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Mr. Smith. That is right.
Mr. CONDON. As these witnesses come before us, there is going to be testimony affecting other departments. For example, here we have mention of General Services Administration and the Department of Defense. Will there be witnesses from General Services Administration and the Department of Defense and other agencies who will be mentioned from time to time that will be before us?
Mr. OSMERS. I don't want to speak for Mr. Hoffman, Mr. Condon, but I believe it is not intended to do here what we did in the Harden subcommittee, which was, as you know, if a statement of this character was made before the Harden subcommittee, General Services Administration would be called, the General Accounting Office would be called, other witnesses, as indicated by the testimony, and I feel that at this time the questions, such as the one you have raised, should be referred to the permanent staff of the Harden subcommittee for further investigation, as well as the very good point that Dr. Judd raised, so that we don't get off the track of considering the legislation and, yet, all of these unchallenged statements are run down to the extent that the Board or the administration that is charged wants to run it down.
Mr. LANTAFF. Mr. Osmers, in connection with the statement here of Mr. Smith and this letter that has been written to General Carter, I don't know whether, in connection with this legislation or as a request to the Harden subcommittee, or in what manner it should be handled, but I certainly would like to see spelled out what factors are to be taken into consideration by the Government and Government agencies in arriving at their cost estimates, because we realize that is one of the problems we are always running into, and the Government agencies do not give us a correct cost analysis of what it costs the taxpayers to do a particular job. While that is just a part of the issue of Government in business, nevertheless, I think it could be conclusively proven in many cases that it was actually costing the taxpayers more for the Government to engage in an operation than it would to contract it out to private industry, but you always run into that answer, and I don't know how it should be handled. However, at some point, either in this legislation or one of our subcommittees, we should take up that whole problem of cost accounting and cost analysis.
Mr. OSMERS. Of course, I want to make just one or two observations about that: In the first place, the Harden subcommittee has heard in great detail from the General Accounting Office as to the procedures of accounting of the various branches and departments of the Government. I don't want to be unfair to any of the departments, but I think I can made a general observation that the General Accounting Office finds most Government accounting, for the purposes
are discussing here this morning, to be rather deficient and elementary.
The second point I want to make is that the Government, not having the profit motive, not having the normal overhead expenses and
executive type of expenses and the sales expenses, if you will, that normal business has, it is very difficult to make an exact type of comparison between the one operation and the other; but you have properly put your finger on a very important field of this activity.
Now, the final observation about that I would like to make is this: I think the importance of maintaining the private enterprise system is so important to the future of the country that costs alone should not be the factor, that cost should certainly be a consideration, and where it would be out of all conscience to have private industry do it, we shouldn't have it done in some isolated station somewhere, but certainly the moving of goods in a competitive area, like this city of Washington, with 20 or 30 important moving concerns here, it would seem to me, in a matter of that kind, the Government would have to make a pretty strong case in order to stay in the moving business.
Does anyone esle have any questions of Mr. Smith? If that is all, thank you, Mr. Smith, .
Mr. Smith. Thank you.
STATEMENT OF TYRE TAYLOR, GENERAL COUNSEL, SOUTHERN
STATES INDUSTRIAL COUNCIL
Mr. Taylor. Mr. Chairman, my name is Tyre Taylor. I represent the Southern States Industrial Council, which is a regional organization with headquarters in Nashville, Tenn. Its members represent all lines of manufacturing, mining, transportation, and banking. These members are distributed over the 16 Southern States from Maryland to Texas. It also has members located entirely outside the South.
The council is governed by a board of 90 directors, 5 from each of the 16 Southern States and 10 chosen at large from outside its territory. It seeks to represent and speak for its membership on those broad, fundamental issues which we believe are basic to the American free enterprise system.
