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Senator NORRIS. They would not know what the situation is going to be.
The CHAIRMAN. No. Senator WHEELER. Of course, you have exactly the same thing with reference to the Tariff Commission, and you have identically the same thing with reference to the Interstate Commerce Commission. For instance, the rate on certain materials materially affects the manufacture of all products in the country, and yet the provision of the Interstate Commerce Act is to the effect that after hearing, the rates shall
Senator NORRIS (interposing). Go into effect at once.
Senator WHEELER. Exactly. For instance, take the coal business. We have had before the Interstate Commerce Commission the controversy going on constantly between the West Virginia coal mines and the Pennsylvania coal mines. That controversy continues. They are applying for hearings before the Interstate Commerce Commission, and they are not only applying for hearings but fighting over who shall control the commission, as to whether it shall be West Virginia or Pennsylvania. They hold hearings on it. After the hearings, the Commission decides. Now, the West Virginia coal people claim that it will put them out of business if it goes one way, and the Pennsylvania people claim it will put them out of business if it goes the other.
Senator NORRIS. That is as to the rate. That would not hurt them more than a day or so anyway:
Senator WHEELER. Oh, yes, it could, if that rate goes into effect. Senator NORRIS. They might have a long-term contract.
Senator WHEELER. It just upsets the whole industry in that particular section of the country. It is very material.
Senator BONE. Do you not think that in the event of an act of this kind becoming operative the men engaged in that line of business would make their business conform to the provisions of the act by a contact that would permit them to meet this sort of thing; prepare for lowering prices?
Senator WHEELER. I do not know how that would be.
The CHAIRMAN. You must understand that most of these processors have their acceptances for months ahead. They are obliged to do it. They make contracts which are not yet filled and for which perhaps they have not yet gotten the raw material. They do that under a certain tax; now, unless they have some notice after the tax is changed, in order to adjust themselves to contracts not yet entered into, you just have confusion worst confounded.
Senator BONE. Mr. Chairman, suppose you made a 30-day notice. A man's commitments covered a year or 6 months ahead. Thirty days would save him possibly some loss, but would not enable him to meet problems that arise in commitments projected beyond that time.
The CHAIRMAN. He would have that time in which to get his material to fill those contracts, which may be 6 months ahead-I have reference now to my knowledge of the cotton business—and he would clear up those contracts in good faith, and then the contracts that come in for still further fulfillment would be in accordance with the new position or new contracts.
Senator WHEELER. It seems to me it ought to provide for lowering it or making it higher.
Secretary WALLACE. Of course, that lower rate, that really refers to the difference between the parity price and the current price, a lower rate than that.
Senator McGILL. It can be revised from time to time, as conditions indicate.
Secretary WALLACE. There is a maximum rate in that amount between the parity price and the current price, but you can set a lower rate than that. That is what that word “ lower means.
Senator WHEELER. Then the manufacturer of cotton goods, for instance, it seems to me is fully protected, because he knows what the maximum rate is, and how is he going to be at a loss, or how is it going to confuse him if he gets a lower rate!
Senator BANKHEAD. He contracts with reference to the maximum rate, and then any lowering of the rate does not hurt him.
Senator NORRIS. Would it not be true, though, that if he was not expecting that, and he did not contract in regard to the maximum rate, that would always put the consumer just a little bit higher than his cost? The consumer would be insured in that case that the processor would not lose.
Senator WHEELER. How much do you really suppose of the tax could be passed on to the consumer, actually passed on, without tremendous additions being made to the price that is going to hurt the consumer ? To me this tax is going to be infinitesimal so far as the consumer is concerned. That is not where the consumer gets stuck.
Senator CAPPER. Do not forget that under the present system the whole market situation changes in a week or two or a month. I have seen a difference of nearly a dollar a bushel in the price of wheat where the board of trade was manipulating the market, breaking the market under their short selling game.
Senator NORRIS. That is one of the things that we have always fought against. That is one of the big evils that is to be avoided here if we can. We do not want such a thing to occur here.
Secretary WALLACE. Is it not for stabilizing purposes, rather than fluctuating purposes ?
