addition, canners' labor costs have risen considerably since last season and transportation costs are also higher because of the shipping situation and increased use of railroads.

"The situation is acute. A maximum pack is needed as an essential part of the war program. The higher canning costs are such that the pack cannot move to market. The established ceiling prices leave no working margin for the function of wholesaling and retailing.

"This is a problem directly connected with the war. That it would arise was realized at the time the general maximum price regulation was issued and discussions looking to its solution were begun soon thereafter with fruit canners and distributors. Plans were developed which involved Government assistance so that the fruit pack could be moved into marketing channels at prices which would permit the distributing trades to function and at the same time allow growers' prices to reach the levels set in the Price Control Act.

"Arrangements which would have permitted the Government to arrange this wartime operation could not be made. There can be no further delay without serious threat to the ripening fruit pack. Consequently, we have been compelled to drop our plans for Government aid and to begin work on a formula toat will, in effect, pass on to the public the higher costs-and no more-that are involved in canning and drying the 1942 fruit pack.

"This is not a satisfactory solution. It is inflationary. It translates into retail price increases a burden that the Government might properly assume as a charge connected with the war. And this burden of higher prices for canned and dried fruits will not be shared equally. It will fall heaviest on large families, especially in the low and middle income groups.

"Inability to complete successfully a plan that would have prevented an inflationary increase in retail prices of the 1942 canned and dried fruit pack is a serious set-back in the battle being fought by Office of Price Administration to maintain stability in the cost of living. We cannot afford any more such losses if we are to prevent a home-front disaster that will importantly impair the prosecution of the war."

The formula referred to by Mr. Henderson will be made public as soon as details are completed by Office of Price Administration and a committee of canners and distributors. The higher prices will begin at the canning level and will be passed on to wholesalers, thence to retailers, and finally, to the buying public. Extent of the increase at retail cannot be definitely determined for the various kinds of canned and dried fruits, but is known that raises of 15% and more will occur in a great many cases.

Among the items that will carry higher prices when the 1942 pack reaches retail store shelves are: Canned peaches, pears, apricots, applesauce, fruit juices, raisins, dried applies, dried peaches, dried apricots, and dried pears.

That is the text of the direct statement I made.

QUESTION AS TO PAYMENT OF A SUBSIDY AS A MEANS OF PREVENTING

INFLATION

Senator HAYDEN. Let us analyze that just a moment in considering that the press would say that what you meant by your statement to the effect other measures which would have prevented this inflationary increase in retail prices, refers to the enactment by Congress of legislation for payment of a subsidy. As a matter of fact that was the only thing that could be done that would have prevented this rise, is that not so?

Mr. HENDERSON. Yes; a subsidy, but it would not require additional legislation. I would like to explain off the record.

Senator HAYDEN. I would like to follow this question on the record. A subsidy would have prevented inflation. That is to say you could not under the act prevent the grower from getting a price as high as 110 percent of parity as of these various dates.

Mr. HENDERSON. That is correct, and we had no intention so to do. Senator HAYDEN. So in no manner was the producer of this type of agricultural product deprived of parity or 110 percent of parity.

Mr. HENDERSON. That is correct.

Senator HAYDEN. Therefore, the canner would have to pay more for his fruit, but if there has been a subsidy by whom would it have been paid?

Mr. HENDERSON. It would have been paid by the C. C. C., or the Surplus Marketing Administration.

Senator MCKELLAR. To whom would it have been paid?

Mr. HENDERSON. It would not have been paid as a subsidy. We proposed that in order to stimulate production of this year's crop the Department of Agriculture would, in effect, establish a support price at which they would buy any of the commodities they wanted to be tendered to them.

Senator HAYDEN. After they were canned?

Mr. HENDERSON. No. That support price would be substantially higher to meet all the standards of the Price Control Act, in addition. Then having bought these commodities as they do many crops, they would sell to the trade at a price lower than they purchased it in order that the retailer could then sell at the March prices and keep the cost of living down.

Senator MCKELLAR. The Government would have to buy it. They would buy the surplus, and they would have to tax the people to buy the surplus. That would just be beating the devil around the bush, it seems to me.

Mr. HENDERSON. May I say this, the amount of that increase if borne by the Government would be less than if it were passed along into the trade.

Senator MCKELLAR. Why?

