ENTRANCE OF GOVERNMENT INTO BUSINESS FRIDAY, MAY 13, 1932 HOUSE OF REPRESENTATIVES, The committee met at 10 o'clock a. m., Hon. Edward W. Pou (chairman) presiding. The CHAIRMAN. We will take up House Resolution No. 214, introduced by Mr. Shannon. (The resolution referred to is as follows:) [H. Res. 214, Seventy-second Congress, first session] Whereas protests against the entrance of Government into business in direct and unfair competition with its citizens are being received from communities throughout the United States; and Whereas under the unprecedented economic depression into which the business of the Nation has been precipitated, and under which the Nation is now suffering, there exists an immediate necessity for the curtailment of the tendency of the Government to engage in business in competition with private enterprise, and for the withdrawal by the Government from many of the fields in which such competition already exists; and Whereas such competitive business activities of the Government may be abolished or restricted in scope without impairing the orderly and necessary functions of Government; and Whereas the following are some of the protests which have been received relative to the disastrous effects on private business of Government competition, to wit: (1) The Chamber of Commerce of Kansas City, Missouri, by resolution adopted March 15, 1932, enters the following protest: "The attention of the Chamber of Commerce of Kansas City, Missouri, repeatedly has been brought to instances of private industry's losses because of competition by the Government. A check up shows that the Government has entered into competition with private business, and even the professions, in an astoundingly large number of cases. The lines of private endeavor which have suffered by this governmental competition include grain, livestock, retailing, wholesaling, and manufacturing. Even in the professions the private citizen finds himself in many cases in competition with Government employees engaged in the same line of work. "In times of prosperity American business was inclined to sleep on its rights and to continue paying ever-mounting taxes without going to the trouble of making its real feelings on the subject known. With the decline of business, not only have taxes become a burden increasingly hard to bear but private industry is suffering in an increasing measure from the effects of competition of the Government in many lines of business. "The Chamber of Commerce of Kansas City emphasizes the necessity of curtailment of the tendency of the Government to engage in business in competition with private enterprise, and of the withdrawal by the Government from many of the fields in which such competition already exists. This competition has had a serious effect upon the ability of private industry to pay taxes for the support of Government and wherever possible we strongly urge that the Government withdraw from such competition." (2) Mr. Conrad H. Mann, president of the Chamber of Commerce of Kansas City, Missouri, under date of April 16, 1932, enters the following protest: "I have been told by officials of responsible business concerns that the Post Office Department plans to provide facilities for a large cafeteria in the new post office now under construction. "It is my feeling that the Government should go slowly in entering into the restaurant business. I am confident that a study of the local situation will show that there is no need for any facilities of this sort to be included in the new post office. If the tendency for the Government to go into business continues as it has in the past we will soon reach the point where there will be no private business to pay taxes for the support of the Government." (3) The Laundryowners' National Association of the United States and Canada, by resolution adopted March 17, 1932, enters the following protest: "Whereas this board of directors has received letters from its members about the entrance of the Government into the laundry business and entering into unfair competition with laundry owners: Therefore be it "Resolved, That this board of directors be recorded as being actively opposed to the entrance of the Government in business in direct competition with its citizens who are paying taxes for the support of government; and be it further "Resolved, That this board of directors oppose the establishment of new laundries or laundry departments in competition with laundry owners; and be it further "Resolved, That this board opposes the practice of Government laundries entering into unfair competition with laundry owners, and in some instances doing laundry work at prices that are below the established cost of production; and be it further "Resolved, That entrance of the Government into laundry business during the present economic period, when widespread unemployment is prevalent, will bring about further unemployment and hardship to our citizens: Therefore be it further “Resolved, That the secretary of our association send a copy of this resolution to the President of the United States and to all Members of Congress." (4) The Kansas City Restaurant Association, of Kansas City, Missouri, by resolution adopted April 14, 1932, enters the following protest: "Whereas the restaurant operators of Kansas City, Missouri, are Federal taxpayers and contribute large sums of money toward the support of the Federal Government; and "Whereas we, the undersigned, do oppose the further entrance of the United States Government into private businesses in direct competition to Federal taxpayers in any form; and "Whereas the Kansas City Restaurant Association, after due consideration by its board of directors and after careful inquiry and investigation as to the restaurant facilities adjoining or closely adjacent to the new Kansas City Post Office Building now under erection, have found such facilities adequate to take care of any number of post-office employees additional to the approximately two hundred post-office employees now being cared for in the neighborhood of Union Station and, therefore, of the new post-office building; and "Whereas