The last annual board meeting of the council was held at Point Clear, Ala., on May 13 and 14, 1954. At this meeting a declaration of policy was adopted which includes the following statements on Government competition with business:
Government competition with private enterprise is destructive of the principles upon which our economic system rests, and should be eliminated * **. The council advocates that all Government-owned facilities which now compete with private enterprise should be sold and the proceeds be applied on the payment of the public debt."
The council takes this position for the reason that, as a private industry-representing organization, it is opposed to socialism; and let there be no mistake about it, what we are dealing with here is socialism, pure and unadulterated, whether it be Government ownership and operation of a rope factory or the Tennessee Valley Authority.
With the exception of atomic energy which presents a special case, this Government competition is not—at least not yet-monopoly socialism in the sense that whole industries are owned and operated by the Government as are the coal mines in England, but it is a step in that direction. The difference is only one of degree, not in kind.
In addition, there is the element of basic unfairness in Government competition. The Government pays no taxes, whereas the private
operator does. In these days of high and, in some instances, well-nigh confiscatory taxes, this competitive advantage of the Governmentowned facility may very well
prove decisive. The function of government in a republic is to govern. It was never intended that this Government should set itself up in business in competition with its own citizens who support it with their taxes.
That this threat to our free-enterprise system is serious is shown conclusively by the testimony given before the Harden subcommittee. I shall not attempt to summarize this testimony here, but will quote one paragraph from the subcommittee's report:
Federal agencies have entered into so many business-type activities that they constitute a real threat to private industry and labor, imperil the tax structure, and are, in many industries, a step toward socialism. Many of these business operations employ thousands of people and have capital assets running into billions upon billions of dollars. These are largely tax free, but competitive with private industry and labor, which pay taxes.
The only remaining question is whether the Osmers bill—H. R. 8832—is adapted to the purpose its distinguished author had in mind, and since it was decided here this morning the details of that bill would not be discussed I simply want to say the council supports the purpose of that bill and the other bills. It wishes to express its appreciation to you, Mr. Osmers, and to Mrs. Harden and the subcommittee for the long distance that we have come, we feel, toward a solution to this problem.
We earnestly hope that this full committee will report out an appropriate bill and that if it is not considered at this session of Congress it certainly may be considered at the next session.
That concludes my statement under the 5-minute rule, Mr. Osmers.
I may want to file an additional statement with some more details in it.
Mr. OSMERS. We will be very happy to have any additional statement you might want to make, Mr. Taylor.
There are 2 or 3 little questions—they may be of a "Yes" or "No" variety-I would like to ask you. Don't answer them "Yes" or "No" unless you feel they lend themselves to that kind of an answer.
Obviously, you feel that there is a need for legislation in this field? Mr. TAYLOR. Yes, sir; definitely.
Mr. OSMERS. The Government makes, generally speaking, four types of arguments in conducting competitive business activity. Those four arguments are:
First, that the Government can do it better;
Third, that security--that is as to espionage, security regulationscannot be observed unless the Government conducts the activity; and
Fourth, the argument that quality cannot be controlled unless the Government engages in an activity.
Now, I would like to have an expression from you, Mr. Taylor, as to whether you feel that any or all of those arguments can be valid in the average situation.
Mr. TAYLOR. We feel definitely that the first two cannot, that the third one might be under certain circumstances and that the fourth one might be under certain circumstances.
We do not take the position that the Government should not engage in any private activity at all. We take the position that it should
not engage in any private activity where a privately owned business can do the job just as well.
We are acutely aware of this problem of national security, and espionage, and there may be certain situations where the Government will have to keep on carrying out a particular activity by reason of those situations.
The council's position on this is in no sense rigid. We simply feel there is a broad trend here, which was brought out by Congressman Curtis this morning, under which the Government is acquiring a large amount of the wealth in this country. I have heard the estimate of the value of these facilities, which can and should be liquidated, as $30 billion.
Now, we feel the time has come to reverse that trend.
