in any industry, and force adherence to sound basic practices and prices under standards established by the strong majorities within industry, and with full cooperation between Government authority and those majorities.

At your session last Friday, May 26, Mr. Loomis, representing the dairy interests, I believe, suggested an amendment to section 8 of the bill which, as I read it, would remove from under the industry recovery bill all industries handling agricultural commodities and would place such industries under the administrator of the Agricultural Adjustment Act.

We would have no objection to this amendment if it applied solely to those industries, like the dairy industry, which handle only the basic agricultural products specifically named in the Agricultural Adjustment Act. However, in the case of our industry-the commercial cold-storage industry-we handle many commodities not covered in the agricultural bill as well as several of the products. included under that act.

It would therefore be most impractical for the administrator of the Agricultural Adjustment Act to treat with all of the operations of the commercial cold-storage industry. We belong under the Industry Recovery Act, and as I stated previously we are here for the purpose of having Congress place our industry in that status.

If, therefore, you gentlemen are inclined to consider the amendment to section 8 of the bill suggested by Mr. Loomis, we respectfully ask and strongly urge that you change its phraseology to read as follows:

During the period in which said act in in force, the Secretary of Agriculture is authorized to carry out the purposes of this title with respect to such industries as are engaged exclusively in the handling of commodities which come under his jurisdiction in the administration of said act, and codes of trade practice and/or trade agreements entered into under such act shall be deemed to be in compliance with this title.

The CHAIRMAN. Thank you very much.

STATEMENT OF BENJAMIN C. MARSH, REPRESENTING THE PEOPLE'S LOBBY, WASHINGTON, D.C.

Mr. MARSH. Mr. Chairman and members of the committee, my name is Benjamin C. Marsh. I am executive secretary of the people's lobby.

This, Mr. Chairman, is a tri-partite bill, and I want to address myself to the three parts. I did not know it was constitutional to deal with three subjects in one bill. I assume it is. But after the first section and I know you want me to be brief-I want to read a paragraph from the book "The Modern Corporation and Private Property", by A. A. Berle and G. C. Means, which throws a lot of light on it. Mr. Berle was one of the men interested in drafting the bill

and one of the advisers.

Senator GORE. This bill?

Mr. MARSH. One of the President's advisers.

Senator GCRE. Did he draft this bill?

Mr. MARSH. I don't know whether this bill or not.

The future may see an economic mechanism now typified by the corporation, not only on an equal plane with the State, but possibly even superseding

it as dominant form of social organization. The law of the corporations according might well be considered as the potential constitutional law for the new economic state, while business practice is increasingly assuming the aspect of economic statesmanship.

Now, Mr. Chairman, this first section attempts, in a way, economic planning, but you cannot have economic planning while you have rent, interest, and profits. Russia is the only country where you can have a ghost of a chance for success for economic planning. I am not opposing it, but I do think we ought to be practical, and I want to read a few specific suggestions, and then take up the bill in detail under the third section.

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The preamble to the industrial recovery bill stating the purpose is, To remove obstructions to the free flow of interstate commerce, which tend to diminish the amount thereof " is misleading. Production and commerce are limited by the inequitable distribution of the national income, with one fiftieth of the families getting nearly one fifth of the national income, by high land values, which constitute a brake of 6 or 7 billion dollars on prosperity, and by about $160,000,000,000 of debt, with its annual tribute of at least $7,000,000,000 a year, by patent laws, by private banking and by taxes on consumption. Four percent of the people own four fifths of the national wealth.

The House bill increases obstructions on commerce by increasing sales taxes, and the Wagner bill would be little help, unless amended to give the Federal Government complete control over profits and prices in industry, and over retail prices and rents, as well as making the shorter work week and the minimum wage mandatory.

may

I submit, however, that nothing in this bill gives any assurance that anything will be done unless the President wants to do it, and I trust this administration will not go down in history as a administration. It says, "The President may." Let these various trade associations do so and so, and if they don't do so, then the President may. If you effect this-just what shall I call it?—morganatic or common-law marriage of the Federal Government and trade associations, then we should require the stock market to be closed while it is in force, and prohibit the issue of any securities by the mergers authorized thereby.

You passed a new securities bill. In 1932 the total of new corporate issues was about $325,000,000 as compared with $8,639,000,000 in 1929. I know Senator Wagner wants to achieve the desired ends under this section, or the whole bill for that matter, but it is quite obvious what the intent of the trade association is to profiteer. I was here during the war. We had the War Industries Board, and there were some 20,000 new millionaires created while you were controlling industry, and then trouble started right afterward. If you are going to have this bill, you have got to have Government control go right straight through. Little new financing is needed. Senator GORE. Would you have the Government regulate not only wages but rent, interest, and profits?

Mr. MARSH. If it doesn't regulate interest and profits and rents and retail prices, you will be in the same fix Henry Ford was in when he tried this: He raised wages to $5 a day, and rents went up, and the wage earners were worse off than before. You can't afford that, because conditions are too serious today. Government cannot repeal

economic laws nor make profiteering trusts good by going into partnership with industry. We have tried governmental control over relatively few public utilities, and that doesn't encourage hope for success with half a million corporations unless you include the amendments we suggest.

It is my impression that without these amendments at least one third of those who should be gainfully employed would be hurt by this bill. They can be protected, but, as I consider it, the building trades are not affected in this section. I don't believe they would be considered to be in interstate commerce. Teachers, hundreds of thousands, many of them out of employment, and the professional classes generally, would be apt to be injured by it without these amend

ments.

