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essential aspect of a healthy and continually prosperous industry. Without exploration and development programs, old mineral deposits are worked out, the quality of the ore declines, and the mines are worked out.
4. A system of direct subsidies to producers, whenever the market->ptice is below a predetermined economic price for the industry, should be established. This economic price should be based upon the following standards: Domestic productions costs, historic price of minerals, prices of substitute materials, and defense and domestic needs for minerals in terms of a predetermined mobilization base. The economic price, which is really the base of this program, should be set at a level to maintain domestic production of the amount necessary to fulfill the mobilization base requirements of the United States.
The subsidy, based upon this predetermined economic price, should apply only to a limited, fixed tonnage of any mine. This is essential in order to avoid windfall profits to the large, efficient producers. Such fixed. tonnage should start with a floor and be graduated 'upward on a sliding-scale basis, prorating the percentage of the average production of each mine to United States needs and requirements.
In effect, this is a limited tonnage subsidy. But the limited tonnage should start with a minimum level tonnage to be subsidized. This takes care of the small producers.
Other mines would have a portion of their production subsidized based upon a sliding scale amount that relates each mine's production to total United States consumption in a specific base year. The subsidy would be designed to maintain that ratio and would apply only to that level of tonnage necessary to maintain that ratio.
All subsidies paid must be on domestic production for domestic use solely.
5. The United States Government should be immediately authorized to work toward the establishment of an international commodity agreement between exporting and importing countries, based upon the following principles :
(a) Establishment of worldwide minimum and maximum prices. (6) Establishment of an international buffer stockpile.
(c) Authority to buy and sell for such stockpile, as worldwide prices fluctuate between the minimum and the maximum prices.
(d) Agreement to curtail exports when buffer stockpiles reach a predetermined level.
(e) Impose necessary safeguards to prohibit the use of the stockpile as a means of interfering with labor-management relations.
International commodity agreements are more and more essential if worldwide production is to be stabilized and if the world is to be prevented from returning to a dog-eat-dog system of quotas and tariffs. The multilateral determination of production levels in relation to world needs, the establishment of worldwide economic prices, and the use of a buffer stockpile to augment these concepts are all in the interest of stabilizing world production and avoiding cat-and-dog fights between nations.
In order to effectively carry this five-point program, there should be established a Domestic Minerals Agency in the executive departments of the Government, which would be created and empowered to carry out the various domestic and international implications of these suggested programs.
Mr. ROGERS. Without objection, the statement of Mr. Charles B. Baker Shuman, president, American Farm Bureau Federation, under date of July 15, 1958, in the form of a letter addressed to the Honorable Clair Engle, chairman, House Committee on Interior and Insular Affairs, will be included in the record at this point.
Mr. ASPINALL. I would like to withdraw my objection. I did not object to the letter from the Farm Bureau. That is in opposition to any kind of program.
Mr. ROGERS. If the objection is withdrawn, the letter will be inserted at this point.
(The letter referred to follows:)
AMERICAN FARM BUREAU FEDERATION,
Washington, D.O., July 15, 1958. Re mineral subsidy bills, S. 4036 and H. R. 13280 Hon. CLAIB ENGLE, Chairman, House Committee on Interior and Insular Affairs,
House of Representatives, Washington, D. C. DEAR MR. ENGLE: This is to summarize the policies of the American Farm Bureau Federation with respect to the above-specified bills. It will be appreciated, if you will incorporate this letter in the record of the hearing on this subject.
We are very seriously concerned that the proposal for mineral subsidies will establish a precedent that could be broadly extended to other industries; and that its application to any industry would serve as a vehicle whereby private competitive enterprises would be converted into enterprises controlled, directed and dependent upon Government.
If we are to adopt the precedent that certain mineral industries, because they face import competition, should receive direct subsidy payments, this policy could be applied with equal logic to a great many other industries. Nor is there any reason to suppose that this approach would be limited to commodities subject to import competition.
