ÆäÀÌÁö À̹ÌÁö
PDF
ePub

3 weeks later. At the time of his request for relief on November 1, 1951, Mr. Merrill stated that his costs of items other than milk had increased 2 to 3 cents per sales point. His records showed that, in fact, such costs had increased slightly over 1 cent per sales point. Area milk price regulation 7, effective December 21, 1951, generally raised existing ceiling prices, including Arown's, 1 cent per sales point.

4. It should be noted, in light of Mr. Merrill's testimony concerning financial hardship caused by OPS ceilings, that during the period December 24, 1951, to March 19, 1952, Årown sold milk at prices below the ceiling prices established under the area milk price regulation applicable to his operations. In fact, Arown has consistently sold many items well under its ceilings since the issuance of area milk price regulation 7 on December 21, 1951.

5. Mr. Merrill testified that Arown employees were granted a wage increase on March 1, 1952, which represented a cost increase of approximately one-fourth cent per unit sold. He states that OPS has again practiced cost absorption by delay and has granted no ceiling-price relief to offset this increased cost.

The facts show that on April 28, 1952, Arown submitted a petition to OPS requesting an increase in ceiling prices. This petition, signed by Mr. Merrill, specified the following costs:

[blocks in formation]

On May 7, 1952, OPS accountants found, upon an examination of Arown's records, the following:

[blocks in formation]

Mr. Merrill, in the petition for relief, had overstated Arown's costs to the extent of $5,564.

In another portion of this petition Mr. Merrill specified that Arown's sales volume was 433,729 sales points. Subsequent examination of Arown's records revealed Arown's true volume to be 495,000 sales points. Consistent with the findings taken on a composite milk marketing area basis it was found that on the basis of Arown's actual monthly volume of sales points the March 1 wage increase had not increased Arown's cost per sales point.

6. Mr. Merrill stated before the committee that the small increase (2 percent) in consumption of milk since Korea does not justify the possibility that unit costs may not have risen because of increased sales volume. As a matter of fact, notwithstanding the operation of OPS regulations, Arown's physical sales volume increased from approximately 373,000 sales points in August 1951 to 560,000 sales points in April 1952, an increase in sales of over 50 percent.

7. On May 27, 1952, Representative Hays of Ohio, in discussion concerning the milk industry with Mr. Arnall during the latter's testimony on H. R. 6546, expressed concern over the trend of absorption of small operators by the larger companies in the industry.

This observation should be made in connection with Congressman Hays' apprehension about the declining number of smaller firms in the fluid milk industry. In the State of Washington, where Arown is located, over a period of the last 8-10 years, the number of State-licensed firms engaged in the distribution of fluid milk products has declined from approximately 900 to 230. As a matter of fact, Arown itself has contributed to this rather rapid rate of absorption. Since January 26, 1951, the inception of present price controls, Arown has absorbed the following dairies into its own operations:

Cyr Bros. Dairy, August 1951

Twin City Dairy, December 1951
Marrymoor Dairy, December 1951
Happy Valley Dairy, April 1952

It is difficult to reconcile Arown's recent and rapid expansion with Mr. Merrill's charge before the committee that the firm was being "bureaucratically liquidated" by OPS.

I trust that the foregoing answers the questions which may have been raised in the minds of the members of your committee by Mr. Merrill's testimony. If I can be of any further assistance on this subject I shall be glad to cooperate in any way possible.

Very truly yours,

Mr. A. C. MERRILL,

Vice President, Arown Guernsey Farms, Everett, Wash.

ELLIS ARNALL.

DEAR MR. MERRILL: This will acknowledge receipt of your letter of June 18 requesting relief under Government Overriding Regulation 10. Before review of your petition can be completed we would appreciate the following additional information:

1. Ceiling prices of your principal competitors for similar commodities and the past relationship of your prices to those of the competitors named in your letter.

2. You have furnished a schedule of proposed ceiling prices but have not shown how these adjustments will operate to bring your operation to a break-even position.

3. What percentage of your total sales is to jobbers?

4. What percentage of your total sales is to Alaska?

5. Have you made ceiling price adjustments caused by increases in "parity"? If so, to what extent and how many?

6. To what extent of total capacity is your plant working?

In addition to answers to the above, we would like to have balance sheets covering the same periods as profit and loss statements which you submitted. Yours very truly,

E. W. TIEDEMAN,
Chief, Dairy Branch.

Mr. BROWN. Governor Arnall, we are delighted to have your views Thank you very much.

