stituted a sound and constructive system which should be applicable to the mobilization period.

Second, it permitted the President to enlist the aid of labor and management in the establishment of any new machinery which might be needed to maintain labor-management harmony.

Third, Congress made crystal clear that no action should be taken which would be inconsistent with existing Federal laws, such as the Labor-Management Relations Act and the Fair Labor Standards Act.

On April 21, of this year, the President created a new procedure for settlement of labor disputes by assigning to the Wage Stabilization Board authority to handle labor disputes. This new procedure ignored the safeguards which were written into title V, and ignored the established practices and the laws which have become basic. Our concern is that this temporary expedient, if permitted to endure, would weaken and destroy sound and constructive principles that have developed in labor-management relations.

This new procedure involves three hazards:

1. Bargaining impaired.-Collective bargaining would be seriously impaired. The language of the statute is plain:

"The national policy shall be to place primary reliance upon the parties to any labor disputes to make every effort through negotiation and collective bargaining and the full use of mediation and conciliation facilities to effect a settlement in the national interest."

Yet, the Executive Order 10233 issued on April 21 undertakes to set up a method for the resolving of labor relations issues which ignores the intent of Congress. It clearly would introduce the edicts of a Government agency, the Wage Stabilization Board, into the settlement of labor disputes.

We have solid experience gained from World War II as to the effect on collective bargaining which results from granting to a Government board authority to settle all kinds of labor disputes. Collective bargaining is stifled whenever the parties are ready to turn over to a Government board the task of resolving difficult issues, the easy way out.

Every labor relations problem becomes a dispute and weakens the individual responsibility of local management and local labor to get on with peaceful production.

Eventually, almost all issues are brought to the board. Preliminary barriers, such as the requirement that an actual dispute or even a strike must exist before the Board will accept the case, are swept away. A dispute or a strike is "made" in order to bring the case before the Board.

In the last war, the War Labor Board had power such as has been newly granted to the Wage Stabilization Board. It made even more difficult efforts to settle disputes peaceably. The record of World War II is a continuous history of strikes and threatened strikes to force labor disputes before the War Labor Board. The unrest, friction, and the uncertainties during the period while dispute cases were being processed by the Board undermined the will to produce and resulted in immeasurable losses in war production.

Although we are embarked on partial mobilization, we are by no means in the same situation as that of 1941, when, in a period of war, there existed patriotic restraints upon such direct economic action as strikes.

I would like to call your attention, in passing, to the fact that organized labor itself, as well as management, has been an outspoken exponent of collective bargaining in recent years.

I should also like to point out that at the present time there are no major labor disputes which involve issues other than wages. Any wage stabilization board can and should have authority to hear issues, provided that these shall be in the form of rulings of general application. It is in an area not directly concerned with wage stabilization, that organized labor has asked for, and received, Government intervention that is both unnecessary as well as dangerous to collective bargaining. The President was able to grant this only by negating the policy enunciated by Congress in section 502 of the Defense Production Act.

2. Procedure ignored.-The second provision of the present law which seems to have been disregarded was the procedure in title V for taking whatever action might be made necessary by special circumstances growing out of the mobilization program.

The President was authorized to initiate voluntary conferences between management, labor, and representatives of the Government and the public and to take such action as may be agreed upon in any such conference. There has been no conference such as the act contemplated and certainly no agreement. It was

clearly indicated that whatever action was taken, it was to have the strongest kind of support possible, namely, the same kind of voluntary agreement which is the fiber of collective bargaining itself.

Instead, the President set up a Board and a procedure which would inject the Government into all kinds of labor issues.

3. Act ignored.-A dispute settlement agency with power to intervene in all kinds of disputes may nullify the national emergency sections of the LaborManagement Relations Act.

Title V of the Defense Production Act says:

"No action inconsistent with the provisions of the Fair Labor Standards Act of 1938, as amended, other Federal labor standards statutes, the Labor-Management Relations Act, 1947, or with other applicable laws shall be taken under this title."

No attempt has been made to integrate emergency sections of the 1947 act into the special disputes settlement machinery created on April 21.