Mr. OSMERS. There is one question I wanted to ask you concerning labor, though I recognize your organization is primarily an organization of employers rather than of labor groups. Mr. Taylor. That is right.
The CHAIRMAN. I am going to ask this question of labor witnesses, too, of course.
Do you feel the American laboring man is better off working for the Government or working for private enterprise?
Mr. TAYLOR. We feel that he is definitely better off working for private enterprise. As was also brought out this morning, when he works for the Government his right to strike is sometimes seriously impaired.
Mr. Osmers. Do you feel, Mr. Taylor, that the intense activity of Government in competitive activities will dry up sources of risk capital if carried beyond a certain point?
Mr. TAYLOR. It will, Congressman, for this reason: No private business can successfully compete with a Government-subsidized, Government-operated business that doesn't pay any taxes, that gets its money at a low interest rate, and for that reason the whole privateenterprise field will become, unless this trend is arrested, less and less attractive to private capital and private investment.
Mr. OSMERS. Do you feel, Mr. Taylor, that the willingness of Americans to engage in private enterprise has been a great contributing factor to our growth and prosperity?
Mr. Taylor. I think it has been by all odds the very greatest contributing factor.
Mr. OSMERS. Are there any other questions?
Mr. WILLIAMS. None of the bills we are considering provide that the money received on liquidation of any of these Government operations would be applied directly to the reduction of the public debt, as I recall, do they?
Mr. TAYLOR. No, sir; not that I recall.
Mr. WILLIAMS. I see underscored in your statement that observation of your council.
Mr. ŤAYLOR. That is the position of the council.
Mr. WILLIAMS. And you would change these bills to provide that there would be a direct reduction of the public debt as a result of such liquidation?
Mr. TAYLOR. That is the position of the council; yes, sir.
Mr. PILCHER. Mr. Chairman.
Government competition with private enterprise is destructive of the principles upon which our economic system rests, and should be eliminated. The council advocates that all Government-owned facilities which now compete with private enterprise should be sold and the proceeds be applied on the payment of the public debt.
Do you mean that the Government should get out of business entirely?
Mr. TAYLOR. The statement says "which now compete with private enterprise."
Mr. PilchER. Don't you believe there is a middle of the road somewhere?
Now, I am a businessman myself. Business can be just as cruel as Government when it comes to profits. There are certain cases, for instance, where, if you didn't have any competition, certain groups of business could sell the Government certain things and the Government would have no yardstick as to price, and they could get together---you know, most all of us, if the Government pays for it, are prone to say, “It's all right; gyp them.”'
I am just as much in favor of getting the Government out of business in free enterprise as any man on this committee, but when you say get it out entirely, where there is no yardstick-and you have your research in some of it-you can't just say, "Get out of businessperiod.”
Now, when it comes to boxmaking and paint manufacturing and banking, and where they just expand it, I am just as strong for that as anybody, but I think we have got to be realistic and when you go talking about the Government not being able to compete in any kind of business, I think we are going a little bit too far.
Mr. TAYLOR. I suppose you have the TVA in mind.
Mr. PILCHER. Oh, certainly not. I haven't the TVA in mind. I am for TVA, and REA, too, just as strongly as anybody, but I have certain other things in mind. Take, for instance, paint. We, in our committee, said we wanted to quit making paint in competition with private industry, but I think we also said the Navy should maintain the paint manufacturing business for research and make certain paints they couldn't buy from private enterprise.
Mr. TAYLOR. I don't think we have any objection to that, Congress
Mr. OSMERS. Are there any other questions?
Mr. McDonough. I would like to have your views on the Government functioning as a subsidizing agency, as it is in some instances, where it subsidizes industry to produce.
Mr. TAYLOR. We think that is legitimate, Congressman, in those situations, such as scarce metals, where a subsidy is necessary in order to secure production.
Mr. McDONOUGH. And in its aid to the housing industry, you think that should continue?
Mr. TAYLOR. No, sir; we do not.