Secondly, the Defense Production Act of 1950, as amended, closely follows the accepted pattern of doing business. Certainly it would appear logical that controls under a familiar and recognized business system would be more easily administered than to attempt to impose a new and foreign system. In a time of crisis there must be a minimum of confusion and floundering. In the opinion of retailers, the present act does minimize such confusion. Likewise, unless a clear course is charted, business cannot operate efficiently. It is indicated that the President would endeavor to put business on a day-to-day basis pricewise, with no businessman knowing from one day to another what his prices were to be, what costs he would have to absorb, and whether or not he could break even at the end of the year. In analyzing the approach now proposed by the President, it seems abundantly clear that instead of sound administrative principles, the political approach has become the attitude of the day. What else can be concluded when the amended provisions of the 1950 act are incongruously labeled "cost-plus," "guaranteed profits," and retailers are described as "agents for inflation"? The act has been termed a "fraud" upon the American people. Can there be a greater fraud than denouncing a statute seriously considered by the Congress of the United States and signed by the President, without an honest effort to administer it? Retailing recognizes that no law is perfect. But retailers always reserve judgment on a product until it is tested. Good business sense has established that principle. Therefore, it is hoped that this committee and the Congress, in its good judgment, will require a test of this act before hastily altering or amending it. If after 3 or 4 months' sincere effort to carry out its provisions it is shown that defects exist, changes could and should be made. Only then could real defects be determined, and sound remedies suggested. The transcript of the hearings before the Banking and Currency Committee in executive session on the proposed amendment pinpoint our anxiety in regard to premature changes in the 1951 act. Mr. Charles E. Wilson, Director, Office of Defense Mobilization, in response to questioning, admitted freely that recent increases in wages granted by the Wage Stabilization Board would be certain to force increases in prices throughout the economy. He also admitted that when these increases in prices have occurred it will be necessary to again increase wages. Thus, the business community finds itself on a merry-go-round without end and must take the position that business firms at all levels in the economy must not be made the whipping boy of price control through compulsory absorption of wage and other cost increases. To allow such to happen would simply represent a concealment of inflation and a damming up of economic forces which sooner or later must find release. The experience following World War II price control and the results following its repeal serve as abundant evidence of this fact. For these reasons, the American Retail Federation respectfully urges that the present act not be reopened for amendment during the closing days of the present session of the Congress. UNITED STATES SENATE, COMMITTEE ON PUBLIC WORKS, September 14, 1951. Hon. BURNET R. MAYBANK, Chairman, Committee on Banking and Currency, United States Senate, Washington, D. C. DEAR MR. CHAIRMAN: I wish to hand you herewith two resolutions adopted by the board of directors of the South Dakota Stock Growers Association at the quarterly meeting held on September 11. Resolution No. 1 asks that all controls on livestock and livestock products be lifted. Resolution No. 2 opposes enactment of any legislation which would grant authority to the Office of Price Stabilization to reimpose slaughtering quotas. I trust that the above-mentioned resolutions will be considered by the members of your committee when amendatory price-control legislation is considered. With kindest regards, I am Sincerely yours, FRANCIS CASE. RESOLUTION No. 1 PRICE CONTROL Whereas price control has caused only uncertainties in our industry and has resulted in less meat for the American table and higher prices than we would have or will have had without it; and Whereas OPS is failing in the control of wages and prices of other commodities and has placed the control of livestock and meat in the hands of those who are not only unfamiliar with it but unfriendly to the industry, who have consistently pointed out the erroneous belief that the livestock industry is owned by rich cattle barons making fabulous fortunes from the industry; and Whereas the truth is, with the exception of a very small percent, the industry is owned by those whose incomes are no more than those working in industry and putting in from dawn to dark, 7 days a week, and many living in very remote circumstances: Therefore be it Resolved, That we urge OPS to release all controls on livestock and livestock products and give the industry an opportunity to furnish