding game
besides the many most people mention. To handle my farm work right I need
from six to nine first-class farm workers. In order to get good men I have to
offer them a year-around job, and I can't use year-around men unless I feed a lot
of stock. There is just no other way for these men to pay their way. I have
spent thousands of dollars on the best equipment I could get and now can't afford
to turn it over to poor men.
It stands to reason that nobody will work a few months on a farm if he can get
a good job for the full year in town. The OPA is forcing good men off the farm&
and into town at a time when production of all kinds of food is so important.
A good farmer can produce 10 percent to 50 percent more than a poor one, so*
let's keep these good men on farms—by knocking out the OPA and letting livestock men go full speed ahead.
If OPA is extended in its present form, I guarantee to have my feed lots empty
before July 1.
Very truly,
By
EVANS FARMS,
MARION EVANS,
Operator.
Here is one showing the effect of the present corn order. This is
from Bernard Crofton in Milledgeville, 111., up in the northwest part
of the State of Illinois. He says [reading]:
I am feeding 100 head of cattle now and do not have enough corn, and Government price control makes it impossible now to buy more and my cattle will not
be fat enough when what I have is gone to sell much above cost of cattle.
I do not intend to buy any more unless the OPA is abolished and I can once
more run my own business instead of Washington's OPA.
Here is another from Milledgeville.
It says:
When you go before the Senate committee tell them we farmers are waiting
on them so as to know whether to breed any sows for fall. Twenty-five sows I
have to farrow the last of May will go to the market if they do not take off the
subsidies and ceilings.
This corn deal was the last straw, and anyone in the livestock feeding business is
in a pretty tough spot.
There have been quite a few cattle go already on that account.
I sure hope the Senate will get behind the House and do away with all price
ceilings and subsidies as of June 30, 1946, so the farmer and livestock men can go
out and produce enough so people can buy our products.
So, thanking you again for your efforts in this fight,
I am,
Yours very truly,
ELMER N .
BUFFINGTON.
P. S. It looks like the Lord is waiting to see what the Senate does with OPA
before He lets it rain. After all, He is the only one they are not trying to rule,
or are they?
Here is one from C. G. Mahrle, president of the Michigan Cattle
Feeders Association, Marshall, Mich. This is a telegram which reads:
Michigan cattle feeders request removal of subsidies and ceiling.
promise.
No com-
E X T E N D PRICE CONTROL A N D S T A B I L I Z A T I O N ACTS OF 19 4 2 1162
Here is one from the president of the Kansas Livestock Association, Mr. Wayne Rogler of Matfield Green, Kans. He says [reading]:
In your appearance before the Senate Banking and Currency Committee on
May 1, urge the importance of adopting the Flannagan and the Gossett amend
ments to the OPA bill.
The Kansas Livestock Association at their meeting at Wichita March 15, 1946,
resolved that price control and subsidy programs on livestock and meats be
allowed to expire on June 30, 1946.
With meat production on a level far above prewar average and with purchasing
power so high the further use of subsidies to hold down living costs, financed by
deficit governmental spending can no longer be justified.
Practically all of the livestock producers in this State are agreed on the above.
I am sure many will write you.
Here is another from Pleasant Plains, 111. I want to impress that
because it is such a big cattle-feeding area. This is from Emory
Purvines. They have a ranch down in Texas and bring their cattle
up to Illinois to feed them out. He says [reading]:
If the Senate will only take similar action to the House of Representatives,
feel that it won't be long until I can again be safe in feeding livestock. Know
that the feeders of this community feel the same, as none of them have any cattle
on feed at present.
Here is one from the President of the Brown Swiss Cattle Breeders'
Association of Beloit, Wis. [reading]:
It is gratifying to me and many other livestock feeders in my locality that
there is great probability the subsidies and ceilings on cattle and hogs will be
lifted by July.
I feel sure that most of the Senators know how important it is to the farmer to
have these removed, and will approve the action taken by the House of
Representatives.
Yours very truly,
J. W . OVITZ, M . D .
I have a number of other letters. I would like to have them put
into the record, if I may, just for your information. It will shorten
things up very much.
The C H A I R M A N . All right.
(The letters are as follows:)
DEKALB
HYBRID
SEED
CORN,
Rockford, III., April 25, 1946.
MARK
PICKELL,
Chicago, III.
There has been a new feeling of optimism sweeping through the
country among the livestock and grain men since the passage of the amendment
to the OPA bill doing away with the ceilings on agricultural products.
Everyone is hoping the Senate will do likewise.
I tremble to think what will happen to the food supply in this country if the
OPA is reinstated like it was.
p As long as the country and world is so short of food and supplies, why don't
they give us a chance to see what we can do in the form of production? A lot of
farmers are talking of seeding their farms down and waiting to see what happens.
Do all you can down there.
Yours truly,
DEAR
SIR:
CLINT
L . L . JONES
&
GLENNY.
SON,
One Mile West of Holcomb, Kans., April 28, 1946.
Mr. MARK
W.
PICKELL,
Secretary, Illinois Cattle Feeders Association,
Washington, D. C.
D E A R M R . P I C K E L L : We as cattle producers and feeders in this section are
highly pleased with House action on the meat ceiling subsidy bill.
E X T E N D PRICE CONTROL A N D STABILIZATION ACTS OF 19 4 2
1163
If the Senate will approve the action of the House it will bring an end to this
black market and one of the most disgraceful things that ever happened to the
livestock industry.
Yours very truly,
L.
LELAND,
Mr.
MARK
III.,
L.
JONES.
April 25, 1946.
PICKELL,
Chicago, III.
Now that the war has been over for some time I think that the
subsidies of meat and price ceilings should be removed.
With the price of all feeds and farm labor what they are we will have to have
better prices to get production of meat that is needed. I don't think there ever
was a time when the consumer was as able to pay all of the cost of the meat he
buys as he is today.
Am shipping 26 unfinished hogs for Monday's market as it doesn't pay me to
finish them.
Yours truly,
DEAR
SIR:
FREMONT
MILLEDGVILLE, I I I . ,
ILLINOIS CATTLE FEEDERS
C.
FARLEY.
April 18, 1946.
ASSOCIATION,
Chicago 3, III
strongly urge that all price controls be ended on all livestock.
Until this is done very few can or will expand livestock numbers. Most all
farmers in this section of the country will not increase stock until controls are
ended.
Again I say, end controls and the farmers will put meat back in the meat
counters.
Yours truly,
DEAR
SIR:
I
HOWARD
GOODLAND, K A N S ,
Mr.
MARK
W.
J. STOVER.
April 26, 1946.
PICKELL,
Secretary, Illinois Cattle Feeders Association,
Washington, D. C.
D E A R M R . P I C K E L L : Being a livestock man and affected by ceilings and subsidies, I wish you would use your influence and urge the Senate to approve the
House action on ceilings and meat subsidies.
It affects us greatly, and I urge this with all sincerity.
Yours very truly,
F A Y K . P A R N E L L , Cattleman.
ILLINOIS
CATTLE
FEEDERS
ASSOCIATION,
April 25, 1946.
note that you and Beach made the "lines" yesterday in the
Tribune. Sock 'em hard next Monday, and if you get tough, so much the better.
Tell 'em of the 3-cattle roll-backs and how again this week with famine receipts
of livestock the market broke 50 to 75 cents up to last night. I think Uncle Sam
muddled things up again.
I enclose the Senator's speech. I had a nice letter from Brooks, but no word
from Lucas.
With best wishes,
DEAR
MARK:
I
CHAUNCEY.
MARK
W.
PICKELL,
Washington, D. C.
D E A R S I R : I note that you are to appear before a Senate committee hearing
next Wednesday, at which time the subject of livestock subsidies and price ceilings will be discussed.
I want to take this opportunity to advise you that it is my opinion, as well as
that of every interested person with whom I have discussed the subject in the
E X T E N D PRICE CONTROL A N D STABILIZATION ACTS OF 19 4 2 1164
past 30 days, that subsidies are a total loss to the Government in that they only
serve to increase the national debt, and that present price ceilings have been
proved unworkable in that they are forcing creation of a black market that is
breeding contempt for law and order as well as being hard on both the legitimate
producer and consumers all over this Nation.
Yours very truly,
W . P.
BILLAU
(Of Steed & Billau).
FIRST
Mr.
MARK
W.
NATIONAL
BANK
OF D O D G E
CITY,
Dodge City, Kans., April 26, 1946.
PICKELL,
Secretary, Illinois Ctittle Feeders Association,
Washington, D. C.
D E A R M R . P I C K E L L : We understand a Senate committee is having a hearing
relating to ceilings and subsidies on cattle.
It is our opinion that in the long run it would be to the best interest of the
country if the ceilings and subsidies were abolished.
Very truly yours,
G E O . B . D U G A N , President.
COTTONWOOD FALLS, K A N S . ,
MARK
W.
April 25, 1946.
PICKELL,
Secretary, Washington, D. C.
M R . P I C K E L L : We Chase County cattlemen approve heartily the action
of the United States House of Representatives in passing bill to remove subsidies
on cattle and increasing ceilings.
We hope it will become a law. Kans-Flint hill pastures are the best at this
time of year we ever saw them.
Yours truly,
DEAR
G.
M.
GOODLAND, K A N S . ,
Mr.
MARK
W.
MILLER
&
SON.
April 26, 1946.
PICKELL,
Secretary, Illinois Cattle Feeders Association,
Washington, D. C.
D E A R M R . P I C K E L L : We wish to join you in having the Senate approve the
House action on ceiling and meat subsidies, as it is of vital interest to us livestock people, and we thank you for your efforts.
Yours very truly,
H. R . S H I N N E A L L , Cattleman.
TRUSLER-BEHYMER
GRAIN
Co.,
Emporia, Kans., April 26, 1946.
Mr.
MARK
W.
PICKELL,
Secretary, Illinois Cattle Feeders Association,
Washington, D. C.
D E A R S I R : A S we operate considerable land on which we feed cattle we are
writing you to add our voice to the almost unanimous opinion of the Kansas
cattle feeders.
We want subsidies and restrictions removed from the cattle industry as rapidly
as possible. Whether it helps or hurts the cattle industry it is still the honest
thing to do.
Very truly yours,
TRUSLER-BEHYMER
H , P. TRUSLER.
GRAIN
Co.,
E X T E N D PRICE CONTROL A N D STABILIZATION ACTS OF 19 4 2
STATE
OF K A N S A S
HOUSE
OF
1165
REPRESENTATIVES
Topeka, Kans.
Mr.
MARK
W.
PICKELL,
Secretary, Illinois Cattle Feeders Association,
Washington, D. C.:
I think that the Flannagan amendment to the OPA bill is very essential, and
should be passed by the Senate, as amended.
It appears to me that price controls only increase inflation at this time, as it is
slowing up production.
If subsidies are left on cattle and removed when we get enough production to
meet the demand, I firmly believe it would be disastrous to all cattlemen.
The Gossett amendment should also be passed so production could increase to
the point it would stop all black markets.
Very truly yours,
E.
GOODLAND,
Mr.
MARK
W.
KANS.,
C.
CROFOOT.
April 26, 1946.
PICKELL,
Secretary, Illinois Cattle Feeders Association,
Washington, D. C.
D E A R M R . P I C K E L L : Being a cattle raiser and dealer in livestock of all kinds,
it is my wish that you use your influence to have the Senate approve the Houseaction on meat subsidies and ceilings.
Very truly yours,
A. T A Y L O R , Cattleman.
THE
FIRST
NATIONAL
BANK,
Goodland, Kans., April 25, 1946.
Mr. MARK
W.
PICKELL,
Mr. MARK
W.
PICKELL,
MARK
PICKELL.
Secretary, Illinois Cattle Feeders Association,
Washington, D. C.
D E A R M R . P I C K E L L : It is the desire of cattlemen and feeders in this country
here that the Senate approve the House action on meat subsidies and ceilings, and
it is my desire that you present these facts to the proper authorities in the Senate,
stating our position.
Yours very truly,
R . F . B R O C K , Cattleman.
GOODLAND, K A N S . ,
April 26, 1946.
Secretary, Illinois Cattle Feeders Association,
Washington, D. C.
D E A R M R . P I C K E L L : Being a cattle raiser and dealer in livestock of all kinds,,
it is my wish that you use your influence to have the Senate approve the House
action on meat subsidies and ceilings.
Very truly yours,
F R E D K O H L E R , Jr., Cattleman.
LAMARK, I I I . ,
W.
April 25, 1946.
D E A R S I R : I am writing you in regard to the removal of ceilings on livestock.
Since April 18, 1946, a feeling of optimism has been sweeping the livestock feeding
sections of the Corn Belt, since the House acted as it did. The livestock feeders
feel that before long they will be given an opportunity to produce meat for the
tables again.
Yours truly,
WALLACE
WARE,
Secretary, Carroll County.
85721—46—vol. 2
2
E X T E N D PRICE CONTROL AND STABILIZATION ACTS OF 19 42 1166
FLOYD'S
MARKET,
Sedan, Kans., April 27, 1946.
Mr.
MARK
PICKELL,
Washington, D. C.
D E A R SIR: Present OPA regulations are putting us out of the meat business.
General sentiment here with those who understand favor removal of subsidies and
price control on livestock and meat.
We see cattle on a thousand hills in this country and surely some way must be
found to get these to the consumers without resorting to a black market to furnish
.meat.
Good luck to you, we are for you.
A . J. FLOYD,
D . D . FLOYD,
LEONARD T . FRAWPORD.
POTOMAC, I I I . ,
We want subsidies and ceilings removed.
Very truly yours,
April 27, 1946.
D E A R SIR:
Ross
GARDEN CITY, KANS.,
M r . MARK W .
A.
BOWERS.
Avril 28, 1946.
PICKELL,
Secretary, Illinois Cattle Feeders Association,
IWashington, D. C.
D E A R M R . P I C K E L L : The action taken by the House of Representatives in
regard to elimination of beef subsidies and ceilings is heartily concurred in by
myself, and other stockmen of this community with whom I come in contact,
and I sincerely believe it to be a necessary action for the good of the industry
and the consumer.
Your good offices in behalf of approval by the United States Senate is solicited.
Very truly yours,
R. G.
EARLVILLE, I I I . ,
WALTERS,
April 26, 1946.
ILLINOIS C A T T L E F E E D E R ASSOCIATION,
Chicago 8, III.
Have been following your progress in the attempt to remove
subsidies and ceilings. Greatly appreciate your efforts but the results needed are
the removal completely of subsidies and ceilings so that farmers will feel safe to
go forth in this all-out food production.
Farmers cannot afford to run the risk and we feel the Government should make
it safe for us to go ahead.
Best of luck in your efforts, I am
Cordially yours,
D E A R SIRS:
W M . WETZEL,
ROCK FALLS, I I I . ,
MARK W .
Sr.
April 27, 1946.
PICKELL,
Vice President, Cattle Feeders Association.
Received your letter of April 23 and I am very much in favor of
ceilings being removed on livestock.
As far as I can see in my neighborhood since raise in price of corn farmers are
marketing pigs light and light cattle going to market. I pity the meat situation in
6 months.
Respectfully,
D E A R SIR:
A. A.
MILLEDGEVILLE, I I I . ,
Mr.
MARK W .
HORMES.
April 26, 1946.
PICKELL,
Executive Vice President.
I want you to do all you can, and kill the
hogs, sheep, and grain and meat and no subsidies.
Yours truly,
D E A R M R . PICKELL:
OPA
E . S.
on cattle,
WAGNER.
E X T E N D PRICE CONTROL AND STABILIZATION ACTS OF 19 4 2
April 27, 1946.
GREENFIELD, I I I . ,
MARK
W.
1167
PICKELL,
Secretary, Illinois Cattle Feeders Association,
Received letter from Illinois Cattle Feeders Association April 2 6 ,
1946, and after reading it am very glad to see the progress you are making. We
feel that if the OPA don't take off the price ceiling or get them high enough to
insure a profit on livestock and grain, farmers are all getting damn tired of this
price setting every few days, so you don't know what he (farmer) is doing. And
all farmers in this section are cutting down on production.
I feel that subsidies should be removed from all livestock and grain.
The subsidies should also be taken away from the meat packers and let them
buy on the open market at a price so he can resell [the meats.
Yours truly,
G E O . B. P R A N G E R & Sons,
D E A R SIR:
By
MARTIN F.
PRANGER,
Member of firm.
L A N A R K , I I I . , April 26, 1946.
In answer to your letter of April 2 3 will say I have been in the cattle feeding business for 30 years and never got in such a mess as now. Corn
price raised and feeders high, but a ceiling on fat cattle.
Hoping you have grand success,
Yours truly,
D E A R SIR:
FRED
PLEASANT PLAINS, I I I . ,
MARK
W.
GUENZLER.
April 27, 1946.
PICKELL,
Executive Vice President
I understand you are going to meet with the Senate next wTeek, to
see if they will do something about this cattle muddle. It has just about put us
out of the cattle business, and for the sake of the consumers, as well as ourselves,
I feel there should be a removal of all ceilings and subsidies on cattle.
Wishing you the best of luck, I remain,
Yours truly,
K I N D SIR:
WILLIAM S.
ROODHOUSE, I I I . ,
MARK
W.
MILES.
April 26, 1946.
PICKELL,
Executive vice-president, Illinois Cattle Feeders Association,
Chicago, III.
D E A R M A R K : It is gratifying to hear of the recent House of Representatives'
action on the continuation of subsidies and price control. Perhaps I should
have waited to pass judgment on our legislators in regard to their knowledge of
economics. I had come to the conclusion that they knew very little about
economics and didn't seem to care whether they ever learned anything about
supply and demand and the function of money. However, that is neither here
nor there, the main point is that the House has made a great stride back toward
true democracy and our past system of economics that has given the people of
the United States the highest standard of living in the world. With continued
control of business by bureaucrats, we will have further decreases in efficiency,
hence, low^er and lower standard of living. Simple, isn't it?
My neighboring feeders made this comment the other day:
"We feeders can bring supply up to demand with a supply-demand basis functioning because we understand the rules of the game played that way; otherwise,
OPA can have corn on the cob until it runs out their ears; and the public can continue to have ample supplies of cheap nothing."
I know that the feeders all feel the same way about it and hope the Senate
will back up the action of the House of Representatives. It is time all good men
came to the aid of their parties and took strong action against continuation of
bureaucrats and socialistic trends in our Government. All we ask for is the
opportunity to stand on our own two feet.
Very truly yours,
W.
M.
GILMORE.
E X T E N D PRICE CONTROL AND STABILIZATION ACTS OF 19 4 2 1168
ROCKFORD,
Mr. MARK
W.
III.,
April 27, 1946.
PICKELL,
Executive Vice President, Illinois Cattle Feeders Association,
Chicago, III.
D E A R M R . P I C K E L L : In view of the meat and livestock situation, my neighbors
and myself urge you to carry on the emphatic protest against the OPA.
During the war, farm production was held at maximum capacity against many
odds. Margins have kept narrowing with the present ceiling prices. Now with
corn prices hiked 30 cents and ceiling prices held on cattle, it seems it will become
necessary for me to liquidate my livestock into other than normal channels.
Please remember that corn I am planning to plant will not under normal conditions make beef until 18 months hence.
With feeder cattle selling this week for $17.65 on the Kansas City market it
will be impossible to continue feeding cattle. Father before me and I have engaged in cattle feeding on the same farm for over 60 years. Kindly convey this
thought to members of the Banking and Currency Committee of the Senate for
their kind consideration.
Cordially yours,
RALPH
ROCKFORD,
Mr.
MARK
W.
R.
III.,
FROEHLICK.
April 27, 1946.
PICKELL,
Chicago 8, III.
would like to congratulate you and your committee selected at
Omaha for the results that you obtained before the Agricultural House Committee
under the leadership of John Flanagan in the fight that is in vital interest to all
of us livestock producers and feeders.
I hope the same results may bo obtained in the Senate Agricultural Committee
under the leadership of Senator Elmer Thomas and Senator Butler.
I congratulate you and your committee on the results you are obtaining in the
House and feel confident you will obtain the same in the Senate under the leadership of men that will use common sense for the good of all.
Very respectfully,
DEAR SIR:
I
GEORGE
W.
BROWN,
Member of the Corn Belt Feeders Association.
SEDAN, K A N S . ,
MARK
April 80, 1946.
PICKELL,
Washington, D. C.:
Done lot of driving, talked to a lot of people in Kansas past 3 weeks; when
people know the facts about black market conditions they want all subsidies and
price control removed on cattle and beef. Hope Senate will approve House
action.
CAL
SANDWICH, I I I . ,
Mr. MARK W .
FORD.
April 26, 1946.
PICKELL,
Illinois Cattle Feeders Association,
Chicago, IlL:
Enclosed find a check for $5 to help cover expenses for our fight for better prices.
I'm so disgusted and mad so I do not know what to say, just the other day I
sold my cattle with a $100 loss on the load because of OPA bungling with ceilings
and corn prices.
Don't say us farmers are not on strike, because we are. Right around here we
have cut down half on hogs, and they will not be back Monday morning, maybe
a year from now. And cattle, well the price have to be better after they are
finish or we are not buying any this fall. We lost enough money this year on
them. If the corn had not been soft we would not have any either, but now the
corn are feeding and we got to take the price the packer will see fit to give, to
be safe from OPA not coming back at them.
The best of luck in your trip to Washington.
Yours truly,
BEN
MATTSON.
E X T E N D PRICE CONTROL A N D STABILIZATION ACTS OF 19 42 1 1 6 9
FANCY
Mr.
MARK
W.
PRAIRIE, I I I . ,
April 27, 1946.
PICKELL,
Chicago, III.
was surely glad that the House acted as it did, for it makes me
feel that ceilings and subsidies are on their way out. Certainly the cattle feeders
cannot operate under existing conditions. Therefore in order to assure adequate
supply of meat all controls will have to be taken off the cattle industry.
Yours respectfully,
D E A R SIR:
I
ROBERT
E.
COUNCIL.
ROCKFORD,
MARK
W.
III.
PICKELL,
Illinois Cattle Feeders Association.
Since the House of Representatives has acted as it did in removing
ceilings and subsidies from the OPA on grain and livestock, I feel greatly encouraged about feeding stock for the market.
Before price controls, ceilings and subsidies, several droves of cattle were fed in
this neighborhood every year. Now mine are the only cattle on feed in this side
of the county.
Since April 18 1 have taken new hope that I may be able to increase my operations.
Last Sunday, two men called and asked for a "few cattle for my store. My
customers are calling for meat and the packer salesmen have none to sell."
This is a deplorable state of affairs when common people are forced to go outside
the regular channels of trade to secure meat for their tables.
I sincerely hope that the Senate will uphold the House in removing ceilings,
subsidies, and all price controls from livestock and grain so that we may produce
and the working people may have meat on their tables again.
Sincerely yours,
D E A R SIR:
GEORGE
GARDEN
Mr.
MARK W.
CITY, KANS.,
R.
BROWN.
April 28, 1946.
PICKELL,
Secretary Illinois Cattle Feeders Association,
Washington, D. C.
D E A R S I R : I am writing to urge the passage of the bill before the Senate to
remove all livestock subsidies. We in Kansas believe this is imperative to
further the best interests of the livestock industry.
Yours trulv,
O. C.
SCOTT
Mr.
MARK
W.
CITY,
KANS.,
HICKS.
April 28, 1946.
PICKELL,
Washington, D. C.
I note the House has passed the ceiling and subsidy bill. If the
Senate will just O. K. the House action I am sure it will straighten out this
damnable black market that seems to exist all over the country.
If this is done I believe the cattle business will soon get back on a sound basis,
and we will know better how to proceed with our business.
Yours very truly,
DEAR
SIR:
HENRY
KENDALL,
Mr.
MARK
W.
PICKELL,
KANS.,
C.
KIRK.
April 27, 1946.
Secretary, Illinois Cattle Feeders,
Washington, D. C.
D E A R S I R : I was glad to see the action taken by the House on the ceiling and
subsidy thing. From what I knowT about the opinion of the cattle operators in
this part of the country I am sure a very large majority of them feel as I do
about this matter.
We surely hope the Senate will see fit to approve the action of the House. If
they do I believe the meat deal will soon right itself. Good cattle may go up
for a while but I venture to say that in 8 months the market will adjust itself
E X T E N D PRICE CONTROL AND STABILIZATION ACTS OF 19 4 2 1170
satisfactorily. This would bring an end to the black market in meat which is
growing by leaps and bounds.
We are hoping for success in the matter. I am
Yours very truly,
JOE BURNETT.
PLAINFIELD, I I I . ,
April 27, 1946.
ILLINOIS C A T T L E F E E D E R S ASSOCIATION,
Chicago, III.
Here is a short letter of thanks for the fine work you have done in
presenting facts and the livestock feeders' views to the House of Representatives.
Please thank the Congressman who helped pass the amendment to the OPA
extension bill that will eliminate ceilings on hogs, cattle, wheat, corn, and oats.
I have some cattle on feed at present. I have had several different local buyers
try to buy them during the past week, usually offering to pay me the subsidy
which I have coming if I sell through the yards.
No farmer in my community is in favor of Congress continuing subsidies on
livestock beyond July 1, 1946, or on meats either. It just makes things worse in
trying to plan production.
If you can give the Senators the truth about livestock feeding as well as you did
the Congressmen I am sure they will pass the bill like our Congressmen did. It is
to the consumers' advantage as well as the producer, for if OPA continues as it has
the past year, not 1 animal in 10 will sell in the legitimate market.
Very truly yours,
D E A R SIRS:
EDWARD J.
PLEASANT PLAINS, I I I . ,
MARK W .
CLOW.
April 26, 1946.
PICKELL,
Executive Vice President, Illinois Cattle Feeders Association.
Just a word of appreciation for the good work you and your worthy
colleagues have done and are still doing for the cattle industry.
Unless there are many changes made, we in the cattle-feeding belt will be compelled to entirely eliminate our feeding operations. At present..we are completely
out of cattle.
I am 100 percent in accord with the late action of the House of Representatives
and sincerely hope the Senate will concur in their efforts to throttle the "power
drunken" actions of the no longer needed OPA.
Unless we midwestern feeders can start operating again soon, beef on the
average American dinner table will be a thing of the past.
Wishing you much strength, patience, and success in your next trip to Washington, I am
Yours truly,
DEAR MARK:
P. S.
Accept this little token to help the cause along.
GEORGE
BUCKLIN, KANS.,
Mr. MARK W .
E.
WITTY.
April 27, 1946.
PICKELL,
Secretary, Illinois Cattle Feeders Association,
Washington, D. C.
D E A R M R . P I C K E L L : We understand that you are in Washington to appear
before the Senate committee that is considering livestock subsidies and ceiling
prices.
For a period of several years we have been extensive farmers and cattle raisers,
handling both cow herds and steers.
We are very much opposed to subsidies, for subsidies in the long run only add
to our national debt, livestock ceilings are causing black markets and breeding
contempt, we would much prefer to let supply and demand regulate this industry.
Yours very truly,
H . P . MCCAUSTLAND.
GEORGE H . MCCAUSTLAND.
E X T E N D PRICE CONTROL AND STABILIZATION ACTS OF 19 4 2
CHADWICK, I I I . ,
Mr. MARK W.
1171
April 27, 1946.
PICKELL,
Chicago, III.
Received your letter and was glad to hear that there is hope of
throwing the subsidies and price control out.
It is high time this was done so that us feeders would know where we wrere at.
I have 147 steer calves on feed and with this boost in the price of corn and at
present prices am losing money every day.
I was elected chairman of the Carroll County Feeders Association and am very
anxious to see price control removed.
Enlosed a clipping by Merryle Rukeyser on OPA that I think is very good.
Hoping that your trip to Washington will bear fruit and wishing you good luck,
lam
Yours very truly,
DEAR
SIR:
J.
CLAYTON
LUCAS, KANS.,
Mr. MARK
PICKELL,
KAUL.
April 25, 1946.
Secretary, Illinois Cattle Feeders Association,
Washington, D. C.
D E A R M R . P I C K E L L : At the request of the officers of the Kansas Livestock
Association I am directing this letter to you in interests of the livestock industry
and the present fight that is going on by the Senate, whereby either they will
approve the House action on meat subsidies and ceilings or will alter it again.
First of all I wish to explain the copies of the two letters enclosed herewith,
the one is a letter that I wrote to President Roosevelt almost 3 years ago, giving
him facts that existed at that time, which of course was during the war, but many
of them will still apply, especially that the Government let the livestock industry
alone and let supply and demand govern our free competitive markets, that the
longer OPA messed with ihis big industry the worse it would get and it now has
proven out just as I stated to him in the letter, also I have enclosed a copy of the
letter I received by Arval Erikson, who was head of the Meat Pricing Department
of the OPA at that time and to the best of my knowledge, still is, as you can
readily see, he sent me a very crude letter only explaining what they thought,
I have met Mr. Erikson personally, several times, once when I was called back
to Washington and at Kansas City at a hearing, also I believe in Chicago, he is
a nice appearing young man, but he needs to get actual feed-lot experience, what
he needs ts to get some good old manure on his boots, instead of taking a pencil
and charts to show the livestock industry what to do, every time that the OPA
called us in and we thought that we could discuss with them the future of the livestock industry, we found that the ball game already had been played and the umpires had made their decisions, when any of us would even as much as suggest
a very constructive move to the better, we repeatedly were told that they could
not change their program, since it had already been previously set up by them
and could not be altered or it would destroy the whole thing, that is still the same
argument they are using today, that the way Congress sent the bill to the Senate
would bring ruination to them.
I wonder if they have ever given it a thought, that they have almost ruined the
meat situation all over the United States, all during the war, it was messed up,
we could have had all the meat we wanted and needed at all times if left alone,
now the war has been over almost a year, we have more cattle in the country than
ever, but they still have it messed up with ceilings and subsidies that consumers
are not getting enough meat, every move they have made has proven wrong, so
I think it is high time for the livestock industry to take the bull by the horns,
explain to the Senate, that instead of trying to smooth over the House action,
they should make it such as to lessen the power some more for the bureaucrats.
Just why has Chester Bowles in his talks over the radio not explained to Mr.
and Mrs. America that the subsidy they are paying is hidden in each and every
purchase sales ticket and that in order to get the billions back he is spending of
their tax money, that for at least 50 more years they will always have their
grocery and meat bill added on until such time that these billions are paid back,
that with the increase in wages and the funds they have they had better pay their
bills now, but no, he and Mr. Porter are telling the public what a "bang up" job
they have done. Well, if they have done such a terrific job, just why, after the
war is over, are they complaining about the pressure of inflation, what have they
been doing with it for the last number of years, of what good is it to have meat
E X T E N D P R I C E C O N T R O L A N D S T A B I L I Z A T I O N A C T S OF 1 9 4 2 1172
prices at 1/ per pound but no meat is available? Would it not be better to raise
meat 5 or 10 cents per pound and then if folks want it, they are able to get it.
Just ask the housewife those questions, take a vote on the above issue and
you will find that they do not want ceilings, price control, or subsidies, but want
meat. We do not want high prices and they will not go too high, they can never
go as high as some of the boys are paying in the District of Columbia under the
black market. Who made the black market? The OPA, the one and only.
I do not have to explain how and why; they know.
If they would come out and tell the truth, that all they are really interested in
is their job and the salary they get, along with some prestige, instead of that
"old hooey" that they are only interested for the welfare of the public.
In closing I wish to state that we have gotten ourselves in a very bad situation,
also our lawmakers have lost the issue for what they are supposed to do, if and
when, those that are only appointed to a position in Washington, D. C. and never
were elected, their name never did appear on a ballot, can tell and try and force
130,000,000 people what to do, including the President, Congress, and Senate,
we are living in a sad United States of America when the bureaucrats and labor
racketeers can do this. So let us get rid of subsidies and all price controls, especially as far as the livestock is concerned, let the livestock industry try again for
6 months at least to run their own business and see if or not meat will be available
at not a high price but at a decent figure, if they cannot get it done by that time,
they can turn it back to the boys now in charge. We are getting darn tired of
even paying taxes for the thousands drawing salaries. Let them get themselves
a decent job, one that the world would be proud of them.
Respectfully,
FRED
K A N S A S LIVESTOCK
W . H E I N E , Rancher
ASSOCIATION,
and Vice President.
JULY
Hon.
FRANKLIN
D.
ROOSEVELT,
1,
1943.
President of the United States, Washington, D. C.
(Personal attention.)
D E A R P R E S I D E N T : I have been repeatedly asked by the farmers and livestock
men of this community if anything could not be done in regards the situation that
now exists for the producer and feeder of livestock, they ask why I do not wire
our Congressman or Senator, but I felt it much better to write to our Chief
Executive, for I have always found that if you wish to get anything done and done
right, to contact the biggest and busiest man and give him your first-hand information and version of whatsoever the trouble might be, that is the reason I am
writing this letter direct to you, and my only hope is that you will see fit and take
time to personally read the contents hereof.
I herewith wish to fully reflect the feeling of every man engaged in the livestock production and feeding of same. The worry of these men is not so much
the dollars; it is the problem of being able to go ahead, in contribution to the war
effort. These men have boys of their own, or otherwise close to them, in the
armed services; they do not want to let them down, they resent the prospect of
being forced to let them down, especially when that is being brought about by
youthful, inexperienced, full-of-theory, empty-of-practice men and youths. The
roll-back on prices and the subsidy, they feel, has not only brought the cattlemen's situation into a desperate position, it is tragic for future years to come;
it will not only stop the cattle industry in the future, but it is already halted,
whereby a big flow of stocker cattle will go to market this summer and fall, but
no beef cattle, with no encouragement to feed whatsoever. Who will want to
purchase these; they will be a glut and burden on the market. At the present
prices of feed cattle no Corn Belt feeder will take them out, and you no doubt
can see the handwriting on the wall, the catastrophe that will hit one of our biggest
industries. Keep feed cattle in line with corn and other feeds, with wages of the
laboring group, who are earning more now than ever, the cattlemen are not hard
to get along with; if prices would just have been left alone as they were before the
roll-back came, that was high enough, and also you will see a steady flow of beef
cattle coming in; there is no reason for a shortage.
In your quotations, you have stated that if and when a better plan could be
worked out, this one could be discontinued. The best plan and most cooperative
plan, is the law of supply and demand. Let the Government keep out, and I
assure you a better feeling will exist; prices will not go too high; cattlemen don't
want them to; they only want a fair margin. You do not hear the airplane
factories or building contractors hollering. Why? Because they know just
E X T E N D PRICE CONTROL A N D STABILIZATION ACTS OF 19 42 1 1 7 3
how much margin and profit they are going to make before they start, when labor
goes up and other prices go up in materials, they bid up on their contracts; consequently, they are satisfied, but the cattlemen have loss of livestock to battle
from sickness, have labor shortage, must do their own work. We have men here
that retired years back that are now out on their own ranches and farms doing
the heavy work; their sons have been called into service; they are wondering the
outcome of the cattle they have on hand, just what to do with them; they cannot
ship them on the present prevailing prices, because they cost too much firsthanded. Who will pay their loss? Who will compensate them for their work
and untiring efforts for the feed they bought and raised and put through these
cattle? Chances are, no one. If they have a heavy loss, they must just place
a bigger mortgage on their ranch; that will be the answer. Also already they have
made the remark that unless they can make a profit on their cattle, they cannot
and will not be able to buy^any more bonds for the great cause for which they are
needed.
Regarding all the trouble and difficulties in Washington, the average layman is
not interested in that; the thing they are most interested in is whether the Nation
is to have cheap food and high wages or whether all the elements of society will
bear fairly and with reasonable equity the cost and burden of this war. The
farmer or the cattlemen cannot be excused if they allow the labor group " t o perpetuate this outrage of higher wages upon this great country." We must have a
fair price in the market for our products and livestock, they cannot be separated
from expanded and maximum food production.
Knowing that you are a great man and big enough, that you have vision to see
our America of future years, that you can see the mistake that has been made,
that you will do all to correct it and that everyone might enjoy our good way of
wholehearted American cooperation. "All for one and one for all"; let us all keep
staying united. I remain
Respectfully,
FRED
W.
HEINE,
Countryman, Farmer, and Banker,
Director of Kansas Livestock Association.
O F F I C E OF P R I C E A D M I N I S T R A T I O N ,
Washington, D. CJuly
24, 1943.
M r . FRED W . HEINE,
The Farmers State Bank, Lucas, Kans.
The White House has asked to review your letter of July l r
1943, in which you discuss several aspects of the livestock production program.
You feel that the law of supply and demand should be permitted to operate with
respect to cattle production and there would then be sufficient quantities of meat
to satisfy all of our requirements.
We do not believe that it would be practicable to remove price ceilings on meat
and permit the law of supply and demand to operate without some artificial
restraint. It is very evident that meat prices would increase very rapidly and
many people would find it difficult if not impossible to obtain their fair share of
our available meat supply. Consequently, it is essential that meat prices be
regulated in the same manner as other food prices are regulated.
We have no intention of establishing prices which will make food production
unprofitable. Our principal concern is to obtain adequate quantities of all types
of essential foods and, at the same time, maintain a stable price structure. In
this connection, we are working in close harmony with the War Food Administration so as to develop well coordinated programs which will accomplish this
objective.
Sincerely yours,
A. L. Erikson,
DEAR MR. HEINE:
ARVAL L.
ERIKSON,
Head, Meat Section, Food Price Division.
BUCKLIN, KANS.
MARK W .
PICKELL,
April 29, 1946.
Secretary, Illinois Cattle Feeders Association,
Washington, D. C.
D E A R S I R : I understand that you are to appear before the Senate committee on
Wednesday when it considers livestock subsidies and ceiling prices.
E X T E N D PRICE CONTROL A N D S T A B I L I Z A T I O N ACTS OF 19 4 2 1174
What I write now is a composite of the conclusions reached after talking to top
livestock producers in Kansas, Oklahoma, Texas, New Mexico, and Colorado
during the past 6 weeks. I have bought and received cattle in all of these States
this spring, and have sold a good many of my wheat-pasture-wintered cattle to
go to eastern Kansas, Missouri, and Michigan so I have really contacted a good
cross-section of thought in this territory.
In brief, the conclusions reached add up to about the following thought:
Subsidies: (a) Every producer is against them. Why take money out of your
left pocket and put it into your right, taxing yourself to maintain a crew to do
this job?
(b) Subsidies in the long run merely add to the already tremendous national
debt, and if we are to pay this debt it will have to be lowered instead of increased.
Ceilings: Livestock ceilings are causing widespread black-marketing to develop.
These black markets are breeding contempt for law and order in both producer
and consumer, and in so doing are becoming the most dangerous menace possible
to the mental health of our Nation.
If ceilings are lifted, prices will undoubtedly rise, but this will quickly be
righted by the age-old law of supply and demand. Consumers will buy meat
until it gets too high for them, then switch to beans, carrots, corn bread, and
other cheaper foods, then meat prices will drop back down to where the average
man can afford to eat them once more.
If producers get higher prices, they can and will pay more taxes. Let us pay
this national debt while both prices and wages are high, and get this Nation
back on solid financial ground. We are the greatest Nation on earth, but we
cannot long endure unless we get financially solvent and have our operating
overhead lowered.
Yours truly,
E.
A.
STEPHENSON.
Mr. P I C K E L L . A S you can see, these gentlemen are in the Corn
Belt and are in a desperate situation. They feel if the Gossett amendmentto the Banking and Currency Committee bill is adopted as put
in by Mr. Gossett, and the Flannagan amendment, that they will
have some hope of being able then to go back to breeding.
Since April 18 a wave of optimism has swept over these Corn Belt
livestock-feeding States. The feeders feel that if the Senate will but
concur in the action taken on OPA extension by the House, then
before long they can once more start work toward providing an ample
supply of meat for the Nation's tables.
We would particularly ask that you include in the Senate version
of this bill the amendments introduced by Congressman Gossett of
Texas and Congressman Flannagan of Virginia and adopted in the
House bill. They are contained in section lA, subsections (b) 4 (A)
and (b) 4 (B); and, in section 6, all of subsection (B). We frankly
would like to see both of those sections included in the bill you report
out, exactly as they have been written. Those are good provisions.
Our only criticism is that even at the best they cannot become operative before July 1 when they should become effective right now
while feed grains are still being planted.
Farmers should be told that under these provisions, the ceilings on
cotton, peanuts, wheat, corn, oats, soybeans, sorghums, hogs, and
cattle, must come off early in July. Therefore, before it is too late,
farmers should plant as much cotton and peanuts, corn and sorghums,
and breed as many sows for fall pigs as practical, and raise as many
soybeans as they can,, so that if the price does rise they can take advantage of it.
The cattle feeders should be told of it so that if the abnormally
warm weather so far this spring is a forerunner of a dry season which
forces thin range cattle out from the Southwest, the mountains, and
the Northwest as is feared in many quarters, then these cattle feeders
E X T E N D PRICE CONTROL A N D STABILIZATION ACTS OF 19 42 1 1 7 5
of the Corn Belt can be ready to step in and buy, where they have the
feed, and thus prevent a price disaster to the range country.
The packing-house workers of the CIO should be told of it, and
told that under these provisions farmers will before long once more be
filling their feedlots with cattle and hogs, and that the marketing of
this livestock will once more give a full week of work at the advanced
pay to the workers.
And the housewife should be told that while it will be very difficult
for her to get meat over the summer, particularly after the run of fall
pigs ends in June, the obstacles that have prevented the feeding of
livestock for market are being removed, and she can look forward to
having an ample supply for the table at a price she can afford to pay.
I think we are going to have the worst meat shortage this summer
we have ever seen at any time in American history. Your hog run
will finish up by June. We had a big pig crop and you will have
more hogs running from June than we had last year.
Then from July on your hog run will decline and as these communications show, they are just simply not being put back into the feed lot.
Senator B A R K L E Y . Mr. Chairman, may I ask a question?
T h e CHAIRMAN. Y e s .
Senator B A R K L E Y . Mr.
Pickell, can you make any suggestions
where by any legislative action by Congress we can hasten the pig
crop this fall? If you can, I would like to know it and cooperate
with you.
Mr. P I C K E L L . All you have to do is to give the fellows assurance
that price control will come off, and they will take care of the pig crop.
Senator B A R K L E Y . I have seen it stated that there is an organized
effort to delay action on this bill, but you say that we should let the
farmers know right away what we do about this.
As a matter of fact, we are trying to hasten the hearings here so that
we can report something out of this committee to the Senate. I am
not at all facetious in suggesting that there is no way to guarantee that
this bill can be passed, or whatever is to be done on any day or in any
week.
Mr. P I C K E L L . That is very true, My only thought is this: If you
gentlemen will report out in your bill those two amendments just
exactly as the House put them in, the farmer will feel confident that
the rest of the Senate will back you up.
Senator B A R K L E Y . Of course, I don't think anybody knows exactly
what the rest of the Senate will do about anything.
Air. P I C K E L L . The fartner has always been a speculator on nature
and the weather, and I think he would take a chance on that.
Senator B A N K H E A D . D O I understand you to predict that we will
have the worst meat shortage in the history of this country?
Mr. P I C K E L L . I think so. This summer.
Senator B A N K H E A D . Well, do you think that is a prudent time to take
the ceilings off of prices?
Mr. P I C K E L L . I do, definitely.
Senator B A N K H E A D . When you have got such a tremendous
scarcity?
M r . PICKELL. I d o .
Senator B A N K H E A D .
that?
Why?
What will happen to prices if you do
E X T E N D PRICE CONTROL A N D STABILIZATION ACTS OF 19 4 2 1176
Mr. P I C K E L L . If you don't take the ceilings off you are going to
have a permanent emergency. It will just simply get worse and
worse and worse. Let me give you, if I might, some figures of the
Department of Agriculture.
Their yardstick for measuring
Senator B A N K H E A D . I don't care to go into anything except your
philosophy about that. I have done that. You say notwithstanding
the very great scarcity you would take that particular time to take
the ceilings off?
M r . PICKELL. Y e s , sir.
Senator B A N K H E A D . All right. That is all.
Mr. P I C K E L L . The cure for high prices is high prices.
Senator B A R K L E Y . D O you mean to say if we don't take the ceilings
off, farmers are not going to let nature take its course and produce
meat?
Mr. P I C K E L L . That is right. If we let nature take its course
Senator B A R K L E Y . Well, it has to take its course if there is any
meat produced. Do you mean deliberately they are not going to
breed hogs?
Mr. P I C K E L L . H O W can they? How can they?
Senator B A R K L E Y . Well, is the ceiling on hogs high enough to
justify breeding?
Mr. P I C K E L L . Not with your present price of corn, it is not. Your
farmer has no assurance he will be able to buy corn at all. In any
event he can make more money by selling his corn than by feeding it
to livestock. On the cattle, he definitely cannot.
Senator B A R K L E Y . But the hog situation and the cattle situation
are not necessarily parallel, are they?
Mr. P I C K E L L . NO. They usually are. The price usually goes
about the same, but so far as making money is concerned, that doesn't
necessarily apply.
I never personally have been able to figure out just exactly a fair
basis for measuring profits in feeding corn to hogs. I know this: that
when the ratio gets to 14 to 1 for corn your hog production increases.
When it gets below 12 to 1 it decreases. Right now I think it is
about 11—or maybe around 12 at the present time.
Senator B U C K . Mr. Chairman, may I ask the witness what that
means? Twelve bushels of corn to one——
Mr. P I C K E L L . T O 100 pounds of hog.
Senator B U C K . And 1 4 to 1 ?
Mr. P I C K E L L . Fourteen to one. When it gets above that you have
an unfavorably large increase in your hog production.
Senator B A R K L E Y . The more corn you feed hogs, the bigger they
get and the faster they get to the market. That is perfectly natural.
If you skimp him on his feed he will not develop as fast as if you give
him all he can eat.
Senator B U T L E R . Y O U don't mean 1 4 bushels of corn will produce
100 pounds of meat, but that for every 100 pounds of meat you feed
12 to 14 bushels?
Mr. P I C K E L L . N O , I mean 1 0 0 pounds of pork is worth 1 4 bushels
of corn. Then you get an expansion in your production, but where
it is below that you get a reduction.
Senator B U C K . I never did understand that.
Mr. P I C K E L L . In the April 1945 issue of the Livestock and Wool
Situation, put out by the Bureau of Agricultural Economics of the
E X T E N D PRICE CONTROL A N D STABILIZATION ACTS OF 19 4 2
1177
Department of Agriculture, they compiled a table showing the margin
of profit in feeding cattle. They took the assumption that a steer that
was bought in September, October, or November, at the average price
at Kansas City, at a weight of 700 pounds, was fed 55 bushels of corn,
three-fourths of a ton of loose alfalfa hay, 50 pounds of cottonseed
meal, and marketed at the average price the next March, April, or
May, their gross margin for 1940-41 showed a gross profit of $8.79 a
head; 1941-42, $18.92 a head; 1942-43, after the OPA had put ceilings on meat, but the packers got around it by selling the carcass
without boning it for the price formerly boned, the gross margin was
$19.06.
Then in 1943-44 the OPA put on the roll-back subsidies and your
farmer got $3.47 a head, for buying that steer in the fall and carrying
it until the next spring.
For 1944-45 their figures show an initial figure of $6.12, but the
price went up in May. This is based on March and April. My
figures show $8.43. In 1945-46, based on buying a steer last fall and
carrying him until this spring and marketing at the March and April
average price they were making $1.28 a head.
It would take about 4 hours a day to feed that steer. They handle
them, according to the figures, 6 months or 720 hours. So your
farmer who bought that steer last fall and has been feeding him has
made the magnificent sum of 4.4 cents an hour for his work, and yet
they talk about the huge profit there has been in the livestock industry.
Senator M U R D O C K . H O W many hours a day did you say it would
take?
Mr. P I C K E L L . For a carload it would be about 4 hours, 2 in the
morning and 2 at night, on the average.
Senator M U R D O C K . A carload?
Mr. P I C K E L L . Twenty-five head in a carload, so he would make
$32 on a carload, and it would figure out that he would make the
great sum of 4.4 cents a head, and the result of that is your shipment
of feeder steers from the four largest feeder stock markets—Omaha,
Kansas City, St. Paul, and Chicago.—during the first 3 months of
this year were 73 percent of last year, and in the first 3 weeks of
April they were only 66 percent of last year.
In other words, your situation is last year you had a meat shortage; this year it is going to be much worse, and the indications are
it is getting absolutely worse and worse all the time. Just the figures
of your actual shipments back to the country complete y verify what
these men told you about what they are doing individually. The
remedy is simple. Encourage the farmer to feed out to heavyweights
the greatly reduced number of hogs and cattle now available, regardless of grade, and I would like to throw in here that the 1st of January
of this year there were only 72 percent as many steers on farms as
there were January 1,1920, which was 2 years after your peak number
of cattle was reached in the First World War.
Senator M U R D O C K . When you say—I forgot what you said about
the number of cattle available—what was your statement again
on that?
Mr. P I C K E L L . That there are 7 2 percent as many steers—that is,
the 1st of January, as there were in 1920.
Senator M U R D O C K . Of steers, where?
Mr. P I C K E L L . On farms and ranches.
Senator M U R D O C K . H O W about on the range?
EXTEND PRICE CONTROL A N D STABILIZATION ACTS OF 19 4 2 1178
Mr. P I C K E L L . That includes the range. There are 72 percent as
many steers on the farm, range, and ranches the 1st of January this
year as there was the 1st of January 1920.
Senator MTJRDOCK. N O W does that mean that the population of
cattle has decreased?
Mr. P I C K E L L . That means that your number of steers has decreased
since 1920.
Senator MTJRDOCK. About the whole number of cattle, how about
that?
Mr. P I C K E L L . The whole number of cattle has increased. There
was an increase of 10,676,000 head in milk cows and an increase since
1920 of 1,288,000 in meat cattle.
Senator MTJRDOCK. That seems to me to be significant, that you
have had an increase in your total beef cattle population and still a
decrease in your steer population. Do you mean that the proportion
of steers has gone down in comparison with female cattle?
Mr. P I C K E L L . That is exactly right.
Senator MTJRDOCK. Can you blame the OPA for that?
Mr. P I C K E L L . Yes, for this simple reason, that they have been
prevented by their methods of utilization of the beef cattle from feeding just as heavy as they possibly could; then when those beef steers
did not produce the necessary meat the packers had to go out and buy
range cattle, many of them two-way cattle, as they were called. They
could be either butchered or fed. They should have gone back to the
feedlots to have more meat put on them. They had to get them in
order to produce as much meat as they could.
When that would not produce the meat, then they had to go out
and kill the calves. There has been a great slaughter of calves.
Senator MTJRDOCK. You mean the decrease in the steer population
results from the slaughter of unfinished steers and smaller weight
steers?
Mr. P I C K E L L . That is right.
Senator MTJRDOCK. And that they haven't fed them out to heavy
steers?
Mr. P I C K E L L . That is right. You have right now from all herd
cows, according to the Government figures, and that is the only
record we have, you have got probably a record number of cows 1 to
2 years old on the farms. That figure is 14,000,000—I think a little
over 14,000,000—compared to 10,000,000 in 1920.
On the other hand your number of steers on farms has decreased
from 10,000,000 to 7,200,000.
Senator C A P E H A R T . Don't you mean the number of steers that are
on feed?
Mr. P I C K E L L . N O , I mean the total in the whole country. The
number on feed—I think it is in the booklet—the first of the year
is down quite sharply.
Senator MTJRDOCK. I assume that your yearling steers haven't
decreased in number; I would assume from your explanation that
the steers above yearlings-—•—
Mr. P I C K E L L . Are decidedly down.
Senator MTJRDOCK. Have decreased and as a result of that your
whole steer population, including your yearling steers, has gone down;
is that right?
Mr. P I C K E L L . Yes, sir; that would be the only assumption you
could have.
E X T E N D PRICE CONTROL A N D STABILIZATION ACTS OF 19 42 1 1 7 9
Senator B A R K L E Y . Mr. Chairman, may I say this: Secretary
Anderson yesterday testified there are now about 81,000,000 head of
cattle in this country.
Mr. P I C K E L L . That is right.
Senator B A R K L E Y . And compared to about 6 2 , 0 0 0 , 0 0 0 average from
1935 to 1939.
M r . PICKELL. Y e s , sir.
Senator B A R K L E Y . Which
means practically 2 0 , 0 0 0 , 0 0 0 more head
of cattle now than there was in the average period 1935-39. How do
you break down this situation? What has happened to those 20,000,000 extra cattle?
Some of them, of course, are dairy cattle, but the proportion is no
greater than it was in 1936-39.
Mr. P I C K E L L . In the first place, you are comparing there a situation
now with the very poorest time you possibly could. That was right
after the drought years when there were thousands and thousands
of head
Senator B A R K L E Y . Well, the average in 1 9 3 6 - 3 9 was not unfavorable by a comparison with previous periods of averages of 4 or 5
years, was it?
Mr. P I C K E L L . Pardon me?
Senator B A R K L E Y . I say, the average for that 5-year period—4 or 5
years, 1935-39—did not compare unfavorably with the average number of cattle at any previous period of the same length, did it?
Mr. P I C K E L L . Well, your total number of beef cattle in 1 9 3 6 - 3 9 — •
well, in 1 9 3 4 there were 3 6 , 0 0 0 , 0 0 0 head and then they commenced
to drop down to 3 0 , 0 0 0 , 0 0 0 head in 1 9 3 9 .
Now it has come up to 41,000,000 head. You have had an increase
there.
Senator B A R K L E Y . We have got more cattle now on feed in the
United States than we ever had.
Mr. P I C K E L L . But they are milk cows.
Senator B A R K L E Y . I don't understand that, when the dairy people
have been coming up here for 2 or 3 years and saying they are going
out of business and killing their dairv cattle off.
Mr. P I C K E L L . In 1 9 2 0 we had 3 0 , 2 5 1 , 0 0 0 head—that is your milk
stock. In 1 9 4 5 it was 4 0 , 5 3 8 , 0 0 0 bead.
Senator M U R D O C K . Senator Barkley has called to your attention
all this information that we have been receiving for the last few years
about dairymen sending their herds to the market in a wholesale way.
Evidently, that is not borne out by these figures.
Mr. P I 6 K E L L . These are the official Government figures.
Senator M U R D O C K . Well, I. am going to ask you if in your opinion
the increase of over 10,000,000 head of dairy cattle would corroborate
the statements we have had from dairymen that dairy herds have
been going to the market in rather a wholesale fashion?
Mr. P I C K E L L . The facts here would not indicate it.
Senator C A R V I L L E . A S I understood your testimony, that included
the heifers, not just the milk cows, but the heifer calves—that would
include the whole group of female cattle, would it not?
Mr. P I C K E L L . Yes; held for milk.
Senator H I C K E N L O O P E R . Mr. Chairman, may I call your attention
and that of the witness to the fact that in 1920 we had a population
in this country of approximately 101 or 102 million people, and in
EXTEND PRICE CONTROL A N D STABILIZATION ACTS OF 19 4 2 1180
1945 we had a population of 140,000,000 people, and that the dairy
cattle have not gone up as fast in their population from 1920 to 1945,
as the population of this country has gone up, thereby accounting for
a substantial reduction in the comparative number.
Senator MTJRDOCK. Y O U have an increase in your dairy herds of
33% percent.
Senator HXCKENLOOPER. I spoke of that, and you have 40 percent
in your population.
Senator MTJRDOCK. What did you give as the population figure?
Senator H I C K E N L O O P E R . I cannot give it *to you exactly. It was
about 101,000,000, just slightly o v e r i n 1920.
Mr. P I C K E L L . And 1 3 9 , 0 0 0 , 0 0 0 , I think, is your last census figure.
Senator H I C K E N L O O P E R . In other words, I think that is a significant
fact in comparing the number of your present dairy cattle with
1918-20.
Senator MTJRDOCK. I think that is very significant.
Senator H I C K E N L O O P E R . And might possibly account for, I think,
the factual statements that they have been slaughtering the dairy
cattle and that there are not as many producing—I should not say
producing—but as many female cattle that would go into the milkproducing end of it proportionate to the population as there was in
1920.
Senator MTJRDOCK. Your increase, Senator, in your population,
compared with the dairy cattle, I believe is about the same if your
figures are correct.
Senator H I C K E N L O O P E R . I believe the human population has gone
up more than the cattle population.
Senator MTJRDOCK. I am taking your figures, now—140,000,000
against 105,000,000, and there is the same percentage of increase in
the dairy herds.
Senator H I C K E N L O O P E R . I have not the figures at hand, the exact
figures, but it runs in my mind there is a differential there that would
show that the proportionate number is not quite as great
Senator M I L L I K I N . I suggest also the fact has to be considered that
by better feeding methods and scientific improvements the production of cows is greater now than it was in 1920.
Mr. P I C K E L L . I don't know anything about the dairy industry. I
only know the fact show that at the peak during this present war,
which was reached in 1 9 4 4 , there was 4 1 , 4 3 7 , 0 0 0 . That is your
cows, your heifers, your calves.
Senator MTJRDOCK. I think the statement made by Senator Millikin
is very important and significant. I know in my own State production per head of dairy cattle has gone up, I would say, very much.
Mr. P I C K E L L . I think that is correct.
The present condition of short meat supplies is the cumulative
result of policies forced by OPA and the Department of Agriculture
during the past 4 years:
1. OPA and USD A put in regulations forcing farmers to market
their cattle at lighter weights than normal despite the fact that
never at any time in World War II were there as many beef cattle
on farms and ranches as at the peak in World War I.
2. When the reduced numbers of beef cattle, steers in particular,
failed to produce the needed meat to supply greatly increased population that was working the greatest number of hours per week of any
E X T E N D PRICE CONTROL AND STABILIZATION ACTS OF 19 4 2
1181
time since the beginning of the century, and to supply the greatest
armed force this Nation ever put together, the packers had to buy
range cattle, many of which should have gone to the feed lots to have
their weights of meat increased 25 to 100 percent.
3. When these failed to supply the meat, the packers had to turn
to killing calves. Slaughter of calves during this war was the largest
ever in all history without a doubt. Those calves should have been
taken to the corn belt and their weights doubled or trebled so we
would have had more meat that was needed.
4. Not content with this, restrictions have been thrown around the
purchase of feeds so that the livestock feeder does not know right
today whether he would be permitted to buy the necessary feed even
if he could secure it.
Those are the causes that have led us to a point where on January 1
of this year there were only 72 percent as many steers on farms and
ranches as there were on January 1, 1920—a year after the last war
ended. They are the causes that have forced a decline in the number
of sheep on farms every year since OPA was created. Those are the
causes that, according to my reports, indicate a spring pig crop no
larger this year than last, despite an urgent request for an increase.
Those are the causes that, according to some doctors' reports, have
led to an increase in the number of cases of anemia during the past
year, cases that respond to dietary treatment of meat. I was told by
a blood technician of a large hospital in Chicago that a change in the
blood has been noted among donators during the past year.
Gentlemen, I say to you, that if there is any danger at all that a
lack of meat in the diet is causing a change in the healthy condition of
the blood of the people, it is imperative that nothing whatever be
left in the road of a restoration of a full supply of meat for the tables,
before a disastrous epidemic strikes.
The packing-house unions at Chicago have asked you to keep
controls on livestock. If they want to throw all of their members out
of work, let them continue that attitude. If you want the people to
go without meat and become an emaciated people like the Chinese,
keep this control on.
Shipments of feeder steers from the four largest stocker and feeder
markets during the first 3 months of this year have been 91,872 head
compared with 125,702 head last year. That is a rate of 73 percent
of last year when we had a shortage to meat to eat. Shipments for
the first 3 weeks of April.were.24,982 against 37,798 last year. That
is a rate of 66 percent of last year. It is getting worse. And it will
continue to get worse and worse unless you gentlemen do something
about it.
The remedy is simple:
1. Encourage farmers to feed out to heavy weights the greatly
reduced numbers of cattle and hogs now available, regardless of grade.
To do this, the ceilings on meat and livestock as well as the subsidies
must be removed so that the price of the finished animal goes to a
level that will encourage feeding instead of discouraging it.
You may ask how high this Would be. It would be to a level that
will encourage feeding for the production of as much meat as can be
sold, sold profitably at a price the housewife can afford to pay. What ^
price'that would be is beside the point. The important thing is that a *
85721—46—vol. 2
3
E X T E N D PRICE CONTROL A N D STABILIZATION ACTS OF 19 42 1182
free price would bring supply and demand into balance at a price the
housewife would pay, like it always has.
2. Remove the regulations that force packers to buy thin cattle
that should go to the feed lots to have their weights greatly increased.
This must be done to retore a margin between the cost of the feed and
feeder, and the selling price of the finished animal, so farmers will
start feeding again.
3. Restore grading to a prewar basis.
4. Remove the restrictions on purchase of grains and feed, and price
controls on them. Give the price an opportunity to restore a balance
between supply and demand in grain by causing farmers to plant and
harvest every bushel of feed grain possible. This should be done
immediately, while the crop-planting season is still on.
It was always the practice of the Russian peasants to store in the
attic of their farm home a full year's supply of wheat to guard against
a crop failure the next year. When Kerenski seized control in Russia,
he sent his cohorts to seize this wheat. A short crop came the next
year, and millions of Russians were reported to have starved as a
result of eating up this surplus.
Feed policies being put into effect by the Department of Agriculture
on grain right now are laying the foundation for exactly the same thing
in the United States if controls were kept on.
Disappearance of corn from the farms and visible supply between
October 1, 1945, and April 1, 1946, was 2,231,000,000 bushels compared with 2,071,000,000 bushels the year previous, or a rate of 107
percent. Remaining supplies on farms and in the visible were
1,096,000,000 bushels.
Last year the disappearance of corn from April 1 to October 1 was
1,040,000,000 bushels. The Department of Agriculture is right now
offering 30 cents a bushel over the prescribed maximum price for corn
in an effort to get 50,000,000 bushels to export.
As it is, the reserve stocks at the end of the year promise to be
dangerously low. If they are successful in their campaign, those
reserves will be practically exhausted despite reductions in feeding. A
crop failure then would be a complete disaster if price controls are
retained.
Yesterday Secretary Anderson made the statement here that this
corn bonus was to get the corn for the corn industries. He belittled
the hog raisers as criminals for having raised some hogs. The corn
bonus of 30 cents, according to his statement, is to get corn for the
industries, but when they put the cattle quota on it knocked the price
of cattle down. In other words, they can boost the corn price and the
Government stands the loss to take care of the corn industry, but when
the cattle quota is put on it is the farmer who has to bear the brunt if
that works out.
Now, your corn industry-—the industrial use of corn by the "wet"
process—the peak we have ever had was 132,358,000 bushels in 1942.
Since then it has gone down. I don't know whether it is significant
that that has happened since OPA has been in operation, but nevertheless the industrial use of corn has declined steadily.
Your primary market receipts for this industrial use—by the way,
some of the corn-products plants are at Decatur, 111.; some at Pekin,
111.; and some at Cedar Rapids, Iowa—not all of that corn comes to the
terminal markets, but your receipts of corn at the primary mjarkets
from the 1st of October up until last Saturday were 175,434,000
E X T E N D PRICE CONTROL AND STABILIZATION ACTS OF 19 4 2
1183
bushels. At that rate they should be well over 200,000,000 bushels
during the crop year.
In other words, there have been many, many years, in the whole
year from October 1 to October 1, you didn't get 175,000,000 bushels
of corn in the primary market. This year they have that much.
» Now, if the corn industries have not been able to buy that corn it
definitely is not the fault of the hog farmer because,he has not bought
one bushel that came to the terminal markets. It has been the fault
of the pricing system, and the hog feeders rather resent the implication that we have been using too much.
There is one thing they don't understand. That is that it has taken
about five bushels of this year's corn to do what four bushels has done
in a normal year because the corn has been so very terribly poor.
We had an example of what would happen in 1943 and the winter
of 1944. It became apparent to some of us early in 1943 that with
meat rationed, and slaughter restricted drastically, the supply of hogs
to move to market that winter would not only swamp the packers, but
unless it was handled swiftly and promptly, the corn reserves would
be seriously depleted. Starting in September 1943 an effort was made
to get the United States Department of Agriculture, the Food Administrator, and the OPA to be ready to take off ration points on pork
and to remove slaughter restrictions the minute a glut in the marketing
became remotely possible. This effort was continued all fall. But
they refused to even consider it.
By winter, the markets were swamped and the promised "floor"
under the market was shown up as but a delusion and a sham.
OPA did remove ration points on pork that year—in June, 6 months
after it should have been done. One month after they took off the
ration points, the market moved to the ceiling where it has been
practically ever since.
I have never seen farmers of this Nation so jittery over a crop as
they are over that for 1946. Where average corn yields from 1929
to 1940, inclusive, were 24 bushels per acre, the average from 1941
to 1945, inclusive, was 32.8 bushels. That is 136 percent. Even
allowing 15-percent increase for the increased yields of hybrid corn,
the yields have been 118 percent of average.
The average yield of wheat from 1929 to 1940, inclusive, was 13.4
bushels per acre. The average yield from 1941 to 1945, inclusive,
was 17.7 bushels or 132 percent.
The yield per acre of the four combined feed grains of corn, oats,
barley, and sorghums in the years from 1941 to 1945, inclusive, was
129 percent of the 1929-40 average.
Contrast these above-normal yields with those in some other countries that either were not in the war or were out of it early. Preliminary reports on the Argentine corn crop this year indicate a yield per
acre not over 50 percent of the long-time average. Yields per acre of
wheat for Algeria, Morocco, Tunis, Spain, and Portugal in 1945, due
directly to drought, were 61 percent of the 1935-39 average. There,
but for the grace of God, could be the United States. Farmers are
waiting in fear and trembling for Nature to even up here.
On last Wednesday, April 24, the chief weather forecaster at Chicago
issued a statement saying that [reading]:
The growing season in America's farm belt is off to the driest start since the
drought years in the mid-thirties, and general rains will be needed within 2 weeks
to maintain the present good-crop prospect. Weather runs in cycles and it may
EXTEND PRICE CONTROL AND STABILIZATION ACTS OF 19 4 2 1184
be that we are emerging from a wet cycle which has been very favorable for crops
since 1937.
If ceilings are maintained at parity and there is a short grain crop,
then every farmer who harvests this short crop is doomed to take a
below-normal income for the year whether he feeds his grain to livestock or sells it as grain on the market. And this right at a time when"
the Government is urging increases in wage rates for all other workers.
If a low average yield of grain resulted in a short crop and the price
was not permitted to perform its economic function of adjusting the
demand to the supply, then so much of that available supply would be
consumed early in the season that, despite rationing or any other
belated palliatives, famine could overtake the Nation before a new
crop could be harvested.
If the crops are good, the supplies large, then price controls are
not needed.
If they are poor, then price controls are the most dangerous things
imaginable.
If supplies are small, then all of the regulations that OPA and
USD A could put into effect would not prevent black markets. Those
who were forced to depend upon food through the regular channels
would be the first to starve just as they are now the first to feel the
pinch of the meat shortage.
We have had short crops in the past. But under a free economy
and a free price, there has never in the past been a time but what the
stores had meat and cereals to sell. There has never been a time but
what at the end of the year we still had a little reserve of grain.
We would appreciate it very much if you as a committee would put
into your bill'the Gossett amendment which says that [reading]:
In the case of agricultural commodities the Secretary of Agriculture is hereby
authorized and directed to make a determination as to whether the supply of the
commodity is equal to the domestic consumption of such commodity. When
such supply is equal to such domestic consumption he shall forthwith certify such
determination to the Administrator. The Administrator shall,within 10 days
thereafter remove all price ceilings with respect to such commodities. When the
production of any agricultural commodity for the past 12 months equals or exceeds
production of this commodity during the 12-month period from July 1, 1940, to
June 30, 1941, then such facts shall be certified to the Price Administrator by the
Secretary of Agriculture and such Administrator shall, not later than 10 days
after the receipt of such certification, remove all maximum price ceilings from
such commodities and all commodities for human consumption derived principally
therefrom.
Adoption of the two provisions written into the House OPA extension bill upon motions by Congressmen Gossett, of Texas, and Flannagan, of Virginia, will restore freedom of prices on most grains,
cotton, and livestock. We of the Corn Belt Livestock Feeders Association plead with the members of this committee not only to write
them into the bill that you are to report, but to let the farmers of the
Nation know that you have written them in so that those farmers will
be encouraged to produce just every bit of food this year that they
possibly can.
The C H A I R M A N . Thank you very much.
Are there any questions?
Senator B A R K L E Y . Yes. I would like to ask Mr. Pickell, did you
write this yellow pamphlet which you left with us?
M r . PICKELL.
I did.
EXTEND PRICE CONTROL AND STABILIZATION ACTS OF 19 42
1185
Senator BARKLEY. Did you write the last part of it in which you
with great eloquence cite the case of Joseph in the Bible and Caesar,
Mussolini, and Hitler?
M r . PICKELL. I did.
Senator BARKLEY. I wxm'T read it.
You refer to Joseph and what
he did in Egypt when they had a famine over there, and then you refer
to Caesar and say he also became the ruler of the destinies as an absolute despot over his people. So did Mussolini. So did Hitler. And
they all died violent deaths.
Then you add [reading]:
A few men who have proved their inability to lead, but have brought chaos,
confusion, and shortages in food, have seized control of the destinies of America
by seizing control of prices. They want to perpetuate that power.
I would like for you to name anybody in the Government of.'thjB
United States—you must have had somebody in mind when you
wrote that—will you name any single man in the Government of the
United States who desires to perpetuate or continue price control
for the purpose of continuing and perpetuating their power over the
destinies of the United States?
Mr. PICKELL. The gentlemen who are in the O P A want to continue
their power until price and production, supply and demand, come into
balance, and it will never come into balance, particularly^ the livestock industry, so long as that continues.
Senator BARKLEY. Well, you did not say that. You say these
gentlemen in the Government desire to perpetuate this control in
order to perpetuate their power. I would like to have some of these
people identified who want to do that. There may be a difference of
opinion about the wisdom of this legislation and about the continuance of price controls, or any other controls. I am interested in
the facts this witness has submitted, but I am not greatly interested
in insinuations against the good faith and the sincerity and the honesty
of men who are in the Government service of the United States.
I would like for you to name one single person in any of these
departments, whether it is Mr. Bowles—do you think he wants to
continue these controls in order to perpetuate his power?
H Mr. PICKELL. That seems to be the action that he is taking, the
actions which he wants to be put in are actions which will not bring
supply and demand into balance, therefore it would automatically
continue his power.
Senator BARKLEY. Mr. Bowles has repeatedly stated to this committee that he desires to get rid of these controls and get out of this
job as soon as possible. You think he desires to continue price control
in order to perpetuate his power? Your answer is " Y e s " to that?
Mr. PICKELL. Through that general organization, I do think so;
yes.
Senator BARKLEY. YOU think he is trying to continue these controls in order to perpetuate his own power?
Mr. PICKELL. Not necessarily his power, but the power of thfe
Government over prices.
Senator BARKLEY. Do you think Mr. Anderson, the Secretary of
Agriculture, has any such motive as that?
Mr. PICKELL. I don't think so of Mr. Anderson. No.
Senator BARKLEY. Do you think Mr. Small, the head of CPA, the
Civilian Production Administration, has had any such motive?
E X T E N D PRICE CONTROL AND STABILIZATION ACTS OF 1 9 4 2 1186
Mr. P I C K E L L . O P A is the only one to which I particularly refer.
Senator B A R K L E Y . Who else in the O P A wants to perpetuate his
power? When you perpetuate something you carry it on forever, do
you not?
Mr. P I C K E L L . That seems to be their general proposition.
Senator B A R K L E Y . That is what you think about them?
Mr. P I C K E L L . That is what I think about them; yes, sir.
Senator B A R K L E Y . And you expect this committee to be influenced
by your opinion that Mr. Bowles, who is the only, one you are willing
to name apparently, wants to perpetuate his power down in the OPA
forever—he is urging the continuance of these controls in order to
do that?
Mr. P I C K E L L . I think that the whole thing is wrong and should be
broken up.
Senator B A R K L E Y . That is a matter of opinion and I might agree
with you about a lot of your views on it.
M r . PICKELL. Y e s , sir.
Senator B A R K L E Y . But when men come here and impugn the motives and the honesty and the patriotism and the sincerity of men
in public life, I would like for them to name them, and I would like
for them to give the basis for their conclusion.
Mr. P I C K E L L . Simply the fact of the things that they advocate,
waiting until your supply and demand get into balance before they
take control off. That will never happen.
Senator B A R K L E Y . D O you think they want to perpetuate their
power just for the sake of it?
Mr. P I C K E L L . I think they are wrong. I think the thing ought to
be thrown out.
Senator B A R K L E Y . Mr. Bowles may be wrong. I may be wrong.
But I certainly don't want to perpetuate anybody's power and I
don't think 'Mr. Bowles does just for the sake of power, or for the
sake of perpetuating it, or anybody else in the Government of the
United States. God knows, we would all rejoice if tomorrow we
could get rid of it. I would thank Almighty God on my bended
knee if I could look forward to never getting another letter giving me
hell about something.
Senator B U T L E R . I don't want to extend the argument any further,
especially between different members of the committee, but I suspect
you base your statement here largely on the propaganda that has gone
out from the OPA agency for a continuance on its own part.
Mr. P I C K E L L . I did. That is very true.
Senator B A R K L E Y . Well, of course, what you call propaganda—
when you have got an organized propaganda against everything the
OPA is doing, you can hardly expect it to be supinely on its back and
not at least give people some information about what it is attempting
to do, when there is all of this organized effort in the United States
attacking its good faith and sincerity and everything else.
Congress created the OPA. It didn't just grow up.
The C H A I R M A N . I received, I suppose, up to date, about 3 0 , 0 0 0
communications from my own State favoring the continuation of
OPA. I think that was done in good faith.
Mr. P I C K E L L . SO do I . I think it is merely a wrong basis. I think
that particularly in the livestock industry we have got to get rid of
them so that the fellows back home will have more confidence. When
EXTEND PRICE CONTROL AND STABILIZATION ACTS OF 19 42 1 1 8 7
they get confidence then they will go ahead and feed their livestock
when they have the assurance that these regulations will not continue.
The CHAIRMAN. Well, thank you very much. We will next hear
from Mr. Downs.
STATEMENT OF JAMES C. DOWNS, JR., REPRESENTING NATIONAL
ASSOCIATION OF REAL ESTATE BOARDS, CHICAGO, ILL.
Mr. DOWNS. My name is James C. Downs, Jr. I am president of
the Real Estate Research Corporation, Chicago, 111. I am here on
behalf of the National Association of Real Estate Boards which is an'
organization of some 800 boards and 30,000 members.
The CHAIRMAN. Would you rather sit down?
Mr. DOWNS. NO, I would rather not, because I intend to use these
charts. I am more particularly appearing here on behalf of some
8,000,000 people who own properties in the United States.
I would like to point out to the committee that I represent the only
group in the entire economy which has had no price rise since the
imposition of its ceiling.
I represent the only group which has never been accused successfully
of a black market, because there isn't any possibility of a black market
in a rented dwelling.
Although the general economic factors in the movement of the
economy have clearly justified a horizontal increase in rents, that is
not what I am here to ask for. I am here to speak on behalf of an
amendment where a property owner if he had had an increase in
costs since the freeze date could apply to the OPA, could file his
increase in costs and could then get an adjustment in rent based on
his increased costs up to not exceeding 10 percent.
Now, with any studies of the general economy it would seem perfectly obvious that a segment of the economy which has been absolutely frozen into its position in the economy as of March 1, 1942,
or before, is entitled in fairness to some relief. We are not here to
advocate the abolition of rent control. We are not here even to seek
a horizontal raise in rents which is not justified by increases in the
general expenses.
I would like to point out just a few facts which I can show from
these charts rather readily.
The cost of living up until the end of 1945 is shown to be up 30
percent, whereas rents were up 4 percent since 1939. The fact is if
you analyze out this cost of living, 19 percent of it is rent. Therefore,
the landlords have subsidized—when you say the cost of living is
only up 30 percent, if rent had gone up as much as meat and food
and clothing, the cost of living would be up 50 percent.
The fact is that since January, as testimony here has shown yesterday and the day before, this cost of living is soaring more rapidly, as
based on Government indexes. What happens as a result of that to
the average owner of property in this country?
In the first place, his income is down at this level and the purchasing
power of the dollar has gone way below. His purchasing power at
the same level has been reduced sharply in the economy.
Another thing that happens directly as a result of this, with the
owner getting no relief whatever, hundreds of thousands of owners
in this country have been forced to sell their housing because its
E X T E N D PRICE CONTROL A N D STABILIZATION ACTS OF 19 4 2 1188
position in the economy of the country was reduced, so that they
could not afford to carry it in the light of the selling price which they
could get.
The fact is that thousands of veterans whp are looking for rental
houses are being forced by the situation in rent to attempt to purchase
houses when rental housing is what they actually need, but the thousands of owners who own the rental housing, who are forced into this
adverse position in the economy, cannot afford to continue to rent
houses.
Senator M I T C H E L L . D O you have any chart that shows the increase
in the sales price of property?
Mr. D O W N S . N O ; but the increase in the sales price, I believe, was
testified here by Mr. Bowles, is up around 50 percent.
Senator MTJRDOCK. Have you any information on this, whether or
not the house on being sold is occupied by the buyer or rented?
Mr. D O W N S . I do have information on that. Practically 100 percent of the houses being sold today are sold for occupancy by the
buyer. There is practically no purchase of rental housing in the
United States today in the single-family dwelling, which is the main
background of our American housing.
Senator M C F A R L A N D . A man could hardly afford to buy a house
at the price he would have to pay and rent it for the rentals he would
be held down to?
Mr. D O W N S . Yes; but the reason for that is not because the purchase
price of the house has moved up beyond the limits of what he could
reasonably expect. Here is the only successful control over prices
that has been accomplished by the Government. I think it is admitted generally, even by the OPA that that is a fact.
One other thing is that because your rents are so low you have
quite a hoarding of what little rental housing there is left in the
market. We know of any number of people who, because rents are
so low, are keeping a town apartment as well as their suburban house.
We know people, groups of young people, who come to the city—a
stenographer who might have gotten $125 a month before this present
emergency, now gets $200 a month. So she lives alone instead of
living with her girl friend.
Thousands of apartments are taken off of the market through
hoarding of housing.
I happen to be chairman of the Wyatt committee in Chicago. The
real need we have got to meet is to get rental housing on the market.
Now, under OPA pricing programs they are granting there is a
20-percent margin between this level of prices and the prices which
they will approve on rent for new dwellings. Factually, unless rentals
are allowed to come up modestly, and that is all we propose, you are
going to have a deterrent to the construction of rental housing in the
United States.
Senator M C F A R L A N D . What would you call modest?
Mr. D O W N S . Well, virtually all the urban rental housing in the
United States is covered by the OPA. There are areas which are
not covered but all the major urban centers of the country are now
under regulation.
Senator M C F A R L A N D . What do you call modest? I have had letters
from people who say that their sole support is the rental of one or
two houses. Maybe it is a widow woman. They had permanent
E X T E N D PRICE CONTROL A N D STABILIZATION ACTS OF 19 4 2
1189
tenants in their houses who had been there for several years and
they were frozen with prices down. They say they cannot live on
that rental, but what would you say would be a modest increase?
Mr. D O W N S . Our proposed increase—the maximum which we propose here is 10 percent. I happen to deal with several thousand
tenants and any tenants I have asked, "Do you think a 10-percent
increase in rents would be out of line?" I have failed yet to have a
tenant tell me, "No; I don't think you ought to get 10 percent more."
As far as I know the average tenant class in the United States are
worried about the removal of price control. It would be a real hardship if the rents went from $60 to $120, but if it goes from $60 to $66
he thinks it is a fair deal and so does the average tenant in the United
States.
I will say that the average person who owns this rental housing—
we will say this widow woman that owns it—is not the ogre that is
pictured as the vicious landlord. Our point here is that
Senator HICKENLOOPER. Mr. Chairman, I would like to get a
statement of Mr. Downs correctly. I understood you to say that
you had asked any number of tenants about an increase and you had
yet failed to have any tenant say no, or that he approved it.
Mr. D O W N S . NO. My statement was that I have asked several
hundred tenants what would they think of a 10 percent increase in
such a rent. "Do you think it would be unfair?" I have yet to
have a man say to me that it would be unfair. They all figure they
would go along on 10 percent. What they are worried about is a
30-percent or a 50-percent or a 70-percent increase.
Senator H I C K E N L O O P E R . My understanding was that they all said
they would object to it.
Mr. D O W N S . NO. They all said they would go along with 10
percent and think it is fair. Our housing is a national asset. I don't
thitik there ever was a time in the history of the country when we
would agree that housing was as great a national asset as it is now.
We have come to recognize in our rural areas that preservation of a
national asset is an objective we ought to maintain.
Senator B A R K L E Y . Are you recommending that we enact legislation so as to instruct the OPA to increase rents 10 percent?
Mr. D O W N S . NO. We are recommending that the committee
amend this bill so that the landlord who has an increase in costs,
taxes, operating expenses, decorating, and so forth, may file with the
OPA a statement of his increased costs. If those costs are up enough
to justify a raise in rents, of 6 percent we recommend that he be allowed to put in a 6-percent raise—that unless OPA can prove his
figures are false that he be given immediately a 6-percent raise, but in
no case should he be allowed to raise his rents over 10 percent even if
his expense is higher than that.
Senator B A R K L E Y . Of course, he can file all that now with the O P A .
Mr. D O W N S . Under the regulations he canfileit, but the only way he
can get a raise in rent is that if his net income in dollars, in the amount
of dollars that are of low purchasing power, is off by 3 percent or more
from what it was in the base period 1939-41.
Senator B A R K L E Y . The point is that if we attempt to write out
or spell out into the law itself any blueprint of what the OPA shall
do with every situation—if we do it as to rents a lot of people would
think we ought to do it as to everything else. It would be like Con-
E X T E N D PRICE CONTROL AND STABILIZATION ACTS OF 19 4 2 1190
gress trying to instruct the Interstate Commerce Commission what
rates the railroads should charge for freight.
Mr. D O W N S . I don't think that is true under the proposed amendment, Senator.
Senator B A R K L E Y . Well, I hadn't seen your amendment.
Mr. D O W N S . We have those amendments here and I would like
to have them distributed and put into the record.
Senator M I L L I K I N . Mr. Downs, how many rented houses are there
in the United States?
Mr. D O W N S . There are 1 5 , 3 3 4 , 9 3 7 housing units rented in 1 9 4 0 .
That has been somewhat reduced. There are 1 1 , 4 1 3 , 0 3 6 units owneroccupied.
Senator M I L L I K I N . D O you anticipate much administrative difficulty in applying your formula?
Mr. D O W N S . N O ; I don't.
Senator B A R K L E Y . Wouldn't practically every landlord come in for
a raise?
Mr. D O W N S . I believe that most of them would find conditions
which would warrant their petitioning, but I think that is no greater
job than the original registration. If the OPA cracks down on anybody that filed a false statement they will very easily have a statement of the accuracy they could expect.
I think on a sampling basis they could check it very carefully. I
don't think the administrative problem is insurmountable.
Senator M I L L I K I N . First of all, I think there are many inequities in
the present ceiling prices that should be adjusted. I am thinking
solely in terms of what it would involve in administrative machinery.
There would be hundreds of thousands of applications come in, each
one of which would have to be processed separately
What sort of an organization are you going to build up?
Mr. D O W N S . The way you could avoid that very easily would be
to give everybody a 6-percent flat increase.
Senator M I L L I K I N . But that is not what you are advocating.
Mr. D O W N S . We are not advocating it because we are trying to be
conservative.
Senator M I L L I K I N . The point I am wondering about—you have two
propositions there, what you have just now said, or your proposal
here. I am just wondering whether your proposal is practical considering the administrative difficulty.
Mr. D O W N S . We believe this: Since in no case would there be an
interim right to raise rents more than 10 percent and the public would
know that, the OPA could investigate such cases at their leisure, being
absolutely certain that in no case was 10 percent being exceeded.
It would save the public probably 3 or 4 percent because we think the
average raise would be somewhere around 6 percent.
Senator M I L L I K I N . It would be contended or it might be contended
that if OPA acted under broad categories and granted automatic
relief to large numbers of persons that it would be the same as an
automatic uniform increase.
Mr. D O W N S . Right.
Senator M I L L I K I N . D O you not really believe that is what it comes
to?
Mr. D O W N S . Well, we really believe, if you ask me, that the property owners of the Nation are more than entitled to a flat 10 percent
increase, yes.
E X T E N D PRICE CONTROL A N D STABILIZATION ACTS OF 19 4 2
1191
Senator M I L L I K I N . I think in many cases the landlord is entitled to
an increase and I am interested in a formula that will do justice in
those cases. I am also interested in not imposing further burdens on
an already overburdened agency. I am just wondering whether or
not you are going to snare OPA up with the processing of 15,000,000
applications each one of which has to be considered on a separate basis.
I wonder if your more practical course would not be to come right
out for a 10-percent increase because I think everybody can show a
10-percent increase.
Mr. D O W N S . Our feeling was that we didn't want to put the agency
in the position of making a 10-percent increase mandatory except
where it was justified. We believe that the whole economy justifies
it, but we want to have this probed. I think in your wisdom you will
select which of the two you believe will be the most effective with
the OPA.
Senator M I L L I K I N . Well, I have not made up my mind what to do
about it, but I would like to see a system whereby there would be a
better administration of justice to landlords in cases where they can
show increased costs.
Senator M C F A R L A N D . A S a'matter of fact, on new houses that have
been built since this act was passed the rentals are high enough and,
in some instances, even too high, are they not?
Mr. D O W N S . The O P A has to approve 20 percent above comparability. If you have a house that rents for $50 a month, and you build
one next door, you can rent it for 20 percent higher.
Senator M C F A R L A N D . But at the start you can rent it for whatever
you want to?
Mr. D O W N S . Under the O P A rent regulation you can rent it for the
first rent, but that is subject to review by OPA. The theory is that
they will not approve now more than 20 percent above comparability.
Senator M U R D O C K . Under the amendment, if the owner files a
statement under oath as to his increased costs, then the burden is on
OPA to disprove that?
M r . DOWNS. Y e s .
Senator M U R D O C K .
The owner is immediately entitled, under his
statement——
Mr. D O W N S (interposing). To a raise in rent not to exceed 10
percent.
Senator M U R D O C K . Coming back to Senator Millikin's suggestion,
does not the rent mandatorily increase on the part of everybody that
files such a statement?
Mr. D O W N S . I do not believe that people are going to perjure
themselves.
Senator M U R D O C K . I do not think they will, either; but is not the
net result of what you propose a mandatory increase in rent on the
part of everybody that files a statement?
Mr. D O W N S . On the part of everybody who has had an increase
in the cost.
Senator M U R D O C K . On the part of everybody that files a statement.
Mr. D O W N S . That is right.
Senator M U R D O C K . I think it is reasonable to assume that everyone
will file such a statement.
Mr. D O W N S . That is correct. But everyone will not come out
10 percent. Some will come out 4 percent, some 6 percent, some
7 percent. So, you do not have a mandatory 10 percent due.
E X T E N D PRICE CONTROL AND STABILIZATION ACTS OF 19 42 1192
Senator MTJRDOCK. N O ; but it seems to me that probably from an
administrative standpoint it would be far better for Congress to
arrive at a definite percentage increase rather than to pile up what I
agree with Senator Millikin would be an insurmountable administrative situation.
Mr. D O W N S . I think there is a lot of administrative merit to that
point of view.
Senator M C F A R L A N D . I think that what Senator Millikin and
Senator Murdock are thinking about is that everyone who did not
get the full 10 percent would be writing to his Senator asking why
he did not get it.
Mr. D O W N S . They would be writing to the OPA, too.
Senator MTJRDOCK. The Senator, of course, is a good mind reader,
but he did not read my mind. I do not think there would be any
need of writing Senators. I think the Senators would be removed
from the picture. When each one files his statement showing an
increase in costs, then the OPA is bound, as I see the picture, to grant
the increase under that statement.
Mr. D O W N S . That is correct.
Senator M U R D O C K . If each one of these owners files such a statement it seems to me that the administrative difficulty in trying to
arrive at what is right would be insurmountable. I am rather inclined to believe that there has been a lot of injustice in rent control,
not intentionally, but of necessity. Such injustices have occurred;
and I am rather inclined to the belief that if we are going to improve
the situation the better way to do it would be to grant a 10-percent
increase.
Senator M I L L I K I N . I would like to ask the witness this question.
Out of a hundred rental cases how many would not be able to show
a 10-percent increase in costs?
Mr. D O W N S . I would say, 40 percent.
Senator M I L L I K I N . SO that there would be a sizable number of
people that could not show a 10-percent increase in costs?
Mr, D O W N S . That is the maximum; yes.
I would like to point out this fact. We are letting our.city houses,
our urban dwellings, go to rack and ruin as the result of the fact that
people who rent them cannot repair anything. It is comparable to
the case of a farm, where the farmer puts a field in corn every year
and finally lets it dwindle down to nothing. There is no way for him
to get it back.
Senator M C F A R L A N D . Before you leave that point: I had occasion
to contact OPA officials for one party, and they told me that this
party wanted to improve his house, make some improvements on it.
They said he would have to get permission from the renter to make
those improvements. Do you have any trouble with orders like
that?
Mr. D O W N S . If you want to remodel a dwelling unit you must get
the permission of the OPA, on the remodeling, from the point of view
of an adjustment in rent. There is a provision in the regulations that
if you modernize or remodel a dwelling unit you can evict the tenants
for that purpose and you can remodel and subsequently rerent at a
higher rate, subject to negotiations between you arid the OPA.
Senator M C F A R L A N D . According to the information given me, the
party had to get permission from the renter in order to do this work.
E X T E N D PRICE CONTROL A N D STABILIZATION ACTS OF 19 4 2
1193
Mr. D O W N S . If they wanted to discommode the renter or alter his
living accommodations, they would have to.
Senator B A R K L E Y . A S a rule there is more pressure on the part of
the renter to have the landlord improve the house than there is to get
the renter to let him do it.
Mr. D O W N S . That is correct.
Senator M C F A R L A N D . But not to get an increase in the price for
the rent.
Senator B A R K L E Y . N O .
Mr. D O W N S . The theory is that whatever you can get you can get.
Senator B A R K L E Y . Of course. But I do not think that every time
a landlord papers a room or a whole house he ought to be entitled to
an increase in rent.
Senator M C F A R L A N D . He is not getting an increase.
Mr. D O W N S . But if it used to cost him $ 1 0 and now it costs him
$20 to paper a room, he ought to get some relief for the extra $10..
Senator M C F A R L A N D . It must be a permanent improvement in
order to get relief?
Mr. D O W N S . That is correct.
Senator M C F A R L A N D . I S there no increase in rental for that?
M r . D O W N S . N O , sir.
The next chart is a break-down of rented dwellings. 41.4 percent
of them are houses; 21.6 are 2-family flats, and these [indicating] are
3-family and 4-family flats.
One of the real stereotypes in this business of why is the landlord
doing so well today is the fact that the landlord is reputed to have
made great gains in occupancy; that he has now had so much of an
increase in occupancy that he has a lot of money, and that has offset
the fact that he has not had an increase in rent.
In the 1940 census the four-family flats and small units in the
United States had a vacancy of 7.86 percent.
Senator M I T C H E L L . IS that for the whole country?
Mr. D O W N S . That is for the urban dwelling units.
Senator M I T C H E L L . Y O U do not have it broken down by pricecontrol areas?
Mr. D O W N S . NO, sir; I do not; but I think it is safe to make the
assumption that rent control was not put on in Detroit, for instance,
until the occupancy was well over 95 percent, because that was a
part of the Administrator's instructions, that when he considered that
there was an emergency shortage in an area he was to impose rent
control. Of course he would not impose rent control in any area
where there was a vacancy of 5 percent or more, because that does
not constitute a shortage.
Senator M I T C H E L L . In other words, the demand for apartments
would have pushed the rental up when price control would come in?
Mr. D O W N S . Yes; our experience is that unless occupancy is well
over 95 percent you cannot get away with raising somebody's rent,
because he will move some place else. A house is either a hundred
percent rented or a hundred percent vacant.
Senator M I L L I K I N . I do not follow you on that statement.
Mr. D O W N S . A house has only one tenant.
Senator M I L L I K I N . Y O U mean renting a room in a house?
Mr. D O W N S . I mean, as a rented dwelling. The house is either
rented or it is vacant. If the fellow living in it runs a rooming house
EXTEND PRICE CONTROL AND STABILIZATION ACTS OF 19421194
he might rent a room; but the typical rental situation is that the landlord owns the home and a single family rents it; and it is not possible
for the landlord of a single-family home to get an increase in occupancy.
That is my point.
Senator M I T C H E L L . On a day-by-day basis that is right, but on an
annual basis or a monthly basis it is not right.
Mr. D O W N S . A house is generally leased on an annual basis. It
might be in a 10-year period, if the house was vacant for 6 months
and the following 10-year period not vacant at all, he would have had
a 5 percent increase in occupancy. But the man whose house was
rented on the freeze date has had no increase in occupancy. "We are
the only group that was frozen into a specific position. That is,
others could get the highest prices they had gotten in the period.
The next chart shows what has happened to the owner in connection
with his costs. These are Government figures and are up to the end
of 1945. Plumbing and heating have gone up 18 percent; paint and
paint materials, 29 percent; general building materials have gone up
tremendously. Lumber has gone up 64 percent.
I had the same identical decorating done to my home last month
that was done to it in 1940, and it cost me 110 percent more. That
same thing is true throughout the operation.
There has been an increase in municipal expense. The property
owners of the Nation pay largely for fire fighting and policing and for
the educational bill of the country. There is no definite figure on a
national average of taxes for 1946, but you gentlemen know, certainly,
that in your towns the fire department expense is going up. In
Chicago the firemen have just come to the city authorities and asked
for an 8-hour day. They will unquestionably get it. It is a new idea
in fire-department operation. We have operated with two platoons
for many, many years. Now we are going to have three. That means
more cost for the fire-department operation. Our school system is
needing more money. Our cities are growing at a terrifically rapid
rate. The school board tells me that if we build a hundred thousand
units in Chicago this year we will need several hundred more schoolrooms; and that means higher taxes.
Local transportation systems are being bought by cities, and that
means higher taxes.
In connection with veterans' housing we are spending city money
which will ultimately come out of the tax bill.
In Detroit the average tax bill this year is going to be 12 percent
higher than last year. The landlord who pays these increased taxes
should get some of his money back.
Now, in all fairness, these figures [indicating] were gotten up at the
tail end of the year when in some communities there were strikes; but
at the time rent is up 4 percent, the take-home pay is up 70 percent.
The take-home pay in bituminous coal is up 150 percent. Yet the
rent bill is frozen at 4 percent higher than it was in 1939.
~ One of the reasons why we have such a threat of inflation—I thought
yesterday, when Secretary Anderson said that people were paying
more money for automobiles and refrigerators, and so forth, that that
had a great deal to do with it.
We do not advocate the abolition of rent control. We would like
to show what a 5-percent rent raise means in the United States. Most
E X T E N D PRICE CONTROL A N D STABILIZATION ACTS OF 19 42 1 1 9 5
of us have no idea how low the actual rental situation is. If we got a
5-percent rent raise, 45 percent of our tenants would be paying less
than $45 rent. If we went to the maximum under this amendment,
70 percent of the tenants would pay less than a dime a day; 26 percent
would be paying 20 cents a day; and only 4 percent would pay more
than 20 cents a day.
The property owners of the Nation have not had two techniques
which almost everybody has used to break price ceilings. The techniques that have been used are, first, the failure to produce; and that
has been used by manufacturers; and, second, and the one that has
been used to break wage ceilings, is the strike.
The landlord or the property owner of the Nation has not either
of those two techniques. If anything is done for the property owner
of the Nation—and I believe .that every reasonable person must
realize the inequity of the present situation—if anything is to be done,
it has to be done by this group in the acceptance of an amendment
which we believe is sound economically.
Thank you very much.
(The amendment referred to and submitted by the witness is as
follows:) •
P R O P O S E D A M E N D M E N T TO H . R . 6 0 4 2 , IN T H E S E N A T E
On page 6, line 17, strike out "Section 5" and insert "Section 5A"; and at the
end of section 5 insert a new subsection as follows:
"(B) Any regulation or order under this section may be established in such form
and manner, may contain such classifications and differentiations, and may provide for such adjustments and reasonable exceptions, as in the judgment of the
Administrator are necessary or proper in order to effectuate the purposes of this
Act. Under regulations to be prescribed by the Administrator, he shall provide
for the making of individual adjustments in those classes of cases where the rent
on the maximum rent date for any housing accommodations is, due to peculiar
circumstances, substantially higher or lower than the rents generally prevailing
in the defense-rental area for comparable housing accommodations, and in those
classes of cases where substantial hardship has resulted since the maximum rent
date from a substantial and unavoidable increase in property taxes or operating
costs. Any regulation or order under this section which establishes a maximum
Bent below the price or prices prevailing for the commodity or commodities, or
below the rent or rents prevailing for the defense-area housing accommodations,
at the time of the issuance of such regulation or order. The owner of any housingaccommodations with respect to which a maximum price or maximum rent has
been established by any regulation or order under this section may, at any time
after the date of approval of this amendment, file with the Office of Price Administration a statement of the property taxes and. operating costs in connection
with such housing accommodations, showing the actual amount of increase, if
any, in such taxes and costs, between the maximum rent date for such housing
accommodations and the date of filing such statement, on a monthly basis, and
may file at the same time or at any time thereafter a new rent schedule for such
housing accommodations, to become effective at the beginning of the first rental
period following the expiration of sixty days from the time of its filing, which new
rent schedule may provide for rent increases not exceeding in amount the increase
in property taxes and operating costs (including a reserve for deferred maintenance
and replacements) shown by such statement, and not exceeding in percentage 10
per centum of the maximum rents for such housing accommodations in effect at the
time of filing such new rent schedule. Statements of property taxes and operating
costs filed hereunder shall be supported by oath or affirmation of the property owner
filing same. Any new rent schedule filed pursuant to his subsection shall become
effective according to its terms unless, prior to the expiration of 60 days from the
date of filing of such new rent schedule, the Administrator shall issue an order
suspending the effectiveness of such new rent schedule on the ground that the
statement upon which it is based is false or in error in one or more major
particulars."
E X T E N D PRICE CONTROL A N D STABILIZATION ACTS OF 19 4 2 1196
COST ojj- L I V I N G
INDEX: FIRST QUARTER OF 1939 = 100
r?9 1940 1941 1942 1943 1944 1945
PKtpmKed, by REAL ESTATE RESEARCH CORPORATION
from BUREAU OF LABOR STATISTICS COST OF LIVING
E X T E N D PRICE CONTROL A N D STABILIZATION ACTS OF 19 42 1 1 9 7
d
Ttotional
flMet
r e n t e d
16.334,937 UNITS
OWNER OCCUPIED
11,413.036 UNITS
85721—46—vol. 2
4
E X T E N D PRICE CONTROL A N D S T A B I L I Z A T I O N ACTS OF 19 4 2 1198
OWNERSHIP ofr RENTED DWELLING UNITS
m3
Two Flats
21
b
. Three & Four Flats
15'%
%
t t t t i i t t t t t
T££E.T£I£££FC
A l l Others
2 1 H
One Family Houses
Two Flats
Three and Four Flats
All Other Buildings
Total Rented Units in US.
fatpafudbq
REAL ESTATE RESEARCH CORPORATION
(pom, 1940
6,763,881
3,529,585
2,468,819
3,572,652
16,334,937
U.S.CENSUS
E X T E N D PRICE CONTROL A N D STABILIZATION ACTS OF 19 4 2
^^ ^^
jflfo
I
B
n^n
fly
HH
Q
j
HHI
m
Mi
^BH
BHS
m
Hi
O J
Hi
Q
HH
j
1199
^^
fsial
LJJ
98%
OCCUPANCY
fjissj
I LLJ
I
E X T E N D PRICE CONTROL AND STABILIZATION ACTS OF 19 4 2 1200
RISE IN
OWNERSHIP COSTS
60%
-50%
40%
-30%
— 20%
10%
Plumbing Soft Paint 8- General Building Lumber
Paint Building Trade +64%
6- Heating Coal
+18% +23% Materials Materials WageRate
+29% +30% +49%
Pk+oluLfryREAL
ESTATE RESEARCH CORPORATION
BUREAU Of LABOR STATISTICS
E X T E N D PRICE CONTROL A N D STABILIZATION ACTS OF 19 4 2
1201
TAKE-HOME PAY
EARNINGS iAd RENT
1939 1940 1941 1942 1943 1944 1945
1939 1940 1941 1942 1943 1944 1945
1939 1940 1941 1942 1943 1944 1945
1939 1940 1941 1942 1943 1944 1945
1939 1940 1941 1942 1943 1944 1945
1939 1940 1941 1942 1943 1944 1945
1939 1940 1941.1942 1943 1944 1945
1939 1940 1941 1942 1943 1944 1945
1939 1940 1941 1942 1943 1944 1945
PkquxuLbu REAL ESTATE RESEARCH CORPORATION
Uom, BUREAU Of LABOR STATISTICS SURVEYS
SHOWING AVERAGE WEEKLY EARNINGS IN
REPRESENTATIVE INDUSTRIES
E X T E N D PRICE CONTROL A N D STABILIZATION ACTS OF 19 4 2 1202
A SVo RENT RAISE
45% less than $ 1.00 per mo.
1
wmn
mm i tmm
QUio less than $2.00 per mo.
96°/o less than $ 3 . 0 0 per mo.
9 9 % less than $ 5 . 0 0 per mo.
E X T E N D PRICE CONTROL A N D STABILIZATION ACTS OF 19 4 2
1203
AAONTHLV
EFFECT
A \0% RENT RAISE
0
0 0 0 0 0
^ U U U U
0 0 0 0 0
U M U U U
00000
00000
0 0 0 0 0
M M U U U
O O O O v
U U U U M
0 0 0 0 0
10 2 0 3 0 4 0 5 0 6 0 7 0 6 0 9 0
0 0 0 0 0
M M | | M U
100)1
0 0 0 0 0
JftAfcMMM
llln mil llll! 11!!! Inn Tiff! III!!
00000 00000
0 0 0 0' 0 0 0 0 0 0
00000
n m i n n m i l n m niii n u i i n n
70^ of tenants would pay
less than a dime a day
00
0
0 0 A A 0 0 0 AAA 00 0 0 0 0 0
00000 o
i n n m i l m i l n m iiiii i
26^' of tenants would pay
from 10$ to 204 per day
Only 4% would pay
more than 204 per day
A | m u 4 ty REAL ESTATE R E S E A R C H CORPORATION
U S . CENSUS REPORTS
EXTEND PRICE CONTROL AND STABILIZATION ACTS OF 19 42 1204
The CHAIRMAN. The next witness is Mr. A. A. Smith, representing
the American National Livestock Association.
S T A T E M E N T OF A. A. SMITH, FIRST VICE PRESIDENT, A M E R I C A N
N A T I O N A L LIVESTOCK ASSOCIATION, STERLING, COLO.
Mr. SMITH. Mr. Chairman and gentlemen of the committee, my
name is A. A. Smith. I live at Sterling, Colo. I am a producer of
cattle.
I want to digress to say that perhaps an explanation is due the
committee. Quite a little of the data that I present was brought out
very much more fully by the American Meat Institute yesterday.
I am a ranchman, and my facts are presented from my experience as
I thought you men should know it, but the American Meat Institute
brought it out much more fully and in much more detail than I shall do.
I am here representing the American National Livestock Association,
of which I am first vice president.
This organization is composed of State, regional, and individual
memberships.
There are 20 State organizations included in our group. These
are made up of the 17 "Western, or so-called range, States, with the
addition of the States of Florida, Louisiana, and Michigan.
Of the January 1, 1946, cattle population of 79,791,000, 40,925,000
were beef cattle, and these 20 States had 27,644,000, or 67K percent.
This cattle inventory is over 5,000,000 greater than the average for
the years 1935-44. In his talk before our convention at Denver in
January 1946, Secretary Anderson warned us that our cattle numbers
were too large—that range and feed conditions had been favorable,
but that less favorable range conditions would be disastrous with our
high cattle inventory. All during the war years our production of
beef has been on a level substantially above that of any prewar year.
The inventory figures show that while the total cattle numbers are
down about 2,000,000, beef cattle numbers are only about one-half
million below January 1, 1945. The number of cows and 2-year-old
heifers is now at an all-time high, the reduction in numbers being
entirely in steers.
I want to digress another minute there. I think it is very important
that you men should know something that I think the great bulk of
our population does not know, and that is that there are two things
that we are considering—beef and cattle. They are not the same.
The cattle that we raise are the frames upon which we put beef. I
think we were a matter of 2 years getting that through the heads of
some of the officials of the OPA. They did not understand that with
80,000,000 we could not ship one^twelfth of them every year or onesixth of them every year, whatever they wanted.
Senator MILLIKIN. Of the cattle in the Western States what percentage are grass-fed?
Mr. SMITH. That go to market?
Senator MILLIKIN. Yes, roughly.
Mr. SMITH. Senator, I am telling you from memory, now; I may be
wrong.
Senator M I L L I K I N . Take a rough shot at it.
Mr. SMITH. Our hope ordinarily is to get our shipment of cows up
to about 50 percent. That may be wrong.
