In this period, according to Senator Dill, some furloughs amounted to as much as 20 or 30 percent. Postal employees, aside from other reducing action, lost 1712 percent in salaries in 2 years.

On June 24, 1932, Senator Bingham stated that a House committee report would have discharged 10 to 15 percent of the employees.

The last comment referred to inspires my thought in connection with the myth of permanent employment in the Government service so often resorted to in salary legislation. It is generally presumed by Congress and the public alike that through some mysterious device that Federal service is immune to the economic down trend. Much importance is attached to this vague assumption in explaining away wage differentials of Government and industry. However, the pages of the Congressional Record provide much of the answer we support of the experiences of many of us even now in the service. Furthermore, even now reduction in force regulations are built into the civilservice laws.

Then, as now, much of the agitation for economy at all cost in Government emanated from the business community. In that regard, let me cite to you several revealing comments made on the floor of the Senate in those days. On February 2, 1933, Senator Cutting stated: If it is right for Government to cut wages; private industry should cut wages, too. The resources of Government outweigh that of industry.

And I might add that the responsibilities of Government far outweigh that of industry.

On the same date Senator Shipstead stated:

We cut wages last year and appropriated $500 million for the Reconstruction Finance Corporation to loan to companies so heavily in debt they could not pay their interest. *** So we loan money that we took from Government employees last year to pay the wages of capital.

Another high lucid observation was made by Senator Cuttingagain on the same day-to the effect that

the great bankers of the city of New York are advocating cutting wages which means deflation and liquidation. *** They are advocating it with every industry they own. They are coming to the Congress of the United States and asking us to further the proposition with the idea that if we set the precedent and cut wages of employees of Government of the United States that precedent will be followed by industry throughout the United States.

Congressman Ragon, on January 25, 1933, stated that

the temptation to balance the budget by decreasing the pay of Government workers is great.

Mr. Chairman and members of this august committee, here you have a historical picture of the role which we employees have played in the economic life of America. Here, you also have the picture of the role of the business community now being repeated with some modern innovations.

In 1934 corporate undistributed profits after tax amounted to a minus $1.6 million. In 1935 it went down to a minus $7 million. It rose from that level to $8 billion in 1954 and even now in the inflationary period is breaking all records. Referring again to the history of the thirties, permit me to cite the role of Mr. C. K. Curtis, owner of the Curtis Publishing Co. In the year 1932, the trough of the depression, he had an income of $12 million which was subsidized by the Post Office Department through the pressure on its employees.

He made a net profit of 71 percent at the same time that the Department was losing $94 million on second-class mail.

The New York Evening Post which was owned by this gentleman denounced as traitors those Congressmen who voted for relief of widows and dependents of deceased soldiers.

Mr. Chairman, then, we were the bodies and souls over which the economy rolled on its way down. In 1952-54 we were the ones who must balance the budget through lower living standards and a belowcost-of-living salary when the economy was going up. Today these same bodies must halt inflation.

I think it unnecessary to belabor you with further statistics on the wage and income comparison which have been communicated to you. But I do wish you to consider the groping salary progress of postal employees in the total sense of our economic growth. For, if balance and relationships have any meaning, the role of these people has been one of rank economic discrimination for one reason or another.

Advocates of this proposition disregard the role of industry in creating the very situations which we are supposed to block.

Many large industries are in the position to totally disregard the free market forces in the setting of prices for their product. The iron, steel, and the electrical machinery industries determine their own prices. Even when demand declines, they maintain their administered price levels.

In 1956, after a period of stabilized prices, and during which we were yet behind the prevailing wage scale-behind in our relative position with profit increase prices began to rise again.

Where did those price increases come from? How did the vise of higher prices grip, even tighter, our diminishing buying power and dropping living standards?

Here is a sample of the record of the business community from whom we are getting such powerful opposition.

In 1953 the Aluminum Company of America made $48,848,094 in net profits after taxes or an after-tax profit of $1,050 per employee. In 1955 they made $87,600,000 in net profits and $1,653 per employee profit after taxes.

In 1953, E. I. du Pont Nemours Co. made $235,565,000 net profits after taxes or $2,571 per employee. In 1955 they made $431,556,000 or $4,843 per employee.

The Ford Motor Co. in 1953 made a net profit after taxes of $165,800,000 or $1,931 per employee, and in 1955 it earned $427 million or $2,406 per employee after taxes.

