Dr. WARE. These incidentally represent only a very small proportion of the grade-labeled goods on the market. They include only products where the grades are determined by Government inspectors. Most of the grades are determined by the canners themselves on the basis of Government grådes, so this represents only a small part of the picture, but I think a clear and significant part.

But opportunity for consumers to cooperate is not sufficient to insure adequate enforcement. There must be an adequate staff in each local board to explain regulations, keep a constant check on retail compliance, and investigate complaints.

Much of the responsibility for this aspect of the program is carried by price panels made up of volunteers such as those you have just heard, but full reliance cannot be placed on volunteers and their work is more effective where there is a nucleus of paid personnel whose work they supplement. This is the job of the price clerks on local boards. And you heard the preceding witness refer to the price clerk as the "executive secretary" of the price panel.

We hope that sufficient funds will be provided to enable the local boards to increase greatly the number of their price clerks. They are now very inadequate.

We hope also that provision will be made for at least double the present enforcement staff.

At the present time there is only approximately one enforcement officer for every two counties in the country. It is truly amazing that price control has been enforced as well as it has with so limited a staff. But the number is obviously inadequate for the task. It is the frequent complaint of price panels that their reports of observed violations are not followed up because of lack of enforcement staff, and in some communities price-panel volunteers have resigned because they feel that their work is wasted unless it is acted upon by enforcement officers.

The third point at which price control should, we believe, be strengthened is in the matter of price reductions to balance the price increases which are allowed. It has been the policy of O. P. A. to allow price increases which break through the line in specific cases where the production is needed the production of the particular companywhere costs have risen to a point where production at current ceilings would involve out-of-pocket losses, and subsidies are not used. Mr. Brownlee explained to your committee how this has been done. You will recall that in his statement he said emphatically that O. P. A. never reduced the price of an individual seller, though his low costs would enable him to earn a reasonable profit at a lower price. This makes price-adjustments travel a one-way street, always upward.

It seems to us only logical that if price increases are allowed, compensatory price reductions should be made wherever possible. There are two logical ways, as we see it, to administer price controls (1) to hold the line firm, letting those who cannot produce to the line fall by the wayside, or supporting them with subsidies; or (2) the alternative is to make some adjustments above and below the line on the basis of the costs of high- and low-cost producers.

We therefore recommend that the Price Administrator be directed to make compensatory price reductions whenever a policy of upward adjustments to follow costs is adopted.

Senator HAWKES. Would you be kind enough to explain just how you would do that thing? Can you give us an illustration?

Dr. WARE. I am liable to give an illustration out of my head which will be technically wrong, but where there are let us say four producers of material for, let us say, something essential like work shirts or something of that sort, and one of those producers-four is too small, but anyhow, one producer cannot produce at the established price line; two producers, let us say, can produce very readily at the established price line; one producer has extremely low costs, so that if a ceiling price were fixed on the basis of his costs, the price required to give him a reasonable return would be very much lower.

Now there are two ways as we see it of dealing with that situation. You fix a price, and then if the high-cost producer cannot produce at that price, either you do without his production or you give him a subsidy. Now, that is what has been done with respect to copper for example to get the high-cost copper on to the market because it was needed. The alternative is to set the line, then to allow an individual adjustment for your high-cost producer; and what we are saying is that if that latter policy is followed you should not only allow your high-cost producer to have an above-ceiling price, but you should reduce the legal price to that lowest-cost producer who is way below in his costs, so that yo you come out with an average of the price line held, rather than the price line held and then breaks-through.

Senator TAFT. Would you think that practical as to farmers? Are you going to pay every farmer on the basis of what it costs? To what would you apply this principle?

Dr. WARE. I would only apply the principle, when the principle is already applied. That is, it seems to us a much sounder, in general, plan to hold the line, and to use subsidies to get needed production, and that is why we have supported this subsidy program.

Senator TAFT. Yes; but if you carry your principle through you are going to add overtime to your price base, are you not, because his price of producing will be different.

Dr. WARE. No; only if you begin to pay the farmers different prices. All that we are saying is that if you introduce the principle of differential prices at all in order to allow price increases for your high-cost producer logically you should carry through that principle and use price reductions for your low-cost producers. We are not saying that you should do that, we are only saying that if you do it and the O. P. A. is doing it in individual instances of high-cost producersyou should do it for both high and low.