E X T E N D PRICE CONTROL AND STABILIZATION ACTS OF 19 4 2
1205
Senator M U R D O C K . Are you speaking of the feeder market or the
slaughter market?
Mr. SMITH. I may be wrong/ Senator. We have two shipments.
Our old cows, the canners and cutters, and a percentage of dry cows,
go directly for slaughter. The bulk of our steers and our calves go to
the feeders.
Senator M U R D O C K . In my own operation I have what are called
grass-fed steers. Those steers were purchased largely by you fellows
from Colorado that came over there and bought them, for the feeder
market.
Mr. SMITH. That is right.
Senator M U R D O C K . They are fed for 2 or 3 months before they
actually go to the slaughter market?
Mr. SMITH. That is correct.
There is another thing I want to mention that is not in my testimony. It was mentioned this morning regarding the great decrease
in the number of steers. The Government figures I think do not
show it as great.
In 1945 there were 76,600,000 head of steers. On January 1, 1946,
there were 72,430,000 steers.
But the thing that I want to point out to you, gentlemen, is the great
change, within my own experience and my own knowledge, in the
method of handling cattle. Up until 1920 we never put a steer in our
feed lot that was less than 3 years old. Now the business has changed
to what cattle men call a cow and calf basis, very largely, the big.
proportion of cattle being fed coming from the range as calves and
are fed from 9 to 14 months, going from a weight of about, roughly,
400 pounds, to a weight of 800 to 1,000 pounds.
That, to me, is a strong argument for the abolishment of price control, because a man taking an animal in the fall of this year, knowing
that he must keep him until the late summer or the next fall, certainly
needs to be able to make a definite long range plan.
I think the reason for the decrease in steers has been that people
have been scouring the country for heavier steers; and I think the
Senator will bear me out in this. You are from Utah, are you not?
Senator M U R D O C K . Yes.
Mr. SMITH. People have been scouring the country for heavier
steers because they wanted something that they could get finished
and on the market in from 60 to 90 days, because if they could foresee
at all what was going to happen they could not foresee for a longer
period than 60 to 90 days.
That is not a part of my testimony, but I thought you men should
know that.
Senator C A R V I L L E . There has not been many of that class of cattle
in the last few years. The younger ones are taken now?
Mr. SMITH. That is true. Of the cattle you see on the market now
there are relatively few of the 3- and 4-year old cattle. The steers
that are put into the feed yard are either steer calves or yearling steers,
very largely.
We have repeatedly been told that when supplies were adequate
there would be no further need of price control. We are also told that
consumption of beef per capita is now, and was last year, greater than
in prewar years.
EXTEND PRICE CONTROL AND STABILIZATION
ACTS OF
1 9 4 2 1206
During March of this year, there were slaughtered under Federal
inspection over 900,000 cattle. The slaughter for the years 1942,
1943, 1944, and 1945 was somewhat larger, but, with the exception
of these 4 years, 1946 was largest since 1915. Receipts at seven
principal markets for the 3 months ending March 31, 1946, showed
a decrease of cattle of about 12 percent from 1945.
Being reasonably sure that shipments from our territory were not
going to the market centers as is usual, I asked our railroad agent at
Sterling, Colo., to give me the destination of cattle shipped the first
3 months of this year. He gave me the following data.
From January 1, 1946, to March 31, 1946, there were shipped
from Sterling, Colo., 588 cars of cattle. Assuming that all shipments
whose destinations he gave as Colorado and Nebraska points, all
went to the Denver and Omaha public markets, there were left 253
cars, or 43 percent, that did not go to public markets.
To me, it seems reasonable to conclude that total shipments of
meat animals have been larger so far this year than in 1945. Considering the shipments which do get to the public markets, another
surprising change has taken place.
From the Omaha Daily Journal Stockman, I get the following
figures:
1946
Feb. 26
Mar. 14
Apr. 15—
Apr. 16
Apr. 17
Bought
b y local
packers
7,332
3, 554
2,204
2,419
1,680
Percent of
receipts
51
51
20
22
21
Bought by
others
6,915
3,304
8, 563
8,105
6,072
Percent
Beef shipped of packer
out by others purchasers
4,150
2,500
6,100
6,000
4, 650
56
70
276
248
276
Shipments out are given as beef and by carloads, and I have used
the figure of 25 head per car.
Senator H I C K E N L O O P E R . Mr. Smith, with reference to these figures
that you have given for the Omaha market, while they are not exactly
applicable to the 588 cars of cattle from Sterling, Colo., yet these
figures from the Omaha market would be comparable to, or representative, I assume, of the number of cars out of the 588 that were shipped
to central markets. In other words, the 253 cars that did not go to
central markets from Sterling, Colo., would not be included in these
figures; is that true? •
Mr. S M I T H . That is right.
Senator H I C K E N L O O P E R . I will not ask you to pass on this question,
but, assuming that the cattle that were not purchased by the central
factors at the central market had gone into a black-market operation
of one kind or another, would it be reasonable to assume that a great
proportion of these 253 cars might have found their way into a black
market and have completely circumvented the central market?
Mr. S M I T H . That might be a reasonable assumption. I would not
know, but I think it would be very reasonable.
Senator H I C K E N L O O P E R . That 253 cars went into some sort of an
unrecorded market?
Mr. S M I T H . I think so.
E X T E N D PRICE CONTROL AND STABILIZATION ACTS OF 19 4 2
1207
Senator H I C K E N L O O P E R . And that these other percentages for April
1946 out of the Omaha market also went into some unrecorded
market?
Mr. SMITH. I think that is a reasonable assumption.
Senator H I C K E N L O O P E R . IS that as you understand it?
Mr. SMITH. I would not know that that is true, but I think you
might assume that.
Senator H I C K E N L O O P E R . Thank you.
Mr. SMITH. From the Denver Record Stockman, I get the following
figures:
Bought by
3 large
packers
Monday, Apr. 8
Week ending Apr. 5
Monday, Apr. 15.. _
Tuesday, Apr. 16—.
639
1,451
143
82
i Mostly fat cattle.
Senator M I L L I K I N . Were the lots cleared on all jthose days?
Mr. SMITH. Senator, I think it has been a good many days since
the lots were not all cleared of cattle for the market, not only Denver,
but all markets.
Senator M I L L I K I N . Are these figures for 1946?
Mr. SMITH. Yes, sir. From my knowledge of the Denver market,
and I have been familiar with it for 32 years, I know that at this time
of year the receipts are virtually all of fat cattle; very little of anything
else.
The Department of Commerce says that at the beginning of price
control there were in the United States 1492 licensed slaughterers.
There were as of July 1, 1945, according to the Department of Agriculture, not counting farm slaughterers, over 26,000 licensed .slaughterers.
The bureau, having in charge the payment of subsidies—I do not
know what the bureau is, but when we were here before they told us
what bureau to call, and that is the bureau we called—they told us
that as of February 1946, a little over 12,000 slaughterers were
receiving subsidies. This indicates that 14,000 do not claim subsidies.
Now, what is the significance of these figures? They mean to us
that while now, and for years past, the legitimate slaughterer has paid
us more for our live animals than they obtained for the beef, and has
at the same time passed the beef on to the consumer at a profit of less
than 1 cent per pound, now much of our beef is going to the consumer
at a profit to the black-marketeer, which necessarily disregards the
value of the byproduct. Under normal conditions the value of the
byproducts is an important factor in holding down the price of beef to
the consumer. In the Denver Press of last week the OPA itself
reported the purchase of meat by its inspectors at a price in excess of
ceiling of from 10 to 70 percent.
Senator M I L L I K I N . I invite your attention to the fact that that
range of figures coincides roughly with the same range of figures that
were produced by the private institute that made a survey of that
kind.
E X T E N D PRICE CONTROL A N D STABILIZATION ACTS OF 19 4 2 1208
Mr. SMITH. Yes. I wanted in the beginning to have you men know
that I knew nothing of that testimony.
They also mean that, while over the years, the meat industry,
in cooperation with the Bureau of Animal Industry, has been able to
assure the public of a supply of meat, healthy when alive and killed
and handled under sanitary conditions, now the consuming public can
have no such assurance when dealing with the black market, neither
have they any protection as to quality.
These things will react on our industry. Our position is vulnerable.
The feeder, on whom we have depended to buy our grass steers and
finish to the condition to which the buying public has been educated
to depend, is not now refilling his feed lots, and is uncertain and fearful of his future operations. The Bureau of Agricultural Economics
reports that on April 1, 1946 there were 17 percent less cattle on feed
in the 11 Corn Belt States than as of the same date a year ago.
The slaughterers, with their large investment, on which we have
in the past depended for a ready cash market for all livestock offered,
are losing business to such an extent that their continuance is threatened.
And the housewife, who buys through legitimate channels and whom
we must please if we are to continue to get her patronage, in competition with other products, is finding it increasingly difficult to secure a
satisfactory and ample supply of meat, forcing her to turn to substitutes.
We have lived through the period when most diagnosticians advised
a minimum or no meat in the diet, and have arrived at a period when
beef is not only popular with the consuming public, but approved and
recommended by the medical profession.
With the approval and at the request of our Government, and in
spite of a shortage of manpower and equipment, we have built up a
high inventory of cattle. This high inventory has been built up at a
time when we have full employment. Now some Government economists go so far as to predict that we may soon have as many as 8,000,000
unemployed.
Surely, it is not the fixed policy of Congress to continue by general
taxation to subsidize the consumer to the extent of about $22.50 per
head on our cattle as marketed. If this is taken off at a time of unemployment and falling prices, the life savings of many of our cattlemen
will be lost. This artificial situation we now ask Congress to remove.
Never has the consuming public been better able to pay its way.
We have the cattle. Remove these hampering restrictions, and we
and our direct customers, the feeders and processors, will give the
consumers as rapidly as possible an adequate supply of good beef and
at a price which we feel sure will not be higher than that of today.
The C H A I R M A N . Are there any questions?
Senator F U L B R I G H T . I would like to ask one question.
We have been told, Mr. Smith, that the feeding of our grain to
cattle is the least efficient way to get the full value of that grain for
human consumption. The thing that is bothering me is that there is
a tendency for the corn and wheat to go into the feeding of cattle,
which only increases the shortage of food for the starving areas of the
world. That is the problem that has been presented to the committee.
Beef is the least efficient converter of grain to useful food for human
consumption. Is not that correct? •
E X T E N D PRICE CONTROL A N D STABILIZATION ACTS OF 19 4 2
1209
Mr. SMITH. I think that has very often been said. I think, however, Senator, that you would have a hard time convincing the
majority of the American consumers that they should be willing to go
without beef in their diet and consume corn bread and corn meal.
Senator F U L B R I G H T . There was no question about the taste. I
agree with you about the taste. But what we are concerned about is
the present shortage of food all over the world as a whole. The people
are starving to death. As I understand it, a pound of wheat, used in
bread, will produce about 2,400,000 calories, and if it is fed to a beef
cow it will produce only a little over 200,000 calories. It is not a
matter of taste and choice; it is a matter of starvation that we are
concerned with; and I agree with you that we all like beefsteaks.
Mr. S M I T H . I am not a scientist, but from what I read and what I
hear, the part of our population in our own country—I am not talking
about starving Europe—the part of our population in our own country that is the least healthy is the part of our population that consumes
almost entirely corn bread and corn pone and fat back. I think the
Southern Senators can straighten me out on that, if I am wrong. My
information is from reading and hearsay. In other words, I think our
medical men will tell us now that we need and have to have the proteins that beef contains to give us an adequate and healthy diet. I
do not believe it can be gotten from the consumption of bread, either
made from wheat or from corn. That is my belief.
Senator F U L B R I G H T . D O not misunderstand me. I am not trying
to run down beef as a food, and neither were the people who had this
argument. It was simply that in this emergency they wanted to
emphasize the use of grain directly by humans rather than through
the eating of beef. No one was trying to say that they did not like
beef or that it was not a good food.
Mr. SMITH. I just want to say, further, Senator, that I do not
know whether we have got as much of a shortage of corn and wheat
as we are said to have. There are so many things said. I know
that out in my territory, when the story came out that we were very
short of corn and wheat to ship to starving Europe, up until that
time feeders in our town told me that they were turning away truckloads of corn. When the story came out the farmers did just what
any other businessman would do: they thought the market was going to go up, and they stopped, and the feeders immediately had
trouble getting corn. Whether corn was short or whether it is just
psychology or not, I don't know.
Senator M I L L I K I N . Let us assume, without admitting, that there
might be some more efficient use made of the grain, you cannot, turn
the beef industry off and on like you would throw a switch. If you
are going to preserve the beef industry you have got to preserve it
in a normal rhythm, have you not?
Mr. SMITH. That is a feature that you know, Senator, because
you come from a range State, and the Senator from Utah knows this.
They told me in Salt Lake City when I was there at the convention
a month or two ago that 95 percent of the land in Utah is suitable
only for grazing purposes. In Colorado it is not quite as large; but
the whole western territory has a tremendous acreage of land that is
economical only in the use of it for grazing sheep and cattle.
Senator F U L B R I G H T . I thought they grew sugar beets out in Colorado.
E X T E N D PRICE CONTROL A N D STABILIZATION ACTS OF 19 4 2 1210
M r . SMITH. W e
do.
Senator H I C K E N L O O P E R . Mr. Smith, I think probably you have
studied this matter much more than I have, but I am quite certain
that the statistics show in every study that has ever been made of
ultimate food values that human beings get more definite, substantial
value out of grain fed through meat animals than they do from the
grain itself. That is, they get more proteins and more vitamins, and
in the long run the feeding of grain through animals does give that
ultimate end result to human beings. There is a contention as to
what animals you should put the grain into in order to get the best
results, and whether it is more efficiently done through a hog or a cow,
but the net result is that the human being gets more substantial food
through feeding the grain to meat animals. I think those statistics
can be substantiated.
But there is another thing to which I would like to call your attention at this time. A very substantial portion of our agricultural
economy is based upon the raising of meat animals. A great number
of our agricultural people have invested their life savings in the production of meat animals. From a humanitarian standpoint we haVe
an obligation to help starving people, and we should do it in the best
manner and the most efficient manner possible. But I think there is
a great economic as well as a moral question involved here, as to
whether or not, because we have a humanitarian problem in some
foreign country, we should lose sight entirely of the economics of our
cattle industry and break every cattle feeder in the United States in
order to meet an emergency humanitarian problem which we can
probably work out in some other way. It seems to me that we are
treading on rather dangerous ground if we take all this corn and wheat
out of the market; not that we must not do it in one way or another,
but when we do it willy-nilly, without too much program or without
knowing exactly what effect it is going to have, we run the danger of
breaking financ'aTy our cattle feeders and hog feeders in this country
that have put their lifetime efforts into this very important field.
Sometimes I think that they do not quite take that into consideration.
There is a long range economy that we have got to consider in this
country.
Mr. SMITH. Y O U have brought that out much better than I could.
' ' There is another feature, Senator. I am farmer-born. I have been
at this a great many years. Our farmers cannot continue profitably
to produce corn and wheat unless they have livestock with it. In a
very short time our Iowa farmers, instead of raising a hundred bushels
of corn to the acre, or 80 or 90 bushels, would drop down to really a
one-crop country, raising probably 10 or 15 bushels to the acre. The
two have to go together to make an economical agricultural economy
in this country.
Senator H I C K E N L O O P E R . Y O U must have animals to continue a
diversified farming operation. You cannot go into one-crop farming
without completely wrecking your economy.
The C H A I R M A N . Thank you very much.
E X T E N D PRICE CONTROL A N D STABILIZATION ACTS OF 19 4 2
1211
(The following was submitted for insertion in the record by Senator
Mitchell:)
STATEMENT BY E . F . FORBES, P R E S I D E N T , W E S T E R N STATES M E A T P A C K E R S
A S S O C I A T I O N , I N C . , O N P R E S E N T G O V E R N M E N T R E G U L A T I O N S AND C O N T R O L S
O N L I V E S T O C K , M E A T AND M E A T PRODUCTS, M A Y 1 9 4 6
The members of the Western States Meat Packers Association, Inc., respectfully request your support in seeing that Senate bill 2028 contains a provision
eliminating price controls and subsidies on livestock and meat. The membership
of the association includes both the large and small independent slaughterers in
California, Washington, Oregon, Montana, Utah, Idaho, New Mexico, Arizona,
and Nevada.
Those charged with the administration of controls on meat products have failed
to accomplish the objectives set up in the Price Control Act by the Congress.
This failure has driven the production and distribution of meat products from
long-established channels into a vicious black market.
The development of the black market has diverted the flow of livestock and
forced old established slaughterers to curtail operations or sell their plants to these
new operators. This destruction of legitimate slaughterers has destroyed the
source of supply for thousands of wholesalers, restaurants, and retailers, and forced
them either to go out of business or patronize the black market. Besides the rapid
destruction of the legitimate industry, and the maldistribution of meat, millions
of dollars of offal products such as hides, tallow, and glands, needed for medicinal
and consumer goods are being destroyed through black-market operations. This
deplorable condition is financed by the Government through subsidy payments
and the people by paying black-market prices.
The reestablishment of slaughter controls on April 25, 1946, will not stem the
tide of black marketing. The latter has become so imbedded in the economic
pattern of the livestock and meat industry that no Government agency has the
staff to cope with the situation. Therefore, the slaughter controls will not return
the slaughter of livestock to normal channels and old-established slaughterers will
sink further and further into financial ruin.
The only solution to the present situation would be the elimination of all controls
on meat products.
If the Senate does not see fit to remove all controls on meat, then it should
provide in Senate bill 2 0 2 8 the following amendments which were adopted in
House Resolution 6 0 4 2 by the House of Representatives. These are—
First. The amendment which would eliminate $ 7 1 5 , 0 0 0 , 0 0 0 on meat subsidies
on June 30, 1946, and allow meat prices, wholesale and retail, to rise in the amount
to compensate for the removal of these subsidies while consumer purchasing power
is at its present high level.
Second. They should allow the amendment which would provide for the lifting
of price controls when the product of an industry equals the production of the
industry in 1941.
Third. Section 3 of the Stabilization Act of 19^2 should be amended to provide,
as Congress intended it to provide, the cost of processing each species of livestock
plus a reasonable margin of profit. This section 3, commonly known as the
Barkley-Bates amendment, was circumvented by the Office of Price Administration who adopted an over-all industry profit test, which formula practically
freezes one-quarter of the industry at a loss. It adopted the industry profit control
method rather than to give to the packers their cost plus a reasonable profit for
processing each species of livestock. The language of this section should be
amended so clearly that the Office of Price Administration cannot circumvent
the intent of Congress in following out the law. Further, it also should provide
that the payments under this section should be made currently following each
quarterly period. There has been only one payment made under this section
during 1945. It is now 2 months past the first quarter of the 1946 packing house
year and no payments have been made to date.
We again want to reiterate that there is only one solution to the meat problem
as it exists today under present Government regulations and that is to remove the
controls and allow livestock and meat to flow again through legitimate channels
and the industry to operate on a basis where it does not have to either sustain a
financial loss or operate in the black market in order to stay in business.
extend price c o n t r o l and stabilization acts of
19 42 1212
S T A T E M E N T OF JOE G. MONTAGUE, A T T O R N E Y FOE THE T E X A S
&
SOUTHWESTERN
WORTH,
CATTLE
RAISERS'
ASSOCIATION,
FORT
TEX.
Mr. MONTAGUE. Mr. Chairman and gentlemen of the committee,
my name is Joe G. Montague. I reside in Fort Worth, Tex. I am
attorney for, and now appear as the representative of, the Texas &
Southwestern Cattle Raisers' Association.
The CHAIRMAN. We know you very well, Judge.
Mr. MONTAGUE. Thank you, sir.
The committee had originally scheduled appearances for the representatives of the Joint Livestock Committee for last April 22. But
when the gentlemen who were to appear for that organization came
to the committee room on that date they learned that the committee
had, because of circumstances beyond its control, postponed their
appearances until today—May 1—they felt that, since they lived in
the western part of the country some fifteen hundred miles from Washington, they could not wait over for 10 days. So they returned home
without appearing but two of them left with me prepared statements
which they requested me to seek the permission of the committee to
file for the record. These two gentlemen were Mr. C. E. Weymouth,
and Mr. William H. Yungclas, and they speak for the Joint Livestock
Committee, which is an organiztion that was formed by 134 associations of livestock producers, livestock feeders, stockyard companies,
and marketing agencies from every section of this country. I hope
that you will allow these two statements to be filed for the record, and
I commend these statements to you for thoughtful consideration.
The CHAIRMAN. They may be incorporated in the record
Mr. MONTAGUE. In whatever I say here now I am going to attempt
to refrain from making any personal statement at all. I have two
propositions that I would like to prove to the committee. The first
is that price controls on livestock should not be continued, and the
second is that the subsidy program should not be extended with reference to livestock and meat. I am not going to say one word of my
own idea about these things. I want to prove those two propositions
from the testimony of Government witnesses, and I shall read to you
excerpts taken from official transcripts.
When the Government started the program of price controls the
announcement was made that price controls would be kept on a
commodity only so long as the supply of that commodity was insufficient to meet the demand. It was at that time frequently stated that
no effort would be made to maintain controls over a commodity that
was in abundant and ample supply. That declaration of policy has
been repeated many, many times. It has been repeated in this committee room frequently by high administration officials and by others
who have appeared in support of price controls. You can and do
hear the same statement made almost every night by some responsible government spokesman over the radio and in public addresses.
Therefore, I take it that we may accept that statement to be a correct
definition of the Government's acknowledged policy.
At this time a strong effort is being made to continue in effect the
price control and subsidy program, as it affects the livestock and meat
industry. The people engaged in that industry are opposed to a
continuation of the price control and subsidy program in this industry
extend
price c o n t r o l and stabilization acts of
19 4 2
1213
and are respectfully asking the Congress not to enact legislation that
will keep the present program in effect.
We believe that, in order for the advocates of extension of the
present programs in our industry to properly support their request,
they must, in all equity and fairness, show to you that our industry
has not met the test that has always been declared by the administrative officials to be the Government's criterion in determining
whether or not a particular commodity should be kept under controls.
Stated simply, before there can be justification for an extension of the
cattle controls it must be shown that the supply of cattle is not adequate to meet the demand for beef. Those who are seeking to extend
the cattle controls have the affirmative on this proposition.
We believe that the highest authority that, under any circumstances, can be quoted on this general proposition is that official who,
under our form of government, is entrusted with the responsibilities
of the high position of Secretary of Agriculture. The Government
should certainly be willing to accept the evidence of the Secretary of
Agriculture and we of the cattle industry will do likewise.
Fortunately, for the proper solution of this problem, the Secretary
of Agriculture has recently given abundant testimony. The Committee on Agriculture of the House of Representatives conducted
extensive hearings, beginning on March 26, and ending on April 12,
of this year, the specific purpose of such hearings being to—
inquire into and determine the present condition of the livestock and meat
industry.
Secretary Anderson appeared before that committee on April 4. He
gave full testimony, and, without the slightest hesitation or reservation we accept his statements on the cattle situation as being the
complete answer we have to give to those who want to keep cattle
under control.
I will, for your benefit, quote with exactness from the testimony of
Secretary Anderson, the references being to pages of the stenographic
transcript of that testimony.
Senator M I L L I K I N . Have you by any chance brought the transcript
with you?
Mr. M O N T A G U E . Yes, sir; I have it with me. I think the Secretary's
testimony of yesterday, which I also have, is completely corroborative
of what he said before the House Committee on Agriculture. I have
those if anyone wishes to refer to them.
On page 73 of the transcript before the House committee the following occurred [reading]:
The C H A I R M A N . It looks as though we have sufficient supply?
Secretary A N D E R S O N . Very ample supply, which we ought to reduce.
Transcript page 81 [reading]:
Mr. C O O L E Y . Mr. Chairman, I would like to ask the Secretary a question: Is
there any scarcity of meat in the country at the present time, in view of the large
cattle population which we have?
Secretary A N D E R S O N . Well, there need not be a scarcity of meat. There is
sufficient cattle to produce all the meat we need.
Transcript, pages 81-82 [reading]:
Mr. C O O L E Y . We never know what the demand is, do we?
Secretary A N D E R S O N . We have been able to calculate it pretty well here before.
But what I am saying is that there is a sufficient supply on the range so that it
ought to be able to take care of any demand which the American people may have,
85721—46—vol. 2
5
extend price c o n t r o l and stabilization
acts of
19 4 2 1214
and it would be a good thing if that demand could be supplied; because we have
too many cattle on the range now, and I would like to see them slaughtered.
Transcript, page 84 [reading]:
Secretary
still there.
ANDERSON.
NOW
it has moved up to 175 or more and the demand is
The Secretary was referring to per capita supply of meat.
Senator
MILLIKIN.
M r . MONTAGUE.
In terms of pounds?
Yes,
sir.
Page 113 of the transcript [reading]:
Secretary
ANDERSON—
Referring to cattle population—
Today we have 79,791,000 head.
Mr. Chairman and gentlemen of the committee, on this point we cattlemen
will rest our case on the testimony of the Government's witness, the Secretary of
Agriculture, Hon. Clinton P. Anderson, whose high position in the Government
warrants acceptance of his official statements as being the statements of the
Government. Not only does he fail to make out a case for the Government's
request for continued controls of our industry, but, on the contrary, he clearly,
emphatically and unequivocally supports our position that further Government
control of our industry is unwarranted and unjustified under the criterion announced by the Government.
One further subject is of vital interest to all cattlemen. The presence of subsidies is now, and, ever since subsidies were started, has been a source of serious
worry and confusion to us. We have never liked and do not now like the philosophy of the subsidy. This is a very realistic problem.
In the first place subsidies have been an unbalancing influence in our business.
Cattle do not just happen. They result from carefully made plans for breeding
and feeding operations. Two things are required—a ranch and a breeding herd
of cattle. Both items require heavy investment of capital. Then it requires
at least 3 years to produce a beef animal—4 years being better. Under the
present subsidy program a very considerable part of our inventory valuation is
represented by reflected subsidies. We realize that this part of our inventory is
subject to change or complete elimination at the whim of one man, the Price
Administrator. No one man should ever have such an influence over the very
economic life of an industry. We believe that the subsidy program in the livestock and meat industry should be discontinued on June 30, 1946. There are
many reasons why we believe this to be correct. But again, we believe that our
high authority, the Secretary of Agriculture, has outlined our position for us, as
again I wish to quote from his testimony given before the Committee on Agriculture of the House:
(Transcript pp. 62-68 [reading]:)
Secretary A N D E R S O N . Mr. Chairman and members of the committee, with
reference to the removal of ceilings and subsidies, if you do not mind, I would
like to divide that, speaking first of just the removal of subsidies, and then of
the removal of ceilings.
I think my attitude on the removal of subsidies is either reasonably well known
or can be quite quickly determined. Last August, I began urging that the producer of livestock 'was entitled to know what the program was likely to be, and
that he was entitled to have subsidies removed during a period when there was
still an active demand for supplies; otherwise, the entire weight of the subsidy
would fall upon him.
In testimony which I gave before the Banking and Currency Committee of the
House a few days ago, I introduced into that hearing all of the various communications and proposals that had been made along that line.
As early as September of last year, I had urged the Office of Economic Stabilization to call a meeting of the interested agencies, and Mr. Davis had kindly done
so, had brought together the representatives of OPA, OES, the RFC, being a
paying agency of the subsidies, and the Department of Agriculture.
At that time, a subcommittee of those agencies was appointed to draft a timetable under which these subsidies might disappear.
extend price c o n t r o l and stabilization
acts of
19 4 2
1215
We had tentatively prepared in the Department a timetable pointing out that
subsidies were of two or three different classes; that, first of all, there was a class
of subsidy that was purely incentive, and that if the need for incentive disappeared, the subsidy might disappear, since it was purely something to stimulate
extra production during the period of the war.
Secondly, there was another type of subsidy which was part incentive and yet
partly a reflection of increased costs; and meat was a sample of that.
The meat subsidy, which averaged—and I am using figures from memory now,
but they should be fairly accurate—about $1.96 straight across the board, about
$1.10 of that was cost of production increase, and the rest of it was stimulation
incentive.
Do I have those figures correct?
M r . REED. Y e s , sir.
Secretary ANDERSON. Then there was a third class of subsidy which was purely
roll-back or cost-of-production, the butter subsidy being a sample of that.
Now, the Department recommended that before there was any shift in living
conditions, which we anticipated there might be with the closing of the war, we
announced a timetable, so that everyone, having had due notice, could govern
himself accordingly; that we could say to a man that he could expect that on a
certain day a certain subsidy would disappear; and that the first group of subsidies, which were purely incentive subsidies, if there was no great demand for
that product, might be dropped, for example, from our scale.
There were some subsidies that were purely incentive subsidies we thought ought
to be retained; such as soybeans, for example.
But there were other subsidies, such as canned citrus fruit, and so forth, where
we felt the subsidy could disappear because there was possibly an abundance of
citrus fruit in the country.
Well, the working committee took that original suggestion, and from it prepared a report, which all the agencies signed, recommending a definite timetable
for the removal of subsidies.
In that timetable, it was recommended that the meat subsidies should be
removed somewhere between the 1st of April and the 30th of June; probably
close to the 1st of April.
The hog subsidy was to be in that schedule removed on the 1st of February,
but beef subsidies were to be removed probably around the 1st of April or up to
the 30th of June.
I need not go into detail, because I think the testimony before the Banking
and Currency Committee covers it, but for many reasons we felt it was desirable
then to announce what this schedule would be.
I went before the Office of War Mobilization and Reconversion, to its advisory
committee, in October, and strongly urged that it be done then, because wage
negotiations were being considered, and it seemed to be desirable that the employer and the employee should know wThat was going to happen to the cost of
living in advance, so that the difficulty would not stand in front of us in fature
negotiations.
In other words, I think it would be too bad to have a strike settled and then at a
subsequent date have a price increase in dairy products or in beef or in something
else, and then have the workers come back and say, "Well, we haven't achieved
what we intended to achieve; we are going to strike over againk" and have that
period of difficulty in the Government.
I thought it was desirable, therefore, in October, to announce what the program
would be. I think it is only fair to say that the other agencies that cooperated in
that study were sympathetic, seemingly, to that point of view; and we did prepare
a report, which all agencies signed, which did set up a timetable for the removal of
subsidies, and which would have taken care of this meat question.
Later on, the food situation took a very great change, because of difficulties in
other lands and because the unemployment that had been estimated did not
materialize.
It had been estimated that several million people would be unemployed by now,
for example; and actually we have perhaps 3,000,000 unemployed, and 2,000,000
are what might be called fractional unemployment, people who are just changing
from one job to another.
So that the actual unemployment probably runs not more than a million people
above this so-called fractional unemployment, whereas we had anticipated the
unemployment might reach 7 or 8 million.
Now, if you have heavy unemployment, you have a drop in national income and
you have a drop in demand for meat, among other things; whereas by the failure
extend price c o n t r o l and stabilization acts of
19 4 2 1216
to develop any great amount- of unemployment, we have a very strong demand
for all of these products.
That led the Administration to announce its program for the continuation of
subsidies and ceilings until there might be some closer approximation of supply
to demand, or until there were other avenues for the expenditure of surplus funds.
I don't need to remind the members of this committee that a man can't buy an
automobile or can't buy a radio, or can't buy a washing machine or the things he
wants to spend his money for, and therefore his money moves very rapidly into
the food market.
There is food available, and therefore there is a steady demand for it. So I
think I should say specifically, Mr. Chairman, that it is the opinion of the Department of Agriculture now that the removal of subsidies can wait until some months
from now; we hope not too many months from now.
But certainly the removal of subsidies now, in a period when labor disputes
are being settled, with a great deal of difficulty, would only inject brand new
items into the picture and might seriously cause us difficulty.
I say if they had been taken into consideration when the original adjustments
were made and an announcement was made, then, having had a fair warning,
nobody could say that he would be damaged by a rise in prices.
The C H A I R M A N . Mr. Secretary, do you think it is proper to subsidize the
American food produce at the period in our Republic when we have more money
to buy food than we ever had before?
The meat subsidy is more or less a roll-back. You are keeping prewar prices
on meat by reason of this subsidy, and you are doing that at the time in the
history of our country when the civilian population has more money to go out
and buy meat than they ever had before.
Now, to start with, I never did see the justification. Ceiling prices are an
entirely different thing, but I am talking about subsidies, rolling back the price
of the meat and holding them at prewar levels, at a time when we are raising the
wage scales and at a time when we have all this purchasing power in the country,
I cannot see. why they should not be removed.
Secretary A N D E R S O N . As I say, Mr. Chairman, I find it very difficult to argue
too strongly against you, because some time ago, when we bad the question of the
lamb subsidies up, it was the position then of the Secretary of Agriculture that the
thing to do was to raise the price of lamb 2 cents a pound, as all the people who were
in that will remember.
I did that on the theory that lamb was a luxury meat and that the people who
were buying it, lamb chops, and so forth, could well afford to pay the 2 cents
additional.
The matter was finally resolved by a special subsidy but the recommendation
of the Department of Agriculture was quite clear on that for a period of months,
and therefore I don't feel that I can reverse the whole position I took and say tha>t
it wouldn't be a good thing to remove certain subsidies.
I only say that in this period now, when we have had extreme difficulty getting
the steel mills back open and extreme difficulty handling various other types of
industrial plants, and when we are trying now to get a series of farm-machinery
plants open, I hate to complicate the picture by tossing in some additional cost-oflabor factors.
Transcript page 88 [reading]:
Mr. H O P E . * * * Now, as long as the ceiling prices are kept low through
subsidies, you have got a wider spread between the ceilings and the amount
that the public is willing to pay, and you give the meat bootlegger, the blackmarket operator, a greater margin of opportunity to make a profit than you would
have if your subsidy were removed and the ceiling went up accordingly, so as to
take up the amount that was eliminated when you took the subsidy off.
Am I right or am I wrong on that?
Secretary A N D E R S O N . I think I would have to concede that there is a very good
argument in what you say: If the black-market operator is working, the subsidy
gives him a greater advantage than he otherwise would be given.
Transcript pages 90-92 [reading]:
Mr. H O P E . Mr. Secretary, getting back to this question of subsidies again, we
are engaged now in this country in an effort to save food for the purpose of the
relief of starving people all over the world; and we are asking people voluntarily to
save food wherever they can. Do you not think that one reason we are not saving
more food is that food is relatively so cheap in this country that there is not very
extend price c o n t r o l and stabilization acts of
19 4 2
1217
much incentive, from the standpoint of living costs, at least, to the average
individual to save food?
In other words, would we not save more food if we eliminated subsidies and
let the consumer pay the full price of the food, so that we would have a little
better idea of its value, and to have some additional incentive for saving?
Secretary A N D E R S O N . The types of food we want to save are fats and oils and
wheats primarily at the present time, and there is very little subsidy entering into
either one of those.
Mr. HOPE. There certainly is in fats and oils. Fats and oils, edible fats and
oils, such as butter and oleomargarine and any kind of animal fats are certainly
covered by subsidies.
You have a subsidy 011 soy beans and all types of vegetable oils. So that it
seems to me that you and others are overlooking a possible chance there to secure
compliance with the request to save essential foods, when the argument is made
that subsidies should be continued.
I cannot help but think that there is quite an element of saving that would
take place if foods were more expensive. It would certainly be going against all
we know about human nature if that were not the case.
Secretary A N D E R S O N . I have testified, Mr. Hope, that I think that foods are
relatively cheap, and that that relative cheapness has increased the consumption
of them.
I think that is about as far as I should go.
Mr. HOPE. Of course, the relative cheapness is brought about very largely by
the subsidies, which some of us would like to see eliminated.
Transcript page 95 [reading ]:
Mr. C O O L E Y . I think, Mr. Secretary, Mr. Hope's discussion is very pregnant,
because we are going to take subsidies off sometime. Are we going to do it while
the demand is increasing, or are we going to wait until prices start down?
Are we giong to do it one time or the other? I agree with him we should do
it now, while the market will advance and we know it will advance, so as to compensate for the lack of subsidy.
Now, if you wait until foodstuffs start down, if you take it off,then you are going
to do what the chairman says you are going to do: Wreck every farmer in the
country in the beef cattle business.
I have made an observation. Will you comment on that?
Secretary A N D E R S O N . I shall, to say that my statements in July, August,
September, October, December, and January of this year would indicate the very,
desire that you have spoken of. I would like to see them taken off while demand
was good. Certainly I would not have started off during July, August, September,
and October with a series of suggestions at that time if I did not think that.
That was repeated again yesterday by Mr. Anderson; and Senator
Taft questioned him about that.
Secretary Anderson made the statement yesterday that these people
had the right to believe that subsidies would be continued. But you
will recall that Senator Taft said that no one derived any rights, because no one knew what Congress would do with it. The Secretary
said he did not mean that they would have contractual rights.
I doubt if anybody who is not in the livestock business realizes just
what that subsidy means to the livestock men and why we are so
opposed to it. But I will give you an illustration. It brings out
what I am thinking about. I own a thousand head of cattle and I go
into a bank. Those cattle on the market are worth $100 a head.
Every cowman I know borrows money. He always has and always
will, because God knows they will never have enough money to operate
without borrowing. He goes into a bank to borrow money and lays
down a list of his collateral and says, "Here is a thousand head of
cattle worth a hundred dollars a head." The banker says, "Oh, no.
The very first thing is to take off $39 a head, because that is the reflected subsidy in each of those steers. So your cattle are only worth
$61."
e x t e n d price c o n t r o l and stabilization acts of
19 4 2 1218
This happens every clay and many times every day. The banker
says that in addition to that, when the Government goes to monkeying with this thing they are liable to take off more than that, so he
will take off about $60 more. So that the collateral which the cattleman presents to the bank is not worth anything like the market value
that those cattle might bring today.
I wanted to bring that out,
Senator B U C K . If Congress does not begin to get these subsidies off
sometime in the near future, is it not your opinion that we will have
that with us for years ahead, because whenever the subsidies come off
the price will go up and the cost of living will go up?
Mr. M O N T A G U E . Yes. What 1 am going to say now is my own
comment. If you do not get the subsidies off now, then there will
never be as good a time time to get them off.
Senator B U C K . There will never be a better time?
Mr. M O N T A G U E . There will never be a better time than now to get
them off, because the public today, according to all the Government
figures and all the Government statements, has great buyingpower
today, and the loss of subsidies today would have less effect on the
economic life than it would at any other time in our history.
Then, of course, in the cattle cycle the 1st of July is the ideal time
to take them off. I do not like to take up the time of the committee,
but the cattle cycle is a well-known thing. The cattle year you might
say starts the 1st of July, because about that time of the year the
movement of grass-fed cattle to the market starts.
We in Texas, and the people I represent, have now nearly a million
head of cattle on grass in Oklahoma, in the Osage part of Oklahoma,
and in the Flint Hills of Kansas. We always move at least 700,000,
and up to a million head, and right now I think our figures are close to
a million head, of cattle getting rass fed, and they will begin hitting the
market in July. That is 1 year's movement.
Shortly after the 1st of July, along in August and September, it
has been typical of the cattle industry always, that when these range
cattle hit the market about 55 percent of them are ordinarily called
two-way cattle; that is, they were in pretty good flesh, but they were
not considered quite fat enough for slaughter. So the feeders take
them out and put a finish on them by feeding them corn.
It is just like painting your house. You do your framework first
and put your finish on afterward.
Senator B U C K . Y O U are concerned about the subsidies on cattle.
I am considering them all. To me, there is something indecent about
the Government's borrowing money to buy food for your or anybody
else. I think it is high time that all of these subsidies should be taken
off.
Mr. M O N T A G U E . My own personal view, just as a represenative
American citizen, not representing anybody, agrees with that about
a thousand percent, Senator.
There is a next step in the cycle of cattle. Along about the 1st of
September the Corn Belt people come out into the range and buy
feeder calves. They would get them just about the 1st of November.
They would be 11 months old; some 12 months old, or maybe a little
more than that, but around that age. They take those cattle and keep
them on feed for 12 or 14 months, and when they bring those cattle
extend price c o n t r o l and stabilization acts of
19 4 2
1219
in, that, Senator, is where you get your Newr York steak. When you
see that label, the steak is from the long-feed cattle.
There is not a single human being that I know that is engaged in
long-term feeding of livestock. I do not know one. There are a
great many engaged in short-term feeding, but there is none that I
know of in the whole industry who are doing long-term feeding.
That is all I wanted to say about that.
I have some conclusions here that I draw from Secretary Anderson's
testimony with reference to subsidies, and the same conclusions can
easily be drawn from his testimony of yesterday.
From the foregoing quoted testimony of Secretary Anderson, two
things are self evident:
First, he wanted to eliminate all meat and livestock subsidies not
later than June 30, 1946.
Second, he was blocked in his effort to eliminate these subsidies by
the administration, of which he is a high ranking member.
And when his statement is further analyzed, the effect of it is
disturbingly plain to cattlemen. What he says is that the administration has decided that, during times of prosperity and full employment
meat subsidies must be employed—which philosophy is exactly opposite to that which was announced as the original justification for the
employment of these subsidies. And then, the farther regrettable
implication is that agriculture will be used as the medium of appeasement to hold other segments of our society in line with a policy that
was conceived for war and which some desire to extend for peace.
Our part of agriculture dislikes the role of appeasement agency thus
thrust upon it.
However, we believe that the testimony of the Secretary of Agriculture, when calmly analyzed, not only fails to make out a case for
those who would continue the subsidy program but he has offered
positive evidence that such subsidies should be discontinued. Certainly he has said nothing that can fairly be construed as justification
for continuation of the subsidy program in our industry.
One further proposition cattlemen wish to make is this: Four years
have now gone by since the first effort was made to control the livestock and meat industry by and through regulations and directives.
Everyone in the industry knows that, at no time, has there ever been
an effective control. Everyone in and out of the industry knows that,
at this time, the effort to regulate this industry is a complete failure.
The black market controls the cattle and beef industry. You have
been given full proof of this fact by other witnesses, but not quoting
because of time, Secretary Anderson's testimony fully corroborates
this statement. And yesterday his testimony corroborated it again.
He did make the definite statement yesterday that legitimate packers
could not buy cattle and stay in compliance, because of competition
from the black marketeers.
*
The logical and inevitable conclusion is that this is an industry
which, because of its very nature, does not lend itself to the artificialities of regimented controls. And, on this point I again want to give
you two specific quotations from the testimony of Secretary Anderson.
Transcript page 106 [reading]:
Mr. P H I L L I P S . I have a question I would like to ask the Secretary. If he does
not think that the meat situation is getting steadily worse rather than improving?
Secretary A N D E R S O N . I do. I think it is getting steadily worse.
e x t e n d p r i c e c o n t r o l a n d s t a b i l i z a t i o n a c t s o f 19 42 1220
Transcript page 85 [reading]:
Secretary A N D E R S O N . * * * As long as there is this great flow of money in
the country, where people can walk into stores and take-out all the meats that are
there on the counter for an average family, you just cannot control the situation.
The cattlemen of the country are in full agreement with the Secretary of Agriculture.
Considering only the evidence of the most responsible witness that
could be called by the proponents of the continuation of price controls
and subsidies in the livestock and meat industry, it is our belief that
the following are the only logical conclusions that can be drawn:
1. Price controls of livestock and meat are unjustified and are not
in accordance with the announced policy of the Government.
2. Subsidies in the livestock and meat industry are not justified,
and equity and fair dealing require the discontinuance of this program.
3. No plan has been devised that will work an effective control of
the livestock and meat industry, and none can be.
In view of these inevitable conclusions, drawn entirely from the
Government's highest official in agriculture, we respectfully submit
to this honorable committee the firm proposition that the livestock
and meat industry should not be subjected to further efforts at
control through regulations.
STATEMENT OF WILLIAM H. YUNGCLAS, PRESIDENT OF THE
IOWA SWINE PRODUCERS ASSOCIATION
Mr. YUNGCLAS. I am William H. Yungclas, a farmer near Webster
City, Iowa. I operate a general livestock and grain farm in central
Iowa, raising about 300 hogs per year and keeping 80 to 100 head of
cattle. Of the 600 acres farmed, about 200 acres are corn, 150 soybeans, and the balance oats, alfalfa, and pasture. Practically no
help has been employed the past 4 years. I am president of the
Iowa Swine Producers' Association, a member of the American Pork
Producers, Associated, and of the Joint Livestock Committee.
I do not propose to have the solution to the problem confronting
your committee, but believe that some of the thinking of an average
livestock producer might be helpful. It seems that the present
confused feed, food, and livestock situation is a direct result of the
continued artificial forces which have been injected into our agricultural production during the war years. Perhaps, they may have
been necessary at that time, but since it is past, there is no point in
arguing it. Now, with the war over and the crying need of the
country being, "on with reconversion and peacetime production," the
producer feels justified in unburdening himself of his woes. Chief of
these are food subsidies, which have gotten into the public thinking
as helps or gratuities to the farmer, but are actually gifts to the
consumer. In the granting or withholding of them, the Government
has had practically dictatorial power over the producer or processor.
They have distorted normal market relationships between grades or
different forms in which a product is marketed. Many of them must
be collected at the local AAA office, and have the earmarks of a
"hand-out" or even political implications. Some are paid to the
packer and are supposed to trickle down to the farmer. Others such
as flour are paid to the miller and in the recent case of the upward
adjustment of wheat price to meet parity, the raise was made im-
extend
price c o n t r o l and stabilization
acts of
19 4 2
1221
mediately following a campaign to get wheat moved with the result
that many farmers had sold and the new owner got the benefit.
The worst part of the whole deal is for the Government to be paying a big slice of the city workers' grocery bill in a time of high wages.
The farmer feels he is paying the bill for the administration being
"cozy" with the labor vote. The entire subsidy program adds to inflation by the simple fact that with food costs low the consumer has
more of his income left to add to the inflationary pressure on other
merchandise. Getting out from under the subsidies and ceilings without anybody getting hurt too much is one of the farmer's major problems. He is old-fashioned enough to believe that the old law of supply
and demand meant something. He sees the effect of illegitimate markets ranging from black to nylon gray on the public morality. This
effect approaches the public indifference to laws and regulations of the
prohibition days. The reports of excessive black-market prices which
the public appears to be willing to pay raises the question in his mind
of just how much ceilings are really protecting the consumer. On top
of this is his resentment because the consumer is paying this tribute
to racketeers when were it not for Government regulations they would
be willing to pay it to legitimate dealers and him. The continued
piling of word upon word and page upon page of regulation, directive,
and order have brought him to the conclusion that the complete elimination of subsidies and price controls on livestock, feed, and livestock
products vvould do more to clear up the chaos than anything.
Livestock numbers are such that if the consumer were to pa}" his
entire food bill instead of having the Government foot nearly two
billion of it, he would adjust his purchases to fit the supply at very
nearly the present price if all costs w^ere included. As corn rose in
price, uneconomical users would drop out of the market, uneconomically produced livestock would be marketed, buyer resistance to
higher prices for scarce items, that had formerly been bargains when
the Government was paying a sizable portion of the cost, would result
in buyers' selection of more plentiful and cheaper foods. Highmoisture or low-quality corn or feed grains could be utilized for what
they were worth on an open competitive market just like we have
always done before the birth of the first directive.
This could be done without wrecking the livestock industry by
wholesale liquidation or completely altering the public's eating habit,
as has been suggested by some. Only by the use of a livestock system
of farming have we been able and can we continue to maintain a
sound, continuous agriculture. With approximately 55 percent of
the Nation's acreage in pasture, grass, and hay land, it is imperative
that livestock must have a major place in our economy.
The intensive production of so large an acreage of intertilled or row
crops during these'past high-demand war years intensifies the importance of the recuperating by return to hay and grass of much of this
acreage that has dropped out of its regular place in a legume rotation.
To utilize this added acreage will require an even larger livestock
population. Naturally, we want to do everything that is sensible
within our power to help those in stricken lands, but liquidating our
livestock industry to do it would only spell disaster for all.
The removal of these subsidies and ceilings need not cause a radical
change in the producer income, a subject which has been spoken of by
some as shamefully high. The farm income through the past years
extend
price c o n t r o l
and
stabilization
acts
of
1 9 4 2 1222
would reflect no more increase than the proportionate share of the
national income if consideration were given the accumulated depletion
of the soil resources, and the depreciation of machinery and buildings
due to inability to get labor, repairs, and paint. Also to be given
consideration are the many added hours of labor of old men, women,
and children. Time-and-a-half and double-time pay are considered
respectable in some occupations. In addition to all of this, the
farmers of the Nation through increased yields, larger acreages and
able management gave in return for this income the largest production of agricultural products on record.
Mr. Bowles has often referred to his great desire to remove ceilings
when supply and demand reach a balance. It sounds like a rather
vague time, but we believe it has arrived. If not, we stand to have
a wartime control of sometimes doubtful value attached to our
economy permanently.
STATEMENT OF € . E. WEYMOUTH, PRESIDENT, TEXAS & SOUTHWESTERN CATTLE RAISERS ASSOCIATION, APPEARING FOR
JOINT LIVESTOCK COMMITTEE, AMARILLO, TEX.
Mr. W E Y M O U T H . Mr. Chairman and members of the committee,
my name is C. E. Weymouth. I reside in Amarillo, Tex. I am a
ranchman—a producer of range cattle. My operations are conducted
in that part of Texas which is generally referred to as the Panhandle.
Today 1 appear before you as the representative of the Joint Livestock Committee which is an organization that was formed some 4
years ago by 134 associations of livestock producers, livestock feeders,
stockyards operators, and marketing agencies, from every section of
this country. And, in passing, may I say that the purposes behind
the organization of this Joint Livestock Committee were twofold.
First, producers of livestock from all parts of the country wanted some
character of organization to be formed through which individuals could
keep themselves informed concerning governmental wartime regulations and orders in order that the maximum amount of accurate information concerning national requirements and expectations would be
widespread in the industry and the full cooperation of livestock producers could be obtained, and, secondly, producers desired to have a
central agency through which their thoughts, ideas, and suggestions
could be transmitted to the proper governmental agency. Producers
believed that it would be beneficial to the Nation to have such an
organization, and we still believe the same thing.
I am also the president of the Texas and Southwestern Cattle
Raisers Association, which organization is one of the members of the
Joint Livestock Committee.
On March 1 and 2, 1946, the Joint Livestock Committee met in
Chicago, and after a full discussion of the condition of the industry
and of the country, voted unanimously to adopt the following quoted
resolution [reading]:
The livestock industry, represented by the Joint Livestock Committee composed of representatives of producers and feeders of cattle, hogs, and sheep, and of
market agencies and stockyards, in meeting at Chicago this March 2, 1946, is
unanimously of the opinion that the Government program of price controls and
subsidies as affecting the livestock industry has proven unworkable, unenforceable,
and has retarded and is now retarding production of food and thereby interferes
extend price c o n t r o l and stabilization acts of
19 4 2
1223
with the reconversion and readjustment program and has not been and is not now
beneficial to this country.
We therefore respectfully recommend and urge that the Congress not extend
this program beyond June 30, 1946.
Following the action of the Joint Livestock Committee, the Texas
and Southwestern Cattle Raisers' Association, on March 23 and 24,
met in annual convention in San Antonio, Tex., and unanimously
adopted a similar resolution, which reads as follows [reading]:
Be it resolved by the Texas and Southwestern Cattle Raisers' Association in convention assembled, That—
1. We believe that the price-control and subsidy program now in effect and
affecting the livestock and meat industry is now not only ineffective but is
actually harmful to the welfare of our country.
2. We believe that the actual prices being paid by consumers for meat, as
distinguished from ceiling prices, are now higher than average prices would be
if the price-control and subsidy program would be discontinued.
3. We believe that our supply of cattle is amply sufficient to meet the demand
of the public for meat.
4. We further believe that the ineffectiveness of the present program, which
is inevitable, has a most demoralizing effect on the character of the citizenship
of this country and is the fruitful source of crime and general disregard of all
laws and rules of society.
5. We believe, and assert it is to be a fact, that there is now no valid reason
for further continuance of the program of price controls and subsidies as affecting the livestock and meat industry.
While I have not seen the various resolutions adopted by the other
organizations that are members of the Joint Livestock Committee,
I have information to the effect that every industry organization that
has acted on this question has spoken in exactly similar terms. I do
not know of any person or any organization of persons in the livestock
industry who does not feel that controls of, and subsidies in, our
industry, should be discontinued.
And this unanimity of opinion goes further than just the producing
segment of the industry. The marketing agencies, the stockyards
companies, and all meat packers and processors, including both what
are generally referred to as the big packers and the small or independent packers, have expressed exactly similar views and recommendations.
So, the entire industry, from the range producers on through the
feeders, the marketing agencies, the stockyards, and the packers, and
even the meat retailers are in complete accord, and each and all
segments of the industry recommend that, insofar as the livestock
and meat industry is concerned, the governmental program of price
controls and subsidies be discontinued. It would be difficult —if not
impossible—to estimate the number of people joining in this particular
recommendation, but I believe that practically all of the 30,000,000
people living on ranches and farms, and all of the people connected
with the 600,000 retail stores, and all of the people connected with
the meat-packing industry and the marketing agencies and stockyards
are in agreement on this recommendation.
The unanimity of the industry is, in itself, a strong argument in
favor of the position it has taken. We who are in this industry are,
above all else, American. We are not presenting just a selfish view^point, but we believe we are presenting a recommendation that, if
followed, will well serve the best interests of our country. But, in
order for you to have an understanding of our position, I would like
extend price c o n t r o l and stabilization acts of
19 4 2 1224
to outline, briefly, a few of the principal reasons why we feel as we do
about this situation. These reasons are:
From the inception of the price-control program the announced
policy has always been that whenever the production of a commodity
reaches the point that the demand is met, then that commodity will
be decontrolled. Cattle producers, in spite of almost insurmountable
obstacles, the greatest of which has been the governmental control
program, have, throughout the war and now, more than met the test
of this criterion. Our production of cattle is now termed excessive
by the highest authority that could be quoted on this point, the Secretary of Agriculture. Just recently, to be exact, on the 4th day of this
month, while testifying before the Committee on Agriculture of the
House of Representatives, Mr. Anderson stated that the cattle population of this country was at an excessive, or surplus, level and that
he was and is recommending a reduction of cattle numbers. Cattle
producers cannot understand why this industry, in view of the known
situation, and in view of the announced policy, is still kept under controls that were designed for the avowed purpose of controlling "short"
supplies and, according to the Government's own announcements,
were never intended to be applicable to surpluses.
2. Our industry is inseparably tied into the meat-packing industry.
Whatever affects that industry affects us, and the converse is necessarily true. While representatives of the meat-packing industry will,
so I have been informed, tell you of these specific problems, I want to
point out to you some of the repercussions we feel in our branch of
this general industry as results from the controls attempted to be
enforced on our market—the packers.
Normally our fat cattle are sold to packers through marketing
agencies located at terminal markets. Our thinner cattle are first
sold to feeders located, in the main, in the Corn Belt of the Midwest.
Today we can and do sell our fat cattle direct. That is, we have
buyers coming to us out on our ranches and farms, buying our cattle
for immediate slaughter, and their purchases are not confined to fat
cattle. They will take anything. This, of course, operates to our
immediate benefit, but we are not so short-sighted as not to see the
effect of this practice. And the buyers are new men in the industry.
They are not representatives of our old market, the packers, but are
buying for newcomers in the slaughtering industry. This is destroying our historical system of marketing. We know that the people
who have been our market for years, and the stockyards and marketing agencies that have always been the medium through which we
marketed our cattle, are rapidly but effectively being put out of
business. And we realize that, when this emergency is over, we will
not be able to find these newcomers who, having taken their profits,
have gone into other fields, and we will be looking for our old customers and looking in vain because the present program has wrecked
them, insofar as beef is concerned. We may be reaping a present
benefit but we will pay for this in the future, and we do not like the
prospect.
3. In addition to the immediate problems of the range producers,
the "feeders" have some of their own. Competitive buying, from
new sources, and the price of feed have made feeding operations a
most hazardous undertaking, especially when it is realized that there
is always an imminent threat of new and different orders and control
extend price c o n t r o l and stabilization acts of
19 4 2
1225
regulations which change the prospect of the operators and make it
impossible for any man to have even a reasonably intelligent idea
about what he may expect from his feeding operations. This situation
is clearly illustrated by what happened in 1942, 1943, 1944, and 1945.
On each of these years, after the feeders had stocked up with feeder
cattle—that is—after they had filled their feed lots, new regulations
were issued, and in each instance these regulations operated detrimentally for the feeders. Is it any wonder that feeders, having
learned their lessen the hard way, are now very leery about undertaking new operations, especially about feeding to an efficient finish?
4. Mention has heretofore been made of the destruction of the
marketing system. This imperils the very economic existence of the
terminal stockyards and of all the marketing agencies operating on
these yards. For generations producers, stockyards, and marketing
agencies have built up a system that worked well. The yards and
the agencies rendered producers services that were well worth the
cost. Now, under the inefficiency of governmental control, that system is destroyed and the business of the stockyards and marketing
agencies has gone to the country direct buyers. The time will come
when these yards and agencies will again be needed. Unless controls
are lifted so that business can follow its customary channels, the yards
and the agencies will not be in existence when we need them and
their investments of many millions of dollars will be gone. All segments of the industry join in protesting against this inevitable result
of attempted governmental controls.
5. There are two kinds of price controls. One, and this is the one
we are dealing with at this time, is the effort of a government to fix
price ceilings and to make sales of commodities above those established
prices illegal. The other price control, and this is the one we really
have, is the control of prices by buyer resistance—which means nothing more than the control of the stituation by the immutable law of
supply and demand.
Anyone who will today say that the price-ceiling controls edicted
by the Government are working in the meat industry is blind to realities. You will, before this hearing is concluded, be given very graphic
proof of the real situation, but every shopper in the United States
knows that the meat program is a failure and that price controls of
meat are an academic fiction that has no foundation on reality. We
are actually operating on the buyer resistance plan that is as old as
time, and I do not believe any plan can be devised that will change
this situation. The fact is that, because of the slight danger of
legal complications, prices that are being illegally charged and freely
paid for meat are actually higher than they would be on a free market.
So, if the Congress would decree the decontrol of our industry, I am
convinced a real service would be rendered alike to consumers and
producers. And another good result would be that distribution would
be equitable.
6. Another reason for our position on this question is the evil effect
of the black-market operations. Black-market business is an expensive process. The clandestine operators must and do charge prices
that not only exceed the legal ceilings, but also provide for funds for
legal difficulties. This is always true, regardless of the commodity.
But there is another evil which grows out of these operations that is
not to be discounted in its effect on the country. Whenever any law,
extend price c o n t r o l and stabilization acts of
19 4 2 1226
or any regulation that has all the force and effect of a law is openly
and universally violated with apparent impunity, a contemptuous disregard of all other laws is bred and developed. We have all of us
seen this effect as a result of the noble experiment called "prohibition."
We all remember that the promiscuous violation of the prohibition
laws was accompanied by the worst crime wave this country has
ever undergone. That crime wave was a natural result of the open,
notorious, and generally encouraged violation of our law. We are
seeing a present parallel develop. The magnitude of the black market
in meat cannot be easily exaggerated. And the effort at enforcement, if it can be called an effort, is puerile.
It is certain that such illegal conduct, rewarded in such a generous
way, will inevitably lead to another period of disregard for other laws
and the present meat and livestock regulations can well be termed
the breeding ground for a genuine crime wave. This is a situation
and a result that no American likes, yet it is just as inevitable as was
the crime wave of the roaring twenties. It is axiomatic that an unpopular lav/ cannot be enforced and will not he respected. These meat
regulations are unpopular with the entire livestock and meat industry
and with the consuming public. It takes two parties to consummate
a black-market operation. A seller and a buyer are required. The
seller is easy to find. He is generally the newcomer who has entered
the trade attracted by the high return that speculative buying brings
to the intermediate man in the industry. And the finders are the
buyer consumers who, although they may talk one way, they, in
reality, constitute the paying half of the black market and by their
disrespect of the regulations register their actual disapproval.
7. There is one more major reason for the position of the industry
on this question. I mean the presence of subsidies in our business.
We have never liked the philosophy of the subsidy. We still do not
like it. We realize that, since we have these subsidies in our industry,
we, the producers, are in a most vulnerable position. Meat subsidies
are being paid, so it was announced at the time the program was
inaugurated, for the purpose of aiding the consumer. The extent to
which subsidies have been put to use is generally not realized. From
an individual standpoint the subsidy reflected in a thousand-pound
steer amounts to $39 per head. And, from an industry standpoint,
the amount is $715,000,000 annually. That is a staggering sum of
money and when one realizes that this amount of money niay be
withdrawn instantly on the whim of the Administrator, or may be
changed from one amount to another, or removed from one type of
animal and doubled on another, it is no wonder that producers are
fearful of this fiction in their inventories and beg to be relieved of this
uncertain influence in their economy.
We realize the absolute impossibility of accurately estimating our
business. This is brought home every time a stockman goes to a
bank or loan company to borrow money. The first thing that the
lender does is to discount the inventory of the collateral by the
amount of the reflected subsidy, and to be safe, this discounting
process is very generous in its estimate of the subsidy. Lenders
cannot be criticized for doing this. They have to make this discount
in their calculations. And when you realize that it takes at least 3
years to make a good beef animal the amount of this subsidy reflected
in inventories is a most uncomfortable sum.
extend price c o n t r o l and stabilization acts of
19 4 2
1227
We believe that subsidies should be discontinued June 30, 1946.
There are many reason why we believe this to be true. In this connection we respectfully call to your attention the substance of the
Flannagan amendment adopted by the House of Representatives just
last week. The Honorable John Flannagan, chairman of the Committee on Agriculture of the House, offered the referred-to amendment after extensive hearings called for the purpose of inquiring
into the condition of the livestock and meat industry. His amendment was unanimously approved by the whole committee together
with a resolution dealing with the subject matter. A copy of that
resolution which incorporates the amendment is hereto attached and
your attention is invited to that instrument. We urgently recommend
that you take similar action.
If I may, I would again like to cite to you the recent testimony of the
Secretary of Agriculture. When he was asked by a member of the
House Committee on Agriculture what reason could be given for continuing subsidies in the livestock and meat industry, his reply was most
enlightening and disheartening. He stated that he and other high
ranking governmental officials had, last fall, agreed upon a program
calling for discontinuance of subsidies on livestock and meat starting in
February of this year and ending not later than June 30, 1946. But
he stated that, since the unemployment situation had not developed
as it had been expected to do—that is, the Government had expected
to have at least from 7 to 8 million unemployed and actually have only
about 1 million unemployed, therefore, subsidies must be continued
to keep from upsetting the situation. Analyzing this statement it
means that, in times of prosperity and full employment, subsidies
must be employed. The philosophy is exactly opposite to that which
was originally used as a justification for the adoption of the subsidy
program, and we cannot see the logic or the correctness of the present
policy. And, in addition to its lack of logic, this present policy is
inequitable in that it uses agriculture as the medium for the appeasement of other segments of our society, and we dislike and object to
being such a medium as much as we fail to see either logic or equity in
the plan.
There are other reasons why we recommend the discontinuance of
subsidies in our industry. It is a well-established fact that the country as a whole nowT has greater buying power than ever before existed.
It appears to us as very illogical that, with this condition prevailing,
the Government should pay a part of the grocery bill of the public.
This is using everyone's money, including consumers' money, to pay
consumers' bills. Then we believe that subsidies are themselves an
inflationary influence. They are inflationary because—
(а) It is admitted that one of the greatest inflationary influences is
the abundance of money in circulation. Every dollar that the Government puts out by way of subsidy is a new dollar off of the printing press.
So, subsidies add to the sum of money in circulation, and are therefore
inflationary.
(б) Another cause of inflation is the cheapness of food. It has been
stated that today the consumer is paying the smallest percentage of
his income for food that has ever been recorded in history. Subsidies
are largely responsible for this fact. On April 4 of this year, Secretary
Anderson dealt at length with this subject in his testimony before the
House Committee on Agriculture. Since an abnormally small per-
extend price c o n t r o l and stabilization
acts of
19 4 2 1228
centage of income is used for food which is in abundant supply a larger
percentage of the income is left for the competitive buying of commodities that are in short supply. That is inflation.
8. Before concluding, may I point out one further very pertinent
fact. Over 4 years have passed since the first effort to control the
livestock and meat industry by regulations was instituted. There
have been issued at least 110 general orders or regulations that affect
the industry, and these orders have been amended at least 1,100
times. And today we have the most chaotic, the most illegal, and
altogether the most disgraceful condition in our industry that we have
ever had. No doubt the Government used the best brains it could
find to work on the meat plans—all to no avail. . Confusion has begotten confusion, and it is getting steadily worse. Is not the present
condition positive and convincing proof that the livestock and meat
industry is an industry that is not susceptible to artifical controls such
as price ceilings and subsidies?
We believe that no plan can or will work that seeks to impose the
artificialities and unrealities of the dogmatic philosophy of price controls by regulations in the livestock and meat industry. Facts sustain our judgment, and again I wish to quote from the testimony of
Secretary Anderson. In dealing with this general situation he stated,
and I am quoting verbatim:
As long as there is this great flow of money in the country, where people can
walk into stores and take out all the meats that are there on the counter for an
average family, you just cannot control the situation.
We of the industry fully agree with the Secretary of Agriculture in
saying that no plan has worked and none will.
Therefore, Mr. Chairman and gentlemen of the committee, it is
our earnest and sincere recommendation that any bill you report out
of this committee contain unequivocal language excluding from the
price control and subsidy program all livestock and meat.
(The following resolution was submitted for the record:)
IN
THE
COMMITTEE
ON
AGRICULTURE,
HOUSE
OF
REPRESENTATIVES
RESOLUTION
Whereas the Committee on Agriculture of the House of Representatives has
just completed extensive hearings which were held for the purpose of inquiring
into the present chaotic condition of the livestock and meat industry; and
Whereas during the couise of such hearings testimony was presented to this
committee by the Secretary of Agriculture, the Office of Price Administration,
and by representatives of all segments of the livestock and meat industry, including representatives of (1) producers of cattle, hogs, and sheep; (2) feeders of
cattle, hogs, and sheep; (3) livestock-marketing agencies; (4) stockyard operators;
(5) packers, including what are generally known as the "big packers" and other
slaughterers generally known as "small" or "independent" packers; and
Whereas, in general, the testimony revealed the following facts:
(a) There is an ample supply of livestock in America. Our cattle population is close to 80,000,000 head, which is some eight to ten million head
above prewar levels, and the Secretary of Agriculture has been advising
producers to reduce their herds by culling out the poorer grades. The
hog population is around prewar levels. There seems to be no doubt about
our supply of livestock being sufficient to meet our normal demands for meat.
(b) The legitimate packers and slaughterers cannot comply with the regulations set up by OPA governing price, weight, and grade of livestock. The
regulations simply impose the impossible upon the packers and slaughterers.
Not being able to comply has resulted in thousands of small packers going
out of business and the large packers running their plants from 10 to 50 percent of capacity. This in turn has resulted in the black-market operators
extend price c o n t r o l and stabilization
acts of
19 4 2
1229
stepping in and practically taking charge of the meat industry, until today
we find (1) the legitimate buyers are being forced off the cattle markets by
the bootleggers paying prices they are unable to pay and stay in compliance,
(2) increasing the number of slaughterers since OPA regulations went into
effect from 1,492 to 26,665, (3) destroying the livestock marketing system
that has been set up and established over the years, and (4) in forcing the
American housewife to pay on an average some 10 to 11 cents per pound
above ceiling prices for the greater part of the meat purchased; and
Whereas the witnesses representing producers, feeders, market agencies, stockyard operators, and packers, large and small, were of one voice in recommending
the removal of both price ceilings and subsidies with respect to the production,
sale, and distribution of livestock and meat, in which view a great majority of the
committee concurred, but were further of the opinion that if this could not be
accomplished, then that subsidies should be removed and a corresponding increase
made in the retail ceiling prices of meat; and
Whereas the committee, after due consideration, could not reach an unanimous
agreement as to the removal of price ceilings due to the fact it was not fully
advised just what effect such action would have upon grains, is of the unanimous
opinion that subsidies should be removed and a corresponding increase made in
ceiling prices. In support of this conclusion the committee respectfully presents
the following facts:
Compliance with such regulations is virtually impossible and is largely a game
of chance. Whether a purchaser of cattle is in compliance or is a law violator
depends upon two guesses which he is forced to make at the time live cattle are
purchased. First, he must estimate the amount of meat the cattle will yield after
they are slaughtered and, secondly, he must guess the grade that a Government
grader will place upon the meat. If he makes a mistake and guesses WTong on
either of these he is in violation of the regulations and is subject to penalties in the
form of loss of subsidy payments, injunction suits, fines, and imprisonment.
The extreme difficulty in complying with these regulations is shown by the fact
that there is as much as $20 per head difference, from a compliance standpoint,
between two adjacent grades of beef and that fully 30 percent of the cattle are
what is known as "liners," that is, they could easily fall within either of two
grades. For example, two packers could buy 100 steers of similar quality at the
same price. The beef of one is graded A and he is in compliance and the beef of
the other is graded B and he is out of compliance and a violator—or one packer
might receive a dressed weight yield of 61 percent and the other a yield of 60
percent—and again the packer with the 61 percent yield is in compliance and the
one with a yield of only 60 percent is out of compliance and a violator.
Automatic penalties are imposed by OPA regulations for mistakes in guessing
by the withholding of subsidy payments. Subsidy payments are withheld as
follows:
Ten percent if the cost of cattle exceeds maximum permissible cost by an
amount not in excess of one-fourth of 1 percent.
Thirty percent if the cost of cattle exceeds the maximum permissible cost
by an amount in excess of one-fourth of 1 percent but not in excess of 1
percent.
Sixty percent if the cost of cattle exceeds the maximum permissible cost
by more than 1 percent but not more than 2 percent.
One hundred percent if the cost of cattle exceeds the maximum permissible
cost by more than 2 percent.
Meat subsidies instead of stabilizing prices are, in fact, fostering the black
market. This is in part due to the fact that retail price ceilings by virtue of
subsidies have been fixed so low in relation to the actual prices which consumers
are willing to pay that at present most sales of meat are made at black-market
prices. This is demonstrated by the facts obtained through an independent market survey of 11 cities, including New York, Newark, New Jersey, Providence,
Washington, D. C., Chicago, Indianapolis, Milwaukee, Memphis, Houston,
Denver, and Los Angeles. This survey shows:
(1) That 83 percent, or 5 out of every 6, of the 1,803 stores visited in 11 cities
were selling meat at prices in excess of Office of Price Administration ceilings.
(2) That 68 percent, or two-thirds, of the meat purchased from the 1,803
stores averaged 11 cents per pound, or 29 percent, above Office of Price Administration ceiling prices.
(3) That the average overcharge on all meats purchased, including that purchased at ceilings and that purchased below ceilings, was 20 percent, showing that
the consumer on the average must spend $1.20 to obtain a dollar's worth of meat
at the Office of Price Administration ceiling prices.
85721—46—vol. 2
6
extend
price c o n t r o l and stabilization
acts of
19421230
(4) That if the amount paid for meat above the ceiling is as great throughout
the entire country as it is in the 11 cities surveyed, consumers are paying $1,550,000,000 in excess of Office of Price Administration ceiling prices annually.
Meat subsidies and their use to obtain compliance with Office of Price Administration price ceilings are disrupting and destroying the entire livestock marketing
and distribution system and are fostering the black market. The evidence shows:
(1) That in 1939 there were 1,492 meat-packing companies in the United States
doing a business of $5,000 or more annually. In contrast to this figure, the Department of Agriculture reports show that in July 1945 there were 26,665 packers
and commercial slaughterers in the United States. This does not include farm
slaughterers.
(2) That notwithstanding the unprecedented marketing of cattle and calves
during the period from 1941 to 1945, the period during which price control and
subsidies came into being, the slaughter of cattle and calves by theretofore
federally inspected plants increased only 10 percent between 1941 and 1945. In
contrast, other slaughter and disappearance of cattle and calves during the same
period increased 70 percent.
(3) That many of the large packing plants located at the terminal markets are
presently operating at less than 50 percent of capacity, and at times cattle slaughter
has been reduced to only 10 percent of capacity.
That meat subsidies have created an atmosphere of confusion, uncertainty,
and fear in the minds of producers and feeders of livestock. This confusion, uncertainty, and fear is shown by the following facts:
(1) The entire amount of the meat subsidy, totaling approximately $700,000,000, is reflected directly in livestock values and prices. This has resulted in
an artificial price structure for livestock because a substantial portion of the value
of the livestock is predicated on a subsidy. Approximately 10 to 20 percent of
the inventory value of each steer and approximately 12 percent of the inventory
value of each hog is represented by a subsidy. Subsidies, therefore, in the minds
of the producers represent a potential and very substantial "possibility of a
break" in livestock prices, which, for example, on choice cattle amounts to as
much as $3 per hundredweight. A break in cattle prices to such an extent would
mean bankruptcy for most producers. The removal of subsidies would remove
this fiction from the price structure and would restore the confidence of producers.
(2) Adjustments and threats of adjustment in price ceilings and subsidies are
made from time to time which create additional hazards and risks for producers.
This is illustrated by a proposal made in February to reduce ceiling prices of
heavier hogs by 50 cents per hundredweight, although producers had been told
that no change would be made in ceiling prices on hogs prior to September 1, 1946.
The proposed action was not taken, but hog producers were again informed on
March 3 that the Office of Price Administration was considering lowering the
subsidy on heavier-weight butcher hogs sometime before September 1. Announcements such as these tend to keep producers in a continuous state of confusion.
(3) Meat subsidies interfere with financing operations of producers and feeders
because banks and lending agencies refuse to recognize the fictional values created
by subsidies, and such agencies discount the proportion of the inventory value
which is reflected by subsidies.
(4) Many producers and feeders of livestock are limiting or curtailing their
operations, the ultimate result of which will be to reduce the supply of livestock
and meat available in the future; and
Whereas the committee, based upon the evidence adduced in the course of
these hearings, is of the opinion that the present chaotic condition of the livestock
and meat industry will not be corrected until such time as ceiling prices and
subsidies can be eliminated, it is of the unanimous opinion that the elimination of
meat subsidies with a corresponding increase in maximum price ceiling on meat
to the extent necessary to compensate for the elimination of subsidies will contribute greatly toward stabilizing the livestock and meat industry and correcting
many of the evils affecting it (1) by eliminating the confusion, uncertainty, and
fear which subsidies have created in the minds of producers and feeders through
the establishment of abnormal price relationships between livestock and meat;
(2) by facilitating a return to normal marketing methods in connection with the
sale and purchase of livestock and the distribution of meat; and (3) by depriving
black marketeers of a $700,000,000 market within which to operate and by
furnishing consumers with meat at prices no higher than the actual prices now
being paid and at the same time saving $700,000,000 in taxes: Now, therefore, be it
Resolved by the Committee on Agriculture of the House of Representatives, That
this committee does endorse and approve the following proposed amendment to
extend
price c o n t r o l
and
stabilization
acts of
19 4 2
1231
H. R. 6042, a bill to amend the Emergency Price Control Act of 1942, as amended,
and the Stabilization Act of 1942, as amended, and for other purposes, which is
now pending before the House, to wit:
That H. R. 6042, a bill to amend the Emergency Price Control Act of 1942, as
amended, and the Stabilization Act of 1942, as amended, and for other purposes,
be amended as follows:
(1) Amend section 5, page 6, line 23, by striking out "Meat, $715,000,000:"
(2) Amend section 5, page 7, line 22, by inserting in line 22 after the word
"That" the following: "no funds heretofore or hereafter appropriated to, borrowed under congressional authorization by, or in custody or control of any governmental agency, including Government owned or controlled corporations, shall
be used to continue any existing program, or to institute any new program for
the payment of subsidies on livestock or meat derived from livestock, or for the
purchase of such commodities for resale at a loss thereby subsidizing directly or
indirectly the production, sale, or distribution of such commodities, except that
nothing contained herein shall prevent the payment of obligations created under
existing programs which accrued prior to June 30, 1946: Provided further, That
in order to prevent a reduction in livestock prices upon the elimination of meat
subsidy operations, the Administrator shall make corresponding increases in
maximum prices of meat and meat products to the extent necessary to compensate for the removal of such subsidies: And provided further, That".
The C H A I R M A N . Thank you very much, Judge.
We are going to take a recess now until 2:30, at which time I hope
every Senator will he present. We have got to finish a long list of
witnesses. Mr. Wilbur LaRoe is going to be the first witness when we
reconvene.
(Whereupon, at 12:30 p. m., a recess was taken until 2:30 p. m. of
the same day.)
AFTER
RECESS
(The recess having expired, the committee met again at 2:30 p. m.,
and proceeded further with the hearing, as follows:)
Senator T A Y L O R (presiding). The committee will come to order,
please. Our first witness is Mr. Wilbur LaRoe, Jr., of the National
Independent Packers Association, and I would like to say that we
have eight witnesses who are supposed to be heard this afternoon, and
we have a little over 2 hours in which to do it. That would be 15
minutes for each one, and we will appreciate it a lot if you will keep to
about that limit.
Mr. L A R O E . I will do my best. It would help me—I do not
object to questions, but if they could be reserved to the end it would
help, I think, in getting through.
STATEMENT
NATIONAL
BY WILBUR LaROE,
INDEPENDENT MEAT
JR., GENERAL COUNSEL,
PACKERS ASSOCIATION
Mr. L A R O E . My name is Wilbur LaRoe, Jr., general counsel of the
National Independent Meat Packers Association. If the committee
please, I appear on behalf of National Independent Meat Packers
Association, with nearly 800 members located in all parts of the
United States. We represent the so-called "independent packers,"
the big packers not being members of our organization.
We have felt throughout the war that the Office of Price Administration was an important war agency of the Government. We believe
that the prevention of inflation was an essential part of the war effort
and that on the whole the Office of Price Administration succeeded
in preventing inflation. We therefore favored price control during
the emergency when others opposed it.
extend price c o n t r o l and stabilization acts of
19 42 1232
But now meat price control has completely broken down. Today
we have price fixing without price control. It is a very bad thing
for America to have Federal regulations in effect which are generally
ignored. Meat prices today are controlled, not by the Office of Price
Administration but by the black market. The situation is so bad
that I am pleading for the saving of this great industry which is being
ruined today by a situation which the Office of Price Administration
has proved utterly unable to control. I do not mean this as a reflection on the Office of Price Administration, because I do not believe that any Federal agency, however efficient, even if equipped
with an army of inspectors, could police the purchase of cattle at
every farm gate and at every country auction and at every stockyard and at every packing plant and at every retail counter.
Since the termination of the war the black market has become
worse instead of better. I do not exaggerate when I say that it is
absolutely impossible for the average beef slaughterer to purchase
beef cattle today in competition with the black market. All beef
slaughterers throughout the country are in a desperate condition due
to their inability to obtain beef cattle. You would not think this
would be true of the great State of Texas, yet I have a telegram from
our former vice president, Mr. J. E. O'Neill, of San Antonio, stating
that 90 percent of the beef in his territory is in the black market.
The Texas beef slaughterers are having just as difficult a time as are
slaughterers in other parts of the United States.
The present situation is unfair to the honest farmer or producer,
because his competitors who are less honest are able to sell to the
black market at fancy prices. It is unfair to the legitimate feeders
because they have to obtain their cattle, if they can get them, in
competition with the black market. And let me say that the position
of the feeders is going to be tragic in view of the feed situation. The
meat packer also suffers, and he is really suffering cruelly, because
of his inability to buy cattle in competition with the black market
and also because under OPA regulations he is heavily penalized in
loss of subsidy if he makes a wrong guess as to the grade of cattle
which he purchases. The situation is unfair to honest retailers, because of the enormous extent of the black market at the retail level.
And, finally, it is unfair to the honest housewife, because she finds the
legitimate stores which she patronizes almost bare of good beef, and
because she must enter the black market to obtain good cuts of meat
at exorbitant prices.
The unfortunate part of it is that there is a reasonably abundant
supply of beef cattle. There are nearly 80,000,000 head of cattle
available. This morning, if the Senators please, there was some
question about the number of cattle available, and with your permission I would like to incorporate in the record a table from the
United States Department of Agriculture's figures showing just the
number of cattle available.
Senator T A Y L O R . It will, be incorporated in the record.
(The table referred to is as follows:)
e x t e n d
p r i c e
c o n t r o l
a n d
s t a b i l i z a t i o n
a c t s
o f
19 42
1 2 3 3
[In thousands]
Total cattle
70,400
68, 714
68, 795
67, 546
65,996
63,373
60,576
68,178
57, 322
58,877
61,003
63,030
65.801
70, 280
Hogs
Milk cattle
60,159
58, 942
59,849
69,304
66, 576
55, 770
52,105
55,496
61,873
59,042
55, 705
54,835
59,301
62,127
21
21
21,
22,
22,
22,
22,
22,
22,
22,
23,
23,
24,
25,
Year
Total cattle
Hogs
Jan. 1—Con.
193 4
193 5
193 6
193 7
193 8
193 9
194 0
194 1
194 2
194 3
194 4
194 5
' 1946
74,369
68, 876
67, 847
66, 098
65, 249
66,029
68,197
71,461
75,162
79,114
82, 364
81,909
79,791
58,621
39, 066
42, 975
43, 083
44,525
50, 012
61,115
54, 256
60, 377
77, 736
83, 852
59, 759
62, 344
Source: U . S. Department of Agriculture.
Mr. L A R G E . I call your attention to the fact from this table that
in the twenties it was around 65,000,000, in the thirties it was just
about the same, in the forties it got a little above 70,000,000, and now
it is almost the highest in history, at close to 80,000,000 head.
Senator M I T C H E L L . D O you agree with the statement of this morning that there are fewer cattle than there were during the First World
War period?
Mr. L A R O E . N O ; I cannot believe that, if you take the sum total.
He tried to break it down into classifications, and those figures I do
not have, but my figures are based on the total available.
Senator M I T C H E L L . Even subtracting your last column, would you
bear out the statement?
Mr. L A R O E . Yes; the last column, if the Senator please, are figures
which are included also in the first column; but I show the dairy
cattle separately in the last column. But you will notice, however
you look at it, we are not bad off for our meat supply; and that is what
Secretary Anderson meant when he told you that there ought not to
be a shortage of meat. There ought not to be. Well, then, why is
there? I think we have the answer to that. There are nearly
80,000,000 head of cattle available. The Department of Agriculture
estimated for the year 1946 that there would be 150 pounds of meat
of all kinds available to the average civilian as compared with the 130
pounds before the war, after taking care of the needs of U N R R A
and the armed forces. In the last few days an allocation to civilian
consumption of 132 pounds has been announced for the second quarter
of the year—this is always a low quarter—but the Department of
xigriculture expects civilian consumption to be higher than this
figure. Of course, the second and third quarters normally see a lower
consumption of meat and the Department's estimate of 150 pounds
for civilians this year still stands.
I vftsh the committee would distinguish between a shortage of meat
and a shortage in legitimate channels. There is a terrible shortage in
legitimate channels. There is such an abundant supply of cattle that
extend price c o n t r o l and stabilization acts of
19 4 2 1234
the Secretary of Agriculture has been advising producers to reduce
their herds by culling out the poorer grades. The hog population is
about the same as the prewar level. The conclusion of the House
Committee on Agriculture was that—•
there seems to be no doubt about our supply of livestock being sufficient to meet
our normal demands for meat.
Now, gentlemen, that is true—a formal finding by that committee.
The tragedy of it is that we are paying $715,000,000 a year to maintain the black market and to maintain the fiction of price control.
This money is being thrown away. It creates an artificial demand
for meat because the subsidies are paid in part to cover a roll-back in
prices. The lower you get the price, the greater the demand. With
the heavily increased purchasing power of the people, there would
have been in any event an increase in the demand for meat, but this
demand has been artificially stimulated and increased by the subsidies and the price roll-backs.1
I think it is obvious that the lower you get your prices the greater
your demand, and when we roll back the prices with subsidies we are
automatically swelling the demand for meat.
The subsidies are doubly dangerous because the black market feeds
like a vulture on the difference between the legitimate price and the
illegitimate price. The lower you drive down legitimate prices, the
greater the opportunity of the black market for a profit. If subsidies
were knocked out, the black market would be less successful.
The black market has been greatly encouraged by an enormous
and unnecessary increase in the number of slaughterers. Prior to the
war there were less than 2,000 legitimate slaughterers. The House
Committee on Agriculture uses the figure 1,492. For reasons best
known to itself the Department of Agriculture authorized approximately 25,000 additional slaughterers—a number so large that to
police all of them was absolutely impossible.
Senator M I T C H E L L . I note that this statement wras written with the
date of delivery April 22. That was before the new control order
went into effect.
M r . L A R O E . Y e s , sir.
Senator M I T C H E L L . H O W many slaughterers do you estimate will
be licensed and given allocations under the new order?
Mr. L A R O E . I wish I could estimate it. I do not have that figure.
Our conviction regarding that, Senator, is expressed in a resolution
adopted by the Eastern Meat Packers Association, a copy of which
I would like to have incorporated in the record, and only one paragraph
of which I will read:
Be it resolved, That the Eastern Meat Packers Association, Inc., expresses its
profound regret that these agencies have seen fit to impose this quota system
against the recommendations of virtually the entire industry, and also of their
failure to carry out the intent of the Congress, that there should be bona fide and
effective cooperation between these agencies and the industry advisory committees of OPA: * * *.
i The House of Representatives on Wednesday, April 17, 1946, adopted the amendment of Chairman
Flannagan, of the House Committee on Agriculture, to the Price Control Act which terminates all livestock
and meat subsidies effective June 30, 1946*
extend
price c o n t r o l
and
stabilization
acts
of
19 4 2
1235
(The full text of the resolution referred to is as follows:)
EASTERN
MEAT
PACKERS
ASSOCIATION,
INC.
Corporate address: Hotel Pennsylvania, New York, N. Y.
Secretary's office: 1420 K Street N W , Washington, D. C.
RESOLUTION
APPROVED
BY UNANIMOUS
VOTE AT THE MEETING
OF APRIL 19, 1946
Whereas slaughtering quotas are bad for the meat-packing industry, and impossible of enforcement; and
Whereas the Office of Price Administration, acting jointly with the United
States Department of Agriculture, after finding the meat industry in utter chaos
as a result of the many regulations and their failure to enforce them, have now
announced the promulgation of a new quota system, and
Whereas the new quota system was ordered into effect against the unanimous
opposition of the industry advisory committees appointed by OPA; Therefore,
be it
Resolved, That the Eastern Meat Packers Association, Inc., express its profound
regret that these agencies have seen fit to impose this quota system against the
recommendations of virtually the entire industry, and also of their failure to
carry out the intent of the Congress, that there should be bona fide and effective
cooperation between these agencies and the industry advisory committees of
OPA; and be it further
Resolved, That the Eastern Meat Packers Association, Inc., go on record as
favoring a licensing system for the industry under which slaughtering would be
confined to those who were in bona fide operation on December 7, 1941, and such
successors of such operators, other than chain stores, who can show substantial
compliance with all lawful price and subsidy regulations.
CERTIFICATE
I hereby certify that the above resolution is a true and correct copy as it is
recorded in the minutes of the meeting of April 19, 1946.
[SEAL]
B . H E R N E N I A S , Secretary.
Mr. L A R O E . I am not sure the committee understands that when
this quota system was submitted to the industry advisory committees
it was unanimously opposed by them and adopted over their protest.
As I see it, one very serious argument against it, Senator, is that if
you impose a quota on the industry at a time when the industry cannot
get animals anyhow, you are not accomplishing much. For example,
if I am a meat packer and my normal slaughter is 200 cattle per week
and I can now get only 17, it does not do very much.
Senator M I T C H E L L . Of course, the testimony is that plenty of
livestock was coming into the markets and not going to the legitimate
slaughterer.
Mr. L A R O E . Well, there is some truth in that.
Senator M I T C H E L L . SO there is enough there for you to buy, if
you have the opportunity to buy it, under the ceiling?
Mr. L A R O E . Yes; if the quota system works, that is the way; that
would be the result. Rut I feel less qualified to appraise it than are
the professional and able industry advisory committees, who are
unanimously against it.
So carelessly and promiscuously were these permits issued by the
Department of Agriculture that in the State of Pennsylvania alone the
health authorities found it necessary to prohibit slaughter for health
extend
price control
and stabilization
acts of
19 4 2 1236
reasons by 300 of those to whom the Federal Department of Agriculture had granted these promiscuous permits. They seem to have been
granted to almost everybody that applied, with the result that the
number of slaughterers increased from 1,492 to 26,665. This was
grotesquely unfair to the established industry, and it resulted in an
uncontrollable black market which has done great injury to the meatpacking industry and to the soul of America. It is significant that of
the 26,665 obtaining permits, only about 12,000 applied for subsidies. This is significant for the reason that it is well known in the
meat-packing industry that slaughter cannot be legitimately conducted
without the help of the subsidies. I say with great emphasis that it is
only those who collect their subsidies who can slaughter beef cattle
and hogs successfully at OPA prices. Yet there are thousands who
did not collect their subsidies. This fact in itself is sufficient proof
of the enormous size of the black market.
The black market is so open and notorious that even on the financial pages of our newspapers the market quotations are given at
black-market levels. For example, I have mimeographed on page 6
part of the financial page of the Greenville, S. C., News of April 11,
1946, which quotes the prices of live animals on the Greenville market,
these prices being well in excess of the OPA prices. A letter received
under date of April 18 from a prominent meat packer in that area
says [reading]:
^Enclosed is a copy of our daily newspaper containing livestock quotations on
the local auction market. The prices are ridiculous. We have not attended this
sale in several months, in fact we are still out of the beef business. Bulls sold
up to $17.20 top, about 4 to 5 cents over the ceiling. (The OPA ceiling today is
$13.50, and the published price, $17.20.) All other classes are way over the ceiling.
(The clipping from the Greenville News, Greenville, S. C., of
Thursday, April 11, 1946, is as follows:)
GREENVILLE
LIVESTOCK
(P. L. Bruce Livestock Co.)
Light run, only had 547 head. Market stronger on all classes of cattle than
previous week. Good fat cattle are getting scarcer and higher every day. There
were no choice steers offered for sale with exception of one carload sold private for
18.40. Plain Jersey steers with fairly good flesh sold from 15.00 to 17.00. No good
heifers were offered, bulk bringing from 14.00 to 15.50. Had a few extra good
bulls, tops bringing 17.20, a number bringing from 15.00 to 16.00, medium bulls
from 12.00 to 13.00, common 11.00 to 12.00. There were no choice veals offered,
best bringing 18.00. Medium veals from 16.00 to 17.50, common from 14.00
down. No good beef type cows were here, best fat dairy cows sold as high as 15.50,
most cows with flesh brought from 13.00 to 14.50. Medium cutter cows from 11.00
to 12.50, common cows were very light, hardly anything selling under 10.00.
Stockers were up at least 75 to 100 points over last week.
Mr. L A R O E . I submit to the committee that things have come to a
pretty pass when the published market quotations in our livestock
markets are on the black-market level. The situation is entirely
out of hand.
Not only that, but the Department of Agriculture itself is quoting
black-market prices to the farmers. What I mean by this is that
each day the Department of Agriculture broadcasts to the farmers
the prices which may be obtained in the markets for live animals.
These prices so broadcast by the Department of Agriculture are
extend
price c o n t r o l and stabilization
acts of
19 4 2
1237
frequently in excess of the OPA ceiling prices, and they are broadcast
nevertheless.
There is only one adequate solution for this whole problem and
that is to eliminate price control on meat and meat animals at the
earliest possible date.
The question is properly asked as to the effect which elimination of
price control would have en prices. The answer is that there would
be a temporary increase in price which we believe would still leave
prices below the black-market level. But we do not believe that an
abnormal price increase would cover a longer period of time than is
required to knock the black market out, and this could be done in a
very few weeks. With a reasonably normal supply of meat animals
and with many hundreds, in fact thousands, of meat packers in keen
competition, the prices would soon settle down to a normal basis,
which would be higher than the present basis to the extent of the
subsidies, but could not be much higher because of the keen competition—and they would be less than the black-market, prices.
At this point I would like to say to the committee that the average
profit from the slaughter of beef animals, to the slaughterer, is normally
between a quarter and a half cent per pound of beef. That is the profit
for the slaughtering. Now, iri the pork the profit is in the neighborhood of one-half a cent. I do not have exact figures, but it is in the
neighborhood of one-half a cent per pound of pork; so that the industry
does not need a huge price increase to cover that one-half cent or less
of profit.
One trouble with the subsidies is that instead of stabilizing prices
at a low level they have fostered the black market and black-market
prices. The House Committee on Agriculture says [reading]:
Meat subsidies * * * are fostering the black market. This is in part due
to the fact that retail price ceilings by virtue of subsidies have been fixed so low in
relation to the actual prices which consumers are willing to pay that at present
most sales of meat are made at the black-market level.
For example, if the subsidy drives the price of a given cut of beef
down to 30 cents at a time when the purchasing power of the average
consumer makes it possible for him to pay 40 cents, an ideal condition
exists for the black market. And so we find throughout the land
prices being paid for meat on the average far higher than the OPA
prices.
This situation has played havoc with our industry. At many
packing plants which depend largely on the terminal markets, the
slaughter of beef has been cut down to 50 percent of capacity ; mother
cases it has been cut down to 10 percent of capacity; and in still
other cases, which I believe to be quite numerous, beef slaughter has
been temporarily discontinued. For the w^eek ended April 13 the
slaughter of cattle was only 163,000 head, or 32 percent below the
same week last year, and the beef production fell from 127,000,000
pounds to 87,000,000, a loss of 40,000,000 pounds.
May I interrupt myself to read two brief things, a telegram from
Albany, N. Y., wliich I have selected from a large pile of similar ones,
from the Tobin Packing Co. [Reading:]
One thousand to fifteen hundred western steers and heifers being slaughtered
weekly in Albany capital district area, which comprises approximately 25 square
miles by slaughterers who never killed anything except a few local cows prior to
the war. All these cattle are being killed by small slaughterers not under Federal
extend price c o n t r o l and stabilization acts of
19 4 2 1238
inspection and sold in black market at from 30 to 40 cents a pound by the carcass.
Department of Agriculture and OPA know of this situation but are doing absoutely nothing about it.
I have one more thing to read, which is also typical. It is a notice
dated April 20, 1946, by Cross Bros., meat packers, Philadelphia, and
it reads as follows:
To Our Customers and the Public:
Effective April 1, 1946, RFC, in conjunction with OPA, amended existing
regulations relating to livestock slaughter subsidy payments whereby severe
penalties are imposed upon slaughterers whose beef costs exceed, even by a
fraction of 1 percent, the permissible maximum cost stipulated in these regulations.
Under livestock market conditions beyond our control, we are unable to purchase livestock within the price range which will enable us to comply with these
regulations.
We therefore regret to advise you that, for the first time in our 26 years of
business, we feel compelled to discontinue operations. We fully realize the
seriousness of this step which will cut off the meat supply to 600 retail meat shops
as well as to Government agencies.
We have made every effort to avoid closing and. assure you that as soon as
conditions permit, we will resume operations.
The producers are going to be very hard hit unless subsidies are
removed while the demand for meat is heavy. If the subsidies are
removed at a time when higher prices cannot be collected from the
consumers, the producers will be struck a terrific blow. I can illustrate this by saying that the subsidies represent between 10 and 20
percent of the value of cattle and about 12 percent of the value of a
hog. Withdrawal of the subsidies at a time when supply is greater
than demand could cause the farmers to lose about $30 a head on
choice cattle. Now, the point was made this morning by Judge
Montague, and has been made by others, that this beef business runs
in cycles—you start about this time of year, everything is low, in
beef; about July 15 your cycle starts, and it starts upward, and it
strikes its maximum in the late fall. Now, in every year there is a
price drop as the flood of animals, the "thundering herd" as they call
it, comes to market. Now, if you wait until October or the 1st of
November when that flood of beef comes off the ranges into the
markets and the supply is temporarily greater than the demand and
the price drops and you take subsidies off then, every penny of that
comes out of the hide of the producer; you cannot get it out of the
consumer because prices are falling; and it is, therefore, awfully important if you are going to take subsidies off and if you want to help
the producer,- to take them off at a time when the prices are stiff
enough so that the producer will not lose. In other words, June 30,
in my opinion, would be a good time to take the subsidies off, and
the fall would be a bad time.
Senator T A F T . H O W about the controls? If you take subsidies off,
you have to take controls off at the same time, do you?
Mr. L A R O E . Y O U do not have to.
Senator TAFT. I mean, do you think it should be done?
Mr. L A R O E . Yes; it should be done. It would be possible to take
the subsidies off without taking the price controls off. We think both
should be taken off; but if you continue price control, we think the
subsidies should be taken off with commensurate increases in the
prices.
Senator TAFT. It has been suggested it would be very difficult to
enforce the price control, even more difficult to enforce the price
control, if there were no subsidies; do you agree with that?
extend
price c o n t r o l
and
stabilization
acts of
19 4 2
1239
Mr. LaRoE. There is a measure of truth in that statement.
I may be asked why we are so much concerned about the producers.
The answer to that question is that we absolutely depend upon the
producers of live animals, and unless the producers are paid incentive
prices which cause large production of meat animals, our industry
suffers for the simple reason that we cannot slaughter animals which
are not produced. Liberal prices for the farmers are absolutely essential to the success of our industry. The producers know perfectly well
that these subsidies are hanging like a sword of Damocles above their
heads, and they are very much afraid of what will happen if these
subsidies are retained too long. And I would interrupt myself again
to say that these subsidies are hanging like a sword of Damocles over
the United States of America, and I do not want to be dramatic but
I do want to express my concern as to the danger confronting our
Nation if these subsidies become quasi permanent.
Senator C A R V I L L E . Y O U mean just the subsidies on livestock?
Mr. L A R O E . That is all I am qualified to talk about.
Why retain subsidies which cost our Government $715,000,000
a year, which constitute a serious threat to the farmers, which are
bringing ruin to the meat packers, and which are sustaining the worst
black market in the history of America?
The House Committee on Agriculture, in its brief but excellent .
report, reaches the conclusion that [reading]:
The present chaotic condition of the livestock and meat industry will not be
corrected until such time as ceiling prices and subsidies can be eliminated.
But it recommends continuation of price control on meat, with
elimination of subsidies, because the committee was not able to reach
a unanimous agreement as to the effect which elimination of price
control would have upon grain. We feel that the enormous damage
done by the black market and by price control is such that price control on meat should be discontinued regardless of its effect on grain;
but if this committee feels differently about it and feels that price
control should be continued in spite of the damage which is now being
done, then we have a few alternative suggestions which I would like
to give very briefly, and then I shall be through.
Our alternative program is a very simple one and involves four
points, as follows:
I. Insuring a reasonable profit margin for nonprocessing slaughterers: The Office of Price Administration, which has never carried
out either the letter or the spirit of the Barkley-Batcs amendment,
is unfair to those packers who prepare only the carcasses of fresh cuts
and who do not have extensive processing operations. OPA has
made meat prices in such a way as to bring back part of the sausage
profits into the fresh-beef prices. This is tough on those slaughterers
who have fresh beef only and who are in part protected now by an
extra subsidy but who will be without protection if subsidies are withdrawn .because the prices are so made as not to provide fair margins
at the carcass level. There is a very wide difference between slaughterers as to the extent of processing. For example, the big packers
manufacture sausage, soap, buttons, fiddle strings, and almost every
conceivable item that can be made from an animal, whereas many
of the smaller slaughterers have no processing at all. If, therefore,
you make beef prices by assuming that profits are to be brought back
from the processing, you work grave injury on those small slaughterers
e x t e n d
price
c o n t r o l
and
stabilization
acts
of
1 9 4 2 1240
who have no such processing to bring back. In the footnote you will
notice I refer to Mr. Heinemann's list, prepared for Senator Stewart,
of the processing operations, potential operations of the big packers,
which are contained in the appendix to this study—a very formidable
list of-processing operations.1
There is apparently no sound reason why the man who breaks up
a carcass and sells it to butchers in the form of fresh meat should not
have a profit from that operation. I say emphatically that beef
carcasses cannot be prepared and sold at a profit today in any part
of the United States except at black-market prices.
Let me interrupt there to make this point still clearer. "Will you
not picture a great industry, a substantial part of which is producing
carcasses and fresh cuts, fresh meat—beefsteak, rib roast. Why
shouldn't we have prices on meat at that level? There is a large
number of packers that do not have any other level than that. Now,
if you make prices at that level without taking into account the profits
from processing, then these fellows can live, and the industry is fairly
treated; but if you start bringing back your profits from sausage and
making your beef prices on that basis, then you are tough on those
fellows who do not have the sausage to bring back.
Senator T A F T . That is the objection to the whole over-all-industry
standard formula of the OPA.
Mr. L A R O E . That is correct; but I have been battling for about
2 years—we have been battling them, and we are asking you now to
amend the amendment, in the manner which I shall show in just a
second.
In other words, there is no profitable beef carcass operation under
present conditions, unless in an isolated case the slaughterer is able
to get by because of some unusual factor in his situation.
I wish to protest as strongly as I can against the policy of OPA in
making their prices retroactively instead of currently. What I mean
by this is that they have been waiting until the end of the quarter and
then, finding that their prices were inadequate, and not in compliance with the Barkley-Bates amendment, they have paid very
substantial subsidies retroactively to make up the deficits and then
continued the unlawful prices in effect for the next quarter. To
illustrate that, at the beginning of November they took a look at
the past quarter. They paid substantial subsidies, because they were
fair enough to admit that their prices were far too low for the preceding quarter. They paid a very large amount of subsidy to make
good that deficit, and then continued the unlawful prices into the
next quarter.
Senator T A F T . And then came up in here for a deficit appropriation of $100,000,000 because they had used up the 12 months' money
in 10 months.
Mr. L A R O E . This deliberate violation of the Barkley-Bates amendment is deeply resented throughout our industry. Is it any wonder
that the Senate Small Business Committee recommends in the sixth
paragraph of their conclusions—if you will be kind enough to look
at paragraph 6 of the green sheet which I attach to my study—recommends—
that an a m e n d m e n t to clarify the Barkley-Bates a m e n d m e n t
the Congress at once.
be submitted
to
1 The potential extent of processing is indicated by a list of 28 operations prepared for Senator Stewart
by C. B. Heinemann, executive secretary of our association, and attached hereto as an appendix.
e x t e n d p r i c e c o n t r o l a n d s t a b i l i z a t i o n a c t s o f 19 42
1241
Many months ago OPA told us and told the Congress that at the
end of last January they would change their policy and make prices
currently reasonable. They have not done so. Indeed, they have
not yet distributed the statistics for the quarter ended January 31.
This causes the Senate Small Business Committee in its first recommendation—if you will be good enough to look at paragraph 1 of the
green sheet—to recommend—
that the Office of Price Administration be asked to report immediately upon the
quarter ended January 31, 1946, and determine whether a subsidy for that
period is due the industry.
While we agree that this should be done, we protest vigorously
against the retroactive making of prices. The Barkley-Bates amendment does not tell OPA to make reasonable prices retroactively. It
contemplates that prices shall yield a reasonable margin currently
on each species. OPA has definitely broken its promise to change
its price policy effective February 1, and the Barkley-Bates amendment is still being violated, as the Senate Small Business Committee
finds.
We have been complaining because they have been making prices
retroactively instead of currently. Now, they won't even make them
retroactively. We haven't yet got the prices or subsidies for the
quarter ended January 31, and yet they promised, effective February
1, that they would revise the prices, so to be on a current basis, and
they have not done it, with the result that beef cattle are being
slaughtered at a loss in every part of the United States today, and
the production has gone down in many cases to a mere fraction of
normal because the loss cannot be stood by the industry.
Senator TAFT. NOW, there was an increase. Has that increase gone
into effect as promised when we gave them the additional subsidy?
That is, when we have made that additional appropriation, they have
said they were going to pass an increased price—the additional wage
increase granted to the packing-house employees.
Mr. L A R O E . Oil, if you are talking about the wage increase, I do
not understand that there is any automatic provision for passing on
the wage increase, even the retroactive wage increase, in the form of
a subsidy; but there was an adjustment in the prices made at that
time, without a wage increase, and I think the whole industry got the
benefit of that.
Senator TAFT. Well, what they said, they were going to subsidize
the retroactive part of it, but from March on they were going to
increase the price to take care of the wage increase. That is what
they did, if I understood correctly.
Mr. LAROE. They did that. They took care of the current and
future wage increases by an increased price, and the retroactive, by
subsidy in those cases where they deemed that the industry needed
the subsidy.
Senator TAFT. But I have had some complaint that those subsidies for the retroactive wage increases have not been paid.
Mr. LAROE. I have had numerous such complaints. They have
not been paid as yet.
Senator TAFT. Although they were for wages paid in January and
February—correct?
Mr. LAROE. From the period January 26 through March 11.
