be absorbed by the steel industry and under the Capehart amendment that it will not break the stabilization program?

Mr. ARNALL. State the question again, please.

Senator HUMPHREY. This is the issue: Do you feel that the recommendations of the Wage Stabilization Board, if fully applied, that is, the economic recommendations, with the Capehart amendment increase, with the ability of steel to absorb, will break down your stabilization program?

Mr. ARNALL. No, sir. It will not break it down. When this thing first came out, I was quite concerned about it. I mean, concerning the Wage Board. I was quite agitated and upset. I could envision the minute that they moved there, I was going to get the heat over on my side of the fence. The more I have gotten into it and the more I have seen these figures I have shown you, the more I am inclined to reach the conclusion it is not as bad as I thought it was.

Senator HUMPHREY. It is not as bad as you thought. I appreciate that candid statement, but I still want to get back to what I think is the fundamental issue in reference to this whole situation.

Does the Wage Stabilization Board's economic recommendations, the dollars and cents items, including wages and fringe benefits, if applied to the steel industry, if accepted by the steel industry, mean a break-through of the stabilization program if all that you grant is the Capehart increase and the ability of industry to absorb the balance?

Mr. ARNALL. Senator, if the wage recommendations are put into effect and then the steel companies get an increase under Capehart, of course thereby is generated a little increase across the board.

Senator HUMPHREY. But that is within the law, is it not?
Mr. ARNALL. That is correct.

So, technically and legally, it is my view that the Wage Board's recommendations could be put into effect and give the companies Capehart and nothing more, and the stabilization program would not be imperiled and we could do a good job still for the people of America. Senator HUMPHREY. Thank you very much.

Senator HILL. Let me ask a question there.

Is it not true that the earnings standard to which you have alluded several times is no invention of the OPS? That is the standard that Congress itself has fixed, is it not?

Mr. ARNALL. That is right.

Senator HILL. Congress has said that profits are in excess for tax purposes when they move above that standard?

Mr. ARNALL. That is right. I represent some of the motion-picture people. We have that problem in our tax situation. We have to take that category where we take the three best years out of the 4 years and that is the base we use. It is a congressional enactment. We really follow what you provide.

Senator HILL. And not in any way determined or invented or fixed by the OPS.

Mr. ARNALL. We did not have anything to do with it. It was invented and fixed by Eric Johnston as Economic Stabilizer and given to us, and I bow down to it every morning when I go in the office because I think it is so eminently fair and just. But he modeled it after your congressional enactment.

Senator HILL. Congress gave it to him.

Mr. ARNALL. That is right. It is fair and equitable.

Senator HUMPHREY. And you have three of the best years out of the four after the war.

Mr. ARNALL. You pick your own.

Senator HUMPHREY. And reasonably good years.

Mr. ARNALL. The best we have had since World War I.

Senator HUMPHREY. In other words, the record years are the standard.

Mr. ARNALL. That is right.

Senator LEHMAN. Supplementing what the chairman has said, when the Capehart amendment was up in Congress, I voted against it and I know the chairman did and the Senator from Alabama did. I thought it was a bad amendment. I still think it is a bad amendment because I think it is arbitrary. But if you can confine the rise in the price of steel to what is called for under the Capehart amendment, which was passed by Congress, and avoid making any further increases, it would seem to me that you are on pretty safe ground.

If you break that and if you break it in steel as you have already testified, you have got to break it in 10, 15, 20, or 25 other commodities. Then you are inevitably going to enter on to a price spiral which will lead to inflation.

I congratulate you on your position. I think it is sound and it is something that shows that the implications of a renewed price spiral had not yet been fully appreciated by the people. If they do appreciate it, I think they will back you up.

I want to say I congratulate you on another statement you made in your presentation here when you wrote that "the reestablishment of confidence in the stability of the price structure and the value of the dollar were major factors in stemming the panic buying which preceded the issuance of the General Ceiling Price Regulation."