If the use of direct payments to bring total returns up to specified levels is warranted in the case of the minerals specified, there is no reason why the same approach should not at some future time be adopted for other minerals-iron ore, coal, oil, sulfur, potash, phosphates, and other mineral products.
Nor is there any reason why this approach should not be used for other natural resource industries such as forest products, fisheries, or for agriculture.
And if this is a desirable policy there is no reason why it should not be extended to many manufactured products—to textiles, ceramics, automobiles, or farm machinery.
The railroads are currently involved in a serious income situation. With comparable logic, direct payments might be made to railroads to bring average earnings to a specified level. It is submitted as axiomatic that
1. That which the Government subsidizes it will come to control eventually, if not immediately. In the long run “He who pays the piper calls the tune.'
2. That the support of price or income creates the need for control of production. Both of these axioms are carried into effect in S. 4036 and H. R. 13280. These bills provide that the Secretary “may fix quarterly limitations on the total amounts of each” product for which payments are to be made. The Secretary is further authorized to “distribute the benefits of the program equitably among the producers.”
This is an effective control of production at any time the margin between the stabilization price and the market price is significant.
Thus, the Secretary of the Interior would have the authority to allocate the ris,ht to produce among the producers of each metal; and the quota for each producer would tend to be frozen, thus preventing normal shifts in the pattern of production in response to economic and market factors.
Any industry for which direct payments are used as an income-supporting device is likely to become a net consumer rather than a net producer of Federal tax revenue, thus adding significantly to the tax burden on all other taxpayers.
For example, a study by the Department of Agriculture of the cost of a directpayment program for agriculture at 90 percent of parity reached the conclusion that the program would cost between $7.5 billions and $10 billions a year.
It is a basic feature our private competitive enterprise system that price serves as the balance wheel-to balance supply and demand, to guide production and consumption, to direct the flow of investment. The economists would say that the function of price is to allocate resources.
But when the Government steps into the picture to prevent price from performing any or all of these functions, we are in effect substituting political management, and centralized control, and planning for the impersonal operation of the market system.
It is our conviction that the archstone of the economic system that has made America the arsenal and support of the free world, is that its functioning is guided primarily by the impersonal operation of the market system, rather than upon centrally controlled and directed authority.
Individuals, by making choices based on price, vote many times daily as to their preferences. Thus free price, if not seriously altered by interference of monopoly or the Government, is the most democratic economic system ever devised.
We were fortunate in that circumstances freed us from the controls, the cartels, the guild system, the political management that was the "old world”. economic system.
Many observers of the European scene have suggested that the postwar recovery of Europe has been roughly proportionate to the extent to which it has thrown off the shackles of centralized control, whether by cartel or government, and moved toward the market system.
The extraordinary resurgence of the German economy since World War II is attributed to the wartime destruction of the many institutional arrangements to restrict competition and control price and production, and the steadfast opposition of the political leadership of the German Government to the reinstatement of such institutional arrangements.
It is our view, therefore, that the issues involved are far broader than the specific mineral industry problems covered by the bills. The basic issue involved is the choice between (1) a free competitive private-enterprise system operating in response to market factors, or (2) central planning and direction of the economy by Government. The pragmatic test of experience, in our view, evi-, dences the overwhelming superiority of the first choice. We believe it is important to the long-run welfare of the people of the United States and to the strength of our economic system that we avoid on every possible occasion, any excursions of precedents going in the direction of the second choice.
The implications of this proposal in terms of foreign trade and foreign rela. tions will also be obvious. The net effect of a payment program is to reduce imports below what they would otherwise be by subsidizing higher cost production here at home. We believe that the long-run welfare of the whole American economy will be most furthered by policies that result in a high level rather than a low level of trade between nations. We must import if we are to export. The present imbalance between exports and imports is not desirable, either to the United States or to other countries. Barriers to increased imports stand in the way of obtaining a better balance.
National defense is commonly given as the reasons for measures to protect a domestic industry. Present legislation provides means whereby such factor may be given carefully considered attention. But this national defense aspect can be overdone. If mineral imports come from nearby countries such as Canada, Mexico, etc., this provides essentially the same national defense feature as production in the United States.
