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and new Members of the Congress—and this is all new to a lot of them and you will have some new ones, I don't know how many

Mr. COLE. There may be, depending upon the vote on this issue.

Mr. ARNALL. Thank you for the observation, Congressman Cole. But I think that you really should, in all good judgment, give yourselves a longer time to consider the legislation,

So, I say 8 months in my judgment will put you up too near the borderline of where you cannot give it the consideration you want to, so I would say, a year. If you say 9 months, I will take 9 months as preferable to 8 months. Whatever you do, I plead with you to do the best you can for us.

Mr. KILBURN. I agree with you about the 8 months. Because with a new Congress, if there should be a change, it would take probably a month to organize it.

Mr. ARNALL. That is right, you will have a lot of problems. Mr. MULTER. As a matter of fact, in 1949, this committee, in this House, wasn't organized until February 1.

Mr. KILBURN. That is why I think there is quite a difference between 8 months and 9 months.

Mr. ARNALL. Then I think, Congressman, that the new administration, whether it be Democrat or Republican, the new President, whether he be Democrat or Republican, would want a little time, or should have a little time to determine the administration's policies on this type of highly controversial legislation.

Mr. PATMAN. The President does not take his oath of office until January 20.

Mr. ARNALL. That is right. I think 8 months is unrealistic, candidly, and I hope the committee will give some serious consideration to that provision, and to my recommendation as to it.

In conclusion, I should like to say that in my judgment this economic stabilization program, and those features of the act dealing with price control, are an integral and vital part of the defense program.

I like to think that this legislation is just as much a part of our defense program as mobilizing our allies, and aiding the democracies, and providing guns, tanks, and airplanes for our armed forces, because in your good judgment, when you enacted the Defense Production Act, you included this provision as one of the weapons, one of the instruments to achieve the the purpose you had in mind, which was to preserve our economy, strengthen our Nation and our allies, and defend our way of life against aggression and against the Communist assaults.

Well, stabilization of the national economy is just as important as the procurement of munitions. And there is nothing in the international situation today which justified letting down our guard. The attack on the economic front is just as real a danger as the threat of military action, and a strong Defense Production Act is our principal weapon for resisting that attack.

Mr. Chairman and gentlemen of the committee, let me thank you for your kindness in permitting me to come back before you.

In the 4 weeks that have intervened since my last appearance here, in my judgment, the situation has tightened up considerably, and I think there is more need for a control act today than there was a

month ago

I base that on the fact that prices continue to go up, we continue to get these applications and requests for price increases, and I know, as one citizen, my cost of living is going up each week and each month.

I was told that Washington was a very expensive place to live in. I am finding that to be true. And I urge this committee to extend the act for a long enough period of time to give the Congress the chance to do with it ultimately what they will, after mature deliberation.

I also urge that the crippling amendments be eliminated. I want to assure you members of this committee one other thing, Mr. Chairman. As long as I am Director of Price Stabilization, I am going to cooperate with you in trying to do the things you want done to carry out the intention of the Congress.

You are not going to have to have a lot of technical provisions in the act to try to get me to do what you want to be done. I am going to try to do it and if you Members ever have any problems to take up with me, I hope you will do it, and give me your views. I think

will find that when we talk about some desire

you might have, that whether we are able to do what you would like to do or not, when you get through, you will see that there is some logic in our position, if it does not suit exactly your preconceived ideas or views.

On the other hand, if we talk about these things, and we find there is merit in the proper suggestion from the Members of Congress, we want to do what you want done.

I consider myself a servant of the Congress. I am here by reason of an act of Congress, to administer a law of the Congress, and I don't want to be in the position of being all-powerful and almighty and unreasonable and unsympathetic to the views of the business people or those who honestly have problems confronting them and about which you are concerned.

Mr. Chairman, thank you very much for your indulgence and your kindness. I believe that the committee will, as it always has, do a good job, and I leave the case in your hands.

Mr. Brown. Mr. Arnall, did you have something to file for the record?

Mr. ARNALL. Yes, I have quite a few factual documents I would like to put in the record, with your permission.