Senator NORRIS. But the man who has got his money invested bought his products for future delivery, a manufacturer or processor, and he cannot change that; he has got to pay it, even though the tax is raised or lowered.
Senator CAPPER. But what I have in mind is that under present conditions the market is variable, the market price.
Senator NORRIS. That is a bad thing. The CHAIRMAN. But you must remember that in the marketing of wheat and cotton they have got a practice known as “ hedging that protects the manufacturer absolutely, but leaves the producer clear out in the open with no redress whatever.
Senator CAPPER. This does not eliminate hedging.
Senator WHEELER. Not only that, but take, for instance, wheat-I do not know anything about cotton, but I do know something about wheat-supposing, for instance, on wheat, the price of bread as a matter of fact does not change very much whether the price of wheat goes up or the price of wheat goes down to the fellow who sells the wheat.
Senator NORRIS. I admit that is true, and that is one of the evils of our system that we kick about.
Senator WHEELER. We cannot change it. Senator NORRIS. I do not want to perpetuate it. Senator WHEELER. You are not perpetuating it by this at all. Senator NORRIS. Oh yes, you are. Senator WHEELER. Not at all. Let us say, for instance, that you add to the tax-I do not know what the proposed tax will be, but supposing you did add, say, 5 cents or even 10 cents, or you add 20 cents tax, I will venture to assert that it will not change the price of bread to the consumers of this country 1 cent or one-tenth of a cent.
Senator NORRIs. But we want it to change the price of bread.
Senator NORRIS, We are kicking, and rightfully kicking about the conditions that exist now, because the price to the consumer does not respond to the price of wheat.
Secretary WALLACE. Senator Norris, Mr. Ezekiel, talking about the flour trade, has developed a contract which, together with the provisions under this bill, takes care of your point, and I think I will ask Mr. Ezekiel to talk on it a moment.
The CHAIRMAN. Just let me make this observation before he comes on. Under the terms of this bill you are setting out a process here by which the parity between what the producer purchases and what he sells must be maintained. Now, if there is a drop in the price of wheat and they maintain the price, the original price, of the product made from the wheat, you necessarily must increase that tax; therefore, in my mind, you are curing the evil which the Senator here [Senator Norris] complains of, because in the fluctuation of the speculative market known as the “grain exchange” and the “ cotton exchange", if the fluctuation of the raw material becomes so obviously unfair, you are going to cure that process by saying that if this raw material drops down 50 points today, or $2.50 a bale, you increase automatically your tax.
Senator WHEELER. You cannot—we might just as well be frank about it; we are not going to cure that by this legislation, to any great extent, in my judgment. I think it is physically impossible to cure it. All you can do is to try to regulate the price of wheat, in my judgment, and you cannot regulate the price of bread under this act and you will not do it, unless you try to regulate it at retail.
Senator NORRIS. What I want to avoid, if possible, if we are going to attempt to regulate the price of bread, is not to have those who are supposed to come under this law say: "Here, under the law you can. not do it; it is so uncertain." I do not want them to use it as a defense. We ought to be able to reduce the price of bread when wheat goes way down, like it does. I know we do not, and that is one of the sins of our system. It is wrong.
Senator WHEELER. You ought to, but you cannot do it.
Senator FRAZIER. The bill that we considered last session contained a clause providing that the Secretary could give notice as to when the price changed, which would mean a change of price in the processed article. I do not know whether that is contained in this or not.
Mr. LEE. It is not in here, Senator. We considered that a desirable provision, but felt that it could all be handled by regulation by the Secretary. You see, it was merely the power to set forth information as to what increase in price of wheat ought to be reflected in the increased price of bread, or similarly as to cotton. We can handle all that by regulation without putting it into the law.
Senator FRAZIER. I do not think it would do any harm to have it included.
Mr. LEE. No.
Senator WHEELER. It might clear up some opposition for our bill. That is about all. If the Secretary of Agriculture has the power, he can do it.
Senator FRAZIER. Only it would show what the difference in price would mean, or should mean; then, if the retailer or wholesaler puts up his price unreasonably, of course the public could be given that information.
Senator WHEELER. The Secretary of Agriculture has that power Senator CAPPER. But he could not enforce any different price.