If you will see paragraph 3 on the green sheet, we ask that the
Price Control Act be further amended to provide a profit for the
extend price c o n t r o l and stabilization
preparation of carcasses and fresh cuts.
by the following proviso:
acts of
19 4 2 1242
This can be accomplished
Section 7 of the Emergency Price Control Act of 1942, as amended, is further
amended to read as follows:
"Section 3 of the Stabilization Act of 1942, as amended, is further amended by
inserting at the end thereof the following: 1 Provided further, That on and after
the date of the enactment of this proviso, no maximum prices shall be established
or maintained on products resulting from the processing of cattle and calves,
lambs and sheep, and hogs, the processing of each species being separately considered, which do not allow for a reasonable margin of profit to the processors of
each such species as a separate group: And provided also, That in the fixing of maximum prices for the processing of each species of live animals for the processors as a
whole in each such group no maximum prices shall be maintained on meat or meat
products which fail to provide a reasonable profit margin for the production of fresh
meat at the carcass level, and for fresh cuts of meat, without regard to further processing,
and a reasonable margin shall also be provided for such further processing"
[New
language italicized.]
II. The unfair price base: I want to say a few words about the unfair
price base which they have used, because we feel strongly about that.
There has been made available to us a memorandum prepared by
the Office of Price Administration and submitted to Mr. Snyder's
office which explains why in the opinion of OPA our prices should be
made so as to yield net earnings not less than 1.5 percent of sales—
that is, one and a half pennies on the dollar. OPA reported to Mr.
Snyder's office that this would leave 19 percent of the industry in a
loss position. Notice, now—1.5 percent would leave 19 percent of
the industry in a loss position! The language of OPA was as follows
[reading]:
However, to reduce the 28 percent of sales volume in a loss position to approximately 19 percent, it is necessary that the average return on sales for the fiscal
year 1945 be increased to approximately 1.5 percent.
I quote it exactly.
The 28 percent of sales volume in a loss position would have resulted from the use of the years 1936, 1937, 1938, and 1939 as the base
period. The unfairness of this is shown by the following table:
Meat packing industry: Net earnings as percent of sales {after taxes)
Percent
1933
1934—
193 5
1936
1.4 1937_
1.6 1988.
1.3 1939_
.. 1.1 1940_
Percent
0.7
~ K1
__ 1.2
1.3
i Loss.
Now if you will look at that table, there, you will notice that the
italicized years as the base years, and you will notice that they constitute the four worst years of the table. You cannot pick four worse
years out of that table than the italicized years, and yet that is the
period that the Government used. Now, in fairness to OPA, they
recommended to Mr. Snyder that in view of the unfairness of this
he change to 1.5 percent of sales instead of 1 percent; but he would
not do it.
Senator TAFT. What did he have to do with it?
Mr. L A R O E . Well, the Office of Economic Stabilization at that
time and now determines, or is a court of appeals, so far as OPA is
concerned.
extend price c o n t r o l and stabilization
acts of
19 4 2
1243
Senator TAFT. He was then in a different office?
Mr. L A R O E . He was then in a different office.
It will be observed that the years 1937 and 1938 are the worst years
shown, yet Mr. Snyder's office, overruling the advice of OPA, used
these 4 years as the base for our prices, and according- to OPA's own
admission, this leaves substantially more than 19 percent of the volume
in a loss position. The statute does not tell OPA to use a prewar base
period, much less does it tell them to use a grotesquely unfair one.
Senator TAFT. More than that, it tells them to take into account—
general increases or decreases in profits earned by sellers of the commodity or commodities during and subsequent to the year ended October 1, 1941.
Mr. L A R O E . That is correct. That is correct.
Senator T A F T . I mean, in the law they have continuously and
directly violated the Price Control Act in adopting that base.
Mr. L A R O E . It would not be fair to case the whole blame for this on
OPA because in this instance Mr. Erickson and the others made a
real attempt to help us out because they saw the unfairness of it,
and they were overruled by higher authority.
We urgently request that the statute be amended to require the
use of a fair base period, which would be accomplished by the following proviso:
Provided, however, That in making prices on meat and meat products the net earnings for the industry as a whole and for the processing of each species of live animals shall not be less in relation to value of sales than in a typical period of four
nondeficit years to be selected by the Secretary of Agriculture.
Senator TAFT. When you refer to Mr. Snyder's office you refer to
the office now occupied by Mr. Bowles?
Mr. L A R O E . That is right—the Office of Economic Stabilization.
III. Licenses for slaughter: Under "Licenses for slaughter" I
would like to read to you from a statement made by Mr. H. A. Greenberg, in his testimony before the Agriculture Committee of the Senate.
Mr. Greenberg is OPA's enforcement officer in charge of the Food Enforcement Division. Mr. Greenberg says—and we agree with him—
One of the problems as we see it in OPA is to eliminate from the market by
regulation, and not from lack of regulation, large numbers of new slaughterers,
thus taking that competition out of the cattle market.
He may be referring there to some of these thousands of new
slaughterers that have come into the picture of late.
The swiftest and surest blow that could be struck at the black market would be to require slaughterers to obtain Federal licenses. While
it is almost impossible to check a price violation, it would be an easy
matter to check illegitimate slaughter by one who does not have a
license. This could be accomplished by the following amendment to
the Price Control Act:
And provided further, That no meat animals shall be slaughtered without a license
to be issued by the Office of Price Administration. Such license shall be issued
as a matter of right to all slaughterers who were in bona fide operation on December 7, 1941, and to their successors in interest, or to any slaughterer whose plant
is now subject to permanent inspection by the Bureau of Animal Industry of the
Department of Agriculture. The Office of Price Administration may also issue
licenses to any additional persons who are engaged in the slaughter of meat animals at the time this Act becomes effective and who shall show that their operations have not been in willful violation of the price or subsidy regulations of the
Federal Government.
extend
price c o n t r o l and stabilization acts of
19 4 2 1244
Senator M I L L I K I N . To finish your thought, is it your idea that all
slaughterers, regardless, should have a Federal license?
Mr. L A R O E . I think all should have a Federal license, and I think
licenses should be withheld from the notorious black market operators.
Just to take an illustration, here is a fellow who has been operating we
will say a whole year without collecting any subsidies. Now, we
know that cattle cannot be slaughtered without a very heavy loss,
and yet during that period he has doubled, trebled, and quadrupled
his production, when the honest slaughterers have been closing their
doors literally because they could not slaughter at a profit Now, is
there not, or should there not be, a burden of proof on that fellow to
show that he is legitimately operating, before he gets his license?
And there are many in that category all over the United States, who
have quadrupled their production at a time when the honest fellows
in business for 30 years are today closing their doors.
Senator M I L L I K I N . Well, I think there is quite a little to your
point. There are a lot of us around here that have observed by
experience what happens once you throw any business into the
supervision of the Federal Government.
Mr. L A R O E . W e l l Senator M I L L I K I N . At the end of one crisis, we find ourselves confronted with another one.
Mr. L A R O E . That is right.
Senator M I L L I K I N . Ultimately they find themselves completely in
the hands of the Federal Government.
Mr. L A R O E . I have every sympathy with that viewpoint, and I
am not recommending these things here unless this committee decides
that our industry should remain under price control. In that event
we must be protected against the black market.
Senator M I L L I K I N . I do not think there is any question but that
that method would help protect against the black market. I am just
casting about in my mind to find it there are some balancing factors
that ought to be thought of.
Mr. L A R O E . I am requested by our board of directors, on the last
page of my memorandum, to convey to you a suggestion regarding
the elimination of subsidies, which I convey to you without too much
personal enthusiasm. If this committee favors gradual elimination
of subsidies rather than immediate elimination, then we recommend
an amendment similar to the so-called Wolcott amendment in the
House whereby subsidies would be reduced 25 percent each 45 days
during a period of 6 months, ending all subsidies by the end of the
present calendar year.
Now, the only objection to that gradual elimination of subsidies
is that you do not know what situation is going to confront you say
on November 1. If you knew that, you could proceed without much
hesitation; but suppose on November 1 there is a terrific flow of
cattle to the market and the prices sag down a cent, a cent and a half,
or 2 cents. The only thing that you can do then by taking away your
subsidy is to take every penny of it out of the hide of the farmer, and
you are running that risk if you postpone the elimination of subsidies.
That is wThy it is wise in our opinion to take subsidies off while the
price situation is stiff.
Senator M I L L I K I N . Take them off completely, you mean?
Mr. L A R O E . Take them off completely, while the prices are stiff.
extend price c o n t r o l and stabilization acts of
19 4 2
1245
Senator M I L L I K I N . By one fell swoop?
Mr. L A R O E . Yes; by one fell swoop. If you postpone the elimination of subsidies you are gambling.
Senator T A F T . The House eliminated them once, did they not,
on meat?
M r . LAROE. Yes.
Senator T A F T . The House bill eliminates them June 30.
Mr. L A R O E . We ask you to follow what the House did on
subsidies,
namely, knock them out on June 30, with commensurate increases in
the price of meat.
Senator M I L L I K I N . Has anyone suggested an answer to your thought
that if you spaced the drop in subsidies that you might make one of
the drops at a very bad time? Has anyone met that argument'
Mr. L A R O E . I do not know. I would like to hear somebody meet it.
I haven't heard it met.
Senator T A F T . This has been suggested, that you might say to the
Price Administration, "All subsidies must be ended by the 1st of
January," and then give them enough money on this elimination scale
for all subsidies, but leave it free to them to take off all meat subsidies,
one time, all flour subsidies, another, all milk subsidies, another time,
so that there would not be a chance for speculators to know exactly
when this was going to happen, when the subsidies were going bo come
off. Do you think that is feasible? They would have them. You
see, they could not continue the subsidies; they would have to eliminate some.
M r . LAROE.
Yes.
Senator T A F T . But they could perhaps keep some for 4 or 5 months?
Mr. L A R O E . I do not feel qualified to speak on subsidies other
than meat, but as to meat, we think the only safe course is to take them
off with one fell swoop, and do it now. If you do not do it now, these
subsidies may plague you for years to come.
Senator T A F T . IS there any reason why w^E should not save another
fifty million by ending them when the bill goes into effect?
Mr. L A R O E . Well, I won't object to the saving of that fifty million
dollars.
Senator CAPEHART. Mr. Chairman, every witness that has been
before us has told us that there has been the greatest employment in
the history of the United States, we have the largest production in
the history of the United States, we have more cattle on the hoof.
Secretary Anderson yesterday stated that people had so much money,
they had nothing to buy except food, therefore they were pushing up
the prices of food; and yet this Congress continues to permit the
Government to pay out subsidies of all kinds and shapes and descriptions. To me it is silly and ridiculous, and the first chance I get I
will vote to eliminate subsidies on meat or on anything, I do not care
what it is. It is silly and ridiculous, and the testimony proves it,
not only by the witnesses that have been here, those that have been
against OPA and those that are for it, and even the testimony of the
Secretary of Agriculture yesterday shows that it is absolutely
ridiculous.
Mr. L A R O E . I have only one more point. I have had some correspondence with Mr. Greenberg of OPA as to what the black market
is and- how it operates. He and we are in some disagreement on
that, and I would like to have the privilege of incorporating in the
85721—46—vol. 2
7
extend price c o n t r o l and stabilization acts of
19 42 1246
record his letter to me, dated April 29, and my reply to him, dated
today.
Senator TAYLOR. Very well; they will be included.
(The letters referred to will be found at the end of Mr. LaRoe's
testimony.)
Mr. L A R O E . The only thing I have to say in conclusion is that I
have a feeling that this honorable committee is sitting on this thing
somewhat judicially as a court, as it were. In other words, while it
is a legislative committee, your problem is to adjudicate the issue as
to what part of price control is in the public interest and what price
feature is not. Now, I have had it said to me, if we take the control
off of meat we will have to take it off of everything. I do not agree
with that. That is not a judicial determination. If you find that
in the meat industry there is something approaching a national scandal—and gentlemen, it is not less than that, a national scandal—if
you find that we are throwing awTay $715,000,000 to perpetuate that
scandal, then I respectfully submit that the courts should find that
it is bad for America, and eliminate price control and subsidies on
meat, regardless of what you do on other commodities.
Senator TAYLOR. Thank you.
Senator TAFT. May I ask one question?
Senator TAYLOR. Yes.
Senator TAFT. What is your view of this latest order?
Mr. LAROE. That it will not work.
Senator TAFT. Mr. Anderson, of course, is in favor of eliminating
controls, but if this order proves the need exists, what do you think is
going to happen to the order?
Mr. L A R O E . I think it will not work, and I think Secretary Anderson definitely had his fingers crossed, when he appeared before you,
and I can prove it by his own words, where he said to you that
we will try it for 90 days, and if it does not succeed, we will end price
control on meat. He is in doubt, himself, on it, and when OPA
appeared before the two industry advisory committees and offered
the suggestion, there was a rising, unanimous vote of protest from
every representative of the industry.
Senator TAFT. You do not think it will force cattle out of the
irregular slaughterers, back to the regular channels of distribution?
Mr. L A R O E . It did not do it before when we had a similar thing,
and it will not do it now, and if you tolerate that sort of dilly-dallying
with the situation you are just perpetuating a national scandal.
Senator TAYLOR. Thank you, Mr. LaRoe.
(The several documents submitted by Mr. LaRoe in the course of
his testimony are as follows:)
OFFICE
OF P R I C E
ADMINISTRATION,
Washington, D. C., April 29, 1946.
WILBUR
LAROE,
Esq.,
Washington, D. C.
M Y D E A R M R . L A R O E : I have just read your remarks to the National Independent Meat Packers Association as quoted in the National Provisioner of
April 20, 1946. During the course of those remaiks you quote my testimony
before the Senate Agriculture Committee.
You indicate that I excuse the lack of enforcement activity by this agency on
the fact that we were unable to discover any evidence of "conspiratorial violations." I don't know whether you read all of my testimony or whether you misunderstood what I had to say. However, it is perfectly clear that the point I
made was, that there was no meat black market in the sense that you and other
extend price c o n t r o l and stabilization acts of
19 4 2
1247
packer witnesses before the various committees have asserted. I stated to the
committee that it was exceedingly important to understand clearly the nature of
the black market, for, through clear understanding, might come the answers on
how to meet the situation which confronts us. My point was, if you read my
testimony, that the black market consists of numerous violations, none of them
committed by the Capone type conspirator or meat bootlegger, but rather by
established members of industry, including members of your association and the
American Meat Institute.
If the meat bootlegger is the cause of our difficulties, as the packers would have
the country believe, then the remedies must take the form of usual police procedures. However, if, on the other hand, violations are being committed by
established persons at all levels of the meat industry because of lack of controls
other than price controls, it then becomes clear that the remedy lies in the adoption
and enforcement of additional controls. The Government has taken this latter
course.
You will see, then, that I was not even discussing the question of enforcement.
I was, rather attempting to point out the meaning of words used by other witnesses so that there could be some understanding of the real issues. I felt then,
as I feel now, that the situation would be better served if basic issues could be discussed than to have loose phrases like "black market" booted about undefined.
I am sorry that my testimony was misquoted at your convention. I presume
there is nothing that can be done about it at this time, but I wanted to point out
to you what I did say.
Very truly yours,
HERMAN
A.
GREENBERG,
Director, Food Enforcement Division.
THE
Mr.
HERMAN
A.
NATIONAL
INDEPENDENT
GREENBERG,
MEAT
PACKERS
ASSOCIATION,
Washington, D. C., May 2, 1946.
Director, Food Enforcement Division,
Office of Price Administration, Washington, D. C.
D E A R M R . G R E E N B E R G : I have your letter of April 2 9 and I wish to thank you
for your frank criticism of what I said at Chicago. If I misquoted you I shall
retract publicly. You and I have always dealt with each other on a basis of
complete frankness and neither of us can afford to be unfair to the other. Certainly I do not want to be unfair.
But I have carefully reread your testimony and I cannot see that I dealt unfairly
with you, if technicalities are left out of consideration. In your testimony you
said:
" W e have had experience with this black market since roughly December of
1942, when the present wholesale meat regulation went into effect. That is something better than 3 years. Now at no time during those 3}i years have we run
into a black market in the sense, I think, that these gentlemen w^ould have us
believe. I mean by that that at no time have we run into a criminal conspiratorial group which has come into the meat industry anew for the sole purpose of
selling a scarce commodity in wartime at an excessive profit. The black market,
as we have run into it, has for the most part been overcharges by persons who have
been in the meat industry."
I interpreted this to mean and I said in effect at Chicago, that you had not-been
able to find a criminal conspiratorial group (which you now define as analogous
to a Capone gang) and you implied, at least, that enforcement was quite different
from what it would be if you had spotted such a group.
You implied, we think unfairly, that we envisaged a gangster bloc wholly apart
from the meat industry which is in conspiracy to defeat price regulation and which
constitutes the black market. On the contrary, we have always felt and we feel
now that the black market consists in part of slaughterers who have been licensed
by the Government. I do not recall using the term "bootlegger" at any time
during the period of price control, although that term could aptly be applied to
many who slaughter under trees and in garages and sheds. While not denying
that there have been some violations of the regulations by long-established
slaughterers, it is notorious that a veritable host of new slaughterers have tripled,
quadrupled, and quintupled their operations at a time when most of the longestablished firms were having serious trouble because they could not buy in compliance. Although it is well known that beef cannot be honestly slaughtered
successfully without collecting subsidies, only about 12,000 of the 25,000 new
extend price control and stabilization acts of
19 4 2 1248
licensees have collected subsidies. The fact that these slaughterers are not "conspiratorial groups" is, I respectfully submit, no reason for not ascertaining why
so many of them can operate at a handsome profit while legitimate slaughterers
suffer.
I quote from one of many telegrams recently received:
"One thousand to one thousand five hundred western steers and heifers being
slaughtered weekly in Capital district, which comprises approximately 25 square
miles, by slaughterers who never killed anything except a few local cows prior to
the war. All these cp.ttle are being killed by small slaughterers not under Federal
inspection and sold in black market at from 30 to 40 cents a pound by the carcass.
Department of Agriculture and OPA know of this situation, but are doing absolutely nothing about it.
"W.
C.
CODLING,
" Vice President, Tobin Packing Cof, Inc.
11Albany, N. Y."
But why do we quibble over the definition of the black market when we both
admit its existence and when we both know that it flourishes almost without
hindrances? If, as you imply, it pervades every level of the industry, including
many "established" plants, that is neither a justification of the black market nor
evidence that OPA can control it. The important fact is that we both concede
the existence of an enormous black market and that we both believe that OPA has
thus far proved powerless to control it. That we differ as to the precise definition
of the black market is relatively unimportant. Frankly, I fear that you are largely
right that it affects every level of the industry, and I will go further and concede
that OPA's colossal failure in enforcement has forced many honest slaughterers to
choose between violating and going out of business. But why do you and I
quarrel over definitions when a whole industry is being ruined by regulations
which are not and cannot be enforced? It is the custom of OPA on the eve of a
congressional hearing to make some grand new gesture of enforcement, or of new
regulations designed to kill the black market, but the entire industry, knowing
that the new plan will not work, and knowing also that it, was opposed unanimously by the industry advisory committees when presented to them for the first
time concurrently with its announcement to the public, suspects that the new plan
is launched to make an impression on the lawmakers, and that the Government has
no valid reason to believe that it will succeed better than its predecessors.
Your plain intimation that the established meat industry is just as much a
part of the black market as the black market itself and that the black market
has been for the most part due to overcharges "by persons who have been in
the meat industry" will be deeply resented throughout our industry. Contrary
to your position in this matter, Secretary Anderson told the Senate Committee
on Banking and Currency that "reliable companies can't get cattle in the (price)
compliance range" because "they run up against people who don't care about
the compliance range." Let me assure you that the legitimate packers do care
about the compliance range and many of them are closing down because they
cannot comply. Your attitude explains why your investigators are annoying
meat packers over trivial and picayune violations, and even taking them to
court for such violations, while the black market rages like a prairie fire.
I would plead with you to save my clients if I thought you could save them.
But I do not believe you can save them. You have tried hard and you have
failed. This is no reflection on you, for a whole army of able enforcement officers
could not police the regulations at every farm gate, at every auction market, at
every slaughtering place (including the trees beside the brooks) and at every retail
counter and at every eating place. You have been given an impossible job and
it is no reflection on you that you cannot carry it out. But I do feel very strongly
that we should not quibble over definitions while a great industry is threatened
with ruin and when it must be apparent to both of us that this whole situation is
almost a national disgrace.
As to your second major point, namely, that the problem is accentuated by
invasion of the markets by new slaughterers who purchase legitimately, but who
care nothing about compliance, this is tragically true, but the new quota system
will not correct it in the opinion of the industry.
In fairness to you I shall offer your letter in evidence before the Senate Committee on Banking and Currency and distribute it to our more than 800 members
through our bulletin.
Sincerely yours,
WILBUR
LAROE,
Jr.,
General Counsel, the National Independent Meat Packers Association.
e x t e n d p r i c e c o n t r o l a n d s t a b i l i z a t i o n a c t s OF 1 9 4 2
1249
[Memorandum]
C O N C L U S I O N S A N D R E C O M M E N D A T I O N S OF S M A L L B U S I N E S S
UNITED STATES SENATE
COMMITTEE
OF
The purpose of this report is to recommend as prompt and effective relief for
the meat-packing industry as it seems possible to secure.
It is evident that the Barkley-Bates amendment needs to be amended and
clarified so that its administration will not be a matter of conjecture and conflicting interpretation by Government agencies. But such amendment could
not be incorporated into law before June 30, 1946, and several more months
might elapse again before its new stipulations were put into effect.
To secure some prompt relief it is recommended—
1. That the Office of Price Administration be asked to report immediately
upon the quarter ended January 31, 1946, and determine whether a subsidy
payment for that period is due the industry.
2. That for such payment, the 1.5 percent of profit be used in the subsidy
determination, as originally recommended by the OPA, and as representing
a somewhat fairer basis of computation.
3. That the current cost figures of the industry, as received monthly by
OPA from a representative group, be examined to reveal what adjustments in
prices are needed currently to place the industry as a group in a reasonable
profit position, "prospectively," on each specie of livestock, as required by
the . Barkley-Bates amendment.
4. That the Office of Price Administration be required to confer with the
Department of Agriculture and with the industry, as soon as possible, to
determine what 4-year period would offer the industry a "fair prewar base"
for profit determination.
5. That the Office of Price Administration and the Department of Agriculture confer and act upon a more effective enforcement and control program
against black-market operations.
For somewhat longer range purposes it is recommended—
6 That an amendment to clarify the Barkley-Bates amendment be submitted to the Congress at once.
7. That the proper committees in the House and the Senate be urged to
give consideration to the possibility of setting a program of gradual removal
of price controls and subsidies on meat, timed to be partially effective with
the beef-slaughtering period in December 1946, provided that as this report
indicates and Department of Agriculture figures substantiate, the production
of livestock continues to be in ample supply.
[Appendix]
L I S T OF T Y P I C A L P R O C E S S I N G O P E R A T I O N S C O N N E C T E D W I T H T H E S L A U G H T E R OF
LIVE ANIMALS
(Prepared by Mr. C. B. Heinemann)
1. Making of tankage for feeding and/or fertilizer.
2. Drying of blood and use as fertilizer, bleach, etc.
3. Processing of bones into fertilizers, case hardening bones, etc.
4. Extraction of material for making glue.
5. Extraction of material for making gelatin.
6. Processing of hair for brushes, binder, felt, curled hair for upholstering, etc.
7. Extraction of lanolin from wool of pelts.
8. Extraction of albumen,
9. Extraction of oil for certain lubrication, flames, etc.
10. Making isinglass.
11. Benzoinating lard as beauty cream or ointment base.
12. Making lard and oleo stearine for stiffening body of oils.
13. Extraction of edible and inedible tallow*
14. Preparation of sausage casings.
15. Making gold beater skins, bottle caps, tennis strings, clock cords, drum
heads, musical strings, surgical ligatures, etc.
16. Making combs, buttons, hair pins, umbrella handles, napkin rings, tobacco
boxes, buckles, crochet needles, knife handles, dice, chess-men, electrical bushings,
washings, artificial teeth, bone rings for nursing bottles, and soap grease from
bones.
17. Making of soap and cleanser.
18. Making of glycerine.
extend price c o n t r o l and stabilization acts of
19 4 2 1250
19. Making of neatsfoot oil.
20. Making of oleomargarine.
21. The making of a constantly growing list of pharmaceuticals such as these:
(a) Gland extracts from the thyroid, pituitary (anterior and posterior)
adrenals (cortex and medulla), pineal, thymus, testes, ovaries, corpus
luteum, parathyroids, pancreas, the greatest of all glands, the liver, spleen,
.prostate, placenta, and mammary.
(b) Pepsin, rennin, diastase, lipose and trypsin.
(c) Lecithin.
(id) Thromboplastin.
(e) Red bone marrow.
22. Salvaging of chitterlings.
23. Salvaging of liver, kidneys, tails, tripe, melt, heart, ears, brain, snouts,
cheeks, tongue, feet, etc.
24. Salvaging of gall and gallstones.
25. Use of horns from cattle.
26. Use of hoofs from all animals.
27. Making of sandpaper and emery paper by use of packer glue. (One packer
makes many miles of this in 1 day.)
28. Use of cracklings from rendering tanks.
Senator T A Y L O R . Mr. Russell Brown.
Mr. B R O W N . I had originally indicated that Maj. B . A. Hardy, who
is an oil producer in Louisiana and president of our association should
appear. He was assigned, the 23d of April, but at that time he could
not be reached, and he had to leave; so he has asked that I appear for
him.
Senator T A Y L O R . All right; we are glad to have you, sir. We are
sorry we are late with our schedule.
STATEMENT BY RUSSELL B. BROWN, GENERAL COUNSEL, INDEPENDENT PETROLEUM ASSOCIATION OF AMERICA, BEFORE
THE SENATE BANKING AND CURRENCY COMMITTEE
Mr. B R O W N . Instead of using the full 3 0 minutes as contemplated, I am sensitive to your problem, here, and I would like to ask
permission to introduce my statement into the record.
Senator T A Y L O R . Yes, sir.
Mr. B R O W N . And let Mr. Frank Porter, of the Midcontinent
Oil and Gas Association, finish my testimony for me.
(Mr. Brown presented the following statement for the record:)
S T A T E M E N T BY R U S S E L L B . B R O W N , G E N E R A L C O U N S E L , I N D E P E N D E N T P E T R O L E U M A S S O C I A T I O N OF A M E R I C A , ON E X T E N S I O N OF P R I C E C O N T R O L , B E F O R E
THE S E N A T E B A N K I N G AND C U R R E N C Y C O M M I T T E E
My name is Russell B. Brown. I am general counsel for the Independent
Petroleum Association of America for which organization I am authorized to
appear on this occasion.
This association is composed of independent producers of crude petroleum with
members in every oil-producing State in the United States. There are now 26
such States. The name "independent" as used in the case of our association
means that the membership of this association comes from those producers engaged exclusively in the production of oil in the United States. The large integrated oil companies engaged in the international petroleum trade are not members of this association. The membership of this association is so widely distributed and of such volume as to justify the conclusion that it is representative of
the domestic petroleum producing industry of the United States.
The purpose of my appearance here on this occasion is to urge upon your
committee and through you, upon the Congress of the United States, that there
is no necessity for the continuation of price controls on petroleum and its products
at this time. There has been no necessity for such controls since VJ-day. There
is no possible necessity for such controls in the foreseeable future.
extend price c o n t r o l and stabilization acts of
19 4 2
1251
Great volumes of petroleum products were used in the prosecution of the recent
war. At the conclusion of the war the great producing capacity of the United
States was being utilized to its limits. With the conclusion of the war much of
our petroleum products was released from war demand and became available for
our civilian requirements. Our full civilian requirements are far short of the rate of
production at the end of the war. It has, therefore, been necessary to greatly
reduce our rate of production, although our capacity to produce remains.
Our refining capacity available for the manufacturing of petroleum products
far exceeds the demand for such products. Crude oil and the products of petroleum have been going to storage since VJ-day. There is a widely distributed ownership of petroleum and of the facilities for sufficiently processing, transporting,
and distributing the products of petroleum in the United States. Competition is
great and with the abundant supply there is no danger of a runaway price condition.
There is no justifiable reason to longer continue price controls in this industry.
All of these facts have been set forth in clear detail in many places. In particular, were they fully discussed by the representatives of the various branches of
the industry before the House Banking and Currency Committee, where they were
not challenged or denied. Since the printed record of those hearings is available to
the entire Congress, unless there is some phase on which you desire further elaboration, I shall not burden you here with a new recitation of this detailed information.
I shall not raise here the question of whether there was at any time justification
for price controls in this industry. It is not necessary to again discuss the kind
and character of the controls we have had. The producer of petroleum has endured the character of controls that have been imposed upon him through improper and stupid and antagonistic administrative agencies. We have suffered
greatly. About 25 percent of our strength has been needlessly sacrificed through
such inefficient administration. If controls of this character are to continue we
will lose much more.
^ iUnder OPA regulations the producing branch of the oil industry could not have
met the requirements of our armed forces during the recent war except for the
fact that the integrated companies in the industry bought up the weakening
companies and carried on their production. These companies who sell crude oil
in the form of refined products received sufficient price for such products to enable
them to continue to make money.
This saved the armed forces supply requirements but did nothing for the companies engaged only in production. It weakened the permanent economy of the
Nation and forced a trend toward monopoly.
We want to remain in business. In that position we may be selfish. If it is
selfish to ask the Government to which we contribute to not destroy us then we
are guilty. We think there is more at stake than the existence of some one person.
There is the great competitive impulse that has been made possible and secure
under a government of laws. These laws have been provided by the Congress of
the United States under a wise constitutional charter.
For a period of some 80 years this industry has been gaining in strength and
usefulness. It was quite useful during the recent war. No special credit is to be
given to the members of this industry for the service it rendered. The credit goes
to the Government that made this condition possible. Other countries have
petroleum resources equal in proportion to the United States. No other country
had these resources available for use when the great necessity developed. It has
been said that this is why we won and others lost.
For the 80 years of this industry's existence, Congress has passed no wholly
destructive law with relation to our activities. You have provided rules by which
we operated. We were free to conduct our business under the same rules that
governed others.
We personally have at times prospered and at times we have not done so well.
The Nation as a whole has prospered. In a pefiod of 4 years administrative
activities have been needlessly responsible for an industrial casualty list of at
least 25 percent of a group of people who were responsible for making available
about 70 percent of our supply of crude petroleum that has meant so much to
our industrial life in peacetime and to our defense in war. This casualty list is
not the result of war. It is not the result of legislative intent. It resulted contrary to necessity and in spite of laws.
We do not believe you feel this situation is necessary or want its continuance;
yet only you can stop it.
The President of the United States has announced in Executive Order 9697,
dated February 14, 1946, the policy of Government to continue controls over
extend price c o n t r o l and stabilization acts of
19 4 2 1252
scarce materials. Mr. Snyder, as Director of War Mobilization and Reconversion,
in his fifth report, in referring to price ceilings, said: "They will be lifted as quickly
as supply approaches balance with demand.''
Mr. Chester Bowles in his speech before the National Association of Manufacturers on December 6, 1945, said: "Price control should and must be removed
as rapidly as supply conditions permit. Barring continued labor-management
difficulties the production estimates for 1946 indicate that in industry after industry during the next 12 months we will find supply and demand coming into balance.
As that occurs, I assure you that your Government will move promptly to eliminate the last vestige of price restrictions in those industries."
He made a similar statement a year ago on the occasion of the renewral of the
price control law. He made it again only recently before the House Banking
and Currency Committee. On this last occasion Mr. Snyder and Mr. Marriner
Eccles each made similar statements in answer to direct questions of members
of that committee.
Petroleum supply has been in excess of demand for many months yet no move
to comply with the many promises has been indicated.
Mr. Porter in his appearance before your committee only recently talked of
some system of "suspension" of controls that was in contemplation. This
program offers no relief because according to his own interpretation ceilings would
again be invoked should the industry commit some act unpleasing to the Administrator. There is here direct evidence before your committee that Mr. Porter,
the present Administrator, does not regard himself as being in accord with the
President or other administrative agencies wrho have given their promise with the
expectation that Congress might act upon it. No security is suggested by such
conduct.
There is but one means of freeing American industry for the difficult task now
before us. That is for Congress itself to remove such controls as should be
removed. The removal should be so simple and so direct as to leave no possible
field for interpretative discretion in the hands of an agency whose action has
indicated such definite desire to control as has been evidenced by OPA. This
agency has demonstrated to the complete satisfaction of many of us that they
have such bias in favor of controls as to render them unfit to pass upon the question of when they should surrender such control.
In other years we have brought our problems to the Congress and have always
obtained feir and sympathetic hearings; there has been legislation enacted at
times to est* blish policy that has been of public benefit. With regard to the price
control law, Congress tried to correct the inequities we complained of and amended
the law to provide a way of getting consideration by OPA. The OPA seems not
to have read the amendment. At least they ignore legislative direction.
We have made an earnest attempt over the entire period of the operation of the
•price control law to conform to the rigid rules of procedure of OPA so as to place
our case before the agency in a manner deemed properly official and technical.
The attempt has failed. As quickly as we thought we had performed all the
legalistic genuflections we would be told that we had erred in some particular not
theretofore visible to us, so we would have to originate a new case. We have
exhausted our energies and our intellectual resources in trying to fit ourselves to
the unpublished rules and standards of the agency.
We therefore ask that no authority be granted or extended in this law with
relation to petroleum and its products.
Mr. B R O W N . I am going to briefly summarize our position, because
I think that there is but one question left.
Senator T A Y L O R . State your name for the record.
Mr. B R O W N . My name is Russell B . Brown.
There is no question about the supply of petroleum. That has been
voluminously set forth in all of the records and has not been questioned
by anyone at this time. There is no question but what all of the
administration leaders dealing with this further have announced
publicly that when supply equals demand, the controls should go off,
and this is the position in the petroleum industry. Since VJ-day we
have had more petroleum uhan any possibility of consumption. As a
matter of fact, we have reduced our production some 400,000 or
500,000 barrels below our top production capacity. We continue to
be able to produce that, but it is not required at .this time.
e x t e n d price c o n t r o l and stabilization acts of
19 42
1253
The only thing that is left as I interpret our situation is the question,
How can you get controls off? Mr. Bowles has admitted they should
go off with the meeting of balance of supply and demand; all of the
administrative heads have agreed to that, but the men we work with
are not Mr. Porter and Mr. Bowles. It is the men down in the
Department.
I want to read from a statement made April 29 in Platte's Oilgram,
by Mr. Sumner T. Pike, He has been head of the Petroleum Division
since its inception. Here is his interpretation [reading]:
The OPA is anxious to get completely out of the oil-price-control business, and
would do so immediately except for the chance that State regulatory agencies
might create synthetic shortages in effect to help producers get a higher price.
Now, in that statement he indicates
Senator CAPEHART. Who made that statement?
Mr. BROWN. Sumner T. Pike, who was the executive. He retired
yesterday as the price executive in the Petrolum Division.
Senator TAFT. Of OPA?
Mr. BROWN. Of OPA. Now, that indicates to me that he has not
absorbed the philosophy as announced by Mr. Porter or by Mr.
Bowles or by any of those in charge of that responsibility. I am
also concerned, when he left—the man who is in control is Mr. Reppert,
who appeared before you yesterday—and in his statement, which is
in the testimony, and I will not repeat it in full, but he himself said that
they were—that Mr. Bowles had announced in a letter to Congressman
Patman—that they were considering temporarily lifting controls
within 6 months and possibly prior to June 30, but they have the
difficulty of finding means of turning loose.
It isn't anything as I understand it that is founded in the law creating the office, but as indicated by Mr. Pike, some extraneous matter
over which they are assuming jurisdiction. I have no reason to doubt
the honesty of State regulatory authorities. They take the same oath
as the rest of the officials do, and I have no reason to believe that they
will not honestly enforce the laws with which they have responsibility.
Senator MILLIKIN. Mr. Brown, isn't the pressure of business exactly the other way? It has been my observation that even when
there is a surplus of petroleum products, everybody is going into the
State regulatory authorities asking them to open it up still wider.
Mr. BROWN. That is right.
Senator MILLIKIN. Isn't that right?
Mr. BROWN. AS a matter of fact, the State regulatory authorities
have had effective control for 10 or 15 years.
Senator MILLIKIN. Yes.
Mr. BROWN. And there is nothing in the history of that to show
that they have ever exercised price regulation.
Senator MILLIKIN. That is right, and every time they close down,
they catch a darn sight more criticism than when they open up.
Mr. BROWN. Quite true, quite true.
Senator MILLIKIN. Because through the competitive conditions in
the oil business itself every fellow, because of side-line drainage, is out
to get his oil while he can.
Mr. BROWN. If he doesn't, someone else will.
Senator MILLIKIN. If he doesn't, someone else will.
Mr. BROWN. That is right.
extend
price c o n t r o l and stabilization
acts of
19421254
Senator M I L L I K I N . SO the whole pressure is to open up instead of
to close down.
Mr. B R O W N . That is quite true. That is why I say that our problem is simplified, but we do not believe that we will get this control
off unless you people make some specific provision in the law itself
and make it self-executing so that discretionary power no longer rests
in the Office.
Senator T A F T . Mr. Brown, isn't this the real reason O P A won't
take it off, that if the normal laws of supply and demand operate,
considering the present costs of oil and of finding new oil, the price
of oil will rise over where it is today?
Mr. B R O W N . Very likely.
Senator T A F T . In other words, the demand and supply are going to
make a higher price than Mr. Bowles has made, consequently they
are afraid. They just are opposed to any price increase regardless of
whether it is made by a legitimate demand and supply or not; do you
not think that is the real reason for failure to be controlled?
Mr. B R O W N . I think it is, yes. 1 think that is probably true, and
I think it is also true that under the present economic condition the
price of crude oil would naturally go up. You see it was frozen at an
abnormally low spot, and costs have increased enormously.
Senator T A F T . And the figures showed, I think, the increase in oil
has been of much less percentage than the general increase in the
wholesale prices of other commodities?
Mr. B R O W N . Quite so. We had no increase until just a few days
ago, we got 10 cents. That is only a short time. Today, the drilling
activity—we have some 2,500 drilling rigs in the industry, but only
1,400 of them are employed today. Now, that may not affect us for,
oh, several months, but if you continue to fail to drill there will be a
shortage of oil way down the road that might be serious.
Senator M I L L I K I N . Mr. Brown, are there any Government set-*
asides that might interfere with the normal operation of the oil
business, at this time?
Mr. B R O W N . I am not quite sure I understand, but I know of no
other influence, other than this one, at this time.
Senator M I L L I K I N . I mean, are our military forces making any
set-asides of oil that might interfere with the normal flow of it?
Mr. B R O W N . N O ; it has not reached sufficient proportion. There
is this difficulty: There is taking oil land, public lands, out of the
public domain to some extent and restricting the operation of those
very materially; but the military use, the naval reserves that could
be available for considerable oil, are withdrawn from production, and
then there is a demand from the Navy for oils, fuel oil, that amounts
to quite a bit.
Senator M I L L I K I N . When the automobile business gets going and
new cars come out, will that add a burden to production that might
bring us to a scarce position?
Mr. B R O W N . It is inconceivable that it will bring us to a scarce
position on automobile fuels, gasoline, because at this time we have
the largest in history, except one time. As a matter of fact we have
such an excess of gasoline that it is selling way below the ceiling now,
a very great excess.
Senator M I L L I K I N . H O W are we on the lubricant side?
extend price c o n t r o l and stabilization
acts of
19 4 2
1255
Mr. B R O W N . Plenty. Plenty of lubricants. There is no shortage
that I know of in any of the products, except there is a narrow margin
on the Navy fuel oil.
Senator M I L L I K I N . IS the industry getting its material for drilling,
so that we can keep going ahead?
Mr. B R O W N . Fairly well. We are having some trouble now with
some of our steels, and that is because of the steel shortage.
Senator M I L L I K I N . IS that getting better or worse?
Mr. B R O W N . Well, it has been getting a little worse the last few
months.
Senator M I L L I K I N . Y O U think that is temporary?
Mr. B R O W N . I think that is temporary. We have enough drilling
rigs that we can resume.
Senator M I L L I K I N . What about the strike stituation in the industry?
Mr. B R O W N . The strike in the industry is not bothering us at this
time.
Senator M I L L I K I N . N O threatened general strikes?
Mr. B R O W N . None that I know of. No, I think that is all pretty
well cleared up. So I do want to urge that one point, that you people
in your final adoption of the renewal of this law, if you do renew it,
make a specific provision for elimination of either petroleum or commodities in this general character.
Senator M I L L I K I N . H O W much in your judgment would petroleum
go up if we took the controls off?
Mr. B R O W N . I wish I knew. It is very difficult. I do not mean
to be facetious in that. I am basing my statement now on history.
I have often thought we ought to get a price increase of X cents, and
wake up to find the fellow who has bought it had a different idea
about it. There has been a recommendation and there is pending
now a recommendation from the Industry Advisory Committee, recommending a price increase on crude petroleum of 35 cents a barrel.
Since that recommendation was made there has been a 10-cent increase. A similar recommendation was made by the Petroleum Administrator during the war; that wasn't acted on, at all; so taking
those two recommendations and the 10-cent price that was increased,
it would look as if you would reasonably expect 25 cents.
Senator M I L L I K I N . D O you have your conversion tables handy?
Can you tell us what that means in terms of gasoline?
Mr. B R O W N . I haven't the table. I can tell you. The full 35-cent
increase was discussed a lot during the wartime, and the refinery
reports and analyses were made, and it was at that time stated that
that meant if the full amount was passed on into products
4
Senator M I L L I K I N . In the normal way?
Mr. B R O W N . In the normal way, it would be seven-eighths of ? A
cent a gallon on the products. You see, there's 42 gallons in a barrel,
and that was the estimate, and that was the studied figure that came
out of that.
Senator M I L L I K I N . Seven-eighths of a cent?
M r . BROWN. Y e s .
Senator M I L L I K I N . Per gallon—at the retail level?
Mr. B R O W N . At the retail level; and that, translated
into the costof-living figure—I put that in the House record. I haven't it here.
I think it finally resulted in a cost-of-living figure of fifty-eight
thousandths of 1 percent, in the figure.
extend price c o n t r o l and stabilization
acts of
19 4 2 1256
Senator M I L L I K I N . Of course, the industry has never been able to
exercise taut control on crude. It might go down?
Mr. B R O W N . It might go down. That is conceivable, and that is
the thing we are not sure of. That is why I hesitate to say what I
think it would do, because I have been fooled in the past.
That is all I care to say. At this time, I wTould like for Mr. Porter
to finish.
Senator T A Y L O R . All right, Mr. Porter.
Thank you, Mr. Brown.
STATEMENT OF FRANK M. PORTER, PRESIDENT, MID-CONTINENT
OIL AND GAS ASSOCIATION, TULSA,
OKLA.
Mr. PORTER. Mr. Chairman and gentlemen of the committee, my
name is Frank M. Porter. I reside in Oklahoma City, Okla., and am
engaged in the business of producing oil and gas as an independent
operator. I am also engaged in the business of drilling oil and gas
wells.
I am president of the Mid-Continent Oil and Gas Association, with
headquarters in Tulsa, Okla. The association has a membership of
more than 3,000 independent and major operators engaged in business
in the States of Texas, Oklahoma, Kansas, Louisiana, Arkansas,
Mississippi, and Alabama.
Since the application of price control to the oil industry by the
OPA in January 1942, the Mid-Continent Oil and Gas Association,
along with the other representative organizations and individuals of
the petroleum industry, has pointed out to the various congressional
committees dealing with the subject, and to the OPA, the inadequacy
of the price of crude oil and its products.
In practically every instance, the position of the industry has been
sustained by the report of the congressional committee that have conducted these investigations. The Petroleum Administration for War
has at all times sustained the position of the industry and recommended to the OPA that a fair and equitable adjustment of prices
should be made in the petroleum industry. The Petroleum Industry
War Council, appointed as an advisory group to the Petroleum Administrator for War, has sustained the position of the petroleum industry and recommended an upward adjustment of prices.
The National Crude Oil Advisory Committee, appointed by the
Price Administrator, has conducted a thorough investigation, under
procedure approved by OPA, of the cost of finding, developing, and
producing crude petroleum, and on February 11, 1946, filed its report
with the OPA, in which it has concluded that the [reading]:
existing crude petroleumimaximum price ceilings are insufficient to permit the
normal exploratory and development operations needed to provide adequate
petroleum reserves in this country sufficient at all times to maintain a readily
available supply of producible crude petroleum for national security and to meet
the indicated military demands and the normal expansion in civilian and industrial requirements for petroleum products.
The report further states:
Supply and demand are now in substantial balance, and the reduced volume of
crude production required in 1946 is a little smaller than productive capacity
within maximum efficient rates.
It is the position of the association which I represent that there is
no longer a basis for price control in the oil industry. Actual daily
extend price c o n t r o l and stabilization acts of
19 4 2
1257
production for the week ended April 13, 1946, averaged 4,691,400
barrels. Runs to stills estimated on the Bureau of Mines basis were
approximately 4,636,000 barrels per day. Thus, without any consideration being given to imports, current domestic production of crude
petroleum exceeded total runs to stills by 55,400 barrels per day.
The declaration of purposes as contained in the Emergency Price
Control Act of 1942, as amended, makes it clear that the intent and
purpose of the law was to assure a supply of any materials necessary
for national defense and to stabilize prices in order to eliminate and
prevent profiteering, hoarding, manipulation, speculation, and other
disruptive practices resulting from other abnormal conditions or
scarcities caused by or contributed to by the war, in order that an
adequate supply of critical materials and commodities may be available for both military and civilian uses at noninflationary prices.
The dangers anticipated by the Price Control Act do not now exist
with respect to the oil industry, because supply and demand for crude
petroleum and its products are in balance.
Following VJ-day and at intervals since, the Administration gave
assurance to the public that it would be the policy to withdraw price
and rationing controls as fast as the supply in any industry equaled
demand. The OPA has failed to act in accordance with this policy
insofar as the oil industry is concerned.
It is, therefore, respectfully suggested to your committee that in
any extension of price control beyond June 30, 1946, an appropriate
provision be included in the act that will make it mandatory upon the
OPA to act in accordance with the Administration policy.
In our view, it is highly important that the statute be made selfexecuting in this respect. We therefore make the additional suggestion that if and when any industry advisory committee, constituted
and appointed as provided by existing law, shall have found and
certified to the Administrator that conditions exist in any industry
which qualify such industry as being eligible for the withdrawal of
price controls under the policy announced by the Administration, the
OPA shall forthwith withdraw such controls.
No concern need be felt that removal of price controls in the oil
industry will result in runaway and inflationary price raises for crude
and refined products. The statistical position prevailing in the
industry dissipates any argument to the contrary.
As recently as Friday, April 12, leading petroleum economists
advised the Interstate Oil Compact Commission that it was estimated
that runs to stills at refineries would about equal domestic crude oil
production. This group of counsellors, acting as the Commission's
economic advisory committee, reported partly as follows:
The committee has not undertaken to prepare for this meeting a complete
forecast of demand for the year 1946 but recognizes that the Compact Commission
is interested in the probable future outlook, particularly the quantity of crude
oil that will be needed to meet demand. Based on their work with statistics in
the industry, the committee members have indicated estimates as to the volumeof crude oil required in 1946, ranging between 4,400,000 and 4,500,000 barrels;
daily. These estimates may be compared with the demand for domestic crudeoil of about 4,520,000 barrels daily in the first quarter of this year, which may
have included some nonrecurring demands. They also indicate that demand will
probably remain near recent levels on the average for the year, although temporary
needs such as the urgent requirement of the Navy for fuel oil and seasonal fluctuations may cause some variations from the average.
extend price c o n t r o l and stabilization acts of
19 42 1258
Senator MILLIKIN. May I ask you how your storage is now, as
against, say, 1941?
Mr. PORTER. Well, storage is practically at an all-time high, both
as to the crude and refined products. I haven't got the figures
exactly, Senator. I Reading:]
Individual estimates by members of the committee show refinery crude runs to
stills about equal to domestic crude oil production. Imports of crude oil are
expected to offset approximately the exports of crude oil and the use of crude oil
as such.
Further, and of high significance to the consumer, we are entering
the period of seasonal rise in consumption with gasoline stocks of
102,000,000 barrels, which is near an all-time peak. Of additional
reassurance to the public is the fact that transportation of petroleum
is fully back to normal, so completely restored that the Government
discontinued some months ago the use of the Big Inch and the Little
Big Inch pipe lines.
There is nothing complex about the economics of the oil industry.
Those engaged in the industry are practical men, and they are concerned with facts. The economic facts of the industry are simple.
The industry's purpose is to get available oil products to its customers in a plentiful supply at the lowest price consistent with a
healthy industry.
To the best of its ability, the oil industry is intent upon carrying
out this obligation to serve the public interests. Petroleum supplies
are now and will be more than ample to meet all foreseeable demands
if they are not subject to arbitrary and unrealistic price structures.
If the industry is permitted to operate under the flexible law of supply
and demand, it is entirely confident that it can furnish an adequate
and continuous supply of crude petroleum and its products at fair and
reasonable prices.
A further continuation of price controls, particularly within the oil
industry, is fraught with certain economic hazards which we cannot
escape. Continued oppressive and unfair prices in any major basic
industry obviously mean curtailment of production. Curtailment of
production in any such industry is reflected in new hardships to the
American public and a greater lowering of living standards, because
scarcities necessarily develop increased prices, which eliminate the
ability of the public to use the products produced as the prices increase.
In the case of the oil industry, continued price controls at subnormal
levels will curtail expansion and finding of new petroleum reserves
as a backlog to a continued healthy condition in the industry, resulting
in weakening the ability of the industry to perform one of its paramount obligations to the public in providing at all times adequate
reserves, first, for the national defense; second, for civilian uses; and
third, the service of expanding and developing new products for the
benefit of the public.
With the decrease of production and a further curtailment of
searching for and finding new petroleum reserves, shortages of current
available supplies will develop. This necessarily will result in
inflationary prices. Such is the cost to the public of a controlled
economy when controls are carried beyond a great national emergency
such as war.
A free economy cannot exist without free prices. They are one
and the same. Any argument to the contrary is elusive. To proceed
e x t e n d price c o n t r o l and stabilization acts of
19 42
1259
on any other basis will lead us to bottomless pitfalls in the economic
structure. Free prices are so definitely the core of a free economy
that the statement must be accepted as axiomatic.
Prices are the reflections of economic conditions and decisions, and
free decisions in the economic world have no other means of expression
than through free prices. Economic decisions, like prices, are controlled by the immutable law of supply and demand All we ask is
that the industry be permitted again to function within the realm of
this economic principle. The history of production and prices in
America is such as to warrant the confidence and faith that a system
of free and competitive enterprise is the best yet devised.
Senator TAYLOR. Are there any questions of the witness?
(There was no response.)
Senator TAYLOR. I guess not. Thank you, Mr. Porter.
Mr. PORTER. Thank you.
(Thereupon, Mr. Porter withdrew from the committee table.)
Senator TAYLOR. Mr. W . L . Mallon, president of the National
Automobile Association.
STATEMENT
OF W. I .
MALLON,
PRESIDENT, N A T I O N A L
AUTO-
MOBILE DEALERS ASSOCIATION, NEWARK, N. J.
Senator TAYLOR. We are glad to have you with us, sir. Let us
have order, please. You may proceed.
Mr. MALLON. Mr. Chairman and members of the committee, I am
W. L. Mallon, a retail automobile dealer of Newark, N. J., and also
president of the National Automobile Dealers Association. Our
national headquarters are at 1026 Seventeenth Street NW., Washington, D. C. I and all other officers of the association, except the
executive vice president, serve without salary.
Our membership today consists of a vast majority of the more than
30,000 presently active dealers in the United States. Before the war
there were in excess of 40,000 dealers nationally. The 10,000 or more,
put out of business by the war, probably will return to the trade if and
when conditions stabilize and financing can be arranged by them.
Of these prewar dealers, exactly 15,695, or about three-eighths, were
located in the 20 States represented by members of the Senate Banking and Currency Committee. Toda}7, within your States, there are
only 11,999 dealers left in business. The mortality among your dealers, due to complete stoppage of new car production between January
1, 1942, and July 1, 1945, and only a trickle of new cars since then,
has been one out of every four. This is in direct ratio to the national
average of new car dealer mortalities since 1941.
Senator MILLIKIN. A lot of the three out of four have just been
scraping along, have they not?
Mr. MALLON. Yes, sir, Senator; just hanging on by their teeth.
Later, I shall divide that picture showing in detail how local dealers
in each of your 20 States have been affected by the war and OPA
restrictions on earnings. Now, however, I want to comment briefly
on past dealer relations with the Senate and our present attitude
toward OPA legislation.
First, the presently active 75 percent of the peacetime retail automobile dealers of the Nation are under deep obligations to this committee and the Senate for the help you have given us in the past.
1260
extend price c o n t r o l and stabilization acts of
1942
Without your aid in passing the Murray-Patman Act, early in the
war, even the three out of four peacetime dealers would not be servicing the public. For your valuable help, we are sincerely grateful.
As to the OPA, we never have advocated and do not now advocate
complete abolition of the agency at this time. We feel strongly that
OPA has not given due consideration to the unusual difficulties of
many small businesses like ours which were deprived in full or virtually so of supplies of their principal stocks during the war, and that
this situation should and will be remedied by congressional action.
In fact, the subsection designed to grant temporary aid to such
specially hard hit retail lines which we shall ask you to approve
already bears House approval. It was endorsed 15 to 6 by the
House Banking and Currency Committee and later approved without
objection on the House floor as a part of the committee bill. We
should like to emphasize that the proposed amendment in behalf of
which we are appearing was not one of the many amendments added
to the OPA bill on the House floor. It was a part of the original
committee-approved bill.
NADA is and has been for several months in wide disagreement
with OPA on various matters of fact regarding the condition of our
industry and the fairness of certain major OPA profit control policies
as applied to us. These I shall discuss later in detail. There are
certain indisputable facts about what has happened to the retail
automobile dealers of the Nation since their new car supplies were
frozen on January 1, 1942, to which I now wish to call your attention.
Knowledge of these facts is imperative to intelligent consideration of
our problems. Unfortunately, these facts are not generally realized
outside the trade and OPA studiously avoids any reference to them
when discussing automobile problems on the air, in press releases, and
before congressional committees.
Here are some of the facts about the retail automobile business of
the United States which cannot be refuted:
1 One-fourth of all the dealers who were in business in the Nation
in 1941 have been forced to close their doors.
2. Between January 1, 1942, and January 1, 1946, due to stoppage
of new passenger-car production, dealers sold no new cars except
569,990 rationed by the Government. If new cars had been available
and 1941 new car sales averages had been maintained during the
1942-45 period, dealers would have sold, exclusive of rationed units,
a total of 14,354,674 new cars which they did not sell. Gross proceeds
of such sales would have amounted to about $15,000,000,000 and the
gross profit on such a group at an average retail price of $1,000 each
would have been $3,445,000,000. That staggering sum is gross profit
that the dealers of this country doubtless would have earned as a
minimum. That minimum suggestion probably is too low as during
the four earless years, national income increased a total of approximately $200,000,000,000. But even the lost $3,500,000,000 in gross
profit is a tidy sum that is gone, and which dealers can never recover.
3. During this same 1942-46 period, the number of passenger cars
in use in the entire Nation dropped from 29,601,774 to 25,301,345, a
dead loss of 4,300,429.
Every time one of these cars went out of service, some dealer lost
at least a part of service and supply income estimated at a minimum
of $200 a year. Thus, between 1942-45 dealers, along with exclusive
extend
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19 4 2
1261
service and supply men, lost through cars going out of service an
estimated total of $2,762,704,800 in service and supply income alone.
That, too, is gone beyond recovery.
Senator T A F T . N O W , I think all those figures are wholly irrelevant,
I am sorry to say. I don't think they have any bearing on the question at all. Those are imaginary profits that did not occur. Many
men went to war, 10,000,000 of them, who gave up all the profits in
their business. Many of the automobile dealers went to war themselves.
This is a theoretical profit that might have been created if we had
not had a war. I think that is wholly irrelevant in our present situation.
Mr. M A L L O N . The reason that was included in the statement, sir,
was due to the fact that OPA on three different occasions has testified
to the profits that the dealers made during that period, and we have
inserted those figures to show what they did not make.
Senator C A P E H A R T . H O W much profit does the OPA claim the
automobile dealers made?
Mr. M A L L O N . They claim according to the-latest figures on car
operations alone they could save 50 percent of their margin.
Senator C A P E H A R T . It seems to me like either Mr. Porter or Mr.
Bowles testified before this committee in the last 10 days that the
profit of automobile dealers was greater the last 4 years than it was
the previous 4 years.
Mr. M A L L O N . By percentage he testified to that. He said 200
percent greater in 1944.
Senator C A P E H A R T . Yes.
Mr. M A L L O N . IS that what you refer to?
Senator C A P E H A R T . Yes; it was in substance that. You deny that
to be the fact?
Mr. M A L L O N . If it was 200 percent greater it rises from a quarter
of 1 percent up to five-tenths of 1 percent.
Senator C A P E H A R T . Wei], I believe I questioned the figure at the
time. I just can't see how the automobile dealers of America have
been able to make as much money during the past 4 years with no new
cars to sell, as they did when they w^ere selling about 4,000,000 cars a
year. Do you have anyfiguresat all to prove the average earnings on
any basis?
Mr. M A L L O N . During the period of 1942-1943-1944-1945 there is
no official governmental report available, sir. The surveys such as
have been made have been spotty for the reason that due to lack of
help the dealers have not been in a position to fill out questionnaires.
They have been very short of help, sir, on account of the war.
Senator C A P E H A R T . D O you or the Government know how many
used automobiles were sold, say, during the last 12 months, by the
dealers of America?
Mr. M A L L O N . NO, sir; there is no such record available at this time.
Senator C A P E H A R T . IS there a record available as to what was sold
in 1942, 1943, and 1944?
Mr. M A L L O N . They have not been completed, again, because of
lack of help in the State departments which compile those figures.
Senator C A P E H A R T . Would you say that the automobile dealers
sold half as many used cars in each one of the war years as they sold
new cars in the prewar years?
85721—46—vol. 2
8
extend
price c o n t r o l
and stabilization
acts of
19 4 2 1262
Mr. M A L L O N . We are here representing the new-ear dealers, the
franchised dealers.
Senator C A P E H A R T . Does not every new-car dealer also sell used
cars?
Mr. M A L L O N . Yes, sir. I will lead up to that. The fact is during
1942 and 1943, and up to July 1944, the enfranchised dealers and the
used-car dealers accounted for between 75 and 80 percent of the usedcar sales in the country, and the other 20 percent were individual sales.
When the used-car price ceiling became effective July 10, 1944, the
trend began to change very radically, so that at the present time the
automobile dealers, the enfranchised dealers—new-car dealers—and
the representative automobile dealers who have always been in business, and not the ones who have popped in due to this black-market
condition, it changed around so that the regular dealers now are selling
about 10 to 15 percent at the most.
Senator C A P E H A R T . OPA sets a maximum price on used cars at the
moment?
Mr. M A L L O N . That is correct.
Senator C A P E H A R T . And they require you by law to give that maximum price in trade on a new car, do they not?
Mr. M A L L O N . Their regulation stipulates an "as is" price and they
require the dealer to give the "as is" price, less the cost of conditioning
the car for resale.
Senator C A P E H A R T . For example, if I have a used car and the
OPA ceiling is a thousand dollars, you must allow me a thousand
dollars on a trade-in of that old car for a new one?
Mr. M A L L O N . Less any money required for reconditioning it.
Senator C A P E H A R T . Reconditioning according to OPA standards?
Mr. M A L L O N . Yes—that you put it in serviceable condition.
That is the way it reads.
Senator C A P E H A R T . SO that it runs—it does not guarantee it will
run?
Mr. M A L L O N . Y O U would be surprised in the cases coming into the
OPA, what they think a car ought to do.
Senator C A P E H A R T . Supposing I have a car and the OPA ceiling
on it is $ 1 , 5 0 0 ; I want to trade it in to you for a new car that has a
ceiling on it of $ 1 , 2 0 0 . You would have to pay me $ 3 0 0 difference.
Mr. M A L L O N . I wouldn't have to do it. I would if I did business
with you, but up to the moment, that is one thing
Senator C A P E H A R T . Well, a man having a used car worth $ 1 , 5 0 0
and he wants to buy a smaller car, he is estopped from doing it unless
the dealer wants to give him a check for $ 3 0 0 .
Mr. M A L L O N . Not exactly; no, sir. He is not estopped because he
has a used-car market that he can go and get cash for it.
Senator C A P E H A R T . He can sell it for cash for more than you would
give him?
Mr. M A L L O N . That is right.
Senator C A P E H A R T . D O you think the O P A ceiling on used cars is
too high?
Mr. M A L L O N . I don't think, I know it. The ceilings on 1 9 4 1
models are above the prices that have been established on many of
the new cars.
Senator M I L L I K I N . Well, when the new cars come out these ceilings
that have been put on second-hand cars will collapse.
e x t e n d price c o n t r o l and stabilization acts of
19 4 2
1263
Mr. M A L L O N . They naturally will. They will be forced down, but
OPA has made the statement they don't intend to withdraw the usedcar-price ceiling. Therefore, when a man comes in to trade a car he
knows what that used-car-price ceiling is and he insists upon getting it.
As I said before, you don't have to give it, though, but it is a
stumbling block in the way of carrying on a legitimate business.
Senator CAPEHART. Senator Millikin, if the ceiling on a used car is
a thousand dollars and you trade a new car for it at $800, you are
subject to prosecution by OPA. That is correct, is it not, Mr.
Mallon?
Senator M I L L I K I N . My point is that these second-hand cars when
the supply of new cars come in will occupy the traditional relation of
a second-hand car to a new car, which means that those ceiling prices
wTill collapse. The value won't be there.
Mr. M A L L O N . The market is bound to drop very rapidly as soon
as the new cars get in production at all.
Senator M I L L I K I N . Are you going to give us any kind of estimate
as to how fast this new-car business is coming back?
Mr. M A L L O N . I can give you that right now.
Senator CAPEHART. Mr. Chairman, one other question.
Why has OPA insisted on placing such high prices on used cars and
has denied the producers of other needed merchandise, such as
clothing and other small products—do you know any reason for that?
There may be some good reason for it.
Mr. M A L L O N . I am sorry, I am not very familiar with clothing.
Senator CAPEHART. They try to keep the cost of living down to the
people and yet they have permitted the setting of prices on used cars
that are beyond the means of the returning veterans to purchase
them; beyond the means of anybody to purchase them.
I had an accident not long ago and broke my leg and the car was
completely destroyed, and the OPA ceiling on that car was more than
the car originally cost 4 years before.
Senator T A F T . Were they not just trying to beat the black-market
price?
Senator CAPEHART. Well, could whoever is here from OPA tell me
why they have been so liberal in making the American people pay
what is considered an exorbitant price for used automobiles, and
made it impossible for servicemen to buy used automobiles, yet been
so niggardly on commodities and things that are so badly needed,
that are in such short supply, such as food, clothing, and other things?
What is the reason for that?
Mr. H O L D E R , Director, Automobile Industry Division, Office of
Price Administration. I will be very glad to answer that question,
Senator.
Senator CAPEHART. I would like to know the reason for it.
Mr. H O L D E R . There were until July 1 9 4 4 no ceilings on used cars.
They had been exempted from the beginning of price control for a
number of reasons. The market moved up fairly steadily during the
first 2 years of the war. We had several times approached the
dealers and indicated we were considering ceilings.
I might say that the imposition of ceilings was violently opposed
by Mr. Mallon's organization, and a number of others, for ajiumber
of reasons.
extend price c o n t r o l and stabilization acts of
19421264
In the first place, it seemed pretty important during a period of
time when no cars were being produced and what there was was
being rationed, to encourage the transfer of cars and sale on the open
market. Undoubtedly the higher price level contributed to that.
Other agencies of the Government felt it was pretty important as
well.
In January 1944 we served notice on the dealers that unless the
inflationary movement was stopped we were going to put ceilings on.
Prices continued to rise month by month and in July 1944 we established the ceiling at about the level of the prices existing in January.
I would say that the upward movement in prices came entirely in
the early war years and wTas the result of the absence of price ceilings.
Since those prices were established we have reduced them each 6
months by 4 percent, so that they have come down, I believe it
would be a total of 12 percent, since they were first established.
Now, that is in recognition of the depreciation that has gone on
and the wear that those cars have been given.
Senator M I L L I K I N . In recognition of what, please?
Mr. H O L D E R . Of the wear on those cars and some measure of the
depreciation, Senator, which has taken place.
Senator M I L L I K I N . Great scott. A second-hand car depreciates
more than 4 percent a year, does it not?
Mr. H O L D E R . Four percent every 6 months. That would be
slightly over 8 percent a year.
Bear in mind on that most owners gave their cars extra special
care during wartime. A car was almost a priceless commodity.
Probably the car owner had his car serviced much more often than
he would in normal times when cars were easily available. We think
the value of those cars held up somewhat better than it would in
normal times.
Senator T A F T . For nearly a year after you put the ceilings on
most of the cars were sold in the black market above the ceiling, were
they not? That was the complaint we had from the dealers that
they couldn't get any cars to sell.
Mr. H O L D E R . With the pressure on those prices, we have had a
good deal of trouble in enforcing the ceiling. It took our enforcement
people a while to catch up with some of the tricks that were going on.
Only recently you have read about the spectacular smash of black
markets in Detroit and elsewhere.
Senator T A F T . Mr. Mallon, the thing that bothers me is this about
this idea: I cannot see why a retail dealer in automobiles should be
treated any differently during the next year than any other retail
dealer. I cannot understand this theory that because the exigency
of war destroyed the business, as it destroyed the business of course, of
many other people during the war, they should therefore be treated any
differently. I am anxious to see them in 1946-47 get a fair margin of
profit.
You don't advocate that we should have gone on making automobiles during the war? That was just a circumstance resulting from
the war. Certainly we are not going to try to make up in increased
profits to you this year something you may have lost last year, any
more than we are going to give the veteran a wider margin than some
other fellow who is not a veteran because he sacrificed for the last 4
years.
extend price c o n t r o l and stabilization acts of
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1265
I don't understand the argument. I don't see the basis for this
House amendment that says that this particular margin shall be
established only for people who suffered in production during the
war. I don't understand any economic basis for such a proposal.
Mr. M A L L O N . Y O U have two or three lines, Senator, in which the
production was entirely stopped, and there was no substitute for the
merchandise. There were other commodities as to which production
may have been stopped, but the merchant handling those commodities
was always able to obtain a substitute and keep functioning.
Senator T A F T . I understand that, but I say it should have no
bearing on what margin you are going to get next year. I cannot
see any reason for it. We are trying to set up a system to enable
merchants to get reasonable profits and to encourage production and
distribution, but we are not trying to recompense people for what
happened in the war. That is a perfectly hopeless task.
Mr. M A L L O N . I think, possibly, Senator, that as I proceed here it
will clear up.
Senator T A F T . That is why I think these figures are wholly irrelevant. They make no impression on me whatever.
Senator C A P E H A R T . I think Mr. Mallon is using those figures to
refute what Mr. Bowles has been saying.
Senator T A F T . I am very glad to have him refute Mr. Bowles.
My point is that I do not think it makes any difference what the
automobile dealer got when his business was out of existence for all
practical purposes, and what he ought to get when the business is
now in existence again. If there is going to be an amendment like
this protecting retail dealers, I think it ought to apply to everybody,
whether they suffered or did not suffer during the war; and I am in
favor of such an amendment.
Senator C A P E H A R T . They should get the same historical percentage
they wxere getting before.
Mr. M A L L O N . The same percentage, Senator, is what we think is
proper.
Senator T A F T . I understand you do not want to change the percentage, and I think there is a good argument for that, although in
some industries they are entirely satisfied with the dollar margin,
which would make a difference of about 10 percent or so.
Mr. M A L L O N . It would make quite a little difference in our business.
Senator T A F T . What has O P A cut you down to now?
Mr. M A L L O N . From twenty-four percent average, down to 16%
percent.
Senator M I T C H E L L . Y O U said there was no substitute for the loss of
new-car sales; but in the OPA figures it shows a practical substitute of
parts, accessories, and services which made up the bulk of your business, as comparing 1939 with 1944.
Mr. M A L L O N . Senator, a dealer establishment is set up basically to
handle new cars. That has always been the larger percentage of
our business; and we have a used-car department, which is much
smaller. We have always had service and always had parts. A large
proportion of the expense of operating a dealer establishment is paid
from the income derived from the new-car sales. When the new-car
sales disappeared it is true that in the early years of the war the volume
of the service department picked up; the parts department in some
cases picked up, but in the last 2 years that has not been so, due to
the fact that we have been unable to obtain the parts. There has been
extend price c o n t r o l and stabilization acts of
19 42 1266
a scarcity of parts, and, consequently, we could not do the repair work
and the special care that Mr. Holder referred to. There are a lot of
owners that would like to have it done, but we were absolutely estopped
from doing it because of lack of parts.
Senator MITCHELL. YOU mean, in the last 2 years, 1 9 4 4 and 1 9 4 5 ?
M r . MALLON. Y e s , sir.
Senator MITCHELL. The figures are for 1 9 3 9 to 1 9 4 4 , and show the
percentage of business from various sources. The sale of vehicles
was 84.4 percent for 1939 and dropped to 41.3 percent in 1944; but the
sales of parts and accessories, which is 8% percent in 1939, went up to
31.7 percent in 1944. Services amounted to 6.2 percent in 1939 and
went up to 22.4 percent in 1944.
Mr. MALLON. Senator, I will have to point out, sir, that those
figures were compiled from a survey made of 300 dealers selected by
OPA. That is less than 1 percent of the dealers in the business.
Senator MITCHELL. Can you give us the comparable figures for a
larger segment of the industry?
Mr. MALLON. I do not have the figures right here comparable to
what is in there, because, as I said before, there is no way of obtaining
them.
Senator MITCHELL. IS there anything on which the committee can
reach a judgment as between your figures and those of the OPA?
Mr. MALLON. We can reach an estimate.
Senator MITCHELL. This is based on a study of 300 dealers.
Mr. MALLON. It is not representative of the industry at all, particularly when you select them.
Senator MITCHELL. But it is the only actual survey that the committee has to go on.
Mr. M A L L O N . It is my contention that the OPA is making decisions
without having the proper knowledge and information to make them
justly and fairly.
Senator MITCHELL. Apparently they have more figures than the
industry has.
Mr. M A L L O N . These figures were compiled by sliderule methods,
but they are not representative figures.
Senator CAPEHART. We certainly can all agree that they sold less
new tires.
Senator MITCHELL. On dollar profits, another point in the OPA
statement, I would like your comments. They say [reading]:
Making allowances for decrease in volume, increase in margin and increase in
operating costs, we note this result in dollar profits before taxes.
Using 1939 as 100, in 1941, which they say was the best year in
history, it was 331, and 1944 was 275. They say that 1945 was based
on the first half of the year, multiplied by 2.
Mr. M A L L O N . That is correct. That is what they say.
Senator MITCHELL. I know individual operators who, at the start
of the war, put aside a sizable fund to carry over losses during the
war, and I know that that fund in some cases is still intact. It was
never necessary for the operator to use that backlog; he still has it for
any future use.
Mr. M A L L O N . Senator, it is no doubt a fact that there is an upper
strata among the 30,000 dealers, maybe 5 percent, maybe 10 percent,
who have this backlog that you are talking about. They are sitting
fairly comfortably and, unquestionably, are going to pull through.
extend price c o n t r o l and stabilization acts of
19 42 1 2 6 7
There is also a lower element, maybe 5 percent at the bottom,
maybe 10 percent, that won't pull through at all. But in between
there is about 80 percent which represents an industry that is very
important to this country. If we are to get back into normal production of cars we have got to have these dealers in there to distribute
them and service them. It is that bunch in there between the two
stratas that we are talking for as an association.
I appreciate that there are some dealers who are in position to
carry through, but they are not the vast majority. The vast majority
of dealers, Senator, sell less than a hundred cars a year, and it means
a lot to them whether they make $70 a car or whether they make
$100 a car. Sometimes the difference of $30 per unit represents their
whole return for the year.
Senator M I T C H E L L . I do not see how these figures would work out
in your outline of the historical conditions at all: 5 percent lost and
80 percent broke even?
Mr. M A L L O N . I do not say they broke even. I say they are the
ones we are trying to save.
Senator M I T C H E L L . The top 5 percent would have to make a
tremendous amount of money to triple the 1939 profit. Are you going
into this as you go along?
Mr. M A L L O N . I had not paid any attention to those figures particularly, Senator, for the reason that I am covering thos£ figures in
my statement, saying that they do not represent the industry. I
might call attention to the fact, however, that if you go over to the
Bureau of Internal Revenue you will find that there were 9,400
dealers, incorporated dealers, who made an official return to the
Government, and in 1939 the average net profit was four-tenths of 1
percent before taxes. In 1940 it was seven-tenths of 1 percent before taxes, and in 1941 it was 1.82 percent.
Those are Government figures. They are taken right from the
Government records, and we believe that those are the figures that
should obtain and should be given consideration. They are official.
The average, by the way, for the 3 years was 1.07 percent of the
great volume of business for those 3 years: 1939, 1940, and 1941.
Senator C A P E H A R T . Mr. Chairman, I think we can all agree on
these facts, that they certainly sold less cars during the war; they
certainly sold less new cars during the war; certainly sold less accessories during the war; they certainly sold less used cars during the
war. The only place where they could possibly increase their business, and I think they did, was on repair work. I think if we would
consider we would have to admit that they sold less tires, less cars,,
less accessories, and that they did more repair work.
Senator M I T C H E L L . The O P A figures indicate that they sold about
5 percent more used cars. In 1939 the used-car business was 24.3
percent; in 1944 it was 29.3 percent.
Senator C A P E H A R T . That may be true; but it would be hard to
get the average person to believe that.
Mr. M A L L O N . That is percentagewise; a less volume of cars, I
think, Senator Mitchell.
Senator C A P E H A R T . Is that in dollars?
Senator M I T C H E L L . Apparently in dollars.
Mr. M A L L O N . The prices were up, sir.
extend price c o n t r o l and stabilization acts of
19 42 1268
Senator T A F T . I cannot see the relevancy of this at all. I do not
think Mr. Bowies' talk is relevant and I do not think yours is. I think
our job is to see that this dealer organization is properly compensated
and properly maintained and not persecuted by the Price Administration by too-low figures. The Government must concern itself with
restoring the industry to more or less a normal condition, rather than
concern itself with what happened during the war.
Senator CAPEHART. Of course, Mr. Chairman, I would like to say
that I think OPA should operate all of its business on the basis of
current costs.
Senator T A F T . Yes.
Senator CAPEHART. I do not think that 1 9 3 6 , 1 9 3 7 , 1 9 3 8 , or 1 9 3 9
have much to do with it. We should be realistic about the whole
thing, and OPA should, and let all prices and all costs be based upon
present-day business, not what it cost 6 or 8 years ago.
Senator M I L L I K I N . I should like to suggest that in any formulas we
should be sympathetic to the troubles that this business has had.
Senator T A Y L O R . Y O U may proceed, Mr. Mallon.
Mr. M A L L O N . Out of deference to Senator Taft, I will not take
any time, sir, in referring to any of these tables. I think you will
find them quite instructive. Your own States have stars in front of
them. I think you may be interested to notice that in some of them
you have dropped down in the sale of cars very materially. It does
make a big difference in the dealer's operation. You want to remember that he still has the same overhead to maintain. He still has the
empty showroom.
Senator T A F T . But there may be thousands of new dealers who
were not in business at all before, who are now coming in and get
full advantage of this margin, so we cannot make the margin wider
than it ought to be. It ought to be a proper margin; and I wTould
say, in the absence of any further evidence to the contrary, that this
historic margin may be presumptively correct, unless something else
is shown.
Mr. M A L L O N . May I emphasize the fact that we are not asking
for any increase in the margin. I would like to emphasize that, sir.
4. Rationing by OPA of gas and tires for the 25,000,000 cars which
ran throughout the war took another sizable bite out of dealer incomes. This loss is estimated, on a basis of $100 a year per car,
which is low, at a total gross of $10,000,000,000 for 4 years.
The foregoing reductions in new car, service, and supply volume
for the 4 years are indisputable. They total more than 27% billion
dollars gross. Dealers sustained $15,000,000,000 of the loss 100 percent and shared deeply in the other 12% billion. Therein lies the
explanation of the high wartime mortality of dealers in your States
and the State of every Member of the Senate.
That you and all other Members of the Senate may realize just
what has happened to your own dealers throughout the United States
since 1942, I have had prepared from complete national official
figures, and not from estimates or partial "samplings," tables showing national and local dealer business mortalities, new-car sales, and
cars junked for the 1942-46 period. I shall not bother to read the
details for all States, but I shall call attention to what has happened
to dealers in the home State of each member of this committee between January 1, 1942, and January 1, 1946, the four worst years of
dealer experience.
extend price c o n t r o l and stabilization acts of
19 4 2
1269
The average mortalities for your home States run in almost direct
ratio with the national averages. About 1 out of every 4 dealers
in your States have passed out. The smallest percentage is found
in Virginia where it is 11.8 percent and the highest in Washington,
with 29.8 percent. The table embraces conditions in all States, but
I shall read only compilations from States represented by members
of this committee.
(Tables A, B and C, referred to and submitted by the witness, are
as follows:)
TABLE
A.-—Number of franchised
passenger-car
dealers, as of Jan. 1 of each
year
Loss 1945 over 1942
1942
1945
Number
* Alabama.
•Arizona
•Arkansas
•California
•Colorado
C onneeticut
•Delaware
District of C o l u m b i a . .
Florida
Georgia
•Idaho
Illinois
•Indiana
•Iowa
•Kansas,..
•Kentucky
Louisiana
Maine.
•Maryland..
M assachusetts
Michigan
Minnesota.
Mississippi
Missouri
Montana
•Nebraska
•Nevada
•New Hampshire
N e w Jersey
N e w Mexico
•New Y o r k
North Carolina
North Dakota
•Ohio
Oklahoma
Oregon
Pennsylvania
Rhode Island
South Carolina
South Dakota
Tennessee
Texas
•Utah
Vermont
•Virginia
•Washington
West Virginia
Wisconsin
Wyoming
United States of America
.
Percent
405
147
363
1,881
446
550
72
84
476
579
316
2,270
1,166
1,359
947
589
393
352
457
1,071
1,791
1, 379
391
1,011
365
662
81
219
1,043
171
2, 788
745
476
2,188
663
451
3,041
163
389
394
475
1,850
194
195
684
731
478
1,616
191
347
113
310
1,383
332
399
59
58
365
477
243
1,793
930
998
687
515
329
307
370
872
1,369
989
322
808
283
505
63
180
815
136
2,132
612
350
1,557
522
345
2,439
115
307
297
388
1,484
159
151
603
513
376
1,247
156
58
34
53
498
114
151
13
26
111
102
73
477
236
361
260
74
64
45
87
199
422
390
69
203
82
157
18
39
228
35
656
133
126
631
141
106
602
48
82
97
87
366
35
44
81
218
102
369
35
14.3
23.1
14.6
26.5
25.6
27.5
18.1
31.0
23.3
17.6
23.1
21.0
20.2
26.6
27.5
12.6
16.3
12.8
19.0
18.6
23.6
28.3
17.6
20.1
22.5
23.7
22.2
17.8
21.9
20.5
23.5
17.9
26.5
28.8
21.3
23.5
19.8
29.4
21.1
24.6
18.3
19.8
18.0
22. 6
11.8
29.8
21.3
22.8
18.3
38, 748
30,110
8,638
22.3
Source: Chilton.
Mr. M A L L O N . The next table consists of official national figures on
new-car sales during our last year of full production (1941) and on
sales of rationed cars sold by dealers 1942-45, inclusive. It is difficult
to imagine stronger proof of severe income losses suffered by dealers*
than this table provides. From a national total of 3,731,166 new cars
extend price c o n t r o l and stabilization
acts of
19 42 1270
for sale in 1941 the total for 1945 fell to 7,676. Practically only rationed cars were sold during 1945.
Imagine, if you can, a great State like New York having sales of
331,730 new cars in 1941 and only 619 in 1945; Ohio with 256,034 in
1941 and only 300 in 1945; California with 276,649 in 1941 and 651
in 1945; Indiana with 122,224 in 1941 and 133 in 1945; and some
States, such as Arizona, Idaho, Delaware, Nevada, New Hampshire,
having no more than 35 and as few as 10 new cars for sale last year.
So impressive is this table that I want to read to you the number
of new cars dealers had for sale in your States first in 1941 and then
in 1945. I urge you to especially remember these contrasting totals.
They seem quite important to us when we have repeatedly to answer
the absolutely false OPA contention that nationally automobile
dealers throughout the war made more money than they ever did in
all previous history.
TABLE B . — N e w
passenger-car sales, by States, 1941-4$—New-car registrations and
deliveries under rationing 1
1941
State
* Alabama..
•Arizona,
•Arkansas
...
•California.. . .
•Colorado
Connecticut
•Delaware.... _
District of Columbia
Florida
Georgia
•Idaho
Illinois
•Indiana._
...
_ •Iowa
•Kansas . . .
•Kentucky
Louisiana
... ... _
Maine
_
•Maryland __
...
Massachusetts
_ ... ...
Michigan
Minnesota
_
Mississippi.
Missouri
Montana
•Nebraska.
•Nevada
•New Hampshire
New Jersey
New Mexico
•New York
North Carolina
North Dakota...
•Ohio.
Oklahoma
Oregon
Pennsylvania
Rhode Island
South Carolina
South Dakota
Tennessee
Texas
•Utah
_
Vermont..
•Virginia
•Washington
West Virginia
Wisconsin
Wyoming
...
United States of America
1942
42, 453
11, 603
23,873
276, 649
28, 054
64, 606
11,371
30,1S6
57, 598
59,300
13, 842
274,142
122, 224
66, 508
49, 776
42, 011
43, 504
20,043
56, 579
125, 603
258, 733
77, 038
26,931
102. 684
17,142
32, 452
4,398
13, 270
134, 584
10, 244
331, 730
65, 727
13,621
256, 034
46, 226
41, 558
289, 285
22,337
35, 611
12,451
56,115
174, 314
13,156
10, 204
73, 808
58, 613
33,166
91,109
8,700
3,816
1,039
3,149
16, 772
2,132
3, 737
879
1,842
4, 250
8, 471
1,340
24, 249
11,314
4,958
4,471
3, 462
3, 866
2,079
5, 613
4, 642
21,680
8, 207
2,338
10.921
1, 808
3.160
728
690
6,140
743
17,046
5,165
1,390
22, 984
3,351
3.306
21, 685
1,231
2,999
1,577
4, 504
13, 771
1,612
697
6,043
4,468
2, 748
6,751
957
3, 596
1,011
2, 497
22, 426
1, 705
3, 731,166
290,779
i Loss in sales (1941-45), 99.79 percent.
Source: Registrations, 1941, R. L. Polk, deliveries (1942-45), OPA.
1943
1944
1945
544
1,171
3,887
5,089
797
12,083
5, 219
3, 512
3, 439
2, 479
3, 938
1,192
3,105
5, 678
10, 880
3,946
2,435
4,825
894
2,238
566
535
5, 284
870
11,986
4,866
1, 226
11,889
3,688
2,505
10, 394
983
3,062
1,011
3,780
16, 549
1,520
371
3, 927
3,801
1,412
3,930
542
988
211
567
7,150
414
957
111
555
1,456
1,627
185
4, 275
1,306
578
1,018
775
1,599
506
1, 097
2, 701
2,943
1,111
677
1, 3S4
230
576
129
239
2,254
292
4, 304
936
209
3,491
1,434
550
3,934
459
482
158
905
6, 587
369
138
1,042
996
388
1, 257
182
131
15
87
651
65
110
13
92
164
150
33
542
133
76
101
85
242
67
165
295
302
137
84
223
30
73
10
35
312
36
619
76
27
300
214
83
429
67
39
10
112
794
30
19
102
72
54
154
16
205,805
65,730
7,676
2,352
extend price c o n t r o l and stabilization acts of
19 4 2
1271
Mr. M A L L O N . Our final table, to which I shall allude only briefly,
shows the decline in car registrations throughout the United States
between 1941 and 1946. As in the case of dealer failures, the decline
was general. Most of the remaining cars listed in this table now
average more than 8 years in service. The question of keeping them
in operating condition until new car production can replace them is
large. The bulk of this repair work will fall on the dealers. For that
reason, it is important to every State and community that the dealers
be permitted to earn a normal peacetime profit on new cars at least
during the time they are getting back on their feet. Such aid will
help greatly in rendering good all-around service to old and new cars.
TABLE
1941
State
•Alabama
•Arizona.
•Arkansas
•California
•Colorado.
Connecticut
•Delaware
District of Columbia
Florida.
Georgia.
•Idaho...
Illinois
•Indiana.
•Iowa
•Kansas
•Kentucky
Louisiana
Maine
•Maryland
Massachusetts
Michigan
___
Minnesota
Mississippi
Missouri..
Montana
•Nebraska
•Nevada
•New Hampshire
N e w Jersey
New Mexico..
•New Y o r k .
North Carolina
North Dakota
•Ohio
Oklahoma
Oregon
Pennsylvania
R h o d e Island. .
South Carolina
South Dakota
Tennessee
Texas
•Utah
Vermont..
•Virginia
•Washington
W e s t Virginia
Wisconsin
Wyoming.
C.—Passenger-car registrations
—
—
-
United States of America,
1942
1943
1
1944
335,000
117,712
213,058
2, 618,369
306, 586
471,845
65,014
160, 267
460,468
463, 921
134, 612
1,826, 583
934,866
715,108
503,138
415,764
384, 337
176, 619
429, 937
850,348
1, 540, 225
773,332
222, 665
823,158
147,606
354, 598
38, 636
109, 998
1,024, 587
98, 805
2, 519,066
563,357
152,107
1,918, 529
479,363
353, 902
2,016,420
178, 281
336,401
167, 796
427,961
1, 441, 998
126,264
87,131
484, 588
522, 258
280,539
793,894
71,157
294,150
113, 833
213, 767
2, 579, 312
297, 660
484, 979
, 55,765
146,721
420, 510
446,947
122,036
1, 749, 717
905,874
657,385
505,121
384,073
338, 914
158,070
427, 679
803, 915
1,458,040
721,951
186, 592
798,419
129, 431
347,023
40,369
96, 734
967,984
87,357
2, 266,048
533,145
142, 251
1,869,416
437,812
342,349
1, 892,102
167, 242
281,135
154, 507
391,778
1, 317,983
129,167
79,009
462, 774
516, 792
246, 760
736,903
66,652
298, 367
109,473
196, 530
2,427,044
277,056
445,930
55,081
120,180
385.008
423, 067
113,122
1, 592, 938
854, 878
615, 535
486, 679
365,772
317, 799
145,944
403, 745
722, 249
1,376, 837
663, 663
183,115
730,122
116,229
334,810
40, 548
84,823
872,049
81,489
1,958, 603
506,655
135,075
1,780,425
407,324
333, 688
1,706,722
152.009
279,614
147,336
376,360
1, 272,358
132,723
71,424
433,960
502, 543
224,847
703,920
62, 764
282,438
109, 523
190,156
2, 321, 500
262, 557
430, 209
52,801
109, 625
404, 630
424, 492
111, 797
1, 518, 629
805, 539
595, 542
476, 852
355, 534
324,906
146, 227
386,142
719, 215
1, 339,000
644, 237
182, 573
688, 276
110,617
327,080
37,106
88, 703
843,168
82, 222
1, 936, 418
4°5,145
133,434
1,696,528
390,488
331,641
1, 643,154
152, 253
279,378
142,678
372,050
1, 264,805
126,929
73,879
431,481
505,153
203,032
686,829
62,068
29,601,774
27,974,156
26,019,432
25, 298,639
i Unit loss (1941-45), 4,300,429.
Source: U. S. Bureau of Public Roads.
Mr. M A L L O N . Before passing from dealer losses and costs which are
indisputable, I should like to mention increased dealer costs of doing
business. A survey of more than 2,000 dealers throughout the Nation
which NADA made last year and submitted to OPA as a reason for
extend price c o n t r o l and stabilization
acts of
19 4 2 1272
not cutting our trade discount showed a general increase during the
war of 25.91 percent. When questioned by the House Small Business
Committee last fall, Administrator Bowles conceded correctness of the
survey. Costs have further increased since then.
Senator T A F T . The price of cars has finally been fixed at not more
than 25 percent over the prewar price, has it not?
Mr. M A L L O N . Much less, sir. The price, I would say, on an average, is about 10 percent, or not over 10 percent, Senator.
Senator T A F T . SO, an increase of 10 percent would give you a 10percent increase in dollar proceeds, and against that you claim costs
have increased 25 percent?
M r . MALLON. Y e s .
Senator T A F T . SO that
you would be worse off than you were before
the war?
Mr. M A L L O N . That is correct, sir.
In ordinary circumstances, we should be inclined to rest our case
on the basis of the tables just submitted to you.
They tell the story of dealer financial conditions better than anything yet produced by either private or Government sources. The
simple reason for this is that they represent accurate national coverage
and should suffice for your purp6ses. Unfortunately, however, the
dealers of the United States for months have had to combat OPA
statistical presentations of quite a different type than these. They
have at times both been incomplete and inaccurate and often have
been presented in tricky ways designed to mislead the listeners and
leave wholly false impressions. For that reason it becomes necessary
that we explain to you the methods used by OPA in arriving at some
of its astounding conclusions about dealer earnings, past, present, and
future.
It should be made clear, however, whatever we now may say in
criticism of OPA activities, dates from the beginning of the administration of Mr. Bowles. Our relations with the agency under Leon
Henderson and former Senator Prentiss Brown were of a cordial and
understanding nature. Mr. Henderson sought always, as in the case
of dealing with our handling charge, to conform to the intent of the
law, that established business practices remain undisturbed. Senator
Brown brought the late Senator Clyde Herring, of Iowa, into the
agency and placed him in direct charge of automobile dealer affairs.
Likewise, both Administrators assembled a staff of men experienced
in retail automobile work to assist them. These experienced men long
since have departed from OPA. The only remaining executive who,
before coming to OPA, had any connection whatever with the automobile business, is a man who was formerly employment manager of a
radiator factory. He passes on such major policies as reduction in
handling charges and trade discounts.
Typical of OPA retail automobile statistical presentations is the
studied avoidance in them of the disastrous dealer years of 1942-43.
These were the years in which dealers in your States and all other
States closed their doors by thousands. Examine past statements
presented by both Messrs. Bowles and Porter and you will find the
financial results of these years generally ignored. For instance, Mr.
Bowles at a House hearing on November 13 last—see page 1505,
report on House Resolution 64—in attempting to deny the failure of
almost 10,000 dealers from 1942 to 1945, suggested it could not be
extend price c o n t r o l and stabilization acts of
19 42
1273
true, as Dun & Bradstreet reports showed only 1,222 business failures
throughout the country in 1944. He failed to state, however, that
this same financial service report showed 9,405 failures for 1942 and
3,221 for 1943.
A recent attempt by Mr. Porter, in a letter to Chairman Spence, of
the House Banking and Currency Committee, to make the wartime
operations of dealers appear prosperous also failed to mention disastrous 1942-43 income results.
The chief cause of our present grave troubles is a vague survey of
the income returns of about 300 unidentified dealers which OPA says
justifies the three heavy cost absorption cuts it has imposed upon
dealers since last fall. This so-called survey represents a coverage
of about 1 percent of present-day dealers and three-fourths of 1 percent of dealers in business at the beginning of the war. All efforts of
dealers and the House Small Business Committee to obtain access to
this report have failed. OPA says it is confidential. We are in the
unpleasant position of having our throats cut with a knife we are
not permitted to see.
Senator CAPEHART. Who is representing OPA here?
Senator MITCHELL. Mr. Holder.
Senator CAPEHART. Would it be possible for you to insert in the
record the statistics on these 300 dealers, who they were, and how you
arrived at the information?
Mr. HOLDER. Senator, we have made public the summarized results
of that study. As to the details of individual companies, their identities, and their profits, I believe that under the law that is considered
confidential information.
Senator CAPEHART. Where did you secure the information?
Mr. HOLDER. We secured the information directly from the dealers,
Senator Capehart. We sent out, I may say, some 2,000 questionnaires in June of last year, and by November we had returned to us
less than 350 usable forms.
Senator CAPEHART. Could you insert in the record, then, a copy of
the letter that you sent out, and the form that you sent out, and the
information you asked for?
Mr. HOLDER. I would be delighted to do so, sir.
Senator CAPEHART. Could you likewise insert in the record the
statistics that you arrived at?
Mr. HOLDER. We will be very glad to do so.
vSenator CAPEHART. And the method by which you arrived at them?
M r . HOLDER. Y e s , sir.
Mr. MALLON. Mr. Chairman,
if that is going into the record, might
I ask the privilege of inserting a report of our survey made on 1,952
dealers last fall and testified to before the House committee?
Senator TAYLOR. Yes. You may put that into the record.
(The following wTas later received for the record:)
NATIONAL
H o n . ROBERT
F.
WAGNER,
AUTOMOBILE
DEALERS
ASSOCIATION,
Washington, D. C.y May 7, 1946.
Chairman, Senate Banking and Currency Committee,
Washington, D. C.
M Y B E A R M R . C H A I R M A N : At the specific request of several members of your
Banking and Currency Committee, made during my appearance before it on
May 2, 1946, I am sending you herewith certain additional facts and statistics
in connection with the operations of the more than 30,000 retail automobile
extend
price c o n t r o l
and stabilization
acts of
19 42 1274
dealers of the United States during the war period. Included in those members
requesting these figures in whole or in part were Acting Chairman Taylor and
Senators Taft, Millikin, Mitchell, and Capehart.
Two subjects of paramount interest to committeemen upon which additional
information was asked were—
1. What were the increased operating dealer costs during the war period,
how and when facts about them were made available to OPA, and what
consideration, if any, was given to these increased costs by OPA before
lowering dealer discounts?
2. Upon what grounds does OPA seek to justify its cuts in dealer trade
discounts and what is the dealer comment thereon?
Replies to these requests which follow are based chiefly on information obtained late in 1945 by NADA from 1,952 dealers throughout the United States.
The data were collected by the NADA and turned over the the International
Businiss Machine Co. for compilation after coding by regions and car makes.
All figures were properly weighted. These compilations then were submitted
to the House Small Business Committee and to OPA. After inspecting the
figures, OPA officials approved their accuracy.
INCREASED D E A L E R
COSTS
These statistics show a national average increase properly weighted of 25.91
percent in the normal operating costs of dealers during the war period. Included
in the survey were 14 expenditures common to every retail automobile operation.
The following list shows the increase in detail.
Percent
1. Make ready for delivery (excluding freight)
28. 43
2. Guarantee policy adjustments
26. 04
3. Average salary paid (including clerical and sales commission)
29. 21
4. Average wage paid
30. 04
5. Reconditioning per used car
73. 56
6. Miscellaneous supplies (including stationery)
19.07
7. Miscellaneous express and hauling
15. 02
8. Rents and leaseholds
34. 67
9. Maintenance—buildings- _
40.30
10. Maintenance—equipment
39. 55
11. Taxes other than income
19. 17
12. Insurance (including building)
16.75
13. Light, heat, water, and power
14. 24
14. Telephone and telegraph
15. 98
Subsequent to the compilation of the above statistics, NADA made numerous
spot checks indicating an additional general cost rise of 7 percent. Thus the
total increased operating costs today over the war period probably are about
one-third.
In considering how OPA arrived at the conclusion that dealers could absorb
substantial discount cuts to help pay increased manufacturing costs, it is important
to remember that at no time did OPA give proper recognition to increased dealer
operating costs. If OPA had done this, dealer discounts never would have been
reduced.
O P A ' s F U T U R E BUSINESS GUESSES
OPA's dealer discount cut, which now amounts to
percent, was based on
theoretical 1946 retail automobile conditions that have proven tragically inaccurate for the trade. First, OPA decided on the basis of hand-picked reports
from less than 1 percent of the trade that the dealer prewar realized margin on
new car sales was only 11.5 percent. The remaining 12.5 percent of the established
24 percent trade discount had been lost by bad used-car trades, OPA said. Therefore, all that dealers would need to make in the postwar period in order to equal
their prewar margin was 11.5 percent, OPA declared. OPA also insisted that
earning of 11.5 percent would be easy.
Here is how OPA predicted dealers in 1946 would make their customary prewar profits, after OPA discount cuts.
1. In November 1945 OPA predicted new car production would reach a
4,000,000 annual average by March 1, 1946.
What happened.—Instead of producing new cars at a rate of 4,000,000 per
year by March 1946, manufacturers by April were only producing them at the
rate of 786,336 annually, or at less than one-fifth the rate predicted by OPA.
Production in April 1946 increased to approximately 132,000, but the outlook
extend
price c o n t r o l and stabilization acts of
19 4 2
1275
for future production is dark. In response to telegrams from NADA on April
19 all leading manufacturers declined to make any estimates on the volume to
be produced in 1946. Consensus of manufacturer opinion was that if the coal
strike were settled promptly, if there were no delays in obtaining parts from
suppliers, and no additional labor troubles, they might produce 60 percent of
the 1941 volume, or approximately 2,245,045 cars in 1946. Steel manufacturers
simultaneously stated that if their plants ran full capacity throughout the year
they could furnish cold rolled steel for no more than 2}^ million cars.
2. OPA insists today that dealers will sustain no net losses on all used cars
traded in against new cars in 1946.
This prediction is open to serious question. It is reasonable to assume that a
majority of new cars sold in 1946 will involve trade-in of used cars. Under OPA
regulations, a dealer trading in a used car against a sale of a new car is required to
allow the "as is" price as quoted in the used-car price-ceiling regulation or the
"fair market value" of the car. The provision of the "fair market value" in the
regulation does in actual application prevent a dealer from making any profit
on a car handled on this basis. A number of the high-priced cars must be handled
on the "fair market value" basis, because the average selling price on these cars
is far below the "as is" price quoted in the OPA used-car regulation, which was
established by a slide-rule method.
3. OPA still insists that the gross profit the dealer will make on used cars will
offset the net loss previously sustained in the used-car department.
Under OPA regulations, the gross profit a dealer can make on a used car tradein cannot exceed a maximum of 20 percent of the selling price. From this he pays
an average of 6 percent commission to salesmen and the remaining 14 percent in
many cases will not more than cover the overhead in operating expenses involved
in the transaction. Used-car ceiling prices as now quoted in OPA price regulation
are on a high level. As new cars are produced, market prices on used cars will fall
rapidly. Under present regulations there is no way a dealer can cover himself
for a drop in prices during the 30- to 60-day reconditioning period now made
necessary by lack of parts.
A SURVEY
OPA
IGNORED
Attached is a statement I made before the House Small Business Committee
on November 15, 1945, demonstrating with statistics from 1,952 dealer operations
the inaccuracy of OPA's position on possible dealer earnings in 1946. The figures
are particularly convircing in showing how badly OPA has misjudged the coming
used-car market. It is certain that there will be used-car losses in the future as
there have been in the past.
It is regrettable that although OPA has had these figures for months, the agency
has never used them. Instead of analyzing these accurate statistics, representing the broadest and most recent survey of dealer operations available, OPA has
chosen to select a few figures of doubtful accuracy and with them try to justify
its cost absorption formula devised during the war.
Repeated statements by OPA officials designed to make congressional committees believe that the agency has had difficulty in obtaining statistical help from
NADA are not factual. As early as March 8, 1945, I appealed personally to Mr.
Bowles to arrange a meeting between NADA and OPA officials so that NADA
might cooperate in the making of needed surveys. At a meeting on April 4,
1945, with Deputy Administrator James F. Brownlee it was agreed that NADA
should make a national survey, but our subsequent efforts to obtain guidance from
OPA as to acceptable base periods, etc., were futile. We finally had to proceed
without instructions. The survey continued, at great expense and effort to
NADA, throughout the summer and early fall. There were numerous vexatious
and unavoidable delays, but finally, on November 15, 945, we were able to submit
the results of our national survey to OPA. At that time there had been no initial
trade discount cut made, and therefore OPA had abundant opportunity to study
the figures from 1,952 dealers before making any cut.
The statistics submitted clearly disprove the contention of OPA that the gross
profit on used-car operation in the ensuing year would eliminate the used-car
losses which OPA claimed had been experienced by the dealers prewar.
Further proof that OPA had the dealer figures when trade discount slashing
began follows: On November 16, 1945, a conference was held in the office of
Hon. Wright Patman, chairman of the House Small Business Committee, at which
time were present Messrs. Ney, Holder, Chandler, and Ketcham from the office
of OPA, and Mr. Mallon, president of NADA, and Mr. Sterrett, statistician of
1276
extend
price control and stabilization acts of
194 2
NADA. Congressman Patman presided and there were in attendance of his staff
Mr. Eastwood and Mr. Deegan. At this conference the representatives of OPA,
in answer to an inquiry, stated they had examined the figures which NADA had
submitted and found they were in line with those that they had developed from
their survey compiled from only 300 replies.
The fact is, the NADA figures proved just the opposite of what OPA now claims
its 300 reports showed.
Your very truly,
(Signed) W. L. M A L L O N , President.
Average dealer's proftt-and-loss statement for the calendar years 1939-41 based on
1,952 returns compiled by International Business Machines
[Tabulations based on N A D A survey released N o v . 15, 19451
1939
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
(11)
(12)
(13)
(14)
(15)
New-car sales
New-car costs
New-car grcss profit
_
Percent new-car gross profit to sales
Used-car sales
___
__
_ _
Used-car costs. _
_
_ _ _ _ - - _
Used-car gross profit loss
Percent of used-car loss to new-car sales
Gross profit retained from new-car sales
Percent gross profit retained from new-car sales
Grcss profit other departments.-__
Over-all gross profit
__
_ _ _ _ _
Total operating expense
__
_ _ __
Total net profit
Percent net profit to sales 2
__ _
$264,000
$208, 530
$55,470
21.01
$122, 970
$133, 228
J $10, 258
i 3. 89
$45, 212
17.12
$28. 671
$73,883
$65, 282
$8, 601
1.86
1940
$341,070
$268, 316
$72, 754
21.33
$147, 738
$165, 599
i $17,961
i 5. 27
$54, 793
16.06
$32, 908
$87,701
$76, 276
$11,425
1.99
1941
$399,060
$311, 592
$87, 468
21.92
$1«1,095
$193, 516
i $12, 421
i 3.11
$75,047
18. 81
$39, 529
$114, 576
$92,068
$22, 508
3.29
3-year
average
$334,710
$262,813
$71,897
21. 48
$150,601
$164,147
i $13, 546
i 4.05
$58, 351
17. 43
$33, 703
$92,053
$77, 875
$14,178
2.47
Denotes loss.
2 Includes finance reserve earned.
1
Average profit and loss as compiled by International Business Machines from
operating statements of 1,952 dealers for the calendar year of 1941
Sales
New-car department
Used-car department
Service department
Parts and accessories departmentFinance reserve earned
Total departments.
Operating expense
Net profit
Evident in 1945 and applicable to 1946 costs:
Increase in operating expense...
Net l o s s . . .
Costs
$399,060
181,095
44, 719
53,880
4,936
$311, 592
193, 516
24,474
39, 532
683,690
569,114
Gross
profit
Percent of
gross profit
to total
i 12,421
20, 245
14, 348
4,936
12. 79
i 1. 82
2. 96
2.10
.72
114, 576
92, 068
22,508
16. 75
13.46
3. 29
23,855
i 1,347
3. 49
1.20
i Loss.
Total passenger cars manufactured
3, 642, 434
Total trucks manufactured
941, 627
The following figures show that increases* in various operating costs amount to
more than any savings which could possibly be realized through reduced used-car
losses:
E X T E N D PRICE C O N T R O L A N D S T A B I L I Z A T I O N ACTS OF 1 9 4 2
1277
New-and used-ear operations for calendar year 19^1 based on returns for 1,952 dealers
Percent of
new car
sales
Sales
(1)
(2)
(3)
(4)
(5)
(6)
(7)
New-car sales
New-car costs
New-car gross profit
Used-car gross loss
New-car expense
Used-car expense
Other expense
__
_ .
___ _ _ -. _ _
_. _ _
-
. ...
-
Total expense
Per $1,000
car
$399,060
311, 592
87,468
i 12, 421
34, 857
i 27,086
30,125
100.00
78. 08
21.92
i 3.11
9. 73
i 6. 79
8. 55
$1,000.00
780.80
219. 20
i 31.10
97. 30
i 67.90
85. 50
92,068
23.07
230.70
i O P A contends that dealers will purchase and sell used cars on a basis that will provide a margin which
will offset the used-car gross loss—
Percent
Line 4
3.11
A n d used-car operating expense (line 6)
6.79
Total
9.90
No one knows how many used cars a dealer may handle, but it is a fact that he is
bound to experience a loss in a declining price market. He certainly will not be
able to recoup from his used-car gross margin sufficient money to cover the
operating expense of the used-car department.
Loss
(percent)
Loss
T h e total of the above item is
Increase in total operating expense (25.91 percent times $92,068)Reduction in handling charge
Depreciation of used cars due to falling prices^.
Loss on junkers
50 percent reduction in finance reserve earned
Loss.
Total-
$23, 855
12,954
13, 226
2,160
2,468
5.98
3. 25
3. 31
.54
54, 663
13. 70
.62
PROJECTION FOR THE C A L E N D A R Y E A R 1946 OF AN A V E R A G E D E A L E R ' S OPERATION
BASED ON ACTUAL RETURNS OF 1,952 DEALER OPERATING STATEMENTS FOR T H E
Y E A R 1941, REVISED TO REFLECT P R E S E N T - D A Y CONDITIONS
Statement No. 1.—Average operating statement for the calendar year 1941 as
reported by 1,952 dealers same as presented to the House Small Business Committee, November 15, 1945.
