which he can operate and not give powers so broadly they can be operated indiscriminately, but operated to achieve a very definite purpose.

Mr. SCHMIDT. If you allocate scarce materials to this or that sector of the economy you think you solve the problem. But you discover immediately that you are pinching somebody else, because from whom are you going to take these scarce materials when you allocate them to where the squawks occur? The minute you allocate any quantity of these scarce materials then you create pincers here and there, and everywhere. You create unemployment in some instances. * * *

Now the whole economy has this very profound technological interdependence. Something like 200 or 300 million business transactions take place every day. The minute you control this economy, the minute you allocate, the minute you interfere with the voluntary efforts of these millions of people, businessmen, consumers, wholesalers and retailers, you are bound to set up all sorts of frictions and bottlenecks and that is why all these controls not only breed friction, but every control is bound to create a new source of friction. In fact, that is its intention, that is its purpose. The purpose of control is to divert something from one place to another, and by the very process of diversion you create irritations, frictions, and shortages in areas that you had not anticipated.

Mr. FOLEY. Voluntary allocation programs under Public Law 395 * will continue to be needed for some time for the more critical items.

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Secretary KRUG. * * * the further expansion of Federal hydro power has long been overdue. Hydro projects that would provide for 30,000,000 kilowatts of capacity should be planned and scheduled as soon as possible. And the capacity problems involved in the manufacture of the generating and transmission equipment required for this program should be surveyed. Such action would constitute a long step forward in reducing the waste of undeveloped hydro and in meeting long-term needs for such products as aluminum.

Allocations of steel will have to be continued and extended. For some needs, I am frankly of the opinion that voluntary allocations may not do the job and that mandatory allocations may be necessary.

Mr. RAVER. * * * there is a place in this whole problem of allocation of materials, whether it is voluntary or whether the President is given mandatory authority to channel the basic materials required to speed up this production, not only in Government plants but in private utility company plants, into those areas which will speed up the development of our basic power supply.

* * * there is a problem of channeling these critical materials, materials that are in short supply, into those particular activities in our economy which will most quickly remedy the shortages that are apparent from the statistics that have been indicated. Power is one of those places. I think aluminum is another. I think aluminum should be channeled into the cable business for the power companies of this Nation.

Mr. FALCK. * * we have had a few isolated bottlenecks, the two most important of which are aluminum for conductor and cable and, in the gas business, plate and pipe for long-distance natural gas pipelines. In both of those areas I cannot see any relief in sight unless there is either (a) further expansion by those industries or (b) mandatory allocations that would give for military procurement and for utilities, regarded as essential for civilian welfare, a priority over other uses.

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Mr. FOLEY. * despite this general improvement in production and supply, the Department of Commerce anticipates that cement and some iron and steel items, particularly pipe, may continue in tight supply during 1949 in some localities.

Production of pressure pipe, soil pipe, cast iron boilers, cast iron radiation, plumbing and drainage equipment, and warm air furnaces was assisted in 1948 by voluntary allocation programs under Public Law 395, and it is quite apparent that this type of assistance will continue to be needed for some time for the more critical items.

Mr. Woops. * ** * 17 percent, or less than were rental-type units.

In the entire United States during 1948, only about 160,000, of the 930,000 nonfarm dwelling units started

If our total supply of manpower and building materials cannot be expanded rapidly enough to produce more than 1,000,000 units a year, then I would recommend temporarily the deliberate discouragement of the construction of single family units for sale. A multiple unit apartment building can be built faster, cheaper, and with less material than the same number of single family homes. This necessary switch from single family units to multiple unit buildings could be brought about by a deliberate tightening of credit and risk insurance requirements for homes and by giving additional incentives to builders of multiple unit structures.