Mr. Brown. That may be done. (The information is as follows:)

MAY 8, 1952, Hon. BRENT SPENCE, Chairman, Banking and Currency Committee,

House of Representatives, Washington 25, D. C. MY DEAR CONGRESSMAN SPENCE: Since my appearance before your committee on April 30, there has been a judicial interpretation of section 402 (d) (1) of the Defense Production Act (the so-called Capehart amendment) which may compel increases in ceiling prices of articles on which American families will spend billions of dollars this year.

I refer, of course, to the decision handed down Monday by the Emergency Court of Appeals in the case of Safeway Stores, Inc. v. Ellis Ařnali, Director of Price Stabilization. Its effect is to require OPS to apply the Capehart amendment to hundreds of thousands of wholesalers and retailers.

The consequences of such a step would be so far-reaching, so disastrous to effective price stabilization, that I am impelled to urge immediate action on legislation to make the Cape hart amendment explicitly inapplicable to wholesalers and retailers.

As you know, I am already on record as opposed to continuation of the Capehart amendment in any form. But I must now urge the Congress to prevent its inflationary effects from being compounded by its extension to new fields, a de




velopment which Senator Capehart and other Members of Congress have publicly stated they never intended.

Legislative action is imperative if the expressed intent of Congress is to be given effect and the consumer protected from unwarranted increases in ceiling prices on groceries and many other items significant in the cost of living.

The court itself recognized that the effect of its decision may be contrary to what Congress intended to accomplish by the Capehart amendment. The court said:

It is true that the result may not be what some Members of the Congress expected. It may to some degree interfere with the use of uniform dollars-and-cents prices and standard mark-ups for wholesale and retail sellers.

“The respondent (OPS) strongly urges that the legislative history of the Capehart amendment shows that it was intended to apply to manufacturers and processors only. We have examined this history and we think that it may fairly be said that a preponderance of the debate was to that effect

No extended discussion of congressional intent relative to the Capehart amendment is needed here. That intent was emphasized again only yesterday when Senator Capehart, sponsor of the amendment, was quoted by the Associated Press as saying:

“It was the intention of Congress that the Capehart amendment was to apply to manufacturers and processors only.”

But the court ruled that the language of the amendment itself did not reflect this congressional intent. It held it was powerless to narrow the broad terms used in the amendment so as to limit its applicability. It added:

"If the language which the Congress used in section 402 (d) (4) was too broad to express its real intention and there was a legislative purpose, not reduced to writing or incorporated in the Capehart amendment, to exclude wholesalers and retailers from its operation, the way is open to correct the error by amendatory legislation."

You will recall, as did the court, that such legislation was proposed in Senate bill No. 2170, Eighty-second Congress, first session, and was passed by the Senate but failed

to obtain House approval despite a favorable report by the House Banking and Currency Committee.

Unless it is made clear with all possible dispatch that the Capehart amendment applies only to manufacturers, processors, and sellers of services, and not to wholesale and retail distributors, the danger to the stabilization program is very real.

It has always been my understanding-which was confirmed by many statements by Members of Congress—that in the 1951 amendments, Congress intended to afford protection to retailers and wholesalers by the mark-up provisions of section 402 (k), the so-called Herlong amendment, which was designed to assure against any reductions in margins occasioned by future increased costs to these distributors. The Capehart amendment, on the other hand, was intended to apply exclusively to processors, manufacturers, and sellers of services.

The number of wholesale and retail sellers who are potential applicants for Capehart adjustments runs into the hundreds of thousands. There are approximately 560,000 retail food stores, whose sales of grocery items under controls total $20 billion each year. Retailers subject to Ceiling Price Regulation 7 alone (sellers of such articles as apparel, shoes, furniture, and floor coverings) are estimated to number 200,000. Their aggregate sales likewise are counted in billions of dollars. When other types of retailers are added, together with all kinds of wholesalers, the impact of the decision is clear.

If-as may be expected-any appreciable number of these sellers were to apply for and obtain ceiling price increases under this interpretation, a marked increase in the cost of living must surely follow. Perhaps the term "inflationary spiral" has been overworked. But it aptly characterizes the consequences if the Capehart amendment is to be extended to wholesalers and retailers.

