high level and thus sustaining our economy while the short-run adjustments are being made.

We

The CHAIRMAN. Your job is to produce these figures according to your deductions, but you are an American citizen, like unto us. have a problem. With your knowledge of statistics, and this information you are giving us, what would you, as a simple citizen, say to this committee, such as: "I think, gentleman, that such and such things would be helpful"?

Go further than your statistics and talk with us as a brother and a friend. What do you think we ought to do about this whole picture? Mr. CLAGUE. Well, I do not know that I can answer that. The CHAIRMAN. Do you know any man's name that can? Mr. CLAGUE. I think there are perhaps people who have testified before you who have opinions on this and who know more about the administrative problems of this than I do.

The CHAIRMAN. You can be entirely frank and critical, or anything else. This is just a group of fellows meeting together who have a job to do and need all of the help that God knows we can get. I say that reverently.

Mr. CLAGUE. I would say this, Mr. Chairman: I think that had controls not been taken off so rapidly at the end of the war, we might have avoided some of this last price rise. Here I want to speak completely nonpolitically and not get into an issue.

The CHAIRMAN. This committee is entirely nonpolitical.

Mr. CLAGUE. I do not want to get into an issue as to who took controls off and who is to blame for doing it.

The CHAIRMAN. We have a problem here that is bigger than that. Mr. CLAGUE. It seems to me, for example, that Canada is an illustration of a country that kept on the controls longer and took them off more gradually and kept the prices down.

The CHAIRMAN. And is now putting some back again.

Mr. CLAGUE. And now is putting some back again. I do not know enough about the experience of Canada to know whether that has worked well in all instances for business and for labor and for the farmers. There is another factor I would emphasize, namely, that the price system works very well when there is any kind of reasonable balance of supply and demand. It is the normal system that we have, and it is a very good system. However, in coming out of a long war, during which there has been a controlled system, into a peacetime free market, there is almost certain to be the kind of condition we have had in this country in the last 2 years, that is, some commodities are in very short supply and yet very little can be done about it in the short run. In that case one of two things will happen: either we let the prices go where they will, which will be very high in the case of urgently needed commodities; or else we try to control those particular commodities for a temporary period to see if we cannot keep a more reasonable price level.

Extreme price rises serve a useful short-run purpose, in that they restrict the demand to the available supply and may encourage more production quickly. But in the long run, if prices stay high, then wages are likely to follow them up, other costs are increased, and eventually the high price is cemented into the economy, is bolstered by high costs, and is not easily brough down, except at the heavy cost of unemployment and business depression.

As Senator Robertson has mentioned earlier, the farm prices in general do not get that way. When increased supply comes in through larger crops, agricultural prices will come down, but that is not as true of industrial products.

The CHAIRMAN. Of course, there is the perishable feature there; that is always a factor.

Mr. CLAGUE. That is right.

The CHAIRMAN. We have three bills before us, with which you are doubtless familiar: the Capehart bill, which seeks to put a ceiling over everything. We have also the Barkley bill, so-called, which is a bill for limited price control, in that it allows the President authority to invoke price controls on any article in short supply, not an over-all price control administration, as we knew it under Henderson and Bowles. Then we have the Taylor bill, which is a little more of the OPA, but does not put ceilings on labor.

We have had able men before us, Harriman and Anderson and different ones, as you know. They have been pleading for this bill— the Barkley bill, mostly.

Can we put controls successfully on certain articles without putting them down the line, because of the component parts involved that produce that finished article?

With these three bills before you, what would be your advice to this committee with this picture before us?

Mr. CLAGUE. Mr. Chairman, I have not studied those three particular bills. I would rather not pass judgment on them as such. I shall be glad to make certain general observations.

First, it is possible to put controls on some items and not on others. We still have controls on rent, for example. It is not impossible to continue some controls on rent, even though other commodities run free. Likewise, we continued the controls on rice long after they had been taken off all other foods.

