Municipal

consideration to any future suggestion to permit such OPS regulation. ities must continue unhampered in their efforts to solve their own problems. Not only is OPS regulation of municipal charges unnecessary and an unwarranted superseding of local government but it would even be futile.

Since profit is not an ultimate governmental purpose, municipalities would not attempt to increase their charges unless it became absolutely necessary to meet increased costs. If they suffered such pressure they could still fall back on taxation to balance their budget. Taxation in such cases just as effectively increases the cost of living in these communities as would an increase in prices. That is why we say that the OPS program would be futile in such cases. It could force a choice of method by the municipality but it could not prevent the increase from being collected in one way if not in the other.

Obviously, a Federal price-control agency should not have the power to decide whether a municipality should charge users or tax the general public. A host of factors beyond the purview of OPS but within the scope of local government must dictate such a choice.

At the present time the OPS insistence that it has statutory power to regulate publicly owned utility charges is proving a constant source of vexation. Our member cities face the problem of deciding whether to tilt with OPS, whether to seek to justify necessary price increases under present permissive regulations, whether to come hat in hand for OPS permission on a hardship basis or whether to absorb increases in costs by cutting down on some public service.

Believing as we must that Congress intended municipalities to be exempt from OPS regulation, we submit that we should not be forced to choose between these courses. Apparently only an unmistakable reaffirmation of the congressional purpose can avoid our dilemma. For that reason we respectfully submit the urgent need for the prompt enactment of H. R. 7079.

Hon. BRENT SPENCE,

NATIONAL WOOL GROWERS ASSOCIATION,
Salt Lake City, Utah, May 12, 1952.

Chairman, Committee on Banking and Currency,
House of Representatives, Washington, D. C.
(Attention: Mr. William J. Hallahan, clerk.)

DEAR CONGRESSMAN SPENCE: This is to advise you that it will not be possible for Mr. W. H. Steiwer, president of the National Wool Growers Association, to personally appear for 15 minutes to testify before your committee on Friday, May 16, relative to H. R. 6546, a bill to amend and extend the Defense Production Act. As you probably are aware, it would be necessary for Mr. Steiwer, of Fossil, Oreg., to incur a substantial increased expense and travel a great distance to attend this hearing.

Under the circumstances, therefore, we would appreciate it if you would incorporate in the record at the proper point in the hearings, the statement of the National Wool Growers Association relative to H. R. 6546. Two copies are enclosed, which is in accordance with the instructions of your committee.

Sincerely yours,

Enclosures.

J. M. JONES.

STATEMENT OF THE POSITION OF THE NATIONAL WOOL GROWERS ASSOCIATION RELATIVE TO H. R. 6546, A BILL TO AMEND AND EXTEND THE DEFENSE PRODUCTION ACT OF 1950, AS AMENDED

GENERAL

The National Wool Growers Association is a service organization for the growers of sheep, lambs, and wool in the United States. The present membership consists of State sheep growers' associations in 12 western range States, including Texas. These 12 States have 64 percent of the sheep population of the United States. In addition, our organization also has individual members in eastern and midwestern sheep-growing States.

We are the only national organization which attempts to speak for the whole domestic wool- and lamb-producing industry and we believe that we do express the views of more than a large majority of the 350,000 growers of wool and lambs in the United States.

THE SHEEP INDUSTRY FROM 1942 TO DATE

Present stock sheep numbers in the United States are approximately 56 percent of what they were January 1, 1942, or approximately 22,000,000 head short of our 1942 sheep population peak. The Bureau of Agricultural Economics, as a result of the 1950 census, found that the reduction in stock sheep by 1950 was even greater than their estimated figures last year. Instead of a 44-percent reduction from January 1, 1942, to January 1, 1950, a reduction of 47.5 percent has now been indicated for that period by the Bureau of Agricultural Economics.

