(The statement of Dr. Campbell follows:)

STATEMENT ON BEHALF OF THE NATIONAL ASSOCIATION OF CONSUMERS, PRESENTED BY PERSIA CAMPBELL, VICE CHAIRMAN

Gentlemen, the National Association of Consumers supports the extension of the Price Control Act freed of the crippling amendments introduced last summer, particularly the so-called Capehart, Herlong, and Butler-Hope amendments.

With respect to the general question of extending price control: From the consumer point of view this is a matter of urgent importance if the inflationary forces now operating in the economy are to be held in check. This does not imply that price control alone can handcuff these forces. We have consistently supported measures to expand productive capacity and a complex of controls, direct and indirect, including a "pay-as-you-go" program, income and credit controls, allocation of scarce resources and so on.

Direct price control is an important part of this complex, particularly because it is direct and visible in its impact. It seems clear from the record that the "general freeze" of January 1951 brought the speculative price rise of the previous 6 months to a temporary halt, as happens when a traffic cop holds up a speeding car. The action was easily recognizable, and restored some degree of confidence that the economy would be kept reasonably stable. This in itself helped to check the disastrous flight from the dollar which was reflected in an average rise of basic raw material prices by 46 percent, of wholesale prices by 18 percent and even an 8 percent rise in consumer prices in the post-Korean period, before the freeze was instituted. The earlier attempt at voluntary control was obviously a failure.

During the past year, the price rise has been slowed down in most areas of the economy so that people's confidence in reasonable stability has been maintained, sufficiently so at any rate to bring about a considerable increase in the rate of savings, which is in itself an anti-inflationary factor. It might be added here that the steadying effect of control would have been greater if the OPS had proceeded more rapidly to dollar-and-cent ceilings at the community level.

But the inflationary forces that people feared 18 months ago are now in fact in operation-a Government deficit instead of a surplus, a large percentage of production going into military supplies, increasing income without a corresponding flow of goods on to the civilian market, and so on. It would be folly to remove controls under such conditions even if we could reasonably anticipate an improving international situation. More so, therefore, in view of the uncertainties ahead. Unless we maintain controls, every new crisis, small or great, will generate new fears and speculative activities of a kind which proved so disastrous to the dollar after the outbreak of the Korean incident. Indeed within little more than a decade the dollar has deteriorated almost to a 50-cent piece. If this deterioration is accelerated, it would hardly be surprising if the American people lost confidence in their financial institutions. The adverse effect of inflation on the defense program is obvious. The drive to increase income in order to maintain present consumption levels itself becomes an unsettling factor with families on relatively fixed incomes and the unorganized groups left far behind in the case. We have not forgotten what happened to prices after OPA was abolished under "post-crisis" circumstances, against the urgent advice of consumer groups. With so many wage contracts tied to the consumer price index, the inflationary force of rising prices becomes even greater and the position of "unprotected" families worse.

It is not enough to have a price-control law on the statute books. The law must be workable, administratively speaking, and generally “fair and equitable" in its application not only to particular interests but also to the consuming public, who find it hard to get a hearing in the clamor of the highly organized groups now characteristic of our economy. This is the reason why the National Association of Consumers urges the deletion from the new act of the major amendments introduced last summer.

The so-called Capehart amendment, which gives to individual manufacturers the right to a cost-plus ceiling has swamped the OPS with thousands of applications an unbearable load of work. And the principle itself is wrong. Our private enterprise economy has never guaranteed to the inefficient and efficient alike the right to a profit regardless of costs; it is indeed contrary to the nature of the private enterprise system, the merits of which we proudly proclaim.

The function of price is to sell goods. After overburdening the OPS with individual demands for Capehart ceilings, the automobile manufacturers are now, I understand, generally pricing their products below the ceilings which the OPS was required, by the amendment, to establish.

In the Herlong amendment we have an illustration of how inflationary forces can be pyramided in a structure of prices. Supporting what are said to be traditional percentage margins at the distributive level is inflationary in its effect, and provides no incentive to distributors to bring pressure downwards on invoice costs. If the fixing of margins is necessary as a price-control technique, it should, under the circumstances of our economy, be on a broad dollarand-cent basis. It is absurd to argue that marketing costs necessarily rise percentagewise with invoice prices-the illustration given in the President's message with respect to the passing on of excise taxes points up this absurdity. The original act contained ample provision for insuring "fair and equitable" standards in establishing ceilings for the various industry and marketing groups. The so-called soft market in some retail areaas no doubt results in part from speculative inventories; but is it not also in part indicative of consumer resistance to the monopolistic principle of charging what the traffic will bear, under the guise of public controls, supported by private trade associations? We had experience of this in NRA days. Do businessmen who support the Herlong amendment really want to hold prices down?

With respect to slaughtering quotas we support the argument of the OPS that they cannot properly establish and maintain ceilings on meat prices, now far above parity, or limit the operations of black markets, unless they are in a position to enforce quotas.

