and he has probably included it; as a matter of fact, they have included too many of them already.

Mr. LEE. Personally, that is the way I feel about it. I think that is one of the troubles the Farm Board got into, was having to set up cooperatives with 50 commodities, and if they could have restricted their operations to a smaller field I think they would have been much better off.

Senator WHEELER. If you can raise the price of the basic commodities, wheat, cotton, and corn, in this country, .the rest of them will take care of themselves. If people would just get that into their heads, that as a matter of fact if you increase the purchasing power of the great agricultural products, such as wheat, cotton, and corn, your other commodities will come up. Now, I do not know that you can do it under this bill or any other bill.

Secretary WALLACE. Of course, with the origin of this as it is, with the farm folks having agreed to it, this representative group, I would feel bound to defend the list.

The CHAIRMAN. Would you prefer to have it as in the old debenture, equalization-fee class, that such commodities as in your discretion you thought should be brought up, rather than specify any?

Secretary WALLACE. Of course, there is plenty of pressure involved in the administration of this bill anyway, but that would open it up to very extraordinary pressure.

Senator WHEELER. Of course, as Senator McNary says, you might be able to get the bill through Congress easier if you left it wide open; then, of course, when you do specify in the bill you are going to meet with the situation that where they are specified, a great many people will take that as an absolute command on the part of Congress to put them in.

Senator MCNARY. That is the reason why in the consideration of the House allotment bill we removed butter fat, rice, peanuts, and hogs and left in wheat and cotton, because we thought we would experiment for a year and operate on those two, and that lessened the fight a lot.

Senator WHEELER. But would it not be better to put in-I am just thinking out loud now-would it not perhaps be better to put in there just

All farm commodities, in the discretion of the Secretary?
Wouldn't you meet with less opposition then?

Senator MCNARY. You remember when Coolidge vetoed the old Food Administration bill he said we were playing patriotism with the products that we mentioned in the bill; and to meet that opposition and meet his veto we passed it again, referring to all agricultural products. He vetoed it again, but not on that ground.

Senator NORRIS. In other words, he was going to veto it anyway, and he was just going to find something to veto it for.

Senator WHEELER. He wanted to stir up the vegetable growers against the wheat farmers.

Senator MCNARY. Now, can I ask one more question on the termination of the act? The act is in full effect until it is repealed by promulgation of the President, is it not?

Secretary WALLACE. Yes; page 12, section 13.

Senator MCNARY. So it is indefinite in that regard.

The CHAIRMAN. Has not the President expressed the idea that he wants it just for one year? Is not that the object, to try this out just for one year?

Secretary WALLACE. You have his message on it.

The CHAIRMAN. It is now about 1 o'clock, gentlemen. What is the pleasure of the committee as to meeting after lunch and completing the bill?

Senator MCGILL. I think we ought to do that.

Secretary WALLACE. Might I ask that in that case Secretary Tugwell take my place, as I have an engagement at 2 o'clock?

Senator MCNARY. How can we finish the bill when we have got to take up and refashion the bill that passes the House?

The CHAIRMAN. I did not mean to complete the bill, but just the discussion of it. My language is unfortunate. I got into trouble yesterday by not using correct terminology. We will then meet at half past 2, if that is agreeable to the committee, half past 2 this afternoon, with the view of continuing the discussion of the bill. Of course, we will have to await the action of the House before we can act.

Senator MCNARY. May I ask this proposition: As soon as the hog fellow finds us here and the cattle man finds us here and so on, they will want to come here; are you going to have any hearings?

The CHAIRMAN. I will leave that to the committee, but I do not think so.

Senator MCNARY. They will be fighting vigorously any inclusion of cattle or reference to them.

The CHAIRMAN. But we had ample hearings on the very principles of this bill in the one that preceded it.

Senator MCNARY. We have the producers and the exploiters of the products mentioned in the bill, but we did not have-cattle were not mentioned in the bill; sheep were not mentioned in the bill; hence those representatives were not here, but the hog man was here.

