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Mr. HENDERSON. The farm products have been under no control, but the metals and the chemicals have been under explicit and implicit controls.

Senator BARKLEY. Does that include all metals?

Mr. HENDERSON. The metals that bulk very large. I will show you the action of some of them with separate charts.

Senator Barkley. What is the difference between the effect of the control of textiles and metals and chemicals, and to what extent do they parallel in control?

Mr. HENDERSON. In the cotton textiles we have had a unique type of ceiling. We have a control over the mill margin, which is the cost of production exclusive of the raw cotton, and then to that is added the market price of raw cotton. In other words, the price of the raw material which is included in the textile price under our ceiling is that which the market has permitted. Only the margin is controlled. In practically all other cases, however, the price per se is controlled. This is true of copper, which is acutely important. It is also true of steel scrap which is likewise one of the most strategic raw materials.

Senator TOBEY. That is what we sent to Japan for years.

Mr. HENDERSON. Yes; and they probably shot it back at us in the last few days.

This [indicating chart 4] is the zinc chart. After a rise about the middle of 1940, we had an informal agreement with the zinc producers. Recently we found we needed more production, and it was necessary to increase the price of zinc, although about 55 percent of the zinc production was yielding a very substantial profit.

I should like to come back to that particular chart when we are discussing buying and selling.

Senator TAFT. Have they made some profits that the Finance Committee could get?

Mr. HENDERSON. I can't speak of profits in zinc but my estimate of corporate profits before taxes this year is about eleven and a half billion dollars, Senator.

Senator TAFT. We are going to have to increase the rate on the tax.

Mr. HENDERSON. That is right. But I might say that very few of the industries that are under schedules have complained to date that they have had an unsatisfactory level of profits.

Senator TOBEY. Senator Barkley inquired, very pertinently, as to the contrast in the control of prices on metals and chemicals in contradistinction to those in textiles, and you said there was a different formula. Why is there a different formula?

Mr. HENDERSON. There is a congressional policy on farm prices which, in the main, we have respected.

Senator TOBEY. With that statement in mind, the fact remains that it has not been as effective as regards textiles as it has been with regard to chemicals and metals?

Mr. HENDERSON. That is correct. But I would say as to cotton textiles that we have had a very satisfactory experience since we established ceilings.

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Here is a cotton textile chart [exhibiting chart 5]. We control the middle line-mill margins and about the time we took over the trend was decidedly upward. This [indicating] is the final price of cotton cloth. We control the mill margin and to that is added the raw cotton price.

Senator TOBEY. The fact remains that you control the mill margin, and the price of raw cotton you simply take as is and mix it in in the ensemble, but you are entirely dependent upon the price of the raw materials which you do not control?

Mr. HENDERSON. That is correct.

Senator TOBEY. Why should you not control it?

Mr. HENDERSON. We have assumed that that was a legislative question. I have wondered sometimes, myself.

Senator TOBEY. If you had come to Congress and said "We want a square deal applicable to all commodities"

Senator BROWN. That is what you are asking now, is it not?

Mr. HENDERSON. I think my testimony in the House was substantially along that line, and I think I will address a greater portion of my testimony this time to that matter.

As I said, the cost of living, which is food, rent, and so forth, is the key to whether or not we get into that old familiar spiral, because the capacity to absorb wage increases and other costs has just about disappeared. Therefore when we leave the question of the effect of a single price, whether it is too high or too low or just about right, we are into the question whether or not we have controlled the cost of living which every other country has had to control.

Senator TOBEY. You are giving us specific illustrations, and it is a very intelligent production of evidence. But what I am getting at is this. Here is Leon Henderson, the man charged with being the Price Administrator, and we look up to you as you come before us. You will, I hope, before you get through, very graphically and tersely, tell us what Leon Henderson would do to control prices for the people of the United States.

Mr. HENDERSON. Yes.

Senator TOBEY. You will finally come to a summing up and say, "Gentlemen, what I conclude is this"-and then tell us. Is that right?

Mr. HENDERSON. I intend, if the committee permits, to submit a draft of a bill which I believe would be adequate and which will cover that point.

Senator BARKLEY. Will these charts be in such form as to be printed in the hearings?

Mr. HENDERSON. Yes, sir. This [indicating chart 6] is the price of woolen goods and wool tops.

CENTS 50.0

40.0

30.0

CHART 5

PRICES OF COTTON CLOTH,
RAW COTTON AND MILL MARGINS

AUGUST 1939-TO DATE

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1. Average prices of middlings inch cotton in the ten designated spot
markets plus the average grade and staple premium and discounts.

2. Difference between cloth equivalent prices and the price of cloth.
3. Average of 17 constructions.

Prices converted to the approximate quantity of cloth obtainable from
a pound of cotton with an adjustment for saleable waste.

10.0

!

JULY

1941

UNITED STATES DEPARTMENT OF LABOR
BUREAU OF LABOR STATISTICS

* PRICE CEILINGS SET BY OPA ON

CERTAIN CONSTRUCTIONS EFFECTIVE JUNE 30

INDEX

160

150

CHART 6

WHOLESALE PRICE TRENDS OF WOOL

AND WOOLEN GOODS

AUGUST 1939 = 100

INDEX

160

150

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