Senator TAFT. But in a very ery limited field where you have a few manufacturers of a given thing; but as applied to a large-scale production of millions of farmers, or to thousands of something else, you just cannot do it without wrecking everybody's costs of producing. Dr. WARE. NO; please let me make myself perfectly clear. We are not advocating that there should be individual adjustments. On the contrary, we have stood, and continue to stand, for establishing a line and taking the necessary steps to hold that line. We are only saying that if and when a policy of individual adjustments is adopted it should be a two-way street and not a one-way street. At the present time, when it is adopted, it is following a one-way street, all the adjustments are upward. All that we are saying is that if you are going to make individual adjustments, logically you have got to make them both ways.

Senator BUCK. Does not that policy penalize efficiency?

Dr. WARE. Which policy?

Senator BUCK. The policy of reducing the man who is efficient, because he is efficient and makes a profit; you bring it down.

Dr. WARE. Let me just repeat again what we believe. We believe that the sound method of price control is to set a generally fair level, and if it is necessary to have the production of a producer who cannot produce at a generally fair level, then to subsidize to cover the coststhat is subsidizing production.

Senator BUCK. I am not talking about that. I am talking about the one up above, who is efficient.

Dr. WARE. No; all we say is that if you do not use that "hold the line" policy and do raise the price to an inefficient producer who has a very high cost, you logically, we feel, if you really are trying to hold price control, should reduce the price to the extremely low-price producer.

Senator BUCK. Does not that penalize efficiency?

Dr. WARE. Well, if it were a free market, there is a very good chance that those very low-price producers' low costs would push the prices down; and what you have done by freezing the price here is to give him "gravy" by your legal action, the price control.

Senator TAFT. Well, wait a moment. There is no minimum price guaranteed anywhere. You are not doing it by price control. There are no minimum prices fixed, excepting in these support farm prices. Dr. WARE. But in the tight market which now exists, the reason why we have price control is that all the pressures are to press up to the ceiling.

Senator TAFT. Well, that is a different thing from what you said before.

Dr. WARE. Have I made myself clear?

The CHAIRMAN. Yes.

Dr. WARE. I am not sure I made myself clear on that. All we are trying to say is that we want price control kept level, and that we do not like a one-way street, which is always going up.

Senator HAWKES. No; but you admit that in keeping the price level, and doing this, under this scheme of yours, where you have a raise of prices in one case to bring commodities into the market; you lowered it in the other one, you are doing what you might assert is a justice for the consuming public; you are doing an injustice to another manufacturer under the American system.

Dr. WARE. I see no injustice in allowing a price which brings a reasonable return.

Senator HAWKES. Well, then, in other words, if that be so

Dr. WARE. I mean I am not suggesting that an indivdual adjustment be made to push a man's price down below his cost.

Senator HAWKES. No, no; but you are talking about taking something out of the efficient fellow so that the inefficient can operate. Now, that is evidence for my argument against subsidies, the very fact that you favor legislation, according to your own viewpoint, for you brought in here the copper subsidy, which had to be done apparently to bring in the high-cost copper when the country absolutely needed it for war purposes. They used that subsidy, and if you could be in my office and see the number of groups who want a subsidy for their particular pet

hobby because this subsidy has been granted, that one; and that is my contention and always has been, that one subsidy leads to another one, and that leads to still another subsidy, until you have absolutely destroyed our American way of life.

Dr. WARE. Our support of subsidies was only conceived to be in the public interest, and price control we consider in the public interest.

Senator HAWKES. That is what each one of the groups thinks-the same thing.

Senator RADCLIFFE. Senator Hawkes, I can very readily see how it would be very difficult to avoid a penalizing effect as you suggested, Senator Buck-by the discrimination, but on the other hand, theoretically speaking, and practically speaking, there may exist certain factors which have a very special bearing on the matter, and which no one would say was due to the question of efficiency. There may be certain factors come in, and due to change, and otherwise, which may have some bearing upon it. I am not offering that as any argument for discrimination, but I can readily see that in some cases at least there may be an ability to produce lower, which is not due in any sense whatever to higher efficiency.