On Friday, May 25, 1951, we appeared before the Senate Committee on Banking and Currency which at that time was considering the extension of the Defense Production Act, with amendments, and as recorded in the hearing on page 1761. On Saturday, May 26, 1951, the same statement was presented to the House of Representatives' Committee on Banking and Currency, as recorded on page 1135. At that time we outlined in some detail what had happened to the sheep industry under the Office of Price Administration, showing that a freeze order was placed on wool December 8, 1941, and prices remained firmly pegged at that level until September 1, 1946. We showed further that on August 1, 1942, prices of lamb carcasses and wholesale and retail cuts of lamb were frozen. On June 21, 1943. meat prices were rolled back and payment of subsidies to packers commenced, It was not until August 5, 1945, that the Commodity Credit Corporation was authorized to pay subsidies to those selling sheep and lambs to legitimate slaugh terers. In our opinion the producer received little benefit under this order. Thus the sheep producer's income was stationary during a 5-year period on wool and a 3-year period on lamb, whereas costs of production continued to rise and resulted in a 47.5-percent decrease in stock sheep in the United States. This story is told in detail in the hearings to which we have referred above. We predicted what would happen at the time of OPA; again with the institution of price ceilings and regulations under the OPS; and we now have evidence that the same thing is happening again.

After the revisions reported in stock-sheep numbers for the year 1950, by the Bureau of Agricultural Economics, the increase in stock-sheep numbers January 1, 1951, over January 1, 1950, is still indicated as 4 percent. From January 1, 1951, to January 1, 1952, a year when the demand for wool and meat was at its height, the increase in stock-sheep numbers was only 2 percent. Higher wool and lamb prices producing an income which would meet high production costs and still return a profit, made sheep raising attractive during 1950. This encouraged more farmers and ranchers to raise sheep and to save more ewe lambs and breeding ewes to increase production, That resulted in a 4-percent increase in stock-sheep numbers during 1950. However, after the wool market rose to unprecedented heights during 1950 and early 1951, there followed a continuous decline, now in its twelfth successive month, and brought about by actions on the part of the executive department and threats of action, primarily by the OPS. This once again made the sheep industry less attractive and is slowing up the rate of increased production.

On the one hand the Government is supporting the price of wool to encourage production, and the OPS, on the other hand, has, during the past year imposed price ceilings and regulations on wool which had no effect on inflation but which did in effect, discourage domestic production. It is unrealistic to have an essential and strategic commodity such as wool burdened with price ceilings, Government regulations and price supports when domestic production constitutes only about 25 percent of domestic consumption. It is true that the OPS very recently issued an order suspending wool price ceilings, but they are subject to reinstatement at the will of this Agency.

A fairly good yardstick which shows what has happened to the domestic sheep industry is the report issued by the Bureau of Agricultural Economics on the slaughter of sheep under Federal inspection. In the years prior to OPA, only from 6 to 8 percent of the total sheep and lambs slaughtered in the United States consisted of older animals, which were a part of the breeding flocks. During the years of declining numbers the ewe slaughter went as high as 21 percent of the total slaughter. In 1950 the ewe slaughter had declined to under 10 percent of the total as more breeding animals were held back for increased production. However, 1951 shows the slaughter of mature breeding animals on the increase, reaching 11.6 percent of the total slaughter for the year.

Ceiling prices are only one phase of the OPS program which has discouraged the sheep industry. This Bureau, in its lust for power, has milked dry every possible authority granted to it by writing complicated rules and regulations which further

:

stymie production. OPS restrictions on cutting carcasses, both for packers and retailers, have seriously prevented efficient distribution and marketing of lamb and mutton. What effect have these regulations had on the sheep producer? Just this: When lamb meat could not be distributed properly, not only was the wholesale price of that product affected, but the live lamb producer, was immediately affected by lower prices and less bids for his product.

It is true that the OPS realized the errors of its ways and did modify some of these cutting and distributing restrictions on March 7, 1952. These amendments have alleviated, to some extent, the merchandising problems. It is, however, and is as usual with OPS, a case of "too little, too late".

It is also true that the OPS temporarily suspended section 12 of CPR 92 from February 5 to March 22, 1952. Temporary suspension of this provision lifted the restrictions on the percentage of primal cuts of lamb which packers could sell in relation to total carcass sales. This order was temporarily lifted to take care of a heaver-than-usual volume of marketing of fed lambs. This action was taken after injury was already done. However, it again went into effect March 22 and every time we have a problem of too many lambs hitting the market, must we again go to Washington and plead with OPS for suspension of this order?

