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controls therefore encourage consumption on the one hand and discourage production on the other.
One thing that is obvious to the meat packer, and to the consumer also, is that price controls cannot succeed in getting good distribution of meat and meat products to retail stores. In the absence of controls, however, that job is splendidly and automatically handled by industry.
One of the great accomplishments of the meat industry is its ability to put fresh meat in all the butcher shops in the Nation and keep those shops constantly supplied. When contrals are not in effect you can walk into any butcher shop and mke your purchases from a variety of freshly received cuts. If the industry is allowed to operate after June 30 un hampered by controls there will be meat available in all the stores with grades and cuts for every pocketbook.
The industry's experience with price controls impels our members to declare in the interest of the American people that controls must be discarded now as unnecessary and unworkable. If they are not discarded and if inflationary forces develop there will be black markets, disregard for law, unsanitary practices, waste of meat and valuable byproducts, and maldistribution of meat to consumers.
Severe meat shortages occurred during World War II. While the shortage was general some areas were destitute for the reasons that necessary additional costs, such as transportation, tended to prevent the flow from areas of production to deficit areas. Fixed prices do not allow for these variable costs. Conditions are ever changing. Some areas are in an export position at one season and import at another. Some areas import feeder cattle and export fat. Other areas import fat cattle and export feeders. Again, in the field of distribution as in the field of price the free play of economic forces make the necessary adjustments far more equitable for all concerned than could ever be done by edict.
As long as price controls are in effect the administration will have to ask for additional power to bolster up its failing program. Scores of complicated amendments, rules, orders, decrees, interpretations, and declarations will pour out from OPS. Greater enforcement power will be needed and finally an army of policemen and other OPS personnel exceeding the 60,000 employees of OPA may be demanded.
During OPA, a slaughterer of beef had to be familiar with over a hundred regulations.
A former economic stabilizer stated that the price and wage controls as administered now are a "futile, expensive, and even tragic venture.” He said that the general freeze of prices was never intended to be more than a stop-gap measure and a sop to public pressure. He said further, that "production is essential to the defeat of inflation and the short-term value of price control may already be more than offset by its impairment of production and production incentive."
Some people feel a certain sense of security in price controls. They erroneously believe that price controls can stop inflation. This false sense of security in price controls may prevent the taking of positive steps to correct the real causes of inflation.
Price controls are like a narcotic that may give you a little lift but after it is over you will be worse than before.
Regardless of man-made controls the forces of demand and supply will continue in effect and all inequities will be corrected by the black market. We believe that we can out-produce our enemies, but we doubt the wisdom of trying to out-control them.
In a free economy during a time of increasing demand and rising prices marginal producers with higher than average costs of production are automatically encouraged to produce. When the production has increased until it equals demand, competitive forces automatically check this marginal producer and balance is maintained. It is an utter impossibility for an administrator to anticipate all of the factors which are in our complex system and substitute arbitrary orders which will function.
Because livestock prices cannot be fixed at all until slaughter results are known the very nature of controls is such that the blackmarket buyer is not recognizable by the price he pays for livestock.
Probably by far the greatest amount of violation occurs in the twilight zone or gray market. Complete enforcement of complicated price controls is an impossibility,
Meat is perishable and impossible to define accurately in terms of grade, fat, tenderness, trim, content of bone, and so forth. These are just as important as the price in determining what the consumer gets for his money. Constant supervision at every point of sale is necessary to insure compliance.
We should not place the livestock man, the slaughterer, or the meat dealer in the position of going "gray” or going out of business.
The livestock and meat industry in order to help meet the national emergency by making as much meat available as possible began 2 years ago to develop an effective program to increase livestock and meat production. Nineteen agricultural groups including the leading farm and livestock organizations with the assistance of the Doane Agricultural Service of St. Louis launched a comprehensive program which embrances every possible means of getting more meat.
The industry's production program if unhampered by controls, may very well increase consumption of meat in the next few years to 160 to 170 pounds per person.