Of course, any general increase, and you cannot compartmentize this thing, you cannot make a special increase for one thing, but you have to make a general increase, and that would break down that psychology which has been so carefully built up. It would again lead to a spiral.

Mr. ARNALL. Thank you for the observation. That is absolutely

correct.

I would like to give you one or two more figures. I thought they were rather interesting. I will give them from memory. I thought you would be interested regarding the steel situation after taxes. We talk about before and after taxes. If you gave the steel companies a price increase of $12 a ton, do you know how much they would keep? They would keep $3.50. They would pay $8.50 in taxes. Senator HUMPHREY. Under the excess-profits tax.

Mr. ARNALL. Yes. So why are we going to penalize all the people in America to give the steel companies that little bit?

Senator LEHMAN. And people in this country just do not realize the evils of inflation, uncontrolled inflation. I have been through it. I have seen it abroad. I remember in 1914 my firm had a deposit of 100,000 marks in Germany with a valuation of $25,000 at that time. Then when inflation set in in 1921, 1922, and 1923 and

1924, the bank stopped sending us their monthly statements showing our deposits.

Finally, after about a year, we did have a letter from them apologizing for having stopped their statements, but they said that the postage stamp which would have had to accompany the statement would have been worth more than our entire deposit of $25,000. That shows the extend of uncontrolled inflation and the effect that it has on people.

Senator HUMPHREY. Gentlemen, are there any other questions? If not, we want to express our appreciation to you.

This committee will stand in recess until the call of the Chair. (Whereupon, at 4:40 p. m., Wednesday, April 16, 1952, the hearing was recessed, subject to the call of the Chair.)

NATIONAL AND EMERGENCY LABOR DISPUTES

TUESDAY, APRIL 22, 1952

UNITED STATES SENATE,

COMMITTEE ON LABOR AND PUBLIC WELFARE,
Washington, D. C.

The committee met, pursuant to call, at 10 a. m., in the old Supreme Court room, the Capitol, Senator James E. Murray (chairman) presiding.

Present: Senators Murray, Neely, Lehman, Pastore, and Taft.

Also present: William H. Colburn, clerk, and Thomas E. Shroyer, staff member, full committee; Jack Barbash, staff director, and Merton C. Bernstein, counsel, Subcommittee on Labor and Labor Management Relations.

The CHAIRMAN. The hearing will come to order, please.

This morning the committee resumes its hearings on Senator Morse's bill, S. 2999, to provide a formal procedure for seizure. By committee action taken yesterday, we will also consider Senate bill 3016, by Senator Morse, which provides for the return of the steel mills to private ownership if certain conditions are met.

(The text of S. 3016 follows:)

[S. 3016, 82d Cong., 2d sess.]

A BILL To provide an orderly procedure for the relinquishment of possession of the steel plants under conditions which will assure the continued production of the articles and materials required for the common defense

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That the Secretary of Commerce is authorized and directed to relinquish possession of any plants, facilities, and other property of which possession has been taken by him pursuant to the provisions of Executive Order Numbered 10340, dated April 8, 1952, if the company from which possession of such plants, facilities, and other property was taken enters into an agreement with the Secretary within fifteen days after the date of enactment of this Act to make effective in its plants, immediately upon the resumption of possession thereof, all of the recommendations (other than the recommendation for establishment of the union shop) which were made by the Wage Stabilization Board in the report which it transmitted to the President on March 20, 1952, containing its recommendations for settlement of the disputes between the United Steel Workers of America (CIO) and various steel and iron-ore companies.

SEC. 2. (a) The Secretary of Commerce is authorized and directed to make effective, on the sixteenth day after the date of enactment of this Act, in any plant of which he has taken possession under the provisions of such Executive Order Numbered 10340 and with respect to which he has not entered into an agreement under the first section of this Act all of the recommendations (except the recommendation for establishment of the union shop) which were made by the Wage Stabilization Board in the report referred to in the first section of this Act.

(b) The Secretary of Commerce is authorized and directed to relinquish possession of any plant (including the facilities and other property connected