the necessary meat for the American table; and be it further Resolved, That a copy of this resolution be sent to the Director of OPS and each of our congressional delegates. RESOLUTION No. 2 SLAUGHTER QUOTAS Whereas a bill has been introduced in Congress to reenact the power of the Director of Price Control to establish slaughter quotas; and Whereas the imposition of slaughter quotas will permit a surplus of cattle at the terminal markets at the end of each quota period to the extent that they cause severe breaks on the markets, which in turn will result in less production, encourage black markets, and with a final result in less meat for the American table: Therefore be it Resolved, That we urge our Congressmen and Senators to use their best efforts in defeating this bill. STATEMENT OF COOPERATIVE Food DistriBUTORS OF AMERICA, Edward G. De STAUTE, GENERAL PRESIDENT My name is Edward G. De Staute. I am general manager of Spartan Grocers, Inc. of Los Angeles, Calif., and president of the Cooperative Food Distributors of America. I appear in opposition to the proposed bill S. 2092 for three reasons: First, the proposed bill eliminates retailers and wholesalers from its benefits. It limits the applicability of its relief provisions to manufacturers and processors. We see no reason to eliminate wholesalers and retailers in any amended form of the Capehart amendment (sec. 402 (d) (4)). What is fair for the manufacturer and processor is also fair for the retailer and wholesaler. Advocates of S. 2092 may argue that the Herlong amendment (sec. 402 (k)) affords adequate protection to the retailer and wholesaler. This new section of the amended act requires that retailers and wholesalers must get the customary percentage margins prevailing during the period May 24 to June 24, 1950. But the Herlong amendment has no individual relief or appeal provision as does the Capehart amendment, and we feel such individual appeal right is necessary. This brings me to my next point. Second, the proposed bill weakens the right to apply for adjustments in the case of hardship or inequity. The Capehart amendment gives any person subject to a ceiling-price regulation the right to apply for adjustment of his ceiling price if he is entitled to such adjustment using the costs standards set forth in the Capehart amendment. This specific appeal provision by an individual on the basis of his individual business is very valuable. We have been informed by our counsel that such appeal could not be effectively made under the old law. We have been further informed that it could not be made under the proposed S. 2092, which simply states that "the President shall make appropriate provision for adjustment" in hardship cases. Experience with price control has shown that such general language results usually in no relief at all. Third, the proposed bill lists costs which may be made the basis for ceiling-price adjustments in a much less specific manner than a similar list in the Capehart amendment. The proposed bill also gives the President the right to determine which of these costs are “properly allocable" to production and sales by manufacturers and processors. We think this is undesirable if any such adjustments are to be allowed. The specific list of costs set forth as a basis for adjustment in the Capehart amendment, with the proviso that the President may exclude such of those as he finds are unreasonable and excessive, gives ample administrative elbow room to the OPS. S. 2092 widens the elbow room to a gaping hole, and we do not see the basis for such increase in the excrcise of discretionary authority. For all of the foregoing reasons, we oppose the passage of the bill S. 2092, which would place the penalty of increased cost on one segment of our economy while arbitrarily allowing other segments to escape the burden. STATEMENT OF GENERAL FEDERATION OF WOMEN'S CLUBS, MRS. GILBERT F. LOEBS, CHAIRMAN, CONSUMER DIVISION The General Federation of Women's Clubs is an organization with an aggregate membership in the United States of some 51⁄2 million women, of whom nearly 800,000 hold per capita or active membership. These women, representing largely the homemakers of America, are deeply concerned and alarmed by the current high cost of living, the further inflationary pressures which threaten as a result of the national-defense program, and the inadequacy of the National Production Act, in its present form, to control these pressures. In May 1951 the delegates at the General Federation's convention in Houston, Tex., adopted the following resolutions: "Whereas inflation is second only to war itself as a menace to the national economy and to individual welfare; and "Whereas the United States now faces grave dangers of uncontrolled inflation; and "Whereas temporizing with the situation undermines our whole economic structure as a nation and brings disastrous and unjustifiable hardship to our people: Therefore be it "Resolved, That the General Federation of Women's Clubs, in convention assembled, May 1951, urge