It seems to me the cooperative preferences might fit better in some. other section than as a part of the disposal of surplus agricultural stocks, but we certainly are in favor of them, as I said in my statement. There are two other questions that might be raised about it. One is that I rather think there should be some provision for the use of such supplies in whatever international agency is set up to deal with this problem at the international level. That is, the War. Food Administrator should not be given the power to interfere with arrangements by the State Department exclusively. Senator JOHNSON. Your reaction to it occurred to me also as I read the bill over, and it seemed to me that probably the proposed amendment meant to deal only with domestic supplies of surplus agricultural products. Mr. SMITH. In that case that would be very satisfactory to us. Senator AUSTIN. How does that differ from the War Food Administrator's powers being exercised now? Mr. SMITH. If there are any surplus food supplies under the control of W. F. A., on the passage of this bill, they will pass to the Administrator. Senator AUSTIN. At the present time, under the control of the War Food Administrator, we are having surpluses that have deteriorated. Senator JOHNSON. Eggs, for instance. Senator AUSTIN. Yes. We have carload after carload of rotten eggs. They cause trouble wherever they go. They have caused trouble in Vermont. Senator JOHNSON. Don't they know up there that there is an election coming up and that such eggs are good campaign material? Senator AUSTIN. That is an illustration of what might happen when you attempt to vest in an Administrator control of food. I don't know that I have any just ground for charging that the Administrator is to blame for the surplus of eggs. But it is a fact that we have a tremendous surplus of bad eggs at the present time. Senator CHANDLER. Have you discovered any good use to put them to? Mr. SMITH. Fertilizer. That is what they are used for. What Senator Austin said is a very valid statement, and it bears to some extent on the third point I was going to make on the amendment. That is, I am a little doubtful about ringing in the processed manufactured agricultural commodities. I am a little bit afraid of the resentment against farmers that might be encountered if the War Food Administrator had power to withhold commodities already processed. I would be afraid to saddle that job on him exclusively. He should have a voice in it. Senator TAFT. In this amendment it really gives the War Food Administrator half of all surplus because it includes clothes and every product of cotton and wool, every single thing except metals. The CHAIRMAN. Are there any questions, gentlemen? Senator Stewart? Senator STEWART. No, sir. The CHAIRMAN. Senator Downey? Senator DowNEY. No, sir. The CHAIRMAN. Senator Taft? Senator TAFT. No, sir. The CHAIRMAN. Senator Murray? The CHAIRMAN. Senator Chandler? The CHAIRMAN. Senator Hill? Senator HILL. No, sir. The CHAIRMAN. Senator Johnson? Senator JOHNSON. No, sir. The CHAIRMAN. Thank you very much, Mr. Smith. We are glad to have had you with us. Are there any other witnesses who wish to be heard? [No response.] I wish to insert in the record a statement entitled "Economic Problems in the Disposal of Surplus War Property" and suggested changes, to be incorporated in S. 2065, prepared by Col. Lewis Sanders. (The statement and suggested changes are as follows:) ECONOMIC PROBLEMS IN THE DISPOSAL OF SURPLUS WAR PROPERTY The United States Government, in the disposal of surplus war property, is faced with the same basic economic problems which are regularly handled successfully by industry; but with one significant difference which must be controlling in the establishment of many of the policies if a successful result is to be obtained. Trade and industry must every year dispose of surplus consumer goods and durable goods and arrange for the absorption of second-hand equipment without having these items disrupt normal markets. With the exception of agriculture, all surplus goods in commercial markets represent only a fraction of the annual established consumer demand. Agriculture, because of the vagaries of the weather and the fact that the producers comprise 6,000,000 independent entrepreneurs who do not gear their production to estimates of markets, frequently produces a surplus so unwieldly as to break the market. Second-hand equipment also bears a definite and controllable relation to new goods since it is a byproduct of the sale of new machines. Surplus war property has no such relation to the size of consumer markets since it is produced solely in relation to war needs and in many items the surplus may equal the total of several years of consumer demand. Because of this factor provision should be made in the powers conferred upon the Administrator and the directives given him in legislation so that he may hold the flow of war property into the market within controllable bounds so that normal markets will not be disorganized. His powers should also be sufficiently broad so that he may apply the proven sound principles developed by business for the marketing of surplus and of used equipment. Commercial surplus goods, mostly consumer, arise mainly from changes in styles and models and new