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In discussing the allocation of materials, Mr. Block said: “The copper problem is the key and virtually the limiting factor in the shortage of critical materials. It is largely responsible for unemployment in our industry.

The electrical industry is the largest consumer of copper in the country, using about 30 percent of the Nation's supply. Copper is our lifeblood for production and unemployment, and these drastic reductions in copper supply have been a major cause of the current unemployment."

To show how even small changes in the copper supply cause large changes in employment, Mr. Block cited the following:

"A pound of copper goes a long way in our industry. For example, 10 workers can be employed with 1 ton of copper a year in the radio-television industry; 6 workers with 1 ton on domestic electrical appliances."

In testifying regarding a bill for supplemental unemployment insurance, Mr. Block pointed out that the only real solution of unemployment is jobs—not the dole. He said:

“We wish to make it perfectly clear that we do not consider the provisions of the present bill as any substitute for returning these unemployed workers to useful and gainful employment.”

While Mr. Block did not inake any mention of the IMC, and did make several suggestions which are not covered here, this committee wishes to point out that much of the responsibility for the unemployment which Mr. Block described rests on the International Materials Conference and its severe restructions on United States consumption of copper.

COPPER SHORTAGE UNTIL 1955?

While the supply situation in aluminum, steel, and several other materials has been easing in recent months, the same cannot be said of copper. Mr. Fleischmann told the Senate Banking Committee:

"I can make no optimistic prediction about copper. I have told this committee before that the aluminum and steel situations are improving very rapidly, and by the end of this year we will be out of the woods on both of them, in my opinion. With copper

* it just is not true. We get no additional supply of copper domestically.”

Mr. Fleischmann then was asked: “Could vou make a 1955 prediction?"
His reply:

"Mr. Larson (Jess Larson, Administrator, Defense Materials Procurement Agency), who knows more about the supply situation than I, predicted that in 1955 we would be about even on copper, that we would have enough increased supply. There is not much other supply that can be brought in, but he predicted we would be about in balance. I will only add a footnote to that prediction. I will predict we will not be in balance before that."

Asked about expansion of copper mining in this country, Mr. Fleischmann replied: "We have tapped most of the sources

* The bringing in of any mineral is subject to a very steep law of declining returns. As you get down further, it costs more and more to get less and less of any mineral. Now, that is true in copper. We are bringing in some high-priced copper which will not be in until 1954 or 1955. It is the judgment of those who know better than I, including Mr. Larson and Mr. Young (Howard I. Young, Defense Materials Procurement Agency) that we have about exhausted the possibilities in this country for getting copper at any economic price."

Thus, the Administration is flatly predicting the copper shortage will remain severe for three more years and that nothing can be done about it in the meantime,

Mr. SADLAK. Last Wednesday, May 21, Senator Ferguson in the Congressional Record on Thursday, May 22, indicated that while the Senate Banking and Currency Committee was considering an extension to the Defense Production Act, and was considering, in conjunction therewith, his bill, S. 2873, which, as I have mentioned previously, is the same as my bill, the Senators were given advance information concerning the new regulations which OPS has issued, and I refer to Congressional Record for Wednesday, May 21, 1952,

page 5729, and I quote from Senator Ferguson's statement that the OPS issued a press release to the effect that they planned tolet copper wire and brass mills charge more for their products when made of imported copper and the Office of Defense Mobilization has announced that the Office of Price Stabilization would permit copper wire and brass mills to add to their ceiling prices 80 percent of the increase in cost of foreign copper above the 2742 cents a pound specified in the old Chilean agreement.

This move, I'r. Chairman, obviously was made to influence members of the Senate Banking and Currency Committee and make them feel this action which Senator Ferguson and I are proposing here was not necessary, but their action would solve the copper shortage.

Actually copper users, such as large electrical users, have always been free to pay any price they wanted if they did not ask for price relief on their own products. The reason they did not buy is not price, but sad lack of CMP tickets.

Nothing in this new order which does anything, as I can figure out, that provides more CMP tickets, so that price is not the deterrent, it is the fact that limitations are established by the number of CUP tickets granted by the National Production Authority.

The first part of my bill makes it possible for anybody, after defense needs have been met, to import copper from wherever they can find it. This is what IMC does not want, according to my investigation.

The only purpose, as I interpret this abrupt action last week, was to protect IMC and keep its unauthorized entitlements for consumption in being.