at least four members of the Kansas City Restaurant Association now operating restaurants in the neighborhood of the new post-office building give assurance that they will enlarge their facilities to accommodate any and all increases in patronage arising from the opening of the new post-office building: Therefore, be it 66 Resolved, That the Kansas City Restaurant Association, through its executive body, composed of its officers and directors, does hereby protest the opening of an employees' cafeteria in the new Kansas City Post Office Building; which cafeteria would make the United States Government a direct competitor in business to Federal taxpaying citizens now operating restaurants in the neighborhood of the new Kansas City Post Office Building." (5) The Chamber of Commerce of the United States of America, under date of April 18, 1932, enters the following protest: "The Chamber of Commerce of the United States has an established policy in opposition to Government entry into business fields which can be successfully undertaken and conducted by private enterprise. ** (6) The National Printer Journalist, of Springfield, Illinois, under date of April 28, 1932, enters the following protest: "The newspapers of the entire United States are very much opposed to the United States Government being in the printing business and furnishing printed stamped envelopes to the public." (7) Many protests are also being received against the activities of the Federal reserve bank in Kansas City, Missouri. The Federal Reserve Board was created by an Act of Congress, and its building in Kansas City, Missouri, erected on Government land, is now competing with private enterprise by renting office space and, also, by maintaining a restaurant on its nineteenth floor for its employees. The Seventeenth Annual Report of the Federal Reserve Bank of Kansas City, for the year ended December 31, 1931, contains the following items under "Earnings": Income from rented space, 1930, $276,028.75; 1931, $261,649. Surely, this gives rise to the question: Is this banking as intended by the Federal reserve act or property income in competition with taxpayers? Further, the Kansas City Restaurant Association, of Kansas City, Missouri, by resolution adopted April 14, 1932, protests as follows: "Whereas the restaurant operators of Kansas City, Missouri, are Federal taxpayers and contribute large sums of money toward the support of the Federal Government; and "Whereas we, the undersigned, do oppose the operation of private businesses by the United States Government in direct competition to Federal taxpayers in any form; and "Whereas the Federal reserve bank, located at Tenth and Grand Avenue, in the heart of the downtown business district of Kansas City, Missouri, now operates, and has for several years, a cafeteria which, we are informed, takes care of about six hundred Federal reserve bank employees, removing six hundred customers from becoming patrons of downtown restaurants operated by Federal taxpayers; and "Whereas this Federal reserve cafeteria operates without the cost items of taxes and interest on privately invested capital and sells food at prices lower than taxpaying restaurant operators can sell it, thus putting into the minds of these six hundred employees that the restaurant operators' prices are unduly high: Therefore be it "Resolved, That the Kansas City Restaurant Association, through its executive body, composed of its officers and directors, does hereby protest the maintenance of a cafeteria in the Federal reserve bank building at Kansas 'City, Missouri.” (8) Protests have further been made against a practice, which originated in the National Capital many years ago and is now spreading to Federal buildings in communities removed from the Capital, of employees of the Government organizing and buying, in lot, articles of merchandise and commodities of all descriptions, to the detriment of private enterprise. These groups of Government employees, functioning under the supervision of Government officials, in Federal buildings which supply space, heat, and light without cost to them, are destructive of dealers in trade. Therefore be it Resolved. That a committee to be composed of five Members of the House be appointed by the Speaker, and that said committee proceed immediately with an investigation of Government competition with private enterprise. The committee shall report to the House of Representatives not later than December 15, 1932, the results of its investigation, together with such recommendations for legislation as it deems advisable. Upon the filing of its report such committee shall cease to exist. For the purposes of this resolution the committee is authorized to select a chairman and hold such hearings, to employ such experts and such clerical, stenographic, and other assistants, to require the attendance of such witnesses and the production of such books, papers, and documents, to take such testimony, to have such printing and binding done, and to make such expenditures as it deems necessary. The CHAIRMAN. Mr. Shannon, the committee will be glad to hear you at this time. STATEMENT OF HON. JOSEPH B. SHANNON, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF MISSOURI Mr. SHANNON. Mr. Chairman and gentlemen of the committee, it is hard to present in the short time allotted a matter which, if it were to be heard in court, would, perhaps, require 30 days for its presentation. Under this resolution, we are proposing that the House appoint a committee of five members for the purpose of making an inquiry into this serious subject of the Government engaging in business, and report back to the next session of Congress in December. In our resolution we limit the time for reporting to December 15. Now, let me just go into this matter a little bit, and tell you how much of it is accidental and how much of it is more than accidental. One day, a year or so ago, I was in Washington, and I dropped into the building opposite my hotel, or the Washington Hotel. As I stepped into the place, I met a policeman or guard. I spoke to him and asked, "What building is this?" He laughed