developments by competitors which make it impossible to carry most goods over to the next season. Competition forces merchants to carry an overstock so as to avoid making dissatisfied customers as would result if they found only broken stocks before the close of the season. For the same reasons old models cannot be completely sold out before the new are introduced. Trade handles this situation by various types of clearance sales which are carefully integrated with the sale of new goods coming on the market. Generally this is done by the distributor himself and cut prices are used to attract customers who may also buy substantial quantities of new goods. Frequently quantities which one customer is allowed to buy are limited so as to spread the drawing power over a greater number of customers. Clearance sales frequently are so efficient in moving goods that a merchant will bring in other merchandise from outside; certain types of goods, generally below standard quality, are also manufactured especially for clearance sales. At one time the average manufacturer regarded used machinery as wholely detrimental to his business and did everything in his power to discourage its use. Industry has learned better and most large manufacturers handle and push the use of used equipment of their own make. They see that it is in good usable candition so that its performance will not injure the reputation of their product. The very existence of the motor car industry is dependent upon a good market for used cars. Only a small percentage of present purchasers of new cars could continue to acquire new cars as frequently as they do if they did not have a good trade-in price for their used car. The motor car dealer would fail if he could not move his used cars. Consequently all motor car manufacturers go to great lengths in establishing good markets for their second hand vehicles and the customer can buy anything from a reconditioned car with almost a new car guarantee to a mechanics job that can be made to operate only through repairs made by the purchaser with parts bought from the automobile wreckers. Only one class of used vehicle is a detriment to the volume of new car business and that is the worn out car kept operating when its condition makes it a menace both to its driver and all others on the road. A large part of present new car buyers started with the purchase of a used car. Many a small operator started with a second hand truck or taxicab and worked up to the owner operator of a small fleet of two to six taxis or trucks. To fully carry out the intent of the Congress the Administrator should have, under such restrictions as the Congress deems essential, power to make discriminatory sales to small users and people of limited capital. These preferences should include holding a reserve of suitable items to give the small man time to make his plans, long term credits and possibly a preferential discount. This is not a suggestion for an economically unsound subsidy to the poor and inefficient but is a suggestion looking to the building up of as many independent entrepreneurs as possible who will, in the course of a few years, develop into purchasers of new equipment. The large trader or manufacturer has a tremendous initial advantage over the small operator in the purchase of war surplus matériel. He has large staffs to make advance studies and can have his plans worked out so that he knows in advance of matériel being declared surplus exactly what he wants. He has the resources to make his ideas effective and he generally has multiple uses for anything he buys so that he is not staking everything on one item or plan. The small man has none of these advantages, he has been at a constant disadvantage in operating during the war but his tax liabilities are just as great proportionately as the large concerns. Preferences that place him on a basis of equality with the large operator in the acquirement of surplus war property are mere equity. The Administrator should be empowered to guard against speculation by refusing to make sales to concerns or people who seek to make a business out of trading in war surplus matériel. Such concerns constitute both unfair competition to established concerns and those seeking to set up a new permanent business; they also introduce a highly speculative element since they have no stake in the future and no settled policy since they are solely opportunist speculators. SUGGESTED CHANGES IN S. 2065 SUBSTITUTE DRAFT NO. 1, DATED AUG. 15, 1944 Section 1: None. Section 2 (b): Add Federal Trade Commission. Section 2 (d), page 5, line 10: Change "may" to "shall". Section 3 (c), page 5, line 24: Between the words "To" and "assign" insert "the greatest extent practicable". Line 25: Strike out "practicable". After paragraph (g) insert: "paragraph (h) being section 21 of S. 2045." Section 4 (d), page 8, line 20: Strike out "may" and substitute "shall, to the greatest extent practicable", strike out "any" and line 21 change "agency" to "agencies". Section 5: None. Section 6 (a): Substitute the "Joint Committee" of House and Senate provided in the reconversion bill. Section 6 (b): Coordinate with submission of reports in Reconversion Act. Section 7: None. Section 8 (a): None. Section 8 (b), page 11, line 22: Change "period” to a "semicolon" and add "The 98534-44-pt. 15-5 War and Navy Departments and the Maritime Commission are exempted from this requirement until six months after the termination of hostilities." Section 9: None. Section 10: None. Section 11: None. Section 12 (a), page 15, lines 16 and 17, Strike out "for the purpose of war production," Section 13 (a): Add— "(4) Place items with established distributing agencies on consignment for sale where, in his judgment, this will facilitate the purposes of this section. "(5) He may set resale prices for items placed on a consignment basis and he may make resale price a condition of purchase where he deems it will better effectuate the purpose of this Act." Section 13 (g): "The Administrator shall have the right to refuse to sell surplus property to purchasers who are making or intending to make the handling of Government surplus property a major feature of their business. He may accept the opinion of the Federal Trade Commission as conclusive as to whether a particular purchase would be used in unfair competition with normal business concerns, either established or being established." S. 2045, section 11 (h): "Whenever the Administrator deems it necessary to better effectuate the purposes of this Act, he may withhold from sale or lease in any calendar year not to exceed 50 per centum of the nonperishable surplus goods or property available in that year." Section 11 (i): "The Administrator is authorized to reprocess matériel for sale when by so doing he can better effectuate the purposes of this Act: Provided, That the estimated net return, to the United States Government, on the reprocessed items exceeds the prospective return on them, as is by at least 20 per centum, all such reprocessing shall be done under contract by private concerns.' Section 14: Add (d) Insert section 13 (a) of S. 2045. (e) Insert section 14 of S. 2045. (f) Insert section 15 of S. 2045. Section 15: None. Section 16: None. Section 17: None. Section 18: None. Section 19: None. Section 20: None. Section 21: None. Section 22: None. Section 23: None. Section 24: None. Section 25: None. Section 26: None. Section 27: None. Section 28: None. Section 29: None. Section 30: None. Section 31: None. Section 32: None. The CHAIRMAN. The committee will now go into executive session. (Whereupon, at 3:20 p. m., the committee went into executive ses sion.) MOBILIZATION AND DEMOBILIZATION PROBLEMS THURSDAY, AUGUST 17, 1944 UNITED STATES SENATE, Washington, D. C. The committee met, pursuant to adjournment, at 10:30 a. m., in the committee room of the Committee on Military Affairs, United States Capitol, Senator Robert R. Reynolds (chairman) presiding. Present: Senator Reynolds (chairman), Thomas of Utah, Johnson of Colorado, Hill, Downey, Chandler, Truman, Murray, O'Mahoney, Austin, and Revercomb. The CHAIRMAN. The committee will please come to order. We have a quorum present. I want to ask permission of the committee to place in the record at this point some observations made by Mr. Floyd Crouse, a mining expert and attorney of Sparta, Allegheny County, N. C., in which he has something to say in regard to paragraph 17, relating to stockpiling of minerals and metals. Instead of taking the time to read this, I am going to hand it to the official reporter and ask her to insert it in the record. (The statement of Mr. Floyd Crouse, referred to, follows:) STOCK-PILING OF STRATEGIC MINERALS AND METALS Section 17 of this bill provides that all Government-owned accumulations of strategic minerals and metals shall be transferred, when no longer needed by the owning agencies, to the account of the Treasury Procurement Division to be held as a permanent reserve for the exclusive use of the Army and the Navy for the national defense in the present war or a future war emergency. The "strategic minerals and metals" are those determined upon by the Army and Navy Munitions Board as essential to national defense and for which stock piles should be kept on hand so that in the event of a future war, they will be immediately available for the production of needed war equipment. Experience both in this war and in World War I demonstrated the wisdom of such a policy, and with the increasing scale of modern warfare and the suddenness of enemy attack, it becomes absolutely essential that the Nation be thus provided with adequate stores of these vital minerals and metals. Some of them are normally produced in substantial quantities in this country, others in minor quantities; but for all of them the sudden surge of wartime demand requires immensely greater quantities than would be available from current supplies. The quantities of many of these strategic minerals and metals-such as manganese, copper, zinc, lead, tungsten, tin, nickel, mica, and many others—which our Government will own at the conclusion of this war, will undoubtedly be very large. If liquidated, they would cause paralysis to the mining communities, with prolonged shut-downs, caving and flooding of mines-involving permanent loss of valuable ore reserves-and a protracted period of unemployment and disorganization. The small-mine operators would be especially hard hit, and producers of manganese, copper, zinc, tungsten, mica, etc., in North Carolina would feel the full devastating effect. |