some figures from the Washington Times-Herald editorial of May 14, which show that in 1946, the last year of price control, the production in federally inspected houses went down from 1,000,000 in January, to 360,000 in September, the shelves were almost bare. Compare that with 1947, when price control was taken off, and in September 1947 the figure was 1,407,000 instead of 360,000 under price control.

There is something about price control that has a deadening restrictive effect on our industry, and I want to tell you it is serious when production is reduced from 1,000,000 to 360,000 at a time when people want meat.

Senator MOODY. Mr. Chairman, may I ask a question?

The CHAIRMAN. Certainly.

Senator MOODY. Mr. LaRoe, do you believe in wage controls?

Mr. LAROE. Now you are getting me out of my field. I can only say that the less Government control there is, the better. We believe in a free economy. We believe that we have such a great Nation, with such tremendous potential powers of production, that supply and demand will take care of the situation, including wages, and if you can defer your question for just a moment, Senator, I am going to take up the question of inflation, and the relation of meat-price control to it, and I believe that your question will be answered under

that.

Senator MOODY. I agree with you, that under normal economy inflation can be best taken care of by production. But at a time when we are about to take $50 billion worth of consumer goods out of the market, and leave that much of an inflationary gap in the economy, I am wondering whether you think that inflation can be avoided in the United States without some control over it?

Mr. LAROE. I believe that inflation can be avoided if you will strike at the roots of inflation instead of the symptons of it. I will deal with that in just a few moments, if you do not mind my deferring the answer. It is discussed on page 6.

I would like to say this, however, on that point that I have heard the argument made that if you have wages and other commodities controlled you must have meat prices controlled. The answer to that is that meat is so different, meat and live animals are so different from other commodities that it is absolutely impracticable to have successful meat price controls, and simply because meat price control is unworkable is a good reason for making it an exception, no matter what you do to other parts of the economy.

Senator MOODY. Do you think it is fair to the other farmers to have a situation where prices have increased for other agricultural products by 15 percent over January 1950, when the price of meat has increased 52 percent in the same period? Is that fair to either the consumers, or to the other farmers?

Mr. LAROE. May I answer your question by calling your attention to page 3 of my statement?

Senator MOODY. Yes; please go ahead. Perhaps I was a little bit premature.

Mr. LAROE. I do not mind interruption. I will answer your questions as best as I can. There will be a lot I cannot answer.

Your last question is partly answered on page 3. Because the price has not kept pace with the general economy, I believe the public is under the impression, honestly, that meat prices have spiraled out

of all relation to the economy. As a matter of fact, the increase in the price of meat is far less than the increase in the factory wages, 117 percent against 175 percent. Secretary Brannan is responsible for those figures, and not we.

Senator BENTON. Which part is that, for those percentages?

Mr. LAROE. Those shown in the table on page 3 of the statement. In 1939, retail price of round steak in 51 cities was 46 cents. The 1951 figure, from Secretary Brannan's calculation of the other day, shows the increase has been 117 percent.

Now, wages in the same period have gone up 175 percent.

We do not like these high meat prices. They discourage our busiWe would like to see them lower, but I want to dissipate the idea that they are out of line with the economy of the Nation.

ness.

Senator MOODY. Do you think the economy was sound in 1929 just before the crash?

Mr. LAROE. Of course it was very prosperous just before the crash. Senator MOODY. But it was not very sound.

Mr. LAROE. If it had been entirely sound, there would not have been the crash.

Senator MOODY. And as a result, we went through the worst depression in our history.

Mr. LAROE. That is right.

On page 2, I show how many pounds of meat can be bought with an hour of labor, and I call attention to the fact that generally speaking it is possible for labor to buy as much meat with an hour's wages as ever before.

Another criterion laid down by Congress-No. 3 on page 2 was that it is practicable and feasible to impose price ceilings. It is neither practicable nor feasible to impose price ceilings on meat and live animals. Experience has proved that, and I will show it is proving it again today.

Another criterion is that the prices shall be generally fair and equitable.

I do not know why it is that when we have price control we cannot get fair prices on meat. We just cannot get them.

What can be more unfair than to establish prices on meat without prices on live animals? That is what the OPS has done, and they have caused one of the worst price squeezes in history.