Last Thursday, Mr. Chairman, the New York Times, in commenting on the action of the day before, which I have just spoken of, explained that:

Officials of the State Department, of the Defense Production Authority, and Mr. Steelman, prevailed over the objections of Roger L. Putnam, head of the Economic Stabilization Agency, and of Ellis G. Arnall, Administrator of the Office of Price Stabilization.

Well, if I recall correctly, Mr. Chairman, I think Governor Arnall said not so long ago that he will resign before giving the steel mills an increase to cover increased costs. However, he has not resigned and I have not checked the wires this morning to see whether he is still in office or not.

Mr. COLE. That will follow later.

Mr. SADLAK. It appears to me when the Secretary of State, Mr. Acheson, wants to keep the IMC, why, we can have a price increase.

Mr. Chairman and members of the committee, I urge the adoption of this amendment when the committee gets around to reporting its Defense Production Act,

Mr. BROWN. We are very glad to have your statement, Congressman.

Mr. COLE. Mr. Chairman.
Mr. Brown. Mr. Cole.

Mr. COLE. I said to the witness the other day that he had a very interesting presentation of a complex and difficult problem. No doubt the International Materials Conference takes under its jurisdiction and authority many things which this Congress and the administration should think about, and I hope that this committee will have an opportunity to carefully consider your proposal, Congressman Sadlak, because it is a matter about which we are not

having much consideration, and with which we are not too familiar. But I hope we will do what we can.

Mr. SADLAK. Thank you very much, Mr. Cole.
I
say,

in connection with the Senate hearings, I noted there that questions had been asked of Mr. Fleischmann by Senator Frear of Delaware in regard to whether the IMC could operate without the use of the Defense Production Act.

Senator Frear asked this question:

Under what authority does the IMC, so far as American participation is concerned, operate?

Mr. FLEISCHMANN. It operates first under the authority of the Defense Production Act, and, secondly, under the authority of the President to conduct foreign affairs.

Mr. COLE. Let me interrupt you there. If that is true, that it operates under authority of the Defense Production Act-

Mr. SADLAK. Mr. Cole, if you will just withhold that until I read the next question.

Mr. COLE. All right.
Mr. SADLAK (reading):

Senator FREAR. The second has nothing to do with the Defense Production Act. If you had no Defense Production Act could you have operated the IMC as you did?

Mr. FLEISCHMANN. No, sir; it could not be made effective.

Mr. COLE. That being the case, I just doubt if this problem is going to be given the consideration that it should be given in this bill, and I think this committee should study it further and go into it very carefully, because it is an important thing, and it is an important thing no doubt in connection with our entire foreign policy. I hope we can consider it carefully.

Mr. SADLAK. I would say to the gentleman that I thought this was just another bureau of Federal Government when I first got into it and after I found the tremendous impact it has upon our economy, upon industry, and upon the employees, I got tremendously interested in it, and with enthusiasm I went ahead trying to find out what I could about it, and I recommend very much, if the committee finds an opportunity, before the bill comes to the floor, to read the report which Mr. Brown has permitted me to include in the record. I urge also, the inclusion of my amendment to any bill reported by this committee to extend the Defense Production Act.

Mr. Brown. Thank you very much for your testimony,
Mr. SADLAK. Thank you, sir.

STATEMENT OF HON. HUGH B, MITCHELL, A REPRESENTATIVE IN

CONGRESS FROM THE STATE OF WASHINGTON

Mr. MITCHELL. Mr. Chairman and members of the House Committee on Banking and Currency, I thank you for your courtesy in permitting me to testify before you on price and rent stabilization, à matter which I believe is vital to the welfare of the Nation.

As you know, I have closely followed this problem from the time when it first became a matter of concern to the Congress, and have had some part in evolving the law under which the economic stabilization program is now being carried out.

The point at issue today is not whether we are to extend the prorisions particularly referring to preparedness in the Defense Production Act. No one, I believe, would risk cutting off our defense production program. Not when the very life of America--and of the free world-is at stake.

But as long as we must maintain our expanded production program, we must face the fact that inflation is a threat-and a very serious threat to the United States.

I don't think we can afford the danger of another bout with inflation such as we had from the time of the invasion of South Korea to midwinter of 1951. It would be most unwise to risk it.