the Government of the United States to act with promptness and firmness in this emergency by adopting and enforcing control measures without regard to partisan, political considerations, or the interests of special groups; and be it further "Resolved, That the General Federation of Women's Clubs declare its conviction, despite difficulties involved, that food prices should be rolled back to those prevailing on or about November 1, 1950, and all other vital consumer items to levels relatively in balance with the food prices of that date." Because the Defense Production Act as amended falls far short of the control measures called for by the above resolution, the General Federation of Women's Clubs urges the repeal of the following crippling amendments to the National Production Act: 1. Section 402 (d) (4) (the roll-back limitation, roll-forward requirement for manufacturers and processors). 2. Section 402 (k) (the percentage-margin provision for distributors). 3. The last sentence of section 101 (the prohibition of slaughter quotas). The General Federation objects to section 402 (d) 4 because 1. The wage-price spiral will prove disastrous to people with fixed and limited incomes, thereby affecting our whole economy. 2. The section places a heavy burden of computation and reporting on business, which is complicated, unwieldy, and, in many cases, will not be a true picture. 3. The section also encourages violation of regulations; promotes dishonesty. To section 402 (k) because This needlessly boosts prices, proves a hardship to the consumer and encourages inflation. To section 101, last sentence, "prohibition of slaughter quotas," because It is inconsistent with the desire expressed by Congress to have price ceilings effective and workable. Quotas are necessary to (1) make ceilings effective, (2) discourage black markets, (3) protect civilian needs, and (4) uphold the whole system of price control. Hon. BURNET R. MAYBANK, HANSON, LOVETT & DALE, Washington, D. C., September 19, 1951. Chairman, Committee on Banking and Currency, United States Senate, Senate Office Building, Washington, D. C. DEAR SENATOR MAYBANK: Safeway Stores has directed me to make its position in opposition to the repeal of the Capehart amendment known to your committee with a request that it be incorporated in the record of your committee on the proposal to repeal this provision of the Defense Production Act. Safeway is a food chain operating approximately 2,000 retail stores in 23 States and in the District of Columbia. It is affected by all of the regulations of the Office of Price Stabilization affecting the sale at retail of foodstuffs. Safeway desires to call to your committee's attention particularly the fact that whereas its prices on many of the items which it sells were frozen by the provisions of general ceiling price regulation as of the base period December 19, 1950, to January 25, 1951, its suppliers' prices to Safeway were not similarly frozen. The result of the operation of general ceiling price regulation and other regulations issued by the Office of Price Stabilization has been to diminish-even in some cases wipe out-the small margin of profit realized by Safeway in the normal conduct of its business. That this margin never was exorbitant is demonstrated by the fact that on sales in excess of $1 billion in 1950 Safeway realized a profit of but 1.4 percent on sales. The Capehart amendment provides that applications for adjustment in prices may be made by those adversely affected by the regulations of the Office of Price Stabilization. Furthermore, this amendment provides that ceiling prices promulgated shall reflect adjustment for increases or decreaess in cost occurring subsequent to the date on which the applicant received its highest price and prior to July 26, 1951. Safeway has filed applications for adjustment and has submitted evidence to the Price Director in support thereof. To date no action has been taken thereon and Safeway has been informed that no such action will be taken until (a) Congress determines whether or not to repeal the Capehart amendment without first having it thoroughly tried out; or (b) in the event Congress refuses to repeal the Capehart amendment a study of retail prices Nation-wide is completed by the Office of Price Stabilization. The study in turn will consume several months of the 12-month period during which the law is operating. Safeway's operating costs for the United States as a whole have increased 18.5 percent during the period January 1950 through July 1951. These in turn when related to sales amount to approximately 2.5 percent of sales. Thus it can be seen that the application of the Capehart amendment to a food retailer will not result in material increases in price. Safeway itself has surveyed some 858 grocery items of which it found that 82 percent are entitled to increases under the Capehart amendment.. Of these, however, approximately one-third were for only cent per item. The average grocery item sells for about 30 cents. A 1-cent