Statement No. 2.—Estimated operating statement for the calendar year 1946
based on—
(a) 60 percent of 1941 sales at present-day prices.
(b) Three used cars handled for every four new cars sold.
(c) 10 percent volume increase in parts and service over 1941.
(d) 50 percent reduction in finance reserve earned.
(e) 25.91 percent increase in operating expenses reported in 1945 survey plus a
7 percent additional increase since VJ-day.
Sales
Sales
Cost
592
516
474
532
$272, 611
66,826
48,029
66, 815
1, 586
$233, 201
56, 689
32, 226
49,029
569,114
455,867
371,145
683, 690
Total
Statement N o . 2
$399,060
181,095
44,719
53, 880
4, 936
New-car department
Used-car department
Service department
Parts-and-accessories department.
Finance reserve
85721—46—vol. 2
Statement No. 1
9
Cost
$311,
193,
24,
39,
1278
extend price c o n t r o l and stabilization acts of
Gross profit
Operating expense
Net profit
Percent of net profit to sales
New cars sold
Used cars sold
,
Net profit if historical discount and handling charge of
5 percent of (list plus freight) were retained:
Net profit
Percent net profit to sales
194 2
Statement No. 1
Statement No. 2
Sales
Sales
Cost
Cost
$114, 576
92,068
$84, 722
91, 438
22, 508
3. 29
389
599
i 6, 716
i 1.47
233
175
$22, 508
3. 29
$6, 332
1.35
i Loss.
Mr. M A L L O N . The situation is as if OPA had entered a city which
once consisted of 40,000 business houses, ignored the fact that 10,000
stores were closed, secretly examined the returns of 300 of the more
prosperous ones remaining open, passed up the 29,700 places which
were hard-hit, and then reported that the entire city was in fine shape,
that its future prospects were absolutely tops, and the retailers should
be deprived of one-third of their possible future earnings to avoid
inflation.
That the reports of only 300 dealers have been used for assessing
cost-absorption cuts on our trade and for making reports to Congress,
such as that our business was up 200 percent during wartimes, have
been confirmed before congressional committees b}^ Messrs. Bowles
and Zenas Potter, statistical assistant to both Messrs. Bowles and
Porter. When Mr. Bowles was pinned down recently by the House
Banking and Currency Committee as to his reason for utilizing the
reports of only 300 retail automobile concerns as a basis for such
important statements, Potter volunteered that it was a NADAapproved practice. This was a very tricky statement. Prior to the
war, when making cursory surveys, NADA on two occasions sampled
as few as 300 dealers; but since the war developed more vastly important situations, we never have surveyed less than from 6 to 10
times this number. Where possible, NADA uses only complete
national reports, such as those submitted in this statement. It
believes all Government agencies should be compelled to do likewise.
It is ridiculous for anyone to contend that an industry that has been
shattered as ours has been during the last 4 years could possibly be
making twice the profits it did before the war. Yet that is one of the
chief reasons advanced by OPA for making dealer income slashes which
already total one-third of our normal peacetime profit margin. The
other reason advanced for cutting our long-established trade margin
is that OPA officials, with absolutely no retail automobile experience,
say they are quite sure that dealers are going to make fabulous sums
on used-car sales, whenever new-car production gets under way. This,
of course, is just a guess and probably a bad one. Experienced usedcar men fear that dealers, instead of making profits on used cars, will
sustain severe losses on them. One ground for this fear is that they
will have to take trade-ins at what OPA vaguely terms "reasonable"
prices or be penalized.
On no better grounds than the foregoing, OPA since last fall has
cut 7% percent from automobile dealer profit margins, which for years
1279
extend price c o n t r o l and stabilization
acts of
194 2
have been established at a gross, averaging 24 percent. The first
cut, one of 3 percent, Mr. Bowles got by trimming a handling charge
of 5 percent which Administrator Henderson after a national survey
of dealer-handling costs had put in effect 3 years previously. The
second cut of 2% percent Mr. Bowles inflicted in November 1945,
after 450 members of the House and Senate, learning of his threats
of a cut of from 6 to 11 percent, had appeared at House Small Business
Committee hearings and demanded a square deal for dealers. The
third cut of 2 percent was put in by Administrator Porter on March
13, last, with the explanation that it was to pay the cost of wage
increases won by CIO workers in their strike against automobile
manufacturers.
The OPA announcement that dealers would have to pay the increased wages resulting from the automobile factory strike was one
of the most unexpected occurrences in all automotive history.
No CIO or OPA officials or member of President Truman's factfinding commission had ever even hinted what the wage increases
might be saddled on an innocent bystander, the dealer. No study
ever was made to determine dealer ability to pay the factory workers.
Nor has any excuse ever been given, publicly or privately, by either
Mr. Bowles or Mr. Porter, for the infliction on dealers of this wholly
unwarranted penalty. Apparently Mr. Bowles just decided to hit
the dealers again despite the fact that he had promised the House
Small Business Committee 5 months earlier that henceforth he would
leave the dealers alone. To this day the dealers do not know why
they have been picked out to be the goats in the situation. But
they were.
In the case of every one of these three cuts, the dealers' advisory
committee, which is supposed, under the pricing act, to be consulted
about any changes in dealer regulations, has been utterly ignored.
The routine has been for OPA to call a meeting of our dealer advisory
committee and, upon convening, to tell the members what new income
cuts have been arranged for dealers to take. Whatever has been
arranged, dealers are supposed to take it and like it.
We retail automobile dealers have never been convinced that
Congress ever intended we or any other retailers should be accorded
such shabby treatment, so we have protested it as vigorously- as we
knew how. When the situation became critical last fall, we consulted
with congressional leaders of both Houses and they counseled that we
continue temporarily to use every possible means to compromise our
differences administratively and, if these efforts failed, to seek legislation. Our efforts along the administrative line got us nowhere.
Finally, when in November 1945, we were advised by OPA that
serious cutting of our trade discount was at hand and that under it
eventually we might lose more than half of our normal profit margin
we arranged an open hearing before the House Small Business Committee. Both Mr. Bowles and I testified and many of the facts
regarding OPA's high-handed method of dealing with us were revealed.
As usual, when businessmen are so bold as to disagree with
Mr. Bowles, he attacked us in the newspapers and elsewhere as
lobbyists who were greedily trying to thwart his efforts to save the
Nation from economic ruin. All members of the committee took him
severely to task for these remarks, telling him emphatically while he
was on the witness stand that they were pleased to see businessmen
1280
extend price c o n t r o l and stabilization
acts of
194 2
come forward and express their views. Further, they sharply criticized Mr. Bowles for the manner in which he had handled our affairs
and demanded that he give us a squarer deal. He was quite conciliatory and promised definitely in reply to questions by Representative Ploeser, of Missouri, that the trade discount cut lie then planned,
which became 2% percent, would be our last.
When, despite Mr. Bowies' promise, cuts either put into effect
directly or arranged by him before he was succeeded by Mr. Porter,
had totaled 7% percent, we carried our case to the House Banking and
Currency Committee and asked for legislation. We were cordially
received and many committee members, including Representative
Patinan, who also is chairman of the House Small Business Committee, expressed both interest and sympathy. The result was
adoption by the committee, by a vote of 15 to 6, of an amendment
which would be helpful to us and other small businessmen and which
the House passed without discussion. It is a matter of interest that a
majority of the members of the House Small Business Committee,
including both Democrats and Republicans, who were familiar with
our problem, were prepared to speak on behalf of the amendment if
there had been any opposition to it on the House floor. There was
none.
Briefly, the amendment would provide that retail establishments
which for a period of 3 years following March 2, 1942, had, by Government action, been deprived of 75 percent or more of their normal
supply of goods, should be given temporary protection against OPA
cost absorption impositions. Until the normal sales of such restricted
goods had reached their prewar averages and been maintained for a
6-month period, OPA would be prohibited from changing the established prewar trade discounts and handling charges of the affected
dealers.
The amendment appears in H. R. 6042 beginning on line 17 of page
12 and continues through line 6 on page 13.
This amendment, which is designated as (q), would protect not only
automobile dealers but also retailers in certain other lines which were
without their principal supply of goods during the war. They include
exclusive radio, refrigerator, and washing-machine retailers. This
provision is designed solely for especially hard-hit small retailers and
is in no way associated with subsection (r) which follows immediately
in the bill and relates to wholesalers. This wholesalers' amendment
was one of the numerous amendments which was offered from the
floor in the closing hours of House consideration of the bill.
The retailer amendment which we automobile dealers are asking
your committee to join the House committee and members in approving, would simply restore to retailers, while they are getting on their
feet, the profit margin OPA has taken away from them. After losing
money for 4 years, or, as in many cases, being entirely out of business,
automobile dealers generally seek temporary assistance, not in the
form of a subsidy or a loan, but as a 6 months' protection against
OPA's experimentation with possible earnings badly needed to rehabilitate and stabilize our trade.
OPA propagandists have sought to make it appear that restoring
automobile dealer trade discounts and handling charges to normal
levels would rob car buyers of vast sums and increase dealer profits
immensely. The impression is left that new-car buyers are bitterly
1281 e x t e n d p r i c e c o n t r o l a n d s t a b i l i z a t i o n a c t s o f
194 2
opposed to allowing the dealer his normal profit margin. That is
not true.
In the first place, prospective car buyers generally deal with neighborhood dealers and are familiar with their troubles. Buyers wrant
their friends the dealers to make fair profits, stay in business, and be
able to service cars as they did before the war. The car owner also
realizes that the more than $27,000,000,000 of business which dealers
lost through limited new-car and supply sales during the war remained
in the pockets of their customers. This total now amounts to more
than $1,000 per present car owner. To him, this nest egg is an
unspent part of his normal automobile transportation budget for the
years 1942-45. He is quite willing to part with some of it to help
his dealer get going after 4 years of struggle. He does not see why
the dealer, who has had more than his share of normal war troubles,
should be saddled with factory strike costs and other OPA-devised
penalties and not even get an allowance for his vastly increased
ordinary operating expenses.
Efforts of OPA to make it appear that enactment of this amendment would result in enormous new profits for dealers do not square
with OPA new-car production estimates. On the one hand, OPA
says 5,000,000 new-car production is near. If that is true, then the
1941 production of 3% million cars is even closer, and this amendment
would only provide a normal profit margin freeze during the first 6
months of production at the annual rate of 3% million. Under OPA
forecasts, this period would be past by next fall.
However, under full production, competition will pull prices down.
Forecasters, who say new-car prices will be stabilized at tops for years,
do not know either manufacturers or dealers, manufacturers push
and dealers sell.
New competition is at hand now. The Ford Co. soon will put a
car on the market to sell for less than $1,000. Young Henry Ford
is determined to recapture first place in sales from Chevrolet. General
Motors has also announced the manufacture of a competing car.
Likewise, Chrysler and other light-car manufacturers will be in there
fighting for supremacy. The light-car market always has been the
scene of bitter fighting and it will be again.
Now the fact is the actual price of a new low-priced car being produced today, even with the normal dealer trade discount and handling
charges added, would be less than in 1941. That may sound strange,
but it is true. I will prove it.
Every time a man or woman buys a car, the cost to him or her is
just so much in hours of labor or products of his labor. To the man
who works for wages, the cost is so much cash for which he has expended so many hours of work. For the grain farmer it is just so
many bushels of whear, corn, rye, or whatever he raises. For the
cotton farmer it is so many pounds or bales of cotton. For the stock
raiser it is so many pounds of meat.
"W hen the discussion arose about the possible cost of cars under the
retail amendment in the committee report (now par. Q, sec. 9) I
decided to make an investigation of comparative rises in the costs of
cars, labor, and produce since 1941.
From the Bureau of Labor Statistics I learned that in 1941 the
average wage earner in the United States would have had to work
1,038 hours to earn either a Ford, Chevrolet, or Plymouth four-door
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sedan. But today the same worker, due to wage increases, would have
to work only 732 hours to earn enough to pay for such a car at the
very highest prices which possibly could be charged under the House
amendment. In other words, the worker today could earn the same
car in three-fourths the time that he could have earned it in 1941.
From the Department of Agriculture I learned that in 1941 a farmer
would have had to raise 1,380 bushels of corn to pay for such a car.
Today he could pay for the same car with 886 bushels of corn.
Whereas in 1941 a car would have cost him 929 bushels of wheat;
today he could buy it for 640 bushels. For 9 bales of cotton today he
could buy a car which would have cost him 11% bales in 1941. And
for 28 hogs, averaging 250 pounds each, today he could get a car that
would have cost him 37 hogs in 1941.
Gentlemen, keeping prices in line with fairness to all is important,
but there are other elements of vast importance in the retail automobile situation.
The first element, which OPA deliberately ignores or is unaware
of, is the slow and costly process of getting our tremendous retail and
service machine back into high gear. The fact that the dealers of
the Nation in normal times had an investment equaling that of the
automobile manufacturers, employed more than half a million men
and women, and sold and serviced the cars of 30,000,000 families is
something to consider. The further fact that this dealer service
machine, now damaged in parts and idle in others, cannot be put
back into working order overnight stands unchallenged. Dealers,
and especially those who were put out of business by the Government
freeze, are not finding it easy to finance their operations in the face
of recurring profit curtailments by OPA and meager and constantly
interrupted new-car deliveries by factories.
These facts strongly impressed the House Small Business Committee, the House Banking and Currency Committee, and the House
Members who without objection approved subsection (q) of the
House OPA extension bill as amended. Their emphatic approval
of the amendment was for the definite purpose of affording temporary
assistance to automobile dealers and others who had been deprived
of 75 percent or more of their new principal stocks during the war.
They took this action because they thought it was a constructive
thing to do, fair to the customers, the dealers, and the country.
The future of our service is up to you. Join the House in saying
that our return to normal functioning is important enough to the
country to warrant Senate approval of this committee-conceived
amendment, and more than 40,000 dealers soon will be making their
now stagnated business plants hum with improvements. These
dealers are go-getters, and being located in every town, village, and
city in the country are an asset to postwar prosperity well worth
encouraging. Essentially boosters and chance takers, with a little
encouragement, they will gamble every cent they can garner for more
employees and plant expansion. They want to put the United States
back on motor wheels and see the people ride in comfort, laugh, and
have a little enjoyment once more. They cannot get to their feet
and lead if every time they start rising they are met with new slashes
in earnings and burdened with the cost of wage increases granted
employees of other parts of the industry.
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They can and will set a fast reconversion pace, if the Senate will
join the House in approving subsection (q) of this bill—the 6 months
moratorium plan.
Mr. Chairman, there is one important point in the current automobile dealer situation which I should like to emphasize and leave
with you. This is it:
There is no law, regulation, or set OPA formula to prohibit adoption of such a cost absorption moratorium as proposed by the House
amendment. Let me cite two proofs of this statement:
1. On March 15, 1944, OPA, after ordering a cut in trade discounts
on trucks, restored the cut and the standard trade discount stands
today.
2. There never has been and is not today any cost absorption imposed on dealers in farm machinery and equipment.
Senator M I T C H E L L . D O I understand from your statement that the
National Automobile Dealers Association has made surveys' right
through the war period?
Mr. M A L L O N . Occasionally. We made one, sir, at the time this
300-dealer survey was being made by OPA. We summarized 1,952
out of some 2,500 that we received back.
Senator M I T C H E L L . Was that available to OPA?
Mr. M A L L O N . That was; yes.
Senator M I T C H E L L . I wonder why it was not used in the compilation.
Mr. H O L D E R . The survey was not made available to us. They
made available to us only certain summary figures. We wrote Mr.
Mallon about 60 days ago and asked for the details of that survey.
He replied that the survey had not been completed and therefore
could not be given to us. We have not received the details of it to
date.
Mr. M A L L O N . May I explain that statement, sir? The figures
were given before the House Small Business Committee on November
15, 1945. We placed upon the table of the committee 1,952 questionnaires from which the summary was compiled by the International
Business Machines Co. We did not make the figures. As fast as
these questionnaires were received from dealers the}7 were turned over
to the I. B. M., and they did all of the summarizing. Each individual
report was made available at the time of the hearing, on November 15,
and was placed on the table.
Senator C A P E H A R T . Did the Small Business Committee insert them
in the record?
Mr. M A L L O N . The summary is inserted in the record; yes, sir.
Senator C A P E H A R T . What was the date of that?
Mr. M A L L O N . November 15.
Senator C A P E H A R T . Mr. Chairman, I suggest that we take from the
Small Business Committee hearings that portion that the witness is
talking about and have it inserted in this record at this point.
Senator T A Y L O R . Very well.
Senator M I T C H E L L . Did the O P A compare the figures?
Mr. H O L D E R . We got the figures and compared them, Senator
Mitchell, and found substantial agreement on points we had in common. Unfortunately the survey was not directed along the lines of
our distribution policy and we were unable from the summary figures
1284
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to compare final conclusions. We have asked Mr. Mallon to make
available to us the details so that we could work out a comparable
situation, but to date we have not received them.
Mr. M A L L O N . I would like to make this statement, sir. Following the hearing on November 15, Chairman Patman held a conference
in his office, and another one the next morning. I think there were
either four or five representatives of OPA there, and I was present
representing the dealers; and at those conferences we asked representatives of OPA if they agreed with our figures or had any fault to
find with them, and we were informed that they could not see anything wrong with them. So we naturally assumed that the figures
were satisfactory.
Senator T A Y L O R . Proceed.
Senator C A P E H A R T . O P A did not ask for the 1 , 5 9 2 that day?
Mr. M A L L O N . Not to my knowledge.
Senator C A P E H A R T . If they had asked you, would you have given
them to the OPA?
Mr. M A L L O N . Yes. What we did—to keep the record straight on
that—we too thought we had better not publicise the names, so we
took a knife and cut the names off and numbered them 1 and 2, and
so forth, and we had a key and submitted the key with all the names
on it to the committee.
Senator C A P E H A R T . There is nothing wrong with that and nothing
wrong with the OPA system of not divulging names.
Mr. M A L L O N . May I proceed, sir?
Senator T A Y L O R . Please.
Mr. M A L L O N . Oryno better grounds than the foregoing, OPA since
last fall has cut 7% percent from automobile-dealer profit margins,
which for years have been established at a gross averaging 24 percent.
The first cut, one of 3 percent-, Mr. Bowles got by trimming a handling
charge of 5 percent which Administrator Henderson, after a national
survey of dealer handling costs, had put in effect 3 years previously.
The second cut of 2% percent Mr. Bowles inflicted in November 1945,
after 450 Members of the House and Senate, learning of his threats
of a cut of from 6 percent to 11 percent, had appeared at House Small
Business Committee hearings and demanded a square deal for dealers.
The third cut of 2 percent was put in by Administrator Porter on
March 13, last, with the explanation that it was to pay the cost of
wage increases won by CIO workers in their strike against automobile
manufacturers.
The OPA announcement that dealers would have to pay the increased wages resulting from, the automobile factory strike was one
of the most unexpected occurrences in all automobile history.
No CIO or OPA officials or member of President Truman's factfinding commission had ever even hinted that the wage increases might
be saddled on an innocent bystander, the dealer. No study ever was
made to determine dealer ability to pay the factory workers. Nor
has any excuse ever been given, publicly or privately, by either
Mr. Bowles or Mr. Porter, for the infliction on dealers of this wholly
unwarranted penalty. Apparently Mr. Bowles just decided to hit the
dealers again despite the fact that he had promised the House Small
Business Committee 5 months earlier that henceforth he would leave
the dealers alone. To this day the dealers do not know why they have
been picked out to be the goats in the situation. But they were.
1285 e x t e n d
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In the case of every one of these three cuts, the dealers' advisory
committee, which is supposed, under the Pricing Act, to be consulted
about any changes in dealer regulations, has been utterly ignored.
The routine has been for OPA to call a meeting of our dealer advisory
committee and, upon convening, to tell the members what new income
cuts have been arranged for dealers to take. Whatever has been
arranged, dealers are supposed to take it and like it.
We retail automobile dealers have never been convinced that Congress ever intended that we or any other retailers should be accorded
such shabby treatment, so we have protested it as vigorously as we
knew how. When the situation became critical last fall we consulted
with congressional leaders of both houses and they counseled that
we continue temporarily to use every possible means to compromise
our differences administratively and, if these efforts failed, to seek
legislation. Our efforts along the administrative line got us nowhere.
Finally, when in November 1945 we were advised by OPA that
serious cutting of our trade discount was at hand and that under it
eventually we might lose more than half of our normal profit margin,
we arranged an open hearing before the House Small Business Committee. Both Mr. Bowles and I testified, and many of the facts regarding OPA's high-handed method of dealing with us were revealed.
As usual, when businessmen are so bold as to disagree with Mr.
Bowles, he attacked us in the newspapers and elsewhere as "lobbyists"
who were greedily trying to thwart his efforts to save the. Nation
from economic ruin. All members of the committee took him
severely to task for these remarks, telling him emphatically while he
was on the witness stand that they were pleased to see businessmen
come forward and express their views. Further, they sharply
criticised Mr. Bowles for the manner in which he had handled our
affairs and demanded that he give us a squarer deal. He was quite
conciliatory and promised definitely in reply to questions by Representative Ploeser, of Missouri, that the trade discount cut he then
planned, which became 2% percent, would be our last.
When, despite Mr. Bowies' promise, cuts either put into effect
directly or arranged by him before he was succeeded by Mr. Porter,
had totaled 7% percent, we carried our case to the House Banking
and Currency Committee and asked for legislation. We were cordially
received and many committee members, including Representative
Patman, who also is chairman of the House Small Business Committee,
expressed both interest and sympathy. The result was adoption by
the committee, by a vote of 15 to 6, of an amendment which would
be helpful to us and other small businessmen and which the House
passed without discussion. It is a matter of interest that a majority
of the members of the House Small Business Committee, including
both Democrats and Republicans, who were familiar with our problem,
were prepared to speak on behalf of the amendment if there had been
any opposition to it on the House floor. There was none.
Briefly, the amendment would provide that retail establishments
which for a period of 3 years following March 2, 1942, had, by Government action, been deprived of 75 percent or more of their normal
supply of goods, should be given temporary protection against OPA
cost-absorption impositions. Until the normal sales of such restricted
goods had reached their prewar averages and been maintained for a
6-month period, OPA would be prohibited from changing the estab-
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lished prewar trade discounts and handling charges of the affected
dealers.
The amendment appears in H. R. 6042 beginning on line 17 of page
12 and continuing through line 6 on page 13.
This amendment, which is designated at (q), would protect not only
automobile dealers but also retailers in certain other lines which were
without their principal supply of goods during the war. They include
exclusive radio, refrigerator, and washing-machine retailers. This
provision is designed solely for especially hard-hit small retailers, and
is in no way associated with subsection (r) which follows immediately in
the bill and relates to wholesalers. This wholesalers amendment was
one of the numerous amendments which was offered from the floor in
the closing hours of House consideration of the bill.
The retailer amendment which we automobile dealers are asking
your committee to join the House Committee and Members in approving, would simply restore to retailers, while they are getting on their
feet, the profit margin which OPA has taken away from them. After
losing money for 4 years, or, as in many cases, being entirely out of
business, automobile dealers generally seek temporary assistance, not
in the form of a subsidy or a loan, but as a 6-months' protection against
OPA's experimentation with possible earnings badly needed to rehabilitate and stabilize our trade.
OPA propagandists have sought to make it appear that restoring
automobile-dealer trade discounts and handling charges to normal
levels would rob car buyers of vast sums and increase dealer profits
immensely. The impression is left that new-car buyers are bitterly
opposed to allowing the dealer his normal profit margin. That is
not true.
In the first place, prospective car buyers generally deal with neighborhood dealers and are familiar with their troubles. Buyers want
their friends the dealers to make fair profits, stay in business, and be
able to service cars as they did before the war. The car owner also
realizes that the more than $27,000,000,000 of business which dealers
lost through limited new-car and supply sales during the war remained
in the pockets of their customers. This total now amounts to more
than $1,000 per present car owner. To him this nest egg is an unspent part of his normal automobile transportation budget for the
years 1942-45. He is quite willing to part with some of it to help
his dealer get going after 4 years of struggle. He does not see why
the dealer, who has had more than his share of normal war troubles,
should be saddled with factory strike costs and other OPA-devised
penalties and not even get an allowance for his vastly increased ordinary operating expenses.
Senator T A Y L O R . Have you made any survey of your customers to
see how they feel about this?
Mr. M A L L O N . Yes, sir. We have a pretty general report. If you
ask if we made a survey, we have not sent out a questionnaire, but we
have made inquiries quite broadly. The answer to that, Senator, I
think would be that the majority of dealers today are now called
upon to explain to the majority of purchasers why the dealers should
not accept an extra $500 in order to give them a car. So the answer
would be that they are perfectly willing to spend the money.
Senator M I L L I K I N . And of course if they could get a car for $500
less, they would like to get it that way?
1287 e x t e n d p r i c e c o n t r o l a n d s t a b i l i z a t i o n a c t s o f
194 2
Mr. M A L L O N . They are offering bonuses in that amount, Senator.
That is what I mean.
Senator M I L L I K I N . We have a strange conflict all the way down the
line, here. The man who goes out and gets an 18% percent increase
in his wages very often has a wife who is a member of a consumer
group who does not want to pay the increased costs.
Mr. M A L L O N . We have found that, sir.
Efforts of OPA to make it appear that enactment of this amendment
would result in enormous new profits for dealers do not square with
OPA new car production estimates. On the one hand OPA says
5,000,000 new car production is near. If that is true, then the 1941
production of 3% million cars is even closer, and this amendment would
only provide a normal profit margin freeze during the first 6 months
of production at the annual rate of 3% millions. Under OPA forecasts, this period would be past by next fall.
However, under full production, competition will pull prices down.
Forecasters who say new-car prices will be stabilized at tops for years,
do not know either manufacturers or dealers, that manufacturers push
production and dealers have to sell.
New competition is at hand now. The Ford Co. soon will put a
car on the market to sell for less than $1,000. Young Henry Ford
is determined to recapture first place in sales from Chevrolet. General
Motors has also announced the manufacture of a competing car.
Senator M I L L I K I N . When do you think those cars are coming on
the market in sizable supply?
Mr. M A L L O N . The statement made by Ford, sir, is that it will be
in 1947. There is no definite date set by General Motors that I
have seen.
Likewise, Chrysler and other light-car manufacturers will be in
there fighting for supremacy. The light-car market always has been
the scene of bitter fighting, and it will be again.
Now the fact is that the actual price of a new low-priced car being
produced today, even with the normal dealer trade discount and
handling charges added, would be less than in 1941. That may sound
strange, but it is true.
Every time a man or woman buys a car, the cost to him or her is
just so much in hours of labor or products of his or her labor. To
the man who works for wages, the cost is so much cash for which he
has expended so many hours of work. For the grain farmer, it is just
so many bushels of wheat, corn, rye, or whatever he raises. For the
cotton farmer, it is so many pounds or bales of cotton. For the stock
raiser, it is so many pounds of meat.
When the discussion arose about the possible cost of cars under the
retail amendment in the committee report—now paragraph Q, section 9—I decided to make an investigation of comparative rises in
the costs of cars, labor, and produce since 1941.
From the Bureau of Labor Statistics I learned that in 1941 the
average wage earner in the United States would have had to work
1,038 hours to earn either a Ford, Chevrolet, or Plymouth 4-door
sedan. But today the same worker, due to wage increases, would
have to work only 732 hours to earn enough to pay for such a car at
the very highest prices which possibly could be charged under the
House amendment. In other words, the worker today could earti
the same car in three-fourths the time that he could have earned it in
1941.
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From the Department of Agriculture I learned that in 1941 a
farmer would have had to raise 1,380 bushels of corn to pay for such,
a car. Today he could pay for the same car with 886 bushels of corn.
Whereas in 1941 a car would have cost him 929 bushels of wheat,
today he could buy it for 640 bushels. For 9 bales of cotton today
he could buy a car which would have cost him 11% bales in 1941.
And for 28 hogs, averaging 250 pounds each, today he could get a car
that would have cost him 37 hogs in 1941.
Senator T A F T . But he would have to pay more for the hogs and
for the corn.
Mr. M A L L O N . Possibly. There is not much difference. It is up
a little.
Senator T A F T . The wage comparison is all right, but not the other
comparisons.
Mr. M A L L O N . The other figures come out that way, too, Senator.
Gentlemen, keeping prices in line with fairness to all is important,
but there are other elements of vast importance in the retail automobile situation.
The first element, which OPA deliberately ignores or is unaware of,
is the slow and costly process of getting our tremendous retail and
service machine back into high gear. The fact that the dealers of the
Nation in normal times had an investment equaling that of the automobile manufacturers, employed more than half a million men and
women and sold and serviced the cars of 30,000,000 families is something to consider. The further fact that this dealer service machine,
now damaged in parts and idle in others, cannot be put back into
working order overnight stands unchallenged. Dealers, and especially those who were put out of business by the Government freeze,
are not finding it easy to finance their operations in the face of recurring
profit curtailments by OPA and meager and constantly interrupted
new-car deliveries by factories.
These facts strongly impressed the House Small Business Committee, the House Banking and Currency Committee, and the House
Members who without objection approved subsection (q) of the House
OPA extension bill as amended. Their emphatic approval of the
amendment was for the definite purpose of affording temporary
assistance to automobile dealers and others who had been deprived
of 75 percent or more of their new principal stocks during the war.
They took this action because they thought it was a constructive
thing to do, fair to the customers, the dealers, and the country.
The future of our service is up to you. Join the House in saying
that our return to normal functioning is important enough to the
country to warrant Senate approval of this committee-conceived
amendment, and more than 40,000 dealers soon will be making their
now stagnated business plants hum with improvements. These
dealers are go-getters and, being located in every town, village, and
city in the country, are an asset to postwar prosperity w^ell worth
encouraging. Essentially boosters and chance takers, with a little
encouragement, they will gamble every cent they can garner for more
employees and plant expansion. They want to put the United States
back on motor wheels and see the people ride in comfort, laugh, and
have a little enjoyment once more. They cannot get to their feet
and lead if every time they start rising they are met with new slashes
in earnings and burdened with the cost of wage increases granted
employees of other parts of the industry.
1289 e x t e n d p r i c e c o n t r o l a n d s t a b i l i z a t i o n a c t s o f
194 2
They can and will set a fast reconversion pace, if the Senate will
join the House in approving subsection (q) of this bill—the 6 months'
moratorium plan.
Mr. Chairman, there is one important point in the current automobile-dealer situation which I should like to emphasize and leave with
you. This is it: There is no law, regulation, or set OPA formula to
prohibit adoption of such a cost-absorption moratorium as proposed
by the House amendment.
Senator M I L L I K I N . Would you mind repeating that, please, that
last statement?
Mr. M A L L O N . That there is no law, sir?
Senator M I L L I K I N . Yes.
Mr. M A L L O N . There is no law, regulation, or set OPA formula to
prohibit adoption of such a cost-absorption moratorium as proposed
by the House amendment. Let me cite two proofs of this statement:
1. On March 15, 1944, OPA, after ordering a cut in trade discounts
on trucks, restored the cut and the standard trade discount stands
today.
2. There never has been and is not today any cost absorption imposed on dealers in farm machinery and equipment.
Senator T A F T . Mr. Mallon, going back to page 6.
M r . M A L L O N . Y e s , sir.
Senator T A F T . Y O U say
a survey of more than 2,000 dealers made
last year showed a general increase during the war of 25.91 percent.
Is that survey available?
Mr. M A L L O N . Yes, sir. That was presented before the House
Small Business Committee, and we have it available.
Senator CAPEHART. We went into that quite carefully, and we are
going to take it into the record.
Mr. M A L L O N . The chairman ordered it in the record.
Senator T A F T . Where?
Mr. M A L L O N . In this record.
Senator T A F T . This record?
M r . M A L L O N . Y e s , sir.
Senator T A F T . And it is
Mr. Bowies' claim that for some reason that
is balanced by used cars.
Mr. M A L L O N . Well, the fallacy, the difference, the big difference,
Senator, between OPA and ourselves is that Mr. Bowles—OPA, I will
say, predicate there the fairness of this 7X-percent reduction in our
normal margin by virtue of the fact that they claim that during from
here out the new cars in 1946 and 1947 will be in great demand, it
will be no effort to sell them, and people will just come in and take
them away from us, and that they will be turned out, in his testimony
he first said, at the rate of 4,000,000 a year by March 1, 1946, which is
just past; and then he said it would possibly go to 5,000,000.
Now, the fact is that at the present time, on the authority of those
in the manufacturing business and the steel business, who should
know, if they can produce 60 percent of what they produced in 1941,
which would be around two million and a half—a little better—that is
the most they can see, if there are no further interferences, if they can
get the supplies, the parts.
Senator T A F T . Are they running between four and five hundred
thousand a month now?
Mr. M A L L O N . The last month, of April, Senator—I will give you
that, sir, right away. I got the latest figure from the CPA.
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Where is that, Charlie?
A V O I C E . Eighty-nine thousand for the first 2 0 days of March.
Mr. M A L L O N . Right here, sir.
A V O I C E . Eighty-nine thousand.
Mr. M A L L O N . There are 8 9 , 9 0 0 passenger cars produced between
April 1 and 20. They estimate if there is no further interference that
the production might run to 1 3 2 , 0 0 0 in April. That would be at the
rate of one million and a half a year. Now, the cold-rolled-steel
manufacturers state that they have not the physical facilities to turn
out cold-rolled steel in quantities that would permit of manufacturing
more than two and a half million cars a year.
Senator T A F T . W^ould it not follow that if they did have the production then the profits from used cars would decrease, would they not?
I mean nobody will want used cars, as a practical matter.
Mr. M A L L O N . If the production in new cars could arrive at any
figure of four or five million a year, there would be a very rapidly
falling market on used cars; yes, sir. Now, the used cars today,
practically none of them is less than 8 years old, and the value is not
there, future value; so naturally as soon as any of them can be replaced
with better merchandise the bottom is going to fall out of the used-car
market. However, even with the two million and a half, three million
new-car production we dealers have the responsibility of putting as
many used cars back on the road in serviceable and safe condition as
possible, because the two or three million, Senator, is not going to
begin to meet the demand.
Senator T A F T . Of course, if cars are only increased 10 percent, then
your margin would increase 10 percent, and all you have to prove is an
increase of cost of 10 percent to justify having that percentage, as
I see it.
Mr. M A L L O N . Marginal increase 10 percent?
Senator T A F T . Well, your total money, I mean. The money you
will get from 24-percent margin on the new cars will be 10 percent
more than the money you got from the 24-percent margin on the old
cars.
Mr. M A L L O N . We get 24 percent of the 10 percent, Senator.
Senator T A F T . What?
Mr. M A L L O N . We only get 2 4 percent of that 10-percent increase.
Senator T A F T . Well, no; but I am suggesting that your increase in
receipts is 10 percent, from the same or similar car, and that if you
can justify a 10-percent increase in cost my general theory is you
ought to get the same percentage.
Mr. M A L L ox. Oh, I thought you meant our gross margin. You
mean the gross receipts.
Senator T A F T . I cannot conceive of any business that will not have
a 10-percent increase in cost; I do not know.
Senator M I T C H E L L . But the figures have not been presented in this
hearing as yet, have the}7?
Mr. M A L L O N . 1 beg your pardon.
Senator M I T C H E L L . Y O U would not say that you have presented the
figures justifying that in this hearing, would you?
Mr. M A L L O N . 25.91 was p r e s e n t e d at the House Small Business
Committee, and Mr. Bowles justified that.
Senator M I T C H E L L . But that was the last year. That is not the
future.
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Mr. M A L L O N . Well, they are going to go up, Senator, from here out.
Senator M I T C H E L L . We have no figures on that, do we?
Mr. M A L L O N . Well, we can make them up just like OPA does, if
you want estimates, but we don't like to do that too much; we want
facts.
Senator M I T C H E L L . Well, why can you not give us factual information?
Mr. M A L L O N . Well, we can give facts as we do try to give you
facts, Senator. The fact is, that I am telling you now, that according
to those who are supposed to know there cannot be more than two
and a half million cars made this year.
Senator M I T C H E L L . Yes; but you have
Mr. M A L L O N . There are only two and a half million.
Senator M I T C H E L L . You have the whole industrial picture to work
out of that.
Mr. M A L L O N . Well, if there are two and a half million cars, sir,
and there are 35,000 dealers, you are not going to have very many cars.
Senator M I T C H E L L . I know, but you said yourself that the used-car
market is going to fall off very precipitately as soon as they bring the
new cars into the market.
Mr. M A L L O N . N O ; I said the market is going to start to fall, but the
heavy production of new cars will move faster in the fall. But you
want to remember this, Senator: that under the present regulations
we dealers are obligated to allow you—when you come to me with a
used car, I am obligated to give you the as-is price or the going market
value.
Senator M I T C H E L L . Well, why can you not give the committee the
figures on that? And then we can ask OPA to comment on those
figures so we can project the meaning of this legislation.
Mr. M A L L O N . Well, we can project—we can build up figures of our
estimate for the 6 months that would be involved in the moratorium.
That we can get. I wired the factory on the 18th, the 19th. I was
supposed to be here on the 23d originally, and that is why I wired,
and there was not one factory that could give us an estimate of the
number of cars that they would turn out in 1946. I have all those
telegrams here if you would like to see them, sir.
Senator M I L L I K I N . Mr. Chairman.
Senator T A F T . In normal times you got them on a 5,000,000-car,
4,000,000-car basis, did you not?
Mr. M A L L O N . 4,000,000-car; yes, sir.
Senator T A F T . And it does not seem to me that it is OPA's function
to change the relationship in different industries. I do not think
they can go back now and say, "Well, you got too much in those days;
the dealer got too big a cut. Therefore we are going to change the
whole business." I agree fully with that.
Mr. M A L L O N . Y O U have expressed it much better than I did.
Senator T A F T . My theory is that we ought to see that whatever
increase in cost occurs, the fellows get it on a prewar basis. We are
not engaged in trying to change the margin basis in various industries^
Mr. M A L L O N . That is all we are asking for, Senator.
Senator M I L L I K I N . Mr. Chairman, I would like to ask the OPA
gentleman: What is your theory for not allowing the traditional trade
mark-ups?
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Mr. H O L D E R . I am very glad to answer that, Senator. We feel
that we are allowing more of a margin than dealers normally received.
We feel that way for this reason: that while, as Mr. Mallon states,
the customary discount to the automobile dealer has been 24 percent
of a list price, the evidence indicates that the dealer has customarily
given away to his customer just about half of that gross margin in
the form of over allowances, in the form of losses on his used-car
business. Those losses are not in the picture today. I think
Senator T A F T . Neither are the new cars. My suggestion is that
if you do get the new cars then you will not have the profits on the
old cars.
Mr. H O L D E R . That will be true over a period of time; yes, sir.
Senator T A F T . And if you do not get the new cars, you do not get
profits on the new cars, so one way or the other I should think itwould balance up.
Mr. H O L D E R . Might I give you just two figures on that, Senator,
to illustrate my point?
In October of 1941, using an average of the Ford, Plymouth, and
Chevrolet as the low-priced cars, the average dealer had, after his
used-car loss, a dollar gross margin of about $127. Under the present
price regulation, including the effect of the absorption, he has a dollar
gross margin of nearly $196. That is an increase of $68; roughly,
50 percent.
Under the proposed amendment, however, which would carry him
back to a 24-percent discount which he never kept himself, the dollar
margin which he would have on the low-priced car, on the average,
would be $281, or more than double the dollar margin that he actuallyhad left after his used-car business before the war.
Senator T A F T . He would only have less than half as many cars in
percentage, I take it.
Mr. H O L D E R . That is in the picture temporarily.
Senator C A P E H A R T . H O W do you arrive at this $ 1 9 6 ?
Mr. H O L D E R . I beg your pardon.
Senator C A P E H A R T . Y O U get a 24-percent discount on a thousanddollar car. That is $ 2 4 0 .
Mr. H O L D E R . That is right, sir.
Senator C A P E H A R T . N O W , where does this $ 1 9 6 come in?
Mr. H O L D E R . The $ 1 9 6 represents the difference between the two,,
roughly speaking, represents the effect of the 4% percentage points
reduction in dealer discounts which we put in.
Senator C A P E H A R T . SO you will give him $ 1 9 6 now?
Mr. H O L D E R . That is right, sir. I might
Senator C A P E H A R T . Y O U maintain that these dealers gave a portion
of their discount away?
Mr. H O L D E R . About half of it, Senator Capehart.
Senator C A P E H A R T . About half of it. And they gave it to the
consumer?
Mr. H O L D E R . That is right, sir.
Senator C A P E H A R T . Well, I thought you gentlemen were interested
in protecting the consumer.
M r . HOLDER. W e are.
Senator C A P E H A R T . N O W ,
if they gave half of it a\*ay, why don't
you permit them to give half of it away? Half of $ 2 4 0 is $ 1 2 0 , and
on 5 , 0 0 0 , 0 0 0 automobiles, that is how much money? That is a tremendous amount of money that you are denying the consumer.
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Senator M I T C H E L L . Shall we put that amendment in the bill?
Senator C A P E H A R T . N O ; I am using his own figure.
I mean, on one hand you are there to protect the consumer. Now
you say that these dealers do not know how to run their business,
that they have been giving half their profits away. Now, if they
have been giving it away, they have been giving it to the consumer.
Now, let us let them continue to do it.
Mr. H O L D E R . Senator, if it worked out that way, if we were satisfied
that dealers would continue under today's conditions to overallow on
used cars, I think your proposition would stand correct. But if we
assume, on the other hand, that in today's market dealers will not
allow for a car
Senator C A P E H A R T . In other words, you think they gave half of it
away in the past but they won't do it from now on?
Mr. H O L D E R . Not for some time to come, sir.
Senator C A P E H A R T . Why don't you breakfast with every one of
them every morning and run their stores and wives and tell them
what to do and when to do it?
Senator M I L L I K I N . IS that a reasonably complete statement of
OPA's position that you have just made?
Mr. H O L D E R . I believe so, Senator.
Senator M I L L I K I N . Mr. Mallon, what do you have to say about
that?
Mr. M A L L O N . Senator, we always recognized OPA was established
for a certain purpose during the war. We did not know it was
established to reform the customs and habits of the business. We
dealers feel that over the period of years we have been a great asset
to the country. We have made it possible for thousands and hundreds
of thousands to enjoy the privilege of having a car. We have traded,
lots of times long. The competition brings that about, Senator.
That is what I mentioned there; competition always brings that about.
For OPA to say that they are going to reform the dealers now is
just a myth, because I have been in this business 32 years, and the
representative dealers in this business have been trying for 32 years to
find out how they could prevent used-car losses and overallowances.
The factories have tried it, and there is nobody who has ever found the
answer, and I am absolutely certain OPA cannot find the answer.
The minute the dealers have new cars in any numbers at all, trading
will take place.
Secondly, I would like to point this out. Mr. Bowles testified that
the dealers would be free, white, and independent and buy cars for
any value they wanted to put on them. That is not so. According
to the regulations we are prohibited from buying cars at what we
might consider a reasonable value. We have to allow what the as is
or the going market value is of that date we make the deal. The
car goes into our shop. It may take 60 days before we can recondition it and have it ready for resale. In the 60-day period that market
is going down, and we have no way of recovering the loss that is going
to take place just from the drop in the market. So we contend that
OPA's theory that there are going to be no used car losses just does
not make sense in our business; it is not possible.
Further than that, they also state that we are not going to lose so
much money on used cars, and what we save on that will pay for our
cost of using the cars—used-car department. They figured out
85721—46—vol. 2 10
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that we are going to handle a great many less used cars, so therefore
we cannot lose the money we did before, and it is not going to cost us
as much to run the department.
We have an established place of business, and the second floor of
our business is for a used-car department. There it is. We cannot
take that and throw it out. That is our overhead. That is still there,
and we have to pay for it some way. So that this theory that they
predicate this whole cost absorption in our industry on is fundamentally
unsound from the experience of this business of over 30 years.
Senator M I L L I K I N . WThy do you gentlemen run counter to the practice and the opinion of an industry of this kind?
To put it another way, you have said that you are trying to change
the customs of their business. Under what theory do you try to change
the customs of their business?
Mr. H O L D E R . Well, Senator, I would answer that in this way: we
feel that we are required by court decision and by Executive order to
keep factory increases from reaching the consumer level if we possibly
can. That means, then, that your decision
Senator M I L L I K I N . Well, let me—I don't want to interrupt you.
M r . H O L D E R . Y e s , sir.
Senator M I L L I K I N . But what is the basic
Mr. H O L D E R . The basic authority on the
authority for that theory?
court side, sir, is a decision
in the case of Bowles v. The Philadelphia Coke Co. The Executive
order I think is 9599, which requires us to do the same thing.
We think also, Senator, that it is only fair that manufacturers who
are required to absorb cost increases, insofar as they can, that distributors should not be given exemption from that policy but should
be accorded the same even-handed action.
Senator M I L L I K I N . Does it often happen that the distributor is
compelled to absorb the increased cost of some prior level of the
business?
Mr. H O L D E R . I am sorry, but did you say it does not?
Senator M I L L I K I N . I say, does it not often happen that the distributor, by that system, is compelled to absorb the increase in cost
of some prior level of that industry?
M R . H O L D E R . It does, Senator, but only IF the facts indicate that
he can do so.
Senator M I L L I K I N . W7ell, under what theory is that justified?
Mr. H O L D E R . I think for this reason, Senator: Certainly it is
pretty
Senator M I L L I K I N . Considering also that the distributor has no
responsibility and no discretion in regulating the cost of that earlier
level of the same industry.
Mr. H O L D E R . Frequently manufacturers would say the same thing,
of course. It seems to us in administering the stabilization program
pretty important to keep cost increases from bumping prices all the
way along the line, because in the process they become pyramided:
The increase at the end is generally greater than the increase at the
beginning.
It seems to us also that during this wartime emergency if one segment of the industry—distributors, for example, or manufacturers—
can absorb cost increases of any type without hardship, that it is only
fair then to ask him to do so in the interests of the whole stabilization
program.
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Senator M I L L I K I N . But doesn't it come down to this: That you
keep complete elasticity to yourselves in increasing costs in the first
steps of an industry, on the theory that you will take that out of the
hide of somebody later along the line?
Mr. H O L D E R . NO, sir. The increases at the manufacturing level
are made only after pretty careful examination of the picture there
and only where we find that the manufacturing industry cannot
absorb its own cost increases without bringing its earnings below
peacetime levels. Only after that do we raise the price at the manufacturing level; and only then, of course, do we have the question
what to do about the distributor's price.
Senator M I L L I K I N . And at that point, when you have gone through
that and have determined that the manufacturer has increased cost,
which must precede—at that point you decide that the distributor
must absorb this cost?
Mr. H O L D E R . NO, sir. You look at the distributor's position.
Senator M I L L I K I N . Isn't that what it comes to?
Mr. H O L D E R . Y O U look at the distributor's position to see if he
can absorb. If lie cannot absorb, the manufacturer's increase would
be passed on through to the consumer.
Senator M I L L I K I N . Well, then, that becomes a relative problem:
instead of cutting his throat with one fell swoop, you make a light
gash today and another gash tomorrow, and ultimately, unless he is
a very tough guy, he is going to bleed to death; isn't that it?
Mr. H O L D E R . I would say rather it becomes a question of fact. It
is the only way to make such a decision.
Senator M I L L I K I N . But it is a part of your established policy, in
degree at least, to take the increased costs of one segment of an
industry and make another segment of the industry bear those costs?
Mr. H O L D E R . If the second segment can do it without impairing its
e arning c ap acity
Senator M I L L I K I N . That is right.
Mr. H O L D E R . A S measured by peacetime standards; yes, sir.
Senator M I L L I K I N . And that, of course, has no normal place in our
economy, has it?
Mr. H O L D E R . I think it happens very frequently in our economy in
normal times, Senator. It would be a rare situation, I think, where a
manufacturer's price were increased or decreased every time that some
one of his costs changed. Frequently prices move on the finished
product with much greater degree of slowness than costs of making
that product vary.
Senator M I L L I K I N . Yes, but there is no rule except competition
that will cause the distributor to absorb. He raises, and then the
question is whether the market will absorb his product. If it doesn't,
he lowers. And when you lower, the other fellow has to lower if he
wants to sell his stuff; isn't that it?
M r . MALLON.
Y e s , sir.
Senator M I L L I K I N . In normal times?
Mr. M A L L O N . That is it.
Senator M I T C H E L L . Isn't that the whole point here, that you do not
have competition to accomplish that at the present time? The decision there, the working of that, is based, isn't it, on the Emergency
Court of Appeals decision of March 1943?
Mr. H O L D E R . I think that is right, sir.
extend price c o n t r o l and stabilization acts
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19 42 1296
Senator MITCHELL. And* that says:
When such increases in producer prices are permitted it is the duty of the
Administrator so far as possible to require them to be absorbed at some appropriate intermediate stage in the process of production or distribution at which
there may be an existing margin of profit reasonably sufficient to absorb them.
Now, is that binding on the OPA?
Mr. HOLDER. I think it is, sir. And I might say also that our
standards of cost absorption, both at the manufacturing and at the
distributor level, have been fully explained to both the House and
Senate Banking Committees in the past several years.
Senator MILLIKIN. Well, there are a good many of us not satisfied
with that explanation.
Senator CAPEHART. Mr. Chairman, this court decision was not on a
lawr passed by Congress, but rather on the Executive order issued by
the President, and of course he could have been wrong in the Executive
order. The court could be right in its interpretation.
Mr. HOLDER. The chicken came before
Senator CAPEHART. And they may be right in their contention,
and the Executive order could have been wrong in principle and in
practice.
Mr. HOLDER. The chicken came before the egg in that case,
Senator. The court's decision preceded by about 2 years the President's order.
Senator CAPEHART. What is the court's decision based upon?
It had to be based upon some law or Executive order, and there was
certainly nothing in OPA law, was there? The court's decision had to
be base on some law or some Executive order, and you say that the
egg came before the chicken in what respect?
Mr. HOLDER. Senator, the court's decision, I preume, was based
on their reading of Congress' intent in passing the Emergency Price
Control Act.
Senator MILLIKIN. The court did not pass on policy; the court
passed on whether something was lawful.
Mr. HOLDER. That is right.
Senator MILLIKIN. At least as far as I am concerned I have been
talking about the question of policy. I am just wondering whether
it is sound policy to do these things.
Mr. HOLDER. It has seemed to us to be so, Senator, as a means of
keeping retail prices at as stable levels as we can, without causing
hardship.
Senator TAYLOR. Any other questions of the witness?
Mr. MALLON. Might I make one statement, sir?
Senator TAYLOR. Yes.
Mr. MALLON. I would like to make this statement: That the
theory that Mr. Holder has just expanded upon and the decision
arrived at by applying that theory was based on a new-car production
of 4,000,000 cars in a year, which we know we cannot get. It was
based on the proposition that there would be no used car loss. We
thoroughly differ with that—completely differ with that contention,
and we also claim that the small number of 300 reports of selected
dealers, by OPA district offices, is not a proper sampling of the trade
upon which to base such a vital decision.
Thank you, sir.
Senator TAYLOR. NOW I believe Mrs. Relis wishes to be heard.
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STATEMENT OF MRS. MATTHEW J. RELIS, CONGRESS OF
WOMEN'S AUXILIARIES, UNITED PUBLIC WORKERS, CIO
Mrs. REUS. Mr. Chairman and members of the committee, I am
Mrs. Matthew J. Relis, of the CIO Women's Auxiliary, and also
represent various consumers' organizations. I and my baby as well
as other women and children have been here today in delegations to
see our various Senators; and as housewives who are the largest consumer group in the United States we wish to urge extension of the
OPA without any crippling amendments, and to submit herewith our
point of view for inclusion in the Congressional Record.
Senator T A Y L O R . The statement may be made a part of the record.
(The statement referred to is as follows:)
C O N G R E S S OF W O M E N ' S A U X I L I A R I E S ,
UNITED PUBLIC WORKERS, C I O ,
Washington, D. C., May 2, 1946.
To
Hon.
ROBERT
WAGNER,
Chairman, Senate Bombing and Currency Committee,
Washington, D. C.
STATEMENT
ON T H E E X T E N S I O N
OF P R I C E
CONTROL
The representatives of the Women's Auxiliary of the United Public Workers,
CIO, comprising 10,000 Federal workers and their families, employed in the District of Columbia and having legal residences in the States, submit for inclusion
in the Congressional Record, the following statement, having today visited their
respective Senators urging support for the extension of the Price Control Act.
The Price Control Act must be continued and extended. Run-away inflation
must be avoided. Prices have been going up for a long time, but without price
control the Nation would face a worse catastrophe than occurred after World
War I. We know that after World War I, with no proper controls, such items as
sugar went up to 28>2 cents a pound, ceiling now is 7 cents a pound; eggs soared to
92 cents a dozen, ceiling now 50 cents. Children's clothing as well as adults'
wearing apparel would be prohibitively priced if the Price Control Act is not
continued and extended. The end result of this inflation would be a far worse
depression than the country has ever experienced. The economy of the entire
country would be shattered, hurting farmers, laborers, and businessmen alike,
all of whom are consumers.
Workers have in many instances won increased wages, but if such inflation
occurs this hard-earned gain will be more than wiped out.
The majority of the American people want price control. We urge that the
Congress of the United States respond to the will of the people and save the country
from disaster.
Respectfully submitted.
M r s . FRANCES JACOBSEN,
Chairman, Women's Auxiliaries, UPWA, CIO.
Senator CAPEHART. Ten o'clock tomorrow?
Senator T A Y L O R . The committee will recess until 10 o'clock
tomorrow morning, at which time we shall take up with the other
witnesses we have not been able to hear today.
(Whereupon, at 5:30 p. m., an adjournment was taken until tomorrow, Friday, May 3, 1946, at 10 a. m.)
(The following was later submitted for the record:)
GROCERY
Hon.
ROBERT
F.
WAGNER,
MANUFACTURERS
OF A M E R I C A ,
INC.,
New York 17, N. Y., May 1, 1946.
Chairman, Banking and Currency Committee, United States Senate,
Washington, D. C.
D E A R S E N A T O R W A G N E R : Thank you for your letter of April 2 9 , inviting this
association to present its written plea for amendment of the Emergency Price
Control Act, as it relates to absorption of freight-rate increases by industry.
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Your attention is directed to petition before the ICC by the railroads for
authority to increase freight rates and charges by 25 percent, with some exceptions.
At the outset, let me say that this association feels the railroads are entitled
to any general freight-rate increase which they can justify as related to the
general wage increase authorized effective January 1 by two railway labor boards.
We also feel that industry generally should be permitted the right of automatic
price increases where general wage increases of the industry have imposed an
undue burden upon the product.
Our present concern is the possibility of having to absorb not only our own
increases in labor, raw material, and other costs but those imposed upon the railroads in the event the ICC authorizes a general freight-rate increase to give relief
to that particular industry, in which case our members would carry a double
burden.
I should like to direct attention of the Senate Banking and Currency Committee to the Emergency Price Control Act of 1942, of which section 1499.2 (2)
(ii) (b) of GMPR provides, among other things, as follows:
" N o seller shall require any purchaser, and no purchaser shall be permitted,
to pay a larger proportion of transportation costs incurred in the delivery or
supply of any commodity or service than the seller required purchasers of the
same class to pay during March 1942 on deliveries or supplies of the same or
similar types of commodities or services."
In the case of certain commodities, GMPR has been superseded by later regulations; but, to the best of our knowledge, it is generally true in the grocery field
that this same rule still applies. The effect of it would be to force a manufacturer who has been selling on a delivered price basis to absorb any increased
freight unless he could get specific relief by an appeal to OPA.
In the distribution field, there are other regulations which would operate in
the same way, namely, section 4, MPR 421, pertaining to wholesale prices; and
sections 4, 5, and 6 of MPR 422-3, pertaining to retail prices.
The general principle of these regulations is that once a ceiling price has been
fixed it cannot b j increased by reason of increased labor costs, increased freight
costs, or increases in other costs without specific approval from OPA. The net
of the foregoing is that any increase in freight rates cannot be passed along unless
either Congress or OPA permits corresponding increases in the price ceilings at
manufacturer, wholesaler, and retail levels.
We, therefore, urge your committee to give a mandate to the Office of Price
Administration and/or Office of Economic Stabilization through an amendment
to the Emergency Price Control Act of 1942, to the effect that where a general
freight-rate increase is approved by the Interstate Commerce Commission it maj^
be concurrently reflected in the selling price of the manufacturer to a wholesaler
or retailer and that such wholesaler or retailer may in turn reflect such increased
prices at that level.
Without such a mandate from Congress, OPA is likely to continue its demands
that industry justify the need for price increases because of a general freight-rate
increase, product by product, as they have in the past, and there is a very strong
likelihood that industry will be engaged in these persuasive tactics for a long
period of time, during which they would be called upon to absorb not only their
own general wage increases but those imposed upon the railroads, which result
in the authorization of general freight-rate increases, as well.
In closing, I might add that the ICC has approved a number of general freightrate increases in favor of the motor-carrier industry, ranging from 4 to 20 percent,
in different sections of the country, all of which have had to be absorbed by
industry to date.
Sincerely yours,
P A U L S . W I L L I S , President.
ALLBORO R E T A I L F R U I T ASSOCIATION,
INC.,
New York 7, N. Y., May 2, 1946.
H o n . ROBERT F.
WAGNER.,
United States Senator,
Chairman, Committee on Banking and Currency,
Washington, D. C.
D E A R S E N A T O R W A G N E R : This is to acknowledge receipt of your letter of the
29th: contents noted.
It is very unfortunate that the committee's schedule has been so heavy that it
does not allow enough time for our organization to appear and express the views
of the small businessmen in the city of Greater New York. It is my opinion that
1299 e x t e n d p r i c e c o n t r o l a n d s t a b i l i z a t i o n a c t s o f 194 2
the small businessmen are the backbone of our Nation and that they have suffered
more than everybody else during this trying period, whereby black-market
operations have been greater than in any other industry. Their merchandise
is perishable; their rent is high; and the wages, the highest that the industry has
ever known. Labor is entitled to every penny they can earn. However, the
small business people must be permitted" to earn a livelihood.
I do not say that the OPA is harmful. I earnestly believe that it is the best
thing for the small businessmen, provided a program is made more liberal and a
conscientious effort be made to drive the black-marketeer away from the business
at its source.
Prior to the OPA, the fruitmen were allowed a 40-percent mark-up. This
would suffice at the present time if the OPA would permit it. The small businessmen are only asking the OPA to take into consideration that when the crop is
bad the prices must rise, and when holiday seasons .arrive, prices likewise rise.
This has happened since time immemorial.
We are all against inflation; however, some control must be exercised, but I
do not want the small businessman to be the guinea pig for the black-marketeers.
I hope that this message is conveyed to your committee, for which I am enclosing herewith 20 copies, pursuant to your request, and that this letter be
entered as part of the Congressional Record with the same force and effect as if
it were stated personally before your committee.
Respectfully submitted,
By
ALLBORO R E T A I L F R U I T ASSOCIATION,
EDWARD A . HAUSMAN,
Executive Secretary.
INC.,
1946 EXTENSION OF THE EMERGENCY PRICE CONTROL
AND STABILIZATION ACTS OF 1942, AS AMENDED
FRIDAY, M A Y 3, 1 9 4 6
UNITED STATES SENATE,
C O M M I T T E E ON B A N K I N G AND C U R R E N C Y ,
Washington, D. C.
The committee met at 10 a. m., pursuant to adjournment on yesterday, in room 301, Senate Office Building, Senator Robert F. Wagner
(chairman) presiding.
Present: Senators Wagner (chairman), Barkley, Bankhead, Taylor,
Mitchell, Carville, Millikin, and Capehart.
The CHAIRMAN. The committee will come to order.
Senator M I T C H E L L . Mr. Chairman, I would like to file as a committee exhibit, a petition circulated by the Joint Committee of
Organized Auxiliaries in Seattle, Wash., on a week ago Friday. Apparently it was circulated one day and signed by 5,000 people in
Seattle, urging the continuation of a strong OPA price-control bill.
I would like to ask to have printed in the record the letter to Senator
Magnuson which transmitted this petition, along with a telegram
sent to me.
The CHAIRMAN. That may be placed in the record.
(The letter and telegram are as follows:)
JOINT
COMMITTEE
OF O R G A N I Z E D
AUXILIARIES,
Seattle, Wash., April 27, 1946.
Senator W A R R E N G . M A G N U S O N ,
Senate Office Building, Washington, D. C.
D E A R S E N A T O R M A G N U S O N : Enclosed you will find petitions bearing more
than 5,000 signatures in support of continued price control with no deviation from
effective policies, and urging maintenance of price and rent ceilings without
crippling amendments or nullifying revisions.
These petitions are the result of last Friday's petitioning campaign in downtown Seattle by members of the Joint Committee of Organized Auxiliaries representing auxiliaries of 12 AFL, CIO, railway brotherhood, and independent
unions, as well as many nonlabor organizations.
The 5,000 signatures sent to you bring to nearly 20,000 the number of signatures
obtained by our committee since the first of the year in support of continued,
effective price control, and prompt action for price control by Congress.
We think you will be interested in knowing that our petitioning campaign
received overwhelming support from the people in Seattle. Men and women, old
and young, in work clothes and in fine dress, from plants and office buildings,
lined up (and we mean that literally, for people stood in lines to get up to our
five booths) to go on record for price control continuation.
Many went further than just signing our petition. They took post cards back to
their offices, shops, and neighborhoods. They asked for petition blanks to circulate where they work and live. Many men, including veterans as well as businessmen, and members of our unions, joined us, some for just a few minutes, some for
hours, to pass out literature and urge people to sign our petitions. Girls from
office buildings near our booth on Third and Union came down during their
lunch hours to help us.
1301
1302
extend
price c o n t r o l and stabilization acts of
194 2
We are telling you these details because we think you should, in view of some of
the statements you have made about "amending OPA", realize how generally
widespread is public support to continued, effective, price control. And we think
you should know that people are alarmed over the action of the House in crippling
OPA with amendments which, as E. M. Weston, president of the State federation
of labor, said so graphically, "Cut the very heart of our price control."
It's not that OPA is perfect. It's simply that we have seen just what can
happen when "amending" starts. We're not the kind of people in this country,
you know, who are so foolish as to believe in "throwing out the baby with the
bath water," so we're asking that OPA be given an opportunity to hold price lines
and we're confident that the organization, so well administered so far, will be able
to adjust its policies to changing conditions.
So, in the interests of the people of your district—and the whole United
States—we petition you to vote for continued price control, effectively administered by OPA and not hamstrung by amendments.
Likewise, we urge you to work with other members of the Senate toward this
end, so that when the vote is cast an overwhelming majority will support the safeguarding of the country's interest through the maintenance of controls that protect us from disastrous inflation.
With our thanks and respects.
Sincerely,
JOINT C O M M I T T E E OF O R G A N I Z E D
Mrs. E D I T H C O L E Y , Chairman.
AUXILIARIES,
Carbon copy to Senator Hugh B. Mitchell.
Senator H U G H B . M I T C H E L L ,
Senate Office Building, Washington, D. C.:
Last Friday 5,000 Seattle men and women signed petitions for continued
price control unimpaired by crippling amendments. Signature sent to Senator
Magnuson as proof that his constituents want him to join you in your valiant
fight to save effective price control. Community appreciate fully your fine work.
Stand firmly behind you. Regards.
J O I N T C O M M I T T E E OF O R G A N I Z E D
M r s . EDITH B . COLEY.
AUXILIARIES,
The C H A I R M A N . After a conference with the members of the committee—because I never do anything without their agreement—we
have decided we must finish today, and we have decided to give only
10 minutes to a witness. We are going to insist upon that rule.
STATEMENT OF ROBERT A. SEIDEL, DIRECTOR, NATIONAL
RETAIL DRY GOODS ASSOCIATION, WASHINGTON, D. C.
Mr. S E I D E L . Senator, I came down here last week. I sat here for
2 days last week waiting to testify. I sat here all day yesterday
waiting to testify. I represent the National Retail Dry Goods Association and I cannot make an adequate presentation of this problem
in 10 minutes, or in 20 minutes.
The C H A I R M A N . Well, if I start with you to increase your time,
then the others are entitled to it, too. There comes a time when we
have got to limit our time here. You can put into the record and
the Senators, when we are discussing this legislation, will read all of
the testimony. You can be sure of that.
Mr. S E I D E L . I don't have a prepared statement to put in the record.
I would like to demonstrate the way price control is affecting the
retail industry.
Senator C A P E H A R T . Are these your exhibits here?
M r . SEIDEL.
The
Yes.
CHAIRMAN.
How long will it take you?
1303 e x t e n d p r i c e c o n t r o l
and stabilization
acts of
194 2
Mr. S E I D E L . I am not sure. I don't know, sir. It depends on how
many questions the people on the committee ask me. In the House
it took 4 hours. I don't know how long it will take here.
The C H A I R M A N . We cannot possibly take 4 hours here, or anywhere
near that length of time.
Senator C A P E H A R T . Mr. Chairman, why don't we start in and see
how interesting it is? Maybe we will be so interested we will want
to give him 4 hours.
The C H A I R M A N . Well, my difficulty is that I want to stand by the
committee which wants to finish today. There are a large number
of witnesses still to be heard.
Senator C A P E H A R T . Maybe there is a number of those witnesses
that won't want as much time. I don't know.
The C H A I R M A N . Well, I am going to limit you, Mr. Seidel. You
may proceed, but if you talk too long, I will have to stop you. I
know you are aggrieved, and all that sort of thing, but what about
us? We are supposed to finish this. I know you are trying to say
something mean.
M r . SEIDEL. N o t a t a l l , s i r .
The C H A I R M A N . All right. Proceed.
Mr. SEIDEL. My name is Robert A.
Seidel. I am vice president
and comptroller of the W. T. Grant Co., and I represent the National Retail Dry Goods Association, composed of 7,000 department
stores throughout the country.
We in the retail business are not happy with the job we are doing.
We are fed up with overpriced substitute, inferior wartime goods, with
having to apologize to customers who find it increasingly difficult to
understand the continued deterioration of quality and the extreme
shortages of most essential items. We urge that Congress restrict
the activities of OPA and require immediate removal of all controls
that retard production, that force quality deterioration, that force
items out of production, that eucourage subterfuges, that raise the
cost of living, that prevent us from supplying the goods that our
customers need.
It is obvious to retailers that OPA's unfair, outmoded, unrealistic,
and dilatory approach to pricing problems is an impediment to
production.
Practically every important regulation that has been issued has
worked in reverse, and the end result has been forced price increases
and cheapening the quality as well as disappearance of goods.
Consumers have been severely penalized because they are compelled
to purchase inferior, overpriced, substitutes, in price ranges very much
higher than those in which they would normally buy.
Manufacturers of far too many important lines have been compelled
to discontinue production of prewar commodities that they were
skilled in making in great volume, and to shift to lines in which they
are not experienced. They have been forced to develop wholly unnecessary new products as a subterfuge to obtain price relief, whereas
in most cases the new products are not equal to the old products in
either quality or utility.
Senator M I T C H E L L . H O W do you know they have been forced?
Mr. S E I D E L . They are changing to other items of inferior quality
and higher price, but not producing the things which the consumer
would like to buy.
1304
extend price control and stabilization acts of
194 2
Senator M I T C H E L L . That is what they have told you?
Mr. S E I D E L . What who has told me?
Senator M I T C H E L L . Well, I presume the manufacturers, since you
are in the retail business.
Mr. S E I D E L . That is right, but of course, all OPA orders are published in the Federal Register. They are obvious to anybody. You
can see what they are doing. It is not a question of telling us.
Senator M I T C H E L L . Y O U have the ability to reach a conclusion on
a manufacturer's problem?
Mr. SEIDEL. Yes, sir. We think it is perfectly clear that the pricecontrol policies as they are presently administered are doing much
more harm than good.
The OPA has throttled industrial activity throughout the country.
It is clear that the stupidity and incompetency of that particular
agency is costing our consumers billions of collars.
There is nothing mysterious about the continuing shortages. They
are clearly the result of inadequate and unreasonable pricing orders.
In order to demonstrate clearly and conclusively the extent to which
these unworkable and unrealistic price regulations affect supplies, I
would like to give you some sales and inventory data on some essential consumer lines.
Although the war has been over for 8 months, the current shortage
and the shortage that has obtained during the months since the war
ended, are more acute than at any time during the war. I want to
quote from our own company's figures.
We have 490 stores throughout the country and I would like to
quote from some of our figures to show just what our dollar stocks are"
as of January 1 this year, as compared with other years.
In domestics—that includes sheets and other bedding, toweling,
and so forth—in January 1942 we had an inventory of $1,498,000.
In January 1943 it was $1,242,000. In January 1944 it was $781,000.
January 1945 it was $509,000, and in January of this year it was
$283,000. Our stock as of January this year is 18 percent of what it
was in January 1942, and it is 55 percent of what it was a year ago
while we were at war.
In hosiery, in January 1942 it was $3,178,000. It went down
steadily and by January of this year it was $644,000; 20 percent of
what it was in January 1942, and 38 percent of what it was in January
1945.
Underwear, it went from $1,973,000 in January 1942 to $441,000
in January 1946. Our stock is 7 percent of normal as of January
this year and 43 percent of what it was a year before.
Curtains and curtain materials, from $2,146,000, it went down to
$750,000; 35 percent of what it is normally and 88 percent of last
year.
Yard goods, $2,023,000 in 1942 and down to $275,000 in 1946. The
stock is 13 percent of normal and 42 percent of last year.
Lingerie, $1,927,000 in 1942, down to $724,000 in January of this
year; 37 percent of 1942, and 48 percent of 1945.
Yourfirstreaction will be, of course, yes, stocks are low, because your
sales are good, but that is not true. For example, our stock of men's
shirts in 500 stores, and this includes all types of shirts, amounted to
only $22,000 in January of this year. It is normally $600,000.
Senator B A N K H E A D . $22,000 against $600,000?
1305 e x t e n d p r i c e c o n t r o l a n d s t a b i l i z a t i o n a c t s o f
194 2
Mr. S E I D E L . Yes, sir. Our sales of shirts during last fall were not
over 25 percent of any peacetime year and the sales were much lower
than they were during any of the wartime years. Sales of staple
cotton yard goods last fall declined 57 percent from the fall of 1944.
At the same time, sales of novelty materials, almost entirely inferior
overpriced wartime substitutes, increased 200 percent. Our sales of
drapery materials declined 80 percent, but the sales of ready-made
draperies increased 170 percent.
I am talking about the fall of last year. Sales of sheets and pillow
cases decreased 46 percent of last fall, and bedspreads and bedding
decreased 60 percent. Women's slips were off 15 percent. Women*s
nightgowns were down 56 percent.
Senator B A N K H E A D . H O W many stores did you say you have?
Mr. SEIDEL. 490. That is our company, W7. T. Grant Co.
Senator C A P E H A R T . W ould you say all other stores are comparable
to that?
Mr. S E I D E L . I would say that stores that are in our price range,
Senator Capehart, are. We are a low-priced store, and I would think
that stores dealing in lines similar to ours would have a similar experience.
Last fall the sales of men's lightweight underwear were under half of
any peacetime year, and our January stocks are one-fifteenth of
normal. All of these decreases occurred in our first peacetime fall as
compared with our last wartime fall period.
During that same period total over-all retail sales and profits reached
a new high, primarily because of extremely heavy sales of high-priced
novelties, gifts, and less essential apparel. Novelty jewelry increased
80 percent. Luggage was up 92 percent. Handbags were up 60
percent. Fountain pens were up several hundred percent. Novelty
aprons were up 67 percent; women's coats, 47 percent; small leather
goods, 60 percent; gloves, 50 percent; art goods, 65 percent; and
novelties in the millinery line were up 170 precent.
Now, all of these facts give you some idea
Senator B A N K H E A D . W7hat period did that cover?
Mr. SEIDEL. Last fall, sir, from the 1st of August last year through
January 1 of this year. That is the fall season. The fiscal j^ear for
our company ends January 31.
Now, these things give you some idea of why we cannot help but
believe that the administration of price control is becoming more
and more a mess.
Mr. Bowles keeps talking glibly of over-all retail sales and profits,
and he is inclined to tell anybody that does not agree 100 percent
with his arbitrary, narrow viewpoint, that they are advocating runaway inflation. Retailers are most unhappy with the present situation not at all because of its effect on over-all sales and profits, but
rather because we are unable to supply our customers' needs, and
the situation is becoming more acute every day.
If the only concern of retailing was high profits, we would probably as a body stanchly support making OPA a permanent institution, because our profits jump by leaps and bounds in times of
scarcity, and practically all consumer lines will continue to be scarce
as long as industry continues to be hog-tied by government
In fact, I think there is nothing quite so inflationary as too much
government.
1306
extend price c o n t r o l and stabilization acts of
194 2
Of course, cur profits are up. They are bound to be, but it is a
little irritating to have Mr. Porter announce as he did 2 weeks ago:
F Established manufacturers are really going to town under the reconversion
formula. We are going to have goods flowing out of our ears within a very short
time.
Retailers generally are fed up with OPA's high pressure, with their
misleading propaganda, and with their phony comparisons and predictions. Every housewife knows whether or not this line has been
held. Consumers spent $83,000,000,000 last year, 84 percent more
than they did prewar for approximately the same amount of goods.
It must be kept in mind that these price indices do not reflect quality
deterioration, nor do they reflect production or availability of goods
on the black markets that are becoming more and more prevalent
and now are really getting out of hand, or the cost of subsidies. These
indicies just don't tell the true story, and I would like to indicate
with these few examples exactly what the real figure has been on
staple items.
I would like to start wi. ?i men's si i. Is. In March 1942 t: e typical
white shirt w^as made of combed mercerized broadcloth with a thread
count of 144 by 76 per inch, and cost $12.80 per dozen. The lowest
cost price that we have been able to find recently was a shipment
made in November 1945. I can find no record of any shipment by
anybody of that quality of shirt, but these were the nearest thing to
it and the price charged was $21 per dozen. The cloth in that shipment. was identical with the cloth used in March 1942, but in many
other respects the shirt didn't measure up to the March 1942 shirt.
First, the tail was shorter and the yardage per dozen is about
1 y2 yards less. Second, the collar is inferior. It is made with poorer
lining materials that are not uniform.
Manufacturers have to use practically anything they can get their
hands on as collar linings. The collars are soft, whereas in 1942 they
were fused. The buttons are made of plastic. They formerly were
of ocean pearl. The laundering is not nearly as satisfactory as it
was formerly and there is no comparison in the packaging.
Now, the actual increase in dollar price for that shirt was 64 percent,
but the deterioration in the quality of the shirt is at least 15 percent.
If you couple the two you have a real increase in the price of that shirt
of 93 percent.
Boys' shirts, a staple boy's shirt of sanforized printed percale, 80
square print to an inch, in March 1942 cost $7.75 a dozen. In January
1946 the cost of a shirt made of 68-by-64 cloth, a cheaper cloth, is
$11.75 per dozen. We had to use that for comparison because there
are no 80 square shirts available.
The cost price of the 68-by-64 cotton print as of today is 16.1
percent more than the cost of the 80 square print, and in addition
the buttons, the laundering, and the packaging are also deteriorated.
Now, the actual increase in the price of that boy's shirt is 52 percent
and the deterioration in quality is 20 percent. Couple the two and
we have a real increase of 90 percent.
A woman's housedress, a cotton housedress, in March 1942, made
of 68-by-72 percale, cost $12 a dozen. In January 1946 the cost of
this housedress is $24 a dozen. The 1946 dress has only a 1-inch hem,
one pocket, and a single collar and belt. The 1942 dress had a 2-inch
1307 e x t e n d p r i c e c o n t r o l
and stabilization
acts of
194 2
hem, two pockets, and double-faced collar and belt. The 1946 dress
is utility styled, and the 1942 dress was fashion styled.
The actual increase in price is 98 percent. The estimated deterioration in quality is 20 percent, and coupling the two, the net increase
is 147 percent for women's cotton dresses.
Girls' dresses, an 80 square print dress in March 1942, was $10 a
dozen, and in January 1946, of 68-by-72 percale, the dress is $15.75.
The 1946 dress contained 2 yards of material less. The hems have
been cut from 3 inches down to 2 inches'. There is no cuff on the
sleeve, no double-faced collar or belt, and only one pocket instead of
two. In addition, the fabric used is cheaper. The increase in cost is
58 percent and the deterioration in quality is 25 percent. The net
increase is 111 percent.
I might give you a further indication of the amount of real price
increases. In 1940 our sales were approximately $112,000,000 and
that year we paid a freight bill of $2,495,000. Last year our sales
totaled $180,000,000, which was 62 percent more than the sales during
1940, and our freight bill was $2,747,000, which was about equal to
that of 1940, notwithstanding the fact that mo tor-trucking rates are
10 percent higher than in 1940, express shipments contain a 10percent shipment additional charge, and we now have to pay a
Federal tax of 3 percent on all transportation charges.
We formerly shipped some things by water. We now ship nothing
by water. The net result of all this is that these figures show our
company is obtaining 62 percent greater dollar volume on a much
smaller amount of physical goods than we handled in 1940.
Everybody knows that labor costs and material costs have increased
sharply, and under the circumstances price increases to consumers are
inevitable. However, I do believe it is high time that the consumers
generally be acquainted with the fact that OPA has not held the line.
Certainly there is nothing inflationary or extortionate about a fair
price. OPA implies that their present pricing policies permit manufacturers a price sufficient to defray current costs and yield prewar
profits, but all industry knows that that is not the case.
The pricing formulas are industry averages and they make only
partial allowances for current labor and materials costs and administrative expenses.
The strict application of these policies has been and is currently a
major impediment to the production of goods. Old-line manufacturers have been forced to change their line and at the same time,
under the "in line" pricing theory—and that is a misnomer; all "in
line"prices seem to be out of line—countless thousands of newcomers
have been permitted to enter into the manufacturing field and produce
commodities at prices considerably higher than would be necessary
to enable old-line manufacturers to remain in their regular businesses.
This situation is, of course, completely ridiculous. It is widespread
and it is inexcusable. I would like first to show it with the lawn
mowers. The center of the lawn-mower industry is the State of Indiana as Senator Capehart undoubtedly knows. This lawn mower came
from the F. & N. Lawnmower Co. of Richmond, Ind., which is the
largest producer of lawn mowers in the world. In 1941 this lawn
mower was produced for $5.75. The OPA granted a price increase
of 17 percent last October, not nearly enough to cover the increase
in cost that the lawn-mower manufacturer has had. His gray castings
1308
extend price c o n t r o l and stabilization acts of
194 2
are up 35 percent; malleable castings are up 45 percent; labor cost is
up 50 percent. The OPA 17 percent was not enough to get him into
production. He has protested many times, all in vain. So, he is not
now producing. He needs $7.76 to make this mower. The OPA has
not given it to him. This is the largest producer of lawn mowers and
he has not shipped one mower this year.
I would like to put into the record a letter from the F. & N. Lawnmower Co. This is dated February 11, 1946, and states very plainly
exactly why they cannot produce lawn mowers. The letter is as
follows [reading]:
RICHMOND,
W.
T.
GRANT
IND.,
February 11, 1946.
Co.,
New York 18, N. Y.
(Attention Mr. T. J. Coyne, Merchandising Department.)
D E A R M R . C O Y N E : The writer has been away from the office for the past week,
which accounts for the delay in replying to your letter of the 5th instant.
Samples of the three mowers that appeared in Ward's Fall 1941 Catalog were
shipped by express prepaid to Mr. Hagen on February 6.
Since OPA has based our prices on those which were in effect in October 1941,
we believe that these are the prices which Mr. Sediel should use, and these prices
were as follows:
Style No. 5667, $5.75.
Style No. 5678, $7.35.
Style No. 5687, $10.
If we were to manufacture the above numbers at the present time, we should
have a mark up of 35 percent on No. 5667, and 25 percent on Nos. 5678 and 5687.
Below you will find the October 1941 price again repeated, another list of prices
showing the 17-percent increase which has been allowed by OPA, and in the
third column is the price that we should have to make a living profit :
October
1941
Style No.
5667
5678
5687
-
17-percent
mark-up
allowed
by OPA
$5. 75
7.45
10.00
Price we
need under
presentday costs
$6. 73
8.60
11.70
$7.76
9.19
12. 50
The writer hopes that the above schedule of prices will furnish the information
required, and if we can assist further in any way, please command us.
Yours very truly,
THE F. & N . LAWN
B . T . HILL.
MOWER
Co.,
Mr. SEIDEL. This is the next price range of lawn mowers, and this
one was sold in 1941 for $7.35. OPA permits $8.60. The manufacturer requires $9.19.
Now, the only lawn mowers available are high-priced new numbers
made by newcomers in the industry.
The CHAIRMAN. Are you in the lawn mower business?
Mr. SEIDEL. Oh, yes; we sell lawnm owers.
The CHAIRMAN. I know you sell practically everything.
Mr. SEIDEL. We sell practically everything.
Senator CAPEHART. DO you have any samples of these lawn mowers
made by the new manufacturers?
Mr. SEIDEL. I didn't bring them along, sir, but we can send them
down here in droves if you would like to have them.
Senator CAPEHART. What are they selling for?
Mr. SEIDEL. Right now about the cheapest lawn mower that anybody can find in retail stores is around $23.99—it is either $22.99 or
1309 e x t e n d p r i c e c o n t r o l a n d s t a b i l i z a t i o n
a c t s o f 194 2
$23.99. There have been some prices authorized around $16 to $18,
but they are made by newcomers. None of the old-line manufacturers are producing, and this letter points out that the manufacturers
that make 85 percent of the American lawn mowers are not in production. It points out, too, what has happened to the newcomers, and
I will read a paragraph of this:
As an old-time producer of lawn mowers, we are penalized by OPA, who have
determined our "increase factor" based on prewar operations. The newcomers
in our industry and those factories which have changed ownership and which are
now considered by OPA as new manufacturers are permitted to establish prices
based on present-day costs and can calculate their selling prices accordingly.
This is most unfair.
Another penalty against the old-time producers is that provision in the order
which requires them to furnish a complete assortment of mowers, including low-end
numbers, and in the same proportion as prewar. The newcomers in the industry,
also those factories which have changed ownership and are now considered by
OPA as newcomers, are not penalized in this respect. They are permitted to
offer higher-priced numbers only without restrictions on quantity. This is also
most unfair.
I would like to put this whole letter in the record. I think it is
quite important, but I don't want to take any more time.
The CHAIRMAN. That may be placed in the record.
(The following letter was submitted for the record by Mr. Seidel:
R I C H M O N D , I N D . , January 31, 1946.
To Our Customers:
GENTLEMEN:
On October 1 0 , 1 9 4 5 , the Office of Price Administration issued
order No. 3, under Maximum Pricing Regulation No. 188 covering the manufacture and distribution of hand lawn mowers.
The order is unworkable. It allows the manufacturer a mark-up of only 17
percent over 1941 prices, while the component parts of a mower and labor are now
so much more costly. Gray iron castings are 35 percent higher and malleable
iron castings are 45 percent higher than they were in 1941, and these higher piices
have the approval of OPA. Other pp.rts, such as handles and rollers and certain
steel items, are higher in price than in 1941. Nothing costs less. Labor costs
are 50 percent higher.
As an old time producer of lawn mowers, we are penalized by OPA, who have
determined our "increase factor" based on prewar operations. The newcomers
in our industry and those factories which have changed ownership and which are
now considered by OPA as new manufacturers are permitted to establish prices
based on present-day costs and can calculate their selling prices accordingly.
This is most unfair.
Another penalty against the old-time producers is that provision in the order
which requires them to furnish a complete assortment of mowers, including lowend numbers, and in the same proportion as prewar. The newcomers in the
industry, also those factories which have changed ownership and are now considered by OPA as newcomers, are not penalized in this resj;>ect. They are permitted
to offer higher-priced numbers only without restrictions on quantity. This also is
most unfair.
The order provides a ceiling price for the chain store and mail-order houses of
150 percent of the manufacturer's ceiling price, while the ceiling price for the
independent dealer is 170 percent. Such favoritism granted to chain stores and
mail-order houses in pricing mowers for resale to the consumer is wrong. Such a
policy would eventually drive the hardware dealer out of business.
Again the order provides for the price-tagging of mowers, with the exception
of those furnished to mail-order houses and chain stores, with no provision for
the freight cost. How can the manufacturers put a ceiling-price tag on a lawn
mower with the same price for resale in Richmond, Ind,, as in California or
Texas? The hardware jobber or retailer cannot absorb this freight cost when the
retailer's percentage of profit as directed by OPA is only 27 percent on his selling
price and the jobber's profit is 19.4 percent. It costs the hardware jobber and
the hardware retailer more than is allowed to them in the way of profit to do
business.
85721—46—vol. 2
11
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OPA regulations and restrictions have greatly hindered the reconversion of our
industry. We have discussed this matter with other manufacturers representing
at least 85 percent of the hand lawn mower industry, and they view the matter
exactly as we do. They cannot and will not produce on the basis of order No. 3
above-mentioned as directed by OPA, and the result will be that very few hand
lawn mowers will go on the market until the order is properly corrected or
eliminated. The manufacturer cannot produce at a loss and is not satisfied with
the terms of the order as above set forth.
We were advised 6 weeks ago that an amendment to the order would be issued
by OPA pertaining only to freight cost. To date the amendment to the order has
not been issued, and such an amendment will not eliminate the other objections to
the order enumerated above.
Lawn mowers are nonessential so far as actual living costs are concerned, and
OPA should immediately remove all controls and restrictions. Manufacturers
could then go quickly into full production, and competition would keep prices in
line. No manufacturer who expects to remain in business would entertain the
thought of an extra profit for a temporary period of time. All that we want to do
is go back to work, give full employment, supply the pent-up demand for lawn
mowers, and make a living profit.
Our Representative in Congress and our two Senators from Indiana are fully
informed regarding the predicament in which our industry is placed by OPA.
They are sympathetic and are trying to help us. We now so licit your help in
presenting this matter to your congressional representative and to the two Senators
from your State in an effort to secure assistance from them. Further, it would
be appreciated if you will present the matter to any organizations to which you
belong and to those whom you think could help us in any way. Our interests are
mutual, and whatever assistance you may be able to give us to get lawn mowers
on the market will be sincerely appreciated.
Respectfully yours,
THE
F.
&
N.
LAWN
MOWER
Co.
Senator C A P E H A R T . Mr. Chairman, do you think we should take
the time now to ask the OPA representative who is here why the new
manufacturer of lawn mowers would be given a higher price than the
old manufacturer?
The C H A I R M A N . Well, is there somebody here?
Mr. S E L L S . Mr. IIoilman is here. He is in charge of that branch.
Mr. S E I D E L . This won't come off of my time, will it?
Senator C A P E H A R T . You don't need to do this if you don't want to.
Senator M I T C H E L L . May I ask whether those lawn mowers are
numbered in some way, so that it could be noted in the record and the
OPA could check on them?
M r . SEIDEL. Y e s .
Senator M I T C H E L L . I wondered if we could have them identified so
that the OPA can know which ones we are talking about.
Mr. SEIDEL. They are all made by the same manufacturer, and the
letter that I put into the record is from that manufacturer.
Senator M I T C H E L L . Does that letter tell the individual lawn mower
by number, or lot, or something, so that the OPA can tell what it is?
Mr. SEIDEL. Well, I will put the three numbers in the record.
Senator C A P E H A R T . Mr. Chairman, I would like to ask the OPA
representative: Is it a fact that new manufacturers are given a higher
ceiling than old manufacturers for comparable merchandise?
Mr. H E I L M A N . NO. That is not so.
Senator B A N K H E A D . I have been complaining that in the garment
business it is just the reverse—they are discriminatory against the
new ones.
Senator C A P E H A R T . You say it is not true that new manufacturers
are given higher prices than old-line manufacturers?
Mr. H E I L M A N . That is right, sir; for comparable models.
1311 e x t e n d p r i c e c o n t r o l a n d s t a b i l i z a t i o n
acts of
194 2
Senator C A P E H A R T . What do you mean by "comparable models"?
Mr. H E I L M A N . A new manufacturer coming into the business has
a selection or a model he might want to make; and, to the best of our
ability, we give him a price in line with that of old manufacturers for
a lawn mower of that type. If he is making an aluminum lawn mower,
we price them in line with a manufacturer who produces aluminum
lawn mowers. That may be a considerably higher price than the
models shown today.
Senator C A P E H A R T . H O W do you arrive at that particular price for
that manufacturer?
Mr. H E I L M A N . That is a base-period price, on which he has received
a 17-percent increase and yesterday an additional increase to bring
it up to 28 percent.
Senator C A P E H A R T . Yesterday?
Mr. H E I L M A N . That is right.
Senator C A P E H A R T . Y O U must have known this gentleman was
going to testify.
Mr. H E I L M A N . NO, sir. It takes considerably longer to get a
legal document out than the day before.
Senator C A P E H A R T . Y O U set the old manufacturer's price on that
lawn mower against a base period?
Mr. H E I L M A N . That is right.
Senator C A P E H A R T . And how do you set the new manufacturer's
price?
Mr. H E I L M A N . In line with the base period on models of old-line
manufacturers, plus the increase given to the industry.
Senator C A P E H A R T . Plus the increase given to the industry?
Mr. H E I L M A N . That is right, sir. The 17-percent level, and it is
now 28 percent higher than the base period.
Senator C A P E H A R T . Well, you take the position that the old manufacturer can manufacture cheaper than the new manufacturer?
Mr. H E I L M A N . No; we don't, sir.
Senator C A P E H A R T . I have many, many instances of where new
manufacturers have been given higher ceiling prices than old manufacturers to make comparable merchandise. It has been brought out
time and time again in the Small Businessmen's Committee; and I
think, or I rather suspect, every Senator in the Senate has examples of
where new manufacturers have been given higher ceiling prices than
old manufacturers for the same or comparable merchandise.
Senator B A N K H E A D . I have examples just exactly the contrary.
Senator C A P E H A R T . Where a new manufacturer has been given a
less price?
Senator B A N K H E A D . Yes; in.garments.
Senator M I T C H E L L . I have here a report of the Small Business
Committee issued March 14 of this year which states that prices are
not preventing old companies from producing their normal products
in normal volume, so apparently the Small Business Committee
reached a different conclusion.
Senator C A P E H A R T . That may be a report, but that is not the
unanimous opinion of the committee.
Senator B A R K L E Y . IS it possible always to decide what is a comparable commodity? A new manufacturer does not go around and
copy item by item what some other company is making. They
probably try to make improvements on it or have a different model
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194 2
that will be its own. There is no way to compare an aluminum,
lawn mower with one that is made of iron or some other metal. Even
where they are made of the same thing, it may be difficult. It may
be claimed that one is an improvement over the other, or it is a
better one than the other. Is it absolutely possible to have an
identical product made by different people so there won't be any
difference in price?
Mr. H E I L M A N . NO. That is correct. It is a very difficult job for
us to do in pricing new articles produced by new manufacturers.
Each manufacturer believes that he has the best item it is possible to
make. He has spent time and engineering in improving it and so
forth. We have to take into consideration any improvements that he
might have made that are more costly to put in a lawn mower, or any
other item.
A very good illustration of the difficulty we ran into is a recent case
on a glass electric heater. There had never been a glass electric
heater made. There are two sheets of plate glass with an aluminum
electron on it. That presents a very difficult problem for the office to
give that new manufacturer of that entirely new article a fair price.
Our final approach to that case was to give him his costs plus the industry mark-up, and it was satisfactory to him.
Senator C A P E H A R T . Mr. Chairman, let me ask this question: Why
don't you give this manufacturer a price here that will permit him to
make a little profit and make lawn mowers and sell them?
Mr. H E I L M A N . Senator Capehart, if you will permit me, I will take
2 or 3 minutes to sum up our relationship with the lawn-mower
industry.
Senator C A P E H A R T . Why can't you answer the question? I mean,
why can't you give that manufacturer a price that will permit him to
make that lawn mower and sell it?
Mr. H E I L M A N . That will be included.
Senator B A R K L E Y . I suggest you cannot pick out a single lawn
mower on the table and ask why that cannot be sold at a profit.
Why don't you let him explain the situation as to the lawn-mower
industry?
Senator C A P E H A R T . I think all the old-line manufacturers in the
lawn-mower industry are losing money or they are producing no
lawn mowers whatsoever. I am greatly interested in this because
the majority of the factories are in Indiana and they are not producing. They are closed up and people are out of work. I am asking
why it is not possible to give them a price that will permit them to
manufacture lawm mowers.
The C H A I R M A N . He wants you to give an explanation.
Mr. H E I L M A N . The answer is that it is possible, but I would like
to give you the background. It will just take a minute.
The lawn-mower industry came into us w^ith a problem in 1945.
We undertook a reconversion survey and in October granted them an
increase of 17 percent over their October 1941 prices. We met with
the industry advisory committee of the group and discussed thoroughly the reconversion formula and our method of arriving at the
17 percent.
Shortly after the issuance of that regulation, indirectly we started
to receive copies of letters that the lawn-mower manufacturers were
sending out complaining about their inability to produce under the
order. There was no direct complaint made to OPA.
1313 e x t e n d p r i c e c o n t r o l
and stabilization acts of
194 2
As a result of that I felt that it was necessary to call the industry
advisory committee in and discuss the problems with them.
That meeting was held in November. We discussed the problems
that they had on their mind. One of them was that the order required
a balanced production. They said they were unable at this time to
produce and ship lawn mowers; their unbalanced inventories from
1941 and 1942 compelled them to produce only high priced lawn
mowers.
We took care of that by approving production schedules of the
individual manufacturers.
There was also a question of freight at the retail level. We also
took steps to correct that. The price formula permitted us to recognize current labor costs. We completed that survey and announced
to the industry in the early part of April that the increase was 28
percent rather than 17, and to the best of my knowledge that is
satisfactory to the major producers who are located in Richmond, Inch
That also takes care of freight at the retail level.
In addition to that on March 8 we issued a low end adjustment
provision in which any lawn mower manufacturer who had a price
of $7 or less, could come in and get his prices adjusted. That would
permit him to receive his current costs of materials and labor plus
half of the industry profit.
In discussions with the major producers in Richmond, Ind., they
have told me they are not in a position to produce low end lawn
mowers at the present time.
The C H A I R M A N . Why?
Mr. H E I L M A N . Principally because of the unbalanced inventories
that they had on hand at 1941, plus the fact that they have difficulty
in obtaining labor and castings.
The C H A I R M A N . It was not a question of price?
Mr. H E I L M A N . It was not a question of price. That is right.
They say they will be in a position to get production lines running on
low-priced lawn mowers sometime in August or September.
Senator C A P E H A R T . D O you believe these figures which have been
presented by the witness?
Mr. H E I L M A N . Yes. If the NRDGA have them there, I believe
they are correct.
Senator C A P E H A R T . D O they correspond pretty much with the
figures you have had on the lawn-mower business?
Mr. H E I L M A N . Well, I might indicate that I believe that is a
sample of one of the lowest-priced lawn-mowers that have ever been
on the market. It is a Montgomery Ward sample. In other words,
it is an unreasonable illustration of what can and cannot be done today.
Senator C A P E H A R T . D O you call these others unreasonable?
Mr. H E I L M A N . I haven't examined the models.
Mr. S E I D E L . If I could interrupt, I would like to ask him if he knows
that nobody could make a lawn mower like this for $12.50 unless they
have been given a price yesterday. The manufacturers are still held
up by pricing, and for no other reason. I will put other letters in the
record about that.
Mr. H E I L M A N . I disagree. They have labor and castings problems.
Senator C A P E H A R T . If they did not have labor and castings problems, and these figures are correct, they certainly would not produce
if they were losing money on every lawn mower?
Mr. H E I L M A N . That is right.
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extend price c o n t r o l and stabilization acts of
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Senator C A P E H A R T . Furthermore, I see no relationship between
the OPA job in pricing and the supply of castings and other parts.
It seems to me as though your job shouftl be to give the manufacturer
a price that will permit him to make a little money or at least break
even and produce lawn mowers.
The same thing is true of many, many other items.
Mr. H E I L M A N . Lacking the labor and castings they cannot get
their production lines going.
Senator C A P E H A R T . They certainly won't get them going even
after they get labor and castings if they are losing money on every
lawn mower.
Mr. H E I L M A N . I discussed the matter with manufacturers in
Richmond, Ind., Senator Capehart, the early part of April, and they
agreed that the 28 percent increase was sufficient for them to produce.
Senator C A P E H A R T . Well, I am happy to know they are getting it,
but the point is it has been nearly a year since the war was over in
Europe and 7 months since YJ-day.
Now, on May 2, you are giving them a price that you say will
enable them to produce, and I hope you are correct. I am glad to
know they agree with you that it will permit them to make some
lawn mowers.
The C H A I R M A N . That won't permit them to make them unless
they can get the material.
Mr. H E I L M A N . That is right.
The C H A I R M A N . Are they suffering the same difficulties that other
manufacturers are for lack of materials, and so on?
Mr. H E I L M A N . Castings, and labor in Richmond, Ind. T h e r e
are lawn mowers being produced today. I believe the rate of production is somewhere between 25 and 50 percent of 1941, in an
industry that is not readily adaptable to getting back into production
quickly.
Senator C A R V I L L E . Materials are going to be higher now than they
were a few months ago, are they not?
Mr. H E I L M A N . The recent survey which gave them 28 percent took
into consideration the steel increase in their anticipated increases and
other increases that OPA is going to give in the immediate future.
Senator B A N K H E A D . I S there any specific reason for the shortage
of their material, the castings?
Mr. H E I L M A N . Well, castings have been tight in all lines. It is
not only lawn mowers but refrigerators, washers, and so forth. It is
a labor problem, I believe, more than anything else, because it is not
a very desirable job for a man in a casting foundry.
The C H A I R M A N . Let me ask you this: You did confer with the
manufacturers?
M r . HEILMAN. Y e s , sir.
The C H A I R M A N . And they were satisfied with the price?
Mr. H E I L M A N . That is right.
The C H A I R M A N . All right.
Mr. H E I L M A N . But I might indicate they are not in a position
to
produce low end lawn mowers, which Mr. Seidel is speaking about.
They will not be in a position to do that until August or September of
this year.
The C H A I R M A N . Because of material?
Mr. H E I L M A N . Because of material and labor and getting the production line started again.
1315 e x t e n d p r i c e c o n t r o l a n d s t a b i l i z a t i o n a c t s o f
194 2
The CHAIRMAN. They said so, did they?
Mr. HEILMAN. That is right.
Mr. SEIDEL. Senator, I don't know who you are going to believe
on things like that.
Senator BARKLEY. I would like myself to know who to believe.
You have two different sets of facts on almost every question here.
I would like to know myself what the facts really are.
Mr. SEIDEL. We buy lawn mowers from the F. & N . Lawn Mower
Co. of Richmond, Ind. They tell us they will sell us these lawn
mowers, make them and ship them, as soon as they get their price.
I would like to put another letter from the F. & N. Lawn Mower
Co. into the record, pointing out very clearly that price is the thing
that is holding them up. This is dated April 19.
The CHAIRMAN. Very well.
Mr. SEIDEL. The letter reads as follows:
RICHMOND, IND.,
April 19, 1946.
M r . T . J. COYNE,
Merchandising Department, W. T. Grant Co.,
New York 18, N. Y.
D E A R M R . C O Y N E : Thank you for your letter of the 17th instant.
We have deferred sending you a record of your allotment until we can get a
price set-up from OPA. We have understood that our "increase factor" is to be
28 percent instead of 17 percent which will permit us to get back into production,
but we have to wait until the order becomes official. Further, we do not know
what the order will provide so far as distributors' prices or profit margins are
concerned.
The new OPA order was supposed to have been issued and printed in the
Federal Register the first of this week, but for some reason or other it has been
held up, and the issuance date is indefinite. It may be wishful thinking on our
part, but we wonder if there is a possibility that controls over the hand mower
industry may be lifted completely in the near future in view of the turmoil now
existing in Washington over the continuance of OPA after June 30.
You will hear from us further, Mr. Coyne, as quickly
we are able to give you
any definite information about the price set-up, and at the same time will advise
you about the first allotment and when we can start making some shipments
N
for you.
We appreciate your interest, and with kindest regards, beg to remain,
Yours very truly,
THE F. & N. LAWN MOWER
B . T . HILL.
Co.,
Senator BARKLEY. In that connection I would like to know how
much of this letter writing in industries, between industries and their
customers, and so on, is prompted by an effort to embarrass us here.
Also, these advertisements that are appearing in the papers, signed
by industries and industrial organizations, saying [reading]:
Write your Senator, write your Congressman, we cannot do this unless we get
more money.
I want to know whether they are telling the truth, or whether it is
just propaganda.
Mr. SEIDEL. DO you believe that industry has done anything more
than those that are in charge of these agencies have done?
Senator BARKLEY. I don't know anything about that, but I know
the National Association of Manufacturers flooded every newspaper
in the United States with full-page advertisements of the type I am
speaking about.
Senator CAPEHART. Senator, they spent $ 3 0 0 , 0 0 0 . They should
have been ashamed of themselves for not spending a million.
1316
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Senator B A R K L E Y . Well, that is a matter of opinion. I am not
complaining about that. I am not saying they did not have a right
to do it, but do you suppose an agency of the Government is going to
be silent if organized efforts are made to influence the Members of
Congress in how they are going to vote? I don't think anybody can
deny that happened, because in every one of these advertisements
they told people to write to their Congressmen and Senators.
Mr. S E I D E L . When I came before the House committee the OPA
distributed to every member present a great big pamphlet of 30 or
40 pages.
Senator B A R K L E Y . I don't see any objection to that pamphlet.
I have seen it and read it. I don't see any objection to it. It tells
the truth, and people are entitled to the truth.
Mr. S E I D E L . It is not the truth.
Senator B A R K L E Y . Well, the National Association of Manufacturers
Mr. S E I D E L . I am not with the National Association of Manufacturers.
Senator B A R K L E Y . Well, you are asking us not to believe the OPA.
There are a lot of complaints I have against the OPA. One of them
is the interminable delay in getting action, and I have complained to
them about it.
Senator C A P E H A R T . My observation is that anyone that comes in
here from an industry knows his business. They are the people who
are trying to make things and do business under all the difficulties
that confront them, and trying to be honest and sincere and conscientious, and in the hope that they will be permitted to remain in business.
I think that to question their integrity and honesty
Senator B A R K L E Y . Well, if you are referring to me, I will say this:
I haven't questioned It. I suppose you are referring to me. I have
not questioned the integrity of anybody. We had a witness here
yesterday who questioned the sincerity and honesty and integrity
of everybody in the Government and you didn't complain about that.
Senator C A P E H A R T . I happen to be in the manufacturing business
and I know what these men are telling is true. When I hear people
011 the other side get up and say they are not telling the truth, I tell
you, I for one resent it. I don't believe we are conducting a fair
investigation when everytime somebody comes in here that should
know their business, that are in the business and have the facts, we
question what they have to say. I am just as much interested in
avoiding inflation as anybody in this room. I expect when the time
comes to vote I will vote right on the subject, but I know from experience—I am not talking from hearsay—I know from experience—the
letter that the gentleman is talking about there that the Senator took
exception to, is a letter from a manufacturer to the Grant Co.——
Senator B A R K L E Y . I am taking no exception to any letter. I
haven't even heard his letter. I am talking about his complaint
that the OPA put before the House committee and probably will
put before this committee, a pamphlet that does not contain the facts
as they have been able to develop them ; because they have done that
in answer to a lot of propaganda that has come in from all sides.
The complaint is made that they are engaged in propaganda. They
are entitled to answer these complaints that are made. It is their
duty to do it, and because they do it, I don't think they ought to be
1317
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194 2
castigated for sending out propaganda. It is not propaganda any
more than the other side of the question is propaganda.
Senator C A P E H A R T . I have no objection to either side doing what
they are doing. I think they have a perfect right to do it, but if we
have a right here to question one side, we have a right to question
the other. This whole argument was brought up by the fact I asked
the OPA representative here why the OPA could not give the manufacturer of a lawn mower a price that would permit him to produce.
His answer was that if they gave them that price they still could not
produce because the.v could, not get castings and other parts.
Now, I ask you if that is a sensible argument when OPA has absolutely nothing to do with production.
The C H A I R M A N . Senator, I think he said he talked to the manufacturers in Indiana and he gave them a price and they were all satisfied
with it.
Senator C A P E H A R T . He gave them a price yesterday.
The C H A I R M A N . NO. This was when?
Mr. H E I L M A N . IT was issued yesterday under the wage-price policy.
I discussed it with them at the end of January.
The C H A I R M A N . That is what I want to know, when you discussed
it with them.
Mr. H E I L M A N . At the end of January. They had labor and casting
trouble.
The C H A I R M A N . When was the price determined on—yesterday?
Mr. H E I L M A N . Yesterday the additional increase up to 28 percent
was granted.
Mr. S E L L S . It was published yesterday.
The C H A I R M A N . Y O U taked to some representative of the industry,
did you?
M r . HEILMAN.
Yes.
The C H A I R M A N . Was that yesterday?
