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doubtedly do give authority to require a license of everybody. As the doctor has intimated, it is not probable that we will do that.

Senator CLARK of Idaho. Since we have a pretty well united country and a tough series of wars to win, it does not seem to me that the Administrator is going to have any unusual difficulty in getting cooperation, particularly with the criminal penalty here. Senator BROWN. You have completed your statement, Doctor? Dr. NYSTROM. Yes.

Senator BROWN. We thank you very much. You have opened up some interesting points here that will cause us to think seriously about them.

Dr. NYSTROM. I thank you heartily for your courtesy.

Senator Brown. I have here a statement from the National Automobile Dealers Association, whom I persuaded to refrain from testifying.

(The statement of the National Automobile Dealers Association is as follows:)

STATEMENT OF THE NATIONAL AUTOMOBILE DEALERS ASSOCIATION ON PENDING BILLS TO PROVIDE FOR THE CONTROL OF PRICES

The National Automobile Dealers Association has upward of 17,000 members, each of whom is enfranchised by a manufacturer of automobiles to sell new automobiles, or automobiles and trucks, replacement parts and accessories. The members of this association sell about 85 percent of all new automobiles sold in the United States. Through the 17,000 dealers who are direct members and by reason of the cooperation of local and State automobile dealer associations, the National Automobile Dealers Association speaks for all automobile dealers who are articulate through organization.

It is the desire of the members of this association to express their views on certain fundamental concepts underlying the control of prices of commodities and finished goods by the Federal Government. These comments are made with the consciousness that this Nation is engaged in war and with the full desire of the members of this association to do all that may be in their power individually or through organization to forward the defense of this Nation and to aid the successful prosecution of the war.

The members of this association are mindful of the dangers of inflation to the Nation and to themselves, and are cognizant that price increases not necessitated by increased costs would tend to inflation and would seriously impede the successful prosecution of the war.

It is the belief of the members of this association that as between the alternatives of selective price controls and a general freezing of all prices, the general freezing order would be more effective in avoiding inflation and would create less inequalities between trade groups than a selective price control system. A general freezing order enacted by Congress would create a law applying equally to all, whereas under a selective price-control act great discretion would necessarily have to be vested in a single administrator or an administrative board and it is impossible to obtain perfect equality in the exercise of discretionary controls. A general freezing order would undoubtedly create individual hardships but provisions could be made for the relief of hardship cases through appeal by the affected group to a board of review which could be created by Congress. It would be necessary, of course, for such board of review to exercise discretion in granting or denying relief but such a type of discretion is well founded in American law as distinguished from putting in the hands of a single administrator or a board the discretion to apply or to withhold from application restrictions generally authorized by Congress.

Because price controls will be recognized by businessmen as being a part of the war effort, the vast majority of those businessmen will voluntarily comply with a price-control law. Realistically, however, it must be acknowledged that there will be those who will not voluntarily submit to such restrictions without some coercive incentive. A licensing system has been proposed whereby each vendor of commodities or finished goods subject to price restriction would have to obtain a Federal license in order to do business, conditioned upon compliance with the price restriction. The very basis of our republican form of government is that local matters should be regulated by the States and municipalities, and it is difficult to conceive of any matter more local in character than the operation of a retail establishment serving a local community.

If such local enterprises must depend for their right to engage in such enterprise upon the granting of a license from the Federal Government the jurisdiction of State and local governments over local affairs will be effectively destroyed. The Federal Government has always relied for enforcement of Federal laws upon civil injunctions and criminal prosecutions. It may be that for the duration of the war period the Federal Government will have to exert a direct control over local merchants in order to effect a price-control program, but it would seem unnecessary in order to perfect that program to depart from the well-recognized enforcement remedies of the civil injunction and criminal prosecution. The licensing power has properly been limited in American law to those occupations that bear a close relationship to the health, morals, and safety of the public. It is not without significance that the totalitarian nations have made extensive use of the licensing device to limit and control trades and those who were permitted to engage in them. Even to obtain the admitted enforcement advantage it is dangerous to extend licensing beyond the traditional limits of the exercise of the police power to those matters affecting health, morals, and safety.

In addition to the desirability of imposing impartially upon all persons and all trades equal restrictions, a general freezing order has the advantage of removing the necessity for a single administrator. If a general freezing order were established the administrative agency would necessarily be in the position of a review board, the scope of whose functions would be to hear and consider petitions for relief from the general order in hardship cases. If a selective price-control system be instituted it would probably require a single administrator for efficient administration. In order to afford a speedy right of review to persons who felt themselves aggrieved by an order of the administrator, it would unquestionably be necessary to set up a board that would have the right to entertain petitions for the review of such orders. Such a board of review should have the right not only to make determinations as to whether the administrative order was within the authority set up in the law but it should also have the right to review the priority of the administrative order with full review of the facts upon which the administrative action was predicated.

