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Mr. THORNE. The coal-mine operators will decrease production provided they feel that two or three months later they are going to get higher prices. That is the human-nature side of it, I think, and if you fix a price so low that they have reasonable grounds to think that two or three months from now the price is going to be raised, you are not going to stimulate production. But if you fix a price which is the maximum above which the subordinate tribunal which you create or to which you assign the task can not go, except by a further increase in labor or cost of production, then your production will be stimulated.

At present there is a high price on grain. The people are hoarding grain. It is not a question of how high the price is; it is a question of how high the price is going to be two months, six months, or a year later. The utilities of the United States are working to their limit, but not at higher prices. They are working at prices as low or lower than they have been receiving in former years.

I have here an exhibit prepared by Dr. King, of the University of Pennsylvania, in the Fifteen Per Cent Case. Our committee, of which he was a member, requested him to make a review of the prices. in recent years of the public utilities throughout the United States, including gas companies, water companies, electric light companies, telephone and telegraph companies, etc. He has here gathered together all the prices he could get from such commissions as kept records, and from such companies as had the information obtainable.

Without reciting the details I will leave a copy of it, if you care to have it. It shows that while there are instances where companies have increased their charges, by far the vast majority are charging less or the same prices as they have been charging during past years. The railroads of the country have been denied even the 15 per cent horizontal advance over the prices of last year by this Government. Nobody complained that this would tend to cripple the activity of the railroads, that they would not want to haul tonnage. They are going to haul all the tonnage they can get to the limit at those prices, although the general advance of 15 per cent was denied.

Every additional ton means that much more money to them. That does not interfere with the law of human nature, their trying to get more if they can get it. I think that great tribunal, the Interstate Commerce Commission, in its opinion in the Fifteen Per Cent Case, has set a magnificent precedent for this Congress to consider with reference to other industries. War profits, as distinguished from ordinary profits, ought to be relegated to oblivion at this critical time. Unless you see fit to adopt some such general policy as that, you are going to have an advance in your coal prices; you are going to have the utilities advance their prices to the public in order to take care of this advance in the coal prices; you are going to advance iron and steel prices; you are going to have the utilities all over the United States advance their prices in all public services in every city in the United States practically, in order to take care of those advanced costs, and you are going to have the railroads of the United States reopen the Fifteen Per Cent Case. The commission has already in its opinion stated that if the railroad prophesies come true they will reopen the case.

I think it is up to this Congress to prevent all these results by a step that will ignore the excessive war profits as a necessary factor to stimulate production.

Now with regard to metal prices

Senator CUMMINS. I think you could go one step farther in this plan that you have proposed. I want to know what it is that you propose we should do. Much of this statement, of course, is interesting, but I want to know what we should do, in your opinion.

Senator LA FOLLETTE. I would like to have him complete the statement he was beginning to make when you interrupted him.

Senator CUMMINS. We have your view about establishing the tribunal regarding the prices during the war-what might be called the prices after investigation. Now we come to the tentative prices which are to take the place, as you suggest, of the prices established by the Peabody committee.

Now, if I gather your view, it is that Congress ought to establish these prices because they must go into force at once and can not await the investigation which precedes the permanent prices; that is your view, is it not?

Mr. THORNE. I would say this, Senator-without trying to go into the details because I will not encroach on your time by suggesting details, it would not be worth anything to you, and you would not adopt it anyhow-but I suggest the wisdom of either a congressional committee acting, or of a congressional committee framing a bill which would authorize some specific tribunal like the Federal Trade Commission, to immediately establish a reasonable maximum price on coal pending an investigation of the cost of production, and other essential factors; that this tentative price shall be based on the actual price at the various points of production as of a certain date, say July 1 or July 3, or June 30, 1916, plus a reasonable liberal allowance for increases in cost of labor and other costs of production. Senator CUMMINS. Say, 30 cents a ton?