The proposed method of financing mineral subsidies contained in S. 4036 and H. R. 13280 avoids annual review of such expenditures by the Appropriations Committees and the Congress and adds one more noncontrolled expenditure item to the Federal budget.
It is not our purpose to present a comprehensive or alternative program for the minerals industry. This is the appropriate function of the voluntary associations representing the industry. Our only purpose is to set forth, in general terms, why the American Farm Bureau Federation believes the enactment of mineral subsidy legislation is not a desirable alternative; but, on the contrary, is against public policy for the reasons stated above. Respectfully submitted.
CHARLES B. SHUMAN, President. Mr. ROGERS. The gentleman from Pennsylvania ? Mr. SAYLOR. I would like to call attention to the statement by Mr. Hoffman. I would like to call particular attention to the fact that this bill is not entirely to the liking of the United Steelworkers of America although they realize the plight of the industry.
Mr. Rogers. Without objection, the statement of the National Association of Manufacturers in opposition to this legislation will be included in the record at this point.
(The statement referred to follows:)
STATEMENT OF THE NATIONAL ASSOCIATION OF MANUFACTURERS The National Association of Manufacturers appreciates this opportunity to express its views on legislative proposals to stabilize production of copper, lead, zinc, acid-grade fluorspar, and tungsten from domestic mines. The provisi of H. R. 13203 and similar bills establish artificial supports for the production and sale of these minerals for the general market; and to subsidies of this type the association is opposed.
These tax-financed supports, whether subsidies in the form of Federal stabilization payments or Government purchases for stockpiling, are economic aids to industry divorced from any defense or military needs. They are designed, as are farm commodity support, to fill in the gap between the competitive market price and an arbitrarily determined stabilization price and thus are intended to revive unprofitable and unproductive operations.
The National Association of Manufacturers has a membership of nearly 22,000, representing the States geographically, all areas of industry, and a broad taxpaying segment of small business_83 percent of member companies employing less than 500 workers. Association policies are developed by action of representative members through both committee and board levels. The policies which base NAM's opposition to the proposed stabilization of minerals production are of long standing, having been worked out initially in 1953 and 1954 and ręconfirmed with revisions in 1957. In essence they are:
1. Federal subsidies.-Except for national defense and security subsidies should not be used as instruments of Federal policy.
2. National stockpiling program.-Industry advocates a stockpiling program by the Government for defense only, and is opposed to Government stockpiling for civilian purposes.
The recession has provided an environment in which a case is being made for economic supports such as provided in bills before this subcommittee. It has been stated that such supports would help overcome industrial pockets of unemployment. The apparent fact is that such a plan as support prices for minerals would not correct unemployment in these mining areas. The Salt Lake Tribune of April 30, 1958, quotes Mr. C. D. Michaelson, general manager of the western mining division of Kennecott Copper Corp. as saying, "giving Kennecott 242 cents a pound for every pound of copper it sells to fabricators at 25 cents a pound isn't going to increase employment at our mines."
The cost push on prices—the infiltration of one round of wage increase after another into the economic structure over recent years, without regard to increase in national productivity-has damaged the competitive position of many enterprises. It has been recognized that this inflationary factor would result in either a validation of higher costs and prices by an increase of the money supply or by a drop in output, sales, and employment.
If subsidies are to be used in an effort to correct this situation in a few pilot circumstances, what is to prevent its extension into the field of other metals or minerals, and ultimately into any area of reduced production and employment? Is the Government, at the expense of the taxpayer or a further devalued dollar, to come to the financial aid of any and all lagging enterprises?
Effective enterprise, operating on a competitive economic basis must recognize the principles of supply and demand which a Federal subsidy program ignores. Ignored also hy the proposed program is the existing domestic stock of metals in the hands of producers. In fact, the stockpiling proposal, now substituted for subsidy of copper in the legislation-and being urged by some for lead and zinc, too—could accentuate this problem enormously and result in surplus sup plies similar to the white elephant of farm commodity surpluses. As it is, present stockpiling is far in excess of anticipated needs.