The National Association of Consumers is specially concerned about the high prices for food, which constitutes more than 30 percent of the workingman's budget. We sympathize with the farmer's claim for a fair return for his labor. We urge maximum efficiency in the distribution and processing of foods, under competitive conditions, to reduce food costs. We believe the time has come for a reexamination of the basic concept of parity and the current price-support program, with a view to reassessing the factors involved in insuring a fair return to all productive agencies while bringing adequate supplies of nutritive foods within the reach of the masses of the people.

We are concerned with the increased pressure from some quarters for amendments to the act requiring decontrol of prices in some areas or under certain circumstances. We are, generally speaking, opposed to decontrol by bits and patches-it does not take long before these cover a considerable part of the fabric of control, destroying its basic design, as we found when OPA was forced to yield to postwar pressures for "gradual" decontrol-which consumers strongly opposed at the time. Definition as a basis of decontrol is administratively different a fur coat may be a "luxury" in one area and a "necessity" in another. "Soft" prices may suddenly harden-and when are prices "soft"? Any time when they are below the post-Korean speculative peaks? There would be an inevitable shift of resources from controlled to uncontrolled areas, from essential to unessential goods and services, as experience proved in the early days of World War II.

In conclusion may we urge the committee to keep in mind the basic purpose of price control, to help stabilize the economy in a period of emergency in a way that is fair and equitable not only to particular interests but to the consuming public and therefore promotional of the general welfare.

Senator FREAR. Do you have any further comments, Dr. Campbell? Dr. CAMPBELL. No; I think it is all in here, sir.

Senator CAPEHART. We are glad you came in. I have enjoyed your testimony very much.

Senator FREAR. I do not know whether the Senator from Indiana sold you yet on the Capehart amendment, or not, but I think we have had an interesting conversation here.

Dr. CAMPBELL. Thank you, Senator.

Senator CAPEHART. Well, it is a matter of getting the facts and understanding.

Senator FREAR. The committee will stand in recess until 10 a. m. tomorrow.

(Whereupon at 5:30 p. m., the committee recessed until 10 a. m.,. Tuesday, March 11, 1952.)

DEFENSE PRODUCTION ACT AMENDMENTS OF 1952

TUESDAY, MARCH 11, 1952

UNITED STATES SENATE,

COMMITTEE ON BANKING AND CURRENCY, Washington, D. C. The committee met, pursuant to adjournment, at 10 a. m., in room 301, Senate Office Building, Senator Burnet R. Maybank (chairman) presiding.

Present: Senators Maybank, Robertson, Sparkman, Frear, Benton, Moody, Capehart, Bricker, Ives, Schoeppel, and Dirksen.

sir.

Also present: Senator Wiley and Representative Herlong.
The CHAIRMAN. The meeting will come to order.

Congressman Herlong, would you come forward and have a seat,

Will you proceed in your own way.

STATEMENT OF A. S. HERLONG, JR., A REPRESENTATIVE IN CONGRESS FROM THE STATE OF FLORIDA

Mr. HERLONG. Mr. Chairman and members of the committee, I am here this morning to discuss processed citrus, which is the greatest part of the economy of the district which I represent.

The CHAIRMAN. Have you copies of your statement.

Mr. HERLONG. Yes.

I am here, as I said, to discuss the prices, the ceiling prices on processed citrus fruits. By "citrus," we mean oranges, grapefruit, and tangerines. We are urging the decontrol of prices on processed citrus. I am speaking for Florida Citrus Mutual and for different grocers' organizations in Florida as well as the processors themselves.

The prices to citrus growers and consumer purchase prices have declined substantially from the level prevailing during the period before the outbreak of the Korean war, and today are extremely low. As of January 14, 1952, the price of oranges was only 24 percent of parity.

I can say your citrus growers in Florida this year, as last year, are really taking a beating.

Grapefruit prices in January 1952 were only 31 percent of parity. The decline of grower prices was primarily the effect of increased orange crops and of the high degree of competition prevailing not only within the processed citrus industry but also within the whole field of processed fruit. In addition thereto was the unwillingness of processors and distributors to engage in processing and forward buying as usual. This tardiness can be in part traced to the fixed margins as set by OPS and losses incurred by many processors during the period from the spring of 1951 to and including 1952.