Mr. H E I L M A N . No; that was the early part of April.
The C H A I R M A N . Was that when they said that the price was all
right?
Mr. H E I L M A N . That is right, sir.
The C H A I R M A N . Well, you have answered the Senator's question.
Senator B A R K L E Y . I would like to ask, what was your position
before you went with the OPA?
Mr. H E I L M A N . I was with A . G . Spaulding & Bros., for 2 0 years in
various sales capacities.
Senator B A R K L E Y . Sports goods?
Mr. H E I L M A N . That is right.
Senator B A R K L E Y . H O W long does it take on the average—did it
take 3 months—you say you met with these manufacturers in January.
Here it is May. Did it take you 3 months to get the information
that would enable you to issue this order yesterday?
Mr. H E I L M A N . N O . The sequence there was that the 1 7 percent
was granted in October.
Senator B A R K L E Y . I know, but you are talking about in January,
about some survey which resulted in your 28-percent order issued
yesterday.
Air. H E I L M A N . That was granted under the wage-price policy which
was only announced in January of this year.
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Senator B A R K L E Y . Well, but that is still three months and a half.
The complaint that I have—it is not only in regard to this—it affects
other things—it takes you so long down there to make up your mind
about what you are going to do. I had an instance brought to my
attention where a concern was trying to get a $4.75 ceiling on an
article made in Covington and Newport, Ky., which is across the
river from Cincinnati, Ohio. The OPA wanted to give them a $1.85
ceiling. They could not make it at that price. The factory was
closed 6 months and 1,500 men were out of employment. They discovered that over in Cincinnati they were getting $4.75 for the very
same or comparable merchandise.
Then they gave them $4.75, 6 months too late. I cannot understand why the plant should have had to be idle and men out of work
for 6 months while they are deciding on a price.
Senator C A P E H A R T . Senator Barkley, that is my contention exactly.
Mr. H E I L M A N . I will agree with both Senators there are undue delays, but a price adjustment can be very irritating internally as well
as to the outsider.
Senator C A P E H A R T . A S a manufacturer let me say this: The manufacturer does not care whether you set his price or he sets it himself if it
will permit him to operate. He doesn't care. If you have an idea
he does care, that is not correct. He doesn't care as long as it will
permit him to operate.
Senator B A N K H E A D . Is there not some way down there to shorten
the red tape and avoid all these interminable delays that everybody is
irritated about?
Mr. SELLS. We are doing everything possible to speed up the
necessary actions that have to be taken.
Senator B A N K H E A D . IT doesn't look like it, Mr. Sells.
Mr. SELLS. I agree with you on that, and I will agree with Mr.
Heilman that we ourselves are irritated sometimes beyond any irritation in industry, in trying to get some of these things solved.
One of our difficulties has been manpower. We have several actions
where the decisions have been made and everything is ready to go,
but we have to decide the priorities in which they are to be prepared
in order to get them out.
Senator B A N K H E A D . How many different people have to pass on
one of these matters like this we have just been discussing? How
many division or bureau chiefs have to pass on them from the time
they originate in OPA?
Mr. SELLS. It is prepared in the branch. Then it comes before the
price executive in charge of the branch. Then it is cleared at the
division level and goes to the Deputy Administrator and then to the
Administrator who approves it finally, and then it goes to the Federal
Register. So there are about four clearances.
Senator B A N K H E A D . Four? Why, you have named at least six.
I think Senator Capehart is right about this, if you didn't decide this
until yesterday, when you started in January.
Mr. SELLS. The delay is in getting up legal documents that permit
them to approve that increase.
Senator B A N K H E A D . That is what I call red tape.
Mr. SELLS. That is right.
Senator B A R K L E Y . I suppose you realize that after 3 months of
consideration in this particular case, to come in here to the committee
1319 e x t e n d p r i c e c o n t r o l a n d s t a b i l i z a t i o n a c t s o f
194 2
after 2 or 3 weeks of hearings and say that you gave them a price
yesterday is fuel on the flames of those who oppose OPA and want it
discontinued. They will say you are doing this because we are holding
hearings and you would not have done it at all if we were not holding
hearings. It creates a suspicion that probably puts a new difficulty
in the way of those who want to be constructive.
We are going to be faced by a charge on the floor of the Senate
which probably will be made by somebody that you did these things
because these hearings were being held. I don't like that sort of an
atmosphere in which to legislate a matter that is as important as
this is.
Mr. SELLS. There is one point I would like to make very clear.
This price was published in the Federal Register issued yesterday
and that action had to be written some time back. That had to go
through clearance and be published. It would have been impossible
to have timed that to come out just at this strategic moment.
I think it is important to realize that when Mr. Heilman said the
price was issued yesterday he meant that the document authorizing
the price was published yesterday, but the actual work on the matter,
as he says, was begun 2 months ago.
Senator B A R K L E Y . I am sure you observed when he said that the
thing was done yesterday a snicker went all around this table on the
theory that it was just done because we were holding these hearings.
The C H A I R M A N . When did the manufacturers know about these
things?
Mr. H E I L M A N . The first week in April.
The C H A I R M A N . They knew they were goiog to get it?
Mr. SELLS. That is right. I would like to get the record clear
about that.
Senator M I L L I K I N . Wait a minute. Mr. Chairman, I would like
to ask—you say the manufacturer knew in the first week of April?
Mr. SELLS. That is right.
Senator M I L L I K I N . Did lie have informal knowledge, or knowledge
of such character that he could act upon it?
Mr. SELLS. He couldn't use the increase until May 1.
Senator M I L L I K I N . Which was the date it became formal and
official, something firm and dependable on which he could regulate
his own actions?
Mr. SELLS. That is right, sir. I would like to get the sequence
clear in the record so that it is not going to be brought out that this
price had any connection with this hearing—that the action was just
taken because of this committee.
Senator C A P E H A R T . Y O U can say that. I am not going to say it.
Senator B A N K H E A D . Let's don't go into that any further. Let's
go along with this man.
The C H A I R M A N . All right. Proceed. ^?
Senator B A R K L E Y . I would like before the hearing is over to get
some information, because I may have to answer that on the floor of
the Senate.
Mr. SELLS. May I enter into the record the printed legal document
I spoke of under date of May 1, as an indication that the matter has
been worked on for a considerable length of time.
The C H A I R M A N . All right. Place it in the record.
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e x t e n d p r i c e c o n t r o l a n d s t a b i l i z a t i o n a c t s o f 194 2
(The document referred to is as follows:)
MPR 188
REV.
ORDER
3
UNDER
159E
MAY 1, 1946
OFFICEIOF PRICE ADMINISTRATION
(Document No. 54254)
HAND
LAWN
MOWERS
[ M P R 188, R e v . Order 3]
ADJUSTMENT
OF CEILING
PRICES
Order No. 3 under § 1499.159e of Maximum Price Regulation No. 188 is
amended, revised and redesignated, Revised Order No. 3, to read as follows:
For the reasons set forth in an opinion issued simultaneously herewith and filed
with the Division of the Federal Register, and pursuant to § 1499.159e of Maximum Price Regulation No. 188, it is ordered:
S E C T I O N 1. (a) Purpose of this order. Hand lawn mowers have been found to
be a reconversion product in accordance with the standards set forth in § 1499.159e
of Maximum Price Regulation No. 188. This order is issued under that section
and permits manufacturers to increase their October 1941 prices, by a specified
price increase factor. It also contains provisions governing wholesalers' and
retailers' ceiling prices. It applies only to hand lawn mowers shipped by the
manufacturer on and after May 1, 1946. It does not cover articles for which a
manufacturer has determined his ceiling price under Order 4332 under Maximum
Price Regulation No. 188.
(b) Definition. As used in this order:
(1) The terms "wholesalers" and "retailers" respectively refer to persons
making sales at wholesale and retail as defined in the General Maximum Price
Regulation.
(2) "Chain store" means a store which is one of a group of ten or more retail
stores under common ownership or control which, as a group, had combined sales
of over $ 1 , 0 0 0 , 0 0 0 for the year 1 9 4 4 .
(3) "Mail order house", means an establishment selling at retail which makes
offerings through catalogs or printed price lists, receives orders by mail, and
makes deliveries by mail, railroad, express or other common carriers.
(4) "Hand lawn mower" means a lawn mower which is designed to be pushed
by hand and which does not have any motor or engine for rotating, revolving or
reciprocating the blades and/or propelling the mower.
(5) "Manufacturer's price" for the purpose of calculating retail ceiling prices
in accordance with section 5 of this order means the manufacturer's f. o. b.
factory ceiling price to the specified class of purchaser as provided by section 2 of
this order, or his selling price to that class of purchaser if it is lower than his
ceiling price.
SEC. 2. Manufacturers' ceiling prices, (a) A manufacturer's ceiling price for a
sale of a hand lawn mower to each class of purchaser is the highest of the following:
(1) 128% of his highest price to each class of purchaser, other than ultimate
consumers, in effect between October 1 and October 15, 1941.
(2) 109% of his ceiling price to each class of purchaser established under the
third or fourth pricing method of Maximum Price Regulation No. 188, prior to
May 1, 1946. However, in the case of an article priced under the third pricing
method this increase may be charged only when the maximum prices of the comparable articles were no higher than the manufacturer's highest prices in effect
to the same class of purchaser between October 1 and October 15, 1941.
(3) His maximum price to each class of purchaser otherwise established under
Maximum Price Regulation No. 188, except under Order No. 4332.
(4) His adjusted ceiling price to each class of purchaser authorized under the
provisions of Supplementary Orders 118, 133, 148 or Revised Supplementary
Order 119.
(b) Regardless of any higher price computed in accordance with paragraph
(a) above, a manufacturer's ceiling price to a dealer must allow the dealer a
margin on the retail ceiling price fixed by this order of no less than 27%.
(c) If during any calendar quarter the net average price per unit of the hand
lawn mowers delivered by a manufacturer is greater than 34% of the net average
price per unit of the mowers which lie delivered during the corresponding quarter
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of 1941, the Administrator may issue an order under this section, denying in
whole or in part the manufacturer's authority to sell at prices adjusted by all or
part of the increases authorized by this section. The average price at which the
manufacturer's products have been sold will be considered in determining how
much, if any, of the increases will be granted to such a manufacturer.
SEC. 3. Manufacturers' reports, catalogs and price lists. Every manufacturer
of hand lawn mowers shall, within 10 days after first offering a model for sale to
the trade, file a report with the Office of Price Administration, Washington, D. C.,
giving the model designation, his ceiling prices to each class of purchaser, and an
explanation of the method by which he determined each ceiling price. In addition, every manufacturer shall file, with the District Office of the Office of Price
Administration having jurisdiction over the area in which his principal place of
business is located, three copies of every catalog, price list, and price notification
to the trade, etc., in accordance with the provisions of § 1499.159d of Maximum
Price Regulation No. 188.
SEC. 4. Wholesalers1 ceiling prices. The ceiling price for the sale of a hand
lawn mower by a wholesaler who ships from his own stocks shall be the retail
selling price of that mower for sales in the zone in which the wholesaler's place
of business is located less 27%. This price is for sales in the smallest quantities
for which the wholesaler has an established ceiling price. It is subject to his
established delivery terms, discounts, conditions of sale, and other price differentials as provided by section 11 of this order. The wholesaler's ceiling prices
for sales in other quantities or under terms and conditions of sale other than those
which can be determined by applying to the price established by this section
the wholesaler's customary differentials for such sales, shall be established by application under the provisions of section 11.
SEC. 5. Retailers' ceiling prices. Manufacturers are required to calculate the
retail ceiling prices of all hand lawn mowers, according to the rules in this section, and to provide tags showing the retail ceiling price for all mowers except
those which they sell to a mail order house.
(a) Chain stores and mail order houses. The retail ceiling price for a hand
lawn mower sold by a manufacturer to a chain store or a mail order house is
150% of the "manufacturer's price" to the class of chain store or mail order
house to which he sells in the largest volume.
(b) Other retailers. (1) The retail ceiling price for a hand lawn mower for
which a manufacturer has a ceiling price to a wholesaler and which he sells to a
wholesaler or to a retailer, other than a chain store or mail order house, is 170%
of the "manufacturer's price" to the class of wholesaler to which he sells in the
largest dollar volume.
(2) The retail ceiling price for a hand lawn mower which a manufacturer sells
to a retailer, other than a chain store or mail order house, and for which the
manufacturer does not have a ceiling price to wholesalers, shall be fixed, pursuant to an application by the manufacturer, by an order of OPA under this
section. Retail ceiling prices fixed under this section will be in line with the
level of retail ceiling prices fixed by this order.
A manufacturer applying under this section shall state his ceiling prices for
sales of eaqh mower to each class of purchaser, his "manufacturer's prices" to
each class of purchaser and his published retail list prices, if any, during October
1941.
(c) Zone differentials. (1) The retail ceiling prices determined in accordance
with the foregoing provisions of this section are for retail sales in Zone I. The
retail ceiling price in Zone II is the retail ceiling price of the same hand lawn
mower for sale in Zone I by the same type of retail seller plus 450 per mower.
(2) For the purpose of this section "Zone I " is that area of the following two
in which a hand lawn mower is manufactured. The other area is Zone II.
(i) One area consists of the States of Arizona, New Mexico, California, Washington, Oregon, Idaho, Nevada, Colorado, Wyoming, Montana, and Texas.
(ii) The other area consists of all the other States in the United States and the
District of Columbia.
(d) Adjustment. Retail ceiling prices calculated in accordance with the foregoing provisions may be adjusted to the nearest five cents.
(e) Alternative retail ceiling prices—(1) Who may apply. The Office of Price
Administration may, upon application by a manufacturer, establish ceiling prices
for retail sales other than those determined in accordance with the preceding
provisions of this section whenever it appears that:
(i) The article was sold at retail at substantially uniform'prices prior to April
1, 1942;
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(ii) The article is identified by a brand or company name;
(iii) The price requested for the article is no higher than the level of retail
ceiling prices fixed by this order.
An order may be issued under this section establishing uniform ceiling prices for
all retail sales of an article which shall apply in place of the retail ceiling price that
would otherwise have been determined under this section. Except as may be
provided by such an order, all other provisions of this order remain in effect.
(2) What the application must contain. A manufacturer requesting establishment of uniform ceiling prices under this paragraph (e) must file an application
with the Office of Price Administration, Consumer Goods Price Division, Washington 25, D. C. In the application the manufacturer shall state the following:
(i) His business name and address.
(ii) A complete identification of the article for which the price is sought including:
(a) The name identifying the article and its style or lot numbers.
(ib) His own ceiling prices to all classes of purchasers.
(c) His "manufacturer's prices" and terms to wholesalers and retailers.
(d) His suggested retail price prior to April 1, 1942.
(e) A list of the names amd addresses of his retail and wholesale customers to
whom he delivered the article prior to April 1, 1942 in substantial quantities.
(Applicant may request OPA to accept a specific part of this list as representative).
(iii) The uniform retail ceiling price which he requests for the article. Different prices may be proposed for sales in each zone.
SEC. 6. Tagging, (a) On and after June 1, 1946 no manufacturer shall ship
a hand lawn mower to a purchaser for resale, other than a mail order house, unless
he provides a retail price tag or label. That tag or label shall state the properly
determined retail ceiling price for sales in each zone or in the zone in which the
mower will be sold at retail, the manufacturer's name or the brand name, and
the model designation.
(b) On and after November 15, 1945, retailers other than mail order houses,
may not display, offer for sale, sell or deliver a hand lawn mower at retail which
was shipped by the manufacturer prior to May 1, 1946 unless it bears the tag or
label provided bv the manufacturer as required by this section, as in effect prior
to May 1, 1946. *
(c) On and after June 1, 1946, retailers other than mail order houses, may not
display, offer for sale, sell, or deliver a hand lawn mower at retail, which is shipped
by the manufacturer on or after May 1, 1946 unless it bears the tag or label provided by the manufacturer as required by paragraph (a) of this section.
SEC. 7. Credit charges on retailers' sales. Charges for the extension of credit
may be added to the retail ceiling prices established by this order or by any order
issued under this order unless such order provides otherwise. No such credit
charge may exceed that permitted by this section.
(a) Retailers who in March 1942 collected a separately stated additional charge
for the extension of credit on sales of hand lawn mowers, may collect a charge for
the extension of credit on sales under this order, not exceeding such charge in
March 1942 on a similar sale on similar terms to the same class of purchaser.
Retailers who did not them so state and collect an additional charge, may collect
a charge for the extension of credit only on installment plan sales; and the charge
shall not exceed the separately stated additional charge collected for the extension
of credit on a similar sale on similar terms to the same class of purchaser in March
1942 by the retailer's closest competitor who made such a separately stated
charge.
An installment plan sale as used in the above paragraph means a sale where the
unpaid balance is to be paid in installments over a period of either (1) six weeks
or more from the date of sale in the case of weekly installments, or (2) eight weeks
or more in the case of other than weekly installments.
(b) All charges for the extension of credit shall be quoted and stated separately.
Any change which is not quoted and stated separately or which otherwise does not
conform to this section, shall for the purpose of this order, be considered to be part
of the price charged for the article sold.
(c) No retailer may require as a condition of sale that the purchaser must buy on
credit.
SEC. 8. Compliance with this order—(a) No buying or selling at over ceiling prices.
Prices established by this order are ceiling prices. Prices lower than ceiling
prices may be charged and collected at any time. However, regardless of any
contract or other obligation, no person shall sell, offer to sell, or deliver, and in the
course of trade or business, no person shall purchase or accept delivery of any
1323 e x t e n d p r i c e c o n t r o l a n d s t a b i l i z a t i o n a c t s OF 1 9 4 2
hand lawn mower at a price higher than the ceiling price fixed by this order or
before the manufacturer has properly determined his ceiling price under this order.
If, in violation of this provision, a sale, offer to sell, or delivery of any hand lawn
mower is made before its ceiling price has been properly established in accordance
with this order, the ceiling price applicable to the sale, offer to sell or delivery shall
be the correct ceiling price for the hand lawn mower properly determined in accordance with this order.
(b) Certain practices forbidden. It shall be a violation of this order to charge
a price above the applicable ceiling price in connection with any sale of a hand
lawn mower, either alone or in conjunction with any other consideration even
though the price increase appears only indirectly.
The following is illustrative of the things a seller is not permitted to do: A
seller is not permitted to require the purchaser, as a condition of the sale or
transfer of a hand lawn mower, to make payment over a period of time; to require
him to finance the purchaser through a particular lending agency; to require him
to purchase any equipment, accessories, repairs, parts or services so as to increase
the total compensation above the article's ceiling price; to require him to purchase
any other commodity or service; or to make payment in whole or in part by
exchanging, transferring, or trading in any other hand lawn mower, product or
commodity. Where there is an exchange, transfer or trade-iu in connection with
a sale, it is a violation for the seller to give the purchaser an allowance for the
hand lawn mower product or commodity exchanged, transferred or traded in,
which is less than its reasonable value.
SEC. 9. Notification. At the time of, or prior to the first invoice to a purchase
for resale of hand lawn mowers covered b}^ this order, each manufacturer -and
wholesaler shall notify the purchaser of states and reseller's ceiling prices in each
zone. These notices may be given in any convenient form.
SEC. 10. Revocation of certain ceiling prices. Regardless of any provisions of
the General Maximum Price Regulation, Supplementary Orders 118, 133 and 148,
and Revised Supplementary Order 119, Maximum Price Regulation No. 188, or
any approved or order obtained or issued thereunder by the Office of Price Administration, except Order No. 4 3 3 2 under Maximum Price Regulation No. 1 8 8 , all
ceiling prices heretofore or hereafter established by any seller under those regulations or orders do not apply to any sales or deliveries made after May 1, 1946,
except those manufacturers' ceiling prices continued in effect by section 3 of this
order.
This section does not affect ceiling prices established under this order prior
to its revision effective May 1, 1946.
SEC. 11. General provisions—(a) Delivery, terms, conditions of sale. (1) The
ceiling prices established by this order are subject to each seller's delivery terms,
discounts, quantity differentials, conditions of sale and other price differentials
in effect during March 1942 or thereafter properly established under OPA regulations.
The ceiling prices established by this order are subject to each seller's delivery
terms, discounts, quantity differentials, conditions of sale and other price differentials in effect during March 1942 or thereafter properly established under
OPA regulations.
In the case of a wholesaler or retailer who did not sell hand lawn mowers during
March 1942, or whose delivery terms, discounts, quantity differentials, conditions
of sale, and other price differentials have not been established under OPA regulation, the ceiling prices fixed by this order for his sales are subject to the same
delivery terms, discounts, quantity differentials, conditions of sale, and other price
differentials which his closest competitor who did sell hand lawn mowers during
March 1942, is required to allow under the provisions of this order. If a wholesaler or retailer cannot ascertain the delivery terms, discounts, quantity differentials, condition of sale, and other price differentials which his nearest competitor
is required to allow, he shall apply to the nearest District Office of the Office of
Price Administration having jurisdiction over the area in which his principal place
of business is located, for an order under this section establishing the conditions
to which his ceiling prices are subject. Such application may be by letter and
shall state the type of business he is operating (wholesale, retail, etc.), when he
started to sell hand lawn mowers, the hand lawn mower he desires to sell and the
classes of purchasers to whick he sells. An order will be issued under this section
establishing terms, discounts, quantity differentials, conditions of sale, and other
price differentials in-line with such conditions of sale, etc., generally fixed by this
order.
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If a wholesaler or retailer who did not sell hand lawn mowers during March
1942, does not allow the same delivery terms, discounts, quantity differentials,
conditions of sale, and other price differentials allowed by his nearest competitor
who did sell hand lawn mowers during March 1942, or does not file an application in accordance with the provisions of this section, or if he fails to provide the
information required by this section, the Price Administrator may on his own motion, issue orders under this section fixing delivery terms, discounts, quantity differentials, conditions of sale, and other price differentials in-line with such conditions of sale generally fixed by this order. Conditions of sale so established
will apply to all sales and deliveries made on and after May 1, 1946.
(b) Resellers' ceiling prices not determined under other provisions of this order.
A wholesaler or retailer who cannot determine his ceiling prices under any of the
preceding provisions of this order shall apply to the District Office of Price Administration having jurisdiction over the area in which his principal place of business is located, for an order under this section establishing his ceiling prices for
his sales. Ceiling, prices will be established in-line with the level of ceiling prices
fixed by this order. The application filed under this provision shall give the information called for by paragraph (a) above in the case of an application for the
establishment of terms, discounts, and other conditions of sale.
(c) Definitions. Unless the context requires otherwise, the definitions contained in § 1499.20 of the General Maximum Price Regulation and § 1499.163
of Maximum Price Regulation No. 188, whichever is applicable, shall apply to
all terms used herein.
(d) Relationship of this order to the General Maximum Price Regulation and
Maximum Price Regulation No. 188. The provisions of this order supersede the
provisions of the General Maximum Price Regulations and Maximum Price
Regulation No. 188, with respect to sales and deliveries for which ceiling prices
are established by this order, only to the extent that they are inconsistent with
the provisions of those regulations.
SEC. 12. Delegation of authority. Any Regional Administrator or District Administrator authorized by the appropriate Regional Administrator may issue
orders under paragraphs (a) and (b) of section 11 of this order.
SEC. 13. Modification of the provisions of this order. The provisions of this
order, as applicable to articles or persons subject thereto, may be modified by
orders of general applicability issued under this section.
NOTE: All reporting requirements of this order have been approved b y the Bureau of the Budget in
accordance with the Federal Reports Act of 1942.
This order shall become effective on the 1st day of May 1946.
Issued this 1st day of May 1946.
P A U L A. P O R T E R , Administrator.
O P I N I O N A C C O M P A N Y I N G R E V I S E D O R D E R No. 3 U N D E R
PRICE REGULATION N O . 1 8 8
§ 1499.159e
OF M A X I M U M
The accompanying revision of Order No. 3 under Section 1499.159e of Maximum
Price Regulation No. 188, authorizes a larger increase factor for manufacturers
of hand lawn mowers. Corresponding adjustments in resellers' ceiling prices are
also provided for.
Order No. 3 was issued on October 10, 1945. It authorized manufacturers to
compute new ceiling prices which would reflect an increase of 17 percent over
their highest prices in effect between October 1 and October 15, 1941 for sales to
each class of purchaser. On the basis of the considerations set forth in the opinion
accompanying the original issuance of the order, methods were also provided for
the calculation of resellers' ceiling prices. As explained in that opinion, resellers
absorbed the increases which had been granted to the manufacturers and the
resulting level of retail ceiling prices was in line with the level of such prices
prevailing during March 1942.
Since the issuance of Order No. 3 manufacturers have experienced further
increases in costs due to increased material prices and increases in wages which
have been put into effect in accordance with the new wage price policy.
Paragraph 2 (c) of Executive Order No. 9697 requires the Price Administrator to "develop standards of adjustment consistent with the purposes of this order to be applied in the case of an industry-wide action affecting an industry
operating at temporary low volume." The reconversion pricing formula had
previously been put into- effect for calculating adjusted ceiling prices for industries which are operating at temporary low volume. In accordance with
1325 e x t e n d p r i c e c o n t r o l a n d s t a b i l i z a t i o n
a c t s o f 194 2
the provisions of Paragraph 2 (c) of Executive Order No. 9697, the Administrator had determined that the reconversion pricing formula constitutes a standard for adjustment consistent with the purposes of the Executive Order. In order to prevent hardship that might impede reconversion, the Administrator
has, in applying that standard, made allowances for all legal changes in the
level of material prices and in average hourly earnings experienced b}7 the industry.
At the request of the manufacturers this Office has completed a new survey
to determine the additional increases in material and wage costs which might be
taken into consideration in reapplying the reconversion formula. The increase
factor authorized by the accompanying revision of Order No. 3 reflects all the
legal increases since October of 1941 in the levels of material prices, including
those subsequent to November 27, 1945, as well as an allowance for such legal increases as are anticipated in the near future. All approved increases in straight
time hourly earnings, including those approved under Executive Order No. 9697
issued on February 14, 1946, are also allowed for.
At the time of the original issuance of Order 3 it was explained that average
increases in material prices experienced by the industry had been 16.04 percent.
The average increase in material prices, including allowances for those which are
anticipated in the near future, upon which the new increase factor has been
recomputed is 31.8 percent. The original increase factor was based on an increase
in average hourly earnings of production workers of 30 percent, whereas the new
increase factor is based on average hourly earnings which are above the level of
October 1941 by 33 percent. On the basis of these increased cost factors the
application of the reconversion formula has resulted in a price increase factor of
28 percent. This factor is applicable to manufacturers' prices in effect between
October 1 and October 15, 1941.
Since the issuance of Order No. 3 in October 1945, some manufacturers have
determined ceiling prices for new models of hand lawn mowers under the applicable pricing provisions of Maximum Price Regulation No. 188. These prices have
reflected the 17 percent increase previously authorized. Accordingly, the revised
order provides a separate increase factor to be applied to those prices, resulting
in a level of prices in line with October 1 to 15, 1941, prices, increased by 28
percent.
The policy of the Office in regard to resellers' ceiling prices when an industrywide increase has been authorized at the manufacturing level has become well
defined. When the product is one which is of major importance in the operations
of the distributive levels, absorption of manufacturers' increases is not required
in any amount which would result in margins less than those which the respective
distributive levels generally realized in a normal peacetime period. When, however, the product is one of generally minor significance to the distributive levels
handling it,absorption is required to the full extent necessary so long as the resulting prices do not leave distributors with margins which are less than their average expense ratios. Hand lawn mowers fall into the latter category since they
are in general but minor items in the operations of the distributive trades through
which the major portion of the industry's production is distributed.
Accordingly, the prices computed under the provisions of Order 3 as originally
issued, generally effected complete absorption of the manufacturer's increases.
On the basis of the information which was available it appeared that the distributive levels had the capacity to absorb further increases in manufacturer's prices
without violating the principles set forth above.
A number of factors, however, had led the Administrator to the conclusion that
further absorption should not be required. It appears that the expense ratios of
certain types of distributors which handle hand lawn mowers are lower than the
margins allowed by the revised order. Although costs records are not complete in
sufficient detail to indicate the costs of handling hand lawn mowers as distinguished from those of handling other items, there is reason to believe that they
are somewhat higher than the average costs of handling the other products which
these distributive trades handle. Lawn mowers are extremely heavy items in
relation to their prices, with consequent higher handling costs. The fact that
they are for a large part a seasonable item also results in generally higher costs.
Accordingly, the provisions of the revised order provide that in calculatingTesellers'
prices the same markups as provided in the original order, shall be used.
It appears that in some cases manufacturers may not increase their prices to
the full extent permitted by the order. Accordingly that there may be no increases in prices to consumers beyond those required by increases in manufacturers' selling prices the order provides that resellers' ceiling prices are to be
85721—46—vol. 2
12
1326
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calculated on the basis of the manufacturer's actual selling price to the designated
class of purchaser when that selling price is lower than his f. o. b. factory ceiling
price to the same class of purchaser. The price which is used as the basis for
calculating reseller's ceiling prices is designated "manufacturer's price" and is
defined in Section 1 of the order.
Order No. 3, as originally issued, provided for uniform resellers' ceiling prices
for sales in all parts of the country. At the request of the industry a study of
freight costs was part of the survey. On the basis of the information which was
gathered, provision has been made in the accompanying revised order for higher
resellers' ceiling prices in certain States which are designated as Zone 2. The
areas included in Zones 1 and 2 vary depending upon the location of the manufacturer. It appears that it is a general practice in the industry for manufacturers
to prepay freight up to 60 cents per hundredweight. This, however, does not
appear to cover the full freight costs of many purchasers located in the eastern,
central, and southern states even when they purchase from manufacturers
located in eastern and central states. The additional freight charges which
purchasers in the extreme western part of the country are required to pay are
considerably higher. The differentials allowed for sales in Zone 2 appear on the
average to allow resellers located in Zone 2 to recover the additional freight costs
which are in excess of those which eastern purchasers of the same class are required
to pay.
Manufacturers are authorized to charge the increased prices computed under
the revised order for all mowers which they ship on and after the effective date.
Resellers' ceiling prices for such mowers are also to be computed under the provisions of the revised order. However, resellers' ceiling prices for mowers which
the manufacturer shipped prior to the effective date of the revised order are not
increased because of the revision and remain as determined under Order 3 as
originally issued. In order that manufacturers may have sufficient time to
procure tags they are not required to provide tags showing the new retail ceiling
prices before June 1, 1946. The revised order also has more detailed provisions
requiring resellers to maintain their established terms, discounts and other conditions of sale. It also embodies provisions under which new sellers can apply
for orders establishing the general terms and conditions of sale to which their
ceiling prices are subject. The provision that any part of the increase authorized
in manufacturers' prices may be denied to a manufacturer who eliminates his
lower priced articles is continued in effect.
The Administrator has advised and consulted with representatives of the
industry and has given consideration to their recommendations.
All provisions of the revised order and its effect upon business practices, cost
practices or methods or means or aids to distribution in the industry have been
carefully considered. No provisions which might have, the effect of requiring
a change in such practices, means, aids or methods established in the industry
have been included in the order unless such provisions have been determined to
be necessary to achieve effective price control and to prevent circumvention or
evasion of the order or of the price control act to the extent that the provisions
of the revised order compel or operate to compel changes in business practices,
cost practices or methods or means or aids to distribution established in the
industry. Such provisions are necessary to prevent evasion or circumvention of
the order or of the Emergency Price Control Act of 1942, as amended.
Issued this 1st day of May 1946.
P A U L A. P O R T E R , Administrator.
Mr. S E L L S . Thank you, sir.
Mr. S E I D E L . May I just say this: That we brought lawn mowers to
the attention of OPA last November. You cannot start to produce
lawn mowers on the 1st of May and have lawn mowers in the consumers' hands in time to get their lawns cut in the summertime.
We brought these things to the attention of OPA and the house committee in November. The industry advisory committee of the lawn
mower industry represents people that produce 85 percent of the
lawn mowers, and it is a very easy industry to get together because
half of all the lawn mowers are made in the State of Indiana. I
think well over half, right in the city of Richmond, although they
have other big plants in Muncie and some of the other Indiana towns.
Now, the OPA knew full well last November all that they knew
yesterday about the pricing of lawn mowers. These letters which I
1327 e x t e n d
price
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194 2
have put into the record from the manufacturer do not say anything
about labor or material problems. They indicate that it was purely
a pricing problem. If there was a labor and material problem the
fly-by-night manufacturer that is now making the mowers and selling
them for 30 or 40 percent more than this man's mower would not be
able to make them either.
Senator M I T C H E L L . Y O U are not a manufacturer?
Mr. S E I D E L . NO, sir; I represent the National Retail Dry Goods
Association. I myself am with W. T. Grant Co.
Senator M I T C H E L L . I S there any manufacturer of iawn mowers
coming here to testify as to why he cannot make these lawn mowers?
The C H A I R M A N . I don't think so.
Senator M I T C H E L L . Would it not be better to have a manufacturer
of these lawn mowers here instead of somebody that buys them? I
am not discounting your testimony, but it is second-hand testimony
at best.
Senator C A P E H A R T . I will be very happy to have them all in here
Monday.
Mr. S E I D E L . Y O U see, Senator, we buy lawn mowers; we ship lawn
mowers to market. We know where we can buy lawn mowers, and
where we cannot buy them. I know we can buy a $12 lawn mower
for $17. I know where we can buy a $9.19 lawn mower for $15. We
can buy plenty of them and bring them right down here, but if we did
we would have to sell them for about $25.
The C H A I R M A N . Y O U would, unless O P A prevented you.
Mr. S E I D E L . They don't prevent us. They give "in line" prices to
the manufacturer and to us.
Senator B A R K L E Y . My point is that the manufacturer is the best
witness to testify he cannot make a lawn mower at a profit.
Mr. S E I D E L . Except you won't get a manufacturer to come in and
say that he is getting too much money for his product.
Senator M I T C H E L L . Y O U are putting in letters here saying they
cannot make them, and I would like to have one of those fellows appear
before the committee.
Senator C A P E H A R T . I will be very happy to bring them in at any
time.
Mr. S E L L S . May I make one comment?
T h e CHAIRMAN.
Yes.
Mr. S E L L S . I would like to point out, with reference to letters
written by manufacturers to their customers, the witness having
testified that he wanted the committee to know that such letters had
been sent out, no application had been made to OPA for any change
in the prices.
Senator C A R V I L L E . D O you have any letters sent in to the O P A
about this situation?
Mr. S E L L S . You mean, letters written by manufacturers to their
customers?
Senator C A R V I L L E . N O ; to the O P A .
Mr. H E I L M A N N . I do not believe there were letters. It was an
industry advisory committee meeting.
Senator B A R K L E Y . H O W did you learn that manufacturers were
writing these letters to their customers unless some of the letters
were filed with you?
Mr. H E I L M A N N . Through purchasers, and also congressional mail.
Senator B A R K L E Y . Y O U do get congressional mail, do you?
1328
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M r . HEILMANN. Y e s , sir.
The C H A I R M A N . Proceed,
Mr. S E I D E L . Let me cite
Mr. Seidel.
the case of the Climax Hosiery Mill of
Athens, Ga. I cite that one case because it clearly indicates the
problem that faces practically all industry today.
This manufacturer had no dealings with OPA throughout the wartime period. The Army took over all of his production. In August of
last year, when his wartime contracts were cut back, he read over the
various pricing regulations. He believed every word of them, and
he felt that they meant that he could file an application with the
Office of Price Administration and receive a fair price for his product.
He did exactly what we would like all industry to do. He reconverted immediately and turned all of his machines to producing the
identical number that he manufactured prewar. This was 240needle, mercerized, split-foot hose, a very desirable quality hose that
had not been available to any merchant for 3 years.
In the course of 60 days he had produced approximately 20,000
dozens and, having heard nothing from OPA, decided to visit their
regional office. There he found, much to his surprise, that there was
no possible way of obtaining price relief; that he would have to produce hosiery at the 1942 price of $2.27% a dozen. The fact that his
current production cost him $2.47 made no difference at all. OPA
was not even mildly interested in his current costs or in his problem.
Because he had operated at a profit during the war, they felt that
he could now afford to sacrifice some of it by producing at a loss.
He solicited our aid in New York. We shopped the leading stores
in an attempt to determine the prices that were being charged for
similar hose. We purchased all the hosiery that you see displayed
on these charts. We then obtained the OPA cost and the number of
selling prices on each pair. Then we sent each pair of hose to the
Hatch Textile Laboratory and asked that they make construction as
well as abrasion tests of each pair.
The Hatch Laboratory reported that the hosiery of this Georgia
mill was the best of all that you see displayed here. Notwithstanding that fact, OPA refused to give the manufacturer a price of 22%
cents.
The second best pair of hose has an approved price of 55 cents*.
The third best pair a price of 50 cents; the next one 75 cents; this one
[indicating] an approved price of 42 cents, and so on.
Senator B A N K H E A D . What is your point here?
Mr. S E I D E L . They refused to give the manufacturer of the best
pair of hose a price of 22% cents, whereas they gave prices much higher
than that to people that produced inferior hose, without even testing.
The abrasion test is very striking. That consists of a test in a
testing machine that simulates the wear on a pair of hose. It took
27,000 rubs to put a hole into the Athens, Ga., hose. The next best
pair was 15,000, and the rest of them run all the way from 4,000 to
8,000.
Senator M I L L I K I N . Who did the testing?
Mr. SEIDEL. The Hatch Research Laboratory.
Senator M I L L I K I N . IS that a well-known research outfit?
Mr. S E I D E L . Yes, sir; and they have their seal on every pair tested.
Senator M I L L I K I N . Are they controlled by any group of manufacturers?
1329 e x t e n d p r i c e c o n t r o l
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a c t s o f 194 2
Mr. SEIDEL. NO, sir. It is purely independent, and is used very
widely by industry.
Senator M I L L I K I N . They are people of high repute in the industry?
Mr. SEIDEL. Yes, sir. I think everybody would agree that the
Hatch outfit is entirely reputable.
After we had these tests made we contacted OPA in New York.
Mind you, now, this manufacturer has 20,000 dozen hose and has no
way of selling them except to sell them at his 1942 price. We offered
to pay the higher costs for these hose and agreed to sell them at the
prewar price of 29 cents a pair. But OPA said, no, that could not be
permitted; that would be a triple-damage violation. We could not
pay them over the ceiling price, and if we did, we would be sued for
triple damages.
His only out—and we got this straight from OPA in New York—
was to produce a new number and apply for a higher price. We have
no regulation permitting you to go up in price on the same number.
Then we called Washington and got the same answer directly from
the head of OPA's Hosiery Pricing Section, and that answer was,
"Mix a little nylon in the heels and toes, call it a new number, and
then send in an application and we will give you a price."
Senator M I L L I K I N . WTIO said that?
Mr. SEIDEL. Mr. Boner, the head of OPA Hosiery Pricing Section—
B-o-n-e-r.
Senator B A R K L E Y . Y O U do not accuse him of being responsible for
his name, do you?
Mr. SEIDEL. N O ; I wanted to be sure that the committee understood the name.
Then we called the Deputy Administrator for Price, and we could
not get him; so we got his chief counsel, and he said, "Leave this
problem with me for a couple of days. Certainly there is a way out.
Two days later he said, "There is only one answer I can give you.
Have this manufacturer file an affidavit certifying that he has changed
the character of his business, and maybe then we can give him relief
under another provision"-—which of course he could not do, because
lie has not changed the character of his business.
Senator M I L L I K I N . Was there any difference of opinion as to costs?
Mr. SEIDEL. I do not think so; no, sir. They did not go into the
matter of investigating his costs, because there was no regulation that
they could give him relief on, regardless of cost.
That story got quite a little publicity. One of the magazines
picked it up because it was used before the House committee.
The manufacturer came to Washington approximately 30 to 45
days ago, and because of the fact that his case had had wide publicity
and because it was damaging to OPA, the head of the OPA Hosiery
Section then told him that there would be a Third World War before
he got anything out of OPA; and it was not until we told the story to
the H ouse committee that they decided to grant relief to this Athens,
Ga., manufacturer.
Again, I think if you will ask OPA you will find they are granting
him an increase as of yesterday—just like in the case of the lawn
mowers.
Senator M I L L I K I N . I S that correct?
Mr. SELLS. Senator, I believe that Mr. Seidel's testimony on this
case is such that I cannot agree with the recitation of the events.
1330
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194 2
With regard to the specific question, we have not yet issued a price
to the Climax Mill. I am prepared to explain the case if you wish
to have me do so.
Senator M I L L I K I N . I would like to have a brief explanation of it.
Mr. SEIDEL. May I correct that by saying that the order issued
yesterday is going to cover that mill and others like it.
Mr. SELLS. That is one of the important points. We are not in
position, and I doubt whether we could hire enough people if Congress
gave us an unlimited budget, to conduct our pricing on the basis of
tailoring every case to the needs of every manufacturer.
Senator M I L L I K I N . That chart indicates that there are five different
kinds of socks and each one has got a special price.
Mr. SELLS. NO, sir. They did not receive a special price. All of
these items are priced under the general maximum price regulation
with the March 1942 prices.
The problem that the Climax Mill represents is one of cost increases
since the base period which make it unprofitable to produce an individual item, although there is still a large quantity of hose produced
which are being produced profitably.
Senator M I L L I K I N . IS the kind of goods that they are producing
desirable in the market?
M r . SELLS. Y e s , sir.
Senator M I L L I K I N . Why
do you not help them to get the product
onto the market?
Mr. SELLS. That is what I am coming to, Senator.
When this case was brought to our attention our problem was to
devise a method of adjustment which would make it possible to adjust every other case of a similar type. In the meanwhile we have
Supplemental Order 133 which would have permitted them to break
even, pending the completion of the work
Senator M I L L I K I N (interposing). How much time has elapsed between the time this case first came to your attention and the present
time?
Mr. S E I D E L . I can answer. Last August.
Mr. SELLS. It first came to my attention about 2 months ago,
Senator.
Senator M I L L I K I N . It has been 8 months.
Mr. SELLS. It first came to my attention about 2 months ago.
Senator M I L L I K I N . What makes you say it was August?
Mr. S E I D E L . August was when he filed his application through
Atlanta, Ga. He applied to the regional office and he failed to hear
from them in October, and all this conversation with Washington and
New York was long before the first of the year.
Senator M I L L I K I N . SO for 8 months a desirable quality of merchandise has been held off the market because the manufacturer could not
get information?
Mr. SELLS. He was able to apply for a break-even adjustment at
any time during that period, but he refused to do so. In the meantime we were deciding whether it would take care of every manufacturer of cotton hosiery.
Senator M I L L I K I N . He could have applied for an order wiiich
would have permitted him to sell socks at no profit?
Mr. SELLS. For a very brief period. We cannot just figure out how
much every individual needs, just because he comes in and gives a
statement.
1331 e x t e n d p r i c e c o n t r o l
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194 2
Senator M I L L I K I N . H O W could you expect a manufacturer to put
out goods on a break-even basis?
Mr. SELLS. Many of these manufacturers have been perfectly
willing to do that, because many of them, in converting from wartime
production to peacetime production, have been running on a very low
volume with a very high overhead and were perfectly willing to have
a break-even adjustment until they got into normal production.
Senator M I L L I K I N . But you would not lay that down as a general
rule of business, would you?
Mr. SELLS. NO, sir; and 1 do not intend to; but I think a temporary
expedient of that kind is highly desirable.
We have worked out an order which applies to all manufacturers of
hosiery and knit underwear which will permit them to compute the
increase in their labor and material costs since the base period and
to add those to the March 1942 prices and compute the adjusted
price, which gives them a full reflection of their cost increases since
the base period.
There are a number of technical problems involved, l o u have
cotton yarns, rayon yarns, wool yarns, and blended yarns. I will
not go into a recitation of the difficulties; but I think it is proper to
point out that the Climax Mill refused to apply for this break-even
adjustment ; and we have been working on a general order which would
take care of their case and all similar cases during that intervening
period.
Senator M I L L I K I N . But the end point is, whatever the regulatory
reason that this product has not been on the market—and it is a needed
product and a very highly desirable product—that it came to the boil
stage last August and it has not been lanced yet, unless it has been
within the last day or two.
Mr. SELLS. There are many manufacturers that come in with their
problems in such a way tlfat we can deal with them directly. If a
manufacturer takes a question up with the office in Atlanta and gets
an answer and takes no further action on it, then the office here is
unable to act on it. We receive communications from the offices in
the field telling us the problems that come into themSenator M I L L I K I N (interposing). You say that a manufacturer
may go on a break-even basis, and if he wants to do that no one will
deny him the opportunity; but if that is the best that can be done you
cannot consider yourselves as an agency of a dynamic nature intended
to encourage production.
Senator B A R K L E Y . D O you mean that in this case the manufacturer
preferred to remain on a losing basis rather than to go temporarily
on a break-even basis while you were working out a general order?
M r . SELLS. Y e s , s i r .
Senator M I L L I K I N . That
is exactly what you are saying to American
business, "Break even or lose;" and it has lost.
Mr. SELLS. There are only two major items that are remaining
under the general price regulation, hosiery and underwear. We
have developed cost-plus formulas for almost every other major segment; so this kind of a problem does not arise generally. W7e have
Dot succeeded in working out as yet an adequate regulation for the
knit-goods industry, but we have made four or five important adjustments of a general nature, and this is one that is now in process of
being issued. So I do not think that we can say that we have either
required anyone to continue operating at a loss or that we have neg-
1332
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194 2
lected the problems of this industry. As a matter of fact, the earnings
of the industry generally have been favorable. There have been
scattered pricing problems and individual items to which we have been
directing our attention.
Senator M I L L I K I N . That is a repetition of the basic fallacy of the
whole administration of the OPA law, to wit, that you can run a business 011 national statistics. You cannot operate a business on national
statistics.
Mr. S E L L S . We are not running it on national statistics; we are
running it on the statistics of its own operation.
Senator M I L L I K I N . But that poses exactly the problem which the
witness has posed, and it has not been solved.
Mr. S E L L S . I think the action we have now taken will solve it.
Senator M I L L I K I N . Will that be issued as a general order?
M r . SELLS. Y e s , sir.
Senator M I L L I K I N . When do you think it will commence to work
with regard to this particular mill?
Mr. S E L L S . I cannot tell you the exact date of issuance. It will be
probably in the next 24 or 48 hours. It has been cleared and is going
through.
Senator M I L L I K I N . I S it your understanding, Mr. Seidel, that this
general order that is coming will relieve the trouble of that particular
mill?
Mr. S E I D E L . I think it will. I think it will give him less than his
prewar earnings, but I think it will put him into the production of
hosiery.
Mr. S E L L S . May I point out one other important fact, and that is
that it was not until the fall of 1945 that the heavy impact of wage increases hit the textile industry, and it was not until the latter part of
1945 and the first part of this year tlyit the yarn increases were
authorized. The great yarn increases came in March. So that we
really did not have a general problem until very recently, although the
problem in this thing was a special one because of some technological
improvements made in their particular products.
Senator M I L L I K I N . I think it was very frankly admitted here that
your internal administration has been on the lethargic side rather than
on the side of promptness. I believe that Mr. Baker made a very
frank and, to me, encouraging admission that you had been very slow
in getting out these individual cases.
Mr. S E L L S . But not lethargic.
Senator M I L L I K I N . If you see a turtle moving along, I think you
can say he is lethargic, and I think you can say he is slow.
Mr. S E L L S . My position is that I have, as an administrative officer,
to consider a number of cases that are pending at any given time;
and if we get one case out in reasonably good time there may be two
others waiting while that is being completed.
Senator M I T C H E L L . This exhibit on socks indicates that the company was making at least nine styles of men's socks right along. The
controversy is on only one kind.
Mr. S E I D E L . Oh, no. These are all made by different manufacturers.
This hose [indicating] is made by the Climax Co. in Athens, Ga. This
[indicating] is made by another company, and these [indicating] are
made by other companies, Senator. I am exhibiting these to show
the disparity in pricing. Here is a company that can charge 29 cents
1333 e x t e n d p r i c e c o n t r o l a n d s t a b i l i z a t i o n a c t s o f
194 2
for hose, not as good as these, and this one [indicating] cannot charge
22% cents for them.
Mr. SELLS. I am interested in one point, and that is that if you
look at the retail prices of the various stockings all the way down you
find that the lowest one is the one to which he is referring. I believe
that there must be some very good reasons why a sock of superior
quality was priced so much lower than the others in the base period.
Mr. SEIDEL. YOU are looking at the cost price. There is no retail
price on that.
I would like to go ahead, because I am afraid that all my time will
be used up by the OPA and I will not get to say what I want to say
here.
Senator MILLIKIN. I am personally responsible, because I like to
get information from both sides as I go along. I am sorry to have
taken up so much of your time.
Senator MCFARLAND. I would like to ask the witness if we are
entitled to assume that these exhibits will be left here.
Mr. SEIDEL. I think if the Climax Hosiery Co. did get a pricing order
they would be glad to send anybody in Congress some socks.
I would like to show an example or two to demonstrate OPA's
in-line pricing theory—the theory of giving a man a price in line with
somebody else's price. It is that practice that results in a great deal
of inferior goods getting on our markets.
I would like to start by showing you a very flimsy bowl-type heater
on which OPA issued an in-line price of $3.65.
In order that there may be no question at all about the authenticity
of this price, I would like to have incorporated in the record a photostatic copy of the Federal Register order, signed by Chester Bowles,
so that nobody will question but what this is a legitimate purchase
at $3.65. The order is order No. 4327 to the Sun-Ray Appliance Co.
(The copy of the Federal Register order, referred to and submitted
by the witness, is as follows:)
[ M P R 188, Order 4327]
SUN-RAY
APPLIANCE
A P P R O V A L OF M A X I M U M
CO.
PRICES
For the reasons set forth in an opinion issued simultaneously herewith and filed
with the Division of the Federal Register, and pursuant to § 1499.158 of Maximum
Price Regulation No. 188; It is ordered:
(a) This order establishes maximum prices for sales and deliveries of certain
articles manufactured by the Sun-Ray Appliance Company, 277 Broadway, New
York 7, N. Y.
(1) For all sales and deliveries to the following classes of purchasers by the
sellers indicated below, the maximum prices are those set forth below:
Maximum prices for sales b y any seller
to—
Article
Single burner hot plate, aluminum, 1 heat,
cord and plug.
Electric space heater, black crackel finish,
cord and plug.
Model
None
100 watt
Wholesalers
(jobbers)
. _
Retailers Retailers
(6 units (less than
or more) 6 units)
Consumers
Each
$1.97
Each
$2.33
Each
$2.51
Each
$3.75
3.09
3. 65
3. 93
5.90
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194 2
These maximum prices are for the articles described in the manufacturer's
applications dated July 24, 1945, and August 8, 1945. They include the Federal
Excise Tax.
(2) For sales by the manufacturer, the maximum prices apply to all sales and
deliveries since Maximum Price Regulation No. 188 became applicable to those
sales and deliveries. These prices are f. o. b. factory and are subject to a cash
discount of 2% for payment within 10 days, net 30 days.
(3) For sales by persons other than the manufacturer, the maximum prices
apply to all sales and deliveries after the effective date of this order. Those prices
are subject to each seller's customary terms and conditions of sale on sales of
similar articles.
(4) If the manufacturer wishes to make sales and deliveries to any other class
of purchaser or on other terms and conditions of sale, he must apply to the Office
of Price Administration, Washington, D. C., under the Fourth Pricing Method,
§ 1499.158 of Maximum Price Regulation No. 188, for the establishment of
maximum prices for those sales,, and no sales or deliveries may be made until
maximum prices have been authorized by the Office of Price Administration.
(b) The manufacturer shall attach a tag or label to every article for which a
maximum price for sales to consumers is established by this order. That tag or
label shall contain either of the following statements with the correct order number, model number, and retail ceiling price filled in:
Order No. 4327
Model No.
OPA Retail Ceiling Price—$
Federal Excise Tax Included
Do Not Detach or Obliterate
or
Sun-Ray Appliance Company
277 Broadway
New York 7, New York
Model No.
OPA Retail Ceiling Price—$
Federal Excise Tax Included
Do Not Detach or Obliterate
(c) At the time of, or prior to, the first invoice to each purchaser for resale, the
seller shall notify the purchaser in writing of the maximum prices and conditions
established by this order for sales by the purchaser. This notice may be given
in any convenient form.
(d) This order may be revoked or amended by the Price Administrator at
any time.
(e) This order shall become effective on the 28th day of August 1945.
Issued this 27th day of August 1945.
CHESTER BOWLES, Administrator.
[F. R. Doc. 45-16012; Filed Aug. 27, 1945; 4:46 p. in.]
Mr. S E I D E L . At tlie time this heater was priced at $ 3 . 6 5 the General Electric Co. was held to $ 3 . 6 8 on its product. When we first
brought this down it was $ 3 . 6 8 , and that price held until the 2d of
January this year. After we showed this comparison down here, then
OPA issued an order to General Electric raising the price on its
heater to $4.92; but not until we showed it down here. And at that
time OPA's department head said that he would have to examine these
heaters to see if this one was not better than that one [indicating]; he
would have to go into an examination of the two.
Senator B A R K L E Y . Would not anybody have to examine them in
order to tell which was the better of the two?
Mr. S E I D E L . I do not think you would have to examine these two
[indicating] to know that something produced by General Electric
was better than this one [indicating].
Senator B A R K L E Y . That might be true of those particular things,
but would they not have to examine different types in order to determine that?
1335 e x t e n d p r i c e c o n t r o l a n d s t a b i l i z a t i o n a c t s o f
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Mr. SEIDEL. I do not believe there is anybody in O P A , if they did
examine them, could tell the quality of the GE product from this one.
Senator CAPEHART. That is the fallacy of O P A . They have got
an almost impossible task.
Mr. SELLS. May I ask the witness a question?
Mr. SEIDEL. Let me finish the whole thing, and maybe I will cover
your question.
On January 2 of this year OPA gave a price of $4.92, and at that
time the consumer's price of this heater was raised to $7.95. This
[indicating] is also the General Electric price. By raising the price of
this one [indicating] to $4.92—a good bowl heater—it puts it out of
line with this price [indicating], which, is $5.66. The price to consumers of the large heater is $8.59. The price to consumers of this
heater [indicating] is $7.95. If you would offer one of the two, everybody would buy this one [indicating]. The in-line price theory is just
creating differences between lines.
Senator BARKLEY. What is the price of this tall one [indicating]?
Mr. SEIDEL. It is $ 5 . 6 6 . The General Electric Co. cannot produce
this heater for $5.66.
Senator BARKLEY. What is the retail price of it?
M r . SEIDEL. I t is $8.59.
Senator BARKLEY. SO there is a $3 difference there?
Mr. SEIDEL. There is 64 cents difference. The price is $7.95
Senator MILLIKIN (interposing). Is that sold through jobbers and
distributors?
Mr. SEIDEL. It is. It clears through them or is sold directly, depending upon who buys it.
At the same time the General Electric was held to this price of
$5.66, this company [indicating] was given a price of $9.69 for an inferior product. And so that there will be no question about the legitimacy of that man's price I will put Mr. Bowles' order into the record.
It is order No. 4345, issued to the Jamaica Machine Co., which makes
this article [indicating].
(The order referred to and submitted by the witness is as follows:)
[ M P R 188, Order 4345]
JAMAICA
APPROVAL
MACHINE
OF M A X I M U M
CO.
PRICES
For the reasons set forth in an opinion issued simultaneously herewith and filed
with the Division of the Federal Register, and pursuant to § 1499.158 of Maximum
Price Regulation No. 188; It is ordered:
(a) This order establishes maximum prices for sales and deliveries of certain
articles manufactured by the Jamaica Machine Company, 899 Boylston Avenue,
Boston 15, Mass.
(1) For all sales and deliveries to the following classes of purchasers by the
sellers indicated below, the maximum prices are those set forth below:
Maximum prices for sales by any seller to—
Article
Electric heater
Model
Aratherm
Wholesaler
(jobber)
Retailer (6
units or
more)
Retailer
(less than
6 units)
Each
$7.92
Each
$9. 69
Each
$10.44
Consumer
Each
$15.67
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These maximum prices are for the article described in the manufacturer's application dated July 18, 1945. They include the Federal Excise Tax.
(2) For sales by the manufacturer, the maximum prices apply to all sales and
deliveries since Maximum Price Regulation No. 188 became applicable to those
sales and deliveries. These prices are f. o. b. factory and are subject to a cash
discount of 2 % for payment within 10 days, net 30 days.
(3) For sales by persons other than the manufacturer, the maximum prices apply to all sales and deliveries after the effective date of this order. Those prices
are subject to each seller's customary terms and conditions of sale on sales of
similar articles.
(4) If the manufacturer wishes to make sales and deliveries to any other
class of purchaser or on other terms and conditions of sale, he must apply to the
Office of Price Administration, Washington, D. C., under the Fourth Pricing
Method, § 1499.158 of Maximum Price Regulation No. 188, for the establishment
of maximum prices for those sales, and no sales or deliveries may be made until
maximum prices have been authorized by the Office of Price Administrator.
(b) The manufacturer shall attach a tag or lable to every article for which a
maximum price for sales to consumers is established by this order. That tag
or label shall contain either of the following statements with the correct order
number filled in:
or
Order N o . 4345
Model N o . Aratherm
O P A Retail Ceiling Price—$15.67
Federal Excise Tax Included
D o Not Detach or Obliterate
Jamaica Machine Company
899 Boylston Avenue
Boston 15. Massachusetts
Model N o . Aratherm
O P A Retail Ceiling Price—$15.67
Federal Excise Tax Included
D o N o t Detach or Obliterate
(c) At the time of, or prior to, the first invoice to each purchaser for resale,
the seller shall notify the purchaser in writing of the maximum prices and conditions established by this order for sales by the purchaser. This notice may be
given in any convenient form.
(d) This order may be revoked or amended by the Price Administrator at any
time.
(e) This order shall become effective on the 29th day of August 1945.
Issued this 28th day of August 1945.
C H E S T E R B O W L E S , Administrator.
IF. R . D o c . 45-16139; Filed, Aug. 28, 1945; 3:46 p. m.]
Senator B A R K L E Y . D O you handle this one [indicating]?
Mr. SEIDEL. I will tell you about that in a minute.
This is required to be pre ticketed, with a ticket on it, $15.67.
Consumers are led to believe that this is a fair price for the product,
and the consumers, seeing a Government tag on here, have a right to
expect that it is a fair price.
We placed an order for this, and instead of offering them to consumers at $15.67 we offered them at 25 percent less than that, and
they still did not sell. The product is not worth anything like the
price.
Senator M I L L I K I N . I will admit that the G . E . product looks a
whole lot slicker than that product [indicating], but is there not some
scientific way of determining which is the more efficient?
Mr. SEIDEL. Yes. I have had them both tested by laboratories,
and they will tell you there is nothing unsafe about this. It throws
out the same heat as this one [indicating]. It is perfectly safe to use.
They would not say that, though, about this one [indicating].
Senator B A R K L E Y . It is not so much a question of safety.
Mr. SEIDEL. That is an important factor.
1337 e x t e n d p r i c e c o n t r o l
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Senator B A R K L E Y . Of course it is; but that does not have much to
do with the cost of making it.
Mr. S E I D E L . In appearance it is better, and the element I think is
better.
Senator B A R K L E Y . Senator Millikin, who is an expert on these
matters, says it may look slicker. But the question of whether it
gives out more heat and lasts longer might enter into the price.
Senator M I L L I K I N . I have had an education in slickness since I
have been watching these OPA deviosities and sinuosities.
Senator M C F A R L A N D . Are you going to show us any electric fans?
Warm weather is coming on.
Mr. SEIDEL. I have lots of items if I had the time.
Mr. SELLS. We have a lot of information on this if you would like
to have it.
Mr. H E I L M A N N . I would like to ask the witness what this exhibit
is supposed to prove—lack of production of one or the other?
Mr. SEIDEL. I would say that it shows conclusively that we cannot
permit incompetent people in OPA to price items for American industry. There is nobody down there that has the slightest conception
of how to set these prices; and before I finish
Mr. H E I L M A N N . Wait just a minute.
Mr. SEIDEL. Before I finish, I am going to offer an amendment.
Senator M C F A R L A N D . I think we are wasting time now.
Mr. H E I L M A N N . I would like to put into the record the fact that
General Electric has produced 95,000 of the bowl-type heaters from
VJ-day to the time of their strike on January 15. They have produced 105,000 of the taller type. They have produced them and
sold them up to the time of their strike.
If this is supposed to illustrate that you are getting production by
a new manufacturer and not getting production by an old manufacturer, I do not think that this has proved it. The production of
General Electric was about three to four times greater than its 1941
production on those two items.
Senator C A P E H A R T . I think it has been brought out that they were
producing at a loss, and I think that speaks well for General Electric,
that they were really cooperating in the reconversion period.
Senator B A R K L E Y . I suppose they were producing at a loss, and
the strike helped to make it impossible to produce at a loss.
Senator C A P E H A R T . Here is an item [indicating] that sells to the
public at $8.59 and here is one [indicating] that sells for $15.67; and
3rou can use your own judgment as to which is the better product.
This one [indicating] has an OPA-approved price of $15.67, and this
one [indicating] has an OPA-approved price of $8.59.
Mr. H E I L M A N N . I might say on the question of comparison that I
do not believe that Congress would want us to price, in the case of the
bowl-type heater, to the returning veteran or the small individual
going into business, with a General Electric article. In the case of
the other heater [indicating] we have a difference of $1.27 which I
think is the proper difference, considering the quality of the two
heaters.
Senator C A P E H A R T . The way to do it is to price both of them so that
they will show a decent profit to the manufacturers and protect the
consumers from runaway inflation.
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Mr. SEIDEL. I believe G. E. has an application for price increase
on this that has not been acted on.
Mr. H E I L M A N N . That is right.
Mr. SEIDEL. Why don't you act on it?
Mr. H E I L M A N N . Because of the difficulty of trying to grant a profitable item to every manufacturer.
Mr. SEIDEL. I would like to give an example or two to demonstrate
the maximum average price program and how it holds up production.
This plan provides, as you probably know, that the average price
of goods sold currently may not exceed the average price of goods sold
during the base period of 1943. That means that producers of cotton
chenille robes must produce robes at a price of $2.25 each. The cheapest robe that can be produced costs approximately $3.25, and as a
result of that, chenille robes have practically disappeared.
In January we contacted 27 producers and we found only 2 of them
that could deliver any robes, and those 2 are discontinuing their production. We found 1 gentleman who could give us 12,000 robes,
provided we paid him $7 each, in cash, no checks.
The C H A I R M A N . What was the point? Why did he want cash
instead of checks?
Mr. SEIDEL. Because he is a black-market operator, or I assume
he is. I assume he has no legitimate way of charging $7 for a $3.25
robe.
Mr. SELLS. Did you p&y that black-market price?
Mr. S E I D E L . N O ; and I kind of resent that. We have never violated
any price regulation at all, ever.
Mr. SELLS. Y O U said you paid $7.
Mr. S E I D E L . I didn't say that at all. I said we found a gentleman
who could give us 12,000 robes if we laid cash on the barrel head to
the tune of $7 each.
Mr. S E L L S . I just wanted to be sure that you did not say that.
Senator C A P E H A R T . I think perhaps Mr. Sells would like to withdraw his question.
Mr. S E L L S . Yes. I thought he made that statement.
Senator M C F A R L A N D . We just waste time with that kind of business.
Senator C A R V I L L E . I think the committee should ask the questions,
unless you ask permission to ask them.
Mr. SELLS. I beg your pardon, sir.
Mr. S E I D E L . A manufacturer of wash suits in Philadelphia has made
and is now holding 48,000 garments, at a price of 92 cents, and 6,000
at a price of $1.26K> and he has got 216,000 in process. All of these
garments are part of the much-publicised low-priced apparel program.
The 92-cent garments would be preticketed to consumers at $1.40
and the $1.26% garments at $1.90. But he cannot ship any of them.
One branch of the Government gives a man allocations so that he
can make goods, and another branch keeps him from shipping them.
The MAP program stymies the low-priced goods program.
I do not think there is any question but what the MAP plan should
be thrown out. The House voted to throw it out, and I presume
the Senate will, too. The OPA would be wise, if they are ever going
to change that plan, to do it now, because there are lots of goods
that could be shipped if we had no MAP plan, and it would help
alleviate the extreme shortages which I described first.
1339 e x t e n d p r i c e c o n t r o l a n d s t a b i l i z a t i o n
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I would like to offer a number of amendments that we have very
carefully considered; but I might say before I offer them that our
membership is practically unanimous in this matter. We have polled
every member; we have had conventions with very large attendance.
We have offered all these amendments without one dissenting vote.
We think that it would certainly be harmful and most unwise to
continue the Stabilization Act in anything like its present form. We
think, too, that OPA has not been very helpful in saying that they
want it continued exactly as it is. Some people would like to throw
them all out. We have not taken either position. We have attempted
to take a middle-of-the-road course and offer amendments. We hope
they will stop OPA from crippling production.
The first proposed amendment is a request that Congress make a
declaration of policy [reading]:
That it is hereby declared to be the policy of the United States to speed the
return to a free economy under which competition will regulate prices, that the
obtaining of maximum production in industry is the- paramount need of the
transitional period and is more important than maintaining existing price levels.
. The second proposed amendment would concentrate the activities
of OPA on essential needs. We believe that if they want to be a
pricing agency they can do a much more effective job if they confine
their activities to items that really need price control, and not attempt
to control production. The amendment is as follows [reading]:
That no price heretofore established for any commodity or service which does
not directly and materially affect the cost of living shall be maintained under the
authority of this act or the Stabilization Act of 1942 as amended. The Price
Administrator, the Civilian Production Administration, the Secretary of Commerce, and the Secretary of Agriculture, shall, by concurrent action, determine
the commodities and services which directly and materially affect the cost of
living, and on and after the effective date of this section, the price of no other
commodity or service shall be subject to control.
The third proposed amendment would eliminate the maximum
average price regulation and all similar regulations. It is as follows
[reading]:
No regulation or order shall be promulgated or enforced under the authority of
this act or the Stabilization Act of 1942 as amended which directly or indirectly
requires or compels a producer of a commodity to conform during any period to a
pattern of production of sales of such commodity by price range or unit classification based on any period.
The House amendment, while it eliminates the MAP plan, I do not
believe is specific enough to eliminate other practices of OPA that
are very similar to the MAP plan. They have at the manufacturing
level what they call the highest price line limitation. You remember
that that was at the retail level also and was eliminated, but it was
never taken off the manufacturer. If the MAP plan is eliminated and
if OPA can later put this price line limitation on a manufacturer, it will
hamstring him just as badly as MAP does. So the thing has got to
be worded in such a way as to make it clear to OPA that it is meant to
eliminate all such types of regulation
The fourth proposed amendment would restore the establishment
of pricing to industry; OPA to function in a supervisory capacity. It
reads as follows [reading]:
The price which shall be applicable to any commodity or service subject to
control under the authority of this act shall be established by persons engaged in
the production and distribution of such commodities and in the rendition of such
1340
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service, and shall not exceed the levels necessary to afford prewar margins above
current costs. The Price Administrator shall have authority to require that
prices so established shall be suitably reported in the manner and at the times
which may be necessary for the proper administration of this act.
In other words, instead of having what you might call price control,
why not have price regulation? OPA has not the personnel to determine how to arrive at these prices. Industry has to arrive at them.
Turn the job of pricing over to industry; give them formulas to work
on. Let OPA permit the sale of goods within these programs and
move in on people who do not comply. I think that is the only way
out. First, confine them to a few items; then give industry the job of
pricing.
The fifth proposed amendment would provide a standard for decontrol. It gives the Industry Advisory Committee the job of making
recommendations to OPA on decontrolling products. It reads as
follows [reading]:
Whenever it shall be made to appear by appropriate petition submitted to the
Price Administrator by or on behalf of an industry advisory committee that the
production of any commodity of such industry, or that the facilities for the rendition of any service performed by such industry, which commodity or service is
subject to control under the provisions of this act, shall have attained a level such
as to preclude the likelihood of speculative, unwarranted or abnormal increases in
price or shall have obtained a level commensurate with demand, price controls
then in effect shall be suspended.
The C H A I R M A N . Does that complete your statement?
Mr. S E I D E L . I have two or three things that I would like to put
into the record.
Senator H I C K E N L O O P E R . I assume that you believe that the
present proposed amendment to continue price control and OPA for
another year is in itself a crippling amendment to American industry?
Mr. S E I D E L . I certainly do.
I would like to put these things into the record. I have some telegrams and I have a booklet. I do not know why I am getting all
these wires from Idaho, but I have had five or six wires from Idaho
since I have been in Washington. This one, from E. G. Harlan,
manager, Boise Retail Merchants Bureau, dated April 30, 1946,
reads as follows:
Wide dissatisfaction with OPA all over Idaho. State Automobile Dealers
Association on February 18, unanimously voted abolishing OPA June 30. Hardware and Implement Dealers Association of Idaho and Utah annual meeting
February 25, voted critical resolution on OPA Idaho Cattlemen's Association
annual meeting April 11, voted abolishing all OPA controls. AH above actions
mailed Idaho Senators. Thousands of merchants, consumers, and people in all
walks of life in Idaho request drastic reduction or abolishment of OPA authority
on June 30, and request your help in presenting our opinions in Washington.
Here is another one from Ezra B. Hinshaw, of the Anderson Stores
Co., to Ted Schlesinger, of the Allied Stores Corp., 1440 Broadway,
New York City, reading as follows:
Following organizations have submitted resolutions asking for modification or
termination of price control since February- 18: Idaho Dairymen's Association,
Hardware and Implement Dealers Association, Boise Valley Power Association,
Idaho Cattlemen's Association, Western Retail Lumbermen's Association, Idaho
Wool Growers Association, Idaho Automobile Association, Boise Food Dealers
Association, E. T. Taylor, master of the Idaho State Grange. In addition a
number of important representatives of Idaho industry have personally intervened
for modification or termination of price control with Senator Taylor. Idaho Wool
Growers Association wired Senator Wagner, chairman, this morning. Inasmuch
as copies of these resolutions are not available within time limit, suggest that
1341 e x t e n d p r i c e c o n t r o l a n d s t a b i l i z a t i o n a c t s o f
19 42
Bob Seidel request copies from Senator Taylor! The above representatives of
associations mentioned are very much incensed over Senator Taylor's inference
that they have not been heard from.
The next telegram is dated May 1, 1946, from A. C. Willemsen,
managing director, Anderson Stores Co., Boise, Idaho, to Theodore
Schlesinger, of the Allied Purchasing Corp., 1440 Broadway, New
York City, reading as follows:
Wires from local individuals as well as members of merchants bureau have
been sent to N. R. D. G. A. headquarters, Washington, D. C., opposing continuation price set-up unless modified. Also grocers association here militantly
against maladministration. Seidel should back up this information in Washington. Also following wire has gone forward: "Caroline F. Ware, Association of
University Women, Monday local newspaper reports Associated Press story you
will present to the Senate Banking Committee a statement in the name of 23
regional organizations urging rejection of all the crippling amendments by which
the House wrecked the price control bill. Our local club has not discussed this
matter- nor authorized this statement." Also Seidel has received direct wire
from local chamber of commerce and we will air mail some resolutions serving
important organizations requesting OPA modification or abolishment. These
resolutions also have gone forward to Idaho Senators.
The CHAIRMAN. Dr. Caroline Ware established the organizations
which she represented.
Mr. SEIDEL. Did she establish the consumers that she represents?
The CHAIRMAN. Yes; she did. I have about 3 0 , 0 0 0 letters from
New York asking that we keep OPA as it is today. That includes
MAP, too.
Mr. SEIDEL. Senator Wagner, the question that seems to be put
to the American public is, Shall we keep OPA as is, or let prices
skyrocket, life-insurance policies disappear, people lose their homes?—
and of course they will say, "We want OPA." But if you ask them,
Would you like a shirt?—you would get replies from people all over
this country that they would like a shirt. But you are not getting
any shirts, because of OPA.
The CHAIRMAN. I think these letters are in good faith, and also
the telegrams are in good faith. The people know what the problem
is, because they have dealt with it.
Mr. SEIDEL. I question that they know what the problem is. I
do not question their sincerity.
The CHAIRMAN. I think they do know.
Senator MITCHELL. Are these telegrams from members of your
organization?
Mr. SEIDEL. The first one is from the manager of the Boise Retail
Merchants Bureau.. I assume that some of the members of the Boise
Retail Merchants Bureau are members of our organization; but a
good many of these organizations are not—the Wool Growers Association and the farmers, and so on.
Senator MITCHELL. I do not see why you should present to the
committee a bunch of miscellaneous telegrams from somebody that
you do not know.
Mr; SEIDEL. I think they were sent to me, sir, because I was a
resident of Boise, Idaho. I think that is why they were sent to me.
Senator MITCHELL. I still do not see why they should be in the
record as part of your testimony. I have no objection, but time is
short.
Senator CAPEHART. I move that they be considered a part of my
testimony.
85721—46—vol. 2 13
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Senator M I T C H E L L , I am not questioning their being put into the
record, but I do not see why they should be read to the committee.
Senator C A P E H A R T . I think it is a very unusual situation when a
Senator asks to put into the record a large document with a lot of
names on it, and then objects to a citizen of the United States putting
into the record wires that he has received.
Senator M I T C H E L L . I do not ask that these 5 , 0 0 0 names be put into
the record, Senator. I merely want the committee to know that these
5 , 0 0 0 people in Seattle are very much in favor of the retention of a
strong OPA. I wanted the committee to know that in my mail I
have received 2,939 letters for OPA and 335 letters against OPA.
Senator C A P E H A R T . I have no objection to it. I think it is a
splendid thing. I think it should be in the record. By the same
token, I think this gentleman should be permitted to do the same
thing.
Senator M C F A R L A N D . Y O U waste more time talking about it than
it would take to read them all.
Mr. SEIDEL. I used to be a resident of your State, Senator Mitchell.
I was in Walla Walla for 4 or 5 years. Last Friday I was presented
with a can of peas from some people in Walla Walla, and they asked me
to bring a booklet down here entitled "Walla Walla, Wash., takes a look
at price control/'
Senator M I T C H E L L . I think that booklet should be in the record,
because it asks for continuation of OPA.
Mr. SEIDEL. It asks for temporary and limited continuation, with a
plan and policy for decontrol; a number of immediate changes with a
method for more flexible administration; stimulation of production to
provide consumer merchandise and more consistent employment; less
of piecemeal economic regulation; action now by Congress.
Senator C A P E H A R T . May I make this statement? The witness has
offered five amendments to the OPA Act. He has not asked that it
be eliminated, I have glanced through these amendments, and while
I have not read them carefully I think they are all fair and equitable,
and I want to congratulate the witness and the association which he
represents for not coming in here and asking that OPA be eliminated,
but, rather, that the act be amended to make it workable. I am in
hearty accord without having studied those amendments, but, reading
them hurriedly, they certainly show that they have studied the problem, and I think they are to be congratulated on trying to solve the
problem.
Mr. S E I D E L . May I put one more thing into the record?
The C H A I R M A N . An amendment?
M r . SEIDEL. N O , s i r .
The C H A I R M A N . Another statement?
Mr. SEIDEL. There is a lot of talk about
where our white shirts
are going. I want to show you an instance of where a large quantity
of white shirts are going. It was reported to me on last Friday that
the Ivy Export & Import Co. were holding 60,000 dozen white
mercerized broadcloth shirts at a price of $22.50 a dozen. They
would deliver these to anybody holding an export license.
On Monday morning, because it seemed completely unreasonable, to
me, that we should be exporting white broadcloth shirts, I assigned
a buyer to the job of looking into this thing, and in order to check it
we had to get an exporter to go with our buyer to check with the man.
1343 e x t e n d p r i c e c o n t r o l a n d s t a b i l i z a t i o n
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Here is what we found.
The Ivy Export & Import Co. has no listed address. They were
authorized to do business under an assumed name, or whatever
the legal terminology for that is, in February of this year. The two
members of the firm are a Brooklyn school teacher and his brother.
These people have the shirts. They refused to tell us who made them.
They refused to let us get a look at the warehouse stocks, but they
will present a sample of the shirt. They will put in any kind of a
label, in the collar, that we want, but they will only sell them with an
export license.
The price is entirely too high. The manufacturer of the shirts
involved has 7 2 0 , 0 0 0 shirts.
Senator M I L L I K I N . D O you know they have that many, or is that
what they said they had?
Mr. SEIDEL.That is what they say they have.
I reported the full circumstances of this matter to the Chief of the
Apparel and Textile Section. The Enforcement Branch of OPA in
New York City does not know whether he has any authority in the
matter or not. I do not know that they violate any law at all; but I
know we are shy of shirts, and it is reported that they have 7 2 0 , 0 0 0 .
Senator C A P E H A R T . That is a firm organized in February of this
year and they have an export license?
Mr. S E I D E L . N O ; they do not have an export license. They will
sell to an exporter.
Senator C A P E H A R T . And they say they have 7 2 0 , 0 0 0 shirts at
prices above the OPA ceiling?
Mr. SEIDEL. The O P A ceiling on shirts is variable, depending on
who has the shirts. It may be that this man can show that he has a
right to charge this price.
The C H A I R M A N . What do you mean by saying it depends on who
has the shirts?
Mr. SEIDEL. One manufacturer has one price and another has
another price on shirts. I do not know for a certainty that this man
does not have the legal right to charge $ 2 2 . 5 0 .
The C H A I R M A N . D O you know anything about that case?
Mr. SELLS. I do not know anything about the case. I have not
heard of this case. There was a rumor some time back of an even
larger quantity, which turned out to be nothing at all.
Mr. SEIDEL. This is beyond the rumor stage, because I gave a
buyer the job of tracing it down for a whole day.
Mr. SELLS. We will look into it.
Senator C A P E H A R T . Would you say that was a black market m
white shirts?
Mr. SELLS. I would not assume to say that.
Mr. L I E B E R M A N . Mr. Chairman, there is one thing in regard to
wash suits that I would like to state. When that was brought to our
attention we made an adjustment in the price. As a matter of fact,
I remember it clearly because we received one of the few commendatory letters received from the firm with regard to those wash suits.
The letter stated clearly that he was able to ship and that everything
was all right so far as he was concerned.
Mr. SEIDEL. I cannot keep checking on these things. Two of the
instances I cited were changed yesterday. I am glad they have
cleaned it up, if they have.
The C H A I R M A N . The next witness is Mr. W. D . Farr.
1344
extend price c o n t r o l and stabilization acts of
19 4 2
STATEMENT OF W. D. FARR, SECRETARY OF THE COLORADONEBRASKA LAMB FEEDERS ASSOCIATION, GREELEY, COLO.
Mr. F A R R . Mr. Chairman and gentlemen of the committee, my
name is W. D. Farr, of Greeley, Colo. I am a feeder member of the
Cattle and Beef Industry Committee. I am a member and representative of the Weld County, Colo., T-Bone Steak Club, whose 35 members feed over 50,000 cattle annually. I am also secretary of the
Colorado-Nebraska Lamb Feeders Association. The members of
this organization feed about one-fourth of all the lambs fed in the
United States. My father and I have fed both cattle and sheep for
over 50 years. I am the third generation in the feeding business.
I would like to tell you a few things about the feeding business;
why subsidies and price ceilings are unbearable in the livestock
industry; why you must eliminate livestock from these controls on
June 30, 1946, or permanently injure the livestock industry and reduce
your meat supplies for years to come.
I am a feeder, a middleman in the picture of meat production. Our
feed lots are a meat factory. We buy feeder animals that have grown
to approximately two-thirds of their slaughter weight on grass on our
western ranges. These cattle are our raw material. We feed them
our farm feed—grain, sugar-beet byproducts, alfalfa hay, protein
concentrates. After feeding a steer or lamb from 3 to 5 months, he
is a finished product, merchandise produced in a meat factory. That
is the way you get beefsteak, lamp chops, and other meats for your
table. From the time the range man breeds the cow until I produce
a fat steer takes about 3 years. On lambs it requires about 18
months. You can appreciate that changing controls every few
months makes intelligent planning and production impossible.
Senator M I L L I K I N . H O W much weight do you put on a lamb in
your feeding operation?
Mr. F A R R . Between 30 and 40 pounds, and between 250 and 400
pounds on cattle.
The uncertainty of OPA controls and subsidies on the necessary
long-range planning of a livestock operation is unbearable. We
accepted these controls during wartimes. We were assured the
would last as long as hostilities continued. Now we know they
expire on June 30.
What will the new rules be? How long will they last? Will we
have ceilings or subsidies, or will Congress realize the danger and
remove livestock and meat from subsidy and price control? These
questions are in every producer's mind in America. The livestock
man wants to produce meat for the consumers and during wartimes
we did produce the largest amount of meat on record. The only
reason that meat supplies are now shrinking is because of the unsettled
regulations, the unfair controls, and the farmer's distaste for doing
business in the black market.
If controls are removed prices will have to rise 15 to 20 percent to
offset the subsidies. These subsidies were originally put in as a
roll-back to hold the line. Then they were increased from time to
time to encourage production. Another use of the subsidy plan was
to establish ceiling prices on live cattle, and the subsidy payments
were used to bring about compliance with the price-control features
of the general stabilization plan. Today the only use that subsidies
1345 e x t e n d p r i c e c o n t r o l a n d s t a b i l i z a t i o n a c t s o f
19 4 2
have is not to encourage production, not to hold the line—it has been
broken too many times—but to hold down meat prices, absolutely
what is was not intended for.
The Department of Agriculture's "The Livestock and Wool Situation" March-April 1946, says:
Demand for meat will continue strong through 1946. Government purchases
for export will be at least as large as in 1945, and high incomes of domestic consumers will continue. Meat production probably will be close to the high of 1945.
Prices of all classes of meat animals will be at or near present levels through midyear, but during the later half of the year will depend partly on ceiling prices and
subsidy programs in effect. Without ceilings, the retail price of meat in the
second half of the year probably would average 15 to 20 percent above present
reported prices, with a somewhat greater rise taking place on the better grades and
more desirable cuts.
In other words, the Department of Agriculture is predicting that it
will increase just about what the subsidies amount to.
That is the latest official prediction of the Department of Agriculture. They estimate that prices will only rise to offset the subsidies.
That is a perfect situation. If prices do not rise to equal subsidies,
then the producers will have to stand the loss. In these times of
everything advancing it is hardly fair for a livestock producer to
take this loss. However, we are anxious to take this loss now, whatever it may be, and get bur business on a firm foundation. We
don't want any more subsidies, because we know that it will lead to
more and more. The further subsidies are carried the harder they
are to stop. You Senators know what happened in France. Subsidies on top of subsidies until finally the country collapsed.
Between 20 and 25 percent of the value of our cattle and lambs is in
subsidies. Certainly we are extremely vulnerable to have our inventory values reduced 25 percent overnight. Because of this threat,,
feed lots are being emptied and not refilled. Cattle, sheep, hogs are
not being bred. Everyone is waiting to see whether we will have the
same ordeal to face 9 months or a year from now. Or if OPA is extended, what will the new rules be? We cannot depend on any
promises of the Government. A year ago Clinton Anderson promised
the livestock producers of the Nation that we would have at least 6
months' notice before subsidies were ended. We could adjust our
operations in that length of time. In January Mr. Anderson told the
livestock world that he could not keep his promise. Congress would
have to vote and we would have to adjust overnight. Would you have
your feed lots full under these circumstances? Of course you wouldn't.
When feed lots are not full, meat isn't produced. Your butcher cannot supply the meat. The answer is that black markets will become
worse and worse and the meat still won't be produced, because of uncertainties.
We have about 80,000,000 cattle in the United States. Numbers
are at record heights; in fact, they should be reduced in case of drought
or short crops. We can and will produce meat in volume where it
can be sold in regular channels.
The legitimate packer cannot buy cattle in volume at the present
time, because almost all the cattle arriving at the markets are selling
above the compliance range. We feeders are getting the advantage
of the black market. We know our cattle are bringing about $1 per
hundredweight over compliance prices. We don't like this way of
doing business.
1346
extend price c o n t r o l and stabilization acts of
19 4 2
Livestock and meat are perishable products. Production is largely
governed by the weather, good crops, good grass, or drought. Normally these are the things that affect prices. Now, in addition to
this, we have changing controls from day to day. Monday of this
week the new quota system of sharing the livestock w^ent into effect.
Markets were shaky ; no one knew what the new regulations were,
and for a few weeks it may help put some meat in regular channels.
However, in a short time it will drive the buyers to the country,
where they will buy their supplies direct from the farmer and the
black market will go merrily on its way. About a month ago a corn
order went into effect where a farmer has to sign a slip when he purchases a load of corn, stating that he agrees to not feed his cattle
past A grade. How can a farmer tell when an animal is A grade
when we all know that upgrading is one of the keys to the black
market? But theoretically if he signs a slip and feeds a steer to AA
grade he is a criminal.
Now, gentlemen, here are the facts of the most vicious directive
that livestock production has ever faced—the new corn and wheat
purchase program by the Government. The average ceiling price
for corn on the farm was about $1 per bushel.
These prices are in western Nebraska and eastern Colorado, where
we are familiar with them.
The black market which was recognized by everyone'was about 30
cents per bushel on top of this. That is the reason the 30-cent figure
is being used. The Department of Agriculture realized they had to
equal or beat the black market to get the corn. Today a farmer who
produced the corn can sell it to the Government at 30 cents a bushel
premium if it grades No. 3 or better. No one else can pay over ceiling
prices. No livestock feeder, dairyman, poultryman, or anyone slse
can get corn at any legal price. The farmer who happens to have
raised some No. 4 or No. 5 corn does not have a very fair deal and he
is certainly entitled to a raise in his prices. We feeders were supposed
to get this offgrade corn. But do you suppose for a minute we can
buy it at legal ceiling prices? Of course not. We have to pay a black
market of 30 cents a bushel the same as the Government is doing in its
own purchases, and get poor corn to boot.
Farmers are even blending their No. 5 or sample grade corn with
their No. 2's and 3's so that it will not grade a No. 3 and be eligible
for Government purchase. They are black-marketing this corn now
for a 40-or 50-cents premium instead of 30 cents. Everybody buying
corn today has to patronize the black market. Either livestock,
poultry, dairy products, and so forth, will be liquidated in a very
short time—which, incidentally, is proved by the tremendous increase
in hog slaughter the last 10 days—or we producers will buy on the
black market and the jails won't be big enough to hold producing
America.
Senator M I L L I K I N . IS the effect of that Government purchase this,
that, first, it confirms what is the black-market price?
M r . FARR. Y e s .
Senator M I L L I K I N .
And confirming it, it sets a new springboard for
a further black-market price?
Mr. F A R R . That is exactly right, Senator. That is what it has
been in the last few days.
1347 e x t e n d p r i c e c o n t r o l a n d s t a b i l i z a t i o n a c t s o f
19 4 2
Senator HICKENLOOPER. In other words, this Government action
has simply jumped the black-market ceiling another 10 to 20 cents
above what it was?
Mr. F A R R . Yes; I think that is true in the State of Iowp,.
Senator HICKENLOOPER. I am quite certain that is true, from conversations I have had out there in the last few days.
Mr. F A R R . A feeder called me as 1 left home. He said he had 1,400
cattle in the feed lots, none of them ready to ship for at least 30 days.
He had 2 weeks' corn on hand—what should he do? My answer to
him was that he had better buy some black-market corn for a couple
of weeks, because I felt that livestock ceilings and subsidies would be
eliminated from the Senate bill in the same manner as in the House.
He stated that he would do that, 43ut if I was wrong and controls were
continued he was going to liquidate his cattle and lock the feed lot
until Congress ended controls. That is an absolute conversation, and
I know there are hundreds like him. We are tired of being forced to be
in violation of the laws in order to feed the country.
Gentlemen, I am telling you honestly and sincerely—OPA is making
crooks by necessity out of almost every farmer in this country. The
farmer's morale is breaking down; his respect of the law is breaking
down. He is a producer; he knows that OPA controls are ruining
him, and he feels that if the public could only know the truth, they,
too, would ask for the same relief.
Senator HICKENLOOPER. IS not the farm situation something like
this, at least under the present order? The farmer will have some
corn to sell, grade 3 or better; he gets what is at least alleged to be a
legitimate bonus of 30 cents a bushel under this Government purchasing plan?
M r . FARR.
Yes.
Senator HICKENLOOPER. His neighbor may have some corn that
is just under No. 3; the moisture content will still permit him to ship
it; it may not germinate quite so well, but it is pretty good corn.
Human nature simply will not let that one farmer that has the lower
grade corn, hold his corn when his neighbor is getting 30 cents a
bushel more for his?
Mr. F A R R . That is correct.
Senator HICKENLOOPER. And out in the agricultural areas of this
Nation it is probably the greatest stimulus in driving honest farmers
into the black market and saying, "Why should we comply with the
law when the Government recognizes the black market and pays 30
cents bonus? We are going to get it, too."
Mr. F A R R . That is just exactly what he thinks. He says, "This
is a legalized black market by the Government; so why should we
pay any attention to any OPA regulations in the future?"
Senator HICKENLOOPER. Don't you know, in your own area, or do
you know, dozens of law-abiding farmers who up until recently have
absolutely refused to deal in the black market and have refused to
sell to those that they thought were dealing in the black market,
because they thought they should try to comply with the law?
Mr. F A R R . Absolutely; and that is the reason that this whole
immediate picture has come to a head in the last few months and got
so much worse. During the war many of these boys from the farms
were in the service, and they just would not do those things, but now
1348
e x t e n d price c o n t r o l and stabilization
acts of
19 4 2
that the war is over there is a different situation. These folks do
not want to be criminals. During the war one of the feeders in our
area bought corn in the spring of 1943 when it was short, and they
prosecuted him and fined him for buying corn over the ceiling price,
which we are all having to do now.
Senator H I C K E N L O O P E R . I would suggest that out in your territory
now, if they started to fine a farmer for selling corn at a 30-cent bonus
there would be a riot out there, would there not?
Mr. FARR. Yes; there certainly would.
Senator H I C K E N L O O P E R . We were told, when this 30-cent corn
purchase came into effect that these 5 0 , 0 0 0 , 0 0 0 bushels purchased by
the Government were to be used by domestic consumers in order to
relieve the pressure on the industrial demand. We were told last
night that that must have been a mistake, because practically all of
these 5 0 , 0 0 0 , 0 0 0 bushels is now intended for overseas shipment. The
question I want to ask you is this—because I am still mystified by this
sudden change of policy and the fact that the program now seems
different from what it was a week or two ago---if this 5 0 , 0 0 0 , 0 0 0
bushels of corn is drained off by the inducement of a 30-cent bonus,
what is it going to do to the black market? Is it going to stimulate
the black market?
Mr. FARR. It will stimulate it. We have to have feed for animals,
and it just stimulates the black market.
Senator H I C K E N L O O P E R , Y O U still have the processors.
Mr. FARR. The Secretary of Agriculture the other day made the
statement here that it was for the relief of people who have pushed off
the bla^k market during the winter. Now they are buying corn and
subsidizing it back to those people, according to the Secretary's statement Monday.
Senator HICKENLOOPER. I tried to locate the Secretary yesterday,
but the paper says that he has gone down to the Kentucky Derby; so
I guess we will have to wait until Monday or Tuesday.
Mr. F A R R . I have a letter here from Mr. Guy Scudder of Sumner,
Nebr., dated April 30, 1946, and addressed to the Secretary of Agriculture, which reads as follows:
SCUDDER
M r . CLINTON P .
ANDERSON,
GRAIN
&
LIVE
STOCK
Co.,
Sumner, Nebr., April SO, 1946.
Secretary of Agriculture, Washington, D. C.
D E A R M R . A N D E R S O N : Enclosed you will find telegram which I received from
Commodity Credit Corporation, of Chicago. This in reply to my telegram to
Commodity Credit Corporation at Kansas City, last week, asking how I could
get* corn.
Now, this order, granting 30 cents per bushel for corn, for a limited time, with
no provision for the feeder, is just about the last straw, and it will put us out of
business in a very short time. It will bring forth the most acute shortage of meat
of all kinds, that this country has ever experienced.
I had 12,000 bushels of corn contracted, to be delivered right after corn-planting
time. Now that your order is out granting this 30-percent increase, these men
want the increase, which I feel they are entitled to. Yet, I cannot pay this
increase, and cushion the loss on my cattle. I am forced to stand by and see
this corn leave this section of the country, because I am prohibited by the OPA,
on one hand, to pay not over $1.09 per bushel delivered here for corn, which I
need for these cattle, and on the other hand, the Government will take it from
here at $1.39 per bushel.
All the corn which is left in this country around here, after expiration date of
this 30-cent order, will be held until October by the owners.
1349 e x t e n d p r i c e c o n t r o l a n d s t a b i l i z a t i o n a c t s o f
19 42
Mr. Anderson, I was good enough through these years of war, to go along with
the Government, feed more cattle and hogs, and did my best to produce more
corn and Atlas, putting up as much as 5,000 tons of silage per year, working
harder the past 5 years than any time in my life, in fact too hard, it has cracked
my health.
And now, in return for what I have helped during these years, you are putting
me out of business, and this within a very short time.
Now it appears this is your aim, and if so, I wish you would advise me, as I
can voluntarily liquidate $200,000 worth of cattle and hogs, to a lot better
advantage, than trying to stay the limit, and being forced out.
Yours very truly,
GUY
SCUDDER.
The
CHAIRMAN. Does that complete your statement?
M r . FARR. Y e s , sir.
The CHAIRMAN. Thank you very much.
Senator MILLIKIN. YOU have made a very fine statement, Mr. Farr.
The CHAIRMAN. The next witness is Mr. Flint Garrison, represent-
ing the Wholesale Dry Goods Association.
STATEMENT OF FLINT GARRISON, CONSULTANT FOR THE WHOLESALE DRY GOODS INSTITUTE, SCARSDALE, N. Y
Mr. GARRISON. I have a very brief statement that I wish to make,
Mr. Chairman.
My name is Flint Garrison. I live in Scarsdale, N. Y., which is
a suburb of New York City. My office is in New York City. I am
a publisher, but I am acting as consultant for the Wholesale Dry
Goods Institute, which is a national association of dry goods wholesalers. Our members are very sympathetic to the purposes of price
control, and for 4 years we have collaborated in every possible way
to help OPA attain its purposes. But the situation has reached a
point today where a general dry goods wholesaler finds it extremely
difficult to do business at all; and literally—and I hope you will take
this sreiously and exactly—it is* literally impossible for a general
wholesale dry goods merchant to operate legally at the present time.
By "legally" I mean to comply exactly, to the letter, with the various
price regulations to which he is subjected at the present time.
That situation arises from the fact that tl^ere is no general regulation
governing the operations of wholesalers. A wholesaler is controlled
by commodity regulations. The more commodities he handles the
more regulations he is subjected to.
Some of our members, in addition to carrying items coming within
the entire range of textiles and textile products, also handle what are
called variety goods which come within the realm of ceramics and
metals, and also home goods that come within the realm of wood and
rubber, furniture, and things of that sort.
About a week ago I asked one of the price administrators in OPA
what he thought was the number of price regulations to which one
of these general houses would be subject at the present time. He
thought the matter over very carefully and said he thought it would
be between 400 and 500 separate regulations that one of these general
houses would have to follow.
One house in particular has an expert with three assistants whose
sole business it is to keep track of these regulations. I asked this
expert, entirely independently of the OPA Administrator, what his
1350
extend price c o n t r o l and stabilization
acts of
19 4 2
estimate was. He thought about it carefully and reached the conclusion himself that it was between 400 and 500 regulations.
That is not the worst of it. Every price regulation is subject to
amendment. Each of these men estimated that on the average every
price regulation is amended from 5 to 6 times. Some of them are
amended more than 50 times. So if you take the lowest figure, 400
regulations, with 5 amendments, you have got 2,000 laws which a
general house of this character must observe.
And that is not the worst of it. Incidentally, if I brought here to
show you the bound volumes of all the regulations which some of
these houses would have to observe, it would be a 5-foot shelf of laws.
Instead of that, I bring merely a directory of regulations [exhibiting
a volume].
Senator M I L L I K I N . Y O U mean, that is an index.
Mr. G A R R I S O N . This is an index, a 500-page volume, an index of
regulations, the majority of which some of our members must know
about and study and endeavor to comply with.
To give you an idea of the complications of it, if you take the single
items of men's and boys' shirts, there are 9 separate regulations governing that line of goods; and if we apply the usual formula of 4
amendments to it, you have got 4 times 9, or 36 laws governing men's
and boys' shirts.
Senator M I L L I K I N . H O W many items will a dry goods wholesale
house handle? Or does that vary so much that you cannot give us
an estimate?
Mr. G A R R I S O N . It varies so greatly that we could not give you a
definite answer.
Senator M I L L I K I N . Think of one that might be typical of a wholesale dry-goods house. Make a rough guess at it.
Mr. G A R R I S O N . If you count as an item, for instance, the different
numbers in thread, as different items, a big house will have from
80,000 to 100,000 items. It depends on how you classify items, don't
you see?
Take cotton piece goods. It is subject to M. P. R. 39, 35, 118,
127, and 157. And that is not the whole story. Some regulations
are amended in another regulation which does not -carry the same
number. Regulation 127 has been completely revised three times
and amended frequently. You will find that 127 has been amended
in S. O. 14-E; and S. O. 14-E has been amended 39 times.
Senator H I C K E N L O O P E R . Y O U never can tell what the law is for
today until you open your mail this morning or read the paper,
under that system?
Mr. G A R R I S O N . That is true, sir.
Here is another difficulty. As manufacturers' prices are increased,
as they have been from time to time, and particularly during the last
year or so, in the cotton goods industry, due to the Bankhead-Brown
amendment, those advances sometimes raise the manufacturers' price
above the wholesalers' ceiling, and we must apply to OPA—we must,
for the group as a whole—for relief on those items. It takes varying
periods of time. There were a number of advances made in September
of last year, and in April of this year we got the last amendment
which corrected some of the prices of quite a wide range of merchandise within the original regulation. Some of them were amended in
3 months, some in 4, some in 5, some in 6; and we are still waiting
1351 e x t e n d p r i c e c o n t r o l a n d s t a b i l i z a t i o n a c t s o f
19 4 2
for an adjustment on merchandise which during that period was
priced on open pricing. Where it was known that the manufacturer
was going to get an increase, the wholesaler was permitted to bill
on an open price; but he is still waiting now to find out what his
surcharge can be on those items.
That is still not the worst of it, sir. Many of these regulations
which authorize a wholesaler to advance his price stipulate that he
must write on the invoice that he ships to his customer the facts
regarding that increase, what the manufacturer's increase was, how
much of it ought to be absorbed, and what part of it he could pass on
to his customer. He is required to pass that information on to his
customer, and in most of the regulations it provides that he must
state it on his invoices.
I had one of the houses fix up an invoice [exhibiting a document].
This is not a typical invoice, by any means. It is a reductio ad
absurdum to show what situation could develop.
A house dealing in a general line cannot write all of that on an
invoice. It is just a physical impossibility. They cannot do it. So
they have to devise various methods of handling the thing. Usually
what most of them will do is to have mimeographed copies of the
information which they have to send to the customer, and then they
will put on the invoice to the customer a code letter signal which will
identify the mimeographed copy of the regulation that he attaches.
Here is presumably a little invoice sent to a little variety store
amounting to some $340. That has 27 attachments to it, each with a
code indicia to show the little retailer how the wholesaler was authorized to increase the price and to show to the retailer what his price
should be.
That is by no means all of the notifications which could be attached
to one of these things; but I am merely offering that as indicating
The C H A I R M A N . I understood you to say that you were rather in
sympathy with the general purposes of price control.
Mr. G A R R I S O N . We are, sir; we are in sympathy with price control
and we actually want to see it continued.
The C H A I R M A N . With all these tremendous items—I think you said
that in one store there might be a hundred thousand different items—
how can OPA exercise its power over a situation of that kind without
knowing something about these items? What is your proposal?
Mr. G A R R I S O N . M y proposal is this. We have urged it on O P A
from the very beginning as being a simple, practical, realistic approach
to the whole problem of price control. We urge, so far as wholesalers
are concerned, and we believe it is applicable to manufacturers as
well as to retailers, that each seller be permitted to price his goods
based on his current costs, whatever the current costs may be, plus
his historic mark-up; that is, the mark-up which he employed on these
goods in a specific prewar base period.
Mr. Bowles has gone on record as saying that that would be
inflationary. I found it difficult to reconcile that statement with
Mr. Bowies'.own statement, which he made before r you gentlemen
here, in his able presentation of the effects of price control.
In order to show that price control had not injured business, Mr.
Bowles showed, and I think his figures are correct, that wholesale
business showed an increase in profit under price control of from 200
to 1,600 percent.
1352
extend price c o n t r o l and stabilization acts of
19 4 2
Now, I submit that it does not seem logical to say that to permit a
seller to go back to the margins that he employed in a base period,
from which he is now showing an increase of from 200 to 1,600 percent,
would be inflationary.
We urge you to consider that as one of the M outs" not only for
industry but for OPA.
I have been in conferences with OPA every week for 3 years.
I actually was a consultant to OPA in the early stages of price control,
and I have great sympathy for those men.' They have an extraordinarily difficult job, a thankless job, and they simply have now
got themselves into a situation where their own procedures cannot
possibly get them out. These delays that occur in adjusting prices
for different people are due to the fact of the complications of OPA
procedure and the inadequacy of the personnel in the organization at
the present time.
Senator M I L L I K I N . It is due also, is it not, to the complications of
our economic system, which is so complicated that no single agency
can do the necessary adjusting to everything all working together, to
keep in mesh with every other thing?
Mr. G A R R I S O N . That is right, sir.
It seems to me obvious that the quickest way that we can get
industry to operating, and at the same time not take the lid completely off of price control is to price on the basis of current costs plus
historic margins. I am fearful of the results if we did eliminate all
price control.
T h e CHAIRMAN. I a m , t o o .
Mr. G A R R I S O N . I am quite
fearful of what would happen. I think
in certain lines we would have a run-away market the like of which we
do not realize. But we could liberalize the whole thing by authorizing
the seller to take his current costs and add to those costs the mark-up
which he employed in a period prior to the war. I do not see how a
run-away market could occur under that.
Senator M I L L I K I N . That would probably result not in a fixed price
level, but it would be a stabilized level, would it not? It would be a
level that you would be capable of holding the line on?
Mr. G A R R I S O N . I think so. But, Senator, if the profits of wholesalers are running from 200 to 1,600 percent higher than they were at
a time when they used historic margins, I do not see why it should
result in an increased price level if we returned to those historic
margins.
Senator M I L L I K I N . Well, I regard that statement as an extravagancy.
Mr. G A R R I S O N . I think there is some truth in it. I do not know
how it is obtained, to tell you the truth.
Senator M I T C H E L L . May we have Mr. Sells' comment on that?
T h e CHAIRMAN. Y e s .
Mr. SELLS. Thank you
very much.
I would like to say that we in OPA have worked very closely with
Mr. Garrison and have a great deal of respect for him and have also
had some differences of opinion on some of these matters. I am sure
that Mr. Garrison will not object if I point out that the volume that
he mentioned a few moments ago is not an index of OPA regulations
but rather an index of commodities and services covered by OPA regulations. In other words, what it does is to list every commodity that
it has been possible to think of.
1353 e x t e n d p r i c e c o n t r o l
and stabilization acts of
19 4 2
The C H A I R M A N . Y O U mean, every item?
Mr. SELLS. Every item. Then it refers to the regulation which
applies to it and the page where it can be found in one of the directories
of the regulations themselves. On the other hand, I do agree that they
cover a very large number of regulations, and we have a serious problem.
Senator M I L L K I N . H O W many regulations do you have?
Mr. SELLS. We have 607, covering all items in all divisions of
industry.
Senator M I L L K I N . H O W many amendments to those do you have?
Mr. SELLS. I do not know for sure, Senator. There are some
regulations that have none, and I know of one that has 43.
Senator M I L L I K I N . Taking the number of regulations, plus the
amendments, it does mount up to a very sizable body of law?
Mr. SELLS. Yes. Of course they do not all apply to the wholesaler.
The problem which Mr. Garrison brings up is a very serious one in
which we are very much interested.
One of the problems at the present time, at this stage of price control, is that the wholesalers for the most part have their ceilings computed on practically everything they handle. The new amendments,
that are coming along make adjustments which they are requesting,
and we have in conjunction with Mr. Garrison worked out a good
many amendments granting relief on certain items as situations have
developed.
> If we were to establish a historic mark-up for the wholesaler there
would be a very great burden to each individual company to compute
the necessary mark-up that would establish their historic margins.
It would be necessary for them to examine their invoice for a period
of time and actually compute what their mark-ups were, item by item;
because I know Mr. Garrison will agree with me that it would not do
to have one mark-up for all items sold by the wholesalers. The
simplest way to do it would be to say X percent on everything.
They sell overalls at a very close mark-up, and other goods at a rather
long mark-up. So it would not be possible to do that.
Senator M I L L I K I N . In normal times the inventory man in a wholesale establishment or any other establishment does those things
almost automatically, does he not?
M r . SELLS. Y e s .
Senator M I L L I K I N .
He knows out of his own experience what the
normal mark-ups are?*
Mr. SELLS. But they vary from company to company.
Senator M I L L I K I N . Yes; of course; but within each company
presumably there is an inventory man who knows those things.