Mr. ARNALL. Thank you, sir, and thank you all. you can for us.

And do the best

Mr. BROWN. We will recess to reconvene at 2 o'clock when we will hear from some Members of Congress, and we will conclude the hearings tomorrow.

(Whereupon at 12:05 p. m., a recess was taken to reconvene at 2 p. m. the same day.)

(The following communications were submitted for inclusion in the record of the hearing:)

PROPOSED STATEMENT TO BE SUBMITTED BY SECRETARY OF DEFENSE ROBERT A. LOVETT TO THE HOUSE COMMITTEE ON BANKING AND CURRENCY IN SUPPORT OF H. R. 6546, A BILL TO AMEND AND EXTEND THE DEFENSE PRODUCTION ACT OF 1950, AS AMENDED, AND THE HOUSING AND RENT ACT OF 1947, AS AMENDED The Department of Defense would like to reaffirm its support of the Defense Production Act of 1950, as amended, and to ask the Congress that it be extended and amended in the manner proposed in H. R. 6546, the bill now before your committee. Appreciating the desires of the committee to expedite the progress of the hearing on this bill, I am furnishing this written statement of support rather than appearing to testify in person.

The Defense Production Act of 1950 has been in effect for nearly 2 years. During that time it has served as the principal statutory framework upon which the Nation's mobilization effort has been based. It is indisputable that without it the Nation in general, and the Department of Defense in particular, could not have achieved substantial progress in meeting the mobilization objectives demanded by national security. Moreover, any build-up that might have been accomplished without the powers and controls provided by the Defense Production Act could have been done only at the cost of an extended dislocation of the economy, and by the creation of an inflationary wave so great that our national economy might have been greatly weakened during the very period when it had to be strengthened.

Your committee is fully aware of how the authority of the Defense Production Act has been utilized to serve the Nation over the last 21 months. The allocation and priority powers have served to divert, from nonessential civilian consumption, the crucial materials and other materials that are needed to turn out the weapons of defense and to sustain essential civilian production. The authority to guarantee loans, to make direct Government loans, and to engage in guaranteed purchase contracts have meant an expansion of our defense production facilities on the part of private enterprise that otherwise would have been out of the question. The creation, under the act, of a Small Defense Plants Administration has meant additional consideration being given to the problems of small business, and has augmented the efforts of the Department of Defense to insure that our defense build-up is not to be achieved at the cost of destroying the great number of smaller American business enterprises, whose continuance is vital for the maintenance of a strong and free economy.

Last but not least, the Defense Production Act has furnished the legislative and administrative tools with which we have fought inflation. Once the invasion of South Korea occurred and it was apparent that a tremendously stepped-up defense program was needed, inflationary pressures began to assert themselves. Prices, wages, and rents moved steadily upward. Fortunately, the pressures have been considerably reduced by intelligent use of the authority granted under the Defense Production Act. At times like these, when all are anxious to ferret out waste and to achieve greater economies of expenditures in the Government, it is well to note that the Defense Production Act made it possible to reduce these inflationary pressures, thereby saving large amounts of money in the Department of Defense. The job of mobilization is far from completed. We have made considerable progress, but there is a long way still to go. A brief summary of the progress we have been able to achieve in our military build-up under the present Defense Production Act may be helpful in measuring the goals still to be reached.

At the end of June 1950, when hostilities began in Korea, the military personnel for the Department of Defense totaled 1,460,000. This force has been expanded so that we now have over 31⁄2 million men in service.

The Army, in June 1950, was comprised of about 590,000 men organized into 10 divisions and 11 regimental combat teams, most of which were below peacetime manning levels, and these were without supporting organizational units adequate for combat operations. The Army has been expanded so that it now comprises some 1,600,000 men organized into 20 divisions and 18 regimental combat teams with collateral units to support them in combat operations. The units located overseas are at full strength and those in this country at a somewhat reduced strength. The Army has also increased the number of personnel in training and provided for a full pipeline of personnel to support combat operations in Korea, including the rotation system.

