mills, these facts have made themselves known in such bitter realities as idle looms and spindles, people out of work or working only part time, of salesmen making few or no sales, or mill managers worrying how they can keep their plants running even at sharply reduced rates.

Translated into such realities, the facts of the situation in this industry become far more actual and personal than abstract theories. They compel us to ask why in the face of this condition which has prevailed for many months must we keep on being subjected to the retarding influences, the uncertainties and the confusion attached to a price control operation. These realities insist that we emphasize to you the very direct connection between controls and the plight of our industry.

You are no doubt familiar with the fact that the textile industry has a functional pattern unlike most other major industries, in that it must be able to schedule well in advance all of its operations-the buying of its raw materials, the mapping out of production and, in fact, the selling of the goods before they are made-in order to produce efficiently.

This traditional pattern and the normal buying methods of our customers have been disrupted for more than a year now. Uncertainty over what OPS might do next, over what new restrictions might be imposed, over what new rulings or interpretations might be issued, any one of which might affect prices, obviously has had a restraining influence on buying and selling.

Over the many months during which these conditions have prevailed, no positive steps have been taken by the price-control authorities to end the constant doubt and uncertainty. Despite the general agreement that price ceilings are academic insofar as the textile industry is concerned, rumors have continued to emanate from Washington that this or that action with respect to yarn or textile ceilings is being contemplated. So long as this condition maintains in an industry like ours, it is bound to serve as a stumbling block on the road to recovery.

There is some evidence that our industry operations now are leveling off, although at a very low level. The present pattern of production is inadequate for most mills to meet current costs of raw materials, labor, and supplies.

An inevitable accompaniment to the present level of cotton textiles production is the sharply reduced rate of raw-cotton consumption and all that this means in lost market to cotton farmers and the hundreds of thousands of people who deal in raw cotton. In February and March a year ago the mills were consuming at the rate of 45,500 bales of cotton a day, and the final consumption total for the cotton year ending in July 1951 was 10,651,000 bales. In March of this year, the consumption rate was 37,200 bales a day, 8,300 bales a day less than a year ago. Total consumption for the year ending July 1952, is expected to be around 9.25 million bales, or a decline of roughly one and one-quarter million bales from last year.

In round figures it may be said that each million bales we do not put through the mills decreases cloth production by about one billion yards of goods. Hence the 8,300 bales decrease in daily consumption is equivalent to around 8 million yards less of cotton cloth being turned out each working day, and by July will amount to a production loss to the Nation of over one billion yards of fabric.

The leveling out process indicates that the industry as a whole has reached economic bed-rock. Our industry knows that the only direction it can move, and keep going, is up. Recovery all along the line is essential, for upon recovery hinges the fate of hundreds of companies and tens of thousands of workers.

Let us note parenthetically that a deficit has existed in civilian consumption for some months now, and that consumer demand could not be dammed up for long under normal circumstances. pickup in business should produce a selling price that will provide a necessary expansion in mill manufacturing margins and still offer the consumer exceptional values, in light of the fact that cotton goods are now available at prices averaging around 29 percent below official OPS ceilings.

It is tremendously important to this basic American industry that if the trend toward some degree of recovery begins to develop, it not be discouraged by renewed threats and rumors of downward revisions in price ceilings. For just as surely as that happens normal buying and selling practices will not be resumed, and recovery will be retarded accordingly.

This industry, spread from Maine to Texas, one of the largest employers in the United States and the consumer of a domestic agricultural product which affects the fortunes of millions of people, requests your assistance in making certain that the lifting forces of recovery, dimly visible just now, are not obstructed by the policies of a price control program, the need for which, if it every existed, has long since expired as regards this industry.

From the very beginning of the controls program we have said time and again to various agencies of Government that given an opportunity to produce this industry would meet every demand made upon it by the military and the civilian population, thereby nullifying any possibility of inflationary pricing. Now the record speaks for itself. Not only has the industry demonstrated beyond any possibility of a doubt that it can meet every production demand made upon it; it has demonstrated also that this productive power can be achieved almost overnight. Moreover, the competitive make-up of the textile industry is such that the full influence of its productive power is brought into immediate play in response to the slightest change in consumer demand. These are established facts. Obviously, in a situation of this nature, inflation is practically a myth.