Mr. Goss. In regard to housing, we think too much attention has been given to the credit phases of it; that the real problem is short materials and defective building codes. Those things might be handled to some extent by allocations, and to the one extent, which I hesitate to recommend-but it may be justifiedthat is, the extension of credit when and if building codes are adjusted to make sense. I do not like to see Congress reaching over and trying to dictate the building codes, but some of them are terrible.

8. Continue the priorities and allocation authority in the field of transportation (Not discussed.)

9. Selective price control authority should be promptly made available to the Government

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Mr. CLARK. Consumers' prices have been receding slightly but the prices of many commodities which are important in determining the costs of production of manufactured articles have continued to rise. It is because there is a chain reaction when these prices move upward that direct action against price increases is necessary in order to break the circle of spiraling inflation. The recommendation for authority to control the prices of essential commodities of prime importance in determining the cost of living or the costs of production of goods * ** * relates to a situation which is now developing to a climax. If wage increases are again secured in the steel and coal industries and the prices of those commodities are again raised, the inflationary cycle will be given another twist which will carry the economy we know not where. If the Government is unwilling to take any action to halt price increases, the workers will have no reason to withhold their wage demands in the expectation that prices will not continue to rise, and the Government will have no excuse for asking the workers to make a sacrifice which the owners of business will not make.

If action is taken to prevent price increases, the Government will be justified in taking action to discourage wage increases and the President has already accepted that responsibility. A part of his proposal is that in order to prevent an established price ceiling from being broken through as the result of wage increases, there shall be a determination by a board that wage advances are justified before those wage advances shall be accepted as a reason for permitting a price increase.

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Mr. KEYSERLING. My summary was that we have recently been facing a situation of continued price increases and continued high margins of profits in certain industrial sectors of the economy-in part reflecting an administered price or a partly monopolistic situation. I also said that at the same time we have confronted what is beginning to be an excessive lowering of the fair take from the economy on the part of the farmer, the basic producer. Thus the industrial and agricultural fronts are getting out of line. Moreover, there is a problem on the distributive side, namely, the margin between what the farmer gets and what the consumer pays is increasing I am here trying to develop the analysis that very many important prices are too high, are rising too fast, and should be restrained rather than kept up * * * I think we need a rounded and balanced stabilization program. I think that such a stabilization program includes many elements of restraint, but also includes some elements of support, because we have now a mixed economic situation.

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Mr. Goss. * * * in regard to price and wage controls, we think we have passed the peak of inflation and we do not approve of the general program of wide powers for price and wage controls. If they are to be exercised, we think they ought to be exercised together. We do not think there should be price controls without wage controls. We do not believe in wage control, and we do not believe in price control.

Mr. KESTNBAUM. Now, as to the powers of the President to fix prices, it would seem to me that would be useful or desirable only with respect to a very few commodities, and they would have to be of a basic character, rather than those near the ends of the manufacturing scale.

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I believe the only place where it is possible to control basic prices is at the source of raw material. There is some possibility that you could arbitrarily say that we may not sell for more than a certain price, or that certain national products such as cotton and wool may not be sold above a certain price. But whenever we try to do things of that kind, we begin to create property rights in allocations, in priorities, and so on.

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Mr. GINSBURG. I am presumably to address myself to the matter of direct controls, and particularly those direct controls which are contained in titles 3 and 4 of the bill which has been introduced in the House, that is, H. R. 2756. These titles deal particularly with matters pertaining to allocations, price control, and wage controls. At the outset, however, I want to indicate clearly that I strongly endorse the principles and objections of stand-by control embodied in these two titles.

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With respect to one matter of principal, however, I should have thought it possible to have tied selective price control and allocations together. If we learned one lesson during the period of controls during the war, it was that control over price and control over supply should be coupled. The economic conditions which give rise to the need for one also call for the other. * * * Beyond that, as I have stated, the legislation in its present form looks broad. That problem can easily be met when the legislation is in fact being drawn. The basic principle, however, the principle of selective stand-by control, of insurance against particularly dangerous price rises, seems to me to be completely sound.