Now if you will turn, please, to page 4, "The unfairness of OPS,” which is a title that I hesitated to put down, because I do not want to be unfair myself, but OPS has caused a very serious beef price squeeze by freezing the price of beef while letting the price of beef animals rise without limit. A similar squeeze is beginning to grow on pork, and will grow more critical in the future weeks. To our knowledge the pork and hog ceilings have been ready for issuance for more than a month, but they have not been issued although we continue to suffer under an unfair and one-sided price freeze.

Would you not think they would give temporary relief of some kind? They will not give temporary relief, or permanent relief, and are therefore unfair.

The sausage price situation is dangerously bad, with losses to independent packers running as high as 5 cents per pound. One of our strongest and finest members phoned on May 10 that he is worried

about the serious threat to the solvency of his excellent business. Yet OPS will not act, and Congress has closed the door to relief by injunction.

As regimentation increases, unfairness increases.

May I explain this paragraph in a little bit of detail, because I think it must impress you.

I have spoken about the difficulty of grading beef. Federal graders, under this new set-up, are mandatory. If you are a country slaughterer of beef, you probably never had a Federal grader near your plant. You have done your own grading. But today you must have that Federal grader come in.

The CHAIRMAN. Have you got enough Federal graders to do it?
Mr. LAROE. No.

The CHAIRMAN. The reason I asked that was because in the last war we had appropriations amendments we had put in on the floor, I believe, because we didn't have enough money to provide them; that is just my memory. Am I right about that?

You know something about meat. I don't know much about it, frankly, but I went through this all in the last war on this committee. Mr. LAROE. I would like to give you the experience of a Texas member last week, because it is bound to impress you:

This man has never had a Federal grader. He called up the Department of Agriculture to get a Federal grader, and none was available anywhere near his plant. The regulations provide-now get this, please that if you can't get a Federal grader, you may grade your own beef, provided you do not grade it better than Commercial.

Now, take your Prime, your Choice, your Good, your Commercial, and your canners and cutters, and bulls down at the bottom, this man, it so happens, specialized in slaughtering good feed beef, good quality beef. This regulation says if you don't have a Federal grader you may grade yourself, but you must stamp it Commercial. He is required to tell a lie.

The CHAIRMAN. Well, now, will you explain that to me? I don't quite understand.

Mr. LAROE. I want to make that clear. You picture a country slaughterer who has his beef fed, specializes in good beef cattle. He slaughters in a given period 300 Choice cattle, 200 Good cattle, and 100 Commercial cattle. The regulations provide that if he can't get a Federal grader and must grade the beef himself, he must grade it Commercial or lower. He had to take his Good and Prime beef, 200 or 300 animals, stamp them as Commercial, sell them at the Commercial price, lose money heavily on them, tell a falsehood as to their quality, calling them Commercial when they were Prime or Good, because the OPS regulations provide that if you do your own grading because you can't get a Federal grader—and as you have indicated, they are scarce

The CHAIRMAN. I don't know, I am asking you.

Mr. LAROE. I am telling you.

The CHAIRMAN. I can remember in 1943 and 1944, I think, and you may correct me if I am wrong because you were here then; they didn't have enough graders, and they didn't have enough money to pay the graders that they had, so all I know about it is on the Senate

floor we had to add additional graders, and if I am not mistaken I think Senator Brooks introduced the amendment on the floor.

Is that correct; that you didn't have enough in 1943 and 1944? Mr. LAROE. In fairness to OPS, I should say when this shocking condition was called to their attention, they postponed the effective date of this terrible thing until next Monday, but it goes into effect next Monday, unless they change it again.

Now, what is fair about telling a man who produces Prime beef and Good beef that he must sell it and stamp it as "Commercial," which is required by the regulation?

The CHAIRMAN. How much less would he get for Commercial beef than the Prime beef?

Mr. LAROE. Very much less. He will lose 15 or 20 percent on his operation.

The CHAIRMAN. Then what incentive would there be to make Prime beef if he is going to get Commercial prices?

Mr. LAROE. None whatever; he will have to go out of business, or else stop making that kind of beef, and go to making Commercial beef, if he can't get a Federal grader.

