time is employing approximately four hundred thousand workers, but in 1929 the top was about 425,000. If that is true I do not see that there is great unemployment in the textile industry.

Mr. WOOD. Have you finished your statement?

Mr. SMETHURST. Yes, sir.

Mr. WOOD. What method would you have us employ legally to give employment to these 9 million workers who are permanently unemployed? Have you any notions about that?

Mr. SMETHURST. Legally?

Mr. Wood. For the enactment of legislation. That is what this Congress is interested in.

Mr. SMETHURST. I think we have had 4 years of attempts to do this through legislation but we have gotten nowhere. I wonder whether the sensible thing to do would not be to see what we can do without legislation for the same period.

Mr. WOOD. We were doing that during all of these years before 1933. But through the N. R. A. and the other recovery measures, the Banking Acts and others that I have mentioned, there have been five or six million workers put back into permanent employment industry out of 16,000,000 unemployed in 1933. Don't you think we have accomplished something?

Mr. SMETHURST. I do. I would not dispute you for a moment. But I think the greatest slack in unemployment now is generally in heavy goods industry, in construction. From recent figures it appears that about one-half of the present unemployed are in those industries. Mr. ELLENBOGEN. Have you made a study of the bill from a legal viewpoint?

Mr. SMETHURST. I have.

Mr. ELLENBOGEN. Did you consider it unconstitutional?

Mr. SMETHURST. That is my opinion. And that is the opinion of the law department of the association.

Mr. ELLENBOGEN. I was just asking your opinion. You do consider some of the sections unconstitutional, do you?

Mr. SMETHURST. Well, I would rather have the particular section pointed out.

Mr. ELLENBOGEN. Those sections that deal with conditions for making Government loans and extending Government loans, for instance, and making Government purchases. Is there any doubt in your mind that those are constitutional?

Mr. SMETHURST. There is a doubt. I will have to be frank and say that. I cannot refer to any specific authority for it.

Mr. ELLENBOGEN. Don't you think the Government has the power

to buy from whom it chooses?

Mr. SMETHURST. To buy from whom it chooses?

Mr. ELLENBOGEN. Yes; to buy from whom it chooses.

Mr. SMETHURST. Yes; I will agree to that.

Mr. ELLENBOGEN. Then the Congress an lay the conditions under which the purchase is made?

Mr. SMETHURST. I will agree with that so far.

Mr. ELLENBOGEN. Then those sections which deal with Govern

ment purchases you conceive to be constitutional?

Mr. SMETHURST. No; I think there is another step in there that

you have not pointed out.

Mr. ELLENBOGEN. What is it?

Mr. SMETHURST. That if these conditions are attacked but have no bearing whatsoever to the Government's getting a dollar's worth for each dollar that it expends but are used rather to acquire an indirect control over production, you have a different situation. And I think-well, I will not refer to that A. A. A. decision again but there is some significant language there that bears on this.

Mr. ELLENBOGEN. You do not mean to say that the A. A. A. decision restricts the power of the Government to make purchases? Mr. SMETHURST. I am reading from the opinion:

It is said that Congress has the undoubted right to appropriate money to executive officers for expenditure under contracts between the Government and individuals; that much of the total expenditures is so made. But appropriations and expenditures under contracts for proper governmental purposes cannot justify contracts which are not within Federal power.

Mr. ELLENBOGEN. But those are not contracts to purchase supplies. for the Government, are they?

Mr. SMETHURST. In a sense. I think I see your point. You are speaking about the acreage contracts, which are not contracts for supplies for the Government.

Mr. ELLENBOGEN. Yes; that is right.

Mr. SMETHURST. I agree with you there. I was merely pointing out this fact. But that was not the section in this opinion that I was looking for.

Mr. ELLENBOGEN. You do not mean to say that Congress does not have the power to say by legislation from whom the Government shall buy and under what conditions its own supplies shall be bought for its own use?

Mr. SMETHURST. All I would say about that, Mr. Ellenbogen, is this: The Government can impose any restrictions or any conditions. to the award of a purchase contract if it has some relation to the Government's getting it's money's worth.

Mr. ELLENBOGEN. Even if it has no relation

Mr. SMETHURST. Then you are using that power that is denied to Congress.

Mr. ELLENBOGEN. Can you not as a consumer go and buy where you please?

Mr. SMETHURST. But I am not restricted by the Constitution. Mr. ELLENBOGEN. What is there in the Constitution that restricts the Government in making purchases?

Mr. SMETHURST. It is restricted by all of the limitations on all their powers. The power to purchase is limited by the Fifth Amendment, the same as the taxing power.