Mr. RAVER. Mr. Chairman, I should like to subscribe to the point of view expressed by Mr. Ginsburg with respect to this legislation. *

Mr. FLEMING. With regard to price controls, we have been conscious of what we think have been efforts to delude the American people into thinking that price controls will control inflation. Price controls deal mainly with symptoms rather than causes. We would think it a sorry situation, indeed, if efforts were to continue to be made to try to convince the American people, whether it be agriculture, industry, labor, or people who do not fall in any of those classifications, that price controls offered any real hope for dealing with the basic causes of inflation. Price levels reflect basic relationships between money in circulation and goods and services available for purchase. Selective price controls are in fact dangerous. They deceive the people and create a false sense of security.

Mr. SCHMIDT. Price control is a device for making the price tag say something which is not true. Immediately you have to employ a battery of policemen to try to implement what is the lie in price control. Selective price controls will not work because they overstimulate demand and check supply. Therefore much of this bill would probably make the system work less effectively. 10. Price control authority should be supplemented with a provision permitting the Government to order the withholding of price advances while public inquiry into their justification is being made

Mr. CLARK. There is a recommendation that the Congress authorize the President, if the occasion arises, to regulate specific prices because there are certain commodities of key importance which have such an influence upon economic developments that if prices are rising in those commodities it brings about chain reaction throughout the whole business world. Steel, of course, is the most important of those commodities.

* * * Finally that there be authority to actually impose specific price controls at certain critical points, accompanied by a proposal that there also be authority to require the suspension of price advances, applying to price advances

exactly the same principle which the Congress has applied to labor in connection with its effort to advance its price.

Mr. WOLCOTT. Do you think the stand-by price controls and allocation controls are necessary to the continued prosperity of the American farmer?

Secretary BRANNAN. I think so, sir, and if I may cite to you for example-the price of tractors went up almost $400 in the last 12 months. The price of fertilizer has gone up. The price of many other things that farmers used to produce has gone up, and because of that, for the first time in 10 years, the net farm income of the farm population of this country has gone down.

Mr. KESTNBAUM. * * * it would seem to me that would be useful or desirable only with respect to a very few commodities, and they would have to be of a basic character, rather than those near the ends of the manufacturing scale. In other words, I think they deal very largely with some of the basic raw materials. * * *

There is nothing in price regulations during the war which indicated that that can be done wisely or equitably, without a tremendous amount of study and investigation. * * *

I believe the only place where it is possible to control basic prices is at the source of raw material.

Mr. FLEMING. I cannot visualize anything that would be much worse at the moment than to announce price controls on livestock.

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Livestock men like to have a little certainty in a business which at best has a tremendous amount of risk taking in it. Consequently, one of the things that livestock feeders are especially conscious of these days is the feed-livestock ratio particularly with the break in commodity prices which has occurred. Any fear on their part that price controls on livestock were going to be reimposed would certainly bring about decisions with regard to feeding livestock and providing more meat which would adversely affect the supply of meat available to the consumers in this country. Consequently we would not achieve our objective, which is the proper balance between the demand for meat and the supply of livestock available.

Mr. KESTNBAUM. * * * the proposal that an industry would be required to file notice before it promulgated any price advance, would seem to me to be a very useful one, because it does put the economy on notice of advances in these important commodities. But obviously, with that meaning, the industry proposing to raise its prices would be indicating the reason for this increase, which would either be an increase in its wage level, or an increase in the cost of its raw materials. So that the problem then immediately becomes acute. If there has been an increase in the cost of certain raw materials or the cost of labor, then obviously the question that the committee would have to decide, or the President would have to decide, is what we are going to do in the circumstances. Will we make an increase comparable to these increased costs, which would certainly appear just, but which then obviates the whole purpose of this legislation? Or should we say that irrespective of what happens they must maintain those prices? Now the difficulty with the December 1948 date is that at no time do you strike a date which is right for all industries. It may well be in the case of steel that December 1948 is too low. On the other hand, in the case of textiles, it may well be that December 1948 was a rather high point, as I think it was.