Mr. SELLS. We did this for the retailers about.a year ago, and
although generally they endorsed that measure as a very constructive
measure, we had more protests and more congressional mail on that
regulation than on any other regulation we ever issued at OPA,
because of the burden involved in computing the necessary mark-up
tables.
1 have looked over very carefully this invoice that Mr. Garrison
shows, and I do not believe it is quite as terrifying as the volume of
it would indicate, because a good deal of it is dittoed material which
would go in on certain items.
Senator M I L L I K I N . Psychologically, if a man is confronted with
reams of stuff like that it is awfully difficult to overcome in his mind.
1354
extend price c o n t r o l and stabilization
acts of
19 4 2
Mr. SELLS. Formerly the same kind of invoice notification was required on individual adjustments granted manufacturers. We have
eliminated that, and we have cut down the volume a great deal and
we are taking further steps in that direction.
The question that I am addressing myself to is whether you can
throw out the work of 4 years and the pricing which has already been
done and start out anew right here in what is practically the last lap,
I think that is something that has to be considered very carefully.
One further point, and that is that I believe that what Mr. Garrison is recommending, in addition to a change in method, is the abolition of cost absorption; and that is something which I think would
make price control impossible.
Senator M I L L I K I N . It would not make control impossible; it would
raise your level?
Mr. SELLS. It would raise it considerably, sir.
Senator M I L L I K I N . H O W much, do you estimate? Suppose you
went back to a traditional mark-up system all the way along the line:
how much would it raise prices?
Mr. SELLS. If you went all the way back and repriced everything
without any prospective judgment, there are some items that would
go up 15 or 20 percent. That is an offhand estimate, and I have not
computed it. I state it "off the cuff." Some might go up more and
some might not be so much.
Senator M I L L I K I N . Just roughly, all the way across the b.oard?
Mr. SELLS. My personal opinion is that it might mean a general rise
in prices of somewhere between 10 and 20 percent right away; possibly
more.
Senator M I L L I K I N . And having done that—and I am not now asking
that it should be done—you would then have brought business into
its normal method of operation; you would have great simplicity so
far as your own administrative job would be concerned; you would then
have a line which would be a normal and healthy line, and then if
you did not commence to interfere with that by granting increased
costs on items down at the lower levels, which in turn would cause
further increases, you would have real stabilization. But I am afraid
that when you get that stabilized line you would commence to undo
it by granting increases down below which would cause a new bulge
and break the line all over again.
Mr. SELLS. I think that using mark-up tables at this time would be
a big improvement over our present system. The cost of doing it is
something that we have to consider very carefully against the amount
of time that such regulation would be in effect.
I might say that we have worked on such a regulation and have a
draft in our office which we have talked about with wholesalers for
some time. Mr. Garrison has seen it, I believe. But there are a
great many problems involved in putting it into effect, and it would
take, I think, 3 months at least just to put the regulation into effect,
and every company involved would have a tremendous burden of work
in order to shift over from one system to the other.
Mr. G A R R I S O N . One other thing, Senator. Here [indicating] is a
recent regulation of OPA. This is MPR 602 governing nylon hosiery.
It limits the manufacturer's sales to wholesalers, to the same percentage of hosiery of all types, full-length hosiery, sold wholesalers in
1941. This regulation is working to the great disadvantage of small
1355 e x t e n d p r i c e c o n t r o l a n d s t a b i l i z a t i o n a c t s o f
19 4 2
wholesalers and small retailers, for this reason. Since 1941 there has
been a cleavage in the selling policies of manufacturers. Certain
ones have gone to the retail trade and others more to the wholesale
trade. This regulation requires those who have increased their percentage of sales to wholesalers to come back to their 1941 percentage,
but it does not require those who have increased their percentage to
retailers to come back to their 1941 percentage. So, automatically,
without any other consideration, there would be a decreased percentage going to wholesalers under that regulation, and there is at the
present time.
Now, I know the purpose for which that regulation was issued.
Wholesalers are granted a mark-up in order to do business, and retailers buying from wholesalers get a few cents a pair more; that is, retailers buying from wholesalers get a few cents a pair more for stockings than the would get going through cahin stores and department
stores. Because of that fact there has been an increase since 1942 to
1945 in the percentage of hosiery going through wholesalers. Somebody is making this extra profit.
On analysis, however, it can be shown that the percentage of increase of hosiery going through the channel to people who might ordinarily be expected to buy direct is a relatively small percentage.
But during those years from 1942 to 1945, inclusive,' there was a great
increase in the sales by wholesalers to large department stores and
other central retail units.
Now, having established that business through the largest stores
in the central shopping areas on their lines going through wholesalers,
the manufacturers, now that their percentage has gone back to 1941,
are doing what? They are taking care of their city trade. They are
taking care of these towns where their lines are sold and are cutting
off the smaller wholesalers who serve the small retailers, and the
small wholesalers are either having theif supplies greatly curtailed or
are being eliminated from the market altogether, and the smaller
retailers who depend on the wholesalers for their supplies are completely out of the market.
Senator M I L L I K I N . What is the remedy for that?
Mr. GARRISON. The remedy is to eliminate the wholesale limitation
percentage.
Senator M I L L I K I N . I have had complaints to that effect.
Mr. G A R R I S O N . That is the simplest, quickest, fairest way of
eliminating this inequity.
I just want to give you the magnitude of the inequity by these
figures. Here are letters from 40 wholesalers [exhibiting documents].
One group of 9 wholesalers has been either cut off completely or had
their supplies greatly reduced by a single manufacturer; and these
wholesalers I happen to know pretty well,, as to the size of them,
what the probable number of customers is. And there are 13,500
retailers represented in that group of wholesalers who are now wholly
out of the market so far as nylon hosiery is concerned.
The C H A I R M A N . Are they proposing any amendment?
Mr. G A R R I S O N . We have been agitating this matter since last November when the regulation first went into effect. We have argued
with Mr. Sells about it; we have brought it up to Mr. Baker, and Mr.
Baker now is giving it serious consideration. We are hopeful that
he will decide in our favor. But if he does not, the only way that
1356
e x t e n d price c o n t r o l and stabilization acts of
19 4 2
the 40,000 to 50,000 small retailers of the United States can get any
nylon hosiery, until there is an oversupply of it, and the only way
you can cover that is to amend the Price Control Act forbidding
OPA to place any limitation on the percentage of goods sold by any
seller to any buyer.
I think one other thing will interest you in that connection. This
regulation comes from a branch of OPA from which have come several
other regulations which have had to be terminated by act of Congress.
The grade labeling provision which was contained in the original
rayon hosiery regulation 339 in 1942 was drawn up in this same
branch by the same people tliat drew up this one.
Senator M I L L I K I N . There is a school of thought that believes that
the wholesaler, jobber, and distributor are excrescences on the body
politic?
Mr. GARRISON. Yes; and that belief seems to be quite prevalent in
that particular branch. The same branch introduced the highest price
line limitation on garments, which had to be thrown out by act of
Congress.
Senator M I L L I K I N . In other words, that is mixing political administration up with the business problem which they have before them?
Mr. GARRISON. It is a group of very sincere, honest young people
that want to reshape the world nearer to their heart's desire. They are
working in that direction. I cannot get mad with them. I know they
are in earnest, but they seem to disregard the effect of these regulations
on legitimate established business.
It is a conservative estimate to say at least 40,000 to 50,000—it is
more likely to be 100,000. Small retailers will be deprived of any
opportunity to secure nylon hosiery if this regulation continues.
We ask you seriously to consider an amendment to the Price Control Act that will prohibit OPA from channeling goods. That is a
function of CPA which can be exercised as and when it is necessary
to have it done.
Mr. SELLS. Mr. Chairman, I think it is important to make very
clear one thing. I am sure that Mr. Garrison had no intension of
creating the implication that we have any subversive element in the
Apparel Branch or in any other part of the agency. I would like to
state emphatically that every regulation that is issued has the approval
of the Deputy Director, the Deputy Administrator and the Administrator and is in accordance with his instructions and his policy.
Mr. Lieberman is head of the Apparel Branch, and it might be well
to have him state just what the considerations of this regulation
are.
The C H A I R M A N . Very well, Mr. Lieberman. I have not heard of
any subversive elements there.
Mr. L I E B E R M A N . In the first place, of course it is clear that we are
not out to change the methods of business. Certainly I would not
consider that for a minute. I have to pass on everything that comes
out of the branch. What we are doing in that regard is to reestablish
the percentage which went to wholesalers in 1941, which was the last
normal year; that is, the percentage of hosiery which went through
wholesalers.
The reason for that is that in a dollars-and-cents regulation, such
as the nylon hosiery regulation, the only way in which anyone can
get any change in price is through the extra handling through the
1357 e x t e n d p r i c e c o n t r o l a n d s t a b i l i z a t i o n a c t s o f
19 4 2
custom in the industry. Hosiery going through retailers normally
comes out at a somewhat higher price, and as result of having more
hosiery go through retailers there grew up the rayon hosiery regulation. We do not want to pick on the wholesalers in any regard at all.
Senator M I L L I K I N . I am getting quite a few complaints from
dealers in my State that they just cannot get this stuff through the
proper channels. How are we going to get at that and fix it up?
Mr. L I E B E R M A N . We made a survey recently of about 60 to 65
percent of the hosiery production, from actual reports from manufacturers that must report to us how much hosiery they sold through
wholesalers and through retailers directly, and that indicated, I think,
the most serious cause. We have a shortage. Shipments of nylons
by manufacturers during this quarter declined by 60 percent over the
hosiery shipments in 1941. That is the main trouble. You have a
terrific decline in production.
We also tabulated the amount which had gone through wholesalers
and we found that the figure for 1941, for this large sample, 60 to 65
percent of the production, was 30 percent distributed through wholesalers; and our tabulation to date, because we are still getting returns,
indicates that to date 28 percent also went through wholesalers.
That is, of course, 28 percent of that vastly reduced supply. In
other words, there had been a slight change, but we are prepared, if
there is a comparable change, to allow, enough tolerance so that the
wholesaler can get his full amount in the base period.
Senator M I L L I K I N . I think you fellows had better put your minds
on that, because we are getting an increasing number of complaints
on it.
Mr. SELLS. We have another report within another day or two.
The C H A I R M A N . When will that report be delivered?
Mr. SELLS. Mr. Baker is going over it, and we are examining the
reports that ar'e coming in.
Mr. G A R R I S O N . I would like to make a comment on the remarks
of Mr. Lieberman.
Anything I might say on this subject would naturally be biased.
I am on the wholesalers' side of this matter. But here is an analysis
of this regulation anS its effect, made by the staff of one of the congressional committees, and this is the language of a congressional
committee. It refers to the difficulty caused by the short supply of
nylon hose, which is the point that Mr. Lieberman has been making.
It says that these difficulties are much intensified and aggravated by
the further reductions of wholesalers caused by the order which I
have referred to, and that the little retailers are not only completely
cut off when wholesalers who formerly served them were eliminated,
but other small retailers are cut off when their wholesale supplier
receive reduced allotments; that this shows little regard on the part
of some manufacturers and wholesalers for the principle of equitable
distribution, but the result is not the restoration of a normal pattern
of distribution.
OPA claims that this is merely restoring the normal pattern of
distribution that existed in 1941. Here is a congressional committee
which says it is not restoring that normal pattern; that retailers are
being deprived of one of the most important items in the dry goods,
business at the present time.
85721—46—vol. 2
14
1358
extend price c o n t r o l and stabilization
acts of
19 4 2
(The invoices referred to and submitted by the witness are as
follows:)
National Distributors of General Merchandise
BUTLER BROS.
Chicago, St. Louis, Baltimore, New York, Minneapolis, Dallas, San Francisco
Randolph and Canal Streets, Chicago 80, 111.
Date: April 29, 1946.
Order No.: 1 2 1234,
Amount:
Folio:
X
Y
Z
Stock shipments: 2% 10 E. O. M. net
30 days from discount date.
GENERAL STORE,
Bills after 25th of month as offirstof
De Kalb, III.:
following month.
Interest charged on past due accounts.
In correspondence relating to this invoice, mention order number and date
of invoice.
Please Mail This Top Stub With Your Remittance
Route 1 2 1234
Date April 29, 1946
L2
El
G4
G5
D6
D4
G4
W1
CI
Kll
Yl
K5
G4
VI
V3
K2C...
N4
C481
B106
J317
L560FH
A702
H402
G140N
F180
C117
J221
RF116
P184
T300
R5-191
HI
K6
J1
K1
E3
HI
N6
C132
K121
RL526
G586
M217
RA406
RV616
RB215
L1142
E100
D102
A405-.
5713/B
A220
E715
A105
653
N6
9221..
N6
87406V.
N6
87406V.
SI
Kll....
K4
Kll....
K4
K2
G2
1
TERMS
1 only
12 yards
1 dozen
..._do
do
do
dozen...
1 only
1 dozen
do
26 pounds..
1 only
1 dozen
1 only
1 carton
1 set
1 only
1 dozen
do
1 only
1 dozen
1 only
do
do
1 dozen
10 only
2 pairs
1 dozen
30 yards. —
1 only..
Dripolator
Cambric
Work pants W C
Boys' apron overalls Y O _
Cotton dresses M P R 578-cotton_
Bathing caps R C
Shirts W S
Imported watch I W
Baby pants B P
Levels L T
Candy H C
Sauce pan H U
Work gloves W G . . i
Velocipede M T .
Cartridges A
Auto seat covers A O . . .
Occasional chair L F (SF)
Fountain pens P P
Hammer T
Oil stove K S
Toolbox AB
Oil stove D C
Oilcan O C
Men's raincoats N R
Women's anklets H R
*.._
Lamps S B .
C o w b o y boots S X
Teaspoons F
Damask T N
Nylon hose NS
Congoleum deluxe rug, 9 x 12 CILess 10 percent
Butler Bros.
$0.12H
13.57
.203^
.05
9. 25
.62
11.20
$1.51
1.47
22.40
15.09
12.35
2. 25
6. 79
16.97
2. 83
7.17
5. 33
4.90
6. 90
6.88
5. 76
4.29
10.84
18. 75
3.12
4.35
6. 60
4.15
.40
4.00
1.39
.50
18. 50
.51
18. 60
2.80
5.42
.54
Pabco stainless sheen guaranty
rug, 9 x 12 P C .
Less 10 percent
5.17
62 square yards
Carpet, at $2 per square yard
Adjustment charge, 43^ percent..
130.20
5.86
40 square yards
Carpet, at $2.50 per square yard.
Adjustment charge,
percent..
105.00
4.?3
.do..
$4.88
4.66
136.06
109.73
Indicates a price increase of 2 ^ percent has been authorized b y the O P A .
Some problems of pricing are still subject to clarification. The seller, in good
faith, has used its best judgment in pricing merchandise on this invoice, however, it reserves the right, in the event it is determined that any such merchandise is not priced in compliance with applicable governmental regulations, to
adjust any or. all of these prices accordingly.
1359 e x t e n d
price c o n t r o l
and stabilization
acts of
19 4 2
When we or our factories deliver goods to transportation companies in good
order our responsibility ceases, and any claims for loss or damage should be taken
up directly with the transportation companies. Claims, of any other nature must
be made within 5 days after receipt of goods.
The net selling prices of merchandise covered by MPR 127 or 102 do not
exceed the maximum prices permitted thereunder.
ITEMS
RETAIL
CODED
"WC"—REVISED
C E I L I N G P R I C E L I S T AS R E Q U I R E D
TRATION
N O V E M B E R 5, 1945
B Y T H E O F F I C E OF P R I C E
ADMINIS-
(Group II—Retail ceiling prices for staple work clothing bought from Butler
Bros., wholesale distributors)
NOTICE.—OPA requires that each garment must be marked with the retail
ceiling price. A garment must not be sold above the ceiling price, but may be
sold for less. This list must be promptly displayed to any person on request
during regular business hours.
The retail ceiling prices indicated in the list are those provided in the tables in
appendix C of RMPR 208. However, under that regulation, you may be required to sell at a lower price on the basis of the procedure outlined in section 4.4.
Accordingly, you should ascertain whether section 4.4 of RMPR 208 is applicable
to your case before selling at the prices indicated on this list.
Copies of RMPR 208 can be obtained from your nearest OPA office.
The retail ceiling price indicated in this column must be the ceiliifg prices listed
in the appropriate table in appendix C, based on the wholesaler's net selling price,
and reflect the differentials allowed for shipments between the "East and Central" and the "Mountain and Pacific" regions.
Butler Bros,
stock N o .
G4-J101
Jlll___
J114/2.
J121
J122
Description
M e n ' s 3.24-weight sanforized poplin shirt.
M e n ' s 2.85-weight work shirt jean
Sanforized 2.85-weight jean shirt
Sanforized 8.2 carded A r m y twill shirt
M e n ' s 3.24-weight sanforized poplin shirt.
do
M e n ' s 3.74-weight sanforized poplin shirt. _
M e n ' s 3.35-weight sanforized subpoplin
J131/2.
M e n ' s sanforized 6-ounce-weight shirt...
J133/2.
M e d i slub shirt
J135/2.
M e n ' s sanforized poplin shirt
J136/1.
J136/2.
J140/1.
J140/2.
J141
M e n ' s sanforized 2.85-weight jean shirt..
.do.
M e n ' s sanforized 6-ounce carded yarn twill.
do
J143/2.
.1145/2.
J147/2.
J148/2.
Men's
Men's
Men's
Men's
J149/2.
M e n ' s carded twill work shirts
J152/2.
J153...
J154...
J300/1.
J300/2.
J314/2.
J315...
J316-,T317--.
J321 —
J321/2.
J322—
Men's
Men's
do
Men's
do
Men's
Men's
Men's
do
Men's
Men's
Men's
J323
M e n ' s type 1 8.2 A r m y twill work pants
J327/2.
M e n ' s Medi-slub work pants. _ _.
$15. 88
13. 90
15.19
23. 37
'24. 60
23. 85
15. 48
15. 48
do..
J124/1.
J124/6.
J125/1..
J126/1.
J128/1.
Wholesalers net
ceiling price per
dozen, East and
Central
M e n ' s shirt sanforized shrunk oxford cloth..
M e n ' s carded twill work shirt
2-85-weight sanforized poplin work shirt
work shirts sanforized twill
8.2-weight sanforized N a v y twill work
8.2-ounce-weight twill work shirt sanforized.
work shirt 8.2-ounce-weight twill sanforized..
work shirt 2.85-weight jean H . B . W
work pants 2.50-weight drill
2.50-weight sanforized twill pants
work pants 2.50-weight H . B . W
work pants 2.50-weight drill
—
8.2 sanforized A r m y twill pants
work pants 8.2-ounce-weight twill
8.2 sanforized A r m y twill pants
t
.......
14.17
J17. 05
\16. 61
T24. 60
[23. 85
16. 70
f 16. 46
L I S . 93
15. 58
15.58
20. 34
20. 34
fl9. 06
[18. 38
J 6.46
25. 40
24. 01
25. 30
'25.48
24.09
22.80
17.50
17.20
19.20
19. 20
19.11
22.10
23.20
22.40
23. 52
25.90
25.89
'23.91
27. 93
20.10
19,10
LD
LB
D. S
C
M
D . S.
D . S.
D . S.
D . S.
D . S.
D . S.
D . S.
Group II—Retail
ceiling price per
garment, East
ahd Central
$2. 00
1.76
1.92
2. 95
3.11
3. 01
1.95
1. 95
1. 79
2.15
2.10
3.11
3.01
2.11
2. 08
2. 01
1.96
1.96
2. 57
2. 57
2. 40
2. 32
2. 08
3. 20
3.03
3.19
3. 21
3.04
2. 87
2. 21
2.17
2. 42
2.42
2. 41
2. 79
2.92
2. 83
2.97
3. 27
3.27
3. 64
3. 52
2.54
2. 41
LD
LB
D . S.
C
M
D . S.
D . S.
D . S.
D . S.
D . S.
P . S.
Wholesalers net
ceiling price per
dozen,
Mountain and Pacific
$14.15
15.44
24.85
24.10
14.
14.
17.
16.
Group II—Retail
ceiling price per
garment, Mountain and Pacific
85
41
35
91 D . i
3.14
3.04
F
D. i
1.87
1.82
2.19
2.14
D . S.
16. 95
16. 66
16.17
2.14
2.11
2.05
15. 83
20. 34
20. 34
1.99
2. 57
2.57
16. 71
2.11
24. 26
25. 55
25. 97
24. 50
23. 05
3.06
3.22
3. 27
3.09
2.91
17. 45
2.20
19. 70
19. 55
22.60
23.70
22.90
2.48
2.46
2.85
3.00
2.89
26.40
26.40
3. 33
3.33
20.60
19. 60
D . S,
«
aM
$1.79
1,95
F
D . S.
CO
O
O
2.60
2. 47 D . S.
O
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tg
Men's 2.60 weight sanforized twill pants.
D . S.
-do.
Men's 8.5-weight sanforized twill pants -
D . S.
Men's heavyweight twill pants.,
D . S.
.—.do
D . S.
do
— —
Men's 1.90-weight twill work pants
D . S.
Men's 8.5-weight sanforized herringbone twill work pants..
D . S.
Men's work pants 8.5-weight H.B. twill
Men's 8.5-weight sanforized herringbone twill work pants.
do.
Men's 8.5-weight sanforized sun tan twill pants..
Men's 8.2-weight sa'nforized sun tan twill pants..
Men's 8-2-weight saniforized twill work pants
D . S.
—
Men's carded twill sanforized pants
Men's work pants 8.2-ounce-weight twill
Men's work pants 2.50-weight twill H . B. W - .
do
Men's work shirt 2.85-ounce-weight jean
do. —
— Men's work shirt 8.2-ounce-weight twill
Men's work shirt jean weave
Men's work shirt jean H.P. weave
Men's 8-ounce sanforized denim bib overall (war model).
Men's 8-ounce sanforized denim bib overall
do
do
Men 1 8-ounce sanforized denim bib overall (war model) Men' 8-ounce sanforized denim bib overall-do
Men's 8-ounce sanforized denim bib overall (war model).
M e n ' s 8-ounce sanforized bib overall (war model)
do8-ounce sanforized denim bib overall (war model).
8-ounce sanforized denim overall pants
Men's 8-ounce sanforized bib overall (war model) _
do—
do...
Men's 8-ounce sanforized denim bib overall
-
D, S.
D . S.
D . S.
D . S.
D . S.
M
M
CLB
CB
CB-D.
D . S.
D . S.
2.4 §
2. 41
2.45
41
3.09
3.09
3.31
3.21
3.31
3.21
2.87
2. 75
3.34
3.15
3. 34
3.15
2.95
2.95
3.03
3.06
3.40
3.34
3.15
2.86
2.92
2.83
1.92
1.92
3.11
3.01
1.94
1.94
2.10
2.06
2.06
2.06
2.22
2.24
2. 28
2.10
2.10
2.10
2.10
2.10
2.10
2.10
1.76
1.64
2.30
2.15
2.12
2.90
D . S.
D . S.
19.94
19.55
2.52
2.46
24.9
3.15
26.75
25.97
D.
3.38
3.27
D . S.
26.95
25.48
D . S.
3.41
3.21
D , S.
24.50
24. 75
27.40
26.95 D . S.
25.48
23.20
3.09
3.12
3.46
3.41
3.21
2.92
22.90
2.89
D . S.
D . S.
D . S.
D . S.
D . S.
15.45
24.85
24.10
15.65
15.65
19.04
D . S.
.20.48
F
15.43
14.46
26.50
1.95
3.14
3.04
1.97
1.97
2.15
2.15
1.80
1.68
D
D
Butler Bros,
stock N o .
N200FK
N200FL
N220L
N221.
N223
N228
N230
N300FL..
N320L
N330
N331
N332
N340
N705
N706
N707
N708
N709
N710
N711
N712
F101FJ...
FIOIFK..
F102J
F102K
F210
F211
K105
Kill
K112
K126
K128
K134
K136
K137
K139
K142
K148
K149-5...
K151/5...
K165
Description
Men's 8-ounce sanforized denim bib overall.
Men's 8-ounce sanforized denim band overall.
do...
Men's 8-ounce sanforized overall pants..
Men's 9-ounce sanforized overall b a n d . .
.doMen's 8-ounce sanforized overall pants.
Men's 8-ounce sanforized overall coats (war model).
-do_
.do.
-do.
-do.
Men's 8-ounce sanforized overall jacket.
One-piece work suit, 8-ounce weight, sanforized covert
One-piece work suit, 11-ounce weight, sanforized tent twill-.-.
Men's work suit—8,5-ounce weight, sanforized
Men's 1-piece work suit, 2.50-weight, sanforized twill.
Men's work suit, 8.5-ounce weight, herringbone twill, suntan.
Men's work suit, 8.5-ounce weight, herringbone twill, white. ~
Men's 1-piece work suit, 2.35 drill
Men's 1-piece work suit, twill
Men's sanforized 3.90-weight chambray shirt
.do.
_do.
.doMen's 3.30-weight mill-finish covert shirt
Men's sanforized 2.85-weight covert shirt
Men's sanforized 2.85-weight covert pants
Men's sanforized 1.65-weight covert pants
Men's sanforized 8-ounce weight covert pants..
11-ounce-weight sanforized twill work p a n t s —
Men's 11-ounce-weight moleskin pants
—
Men's whip-cord work pants, sanforized
Men's 11-ounce sanforized whip-cord pants..
Men's 1.45-weight sanforized whip-cord pants
Men's heavy-weight twill work pants (moleskin pattern).
-doMen's sanforized drill pants.
Men's work pants, 1.65-weight covert.
Men's work pants, 8-ounce-weight covert
Men's 8,5-weight herringbone-twill, sanforized.
Wholesalers net
ceiling price per
dozen, East and
Central
$14.11 M
14.11 C D L B
15.39
14.90
14.11 D . S.
Group II—Retail
ceiling price per
garment, East
and Central
$1.64
1.64
1.79
1.74
1.64
fl4.90
114.11 C B - D . S.
15.30
18.55
19.98
19.06
19.36
19.06
17.90
32.14
f46. 55
[45.08 D . S.
37.00
1.74
1.64
1.78
2.10
2.10
2.12
2.15
2.12
1.98
3.96
5.85
5.70
4.66
41.60
40.40
38.60
39.20
10. 98
10.98
11. 30
11.30
11.07
11.96
14. 36
1& 16 C L B M
17. 05
25.28
r26. 85
[25.97 D . S.
19. 40
20.48 C L B M
20.19
26. 95
23.18
27. 30
18.30
21.50
5.32
5.10
4.86
4.94
1. 31
1.31
1. 35
1.35
1.34
1.45
1.77
2.37
2.11
3.19
3. 39
3.27
2.40
2.53
2. 49
3. 41
2. 92 .
3.45
2.26
2.65
27.30
MS
Wholesalers net
ceiling price per
dozen, Mountain and Pacific
Group II—Retail
ceiling price per
garment, Mountain and Pacific
CO
to
M
a
$14.45
15.77
F
$1.68
1.84
e
w
H
H
O
a
o
o
H3
W
O1
tr
>
v
15.09
19.04
20.48
2.15
2.15
32.93
47.04
45. 57
4.06
5.94
5.76
38.35
42. 95
41.15
39. 35
39.95
11. 22
4.84
5.42
5.20
4. 95
5. 06
1.34
1. 34
1.37
1. 37
11.22
11.54
11.54
o
w
w
cs
>
W
o
>
17.59
25. 77
2.18
3. 25
20.97
20. 68
2. 59
2.55
27.80
F
3. 52
Q
t-3
C
C
o
H-i
C
^O
to
K154
K155
K159
K170
3C180
G6-J140
J141
J177
J280
J352
J355
J381.
L121
L122
L140G—
L384/1
L385
L385G
L389
L392
L394
L395
L396
L397
L398
L502FJ—.
L560FH..
L564G—
L565
L567
L568
L570
L624
L160
F105
J138/1 —
J138/2
J146/2
K180
N709H..
G5-L380
L381
L382
L387
L399
J386
J390
G4-K115
K135
Men's work pants, 9-ounce-weight twill, sanforized.
Men's 1.66-weight sanforized whip-cord pants
Men's suntan sateen work pants
.
Men's heavy-weight corduroy pants
Men's seersucker work pants, sanforized
...
Boys' slacks
do
—.do
Boys' slack suits
Boys' pants
...
Boys' slacks
Boys' pants,
.
Boys' work shirt—
..
do
—
Boys' work shirt 2.85-weight sanforized.
Boys' work pants
do
Boys' work pants 2.50-weight
Boys' work and play pants
do
Boys' work pants.
do.
do
do
do
Boys' 8-ounce sanforized blue-denim waist band.
Boys' overalls
Boys' 8-ounce denim overall sanforized
Boys' 8-ounce sanforized bib overall
Boys' overals
_do.
do
do
Boys' work shirt
Men's sanforized chambray shirt
—
Men's 2.75-weight poplin work shirt, sanforized
Men's 2.75-weight poplin work shirt, sanforized
Men's work shirt, mercerized herringbone twill, sanforized..
Seersucker work pants, sanforizedMen's work suit, 8.5-weight herringbone twill suntan
Boys' work pants
.do.
do.
do
—
do.
Boys' wash slacks.
do
—
Men's 1.65-weight sanforized covert work pants
Men's 1.66-weight sanforized whipcord work pants..
16.60
16.90
2.65
2. 21
2. 76
4.10
2. 87
3.80
3.80
3.34
4.12
2.10
2.26
2.33
1.34
1.33
1.55
2.02
2.10
2.14
16.60 CL
16.70 B M D
17.80
17.10
16. 70
2.10
2.11
2.25
2.16
2.11
11.60
[10. 78 D . S.
15.09
15.68
15.09
1.36
1.26
1.68
1. 75
1.68
14.80
15.10
1.72
1.76
13.40
15.80
15.80
25.40
1.61
1.99
1.99
3.20
43.80
5.50
24.40
22.80
18.80
18.20
3.08
2.87
2.32
2.25
21.00
17.89
21.90
32.34
22.80
30.20
30.20
26.50
32. 59
16.60
17.89
18.50
11.19
11.10
12.35
16.00
20.50
18.38
22.39
2.59
2.32
2.82
30. 55
30.55
26.84
33.08
16.95
3.84
3.84
3.38
4.18
2.14
18. 85
11.19
11.10
12.50
16.35
16.75
17.05
18.00
16.95
2.36
1.34
1.33
1. 57
2.07
2.12
2.15
2.27
2.14
18.80
19. 38
11.90
11. 27
15.44
2.37
2.44
1.40
1.31
1.72
15.44
14.80
15.10
1.72
1. 72
1.76
13.90
15.20
13.65
1.76
1.90
1.64
16.05
2.02
23.30
44.55
22.40
22.40
26.00
22.60
25.40
2.95
5.62
2.83
2.83
3.28
2.85
3.20
23.15
2.91
&
M
H
£3
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1364
extend price c o n t r o l and stabilization acts of
ITEMS CODED
30-YARD
"YO"
MINIMUM
REVISED
BOYS'
1942
N O V E M B E R 5, 1945
BIB
OVERALLS
This notice is sent to you as required by appendix E of RMPR 208, which
covers sales of certain boys' bib overalls. We have been allowed to price these
overalls, lot No. G5-L560FJ under that appendix since they conform to the
prescribed yardage requirements. Whether you are a wholesaler or retailer,
this notice tells you how to find your maximum prices. You just be! certain to
follow the method set forth below in order to comply with the law.
HOW
TO COMPUTE Y O U R M A X I M U M
PRICES
Take the highest price you charged for a boys' bib overall, which you delivered
in March 1942, and divide that price by the net invoice cost of that garment to
you. If you did not deliver any boys' overalls during March 1942, take the
highest price you charged for men's bib overalls which you delivered during March
1942 and divide that price by the net invoice cost of that garment.
Multiply the percentage so obtained by the net invoice cost of the garment
being priced. The resultant figure shall be the maximum price of the boys'
overall being priced, but in no event shall the maximum price for a retailer be
higher than $1.61 a garment in the East and Central area (refers to sales in
which the seller's place of business is in a State east of New Mexico, Coloradoj
Wyoming, Montana, and the following counties of Texas: Loving, Ward, Reeves,
Peco, Brewster, Presidio, Jeff Davis, Culberson, Hudspeth, and El Paso) and
$1.64 a garment in the Mountain and Pacific area (refers to sales in which the
seller's place of business is in the States or counties previously enumerated, or
farther west). The maximum price for a wholesaler shall in no case be higher than
$14.88 per dozen for sales in the East and Central area and $15.23 per dozen for
sales in the Mountain and Pacific area.
"Net invoice cost" means the price on the face of the invoice less all discounts
available, but adding transportation or delivery charges.
If you did not deliver any boys' or men's bib overalls during March 1942 your
maximum price shall be:
Sales at wholesale:
$14.88 per dozen in the East and Central area.
$15.23 per dozen in the Mountain and Pacific area.
Sales at retail:
$1.61 per garment in the East and Central area.
$1.64 per garment in the Mountain and Pacific area.
The pricing method outlined above does not apply to special sales. Sections
3.3 and 4.5o F RMPR 208 tell you how to determine ceiling prices when there is a
special sale.
[RC]
Pursuant to section (f) of order No. 117 to MPR 220 we are herewith notifying
you of our maximum prices as wholesalers and of your maximum prices for sales
at retail of the following full heart-shaped molded bathing caps with and without
chin straps and made of natural and/or Buna-S rubber as follows:
Wholesalers' maximum prices per dozen, boxed
Aviator type (with chin strap)
Diver type (without chin strap)
$4. 60
4. 10
Retailers' maximum prices
(1) Aviator cap (with chin st^ap):
If your net cost per dozen, boxed, is 1 —
$3.78 or below
$3.79 to $4.20
Over $4.20...
_.
x
(2) Diver cap (without chin strap):
If your net cost per dozen, boxed, is 1 —
$3.38 or below
$3.39 to $3.75„
Over $3.75—
price
caP
$0.49
. 54
. 59
Fowr maximum price
veT caP
$0. 43
.48
. 53
i Net cost m a y be defined as invoice cost not including freight, Quantity discounts, and cash discounts.
1365 e x t e n d p r i c e c o n t r o l a n d s t a b i l i z a t i o n
acts of
19 4 2
[WS]
Maximum retail prices, cotton flannel shirts, RMPR No. 504
Retail ceiling
price
Butler Bros,
stock No.
Description
Weight
Shrinkage
3.50
3 yards..
...do
7 ounces.
...do....
...do
—do....
3 yards..
Unshrunk.
—do.
...do
...do
...do
Sanforized
Shrunk.
—do
Unshrunk.
—do
—do
Sanforized
Shrunk.
—do_
Unshrunk.
4.50
...do
G4-G139
G4-G140—
G4-G140N.
G4-G141
G4-G141H.
G4-G150
Plaid (men's)
do..
G4-G151
G4-G300
G4-G411/1..
G4-G411/5..
G4-G420/1-.
...do.-Solid color "(men's).
3 yards..
Solid color twill domet (men's). . . . d o . . . .
...do....
7 ounces.
G4-G420/5..
G5-L261-G5-L263G...G5-L265
!IIIIdoIIIIIIIIIIIIIIIII"IIII!
Boys' plaid flannel shirt, inand-outer.
Boys' plaid flannel shirt, regular style.
Boys' plaid flannel shirt, inand-outer style model.
Butler's wholesale
ceiling price
MounEast
East
tain 1
and 1
and
and
Central Pacific Central
3 yards.. . . . d o
$1.50
1.61
1.67
1.93
1.93
2.23
$12.77
213.00
13. 57
15. 57
1.96
16.20
18.00
2." 26
$1.64
2.23
1. 71
1. 59
1.59
2.16
1. 63
1.63
2.19
18. 71
13. 90
12.87
12. 87
17.48
2.16
1. 25
2.19
1.26
17.48
10.03
1.42
11.19
9.17
1.14
» CLBMD.
These prices do not exceed our maximum prices under section 9 of RMPR
No. 499. The maximum prices for any sale of these watches to purchasers for
resale are indicated on this invoice.
[LT]
NOTICE OF OPA ADJUSTMENT
Order No. 94 under second revise order No. A-3 under MPR 188 authorizes
all sellers of the articles covered by this invoice to adjust their maximum prices,
in effect prior to May 26, 1945, by adding no more than the exact dollar-and-cents
amount of the adjustment charge appearing on this invoice, provided that the
amount is separately stated on an invoice which contains this notice.
[BP]
In accordance with section 9 (c) of MPR 220, we are hereby furnishing the
following notification:
Stock No.
C1-C100
Description
Baby pants
C1-C117
do
C1-C125
C1-C142.
C1-C143A
do
do
do
C1-C143B
do
C1-C186
C1-G126
C1-G170
C1-G374
...do
Rubber crib sheets
do
Rubber crib sheeting
Maximum retail
selling price
$0.35 each, M D .
$0.39 each, F.
$0.39 each, C L B M D
$0.45 each, F.
$0.55 each, CB.
$0.50 each, M D .
$0.50 each, C L B M D .
$0.55 each, F.
$0.50each, C L B M D .
$0.55 each, F.
$0.65 each, C B D .
$0.69 each, L M .
$0.45 each, C L M B D .
$0.50 each, F.
$0.85 each, C L M B D .
$1 each, F.
. $1 per yard, C L B M D .
$1.05 per yard, F.
1366
extend price c o n t r o l and stabilization
acts of
19 4 2
[HC]
The Office of Price Administration has established maximum prices for sales of
this hard candy. Our billing is in accord with the prices so established. You are
authorized to sell this candy at retail at prices not in excess of the following
retailer's prices:
B u l k hard candy shipped from stock
YI-RF116...
YI-RF117
YI-RF118
YI-RF121
YI-RF135
YI-RF149B
YI-RF166
YI-RF119.
YI-RF145B
. Butler Bros. O P A maximum price
Retailer's
maximum
O P A price
(cents)
Branch
33 C L B D .
33 M D .
33 C L B M F .
33 C M .
33 C M .
33 C L M .
33 M .
35^ C.
35H L B .
20H cents delivered, prepaid
do
do
do
do
do
do
23 cents delivered, prepaid
do
[HU]
Zone I is that area of the following two in which a household aluminum cooking
utensil is manufactured. The other area is zone II.
One area consists of the States of Washington, Oregon, California, Nevada,
Utah, Idaho, Montana, Wyoming, Colorado, New Mexico, Arizona, and the
following counties of Texas, El Paso, Hudspeth, Culberson, Jeff Davis, Presidio,
Brewster, Terrell, Pecos, and Reeves.
The other area consists of the remaining counties of Texas, all the other States,
and the District of Columbia.
Articles for which the retail ceiling price in the zone in which it is manufactured
is 30 cents or less are not required to be tagged with retail ceiling price.
APPENDIX
C
[WG—Revised November 13, 1945]
Retail ceiling price list for work gloves bought from Butler Bros, and which are covered by amendment No. 2 to Revised Maximum Price Regulation No. 506
(NOTICE.—Each pair of gloves must be marked with the ceiling price. A pair of gloves must not be sold
above the ceiling price, but m a y be sold for less. This list must be promptly displayed to any person on
request during regular business hours)
Mill N o .
Description
Butler
Bros. 1
price
8445....
9445....
8647....
9647....
4644....
475B...
31-320..
4027....
475
975
875
224
224....
3130...
3160...
419....
420....
334...
230...
230B.
1
Leather palm gloves.
do
do
do
Leather-faced gloves.
Leather palm gloves.
.do
do
.do.
.do.
.do.
do
do
.....do
do
do
do.
.....do
....
do
do
Husking gloves.
do
Subject to Butler Bros. 2 percent discount.
$7.04
7.65
8.48
9.10
7.16
4.00
8.37^
4.13
4.13
4.35
4.25
8.80
9. 40
8.80
7.04
7.65
8.80
8.18
2.11
2.09
Table in
Butler
appendix
Bros, net
A of
ceiling
RMPR
price
N o . 506
$6.90
7.50
8.32^
8.92^
7.02y2
3.92^
8.37 y2
4.05
4.05
4.27 K
4.17 K
8.62^
9.22^
8.62y2
6.90
7.50
8.62y2
8.02 y2
8.32 y2
7.92 y2
2.07H
2.05
1367 e x t e n d p r i c e c o n t r o l a n d s t a b i l i z a t i o n a c t s o f
19 4 2
JRetail ceiling price list for work gloves bought from Butler Bros, and which are covered by amendment No. 2 to Revised Maximum I rice Regulation No. 106—Con.
Department
G4—But- MH1 No.
ler Bros.
Stock No.
1V102..;.
W103-...
W161_...
TV300....
W301_...
TV302
W400
W401
TV402_.__
W403
W500
W502
W503
"W506
W508
W522
W525
W540
W560
W562
W582
250....
270....
770
5031...
8031...
9031...
2265...
2265B.
2265J..
76
8552...
8532...
8532B.
551....
533....
512B_.
533B_.
5533...
5573...
5574J..
955....
36
W600
36B
W602
37
W603
*W604_... 310
W605-... 7701...
"W606
G1-J304.- 407.
Butler1 Butler Table in Maximum
Bros. Bros, net appendix retail
gross ceiling A of ceiling
price
price RMPR price per
No. 506 pair
Description
Husking gloves
$2.36
do.__
2.60
Husking mittens
2.80
Brown palm, white canvas back glove. 2.98
3.36
do
3.69
do
2.93
Chore gloves
2.90
do
3.06do
2. 67
do
2.16
Cantonflannelgloves
1.88
White canvas gloves
1.85
do
:
1.71
6-ounce cantonflannelgloves
1.88
White canvas gloves
1.65
1.85
::::doi::::::::::::::::::::::::::::::::
2.11
do—
2.34
do...
2. 50
do *
2. 98
do
...
2.16
Jersey gloves
2.11
.....do..
2.29
.....do
2. 55
do
1.42
do
1. 73
3.03
i4-ounce Jersey gloves
$2.32M
2. 55
2. 75
2.92^
3. 30
3. 62H
2. S7H
2.85
3.00
2. 62^
2.12
1.85
1.82M
1.67J4
1.85
1.62H
1. 82H
2; 07y2
2. 30
2.45
2. 92M
2.12^
2.07 y2
2. 25
2. 50
1.40
1.70
2.97y2
.31
.33
.37
.41
.32
.32
.34
.30
.24
.21
.20
.19
.21
.18
.20
.23
.26
.28
.33
.24
.23
.25
.28
.16
.19
.33
i Subject to Butler Bros. 2 percent discount.
[MT]
Under MPR 188 order No. 4 under section 9 (0) we have adjusted our maximum
prices as follpws:
Description
Stock No.
T1-RN185..
"V1-RJ181..
"V1-RJ193..
V1-RJ195-.
V1-RJ715.
V1-RJ725.
V1-RJ735.
Stake truck:
C
L
B
M.
D
F...
Junior toy, No. 240,12-inch velocipede:
C
L
B
M...
D
F
Junior toy, No. 241,16-inch velocipede
C
L.
B
M
D
F
Junior toy, No. 242, 20-inch velocipede
C
L
B
M
D
F
Kalamazoo, No. 01, 37-inch sled: B
Kalamazoo, No. 02, 41-inch sled:
C
B
Kalamazoo, No. 03, 46-inch sled: O....
Old ceilingNew ceiling
$12.27
12.47
12.29
12.66
13.61
14.32
5.95
5.95
5.95
6.25
6.25
6.25
6.75
6.75
6.75
6.95
6.95
6.95
7.50
7.50
7.50
7.75
7.75
7.75
17.25
20.02
20.71
24.25
$13.86
14.06
13.88
14.24
15.24
15.91
6.88
7.10
7.29
7.30
7.85
8.21
7.71
7.97
8.17
8.19
8.83
9.25
8.61
8.89
9.13
9.14
9.86
10.33
22.35
26.09
27. 21
29.75
1368
extend price c o n t r o l and stabilization acts of
Stock N o .
Vll-M367._
V4-RN251
V4-RN350
V4-RN351
Description
Kitchen cabinet:
C
L
B.
M
D._
F_.
South Bend, N o . F436, doll carriage:
C
L
B.
M
D.
F
South Bend, N o . C907, doll carriage:
C._
L
B
M
D
F
South Bend, N o . C919, doll carriage:
C
L.
B
M
D
F
19 42
Old ceiling N e w ceiling
$11.39
11.54
11.37
11.61
12.30
12.62
$11.72
11.87
11.70
11.94
12.64
12.96
5.35
5.35
5.35
5.35
5.50
5.50
6.40
6.55
6.65
6.70
7.15
7. 30
5.50
5.50
5.50
5.50
5. 50
5.75
5.80
5.95
6.05
6.15
6.60
6.85
9. 25
9. 25
9. 25
9. 25
9. 25
9.60
10.40
10.70
10.85
11.00
11.80
12.20
You will determine your ceiling prices for sales at retail, by adding your '''initial
percentage mark-up" which you determined under M P R 210 to the new ceiling
prices shown above.
M . C . POND,
J. A . DONALDSON.
[AC]
As a reseller you will determine your maximum prices on stock numbers;
K2C-K120, K2C-K121, K2C-K123, K2C-K126, K2C-K127, K2C-K122, K2CK124, K2C-K125, K2C-K128, and K2C-K129, under order No. 3 under order
4418 to MPR 188 according to the following section of this order:
Purchasers for resale of such articles, which the manufacturer has sold at
adjusted maximum prices, shall determine their maximum resale prices, as
follows:
(1) A purchaser for resale who delivered or offered for delivery during
March 1942 an article which meets the definition of "most comparable commodity" contained in section 1499.3 (a) of the General Maximum Price
Regulation, except that it need not be currently offered for sale, shall determine his maximum resale price by adding to his invoice cost the same markup which he had on that comparable article, according to the method and
procedure set forth in that section.
The determination of a maximum resale price in this way need not be
reported to the Office of Price Administration. However, each seller
must keep complete records, showing all the information called for on
OPA Form 620—759, with regard to how he determined his maximum
resale price, for inspection by the Office of Price Administration, for so
long as the Emergency Price Control Act of 1942, as amended, remains
in effect.
(2) If a purchaser for resale cannot determine his maximum resale price
under the above method, he shall apply to the Office of Price Administration
for the establishment of his maximum resale price under section 1499.3 (c)
of the General Maximum Price Regulation. Maximum resale prices established under that section will reflect the supplier's prices adjusted in accordance with this order.
1369 e x t e n d p r i c e c o n t r o l a n d s t a b i l i z a t i o n a c t s o f
19 4 2
[LFi
Stock N o .
Unadjusted
maximum
prices
Description
club
$25.93
25.69
25.30
26.16
26.87
10.50
10.44
10.49
10.63
10.64
10.86
10.84
10.77
10.83
10.97
10.97
11.20
11.18
11.11
11.17
11.30
11.31
11. 53
14.61
14. 53
14. 63
14.78
14.78
15. 25
15.09
15.00
15.11
15.12
15.12
15. 72
15. 56
15.47
15.59
15.72
15. 72
16.19
13.99
C
L
B
M
D
C
L
B
M
D
F
C
L
B
M
D
F
C
L
B
M
D
F
C
L
B
M
D
F
C
L
B
M
D
F
C
L
B
M
D
F
C
wing
13.91
13.97
14. 25
14.32
14.99
14.67
14. 58
14. 65
14.92
14.99
15. 65
15. 35
15. 26
15. 33
15. 66
15. 91
16. 32
12.10
L
B
M
D
F
C
L
B
M
D
F
C
L
B
M
D
F
C
12.03
12.12
12. 30
12. 31
12.78
12.58
12. 50
12. 59
12.77
12.78
13. 25
L
B
M
D
F
C
L
B
M
D
F
}?4-RG182____ Wardrobe
N4-RL525
Occasional chair
N4-RL526
....do
N4-RL527
. . . do
N4-RL528
do.
N4-RL529
do
N4-RL530
do
N4-RL531
High
back
rocker.
N4-RL532
do
N4-RL533
do
N4-RL534....
N4-RL535
-
Occasional
chair.
do
-
Stock No.
Description
Unadjusted
maximum
prices
$13.05
12. 97
13. 06
13.24
13. 25
13. 71
10.
97
Occasional
chair
N4-RL537
10.91
, 11.00
11.10
11.11
11.33
do
11.31
N4-RL538
11.25
11.30
11.44
11.45
11. 67
occasionHigh
back
8. 05
N4-RL539
8. 01
al chair.
8.04
8. 21
8. 23
8.46
8.53
Occasional rocker.
N4-RL540
8. 48
8. 51
8. 68
8.70
8. 92
7. 71
N4-RL541.... High back o c c a 7. 67
sional chair.
7. 72
7.88
7.89
8.12
11.65
Occasional chair
N4-RL542
11. 58
11.64
11. 77
11.78
12.00
8.19
Occasional rocker. _.
N4-RL543
8.14
8.17
8.35
8.36
8. 59
6. 53
Bathinette
N4-RB351
6. 71
9. 84
Cocktail table.
N4-RC814
9.84
10- 07
8.56
End table
N4-RC815
8. 53
8. 65
Lamp table
8.83
N4-RC816
8. 82
9. 00
Baby bathinette
6.97
N4-RB354
7.00
7. 35
Crib
14.34
N4-RB151
15.05
15.40
15. 44
16. 47
16. 56
:____do
18. 30
N4-RB155
18. 69
18. 72
19. 57
Baby bathinette
6.81
N4-RB354
N4-RL536
O c c a s i o n a l wing
chair.
C
L
B
M
D
F '
C
L
B
M
D
F
C
L
B
M
D
F
C
L
B
M
D
F
C
L
B
M
D
F
C
L
B
M
D
F
C
L
B
M
D
F
C
L
B
M
D
F
L
M
C
L
M
C
L
M
C
L
M
L
M
F
C
L
B
M
D
F
L
B
M
D
B
1370
E X T E N D PRICE C O N T R O L A N D S T A B I L I Z A T I O N ACTS OF 1 9 4 2
[LF]—Continued
Stock No.
N4-RN201 _
Description
N4-RB350-.
Innerspring
tress.
Bathinette.
mat-
N4-RL474-.
N4-RL473-N4-RL472..
N4-RL471-.
N4-RL470-.
N4-RL469..
N4-RL468..
N4-RN309N4-RB355..
Platform rocker..
do
do
do
do
do
do
Crib mattress
Baby bath
N4-RC251..
N4-RC561N4-RC787--
Lamp table
Occasional table
Cocktail table
Unadjusted
maximum
prices
$26.16 C
6. 51
6.53
6.47
6. 71
15. 96
15. 41
14.87
14.33
13. 78
13. 24
12. 97
7. 77
8.07
8.06
8.01
8.28
8. 40
10. 65
28. 05
14.18
14.49
14.85
14.
14.98
15. 48
20. 25
19. 76
19.94
19.66
19. 72
20. 22
15.84
•15.95
16.18
15.93
16.06
16.48
11.31
11.72
15.37
15.23
15. 72
15.47
15.60
16.02
14. 78
14.90
15.13
14.89
15.03
15.44
21.23
19.80
20.07
20.45
20.08
20.43
21.04
27.40
16.36
14.49
14.36
15.16
14.83
15.28
15. 78
25.94
2.48
7. 56
12.38
19.83
19. 78
11.67
11.58
11.90
11.85
11.72
13 06
53
N4-RF576__.
N4-RC276..
Bed
Lamp table.
N4-RC277-.
_do.
N4-RC280-
_do_
N4-RC286-.
.do.
N4-RC287..
.do.
N4-RC394...
N4-RC459...
Step table
Cocktail table..
N4-RC762..
N4-RC770..
N4-RC595..
do.
do
Occasional table-
N4- RC576...
N4-RK233-N4-RC371...
N4 RC605...
N4-RG218...
N4-RG219...
N4-RL550...
Tier table.
Chair
End table
Telephone set...
Bed, full size
Bed, twin size...
Occasional chair.
C
L
B
M
C
C
C
C
c
c
c
M
C
L
B
M
D
C
D
C
L
B
M
D
F
C
L
B
M
D
F
C
L
B
M
D
F
M
F
C
L
B
M
D
F
C
L
B
M
D
F
D
C
L
B
M
D
F
D
F
C
L
B
M
D
F
D
M
C
C
L
L
C
L
B
M
D
F
Stock No.
N4-RL551
Occasional chair.....
do._.
N4-RL549
N4-RC767
Unadjusted
maximum
prices
Description
• Cocktail table
N4-RF483
Chest
N4-RF484
Bed
N4-RF561
N4-RF562
N4-RF563
N4-RF564
N4-RF565
N4-R J] 51
Chest of drawers
Bed..
Vanity
Chest of drawers
Bed
5-piece.dinette s e t . . .
c
X4-RJ191
do.
N4-RJ193
do
do
N4-RJ194
N4-RC259.... Lamp table..
.
.
N4-RM270:.. Box spring
N4-RN271
do
N4-RN202--. Innerspring
tress.
do
N4-RN203
N4-RN316
mat-
N4-RL502
Innerspring crib
mattress.
Occasional chair
N4-RL504
Rocker
N4-RL522
Occasional rocker
N4-R B325... Nursery chair
N4-RB327
$12.39 C
12. 29 L
12.62 B
12. 56 M
12.43 D
13. 24 F
10. 69 C
10.60 L
10.92 B
10.88 M
10.75 D
12.09 F
4. 73 C
4.92 L
23.72 C
23. 61 L
23. 51 B
24. 30 M:
20.63
20.51 L
20. 52 B
20.89 M
22.02 M
16.89 M
33. 77 M
26. 44 M
19.14 M"
28.86
28.64 L
29.18 B;
30.90 F
28. 04 C
28. 59 L
29. 25 B
29. 83 M
30.97 D
30.20 F
33. 87 B
34. 57 M
35.72 D
35.00 F
39.74 F
10.90 L
11.15 M
11.11 D
17. 56 C
14.10 M
25. 36 C
26.11 M
17. 56 C
18.18 M
25. 36 C
25. S5 M
8. 78 C
& 92 M
10.30 C
10. 21 L
10. 53 B
10.50 M
10. 37 D
11.71 F
13.38 C
13.27 L
13. 65 B
13.62 M
13.87 D
14.45 F
10.6FR C
10. 57 L
10.90 B
10.85 M
11.08 D
12.11 F
2. 69 C
2.78 L
2.83 B
2.84 M
2.94 D
3.01 F
1.64 C
do
...
c
1371 e x t e n d p r i c e c o n t r o l a n d s t a b i l i z a t i o n a c t s o f
19 4 2
[LF]—Continued
Unadjusted
maximum
prices
Description
Stock No.
N 4 - R B 3 2 7 - . . Nursery chair
N4-RF581- — Dresser
Vanity
N4-RF582
N4-RF583,.-" Chestrobe
N4-RF584-"-- Bed
Night table
N4-RF585
Chair
N4-RF586 *
N4-RF587.~-_ Vanity chair
Chest
N4-RF588
N4-RF589
Bed
N4-RC346
End table
N4-RC800
_ .
do
N4-RC801
Lamp table .
N4-RC802
Coffee table.
N4-RC803
N4-RC771
N4-RF481
Book trough
table.
Nest of tables
Dresser
N4-RF482
Vanity.--
N4-RF485
Bench.
N4-RF486
N4-RF507
3-piece
suite.
do
N4-RG186
N4-RK205
Chestrobe.
Chair...
N4-RS134
Dinette chair
and
bedroom
N4-RN204
Innerspring
tress.
N4-RN205
do.
mat-
N4-RL503-..
Occasional chair
N4-RW109...
Card table
$1.71
1.75
1. 75
1.83
1.88
38.02
50.17
46.01
30. 95
11.90
6. 75
7.31
24. 93
25.06
24.68
23.35
16. 73
16.82
16. 56
15.60
9. 30
9. 30
9. 45
2.08
2. 05
2.08
2. 05
2.08
2.05
2. 08
2.05
25.82
30. 46
30.84
29.95
31.56
32.08
32. 37
31.34
32. 96
6. 76
6.83
6.64
6.89
99.41
L
B
M
D
F
B
B
B
B
B
B
B
C
L
B
F
C
L
M
F
L
M
D
M
D
M
D
M
D
M
D
M
C
L
B
M
C
L
B
M
C
L
B
M
C
54. 51
54. 54
55.02
25. 71
5. 65
5. 69
6.03
6. 26
6. 52
6. 64
6.70
6. 54
6.87
20.41
21.08
20.51
21. 37
16.03
16. 77
16.29
16. 93
14. 60
14. 50
14.88
14.82
15.06
16.15
5.72
5. 79
5. 93
5. 69
6.02
6. 04
C
L
M
M
C
L
M
D
C
L
B
M
D
C
L
B
M
C
L
B
M
C
L
B
M
D
F
C
L
B
M
D
F
Stock No.
N4-RW203—
Unadjusted
maximum
prices
Description
Card table chairs
Chest
N4-RF591
Bed
N4-RF592
Night stand.
N4-RF593
Bench..
N4-RF594
Bed
N4-RG260
N4-RH145 — 8-piece dining room
suiteLamp table
N4-RC823
Cocktail table
N4-RC824
Lamp table
N4-RC221
N4-RC316
End table
N4-RB352
Baby bathinette
N4-RB301
Nursery seat
N4-RB157
N4-RB311
N4-RL555
Kiddie Koop crib
DeLuxe
nursery
seat.
Occasional rocker
N4-RL553
Occasional chair
N4-RL553
_do
N4-RB100
Baby bassinette. __
N4-RC225
Night table
N4-RC341
End table.
N4-RC348
Butterfly table
N4-RC422
Coffee table
-
N4-RC429
Cocktail table
N4-RJ100
5-piece dinette s e t . . .
$3.48
3. 57
3: 62
3.48
3. 76
3.71
26. 93
17.11
7.61
7. 09
19. 75
105. 31
C
L
B
M:
D
F
C
C
C
C
C
C
4. 85
4. 92
7.23
7.23
7.47
7.43
7.81
7.12
7.14
7. 39
7.38
7. 77
8.57
8.76
1.71
• 1.72
19. 29
3. 35
L
L
C
L
MD
F
C
L
M
D
F
L
M
C
L
L
c-
13. 78
13. 67
14.05
14.01
14.26
15. 36
10. 69
10.60
10.84
10.80
10. 67
12.00
11.06
10.97
11. 30
11.25
11.47
12. 51
6.66
6.72
6.83
6.48
6.91
7. 48
7.77
7. 77
7.90
7.23
7.23
7.47
7. 43
7.81
9. 24
9. 62
10.20
7.23
7.26
7. 51
7.65
8.03
8.91
9.40
50. 71
52.07
51.84
50.07
52.15
C
L
B
M
D
F
C
L
B
M
D
F
c
L
B
M
D
F
C
L
B
MD
F
C
L
B
C
L
M"
D
F
L
D
F
C
L
M"
D
F
D
F
C
L
MD.
F
1372
extend price c o n t r o l and stabilization acts of
19 4 2
[LF]—Continued
N4-RF545
Chest
N4-RF546
Bed
N4-RF548—
Vanity
N4-RF550—
Bench
N4-RG122...
Chest onfchest
N4-RH146...
N4-RL544—
Unadjusted
maximum
prices
Description
Stock N o .
10-pice dining room
suite.
Occasional chair
N4-RL546
Occasional
wing
chair.
Occasional chair
N4-RF596..
N4-RF597..
N4-RF598..
N4-RF599..
N4-RF600..
N4-RF601-.
N4-RF603..
N4-RF604..
N4-RF605..
N4-RF606..
Lowboy
Chest
Bed
Chair
Night table
Dresser.-.'
Chestrobe
Vanity chair
Bed
Night stand
N4-RL545
$21.11
21.94
22.86
15. 75
16. 41
17.13
27. 54
28. 56
29. 38
4. 77
4. 93
5.11
26. 30
25. 83
25. 98
26. 89
26. 67
28. 34
165. 77
11.01
11.19
13.19
13.43
11.46
11.64
25. ?6
34. 44
16. 56
6. 78
Stock N o .
N4-RV163-.
N4-RC814..
N4-RC815.N4-RC816N4-RC817..
N4-RF445..
N4-RF446..
N4-RF447..
N4-RF448N4-RS308..
N4-RS309..
N4-RS310-.
N4-RS311-.
N4-RS312-.
N4-RS108-.
Dresser
Chaisette
Club chair
Ottoman
2-passenger s e t t e e . . .
.X-Ieg barbecue set_ _
do
X-leg end bench
Straight end bench..
Umbrella table
Coffee table
Double couch
Sand box
Adjustable back
davenport.
Table for davenport.
Cocktail table..
E n d table
L a m p table
Cocktail table
Vanity
Bed
Chest
Bench
Kitchen cabinet
do
do
Kitchen base
do
Chair.
N4-RG121
Chest.
N4-RF607-N4-RV150-N4-RV151_.
N4-RV152..
N4-RV153-N4-RV154..
N4-RV155__
N4-RV156-.
N4-RV157..
N4-RV158-.
N4-RV159..
N4-RV160N4-RV161..
N4-RV162..
10.82
42. 38
42.94
7. 26
30. 57
6. 79
Description
Unadjusted
maximum
prices
533. 64
17. 92
14.83
6. 34
24.00
17. 93
21.31
2.86
2.86
9.02
6.13
29.87
9. 55
34. 63
L
F
F
F
F
F
F
F
F
F
F
F
F
F
3. 22
9.96
8.49
8.86
12. 65
34.40
19. 37
27. 30
5. 38
17. 76
24. 37
25.79
8.79
11.15
5. 21
5. 25
5.46
5.33
5.48
16. 72
F
D
D
D
L
L
L
L
L
B
B
B
B
B
C
L
H
D
F
IB
M . C . POND,
J. A . DONALDSON.
[SF]
All prices on this invoice are at or below our ceiling prices to you for the quantities, terms, and conditions of this sale, as shown on our ceiling price statement
filed with the Chicago regional office of the OPA, pursuant to section 16 of MPR
No.
.
[PP]
Retail ceiling prices for fountain pens and mechanical pencils sold by Butler Bros.—
MPR No. 564
Butler Bros,
stock N o .
S1-G586..
S1-G554..
S1-G576..
S1-G597..
S1-G798-.
S1-G200..
S1-G250.S1-G231-.
S1-G251..
S1-G280-.
Sl-G530/1.
Sl-G530/2.
S1-G560..
S1-G565-.
S1-G555-.
S1-G598..
S1-G570-.
S1-G285-.
Sl-G294..
Sl-G298..
1
Manufacturers
No.
5200B..
831-:..
845
855
f45
\845
77
P59
75-60._.
045C. _.
P100--.
M59—
L59-__.
RL1...
7005P..
50
DN34_.
1401....
1500—.
100
REL__
O L B only.
Description
Fountain pen
D e Luxe fountain pen..
Zenith fountain p e n - . .
Pacemaker
[•Zenith fountain pen and mechanical pencil set..
Mechanical pencil
Arnold mechanical pencil
Eagle mechanical p e n c i l —
American mechanical pencil.
Arnold mechanical pencil
Arnold fountain pen
do.....
—
do..
Stratford Conqueror fountain pen
Conklin Ottawa pen
Conklin glider p e n .
Permapoint fountain pen
Mechanical p e n c i l —
do
do
Maximum
retail
price
$2.41
1.00
1. 95
2. 75
.80
.20
1. 95
.29
.17
1.29
.60
.60
.60
1.08
.83
1.00
2.78
1.50
.69
1.00
1.50
1373 e x t e n d p r i c e c o n t r o l a n d s t a b i l i z a t i o n a c t s o f
19 4 2
[T]
Permitted price increases for the following numbers by order No. 1 to Supplementary Order No. 133:
Description
Butler Bros, stock N o .
Kll-M-217-
(Hammer
__do
I
do
/ C a m p ax
1
Hrv
^
ao
/..--do
1
do
/Half hatchet
I1. . _ rln
CIO
fAx
^
do__
L—do
.
Kll-M-314
Kll-M-315
Kll-M-364
Kll-M-406-
Butler
Bros, former price
$3.11
3.26
3. 36
4.40
4. 65
6.17
6. 47
4. 39
4. 64
8. 30
8. 55
9. 25
Permitted increases
for resellers
Butler
Bros, new
ceiling
prices
Branch
$0.07
.'08
.08
. 11
.11
.15
.16
.11
. 11
.20
.21
.22
$3.18
3. 34
"3. 44
4. 51
4. 76
6. 32
6. 63
4.50
4. 75
8.50
8. 76
9. 47
CLBM.
D.
F.
CLBM.
DF.
CLBM.
DF.
CLBM.
DF.
CLB.
MD.
F.
[KS]
As a retailer under order No. 4D to supplementary order No. 119 you determine
your ceiling prices as follows:
(a) Purchasers for resale of any of the articles in the lines of kerosene hot
plates, kerosene ranges, and kerosene heaters manufactured by the United Stove
Co., Ypsilanti, Mich., which the manufacturer has sold at the adjusted ceiling
prices permitted by order L-6, under supplementary order No. 1019, shall determine their ceiling prices as follows:
(1) A purchaser for resale who delivered or offered for delivery during March
1942 an article which meets the definition of "most comparable article'; contained
in section 1499.3 (a) of the general maximum price regulation, except that it need
not be currently offered for sale, shall calculate his ceiling price by adding to his
invoice cost the same mark-up which he had on that comparable article, according
to the method and procedure set forth in that section.
The determination of a ceiling price in this way need not be reported to
the Office of Price Administration. Each seller, however, must keep complete
records showing all the information called for by OPA Form 620-759 with
regard to how he determined his ceiling prices, for so long as the Emergency
Price Control Act of 1942, as amended, remains in effect.
(2) If a purchaser for resale cannot determine his ceiling price by the above
method, he shall apply to the Office of Price Administration for the establishment
of his ceiling price under section 1499.3 (c) of the general maximum price regulation. Ceiling prices established under that section will reflect the supplier's
prices adjusted in accordance with this order.
[AB]
The maximum retail price of stock No. K11-RV616 is $0.85.
[BC]
Pursuant to sec. 11C of MPR 64, we are herewith furnishing you with the
following information:
Description
Stock N o .
K4-RB303
K4-RB304.
K4-RB305
K4-RB309
K4-RB311
K4-RB313
_ .
Gas heater
do
do—
do
. .do—
do
85721—46r—vol. 2
15
O P A industry
reconversion
increase
$0.23
.25
.31
.36
.43
.50
Stock N o .
K4-RB318—
K4-RB319
K4-RB321-.
K4-RB215
N5-RA110N5-RA111.
Description
Gas heater
do.
do
Oil heater
Gas range
do
O P A industry
reconversion
increase
$0.48
.55
.64
.1615
2.43
3.00
1374
extend price c o n t r o l and stabilization
acts of
19 42
[OC]
[Attachment]
Order No. 18 to supplementary order No. 94
Butler Bros, stock
No.
K2RI442
Maximum
price
Maximum retail price for this Navy fuel tank
$1, 50
[NR]
Pursuant to paragraph (d) of order No. 79 to supplementary order No. 94, we
are hereby notifying you that your maximum retail price for a single-breasted
Navy raincoat, waterproofed black twill fabric, convertible collar, double-texture
material combined by layer of polymerized or copolymerized vinyl resin suitably
pigmented and plasticized is $15.
Under paragraph (d) of order 79 to supplementary order No. 94 you as a retailer
are required to attach to each of the above-described raincoats a tag or label
which plainly states a selling price not in excess of $15.
[HR]
STATEMENT
OF O P A
ADJUSTMENT
CHARGE
The Office of Price Administration has permitted us to add the following adjustment charges to our ceiling prices on the following items one or more of which are
billed on the attached invoices:
Stock N o .
H1-D102
H1-D124
H1-D173
H1-D175
H1-D177
H1-D181
H1-D183
H1-D205—
H1-D255
H1-D370
H1-D375
H1-D381
H1-D385
H1-D388
H1-D389..
H1-D390
H1-D39L.
H1-D485-.
-----
-
Old
ceiling
Adjustment*
charge
$1.25
1. 50
2. 10
2.10
1.95
2. 00
2. 00
2.00
2. 60
1.95
2. 00
2. 00
2. 00
2.00
2.00
2. 00
2.00
2. 00
$0.14
.14
. 14
. 14
. 11
. 14
.14
. 14
.07
. 11
.07
. 11
. 11
. 11
. 11
.11
.11
.11
New
ceiling
$1. 39
1.64
2. 24
2. 24
2. 06
2.14
2.14
2.14
2. 67
2. 06
2. 07
2.11
2.11
2.11
2.11
2.11
2.11
2.11
Stock N o .
H1-D490.
H1-D491.
H1-D492
H1-F121H1-F122.
H1-F186.
H1-F191.
H1-F286.
H1-F291.
H1-F320.
H1-F330.
H1-F335.
Hl-F337_
H1-F340H1-F400H1-F401.
H1-G250.
H1-G251.
Old
ceiling
$2. 00
2. 00
2.00
2.10
2.10
1.53
1.75
1.53
1. 75
1. 25
1. 50
1.80
1.80
2. 05
1.95
1.68
2. 50
2. 50
Adjust- N e w
ment
ceiling
charge
10.07
.07
$2. 07
2. 07
. 14
.14
. 14
.14
.14
. 14
.14
. 14
. 14
. 14
.14
.14
.14
.07
.07
2. 24
2. 24
1.67
1.89
1. 67
1.89
1.39
1.64
1. 94
1.94
2.19
2. 09
. 11
2.11
1.82
2.57
2. 57
You may not increase your prices when you sell under the GMPR, nor may you
include the amount of this adjustment charge as a part of your net cost when
you price under Maximu Price Regulation No. 580.
[SB]
Pursuant to approval No. 47 under section 7 of supplementary order No. 122,
your maximum retail price for our stock No. K6-A405, new incandescent war
surplus lamp, 25-watt, is 10 cents each.
1375 e x t e n d p r i c e c o n t r o l a n d s t a b i l i z a t i o n a c t s o f
19 4 2
[SX]
The following adjusted ceiling prices are based on amendment 25 to SR14E:
NOTICES
We are directed by the Office of Price Administration to notify you that if your
sales are governed by MPR 580, you may not include as part of your net cost any
adjustment charge attached to this invoice.
If your sales are governed by the General Maximum Price Regulation, you may
not increase vour ceiling price properly computed under that regulation. If
your sales are governed by MPR 210, you must follow the provisions of section 13
of that regulation.
Description
Stock N o .
J1-4050
Jl-4051
J1-5713/B
J1-5713/D
J1-5730/D
J1-5732/B
J1-5732/D
J1-5733/B,
J1-5733/D
Jl-4350
J1-4878/C
J1-4878/E
J1-4678/0
J1-4678/E
J1-4741/C
J1-4741/D
J1-4741/EE...
J1-4748/C
J1-4748/D
J1-4353
Jl-3432.
J1-3434.
J1-5711/B
J1-5711/D
J1-5706/B
J1-5706/D
J1-4099.
J1-4859/A
J1-4859/B
J1-4859/C
_
J1-4859/D
J1-4854/A
J1-4854/B
J1-4854/C —__
J1-4854/D
J1-4855/A
J1-4855/B
J1-4855/C
J1-4855/D
J1-4856/B
J1-4856/C
J1-4856/D
J1-4850/B
J1-4850/C
J1-4850/D
J1-4851/B
J1-4851/C
J1-4851/D
J1-4853/B
J1-4853/C
J1-4853/D
J1-4857/B
J1-4857/C
J1-4857/D
J1-4857/E......
J1-4857/EEE.
JlXF-5850
JlXF-5851
J1-494D.
J1-494EE.
Boys' work shoes
do
r
C o w b o y boots
....do
....do
do
do
do
do
Boys' shoes
Men's shoes
—
do
do
do.'
....do
_,__do
.....do.
do.—
do
Boys' shoes
M e n ' s shoes
do
Men's cowboy boots
do
..—do
.....do
Boys' shoes
M e n ' s shoes
do
do
..._do
—.do
do
....do
do
do
do
do
....do
do—
dodo
do..
do.
do—
do.
.._..do—..
do
do
do
do
do
do
do..
do
do
M e n ' s Wellington boots..
do
Women's house slippers:
L
B
Women's house slippers:
L
B
OPA adjusted
O P A ad- New selld ceiljusted
charge
ing price
\ price (percent
charge
increase)
$2.30
2.20
9.15
9.15
7. 65
7. 65
7. 65
7. 65
7. 65
2. 52
4.05
4.05
5. 39
5. 39
3.90
3. 90
3. 90
4.20
4.20
2. 52
4. 25
4. 25
9.05
9.05
8. 48
8. 48
2.05
6. 52
6. 52
6. 52
6. 52
5.94
5. 94
5. 94
5. 94
5.95
5. 95
5. 95
5. 95
6. 21
6. 21
6. 21
6.00
6.00
6.00
6. 21
6. 21
6. 21
5. 81
5.81
5.81
6.10
6.10
6.10
6.10
6.10
13.50
13. 50
$9.25
9. 25
7. 76
7. 76
7. 76
7. 76
7. 76
2. 55
4.14
4.14
4.85
4. 85
3. 57
3. 57
3. 57
3. 57
3.57
2. 55
4.08
4.08
9. 23
9.23
8. 65
8. 65
2.10
6. 65
6. 65
6. 65
6. 65
6.07
6.07
6. 07
6. 07
6.08
6.08
6. 08
6.08
6. 34
6. 34
6.34
6.15
6.15
6.15
6.37
6. 37
6.37
5. 93
5.93
5.93
6.23
6.23
6.23
6.23
6.23
13. 79
13. 79
2Y2
2H
2V2
$0.18
.18
.16
.16
.16
.16
.16
.05
.09
.09
.10
.10
.07
.07
.07
.07
.07
.05
.08
.08
.18
.18
.17
.17
.05
.13
.13
.13
.13
.13
.13
.13
.13
.13
.13
.13
.13
.13
.13
.13
.15
.15
.15
.16
.16
.16
.12
.12
.12
.13
.13
.13
.13
.13
.29
.29
2.04
2.05
X
OIZ
I *>/2
. uo
/
\
2.05
2.05
2.14
2.15
\I
/
. 05 \
2.15
2.15
2^
2^
2M
2H
23^
2H
2^
2H
2K
2H
2H
2M
2K
2H
2M
2H
2H
2M
2V2
2K
2H
2H
2^
2K
2H
2H
2K
2M
23^
2V2
2V2
2V2
2V2
2H
2H
2M
2V2
2H
23^
2M
2M
2H
2H
2H
2H
2M
23^
2H
2V2
2V2
23/2
2V2
2VI
01/
472
1376
extend price c o n t r o l and stabilization
Description
[Children's house slippers:
L
B
[Women's house slippers:
L
B
Men's house slippers:
L
B
jMen's shoes
Cowboy boots
....do
....do
Boys' dress shoes
....do
Boys' shoes
Men's shoes
....do
Boys' shoes
Mocassin vamp high shoe..
Cowboy boots
Men's shoes
— .do
--.do
. — do
_...do
....do
. — do
....do
Boys' shoes
Men's sandals
Women's house slipper
— do
Women's house slipper:
{
Women's house slipper:
BI"——————
Men's shoes
--..do....do
--do
—do
— do
Men's dress
....do
do
do
.—do
do
Men's shoes
do.
.—do
do..
do
.....do
do
do
do
do
do
—
do
do
do
do
do
:.
do
do
do
do
do
do
do
do
do..
do
Cowboy boots
do
Men's work shoes. -
Old ceiling price
acts of
OPA adjusted
OPA adcharge
justed
(percent
charge
increase)
1.87
1.09
1.07
2K
2. 22
2. 22
2K
2H
2V2
2V2
2H
2V2
2V2
2y2
zy2
2H
2V2
2V2
2V2
2H
2V2
2V
2
x
$1.88
4. 20
7.74
9. 07
9. 07
3. 75
3. 75
3.15
3. 90
3. 90
3.15
2. 55
7. 79
4.20
4.20
2. 75
3.10
3.10
2. 75
3.10
3.10
3.15
2.31
1. 62
1. 62
.76
.75
.76
.75
6. 47
6. 47
6.47
6. 47
6. 47
6. 47
6.13
6.13
6.13
6.13
6.13
6.13
6.24
6.24
6.24
6.24
6.24
6.24
6. 07
6. 07
6. 07
6. 07
6. 07
6. 07
6. 66
6. 66
6.66
6. 66
6. 66
6. 66
6. 66
6. 66
6.07
6. 07
6. 07
6. 07
6. 07
6. 07
9.15
9.15
4.25
19 4 2
2M
2 /i
2V2
2V_
2}/2
2
2
2Y
2y
2Y2
' 2%
2Y2
2V2
2Y2
2H
2V2
2Vz
2V2
2V2
2V2
2V2
2V2
2 y2
2V2
2y2
2V2
2H
2V2
2M
2M
2H
2^
2K
2^
2V2
2H
2V2
2V2
2V2
2V2
2V2
2V2
2H
2V2
2Y2
2H
2V2
2H
2 y2
2V2
2H
2H
2V2
2K
2H
1377 e x t e n d p r i c e c o n t r o l a n d s t a b i l i z a t i o n a c t s o f
Stock No.
Jl-8199
J1-5718-B..
J1-5718-D.
J2-9718.
J2-9719.
J2-9777.
J2-9778.
J2-9516.
J2-9517.
J2-9518.
J2-1983A _
J2-1983C _
J2-2195C
J2-2195E
J2-2195EEE.
J2-9785.
J2-9786.
J2-9779.
J2-9781J2-9383.
J2-9384.
J2-9385.
J2-8381.
J2-8382.
J2-8383.
J2-9381.
, J2-9382.
J2-9712.
J2-9723.
J2-9724.
J2-9715
J2-9716
J2-9717
J2-2190C
J2-2190E
J2-2191C
J2-2191E
J2-8992B
J2-8992D
J2-8992EE.
J2-8996A
J2-8996B
J2-8996C
J2-9725
J2-9726
J2-1976A_
J2-1976C _
J2-8385.
Jl-578.
Jl-579.
J2-8264.
J2-9669A_
J2-9669C _
J2-9483,
J2-8386.
J2-9555.
Description
Little gent's work shoes.
Cowboy boots
do
Women's shoes:
{
!i
:
Women's
Women's
'Women's
L.
B
Women's
L
B
Women's
L
B
shoes, L
shoes, B
shoes:
Women's
L
B
Women's
L
B
Women's
L
B
Women's
L
B
Women's
L
B
Women's
L
B.
Women's
L
B
Women's
L
B
Women's
L
B
shoes:
i: :
oxfords:
shoes:
shoes:
shoes:
shoes:
shoes:
shoes:
shoes:
shoes:
shoes:
Women's shoes:
L
B
Women's shoes:
L
B
Women's oxfords:
L
B
Women's shoes:
L
B
Men's house slippers:
L
B
Women's shoes:
L
B
Women's shoes:
L__
B
Women's shoes:
L
B
Women's shoes:
L
B
Women's shoes:
L
B
_.
Old ceiling price
$1.95
9. 51
9. 51
2. 99
2. 96
2. 61
2. 60
19 4 2
OPA adjusted
OPA ad- New sellcharge
justed
ing price
(percent
charge
increase)
23^
234
2K
23^
2^
$0. 05
. 19
0 .19
$2.00
9. 65
9. 65
.07
.07
.07
3.03
3. 03
2. 65
2. 65
3.05
3. 05
2K
.08
3.10
3.10
2. 50
2.50
23^
.06
2. 55
2. 55
2.60
2.60
2M
.07
2. 65
2. 65
2. 61
2.60
2K
.07
2. 65
2. 65
2. 61
2. 60
2H
.07
2. 65
2. 65
3.14
3.13
2K
.08
3.10
3.10
2. 35
2. 32
2K
.06
2. 38
2.38
2. 84
2.83
23^
.07
2. 85
2.85
2H
.07
2. 85
2.85
23^
.08
3.10
2M
.07
3.03
3.03,
.07
2. 65
2.
2. 85
2.85
3.09
3.08
2. 97
2.96
2. 60
2.60
4.29
4.29
2H
4. 30
4.30
3.07
3.06
2M
3.10
3.10
2.50
2.50
2H
2. 55
2. 55
2.36
2. 35
m
2.38
2.38
2.22
2. 22
2V2
2.25
2. 25
2.25
2.24
2M
2.30
2. 30
3.60
3.60
2X
3.65
3. 65
2.61
2. 59
2V2
2.60
2. 60
2.36
2.35
2V2
2.38
2.38
2V2
2.90
2.90
1378
extend price c o n t r o l and stabilization acts of
Description
Women's
L
B...
Women's
L.
B
Women's
L
B...
Women's
L .
B
Women's
L...
B___
Women's
L
B
Women's
L
shoes:
shoes:
shoes:
shoes:
shoes:
shoes:
B
Women's shoes:
L
B
Women's shoes:
L
B
Women's shoes:
L_
B
Women's shoes:
L
B
Women's shoes:
L
,
B
Women's shoes:
L
_
B
Women's shoes:
L__
B
_•___
Women's shoes..
Patent T strap shoes
White T strap shoes
Patent T strap shoes..
White T strap shoes.
Brown barefoot sandal.
White barefoot sandal
Brown Ghillie oxford
White Ghillie oxford
Brown Ghillie oxford
Brown barefoot sandal..
..—do
Brown scuff tip oxford.
Brown and white shield tip oxford.
Black scuff tip oxford
White and brown saddle oxford
do
Brown moccasin vamp high shoe...
do
Brown moccasin vamp oxford
do
.....do
Army russet high shoe
Black high s h o e . . .
White high shoe
Patent high shoe
Army russet high shoe.
do
Black high shoe
Army russet scuff shield oxford
Misses' brown oxford
Children's russet oxford..
Children's black oxford
Children's white oxford
Children's patent o x f o r d . . .
Old ceiling price
$4.2
4.2
194 2
OPA adOPA adjusted
justed
charge
charge
(percent
increase)
2V2
2K
2y2
2h
21,
2V2
2H
2H
2H
2M
2V2
2 y2
2y2
2H
2H
2H
2K
2H
2H
2H
2H
2H
2 y2
2 y2
2tt
2K
2H
2H
2 y2
2y2
2 y2
23/2
*M
2%
2V2
2 y2
2 y2
2V-2
2M
2H
2M
2H
2H
2H
2y2
2H
1379 e x t e n d p r i c e c o n t r o l a n d s t a b i l i z a t i o n a c t s o f
Old ceiling price
Description
J3-7735
J3-7736
White sandal—
Brown sandal
White sandal—
White strap sandal
Turftan strap sandal
Brown loafer
Brown and white loafer
Brown oxford
White Roman highshoe..
White sandal.
do...
Brown moccasin v a m p oxford.
White high shoe
Patent high shoe
Brown high shoe
Black high shoe.
Brown high shoe
Black high shoe
Brown and white oxfords
Brown oxford
Moccasin v a m p oxford — .
Brown and white oxford
Brown strap sandal
White open toe T strap
19 4 2
O P A adO P A adjusted
charge
justed
(percent
charge
increase)
$1.30
1.30
1. 58
1.95
1.95
2.35
2.35
1.55
1.35
2. 25
2. 25
1.55
2. 55
2.30
2. 55
2. 55
2. 55
2. 55
2. 35
2.25
2. 60
2.35
1.89
1.95
2H
2K
2X
2Vt
2K
2K2
2M
2H
2H
2K
2M
23^
2H
2V2
2V2
2Y2
2H
2V2
2V2
2V2
2V2
2V9
2V2
2 y2
$0.03
.03
.04
.05
.05
.06
.06
.04
.03
.06
.06
.04
.06
.06
.06
.06
.06
.06
.06
.06
.07
.06
.05
.05
*** O P A shoe wholesale N o . 602-6.
[F]
Pursuant to section (d) of Order 56 to Supplementary Order No. 119 we hereby
notify you that as a purchaser for resale you shall determine your maximum
prices as follows:
(1) If during March 1942 he delivered or offered for delivery an article of
silver plated flatware which meets the definition of "most comparable article"
contained in section 1499.3 (a) of the general maximum price regulation, except
that it need not be currently offered for sale, and on which he has established an
adjusted maximum price under either Order No. 226 or Revised Order No. 226
under Maximum Price Regulation No. 188 (adjustment on certain articles containing silver) he shall determine his maximum price on an article covered by this
order according to the following steps:
Step 1. He shall determine the percentage of mark-up he has on that
comparable article between his actual invoice cost (including the silver
adjustment permitted by Order 226 or Revised Order 226) and his maximum
price as adjusted under Revised Order No. 226.
Step 2. He shall apply the mark-up which he finds in step 1 above to his
actual invoice cost of the article covered by this order. The result is his
ceiling price for his sales of that article to the same class of purchaser as that
to which the maximum price of the comparable article applied.
(2) If a purchaser for resale cannot determine his ceiling price under the above
method, he shall apply to the Office of Price Administration for the establishment
of his ceiling price under section 1499.3 (cj of the general maximum price regulation. Ceiling prices established under that section will reflect the supplier's
prices adjusted in accordance with this order.
[TN]
S T A T E M E N T OF O P A
ADJUSTMENT
CHARGE
The Office of Price Administration has granted us adjustments on the following
items, one or more of which are billed on the attached invoice. The part of these
adjustments which you are required to take into account in pricing under Maximum
Price Regulation 580 (section 318.25) is stated separately as "wholesaler's OPA
adjustment charge."
1380
extend price c o n t r o l and stabilization acts of
Stock No.
Old ceiling
E3-E715
0.657
.666
.676
' 1. 796
2. 34
14. 70
14.95
1.48
17.15
16. 89
.625
.625
.57
1.07
1. 91
E3-E476
E3-E477
E3-E412
E3-E475
E3-E405
;
E3-E723
E3-E722
E3-E729
E3-E596
.
CLB
MD
F
CLB
CLB
CLB
NDF
CLB
CLB
F
MD
F
CLB
CB
CB •
Wholesalers
OPA adjustment
charge
0.068
.069
.069
.164
.24
1. 52
1. 52
.14
1. 65
1. 63
.065
.075
.053
.11
.19
1942
New ceiling
$0. 725
.735
.745
1. 98
2. 58
16. 22
16. 47
1.62
18. 80
18. 52
.69
.70
.623
1.18
2.10
CLB
MD
F
CLB
CLB
CLB
MDF
CLB
CLB
F
MD
F
CLB
CB
CB
When you price under Maximum Price Regulation 580 you may not include
the above-stated "wholesaler's OPA adjustment charge" as part of your "net
cost."
[NS]
Qualified Wholesalers Registration No. W-2046.
[CI]
You, as a retailer, must determine your maximum retail prices for the above
articles under section 5 or 6 of Order No. 4875 under section 9B of MPR 188.
Your unadjusted ceiling prices are listed in price list No. 51 for CongoleumNairn products, dated December 26, 1945.
[PC]
You as a retailer must determine your maximum resale prices for the above
articles under section 5 or 6 of Order No. 4875 under section 9 (b) of MPR 188.
Your unadjusted ceiling prices are those listed in price lists of Paraffine Companies,
Incorporated, No. 32 for linoleum and felt base, dated October 23, 1942, and
No. 12 for mastipave dated August 23, 1943.
The C H A I R M A N . Thank you very much, Mr. Garrison.
The committee will take a recess until 2:30 this afternoon. Senator
Taylor will preside at that time.
(Whereupon, at 1:10 p. m., a recess was taken until 2:30 p. m. of the
same day.)
A F T E R RECESS
(The recess having expired, the committee met again at 2:30 p. m.,
and proceeded further with the hearing as follows:)
Senator T A Y L O R (presiding). The committee will come to order,
please. I have been requested by Senator Wagner to conduct the
hearing this afternoon, and we have a long list of witnesses who would
like to be heard. It is Senator Wagner's desire and the desire of all of
us I a,m sure, to bring the hearings to a conclusion this afternoon if
possible. This matter has dragged on for much longer than we anticipated. We do want everybody to have an opportunity to be heard,
but if it is at all possible I would like to request all witnesses present
this afternoon to condense their statements and tell us briefly and simply, and state their case as briefly as possible, in order that we may get
through with these other witnesses. If some take all of the time, the
1381 e x t e n d p r i c e c o n t r o l a n d s t a b i l i z a t i o n a c t s o f
19 42
upshot of that may be that the others may not be heard at all, so in
fairness to the other witnesses, who are just as anxious to be heard as
the ones who appear first, we do hope we can conduct the hearings
expeditiously and as briefly as possible. Our first witness is Mr.
Arthur Clifford, who represents the Retail Lumber Dealers Association.
STATEMENT
BY
ARTHUR
CLIFFORD,
REPRESENTING
THE
NATIONAL RETAIL LUMBER DEALERS ASSOCIATION
Mr. CLIFFORD. My name is Arthur Clifford. I am vice president
of The A. W. Burritt Co., of Bridgeport, Conn. I am here today,
however, to try to give you the viewpoint of the thousands of lumber
dealers situated all over the United States who are represented by the
National Retail Lumber Dealers Association and its affiliated regional
and State associations. There are over 25,000 of these dealers and
I am certain that the statements that I have to make have the approval of the overwhelming majority of them.
We call ourselves retail lumber dealers because in the early days
lumber was the principal commodity we handled. We have a
tendency to think and talk in terms of lumber. The facts are, however, that even before the war most of us had increased our sales of
other and newer items to a point where the total of these other items
became a substantial amount of our total sales volume. However,
since the situation with respect to most of these other items is relatively the same as on lumber, we are justified in using lumber as the
best medium to express our difficulties. At the outset I want to point
out to you that you will not find among those voicing objections to
OPA rules the black market sawmill operator or the dealer who is
buying from him and selling at black-market prices. They are
getting along very nicely under the monopoly given them by OPA
and I am making no objections to their position.
The retail lumber dealer who is complying with the regulations and
their intent is slowly being put out of business by his black-market
competitor, and his position is a desperate one. He is the one who is
asking for relief—and he richly deserves it.
1 have here copies of the testimony which this industry! gave to[ the.
House Banking and Currency Committee in connection with its hearings on this subject, and on the assumption that the members of this
committee wall read it, I will not deal with the points covered in that
testimony. It has the full endorsement of the industry, and I respectfully request that each member of this committee read it before
making a decision.
(Copies of the pamphlet, entitled " Why Price Controls on Building
Materials Should Be Eliminated," referred to by Mr. Clifford, were
distributed to members of the committee.)
Mr. CLIFFORD. In that testimony you will find that the industry
took the position that the only sure cure for the situation was the
removing of OPA controls over lumber and building materials. In
taking that position we did so in the firm belief that the price of
building materials would drop below the black market price and also
in the firm belief that it was impossible for the industry to work with
the OPA to accomplish improvements in their regulations because:
(1) The OPA is far more interested in profit controls than it is in
price controls, as evidenced by the absorption policy, both at production and distribution levels, as I will point out a little later;
1382
extend price c o n t r o l and stabilization acts of
19 4 2
(2) The OPA in its attempt to control profits has no regard for the
small businessman as evidenced by the 75 percent bulk line theory
and the absorption policy;
(3) The OPA^ in dealing with its industry advisory committee,
starts off with an assumption that businessmen are not to be trusted,
as evidenced by its disregard of suggestions of the committees and by
its total disregard of the crying, desperate calls for needed relief.
This I will also mention later.
(4) The OPA firmly believes that it can prove once and for all
that industry can pay higher wages and still market its products
with a profit below the figure wThich it normally requires to induce
people to invest in a business venture as evidenced by the 1936-39
base for determining profits.
How we wish we could—it would be Utopia—but it is just a sad,
mad theory.
In general, my comments are limited to the absorption policy of the
OPA and how it affects our industry.
Of the 25,000 building and supply dealers in the United States,
according to the 1940 census, you have the following break-down:
12,700, or more than one half, are in communities with a population
of less than 2,500 people; 2,358 are in communities with a population
of from 2,500 to 5,000 people; 2,181 are in communities with a population from 5,000 to 10,000 people; 1,805 are in communities with a
population of from 10,000 to 20,000 people. In other words, 19,044
dealers serve communities of not over 20,000 people.
As you can see, the retail lumber and building material industry is
a small business industry. For example, the 12,700 retailers in communities of less than 2,500 in 1939 had a total sales volume of $416,000,000, or an average of $32,756 each. Now the OPA says that
between the period of 1936-39 the industry as an average made 2.7
percent profit on sales. This means that on the average these yards
had an annual profit before taxes of $884.41. However, let us assume
that these yards made half again as good as the average for industry
or 4.1 percent on sales. Before taxes, the average yards would have
made $1,342.99. With such a profit, would you say it was huge
enough to qualify all 12,700 dealers as "robber barons"?
Now, let us see what this $1,342.99 would have meant. You may
be amazed to learn that slightly over 9,000 yards with a volume of
$32,756 in communities of less than 2,500 people are owned by a sole
proprietor, and profit before taxes is not only a profit on the man's
investment, but it is also his salary.
Let us take the most extreme and ridiculous situation we can think
of and let us treat this proprietor as an unskilled laborer. Under the
minimum wage law he could have made $832 in 1939, 30 if he operated
at the industry average profit, he made before taxes $52.41 on his
investment, or if he were fortunate to make half again as much as the
industry average, he made the "tremendous" profit of $510.99 on his
investment. And remember this, gentlemen, 1939 was a fairly good
business year. Lumber production in that year exceeded 25,000,000,00Q feet and the retailer was the principal outlet for this lumber. On
the basis of current trends we will be fortunate if production reaches
24,000,000,000 this year—and most of this is moving through the
black market and not through the retailer. Now, let us see how the
1383 e x t e n d p r i c e c o n t r o l a n d s t a b i l i z a t i o n a c t s o f
19 4 2
OPA decided how the retailer could absorb—and pretty soon I will
give specific instances of this absorption.
In a survey conducted by the Office of Price Administration the
OPA claims that the industry in 1944 showed a profit before taxes
of 6.7 percent on sales. If these small retailers had the same volume
in 1946 as they had in 1939, which they positively do not, the retailer's
profit based on the industry average would have been $2,194.65. If
that same retailer had one-half again as much as the industry average,
his net income, before taxes, would have been approximately $3,100.
If you treated him as an unskilled laborer at 40 cents an hour on a
40-hour week, with an annual salary of $832, he made $1,362.65 on
his investment. If he made one-half again better than the rest of
the industry, he would have made $2,268 on his investment—before
taxes.
You will recognize that these are the most optimistic figures that
you could possibly have drawn from the situation. Obviously, the
$832 minimum wage is a ridiculous figure to use for salary, especially
today. However, the real distortion in the picture is that the OPA,
in determining that lumber and building material retailers could stand
absorption, made no allowance for depletion of inventories. Retailyards inventories in 1941 stood at 6,000,000,000 board feet. In January 1946 it was a little over 1,000,000,000 feet. In other words, the
retail yards had liquidated 5,000,000,000 feet or $250,000,000 worth
of inventory. For taxing purposes, of course, it is profit, but it is a
profit earned over a good many years. The largest liquidation occurred in 1944 and 1945, but assuming that it was equally apportioned, then $50,000,000 worth of inventory was liquidated in 1944,
the year that OPA made its survey. This is a vital fact not to lose
sight of because it boosted the profit picture for that year.
As you can see, the profit position of dealers during 1944 is a completely distorted figure. The OPA study in 1944 showed that the
operating costs of small yards was 17.8 percent of sales. From experience, large yards are much higher than that, and they are up to
31 percent. If between 1944 and today, the operating costs crept
up 2 percent, the net profit of one of these small yards is reduced by
$755. If it crept up 3 percent, its reduction is $982. And if it crept
up 5 percent, its reduction is $1,537.
There are two kinds of absorption. The first is the absorption
imposed by the OPA directly—that is, where mill ceiling pricesjare
increased but the retailer is not permitted to pass the increase on to
the consumer. It is plain from the facts that a large majority of the
industry is not able to bear this burden without going into a loss
position. This is even truer when you consider the second type of
absorption—namely, increased costs arising out of distortion in manufacturing practices and in distribution.
Before discussing the absorption imposed by the OPA directly,
I would like to give you some specific examples of the second type of
absorption which must be borne by retailers. You will note that
most of these arise out of OPA pricing policies, and you should understand that when the OPA determines that retailers can stand direct
absorption, these second types of absorption are not taken into
consideration even though they equal or in some cases exceed the
amount of absorption imposed by the OPA directly.
1384
extend price c o n t r o l and stabilization
acts of
19 4 2
One of the principal items of lumber used for construction purposes
is Douglas fir. Previous to ceiling prices, the bulk of this stock was
shipped by the mills in a condition ready for use by the consumer—in
other words the material to build a house, such as framing lumber,
sheathing, boards, siding, flooring, and such things, was dressed or
planed to the finished sizes and patterns. Due to the price structure
set up by the OPA, lumber-producing mills ceased processing these
items and made shipments in timbers and in rough condition.
Now, you doubtless know that timbers and rough lumber cannot
be used for home construction, so it became necessary to find mills
somewhere along the line that would finish the job. Such mills are
called "transit mills" and we say that the material has a stop-over to
be milled in transit. The retailer has to pay for these remanufacturing services but cannot charge more just because he has to pay
more, so he must absorb the difference—an added cost of several
dollars for each thousand feet. Here, you see, the dealer has to use as
a cost basis a figure that is actually lower than his cost. Another
point about Douglas fir—due to a combination of reasons connected
with production, the only way a distributor can secure the stock is to
accept shipments of random sizes and mixed grades. The custom of
our industry is to buy one or two grades only in framing lumber—now
we are obliged to accept several grades. Any one size in a grade
comprises six to eight different grades at widely varying mill ceiling
prices, and this makes it really tough.
Limitation in lumberyard space and shortage of labor qualified to
grade the lumber makes it impossible to keep every grade in every
size separated. The result is that the average retail distributor, under
the OPA ceiling price provisions, is compelled to absorb in his cost an
average of 2 to 3 dollars for each thousand board feet. This is because
he has to dispose of the higher grades at the price level of lower grades.
In this case it is not claimed that this is the fault of price structure,
but the fact remains that the dealers are penalized. Theoretical
margins of gross mark-ups are again cut and in this case it is on our
principal quantity item. It might be claimed that the development of
transit milling was due to labor shortage, but it takes more labor to
remanufacture lumber along the route. Among other things you
have to unload the car, pile it, sort it, then run it and again sort, pile,
and reload the lumber on another freight car.
In handling species other than fir, the same conditions exist. In
New England, for example, only a very small proportion of lumberproducing mills are equipped to manufacture finished products—so it
has to be done "ill transit" planing mills—also at higher prices.
The distributor is compelled to use as his base cost a mill ceiling price
that is from 3 to 4 dollars less than actual cost. Because fully 90
percent of the New England softwoods have to be remilled in transit
we see once more a serious reduction in these theoretical gross
mark-ups.
New York State hemlock framing has a price set up at $3 a thousand
higher than hemlock produced in the New England States, and again
most of it has to be milled in transit, so when it is sold in New England,
the dealers have to absorb from $6 to $7 a thousand. In other words,
they must absorb the price differential of $3 and the transit milling
charges of $3 to $4, making a total of around $7, which has to be
absorbed by the retailer.
1385 e x t e n d p r i c e c o n t r o l
and stabilization
acts of
19 4 2
To give you another specific example, let us use the case*of*2-inch
by 4-inch framing lumber, always referred to as "2 by 4's." The price
allowed by OPA for 2 by 4 northeastern softwoods is so low that the
producers refuse to make them and manufacture in their place 2 by 8's
at a higher price per thousand board feet. The retailer has to pay the
higher rate for the 2 by 8's and out of his own pocket pay for the cost of
reducing the 2 by 8's to 2 by 4's, and sell at the lower OPA 2 by 4
ceiling prices. These are all instances of absorption which the OPA
refuses to acknowledge. These are financial hardships that are incurred by retailers as a result of unrealistic mill pricing. These are
absorptions which retailers have been required to bear since the 1944
distorted cost survey of OPA—even before that in some cases.
Another absorption imposed on distributors because of pricing policies of OPA is the case of having to use as a base cost a price predicated
on shipment from a specified basing point, which means that most of
a dealer's lumber originates at a more distant point and so he has to
absorb the higher freight differential. It is like the Government allowing you railroad-expense money from Philadelphia to Washington
when you came from New York and paid your fare from New York.
A similar instance is where the retailer due to scarcity of stock has
to buy green stock loaded with moisture which runs approximately
60 percent heavier than dry lumber, resulting in heavy freight charges
that must be sbsorbed by the retailer.
I hope each of you understands that the absorptions I have been
discussing up to this point are absorptions which have nothing to do
with the OPA absorption policy. They are absorptions that the
industry has had to bear since early 1944, but which the OPA takes
no account of in determining whether the industry can afford to absorb
increases granted to manufacturers and wholesalers. In other words,
we might call the absorptions heretofore discussed as unrecognized
absorptions, while the absorptions that I will discuss hereafter will be
referred to as direct absorptions resulting from OPA's absorption
policy.
The first example of direct absorption the retail distributor has to
swallow is that portion of the commission on mill ceilings allowed to
wholesalers which the OPA first unveiled in "Southern yellow pine
ceilings" and later, on other softwoods and hardwood flooring.
The retail distributor has to depend quite largely on the wholesaler
for his supply. The OPA grants the wholesaler of southern pine a
6 percent overage on mill ceilings. On a mill ceiling price of $50 a
thousand board feet, 6 percent equals $3 a thousand. The retailer's
costs thus become, for illustration, $53, but the retailer has to absorb
two-thirds of this $3 addition and compute his mark-up on $51
although he actually pays $53.
The overage mark-up on softwoods and hardwood flooring granted
by OPA to wholesalers is 5 percent on mill ceilings. The retailer has
to absorb 60 percent of this. As an example, take hardwood flooring
with a mill ceiling of $90 a thousand. The retailer pays $90 plus
5 percent—which is $4.50—making a total of $94.50. In computing
his sales price he has to use as his base cost $91.75 although the cost is
actually $94.50. When the OPA recently granted a long overdue and
greatly needed advance to producers of oak flooring, the advance of
10 percent has to be paid by retailers but they cannot collect for it.
1386
extend price c o n t r o l and stabilization
acts of
1942
But, gentlemen, you haven't heard anything yet. Here follows
the third phase of absorption. The OPA grants the producers of
various species advances in their mill ceilings—and the dealer has to
pay these advanced prices. But is he allowed to take the advanced
prices he uses as his cost basis? No. Here the retailer takes the mill
increase but must not pass it on to the consumer. Remember, gentlemen, this is over and above all the Qther absorptions required.
Let us talk handling costs—you would not expect to find absorption
costs in lumber-handling charges. Dealers awakened from troubled
dreams about the OPA one morning and found a price increase had
been given producers of southern pine. We thought at first the boys
from the OPA had become realistic all of a sudden because there
seemed no call to absorb it—or so the industry thought. But what
happened was this. Retailers, up to that point, in determining their
sales prices, were allowed to add $5 a thousand to cover handling
charges. The OPA at this point reduced this handling charge $2.50
per thousand board feet. It was a tricky scheme, but it did not fool
the industry. The OPA thought it could virtuously say they did not
make the dealers absorb the price of the increase in the lumber—they
conveniently forgot that they had reduced the handling charge which
was the "same difference."
Not satisfied with that absorption, along came another absorption,
and, lo and behold they took the second $2.50 off the handling charge,
and that wiped the slate clean. We were then forced to handle
southern pine lumber for nothing. Once again they took the pitcher
to the well, and this time they took 2 percent more away from the
industry—in other words, 2 percent off the 6 percent they had granted
when they raised* the price to the wholesalers—and because you have
a percentage mark-up from which to figure, when the industry lost
the $5 handling charge, they also lost the mark-up on that—so bang
went still another $1.50 per thousand.
How can you believe or trust an outfit like that? And gentlemen,
bear in mind it is a Government agency and it has done more to foster
sharp practices in business than anything you can imagine.
Let us now look into another phase of absorption. The OPA has
cost business staggering amounts in forcing them to change their
methods of doing business. This is absorption with a vengeance.
We recognize the need for some extra record-keeping—we are talking
about unnecessary records that have to be kept to comply with
practices that are not customary in our business—methods of handling
orders, invoices, and wording on invoices. Many concerns have had
to add persons to their pay rolls in order to have manpower to comply.
Attached is an exhibit of invoicing a contract order for your records.
We normally could figure a contract for building material and invoice
it to the customer in half an hour. Now it takes 3% hours to do the
same job by actual test. Dealers normally have from several hundred
to several thousand contracts and orders for lumber and building material in a year.
At this point, gentlemen, I would like to refer you to exhibit 2,
page 1, which is headed "An invoice normally supplied a buyer before
OPA regulations." I just want to mention it. I just want you to
first note the top part. It says ".Description of material." It shows
how the industry invoiced in the regular way; that is, they had one
line to prepare, and the sum was there. Now, we do not mean that
took us only a half hour to do that particular thing, but we do mean
1387 e x t e n d p r i c e c o n t r o l a n d s t a b i l i z a t i o n a c t s o f
19 4 2
that with the material shipped, as was expected by the customer,
which was furnished on his estimates, he had a complete break-down ;
and that is the way you would have invoiced it. Now, according to
the OPA requirements——
(The following was later received for the record:)
EXHIBIT
AN INVOICE N O R M A L L Y
Order
No.