Mr. ELLENBOGEN. The power to purchase is not limited by the Constitution. When you make such a statement, Mr. Smethurst, I begin to question your judgment on the other matters.

Mr. SMETHURST. That is your privilege. I am not trying to impress you with my knowledge.

Mr. ELLENBOGEN. I have never heard a lawyer say that the Congress did not have the power to fix the conditions under which the Government supplies shall be purchased.

Mr. SMETHURST. I do not question that statement, but I say that there is a limitation on the conditions which can be imposed.

Mr. ELLENBOGEN. Then you are questioning the unlimited power? Mr. SMETHURST. I am saying that Congress cannot impose any conditions whatever. Do you suppose that Congress can pass a law

saying that no Government contracts shall be awarded to a closed shop establishment?

Mr. ELLENBOGEN. Yes; Congress can pass a law saying that we cannot buy from black people or from white people.

Mr. SMETHURST. No; that would come under distinction between races. But the Congress could say that we could buy from the highest bidder instead of from the lowest bidder.

Mr. SMETHURST. Yes.

Mr. ELLENBOGEN. Congress could say we do not need any bids. Does the National Manufacturers Association object to the part of the bill that deals with control of production? Would you be willing to see that eliminated?

Mr. SMETHURST. Our objections to the bill were taken to the bill as a whole.

Mr. ELLENBOGEN. That section about production control to which you have objected in your statement was inserted at the request of a great number of manufacturers or employers. I personally would like to see it eliminated. And, if the industry wants to see it eliminated, I will do my best to have it done.

Mr. SMETHURST. I don't know what the feeling of the industry is on that question of production control. As I said, our objection is to the bill as a whole and not any particular feature of it.

This statement is submitted by the National Association of Manufacturers, composed of many thousands of manufacturers throughout the United States and including a large number of manufacturers who would be subject to the proposed national textile bill by virtue of the definition of the term "textile industry.

The bill received the earnest attention of the National Association of Manufacturers' Congress of American Industry, which adopted the report of the committee on relation of government to industry in the following language:

The textile control bill follows the general lines of the Guffey Coal Act. The principles involved in the National Industrial Recovery Act are unsound. It is obvious that the harm to be done our economic structure from such limited legislation is only less because of its restricted scope. The difference is one of degree, not of kind. The presence of one or more industries so regulated can only serve to make more pronounced, maladjustments between industries, and to render more difficult the problem of natural adjustment and balance, so necessary to the functioning of our competitive system.

So far as Government contracts are concerned, we agree absolutely that the Government should make all necessary regulations to insure that it gets a dollar value for every dollar of public money expended. That is a duty as well as a privilege. But to go beyond that and to try, through misuse of its power, to regulate purely local matters of production through control of contractor and subcontractors, is to pervert a protective device and translate it into an instrument of boycott, oppression and discrimination. Irrespective of legal objections to such a course, it is obvious that the imposition of restrictive conditions upon bidders, narrows the field of competition, increases the cost of goods to the Government, and tends directly toward monopoly.

Your committee has noted with especial concern the various proposals in pending statutes to enforce Federal regulations of local matters by denying to violators or those who will not comply, the right to engage in interstate commerce or to use the mails. * *The type of enforcement now so frequently proposed is obviously predicated on the theory that the right to engage in interstate commerce and the right to use the mails are not fundamental rights of the individual person but are simply privileges to be conferred or withheld by Congress. This is not true either in act or in law. The right to engage in commerce, as the Supreme Court has often pointed out, antedated the Constitution and was secured by that instrument. The power of Congress is confined to the regulation

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Butler, opinion of Jan. 6, 1936) (A. A. A. decision). Not only does it involve a submersion of the Constitution but it lessens respect for law. Evasion by the legislature of normal legal procedure tends directly to bring about evasion on the part of those embraced within the scope of such legislation. It cannot reasonably be expected that laws which depend for their enforcement upon an abuse of power and a suspension of usual legal processes, will be welcomed, even by those most sympathetic with their ultimate purposes.

Furthermore, the line once crossed and the boundaries once broken,. the trespass will inevitably become more extreme. It is possible to trace an evolution in recent legislation, stemming from cautious ramblings to outright invasions. There is no perceptible distinction in policy between the present proposal and the previous attempt on the part of Congress to exercise control in forbidden territories by abortive use of the taxing power and of the right to regulate commerce, of which the clearest examples are the A. A. A. and the child-labor legislation,. the legal phases of which are discussed below.

