4. Since incomes are higher, it would be better to permit the public to pay more for beef than to run the risk of reducing the future supply of beef. The following comments may be made with respect to these four points: 1. The increase in the cost of meat generally and of beef particularly has been out of all proportion to the increase in consumers' spendable income

During the fourth quarter of 1949, spendable income was at the annual rate of $187 billion. For the first quarter of 1951, spendable income was at the rate of $216 billion. The increase was therefore less than 16 percent. During the same period, the average retail price of beef and veal advanced about 25 percent, or from 247 percent to 308 percent of the 1935-39 average.

The price increase for beef and veal has been out of all proportion, also, to the increases for other consumer goods. For example, during the 12 months ended March 15, 1951, while beef and veal prices rose 26 percent, all meats (including beef and veal) rose 21 percent; all foods rose 15 percent; apparel 10 percent, and the general consumers' price index less than 10 percent.

At present prices, therefore, the purchase of beef preempts a considerably larger share of the consumers' dollar than before Korea, probably well in excess of the "historic ratio." This inevitably reduces the amount available for buying other consumer goods, and for purchasing savings bonds. There seems no compelling reason entitling the livestock industry to such specially favored treatment.

2 Production

The regulation will tend to the achievement of maximum production.

We can assume that a condition for maximum cattle production exists when cattle prices are favorable in relation to costs of production.

All the reductions planned for live-cattle ceilings will leave cattle prices at 120 to 125 percent of parity. Feed prices are below parity and it is anticipated that they will not rise above parity. Thus it would appear that the situation is conducive to cattle production. Furthermore, both the price of milk and the price of hogs are below parity, indicating that the ceiling regulation provides an incentive to cattle feeding. Even when feed, milk, and hog prices reach parity, it is obvious that cattle prices will have the advantage.

After all the reductions in the regulation become effective September 30, cattle ceilings will be 7 percent above prices of last June.

Experience during OPA indicates that ceilings do not prevent a high level of production and consumption. Cattle numbers in the United States reached the all-time high in 1945. Also, the record hog production occurred during OPA. The second-highest production of beef in the Nation's history was in 1945, the last full year of the OPA. (See table below.)

Also, the regulation can have the tendency to remove some of the uncertainty of rapidly rising prices such as we have had in recent months. With stability in the market, we can encourage many small feeders, who have not had the capital to incur the risks involved in these abnormally high prices, to undertake cattle-feeding operations.

The Department of Agriculture reported an increase of 4 percent of the number of cattle on feed in the 11 Corn-Belt States on April 1, 1951, compared to April 1, 1950. It is true, however, that the current production of beef is substantially below the level of last year, presumably because of anticipation that price controls may be discontinued or that ceiling prices may be raised in the near future. The relatively small number of cattle being sold for slaughter at the present time is not in normal relationship to the numbers of cattle on farms. It is our belief that farmers will deliver these cattle to market in a more normal pattern as soon as they are convinced that the price-control program will be continued in approximately its present form.

It has been suggested that the roll-back of prices will cause a glut in the markets as feed lots are emptied to avoid having to accept the lower prices after the date of the roll-back. This is not likely to be a substantial problem because the roll-back in October will come at a time when it is not abnormal for prices of live cattle to decline substantially and at which time the numbers of cattle in feed lots normally are at their lowest point. The roll-back in August may cause some feeders to sell their cattle somewhat sooner than they had planned, so that there might be a decline in prices of cattle prior to August 1 as a result of this possible increase in marketings. Again it should be recognized that the amount of the roll-back is only $1.50 per hundredweight and that prices of live cattle could decline by this amount without any serious gluts in the markets. Such a decline

The information given above shows that the price of beef cattle had risen in this way and threatened to continue to rise.

The price freeze of January 26, 1951, placed a lid on beef prices at all levels except for live cattle.

3. Black market

Profiting from the experience obtained in World War II, the Office of Price Stabilization has set up a distribution program designed to channel the available livestock to slaughterers and to maintain a normal flow of meat from slaughterers to those who sell or serve meat to ultimate consumers. This distribution plan has the effect of spreading the cattle supply among established and registered slaughterers and of assuring wholesalers and retailers that they can depend upon a normal distribution of beef, thus eliminating most of the basis for the black market.

In order to make it possible for cattle feeders to adjust their operations, the Director of Price Stabilization announced at the time of the January price freeze that ceilings on livestock prices would be issued later. Also, in the price ceilings which were announced on April 28 the reductions in live-cattle prices are made in three different steps so that time will be allowed for cattle feeders to govern their transactions accordingly.

4. As already pointed out, despite the increase in spendable income in the hands of consumers, they cannot purchase beef at present excessive prices without cutting into other essential expenditures and into savings. Moreover, there are large groups of consumers whose income has remained static or increased much less than the average, and for whom the high price represents a particular hardship. The suggestion that inflation can be cured by permitting prices to rise is, of course, directly contrary to the basic objectives of the stabilization program. Operators of other commodities would ask-quite properly-for treatment equally favorable with that accorded the livestock growers. Higher prices of beef would also raise living costs and lead to a justifiable demand for higher wages, giving renewed impetus to the entire vicious spiral of higher costs and higher prices. The net result would be the economic disruption and social chaos which are the inevitable accompaniments of inflation.