The Navy, in June 1950, was comprised of 380,000 men with 238 combatant vessels manned at peacetime levels. Since then the Navy has expanded to approximately 400 combatant vessels and approximately 800,000 men with manning levels having been generally raised throughout the fleet; particularly important is the increase in air power as exemplified by the addition of 7 large carriers and the exapansion of the large carrier groups from 9 to 16. Personnel in training has substantially increased during this period.

The Marine Corps, in June 1950, consisted of 74,000 men organized in regimental combat teams and smaller units; it has now expanded to a total of 240,000 men organized into 2% divisions, 2% wings of combat aircraft, plus a substantial expansion in their training activities.

The Air Force in June 1950 consisted of about 411,000 men and 48 wings. Now the Air Force has been expanded to nearly 1,000,000 men and 90 wings in addition to substantial expansion having taken place in Air Force training activities and supporting units.

While the expansion in military personnel and organized combat units over the recent months has been very substantial, the expansion of production and production capabilities has been of even greater proportions. It has utilized a major portion of the total funds appropriated by the Congress. On June 30, 1950, the Department of Defense was expending about $300 million per month for hard goods such as aircraft, ships, tanks, guns, and ammunition. At present, expenditures for this type of material have expanded to more than six times the pre-Korean rate. These expenditures included substantial amounts for the establishment of a mobilization base which would permit rapid all-out mobilization should world conditions require it.

To achieve this expansion of milita.y forces and production, the Departinent of Defense expended, on its own account, $19.8 billion in the fiscal year 1951; during the first 10 months of fiscal year 1952, we expended $31 billion, and it is anticipated that by June, when the present Defense Production Act is scheduled to expire unless extended, expenditures during fiscal year 1952 for the Department of Defense will be approximately $39 billion. These figures are exclusive of expenditures for the military portion of the foreign aid funds, which are estimated at over $3 billion for this 2-year period.

I think the record indicates that our progress in the expansion in personnel, production, and procurement has been tremendous. However, the hour of greatest effort is now upon us. In many ways it may be an even more trying period than that through which we have just passed. Although the fiscal year 1953 program is being scheduled so as to avoid peaks that would be followed by cut-backs in defense production activities, and which are so costly in terms of money and in terms of industrial readiness for quick expansion in case of emergency, it still will be a year of great production and procurement. American industry is now working on outstanding orders for military procurement and construction of over $50 billion. The unobligated funds now on hand, together with the funds budgeted for fiscal year 1953, would make a total of nearly $60 billion available for the new orders which must be placed during the next 14 months. It is the program of the Department of Defense to secure a minimum of $52 billion worth of goods and services during fiscal year 1953. Contracts and advance commitments are necessary in this volume in order to reach and maintain high levels of production that are required to equip the authorized forces, to build up minimum reserves, and to carry out our share of the Mutual Security Program. Moreover, these things must be done during a period when military demand represents a substantial percentage of our total material supply and of our total production capacity. Even though, as I indicated previously, there have been changes in the military production schedules so as to avoid "peaking," military requirements for basic materials such as steel, copper, and aluminum will remain high. For instance, in this quarter the military and atomic energy programs required over 25 percent of our steel supply, 40 percent of our copper supply, and 50 percent of our aluminum supply. If we did not have the authority to allocate those metals, so basic to our industrial economy, military requirements could be satisfied only under conditions which would make for wild scrambling among the other users in the economy. The result of that would be an unfair distribution of the remainder of the material supply, and with the closing down, for lack of materials, of many small business enterprises. Obviously, continuance of the authority to allocate materials is necessary from the point of view of seeing to it that military requirements are realized, and at the same time insuring that the remainder of the economy is not tossed around severely.

The need for retaining existing authority in the fields of production expansion and control is clear. Equally clear, it seems to me, should be the realization that we must continue in effect, and even strengthen, the legal authority we now have to curb inflation. Remember, in spite of the progress we made during 1951, it was still essentially a year of making ready. It was a time of designing and engineering, tooling-up, testing, and of getting ready the production lines to turn out their products. Over the next year or so, the maximum production impact of our defense effort will occur. The long lead-time items, the heavy stuff, is beginning to roll off the production lines. More goods and services will be diverted from the nonessential civilian economy. Purchasing power will be up, goods available will be down. When this impact is felt on our economy, its inflationary effect must be contained or much of the industrial strength of that we have built up will have been dissipated by the increased costs which will result, and the dislocations of price, wage, and profit which will ensue. The bill now before your committee will preserve and strengthen the statutory weapons with which we can help to make sure that our policy of containing inflation is effective.