Senator HAWKES. It is due to efficiency in taking advantage of chance; and that is what American life is.

Senator RADCLIFFE. Well, there may be certain circumstances which permit a certain manufacturer to take advantage of something which is not related to his efficiency, and may not require any particular insight or progressive spirit on his part. I do not think there are many of them, but sometimes they occur.

Senator HAWKES. Can you sight one single example, so I can get your point of view, because I would like to have an illustration of that thing.

Senator RADCLIFFE. I could very easily do so if I stopped to think it over. I cannot at this moment, but I can certainly conceive it to be a fact that all differences in costs of operation are not due to efficiency. They are due to differences of market, due to difference in convenience of location, they may be due to various conditions, some of which may be accidental, some of which are not. I can very easily think of some technical "insides" that would give; but certainly I am not going to assume efficiency to be the only difference, the only factor, which would enter into the question as to whether or not a man had produced at less than someone else.

Senator HAWKES. I suppose what you have in mind would depend in large measure upon your definition of what is efficient. I think it is efficient to study the United States and put a plant near the supply of raw materials so that you have that advantage. I think that is efficiency.

Senator RADCLIFFE. Yes; but after the plant is in existence, certain conditions may make it possible for a certain plant to benefit more than other plants would, that haven't anything to do with the location of the plant. It simply means the plant is already there, but questions of the location of plants may under some conditions give an advantage to some particular plant or some particular industry. I do not think it likely to occur very often, but I have seen that occur in various forms of industry, and it is likely to occur again.

Senator TAFT. Mr. Chairman, may I call the witness' attention to the fact that as far as the general question of reducing prices is concerned the act gives full power to reduce prices if justified, if the new price is a fair and reasonable price. It does not require any legislation to bring that about.

Dr. WARE. The authority is there. There is a question of indicating congressional intent that it should be exercised in that way.

The CHAIRMAN. If I may, I recall an incident that took place in the committee meeting when we had the O. P. A. up before, an instance of where there was some shortage of apples in the New England district, and there was a surplus somewhere else in the New England district. Apples were at a cetain prices. Over here in the west, they were also at a certain price, whatever it was; I do not recall. Now, in order to get those apples over into the other district, they would have to pay a certain freight charge which would increase the price of apples. Now, instead of increasing the price of apples, the O. P. A. simply paid as a subsidy the transportation costs so that the apples over in New England were the same price as in the West. I mean, that is one of the instances, where a subsidy was used rather than giving an increased price to the apple grower on this side; which was not necessary. I mean he was getting along very well on 5 cents. Well, all right, Dr. Ware; you have aroused something, now. You have us all thinking.

Dr. WAKE. These suggestions relate to the clarification of the intent of the act as well as to actual specific amendment to the act.

Now, we believe that if the present Price Control Act is strengthened in these three respects and extended for a sufficient time after the close of hostilities it will provide the means for carrying on a successful fight against inflation in the months and years ahead. No changes in the act must be allowed to reduce the present authority or hamper the present procedure, for these constitute the minimum essentials for price control.

There are many current attacks on specific features of the act, and many proposals to limit the authority or modify procedures. All these attacks are actually attacks on price control itself.

Senator TAFT. How can you say that?

Dr. WARE. Because if price control is to serve any purpose at all it cannot be any weaker. There is no extra strength.

Senator TAFT. That is a general statement that no one questions. If we have evidence of a clear case of injustice I do not see why an amendment to meet that is any attack on price control, and we have a good many of those cases-people who have been put out of business; cases of injustices as to particular individuals. Now, I do not think there is any attack on price control in trying to correct those things: and this general attitude that "any amendment is a crippling amendment" seems to me a wholly unreasonable view.

I am just as anxious to maintain price control as anyone, but I say we do have called to our attention a good many cases that ought to be corrected. The whole question of procedure, the whole question of getting hearings on the validity of regulations, is something that I think certainly should be corrected so people can get a hearing; and in my opinion they are not crippling amendments.

I do not think you can just take a sweeping view that there can be no improvement in this act without weakening it.