The power to control prices at which commodities and manufactured articles are sold by merchants is a very drastic power which should be limited to the duration of the war period. The right to price the goods which one has for sale to the public is a very fundamental right in the private enterprise system which, if it be necessary to have suspended during a war crisis, should be protected beyond doubt so that the suspension will automatically be lifted at the conclusion of the war. Termination should be specifically provided in the statute, should not be left to Executive order and it should be definite. If the specified termination date is reached prior to the conclusion of the war, it would be within the province of Congress to make a further extension.

Respectfully submitted.

L. C. CARGILE,

President of the National Automobile Dealers Association. Senator TAFT. Mr. Chairman, Senator Brooks has asked me to call attention to a number of telegrams he has had from hotel keepers who seem to think that hotel rates ought to be frozen as of this date of October 1 to 15. Frankly, I do not know about this, and I do not know what Mr. Ginsburg thinks, but I do not think there is anythink that can be done unless they fall under defense housing. I do not see how you can fix room rates in hotels.

Senator BROWN. You had better find out a way to do it. Mr. GINSBURG. I think the answer is that the term "defense housing accommodations" is defined in the bill to include hotel accommodations. But the April 1940 date must be adjusted for any increases in cost. That is mandatory.

Senator HUGHES. How would that affect Washington?

Mr. GINSBURG. Where the local community has taken adequate action to control rents, and has in fact controlled them, no Federal power exists under this bill.

Senator BANKHEAD. Have you considered the District rent bill? Mr. GINSBURG. Yes, sir. We worked with their people in connection with it.

Senator BANKHEAD. What do you think about putting it into this bill for the Nation?

Senator BROWN. There is such a provision in this bill.

Mr. GINSBURG. I think it would be inadvisable, sir, because that bill was intended for the District of Columbia. It was tailor-made for the District of Columbia. There were certain provisions put in it which I think are peculiar to this community, and I rather doubt that it would be advisable to extend that law generally throughout the country.

As a matter of fact, what we had planned to do was to work with the real-estate boards and the other interested people in the preparation of a model statute which would be offered in lieu of regulation under section 2 (b) of this act.

Senator TAFT. Then, as I understand it, what these hotel people must be objecting to is this date on page 5. That part reads thatThe Administrator shall ascertain and give due consideration to the rents prevailing for the accommodations, or comparable accommodations, on or about April 1, 1940

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They are claiming, as I remember it now, that hotel rates in many places have been greatly depressed. There are many cities in the country where there has been a great oversupply of hotels, and that what they could charge at that time had no relation to what the basis of cost was at that time and should not be used in determining their proper rates. That is their argument. I present it for whatever it is worth.

Senator BROWN. I announced on yesterday that the hearings would be closed at 11 o'clock today. I now declare them to be officially closed.

I want to say to the Senators that if there is anything received by any of you that you want placed in the record, we will see that it goes into the record if it is received before tomorrow night.

The committee will now go into a short executive session. (Thereupon, at 11 a. m., the hearing was concluded, and the committee met in executive session.)

(The following was submitted for the record :)

TABLE 19 SUBMITTED BY SENATOR BUTLER ON THE TREND OF FARM PRICES AND FACTORY WAGES, 1909 TO DATE

The attached table shows the trend of factory wages and of prices during the past 30 years. It is perfectly clear from this table that farm prices are far, far below a parity relationship with wages, since factory hourly wages are now better than three and one-half times as high as they were during the base period, while farm prices have increased only 31 percent. In other words, factory hourly wages have gone up more than eight times as fast as farm prices.

If there is danger in the inflationary spiral of wages such as we had in the last war, then that danger has already happened, since wages are already higher than the absolute peak they reached during that last inflationary period, and they are still going up, and apparently this administration, and the sponsors of this bill, have no intention of stopping them.

TABLE 19

Trend of farm prices and factory wages, 1909 to date

[Index of hourly earnings of factory workers recomputed to base of 1910-14-100]

[blocks in formation]

Source: The Demand and Price Situation, October and November 1941, Bureau of Agricultural Economics.

STATEMENT MADE BY SENATOR BANKHEAD AT A BANQUET HELD IN BIRMINGHAM, ALA., OCT. 7, 1941

There seems to be an impression in some quarters that if a price ceiling on cotton is fixed at the parity price level that farmers would then receive parity prices for their cotton. It is agreed that farmers are entitled to receive parity prices without legal interference through price-cortrol devices, if under fair-trade conditions the market price goes that high. It is true, however, that if a price ceiling is fixed by law at the parity price, there would be no reasonable chance for farmers to sell their crop of cotton at the full parity price. The reasons for the result stated are obvious and well known in cotton-trade circles.

The market price of cotton and a number of other agricultural commodities is ascertained by daily trading on the commodity exchanges. If there are more buyers than sellers the price advances. If the sellers predominate, the price declines. When a cotton merchant or a cotton mill buys a quantity of cotton, prudent business management calls for hedging sales on the exchange to insure against loss as the result of declining prices. Investors and speculators who believe the price will advance and thereby produce a profit buy the hedges. If an annual crop is 12,000,000 bales and the annual consumption is 10,000,000 bales, who buys the ntire crop during the 4 or 5 months of the marketing seasons? Consumers buy their current requirements, and traders, who believe that a profit will accrue by holding the cotton, buy the rest of it.