I would suggest that Congress note carefully the relations between those emergency sections and actions that have been taken in the past 2 months.

On the general question of how the Wage Stabilization Board might be reconstituted, the Chamber of Commerce and other management groups publicly proposed granting the Board adequate authority to handle only actual wage stabilization issues.

We suggested to the Board a method of operation which would make genuinely effective the purpose for which it was created-wage stabilization. We oppose

the granting of authority to the Board to handle labor disputes which actually are outside that field.

Board jurisdiction.-The Wage Stabilization Board is the appropriate agency, of course, to hear interested parties on problems directly related to wage stabilization matters. We mean this to include only economic and monetary issues. Such problems can be expected to include one or more of the following categories:

(1) Requests for interpretations or rulings as to application of existing policies; (2) Petitions for changes in existing policies, or adoption of new policies; (3) Petitions for permission to exceed existing ceilings or otherwise to be exempted from the operation of general rules and policies.

In any of these situations, the Board should provide procedures so that it may receive requests for rulings or interpretations and may give adequate consideration to them. The Board's authority should be final in the application of existing policies. However, it should have no authority to modify an existing policy in a particular case, but should, in any case where it concludes that a change in policy is required, refer such recommendations to the Economic Stabilization Administrator who thereupon should approve or reject them without modification.

The point to be observed here is that any change in policy should be general in application and not confined to the particular parties or to the case in which the request for a change was made. If the wage stabilization program is to be at all effective, the principles which are developed must be maintained rather than modified a little to meet the exigencies of each particular case. Such a gradual yielding of principles is worse than no policy at all.

Where a matter is jointly submitted by an employer and his employees or their representatives, both submitting parties should be required to agree, in advance, that they will be bound by the board's final decision.

In view of this background, the Chamber recommends two steps, if you continue title V.

First, Congress should prevent the Wage Stabilization Board from passing upon noneconomic or nonmonetary issues. Because the administration has sought to achieve this result despite the legislation, which prevents direct action without the previous agreement of management and labor, this prohibition should be made entirely specific.

Second, we believe that legislation should be enacted so that the Wage Stabilization Board shall be directed to refuse to proceed with any request for a ruling or interpretation in any case where a strike is in progress. It must be recognized, also, that wage stabilization policies are meant to be restrictive and that requests for wage increases will be denied where these would circumvent those policies. Any strikes which follow such denials are strikes against the Government's policies and are designed to coerce or to induce the Board to make concessions.

It is imperative to wage stabilization, and indeed, to mobilization, that such strikes should not be met with appeasement or consession but should be handled in accordance with existing law, including where appropriate the national emergency provisions of the Labor-Management Relations Act.

DOMESTIC ECONOMY

Another set of recommendations the chamber makes to you relates to operations of the Nation's distributors.

Should Congress continue price and wage controls, we believe that prices would be most effectively controlled by holding constant the percentage of markup margins between cost and resale price for various classes of goods sold by individual distributors. Under this type of regulation, in instances where a price control authority permits increased prices at prewholesale or preretail stages in the flow of goods, the individual distributor will not be forced by Government interference to absorb the increased costs.

There should be adequate consultation between public price control officials and private businessmen in preparation of specific control regulations. Prior to issuance of price control regulations, controlling Government officials should consult freely with representatives of each industry affected as provided in section 709, of the Defense Production Act.

Under the most favorable conditions, rationing can only be partially successful when restricted to commodities which have two characteristics;

1. Highly essential to large proportion of all consumers.

2. Very scarce as compared to normal supply.

There are few, if any, such commodities at present. Any proposal to use rationing to reduce over-all purchasing power and inflation is extremely difficult of performance. During World War II, less than 20 percent of consumer expenditures were for items subject to any type of rationing.

The purpose of rationing to equitably distribute scarce commodities regardless of ability-to-pay conflicts directly with the purposes of other Government policies. Credit control, for example, aims to restrict buying power by eliminating large numbers of prospective purchasers from the market strictly on the basis of inability to pay.