03917
2
SUPPLIED A BUYER BEFORE
Description of material
OPA
REGULATIONS
Unit
price per Extension
thousand
Feet
$983. 22
Material as per our estimate N o . 000 $983.22
Total
$983.22
I N V O I C E F O R T H I S S A M E M A T E R I A L AS I T M U S T B E W R I T T E N U P U N D E R O P A
REGULATIONS
03917
2 x 8 D r y No. 3 Com N E W h Pine D4S 14/12
2 x 4 No. 1 Fir D4S Green 1/10
2 x 4 No. 1 Fir D4S Green 76/18
1 x 3 Merch N E Spruce D1S D r y
1 x 6 Pat No. 116 G. M . S L Yel Pine A D D & M 3/10.
No. 2 Com.
1 x 6 Pat No. 116 G. M . S L Yel Pine A D D & M 47/12
1 x 6 Pat No. 116 G. M . S L Yel Pine A D D & M " D "
. Grade 16/10
1 x 6 Pat No. 116 G. M . S L Yel Pine A D D & M " O "
Grade 1/10
1 x 6 Pat NO. 116 G. M . S L Yel Pine A D D & M " D "
Grade 157/12.,
1 x 6 Pat No. 116 G. M . S L Yel Pine A D D & M " O "
Grade 4/12, 35/12
•
1 x 6 Pat No. 116 G. M . S L Yel Pine A D D & M B &
B T R 2/10
1 x 6 Pat No. 116 G. M . S L Yel Pine A D D & M B &
B T R 12/12, 2/12
1 x 6 Pat No. 116 G. M . S L Yel Pine A D D & M No. 3
Com 9/12, 2/12
2 x 10 D r y Sel Com West W H Spruce D4S 1/14, 6 / 1 4 . . . .
2 x 10 D r y Sel Com West W H Spruce D4S 18/16
2 x 10 D r y No. 3 Com N E W H Pine D4S 19/12
2 x 8 Sel Com West W H Spruce D4S A D 1/14
2 x 8 Sel Com West W H Spruce D4S A D 7/16.
2 x 8 D r y No. 3 Com N E W H Pine D4S 4/10.
2 x 6 No. 1 N E Hemlock Green D4S 21/9
2 x 6 D r y No. 3 C o m N E W H Pine D4S A D 31/12....
1 x 4 Sel Merch N E Spruce D1S A D 9/12
2 x 10 Sel Com W W Spruce D4S D r y 2/18, 5/18
2 x 10 Sel Com W W Spftice D4S D r y 5/16
2 x 10 Sel Com W W Spruce D4S D r y 23/18
2 x 8 Sel Com W W Spruce D4S D r y 2/14, 16/16
2 x 6 Sel Com W W Spruce D4S D r y 26/16
2 x 6 Sel Com W W Spruce D4S D r y 3/10, 9/12, 3/14
2 x 4 Sel Com W W Spruce D4S D r y 20/16, 12/16, 50/16,
7/16
2 x 6 Sel Com West W H Spruce D4S D r y 20/16..
2 x 4 Sel Com West W H Spruce D4S D r y 15/12, 10/12,
11/14, 1/10
2 x 3 D r y No. 3 Com N E W H Pine D4S 68/10, 13/12...
2 x 8 No. 1 Fir D4S 19/18, 2/18
2 x 6 No. 1 Fir D4S 15/20
18 Bdles. 2 x 8 x 25/32 J M Sheathing B D
5 Pes. 2 x 8 x 25/32 J M Sheathing B D
$83. 25
81.50
82. 25
76.50
' 72.50
$18.65
.57
75.01
70. 23
1.09
282
73. 75
20.80
80
76.50
6.12
5
95. 25
.48
942
77. 75
73.24
234
96.50
22. 58
10
99.50
1.00
84
100. 75
8.46
66
163
480
380
19
149
53
189
372
36
210
133
690
378
416
180
64.50
90.00
90.00
85. 75
84. 75
84. 75
83. 25
77. 25
82. 50
87. 75
94.00
90.00
94.00
84. 75
85. 50
93.50
4.26
14. 67
43.20
32. 59
1.61
12. 63
4. 41
14. 60
30. 69
3.16
19. 74
11.97
64. 86
32.04
35. 57
15.03
949
320
86. 25
85.50
81. 85
27. 36
310
418
504
300
1, 728
80
84. 75
80. 75
81.75
83.50
26. 27
33. 75
41.20
25.05
1,808
60.00
108. 48
224
7
912
918
15
$983. 22
Senator C A P E H A R T . Pardon me, Mr. Chairman, just one moment.
Senator T A Y L O R . Yes; Senator Capehart.
Senator C A P E H A R T . Who is representing OPA this afternoon?
Mr. H O L D E R . I am, Senator Capehart.
Senator C A P E H A R T . May I ask you this question: Why do you ask
these people to invoice as they show here? What is the purpose of
requiring that they invoice in this method?
1388
extend
price
c o n t r o l
and
stabilization
acts
of
19 4 2
Mr. H O L D E R . I would say the purpose, Senator Capehart, is to
present to the buyer an exact record of what he is getting, and.exactly
wiiat he is raying for each class of the material he is receiving.
Senator C A P E H A R T . Well, could you not bill 1,000 feet of fir lumber
at $90? Why do you have to put all this OPA monkey business in
there?
Mr. H O L D E R . If it were a single item, 1,000 feet of fir lumber of a
particular size and grade, you would have just one entry on the invoice; if made up of six or eight different kinds of lumber, sizes, and
grades, you would have that many entries.
Senator H I C K E N L O O P E R . I understand that this exhibit 1 is the
method you used before.
Senator C A P E H A R T . N O W , your exhibit 4 ; what is that?
Mr. C L I F F O R D . This is the one, Senator. It is the top one against
the low^er one. The top one is the old way of doing it, just the top
of it, above this line, Senator, and all below that is the present, a
page and a half.
Senator C A P E H A R T . In other words, here is an invoice. I get it.
Here is an invoice, "Material as per our estimate." Now, in the
estimate, you itemize it?
Mr.
CLIFFORD.
Yes,
sir.
M r . CLIFFORD.
Yes,
sir.
Senator C A P E H A R T . $983.22.
Mr. C L I F F O R D . Not only that, sir, but the customer has a shipping
ticket for e^ery shipment.
Senator C A P E H A R T . That is right; but in the estimate you itemize
it. Now, OPA requires that you break up that $983.22, in a page
and a half, which is exactly what you did when you gave him the
estimate?
Senator C A P E H A R T . Or something similar.
Mr. C L I F F O R D . That is right.
Senator C A P E H A R T . N O W , what business is it of OPA's?
Mr. H O L D E R . Well, the example shows, here, Senator Capehart, it
works out luckily to the identical figure. Let us suppose, for example,
the fir is of a different size or grade; it would then be pretty important,
would it not, to give the buyer an exact statement of what he is getting
and what be is paying for it? Otherwise there is no record to show it.
That is the reason for the request.
Senator C A P E H A R T . Is there anything in the OPA law that states
you shall tell a man how to invoice?
Mr. H O I D E R . I think the law, Senator, gives us the authority to
require the keeping of such records as are necessary to demonstrate
compliance with the price regulations.
Senator C A P E H A R T . I give up. No wonder you cannot get prices,
or get anything done on OPA, because in my opinion you are doing a
lot of things you haven't got any business doing. I cannot conceive
the OPA's dictating how a man in business shall invoice his merchandise. I can understand how you could tell them what price to
sell at, but when it comes to dictating to them that they must invoice
in a given way on a form or formula that is worked out by OPA, I
do not believe it was ever the intent of Congress. Maybe I am wrong,
but it certa inly seems that way to me.
Mr. H O I D E R . We particularly do not prescribe the exact form or
anything o:' that sort.
1389 e x t e n d
price
control
and
stabilization
acts
of
19 4 2
Senator C A P E H A R T . The only reason you are doing it is that some
lumber dealer, some man in business may cheat somebody—is that
the idea—substitute something that he should not?
Mr. H O L D E R . Which would be an easy way, to be sure, of violating
his ceiling prices. This is a statement of what the buyer gets and
how much he pays for it. It is a record of the transaction which can
be checked over by the buyer or by OPA.
Senator C A P E H A R T . N O W , you say you are entitled to do this under
the act, because you must have some method of checking. Well,.
"Material as per our estimate"—couldn't you check from that?
Mr. H O L D E R . It would be very difficult, sir. The estimate may
or may not in this case have been carefully drawn and carefully specified a list of material. I suppose, as often as not, it might be some
calculations on the back of an envelope.
Senator C A P E H A R T . Well, I guess we have been wrong in this
country for 150 years in the way we transacted business.
Mr. C L I F F O R D . N O W , one other reason. You notice it took 3}{
hours by actual count to do the work. Now, the reason is this: We
have a very thick price book—everybody has to have one, because
you have so many types and kinds. You have to look up the exact
OPA wording in order to put this in, and the time it takes is not only
to figure the item but to get the exact wording. I am coming a little
further to that later on, gentlemen.
Senator H I C K E N L O O P E R . D O you have any difficulty understanding
the wording when you find it?
Mr. C L I F F O R D . That is a good question, Senator. It is very difficult, and it takes expert pricing specialists to do this thing and to do
it right.
Senator H I C K E N L O O P E R . Can they ever be sure that they are right?
Mr. C L I F F O R D . They cannot be sure, themselves. None of us can
be sure, and we are experts at it, supposedly. I am reading from the
top of page 10, gentlemen.
Senator C A P E H A R T . You are getting back now to the top of page 1 0 ?
Mr., C L I F F O R D . Yes; back to the copy.
I hope you will note how much detailed description is now required
in describing lumber on invoices. That is what we just looked at,
gentlemen. Just leave off one tiny item such as whether the lumber
is dry or green, air-dried or kiln-dried, or B and better grade, or C,
D, or some other grade and you will find yourself liable to have a
compliance man from the OPA slapping a court injunction on you.
It is being done. Innocent dealers -are being persecuted by the OPA,
and prosecuted too, for such technical violations as mentioned against
impossible regulations while black-market violators run wild. This
is a disgraceful situation.
Right now there is evidence that they are scurrying around in the
OPA to get their house in order for the time being—be good boys
until they are back in power with the heat off for a while. Can we
trust them to be realistic? I'll answer it by asking if you ever believe
the confirmed drunkard who swears off the morning after the night
before.
This absorption policy is the devil incarnate, but it is evidently
OPA's idea of fairness, justice, and all that's holy. When business
cries, out in the wilderness—the OPA officials appear to be shocked at
the very idea that there should be a profit—but I imagine they would
85721—46—vol. 2
16
1390
extend price c o n t r o l and stabilization acts of
19 4 2
be doubly shocked and howl to high heaven if they had to pay their
own travel expenses around the country when on official business.
In other words, absorb that cost out of their salaries just because they
were makir g a profit*over and above living expenses. That may sound
silly—but it is the very theory the OPA has been preaching to industry
and merchandisers. In other words, they have exercised their allpowerful position to dictate things the Congress never intended—
namely, profit control through absorption as well as by mark-downs on
ceilings.
Senator H I C K E N L O O P E R . I may say, Mr. Clifford, that I think you
have given an extremely apt illustration there. I think if those Government of icials had to absorb the cost of their activities in their own
offices out of their own salaries they would begin to realize eventually
what this policy is doing to American production; but fortunately
they do not have to.
Mr. CLIFFORD. What is the future OPA policy going to be on
absorption'* Let me quote from the "Statement of considerations
accompanying amendment No. 19 to Second Revised Maximum
Price Regulation No. 215"—dated March 29, 1946. [Reading:]
When final determination of the effect on retail yards of the Douglas fir mill
prices has been made and reviewed with the industry advisory committee, such
further abso option will be required of retail yards as the determinations indicate
to be necessary under the pricing standards of the Office. At that time, also,
action will b* taken to require absorption by wholesale distribution yards and by
retail yards on wholesale-type sales to the extent that investigations now being
made may show to be warranted by the circumstances.
The considerations which have led the Administrator to require absorption by
retail yards of increases in mill prices for lumber have been stated in detail in
the statements of considerations relating to previous amendments to Second
Revised Maximum Price Regulation 215. In this instance, as with previous
absorptions, it has been determined that the average margins of retailers on
Douglas fir and related species, after absorption, will be above the retailers'
average expense rate, and that over-all earnings expressed as a percentage of total
sales will be above the normal peacetime rate. No financial hardship will be
incurred by retailers as a result of this absorption.
There are two points here for your special attention, gentlemen.
First, note the OPA definitely says that in addition to the several
absorptions already suffered, we face still more in our industry.
In the second place when they say that "No financial hardship will
be incurred by retailers as a result of this absorption," it is unutterable nonsense and unmitigated gall, or inexcusable ignorance. This is
typical and in line with other OPA classics of misstatements. In a
part of the regulation quoted a moment ago, our industry advisory
committee is mentioned in the following words—and I quote again:
Because the full effect of the mill price increase has not yet been finally determined, and because the effects of absorption on retail yard earnings are to be
Teviewed with the industry advisory committee,
and so forth.
As the industry understands it, all industry advisory committees
were set up by the Congress as a safeguard to see that common sense
and industry practices were made known to the OPA and their suggestions heeded by the OPA. The law said the OPA had to consult with
the committees—but because it said nothing about having to "heed"
their advice, the OPA has flouted your will; and I think this holds
pretty true in all industries.
1391 e x t e n d p r i c e c o n t r o l a n d s t a b i l i z a t i o n
acts of
19 4 2
Since December 14, 1945, this industry has had considerable difficulty in keeping the OPA lumber advisory committee from resigning.
This committee feels it should resign because the OPA had not heeded
the suggestions of the committee for over a year. Mr. Jerome Ney,
then one of the top pricing executives of the OPA was thoroughly
familiar with the situation and urged the chairman and his committee
to continue to serve. The ignoring of the advice of practical men in
the industry with wide experience is one of many reasons why you
have unrealistic pricing policies and shortages in housing construction
lumber and other building material and will continue to have them as
long as the will of the OPA prevails over that of Congress.
Now let us say something about operating costs because no absorption picture is complete without it. Obviously, operating costs have
been creeping up since 1944, and in the last year they have jumped
considerably. There is hardly a yard in the country that is paying
a common laborer less than 65 cents and the major part of labor
increases occurred last year. Take one single item that every yard
must maintain—namely, a truck. The cost of replacement, repairs,
tires, and parts have gone up; and the cost of gas has gone up. Furthermore, dealers' purchasing costs have gone up because the wholesaler no longer comes to his yard to sell him lumber, and the retailer
must go out to find it at heavy expense—and all the while his volume
is going down. I ask you how any sane-thinking man, or even a
Washington economist, can figure out how the retailer is making too
much money.
Gentlemen, I have the Government statistics here and the number
of yards and their sales volume for 1939. I have the OPA's own
statements on industry profits and I will be glad to sit down with
'you by the hour, and no matter how you figure them you will come to
the same conclusion.
I have also a set of figures which were supplied the National Retail
Lumber Dealers Association by the Service Lumber Co. of Rolling
Fork, Miss., showing the increased operating cost. I would like to
have these figures incorporated in the record, together with the letter
of the Service Lumber Co. which accompanies the figures.
Senator T A Y L O R . Very well.
(The letter and tabulation referred to are as follows:)
SERVICE
LUMBER
Co.,
INC.,
Rolling Fork, Miss., December 6, 1945.
Mr. H. R.
NORTHRUP,
Secretary-Manager, National Retail Lumber Dealers Association,
Washington 6, D. C.
D E A R M R . N O R T H R U P : I acknowledge receipt of your wire December 1 advising
of meeting of our I AC to OPA in District of Columbia on December 12. Ted is
writing you why we think neither he nor I should attend.
Our dealers are highly indignant at this latest slap by OPA and just what this
may lead to in noncompliance I am not prepared to say, but can hazard a good
guess, as frankly I do not think the smaller dealers who may not keep complete
records will pay any attention at all to this absorption edict.
To substantiate my contention that it is unjust that we absorb this increase
given the producers I have prepared a chart giving some comparative figures
between August 1943 (date of beginning MPR-215) and November 1945, as well
as many of the intervening months. You will note that these figures show that
our footage volume of lumber has been declining, our cost of handling and cost
per thousand of handling have been steadily increasing. Also note that where our
total sales volume in November 1945 increased over August 1943 by 26.32 percent
our total yard expense increased 67.74 percent.
1392
extend price c o n t r o l and stabilization
acts of
19 4 2
It is my contention that if OPA considered the mark-ups they accorded us in
August 1943 as fair, then it is up to them to show that our expenses have decreased
since then before reducing our mark-ups. In my opinion their reasoning that
retail lumber yards profits have increased is irrelevant as a reason for reducing
mark-ups. I do not think it is within OPA's province to regulate profits as our
internal-revenue boys are doing a right good job of this.
I am enclosing the data mentioned above and hope that it may be of interest
to you. Am certain that any other information Ted or I can supply will be forthcoming promptly at your request.
With kindest regards, I am
Yours very truly,
RUSSELL
Yard labor truck expense
shipping
Date
August 1943
August 1944
August 1945
Octobfr 1943
October 1944
October 1945
November 1943
November 1944
November 1945
January 1944
January 1945
March 1944
March 1945
M a y 1944M a y 1945
Footage
sold
115, 223
187,115
50, 700
110, 688
59, 429
84, 927
112, 240
68,076
62,117
133, 320
127,189
94, 386
88, 620
70, 793
73, 689
Dollar
expense
Thousand
board
feet
cost
$716.45
1,011.56
822. 50
789. 66
668. 54
813.66
742. 43
650. 72
867. 47
904.16
1.150.11
827.07
1,112. 57
788. 75
742.19
$6. 21
5.40
16. 22
7.13
11.25
9. 58
6. 61
9. 55
13.97
6.78
9. 04
8. 76
12. 55
11.14
10. 07
SMITH.
Per
thousand
board
feet
Dollar
percent, expense,
using
using
August
August
1943
1943
as 100
as 100
percent
percent
Total
sales
volume,
August
1943=
100
percent
Total
yard
expense,
August
1943=
100
percent
Percent
100.00
141.19
114. 80
110. 22
93.31
113. 56
103. 62
90. 82
121. 07
126. 20
160. 52
115. 44
155. 28
110. 09
103. 59
Percent
100.00
128. 34
99. 05
84.24
78. 96
109. 27
129. 80
98.75
126. 32
131. 20
166. 02
157. 39
157. 45
122. 52
116.16
Percent
100.00
117. 54
139. 51
107. 58
96. 63:
150. 38
103. 77
93. 51
167. 74
118. 58
141.21
115. 80
137. 85
118. 08
128. 05
Percent
100.00
86. 90
261.19
114. 81
181.10
9.58
106. 44
153. 78
224. 95
109.17
145. 57
141. 06
202. 05
179. 38
162.19
Mr. C L I F F O R D . Y O U will notice this letter is dated December 6,
1945, and was not prepared for these hearings, therefore we do not
consider it a self-serving declaration. I would also like to have
incorporated into the record the following table which reflects the
penalties imposed on the retail lumber dealers in the southern-pine
area since August 11, 1943, and you will find that in the back of this.
Senator T A Y L O R . Very well. It will be incorporated in the record.
(The table referred to is as follows:)
EXHIBIT
3
These comparative tables are intended to reflect the penalties in the form of
absorptions and cut-backs imposed upon the retail lumber dealers in the southernpine area since August 11, 1943 (item covered is any typical southern pine item
with delivered cost of $50 per M board measure):
1393 e x t e n d p r i c e c o n t r o l
and stabilization
acts of
19 4 2
Formula for retail lumber yards in
Amendments to MPR-215 bring the
North and South Carolina per OPA following figures as the retail dealers'
MPR-215, effective Aug. 11, 1943:
prices, including cut-backs and absorpt i o n s p e r amendments 13 and 18 to 215:
Use any typical item:
Landed cost of item, conUse any typical item:
Landed cost, consisting of
sisting of mill price $48
(list 19) plus freight from
mill ceiling price
$48. 00
basing point $2
$50. 00
Freight from basing point.
2. 00
Handling charge
5.00
6 percent commission which
must now be paid by reTotal on which retailer's
tailers 1
2. 75
mark-up is based
55. 00
25 percent mark-up (lower
52. 75
bracket)
13. 75
Handling charge: This was
originally $5 under M PRDealer's selling price
68. 75
215 of Aug. 11, 1943.
=====
Later reduced to $2.50 by
Gross profit in dollars... 18. 75
amendment 13 to MPR^ Percentage mark-up on cost 37.5 per£15. M i n t e d entirely
Percentage gross profit on sale, 27.3
percent.
M P R
215
00
52
Cost price OPA required
retailers to use in determining mark-up and selling price
The $51 consists of
mill ceiling price, $48;
freight from basing
point, $2; 2 percent of
wholesaler's commission
reduced to nearest
quarter dollar, SI.1
25 percent mark-up (lower
bracket)
75
51. 00
12.75
Selling price
63. 75
Gross profit in dollars
11. 00
Percentage mark-up on actual costs,
20.8 percent.
Percentage gross profit on sale, 17.2
percent.
Dollar reduction in gross profit as a result of absorption, $7.75.
Gross profit on sales reduced, 41.3 percent.
Mark-up on costs reduced, 44.5 percent.
Operating cost of average yard, 20 percent on sales.
* 6 percent commission must now be paid to wholesalers—4 percent must be absorbed by retailers, and
2 percent is passed on to consumer. Normally mills gave wholesalers a discount which mills no longer
do because of sellers market.
1394
extend
price c o n t r o l
and stabilization
acts of
19 4 2
Mr. C L I F F O R D . Since the testimony of this industry before the
House Banking and Currency Committee covered the field of production, I will say only a few words regarding our differences with the OPA
in this field. There are two items that are the backbone of a frame
house—the 2 by 4's—that is, lumber 2 inches thick by 4 inches wide
by whatever length needed—and boards. The boards are less than
an inch in finished thickness, are 6 or 8 inches wide, and of varying
lengths. Without 2 by 4's and boards, you have no framing lumber—
therefore no house construction.
Three weeks ago our lumberyard in Bridgeport did not have in stock
a single, solitary 2 by 4 or a sheathing board—and normally we have a
stock of over 5,000,000 feet of lumber to serve builders and industry.
And I may say since that date they have been in the same position
many times. In other words, you just do not get it.
Our industry is firmly convinced that OPA pricing policies have
retarded production. But what does the OPA say? I quote from an
article by Mr. Stanley Crute, Connecticut director of the OPA. In
the Connecticut press recently, he said, and I quote:
The real cause for our present shortage of building lumber lies not in prices
but in the shortage of manpower in the lumber industry and in the weather.
Gentlemen, we had far greater shortages of manpower during the
war—but we had 2 by 4's and sheathing boards in ourj yard. We
have always had bad weather plague us on and off for the over half a
century that the company I represent has served the public, and we
never were out of 2 by 4's or sheathing boards.
Mr. Crute also said, and again I quote:
OPA lumber pricing policies are and have been realistic.
Is that correct? We seem to disagree most emphatically. Just to
give one illustration out of dozens: Fir lumber price ceilings .were
supposed to have been adjusted to give an increase in realization of
about $1.10 per thousand, but fir log prices were upped $1.25—and
you don't have to be a lumber producer or dealer to know that is
not realistic.
This committee has allowed our industry 30 minutes; therefore, it
was necessary for me to telescope this testimony; but if this committee
or any member of it wants to pursue this matter further, the members
of our industry are available, including members of the industry
advisory committee. This testimony has been limited to a few of the
many complaints we have against OPA, but if the subject matter of
these complaints, especially absorption, could be corrected, and if
the OPA would utilize its enforcement staff in the proper places, we
could get along for a few more months if the public interest so requires.
However, if Congress by legislation fails to correct this situation, our
honest members are rapidly being maneuvered into a position where
they will have to violate or liquidate; and when I say that, I am not
being facetious, because our industry is in dead earnest and means
business.
In the name of the building material dealers of this country, I
plead with you, gentlemen, to stop unrealistic pricing policies that
hinder production, and I plead with you to see to it that the law requires the OPA to abandon all absorption policies that sifle justifiable
earnings, the loss of which will eventually curtail jobs even more than
it is now doing.
'
1395 e x t e n d p r i c e c o n t r o l a n d s t a b i l i z a t i o n a c t s o f
19 42
And I want to add, please, that we warn that in abolishing of absorption any law written must be so specific that it prohibits direct
and indirect absorption, such as the hidden absorption in handling
charges mentioned in this testimony.
And I might also add, gentlemen, that I noted it was reported in
the press that the Senate Agriculture Committee had recommended
removal of all price control on meat, charging that controls and price
regulations on livestock and meat "had completely broken down."
The situation with regard to lumber is identical. The distribution
controls of the OPA are ineffective, and price regulations of the OPA
are honored only in the breach. If there is justification for removal
of price controls over meat, the same justification exists over lumber.
I would also like to point to the illustrations in the back of the
material that I have here, which is exhibit 3. Exhibit 3 shows some
typical examples of the cost formula for retail lumberyards in North
and South Carolina in accordance with OPA regulation MPR 215,
effective August 11, 1943, both before then and the date of the
present time; and you will notice that the gross margin in dollars is
down from $18.75 to $11, which brings a gross margin of profit on
sales reduced 41.3 percent; that is, since they have started this absorption along this particular line the dealer's gross profit on sales
is reduced 41.3 percent.
"We have other exhibits here. "We know you are pressed for time,
and I will not go into them in detail, but I might say this—that some
of these regulations have had 30 and 40 amendments by virtue of
revisions. I have got some of them here. You probably do not want
to see them, but it takes more than a Philadelphia lawyer to dig them
out and work them out.
We have a complicated business anyway, and the OPA, none of
whom I believe are experienced lumbermen—they are very fine
gentlemen, but they are not experienced lumbermen, and we men
who have spent a lifetime in the business are in the hands of these
men who are not realistic, who do not know the business, and are not
qualified to handle it. They are not qualified to take the second
largest business in these United States, which is the building material
and affiliated lines of construction, and so forth, and without experience say what can be done. This OPA doctor is a doctor that is not
consulting with the experts, the advisory committee. They talk
with them, and then they do as they please, and it is a rank injustice
to the industry. Absorption, gentlemen, is something that we certainly must get rid of. It was never intended by you gentlemen.
(The following was later submitted to the record:)
EXHIBIT
TABLE
4
No. 1.—Methods used by northern retailers in computing sales prices on a
$40 southern yellow pine lumber item before and after absorption
BEFORE
ABSORPTION
Actual costs *
Mill ceiiing price RMPR 19.
Wholesale commission 6 percent
Freight, 41-cent rate 2,500 pounds
Transportation tax 3 percent-.-Total landed cost.
.
$40.
2.
10.
.
0040
25
30
52. 95
1396
extend price c o n t r o l and stabilization acts of
19 4 2
1.—Methods used by northern retailers in computing sales prices on a
$40 southern yellow pine lumber item before and after absorption—Continued
TABLE NO.
BEFORE
ABSORPTION—Continued
Method of computing selling price before absorption:
Mill ceiling price RMPR 19
$40. 00
Wholesaler's commission 4 percent (note here that dealers absorb 1/3
of commission)
1. 60
Freight 41-cent rate 2,500 pounds, plus transportation tax of 3 percent, or a total of $10.55, which must be reduced to the nearest
quarter dollar
10. 50
Total of above three items reduced to nearest quarter dollar
Add handling charge $5_
52. 00
5. 00
Total on which mark-up is allowed
30 percent mark-up on $57
57. 00
17. 10
Selling price (add 30 percent mark-up to $57 and reduce to nearest
quarter dollar
74. 00
Gross profit
21. 05
Percentage mark-up on cost, 39.8 percent.
Percentage gross profit on sales, 28.3 percent.
Operating costs of average yard, 20 percent on sales.
No. 2.—Methods used by northern retailers in computing sales prices on a
$40 southern yellow-pine-lumber item before and after absorption under present
absorption policy
TABLE
Actual costs:
Mill ceiling price, RMPR 19
Wholesale commission, 6 percent
Freight, 41-cent rate, 2,500 pounds
Transportation tax, 3 percent
Total landed cost
Method of computing selling price under current absorption policy:
Mill ceiling price, RMPR 19
Wholesaler's commission, 2 percent (note that retailer absorbs % of
wholesaler's commission)
Freight, 41-cent rate, 2,500 pounds, plus transportation tax of 3 percent, or a total of $10.55, which must be reduced to the nearest
quarter dollar
Total of above 3 items reduced to the nearest quarter dollar
30 percent mark-up on $51.25
$40.
2.
10.
.
00
40
25
30
52. 95
40. 00
. 80
10. 50
51. 25
15. 37
Selling price (add 30 percent mark-up to $51.25 and reduce to nearest quarter dollar
66. 50
Gross profk
13. 55
Percentage mark-up on cost—25.5 percent against 39.8 percent before absorption, or a reduction in the mark-up on costs of 36.6 percent.
Percentage gross profit on sales—20 percent against 28.3 percent before absorption, or a reduction in the mark-up ori sales of 29.3 percent.
Dollar reduction in gross profit as a result of absorption, $7.50.
Senator T A Y L O R . Are there any questions?
Senator H I C K E N L O O P E R . Yes; I would like to ask a question of
Mr. Clifford.
M r . CLIFFORD. Y e s , s i r .
Senator H I C K E N L O O P E R .
Y O U say it is a rank injustice to the industry. What is your opinion as to whether or not the public under
this system is getting the supply of lumber and building materials
1397 e x t e n d p r i c e c o n t r o l a n d s t a b i l i z a t i o n a c t s o f
19 42
that it otherwise would get? What would you believe to be a realistic
policy?
Mr. CLIFFORD. An excellent question, Senator. If there were
realistic pricing policies, the industry is convinced, definitely convinced, that the flow of material would t>e increased, that the material
would go through proper channels, and that the people would get the
building material at less cost than they get it at today. And besides,
they would get the quality and kind that they want; they would not
be forced to take anything and everything that comes along just
because it is lumber.
Senator HICKENLOOPER. Thank you.
Senator TAYLOR. Thank you a lot, Mr. Clifford. We are happy
to have had you with us, sir.
Mr. CLIFFORD. Thank you, sir.
Senator TAYLOR. Our next witness is Mr. Quentin Reynolds, of the
National Council of Farmer Cooperatives.
STATEMENT
OF
QUENTIN
REYNOLDS,
PRESIDENT,
NATIONAL
COUNCIL OF FARMER COOPERATIVES A N D GENERAL MANAGER
OF THE EASTERN STATES FARMERS EXCHANGE, WEST SPRINGFIELD, MASS.
Mr. REYNOLDS. Mr. Chairman, I want to cooperate with you and
I have spent a good deal of time on this. I think if I read this statement it will be quicker than if I attempted to paraphrase it.
Senator CAPEHART. YOU do not have copies of it?
M r . REYNODS. Y e s .
I am Quentin Reynolds, a resident of Massachusetts, president of the
National Council of Farmer Cooperatives and general manager of the
Eastern States Farmers Exchange, Inc., a cooperative farm production supply purchasing association, owned by and serving farmers in
all the New England States and also Delaware, Maryland and Pennsylvania. The views which I am expressing are based upon my experience with Eastern States Farmers Exchange since 1923 and on my
contacts with farm supply organizations, both cooperative and
proprietary, as chairman of the National Committee for Farm Production Supplies from 1941-44 and as the personal representative
first of Governor Saltonstall, a Republican, and now of Governor
Tobin, a Democrat, on the Northeastern Governor's Emergency
Feed Committee. This committee includes the representatives of
10 governors.
With the consent of the executive committee of the Eastern States
Farmers Exchange, Inc., I am appearing to present for your consideration suggestions to secure optimum production of essential foods by
farmers, particularly by those in the so-called deficit-feed areas—the
dairymen and the poultrymen along the Atlantic and the Pacific
Coast States.
Let me make clear that I am not asking that livestock and poultry
in the deficit-feed areas be fed at the expense of human beings.
It is important to recall that the livestock and poultry operations
in the so-called deficit areas are important from the standpoint of
agriculture and of the national economy. The 16 Eastern States
from Maine to Georgia, for instance, have a population of 49,000,000
people, who, while they require a wide variety of food items from all
1398
extend price c o n t r o l and stabilization
acts of
19 4 2
parts of this Nation and from abroad, depend primarily on the
farmers of the Atlantic seaboard for their supplies of fresh milk and
fresh nearby eggs.
There are about 1,250,000 farms in these 16 States. According to
the most recent figures available, these farms have about 4,900,000
dairy animals, producing about 1,575,000,000 gallons of milk per
year. On these farms there is also a poultry population of over
110,000,000 and other livestock of about 10,000,000.
Over the years which preceded the outbreak of World War II,
dairymen and poultrymen east of the Alleghenies and in the Intermountain and Pacific Coast States had come to rely on their fellows
in the South and the Mississippi Basin as their source of grain and byproduct feeds, and the farmers of the great Middle West had come
to rely on those same poultrymen and dairymen as profitable outlets
for feed products of their farms. Under our competitive system, the
farmers in the East and the West have acquired skills in poultry and
dairy management. Through combining the feeding of home-grown
roughage to quality stock with effective selling in accessible markets,
they have been able to offer midwestern farmers markets for their
grain production which compared favorably with the returns which
they could secure by feeding the major part of their production at
home. Cereal grains constituted some two-thirds of the purchases in
the East and in the West, the balance being composed largely of such
byproduct feeds as gluten, soybean and linseed meals, distillers' and
brewers' grains, dried whey, tankage, meat scrap, et cetera, purchased
from processors who in turn purchased grain or livestock and dairy
products from Corn Belt farmers. The cottonseed and peanut meals
came from the South. These purchases were made through agencies
competing on a service basis in accordance with the American tradition—elevators, processors, feed manufacturers, cooperative and
proprietary—according to the individual inclinations of the farmers
selling and the farmers buying.
The program resulted in extremely efficient use of feed ingredients,
with consequent benefit to the consuming public. To bid for the ingredients direct or through feed manufacturers and dealers, farmers
in the East and the West have had to satisfy consumers who have
not been restricted in their selection of their food purchases. Conversely, the farmers of the Middle West and the South have weighed
the returns offered them with the prices available for the poultry and
livestock products they could produce themselves.. Both groups of
farmers, those in the deficit areas and those in the grain and concentrate producing areas, all combined to afford the packers, grain processors, and creameries the markets for byproducts for use in feed
which justified their husbanding and satisfactorily preparing residues
which, so salvaged, have greatly augmented the national livestock
feed supply and thus the national supply of essential human foods.
The regulations established under the OPA have drastically interfered with this program. By so doing, as I shall show presently, they
have sorely penalized and lowered the efficiency of production of the
poultry and dairy producers of the East and the West, with consequent loss to the economy through wasteful use of feed ingredients.
The Nation's potential food supply has been reduced, and costs of food
production have been increased. These price regulations have combined with administration of the over-all food program to reduce
considerably the amount of human food available for export.
1399
extend price c o n t r o l and stabilization
acts of
19 4 2
It must be understood that the poultry and livestock feeds which
supplement roughage (whether home-mixed or ready-mixed) are
largely composed of proteins and carbohydrates. The carbohydrates
are supplied from the grains and the proteins chiefly from the byproduct, or concentrate feeds. It is important to keep in mind that
normally the concentrates, the protein carriers, are substantially
more costly because they are in much more limited supply, and that
in the animal diet, protein can replace carbohydrates but that carbohydrates cannot replace protein.
The OPA price ceilings on protein concentrates have been consistgently more favorable to feeders than the ceiling prices on grains. Consequently, it has become the common feeding practice to feed ;the
scarce proteins relatively wastefullv if, as, and when they are obtained.
They are obtained more readily in the areas of their production because processors have been allowed to secure higher margins in bag
and truckload lots than in carload lots. They have remained in areas
of production for another reason. As products to process have become more valuable, the processors who, because of ceiling prices,
could not legally bid for them with cash have exchanged protein concentrates for soybeans, flax, beef, or hogs. The farmers in the deficit
areas and their suppliers, because they have had nothing but money to
offer for protein, are out of luck in this barter economy.
"While the OPA, through the United States Department of Agriculture, has devised a rationing set-aside mechanism by which farmers
in deficit areas have secured a greater portion of protein concentrates
than they otherwise would have received under the price regulations
and supply conditions resulting from these circumstancesj it is generally admitted that farmers in the areas of production are today
. using a greater proportion of protein concentrates than they used
when the farmers in the deficit areas had equal opportunity to bid
for these ingredients, and for the reasons previously suggested are
wasteful in their use of protein meals.
In spite of fat and protein shortages, indications are that Corn
Belt farmers are not planting either as great an acreage of soybeans
as the production goals are seeking or as they planted last year.
Corn Belt farmers are convinced from past experience that net return
from beans at OPA ceilings is considerably less attractive than similar
returns from corn. Consequently feeders in the deficit areas continue
to enjoy attractive prices for proteins while going without supplies
critically needed which higher prices to farmers would provide.
The admitted deflection of meat from the established packers is
resulting in less meat scrap, as well as in less of the other byproducts
which are sorely needed by consumers direct and through various
industries. The smaller slaughterers, though individually operating
at a profit, do so at the expense of the general economy.
The legal ceiling price for corn is so decidedly less than the legal
price for corn after it is converted into hogs, that farmers in the
deficit areas have not been able to compete with hogs for corn which
normally constitutes a third of their purchased feed. The corn
grower, in other words, has not had the customary option of deciding
whether to sell legally his corn for the going price or put some labor
against his grain production and feed it out at home. This situation
has proved costly to the economy. The dairy cow stands at the top
of the list as a converter of feeds into food products when milk solids
are used for direct human consumption, and the hen as an egg pro-
1400
extend price c o n t r o l and stabilization acts of
1942
ducer is ahead of the hog as a meat producer. To make matters stilL
worse, OPA ceiling prices have encouraged the use of corn and protein
for the production of hog fat, an extremely wasteful use of feed.
From the inauguration of the price regulation program, the feed
trade, State departments of agriculture, farmers, and governors in
the deficit areas have called these facts to the attention of the OPA
direct and through the United States Department of Agriculture.
Suggestions have been offered for their correction. Specifically an
opportunity to bid on equal terms with farmers in the area of production and the bringing of all feed ingredient ceiling prices in relationship from the angle of their respective feeding values have been urged
but to # no avail. The adjustments have not been made.
Other grains have been substituted for corn and always at prices
more costly than corn to the feeders of the deficit areas. In other
words, the feeds used to replace corn have cost the consumers in the
East and West much more than corn would have cost them. These
consumers would have been better off buying corn in milk and eggs
locally produced than they have been paying for it as meat on the
platter and as grease in the skillet or roasting pan.
For instance, milo has been shipped from Texas and Oklahoma to
the North Atlantic States as a replacement for Ohio and Indiana
corn, a distinctly less valuable feed ingredient than corn but costing
approximately $65 a ton at Boston rate points when corn which would
have been worth more to feed is being held down to approximately
$50 a ton delivered Boston rate of freight. Oats which are now largely
replacing corn, cost $61 delivered Boston. A typical 20-percentprotein dairy ration cost farmers in central New York State, November
21, 1941, $40.20 a ton. When price control was applied to mixed
feed on February 17, 1943, that feed cost $48.09. On April 17, 1946,
the cost was $68.50.
It is interesting to note that when the administration determined
that it required corn as well as wheat, it did the very thing which
feeders in the deficit areas had asked that they be permitted to do—
tried to bid as much for the corn as the hogs have been permitted to
grunt for it.
Let me repeat that I am not asking that livestock and poultry in
the deficit feed areas be fed at the expense of human beings. I am
asking only that liquidation required to bring the animal and poultry
units in this country in line with feed stocks be participated in equitably by allowing all to bid for feed in a free market. This practice
will result in feed grains now being produced at optimum volume and
being fed to optimum efficiency.
The suggestions which I am making for your consideration are
based on the premise that OPA is only one of the instrumentalities
which Congress is using to fight the inflation threat. Other means
include tax programs, fiscal policies and allocations. I also assume
that it is conceded today that price rises are the result of an excess
of spending power over the supply available of desired goods and
services. That being the case, production required to fill the gap
should be the objective of OPA regulations.
And I suggest that—These are just principles. I have not attempted in my limited experience to spell out bills or anything but
principles that I feel from our experience—or my experience, not
speaking for any particular group; I am speaking from my experience
extend
price c o n t r o l and stabilization acts of
194 2
140S
with these circumstances—that I feel might well be incorporated, not
to cripple OPA but to help OPA effectuate the objectives for which it
has been created:
1. Pricing regulations on agricultural products and the food and
feedstuffs processed therefrom should be terminated whenever the
domestic production, as determined by the Secretary of Agriculture,
reaches the production of a historical base period which represents
optimum over-all production of agricultural products under normal
conditions.
And here, gentlemen, I have changed the wording slightly, because
I want to stick to principles rather than to appear to be so specific as
I was when I drafted this. You will catch the difference when I read.
2. Government payments and subsidies paid to processors or
producers of agricultural products or the food and feedstuff processed
therefrom should be removed by December 31, 1946; and any existing
price ceilings should be raised at the same time any such removals
occur by the amount of the subsidy reduction. The problem of taking
care of the nutritional needs of disabled and underprivileged people
should be treated by specific remedies.
It seems to us, many of us, that the fundamental of any national
standard of living is its food supply and that a standard of living which
is geared on any other basis than people paying what it costs to
supply themselves with food is not a realistic program.
3. Any price ceilings existing after June 30, 1946, should provide
for the cost of production, processing, and/or distribution of each
individual item, plus reasonable sales margins.
Now, one thing I very definitely have in mind there is the position
in which cooperatives find themselves when they operate on this
principle that if you are breaking even on everything you are operating all right. Now, cooperatives are required by the United States
Government, through the Department of the Treasury, to operate on
a nonprofit basis. Therefore an honest-to-goodness nonprofit cooperative enj^prise must have each of its projects carry its own
weight in the boat—carry itself; and to ask the fertilizer department
of the cooperative purchasing association to carry the seed department
or the roofing department or the lumber department or any other
department is not fair.
I have been listening to some of the testimony here with a great
deal of interest, and it seems to me that there is a profound difference
between an industry electing to operate at prices which involve not
carrying the entire cost and the Government putting into practice
mandates which require an industry to operate on that basis.
And finally—
4. Materials and products needed for farm production purposes,
which depend for their supply substantially on imports from other
countries, shall be allocated on the basis of historic use, until imports
have been restored to volumes supplied at a historical normal base
period.
What I want to emphasize there, and the fertilizer industry emphasizes that quite well, is the fact that keeping prices attractive to
hold the line tends to increase consumption; and if there is a shortage
of items, then the only way in which you can carry out the purposes
of the Congress in meeting the situation is to combine allocation with
pricing.
extend price c o n t r o l
and stabilization
acts of
1 9 4 2 140S
Senator T A Y L O R . Thank you, Mr. Reynolds.
Senator M I T C H E L L . D O you have any estimate as to how high grain
prices would go if controls were taken off?
Mr. R E Y N O L D S . N O ; I have not. I think somebody answered that,
Senator, rather well the other way when they pointed out that the
price would probably be somewhere between the legitimate price and
the black-market price.
Senator M I T C H E L L . But that is just an assumption?
Mr. R E Y N O L D S . That is just an assumption.
Senator M I T C H E L L . "W hich probably does not give too much weight
to the effect of the ceiling now in holding down prices.
Mr. R E Y N O L D S . N O . But may I carry further this idea that X
made in connection with my last point—that if we are going to have
run-away prices with no price control, or a very high ceiling price
which would amount to no price control and a free market, then
your supply of money and demand are entirely unrelated to the actual
supply, and then you have got to ration. Merely holding down the
established price will not accomplish the purpose of the Congress.
Senator T A Y L O R . Any other questions?
Senator C A P E H A R T . I have nothing to ask, except I would like to
make this comment: That as a result of the Government paying 30
cents premium for corn and wTheat—and I will make the prophecy—
that within 72 hours or not to exceed a week, that they increase the
price of corn 30 cents a bushel. They will be forced to do it.
Senator T A Y L O R . Thank you, Mr. Reynolds.
Mr. Slotkin.
STATEMENT
OF S A M U E L
S L O T K I N , CHIEF E X E C U T I V E
HYGRADE FOOD PRODUCTS
CORP., N E W
OFFICER,
YORK, N . Y.
Mr. S L O T K I N . M y name is Samuel Slotkin. I am the chief executive officer of the Hygrade Food Products Corp., with offices at 30
Church Street, New York City. The company of which I am the
head owns and operates plants in 14 States, and does business in everjr
one of the 48 States of this country. In 1945 the Hy grade company
did a gross volume of $110,000,000. This year its sales will be substantially larger. Hygrade is the seventh largest member of the meatpacking industry.
M y purpose in submitting this statement at the invitation of the
committee is not to dwell upon the special problems confronting either
the meat industry in general or the Hygrade company in particular
during the reconversion period. No doubt these problems are familiar
to the members of this committee. Highly competent authorities
representing all points of view have given you the benefit of their
experience concerning these problems during the hearings you have
been conducting.
I would be less than frank if I were not to make it clear that I, in
common with every other corporation executive in the country, find
myself confronted with many unfamiliar and unpleasant problems.
T o do business with less Government regulation, or without any
regulation at all, would be simpler; it would be more profitable; it
would be more pleasant. But it is impossible. We in America face
a condition—indeed it is a crisis. In rising to meet it, we dare not be
wishful. We can afford nothing less than to be practical.
e x t e n d price c o n t r o l and stabilization
acts of
194 2
140S
Accordingly, I am submitting this statement not simply as a corporation executive expressing the necessarily narrow and inevitable
grievances of an individual management toward government. These,.
I assure you, are many, troublesome, and costly. Rather is it my
intention to speak as one trying to be simultaneously a corporation
executive and an average American citizen. It is in this capacity
that I venture to urge upon the members of this committee my belief—
my conviction—that it is the feeling of most of the ordinary citizens
at large that the legislation now pending before Congress must take
into consideration not merely the special statistical grievances of the
meat-packing industry but also the responsibilities which all of us—
including business—owe to our national economy during these critical
days of transition from war to peace.
It is my conviction that to legislate purely and simply in terms of
the statistical problems of any industry at a time of crisis in the world
is less than practical. If we are to have the truly practical legislation
we all want, the truly practical legislation your committee wants to
recommend, each and every industry, each and every company, each
and every group, must temper its conviction as to its own self-interest—as to its legitimate self-interest, to be sure—with the more
humane and, if I may say so, more practical question: What is good
for the country? What is good for the world? WTbat does the
general welfare require from each and all of us?
I, as a citizen, would willingly and unhesitatingly sacrifice all of my
business interests if I believed such was the price necessary for the
maintenance of peace in the world and the attainment of our universally accepted domestic objectives—plenty and security. I hope that
I will be pardoned if I seem complacent in my conviction that the
attainment of these objectives is not in any way inconsistent with the
normal and profitable operation of American business in this difficult
period of readjustment. I believe that recognition of the broad needs
of reconversion, as embodied in the general agreement of public
opinion that OPA must be continued, is not at all inconsistent with
the continued operation of American business in a manner entirely
compatible with the American system.
It is in this spirit that I am glad to have the opportunity to assure
the members of this committee that a very representative cross section
of opinion in the food trades is anxious that the legislation now pending
be written entirely in terms of what is good for the country and what
is good for the world. The members of every industry will find their
greatest security in those measures which will insure the greatest
good for our national economy and for the new world order now"
a-borning. If the legislation you pass in this session attains these
lofty objectives, I assure you it will help the industry of which I am
proud to be a member more than any designed to serve our immediate
corporate convenience thatl could urge upon you.
Having tried to express the spirit of the point of view which prompts
me to submit this statement to you, may I now proceed more specifically to give you my opinion of the actual condition which confronts
the meat-packing industry and the food markets of our economy.
Clearly we'd all agree OPA has been less than perfect on both the
policy and the administrative levels. But it must be given the
power to operate effectively. Our continued need for OPA must be
accepted as frankly as the need to amend the OPA Act. If all meat-
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price controls were removejd, or if the power to control meat prices
were forfeited by amendment, the price of livestock would undoubtedly
rise substantially.
In my opinion, the price of hogs would immediately rise to a level in
excess of $20 per hundredweight, and the price of cattle would go even
higher. Because of the endless demand for meat, I see no possibility
that these prices would soon fall from this excessive, inflationary level.
Food is needed now. It is needed here and, for reasons too obvious to
require restating by me, it is needed abroad, too. We dare not risk the
possibility of further difficulties in obtaining supplies from producers.
Maintenance of present price controls on livestock and meat is necessary. The strong consumer demand for meat, in the absence of other
items on which to spend the prodigious stream of purchasing power,
would cause meat prices to skyrocket for an indefinite time.
Consequently, I believe that the immediate and unavoidable consequence of the removal of meat price controls would be chaos. Because
it is fashionable to use extreme words loosely nowadays, may I add
that I am using the word "chaos" in its literal dictionary sense when I
predict that chaos will result from the removal of meat-price controls.
I am no political advocate. I have no special political allegiances.
I am just a businessman. But I will stake my reputation for straight
and successful dealing as a businessman upon this prediction. I will
bet upon it in my conduct of my own business.
In closing, may I again express my conviction that Americans of
every group, of every occupation, of every point of view, will most
shrewdly secure the interests which divide them from other Americans
if they grant an over-riding priority to the responsibilities and loyalties
and, yes, the pressures which bind all Americans together. I thank
you again for inviting me to submit this statement for you consideration.
Senator T A Y L O R . Mr. S. Clay Williams, R. J. Reynolds Tobacco Co.
STATEMENT OF S. CLAY WILLIAMS, CHAIRMAN OF THE BOARD
OF DIRECTORS, R. J. REYNOLDS TOBACCO CO., WINSTONSALEM, N. C.
Mr. W I L L I A M S . Mr. Chairman, and gentleman of the committee,
if I may, I will read a statement I have dictated, in the interest of
time.
Senator T A Y L O R . Yes, sir.
Mr. W I L L I A M S . I have found that I cannot stay within close time
limits if I speak offhand about this thing.
I am S. Clay Williams, of Winston-Salem, N. C., and am chairman
of the board of directors of R. J. Reynolds Tobacco Co., a manufacturer of cigarettes, smoking tobacco, and other tobacco products,
without any production of cigars or snuff.
It is not my purpose in the short time through which you will be
able to hear me to address myself to the broad area of OPA extension.
I speak only to OPA amendment and to just one amendment—that
single amendment under which OPA would be required by the Congress
to remove all of its controls from an industry in which supply of the
products of the industry shall have come generally and substantially
into balance with the demand therefor.
e x t e n d price c o n t r o l and stabilization acts of
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Inasmuch as the only generally supported basis for the acceptance
of price control in this country of free men and free competitive enterprise lay in shortages of goods of respective kinds as developed through
the fact that in the war emergency Government purchasing and the
attendant conversion of manufacturing facilities to the production of
war goods forced an unnatural shortage of goods for civilian use, it
would seem to be altogether obvious that when the war emergency
was over and goods of any given line had again become available in
adequate supply, artificial price controls would naturally be removed,
even where they were free of inequities and destructive results in the
working of the economy. It would seem to be equally obvious that
inasmuch as these artificial controls were attached industry by industry as shortages of goods developed or were threatened, they would
be detached in the same wray—industry by industry as the shortages
they were designed to protect against disappeared following the
passing of the war emergency.
It will be noted that the question I propose to discuss does not
involve at all the question of whether or not price control should be
continued in an industry making a product for which, through and on
account of the war and its dislocations of industrial production, an
enormous backlog of demand was built up and still remains unsatisfied. Leaving that aside I narrow my comments to situations where
supply of the product of the industry is in, or shall have come into,
general and substantial balance with the demand therefor.
Clear as the answer to the question of what should be done in such
situations would seem to be, I fear that in the general turmoil of
argument pro and argument con over the extension or the discontinuance or the amendment of OPA even so simple a question as the one I
present has become enveloped in the general cloud of confusion and
contention now affecting the public mind.
Let me, therefore, pose the question before you in the position in
which it seems to me to stand in the midst of all of this turmoil of
argument over OPA.
Beginning at the White House, I quote the President's public statement asking for renewal of OPA "without crippling amendment." In
the President's statement, there was no definition of "crippling amendment," but the answer to that question, so far as the point I am presenting is concerned, is not far to seek. Mr. John W. Snyder, Director
of War Mobilization and Reconversion, seems to have cleared the
point unequivocally through his testimony before the House Committee on Banking and Currency on February 27, 1946—volume I, page
220—from which I quote:
Mr. S N Y D E R . When supply comes into balance with demand, or approaches
balance with demand, I think competition will take care of the pricing, and certainly I would think we should remove the controls at that period.
Mr. C R A W F O R D . Regardless of the backlog of buying power?
Mr. S N Y D E R . I think that wre may find other areas that we will have to look to
at that time, but certainly so far as products are concerned, whenever the supply
approaches demand, I see no reason for continuing control on those products.
Senator CAPEHART. Mr. Chairman.
Senator TAYLOR. Senator Capehart.
Senator CAPEHART. After Mr. Snyder's making that statement I
am wondering why the President, Mr. Bowles, and others called the
particular amendment in the House bill a "crippling amendment"
85721—46—"vol. 2
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when it did exactly what Mr. Synder states, in the statement you just
read, that it should do.
Mr. WILLIAMS. Mr. Chairman and Senator Capehart, I am not
familiar with any statement from the White House that characterized
the particular amendment of the House bill that involves this situation
as a "crippling amendment."
Senator CAPEHART. The point was that they did not define the
"crippling amendments"; they simply left the impression writh everybody that every amendment was a crippling amendment.
Mr. WILLIAMS. And that is exactly, Senator Capehart, what I am
trying to go away from in this argument.
Senator CAPEHART. That is right.
Mr. WILLIAMS. Mr. Snyder, as close to the President I think as
anybody in Washington and, so far as I am concerned at least, established as a spokesman for the White House, has testified that wherever
supply comes in balance with demand he thinks controls should go off.
Senator CAPEHART. And the House wrote such an amendment.
Now, they may have been somewhat wrong in their formula—I do
not know—but at least they tried to do what Mr. Snyder said should
be done.
Mr. WILLIAMS. If I may submit my owTn view of that particular
House amendment, I think the only defect in it is that it isn't quite
sharp enough or quite clear enough.
Senator CAPEHART. That is right. But I mean they at least tried
to do what Mr. Snyder said they should do. And yet we have those
who go on the radio and write to the newspapers and say that everything the House did was a crippling amendment and that it was
going to ruin OPA and just couldn't be done.
Mr. W ILLIAMS. YOU doubtless suspect and I am happy to confirm
that I do not carry that view.
Senator CAPEHART. I certainly do not carry it.
Mr. WILLIAMS. With the question I am discussing thus shown
clear of White House resistance and not regarded as involving a
crippling amendment, I turn to the status of the question in the
OPA administration. OPA Administrators, from the birth of the
Bureau until very recently, have so frequently asserted the proposition to which I refer that even counting the instances of such assertion would be difficult. Ralph Robey, in last week's News Week,
or whatever the publication is
A VOICE. This W'eek.
Mr. WILLIAMS. This Week, excuse me—said "hundreds of times."
As a typical example of a multitude of statements to similar effect
through some 3 years, it is sufficient to quote Mr. Bowles speaking in
New York last December, as reported in Vital Speeches, issue of
January 1, 1946, in which lie said [reading]:
Price control should and must be removed as rapidly as supply conditions
permit. * * * in industry after industry during the next 12 months we will
find supply and demand coming into balance. As that occurs, I assure you that
your Government will move promptly to eliminate the last vestige of price
restrictions in those industries.
Of course, I am not unmindful of the fact that
assertion of this principle and of the dishing out
the OPA administration is currently engaged in
away from that proposition and in trying to keep
legislating with respect thereto.
despite 3 years of
of this assurance.,
attempting to get
the Congras's from
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Senator M I T C H E L L . Are you going to point out specific instances of
that in your statement?
Mr. W I L L I A M S . Yes, I am. And if I do not, Senator Mitchell, to
your satisfaction, I trust you will ask me to follow it further.
Senator M I T C H E L L . Very well.
Mr. W I L L I A M S . I w^ant to deal with that later in this argument
and in doing so I propose to trace the development of the new position,
try to uncover the fallacies involved, search for the motivations
behind the new position and refer briefly to some of the hurts involved
for our economic machinery and its operation if OPA is permitted to
repudiate its long-acclaimed and almost universally accepted principle and operate, instead, on the new policy which it has established
for itself and for which it seeks approval at the hands of the Congress.
But, having posed the question in relationship to White House
position and to OPA's oft-repeated declarations of policy, let me suggest that the question I am discussing is equally free from involvement
in the present barrage of propaganda that is each day being leveled
at the Congress through all of OPA's multiplied channels and mechanisms of propaganda. I hasten to add that I have no fears of undue
influence on this committee or the Senate or the House through that
propaganda which by its own methods and on its own face indicates
so clearly both its character and its inspiration.
I cannot tell anybody in the United States Congress anything new
about the methods of modern propagandists or what is to be expected
out of a bureau with thousands of employees scattered all through
the country and under the leadership of an expert propagandist who
with some of his close associates is in the press or on the radio almost
every day and night with a suggestion to hearers and readers that
they should pile on you gentlemen more and more of his suggestions
as to how you should deal with this important national problem. The
only point that I want to make in this area of the situation is that,
so far as I knowT, the point I am discussing is not to any substantial
extent involved even in all of that flood of propaganda. In other
words, even if through such a deluge of propaganda a question before
the Congress can be made a political issue and decision thereof be
affected by political considerations, the question I discuss is not so
posed. Fortunately, under these circumstances the question can be
presented and can stand for consideration as an economic question
and not as one that has been given high political significance.
Senator H I C K E N L O O P E R . Mr. Williams, may I make a suggestion
right there?
Mr. W I L L I A M S . Yes, Senator Hickenlooper.
Senator H I C K E N L O O P E R . I suggest, Mr. Williams, in connection
with your paragraph on propaganda that has been so astutely built
up in this country in the last few months, that there is a new emphasis
on a very ominous note in connection with that propaganda, and that
is the propaganda of fear that is being built: a fear propaganda without
being documented by adequate facts.
Mr. W I L L I A M S . And presenting quite an inconsistency as against
another propaganda w^ith "fear" as the subject of the sentence.
Senator H I C K E N L O O P E R . I just wondered if you had noticed that
same fear propaganda is increasing and increasing and increasing with
this organized effort.
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Mr. W I L L I A M S . Y O U will find in later parts of this statement that I
have tried to hang an adjective or two on the proposition to which
you have reference now, Senator Hickenlooper.
Senator H I C K E N L O O P E R . And I say this with all due respect, but a
few years ago—a very few years ago—we were told by high Governin en t^officia Is themselves that all we had to fear was fear itself. I
believe that statement was used; and yet we find a Government agency
now bottoming the most extensive propaganda this Nation, at least,
has ever seen, on fear and instilling that into the minds of people.
Mr. W I L L I A M S . I assume you refer to what Mr. Chester Bowles,
his associates and allies, are doing. If you do, I could not make other
than an emphatic affirmative answer to your suggestion.
Senator H I C K E N L O O P E R . I refer exactly to that.
Mr. W I L L I A M S . Speaking to the question, therefore, as an economic
question not handicapped by any White House position or any such
involvement in any current propaganda as would give it political significance, my point of departure will be found in the picture and process through which OPA officials—despite their years of declara tion of
allegiance and fidelity to the proposition that as soon as supply is in
balance with demand in any industry they will take the controls off—
have tried to slip those sound and ancient moorings and continue to
hold controls even after all originally assigned and sound reasons
therefor have disappeared.
The process began at about the time the end of the war was clearly
foreseen. Somebody in and around OPA seems to have gotten nervous—certainly solicitous—when the realization came that Government buying would soon go out of the picture and that with it, sooner
or later, in industry after industry all of the originally assigned and
sound reasons for price control by Government would go out of the
picture. To test my suspicions as to what OPA administrators would
do under that prospect, I went into the OPA offices with the suggestion
that inasmuch as tobacco products were now in full supply I assumed
that, in line with their oft-repeated assurances to that effect, controls
would be lifted promptly from that industry. I got the answer:
Oh, n o .
L e t m e give y o u a c o p y of our n e w D i r e c t i v e N o . 68.
You gentlemen are doubtless familiar with that directive as the
one into which there was incorporated the new idea that even when
supply should come into balance with demand, price controls would
not be lifted except as OPA could be assured that on the lifting of
controls there would not be any increase in the price of the goods.
In other words, if through its exercise of the power of price control
in the service of the war emergency OPA had been holding prices at
a destructively low level, the new policy would continue so to hold
them.
The viciousness of the rule appears when it is remembered that
throughout the emergency OPA was continuously admitting that
many of its ceilings were working destructively on individual units in
industry and were justifying that admittedly otherwise unjustifiable
result by simply teiling complainants, "We are in a war. This is an
emergency situation. We can't attempt nowr to relieve against destructive results of our policies and standards so long as an industry
taken as a whole is experiencing a general result not below its prewar
experience."
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At about the same time there began to appear in the speeches of the
Administrator of OPA and his prime associates a suggestion, kin to the
proposition in the order under reference, to the effect that even when
supply of the product of an industry is in balance with demand,
controls would not be taken off until there was some evidence of a
softening of price—as if there is any point on taking off the controls
when price is softened to a level below the control level and, conversely, as if there could be any softening of price where OPA was
holding a too-low ceiling on the suppliers involved.
The question of whether that formula leaves a possibility for an
industry that is under a too-low price ceiling ever to meet the conditions of the formula is presented. But at the moment I am only
tracing the development of the OPA position I shall attack from some
other angles. Neither shall I digress now to follow the question of
what Mr. Bowies' position could have been in December 1945, many
months after Directive No. 68 had been procured for his uses and after
the idea of price softening or assurance against price rise had been
incorporated in many OPA statements when he said so unequivocally
to businessmen in New York that [reading!:
* * * during the next 12 months we will find supply and demand coming
into balance. As that occurs, I assure you that your Government will move
promptly to eliminate the last vestige of price restrictions in those industries.
To eliminate any possible question as to what OPA's present policy
is, let me remind you that on my call at OPA prior to the date at
which Mr. Bowles made the above statement and when, following
discontinuance or reduction of Government buying, tobacco products
were in ample supply in this country I was told that despite all prior
assurances to the contrary, controls would not be removed for that
cause. But going further, let me point to an official order made in
January 1946 removing a prior inhibition against the sale of single
cigarettes, in the body of which order OPA states that [reading]:
In the period since May 12, 1945,
brands has gradually become ample
*
*
*
the supply of cigarettes of all
and also states that—
With the cigarette shortage having abated, the prohibition is removed by the
accompanying amendment.
And, finally, within this week and on April 30, 1946, there was
sent out from Washington a United Press dispatch stating [reading]:
An OPA official today rejected industry demands that price ceilings be removed
from tobacco and tobacco products.
Sol Arthur Segal, price executive for the grocery products branch, told the
Senate Agriculture Committee such action would be unwise.
" W e feel we cannot decontrol any significant tobacco products because of our
feeling that prices would increase without control," he said.
Segal was called to answer the industry's viewpoint, already before the committee.
He said there is no tobacco products shortage—"with the exception of cigars."
I do not want, gentlemen, to get this discussion down to an industry
or a company basis. I referred to these incidents in the record of
what has been happening in the industry with which I am identified
because in them are found official findings, unequivocal statements
by the OPA itself, to the effect that the conditions which until
recently represented the sum total of condition that had to be met
before controls would be removed, have in this industry been met;
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and in these references there is the expressed denial that controls will
be removed even though all the conditions have been met.
I have not seen the stenographic report of that part of the proceedings before the Senate Agriculture Committee, but I have no doubt
that Mr. Segal was quoted correctly. At any rate, I know that tobacco
products other than cigars—which is an industry within itself—are in
ample supply, and I think my quotations from OPA officials established
the fact that they have been officially adjudged as being in ample
supply.
With the factual background thus established, I want to ask this
question: When will OPA administrators find an occasion and a time
for removing controls from an industry if they do not find it in a situation where, with the war emergency well behind us, supply of the
goods is in balance with the demand therefor?
Let me repeat that question for emphasis:
When will OPA administrators find an occasion and a time for
removing controls from an industry if they do not find it in a situation
where, with the war emergency well behind us, supply of the goods is
in balance with the demand therefor?
M y answer to that question is that those officials will never find
such occasion or time because they wrant to see a Government bureau
control prices instead of leaving prices, as we have traditionally done,
to find their level in a free competitive market where the goods are
in supply.
This country either believes in the free competitive system or it
does not. I think it does, but there isn't time enough left in this
week for a recital of the various theories that those in and around
OPA have put forward as reasons for continuing price control in
industries where all of the originally assigned and sound reasons therefor have disappeared. The common characteristic of all of these
assigned reasons seems to me to be their earmark as part of an attempt
to advance splendidly the cause of a planned and controlled economy
in substitution for the free competitive system under which the
people of this country have lived and fared so well and in which they
believe to such an extent that we have sent millions of our boys to
fight on foreign soils to eliminate some foreign ideas which if not
eliminated could not have failed in the end to drive us away from our
traditional forms of institution and activity. The right to continue to
have in this country competitive operation of industry in the hands of
free men in free markets was part and parcel of the package of freedoms for which we and our allies fought the rest of the world and
there is no better measure of the depth of the determination of those
who would destroy or impair this American method than the fact that
the kind of attack I am now resisting is here and now brought against
that industrial method when, in the opinion of every man whose
thought I know, this country found in that distinctively American
system, and only in it, the capacity and ability to produce what it
took to win the late war.
I must not give more time to the disappearance of reasons for
continuing price control in industries wrhere supply is or shall come to
be in balance with demand or to the reasons of some of those in and
around OPA for advocating such a policy.
Let me now proceed affirmatively to the listing—and I shall hardly
have time for more than a mere listing—of some of the hurts that
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can readily be foreseen for the American people in continuing price
control in areas of the economy where it is no longer necessary.
(1) In continuing price control where supply of the product of an
industry is in balance with demand, injustices, heretofore continuously
admitted by OPA but justified by them during the war period on the
basis that war conditions and emergency requirements left the Bureau
no chance to correct them, will be continued with great hurt to some
phases of the industrial set-up without any necessity therefor.
For instance, under OPA's industry rule, no relief was provided for
an individual producer—even though he was a high-cost producer
because of his insisting on using high-quality raw materials in his
product and operating under liberal wage policies—if the over-all
returns of profit to the industry in which he was engaged were not
below the returns for the prewar period. Simply to state such a
proposition reveals both its unfairness and its destructiveness in the
American economy.
Senator M I L L I K I N . I should like to add: and its complete stupidity.
Mr. W I L L I A M S . I shall not resist the suggestion, of course, Senator.
The American people want many high-quality goods, along with
cheaper goods, and American manufacturers should have the opportunity to supply them, particularly when in supplying them they are
serving handsomely the raw material markets and the wage interests
of workers, along with the demands of consumers.
(2) At the other end of the quality or cost ladder, it has been unmistakably demonstrated that OPA policies have driven from the
market or into the black market many of the more reasonably priced
lines or qualities of goods. Why should the citizen who desires to
purchase and use more reasonably priced lines or qualities of goods be
denied by a Government bureau the opportunity of so doing when there
is no longer emergency reason for continuing the controls that develop
that result?
(3) Probably the most destructive of all of the bad results from a
continuation of price control when the necessities therefor have disappeared is to be found in the fact that such continuation establishes
and maintains a pressure in the direction of reversing one of the most
important fundamental concepts and methods of American industry.
I refer to the fact that, distinctively in American industry, the rivalry
between producers found its best expression in a determination to
make a better product for the money then could any other man in the
business. This is the historical better mousetrap maker in New
England and it is a lot of the rest of the industrialists scattered all
over this country. It is the principle and the aspiration which has
made this country's produced goods go entirely out of the class of
goods produced in other parts of the world and that has given the
American citizen his superior standard of living.
The point here is that under price control when the ceiling is too
low—and you have had that in hundreds of instances in this country
in the last few years—this normal and magnificently effective American incentive is reversed. I am not complaining about that reversal
when it was necessary to serve a war emergency. I am talking about
what kind of policy we should work under now that the war is over
and when in many industries we have a full supply of goods and can
go back to the old basis and restore the old effective incentives. I
need not tarry to emphasize here the already thoroughly established
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fact—that under ceilings which presented the inability to charge more,
and under the necessity of staying in business and doing the best one
could, there developed in a great many industries competition, not in
the direction of making better goods than the other fellow—the best
that could be made for the money—but in the direction of making the
cheapest and shoddiest thing that could be accepted in the price
category. That is an unhealthy situation.
A lot of us refused to yield to that pressure thinking it more important to maintain the standards of quality of whatever we made
whether we made much or little out of it during the emergency period.
But while it is possible to follow that policy for a while in meeting a
national emergency, it is not possible in the face of ascending costs to
keep on and on and on under that policy and still stay in business.
Unless, as Mr. Bernard Baruch suggested to the House committee,
we can get away from all of the bunk about it being possible to continue to raise wages and raw material costs without appropriately
increasing price, some results more tragic to the interest of the American citizen than he now realizes are going to develop and develop
promptly in American industry.
Senator M I L L I K I N . Mr. Williams.
Mr. W I L L I A M S . Yes; Senator Millikin.
Senator M I L L I K I N . With respect to that paragraph, isn't it almost
the inevitable result of human nature that where a rigid price ceiling
is fixed that is below cost the only road that the producer has to
follow is to make shoddier merchandise in order to decrease his costs?
Mr. W I L L I A M S . He can take the one other road—the end of which is
destruction if the condition prevails long enough. That is, he can
continue to let his own determination in the direction of quality as
reflected from high cost paid for raw materials and liberal wage policy
just eat up his profits and eventually cut into his capital and swallow
him. That is the only long-run alternative.
Senator M I L L I K I N . That is true, but I question the directive along
this line: Isn't it the ordinary and usual trend of human nature under
a frozen ceiling—the trend is to decrease quality?
Mr. W I L L I A M S . Assuredly; yes.
Senator M I L L I K I N . In order to increase profit return.
Mr. W I L L I A M S . Assuredly, yes; because business people have to
remain able to stay in business and have to have some profit to stay in
business in order to keep the necessary capital behind them in the
business.
Senator M I L L I K I N . I realize there are people today that are keeping their quality high and their wage scales high at a loss, either in
order to maintain the quality of their merchandise or to maintain
their reputations, or/and in desperate hope that some day they will be
able to get back on a profitable basis.
Mr. W I L L I A M S . Y O U also realize that meanwhile they are taking
plenty of what is commonly called belly punches too. That is assuredly
what is happening, and it is a thing that I am determined to characterize as probably the most destructive of all of the effects that flow
out of continuing price control when you no longer need price control
for the original reasons assigned therefor. We have had in this
country—if I may stick for one more minute to the line that Senator
Hickenlooper suggests—we have had, by everybody's admission and
even by their assertion, the greatest rivalry between producers of
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everything from mousetraps to electric locomotives that has ever
existed in any part of the world, and we have had good goods.
I am crying out loud, Mr. Chairman and gentlemen, against the
prospect of the ability of the American manufacturer—the right, the
privilege, if you please, of the American manufacturer—to continue
to work under that concept, being taken away from us. And I am
not crying just for myself; I am crying for the American citizen, if
you please. He has not denominated me as his representative, but
that is what we are all thinking about—the welfare of this country;
and if this thing is permitted to reverse the incentives in American
industry, in terms of the qualities of goods that it will turn out,
then destruction in the industry of this country of a kind that we have
never yet experienced is right ahead of us.
If anybody wants practical application of it, go buy a child's dress
that is still on the market in the low-price categories, if you can
find one. Most of them have been driven out, but occasionally you
can find one. Compare it with the quality you got in that category in
prewar days,
I mustn't linger too long. I believe I was down to (4), Mr. Chairman.
Senator T A Y L O R . Yes.
Mr. W I L L I A M S . ( 4 ) A continuation of price control along the lines of
the policies under which it is now administered will not only retard
that restoration of production to which everybody looks for relief from
the threat of price inflation but in industries where supply is already
generally and substantially in balance with demand such continuation
of price control will greatly limit the expansion of industry.
In this country, practically all of the great, rapid expansions of production of goods of any kind have been accomplished, or at least
accomplished more rapidly and more fully, through the use of advertising. The Congress recognized that fact, and, in authorizing the
OPxi Administrator to fix prices, the Congress expressly provided that
he should not so fix them as to force the abandonment of the use of aids
to distribution—advertising and kindred activities. But the OPA
Administrator, in that as in so many other instances, saw fit to ignore
the requirement of the Congress in that regard and has held to his
price ceilings despite the fact that in some instances they were so low
as to deny to the producer of the goods the possibility of having funds
available for use in advertising them and increasing his production
thereof.
Senator M I L L I K I N . Mr. Chairman. It has not escaped the witness,
however, that OPA has done considerable advertising on its own
account.
Mr. W I L L I A M S . There is nothing in industry that has been able to
get within a stone's throw of what OPA has accomplished in terms of
mechanisms for and operations of the mechanisms for doing its advertising.
Senator M I L L I K I N . IS your company a member of the National
Association of Manufacturers?
Mr. W I L L I A M S . We are a kind of a long-range member. Don't let
me sound like I am apologizing for being identified with the National
Association of Manufacturers. I am not. I am not active in that
association; do not work on that board. I used to be a member of the
board of directors and a vice president of it.
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Senator M I L L I K I N . I think perhaps that there is a just apology
due from you and the other members of that association in that with
all the values involved here the best you could do was to put on a
miserable, piddling $300,000 campaign to offset the OPA campaign.
Now, you fellows have got to let the moths out of your pocketbooks.
You have got to get busy if you think this thing that is valuable is
worth keeping, and I hope that never again will you be confronted
with an issue such as you have been confronted wi h here and limit
yourselves to a $300,000 offseu campaign. Why, you gentlemen in the
cigarette industry will spend a couple of million dollars in advertising.
I hope
Mr. W I L L I A M S . If OPA would leave us margin enough with which
to do it, we would spend 15 or more.
Senator M I L L I K I N . Yes. And I hope that you transfer that same
zeal for advertising to your association and get it to pat on a campaign that is a campaign; that will bear some semblance of meeting
the campaign on the other side. Why, one of the labor organizations
involved, by passing the cap, can collect a couple of million dollars,
and does so, and spends it very effectively. Yet here you gentlemen
in an organization that represents 70 percent of the production of the
country—I don't mean controls it, but represents 70 percent of the
production of the country—you come up with a $300,000 campaign.
You ought to be ashamed of yourselves. [Laughter.]
Mr. W I L L I A M S . Mr. Chairman, may I say to that suggestionSenator M I L L I K I N . I don't want to make you feel too bad.
Mr. W I L L I A M S . I really am not feeling bad, Senator, if I may say
in that way, witn respect to that—but this: I think we have come to
the place in this country in the development of bureaus and the toleration of methods of bureaus, and the extensiveness of opportunity of
bureaus for perpetuating themselves, that I would express a great
deal of doubt as to whether or not the business community, if it were
disposed so to do, would have a chance in the competition with them
in the matter of propaganda to the American people; and without
attempting to make a speech on that, let me say that my faith is
rather more in opportunities like this to present facts and opinions and
arguments to the men in whose hands the determination of these
questions really lies.
I know that the wires of the country are full of messages every night
and the mail full of letters every morning and the desks heaped with
telegrams every morning, in this process that you refer to as in operation in this country, but I have not thought that any of you gentlemen
who sit around this table and on the floor of the United States Senate
were really misled with respect to that.
Senator M I T C H E L L . I would just like to say I wish the organizations
which are spending money on this program would spend it on the
development of the facts, in bringing factual matters in here, instead
of propaganda in to this committee. I think this committee would
get along a lot better and do a lot better job for the American people
if all of the people who came before it would try to present the facts.
Mr. W I L L I A M S . The Senator describes my aspiration as I come
before the committee. I hope I have not disappointed him in pursuing that aspiration.
Senator M I T C H E L L . I wish more of them had your objective point
of view.
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Mr. W I L L I A M S . I think this thing is simple, Mr. Chairman and
gentlemen, if we forget the propaganda and get al the fuzz and
feathers off of it. I have never been able to get any statement out
of OPA that didn't look fuzzy when I got it. If they tell you anything, it is so fuzzy it is unintelligible. I register that complaint
against them. Businessmen do not work that way. They do not
understand working that way. They are not trained to work that
way. I do not think it is a good way to work anyhow.
Senator C A P E H A R T . This matter is strictly one of business, and not
evangelistic statement.
Mr. W I L L I A M S . And business travels on facts and figures and
economic principle, and it is going to be traveling there until it is
destroyed by Government bureaus taking hold of it, if that ever
happens.
Senator H I C K E N L O O P E R . A question that is purely one of curiosity,
and perhaps you do not know the fact, Mr. Williams: Has OPA ever
controlled or dictated the fees or the prices of advertising agencies?
Do you know? Are they under OPA control? I dojnot know
whether you w7ould have knowledge of that, but you are a good-sized
advertiser, I see here.
Mr. W I L L I A M S . I have no answer—I haven't the knowledge out of
which to answer the Senator's specific question in the terms in which
he lays it, but I make this suggestion: That the administrative group
in OPA can get away with ignoring a perfectly plain mandate of the
Congress and fix a price ceiling so that there is no room in there to
have any advertising budget. Then I think an answer to the question
is that they can control, and that they do control advertisers—and I
will tell you in a minute, in this statement, that as far as R. J. Reynolds
Tobacco Co. is concerned they controlled its advertising to the extent
of forcing $6,000,000 out of its advertising budget in 1944, and
$4,000,000 more in 1945.
Senator H I C K E N L O O P E R . I was not referring to that, Mr. Williams.
I realize that you can control the income of a man by cutting off his
pocketbook. That is very true. But I wonder if in the mechanics
of price control whether you have am knowledge that the OPA has
gone in and told people who solicit advertising business how much
they can charge for the services as advertising agents.
Mr. W 7 ILLIAMS. I have never heard, Senator Hickenlooper, of that
subject being approached. I am sure you know that as far as advertising agencies are concerned there is not, so far as I know, in that
field any competition over rates that should be charged for advertising.
That is fixed. Newspapers give certain discounts to advertising
agencies. The agencies do not allow the advertiser to have any part
of that rebated to him; so with magazines, and so on. So there is not
in that area of industry—if it be industry, and I think it is an adjunct
to the industrial field instead of an industrial field—there is not any of
this thing of price regulation. That is already disposed of by the mere
status and set-up of "industry. It is 15 percent on whatever the
advertiser spends: that is the great generality of position with
respect to it.
Senator M I L L I K I N . I just want to make——
Mr. W I L L I A M S . Of course, that is a thing that has existed almost
from time immemorial. OPA did not erect it. It has been a fixture
in the advertising situation ever since I have known anything about
advertising.
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Senator M I L L I K I N . I just did want to make one additional suggestion. I think you are quite right theoretically in your reliance on the
Congress to try to reach a right decision in these matters; but when
a business problem becomes a political problem, as this one has, I
think that people in business should take adequate steps to sell their
case to the public just as their opponents sell their case to the public.
That is what I wanted to get over, and I am very, very serious about
that.
One of the scarce items in many places in Washington is guts.
Mr. W I L L I A M S . I agree with the Senator very heartily if I may
say it this way: That when the institutions of this country and the
principles upon which the institutions of this country operate come
under attack with the potentiality of hurt, of destruction and injury
to the people generally, then businessmen owe it to stand behind their
political representatives, or before them, and present the facts and the
opinions which, as they think, represent reasons why what they represent should not. be destroyed.
I agree to that very heartily, which I understand is what the
Senator is suggesting. I do not think we have a right to stay home
and let you all who happen to have political exposures, sit here and
stand yonder and take all the punishment without benefit of support
from those of us who believe as definitely as some of us do believe in
some of these areas of business or economic questions.
Did I, Senator Hickenlooper, cover what you had in mind?
Senator H I C K E N L O O P E R . Thank you.
Mr. W I L L I A M S . Thank you.
I am talking about what happened to advertising, still. When
some such instances were called to the attention of the Administrator,
and there is nothing fictional about that because your witness called
them to the attention of the administrators themselves, the Administrator's answer was that he was not required to grant any relief because there was a question in his mind whether the Congress intended
by that provision to prevent his fixing prices that would force out
advertising if in fixing the prices he did not expressly intend thereby
to force the abandonment of the use of advertising—as if the proposition were one of criminal law and intent were involved. The
Congress simply said that he could not fix a price that forced the
abandonment of aids to distribution—advertising—but the Administrator forced and continues to force the abandonment of such aids and
thereby impedes greatly sorely needed expansions of industrial
activity in this country. R. J. Revnolds Tobacco Co. had to reduce
its advertising by $6,000,000 in 1944 and by an additional $4,000,000
in 1945. And that is why I was down there raising that question
with the Administrator.
Senator M I T C H E L L . H O W did that work out in practice? How did
that force you? You say "had to reduce its advertising." How did
that come about? Did you ask for an increased price to allow this
advertising?
Mr. W I L L I A M S . We asked for an increased price on the basis that
if we did not get it we would be forced to abandon a large part of our
advertising, and we were told so definitely and categorically that we
had no chance under the industry rule to get a price increase, that we
did not file a formal application for it. It was an informal approach,
Senator Mitchell.
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• Senator C A P E H A R T . Mr. Chairman.
Senator T A Y L O R . Yes.
Senator C A P E H A R T . One question. What are cigarettes selling for?
Fifteen cents a package?
Mr. W I L L I A M S . Cigarettes sell at a range of prices from 13, two for
a quarter, on up to 16 or 17 cents, depending upon the place, the kind
of place at which you buy.
Senator C A P E H A R T . On a 13-cent package, what is the tax?
Mr. W I L L I A M S . The tax on a 13-cent package of cigarettes is 7
cents.
Senator C A P E H A R T . And vou as the manufacturer receive 6 cents
for it?
Mr. W I L L I A M S . Oh, a great deal less than that. We receive
Senator C A P E H A R T . That is, you receive—or no; the dealers receive
6 cents, the retailer?
Mr. W I L L I A M S . That is right.
Senator C A P E H A R T . And out of the 6 cents——
Mr. W I L L I A M S . That is out of the 13 that he receives.
Senator C A P E H A R T . Seven.
Mr. W I L L I A M S . Seven going for tax, 6 goes for the goods—including his profit and the wholesaler's profit and the manufacturer's profit
and costs.
Senator C A P E H A R T . In other words, the 6 cents represents the
tobacco raised by the tobacco growler, the transportation, the making;
of the cigarette, the profit on it, the wages, transportation to the
wholesaler and to the retailer, and the wholesaler's profit, the retailer's
profit, the manufacturer's profit, is all in a 6-cent package of cigarettes?
Mr. W I L L I A M S . Speaking from a retail counter at which cigarettes
are selling at 13 cents a package, your analysis and description is
correct.
Senator C A P E H A R T . Yes.
Mr. W I L L I A M S . Seven out of the 13 cents goes to the United States
G o v e r n m e n t , a p p r o x i m a t e l y $1,000,000,000 a year.
Senator T A Y L O R . A S a direct tax or a hidden tax?
Senator C A P E H A R T . Direct tax.
Mr. W ILLIAMS. It is that little blue stamp there. I can exhibit the
stamp better than I can define the status of the tax.
Senator T A Y L O R . Full 7 cents?
Mr. W I L L I A M S . That is so.
Senator C A P E H A R T . In other words, the tax is greater by 1 cent
than all people concerned in the manufacture, sale, and distribution of
cigarettes make out of it, out of a package?
Mr. W I L L I A M S . That is correct as against a 13-cent retail price.
Senator C A P E H A R T . Yes; but at 1 5 cents the tax would still be 7
cents?
Mr. W 7 ILLIAMS. That is right. At 14 cents the break is even.
This little thing has 7 cents in it [indicating stamp]. We send a
check to the Government many mornings a wreek for half a million
and more dollars to buy this, and that is 7 cents of what is in this
package, and in that retail price of 13 cents.
Senator C A P E H A R T . Mr. Williams, do you-think the average person
that buys a package of cigarettes realizes that?
Mr. W I L L I A M S . N O ; they do not, Senator.
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Senator H I C K E N L O O P E R . Well, that does not include all your tax,
Mr. Williams; that is just more in the nature of an excise tax.
Mr. W I L L I A M S . Oh, that is just one we collect for the Government,
and then the Government comes along and collects a whole lot on
its own behalf. There is no property tax or immunization there
against—no income tax, no excess-profits tax, no license tax, no franchise taxes involved in this stamp situation. That is just the Government's take that we collect for them.
Senator M I T C H E L L . Y O U will be able to reduce your advertising
budget this year?
Mr. W I L L I A M S . N O ; it's already too low and I am sure that fact
will have some sympathy at the hands of some of those present here.
I believe I was down to where I had said that we had reduced advertising by $6,000,000.
Senator T A Y L O R . Mr. Williams, inasmuch as Mr. Bowles is engaged
in the advertising business it cannot be said that he is favoring his
industry when he forces this great cut in the advertising business of
the various companies.
Mr. W I L L I A M S . That act in itself w^as not favoring the industry
in which he used to be.
Senator T A Y L O R . He is no longer in the industry now?
Mr. W I L L I A M S . I can't say, but I know he used to be in that
industry.
Senator H I C K E N L O O P E R . I think he testified he had not been connected with the advertising business since he came into OPA.
Mr. W I L L I A M S . I am sorry, Mr. Chairman, I don't have the facts
with respect to that.
(5) The continuance of OPA control of prices in this period where
they are no longer serving any emergency purpose has had and will continue to have increasingly disastrous results on some phases of this
country's foreign trade with consequent destructive effects in some
segments of the American economy and particularly on producers and
others operating in those segments.
Without time to develop the point in detail, let me illustrate it
briefly and point it up sharply to a situation affecting directly and
particularly citizens of all States whose economy is substantially
affected by the growing of leaf tobacco, and, broadly, of course, all
who are concerned with the general status and the health of our
economy.
As you gentlemen know, there are 10 or 12 States in which tobacco
is a very substantial part of the economy.
Specifically, and very briefly, tobacco growers in the Southeastern
States grew last }rear approximately 1,200,000,000 pounds of fluecured leaf tobacco while growers in the burley-producing States—•
Kentucky, Tennessee, and several others—were growing around
600,000,000 pounds of burley leaf.
Ordinarily, more than half of this country's crop of flue-cured
tobacco is exported. That fact has a very vital relationship to all
concerned in any way with the tobacco industry or this country's
foreign trade and is particularly vital from the farmer's point of
view.
Not all of the leaves from a tobacco plant are satisfactorily usable
for domestic consumption but, of course, there is no way to train the
plant to produce only those leaves that are so usable.
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The farmer has to look to the foreign markets for disposal of about
half of his flue-cured crop and the manufacturer and all concerned
with the tobacco industry, down to the consumer
Senator T A Y L O R . I am sorry to interrupt you, sir, but they are
calling for a quorum over on the floor and ask that the Senators be
there personally. We will have to go over and get our names on the
roll.
Senator M I L L I K I N . All of us?
Senator T A Y L O R . I am afraid so. The Sergeant at Arms has requested us to be there. We will be arrested if we don't go. We will
be back as soon as we can.
Mr. W I L L I A M S . I shall be comfortably standing by.
(Whereupon there was a recess at the conclusion of which, the proceedings were resumed as follows:)
Senator T A Y L O R . The committee will come to order, please.
Mr. W I L L I A M S . Mr. Chairman, shell I proceed?
Senator T A Y L O R . Please, Mr. Williams.
Mr. W I L L I A M S . The farmer has to look to the foreign markets for
disposal of about half of his flue-cured crop and the manufacturer and
all concerned with the tobacco industry, down to the consumer, are
interested in his continuing to be able to do so because the farmer must
have a satisfactory return from his crop and if he gets nothing or too
little from the part of it which now goes to export, he will have to
have more—arid much more—for the part of it that is used for domestic
con sumption.
Senator M I T C H E L L . Of course, he is getting a very good price for
export tobacco now, is he not?
Mr. W I L L I A M S . T O the extent there is a market for export tobacco.
I think there is nothing in the statistical showing as to tobacco exports
up to this time that indicates the necessity of worry on this part, but
I remind the Senator that the United States Government under lendlease has been buying the export tobacco for foreign countries. I
speak to the prospect just ahead instead of to the historical record
which is behind.
Senator M I T C H E L L . Well, you don't mean they are purchasing tobacco under lend-lease now?
Mr. W I L L I A M S . I don't; but the sentence I was going to add is that
since they are not purchasing tobacco under lend-lease the dealers in
tobacco who have ordinarily sold half of the flue-cured crop to the
foreign markets of the world are having a great deal of difficulty in
finding purchasers able to buy at present prices. W?e have a situation
where one of the things that has been bought from us has been artificially forced up beyond their reach.
Of course, I am not speaking of the part of our flue-cured crop that
goes to the British-American Tobacco Co. and to the Imperial Tobacco
Co. of Britain and Ireland. Britain will have to get a good deal weaker
than she is now before they will not be able to buy tobacco, but the
answer to that is that Britain is having that kind of tobacco grown up
in Canada and in Rhodesia and in other areas of South Africa in order
to avoid having to buy from us.
Senator M I T C H E L L . But at the present time the thing I am thinking
of is the need we have in Washington State for nicotine sulfate.
They use a dark burley for that, but the price of that tobacco is too
high to permit its use in the making of the insecticide and the story
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we get is that the foreign buyer is paying a price which makes it impossible for the insecticide company to compete.
Mr. W I L L I A M S . Without knowing the facts of the specific situation
to which Senator Mitchell refers, several facts I do know. Nicotine
sulfate is ordinarily recovered from the stems of tobacco after the
stems are taken from the leaf before the resulting strips, which is the
part of the leaf after the stem is taken out, are put into manufacture.
That is the regular source of it. There is another source that has
developed in recent years since the price of nicotine sulfate has gone
up so high.
Some areas in the country have been found suitable for growing
tobacco expressly for nicotine sulfate content. That, instead of
growing 3 or 4 feet high, grows 8 or 10 feet high, a rank, rapidly growing plant out of which the sulfate is recovered.
Now, so far as I know that tobacco grown expressly for that purpose
in that rank form has never been regarded as usable in the manufacture of consumable tobacco products. If foreign countries are
buying that, I would say that that is some evidence of the extent to
which the proposition I am talking about is already at work in the
world. I think it would represent an interesting illustration of where,
under their inability to buy the kind of tobacco they ordinarily have
been able to buy, they have had to drop the level of their requirements and are seeing if they cannot find something else that is usable.
Senator M I T C H E L L . Which wrould indicate a world shortage of
tobacco today.
Mr. W 7 ILLIAMS. I don't think there is either a world shortage or a
world longage of tobacco indicated at the moment. Certainly there
is no shortage of tobacco on this country or for domestic consumption
in this country at the moment. I must drop a postscript to that to
remind you gentlemen that when I speak of leaf tobacco itself as not
under shortage at the moment, I am necessarily talking about tobacco
that is not available for manufacture at the moment because it has not
yet sufficiently been cured with respect to the leaf.
When I speak with respect to manufactured tobacco, I speak of
tobacco that has matured enough for manufacture. At the moment
I think there is no shortage in this country in either of those two categories. I think the question is adjudicated officially for me by these
findings of the OPA which I have already noted in this statement.
I think those foreign countries would use enormously more tobacco
than they are now using except for this thing I am talking about, the
high price and their inability to pay that high price, and that is one
of the objectives—meeting that is one of the objectives I have in
making this point.
Did I answer you, Senator, satisfactorily?
Senator M I T C H E L L . Yes, thank you.
Mr. W I L L I A M S . That brings in the question of the ability of the
foreign purchasers to take and pay for the part of the crop that normally goes to them. But foreign purchasers, with possibly an exception or twro in Great Britain, are not now able to pay high prices
for leaf tobacco.
Yet, OPA wants to continue its ceilings on leaf tobacco despite the
fact that, paradoxical as it may seem, it was those ceilings that were
largely responsible for forcing the price of export tobaccos above the
limit which most foreign buyers can pay.
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Under the leaf ceilings effective in recent crops, buyers could not
pay above a certain average price for their flue-cured purchases and
in the burley area they could not pay above a grade price named by
a Government official for any grade of tobacco offered. The effect of
so preventing domestic manufacturers who use most of the highestquality leaf from paying therefor the higher prices that would be
competitively indicated was to deny to the farmer an appropriate
return on those better tobaccos.
Fortunately for him from that point of view, the same process
resulted in forcing up the price of the ordinarily cheaper tobaccos so
that his average price in a period of strong demand greatly stimulated
by Government purchases for war uses wras quite good. But, unfortunately for him, now that the pressures accompanying the emergency
a^e no longer in the market, he is confronted with a situation where the
price of the tobaccos for whose market he ordinarily looks abroad is so
high that a great many of the foreign purchasers cannot even contemplate paying the price.
In attempting to meet this situation, even England is encouraging
the production in Canada, Rhodesia, and elsewhere of flue-cured
tobaccos for which it has traditionally looked to this country. Other
foreign countries are attempting to grow their supply at home.
To put the picture in figures, almost all of last year's flue-cured
crop, selling under OPA's ceilings, moved in a price range between
38 and 53 cents, whereas, in normal times and judged by the differences in crops and the differences in leaves as they come from different
positions on the plant, that range would have been from maybe 5 or 6
cents for a small percentage of the crop to 65 or 70 cents, or more,
with the probability of an average approximating that which was
obtained.
Similarly, burley grades, selling under OPA ceilings specifically fixed
for each grade, moved mainly in a narrow range from 40 to 58 cents,
whereas, except for the ceilings, the higher-quality tobaccos would
have sold much higher and the lower qualities much closer to their
real values with probably about the same over-all result to the
farmers.
This problem is exceedingly important to tobacco-growing States;
600,000,000 pounds of flue-cured tobacco represents some hundreds of
millions of dollars. The solution of the problem would seem easy,
but it cannot be worked out under OPA and its present authorities
and policies.
I suggest that the common-sense way to solve this problem is to
require OPA to remove all controls from leaf tobacco, whether imposed
directly on the leaf or on the products made therefrom, let domestic
manufacturers pay whatever tJhe market indicates for the top grades
of tobacco ordinarily used in the production of tobacco products in
this country and thereby restore to the leaf tobacco markets that normality of position under which we have retained this big foreign market
in the past and under which alone it seems to me we will have a chance
to retain it for the future.
Even if it is to be asumed that the prices of lower qualities of leaf
tobacco will fall back to their normal position in the scale of prices
now that the war pressures have passed, the farmer wrould find himself
cut off from recouping the loss thus accruing to him in the average
price for his crop so long as OPA control of prices of leaf tobacco or of
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products made from leaf tobacco prevents manufacturers thereof from
paying the higher prices which a normal market might indicate for the
better grades of tobacco.
If I may digress for an explanatory paragraph. Normally, if I may
hold up my hand w7ith spread fingers to indicate it, there is a wide
range of prices in leaf tobacco grades. The lower grades sell down to
five or ten cents in small percentages, and then you work on up in
tobaccos that are more useful for chewing tobacco, and then on into
tobaccos usable for smoking tobaccos, then into the cigarette tobacco
and the prime cigarette tobacco, so that there is a very wide spread.
When OPA put its ceilings on leaf tobacco the effect was to prevent
manufacturers or buyers of leaf tobacco from paying prices as high as
those top grades ordinarily, under similar conditions, would bring.
That effect was worked out in two ways. In the burley, our Government had every pile of tobacco graded by a Government grader and
the grade was put on and there was a price fixed on that grade which
was the ceiling, above which no manufacturer could pay. He could
bid that price and bid no more.
After he had bid it it was a question of whether he got it or somebody else got it. In the flue-cured area the process was a bit different, in that the buyer was required to meet a certain average that he
paid for his purchases. The result was the same. Nobody could
pay what the top tobaccos were really worth because it put him over
his average or it would violate the ceiling if it were above the ceiling.
If I may go back to my hand and close the gaps between those
fingers to indicate good tobacco and medium tobacco and poor tobacco selling very close to the same price-—that forced process is what
lifted the level of the price of the tobacco that goes to India and China
and other foreign countries above the heads of those producers.!
What I have said in this last paragraph is that the market now
represents those fingers closed, and that if under heavier leaf tobacco
production those lower grades go back dow^n to prices that again
permit those grades to go to foreign markets you will have solved to
some extent this question of whether we lose our export market for
flue-cured tobacco. Maybe that can be done by producing enough
tobacco in this country so that those grades will have to go down under
an excess supply as against possible domestic use.
The point is you will have defeated the farmer of a proper average
for his crop except as, when you develop those conditions and let
those lower grades go back down to their normal position, you take
the ceilings off, whether on the leaf or on the finished product made
from the leaf, and let those top grades go up to whatever the market
condition indicates they should go up to.
That, Mr. Chairman, and Senator Mitchell, it seems to me, to be
not only the common sense way, but the only way in which there is
any opportunity for the Southeast to continue to enjoy what it has
enjoyed in the way of a return from flue-cured tobacco from foreign
countries.
I think we know commercial and businessmen well enough to
know that when once England has developed a source of supply in
Canada, which is under a preferential duty rate—I assume it is now—
it always has been—and a supply of leaf tobacco in Rhodesia, which
is also under a preferential duty rate as it goes into the mother country,
it is hardly within the probabilities that such part of the export
e x t e n d p r i c e c o n t r o l a n d s t a b i l i z a t i o n a c t s o f 194 2
140S
business of the southeastern part of this country in flue-cured tobacco
as has been supported by Britain and is then covered by these colonial
sources of supply, will be available to this country again, particularly
at prices we want the farmers in this country to have for their tobacco.
Without more listing of affirmative reasons for discontinuance of
price control when supply of commodities or goods comes generally
and substantially into balance with demand in any industry, I now
turn briefly to a consideration of how the' OPA Administrator and
his associates have handled themselves in this situation and particularly to the reasons they have assigned for continuing to insist that
price control be left in their hands after all the original and sound
reasons therefor have disappeared and supply has come into balance
with demand.
I have already suggested that when this administrative group
began last year to work away from its declarations that were so
definitely assertive of the necessity, as well as the policy, of removing
price controls when supply and demand came into balance, they
moved first to a suggestion that their formerly announced policy
would apply only when some evidence of a softening of prices had
already appeared and then to the kindred idea, appearing in Directive No. 68, that their oft-asserted policy would not apply except as
they could be assured in advance that removal of controls would not
be followed by a rise in price.
The fallacies in these ideas have already been suggested, but for
the present purposes two observations are pertinent:
First, either formula tends to take the whole of the American
economy forever off the competitive price system and make price
control by a bureau a permanent part of the industrial mechanisms
of this country; and
Second, the position taken did not afford very substantial cover for
the advocates thereof as they thus attempted to advance the cause of
those who want the hitherto free economy of this country forever
hereafter completely controlled and regulated by bureaucrats.
Accordingly, and evidently in a search of better cover, the administrative expression began to incorporate the suggestion that when they
are talking about supply being in balance with demand they mean
total supply of all commodities and all goods being in balance with
total demand for all commodities and all goods.
You gentlemen heard that in Mr. Bowies' testimony at the opening
of these hearings before this committee when for the first time in
official declaration, so far as I know, the word "total" seems to have
taken the key position in his protective strategy.
But, again, the cover is a bit thin since everybody knows that there
is not normally any time in a far-flung economy like ours when the
total supply of all commodities and all goods is in balance with the
total demand for all commodities and all goods.
I heard that for the first time in Mr. Bowles' testimony before this
committee at the beginning of these hearings last month, when, for
the first time, in an official declaration, so far as I know, the word
"total" seems to have taken on a key position in his protective strategy, but again the cover is a bit thin, since everybody knows that
in a free economy such as ours there is no time wThen the total supply
of all commodities and all goods is in balance with the total demand
for all commodities and all goods.
extend price c o n t r o l and stabilization
a c t s o f1942140S
But, most pertinently here, this position, too, bears the earmarks
of a method for making price control by a Government bureau a
permanent part of this country's industrial economy.
But the end of the strategy is not yet declared. Even before the
date of his late discussion before this committee, Mr. Bowles and
his associates had adopted the policy of dangling before the American
people the terrifyingly phrased suggestion that if he and his associates
were not permitted to continue to control prices as during the period
of the war emergency a destructive inflation would overtake this
country and all but destroy everybody and everything.
Of course, that is thicker cover in which to operate and, therefore,
it is not surprising that most of both the defensive and the offensive
operations of the Administrator and his allies have since been from
that area.
In fact, that particular cover is so thick and entangled that if the
citizen can be led into it the high probability is that he can become
so confused and entangled in the various economic concepts there
involved that there will be little left for him to do except to desist or
to surrender to the suggestions made.
But let us examine that contention. Of course, Mr. Bowles is not
talking about currency inflation or credit inflation, since in the ABC's
of economics everybody knows that if higher prices have anything to
do with those two kinds of inflation the result is to be expected in
terms of relief instead of an intensification of the pressures because
higher prices draw off inflated reservoirs of currency and credit faster
than do lower prices. He was necessarily talking about what he calls
price inflation.
And, unfortunately for his contention, the moving upward of prices
is only a symptom of general inflation and not at all the cause thereof.
Prices go up because of the pressures forcing them upward. And the
causes of such upward movement, price inflation if he wants to call it
that, are to be found in the areas where those pressures develop and
not in the prices themselves.
Moreover, I know of no generally accredited economist who contends that there is any element of inflation in fair prices as developed
in a free competitive market with the goods in ample supply against
the demand.
Senator M I L L I K I N / May I invite the attention of the witness to the
fact that the testimony indicates wherever there has been a real pressure against the line that particular commodity has gone into black
market. In other words, the line has not held where there might have
been justification for holding the line.
Mr. W I L L I A M S . But the Senator will agree with me in this postscript if he will let me write it to what he has suggested, a postscript
to the effect that when any product goes into the black market it takes
as its cost to the consumer a figure very well above and wholly disassociated from the figure that the OPA continues to use as indicating what the citizens of this country are paying for that commodity.
Senator M I L L I K I N . I accept that completely.
M R . W I L L I A M S . That is the most pertinent of all effects as far as the
statistical showings are concerned.
Senator M I L L K I N . We have had witness after witness here on
various lines of business—meat, butter—black market effects through
upgrading and so forth and so on—where the selling price has no
relation whatsoever to the price-control figure.
e x t e n d p r i c e c o n t r o l a n d s t a b i l i z a t i o n a c t s o f 194 2
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Mr. W I L L I A M S . If the Senator will let me, I would like to read a
paragraph from page 7 of a report of the Senate Committee on Agriculture and Forestry, a report that I picked up today, which is
apropos. The statement is this [reading]:
A representative of the Department of Agriculture testified before the committee that the Department—
and it must have been the Animal Industry Division—
had recently completed a study for the purpose of determining what advance
over ceiling prices would occur if all subsidies and controls were removed from
livestock and meat; and the conclusion is that meat prices at retail would advance from 10 to 15 percent, representing a saving of from 5 to 10 percent of what
the consumer is now paying the black market, as well as the $750,000,000 being
paid out annually in subsidies on meat.
The anomaly of the situation to which I was pointing is in a price
going up, as against the figures on some of Mr. Bowies' charts showing
to where the price is, and after it has gone up you find that so far as
the consumer is concerned it has gone down. That is the working of
the black market in a great many areas of this country at the moment.
Continuing with my statement, I am not trying to say that there
are not situations throughout the economy where if price controls are
removed there will be some increases in prices in spite of the fact
that supply is in balance with demand.
What I am saying is that if our economy is to preserve the character
it has had through all the years of our existence and is to remain sound
according to American ideas, there should be increases in prices where
OPA has been holding prices too low.
Mr. Baruch's characterizing as bunk the idea of pushing up costs
illimitably and still trying to hold the line on prices is pertinent and I
do not believe that the Congress of the United States believes, any
more than does Mr. Baruch or hundreds of thousands of other businessmen in this country, that taking prices out of the arbitrary control
of a few bureaucrats and returning them to their traditional position
of seeking their own proper level in a free competitive market with
goods in ample supply can set off any of the kind of garishly described
inflation spirals with which OPA threatens every citizen from day to
day.
But I do believe that the detachment of controls as suggested in
this statement can put back into the body of our economic system
that vital throb of life and health and vigor on which depends, if we
Americans believe what we say we do and what we have seen demonstrated so often and so magnificently, the general welfare of all
American citizens.
I shall conclude this statement with another reference to my earlier
suggestion that the deluge of propaganda that has been put behind this
question of extending price control has little, if any, relation to and is
not directed at the proposition I have been discussing.
You gentlemen know it, but an example from developments within
the week will sharpen the picture—and I believe now it was day before
yesterday's papers that carried the announcement from Mr. John W.
Snyder, Reconversion Director, that the Advisory Board of the
Office of War Mobilization and Reconversion had adopted a resolution
the day before in which it—
unanimously urged
to exceed 1 year.
*
*
*
that the life of OPA be extended for a period not
extend price c o n t r o l
and stabilization
a c t s o f1942140S
I read that and then remembered that OPA moves and has its being
in a great many forms and areas, so I am not sure I know what—
unanimously urged that the life of OPA be extended for a period not to exceed
one year—
means; but I do know that on the face of that report, there is no
indication that removal of price controls in areas of the economy
where supply is or shall come to be in balance with demand was under
consideration or referred to. It could not have been. I have already
quoted Mr. John W. Snyder's testimony favoring removal under
those conditions as he gave it before the House committee.
But Mr. Eric Johnston, then and until Thursday of this week
president of the Chamber of Commerce of the United States, lias
been a prominent and active member of the Board whose action
Mr. Snyder reported to yesterday's papers.