On the other hand, I would strongly emphasize this point: Controls of any administrative type will only work if they have general popular support. One of the reasons why OPA worked as well as it did during the war is that the American people in general were very desirous of keeping the cost of living down. Therefore, OPA got widespread public support, regardless of the irritations that people may have felt in individual instances. So one of the factors which must concern you as Senators, since you are experts in public opinion more than I am, is this question as to the public attitude toward controls. If public opinion strongly supports controls, then they will work reasonably well, or at least can be made to work, even though they may apply to only a part of the economy.

On the other hand, if there is not that kind of general public support, then the controlled items are under constant pressure, that is to say, there is persistent violation and break-down, and the enforcement problem becomes exceedingly difficult.

--

There is one additional point: From the price picture which I have presented here today, it is clear that the price rise has been very uneven the prices of some commodities have gone up several hundred percent, while others have lagged far behind. Thus while some prices are now too high on a long-run basis, other prices are probably too low. For this reason the establishment of over-all price ceilings on all commodities at present levels would hamper rather than help the

necessary price readjustments. Interference with normal free-market operations should be confined to a minimum and should be strictly temporary. The cases in which control may be justified are those where high prices will not have much effect in increasing the supply in the short run. Long-continued high prices for a commodity usually tend to bring about gradual increases in its own cost of production, so that it is difficult later on to bring the price down without disastrous results for the industry and sometimes for the whole economy.

The above conclusions are based upon strictly economic considerations. They do not take into account either the administrative enforcement problems of price control or the equity of such control to the producers of the particular commodities involved.

Senator ROBERTSON. I want to thank Mr. Clague. He has been a very fine and helpful witness.

The CHAIRMAN. There is no question about that.

Senator SPARKMAN. I have nothing else.

The CHAIRMAN. We do appreciate your coming. We sit down here, and we lean hard on your Bureau for many of these facts connected with this. We commend the work you are doing, and it is available to us at all times.

I thank you for appearing here.

Mr. CLAGUE. If there are any additional facts, if later on in your deliberations you wish to have us supply additional material, we shall be very glad to do so.

The CHAIRMAN. Thank you very much.

We have the pleasure now of hearing from Mr. Ray Sawyer, formerly commander of the AMVETS committee.

I have to apologize to you for the small attendance here, but it is because we have subcommittees working on rent control and housing, and we had to divide ourselves up.

STATEMENT OF RAY SAWYER, NATIONAL LEGISLATIVE

DIRECTOR, AMVETS, WASHINGTON, D. C.

Mr. SAWYER. I have this morning appeared before Senator Cain's subcommittee.

The CHAIRMAN. Then you know the truth whereof I speak.

Mr. SAWYER. And he really squeezes all of the information there is to be gotten out of every witness. He is doing a good job of it. The CHAIRMAN. Thank you. I had the pleasure of appointing him. Mr. SAWYER. My name is Ray Sawyer, Senator Tobey and Senator Sparkman and Senator Robertson. I would like to say that the AMVETS should not be confused with an organization frequently referred to as a committee. We are the only exclusively World War II veterans' group chartered by act of Congress. We take considerable pride in being known as the middle-of-the-road organization. We have been characterized variously as conservative, insanely progressive, liberal, but never radical. That is particularly appropriate by way of background here, because we are going to advocate certain types of Government control which sometimes are more commonly alined with the liberal point of thinking than with the conservative; and I think it is very significant that our organization is advocating Government controls, because of the fact that at our convention in

St. Louis in November 1946 we voted against public housing. We voted against OPA, and we voted against almost every kind of Government control over business activities.

The votes that we took at our convention were perhaps similar to the votes which the American people took in the election the same year. Eleven months later, in Columbus, Ohio, the same people, in many instances the same chairmen of committees, people whom I knew personally and appointed particularly in the case of our legislative and our housing committees the chairmen of those committees were conservative people; one of them is an active worker in the Republican Party in Fitchburg, Mass., men who had voted against these controls the year before-came to Columbus and brought in reports favoring inflation price control, favoring rent control, favoring public housing if that was the only manner in which we could get housing, showing a completely reversed opinion in the short period of 11 months. as to the part the Government should play in this very difficult problem of inflation and high prices.