Mr. THORNE. I would not say 30 cents. I would not say any figure. I will leave that to your judgment to state the figure-with a reasonably liberal allowance for the increased cost of labor and other costs of production; that price to be the maximum price during the war period, subject to other increases that may be justified because of increased cost of labor and of other increased costs of production; that price to be reduced later to a price which the Federal Trade Commission, or some other official or tribunal to which the task is assigned by the President, shall determine, to be a reasonable maximum price, the same not to exceed the said tentative price established at this time. The reasonable maximum price ultimately established should be based upon actual costs of production plus a reasonable profit.

In the last statement I have left out what that reasonable profit is to be based upon, in view of the discussion which we had a few minutes ago. You might base that on so much a ton; you might base it on the value of the plant, or such other factor as you might determine upon. That is subject to argument. I do not think what I have suggested is subject to argument. If you take the prevailing market price of a year ago for free coal in those districts as your base figure, you have a figure which is greater than the price at which approximately three-fourths or four-fifths of the total coal was sold, because

there is shown in the Indiana investigation by the operators themselves 78 per cent of their coal was covered by contract, and this free coal only constituted approximately 22 per cent. Some companies only had 2 per cent free coal, and others 8 per cent.

Senator CUMMINS. I have your view with respect to that. Can we have the price fixed at the mine? How are you going to get it to the consumer without the intervention of the excessive profits?

Mr. THORNE. I think the recommendation of the Peabody commistee very sane, which was that the margin to the jobber should not exceed 25 cents a ton, regardless of the number of jobbers handling coal between producer and consumer.

Senator CUMMINS. That is, that there should not intervene between the mine and the consumer a profit of more than 25 cents a ton? Mr. THORNE. Yes, sir; as I understand the recommendation. Now, I think, in order for this to solve the difficulty, you must have adequate supervision over the distribution of cars.

The CHAIRMAN. One step further. After it has got into the hands of the jobbers it has not yet reached the consumer.

Mr. THORNE. I understand the 25 cents should cover the price between the producer and the consumer.

Senator CUMMINS. Then, of course, you would have to make an allowance. Would you make any allowance for the quantity in which the coal might be sold at various places?

Mr. THORNE. I think there are other measures pending before you which provide adequate power being given to the President for the movement of commodities.

Senator CUMMINS. I think the President has that power. What is known as the car-shortage bill and the authority given to the President to direct preferences and priorities of shipments probably will enable him to handle the situation as well as it can be handled, as far as the railroads are concerned.

The CHAIRMAN. Now, Mr. Thorne, I am inclined to think that the simplest way for Congress to act—if it does act upon this subject— would be to fix a maximum price that would be a certain number of cents per ton above the cost of production. Now, what has puzzled me is to determine what number of cents it should be. I realize everything that you say with reference to the disorganizing results of this increase of prices; they disarrange everything; they disarrange the prices of commodities with reference to each other. They disarrange the prices with respect to the cost of the commodities which enter in as a part thereof; they disarrange the whole system; and it is just creating a constantly increasing concentric system of changes, one after another, in the way of expansion-demoralizing to trade in every way-and I would much prefer to cut down the prices to the present level if I could do it, and if there is any way of doing it I would be glad to do it.

Senator CUMMINS. What do you mean by the present level?
The CHAIRMAN. I mean the old level.

Mr. THORNE. I am not suggesting that.

The CHAIRMAN. I say I would be glad to go to that extreme if I could do it, but we have this problem before us of actual increase in prices which has taken place in almost everything. The question of possible discouragement of production by extreme action, and we also have the experience of England in the direction of a very liberal

allowance per ton in order to stimulate production. Are we to assume that England is mistaken in that policy?

Mr. THORNE. My answer to that would be this: Must we assume that England was mistaken in taking over the railroads? Are you in favor of taking over the railroads?

The CHAIRMAN. I think England was right in taking over the railroads; I think she did also the right thing in continuing their operation in the hands of the present managers.

Mr. THORNE. They have their seperate managers.

The CHAIRMAN. Yes; but the railroads practically leave the management of the railroads to the Government.

Mr. THORNE. Would you be in favor of our Government taking over the railroads as England did?

The CHAIRMAN. I have been inclined in that direction, but I can not say I would be willing to go that far. It has been successful over there.

Senator CUMMINS. That, I understand, has been mentioned several times, and this has occurred to me: Does any one present know the price of coal in England before the war and before this addition of four shillings a ton?