It is interesting to note that during the last 13 months the prices received by farmers for sheep, lambs, and wool have been declining. Prices received by farmers for lambs have declined from $35 per hundredweight on March 15, 1951, to $26.40 on April 15, 1952; wool in the same period from $1.19 to $0.499 per pound; sheep in the same period from $19 to $13.60 per hundredweight. For the past 6 months prices received by farmers for both sheep and lambs have been below the legal minimum which dressed ceilings are supposed to reflect. Prices received by farmers for wool have been below the legal minimum ceiling for the past 10 months.

What, then, has been the justification for spending taxpayers' money to enforce ceiling prices-to police an inflation spiral which just does not exist? And by the same token, what is the justification for hampering packers and retailers with merchandising restrictions which prevent proper distribution of our products and which consequently restrict the returns possible for the producer? Is it within the province of the OPS to reduce returns to livestock producers even when their products are selling below ceiling?

OPS actions with regard to wool have also been not only needless but have discouraged production. In spite of the fact that wool prices have been dropping continually and drastically since March 1951, the OPS on January 9, 1952, announced it was reducing by slightly over 20 percent the average price levels established by Ceiling Price Regulation 35. This announcement was made at a time when wool was selling approximately 45 to 55 percent below the ceilings established in May 1951, and 35 to 40 percent below the ceilings which went into effect April 8, 1952. What savings did this roll-back mean to the consumer in lower clothing prices? Absolutely none. Finished wool goods were already below existing ceilings. What effect did this move have on curbing inflation? Absolutely none, because it had no effect on price. The only possible effect this order could have would be to reduce the confidence of the sheep producer in the profitability of raising wool under stricter Government regulations and consequently discourage production of this needed commodity. Now, after 13 months of a continuous and drastic price decline in wool, the OPS has finally decided to "suspend" ceiling prices on wool, and, as we have mentioned, subject to reinstatement at the will of this agency.

Congress last year was successful in its efforts to prevent further roll-backs in beef prices. However, because of the fact that the price of wool has been in a continuous decline since March 1, 1951, and because of the provision that no price ceiling shall be established or maintained below 90 percent of the price received by producers (by grades) on May 19, 1951, the OPS was permitted and did roll back wool ceilings an additional 20 percent beyond the first roll-back of 14 percent. This illustrates that because of the great complexity of agriculture and its products that an action which may prevent a roll-back in one commodity permits a roll-back of 20 percent in the case of another commodity. Therefore, while the consumer receives no benefit from this roll-back, as we have pointed out, the OPS demonstrated that it was going to injure an industry to the limit of the law, regardless of the benefits, proving that OPS action is so confusing as to further discourage production.

Last year the OPS stated that unless they were permitted to impose slaughter quota limitations on livestock, that the whole price-control program would be in jeopardy. Quotas were removed on July 31, 1951, and in the case of sheep and

lambs, as we have already pointed out, prices have declined considerably and almost constantly during the last 13 months. Why must our industry be called upon to justify its position, especially when our past testimony has shown that our position is sound? Has the time not come that the OPS should be called upon to justify its existence? We do not believe that as yet they have done so.

CONCLUSION

We, therefore, submit that titles IV and V of the Defense Production Act must be eliminated if confidence is to be restored in the sheep industry and needed production increases are to be made. A year ago we took the position that although we were opposed to title IV, that because of the specific bills, S. 1397 and H. R. 3871, before committees, we should attempt to aid in perfecting, so far as possible, the amendments to the Defense Production Act of 1951. We also made every effort, as is evidenced by our testimony of a year ago, to assist the OPS in formulating the rules and regulations applicable to our industry. However, we have definite proof that we were not wanted nor were we ever permitted to work with this group. The OPS made ceiling reductions on wool against the advice of at least three different segments of the industry and we were never consulted on any rgulation or price ceiling established on lamb.

The latest statistics available show that the cost of the Office of Price Stabilization is running at the rate of $65,316,000 a year. On January 1 there were 11,404 people on the OPS payroll, drawing salaries at the rate of $55,822,800 a year, and there are now 12,000 people on that payroll. This is an expenditure of time and money which produces absolutely nothing, increases the burden of additional time and expense toward all businesses, and stymies production.

In our opinion it has been conclusively proven that direct price controls will not work, are of no benefit to consumers, are a handicap to production, and are a waste of the taxpayers' money. It is, therefore, our firm conviction that titles IV and V should be stricken from the Defense Production Act. We also firmly believe that inflation should be controlled by giving every encouragement to increased production of needed agricultural products, by a reduction of Federal expenditures, by wise management of the public debt and by stricter credit controls.