Another economic anomaly inherent in the subsidy proposal involves aspects of practical pricing-competitive pricing. Subsidizing producers could cut their incentives to mtintain prices, especially under consumer resistance, and would thus give manufacturers a cost of raw material below actual cost, creating unfair competition between manufacturers of like products made of different materials, and defeating both inventiveness and progress.
The mining and metals businesses are not alone in their need to be revived. But Federal supports are not the answer. Once instituted, subsidies lead to greater dependence on Government and to more Government interference, regų. lation, and control of business. The discretionary authority provided in the
legislation for carrying it out suggests that the establishment of regulations or their alteration could determine or redetermine the whole economic effect of the proposal. Subsidies may look like an easy "out"—an acceptable, temporary expedient—but they constitute a one-way throughway to a firm concentration of economic and political power in the Central Government.
In registering its opposition to the proposals before this subcommittee, the NAM wishes to emphasize that without reference to any particular industry and its current troubles, the negative characteristics of any Government subsidy are so great as to render further use of the mechanism by the Government, a hipdrance to the dynamics of enterprise and economic progress, an unjustified burden on the taxpaying public, and a threat to the independence of American business.
As the following quotation indicates, NAM's attitude in this regard was clearly expressed as long ago as 1950 in its publication, Bring Government Back Home:
“In one respect it is incredible that the most prosperous Nation in the world should have so little faith in the economic system that has made its prosperity, wealth, and economic progress possible as to permit the introduction of as many programs of support, assistance, subsidy, and control as it has. The concept that Government can support the economy and carry it to higher levels is completely inconsistent with the concept of free, private enterprise as the mainspring of economic advance."
Mr. ROGERS. Without objection, a statement by the Chamber of Commerce of the United States bearing the signature of Clarence R. Miles, in the form of a letter addressed to the chairman of this subcommittee, in opposition to the legislation, will be included in the record. (The statement referred to follows:)
CHAMBER OF COMMERCE OF THE UNITED STATES,
Washington, D.C., July 17, 1958. Hon. WALTER ROGERS,
Chairman, Mines and Minerals Subcommittee, House Committee on In
terior and Insular Affairs, Washington, D.C. DEAR MR. ROGERS : The Chamber of Commerce of the United States strongly urges your subcommittee to oppose S. 4036 which would attempt to stabilize production of copper, lead, zinc, acid-grade fluorspar, and tungsten from domestic mines by means of stockpile purchases for copper and a domestic minerals stabilization plan for the other commodities.
The chamber's board of directors, on June 13, 1958, went on record as opposing the domestic minerals stabilization plan proposed in S. 4036, pointing out that Congress has already provided machinery for relief in the escape-clause section of the Reciprocal Trade Agreements Act. Stockpile goals should be restricted to foreseeable mobilization and rehabilitation requirements and should not be set or adjusted for social or economic reasons.
The chamber is not unmindful of the plight of some domestic producers of certain metals and fluorspar due, in part, to imports of these materials at the presently low prices. The result has been a closing of some domestic mines and the operation of others at a loss.
The chamber believes that the mining industry within the continental United States is of prime importance to our national well-being and safety. Even if the necessity for the importation of certain minerals and metals is conceded, we can have national welfare and security only through a sound and active domestic mining industry.
The solution to the problem does not lie in the plan proposed in S. 4036, however, because :
1. It provides for direct Federal subsidies. The chamber vigorously opposed a somewhat similar subsidy plan for agricultural production proposed some years ago by the then Secretary of Agriculture, Charles Brannan. We believe that enactment of S. 4036 would establish a precedent that could be broadly extended to other industries.
2. The authority given the Secretary of the Interior to adjust the stabilization payments to the individual producers cannot be equitably administered and could only lead to direct Federal controls over the domestic mining industry.
3. The proposed method of financing the domestic minerals stabilization program by authorizing the Secretary of the Interior to borrow from the Treasury instead of through the usual appropriation process is highly undesirable. With