Now, OPS has ordered provisional removal of control machinery from a number of important commodities, and last week revealed that raw cotton and textiles were to be among the next under consideration for suspension action. We sincerely hope that the control authorities will utilize this opportunity to institute a practicable, workable price suspension plan which will return to our industry some of the confidence that has been denied us for so long.

If this is to be accomplished, two things on the part of OPS are necessary: First, a clear-cut announcement that price controls for textiles are being suspended immediately, and that they will not be reimposed until and unless prices reach current ceilings; second, an accompanying statement that if ceilings prices are reimposed at any time in the future they will be at levels not less than those ceilings now in effect-in other words, that there will be no roll-backs, directly or indirectly.

Our request for suspension which shall be permanently effective below present ceilings is not based on any expectation that prices can return to ceiling levels. The industry's great production capacity, much of which is now idle, would seem to make that impossible, except in the event of all-out war.

Short of a world war, suspension of the type we request means permanent decontrol for all practical purposes without abandoning the existing safeguards.

Such action is necessary for the restoration of buyer confidence. This confidence must be restored if the normal pattern and volume of advance buying is to be resumed. Converters and industrial consumers, such as manufacturers of automobiles, shoes, furniture, bags, and machinery belting; wholesalers and retailers; apparel manufacturers and upholsterers, the knitting trades, tire and narrow fabric manufacturers—will not assume normal inventory risks and make advance commitments, either on the buying or selling side, when the usual hazards of the market are further clouded by the uncertainties, confusions, and dangers of price regulations, whether they be actual or prospective. The bitter truth of this has been proved to us for the past 10 months. As a matter of fact, the depressing effect of regulations became more and more intense as actual prices receeded from the ceilings.

The experience of the industry, therefore, is that the return of buyer confidence and normal market operations require that the atmosphere of the market be cleared.

Such an announcement on the part of OPS would relieve the industry of the uncertainties, the rumors, and the consequent marketing distortions which have plagued us for so long and which are so completely unnecessary. And such an announcement would not to the slightest degree violate the intent or the spirit of the stabilization program.

These things I have mentioned, OPS should do. To insure against future uncertainties, we strongly recommend that the Congress provide additional safeguards which so obviously are needed. First, through some type of decontrol or suspension formula, assurance should be given to American business and industry that price controls will not be retained in situations where they are not needed. Second, through the medium of an air-tight anti-roll-back provision, assurance should be given that the delicate relationship between supply and demand will not be subjected to the distortions which inevitably result from the rumors and uncertainties attached to threats of price rollbacks.

Why, you may ask, should Congress take these steps if the stabilization agency is willing to take the same steps administratively? The answer lies in the frequent changes of personnel and consequently of policy-which has been experienced by agencies operating under the Defense Production Act. Not only have there been frequent shifts all through these agencies among top-level personnel, but right in the Textile Division of OPS, for example, there have been three or four complete turn-overs of administrative personnel. With many of these people being called in to serve more or less temporary assignments, such a turn-over is to be expected. But it is obvious that this type of operation places an added responsibility on the Congress to define policy more specifically than normally would be the case.

In behalf of the American cotton-textile industry, I wish to express to this committee our very genuine appreciation for the privilege of presenting to you our story, and we urge your careful consideration of the recommendations which we have made.

Mr. BROWN. Thank you very much, Mr. Hertwig, for your excellent

statement.

As I understand it, you people in the textile industry have a very large surplus of textile items on hand at this time, is that correct? Mr. HERTWIG. Yes, sir.

Mr. BROWN. And one of the main reasons you cannot sell them is the uncertainty about further roll-backs, is that right?

Mr. HERTWIG. Yes, sir; that is part of it.

Mr. BROWN. Have you people made money or lost money in the last few months?

Mr. HERTWIG. We are substantially-as far as I can understand, sir, the figures that I get come out very slowly, but I understand a large segment of the industry has been making more money or has lost money during the last 3 or 4 months.