B. The penalties are illegal and unconstitutional:

1. The proposed exclusion of unlicensed and unlabeled textile products from interstate commerce is so clearly condemned by the decision of the Supreme Court that there would seem to be no need for an extended discussion of this phase of the legislation. Reference may be made to the controlling case (Hammer v. Daggenhart, 247 U. S. 251). The Court said (pp. 273-276):

It is further contended that the authority of Congress may be exerted to control interstate commerce in the shipment of child-made goods because of the effect of the circulation of such goods in other States where the evil of this class of labor has been recognized by local legislation, and the right to thus employ child labor has been more rigorously restrained than in the State of production. In other words, that the unfair competition, thus engendered, may be controlled by closing the channels of interstate commerce to manufacturers in those States where the local laws do not meet what Congress deems to be the more just standard of other States.

The grant of power to Congress over the subject of interstate commerce was to enable it to regulate such commerce and not to give it authority to control the States in their exercise of the police power over local trade and manufacture. The grant of authority over a purely Federal matter was not intended to destroy the local power always existing and carefully reserved to the States in the tenth amendment to the Constitution.

In our view the necessary effect of this act is, by means of a prohibition against the movement in interstate commerce of ordinary commercial commodities, to regulate the hours of labor of children in factories and mines within the States, a purely State authority. Thus the act in a twofold sense is repugnant to the Constitution. It not only transcends the authority delegated to Congress over commerce but also exerts a power as to a purely local matter to which the Federal authority does not extend. The far-reaching result of upholding the act cannot be more plainly indicated than by pointing out that if Congress can thus regulate matters entrusted to local authority by prohibition of the movement of commodities in interstate commerce, all freedom of commerce will be at an end, and the power of the States over local matters may be eliminated, and thus our system of government be practically destroyed.

The application of this decision to the present bill can best be illustrated by the language of Coleman, J., in his opinion upon the Public Utility Holding Company Act of 1935 (in the matter of American States Public Service Co., opinion of Nov. 7, 1935.) In this decision Judge Coleman reviews the cases in which Congress has properly regulated interstate commerce by exercising the power to prohibit the movement of persons or things in interstate commerce. After listing such regulation Judge Coleman concludes:

The substantive provisions of the licenses are specified in sections 16 through 28 of the bill. Summarized, the provisions are as follows:

Section 16 prescribes certain minimum wage rates which, according to section 17, may be increased by the Commission; section 19 specifies maximum hours; section 21 prohibits employment of individuals under 16 years of age; section 22 restates the basis provisions of the National Labor Relations Act and provides that the unfair labor practices shall be conditions in every license; section 24 specifies certain general labor provisions; section 25 deals with work assignment and requires compulsory arbitration of changes in work assignment; section 26 authorizes the Commission to control and limit productive operations; section 27 requires employers operating on three-shift basis to pay a bonus of 5 percent to their employees; and section 28 specifies that every license shall contain certain fair-trade practices prohibiting misleading advertising, defamation of competitors, secret rebates, and inducing breach of contract. The issuance of general licenses by the Commission is provided for in section 29 of the bill and the procedure for the revocation of licenses by the Commission is outlined in section 31. A license may be revoked by the Commission after notice and hearing, with a right given to the licensee to obtain review of the action of the Commission in the Circuit Court of Appeals of the United States. The findings of the Commission as to the facts, if supported by any evidence, shall be conclusive. Section 31 (g) provides that the commencement of proceedings shall not, unless specifically ordered by the court, operate as a stay of the Commission's order, and section 32 provides that upon refusal to issue a license or upon revocation of any license, the Commission shall notify all agencies of the Government which are thereupon. required to accept such notiffication as binding until the order has been set aside by a court. Persons found guilty of an unfair labor practice within the meaning of the National Labor Relations Act may be deprived of their license.

The following are the penalties provided by the act:

Section 12 prohibits the use of the mails for transmission of matter relating to textile products manufactured, processed, or produced not under a license issued by the Commission.

Section 13 prohibits Government purchasers from making contracts with, or loans to, producers, manufacturers, or processors of textile products not licensed by the Commission, and requires all individuals receiving loans or grants from the Government to agree that the grantee will not in the use of such funds contract with a person in the textile industry not licensed by the Commission.

Section 14 prohibits the interstate commerce in all registration of securities of unlicensed textile corporations.

Section 34 provides that any product purchased or shipped in interstate commerce in violation of the act shall be subject to seizure by any public officer or by any officer of the Commission authorized by the Commission, and shall be forfeited to the United States.

Section 36 (a) provides that any violation of the act shall be deemed a misdemeanor and upon conviction an offender shall be fined not more than $100,000 for each offense or imprisoned for not more than 1 year, or both; the district courts of the United States are vested with jurisdiction to restrain violations of the act by injunetion; any person wilfully resisting or interfering with any member of the Commission or any of its agencies in the performance of