In 1953, International Harvester earned $55,501,272, or $652 per employee, after taxes. In 1955, it earned $52,929,417, or $688 per employee, after taxes, with a reduction of almost 10,000 employees. Republic Steel in 1953 earned $56,744,000, or $817 per employee, after taxes, and, in 1955, $86,270,000, or $1,305 per employee.

Standard Oil of New Jersey in 1953 earned $581,008,000, or $817 per employee, after taxes, while in 1955 it made $709,309,992, or $4,636 per employee, after taxes.

The United States Steel Co. in 1953 made $222,088,000, or $736 per employee, after taxes, but in 1955 it earned $370,099,353, or $1,360 per employee, after taxes.

Union Carbide in 1953 earned $102,783,000, or $1,468 per employee,. after taxes, but in 1955 it earned $140,756,000, or $1,928 per employee..

I think it worthy of note that the characteristic maneuver of these large companies is to cover any wage increase to its employees with a price boost amounting to twice the cost of the increase. Therefore, the observation that our business structure should be involved in our growth or lack of growth recapitulation is valid. Not only is this so to point to the lack of relevance which their expressions have to our purpose here, but it is so because it is to them that we must go to obtain the necessities of our day-to-day existence.

Permit me, please, to continue to lay the basis of our approach here. The price rises noted have meshed inextricably into our economy. The absence of wide-scale competition in our basic manufacturing industries makes this possible. The larger firms control most of the producing capacity; they dominate the markets and establish prices that insure high unit-profit margins and high total profits.

Now, if, as the administration proposes, no salary increase be given, this is the burden you require that we and we alone must carry.

Seventy percent of the total product of the Nation goes to consumers. We must absorb the increased prices allocated to the consumer market. In addition, the 19 percent which is consumed by Government we must in part underwrite because of budgetary decisions. And I note that, in the near future, the steel companies will raise their prices substantially, which will again raise the cost of their products to Government and consumers.

In addition, the tight-money policy which originates with the Government has hit those of us hard who are in the market for homes and other requirements for which we have to use credit. The policy has created a marked advantage to the banking interests.

Moreover, postal employees throughout the country must absorb the pressure placed upon State and local governments through increased taxes to meet the interest-rate demands of tight money. While the Federal tax is based upon the ability to pay, most State and local taxes fall on these people irrespective of their ability to pay. And, Mr. Chairman, that is no minor item. Since 1942, total State and local taxes have risen from $8.5 billion to an estimated $26 billion. Through the regressive sales-tax method, employees in the $4,000 salary bracket pay 4.4 percent of their income to State and local governments, while those in the $10,000 bracket pay only 2.2 percent.1

In addition to this is the payroll tax about which many of our members complain. This tax, now growing in the States, taxes the first dollar of income irrespective of dependencies, family crises, and other serious handicaps.

From these sources-ultimately the employee's pocket-will come the interest for bonds for roads, schools, sewers, and other State and local financial needs.

But, to us, the bitterest potion to swallow is the administration's endorsement of the natural-gas bill, which will raise the rates of the fuel we use to cook and heat with. This represents a sharp contrast in the sense of obligation and responsibility, when the very agency which grips us tightly in the salary status quo, willfully gives the green light to gouge us further.

1 Richard Musgrave, University of Michigan, appearing before the Joint Economic Committee.

In saying this, I want it clearly understood that I am in sympathy with the President and the Postmaster General in their effort to operate efficiently and to adhere to the principle of service of government to the Nation. I do say, and most emphatically, that there is a moral obligation to equate responsibility with reality and not with what we would like it to be.

Senator Paul H. Douglas in his supplemental views on the January 1957 Economic Report of the Government had this to say in reference to stabilizing effect of social-security payments and unemployment compensation.

As the economy has expanded and the price level has risen, the failure of social-security payments and unemployment compensation payments to keep pace with price levels means that their potential countercyclical impact in times of recession has become proportionately less, year by year.

That means that for those people depending on such income their minimum living standards are falling and the amount of money they would be able to feed back into a declining economy falls below that necessary to firm up their stabilizing potential.

Applying this same thesis to the postal-wage bill, this means by which the Government feeds back tax funds into the economy is lessened for people, not retired, not unemployed, but actually producing the services so vitally required by this economy.