Mr. HENDERSON. Because when you increase a price of a basic commodity each person handling it, the jobber, wholesaler, and retailer, adds on a percentage and if you have a dollar added to the basic cost, by the time it has gotten to the man who eventually pays for it, the ultimate consumer, it will be $2 or $3.

Senator HAYDEN. It is pyramided.

Mr. HENDERSON. The increase is pyramided, and it is a most serious thing.

Senator MCKELLAR. They cannot pyramid if you have fixed a price ceiling on it.

Mr. HENDERSON. If you fix a price ceiling at which the retailer cannot do business he will not handle it.

Senator MCKELLAR. That is true, but it is not necessary to do that. Mr. HENDERSON. If he will not handle it crops are likely to rot in the fields.

Senator O'MAHONEY. Let me interrupt.

Mr. HENDERSON. I think I am entitled to one more point here. I wanted to do it this way.

to.

Senator O'MAHONEY. We are going to give you all you are entitled

Mr. HENDERSON. I am entitled to $161,000,000.

[Laughter.]

INCREASED WAGES URGED ON BASIS OF INCREASE IN COST OF LIVING

The important thing is this, Senator, every increase in wages that is being urged, little steel, that is before the War Labor Board, the aircraft industry and the shipbuilding industry, and the building

trades, is urged on the basis there is an increase in the cost of living. The time has come to call a halt to argument, and I want to call a halt to it. If it is based on the cost of living we can prevent the cost of living going up, and we can prevent the pyramiding and spiraling of prices.

Senator MCKELLAR. That is just taking money out of one pocket of the Government and putting it in another.

Mr. HENDERSON. You take less out of the price level and that is the program the English have followed for 2 years. They followed it because they wanted to keep the prices down and the wage levels down and the burden on the public treasury less.

Senator MCKELLAR. That does not keep ours down.

Mr. HENDERSON. Every one of these increase pressures is based on the increase in the cost of living. If we let wages go up and prices go up you are in the old familiar spiral.

Senator O'MAHONEY. Do you not think by a statement such as you issued last night you stimulate the demand for wage increases? I will show you why.

Mr. HENDERSON. Let me say "no," so it will not make it a rhetorical question.

PRESS RELEASE OF MR. LEON HENDERSON DATED JULY 1, 1942

Senator O'MAHONEY. Thanks. You were careful enough in answer to the question by the chairman to begin reading this release at the quotes. Now I am going back and read the whole release because the Office of Price Administration is responsible for the whole release. Mr. HENDERSON. I was reading my statement. There was no element of trickery in that.

Senator O'MAHONEY. I agree with you on that, but I want to get it clear what the implication was, whatever it is:

Office of Price Administration. OPA-160.

I assume it is the 160th release, or maybe that is only a fraction.

For immediate release Wednesday, July 1, 1942.

Price Administrator Leon Henderson today announced he is being compelled to take measures that will raise retail prices of the 1942 pack of canned and dried fruits by as much as 15 percent and possibly more when the new pack reaches the store shelves.

We cannot blame the newspapers for drawing conclusions. There is a conclusion already drawn and drawn by the Office of Price Administration.

Mr. HENDERSON. I wrote it myself.

Senator O'MAHONEY. Good. You are a good newspaper writer. Characterizing the move as "a serious setback in the battle being fought by Office of Price Administration to maintain stability in the cost of living," the Administrator attributed his action to the special agricultural provisions of the Price Control Act and inability to work out arrangements for direct absorption by the Government of higher fresh-fruit costs.

These higher fresh-fruit costs, he indicated in a statement addressed to American housewives, might have been absorbed by the Government as a charge to the war effort, as Great Britain and Canada have done in similar instances.

Mr. Henderson cautioned retailers against any increase in the prices now charged for canned and dried fruits. These goods were all packed last season and are under a ceiling at the highest levels reached in March. The prospective price advance will be confined to the 1942 pack and present March prices will prevail until the new packs reach the store shelves.

74384-42- -2

QUESTION AS TO MARKET PRICES AND PARITY PRICES OF CANNED

FRUITS

Now that is a lead, and it seems to me to carry the implication justifying the conclusions which have been reached by the headline writers and the rewrite men of the various press services, so the question arises where in this statement have you indicated what the present prices of fruits which are canned and which are affected by this order are and what their relation is compared to parity.