Mr. BROWN. I understand the textile industry as a whole has made very little money or no money during the last 12 to 18 months; is that not so?

Mr. HERTWIG. Due to the impact of the Korean war, and due to the fact that we had bought cotton, we made some money at the beginning of last year, but at the end of last year, the industry got to the point where they made no money or began to lose money, sir. So I would say for the last 9 months, it has been nip and tuck with a loss.

Mr. BROWN. Assuming that the Defense Production Act is extended, would it help you gentlemen any to take off ceilings at this time, with authority to reimpose them at the present ceiling price?

Mr. HERTWIG. If they were taken off at this time, sir, I think it would restore confidence to the market, and if they knew they could not be reimposed at a price lower than those now existing, I think it would restore confidence to the market, and some buying might come into it.

These things move in cycles. We people stop buying, it goes down and down, until you can start it back up. Then you are in a losing period, sir.

Mr. BROWN. Textile items are presently selling how much below the ceiling price?

Mr. HERTWIG. The average on the 17 cloths published by the Department of Commerce, I believe, is about 29 percent.

Mr. BROWN. Twenty-nine percent below ceiling?

Mr. HERTWIG. Yes, sir.

Mr. BROWN. They did not put the ceiling price too high at the beginning, did they?

Mr. HERTWIG. No, sir; I do not think so.

Mr. BROWN. Mr. Wolcott.

Mr. WOLCOTT. I have no questions, thank you.

Mr. BROWN. Thank you again for your very fine statement.

Call the next witness, Mr. Clerk.

The CLERK. The next witness is Mr. Joseph Danzansky.

97026-52-pt. 1-38

STATEMENT OF JOSEPH B. DANZANSKY, OF THE LAW FIRM OF DANZANSKY & DICKEY, GENERAL COUNSEL OF THE NATIONAL ASSOCIATION OF MEAT PROCESSORS AND WHOLESALERS, INC.

Mr. DANZANSKY. My name is Joseph B. Danzansky. I am a member of the law firm of Danzansky & Dickey, general counsel of the National Association of Meat Processors & Wholesalers, Inc., an organization comprised of approximately 500 independent meat processors and wholesalers throughout the country. These men are small business in every sense of the meaning of the phrase.

Despite their independence and size, however, they collectively account for a substantial portion of the meat distribution of our Nation. For example, in New York City alone the meat wholesalers who are constituent members of our association account, in normal times, for the distribution of approximately 70 percent of the meat consumed by that enormous city. I think in Michigan, if my memory serves me correctly, the members of the Michigan State Association, which are constituent members of our group, account for approximately 40 to 50 percent of the distribution in the State of Michigan. Our group consists chiefly of the nonslaughtering phase of the meat industry, those who depend on slaughterers for their source of supply, and then who process it into hotdogs, bolognas, and so forth, and they also wholesale fresh meats.

In the event the Congress of the United States should see fit to reenact title IV of the Defense Production Act in its present or a modified form, we think special attention should be given by this committee to the following:

1. We favor the inclusion of the right in the President to invoke slaughtering quotas and for the allocation of meats to processors and wholesalers when such powers are invoked.

2. We favor an amendment to section 409 (c) of the act which will give to the courts the discretionary power to grant a judgment in less than the amount of the overcharge; and which will give to the President the right to compromise an action for less than the amount of the actual overcharge where the defendant proves that he did not increase his legitimate margin of profit but merely passed on additional costs of material or services.

3. Section 701 (b) (iv) of the Defense Production Act of 1951 should be implemented by forcing the President to set up a division within the framework of the Office of Price Stabilization to expedite requests, applications, or appeals from small-business enterprises and thus assure these enterprises that the clear intent of Congress will be carried out.

4. There are a few miscellaneous changes which should also be made in the act.

At the outset of this discussion I think it should be clearly understood that the suggestions for amendment which we are herewith presenting are not to be considered as an expression, implied or otherwise, by our association in favor of continued controls on meat and meat products. We abhor controls and the factors which make them necessary. We are frankly not qualified to express ourselves in the broad sphere of economics surrounding a controlled economy. We sincerely hope that this country is or will shortly be in a position where