Senator FRAZIER. There is no particular way of enforcing it, only publicity.
Senator WHEELER. But he has that absolute power now. The Secretary of Agriculture can do that without any law being passed at the present time, if he wants to do it.
I do not see any particular objection to the 30-day proposition. It cannot do any harm anyway.
Mr. EZEKIEL. Mr. Chairman, to clear up this question as to existing contracts. During the last 9 months I have had under active discussion a provision which will provide that at the time any tax is imposed subsequent to the entering into the contract, that tax will automatically-automatic adjustment will be made in the price of flour to take account of the tax. Section 18 of the proposed bill covers the existing contracts—secion 18, page 17. That section provides that:
If (1) any processor, jobber, or wholesaler has, prior to the date of approval of this act, made a bona fide contract of sale for delivery after such date of any article in respect of which a tax is imposed under this act, and if (2) such contract does not permit the addition to the amount to be paid thereunder of the whole of such tax, then in effect that will be added to the price he has to pay, and will be collected by the Bureau of Internal Revenue. So that this takes care of contracts which were entered into prior to the date of the legislation, and without question, contracts in the trade after the date of the legislation would include provision for the prices that have already been discussed, stating the way in which subsequent taxes would be adjusted.
Senator NORRIS. That will pretty nearly adjust itself, then. They will do that by contract.
Senator BONE. That would become a part of the contract, unless stipulated otherwise. That is a very commonplace thing in the law.
Mr. EZEKIEL. Similar provisions have been placed in other features of the internal revenue laws.
Senator BONE. The statutes are full of them.
Senator WHEELER. We have given the President power to cut down compensation and cut wages; now I want to see somebody have the power to regulate these grain gamblers, for the benefit of the farmers of the country. The CHAIRMAN. You may proceed now, Mr. Secretary. Secretary WALLACE (reading): SEC. 10. (a) The Secretary of Agriculture may appoint such experts and, in accordance with the Classification Act of 1923, and all acts amendatory thereof, and subject to the civil-service laws, such officers and employees as are necessary to execute the functions vested in him under this act: Provided, That no salary in excess of $7,500 per annum shall be paid to more than 10 additional officers or employees of the emergency agricultural adjustment administration which the Secretary shall establish in the Department of Agriculture for the administration of the functions vested in him by this act.
Senator MCGILL. As to those 10 employees there is no limitation on the amount that he can pay?
Secretary WALLACE. No.
Senator McGill. And as to those 10 he might pay such salaries as he saw fit?
Secretary WALLACE. On those 10 there is no limitation on the salaries that might be paid them.
Senator McGILL. Do you not think this should be limited, that no salary should be in excess of $7,500, striking out the words "more than ten" ? Senator BANKHEAD. What is the idea there?
Secretary WALLACE. The idea there is that this is really a tremendous undertaking, and in order to get competent men for the whole thing and for the heads of the respective commodities it might be necessary to go materially higher than $7,500, or it might be good economy for the Government to do it.
Senator BANKHEAD. I mean why this limitation of 10?
Senator WHEELER. I think there ought to be a limit in this bill, to be frank with you. Things have been so thoroughly deflated that I think you could get men today-you might not have been able to get them 2 years ago, in 1929—but today there are plenty of men in this country that are walking the streets that, in my judgment, could do this work; that you can get for salaries of $7,500, and there are 10,000 of them; and I, for one, would want to limit the salaries, because we have had an experience of that kind, and I do not think we should permit you, Mr. Secretary, or anybody else, to have the power to go out here and employ some of these fellows and pay them $25,000 or $50,000 a year on the ground that they are supermen, because the supermen have been so deflated now that there are none of them any more.
Mrs. CARAWAY. I would like to add that they should be subject to the 15 percent cut in pay, as the rest of us are.
The CHAIRMAN. Mr. Secretary, do you not want to change the language of that? It is very ambiguous—“that no salary in excess of $7,500 per annum shall be paid to more than 10 additional officers or employees," and so forth.
Secretary WALLACE. I think the meaning is clear. The question is as to the facts. If we had time to set this up, I would agree in principle with Senator Wheeler, but with such extraordinary speed