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poultry is in the ascendency, then you can go out and place a tax on every poultryman in the country?

Secretary WALLACE. That would be possible.

Senator McNary. For instance, suppose that the price of milk has become unreasonably elevated and people were taking to vegetables, under this section you could go out and place a tax without notice, without warning, on every producer of vegetables or fruits in the country?

Secretary WALLACE. Yes; you could do that.
Senator McNARY. You think that is a fair proposition?

Secretary WALLACE. In the case of vegetables that would have to be a processing tax. The process consists of drying or canning. You could do extraordinary things if you wanted to.

Senator McNary. I am asking you if you think that is fair to a producer, not mentioned in this bill, that you might have the power to go out overnight and place a tax on his commodity?

Secretary WALLACE. I don't think it would be fair to do it.

Senator McNary. Then you think that ought to be stricken out, don't you?

Secretary WALLACE. You might limit the breadth of that thing. You might limit the breadth. My attention has been called to this fact, that it is after investigation and due notice. They would have opportunity to protect their constitutional rights, which they would undoubtedly avail themselves of.

Senator ROBINSON of Arkansas. Mr. Chairman, I am not a member of the committee, but I am interested in hearing this matter. May I ask one question in relation to a different subject matter? The CHAIRMAN. Yes, Senator Robinson.

Senator ROBINSON of Arkansas. Cooperative associations have contracts and frequently make them for the future delivery of the commodities in which they are concerned. For instance, the American Cotton Cooperative Association has made contracts for the delivery of cotton in 30, 60, or 90 days. The same is true of the rice cooperative associations, both of these commodities being in the bill. Would the processor's tax apply to such commodities under the contract, and if so, what adjustment or arrangement would or could be made with respect to the tax? Do I make the question clear? I am not asking it solely of the Secretary.

Secretary WALLACE. I think I will call on Mr. Lee, who has thought more about that particular phase of the matter than I.

Mr. LEE. As I understand you, Senator, you have in mind the situation where a contract is made before the processing tax goes into effect for delivery after the tax goes into effect, is it fair then to impose the burden of the tax on foor stocks, that is, stocks on hand at the time the tax goes into effect? Obviously not. It would apply to a miller or packer just the same. The bill specifically cares for it in section 18 which is on page 19, which is the usual section that the Congress has included in all revenue measures that have provided for manufacturers' excise taxes and it is to care for the specific situation I think you have in mind, sir.

The CHAIRMAN. That is the section known as the floor tax?

Mr. LEE. No; it is not the floor tax section, it is called “existing contracts.” It is to permit the tax to be paid upon floor stocks

that are on hand at the time the processing tax goes into effect, to permit that tax to be paid by the vendee instead of the vendor if the tax was not taken into account by the vendor and vendee.

Senator ROBINSON. That would take care of all cases where a bona fide sale for future delivery has been made and where the product is actually in stock?

Mr. LEE. Yes, sir.

Senator ROBINSON of Arkansas. That is the information I desired.

The CHAIRMAN. Are there any further questions the committee desires to ask the Secretary?

Senator MoNaRy. The correspondent of a very prominent newspaper has just handed me a wire asking a question. Assuming that this bill will elevate the price level of agricultural commodities, what proportion of the increased income of the farm population would be paid on interest and farm mortgages and what part would be spent for commodities? Have you give that any thought at all?

Secretary WALLACE. No; I haven't given it any statistical investigation. I suppose you could get at it roughly on the spur of the moment but it would take two or three minutes to figure it out.

Senator McNary. If you can, I wish you would.

Secretary WALLACE. I will get that over to you if you will give me a copy of the telegram.

Senator FRAZIER. I would like to ask the Secretary if he thinks the provisions of this bill would give the farmer the cost of production for these principal farm products?

Secretary WALLACE. You mean if the exchange situation as existing from 1909 to 1914 is the cost of production?

Senator FRAZIER. Yes.

Secretary WALLACE. As a matter of fact, that is my definition of the fundamental cost of production, the price which brings about a balance between the various productive forces in the country. We did happen to have somewhat normal conditions from 1909 to 1914. Labor was going along, farmers were going along, the business men were going along. My definition of cost of production is that price which brings about a balanced, smoothly functioning situation. That is my definition. It is a philosophical concept, and I therefore base it on a historical period in which there was a certain degree of happiness for all concerned. It meets my definition. Now, as to whether it doesn't happen to be the same price, I don't think it is the same price the Department of Agriculture accountants would find. I don't necessarily think it would be the same price John Simpson would find by his method. His method is the ultimate ideal. This thing is the more practical measurement. In some cases one might be higher and in some cases the other. They are slightly different concepts.