The administrative and enforcement difficulties inherent in such a situation need be noted only briefly. It would be virtually impossible to establish or maintain dollars-and-cents ceilings or standard mark-ups in the distributive trades-unless the ceilings were at such high levels as to make a mockery of stabilization.

Processing of individual applications for Capehart adjustments from the Nation's distributors, if it could be practicably done at all, would be a task of staggering magnitude.

We have already noted the benefits conferred on retailers and wholesalers by the Herlong amendment. To grant these sellers Capehart adjustments as well would be to give them a double opportunity to obtain increases in ceiling prices. Such action, particularly at the retail level, with its direct impact on the consumer. would utterly negate the basic policy of title IV of the Defense Production Act.

Relief under the Capehart amendment is, of course, unnecessary for wholesalers and retailers. Application of the Herlong amendment, as well as the industry earnings standard, provides the means for insuring them "fair and equitable” treatment. To grant additional benefits at the expense of the consumer is unthinkable.

That, in brief, is our view of the situation existing as a result of the Safeway decision.

We are, of course, moving to seek Supreme Court review of the decision. We are asking the Solicitor General to file a petition for a writ of certiorari.

Under the circumstances I have outlined, however, prompt congressional action seems to me to be required to protect the public from altogether unwarranted increases in the cost of living. It is vital that this breach in the stabilization dikes be repaired.

I am enclosing a copy of the opinion in the Safeway case, as well as our brief, in which you will find an extensive summary of the legislative history of the Capehart amendment. Sincerely yours,


(Copy of letter sent to Chairman Brent Spence, and to each member of the House Banking and Currency



Washington 25, D. C., May 29, 1952. During my testimony before your committee last Tuesday on the extension of the Defense Production Act, I mentioned a few items for which higher ceiling prices have recently been requested. Since these requests are such conclusive evidence of the extent to which prices are pressing ceilings, I know you will be interested in the enclosed list of 79 of the principal items for which price increases have recently been requested.

Higher ceilings have been authorized in a few cases which meet our established standards, but many others have been or will be denied.

It should be emphasized that these applications cover products or entire industries, and should not be confused with the list of approximately 19,000 applications for individual price relief filed as appendix D to my statement before your committee on April 29, 1952.

I should also point out that many price regulations provide for automatic pass-throughs of certain increased costs such as freight charges. Therefore, price increases are actually being granted for additional items not included in the attached list. Sincerely yours,



Iron and Steel Branch:

Metal cans
Steel mill
Warehouse steel
Concrete reinforcing bars

Die castings
Nonferrous Metals Branch:

Graphite crucibles
Collapsible tubes, both soft metal and aluminum
Asbestos products

Building Materials Branch:

Selected building construction materials
Glass containers
Asbestos cement products
Sand and gravel
Crushed stone
Crown closures
Asbestos paper millboard

Masonry materials
Machinery Branch:

Diamond wheels and tools
Selected used machine tools
Construction machinery rentals
Small compressors
Cotton ginning machinery
Motorized fire apparatus
Tools and dies


Semivitreous dinnerware
Vitrified china dinnerware
Hand-made household glassware


Automotive and mechanical repair services
Laundry and dry cleaning
Bank services
Television repair

Mixed fertilizer
Phosphate rock
Synthetic cryolite
Aluminum fluoride
Sulfur produced from open-pit mines
Ten-cent cosmetics
Private brand drug manufacturers
Hydrofluoric acid

Lumber and Wood Products Branch:

Millwork transportation costs
Philippine mahogany plywood
Untreated poles and piling (east of the one hundredth meridian)
Imported lumber, logs, and allied wood products
Sitka spruce
Aircraft lumber

No. 2 and 3 hemlock logs
Pulp, Paper, and Paperboard Branch:

Lake States pulpwood

Meat and Fish Branch:

Horsemeat (slaughterers and retailers)
Selected beef cuts
Hindquarters of veal
Pork at wholesale
Whole hog sausage

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