The Department of Defense, as the largest single purchaser in our economy, has a vital stake in the sufficiency of our stabilization efforts to meet the challenge that will be presented in the near future by our accelerated production and procurement programs. Not only would mounting inflation have a deleterious effect on our military budget in reducing the end items obtainable per dollar, but it also would make very difficult the necessary planning of production and procurement that must be done if the national security is to be intelligently safeguarded. As General Marshall reminded us in his appearance before your committee last year, "The loss of guns, tanks, and planes to a creeping inflation is just as damaging to

His

national security as if they had been destroyed in battle or captured by a more visible and concrete enemy. In either case, it is the Nation that suffers." observation is equally applicable now.

The bill before your committee provides a means of curbing inflation and mitigating its effects on the national economy in general, and the military programs in particular. While the bill essentially asks for an extension of the act and does not request any new broad statutory authority, it does call for the repeal of several sections of the stabilization part of the present statute, whose continued presence hinders rather than makes easier the task of stabilization control. The disadvantage of those particular amendments undoubtedly has been explained in detail by the Government officials who have the responsibility for enforcing them, and who are more competent than I to point out their inflationary tendencies. However, the Department of Defense supports this bill, including those provisions of it which call for the repeal of some of the original sections of the Defense Production Act, as amended.

I know that the temptations to remove administrative controls which we have imposed upon ourselves over the last 21 months are often superficially attractive, and not easty to resist. It isn't easy to carry out a partial mobilization which would permit the build-up of the military strength necessary to national security, and at the same time maintain a strong civilian economy. It is novel and it is difficult; it has never before been attempted in this country. I like to refer to it as "running with the throttle half open.' It takes patient and intelligent compromising which the middle way always demands, and which is never easy to achieve.

[ocr errors]

The building of a military organization capable of deterring aggression without destroying our economy is an extremely complicated problem. However, we have come a long way in our attempts to do just that. We could not have done so without the powers provided by the Defense Production Act. We still have a long way to go. Now is not the time to cast aside the statutory instrumentalities which helped to make it possible.

DEPARTMENT OF LABOR,

Hon. BRENT SPENCE,

OFFICE OF THE SECRETARY,
Washington, May 28, 1952.

Chairman, Committee on Banking and Currency,

House of Representatives, Washington, D. C.

DEAR CONGRESSMAN SPENCE: I will appreciate it very much if your committee will accept for the record this expression of my views with regard to H. R. 6546, the bill to amend and extend the Defense Production Act of 1950, as amended, and the Housing and Rent Act of 1947, as amended.

I note that this bill is identical with S. 2645, now under consideration by the Senate Banking and Currency Committee, and which I have strongly supported. Both bills would extend the Defense Production Act for 2 years beyond its present expiration date, which is June 30, 1952. They would also repeal the socalled Capehart and Herlong amendments, and would make other needed improvements in the act, particularly in the field of credit and real estate controls. The Department of Labor, because of its extensive work in the field of prices and its responsibilities in the field of defense manpower, is in a good position to keep constantly in touch with developments in the Nation's economy. I would, therefore, like to take this occasion to urge upon your committee the necessity for reporting favorably with regard to H. R. 6546 and for impressing upon Congress the fact that the country cannot yet afford to be without the powers carried in the acts extended thereby.

The schedule for the Government's defense program indicates that it will probably take 2 years of continued control authority to get us over the danger period. With luck, these controls can be kept at a minimum. Already, price controls have been lifted from a number of products, and credit controls have been lifted from a number of products, and credit controls removed. However, if inflationary pressures should mount, the authority to invoke stand-by controls promptly can prevent new waves of scare buying and price rises.

I note that H. R. 6546 not only extends the control laws, but also eliminates therefrom the Capehart and Herlong amendments enacted in 1951. These amendments so weakened the control legislation that, even with the lessened price pressures of 1951, it was difficult to contain price rises in certain parts of

97026 -52-pt. 2—-48

« ÀÌÀü°è¼Ó »