Senator WHEELER. But this is a little bit different, and I do not think we should have hearings, because it is going to be within the discretion of the Secretary of Agriculture, and the Secretary of Agriculture will have to have those hearings, no matter whether we have hearings or not.

Senator MCNARY. I am only bringing that up because we have wires all day long from those people.

Senator WHEELER. Well, I think we ought not to have any hearings.

The CHAIRMAN. The committee will stand in recess until half past 2.

(Whereupon, at 12:50 p.m., a recess was taken until 2:30 p.m. this day.)

AFTER RECESS

The committee reassembled at 2: 30 o'clock p.m., pursuant to recess. The CHAIRMAN. The committee will come to order. Where did we leave off?

STATEMENT OF HON. R. G. TUGWELL, ASSISTANT SECRETARY OF AGRICULTURE

Mr. TUGWELL. Mr. Chairman, a good many of the other provisions of the act from here on are the usual revenue provisions which are carried in most tax legislation.

Senator MCGILL. How is that?

Mr. TUGWELL. They are the usual provisions that you find in tax legislation, such as supplementary provisions.

The CHAIRMAN. Well, you have got the determination of that and you have got the compensation taxes.

Mr. TUGWELL. Yes.

The CHAIRMAN. And separability provisions. Of course, we have had floor stocks explained. Most of them understand that. Then we have exportations, existing contracts, collection of taxes. I think you had better take up that question of appropriations.

Mr. TUGWELL. The proceeds derived from the tax imposed by the act are provided for as you see in this section. This is section 12, appropriations:

(a) The proceeds derived from taxes imposed under this act are hereby appropriated to be available to the Secretary of Agriculture for rental and benefit payments and administrative expenses including refunds under this act.

And in the next section you will notice that the Secretary of Agriculture and the Secretary of the Treasury jointly estimate the amount to be appropriated, and this is advanced to the Secretary of Agriculture by the Secretary of the Treasury, and the amount of the advance is deducted from such funds as subsequently become available.

The CHAIRMAN. That means that after they collect the taxes as provided in this section they shall refund to the Treasury the amount advanced?

Mr. TUGWELL. That is right. And if there should be a mistake there of any kind, it could be corrected under a subsequent collection. The next section has to do with administrative expenses and provides that the Secretary of Agriculture shall transfer to the Treasury Department such sums as are required to pay administrative expenses and also such refunds as are made by the Department or agencies in the administration of this act.

The CHAIRMAN. Now, the termination of the act; I have understood from conversation I have had with the President-of course, this may cover it, but he said that he wanted to try it for one year. He said it is purely experimental, and if any provision was found to be workable he would continue it, and, if not, the whole thing would be terminated. Now, this language here—

Shall cease to be in effect whenever the President finds and proclaims that the national economic emergency in relation to agriculture has been ended; and pending such time the President shall by proclamation terminate with respect to any basic agricultural commodity such provisions of this act as he finds are not requisite to carrying out the declared policy with respect to such commodity.

I was wondering if different wording there might not clarify it. That this act shall terminate at the expiration of a given period: Provided, however, That if the President finds proper, he may continue any one of the commodities which he thinks would be benefited by continuation of it.

Senator MCGILL. That is practically what it means now, Senator. The CHAIRMAN. I know it does, but the language is such as to give the idea that it is a permanent thing, with certain provisions.

Senator MCGILL. With the provision that if the President finds certain facts to exist he would issue a proclamation, and that would end it.

Mr. TUGWELL. Might I say, Mr. Chairman, that that was discussed at great length, both amongst ourselves and with the President, and the phrasing as you have it here seems to meet the wishes of most everybody. Everybody could see that 1 year might not be material, 6 months might be material, or a year and a half might be material, and it was thought best to leave it indefinite in this way, with discretion to withdraw the entire act, the provisions of the entire act or the provisions of any part of it at any time, in the discretion of the Executive. I might say also that it was felt that some provisions of the act it might be desired to leave permanently, unless Congress desired to repeal them; for instance, such arrangements as might be set up under the agreement section it might be desirable to keep if they seemed to operate well, and as a result of this whole discussion the President wrote this paragraph in his message, which you will remember:

If a fair administrative trial of it is made and it does not produce the hopedfor results, I shall be the first to acknowledge it and advise you.

