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Senator TAFT. How do you figure a thing like that? Do you figure that certain increases produce certain increases in wages, and then figure it all back?

Mr. HENDERSON. The $67,000,000,000 that was to be spent is estimated to be paid out in certain amounts each month for the next 2 years, and I said that the rate at which the price level had been increasing recently was almost 1 percent a month since the beginning of the war in 1939. If you, however, assume less than 1 percent a month increase in the cost each month as the Treasury paid out its money, it would cost $13,000,000,000 additional. In other words, as the Army and Navy have had to do with some of their construction items, they would have to come back and say, "We need this amount of money more." However, if you take it in terms of the accelerated rate in price increases that have been taking place since March of this year, we find it in exactly the same way. Assume that this month we were paying out $1,900,000,000 and next month were paying out $2,000,000,000. Then it would cost $31,000,000,000 more.

Senator Brown. Your purpose is to prevent that great increase that was shown in the column farthest to the right?

Mr. HENDERSON. That is right.

Senator BROWN. Prevent it by price control and therefore save the Government of the United States a considerable amount of money.

Senator BARKLEY. Your estimate of $31,000,000,000 of inflationary values in there is based upon the continuation of present conditions and the normal increase in the price. To what extent can you hope to reduce that $31,000,000,000 by any legislation that might be enacted or by such legislation as you will recommend. You can't wipe it all out? Mr. HENDERSON. No; you can't. I haven't any standard on it. I know that if we run from 11/2 to 2 percent a month increase, we are in an inflationary period. I do not know what you can hold it to. It depends, Senator, on how far this country wants to go. I am trying to show here that it is worth-while to go a long way in control. That is, what you get for your money is pretty great.

Senator BARKLEY. Is the percentage of the increased cost without any legislation, assuming that there would be an average of 1.1/2 percent increase a month, larger or smaller in defense purchases than it is in the ordinary consumption of goods throughout the country?

Mr. HENDERSON. You can't tell because you do not have bombers and tanks bought privately; but we do know that practically all the important items on contract have the escalator clause in them to take account of increases in cost, particularly of wages. That is, if you have a change in the prevailing rate in a community, then people working on that defense job are entitled to that higher cost. I do not think that you can very well separate out the items, because through these clauses what happens to the cost of living is translated into the cost of bombers and tanks.

Senator BARKLEY. Well, I do not want to pursue it and take up further time.

Mr. HENDERSON. I have a little index to it.

Senator MALONEY. When you talk about the normal increase of 1 or 112 percent a month, are you talking up to now, up to the time you get the kind of price control bill you recommend?

Mr. HENDERSON. No; I mean that from here out. If we have, say, a 2-percent increase in the price level every month, then I would know we were in an inflationary period; that at any moment we could be touched off into uncontrolled inflation.

Senator MALONEY. That is going on to some extent now; is that right?

Mr. HENDERSON. Yes; the price level has been going up. I would like to show you, however, what happens.

Senator MALONEY. Before you begin to show that, is it your hope that with the kind of price-control bill you will recommend that can be stopped?

Mr. HENDERSON. That it can be kept within what I would call manageable bounds. That is a rather vague standard, but what I mean is this: It has to be a kind of a gradual price rise that lets a manufacturer make his forward commitments-5 or 6 months, and so forthknowing that he will not be destroyed by changes in valuation when he comes to get his money.

Senator TAFT. Would you not be well pleased if we could hold this increase down to one-half of 1 percent a month?

Mr. HENDERSON. Yes; I would. I feel that a 12-percent rise from where we are now, at a level of 92, would be a manageable price level. I think it would be an extraordinary achievement if we did it. England has had about a 40-percent increase.

Senator TAFT. You would require the cooperation, however, of the control of credit, bank loans, taxation, savings, bonds, and the other things that are necessary to accomplish anything like that?

Mr. HENDERSON. That That is is correct. I wish Senator Downey were here. I felt when I left that I might have been a little bit abrupt with him this morning about this question of controlling through a withholding tax that would take up the whole 6 billion. I would have called his attention to this chart (chart 26). These are the 28 basic commodities. Taken together, they have gone up 55 percent since the outbreak of the war. If you want to make any measurements, just keep in mind that prices doubled during the last war, and that was considered a highly inflationary period. We know it was, because of the deflation that took place. These 28 basic commodities, which are the most important commodities I would say we have-we keep a daily index on them-have gone up 55 percent; but uncontrolled commodities, those with which we have not attempted any control, have gone up 71 percent; but the one that we have controlled have gone up only 34 percent. You will get an idea of what the nature of control has been when I tell you that here are the first of the real controls we imposed [indicating]. We had some understandings back here [indicating] beginning at this period, and after the Office of Price Administration and Civilian Supply was created in April. Controls were placed on lead, scrap steel, hides, print cloths, silk, burlap, tin, sugar, rubber, and copper on the dates indicated on the chart. But that is the line which shows you that if we had been able to get the bulk of prices under a similar type of control, we would not now be threatened with either a runaway cost of living or with inflation.

