The CHAIRMAN. We are very glad to have your views, Mr. Gunther. Are there any questions?

If there are no questions, you may stand aside, Mr. Gunther. Your statement will be considered by the committee when it goes into executive session.

Mr. GUNTHER. Thank you, Mr. Chairman.

The CHAIRMAN. Apparently we have no other witnesses this afternoon.

The committee will adjourn to meet tomorrow morning at 10:30. (Whereupon at 2:45 p. m. the committee adjourned to reconvene at 10:30 a. m. the following day.)

(The following statements were submitted for inclusion in the record:)

STATEMENT REGARDING H. R. 3871 TO AMEND THE DEFENSE PRODUCTION ACT NATIONAL FEDERATION OF SETTLEMENTS, INC.,

New York, N. Y.

To the Committee on Banking and Currency: The National Federation of Settlements wishes to go on record as favoring the enactment of H. R. 3871, title I, section 104, price and wage stabilization, and title IV-A, rent stabilization.

This statement is in accord with action taken by the delegate body of the National Federation of Settlements at its annual business meetings April 21, 1950, and May 12, 1951.

The National Federation of Settlements is a federation of nearly 300 agencies in 85 cities scattered throughout the United States.

The human misery created through the continuing rise in prices and the great jump in rents in decontrolled areas is common knowledge among settlement workers. We therefore urge the Congress to take prompt and effective action to stop this inflationary trend.

Respectfully submitted for the National Federation of Settlements.

Hon. BRENT SPENCE,

FERN M. COLBORN,

Secretary for Social Education and Action.

House Banking and Currency Committee,

House of Representatives, Washington, D. C.

DEAR MR. SPENCE AND MEMBERS OF COMMITTEE: The D. C. Home Economics Association, an affiliated organization of the American Home Economics Association, strongly urges extension of the Defense Production Act, H. R. 3871. As an organization of professional home economists and homemakers who deal with the problems of consumers, we are concerned with so managing the defense effort as to distribute the necessary sacrifices fairly. Consumers have little or no organized means of expressing their needs before the Congress. Yet they are a large group, and vitally concerned with all problems that affect the home. We urge this committee to realize the needs of consumers in extending the Defense Production Act. Inflation is of great concern to consumers. Many homemakers in families with low incomes and in families whose incomes have not kept pace with rising prices have difficulty in providing family needs for food, clothing, housing, and all the other goods and services that make up the American standard of living. In the present inflationary situation price control is critically necessary for these families. We know that good management of family funds requires advance planning. Yet a run-away inflation makes advance planning almost impossible. We want to budget savings for the education of our children, for helping them set up new new homes when they marry, and to provide financial independence when we are old. An uncontrolled inflation would make these family goals almost unrealizable and upset the moral principles on which American family life depends. Under the Defense Production Act a start has been made at controlling prices. We urge that this effort be continued and strengthened.

We have faith that the productive capacity of this country will eventually be able to meet the needs of defense and provide for the basic material needs of the

American way of life. If any materials are in short supply we believe that they should be allocated first to the defense effort and the remainder distributed to the best advantage of all. Most consumers are willing to share in any necessary sacrifices. However, too often the needs of consumers are not considered until it is too late. The machinery set up under the Defense Production Act provides a means for assessing competing needs and allocating scarce materials to most important uses. We believe that this effort should be continued and that it should take account of consumer needs.

The council of the District of Columbia Home Economics Association urges the House Banking and Currency Committee to give serious consideration to the interests of the consumer. We ask that this statement be read and included in the record.

Very truly yours,

FRANCES KIRKPATRICK, President, D. C. Home Economics Association.

STATEMENT OF GEORGE E. BAILEY, PRESIDENT, ASSOCIATION FOR THE ABOLITION OF FARM PRICE SUPPORT, INC., NEW YORK, N. Y.