This plan entitled “A Common Sense Meat Program" calls upon farmers to increase production of feed grains and livestock producers to boost animal numbers. It covers such goals as grassland improvement and better use of pastures, efficiency in feeding, reduction of death losses, and a host of other ways to increase output.
The industry's program also calls on Congress and the administration to attack the causes of inflation through adoption of sound monetary and fiscal policies.
You cannot have cheap meat and cheap dollars. We are convinced that the solution to the inflation problem is to restore the value to the dollar and not to concern ourselves with techniques such as price controls which are not even designed to deal with the problem.
We should make sure that we handle the national debt in a way not to increase the money supply. And we must cut Federal expenditures. We are going to support the Congress in cutting Federal expenditures.
This positive program calls for making sure we get on a pay-as-yougo tax basis and stay there, and that we encourage savings and increase production.
The program we support has no place for price or wage controls. It is designed to get at the causes of inflation. It is an affirmative and workable program. Price controls deal with the symptoms, they do not deal with the causes. They do nothing to increase production. They are only able to decrease production,
Our industry believes firmly in the American way of life which respects individual initiative and stimulates production and thrift. The other system, prominent in the world today, relies on the state and makes the government master of the people. We have faith, as you do, in the American way and believe that the interests of our Nation will be served by guarding against encroachments on human liberty which inevitably come with planned economy, and excessive Government controls.
We have in the Western States Meat Packers Association 415 companies, and they are all against price controls.
I think we have one of the finest progressive groups of businessmen that you could find anywhere in the United States. They are patriotic, and they are against price controls for several reasons.
Not because they want to injure the Government or the country, because that is precisely what they do not want to do. But they have a business which is not readily controlled. There are many problems that come up in the operation of a packing business which price controls cannot solve.
Our people feel that price controls are unworkable, that they are inequitable, and that they cannot succeed in an industry as complex as the meat-packing industry.
Under a free-market system, prices in the meat industry are constantly changing. They are changing every minute, and it is that free change of price resulting from the law of demand and supply, which gets perfect distribution of meat in every individual market in the United States.
When you do not have price controls, you can find meat wherever you go, and you will find it at a price that you can afford to pay, because under free enterprise, it is the consumer that sets the price, and he sets that price in relation to his pay envelope and in competition with all other foods which he can buy.
Free enterprise is a great and remarkable system. It has made this country the great productive country that it is-a land of freedomand these controls are taking away that freedom and they are substituting a different system, which is more costly, which requires thousands of man-hours of time to write and administer, the regulations. It takes thousands of Government employees and, on top of that, it takes hundreds of thousands of man-hours in industry to study the regulations, to make reports on them, to be sure that everything is complied with.
Then on top of all that, after a legitimate packer has conformed with all of those compliance features, he finds that there are certain people in our industry, as there are in all industries today, who will take advantage of price controls and will use them for their gain. Our industry is so complex that OPS cannot possibly enforce all these regulations. There are just too many ways in which you can get around them.
So the legitimate packer and the legitimate businessman today is penalized by his compliance with the Government regulations.
I note here a part of a letter that was written by John Witherspoon to George Washington in 1777. He said:
Fixing the prices of commodities has been attempted by law in several States among us, and it has increased the evil that it was meant to remedy, as the same practice ever has done since the beginning of the world. To fix the price of goods, especially provisions in a market, is as impractical as it is unreasonable. The whole persons concerned, buyers and sellers, will use every art to defeat it and will certainly succeed.
We have found, gentlemen, that price controls adversely affect production. It has been pointed out by Mr. Owen, and others here today, that in 1951, the Department of Agriculture estimated that we would have 148 pounds of meat per person.
Then with price controls and the uncertainty that they foster, the Department of Agriculture had to come out with revised estimates throughout the year, and we finally ended up the year with 138 pounds per person, or 10 pounds less meat per person last year than was expected when the year started.
What is the reason for that? It is simply this, gentlemen: that when you substitute man-made controls for price controls, and you set rigid ceiling prices on goods, and you can only set rigid ceilings under price control, then you find that your producers, whenever they have an increase in the cost of production, inevitably get into a price squeeze.