Rationing increased the consumption of covered commodities by many individuals, particularly those who ordinarily use very small quantities. This defeats the purpose of conserving resources and controlling inflation.

It is important that concentration of energies on expansion of military production in times of national emergency should not result in neglect to the civilian economy. Effective organization of the civilian economy is needed to forestall disruption of morale and to preserve the physical strength and spirit of our citizens. The Chamber of Commerce of the United States endorses every practicable method of increasing civilian supplies as a means of combating current inflationary trends.

H. R. 3871 AMENDMENTS

The next set of recommendations relates to specific amendments to the Defense Production Act that are embodied in H. R. 3871.

At the outset, the act already contains measures which give the Government authority to insure production for defense. Control over the direction of the industrial segment of the economy can be exercised through powers to issue priorities, allocations and DO orders.

Corporate and business expansion can be controlled and directed through controls over materials and the granting of accelerated depreciation and obsolescence allowances on defense production, and the making of both plant expansion and operating loans to private businesses engaged in defense production.

All of that being true, there seems scant justification for the amendments that have been proposed.

For example, the act provides great authority for the President to requisition property and facilities. The amendments would add unnecessarily the power of condemnation, without even carrying forward the present safeguards against misuse of that power.

The same can be said about the proposed authority for the Government to build new defense plants. Similar authority was requested of the Eighty-first Congress, but the reason advanced then was that it was needed to avoid a postwar depression.

In this connection, I would like to call to your attention this comment by the Joint Committee on the Economic Report of this very Congress on proposals to authorize Government construction of industrial facilities:

"While such might be necessary in an all-out war effort, it handicaps our longrun chances to maintain a maximum of free, private enterprise and reduces our reliance upon the creative impetus of private initiative. We recommend against this proposal except in limited fields where clearly demonstrated to be necessary."

Congress refused to approve the creation of new Government corporations when the Defense Production Act was passed last September on the ground that Congress would have greater control over defense expenditures if they were handled by the usual Government agencies through normal appropriation procedures. The present law appears adequate, yet authority again is requested to establish corporations.

In the absence of any justification, it would not seem necessary to remove the present $600 million limitation on Treasury loans to Government agencies engaged in defense activities. While considering the original act, Congress reasoned quite properly that such a limitation would force borrowing agencies to return to Congress with specific justification for any loans once the $600 million had been reached.

Subsidies are not applicable to agricultural products or broad categories of consumer or other goods as an adjunct to price controls.

Subsidies depress prices below their market levels. This is certain to intensify demand and thus accentuate the condition which price control is designed to relieve.

Generalized subsidies are one of the most vicious devices known for destroying the free market process. When applied on any appreciable scale, they increase Government spending and the tax load, which is inflationary, and encourage inefficiency and waste by rewarding inefficient or high cost producers. They largely remove the incentives for efficient production and cost cutting. The chamber is firmly opposed to consumer subsidies on agricultural commodities.

The chamber membership, at the annual meeting a month ago, adopted a statement of policy which said:

"We oppose the payment of generalized Federal subsidies for the production, distribution or consumption of any farm produce or food. Such subsidies are opposed whether paid to producers in lieu of prices to assure adequate production, paid to processors or distributors in lieu of fair margins to cover costs, or paid to consumers to reduce or otherwise subsidize their food bills."

While any law is on the statute books, all will agree that it should be enforced. It seems to us that the Defense Production Act contains adequate enforcement powers. Therefore, the added provisions in section 104 (e), (f), (g), and (h) of your bill are unnecessary.

By the same token, the provision in section 104 (h) relating to licensing of businesses is unjustified and unnecessary. This provision should be eliminated in any event because of its sweeping nature and because of the precedent it would create for peacetime. This proposition had been advanced repeatedly in Congress over the years. It never has been able to attract serious support on

its merits.

In many countries of the world, a comprehensive system of authorizing and licensing every business, including every new business, has become a powerful weapon for reducing and indeed destroying competition in business and in the goods market. If we adopt such a licensing system, it may become very difficult, if not impossible, to get rid of it because it would tend to provide a shield and a buffer against newcomers and new competition.