That, I think, is the best argument for control next to what was done in the last war, considering how little they had to go on either

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UNITED STATES DEPARTMENT OF LABOR
BUREAU OF LABOR STATISTICS

AUG IS-BURLAP
AUGIS-TIN
AUG 14-SUGAR
AUG13-RUBBER
AUG 12 COPPER

AUG

SEP

[blocks in formation]

INCLUDES SUGAR, RUBBER, HIDES, PRINT CLOTH, SILK, BURLAP, STEEL SCRAP ICHICAGO), STEEL SCRAP (PHILADELPHIA), TIN, COPPER, LEAD, FING
INCLUDES WHEAT, FLAXSEED, BARLEY, GORN, BUTTER, TALLOW, HOGS, STEERS, LARD, COFFEE, COCOA BEANS, SHELLAC, ROSIR, COTTONSEED OIL, WOOL TOPS, COTTON

in the way of experience or information, and the fact that they were dumped right down into it with a declaration of war after prices had been rising for so many months.

Senator MALONEY. What held you back on the controls of the other commodities? Time?

Mr. HENDERSON. Well, partly that, but also the nature of the commodity and the fact that we have a parity policy on agricultural products.

Senator MALONEY. Was it principally agricultural products? Mr. HENDERSON. Well, it was agricultural products and the imported commodities, which are very difficult

Senator MALONEY. Do you mean like coffee?

Mr. HENDERSON. Yes; and, recently, plus the distributive items, like wholesale and retail.

Senator BROWN. The Government-not particularly your section of it, but the Government had some definite controls over some products; for instance, sugar. The Department of Agriculture has pretty definite control over the price of sugar.

Mr. HENDERSON. I do not believe so. We had to step in after it had got to about 3.87 and peg it at 3.50. I must say that they had as fine information as you would need for control of any commodity. It was a very exceptional working relationship that we had.

Senator BROWN. That was based upon statutory authority in the Department of Agriculture. Mr. HENDERSON. Well, their information was, yes; what we did was not based upon statutory authority.

Senator TAFT. It has never occurred to the Department of Agriculture to impose maximum prices if the legislation does not authorize it?

Mr. HENDERSON. No. However, they have had a standard which the American producers have never been satisfied with. They took some language that was in the President's message as a guide to the price that they shall attempt to maintain as protection to consumers. Senator BROWN. That is in the law, Mr. Henderson. I was a member of the conference committee that wrote that section, and we had the idea that it gave the Department definite control over the price of sugar within certain limitations.

Mr. HENDERSON. Well, some of your fellow Senators, particularly those from the southern Mississippi region and the Michigan regionthe cane-sugar and beet-sugar people-disagree considerably. They have disagreed in my office about it. At any rate, we have been holding the price of sugar at 3.50 since August.

Senator MALONEY. In connection with sugar, you said this morning, I think, that you were about to move into the field of coffee, and things like that. Do you in such instances and this question is prompted by what has happened in the last few days-take up the matter with the State Department?

Mr. HENDERSON. Yes; we take the matter up with the State Department and with all the other interested agencies. I do not want that to mean that we are always bound by their inclinations on it. Senator MALONEY. I should hope that you would be considerably persuaded by them right now, because as we fuss around with sugar and coffee and such things from South America and neighboring countries, right now it is pretty important that we at least hear their story.

Mr. HENDERSON. Well, if I may explain, we have had continuous contact with those commodities by experts for several months. It is not a case of taking hasty action.

I should like to refer to chart 27 in passing [indicating]. It takes three items: Taxes, wages and salaries, and cash farm income. It compares them 1940 over 1939, 1941 over 1940, and 1941 over 1939. It compares profits before and after taxes. The purpose was to see - whether or not there had been a disparity between what had happened on income to the wage earner and to the farmer.

Senator Brown. Well, name for us each column.

Mr. HENDERSON. This first column is "Corporate profits before taxes," and that is the percentage increase. This is "Corporate profits after taxes." This is "Wages and salaries." This is "Cash farm income."

CHART 27

PERCENTAGE INCREASES IN PROFITS WAGES AND

FARM INCOME

1940 OVER 1939, 1941 OVER 1940, AND 1941 OVER 1939

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Senator TAFT. The percentage increase over what?

Mr. HENDERSON. Over 1939.

You see, this first one is 1940 over 1939, and in that period the farm income was up only 5 percent and wages and salaries were up only 9 percent.

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