profit on such an item, therefore, equals about 3 percent on sales. Conversely if costs go up as they have done, the merchant operating on a narrow margin of profit on sales as does Safeway and who is prohibited from using them as a factor in making his prices is threatened with bankruptcy. It is Safeway's opinion that the application of the Capehart amendment in the retail food business is essential to that business and that adjustments in price should be made, as costs increase or decrease just as is provided for in the amendment. The retail food business is not a static one. The turn-over of merchandise is great. There are many fluctuations in cost to the retailer from week to week. His prices to his customers must be calculated upon his actual costs if he is to remain in business. Flexibility in the handling of such fluctuations is imperative. To date no equitable, fair or proper substitute has been found for the practice of basing prices at retail on a margin over cost. Very truly yours, ELISHA HANSON, Attorney for Safeway Stores, Inc. Hon. A. WILLIS ROBERTSON, MILK INDUSTRY FOUNDATION, Washington 6, D. C., September 17, 1951. United States Senate, Washington, D. C. MY DEAR SENATOR: I note that you are conducting brief hearings regarding the so-called Capehart amendment to the Defense Production Act of 1950. The Milk Industry Foundation is interested in the topic being given consideration by your committee because of the fact that a procedural regulation has just been issued by the Office of Price Stabilization. This procedural order omits four basic costs in the computation of total allowable expenses and distribution to plant delivery costs, as shown on the form accompanying the order. The omitted costs are: 1. Purchased fuel and power. 2. Ordinary repairs and ordinary maintenance. 3. Licenses and taxes (excluding income and certain property taxes). 4. Purchased transportation of materials and supplies. It would appear that in striking the cited cost items from the schedule of allowable costs, Mr. DiSalle's office was assuming that the Capehart amendment. is not effective or that your committee will vote to amend it so that the procedural order referred to with accompanying form will actually be legal. As I write I cannot see but what the omission of the four cost factors cited is contrary to the provisions of the Defense Production Act. The costs which have been included as allowable are: plant wages, delivery wages, and containers including cans and cases. Obviously these three cost factors are of the greatest importance but as the combination of materials and wages exceeds 80 percent of the sales dollar in the fluid milk industry, you will readily perceive that the four items which have been omitted also become of great importance. I would like to point out also, as shown by the enclosed report of a survey by the University of Indiana, that the profit per dollar of sales after taxes is 2.06 cents (the profit per quart of milk is two-fifths of a cent). The fact that this order has come out with the omission of the four cost factors cited gives, I believe, a criterion of the intent of the Office of Price Stabilization when it is following out the suggested amendment (suggested by the administration) to clear up administrative problems of section 402 (d) (4) wherein it says "the President shall make appropriate provisions for adjustment for any such manufacturers or processors whose ceiling prices result in financial hardships to such manufacturers or processors". I would conclude that "appropriate provision for adjustment" in the case of fluid milk distribution would not include all essential costs. We respectfully recommend that your committee consider in any revision of the Capehart amendment inclusion of a mandatory direction to the Office of Price Stabilization that it recognize established and legitimate costs of doing business. We make this recommendation with thorough knowledge of the attitudes which prevail at certain levels in the Office of Price Stabilization, many of whose staff members are of the opinion that processors and distributors can by a process of "cost absorption" hold down sales prices. This opinion is obviously based on the belief that as sales volume increases unit costs of overhead decrease. Certainly for some manufacturing industries, notably the airplane industry, this is true. However, in the great fluid milk industry (the sixth largest industry in the United States) it most emphatically does not apply for the reason that increases in volume are dependent on a change in diet of the American people. It is true that experience has shown that in a war emergency when there is a scarcity of other proteins, sales of milk increase, but it is also true that the increased sales volume is very small compared to that in many manufacturing industries, especially those having war orders. It may be stated that an increase of 5 percent per annum for the industry in the United States is considered-very large. Very truly yours, BENJAMIN F. CASTLE, |