Mr. CASE. I think it is generally conceded that your experience and training should indicate that you know that money that is spent has to be paid or found. Mr. VINSON. Yes; that is right. UNOBLIGATED BALANCE Mr. CASE. Now, with respect to the funds that you have this year. I think there is an indication that there would be an unobligated balance. I am wondering, if that is so, where that unobligated balance will rest, in the appropriated funds or in the transferred funds' Mr. VINSON. I will ask Mr. McClure to answer that-Mr. James McClure, our budget officer. Mr. MCCLURE. There is an estimated unobligated balance of $149,228. Of that amount, $46,588 is a saving from the appropriation, the remainder being a saving from an allocation made to the Office of Contract Settlement. Mr. CASE. Well, then, referring to the saving in that allocation, where are those funds going? Mr. MCCLURE. They will be returned to the emergency fund of the President. DISCUSSION OF HIGH WAGES, HIGH PROFITS, AND HIGH PRICE LEVELS Mr. CASE. Judge Vinson, in your early general statement-and part of it possibly off the record-you were talking about the national income and the problem of meeting the inescapable Federal Budget. which includes servicig of the debt, and other expenditures regardless of the war, and you indicated it would be desirable to have higher wages and higher profits to meet this high tax level. Would you not agree that if you are going to have a high wage level and a high profit level that inevitably you have got to have a high price level? Mr. VINSON. I do not think it is inevitable; no, sir. It is a question of the amount of production you have. If you have mass production. or capacity production, your unit cost drops quickly, Mr. Case. Ido not think it follows inevitably that you will have higher prices. Mr. CASE. To the extent you can achieve mass production and reduce the per-unit cost, that is true. Mr. VINSON. If you do not have mass production you are not going to have the high national income that we were talking about. Mr. CASE. Well, historically, if we have had a high price lev l we have had a high volume of business, which has meant a high tax return based upon its relation to the total volume of business. Has not the high tax return followed a high level of national income and wages and general costs? Taxes reflect the total turn-over. Mr. VINSON. I think that high national income should have n flection in high tax payments. Mr. CASE. Conversely, a time of high prices is a time to have high. tax revenues, is it not? Mr. VINSON. We have had higher prices and higher wages than w had pre-war, and I think it is perfectly proper to have high taxes. PORTION OF FEDERAL BUDGET DUE TO SUBSIDY PROGRAMS Mr. CASE. Can you state how much of the Federal Budget that we face is due to the various subsidy programs? Mr. VINSON. No, sir; but I can get it for you. Mr. CASE. I wish you would put that in the record. (The matter referred to is as follows:) STATEMENT ON SUBSIDY PROGRAMS (See p. 1744) SUBSIDY PAYMENTS IN FISCAL 1946 OUT OF COMMODITY CREDIT CORPORATION AND RECONSTRUCTION FINANCE CORPORATION FUNDS Under the provisions of the last paragraph of section 2 (e) of the Emergency Price Control Act of 1942, as amended by the Stabilization Extension Act of 1944, the Price Administrator, the Reconstruction Finance Corporation, and any other Government corporation were prohibited after June 30, 1945, from making any subsidy payments or buying any commodities for the purpose of sale at a loss unless the money required for such subsidies or sale at a loss has been appropriated by Congress for such purpose. Public Law 30, Seventy-ninth Congress, approved April 12, 1945, provides in section 3 that this paragraph shall not apply to the operations of the Commodity Credit Corporation during the fiscal year 1946, but limits subsidy payments and buying of commodities for resale at a loss to obligations which may be incurred and paid for, making such payments and absorbing such losses to (a) Such amounts as may be necessary -- (1) To complete operations with respect to 1944 and prior year crop programs; and (2) To fulfill obligations incurred prior to July 1, 1945, with respect to 1945 or prior fiscal year noncrop programs; and (b) Maximum subsidy payments or losses of― (1) $568,000,000 for operations during the fiscal year 1946 of the dairy production payment program; (2) $120,000,000 for operations of other noncrop programs, during the fiscal year 1946; and (3) $225,000,000 for the 1945 crop program operations. Thus a total of $913,000,000 to subsidy payments is permitted under (b); an additional 10 percent of the amounts specified in each of the three clauses can be added, provided there is no increase in the total payment of $913,000,000. S. 502, making similar provisions for payment of subsidies out of Reconstruction Finance Corporation funds, has been passed by both the Senate and the House, but there are differences in the amounts of subsidy payments permitted and in certain accompanying limitations. Both versions authorize payments or purchases necessary to fulfill obligations incurred prior to July 1945, with respect to 1945 and prior fiscal year activities. In addition, they authorize payments and purchases with respect to operations for the fiscal year 1946 which involve subsidies and anticipated losses of $1,468,000,000 in the case of the Senate version and $1,503,000,000 in the case of the House version. These totals are broken down by programs as follows: (1) With respect to materials or commodities, other than rubber and rubber products, produced outside the United States, in an amount not to exceed $80,000,000. (2) Wih respect to rubber and rubber products produced outside the United States, in an amount not to exceed $60,000,000. (3) With respect to materials or commodities produced within the United States a- follows: (a) Meat in an amount not to exceed $560,000,000 [$595,000,000 in House (b) Butter in an amount