Mr. CAREY. The chairman made reference to a provision in this bill to require the managers of industry to give up to 60 days' notice before they increase a price and, of course, to give their reasons as well. Now, it would be similar to the provision in the present law that puts on a cooling-off period if labor seeks to increase wages.

11. Authority (as requested in July 1948) to limit wage aljustments which would force a break in a price ceiling, except where wage adjustments are essential to remedy hardship, to correct inequities, or to prevent an actual lowering of living standards

Mr. Goss. In regard to price and wage controls, we think we have passed the peak of inflation and we do not approve of the general program of wide powers for price and wage controls. If they are to be exercised, we think they ought to

be exercised together. We do not think there should be price controls without wage controls. We do not believe in wage control, and we do not believe in price control. It is true that some prices are still going up. We think we are close to. the end of that.

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There are two things which have disturbed us a bit in the presentation of the situation before your committee by all these diagrams that have been set up before you. In the first place, wages have not been compared with prices. Secondly, wages, and increases in prices, prices on farm products, and the cost of living, have all been based upon a period when agriculture was greatly out of kilter. 12. Continue rent control for at least 2 years, and strengthen its enforcement.

Mr. Woods. Rent controls should be extended for a 2-year period beyond the expiration date of the present act. It is my judgment that the demand for rental housing will not have been reasonably met within this period and that inflationary pressures which would be exerted if controls were removed from the estimated 14,350,000 rental dwelling units now under control would be a serious blow to our economy.

Mr. CLARK. Among the recommendations of the President for policies which directly attack points of particular inflationary pressure, that for rent control requires only the comment that the housing situation clearly proves that the economy has not yet entered the phase where Government intervention in the making of business decisions is not needed. If rents were freed from control, the inflationary forces underlying our deceptively quiet economy would become too clear to be discounted.

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Mr. Goss. * * * there is going to be the necessity for some extension of rent control. We hope that it may be administered upon a realistic basis, recognizing those economic forces which may contribute to or prevent the investment of money in private housing.

13. Extend existing powers of control over exports, and strengthen the machinery for enforcement

Mr. THORP. The record has been reported in detail by ECA and it is to the effect that the commodity structure has not been seriously deranged, thanks in large part to the operation of export controls over the critical uses of so-called scarce commodities.

Mr. CLARK. The case for export controls is generally accepted. Some support such controls upon the ground that they are needed in order to channel goods in such manner as to accomplish the purpose of the foreign-aid program, but there is inherent in this argument a recognition that the supply of certain commodities required for that program is too small in relation to total demand to permit the allocation of those goods to be made by the operation of the free-market mech

Mr. Goss. We believe there is necessity for some export controls. That is now being exercised to a considerable extent through ECA, but we would approve export controls over strategic materials to keep economy in balance.

14. Grant more specific and more adequate authority to prevent excessive speculation or the manipulation of prices of agricultural commodities

Secretary BRANNAN. This week's price fluctuations also point up the need for one additional stabilizing measure on the agricultural side. * * * We know from experience that speculation may start a downward market cycle or may intensify the movement, forcing prices to unduly low levels. On the other hand, speculative buying movements may cause a boom in market activity temporarily pushing prices to unwarranted levels. Speculation may simply reflect actual changes in crop production, supplies, or demand. But just as easily it may reflect rumor, gossip, and unfounded reports.

We must not impair the hedging facilities of the futures markets. At the same time we cannot afford the effects of excessive speculation. The present Commodity Exchange Act provides a considerable measure of protection against outright manipulation, corners, and sharp practices in certain commodities. This protection should be extended to all agricultural products in which there is futures trading. But neither the Commodity Exchange Act nor any other present authority can be exercised to curb the speculative fevers that sweep over these markets at times.