The present parity price is 17 cents for seven-eighth-inch middling cotton. If it is made unlawful to sell cotton at a higher price than that, who will buy the cotton or the hedges? If the mills cannot sell hedges, they can with prudence buy cotton only as needed for current use. Without buyers, every offered sale will drive down the price. Until the price goes low enough from the ceiling and parity price to attract buyers there can be no future sales. Without that reduction in the price and without a margin wide enough to encourage speculators and investors to buy, there would be no market for cotton except in quantities sufficient to supply the immediate needs of the mills. Such a situation would produce unhappy results as follows:

1. The farmers would not get parity prices.

2. Farmers would be deprived of a market for a large part of their crop during the marketing season.

3. It would result in mortgage and other lien foreclosures or cause long delays for creditors.

If an all-time market for cotton is maintained, there must be fluctuations in prices. If a price ceiling is fixed for cotton, the fluctuations will all be below that price. If parity is the ceiling point, all cotton will be sold below that point. A maximum price fixed by law at the parity level would mean either a price to the farmers lower than that price or the closing of the markets for the sale of cotton except as needed for prompt use. Such a situation is unthinkable and will be resisted to the bitter end.

If cotton, wheat, and corn producers are to be given a chance to get parity prices and parity income, there must be reasonable flexibility in price ranges above parity prices, as well as below those price levels. If inflexible ceiling prices are to be fixed by law, without having adequate floor prices, then a fair and reasonable margin must be provided between the parity price and the ceiling price. There is a difference of opinion among sincere farm leaders on what that margin should be; 10 percent and 20 percent have been suggested; the floor price under the basic commodities is 15 percent below parity. It seems to me that a fair and reasonable adjustment would be to permit a similar margin of 15 percent above parity prices. The price would then fluctuate between these two levels and would be governed by the trade law of supply and demand.

If advocates of a lower ceiling are not willing to accept a ceiling price of less than 10 percent above parity, then I submit that the floor price should be increased from 85 to 90 percent of parity, leaving a margin of 10 percent above and 10 percent below for price flexibility. Under this formula, if adopted, present prices for cotton would range between the loan price 85 percent of parity on August 1-16.49 cents a pound, plus 25 points which represents the difference between seven-eighths-inch middling and fifteen-sixteenths-inch, making 16.74 cents as the low, and 19.80 cents which is 15 percent above present parity of 17 cents plus the 25 points difference in staple as the high.

Under no circumstances, in my opinion, can a bill pass Congress which limits the price of the production-controlled basic crops to a point less than 10 percent above parity. The administration has agreed to that price as a ceiling point.

It is generally agreed that when a surplus, of any commodity exists there can be no inflationary price for that commodity. The object of the pending price control bill is to prevent inflationary prices. There exists in this country large surpluses of cotton, wheat, corn, and tobacco. There is no sound reason for including these commodities in a price-control law so long as there are large surpluses in the ever-normal granary.

Another important reason, from the farmer's standpoint, for objection to a price ceiling at the parity price is the fact that parity income is more important than parity unit prices. The mere fixation of a price per pound for cotton establishes only one of the income factors. The other is volume. Price times volume. This year, in the face of rapidly rising prices of everything the farmer buys, there is a reduction in production of cotton of about 15 percent over last year. The reduction may be 20 percent. A price ceiling fixed at the announced parity price would leave the producers 15 or 20 percent short in income. Parity income calls for parity price on the average quantity produced.

Dr. Stine, an outstanding economist in the Bureau of Agricultural Economics, has furnished me with the definition of parity income, as distinguished from parity price. It is as follows:

"Parity income takes into account quantities and prices for all products of the farm. Costs are deducted and the net income for farming is compared with the net income from other sources in terms of per person living on farms, and per persons not on farms. Parity prices indicate the exchange relation in terms of prices per unit between the products of the farm and the items farmers buy for production and living. In this there is no allowance for changes in volume of production nor in volume of purchases of goods."

If an inflexible price is fixed at 17 cents (present parity price), how would the cotton farmers' income compare with the income of industrial labor whose wage scale is positively fixed except as it increases from time to time?

Present so-called parity prices for agricultural commodities do not truly represent parity between agriculture and industry. This country cannot have real lasting prosperity until a real balance in earning power between these two groups is established. The debt-paying and purchasing power of farmers should be readjusted upward. That can be done now only by increasing the daily, weekly, and annual earnings of the agricultural workers.

Walter Lippmann has recently made a suggestion for the treatment of this subject which seems to merit full consideration. His formula, as stated by him, is in part as follows:

"If we can tie farm prices to industrial prices by the rule of parity, and if we can tie wage rates to the cost of living, then we can concentrate our regula

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