Under free enterprise, they will take a chance on production because they realize that if their costs increase, that there is a possibility that they can pass those costs on, through a higher price.
But under price controls they cannot pass increased costs on, and the producer is curtailed.
Now during the last few weeks, it was also pointed out that the Department of Agriculture has been spending millions of dollars to buy pork products, and take them off the market, in order that the price of pork could be increased.
At the same time that the Government was spending these millions of dollars to accomplish this, the Office of Price Stabilization was spending the taxpayers' money to hold prices down.
Now that is not consistent, but the thing about it is, that it works all sorts of inequities, because recently we have had a tremendous decline in the price of lard. And now that the Government and other factors involved have raised the price of the live hog about $4 in the past several weeks, the packer finds himself in a bad squeeze and he is now losing about $3 per head on his hog because of the drop in the price of lard, and he cannot recover that because he is not at this time able to hold down the price of the live animals.
Demand and supply prices keep things in balance. They give businessmen an opportunity to make a profit and, best of all, consumers can buy at prices they can afford to pay.
Under price control all sorts of inequities occur. Take for example the potato situation. I know that probably it has been brought to vour attention, and you know what the problem is. There was a short crop of potatoes.
Without, price controls the price of potatoes would have risen, temporarily, and as a result of having risen, the demand for potatoes would have dropped off and the supply would have been evenly spread during the season and we would not have had this tremendous shortage of potatoes that we now have.
I would like to mention that in 1550 an Englishman named John Mason made some comments on price controls. He said:
I have seen so many experiences of such ordinances; and ever the end is dearth, and lack of the thing that we seek to make cheap. Nature will have her course, and never shall you drive her to consent that a pennyworth shall be sold for a farthing.
For who will keep a cow that may not sell the milk for so much as the merchant and he can agree upon?
That is always going to be true, gentlemen. We can set up price controls. We can put the authority in an OPS, and every time they make a decision they are favoring one group and they are hurting another. They cannot move fast enough to keep inequities from occurring. They are always away behind. This gives the unscrupulous people in business and industry an opportunity to come in and avoid the law, and to profit from it.
And that penalizes the people that we should depend upon to be respectable and to uphold the traditions of this country.
Mr. Talle. It is something like chasing the devil around the stump.
Mr. LILJENQUIST. Exactly right, Congressman.
We would like to go on record then, as stating that these controls are ineffectual, unworkable, and contrary to the interest of the people, and that title IV containing the authority for price, wage, and rationing control, be deleted from the Defense Production Act of 1950.
The stated purpose of the Defense Production Act is to achieve all-out production of goods and to check inflation. We believe that, in our industry, it has had just the reverse effect, because it encourage 1 consumption on the one hand, when prices were held down, and it discouraged production on the other. If inflationary factors continue, then you get a scarcity and you get maladjustment in distribution, and you weaken your forces of production.
We feel that we can out-produce our enemies, but we do not feel that we should try to out-control them, and if we do try to outcontrol them, we are led to distress and trouble and grief of all sorts, and we move our country along the road to socialism.
I would like to say also a word or two about the steel seizure. We are concerned about the Government taking over steel because we know that they have been interested in the past in taking over cattle, and they have been interested in taking over the packing plants.
When controls broke down in 1946, you will recall that President Truman, in a prepared statement, on October 14, of that year, had this to say, on the radio:
Some have even suggested that the Government go out onto the farms and ranches and seize the cattle for slaughter. This would indeed be a drastic remedy, but we gave it long and serious consideration. We decided against the use of this extreme wartime emergency power of Government. It would be wholly impractical because the cattle are spread throughout all parts of the country.
In other words, here was a President of the United States, in this democratic country of ours, stating that they had given up the idea of taking the cattle in this country, only because it was impractical.
Mr. TALLE. That was in 1946, was it not?
Mr. Talle. I remember that very well, and the President said nothing about the ethics of the thing. Mr. LILJENQUIST. Not a thing.