The CHAIRMAN. You mentioned graders, and I am curious because I hadn't thought about it since 1944 or 1945, whenever it was. Are Federal graders generally short?

Mr. LAROE. Yes; under this new regulation it becomes necessary to put these Federal graders in many, many plants where they have never been before.

The CHAIRMAN. But I mean are there enough of them to go around? Mr. LAROE. No.

The CHAIRMAN. Is there going to be a great shortage?

Mr. LAROE. I don't know how great the shortage will be.

The CHAIRMAN. I can understand one or two cases, but I was curious to know.

Mr. LAROE. In fairness to the Department of Agriculture-
The CHAIRMAN. Can you find that out?

Mr. LAROE. They are making a feverish attempt to find graders now, and are raising the salary from $3 an hour, to $3.60 an hour in order to get the graders, and we hope they will get enough, but it takes time to fill all these gaps.

The CHAIRMAN. You say you think they will get enough?

Mr. LAROE. I think they will, if we give them time.

The CHAIRMAN. How long will it take?

Mr. LAROE. I don't know. They will have to answer that one.

May I give you one other illustration of the unfairness of OPS? I am a slaughterer, we will say, in eastern Pennsylvania. I have always had my peddler truck routes. In other words, in addition to slaughtering and selling at wholesale, I had my peddler routes, which are primarily for the benefit of the little stores in the outlying sections. The CHAIRMAN. Let me ask you this question, Mr. LaRoe:

You haven't been getting the graders in some places, and a man who has prime beef and has got to slaughter, as you suggest, this man slaughtered 300 head of cattle, and all that has to be sold on a Commercial base and he loses 20 percent.

Is there any solution that the OPS can arrive at to permit him to grade it as Prime beef?

Mr. LAROE. Yes; there is a very obvious solution to that, and that is you grade your beef honestly according to what it is until we can get a Federal grader there. That is the answer to it.

The CHAIRMAN. Have you people put it up to OPS?

Mr. LAROE. Yes; but their answer to us is that they have to assume that the man is dishonest and will grade his beef higher. I don't believe in assuming people to be dishonest.

The CHAIRMAN. I just wondered what the answer was.

Mr. LAROE. The reason for making him stamp it "Commercial” is they fear some Commercial grade will be stamped "Prime" dishonestly, and I suppose there would be cases of that kind, but is that any worse than telling a man to lie and call his Prime beef Commercial when it isn't?

That is dishonest, too.

The CHAIRMAN. Go ahead, sir. I was just curious to know.

Mr. LAROE. Take a man in eastern Pennsylvania, who has peddler truck routes which serve the small stores. That is quite customary. You have a big slaughtering operation, you can serve your chain stores easily enough right nearby, but you need peddler routes to go out and serve the outlying stores. They have practically prohibited that.

The CHAIRMAN. Has that got to do with this frozen meat that is sold in West Virginia, Senator Kilgore was telling me about yesterday?

Mr. LAROE. It isn't directly related to that, although that is involved in it.

The CHAIRMAN. Is that a bad situation in Pennsylvania, too, or do you know?

Mr. LAROE. I am not well enough informed to know, but why should I, as a slaughterer of meat in eastern Pennsylvania, be told that I can't operate my peddler trucks any more, and send them out to these small stores in the country?

I have a letter from one of our very best members, complaining that his peddler-route business is going to be killed by these regulations. Why does price control on meat have to have an unfair and restrictive effect every time? Why does it have to handicap our normal operations?

OPS is very unfair about all those things.

Then another thing that they are unfair about. You were very careful when you passed this Defense Production Act to say that they should consult with committees of the industry in promulgating these regulations. They rolled back the prices of hides and tallow without any consultation with independent meat packers, in violation of section 404 of the act, and that roll-back of hides and tallow prices at a time when we are squeezed on beef, and about to be squeezed on sausage, is ruinous, and it is unfair.

The CHAIRMAN. Now, Mr. LaRoe, would you explain for my benefit a little bit more about the peddler situation, because I am not familiar with that.

In my State, of course, a lot of fellows kill their beef and sell it around the neighborhood to other farmers, or to tenants, but I don't know that they have a peddler system. I just don't exactly understand.

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