It seems to me the public-works section and the tax section should be separate. Their incorporation unfortunately raises the question of why this bill was introduced, instead of definite revenue revision, to which I wish to devote some time.

There were two bills which were finally dropped-the 30-hour bill of Senator Black, which was mandatory; the minimum wage law, which was mandatory. We endorsed both those bills with the proviso that there be this Federal control of rents, Federal control of retail prices.

I believe those bill are limited in their application to 2 years without further action by the President. We hope you will accept those amendments.

Then, coming to the construction section, 203-4, it says to make loans for construction

Provided, That in deciding to extend them aid or grant hereunder to any State, county, or municipality, the President may consider wether such action is in good faith * * * reasonably designed to bring the ordinary current expenditures therefore within the prudently estimated revenues thereof.

I think that would have to be amended if you are going to carry on the public-works sections. I would request now, as I wanted to request the House Ways and Means Committee, which gave me 5 minutes, after they gave the president of the United States Chamber of Commerce an hour and a half-I want to ask you to get two experts in here, Joseph J. Wexler-let him make specific amendments and Prof. Joseph J. McGoldrich, of Columbia University, who made the statement that the municipal budget of New York has a deficit of $250,000,000.

Senator GORE. State or city?

Mr. MARSH. The city of New York. As I read this section, the city of New York, of course, they have a municipal election this fall, and they are all ducking the taxation question cannot borrow a cent; Detroit cannot borrow a cent; Chicago cannot borrow a cent. Senator GORE. The Federal Government is going to let them have the money.

Mr. MARSH. But the Federal Government insists on their keeping their house in order, and they haven't done it. I don't know how they are going to raise the money, unless they make more drastic changes than they have. Most of the large cities of the country, where there is serious unemployment, cannot balance their budgets without drastic changes in their tax system.

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This morning's New York Times has a story as to who is going to get the benefit out of this bill. "Manhattan land now $5,500,000,000." You can raise wages and reimburse those landowners. It is not going to help the country as a whole particularly, and the West may object to it after a while.

Coming down to specific suggestions of the section, which I regret has to be considered as part of the general bill, you see the administration relied upon your judgment in one respect: Reemployment and relief taxes. "The taxation provision to be inserted later as section 208."

Here is what we recommend:

Increase normal and surtaxes to raise $750,000 more.

Tax net income of corporations progressively, at least for 2 years, as an emergency measure.

I would like to make a part of the record, Mr. Chairman, a table compiled by Mr. Wechsler, certified public accountant, showing that on December 31, 1931, 442 industrial corporations had cash or equivalent balances of $3,472,000,000. I haven't the balance sheets for all of them, but at the end of 1932, 81 industrialists had cash and equivalent of $1,431,000,000.

Senator GORE. How many?

Mr. MARSH. Eighty-one industrialists, $1,431,000,000. (The table is as follows:)

Composite balance sheets of 107 corporations as of Dec. 31, 1932

Comparative statement showing percentage of cash to capital invested for the

Now, what the big corporations are doing is this: They are withholding the payment of dividends on account of the slight increase in surtax rates, so that their rich stockholders will not have to pay those higher surtax rates.

I haven't an extra copy, but you will find it in the hearing of the Ways and Means Committee. On the balance sheet of the 31st of December last, of the United States Steel Corporation. I would like to have this included in the record, and I would also like to have included the summary of 107 corporations as of December 31, 1932, worth $29,000,000,000. If course, including the larger corporations and showing their surplus in cash and liquid assets.

For instance, at the end of 1930 the corporations had $10,226,000,000 of Government bonds.

Gentlemen, America has plenty of income. You do not need all of this economic planning, and it will be futile unless you redistribute your national income through taxation. It is useless to raise wages $5 a month, and then slap two or three times as much on in sales

taxes.

Senator REED. Mr. Marsh, the proposed sales tax of 1 percent you say we would slap on two or three times as much as $5 a month in sales taxes. That would be at least $10 a month.

Mr. MARSH. No; I did not say 1 percent. I said if you put on such a sales tax.

Senator REED. Well, a sales tax that would produce $10 a month would necessitate the spending of $1,000 per month on taxable articles.

Mr. MARSH. Yes, sir.

Senator REED. Obviously the burden on the working man is not going to be $10 a month, is it?

Mr. MARSH. No; I didn't say 1 percent sales tax would, but I will point this out; I presume all of you have seen this report of the Ways and Means Committee entitled, "Double Taxation" in which they point out that people with incomes under $3,000 pay most of the thirteen and a half billion dollars of Federal, State, and local expenditures, using round figures; and therefore we suggest since your job is to increase the consuming power of the people, you can do this by repealing consumption taxes, and every dollar of sales tax you add reduces consumption.

We don't need a sales tax. They are collecting about $500,000,000 in gasoline taxes, Federal, State, and local.

Senator GORE. I think it is more than that.

Mr. MARSH. Well, those figures are a year old. But I say at least $500,000,000, which is totally unnecessary. You can raise at least $1,000,000,000 by taxing corporations' surpluses above the minimum-they have to have some minimum of course-with progressive rates, similar to what you apply to individual incomes. Then you can tax the income from Government bonds; amend the partnership tax section to stop evasions which are now costing from fifty to seventy-five millions; amend the capital loss tax section to stop evasions. You should also levy a small direct tax on land values. Take this proposal, gentleman, to liquidate this over 10 years, or some such matter-this public-works program. You had that during the war. Take the next fiscal year, you are going to pay an