The members of our organization are not in agreement as to the necessity for or the efficacy of price and wage controls for the control of inflation. However, we are in agreement that no program looking to the stabilization of prices can be effective unless there is effective control of the prices of farm products. To this end we urge the Congress that any revision of the Defense Production Act of 1950 eliminate the present inflationary parity floor under farm prices and provide for the mandatory control of farm prices at the producer's level. We also urge that existing legislation requiring the Department of Agriculture to support the price of most farm products at 90 percent of parity be terminated or, at the very least, suspended during the inflation emergency.

Stripped of its technical verbiage the parity concept assumes that the American farmer is entitled to receive the same amount of commodities for the products he sells as he did during a base period, usually 1910 to 1914. One need not be an economist to recognize the fallacies inherent in this assumption. In the first place, the 1910–14 base period was chosen arbitrarily. Who is to say that the balance existing between the prices received and the prices paid by the farmer was more equitable in 1910-14 than in any other 4-year period that might be chosen? An even greater indictment of the concept of parity is the fact that it neglects entirely the vast technological advances of agriculture in the last 40 years. In many cases modern farming methods have doubled the productive capacity of land and have eliminated a greater proportion of the labor cost involved in the production of farm commodities. Yet parity assumes that combine harvested wheat should have the same purchasing power as wheat harvested with a horsedrawn reaper. The increased efficiency of American agriculture is evidenced by the decline in the relative number of farmers to our total population. In 1910 the productive effort of one farmer was sufficient to feed only eight persons. Now he can feed 15 persons. This would indicate that a fair price for farm products would be about one-half present parity.

The fact that parity prices are ridiculously high is demonstrated by contrasting such "fair" prices with the cost of production. The Department of Agriculture estimates that the efficient producer can produce wheat for about $1.25 a bushel, as against a parity price of around $2.70. Those who advocate special protection of farm prices carefully avoid any reference to cost of production in determining what constitutes a fair price.

What has been said should be sufficient to demonstrate that parity has no place in any legislation designed to control inflation. However, it should also be pointed out that the parity provisions of the Defense Production Act of 1950 act as a stimulus to the inflationary forces that are threatening to wreck our economy.

A major factor in any inflation-control program is the stabilization of wages. About 3,000,000 union workers are protected against increased living costs by escalator clauses that provide for increased pay when the cost-of-living increases. The remaining 14,000,000 workers covered by union contracts receive substantially the same treatment under present policies of the Wage Stabilization Board. We now know that wage ceilings cannot be maintained so far as organized labor is concerned in the face of constantly increasing living costs.

Food expenditures represent the largest single item in the cost of living and the cost of food is directly related to the cost of farm products. We are rapidly advancing into an era where we will be faced with an acute shortage of consumer goods other than food and when this occurs the excess buying power so generated inevitably will result in the bidding up of any uncontrolled prices. The floor price of many farm products increases monthly with each increase of parity prices resulting in an ever-increasing cost of living. Under these circumstances it is too much to expect that organized labor will consent to fixed wage ceilings.

It serves no purpose to argue that if rigid wage ceilings were established, then the parity level would stop its relentless rise. In the first place, the nonfarm population will not stand idly by and permit the farmer to utilize the defense effort for the purpose of securing a larger share of the available supply of goods and services. In the second place, even if there were a rigid freeze on wages, parity would still advance. This follows from the little-publicized fact that approximately one-fourth of the items in the list of commodities that farmers buy, the prices of which are used to determine parity prices for farm products, are themselves farm products. Under these circumstances an advance in the price of corn, for example, tends to raise the parity prices of all other commodities. As these other commodities increase in price the parity price of corn further increases. Here are the elements of a true inflationary spiral.

In addition to its function as a floor under farm prices, the concept of parity also furnishes the basis for the support of farm prices under the Agricultural Act of 1950. Due to the fact that parity prices have paced the inflationary spiral, the prospects are that the Agriculture Department will be purchasing many key commodities this year to keep prices up while other agencies of Government are attempting to keep prices down. The prop point on 1951 corn will be around $1.72 a bushel at Chicago; corn for December delivery at Chicago is selling around $1.60. The 1951 wheat crop's support level at Kansas City is expected to be about $2.44 a bushel; wheat for July delivery in Kansas is selling for more than 10 cents below the support level. The consequences of spending further vast sums of money to support farm prices at an artificially high level during this inflationary period would be calamitous. It is vitally important that the Congress terminate the price-support provisions of the Agricultural Act of 1950, or at least suspend such provisions during the inflation emergency.