STATEMENT OF THE AMERICAN MEAT INSTITUTE ON THE EXTENSION OF THE DEFENSE PRODUCTION ACT AFTER JUNE 30, 1952

The American Meat Institute is a trade, research, and educational association of the meat-packing industry with a membership comprised of more than 500 meat-packing companies and sausage manufacturers, of all sizes, located throughout the United States. This group of companies processes and distributes more than 85 percent of the meat produced commercially in the United States.

The opportunity of presenting this statement on behalf of our members is much appreciated. It is our sincere feeling that the authority for price controls on livestock and meat should not be extended beyond June 30. The inflationary pressures which accompanied the early period of the Korean war have subsided. and prices have returned to normal levels relative to consumer income and purchasing power. This has been recognized by the Government itself in the suspension of its regulation W on consumer credit. Numerous products, including meat, are selling below ceiling prices and the OPS reluctantly has suspended the ceilings on some of these items.

All the evidence indicates that price controls not only are unnecessary but have been harmful to public interests by reducing consumer meat supplies and thereby holding prices higher than they otherwise would have been. Attempts to continue ceiling prices on livestock and meat ignore the experience of the past year, which once again has demonstrated that price controls

1. Distort meat distribution;

2. Discourage meat production;

3. Can't be enforced.

In view of this situation, which is amply documented on the following pages, it is our sincere belief that the present program of direct price controls is not a sound way of dealing with inflation, and should be abandoned.

PRICE CEILINGS FORCE ESTABLISHED PACKERS OUT OF CATTLE MARKET

Shortly after the imposition of price controls in early 1951, it became increasingly apparent that meat was being diverted away from regular commercial channels.

This was especially noticeable in the case of beef.

And with the imposition of dollars and cents ceilings for cattle and beef at midyear the situation became

even worse.

For example, as table 1 below clearly shows, a serious dislocation of cattle slaughtering operations developed in early June, coincident with the effective date of compliance prices for live cattle. During 1950 cattle slaughter by 99 plants of established firms had consistently represented approximately 60 percent of the weekly total slaughter under Federal inspection. This percentage dropped moderately in March, April, and May, then plunged to only 44 percent of the total in June.

As a group, these 99 plants were forced to reduce their cattle slaughter in the 5 months June through October 1951, by 33 percent from a year earlier, while the balance of the federally inspected industry actually showed a 12 percent gain compared with the previous year.

Although the situation has improved somewhat since last summer, this group of established meat packers has not regained the ground lost when the OPS ceilings caused drastic reductions in their slaughter last year.

TABLE 1.-Total cattle slaughter under Federal inspection and percentage slaughtered by 99 plants-1950, 1951, and 1952

PRICE CONTROLS DISTORT THE NORMAL PATTERN OF CATTLE SLAUGHTER

This diversion of cattle away from normal channels is further illustrated by the accompanying map of the United States showing regional changes in total commercial cattle slaughter, for 1951 as against 1950.

For the entire year of 1951 commercial cattle slaughter in the United States totaled about 16.4 million head, 1.5 million or 8 percent less than in 1950. However, as this map shows, this reduction was not equally distributed throughout the country. Slaughter in the Corn Belt (which normally represents 55 to 60 percent of the total) was down 15 percent, while on the east and west coasts it was up 4 and 5 percent respectively.

During the period of greatest diversion (June-October), the reduction in the Corn Belt amounted to 24 percent, while the east and west coast States registered gains of from 8 to 9 percent over a year earlier.

Illustrative of the uneconomical results of this diversion in cattle slaughter is the experience of the Army in procuring beef during this period. It is reported that the Chicago market center found it necessary to purchase practically its entire beef requirements from west coast plants. Some of this beef was moved all the way across the country to eastern points, despite the fact that it was from some cattle which had been purchased at Corn Belt markets.

It is worth noting also that this uneconomical shift in cattle slaughter was not entirely a matter of price violations on the part of some packers. The price regulations, even when observed, were such as to favor the shipping of live cattle from major producing areas to other points for slaughter. Although the regulations have been amended several times, it has been impossible to correct all the faults which crop up one after another and which are inherent in man-made regulations designed to replace the economic laws.