We are confronted with a clear choice. We must either control prices all across the board or abandon any pretense of control. We should be derelict of our responsibilities if we yielded to the clamor of any group that desires to retain an inflationary level of prices or if we submitted to blackmail in the form of threats to withhold supplies or channel them into black markets.

MAY 14, 1951.

Average cost of cattle bought by slaughterers, pounds of beef produced, and number of cattle on farms in United States, by years, 1940–50

Senator DIRKSEN. Your answer prompts one thought.

What is the total number of people in your agency at the present time?

Mr. DISALLE. The total number at this time, I would say, is in the neighborhood of 6,000.

Senator DIRKSEN. And how many have you asked for in the 1952 budget?

Mr. DISALLE. I think there is a request for 35,000.

Senator DIRKSEN. Plus 6,000.

Mr. DISALLE. No; including the 6,000.

Senator DIRKSEN. Do you propose to use volunteers also?

Mr. DISALLE. In the rationing program the OPA found volunteers helpful. They had somewhere in the neighborhood of 200,000 volunteers, in addition to 60,000 paid workers. We have no plans at this time for the use of volunteer committees, with the exception of the mayor's committee which is now operating in quite a few communities. Whether we go to the local board type of organization or not is something that has not been determined.

The CHAIRMAN. You have not requested them? There is no law that gives you that power?

Mr. DISALLE. Power to do what?

The CHAIRMAN. Set up rationing and local boards.

Mr. DISALLE. NO; the rationing authority is under the President,. and that has not been delegated to anyone that I know of, but as far as: local board supplementing the program

The CHAIRMAN. But it is in the law, the President has the right to delegate it. He has not delegated it. It is in this law. Suppose this. committee eliminated that part. You say it is not going to be necessary. Would there be objection on your part?

Mr. DISALLE. I think that it is one of the stand-by tools that the. program ought to have. I certainly am not looking forward to any type of rationing.

In answer to your question as to whether the Congress could not just fail to pass the rationing amendment, I would like to point out that while the Administration does not foresee that it will at any particular time have to resort to rationing, still if the need does arise and I have to come and ask power to ration from Congress; that might start a stampede of hoarding. It is wiser to have it in the law; if the necessity arises it can be imposed suddenly to prevent hoarding.

The CHAIRMAN. I want the record to show, you certainly do not see in the near future with the situation as it is today the necessity for rationing, but you believe it should be left in the law as a standby?

Mr. DISALLE. I think the President ought to have the authority. Finishing Senator Dirksen's question on the local board set-up, we now are studying the different types of organization, whether for the smaller community, a local board with a clerk would do the job or whether a mobile unit operating under the closest district office would do the job or whether we could have more district officers and smaller district offices. Those are alternatives that we are studying, but no decision has been made.

Senator DIRKSEN. Have you considered representations made by some retail association that small stores doing a gross annual business of $50,000 or less should be exempted on the ground that, first, they would be subject to price control; secondly, competition from large stores would almost compel them to keep their prices in line; and, third, it would diminish the field force that would be necessary, and finally would save them a tremendous amount of work. As you know, there is frightful protest now from those stores with a lot of

83762-51-pt. 1-40

items about setting up the schedule and furnishing the old invoices against which to check back?

Mr. DISALLE. We have that recommendation under active consideration. I do not think we could totally exempt stores doing $50,000 or less. I do think we could devise a more simple means of control so that the reporting provisions would not be too tough on them. We have been considering $50,000. In our Ceiling Price Regulation No. 7, we did give stores doing a net of $20,000 the option of complying with Regulation 7 or staying under the general ceiling price regulation, and in the manufacturers' regulation, for example, we gave to manufacturers doing $250,000 a year or less the option of staying under the general ceiling price regulation, or complying with the general manufacturers' regulation. We are actively considering some sort of program that will lessen the amount of paper work necessary for smaller business people.

Senator DIRKSEN. What about time extensions for small hardware stores, for instance, who may find it necessary to take 2, 3, or 4 months, for instance, to do an effective checking job?

Mr. DISALLE. I think there is a great deal of misinterpretation with respect to hardware stores. Instead of trying to comply with general categories, they have been going to specific items. We are now preparing or studying a special regulation for hardware stores, and taking into consideration the limitations of $40,000, $50,000, $60,000 a year, and establishing special circumstances for those opera

tors.

Senator SCHOEPPEL. Mr. Chairman, I would like to ask one other question on the matter of licensing.

I have received some information strictly on the basis of being a member of the Small Business Committee of the Senate about the attendant delays, apparently, that have come to our knowledge in some instances where slaughtering concerns had been in business before, and, say in 1950, were down completely for remodeling, and had not established a slaughtering quota, and have applications in. If on proper showing of the legitimacy of that previous business, should there be any necessity for any long delays on that?

Mr. DISALLE. No; if they can make a proper showing. A good many of those I have gone into personally and have looked to see whether there was a proper showing. I think if you examined them yourself you would find no proper showing, simply a device to get around the order.

In the case of legitimate operators, there have been adjustments made, and there will continue to be adjustments made.

Senator BRICKER. How many orders have you issued for new slaughterers?

Mr. DISALLE. We have issued none.

Senator BRICKER. How many applications are there?

Mr. DISALLE. I would not know how many there are at this time. Senator BRICKER. Have you not made a statement to the effect that you intend to deny most of them?

Mr. DISALLE, Yes.

The CHAIRMAN. Why did you make that statement?

Mr. DISALLE. Because increasing the number of slaughterers would mean the reduction of quotas.