Those in the administration and Congress who have arrogated to themselves the right to speak for the American farmer advance woefully weak arguments in favor of continued favored treatment for agriculture during a national emergency. They argue that average farm income is still less than nonfarm income and, so the argument goes, this demonstrates that farm prices are not too high. This contention quite obviously is not germane to the question of whether farm prices are at a fair level. When they speak of average farm income they are talking of all of America's 6 million farmers. The inefficient farmer, the owner of marginal lands, the small farmer, the southern sharecropper, the tax-conscious gentleman farmer all these are included in the determination of average farm income. Yet there is no conceivable high level of farm prices that can bring prosperity to all these.

The great bulk of America's cash crop-approximately 80 percent-is produced by only 2 million farmers. Within this group there are many who have made fortunes during the last 10 years as a result of the maintenance by Government of a high level of farm prices. A relatively small increase in the price of farm commodities can mean a large increase in net income to these large producers. These are the individuals that must be considered in determining whether farm prices are too high-not those whose income is affected but little by increases in farm prices.

Secretary Brannan urges a variation of the low-income argument. To support his contention that farmers are not overpaid he points out that farm operators on the average receive 90 to 95 cents an hour for their labor, compared with average hourly earnings of factory workers of $1.56. What earthly relationship there is between the owner of a thousand-acre wheat farm with an investment in land and equipment of several hundred thousands of dollars and a factory worker paid on an hourly basis is difficult to see.

With respect to the parity floors contained in the Defense Production Act of 1950, the Secretary of Agriculture contends that the advancement of all farm prices to parity would result in only a negligible increase in the cost of living. The Secretary disregards the fact that parity has no fixed level that as long as inflationary pressures exist, parity, and consequently the prices of farm products, will continue to rise.

The administration has proposed that the new Defense Production Act retain the parity floor for farm prices, but freeze this floor for a period of 1 year. While this would reflect some improvement over present legislation, it is a weak compromise that would accomplish little. It would merely transform the inflationary spiral into an inflationary stairs.

As previously stated, many in our organization believe that inflation can be controlled without any price or wage ceilings. The logical alternative involves a program of selective taxation and the encouragement of saving to absorb the excess purchasing power created by rearmament, the drastic reduction of governmental spending, stringent credit controls, and increased production. This, incidentally, is a program advanced by our leading farm organizations. However, if the Congress considers it necessary that price and wage controls be imposed, we sincerely urge that rigid on-the-farm prices be established for farm products based upon the prices existing during the same base period as is utilized for other industries. As a necessary corollary, we also urge the termination or suspension of the farm price-support program. Only through this means can the cost of living be stabilized by price controls. Failing this, it will be impossible to stabilize wages and we will have lost our battle against inflation.

MAYONNAISE AND SALAD DRESSING MANUFACTURERS' ASSOCIATION, INC, Washington 5, D. C., June 12, 1951. Hon. BRENT SPENCE,

Chairman, House Banking and Currency Committee,

New House Office Building, Washington, D. C.

DEAR CONGRESSMAN SPENCE: At a meeting of the board of directors of this association held last week in Washington, D. C., I was instructed to send you this letter and ask that it be read to your committee and incorporated in the record of your current hearings on the extension of the Defense Production Act of 1950. It has been brought to our attention that the Director of Price Stabilization has stated that he would like to have the authority to license all businesses under price-control regulations so that he might use that licensing power as a method of policing price controls.

The board of directors of our association feels that the actual or implied grant of any such authority as this would be a step toward totalitarianism and dangerous in the extreme.

Therefore, by unanimous action of our board of directors, I have been instructed to urge you and your committee to specifically prohibit the Director of Price Stabilization from invoking any system of licensing of businesses in connection with price controls. We would not presume to suggest the appropriate legislative language, but do urge that you give this matter your immediate and most serious consideration.

