particular pressure against State and local government borrowing. I call your attention to its Bulletin No. 3, issued May 4, 1951, and to the address of Governor Powell May 26, 1951. These documents indicate strong opposition by this voluntary committee to loans for meeting community needs for schools, sewers and hospitals except in expanding communities. This opposition of the voluntary committee to public financing is most strikingly expressed in its veto of borrowings by public utility districts in the State of Washington for the purpose of acquiring the properties of the Puget Sound Power & Light Co., as reported January 8, 1952. That this action is motivated by opposition to public ownership is sharply emphasized by the fact that bank credit to private utility companies has expanded by several hundred millions of dollars during the past year without interference from the voluntary committee. 4. Chairman Martin's outspoken opposition to public housing loans before your committee represents a reversal of the Board's position with respect to housing financed under the Federal housing program. The program for voluntary credit restraint promulgated by the Board on March 12, 1951, specifically stated that "this program would not seek to restrict loans guaranteed or insured, or authorized as to purpose by a Government agency, on the theory that they should be restricted, in accordance with national policy, at the source of guaranty or authorization." Governor Powell, Chairman of the Voluntary Credit Restraint Committee, advised Housing Administrator Foley on May 23 that "the program for volun. tary credit restraint does not apply to loans to public housing agencies carrying out low rent public housing projects assisted under the United States Housing Act of 1937, as amended, or slum clearance and urban redevelopment projects. assisted under title I of the Housing Act of 1949." At a press conference November 22, 1951, Governor Powell stated that lending institutions are constantly complaining about the inflationary impact of the public housing programs. "The most insistent complaints," he is quoted as saying, "come from the savings and loan associations." Chairman Martin now advises your committee that the issuance of public housing bonds is of special concern to the Federal Reserve Board because the voluntary committee has been exerting strenuous efforts to keep down the volume of tax-exempt securities. I submit that the Board's position as stated last March 12-that it should not. asume authority to restrict loans guaranteed or insured or authorized as to purpose by a Government agency-was correct. The decision is one for Congress to make and I urge your committee to take the necessary steps to make sure that the Federal Reserve Board and its Voluntary Credit Restraint Committee confine their exercise of authority to loans not guaranteed or insured or authorized as to purpose by a Government agency. The need for low-rent public housing, especially to provide for workers' families in critical areas, is desperate. To permit private lending institutions or the Federal Reserve Board or its Voluntary Credit Restraint Committee to destroy that program would create incalculable hardship for middle-income and lowincome families. The program which Congress has authorized in this field is certainly a minimum one, and it is unthinkable that the Chairman of the Federal Reserve Board would propose to confine the housing starts of 1952 to high-cost, high-rent units which only well-to-do families can afford. Sincerely, WALTER P. REUTHER, Chairman, National Housing Committee, CIO. Senator DOUGLAS. The next witness is Mr. Herschel D. Newsom, who is a farmer and master of the National Grange, formerly master of the Indiana State Grange, and a member of numerous public bodies. Mr. Newsom. STATEMENT OF HERSCHEL D. NEWSOM, MASTER, THE NATIONAL GRANGE Mr. NEWSOM. Thank you, Mr. Chairman. I should like to say first of all that I make no claim at all to being an economist, and I have never been a director of even any local bank. I am a farmer in Indiana, farming on land that is being farmed now by the fifth generation of the family. So my remarks will be made entirely from that particular point of view, from the point of view of a farmer who, I think it might be appropriate to point out, at this time, right now, is in the rather unusual position, as I see it, insofar as being compared with his fellow Americans is concerned, of using a rather rare combination of "current" labor and what I choose to refer to as "stored" labor. The right to store up the fruits or value of labor or productive effort in money or other valuable property purchased by income from that labor or effort and have assurance of a reasonably constant value of that money or other property is fundamental to the pursuit of happiness that has been basic to Americans. I am trying to say to you that the capital requirements in agriculture are terrific now. I am reminding you that the capital required to furnish a full-time employment within this modern agriculture of ours is the highest capital investment of any industry in America by a rather substantial figure. I am saying that we have a dual concern then in this matter of reward not only for current labor but reward in some reasonable balance upon our stored labor, or our capital investment. Frankly, I have been a little bit alarmed at certain attacks that have been made on the earning power of stored labor. I have been more than alarmed at the not necessarily deliberate but persistent attack that has been made on the value of that stored labor, not only its earning power but its real value, and I say to you it is my firm conviction that as a Nation and as a Government by ourselves we have no moral right to so nearly destroy the value of stored labor as we have done in recent years. The