With that as a preface I want to say briefly-and I will not read my statement; it is in the record, although I will follow the substance of what is in it.

I would like to say that history shows that our major wars have been followed first by inflation, second by depression, and third by another war. And there can be no doubting that we have started certainly one part of that dreadful and awful cycle.

In November, after our convention had voted in favor of price or inflation control, we called together in Washington the best leaders in AMVETS, and we spend several days here in session, working out a program to present to you, and we heard all shades of thought. We sat as sort of a committee the way you do sometimes, and we numbered among our advisers people who came in and spent hours with us; a representative from the U. S. Chamber of Commerce, Forrest Keller; Peter Henle, from the American Federation of Labor; Richard Heflebower, from the Brookings Institution; and Leon Henderson, former Price Administration.

We discussed and considered very hard the subjects which I have listed in my statement, which I will not take your time to read again but which covers the whole perspective of price control from the old OPA type of price control to just mere buyer's resistance.

Our committee of 11 voted unanimously, after spending several days working on this, in favor of the seven-point program which I would like to read to you, because you may have some questions on it.

First is to establish-and I might say that these are all temporary kinds of controls-first was to establish ceilings on food products at the production and wholesale levels, especially on meat and grains, and to make these ceilings effective we felt that stiff penalty provisions should be provided in any law that you may enact.

Second, we believe that the Government should, if not actually do the allocating, certainly enact so-called stand-by authority to allocate scarce materials, vital to essential industries.

The CHAIRMAN. I might say there there will be a bill introduced this morning on the floor covering that. I am presenting the bill myself.

Mr. SAWYER. I am glad to hear that.

Materials such as steel, scrap and scrap iron, and nonferrous metals, oil and fuel, and perhaps some building materials that are in short supply.

Senator SPARKMAN. And meat.

Mr. SAWYER. Yes; I mentioned meat here. We go a little further with meat. We even advocate wholesale prices on meat.

Senator SPARKMAN. I noticed you did. I wondered if you included rationing as well.

Mr. SAWYER. I am willing to say that we would go along with it if your committee feels that it is necessary.

Of course, you recognize that I do not appear here as an expert, although I have had about 7 years' experience as a retailer. I still advocate this sort of thing because I am a person who has spent 7 full years of my life in business.

But I represent here today what I like to think of as grass-roots thinking, because our organization is essentially composed of a cross section of the young people who served in this war.

Third was to continue rent controls, including the control of apartments as to which so-called voluntary leases for increased rentals were signed pursuant to the Housing and Rent Act of 1947. I have gone into that question in some detail with Senator Cain's subcommittee this morning.

Fourth, to stimulate increased production by utilizing full plant capacity, all productive resources, and by adopting the bill introduced by Senator Bridges to create the so-called Veterans Economic Development Corporation, to enable veterans and others to start new businesses and to expand old ones.

Fifth, to reexamine the administration of the farm-parity-price program to determine the extent to which so-called support payments are contributing to the high cost of food.

The CHAIRMAN. I am sorry Senator Robertson is not here.

Senator SPARKMAN. Let me ask a question there which Senator Robertson might ask if he were here. I ask it in all sincerity, because so often we hear this question about the effect of the Government's support-price program on the cost of food products. Of course, the support program is 90 percent of parity.

Mr. SAWYER. Yes.

Senator SPARKMAN. The parity on wheat now-I do not know what it is now, but not long ago the support price would have been $2.12 a bushel. But wheat is selling for more than $3 a bushel.

How can the Government support price contribute to the high price of wheat when the sale of wheat on the cash basis is nearly a dollar above what the support price is?

Mr. SAWYER. A good deal of that depends on what the Government does with the goods it buys.

Senator SPARKMAN. I am not talking about the Government buying program. I am talking about the Government price-support program. The Government is not buying under its price-support program as long as the going price is so far above the support program.

Mr. SAWYER. I have a statement here by a staff writer of the ScrippsHoward newspapers in which he lists the items which the Government has purchased under this program this year, and there are listed 277,000,000 dozens of eggs, for example.