That bout increased our defense production bill by more than $7 billion in a few months. It cost the American people some $16 billion in increased prices for essential cost of living items, according to the former Price Stabilizer, Michael DiSalle.

The machinery we in the Congress created in 1950 and kept in being last year has helped to halt this disastrous spiral. Measured in cost of living alone, it has reduced price increases from the monthly rate of 1 percent for the 8 months followlng the invasion of South Korea to an average of one-fourth of 1 percent for the next year. When we look at basic commodities which more quickly affect defense production, the results have been even more striking. From June 1950 until the price freeze in January 1951, prices soared almost 50 percent. They reached their peak soon afterwards, and since February 1951 they have dropped nearly 25 percent.

On the whole, prices have been fairly well stabilized since the early spring of last year. As you know, prices of some commodities have dropped below ceilings, and sales in some lines have been lagging. There are some soft spots in our economy today, but their prevalence has been greatly exaggerated. In March, the Bureau of Labor Statistics reported that 50 percent of consumer expenditures-as measured by its cost-of-living index-were at their highest 1951-52 peaks. Practically 71 percent were within 2 percent of their peaks. Less than a tenth were as much as 10 percent below their peaks, and most of the foods in this category were fresh fruits and vegetables which are still selling below parity and hence not subject to price control.

Basically our economy is firm, with widespread upward pressure on prices despite the presence of some soft spots. Under these circumstances, inflation remains a real threat to our national security.

OPS is meeting this situation realistically by suspending controls on commodities which are well below ceilings. Any action is preceded by a quick but thorough study. OPS is not suspending controls where such action would result in higher prices than permitted under existing regulations. And if prices begin rising on any commodity after such suspension, controls will be reimposed before previous ceilings are reached.

I tell you these facts because I know you share with me the belief that American business should not be called upon to keep unnecessary records and file unnecessary reports. This policy is basic with OPS also. Wherever this load can be lightened for business without danger to our economy, OPS will do so.

But we cannot dismiss the very real threat of inflation during the months ahead. Recently, on May 18, 10 of the Nation's top econo

mists declared that the country faced an indefinite period of long-term inflationary threats. There may be intermittent relief, they said, but this does not change the long-term outlook.

Attached, for the record, is a reprint of a story which appeared in the New York Times of May 18, 1952, carrying these predictions.

In examining some of the specific factors making for inflation, we find that during the first quarter of 1952, our expenditures for national security were at a rate of $47 billion a year. By the end of the second quarter, the rate may reach as much as $55 billion. And by the end of 1952, the rate is expected to go to $65 billion. We cannot ignore the tremendous inflationary pressures generated by such a build-up. It puts more and more money into the hands of American consumers at the very time when vast quantities of raw materials are going into defense production.

The American people have helped keep prices stable during the past year by buying sanely and boosting their savings. However, many things could happen to upset this precarious: balance.

As much as we all hope for peace, we cannot ignore the possibility that the Korean truce talks may collapse. If so, what would happen? Would the fear of renewed and increased hostilities cause another wave of scare buying such as followed the original outbreak in June 1950?

The steel issue is another potent factor. If there should be a break-through in steel prices, Elis Arnall, OPS Director, has estimated it could mean an increase of $300 a year in living costs for the average American family. And think of the extra billions it would add to our defense expenditures.

Poor crops in a few key commodities could have serious effects on the general price level. Moreover, some increase in grocery prices appears certain anyway. A recent survey showed that earnings in that industry had fallen below the standard which OPS considers fair. Therefore, some ceilings will be raised.

And remember these points:

1. Agricultural labor is leaving the farm. There are a million and a quarter fewer workers on the farm than 10 years ago. The 1951 farm-production job had to be done with 400,000 fewer workers than in 1950, and the Department of Agriculture expects this trend to continue during 1952.

2. The cost of feed grains is pushing ceilings.
3. Inventories of feed grains are small.
4. The cost of fertilizer is going up.

5. Parity ratio is dropping and could create the need for a parity readjustment.

6. The prices of farm machinery and of many farm supplies are already at ceilings.

Consider these miscellaneous factors: Transportation rates are up. Automobile casualty rates are going up 20 percent. Freight rates are up 16 percent, and rents are up.

But beyond all else, Communist aggression remains a continuing threat to us and to all the other nations of the free world. In the face of this danger, we must continue to build up our defenses-even though it will generate continuing inflationary pressures. 1 Article referred to appears at p. 1635.

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