But other sectors of the economy through policies of the Federal Reserve System advance with small heed to the problem of inflation. On this, Senator Douglas makes the following comments:

It was something of a shock to be told by the Chairman of the Board of Governors of the Federal Reserve System in a considered answer to questions asked by this committee (Joint Economic Committee on the January 1957 Economic Report to the President) that, "We know of no figures that permit a precise measure of the relative impact of credit restraints, in particular, on different groups of borrowers." Thus a potent tool is being relied on to stabilize the economy while those who are in charge of its use confess little knowledge of its impact and the hardships or restraints which may grow out of its use.

He further alluded to the policies of monetary ease set into motion in 1954 to reduce the member banks' requirement in the deflationary period of 1954. That policy remains in effect, even though we are now in an inflationary period. As a consequence, banks are encouraged to lend at the same pace as in 1954, but to charge the higher interest rates now existing under the tight-money policy. Furthermore, stock purchases can be made with 50 percent down and the other 50 percent on credit.

If we must look to the sources of inflation, I hardly suspect that the hard-pressed postal employees can be found among the aggregation aforementioned as the culprit whoses demands are insatiable. With your indulgence, sir, and that of this esteemed committee, I wish to address myself to matters closer to the field of postal operations.

The Postmaster General noted that postal employees' salaries in 1954 had risen 94 percent as against 93.6 percent in cost of living. He further stated that he understood the natural desires of employees to obtain for themselves the most favored pay adjustments.

But the revealing statement which followed these remarks was: We, therefore, had a responsibility to argue against any unwarranted pay increase which would hamper the President's program for balancing the budget.

Mr. Chairman, just suppose this criterion was used in the Government consumption area of the wide range of products which it must obtain from the industries which I have mentioned. The Government is likewise a consumer of labor, and without which its functions would grind to a halt.

Why must the Postmaster General dwell on a 94 percent increase in salaries when the penalty of price increase has been retroactive, and much of the salary increase has not? Furthermore, we can be grateful for his understanding of our desires for higher living standards, but we are not appreciative of his desire to peg those standards down to the bare cost-of-living level. I, therefore, feel correct in saying that, just as we were sacrificed upon the altar of a balanced budget in 1954, today we are confronted with outright opposition and thus placed upon the altar of inflation. Meanwhile, the President's admonition to business and labor has gone unheeded.

Thomas L. Stokes, writing in the New York Post, April 25, 1957, made the following observation:

This is a businessmen's administration, so advertised and so generally recognized. It has let off the brakes, relaxed regulatory functions to give business and industry the highest profits in history, boosted interest rates to increase banker profits, and devoted its tax legislation to relief principally of business. The result has been to create an atmosphere conducive to inflation. Business was invited in as a partner and has improved its position. It does not expect any disciplinary measures from the Government.

How inflation is beginning to pinch was pointed up by the latest consumer index report, which showed, among other things, that buying power of factory workers had declined because of the rise in prices and shortening of hours. It was the first time in 22 years that the real earnings of factory workers had failed to register a gain above the previous year.

About all the administration has offered thus far on the inflation situation, aside from the President's verbal warning, is to repeat over and over the orthodox economic axiom that taxes must be left high so as to absorb the purchasing power that contributes to inflation.

This has a sort of hollow ring to citizens of low and medium incomes, especially those on fixed wages and salaries or pensions who have been overlooked in tax relief. As the pinch tightens, they see prices jacked up by business, which, at the same time, is enjoying an all-time record income swelled by the easing of business-tax burdens.

This may all be economically sound, but it is hard for the fellow who gets hit to understand. And more and more are getting hit.

The position of the Post Office Department is not unaffected by its continual opposition to equitable salaries.

In a period in which postal volume is mounting, we find a decline in man-years applied to it. The inescapable conclusion is that with the minimum of laborsaving devices, the productivity of postal personnel has increased. The Department's pay policy, however, retards the further development of productivity because of the quality of manpower which it attracts. This places a severe burden on those career employees earnestly trying to do the job.

In this regard, I might state the following-Federal, State, and local governments now acount for 13 percent of total employment as contrasted with 10.8 percent in 1948-a rise of 34 percent. And yet we find a decline in postal personnel contrasting with a rise in postal volume.2

As remarkable as this may be, there are inherent certain kernels of concern which I feel should be set down.

'Harold Dorsey, Washington Post and Times-Herald, April 15, 1957.

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