RENT CONTROL

The amendments to the act before you would reinstate and, in fact, expand the system of Federal rent control used during World War II. If the amendments prevail, the proposal would be based on a congressional declaration that there is "an acute shortage of housing, particularly rental housing, in many parts of the country."

There is no evidence to support this general conclusion. On the contrary, the 1950 Census of Housing shows that, since 1940, our inventory of housing has increased 23 percent while population increased less than 15 percent. In 1940 there was a 6.2 percent gross vacancy rate. The 1950 gross vacancy rate was 6.8 percent.

These are national figures. Of course, there will be some problem areas where large numbers of new families must be accommodated because of defense activities. There cannot be many of these, for the Defense Production Administration's interagency committee charged with designating defense areas where housing is a problem has thus far announced only half a dozen areas. For such isolated and scattered cases the only truly effective remedy is the provision of more housing by construction and by conversion. Rent control is a potent

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deterrent to both these remedies. Experience shows that the most powerful stimulant to new construction is a free rental market.

If, however, it is still felt that rent control must be imposed in these scattered areas, the State and local authorities can do the job more effectively than it can be done from Washington.

As regards commercial rent control, the Congress did not find it necessary during World War II, so certainly it is not needed now. The fact that the Administration is now requesting power and authority to control commercial rents is further evidence of how one set of controls leads to another.

Title IV-A would also extend the present emergency restrictions on real estate mortgage credit to cover existing properties as well as new construction. Regulation X was imposed primarily to reduce the volume of new construction and thus conserve materials and manpower. It is doing this very effectively. Housing starts, after a heavy first quarter based upon a large carry-over of preregulation commitments, dropped in April 1951, to the lowest figure for this month in 4 years. No additional deterrents are necessary.

Transfers of existing homes do not, of course, involve construction materials or manpower. Adoption of the proposed amendment would increase the scope of controls at least fortyfold-from less than a million new housing units to the entire housing inventory of over 40 million units in the residential field alone. Lending institutions are traditionally very conservative on mortgage loans based on old housing, and have ample means to prevent a runaway market. Imposing Federal regulation on this vast field would accomplish no useful purpose but would, on the other hand, multiply the administrative problem and add new burdens to the worker moving into a defense job involving a change of residence.

I would like to make two more suggestions in another field. The first is that the declaration of policy of the Defense Production Act be amended by adding this thought; that every effort be made to fill essential requirements of the free nations of the world, and to provide incentives for foreign production, so that we may receive those imports so essential for our needs.

The other is the insertion of language which would make certain that materials are so allocated under title I that domestic shortages would not be filled by restricting exports.

ADDENDUM

The Chamber of Commerce of the United States is a national federation of 3,133 trade associations and local chambers of commerce, which, in turn, represent 1,350,000 individual businessmen. Because the chamber in membership and direct interests embraces every important activity in our economy; and, through its membership-small businesses as well as large-it presents the opinion of a cross section of our entire economy. Thus, it is that policies of the chamber do not represent the views of some special group or particular interest, but are drawn from the diverse interests of the country as a whole and are voted by its membership. This voting, incidentally, is so regulated that no geographic concentration of interests or economic concentration of power can override the broader interests of the entire membership.

Since, the Chamber of Commerce is a democratic organization, and since its membership encompasses the widest range of interests, the members retain every right to express themselves as individuals.

Mr. STEINKRAUS. Thank you, sir.

Mr. BROWN. Off the record.

(Discussion off the record.)

Mr. DEANE. What is the position of the chamber with regard to relaxing Federal Reserve regulations on Regulation W?

Mr. STEINKRUAS. Mr. Congressman, our chamber's policy on that matter is not to relax the regulation.

Mr. DEANE. The radio announcements of yesterday in several sections of the country were to the effect that the used-car lots are full and that they cannot move their products; that they have to have relief, but as I understand it, you feel that 24 months should be retained by the Federal Reserve?

Mr. STEINKRAUS. Yes, Mr. Congressman. I believe the fact that this is happening is a sign it is working. Is not that what we are trying to accomplish-restrict some buying?