figures that I have in mind, are, to some extent, round figures, but they are the figures from which my impressions have been developed. For example, as I recall the figures, our total money supply in December 1939 was something in the neighborhood of $36 billion. Our total money supply in December of 1950 was something in the neighborhood of $118 or $120 billion. That, according to my arithmetic, means that we increased the volume of our money in this country by some 228 to 230 percent. Now in that same 11 years' stretch of time we were able somehow or other to increase our total production by a little less than 100 per cent. The only reason under the sun that prices did not increase by the full 228 percent, as the money supply increased by that amount, was the fact that we did increase production. So the value of the stored labor, or we will say the savings for our widows and our children, had declined. So prices increased and money declined in value by the figure determined by the 100-percent increase in production and 228-percent increase in the volume of money, and I believe the figures are that prices actually rose by 127 percent in that 11-year period of time. Now that was no accident, that was nothing except the result of our inflationary practice, and the result of our expanded volume of money supply. Of course I concede right off the reel that perhaps we did not have too much choice in all of the factors that brought this into being. As I look at it I remind you, from the point of view of an Indiana farmer, the necessity of paying our way through World War II, and through the results of that effort probably meant that we had little choice, maybe even no choice, in the matter. But, nevertheless, the fact remains that that is what happened, and we must take a lesson out of that experience. That, in effect, partially states my conception of the farmer's interest and stake in a monetary policy. I would say that my lay point of view in considering the thing clearly indicates that we must guard judiciously against increasing the Government debt, because I think that was, no doubt, the major factor in this increasing supply of money and its declining purchasing power. I would say, too, when we view the situation as it developed in fiscal 1951, we realize that in that particular year we had a budgetary balance, or surplus, of about $711⁄2 billion, and that by reason of that and certain credit policies, that I think were to a large extent sound, we did decrease the total money supply of this country, in that particular period of time, up to June 1951, in the amount of about $312 billion and incidentally lowered the turn-over rate. Let us look at the thing that happened to our farm prices and to the prices of basic commodities at the same time. They went down somewhat, and, as a matter of fact, the net farm income declined by 21 percent in those months, and I think that decline in farm income and in basic commodity prices was largely because of the decreased money supply, coupled, of course, with the lower turn-over rate (the less number of times that the dollar was actually put into use) which was perhaps, to some extent at least, caused by certain credit policies of the Federal Reserve Board, which perhaps it might have been a mistake to terminate as we did a year ago last June. Frankly, I am a little bit disturbed at the action of the Senate committee yesterday in regard to their refusal to reinstate, or to make possible the reinstatement, of certain credit restrictions at the hands of the Federal Reserve Board. I try to recognize that regulations X and W, for example, probably were not too well conceived, and maybe they were a little rigid at that time, and that is what required the Congress, in their effort to protect the interests of all the people, to bring those regulations to an end. Somehow or other I think it should be possible to reinstate those regulations at this particular time. The Grange policy, as an organization policy, is not too complete on this subject matter. I am injecting some of my own personal impressions here. It is my firm conviction that the Federal Reserve Board should always be responsible to the Congress and be an agency of the Congress of the United States. I believe that the monetary and fiscal policies of this country should largely be formulated by the Federal Reserve Board and not by the Treasury, an executive department of the Government. That, in turn, imposes immediately and continuously an increase of responsibility on the Congress, which is the only place that I know that it is safe for us, over a long period of time, to rest responsibility, and I think it is in compliance with the Constitution, in compliance with the basic law of this land of ours, that we do rest it there. I think the law imposes the basic responsibility on the Congress to see that the Federal Reserve Board operates within the policy laid down by the Congress, and so even though I have a basic difference of opinion from that which the majority opinion of the Sen ate Committee on Banking and Currency yesterday seemed to dictate. I like the policy of their determining what the Federal Reserve Board shall do. If what I said leaves any implication that they made a mistake, I say it is a mistake in my judgment only in the matter of their particular finding, but I like that procedure. That is the way the rules of the Federal Reserve Board must be established. Probably I have used up the time that I had assigned to emphasize the importance of this thing that I referred to as the necessity for a reasonable balance between the earning power of our "stored labor," which we have been willing to save, rather than to put into the consumer market immediately and the value of "current labor" in and out of our own industry. I think we must have encouragement for the saving, as an incentive for investment in productive enterprise. 