and said, "This is the Temple of Folly." I then asked him, I then asked him, "What is the name of the building?" and he answered, "That is the Commerce Building." I asked, "What do they have in the building?" and he said, "Everything." I said, "Do you have rooms in there?" and he said, "They have a big restaurant downstairs; a restaurant with the largest seating capacity of any in the city, and possibly in this part of the country." I went down to the restaurant, sat down and ate, and then paid my check and went out. I made further inquiry about it and asked, "Why do they have this restaurant?" The reply was, "This restaurant exists because it promotes efficiency; these clerks in Washington get off at 4.30 o'clock in the afternoon; they leave at 4.30 o'clock, and it is necessary to save time." He said, "They have about half an hour's time off, giving them but a short time to eat." Therefore, the Government, or rather the management, provided this cafeteria. In my movements around since, I find that there is a welfare organization of some kind that has charge of this work. Then I said to my informant, "This pertains to the noon meal, does it not?" and he said "Yes." Then I asked, "What about breakfast?" Then there was the explanation that breakfast would be served in a room. Now, I can not understand why the Government of the United States should use a great structure of that kind as a place to go to have a meal or a breakfast service. Here were people from Alexandria, where many of these clerks live, and people from across in other parts of the District, coming every morning and taking their meals, and I wondered if it would not be better, especially in this period of depression, to have these people either eat at home or eat in the neighborhood restaurant or places of that kind where they lived. If they would do that, they would be helping the little fellow engaged in trade. I could not understand why some notice had not been taken of this condition. Yet, no attention was paid to it on my part other than the fact than this thought was constantly with me. It has been constantly with me since I started on this investigation. If I had not made the investigation, I would not have been before the committee now, but I had occasion to go into the question in a more serious way. I said to myself, "Surely some notice has been taken of this, because this is something that is surely stifling trade in these communities." Now, I had occasion to examine a report that was made on June 10, 1931, that seems to have been made by some sort of hard-boiled organization that was apparently striving at the time to cut down. expenses. This is a report made by the efficiency commission to the War Department, and on the subject of cafeterias in public buildings they said this: The establishment of a cafeteria in a Government building is warranted only if proper food for the employees during the lunch period can not be provided in the vicinity by private enterprise. Except in those Government establishments such as the Government Printing Office and the Bureau of Engraving and Printing, where two or more shifts of employees work daily, lunch is the only meal that should be served is these cafeterias. The policy to be followed relative to cafeteria service in any department should be determined by the head of the department or establishment. Bureaus, divisions, or offices within the larger establishments should not be permitted to establish their policies. There are three cafeterias in the War Department; two are being operated by offices within the department, and one is being operated for the benefit of the entire department. If the department needs and wishes cafeteria service, one cafeteria, as centrally located as possible, should be established in the Munitions Building and operated as a departmental, but not a bureau activity. The office of the Quartermaster General and the Ordnance cafeterias should be then discontinued. The War Department cafeteria at Eighteenth and D Streets NW., is now serving War Department employees primarily. It serves breakfast and dinner in addition to lunch and is patronized by persons from all sections of Washington. It does not serve a large number of War Department employees at lunch time due to the distance from the Munitions Building. The real purpose of cafeteria service in the department is lost by this fact and the cafeteria should be discontinued in its present location. So I then felt that I was on safe ground, because here was a department of the Government, or the efficiency department, calling this condition, not only to the attention of the legislative department, but to the attention of the heads of the different executive departments. I also find that there is now in the making a report that will go to Mr. Wood, the former chairman of this committee. That is something that started within this body, and the report will soon be made. It will be of great service to this body if you should see fit to adopt this resolution. The CHAIRMAN. Mr. Wood was the chairman of the Appropriations Committee, and not of this committee. Mr. SHANNON. Yes, sir; this report was made at the request of Mr. Wood. I am mistaken as to the committee. That report is in the making at this time, and it is being made at his request. Now, the thing that caused me to take notice of this condition was this: I went back to my home State some months ago, and as I came upstairs from the train in the depot, I met Major Harvey. Now, they have three restaurants there; they have a lunch room and a restaurant that is built especially for the trainmen and mail service. The men employed in the mail service have been eating there. I had no sooner got away from the depot than I went across the street and heard this complaint from Major Harvey. He said, "We learn now that the Government is going to put a restaurant in the new depot across the street from us." He said, "We seriously object to that, because it will greatly impair our business." He protested so loudly that I thought that he was unreasonable. I asked, "Who is doing this?" and he said, "I do not know." He said, |