On Wednesday of this week the press reported Mr. Johnston as
in Atlantic City fresh from a series of conferences in Washington for
the annual meeting of the Chamber of Commerce of the United States
and as giving an interview advocating generally the extension of
OPA, as did the resolution under reference. After reading his
statement, and largely with a view to reassuring myself on the point
that current expressions with respect to continuance of OPA are not
necessarily at all in opposition to the thing I am here advocating,
I sent Mr. Johnston (I should say he is a very good friend of mine of
many years' standing, and this is not an antagonistic situation) the
following telegram [reading!:
APRIL 30,
Hon.
ERIC
1946.
JOHNSTON,
President, United States Chamber of Commerce,
Atlantic City, AT. J.
In line with our conversation of some weeks ago in which you stated agreement
with the position that controls should be removed from any industry whenever
supply comes into balance with demand I am wondering if you will not agree that
an amendment of the act requiring OPA to decontrol an industry when supply
is in balance with demand would greatly relieve against the bad conditions
you picture as possibly resulting from dropping all controls at any one time.
Such an amendment of the act is wholly independent of the question of the date
on which all controls should be finally removed but such amendment seems to me
to be entirely necessary because of the determination of somebody in OPA to
continue controls in such areas when all of the reasons that even OPA until recently has put forward as justifying control have disappeared. Chester Bowles
has said repeatedly with respect to industries in which supply comes into balance
with demand that 'As that occurs I assure you that your Government will move
promptly to eliminate the last vestige of price restrictions in those industries.'
But you know the determination with which OPA is resisting an amendment
which would require just that.
My own view shared by a great many other people is that a very skillfully
designed play to advance the theory of a completely controlled economy in this
country is being made before the Senate committee and the Senate around this
simple point on which there is less cause for disagreement among businessmen, the
Congress, and the people than there is in any other controversial point. I think
the chamber would be serving well all of the people as well as the business of the
country and would be aiding the Congress if irrespective of what it does on the
question of when OPA shall be finally terminated it would endorse the House's
position under which it amended the bill to require decontrol in any industry
when supply comes into balance with demand. I have seen no reason assigned
against doing this which does not in my opinion bear unmistakably the fingerprints of the advocates of a planned economy and of the kind of control of business
and people in this country that I can't believe has your support or that of any
substantial part of the membership of the chamber.
Respectfully submitted with a personal good wish.
S. CLAY
WILLIAMS.
e x t e n d p r i c e c o n t r o l a n d s t a b i l i z a t i o n a c t s o f 194 2
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In response to my wire, I have just had from Mr. Johnston the
following reply [reading]:
S.
CLAY
WILLIAMS,
R. J. Reynolds Tobacco Co.:
Your position is one that I have always advocated. We are in complete agreement. In industry when supply equals demand controls should immediately be
removed. Such an amendment should be added to pending OPA legislation. I
will be happy to support such an amendment. You may make this public if you
wish.
ERIC
JOHNSTON.
The point, gentlemen, in calling attention to that exchange of
telegrams is to clinch, if I may, and I think it does clinch so far as that
incident in that group is concerned, the idea I am putting forth here,
that all this heavy propaganda poured in here is not even directed at
the point I am talking about. It says: "Renew OPA."
Well, the thing has so many forms of life in its existence in so many
areas of industrial life in America that the renewal point, as involved
in a simple suggestion to a Congressman or a Senator to the effect
that OPA be extended, that I say that the suggestion, in propaganda
or anywhere else is an unintelligible suggestion.
I don't know what anybody means when he says "extend the life
of OPA." I know easily a thousand ways in which I could extend
it and possibly improve it.
Senator MITCHELL. Your testimony, then, favors the continuation
of the Price Control Act which will control prices in those areas where
supply is short?
Mr. WILLIAMS. My testimony is in the obverse position from that
which your question assumes, Senator Mitchell, if I may say it that
way.
Senator MITCHELL. Which infers that you see the need for price
control?
Mr. WILLIAMS. IT infers, or rather it says very specifically and
directly, that I am limiting my testimony to this question of decontrol
when supply comes into balance with demand. With respect to the
question of whether in other areas there are other reasons for decontrol,
I am not as familiar in those areas as in the area in which I speak.
Senator MITCHELL. That certainly would leave me with no conclusion but to assume you were in favor of price control in any area
where the supply is short and therefore we would have to continue
some Government organization such as OPA to handle that problem.
Mr. WILLIAMS. I would have to qualify the answer to that question
quite extensively by saying—and I admit in saying it I am speaking
with less factual knowledge behind me than I have behind me when
I speak in the terms of problems affecting my own company—that in
spite of the fact that supply may not be in balance with demand in
certain industries there are, considering certain OPA policies of
administration or maladministration, still reasons for removing control.
I cannot answer, Senator, categoricaly, the question you put to
me because I haven't all the knowledge that would be required for
an answer to mean anything, but I do recognize the fact that out of
what I think I know generally it is not true that there are not reasons
for removing OPA control in some areas, at least, where supply is
not in balance with demand. Have I expressed myself—
Senator MITCHELL. YOU have expressed yourself.
Mr. WILLIAMS. Intelligently, I hope.
extend price c o n t r o l and stabilization
acts of
1 9 4 2 140S
Senator M I T C H E L L . Well, my conclusion is that you favor OPA and
price control in certain areas. That is the only conclusion I can get,
and in view of that I am wondering, in view of your characterization
of all Government officials as bureaucrats, I am wondering since you
do depend upon them to do something in the economy, I am wondering
what your definition of a bureaucrat is.
Mr. W I L L I A M S . I have to ask to be permitted to amend the Senator's
imputations. I did not intend to, and do not think I did, characterize
all Government officials as bureaucrats. I would like it very definitely
understood, gentlemen, that I want the force, if any it has, of every
word I have said to be directed to this particular group of bureaucrats
down here in OPA who are doing some of these things I have been
pointing to here; but I do not suggest that by the use of the word
"bureaucrats'' that I am talking about every Government official.
I used to be a bureaucrat myself. I was Chairman of NRA at one
time, following Hugh Johnson.
Senator C A P E H A R T . Mr. Williams, would you care to state what
percentage the cigarette industry's production is at the moment over,
say, 1 9 4 1 , or 1 9 3 6 ? Are vou producing 2 0 0 percent more cigarettes
than you did in 1940, 1939, or 1941?
Mr. W I L L I A M S . The United States Government official figures
issued by the Bureau of Internal Revenue in the annual report of the
Commissioner of Internal Revenue show that in 1935 the production
of cigarettes in this country totaled 1 3 9 , 0 0 0 , 0 0 0 , 0 0 0 cigarettes. In
1 9 4 0 from the same source the production figures appear as 1 8 9 , 0 0 0 , 0 0 0 , 0 0 0 cigarettes.
In 1 9 4 4 the figure on production appeared as
3 2 3 , 0 0 0 , 0 0 0 , 0 0 0 cigarettes.
I would like to ask the privilege, Senator Capehart, to check those
three figures.
Senator C A P E H A R T . Y O U don't have 1 9 4 5 ?
Mr. W I L L I A M S . I don't have 1 9 4 5 in that same official form, but
the estimate on 1945 that I have seen and to which I give more
credit than to any other estimate I have seen, places that production
at three-hundred-and-thirty-odd billion cigarettes.
Senator C A P E H A R T . Then over 1 9 4 0 there would be almost 2 0 0
percent which certainly takes care of the increase in population.
Mr. W I L L I A M S . And a lot of other things.
Senator C A P E H A R T . And there is certainly no pent-up demand for
cigarettes. There is for automobiles, but not cigarettes because the
smoking public is getting all the cigarettes it wants. So that there
would be no necessity for keeping a ceiling on tobacco on account of
pent-up demand?
Mr. W I L L I A M S . There is no such thing as pent-up demand at the
moment. The big brands of cigarettes move rapidly through the
channels of distribution. Cigarettes of those brands are consumed in
an average of 30 days or less from the time they come off the machine.
Senator C A P E H A R T . The only thing we would have to consider is
the increase in population?
Mr. W I L L I A M S . Y O U would have to leave us some room for expanding the industry through the use of advertising, and I should like to
have the privilege of one minute right on that.
Senator M I T C H E L L . Before you leave that, I would like to say that
represents an almost tenfold increase in production. Apparently OPA
controls during the war didn't hinder production.
extend price c o n t r o l and stabilization acts of
194 2
140S
Senator C A P E H A R T . Well, Mr. Chairman, there is the fact that the
Government themselves were in the war purchases. In fact, they
were purchasing the majority of the——
Senator M I T C H E L L . I would like to have Mr. Williams' comment
on that. I did not direct my question to the Senator.
Mr. W I L L I A M S . I make no contention that the production of
cigarettes during the war period was diminished by any direct actions
of OPA, and mark you, I say OPA instead of Government.
Now, if you w^ill let me go to another territory I should like to tell
you what the ceiling on cigarette production in this country during
the war was, and tell you about that from which it derived.
Following the low prices of cigarettes and other kinds of tobacco
in the early 1930's, the Government w^ent on a restrictive productive
basis for tobaccos. Unfortunately from the point of view of the
tobacco manufacturing industry—which is unlike the cotton industry,
unlike hogs and corn—not so much unlike cattle because you have to
keep them a while—we have to keep our invenTories a long time.
When the Government decides how much tobacco the farmers can
grow this year they have to decide it not on the basis of how many
pounds of cigarette and other tobaccos are going to be used this year,
but they have to go way down yonder into next year and the next
year and estimate what is going to be needed then.
Now, before the war the people who made the estimates, and I don't
speak critically, but rather sympathetically, as to how much tobacco
we were going to need in 1942, 1943, 1944, were still believing apparently from what they did that we were not going to get into this
war. When we did get into the war, we found that these stocks of
tobacco they had estimated as sufficient for growth in 1941, 1942,
1943 were, under war conditions, utterly insufficient. So that the
bottleneck of cigarette production in this country during the war
period was found in that limitation of available stocks of leaf matured
sufficiently for manufacture, which cut off the possibility that anything OPA might have done might have then restricted that manufacture.
There was a bottleneck that existed before OPA.
Senator M I T C H E L L . That was a bottleneck which came about because of governmental action to protect the price to the farmer; is
that true?
Mr. W I L L I A M S . That is correct. The prices beginning in 1933,
when I for the industry signed with Secretary Wallace the only agreement in agricultural products that ever did work—greatly to my satisfaction—the tobacco situation worked out through AAA enormously
satisfactorily from the early 1930's up to now. But it is true that out
of that situation, without fault of anyone, the industry in the manufacturing end found itself in a bottleneck through shortage of leaf
tobacco.
That accounts to quite some extent for the thing I was talking
about a while ago, under which these lower grades of tobacco were
pushed up to higher prices.
A great many manufacturers of new brands of cigarettes came into
the market, where there was a shortage in the early days of the war,
and continuing later in the war, and bought a great many of tho&e
tobaccos.
1430
extend
price c o n t r o l
and
stabilization
acts
of
1942
Judge Moore reminds me, and I thank him, that the restrictions the
Government felt it necessary to put on the use of acreage for things
other than food made some contribution to the same thing you are
talking about. They would not let people grow tobacco because it
preempted the possibility of growing food.
To go back to Senator Capehart's question, and drop a footnote, in
answer to his question, on this thing of what place advertising has in
this industry, I say categorically there is no industry in this country
which has been as dependent upon, and which has used advertising
any more successfully, than the cigarette industry. You can have
enough of the tobacco suitable for chewing tobacco and for snuff and
the farmer won't get anything worth while; the manufacturer won't
get anything worth while; the wholesaler won't get anything worth
while, and the Government won't get anything worth while. You can
grow smoking tobacco and the farmer will just about break even.
Often he will be losing money on this chewing and snuff tobacco. He
WTII be just about breaking even on smoking tobacco, but nobody
begins to make any money, not even the Government, because Government gets 18 cents a pound on that kind of thing, and they get
$1.15 or $1.20 a pound on the tobacco that goes into these cigarettes.
Nobody makes any money down there.
Where they all make their money is in the cigarette tobaccos. Here
is an astounding pair of figures. In 1910 only 38,000,000 pounds of
tobacco grown in this country (and some of that—a little bit—is included in there that was Turkish, imported from abroad)—was used
in cigarettes—which means that there was only 38,000,000 pounds of
tobacco grown in this country that was in the high-priced category.
The rest of it was going into these other lower-priced categories, but
nobody—not even the farmer—got much from them.
Through the use of advertising, very largely—and I am trying to
underscore, Mr. Chairman, the first point I made here: That OPA
regulations in this industry have forced advertising or the use of it out
of this industry by the millions of dollars' worth—through the use of
advertising this industry has shifted people to the use of cigarettes
to the extent that in 1943 instead of the farmer being able to sell
38,000,000 pounds of his tobacco for use in cigarettes, he sold 860,000,000 pounds of tobacco in this country for use in cigarettes—the
high-bracket return to the farmer, without regard to the manufacturer and the distributor and the shipper, and the retailer, and the
Government. I am trying to say that when OPA fixes a rule that
drives advertising out ot this industry it is working destructively to
a degree indicating that, in their own interest, the farmer and everybody else concerned ought to rally around this table and point out
the extent to which that destruction can reach.
Returning to my statement, I say in conclusion, that if, instead of
the blasts and belches which we have from day to day from the bulwarks of the Bureau, we might have put to the American p e o p l e not in fuzzy, unintelligible form but in clear language—the question
of whether or not they are willing to pay a fair price for the goods
and services they want and are willing to trust themselves, without
help of a Government bureau, to insure against any but a fair price
in a competitive market with goods and services in ample supply, I
undertake to say that the answer would be an unequivocal and
resounding "Yes!"
extend price c o n t r o l and stabilization acts of
194 2
140S
I think that the American people are deeply anxious to move
forward as promptly as possible to where they can do, and have enjoyment from doing, what Amon Carter had in mind when he concluded
a recent powerful editorial in his Fort Worth Star-Telegram on this
and kindred subjects with this suggestion: "Let's just be real Americans again."
I thank you, Mr. Chairman. I am ready to answer any questions.
Senator T A Y L O R . Are there any questions of Mr. Williams?
(There was no response.)
Senator T A Y L O R . Thank you, Mr. Williams, for your testimony.
The remaining witnesses will have an opportunity to be heard
Monday afternoon. We had intended to wind up these hearings
Monday morning, but because we have been unable to get all the
witnesses in this afternoon, those that desire to be heard at that time,
we will have a session Monday afternoon to hear the rest of them.
We will recess now until Monday morning at ten o'clock at which
time we are going to hear from Mr. Eccles, Chairman of the Federal
Reserve Board. Then Monday afternoon we will have the extra
session, or special session.
(Whereupon, at 6 p. m., an adjournment was taken until Monday,
May 6, 1946, at 10 a. m.)
1946 EXTENSION OF THE EMEBGENCY PEICE CONTKOL
AND STABILIZATION ACTS OF 1942, AS AMENDED
MONDAY, MAY 6, 1946
UNITED STATES SENATE,
C O M M I T T E E ON B A N K I N G AND C U R R E N C Y ,
Washington, D. C.
The committee met at 10 a. m., pursuant to adjournment on Friday,
May 3, 1946, in room 301, Senate Office Building, Senator Robert F.
Wagner (chairman) presiding.
Present: Senators Wagner (chairman), Radcliffe, Downey, Taylor,
Fulbright, Mitchell, Carville, Tobey, Taft, Capper, Buck, Millikin,
Hickenlooper, and Capehart.
The C H A I R M A N . The committee will come to order.
Mr. John M. Costello of the Los Angeles Chamber of Commerce
desires to submit a statement for the record.
STATEMENT
OF JOHN M. COSTELLO, GENERAL COUNSEL, LOS
ANGELES CHAMBER OF COMMERCE, LOS ANGELES, CALIF.
Mr. C O S T E L L O . The directors of the Los Angeles Chamber of
Commerce earnestly recommend that the Emergency Price Control
Act not be extended beyond June 30 of this year. They believe that
such termination of price control is necessary both to combat inflation
and to promote economic, political, and moral reconversion from war
to peace.
A. Price control promotes inflation: Administration of Government-determined price ceilings and subsidies is not preventing inflation
in any sense of the term. Instead, it is promoting inflation in several
ways.
First, it is restricting production and intensifying shortages of
goods.
Secondly, it is promoting wasteful consumption and use of commodities and services.
Thirdly, it is creating political conditions favorable to continuance
of inflationary policies by deceiving the public concerning the real
nature, extent, and consequences of inflation.
1. Restriction of production: Administration of price control is
restricting output by entangling producers in a maze of red tape.
Time and talents of management which should be devoted to problems
of production are increasingly diverted to the problems of trying to
conform to an endless stream of obscure, conflicting, and complicated
price-control decrees and regulations.
Strict conformity to the letter and spirit of the law is generally
impossible. Yet the arbitrary and dictatorial power of the administrators makes highly dangerous any deviation from the letter of the
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law as it is laid down and interpreted by the thousands of pricecontrol officials. Consequently, business management operates in an
atmosphere of uncertainty, conflict, and litigation which makes
efficient operation impossible.
Such conditions are not the fault of the administrators. They cannot be remedied by amendments of the law. They are the unavoidable results of trying to use Government price fixing in place of sound
fiscal and financial policy to combat inflation. Administrators must
have arbitrary and dictatorial powders if they are to fix prices and
enforce their decisions. Yet, no matter how complete their authority
and how numerous their staffs, the price-control officials cannot make
and enforce their price decisions quickly and fairly enough to avoid
costly sabotage of production.
2. Promotion of waste: Insofar as price ceilings are effective in
keeping prices below those which would be set in free markets, they
create shortages, speculation, inequity, and waste.
Prices tend to rise when buyers want more goods at current prices
than are available. When Government prevents the rise in the face
of an excess of demand over supply, it aggravates and prolongs the
shortage. Not only does the lower price discourage production, it
also encourages continued buying as would-be purchasers try to get
the goods faster than they are being brought to market.
The results of this continued shortage are shoppers' lines, or queues,
waiting lists, under-the-counter practices, linked purchases, or tie-ins,
increased shopping around, duplicate orders, multiplication of outlets
and go-betweens, favoritism, and hoarding.
All of these practices mean waste—waste of time and labor for
buyers; waste of time and labor for producers and sellers; waste of
commodities which are hoarded; waste of goods which are distributed
on a basis of favoritism or first-come-first-served, and waste of good
will destroyed by practices repugnant to every citizen.
3. Concealing symptoms of inflation: Supporters of continued price
control point to official price indexes as evidence of success in preventing inflation. By emphasizing the comparatively small rise in these
indexes since 1942, they lead many people to believe that inflation
and the evils of inflation have been avoided in the past and can be
avoided in the future by price control.
, When goods are unavailable, however, or are available only at
increased time and labor cost to the buyer, the official prices and price
indexes are worthless as measures of currency depreciation. Bonuses
and bribes to sellers, linked purchases and tie-ins, inferior quality of
goods and services, up-grading, and illegal price increases are rampant
throughout the national economy. They constitute a form of price
inflation all the more vicious because it is under cover or illegal.
• Government subsidies should also be considered as a form of hidden
price increases. Such expenditures add to the cost of living either as
taxes or as causes of currency expansion. They promote currency
depreciation and inflation both by aggravating shortages of subsidized
items and by adding to Government deficits.
By ignoring or belittling these forms of price inflation, advocates
of price control help to conceal the fact of inflation and the urgent
necessity of adopting effective measures for preventing it. They
foster the impression that Government extravagance and deficits are
of little consequence as long as Government maintains price controls.
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In this way opposition to new proposals for Government lending and
spending is disarmed and the Treasury doors are held open for new
raids by political pressure groups and their representatives.
B. Price control promotes disunity: The assumption underlying this
administration of price controls is that Government control of trade
is necessary to prevent exploitation of buyers by sellers. In the name
of law enforcement, a continuous campaign of propaganda promotes
the idea that this Government agency alone protects a helpless public
against unfair and exorbitant prices which would otherwise be exacted
by the ruthlessness and greed of private enterprise.
This propaganda is false and destructive in regard to both the
supposed gullibility or lack of prudence ascribed to consumers and
the shortsighted greed attributed to producers.
Buyers have shown that they can and will postpone their purchases
when there is a prospect that increasing supplies are to be forthcoming.
Experience also shows that the price policies of most producers and
distributors take into account not merely local and temporary market
conditions, but the rate at which goods can be marketed over a considerable period of time.
The belief, therefore, that a violent rise in prices would follow the
removal of price controls is entirely unwarranted. It fails to take
into account the extent to which inflationary forces have already had
their effect in concealed price increases and the extent to which prices
are governed by the good sense and prudence of buyers and sellers
rather than Government fiat.
Meanwhile, the cultivation of distrust in the ability of the American
people to manage their own affairs by private, voluntary agreement is
a disservice on the part of the price-control agencies. It fosters sentiment in favor of a continued policy of price manipulation by Government to promote the interests of one class at the expense of another—
tenants as against property owners, consumers and others at the
expense of distributors, w^ageearners at the expense of investors, and
so on.
Thus the fiat of Government officials replaces the system of free
exchange in which each individual selects that use which seems to him
best for his services, his property, and his money.
Such price manipulation by government means setting class against
class and setting up new Government agencies and controls to deal
with shortages and surpluses created by Government itself. It is a
primary cause of growing stateism, with all of the economic and moral
degeneration which accompanies that political disease.
Rent controls as a cause of the housing problem: The way Government price control causes economic difficulties which in turn create an
apparent excuse for further Government intervention is well illustrated
by the current housing shortage. Imposition of rent ceilings for
housing in the face of rising money incomes has had the same effect as
a reduction of rents in a period of stable incomes.
This relative reduction in the cost of housing has given rise to an
increased demand for housing, especially for housing above the lowest
grade. Millions of families have been tending to "spread out" and
to move to more commodious quarters as vacancies occur.
The result is improved housing conditions for some, but also less
housing and more overcrowding for the newcomers and for the less
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fortunate, such as, for example, returning servicemen and their
families.
In short, it means a less efficient use of the Nation's housing supply
and increasing hardship for many individuals and families.
This artificial increase in demand for housing resulting from rent
control is also causing a rise in real-estate prices relatively to rentals
and to building costs, because purchase is the most effective method
of getting living quarters commensurate with the increased incomes and
credit resources of the average family.
This rise is induced by rent control and creates an unwholesome
and dangerous speculative condition in the real-estate market. At
the same time, these unfortunate results of rent control are being used
as an excuse for a vast expansion of Government control over the
building industry and related fields. These new restrictions, in turn,
will further discourage production and enterprise necessary for national
recovery and prosperity.
C. Profit controls restrict capital growth: Price control becomes
especially restrictive when it involves determination and control of
profits or prospects for profits.
Such profit control appears likely to remain a part of price control
in general, both for political and administrative reasons.
The principal criterion for adjudging any price "fair" or "unfair"
seems to be whether or not it is considered likely to yield an "excessive" profit to producers. But when are profits "excessive"?
Profits represent not only incentive to efficiency and increased output but also a chief source of capital and credit required for expansion
of production.
Restriction of profit levels, therefore, correspondingly restricts opportunity, as well as incentive, for producers to expand output of
those commodities which are in greatest demand.
In fact, the greater the prospect seems for a large demand and a
high volume of business in any line of trade or industry, the greater
is the tendency for OPA to reduce profit margins for that line by price
limitations, price reductions, or formulas for "cost absorption."
No form of price control policy could be more restrictive, because
the amount of equipment which a producer can install, the amount of
materials he can buy. and the number of workers he can hue all depend on his prospects for earnings and his consequent credit rating.
Selection of any period immediately preceding the war, such as
1936-39, as the base for "fair" profits is clearly unwarranted, in view
of the depression character of those years.
Furthermore, the use of "profits before taxes" as the criterion
makes no allowance for the heavy increases in tax rates since 1939
or for the fall in purchasing power of money.
These conditions make a dollar of profits worth scarcely one-half
as much as before the war.
And profit levels in the prewar years wTere at depression levels.
Use of any other base period for determining "fair" profits, howTever,
would not obviate the fundamental difficulty that any degree or form
of profit limitation discourages efficiency and checks production.
The interest of consumers is not best served by the low-profit
producer or by conditions of low profits in business and industry
generally.
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What is needed, instead, is rapid expansion of output by low-cost
producers so that supplies of goods may be increased and prices
thereby reduced. But this expansion can be financed and promoted
only under conditions wrhich permit these efficient producers to reap
the profits resulting from their superior efficiency and enterprise.
In this connection it should also be noted that wartime earnings
provide no indication as to prospects of profits or need for profits in the
future.
Every business outlay for labor, materials, fuel, equipment, or
other expense of production represents an investment.
Incentive for such investment, as well as incentive for labor, depends on prospects for future earnings, not on past earnings.
Again, it cannot be too strongly emphasized that returns on investments are the chief source from which must come the capital
necessary for reduction of costs and prices.
It is true that in free markets shortages and scarcity result in rising
prices.
But high prices and rates of profits constitute the one effective
remedy for shortages and scarcity. And the economic aim of sound
policy is the mitigation or elimination of scarcity, not preservation of
any particular level of prices.
D. Urge termii ation of price control: Termination of the price
control administration, in the opinion of the board of directors of the
Los Angeles Chamber of Commerce, therefore, is necessary in order
to increase production, end shortages, combat currency and credit
inflation, stop the decline in purchasing powTer of the American dollar,
restore confidence in the Nation's financial stability, stop antibusiness
propaganda, and restore and preserve the system of individual liberty
and free, private enterprise.
For these reasons we urge that the Emergency Price Control Act
be permitted to expire on June 30, 1946.
The CHAIRMAN. Mr. John D. Small, Administrator, Civilian Production. W7e would like to hear from you. You know what our
problem is.
M r . SMALL. Y e s , s i r .
Senator C A P E H A R T . Mr.
Chairman, before he proceeds I would like
to make a complaint. I have had telephone calls from women who
claimed that they have talked with members of the committee, meaning the staff, in which the staff had told them I was opposed to the
OPA bill and for them to use pressure on Senator Capehart. They
likewise gave the names of other Senators who were supposedly opposed
to the OPA and urged them to put the pressure on them to straighten
them out.
Now, I want to publicly lodge my complaint against members of
the Banking and Currency Committee staff saying to anyone that any
Senator prior to the vote is opposed to OPA, and suggesting that they
use pressure.
The .CHAIRMAN. I will make inquiry about that at once. They
certainly have no right to do any such thing.
Senator C A P E H A R T . I trust you will be able to stop it, because it :'s
very unfair and unwarranted and certainly is against all the rules and
regulations of the Senate.
The CHAIRMAN. I didn't know any such activities took place
anywhere.
85721—46—vol. 2
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Senator C A P E H A R T . I have had half a dozen telephone calls.
The C H A I R M A N . Very well. I will look into it at once. It certainly will have to be stopped if it exists.
Senator C A P E H A R T . I don't know how anyone knows how I am
going to vote.
The C H A I R M A N . You are going to vote for it, are you not?
Senator C A P E H A R T . I said I didn't know how you or anyone else
was going to vote.
The C H A I R M A N . Well, I don't. I wish I did.
Mr. Small.
STATEMENT OF JOHN D. SMALL, ADMINISTRATOR, CIVILIAN
PRODUCTION ADMINISTRATION, WASHINGTON, D. C.
Mr. SMALL. Mr. Chairman and members of the committee, our
Nation stands today at an extremely critical juncture. We have
within our own hands all of the elements that can insure a continuous
and steadily increasing prosperity if we, as a nation, have the wits
and the will to handle our economic affairs sensibly and reasonably
for the next 6 or 8 months.
I think the next few months ahead are the most critical in the history
of our country. We are on a hump. If we can get over it, we have
industry like a track team straining at the tape, ready to go. They
will go, and we will have a flood of goods such as you have never known
and the greatest prosperity if they can get going, if we can get over
this hump during the next 4, 6, or 8 months which are so vital to our
economy and to our prosperity.
It seems to me that price control is one subject wThere we find a
maximum of confusion in the minds of the public and also of violent
differences of opinion. Rarely, during recent years has there been on
any subject so much sound and fury, and so much controversy and
heat and so much insistence upon extreme positions. Things have
certainly changed since VJ-day.
During the war our people were not only patriotic, but also by and
large in their dealings with each other, were reasonable, flexible, and
tolerant. Nowadays people are impatient, less reasonable, certainly
far less tolerant, and selfishness has come out into the open to a very
considerable degree.
I am glad to have the opportunity to discuss with you today the
question of the extension of price control—which in my opinion is one
of the most immediately important problems that confront us. I
certainly cannot reduce the problem to simplicity, nor indicate to you
solutions that are so clear and so obvious as to be beyond debate. I
can, however, from the vantage point of the production agency, the
Civilian Production Administration, give you facts on which good
judgment can be based.
The economic situation in the country at the present time is explosive. Enormous demands far exceeding supplies have create.d great
pressures which, if unchecked, would lead, I believe, to skyrocketing
prices. I believe, also, that most thinking people, both producers
and consumers, are convinced that those pressures must be checked.
Both the supporters and the opponents of continued price control
seem to agree that production is the best insurance against skyrocketing prices and wild inflation. I certainly agree. But also I believe
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that if we are to get maximum production promptly and maintain it,
we must not only have assurance of stability of prices, but also of
stability of costs, including wages, and stability of working effort,
at least for the critical 6 or 8 months next ahead.
With your permission, therefore, I would like to discuss briefly
some of the individual factors that have a bearing on the problem
of the extension of price control.
1. The threat of inflation: Is there a real and serious threat of
run-away inflation at this time—or, is inflation just a "bogeyman"
blown up, far beyond its real importance, by the proponents of the
extension of the Price Control Act?
W e have a limited measure of inflation with us already, but through
price control it is being held within bounds. I, for one, am convinced
that there is a very real danger of rampant and uncontrollable inflation
unless we can continue to hold prices within bounds during the nextfew months ahead. Here are the reasons why.
Inflationary conditions today are comparable to, but far more
powerful than those existing at the end of World War I.
Our experiences after WTorld War I were disastrous. As we look
back, the causes and effects of the violent inflation and subsequent
deflation that followed the last war seem very clear
To lift price control now wrould, in my opinion, inevitably recreate
the same cycle of inflation and deflation that we had in 1919-40—
disaster and ruin for thousands upon thousands of businesses—the
majority of them small firms.
Senator M I L L I K I N . Mr. Chairman, may I ask this: Mr. Small,
during the course of your paper will you discuss whether we actually
have price control where there are real pressures against the line?
M r . SMALL. Y e s , s i r .
In my opinion, the most important inflationary factors present in
our economy which require that we control prices are the following:
1. The enormous volume of liquid assets currently held by business
units and by the consuming public, a part of which is the enormous
volume of money in circulation; and the volume is now greater than
the total public debt at its peak in 1919.
Senator B U C K . What would be other liquid assets in that classification?
Mr. SMALL. Credit, bonds
Senator M I L L I K I N . Savings?
Mr. SMALL. I am merely saying here that the actual cash money,
greenbacks in circulation, is greater than our public debt, regardless
of all the other things.
Senator B U C K . H O W much greater is our money in circulation now
than it was at the beginning of the war?
Mr. SMALL. I can get that figure for you.
Senator C A P E H A R T . Well, it is about 8 billion against 26 billion.
Senator M I L L I K I N . What was that figure?
Senator C A P E H A R T . Eight billion against twenty-six billion.
Mr. SMALL. That is approximately correct.
The CHAIRMAN. That is approximately correct, irrespective of
bonds? We are not speaking about bonds?
Senator C A P E H A R T . NO. We are talking about cash money.
The CHAIRMAN. Currency in circulation?
Mr. SMALL. 2. The increasing wage scales which means increasing
buying power in the public's hands.
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3. The large volume of deferred demand for housing, non-Federal
public works, consumers' durable goods, clothing, and other items
and the related demand for industrial plant and equipment.
4. The heavy foreign demand for American products for relief and
rehabilitation and for commerce. The latter would be increased by
proposed foreign loans.
5. Industry's requirements for replenishment of inventories to get
into civilian production; the urgent need to fill up with goods all distributing channels—the pipe lines from factory to consamers.
Now, No. 6 has changed since this was written so let's cross No.
6 out.
Senator B U C K . I don't think it should be crossed out. Why should
it be crossed out?
Mr. S M A L L . Well, the last 3 months' income has been greater than
outgo.
Senator B U C K . Are you sure that is right, or are we living on
surplus cash in the Treasury, or excess cash? Do you think today
our income is greater than our outgo?
Mr. SMALL. I think at the minute it is, but there is no question
about the fundamental that the budgetary deficit of the Federal Government is an inflationary factor if it continues.
vSenator B U C K . I think your position would be stronger if you let
that stay in.
Mr. SMALL. All right. Let's let it stay in.
6. The continuing budgetary deficit of the Federal Government.
All of these six factors create demands, but on the supply side we have:
7. A volume of production now far below demands and even under
the best of circumstances unable to catch up with demands for many
months.
Senator M I L L I K I N . Mr. Small, you may come to it later, and if
you are, I don't want to go into it. We have had considerable
testimony that in a number of very important items production—in
petroleum, for instance—has gone up considerably over the prewar
figure and is in excess of our needs, and there is a possibility it exists
in a number of commodities.
Mr. S M A L L . I go into that in some detail, on production.
Senator M I L L I K I N . All right.
Mr. S M A L L . All of the above factors were present after World
War I and help to explain the speculative boom of 1919-20, but
owing to the greater length, and more productive effort required in
World War II, they are now potentially much more explosive than
in 1919-20.
It seems to me that in the face of these inflationary factors, we must
for the immediate future continue to control prices in those areas
where demand greatly exceeds current supply.
But we must at the same time recognize that price control does not
eliminate inflationary pressures; it merely holds them in check.
Senator C A P E H A R T . May I ask a question?
M r . SMALL. Y e s .
Senator C A P E H A R T . IS
it possible, Mr. Small, for your division, or
some other division, to arrive at exactly those items in industry that
come within this category and those where price control could immediately be eliminated? To me that is the heart of the whole matter.
We must continue price control of those things that are in short
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demand. I don't think anybody denies that; at least I never have,
and I don't think anybody has; but we would like to eliminate those
from price control where production is equal to demand.
Now, is it a complex matter, or quite a simple matter for you, or
some other agency, to give us the itgms that should be controlled and
those that should not be controlled? Then it would be quite simple
to give us a formula for decontrolling those at the moment that should
be decontrolled; those that should be decontrolled in 6 months, a
year, and year and a half, and 2 years from now. To me that is the
heart of the whole problem right there.
Mr. S M A L L . If you don't mind, I would like to come back to that
because I hit at it later on in this discussion. I can assure you that
the question is not simple.
Senator C A P E H A R T . Of course, price control is never simple. It is
a complex matter. I agree to that, but the whole debate and argument to this committee has been over that one thing. Are there
items we can immediately eliminate price cnotrol from and if so, what
are they? On those items we cannot eliminate price control at the
moment, can we set up a formula that will automatically decontrol
at some future date? That is two factors.
The third factor is speeding up, better administration and better
control, making adjustments on those items at the moment where it
would seem from the evidence that they do need some relief in order
to secure production.
Now, those are the three things I am vitally interested in. That
is all I want, is to get a decontrol formula. I want those items that
there is no necessity for price control to be eliminated, and those
where there is a necessity for price control, I want it continued, but
I wrould like to see some formula that would tell the businessman
and the public and the world that when certain things happen they
will automatically be decontrolled. That is my position, and I believe
it should be the position of those that are both for and against continuing OPA. I believe if we concentrated on those three things we
can report out a very, very fine bill that would be practical and
sensible and workable.
Mr. S M A L L . Well, in the War Production Board and in Civilian
Production Administration we have had to put out a lot of regulations
a lot of laws, if you like, on these short items—regulations of one
kind and another. We have tried to write into those regulations
good judgment. We have always found it impossible. We cannot
write into a regulation the exercise of good judgment or of good
administration.
So far as your simple formula you are speaking of, I am afraid there
is no such simple formula. For example, in a good many things production is back to 1941 levels. In some of those things the supply is
now quite adequate at that level of 1941. In others it is completely
inadequate even though it is at the 1941 level. You have to look at
each of these products on its merits. To say when it hits the 1941
level that is the measure and you can decontrol immediately—for
instance, on men's suits, we are making many, many more men's suits
today than we ever made in our history, but the demand is twice or
more what we are making.
Senator T A F T . H O W do you know that, Mr. Small? I have talked
to the manufacturers of suits who say they cannot get linings for them.
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Mr. SMALL. It is true that on linings we ran into difficulty, but the
problem of the rayon linings has been eased. The rayon industry
voluntarily came up with additional yardage to go into men's suits.
I don't believe the lining problem is much of a problem today.
Senator T A F T . But there aren't any men's suits. Where do you
get your figures that we are producing at the 1941 level?
Mr. SMALL. We are producing suits at the present time at the rate
of about 20 or 21 million.
Senator T A F T . Where do you get your figures? Do you get reports
of those weekly, or how do you get them?
Mr. SMALL. We get a report on production which we are constantly
making checks on. I have figures with me which I will go into with
you if you like, as to the spot checks we make; what the production is,
and what the shipments are. We are up to about 21,000,000. We
can go to 25,000,000 on the capacity and the workers we have. We
are trying to get more capacity and more workers.
Senator T A F T . That seems to me to be contrary to everything that
everyone tells you, everything that everyone says.
Mr. SMALL. Well, that is what our figures show.
Senator T A F T . Yes, but there are no suits in the stores.
Mr. SMALL. They are being gobbled up as fast as they hit the stores.
Senator T A F T . Y O U cannot buy a suit that you want to buy.
Mr. SMALL. That is right. You have this terrific demand. Our
prewar peak, if I recall the figure correctly, was about 20,000,000 or
21,000,000. That is at the rate of one suit every 3 years for a
man. I would have expected it to average around about one suit per
year, but it is one suit for 3 years.
But people have more money now and they want to buy suits. I
am not talking about the returning veteran. I am talking about the
civilian and the demand is there for far more suits than we have ever
made in this country.
The C H A I R M A N . What would you regard as the supply now?
Mr. S M A L L . We are making about 21,000,000 at the present time.
I think we can go to 25.
The C H A I R M A N . But the demand would be what? What would
you guess?
Mr. S M A L L . I guess the demand at 40,000,000.
Senator M I T C H E L L . That goes back to your pipe-line illustration?
M r . SMALL.
Yes.
Senator M I T C H E L L . Nothing in the pipe lines, practically speaking.
Mr. SMALL. Nothing in the pipe lines. In addition to that, something that is frequently forgotten, or lost sight of, we talk in terms of
men's suits only, but there has been an enormous increase in separate
pants and jackets in certain areas of the country.
Senator H I C K E N L O O P E R . Mr. Small, here is the thing that is very
difficult for me to understand. I understood you to say that prewar
production was about 21,000,000.
Mr. S M A L L . The peak.
Senator H I C K E N L O O P E R . Per year?
Mr. S M A L L . The best we ever did.
Senator H I C K E N L O O P E R . And we are now producing some 2 4 , 000,000?
Mr. S M A L L . No, we are just about at the peak of prewar.
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Senator H I C K E N L O O P E R . Well, perhaps 21 or 22 million. The
demand is 40,000,000?
Mr. S M A L L . That is a guess.
Senator H I C K E N L O O P E R . Here is the thing that is difficult for me
to understand about this fabulous and uncertain nature of price
control which seems to be in the air. When will we ever catch up
with that demand if we are only producing today 21,000,000 and our
total maximum capacity is around 25,000,000 suits, when will we ever
catch up with the surplus demand that is alleged to be in existence?
We were supplying 21,000,000 suits for the normal prewar demand.
If we get up to the total maximum production in this country, according to present employment and manufacturers' facilities, we will only
get up to about 24,000,000 or 25,000,000. That will be an excess of
3,000,000 suits over the prewar demand. It would take almost 10
years to catch up with that 40,000,000 surplus demand. Therefore,
price control under your theory could be extended for 5 or 6 or 7 or
8 or 9 or 10 years.
Mr. SMALL. I certainly don't agree with extending price ^control
for any such period of time.
Senator H I C K E N L O O P E R . I am not asking you that. I am not
saying that you do, but the theory now seems to be that when supply
fully equals demand, then we will decontrol. The only way you can
meet that excess demand is out of this surplus over and above the
normal current peacetime needs, which was 21,000,000 suits. You
can only catch up with this excess demand of 20,000,000 suits with
about 3 , 0 0 0 , 0 0 0 suits a year.
So that will be at least 7 years on those figures.
Mr. SMALL. Let's get it clear. We are making around 2 1 , 0 0 0 , 0 0 0
right now, plus these separate pants and jackets. We can go up to
about 2 5 , 0 0 0 , 0 0 0 , I think, with our present working force. We have
got to get some more people into the working force. The plants will
support more. We are currently making cloth enough—men's
suiting cloth-—enough to make about 3 0 , 0 0 0 , 0 0 0 suits. It is going
into other things. It is going into women's gabardine, and what not,
but we are going to make more cloth—we are going to have more cloth
because the women's stuff is backing up on the shelves in the women's
apparel stores, so we will have the material to make more suits. We
probably could go up to about 28,000,000 if we could get the workers in.
But the point is—you are absolutely right—we are not going to stop
all that backed up demand this year or maybe 2 or 3 or 4 years more,
but at this juncture, right here in the month of May or June, this is not
the time in my opinion to lift price control on men's suits, because with
that enormous demand up she goes. But you don't have to hold onto
price control forever just because of men's suits.
If we can get a flood of goods onto the shelves of the country to stop
up this buying power, they are going to spend their money on other
things, and not concentrate on one thing.
Senator H I C K E N L O O P E R . Yes; but pursuing Senator Capehart's
question, is there not some way, some formula that can be announced
for the ending of price control in this country? I mean, can we not
suggest a goal to work for, instead of leaving it up in the air, or to the
somewhat uncertain discretion of the price-control officials?
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Mr. SMALL. I repeat again, Senator, the fact we hare tried to write
good judgment into our regulations and we always fail. If you leave
any leeway in there
Senator C A P E H A R T . May I ask this question
Senator H I C K E N L O O P E R . Just a moment. Let me pursue this a
little further. On that statement there—you have made it before—
I wanted to ask you about it a little later, but I can do it at this
moment. The theory of laws such as price control is to defend them
and justify them, but it is often lack of judgment and the lack of sound
discretion in the enforcement and the writing of the regulations in
order to carry them out; is that not true?
Mr. SMALL. That is right.
Senator C A P E H A R T . Would you be willing to say that men's suits
would automatically be decontrolled, when, say, over a period of 54
months, that production was the equivalent of 30,000,000 suits a year?
Mr. SMALL. Oh, I would say we could safely do it at that rate, but
that is not the 1941 rate.
Senator C A P E H A R T . N O ; I appreciate that. I don't think the calendar has a thing to do with when we should discontinue OPA.
I don't think it has a thing to do with it. I am not so certain that
1941 has anything to do with it, or 1939, but I always get back to this
thought: that there must be some formula which we could put into
the law which would tell the world and tell the manufacturers and tell
the public and tell the dealers and tell the Congress and the membership of OPA and CPA that when certain things happen that control
goes off of that industry. I believe that it is sound and I believe your
testimony, what you said today, more or less concurs in that, and I
think the amount of the formula should be quite liberal—should be on
the liberal side in favor of continuance, rather than on the opposite
side, because to me it gets down to just three things, the things I
described a moment ago. There are things that should be eliminated
at the moment from control. There are others that may go for 6
months, say, or for 12 months; others for 2 years or 3 years.
Then I think we should do something—just as you have said, it is
impossible to administer—you say it is impossible to write a formula,
which brings me back to this thought: then we must have an administration of OPA that is flexible in itself and recognizes that fact and
one that will enable them to act quickly on these adjustments.
Mr. SMALL. It has to be flexible; it has to be realistic; it has to be
fast.
Senator C A P E H A R T . WThen a man comes in with figures that show
he is losing money, he should get relief in 24 hours. Get the job done.
That is my point. I am not interested in the formula. I am interested in avoiding inflation and getting the job done. To me the
job is the important thing. The result is what we are looking for,
Mr. SMALL. Y O U have no disagreement with me on that, Senator.
I believe in the Government getting out of business just as quickly
as it can do it.
On the other hand, I repeat again, we are at a very critical juncture
right now and we don't dare take off
Senator C A P E H A R T . If you were to take price control off of hundreds
of items that there is no necessity for it, it would give OPA and their
personnel more time for things that are more important.
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Mr. SMALL. That is right. What you are really trying to do is to
write into this—or suggesting writing into it—an arithmetical formula
or a mathematical formula by which anyone can say this is when
we are going to do it.
Senator C A P E H A R T . If we don't do it, O P A has got to do it, or
you have got to do it.
M r . SMALL. O P A i s t h e o n e t o d o i t .
Senator C A P E H A R T . Why can't O P A
sit down with this committee
and prepare that formula now, rather than OPA doing it in 60 days?
Mr. S M A L L . I understand you are going to talk to Mr. Porter today
or tomorrow.
Senator C A P E H A R T . Yes.
Senator T A F T . This question le&ds me to say that perhaps a formula
is necessary on the oil problem. According to all the evidence we can
get there is more oil being produced than there is any demand for.
Stocks are being cut back here. Under those circumstances should
not oil be decontrolled by Mr. Bowles, or if he will not do it, by
Congress?
Mr. S M A L L . Where the acute demand has been supplied I believe
price control should be lifted right then.
Senator T A F T . That would come out at about 120 percent of 1941
production. That is about where we are today, in that particular
case. But I cannot see any argument against taking it off. I don't
understand why it is not done, and consequently it raises the suspicion
that Mr. Bowles does not intend to take anything off of any commodity, regardless of demand and supply. That is what the ordinarily
logical thing to do would be, would be to leave it to him, but—with
some general statement of principle about demand equaling supply
Mr. S M A L L . Well, you take fuel oil. Your production for 1 9 4 1 - 4 4
was 5 0 6 , 0 0 0 , 0 0 0 . In the last 1 2 months it is 7 1 9 , 0 0 0 , 0 0 0 , well over
1941-44.
Senator T A F T . That is right.
Mr. SMALL. On gasoline it was 637,000,000. Now it is 786,000,000.
So you are well over on the basis of your 1941 figures.
Senator D O W N E Y . Mr. Chairman, may I ask a question?
T h e CHAIRMAN. Y e s .
Senator D O W N E Y . Mr.
Small, to what extent will the continued
coal strike affect that question of there being a surplus or a shortage
of oil?
Mr. SMALL. We are headed head-end toward disaster if we don't
stop this coal strike.
Senator C A P E H A R T . That is why I made the statement a minute ago
that the calendar has nothing to do with it. We should write a formula that it is decontrolled when certain things happen not whether it
is June 30 or July 14.
Senator T A F T . Well, so far as coal production is concerned, you
could not rapidly increase the production of fuel oil to take the place
of coal, could you?
M r . SMALL. N O .
Senator T A F T . That
would involve making new oil burners, and
so forth?
Mr. SMALL. That is true. You could not get to it in time to solve
the problem. Another thing is on glass containers. That is one of
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the shortest things we have got. We made 59,000,000 gross in
1940-1941. The last 12 months it is 107,000,000 gross.
Senator T A F T . That is the production, and the demand is even
greater?
Mr. S M A L L . That is right. The demand is away out of sight.
You have doubled your production and still haven't come anywhere
near meeting your demand.
Senator C A P E H A R T . Maybe the formula should be 300 percent.
Mr. S M A L L . On that particular thing. If you took it item by item,
then you could do it, but you cannot do it and say it applies to
everything.
Senator C A P E H A R T . I appreciate that.
Senator M I L L I K I N . Mr. Small, I* should like to say at the outset I
am in entire agreement. You cannot have any mathematical formula,
100 percent, 200 percent, or 500 percent. The point is whether the
supply balances the demand as of the date you are looking at the
problem; is that not right?
Mr. SMALL. Exactly.
Senator M I L L I K I N . Y O U cannot measure that in advance with a
mathematical formula; is that not correct?
Mr. SMALL. That is right.
Senator M I L L I K I N . If this committee should determine that there
is a certain number of important items that are now in a position
where supply equals demand, why should we not specifically exempt
those from further control?
Mr. SMALL. I certainly have no objection to that. I believe OPA
will go along with it. They should go along with it.
Senator M I L L I K I N . Does that involve the question of recontrol?
Let us say that today OPA or Congress decides that X , Y, and Z
items are in balance. Three months from now they get into serious
unbalance. Must we also be thinking about a recontrol formula
while we are thinking about a decontrol formula?
Mr. SMALL. I think you do, Senator, although I believe that the
case for recontrol has got to be so clear and so compelling that there
is just no argument; it is beyond debate.
We are up against that every day. Pressure is on us to reinstate
control which we have fought off consistently, but nevertheless there
are those pressures. It should be a last resort before wTe reinstitute
control, but you would have to do it on some things.
Senator M I L L I K I N . If Congress itself should exempt a number of
specific articles from further control, it could by legislative process
reinstate those articles if they needed control in the future?
Mr. SMALL. It would certainly take some time to get it through.
Senator M I L L I K I N . Well, it takes time to get it through OPA.
Senator C A P E H A R T . Mr. Chairman, why could not Congress write
into the law, if any item is decontrolled, if the general price went up
25 percent it would automatically come under control again?
The C H A I R M A N . I know you have suggested that before, and we
might ask Mr. Small about the suggestion of Senator Capehart.
Mr. SMALL. Yes; I think that would work. You have the Brown
amendment somewhat along that line. It doesn't put it on a mathematical formula, but it says that the President shall say that the acute
e x t e n d p r i c e c o n t r o l a n d s t a b i l i z a t i o n a c t s o f 194 2
140S
demand has been filled—when the acute demand has been filled, go
ahead and decontrol, but in reverse, if the need should arise, go ahead
and recontrol. That is the principle of the Brown amendment.
The C H A I R M A N . Do you think that is workable?
Mr. SMALL. I think it is. I would personally rather see that power
vested in the President, rather than in my own hands—rather than
seeing the Secretary of Agriculture and the CPA doing it.
Senator T A F T . Isn't there a factor about this demand-equals-supply
formula—I mean just a general formula—is not that a question of at
what price?
Mr. SMALL. N O , sir; take glass containers for example. Regardless
of price, you cannot fill the demand.
Senator T A F T . Take strawberries. At 5 cents a box less the demand
for strawberries would be three times what it is now, or a dozen times?
Mr. SMALL. That is right.
Senator T A F T . SO, it seems to me in the demand-supply formula
you have to put in something about price and what price ought to be.
My difficulty is that Mr. Bowles is trying to combine holding the
price down artificially to below where demand-supply would put it
and then trying to make supply equal demand at that price. That is
a thing I just don't think can be done. If you are going to have a
formula it seems to me it has got to be a formula at a price that would
normally be met by demand-supply. That is why it seems to me
that this thing about demand equaling supply will never be fulfilled
in many industries.
Mr. SMALL. Well, in a free economy you always have cases where
supply falls short of demand.
Senator T A F T . And immediately price goes up to take care of it.
Mr. SMALL. Then you could have certain declines in demand because
price did go up.
Senator T A F T . That is right. I don't see how you could ever say
that supply equals demand, or demand equals supply, without balancing the thing. So that it seems to me if we write a formula resting
on that and leaving it to the Administrator we have to say something
about price rather than demand.
Senator C A P E H A R T . Mr. Small, would you feel that a formula of
this nature would be practicable and sensible, a formula where the
President could decontrol at any time because in his opinion it was
practical to do so, where OPA would automatically have to decontrol
when production had reached a certain peak and where the President
would be given the right to place controls back on again if prices in a
given industry or a given item increased, let us say, 25 percent above
the point they were when it was decontrolled? I am not attempting
to say what figures he could use against any other figure, but I am
talking about a principle.
Would you object to that sort of a
principle?
Mr. SMALL. Well, you have said two things. You have said the
President—which is the essence of the Brown amendment
Senator C A P E H A R T . I had no amendment in mind. I am just
talking about the principle. First the President would be the one
to do it; secondly, he would automatically have to decontrol if a
certain thing happened; and, third, he would be given the right to
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place controls back on, if prices in that given industry or item advanced, let us say, 25 percent above the point they were when they
were decontrolled.
Mr. SMALL. Point two is the mathematical formula again.
Senator C A P E H A R T . Well, somebody would arrive at that, the Congress, the President, or the OPA. Now, could we not write into the
law a provision of that sort and be liberal in doing it? Do you not
think it would be better for everybody concerned, those that are
opposed to any extension of OPA, and those who are for it? Don't
you think it would give the Nation something concrete to shoot at; and
don't you think it would encourage the manufacturers that were under
controls to reach those peaks and get out from under controls?
Mr. SMALL. If the action that he took or the action that our country
takes results in a substantial rise in prices, you are goirg to have
another wrave of strikes and production is going to go down again.
We are going to get right back into this same ball of wax where we have
got to recontrol and recontrol again. I am firmly of the opinion that
the next 4 months, or 6 months, if we can manage to hold this boat
from rocking too much
Senator T A F T . What makes you think we are not going to have
another wave of strikes anyway? We are going to have another wave
of strikes. The CIO has already announced it.
I don't think there is any reason to think it is going to be any worse
with change in price or without it. They demanded an increase and
got it when there was no increase in the cost of living. They will
demand it, whether there is or not. It is an argument, but as far as
saying that price control will simply prevent a wave of strikes, I
just don't see any basis for that claim.
Senator F U L B R I G H T . May I inquire if Mr. Small is going to complete
his statement, or not?
Mr. SMALL. I would like to.
Senator F U L B R I G H T . Well, I would like to hear it.
Mr. S M A L L . All right. I will go ahead with my statement for the
moment. I have these figures now that we were talking about.
In 1 9 3 9 , December 3 1 , the money in circulation was $ 7 , 0 0 0 , 0 0 0 , 0 0 0 .
In February 1 9 4 6 it was $ 2 8 , 0 0 0 , 0 0 0 , 0 0 0 . That is cash money in
circulation.
Senator H I C K E N L O O P E R . What was that first figure?
Mr. SMALL. Seven billion.
Senator H I C K E N L O O P E R . N O . I mean the first date.
Mr. SMALL. December 3 1 , 1 9 3 9 .
The C H A I R M A N . That is free of any bonds?
Mr. S M A L L . Yes. That is money in circulation. Your demand deposits, if you want that figure
Senator H I C K E N L O O P E R . Your $28,000,000,000 was when?
Mr. SMALL. February 2 8 , 1 9 4 6 . Your demand deposits, December
3 1 , 1 9 3 9 , were $ 1 8 , 7 0 0 , 0 0 0 , 0 0 0 .
February 1 9 4 6 , $ 3 7 , 7 0 0 , 0 0 0 , 0 0 0 .
I have here some graphs which picture the course of prices and production in the uncontrolled situation which came with the First World
War.
(The charts are as follows:)
extend price c o n t r o l and stabilization acts of
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PRICES, PRODUCTION A N D COST OF LIVING
PRICES, PRODUCTION A N D COST OF LIVING
SECOND WORLD WAR
FIRST WORLD WAR
Mr. S M A L L . This is what happened last tjime. I believe that b y
all the rules of probability, something like this would happen again
if we dropped our price controls before production is within reach of
demand.
On the first chart there you have wholesale prices at the black line.
Starting back in 1914 as a base, you can see the precipitious rise,
before we took on some voluntary controls in 1 9 1 7 - 1 8 . Then we had
a little depression after the armistice and then a sharp rise again.
At the same time, look at that production curve, which is red.
Production does not follow prices. It certainly did not then.
Senator M I L L I K I N . What brought those prices down?
Mr. S M A L L . D O you mean finally brought them down?
Senator M I L L I K I N . Yes.
Mr. SMALL. We had in 1 9 1 9 - 2 0 — t h a t was your inflationary
period—a snowballing of demand and hoarding of inventories,
duplication of orders, everybody tried to buy everything he could
get his hands on and hold it, and the price rose. It finally got up
to such a point that the prices themselves caused a buyer's strike,
which produced a catastrophe.
Senator M I L L I K I N . An accumulation in goods came into the market—hoarded in the manner which you mention, and then let loose—
came on the market and reduced prices.
Mr. SMALL. That is right.
Senator M I L L I K I N . Which is another way of saying production.
Senator T A F T . Mr. Small, there is one other factor that is not shown
in any of these figures, and that is the wage level. It is not shown in
any of these charts that Mr. Bowles brings in, and that is one thing
that seems to me to have a bearing on the fact that wholesale prices
are not going to collapse, because they cannot collapse to the extent
extend price c o n t r o l
and stabilization
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PRODUCTION, PRICES,WAGES AND COST OF LIVING
FIRST WORLD WAR AND SECOND WORLD WAR
INDEX
250 r
INDEX
1
FIRST WORLD WAR
Wholesale Prices
SECOND WORLD WAR
Industrial Production
I
i
**
( August 1939 = 100)
Prepared by CPA
;
Cost of Living
250
INDUSTRIAL PRODUCTION FOR WAR AND CIVILIAN ACCOUNT
INDEX
250 "
1939
'
INDEX
250
f
1940
1941
1942
1943
Prepared by CPA from data furnished by Board of Governors of the Federal Reserve System
No information on war production available before January 1941
1944
1945
'46
extend price c o n t r o l and stabilization
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they did after the former war. I don't know what they would show,
but I think they would show that wages have kept up, more than kept
up with prices, whereas the other time wages fell way behind prices.
Now, that factor is not shown, in any of these charts. I think it
ought to be.
Mr. SMALL. I will be glad to have those charts changed to have
wages in. I suppose you mean the wages in the manufacturing industries?
Senator T A F T . That is right. What I am trying to get at is the cost
of production, how much the costs of production have gone up.
Mr. SMALL. I will be glad to have that put in, but the main thing
this chart is supposed to show to you-—the illuminating thing to me—
is that just letting prices go sky high does not automatically increase
production. I go into that at greater length in my statement.
The CHAIRMAN. There was a great deal of speculation then, was
there not?
Mr. SMALL. Oh, yes; certainly.
Senator T A F T . I don't see why that chart shows that. If you take
your chart on industrial production, at the end of the war, 1918, and
during the year 1919, although war production stopped, there was a
big increase in production as a whole, so that there must have been a
tremendous increase in civilian production in 1919. So I don't quite
see that that proves your increase in prices did not produce increased
production. Is that not a correct analysis?
Senator M I L L I K I N . Your production fell from the last war, when?
Mr. SMALL. From here down to here. This obviously was to take
care of civilian production.
Senator M I L L I K I N . That is right.
Mr. SMALL. And apparently did the job, because it caused the
whole thing to collapse.
Senator C A P E H A R T . Mr. Chairman, may I say this: That prices
either low or high, have nothing to do with production. The thing
that encourages production is profits. You might not want to manufacture at prices that are extremely high because there is no profit; or
again, you might want to produce at the utmost capacity if prices were
low. The thing that gets production is the chance to make a profit,
not whether prices are high or low. I don't care, as a manufacturer,
whether I sell at a high price or a low price if I get the volume to make
a little money, so that there is no relationship between high prices and
production.
The thing that gets production is profits. The profit incentive is
the thing that makes people produce. Prices might be sky high and if
their costs were just as high in relation, and they were making no
money, they might be less likely to produce, because their chance of
loss would be that much greater, because they are dealing in more
business, more volume, and taking the same chances. So the relationship between prices and production, as I know it through having been
in business for 25 years—wTell, there is no relationship.
Mr. SMALL. Mr. Baruch said one time a very true statement.
He said [reading]:
No device is more stimulating to the energy of the American businessman than
is a vision of fair reward.
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Senator C A P E H A R T . That is the point exactly, and the businessmen
don't care whether prices are high or low, if the yare getting volume
and making some profit.
Mr. SMALL. One thing, however, that is along the point Senator
Taft is making, in normal times when demand exceeds supply, the
rising of prices may cause production to go up on that particular
element, but the ones where you have a shortage are rather few out of
the many. Most things that are scarce today prices would go up on.
In normal times, in a free economy, if prices go up, consumption is
reduced automatically, because of the higher price, and in the long run
prices will return automatically, but here today everything is scarce.
You have this avid demand for consumer goods. It differs from the
normal economy in that degree.
If I may go on, the second chart is the one that shows the condition
during this war, where production has gone up due to the war; it has
now turned back up again and wholesale prices have been maintained
practically on a plateau, a gently rising plateau.
Senator T O B E Y . That red line refers to war production?
Mr. SMALL. All production; civilian as well as war.
Senator T O B E Y . IS that broken down in any way to show civilian
and wrar production separately?
Mr. SMALL. We could do it, but this is the sum of the two. We
could give you those figures. I think I have those figures here.
Senator M I L L I K I N . Mr. Small, there is no attempt made here in
this chart we are now referring to to give any weight to black-market
prices, is there?
Mr. SMALL. N O , sir. That is one thing I don't know how we
could put into a chart.
Senator M I L L I K I N . I do not think you can. But I think we should
keep in mind the chart has some distortion because it does not reflect
the.black market.
Mr. SMALL. That is right.
Senator T O B E Y . I had a manufacturer of gaskets in New Hampshire complain to me? about black markets. He condemned black
marketing very severely. After he got through condemning it, I
said, " D o you know where there is a black market operating?"
He said, " I certainly do."
I said, "Have you ever gone to the OPA in Concord, N. H., and
presented them with your evidence?"
He said, "No."
I said, "Why not?"
He said, " I haven't time."
I said, "You have time to call me and talk to me for a half hour
about the matter, but you haven't time to go to OPA who could
really do something about it."
That is typical of people in this country today. Everybody is
talking about black markets, but nobody seems to want to do anything about helping OPA to get rid of them. We talk about them,
we acknowledge them, but we go along with them; am I right?
Mr. SMALL. Right. I think industry is falling down on this job of
helping OPA and the FBI to cure this black-market situation. The
OPA, the FBI, and the Treasury Department are trying to make a
job of it, but we need the support of every citizen in this country.
85721—46—vol. 2
20
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Senator T O B E Y . Exactly.
Mr. SMALL. If we are going to beat the black market.
Senator T O B E Y . Fearless teamwork of every soul in this country,
would do it?
M r . SMALL. Y e s .
Senator T O B E Y . But
throwing bricks and calling it names will not
do it?
Mr. S M A L L . That is right.
Senator T A Y L O R . Mr. Small, what we are primarily interested in is,
when you speak of the cost of living, we are interested in the cost of
living of the wage earner and the salary earner, and not these sports
who have a lot of unprecedented wartime profits to spend. Is that
not what you would say was our objective?
Mr. SMALL. That is right.
Senator T A Y L O R . Then I would say that black markets do not affect
the people in whom we are primarily interested so much. I know
that I am not going out to hunt up black markets to buy things,
scarce items like T-bone steaks, and one thing and another. We
buy all of our groceries right at our neighborhood grocery. It is
run by an Italian couple who had two sons in the war. I talked to
them about the black market and they said they could go to the black
market and have these T-bone steaks in their store, and butter, every
day, and all these different things, but they absolutely wrould not
trade in the black market.
So, wre don't have to go to the black markets. It may affect the
prices of some; there are a lot of people with a lot of money, trying
to put on a big front, and they go out and get the butter and the
T-bone steaks and all the other scarce items. I do not think it is
hurting the wage earner there so awfully much to let these people
squander their money if they want to.
I am not saying we should condone the black market. I am just
saying when we talk of the black market having raised the cost of
living, it has for some people, those who are foolish enough to patronize
it, but not so much those who try to stay within the legitimate ceilings
or stay in the legitimate market.
Mr. SMALL. The trouble really arises, Senator, when the black
market diverts too much so that you have nothing left in the free
market. In certain areas you haven't anything left in the free market
to be sold at ceiling prices.
Senator M I L L I K I N . We have a perfect example of that, Mr. Small,
in the meat business.
Mr. SMALL. That is right.
Senator M I L L I K I N . Where we have a packing plant with a 5 , 0 0 0
steer capacity that is able to get 8 or 9 steers, as w^as developed in the
testimony last week. There is your complete answer.
Senator T A Y L O R . Well, but even so, the part of that meat that goes
to the black market is the fancy cuts. I doubt very much if they can
dispose of the regular cuts on the black market and it is turned back
to the stores. Even black-market meat, I imagine, comes to the
store at the ceiling, to get rid of the undesirable cuts. So there again
I don't think the black market has such a big bearing on the cost of
living to the average people.
Senator C A P E H A R T . Mr. Chairman, unfortunately we found our
own Government the other day entering the black market on 5 0 , 0 0 0 , 0 0 0
bushels of corn.
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The C H A I R M A N . That was to help feed the people of Europe.
Senator C A P E H A R T . Mr. Chairman, Mr. Anderson testified before
this committee that the 50,000,000 bushels were going to the corn
processors of America; and that the American taxpayer was going to
absorb the 30-cent premium that the Government was paying. That
was Mr. Anderson's own testimony. That is part of the record.
That is wThat we all thought when it was originally announced, but Mr.
Anderson in his testimony the other day stated it wos going to the
processors to make corn products. He said indirectly it possibly
would help the situation, but the corn is being turned over to the
processors in this country, not to the starving in Europe, and that the
American taxpayers would absorb the 30-cent premium they were
paying.
Now the reason the Government did it—and I am not criticizing
them for doing it, because I know of no other way they could have
secured the corn—but the fact remains they found in order to get
50,000,000 bushels and get it in a hurry they had to pay a premium to
get it, which in principle is the same as any other businessman or
individual does when he finds himself short. If he must have some
thing he goes out and pays a premium price for it, which we term th«
black market.
Mr. SMALL. Shall I proceed?
The C H A I R M A N . Proceed.
Mr. SMALL. These graphs provide the answer to those who claim
that price rises would immediately bring out production of the things
we need. It is true that over the long term the laws of supply and
demand would tend to increase and balance our production and bring
prices down.
This happened—over the long term—after the last war. But the law
of supply and demand cannot bring about these adjustments in the
short term of a few months. Severe shortages exist—lumber, steel,
particularly sheet steel, lead, paper, building materials, are typical
examples. They cannot be relieved overnight by the mere act of
removing or altering price controls.
If it were not for strikes, w^e would now be at or near capacity
production in most fields. But the demand is so great that even this
is not enough. We are limited by our existing facilities and materials,
and especially by our manpower resources. Our labor reserves are not
flexible. They are now low, and they will grow lower as reconversion
proceeds.
Our time of danger is during the next few months ahead. Six
months of full production would, I think, see us in a position where
we could afford to take risks. Fiscal reforms, even if put into effect
now, would not affect the near future substantially.
All this means that increases in production certainly could not keep
pace with the increases in prices which would follow relaxation of controls. The lines in the graph show what happened after the last war;
prices shot sky high, but increases in the amount of goods produced
were insignificant. There is no reason to believe that the same conditions would give us any better results now.
Senator M I L L I K I N . Mr. Small, I don't want to continue a debate
on it, but I respectfully suggest that the graphs did not show that
production did not affect the price line. I should like to recall to your
memory that the graphs line in production took a rise after the conclusion of the last war, and I conclude from that it was responsible
extend price c o n t r o l
and stabilization
a c t s o f1942140S
for bringing down prices. Whether through immediate channeling
of goods into the market or through hoarding, it finally came on the
market and broke the line.
Mr. S M A L L . Production started up after that sharp rescession we
had after the Armistice Day. Production did start up in percentagewise, but by no means like what prices did percentagewise. Your
prices, starting in with raw material, going all the way up, finally
reached a point where we had a buyers' strike. We did not flood the
country with goods at a low price. We were starting to flood the
country with goods at a high price that the people could not pay.
Therefore they stopped buying and the people who had hoarded
inventories, which had deterred production and competition which
would have forced production down didn't occur and we found our
boys all caught then with this high priced inventory. That is the
reason you had all your bankruptcy.
Senator M I L L I K I N . I quite agree that was a factor, but the existence
of the inventories was the pressure which I suggest brought prices
down and the distribution of the inventories into the market. It
could not have happened, I suggest, in any other way.
Mr. S M A L L . My belief is that it was the existence of the inventories
at an inflated price which caused it.
Senator B U C K . Y O U say, "Six months of full production would see
us in a position where we could afford to take risks." Do you think
by the end of the year, or even by a year from July, we can be through
with price controls?
Mr. S M A L L . If we could have full production starting in right now
and no interruption—this stop-and-go business we are going through is
wrecking production, but if we could have full production without
interruption, maximum production where everybody could get his
parts, basic materials and everything he wants, we would make so
many units—that is, at a price, a controlled price, that would not
be out of balance, we would flood the country with so many goods that
most of these problems would disappear and you would find very
few of them left.
In our own field, in CPA, you would find nothing left, practically.
Senator B U C K . Y O U expressed some hope that that might occur in *
6 months, but evidently you did not take into consideration the coal
strike. Do you think in another 6 months after that, regardless of
what conditions may be, it won't be so serious that we will have to
administer price control for 12 more months?
Mr. S M A L L . I have down in the lower left-hand corner of my desk
a crystal ball which I look into every morning. But if we keep this
stop-and-go business, I don't know what will happen. Everybody
gets started to producing; then something stops like lumber, or steel,
or copper, or whatever it is, or electrical goods. That cuts clear across
the board and everybody then has to slow down again. I think we
are going to find ourselves forced back into more controls than we
have got today, the very thing I think would be horrible for our
country.
Senator C A P E H A R T . Y O U are talking about rationing?
M r . SMALL. Y e s .
Senator M I L L I K I N .
Your whole theory of a substantial rise in production rests on the theory of wage stabilization?
Mr. S M A L L . That is right.
extend
price c o n t r o l
and stabilization
acts of
194 2
140S
Senator M I L L I K I N . D O you go with the Baruch theory that industrial disturbances should be rigidly prohibited for, say, a year?
Mr. S M A L L . I do not think we would have to do it for a year; but
I think that the best thing that could possibly happen to our country
would be to have labor agree that they are going to cease work
stoppages for a period of the next 6 months ahead; and we wrould be
over the hump.
Senator B U C K . What is your prescription with regard to Mr. Lewis?
Mr. S M A L L . Mr. Lewis' actions are detrimental, and I think he
should awaken to what he is doing, because this country cannot be
run, in my opinion, successfully, where one small group of people can
stop the whole thing.
Senator B U C K . Why do we permit it?
Mr. S M A L L . That is a question that should be asked of the Congress.
Senator C A P E H A R T . The fact of the matter is that Mr. Lewis is not
violating any law.
Mr. S M A L L . Of course he is not.
Senator C A P E H A R T . He is violating no law; he is living within the
law; he is doing what the law permits him to do, and he is doing what
labor has been encouraged to do, and what everybody professes to
believe in, which is collective bargaining. The miners have just as
much right to do what they are doing as did the automobile workers
and the steel workers.
Senator T O B E Y . And what the Republican Party put into its
platform.
Senator C A P E H A R T . I do not know about that. Unfortunately,
they do not consult me when they write the platforms.
Senator T O B E Y . Nor me either.
Sentor M I L L I K I N . IS it not perfectly clear that if you grant a wage
increase in one important segment of industry, you have given an
invitation for a similar increase in the rest of industry?
Mr. S M A L L . The invitation is certainly there and will be used;
but it does not follow that all segments are entitled to that same wage
increase. In collective bargaining they should get what they are
entitled to. I believe in the rights of labor and that they should be
protected, but I also believe that great harm is being done to the
cause of labor by its arbitrary actions, with no real benefit to anybody.
Labor is being harmed and the cause of labor is being harmed.
Senator M I L L I K I N . I think, Mr. Small, that we should be fair; but
when you give a wage increase to a substantial segment of our economy
you are giving an invitation for the workingmen in other parts of our
economy to secure a similar increase. That is human nature. We
have got to conform our actions to human nature. If we do not, we
get into what we are in now, and we also get into this black-market
business that we have been talking about.
Senator T O B E Y . Is it not also an economic fact that if you remove
controls from products and the cost of living goes up, the people that
work in industry and the white-collar people have no redress because
of increased costs?
Mr. S M A L L . Exactly. It leads into just a vicious circle.
Senator T O B E Y . More pay is needed to meet the increased costs?
Mr. S M A L L . Yes; the workingman always loses out in such a case.
Senator T O B E Y . Surely.
e x t e n d
price
c o n t r o l
and
stabilization
acts
of
1 9 4 2 140S
Senator C A P E H A R T . I S it not also true that if people are not working
and not producing you likewise constantly have the threat of inflation
in a shortage of merchandise which at any time is likely to erupt
into a severe inflation and cause tremendous harm to the Nation?
Mr. S M A L L . I am not sure that I quite understand your question.
Senator C A P E H A R T . It is a question as to which is worse. They
are both bad; they are both a vicious circle.
Mr. S M A L L . I would like to go on, if I may.
The C H A I R M A N . I hope you will.
Mr. S M A L L . S O that you may know the facts as to what progress
the Nation is making in production I will give you, in a few moments,
the latest available figures on over-all production. I will also give
you some figures on items which we are watching closely.
Last fall many persons both in and out of Government expected
that by this time we would be facing surpluses of materials, of labor,
and of productive capacity. The immediate postwar problem was
seen as one of finding work for the men and machines that would be
idle.
Reconversion in its early stages was so successful that our big
problem now is not unemployment, but inflation. Production turned
sharply upward last November in spite of pricing problems, and it
continued its climb until the major set-backs caused by strikes. At
present the coal strike is becoming a larger and larger obstacle. In
general, however, America's reconversion thus far, up until the time
of the coal strike, has been an outstanding achievement, especially in
view of the pessimism expressed last fall. Actually, if you use prewar standards as a yardstick, production in a good many fields is very
high. Here is the over-all picture:
Industrial
production,
civilian
and, military
selected
items
[Seasonally adjusted indexes, 1935-30-100]
1945
1941 average
First half Low for
average
year
Item
Industrial production, total
Selected industries:
Iron and steel
Machinery
, Automotive (inclndiag trucks)
Chemicals
Stone, clay, and glass products. _
Lumber
Textiles and products
Leather products
Paper and products.
1946
January
February
March
162
230
162
160
153
169
186
221
152
176
162
129
152
123
150
206
419
228
318
164
110
151
121
140
162
230
94
230
158
72
132
108
131
101
222
105
235
174
95
151
119
133
43
193
101
234
186
108
159
133
140
170
213
105
236
191
108
162
144
Source: Federal Reserve Board.
Senator
TOBEY.
M r . SMALL.
Yes,
Does lumber come within your purview?
sir.
Senator T O B E Y . What do you have to say about the shortage which
is so prevalent? You cannot buy pine or cedar shingles; you cannot
buy clapboards. I have just returned from New England and met a
great many people, including veterans returning from the war, who
cannot get a clapboard and cannot get a shingle. What is.the situation?
extend price c o n t r o l
and stabilization
acts of
194 2
140S
Mr. SMALL. We were running, back in December, at the rate of
about 25,000,000,000 feet; that is, the annual rate. The demand was
for 36,000,000,000 or 38,000,000,000 feet. In January and February
conditions were improving a little bit, and we were up to about 29,000,000,000 feet, or maybe 30,000,000,000. There is a strike vote out in
the West, and if that happens we will drop off again. We have a
terrific shortage of lumber, and we have this housing situation.
Presumably, last fall, when we lifted L-41 the demands for all types of
construction, including repair and maintenance, would be about 12%
billion, and we believed at that time that if people went back to
work in the woods and mills we would have enough material to support
that 12% billion. But by November it became clear that it was
going to be about 14% billion. Then Mr. Wyatt and the President
came along with a program for the veterans that adds another 2 billion,
which makes it about 16% billion dollars' wrorth of construction,
maintenance, and repair. We have not got anything like that, and
we are not going to get it.
Senator T O B E Y . Y O U are not going to see a time in the immediate
future when you will come to that production?
Mr. SMALL. N O ; we cannot have it.
Senator T O B E Y . Ordinary matched pine boards normally selling for
$30 or $40 a thousand are now $100. ^ There is a 3 to 1 ratio. That
is such a tremendous increase in price that it made me raise my
eyebrows. I have just come from a section of New England where
I found that situation to exist, and I have been amazed at the lumber
situation. It is a staggering thing.
Senator M I T C H E L L . But there is another factor that you have not
mentioned, which is the weather. It has cut down production
tremendously.
Mr. SMALL. Yes. But the main problem has been manpower,
wage disputes, and pricing problems.
Senator M I T C H E L L . But our log requirements in the Pacific Northwest should have been filled up in March, and they are not filled up
yet. The weather has a very definite effect in cutting down production. So there are a number of factors in all of these things.
Mr. S M A L L . Yes. We use OPA as a whipping boy, but price is
not the only answer to these things.
But if production is high by prewar standards, why can't the
consumer get everything he wants?
The answer, of course, is that prewar standards no longer apply.
Production is relative. It must be measured against the needs of the
present and of the future, not solely against the records of the past.
What would have been an adequate supply in prewar years may
today either be entirely inadequate due to enormous demand, as in
the case of men's suits, or may be more than adquate, as in the case
of those things where the market is now saturated; for example certain
types of machine tools. There is no single, simple rule that I know
whereby adequacy of supply today of all products can be accurately
measured by some arbitrary percentage of the production of a prewar
year. The case of each product must be judged on its own merits.
Prewar production may have balanced prewar demand, but the same
rate of production today would be hopelessly outweighed by the
present demand.
1460
E X T E N D PRICE CONTROL A N D STABILIZATION
acts of 19 42
I have been emphasizing that our production must be measured
against current demand—that the demand-supply position must
always be expressed as a ratio, not as a single figure. That brings
up two questions: "What is our present production?" and "What is
the demand?"
I am prepared to give you today some figures on the production of
selected items which are now in short supply. Thesefigureswill show
that we have made substantial progress since VJ-day, and that we are
now approaching prewar production rates in a number of our short
commodities.
The companion question, "What is the demand?", cannot be
answered in figures. It can be answered only by saying that the demand is so great on these short products that for at least the 6 or 8
months ahead it will continue to absorb nearly everything that can
be produced.
The term "sales resistance" has vanished from our vocabulary.
Instead of resisting sales, the public is clamoring for goods. Sales
resistance will return within the next year only if price controls are
removed and prices skyrocket to such heights that the public stages
another buyers' strike. This is what happened at the peak of our
inflation after the last war, and this is what could again burst our
economic bubble unless we keep prices within bounds.
Just how are we doing in production of so-called shortage items?
Here are the figures:
I shall not quote all of these figures.
The C H A I R M A N . Put the table into the record.
(The table referred to is as follows:)
Selected items short in the civilian economy
Prewar base period
Item
Automobiles
T r u c k s , extra military
Tires:
Passenger cars
B u s and truck
V a c u u m cleaners (domestic)
W a s h i n g machines
:
M e c h a n i c a l refrigerators
A l a r m clocks
R a d i o receivers
Electric ranges
Electric irons.
Sewing machines
Enamelware
Flatware
Do
Bicycles
Shoes
C o t t o n fabric
R a y o n , silk, n y l o n , a n d other synthetic
fabric.
W o o l e n a n d worsted fabric
Lumber
Softwood plywood
C o m m o n a n d face brick
„
Structural clay tile
C l a y sewer pipe
Cast-iron soil pipe
G y p s u m board
Cast-iron radiation
W a r m air furnaces
Bathtubs
Freight cars ?
Fractional horsepower motors
M e c h a n i c a l presses
F a r m machinery, including repair p a r t s , .
1 Estimated.
N o t available.
2
1945
Units..
do..
Date
Average
month
1941
1941
358,071
86,839
Millions
do..
Thousands..
do.
do
do
do.
do
do.
do
Millions of dollars
do
Million pieces
Thousands
Million pairs
M i l l i o n linear yards..
do
1941
1941
1940-41
1940-41
1940-41
1936-41
1940-41
1940-41
1940
1941
1940-41
1940-41
1940-41
1941
1940
1939
1939
do
M i l l i o n board feet
M i l l i o n square feet
Millions
T h o u s a n d tons.
do
do
M i l l i o n square f e e t . . .
T h o u s a n d square feetT h o u s a n d units
do
Units
Thousands
Thousands of dollars.
Millions of dollars
1939
1941
1941
1941
1941
1941
1941
1941
1941
1941
1941
1941
1939
1939
1941
August
1,831
27, 532
4.2
2.5
1.0
(2)
(2)
(2)
(2)
(2)
(2)
(2)
(2)
(2)
(2)
(2)
(2)
156
158
309
1,147
1,078
47
380
67
$1.6
$3.3
26.5
155
33.7
692
112
32
3,045
140
412
94
(2)
47
231
7, 007
47.3
98
5,490
885.1
762.0
46.9
1.2
November
December
January
580
30,106
16,839
40,900
34,612
53,103
30,022
28,792
58, 575
54,791
3.7
3.7
3.9
82
1.0
4.8
1.3
26
125
713
171
123
451
550
25
2.6
.8
35
2,664
114
38
2,196
90
211
61.6
210
26.8
1,618. 2
* Census Bureau figures.
Negative.
October
42.1
667
129
8 3, 966
703.7
4
September
(2)
(2)
(2)
(2)
(2)
(2)
(2)
(2)
(a)
(2)
(2)
(2)
37.5
705
143
59
15.3
173
1,310
33.4
Source: Civilian Production Administration, Review and Analysis Staff, A p r . 29.1946.
1946
U n i t of measure
49.2
62.4
60
17.3
174
1,471
34.9
29.5
3,050
686.-7
2,133. 6
47.9
1.1
1.0
40
85
115
600
660
0)
15
210
4
$2.5
$2.7
21.9
68
42.4
707
136
41
2,014
67
250
67.8
72
22.1
198
904
40.2
35.5
3,684
888.9
3,097. 6
54.2
s Preliminary.
8 26-inch basis.
60
50
27
308
4
$2.3
$2.9
23.0
97
40.2
729
135
42
1,878
58
263
71.5
74
22.8
191
1,298
41.5
36.5
3,490
1,058.7
2,561.3
56.3
200
29
348
9
$1.5
$3.4
27.6
86
34.6
697
131
41
1,447
75
236
62.0
71
22.0
174
1, 616
33.3
41.5
3, 332
1,079.1
2, 587. 0
55.3
120
282
12
$2.9
$3.2
25.7
129
34.7
732
141
44
1,902
107
271
68.7
88
27.5
216
1,931
37.7
(2)
4, 312
873.4
2, 538. 0
66.2
February47,965
28,594
4.6
1.2
8 128
3 88
3 67
1,100
750
3 20
308
13
$2.6
$3.4
27.3
120.5
40
764
149
49
2,081
98
281
67.5
63
25.6
207
1,952
(2)
(2)
2,852
849.9
2,478. 0
49.2
7 Including exports,
s Excludes military of 1,380.
March
90,045
39,348
15.4
1 1.4
'111
3 162
i 1,000
323
28
42
779
2,250
i 101
i 334
i 78.1
1 62
28
i 240
2, 353
2, 771
85.0
2,523.0
48.6
O
EXTEND PRICE CONTROL AND STABILIZATION ACTS OF 19 4 2 1462
Average weekly production, selected men's clothing items
[In thousands]
Suits, wool
M e n ' s and
students'
B o y s ' and
cadets'
Overcoats
and topcoats,
men's
t
Separate
trousers,
men's
Separate
coats,
men's
1945
July
August
September
October
November
December
January
February
March
149
169
184
243
287
1946
105
132
142
131
365
415
463
120
114
118
Shirts, cotton
Men's
dress
July
August
September
October
November
December
Boys'
dress
1945
86
99
103
127
105
Men's
work
51
83
83
80
123
108
159
224
267
26
37
41
43
56
60
327
366
Undershorts,
men's
61
100
65
91
131
137
173
102
114
106
114
146
94
75
97
127
and nightshirts,
men's
15
19
20
23
22
20
1946
January
February
March
122
106
135
18
23
15
Source: C P A , Textile Division.
Mr. S M A L L . I think these figures are well worth looking at, because
they show that we are making very considerable progress.
Just running down the list, take tires, bus and track. In the average monthly base period we were producing 1,000,000 monthly. In
March 1946 we were producing 1,400,000.
Vacuum cleaners, 156,000 and now 162,000.
Production went up rapidly until the steel strike.
The C H A I R M A N . Was it due to an increase of manpower?
Mr. S M A L L . The plants had been doing other things, and they went
to the production of these products and started to produce them until
the steel strike hit them and cut off their materials; and now the coal
strike, which, again, is hitting steel and hitting at the plants themselves. But these are the short items. These are the things that are
particularly important.
We were talking about men's suits a short while ago. Take men's
separate wool trousers. We produced in the average month in 1941
730,000 pairs. We are now producing 1,269,000—almost double.
And men's wool jackets. We produced 150,000 in the average month
of 1941, and now we are producing 231,000—almost double again.
These are men's suits, really, because people use them for suits.
Senator C A P E H A R T . They buy them because they cannot get suits.
Mr. S M A L L . Yes; but in the South they are certainly used in preference to suits.
E X T E N D PRICE CONTROL AND STABILIZATION ACTS OF 19 4 2
1463
Senator C A P E H A R T . Would this chart that you have here serve for
making up some sort of formula, if it was liberal enough? It certainly would act as a working basis for doing something of that sort,
would it not?
Mr. S M A L L . Senator, if you can come out with a formula, a formula
that will go across the board, I will be one of the most amazed people
you have ever seen. I have thought about the thing for months; we
have been talking about it, but I found no way of doing it.
Senator C A P E H A R T . Let us take your own chart here. You have a
statement of what was produced in 1941. That is accurate, is it not?
M r . SMALL.
Yes.
Senator C A P E H A R T . Take the list there for April; suppose the figures
in April had been 150 percent in every instance, or, say, in some instances 200 or 250 percent; would not that be indicative? If you had
continued that production for 6 to 8 months, would not that be a
good formula?
Mr. S M A L L . Suppose production was 200 percent of that in 1941
Senator C A P E H A R T . Let us take the short items, which you say are
the ones that are causing us the trouble; and I agree with that. Those
are the ones, then, that we should concentrate on. Those are the
ones that we are likely to have inflation on. So let us take those items
and take your chart for 1941 as being accurate and say that if the
production of these items continues X amount for 4 months straight,
or maybe 6 months, then they shall be decontrolled. I would be willing to leave that up to your judgment and that of the OPA officials.
We can say that the President has the right to decontrol sooner if he
sees fit; and if and when controls are discontinued, if the price goes up,
the general over-all price, 10, 15, 20, or 25 percent, they would be subject to control again.
We have before us an amendment by the House under which they
would decontrol when production reaches the amount reached in 1941.
We have got to vote that up or down or we have got to rewrite it on a
more liberal basis, or kill it. That is one of the problems that we
have confronting us.
Mr. S M A L L . I know it. If you adopt that formula and say 200 percent of 1941, when it reaches that point
Senator C A P E H A R T . It would have to stay there for 4 months.
Mr. S M A L L . I would say you would be holding on to price control.
Senator C A P E H A R T . We can give the President the right to eliminate control or decontrol the item any time he sees fit, but it automatically has to be decontrolled when it reaches that figure; and then
he would have the right to bring it back under control if the price
increase was X percent.
Senator T O B E Y . I take it that you do not consider the House
amendment a sound amendment?
M r . SMALL. N o ; I d o n o t .
Senator T O B E Y . I do not
think many of us do here. I do not
know how many.
Senator C A P E H A R T . My opinion is that the reason it is unsound is
that it asks that everything be decontrolled on a basis of 1941 production. It seems to me that 200 percent on some and maybe 125
percent on others is large enough.
Mr. S M A L L . When you do that you have to do it on a product-byproduct basis.
EXTEND PRICE CONTROL AND STABILIZATION ACTS OF 19 4 2 1464
Senator C A P E H A R T . Let us do it on these items here which you
have exact figures on, and leave other items out, because these seem
to be the main items in our national economy. I think food requires
separate treatment. I think food and manufactured items are in two
entirely different categories and should be entirely so treated.
Mr. S M A L L . Just take a simple illustration, that of automobiles.
If we had 15,000,000 automobiles produced this year there is no question about being able to sell them.
Senator C A P E H A R T . Let us say that when automobiles reach a
production of 150 percent of what it was in 1941, over a period of
12 months
Mr. S M A L L . That carries price control further than I want to see
it carried. I want to get rid of it.
Senator C A P E H A R T . I do not think the calendar has anything to do
with it. The thing that we are trying to avoid is inflation, and we are
trying to decontrol when consumption comes within demand. I do
not think the calendar has anything to do with it. If we try to legislate according to the calendar, we are going to get into trouble, and
we will be back here again a year from now going through what we
are going through now, and there will be confusion on the part of all
the people, particularly industry, as to what they may expect.
Senator R A D C L I F F E . In view of the fact that production has been
practically nonexistent for a number of years would you not, in attempting to set up any program or standard, have to give consideration to the durability of a number of articles? Where an article lasts
a number of years the question of replacement is totally different
than in cases where the life is very short. It seems to me that that
element would necessarily come in if we attempt to fix any kind of
standard or formula—the relative durability of various articles.
Mr. S M A L L . Yes. There are a great many factors that enter into
it. In all of the thinking that I have been putting on this matter
I come back to the fact that what we are talking about is the exercise
of good judgment on a product-by-product basis.
You have before you our April report, and in your thinking on
this problem, if you will turn to page 10 of that report, you will find
building materials, and the amount we need in 1946 and 1947 as
against our peak production in the past. It varies all over the lot.
Senator C A P E H A R T . I recognize that. That is why the calendar
could not operate. I have no objection to even setting a formula
that in some instances we might say 300 or 400 percent. I am not
going to quarrel with you as to the percentage, because I think that
could be fairly well arrived at, because goods at the moment divide
themselves into two categories. We have a category where there is
a pent-up demand, such as for automobiles and durable goods because people have not been abje to buy any in the past 4 years. Then
we have another category, which is food, tobacco, cigarettes, gasoline,
and oil. There is no pent-up demand for those. The fact that we
are all living today shows that there is no pent-up demand for food.
So they come into two different categories entirely, food and durable
goods, manufactured goods.
I am not going to quarrel with you as to what the percentage is.
I am just trying to arrive at what I believe should be an amount
that would be a good thing for the Nation as a whole, because everybody would know what to expect.
E X T E N D PRICE CONTROL A N D STABILIZATION ACTS OF 1 9 4 2
1465
Mr. S M A L L . Y O U might be able to do it by categories; you cannot
do it on an over-all basis.
Senator R A D C L I F F E . Not only broad but numerous categories?
Mr. S M A L L . Yes. I just shudder at the task.
The C H A I R M A N . Y O U would not have to take care of that.
M r . SMALL.
NO.
Senator C A P E H A R T . Y O U have it right in this chart. It is already
worked out, as far as the 1941 production is concerned. These are
short items. All you have to do is to say that production is X
amount for 6 months continuous period, and you automatically decontrol with the right to again control if prices go up.
But, pardon me; proceed.
Mr. S M A L L . Thesefiguresw^ere chosen simply to show that progress
is being made in overcoming shortages. They are a sample—a cross
section—of the total production picture in scarce consumers' goods.
For an over-all picture of American production, I refer you to the
monthly reports of the Civilian Production Administration for March
and April, copies of which have been distributed to the committee.
These reports reveal that much the same situation exists in nearly
all types of production—our output was climbing until the strikes
intervened, but it was still far short of demand in March. April
shows a worse picture because of the slow-dowTns and shut-downs
caused by the coal strike.
In order to give you another type of concrete evidence of the current
rate of operation of the industrial machine, I am inserting in the record
a table showing recent production of 15 basic industrial materials as
compared with 1941, our best prewar year. It should be remembered
that in that year military procurement accounted for a considerably
larger proportion of industrial output than it has in recent months.
You will immediately see that our main problem areas have been and
still are steel and copper, cotton textiles, and building materials. In
both steel and copper our poor showing is primarily due to strikes in
the first quarter. In cotton textiles in addition to price problems
which I hope are now largely solved we are still wrestling with the
labor shortage that developed in the mills from 1942 on. In building
materials our difficulties are traceable to price problems, now largely
but not completely solved and to the low levels of operation and of
employment induced by wartime restrictions on consumption. In
building materials as in cotton textiles considerable improvement in
production has been effected in recent months and we have every
reason to hope for more in the months ahead.
The C H A I R M A N . Can you estimate how many items there wTould be?
Mr. S M A L L . There would be hundreds of thousands of items.
Senator C A P E H A R T . They divide themselves into categories.
The C H A I R M A N . I asked that question because Senator Capehart is
very insistent on his point.
Senator C A P E H A R T . Y O U have building materials divided into two or
three categories.
The C H A I R M A N . Y O U regard it as very simple, but I regard it as
complex.
Senator T O B E Y . Did you print this down in your establishment?
Mr. S M A L L . We mimeographed it.
Senator T O B E Y . H O W many extra copies have you down there?
Mr. S M A L L . We have a hundred at the office.
1466
EXTEND PRICE CONTROL AND STABILIZATION
acts of
19 42
Senator T O B E Y . I wish you would send me 500 copies.
Mr. SMALL. All right, sir.
The C H A I R M A N . I think they would be very useful.
(The table referred to and submitted by the witness is as follows:)
Post VJ-day
production
of selected basic materials compared with production for 19/+1
[ M o n t h l y averages]
1941
Steel ingot production
Copper, refinery. __ ._
L e a d , refined
_ .
R a y o n consumption
_.
Apparel wool c o n s u m p t i o n . . _
Paperboard production
Newsprint consumption
Sulfuric acid
Nitric acid
Glass containers
Portland cement
1
B i t u m i n o u s coal production
Petroleum production
Electric power production
Manufactured and natural g a s . . .
_
...
thousands of short t o n s . .
do....
do
millions of p o u n d s . .
do
thousands of short t o n s . .
do....
do....
do....
thousands of gross..
millions of barrels._
millions of short t o n s . .
millions of barrels. _
billions of kilowatt-hours..
billions of cubic f e e t . .
Latest 6
months
6,903.0 4,943. 0
88.8
57.6
44.0
43.1
48.3
68. 3
42.4
45.1
653.5
650. 5
245.6
235.1
565.0
713. a
28.0
33.0
5,901.0 9, 369.0
13.7
10.3
42.8
44.2
116.9
135. 7
14.0
17.3
167. 7 208. a
Senator M I L L I K I N . Why is cement down in production?
Mr. SMALL. Because of the lack of other building materials. They
do not stock-pile.
For other types of industrial materials—paper products, textiles
other than cotton, chemicals, and fuels—recent production is generally
close to, in some instances well above, 1941 rates. Current production
levels of fuel are especially significant. Significant also is the fact
that total civilian employment today—I am talking about March
and early April—is about one-half million higher than a year ago.
It sounds unbelievable, but it is true. We have now got a half million
more people working.
These signs indicate that general industrial activity is now considerably above 1941. This fact may at first sight be hard to square
with the general impression of serious shortages at the retail level,
but this is explained by three circumstances: A high proportion of
recent output has gone into reconversion operations; into the construction of new plants, the purchase of new equipment which is a
necessary preliminary to any expansion in the production of additional
consumers goods; into the filling of component pipe lines through the
manufacturing chains; and into filling distribution pipe lines through
the wholesaler to the retailer.
There is an inevitable lag between the production of raw materials
and the appearance of finished items on dealers' shelves. The high
levels of raw-material production achieved in March will not be
reflected in increased supplies of consumers' goods until the summer
months or even later.
Senator T O B E Y . That, of course, varies with different products and
different industries?
Mr. SMALL. Yes. For such consumers' items as are being turned
out in quantities considerably greater than in 1941, consumer demand
is so great that dealers are unable to accumulate normal stocks and
to those who lose out in the scramble for goods, it may well appear
E X T E N D PRICE CONTROL A N D STABILIZATION ACTS OF 1 9 4 2
1467
that the supply situation is no better, or even worse, than'during the
war, and certainly not to be compared with 1941 when dealers' inventories were at very high levels.
The C H A I R M A N . Y O U speak about dealers' shelves. Does that mean
that they are holding back for higher prices, or what?
Mr. S M A L L . No, Senator. I go into that a little later. The situation
is not as it is commonly thought.
Every now and then, when we present figures showing how well
our reconversion is going, someone tries to stump us by asking: "Well,
if production is so good, why can't I buy everything I want?"
The answer is: "You can't go out right now and buy everything
you want because right now you want more than you ever wanted
before. You are impatient and in a hurry. You can't wait. And
whenever scarce goods do appear on the shelves of the stores m a n y far too many—consumers buy all they can get their hands on instead
of buying only what they really need and thus leaving something
behind for the other fellow who really needs it."
The C H A I R M A N . They are buying because they feel they may need
it some day?
Mr. S M A L L . They are buying just because, if you even hint something is short on a consumer item the stores are mobbed.
Senator T O B E Y . Y O U have not mentioned one other factor, and that
is the plethora of money.
Mr. S M A L L . I mentioned that earlier. We have more cash money
in circulation today than the whole public debt—$28,000,000,000.
Senator C A P E H A R T . D O you not think that the Government might
help the situation by putting on a campaign stating that there will
be plenty rather than a campaign of scarcity? That prices will come
down and consumption will go up? I agree with your statement a
hundred percent, but I am wondering if the Government could not
help the situation by reversing its tactics in its propaganda and
publicity.
Senator M I T C H E L L . We can help them by passing a good OPA bill,
can wre not?
Mr. S M A L L . Y O U certainly can. I know of no campaign to preach
scarcity. Take this report that you have in front of you. We tell
facts; we tell the truth. This is the production of the country. This
is what is really happening in the country.
Senator C A P E H A R T . But we had propaganda in the last month of
run-away inflation and what would happen if OPA was or was not
continued. That is what I am thinking of. It has had no effect on
me.
The C H A I R M A N . Mr. Small is concerned with the question of inflation.
Senator C A P E H A R T . It has had no effect upon my thinking.
Mr. S M A L L . I think there is a very real danger of inflation—I never
believed anything with more sincerity —unless we can keep the boat
Irom rocking. To point that out I think that is telling the truth to
the people; and I believe we must tell the truth about all of these
things.
Senator C A P E H A R T . That statement, when you make it as a Government official, of course causes people to run to the stores and buy
all these things that you describe in your statement.
EXTEND PRICE CONTROL AND STABILIZATION ACTS OF 19 4 2 1468
Mr. S M A L L . Human nature is human nature. If they have nylon
stockings in a store the women are going to mob it anyhow. But the
moment that they can get them without waiting, the demand will
drop off.
Senator T A F T . D O you think that the drop might be as bad as it
was after the last war, if we even relax price control a little?
Mr. S M A L L . It is all a question of degree, Senator. If the country
believes that prices are going to be held within bounds and they can
plan to go ahead and get production rolling, without being afraid
that the thing that they are making today they will not be able to
replace, or if they take an order today at a certain price they will be
able to complete the transaction
Senator T A F T . In I S months after the First World War, when the
prices were taken off all at once, much sooner than it should have been
done at the time, I remember the battle in the administration as to
whether to retain some controls—on sugar, for instance—prices went
up 12percent above the prices that existed at that time. Of course
they had already gone up pretty high; but with no control at all, in
18 months prices were only 12% percent higher.
Mr. S M A L L . Yes, from the bottom; but you are talking about
starting from 100.
Senator T A F T . I am starting with what was the war level that was
established. From that point they went up only 12% percent, with
all controls off. No one is proposing to take off ail controls now. We
are only trying to get a little justice in the administration of them. I
cannot see that you are presenting any evidence that there is going to
be this tremendous effect.
Mr. S M A L L . Starting in, by Armistice Day prices had doubled.
Senator T A F T . I agree that is true; and today they have gone up
only 67 percent.
Mr. S M A L L . From Armistice Day on they went up another 5 0
points. In other words, they went up 50 percent beyond what they
had been at the beginning of the war.
Senator T A F T . That has no relation to it. They went up 12}£
percent from the economy that was established during the war.
Why do you think it is going to be any different now from the economy
established during the war?
Mr. S M A L L . I will go back again to the early part of my statement
and say that the pressures wThich exist today are immeasurably greater
than they were at the end of the First World War. The duration of
the First World War was very much shorter.
Senator T A F T . I agree that conditions are entirely different, but
I do not think it proves anything, because I think the increases in
wages are much greater, the increases in costs are much greater, and
prices are held down so much more in proportion to costs than they
were then, that conditions are entirely different. I am just saying
that I do not think the parallel charts prove anything. That is all
I am suggesting.
Mr. S M A L L . My own feeling, Senator Taft, is that if we did what
we did after the last war, and lift controls today, this peak we see on
the chart would be at least doubled.
Senator T A F T . Your contention is that although in the last war,
when prices increased only 12% percent, that now conditions are so
much worse that prices would increase much more if we take all
EXTEND PRICE CONTROL AND STABILIZATION ACTS OF 19 4 2
1469
controls off. But nobody in the committee is seriously considering
taking all controls off. We are only considering amendments that
change the method of administration, which might result in some
increases.
The C H A I R M A N . I do not want to get into a controversy, but there
is one Member that thought we ought to take all controls off.
Mr. S M A L L . There are many Members of Congress who think that
today; I am sure of that.
The favorable picture, of over-all production gains, that I have
been giving you, hides many of the troublesome distortions and
production losses within product classes caused primarily by price
ceilings and price controls. Over-all production of cotton fabrics has
been rising, for example, but the figure hide the fact that the textile
mills were shifting from low-profit fabrics that we badly need into
higher-profit fabrics that could of course, be readily sold, but which
we do not need anywhere near so badly. This situation became so
acute on industrial fabrics that industrial production was being
seriously interfered with.
Our whole electrical industry was in a jam because we could not
get varnished cambric.
Senator T O B E Y . Was there a great scarcit}7 of BX cable?
Mr. S M A L L . There is a scarcity, yes; but I am not informed on
that.
In consequence, CPA was forced to exercise its controls to insure
production of the needed fabrics, and simultaneously OPA gave price
relief on those fabrics.
Much against my will, we had to do it to keep reconversion and
production rolling and get those fabrics where we had to have them.
Production of the essential fabrics was resumed and I doubt that
in this case any real hardship was caused the mills by the exercise of
CPA controls.
Throughout industry similar shifts have been, and are, taking
place—shifts away from "bread and butter" low-profit, or no-profit
items into higher-profit items.
That is human nature. You cannot help it.
Such shifts as are permissible under the pricing regulations, are
normal and are to be expected. Here and there the result is that
certain products may go out of production and disappear from the
market. Once this occurs, regardless of whether or not the product is
of importance to the general welfare, and regardless of whether or not
adequate substitutes are available, pressures are immediately exerted
on CPA to take action under its powers to force production of the lowor no-profit item. Such pressures I have resisted, and will continue
to resist, except in those few cases where the general public welfare
is clearly jeopardized, and even then only where a fair and equitable
price, including a reasonable profit, has been established. For example, a shift away from the production of tobacco cloth was a good
example of where the public interest was jeopardized.
During the transition period from full war controls to peace conditions we have to accept the fact that some temporary dislocations
are bound to occur. If we are ever to get back to free enterprise
we must adjust ourselves to such dislocations through individual
enterprise and not be stampeded into setting of new production
controls, except in those rare instances where the public welfare is
clearly imperiled.
85721—46—vol. 2 21
EXTEND PRICE CONTROL A N D STABILIZATION ACTS OF 19 4 2 1470
One of the fundamental concepts of our people, and one to which I
wholeheartedly subscribe,, is the theory that government should not
interfere with the processes of business any further than is absolutely
necessary—the judgments of bureaucrats should not be substituted
for economic trends.
With reference to inventory hoarding, rumors are constantly arising
that there is inventory hoarding on a huge scale, that manufacturers,
wholesalers, and retailers are hoarding their goods, building up inventories and holding goods off the market in order to break OPA. If
this were true, the best way of stopping it would be to make it known
immediately that prices would not be allowed to get out of hand.
However, the story of huge inventories of goods jamming warehouses,
simply is not true. Generally speaking, goods are moving from manufacturers to retailer to consumer almost as fast as a baseball moves
around the infield in a double play.
I think you will be interested in those figures, Senator.
There are exceptions, of course. For example, whenever a rumor
is spread around that a price rise is in prospect, shipments tend to
drop off at once, or when a price adjustment has been agreed to by
OPA, but has not yet been put into effect, some shipments are bound
to be held up. But these exceptions are minor in number and in
quantity of material.
Here are the facts on the inventory situation, as we have been able
to follow it from monthly figures supplied by the Department of
Commerce:
Merchandise inventories held by retailers in February of this year
represented less than 30 days' sales and consisted chiefly of items in
good supply. In February of 1939 they represented 45 days' sales,
and constituted a balanced supply.
Wholesale inventories last February were 20 percent higher than
they were in February of 1939-—but over the same period retail sales
increased 125 percent. When compared with retail sales, wholesale
inventories this year were only half what they were in 1939.
The dollar value of manufacturers' inventories of finished goods in
February of this year was 15 percent higher than it was the same
month in 1939, but shipments of goods this year were 100 percent
higher—$8,200,000,000 in February 1946 as compared with $4,100,000,000 in February 1939. Compared with shipments, manufacturers' stocks of finished goods are only half what the standards of
1939 seem to call for, and here again the stocks are concentrated on
items in good supply.
The Compliance Division of the Civilian Production Administration is continually making spot checks on the inventories of critically
short commodities. These investigations have shown that in some
cases goods pile up in the process of manufacture because of shortages
of materials or component parts. In a very few cases our investi
@FedFRASER