Respectfully yours,

SAMUEL G. DOMASH, President.

STATEMENT OF CHARLES J. MACGOWAN, INTERNATIONAL PRESIDENT, INTERNATIONAL BROTHERHOODS OF BOILERMAKERS, IRON SHIP BUILDERS, BLACKSMITHS, DROP FORGERS AND HELPERS, A. F. L.

The American competitive enterprise system, commonly referred to as "free enterprise," has undoubtedly contributed materially to the unparalleled progress of American industry in attainment of the commanding industrial position occupied by this Nation today.

Except in times of recognized necessity, such as a national emergency, restrictions on the system, which has worked so successfully, should be avoided.

However, in the interest of maintaining our economy and preventing uncontrolled inflation during a national emergency, it has been found necessary to impose wage and price stabilization regulations whereby the menace of inflation may be controlled. Such stabilization operated successfully during the years of the Second World War, which witnessed an unprecedented period of labor-management tranquillity and a new minimum of lost man-hours due to industrial-relation disputes.

Regulation W, establishing certain controls on installment buying, was designed to combat panic buying. This regulation stipulates the amount of initial payment on installment buying in relation to total cost, and limits the period during which the remaining cost must be retired.

Many dealers and distributors allege that regulation W imposes unnecessary hardships upon the industry and the low-wage earner; that inventories are at record levels; and factory curtailments or shut-downs must inevitably follow. Unrestricted or encouraged installment buying such as in the late 1920's constitutes mortgaging the future of the wage earner and leads to eventual complete disaster. In 1929, instead of suddenly finding the promised "chicken in every pot," the workers by multiplied millions found that they did not even have a pot in which to cook a chicken.

Relaxation of credit buying for homes and home equipment, but not for luxuries could bring relief to overstocked distributors, but in some instances, the problems about which complaints of business strangulation arise, are self-created. Apparently some distributors and dealers overstocked in anticipation of a golden harvest of business, which has failed to materialize.

While organized labor fundamentally opposes Federal Government wage controls, except during wartime, the formula for equalizing sacrifice by regulating wages and prices has been inferentially approved or manifested by the return of labor representatives to the national defense agencies. Labor still believes that the 10 percent wage increase formula is inadequate and this contention is supported by the solution of the nonoperating railroad employee and meat packers controversies. However, labor will endeavor to effectuate an acceptable formula within the framework of the present, or amended, wage-price controls system.

It is a recognized fact that control of materials and the diverting of materials from the ordinary channels of a peacetime, civilian economy to the channels of an emergency or war economy has resulted in considerable unemployment and displacement of labor. This unfortunate condition (the seriousness of which could not be overemphasized), is destined, we hope, to be of limited duration, and every possible effort should be made to accelerate the industrial readjustment to the end that the impact of unemployment should be cushioned to the maximum degree and our manpower resources utilized at top efficiency levels.

It is my considered opinion that to abandon completely all controls under present conditions would jeopardize our defense effort, materially increase the cost thereof, imperil our recognized obligations and commitments to other nations endeavoring to maintain or establish democracy; and would constitute a disservice to the principles for which our Nation stands.

RECOMMENDATIONS

1. A comprehensive reexamination of credit controls and modifications providing flexibility where justified, to stimulate the flow of products to the ultimate

consumer.

2. Careful consideration of lowering the initial payment for potential home purchasers and extension of time to retire balance of total cost.

3. Automobiles are a necessary form of transportation for workers and some household appliances are a necessity. This fact should be carefully considered and the purchase of automobiles and some household appliances excluded from the provisions of regulation W.

4. Unrelaxed efforts to stimulate production in defense industries to prevent undue hardships on labor and industry arising from dislocations attributable to changes necessitated by the concentration of industrial activity on defense production.

5. Extension of the Defense Production Act in principle for at least an additional 12-month period, during which experience shall be recorded as a guide to the future.

6. In the meantime, regulation W should be realistically adjusted to make it flexible and workable with a minimum of hardship.

83473-51-pt. 3-23