'That is why I say I am so much concerned about the value and the earning power of our "stored labor," as well as our "current labor." The fact that we haven't done a very good job of preserving that value is reflected, in my opinion, by the fact that between December 1, 1950, and December 31, 1951, the agricultural loans of this country in the national banks increased by 28 percent. Of course we could make quite a point, and I think it would be entirely appropriate to make that point, out of the fact that also reflects lack of balance, lack of adequate earning power within agriculture itself. The major portion of that inadequate earning power in agriculture was in this stored labor. As a matter of fact, though small compared to other labor, we could show a reasonable return on certain current farm labor last year, provided we show no interest on capital investment or no return on our stored labor, and I think that is about the way that the situation stakes up. I would like to call the committee's attention to the fact, too, that the Production Credit Association loans, which again reflect increasing cost of operation and, to some extent, the continuing effects of inflation, insofar as our costs are concerned when we are experiencing some deflation insofar as income is concerned that the Production Credit Association loans increased by 22.8 percent. The point I am making is just this, that I am as much interested and concerned, I think, as any layman, anybody that does not understand the problem perhaps better than I about a balanced budget and about retiring the Government debt, it seems to me obvious that it is the major responsibility of the Congress in this critical period to determine how much budgetary surplus, in the event we get to the place that we can retire the debt, how much budgetary surplus is desirable in the interest of our economy. I have modified my feeling in the year I have been in Washington a little bit about how fast we dare pay off the debt when I see what a small budgetary surplus did about prices of basic commodities last year, and yet I know we must retire the debt. Senator DOUGLAS. You don't think there is imminent danger, do you, that we are going to have such large surpluses? Mr. NEWSOM. It is my opinion, Senator, that the major responsibility of the Congress, as I see it and perhaps the Congress has long ago accepted that responsibility is that we should early in each session determine how much budgetary deficit or surplus the total economy of the country can well stand or absorb, and then basically I believe it is sound that we should depend on the Federal Reserve Board, under the supervision and within the jurisdiction of the direct representatives of the people of this country, to carry out the policy. Senator DOUGLAS. Thank you very much, Mr. Newsom. The next participant is Boris Shishkin, who is the economist for the American Federation of Labor and has been for many years. He is Secretary of the Federation's housing committee and the committee on social security, and has been, I believe, in the past, Director of the European Labor Division of the Economic Cooperation Administration. Mr. Shishkin, we are very glad to have you with us. STATEMENT OF BORIS SHISHKIN, ECONOMIST FOR THE AMERICAN FEDERATION OF LABOR Mr. SHISHKIN. Thank you, Mr. Chairman. I am very glad to have the opportunity to join in this panel before this committee. I want to present a very brief statement indicating some of the things that we consider vital. I would like to preface that by saying with regard to debt management, credit, and monetary policies, the organization I represent has not made any specific policy decisions that could be expressed as a policy, but at the same time, on the issues involved here, organized labor has taken into account and expressed itself on a large number of issues that really add up to fairly definite and concrete policy approach. There are many elements in the present situation and problems that we are discussing here that concern us a great deal. I want to make brief reference first to some of the underlying considerations. The decisions made and actions taken by the Congress and the various agencies of the Federal Government in shaping the economic policy of the Nation are too often warped by the notion that these decisions and actions are valid for their own sake. The economic policy of the Government is only a means to an end. Policy judgments with regard to the budget, taxation, credit, and monetary policies can, therefore, be properly evaluated only in the broader framework of the Nation's economic goals. The peacetime goals of economic policy are well stated in the Employment Act of 1946. The responsibiilties of the Federal Government to concert its policies toward the achievement of that goal are likewise stated in this act. Yet today the American people are confronted with a threat to their institutions and to the Nation itself. The ability of the Nation to meet this threat the threat to our survival-is at present the overriding consideration in all our policy decisions. In other words it seems of extreme importance to recognize the futility of establishing one particular theoretical precept or one particular framework of policy decision, and ignore the larger considerations of national policy that are not, in themselves, either physically or even more broadly economic. Another force which compels us to give priority to some actions over others is the force of events which is bringing our lives into a much closer relation with the rest of the world. When we are dealing with the question of the public role with regard to investments, the need to recognize the necessity to find ways and means to afford an expansion of investments and to take new steps to safeguard the pre 97308-52-53 |