That paragraph was written with that particular thing in mind; I am sure that he wants the discretion to withdraw it very quickly if it does not seem to work and try some other mechanism if that seems to promise better or to terminate the whole business.

Senator NORRIS. Are you going to go through these by sections? Senator McGILL. I think we should.

Senator NORRIS. Why not commence right there, then?

The CHAIRMAN. We did. We commenced with the commodities. wheat, cotton, corn, hogs, cattle, sheep, rice, and tobacco. We discussed that and we were down to section 12, and now he is discussing the first paragraph of section 15.

Senator NORRIS. Why does he not read section 12, Mr. Chairman?
The CHAIRMAN. He just got through with that. He read it.
Mr. TUGWELL. Yes, Senator Norris; I read that.

Senator MCGILL. I do not believe Senator Norris had come in at that time.

Senator NORRIS. All right, go ahead. As I understand it, the Internal Revenue Bureau is going to collect the taxes?

Mr. TUGWELL. Yes.

Senator NORRIS. And they are going to turn it into the Treasury of the United States?

Mr. TUGWELL. Yes.

Senator NORRIS. And the Secretary of the Treasury, out of the Treasury of the United States, pays the necessary money to the Secretary of Agriculture?

Mr. TUGWELL. Yes.

Senator NORRIS. And he pays it out?

Mr. TUGWELL. Yes.

The CHAIRMAN. Now are there any other provisions that the committee would like to discuss?

Senator MCGILL. We have not been able to go through them, Mr. Chairman.

Mr. TUGWELL. The separability provision which follows this is is of course, the usual provision.

The CHAIRMAN. That is all right. We do not care about that.

Mr. TUGWELL. Exemptions and compensating taxes were talked of this morning to a certain extent. That is, of course, to provide against the import of processed commodities which otherwise would not pay the processing tax.

Senator NORRIS. I do not understand. You are down to section 15 now.

The CHAIRMAN. Yes.

Senator NORRIS. Suppose you read it.

Mr. TUGWELL (reading):

If the Secretary of Agriculture finds, upon investigation at any time and after due notice and opportunity for hearing to interested parties, that any class of products of any commodity is of such low value compared with the quantity of the commodity used for their manufacture that the imposition of the processing tax would prevent in whole or in large part the use of the commodity in the manufacture of such products and thereby substantially reduce consumption and increase the surplus of the commodity, then the Secretary of Agriculture shall so certify to the Secretary of the Treasury, and the Secretary of the Treasury shall abate or refund any processing tax thereafter imposed with respect to such amount of the commodity as is used in the manufacture of such products.

That section that provision of that section-has to do with the prevention of the incidence of the tax falling on the producer, and allows discretion if it is found that the imposition of the tax causes consumption to decline.

Senator NORRIS. Can you give us an illustration of where that would apply?

Mr. TUGWELL. Will you explain that, Mr. Ezekiel?

Mr. EZEKIEL. Practically all of these products, certain portions of them are used for subsidiary products of very low value; for example, wheat, there is cracked wheat for chicken feed. This would permit the Secretary to exempt the processing of wheat for animal feed, or bran, from the tax on wheat.

Likewise a considerable quantity of cotton is 'used in the manufacture of bags which compete with paper, such as the bags they sell oranges in in retail stores. This would permit cotton used for such purposes to be exempt from the tax and would permit cotton to displace paper in those uses.

And in tobacco, certain low grades of tobacco are processed and manufactured in nicotine and other byproducts which would not be used unless they could be acquired at a low cost.

The CHAIRMAN. And in the manufacture of these byproducts, if we find that the imposition of the tax will so increase the price as to have a competitor used in the place thereof, they can remit the tax?

Mr. EZEKIEL. That is right.

Senator MCGILL. In other words, it will be used to prevent the substitution of some other commodity for the commodity benefited? Mr. EZEKIEL. Yes.

Senator NORBECK. Can it be renewed as well as abolished, the tax, under the provisions of this law?