The CHAIRMAN. Do you know, Mr. Thorne ?

Mr. THORNE. I can not state it.

Senator CUMMINS. It was very much higher than the price here, and the four shillings a ton added to the coal there does not represent what four shillings a ton added to the price of coal here would rep

resent.

The CHAIRMAN. Not the same percentage.

Mr. THORNE. Senator, so far I have not stated any difference as to the amounts that should be allowed to the coal operators. The only difference between what I suggest and what you suggest is as follows: You suggest that Congress should fix the price while I suggest that either Congress should fix the price or authorize a tribunal to do so; secondly, you suggest that that price shall be based on the cost of production plus a reasonable allowance. That is precisely the basis that I suggested a while ago as a permanent price during the war.

Now, as to the first proposition that I made, I do not believe that you yourself will think that the plan you state would be adequate. If you have to wait until you find the cost of production in these various districts, considering the various methods by which the coal is mined, the various types of machinery they use, and the various ways in which coal lies in the rock and ground-if you have to wait until you have ascertained the cost of production before you fix this tentative price, it is going to be almost disastrous. I am suggesting that you should, in the meantime, provide a tentative price that shall prevail in lieu of the Peabody prices, and that that price should be based on the price of a given date last year, plus reasonable allowance for increased cost.

Now, I think when you take the market price of the last yearSenator LA FOLLETTE. You mean plus a reasonable allowance for additional costs?

Mr. THORNE. Yes.

Senator LA FOLLETTE. Now, just expand that a little bit.

Mr. THORNE. Because of the advanced cost of labor or other costs of production. The base figure that I stated to you there is the price

of free coal, and offhand you might be inclined to think that would not make much difference in respect to what the Peabody committee has done. You will find that the prevailing market price of this free coal last year was from $1 to $2 a ton less than the Peabody prices. And those market prices are on the free coal, and threefourths of their output was sold at prices still below that.

Now, the second modification that you have to make in your suggestion, Senator, is that you have to provide some other method, or some additional method of determining the maximum price because of the different character of consumers. A company that is able to purchase a thousand tons a day for a period of one to two years enables an operator to know just where he is and to make his contracts accordingly. It seems to me there should be some difference in price to that kind of a consumer, and the person who was only buying here and there a little at a time. I do not know but what there should be some difference to the Government also. There may be various factors to take into consideration. Therefore, I think that your permanent price should not be established by Congress because there is not enough opportunity or time for investigation to get the actual facts. There should be power delegated to a subordinate or some other tribunal, either the President or somebody else whom he shall name. But the tentative price, based on the market prices of last year, plus this allowance for increased cost, might well be fixed by Congress. You can certainly do a better job than the Peabody committee.

The CHAIRMAN. Now, right there, as to that tentative price, you are probably better prepared to-day to fix that price than any member of this committee because of your information upon the subject. Now we would like to have the benefit of your judgment regarding that.

Mr. THORNE. No, Senator

The CHAIRMAN. Assuming that we shall have to fix it to-morrow by amendment to the pending bill, that is the tentative maximum price of coal during this period of investigation by a tribunal, or some of the functions of government, what would you fix that tentative price at?

Mr. THORNE. Just to be safe, without investigation, I would say the average price of July, 1916, plus a reasonable allowance for increased cost of labor and other increased costs of production, to be determined within 10 days, or to be estimated within 10 days, by the Federal Trade Commission.

Senator TOWNSEND. You testified this morning, with regard to the Chesapeake & Ohio Railroad Co. contract

Mr. THORNE. Pardon me, Senator. May I add that tentative price to be merely to supplant the tentative action of the Peabody committee, and in no sense to be regarded as final?

The CHAIRMAN. I understand that.

Senator CUMMINS. The Trade Commission has already estimated that additional cost, has it not, at 25 or 30 cents a ton?

Mr. THORNE. I do not know whether they have, in the bituminous field, covered all the increased costs or not. I know they estimate it, for the anthracite field, 25 or 30 cents for labor.

Senator TOWNSEND. You testified this morning that the C. & O. made a contract at 99 cents for six years, and then beginning this

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