not to exceed $100,000,000; (e) Flour in an amount not to exceed $190,000,000; (d) Petroleum and petroleum products in an amount not to exceed $290,000,000; (e) Copper, lead, and zinc, in the form of premium payments, in an amount not to exceed $88,000,000; and (f) Other materials or commodities in an amount not to exceed $100,000,000. The unused portion of any of the above allocations up to 10 percent of such allocation may be used for making payments on or purchases of any other item or items enumerated in the act. The report of the Senate Committee on Banking and Currency (S. Rept. No. 86) points out that probably as much as $500.000,000 of the Reconstruction Finance Corporation subsidy payments is accounted for by payments on commodities and materials used directly by the Government, leaving a net figure somewhere in the neighborhood of $900,000,000, for subsidies on commodities or materials sold to nongovernmental purchasers. A relevant excerpt from the report follows: "Of the total over-all limitation of $1,468,000,000 provided in the bill for payments and purchases with respect to operations for the fiscal year ending June 30, 1946, which involve subsidies and anticipated losses as to corporations created or operations authorized to be performed pursuant to section 5d (3) of the Reconstruction Finance Corporation Act, as amended, it should be pointed out that a substantial amount, probably as much as $500,000,000, is accounted for by the payments on the substantial portion of meat, butter, flour, and other commodities and materials used directly by the Government, leaving a net figure somewhere in the neighborhood of $900,000,000. Thus, the total cost of operations for the purpose of maintaining maximum prices established pursuant to the provisions of the Emergency Price Control Act of 1942, as amended, with respect to civilian consumption, including the approximately $845,000,000 already proposed for Commodity Credit Corporation, will be somewhat less than the figure of $2,000,000,000 which has been often mentioned as the maximum annual cost of subsidy payments and purchases for the purpose of selling at a loss in maintaining the so-called hold-the-line program." Mr. CASE. Then I am wondering what you think of the wisdom of letting prices go up sufficiently to absorb the guaranties so that subsidies would not be necessary. Mr. VINSON. I think it would be a very, very serious thing to do at this time. Mr. CASE. Do you have that same feeling as to the wisdom of it when the war with Japan is over? Mr. VINSON. Well, I would want to take a look and see what the situation was, Congressman, before I would give you my judgment on that. Mr. CASE. At one point you indicated it was desirable to have many people paying taxes, or everybody contributing to the Federal Budget. It seemed to me that to the extent that people paid the costs directly of the things that they buy, and thereby the tax load was reduced, you would save a lot of bookkeeping and tax collecting. Mr. VINSON. Yes; and you would relieve the taxpayer of that amount he pays into the Federal Treasury. Coming back to subsidies, I know the arguments that have been made against them, but I actually believe that the Federal dollar that has been used in the payment of subsidies has paid the greatest return, both to the Government in lower prices and to the consumer, than any dollar I ever knew the Federal Government to spend. I really think that if I could get a little time off, or if I could use somebody, I would like to try to figure out just how much saving to the Federal Government alone has flown from the subsidy program. Mr. TABER. I think you would find it was a big loss. Mr. VINSON. I do not agree with you at all, Mr. Taber. Mr. TABER. I am quite sure of it. Mr. VINSON. I could take you on that one. Mr. TABER. I would be glad to go on. Mr. VINSON. I will just put somebody on it and send it up to you. (The matter referred to is as follows:) Total Federal expenditures on subsidies for the 1945 calendar year are estimated at $1,942,000,000, made up as follows: Food... Payments to domestic producers of copper, lead, zinc East coast petroleum movement.. Other nonfood.... Total 1 1 Some Foreign Economic Administration import subsidies are not covered. In most foods, the saving to the consumer is equal to the amount of the subsidy plus the margin of mark-up that would be applied to the subsidy. For example, in the case of butter, the estimated payments to the creameries this year will run to $73,000,000, but the estimated saving to consumers is $80,000,000. In the case of metals, the subsidies are paid only to marginal mines whose operating costs would not permit production at the ceiling price. Thus the country gets increased production without paying higher prices to the whole industry. The subsidy on petroleum to the east coast is to offset the increased cost of transporting oil by railroad tank cars instead of by tanker. It is estimated that total savings to ultimate purchasers (whether civilians or the Government)_ amount to about $3,600,000,000, or a total net saving of $1,600,000,000. The estimated saving on food alone is nearly $1,950,000,000, or about 35 percent more than the subsidies paid on food. I am entering into the record a tabulation prepared by the Office of Price Administration on food subsidies-how they work, to whom they are paid, and why. Food subsidies at a glance-how they work, to whom they are paid, and why Cheddar cheese. do. Dairy production payments. do. Dried edible beans " do. Feed wheat. do To offset cost increases and to en- To permit increased grocer returns.. Payment on deliveries of whole milk Dairy farmer..] Payment at specified rates per hun- Payment equal to difference in any De 16.5 20.5 479.0 596.0 Dealer. 3.5 5.0 Feeder. 40.0 40.0 Miller. 152.0 198. O Payment on live weight slaughtered Slaughterer.. Payment of 4.5 cents per pound to Manufacturer. Purchase of peanuts and resale to crushers at a loss. Crusher. |