Senator FRAZIER. Of course conditions have changed radically since that period of 1909 to 1914.

Secretary WALLACE. It might be that the cost of production would be somewhat lower than this, that is, the physical methods of production might make it that wheat would be somewhat lower, for example. Or you might invent a satisfactory machine for picking cotton and that would mean less hours of man labor and even with the cost of machinery going in, that would be changed. You have to take that into account.

Senator FRAZIER. Of course our taxes have trebled or quadrupled during that time.

Secretary WALLACE. That is true. That is a very good point.

Senator McNary. Mr. Secretary, have you made an estimate of the number of employees it will take to administer this bill?

Secretary WALLACE. I haven't made it. Some of the folks in the Department are working on that now, and I don't think they yet know the answer.

Senator McGill. Do you suppose we could have that information at a later date?

Secretary WALLACE. I don't know whether we can get it at an early date or not. Here is a thing that I would like to saySenator WHEELER (interposing). That would be more

or less problematical? Secretary WALLACE. Yes, very problematical.

Yes, very problematical. Here is a thing I would like to say: Necessarily faced with a huge administrative responsibility, we have been trying to think about personnel. We would like to know as soon as possible about your decision on the compensation of the thing. There is one man that I think would be extraordinarily useful and command the respect of the processors and the producers who 2 years ago was getting, we will say, $25,000, and at the present time is getting $20,000. I_don't think that he should command any more than $15,000. I know he could be extraordinarily useful to us. What I am getting around to is this, that if we could go out and get a few key men right away, even before it becomes a law, assuming it is going to become a law, it would be an enormous help to us in laying down some of these outlines. What are we up against now? As some of you gentlemen have pointed out rather critically, we have theoretical men, splendid, brilliant fellows, but not the practical men to get this machinery going, and we want to get in position to get the practical men on the job as soon as it is safe to get those men on the job. We are in a difficult situation right now on that account.

Senator WHEELER. That is the same thing, Mr. Wallace, that they said with reference to the Farm Board.

Secretary WALLACE. We are not asking for $75,000 or $50,000 or $25,000, but I would like to have one man we could pay as much as $15,000.

Senator POPE. Where is that section in the bill, Mr. Wallace?

Secretary WALLACE. I don't know just where the compensation section is.

Senator McNARY. Page 10, line 4.

The CHAIRMAN. Mr. Secretary, we are very much obliged to you. I would like to have a short executive session of the committee. We propose to recess until Monday morning at 10:30.

(Whereupon, at 12:20 o'clock p. m., the committee went into executive session, at the conclusion of which a recess was taken until Monday morning, March 27, 1933, at 10 o'clock.)



MONDAY, MARCH 27, 1933


Washington, D.C. The committee met, pursuant to adjournment, at 10 o'clock a.m., in its committee room in the Senate Office Building, Senator Ellison D. Smith presiding.

Present: Senators Smith (chairman), Kendrick, Wheeler, Thomas of Oklahoma, McGill, Bulow, Caraway, Murphy, Pope, Norris, McNary, Capper, and Frazier.

The CHAIRMAN. Mr. Simpson was to go on and conclude his statement but on account of a gentleman being here who represents a part of the stock industry and who must leave on account of illness in his family, at the request of Senator Kendrick, if it is agreeable to the committee, we will hear him for 10 or 15 minutes.

Mr. Farr.


NEBRASKA LAMB FEEDERS ASSOCIATION, GREELEY, COLO. The CHAIRMAN. Mr. Farr, will you give your name and address and your occupation, please, sir?

Mr. FARR. Harry W. Farr, of Greeley, Colo., president of the Colorado-Nebraska Lamb Feeders Association.

The CHAIRMAN. Mr. Farr, you may now make your statement in reference to this bill.

Mr. FARR. I also have a couple of telegrams here which I would like to read. One is from the National Wool Growers Association, Salt Lake City:

Unable to come to Washington account of illness in family. Will you please tell Secretary Wallace and Senate committee National Wool Growers Association considers provisions House bill would be injurious to lamb raisers. 1909 to 1914 period very unfortunate as lamb markets then out of line with other livestock and sheep men operating at loss.

MARSHALL, Secretary. I also have a wire from Mr. C. B. Wilson, of the Wyoming Wool Growers Association, Douglas, Wyo.:

Believe sentiment among livestock growers of Wyoming practically unanimous in opposing inclusion of lambs and cattle in farm relief bill now being considered by Senate. We trust you will use your best efforts to have lambs excluded from bill.

The members of our association feed about 2,000,000 lambs in northern Colorado or in the irrigated sections of Colorado and western Nebraska. That is about one seventh of all the lambs consumed in the United States is fed in this irrigated territory. Personally, I feed

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