355

There is no short supply of either fresh or processed citrus. There is no foreseeable likelihood of any short supply. The Florida orange crop increased from the 1940-49 period of 46,070,000 boxes to 58,500,000 boxes in 1949-50; in 1950-51, 67,300,000 boxes; and the 195152 estimate is an increase of 74,500,000 boxes. The present estimated over-all citrus production this year is estimated at more than 115,000,000 boxes, practically a 20-percent increase over last year. In addition to this, new groves with very slight production are coming into bearing and will produce increased yields, so production in the future will be even greater in the absence of some terrific calamity; and, of course, if such should occur, price ceilings should be restored. Dealing for a moment with processed fruits, the stocks of frozen orange concentrate as reported by the USDA as of December 31, 1949, were 1,732,000 gallons; as of December 31, 1950, were 6,001,000 gallons; and as of December 31, 1951, were 9,920,000 gallons. Canners' stocks of canned citrus juices, primarily orange juice, were as follows: January 1, 1950, 5,273,000 cases; January 1, 1951, 8,829,000 cases; January 1, 1952, 10,599,000 cases. Thus you can see that there is absolutely no possible forseeable short supply.

However, the psychological effect of price ceilings does have an effect on the purchases made by those who usually purchase and store. By reason of the increased production now and the future increased production, we feel it is not necessary or advisable to have controls on a product which has a high surplus and that citrus fruits should be decontrolled and adequate provision for this placed in the bill. There should be no price regulations unless there is a definite administration determination in advance that the product is likely to become in short supply or that the price to the producer has reached parity. The CHAIRMAN. Now you are talking about processed goods? Mr. HERLONG. Yes, sir.

The CHAIRMAN. How would procesed goods be in keeping with what they are selling for now? Oranges, I understand, are 24 percent of parity and grapefruit 30 percent of parity because they have no orders on the fruit itself; but what about the processors?

Mr. HERLONG. The price the processors pay to the growers is determined by what they can get for the processed product. Everybody knows in the industry what it is.

The CHAIRMAN. In other words, if they pay 24 percent of parity for oranges, that processed fruit is lower than if they were paying 50 percent of parity; is that right?

Mr. HERLONG. Yes, sir.

The CHAIRMAN. How does OPS control that? What is the ceiling on it now?

Mr. HERLONG. On processed oranges, under the ceiling they have set, a lot of these processors are losing money today even paying these prices because they are not up to the ceiling.

The CHAIRMAN. I know, but there is a hardship clause in the bill. It appears to me-I am totally ignorant on this except for conversations that I had with you, when you said you would come here-they cannot, under the law, have processors with a ceiling that would make them lose money when they are only paying 24 percent of parity for the raw material.

Mr. HERLONG. What I am interested in primarily is not the processor himself but in the citrus grower. The man has got to have a margin

so we can pay the citrus grower a higher price before the grower can benefit from it.

The CHAIRMAN. The law says he must have a fair and equitable margin.

Mr. HERLONG. You see, citrus prices have been steadily declining since Korea. If we got the pre-Korean level for citrus, we would be in pretty good shape. We would get along all right. It would cost you about 50 to 60 cents a box to produce a box of oranges. The growers are being offered 30 to 35 cents a box for it.

The CHAIRMAN. Why is that? Large production?

Mr. HERLONG. Large production; yes, sir; and the fact that the canners and processors are not buying because they have these large stocks on hand which they cannot get rid of. They are taking cuts on that stuff now.

The CHAIRMAN. The dry-goods people told me this morning that is their trouble, they are taking losses; and the farmers are going to suffer.

Senator FREAR. What effect does price control have?

Mr. HERLONG. Well, we do not want any ceiling on anything that is selling so low at this time, because we hope to average out a little later or in the season, if possible, when the crops come in.

Senator FREAR. Do you think, if the ceiling were removed, the producer would get more for his oranges now?

Mr. HERLONG. Not today he would not; no, sir; but we are looking to the future.

Senator FREAR. Would it be the removal of controls that would increase his prices, or perhaps the reduction in quantity?

Mr. HERLONG. We do not want to be hide-bound by any ceiling which reflects to the grower a lower than parity price.

Senator FREAR. But does the Office of Price Stabilization now prevent the producer from getting more for his oranges or grapefruit than he is now getting?

Mr. HERLONG. Not right today, it does not, because the price is below ceiling. I am looking to the future, Senator.

Senator FREAR. I assume that is the producer's price, oranges 24 percent of parity, and grapefruit, 31 percent?

Mr. HERLONG. Yes, sir.

Senator FREAR. Just suppose that oranges were 75 percent of parity and grapefruit was the same, would they then be above the now stipulated ceiling price?

Mr. HERLONG. Yes, sir; that is exactly right, sir.

Senator DIRKSEN. Mr. Herlong, how long has citrus been under a price ceiling?

Mr. HERLONG. All processed foods are under ceilings. Of course, fresh citrus fruit is not under ceiling.

Senator DIRKSEN. It is below the price ceiling?

Mr. HERLONG. It has been below the price ceiling ever since there has been one, all the time.

Senator FREAR. Are there any other questions?

Senator DIRKSEN. One other question.

I suppose only a weather condition in the Citrus Belt might operate to develop a highly short crop?

Mr. HERLONG. A hurricane or freeze or something like that could be nature's prorate to take care of it, but in those instances, of course, some individuals are always hurt worse than others.