I have before me a table which was inserted in the House hearings, at page 227, of the various commodities. Now on this the only fruit commodity that I find is apples. According to this table the actual price on April 15, 1942, was $1.41. The parity price was $1.45, and according to the last two columns, in order to reach the ceiling under the act, apples as of April 15, 1942, would have had to rise 13.5 percent. In order to reach parity price, the price would have had to rise 2.8 percent.

Now can you tell us what the figures are with respect to other fruits that are covered by your statement?

Mr. HENDERSON. Let's take raisins.

Senator O'MAHONEY. Let me interrupt you. This table was drawn to cover the principal food crops, and it does not include these fruits, but on the opposite page, page 226, I find a quotation which Mr. O'Neal of the Farm Bureau Federation put in the record from a statement made by Senator Brown of Michigan. I remember very well when he made the statement on the floor of the Senate. This was on the 26th of May, scarcely a month ago:

I wish to call attention to the actual price structure as it is today, to show the country that the general averages of prices is still a long way below parity, and below 100 percent parity of which the Senator from Wyoming (Mr. O'Mahoney) wanted in the law. I think public notice should be taken of the fact that farm prices have not risen to any such degree as many people at that time feared they would.

In a list of 25 representative farm commodities, including rice, wheat, corn, oats, barley, buckwheat, flaxseed, cotton, potatoes all the principal farm commodities there are only five commodities which are above the ceilings established in the price-control law. These particular commodities are hogs, beef, veal, wool, and rice. Every other farm commodity-and there are 20 more of them-is still materially below the ceiling fixed in the price-control law. There are only 9 commodities out of the 25 which are above parity-at the present time. (Congressional Record, May 26, 1942, p. 4721.)

Now it seems to me taking the statement of Senator Brown who was the sponsor on the floor of the Price Control Act, as correct, and I think it was correct

Mr. HENDERSON (interposing). I might say I have never seen a better handling of a difficult economic act in the committee or on the floor in Congress than Senator Brown did.

Senator O'MAHONEY. I agree with you.

Mr. HENDERSON. I have never seen in my experience a more complete handling of something that is the subject of controversy, and I think this country should feel directly indebted to Senator Brown, because if we had not had that the country would have been impoverished by the bill the House passed.

STATEMENTS GIVING IMPRESSION THAT PRICES FARMERS ARE RECEIVING ARE CAUSE OF INFLATION

Senator O'MAHONEY. I think he did a splendid job with a very difficult situation. If it be true, as he says, there are only nine commodities which on the 26th of May were above parity, I am at a loss to understand why so many spokesmen, including yourself for the Office of Price Administration, are constantly feeding to the press the impression the prices the farmers are receiving are the cause of inflation.

Mr. HENDERSON. Now what is inflation except in technical terms, and Senator Thomas is an expert, but an increase in price without an increase in production? While there is a technical question as to whether or not there is inflation, there is no doubt that agricultural prices have risen more than any other prices under the war effort.

Senator THOMAS of Oklahoma. Do you contend there is any inflation now?

Mr. HENDERSON. I contend only we have a rise in prices without corresponding increase in production. What I say about agricultural prices in this connection is this, and I think something has been missed, and I would have adverted to it when we were talking about apples, although we have better examples. What is the situation? Simply and strictly it is this, although some of these commodities have not risen to the standard set in the act

Senator O'MAHONEY. That is some of these fruits which are in these cans?

Mr. HENDERSON. That is right. In order to set a price on that which passes in retail and be able to hold it, we have to fix it at a price which will yield the farmer the full standard of the act. Now that is all right. That is perfectly all right. In many cases that means that the price that we have got to fix at retail is even above the market price which it would be if left alone. But due to the demand for foods by the armed forces and by others the amount left for the civilian population is relatively small, so that what would happen, is the price and cost of living will run up unless you take your steps now to give farmers the full amount of the standards in the act and set the price because of the short supply.

Senator O'MAHONEY. But if it be true, as you have just acknowledged, that prices to producers of fruits which are in cans have not yet reached parity how can you go before the country in a statement like this and attribute your action to the 110 percent of parity which

is written in the law?

Mr. HENDERSON. The action we had to take is because of that.

QUESTION AS TO INFLATION

Senator THOMAS of Oklahoma. At this point, I want to place in the record some figures which cannot be disputed. The impression is throughout the country that we are in a spiral of inflation. The newspapers say we are and your organization implies we are.

Mr. HENDERSON. I am implying we are threatened with it. Senator THOMAS of Oklahoma. I want to put in the record the facts. The data you have submitted today starts on the basis of 100 as of