H9

PROGRAMS COSTING MORE THAN $10 MILLION, 1954—Continued

Department of Agriculture, Agricultural Research Service, meat inspection, operating expenses including salaries (Projects).

H10 Department of Agriculture, Forest Service, pest control and brush disposal, operating expenses including salaries (Projects).

H11 Department of Defense, Air National Guard, payments to State agencies administering program (Finances).

H12 Department of Defense, Army National Guard, payments to State agencies administering program (Finances).

H13 Department of Health, Education, and Welfare, Public Health Service, operating expenses including salaries (supplied upon request to agency); by location of regional office.

H14 Post Office Department, compensation of postmasters (supplied upon request to agency).

H15 Post Office Department, rental, maintenance of buildings, utilities, and services (supplied upon request to agency).

H16 Post Office Department, mail delivery and collection, clerical and contractual services including salaries (supplied upon request to agency). H17 Department of Commerce, Maritime Administration, ship construction and repair (supplied upon request to agency); by location of shipyard. H18 Department of Health, Education, and Welfare, Social Security Administration, Bureau of Old-Age and Survivors Insurance, operating expenses including salaries (supplied upon request to agency); estimated on the basis of workload and regional distribution of benefits.

NOTE. The 10 richest and 10 poorest States were selected from the 1953 tables State income payments (Survey of Current Business, August 1954). The 1954 tables could not be used since they were not published until this study was well under way; in any case the difference would have been slight-a matter of one State.

The States used in our calculations are:

By New England Governors' Textile Committee (S. E. Harris, chairman)

(Accepted by New England Governors, November 11, 1955)

"RESOLUTION I-TRADE POLICY

"We urge the United States Tariff Commission and the interdepartmental trade agreement organization not to grant further concessions in tariffs on textile products in the forthcoming international discussions of trade policy." Support of resolution I

In support of this resolution, we point to the large losses of textile jobs in New England and substantial losses in the country (a 20 percent national loss in a recent period of 31⁄2 years). From the first quarter of 1947 to the first quarter of 1955, the decline in textile jobs in New England was from 301,000 to 172,000, or a loss of 43 percent. Though textiles are still the largest manufacturing industry in the region, the percentage of textiles to manufacturing jobs declined from almost 20 percent in 1947 to 12 percent in early 1955 and from 9+ to 5 percent of all jobs.

We base our case for the maintenance of present levels of trade restrictions as a minimum on the following:

1. The losses of jobs in the industry as a whole.

2. The large losses of New England and the North generally to the South, a movement that aggravates the adjustment problems. These losses to some extent result from Federal policies such as special tax favors to the South, the low standards of social security in the South, Federal aid in power and research, etc.

3. The large drains of cash by the United States Treasury from New England relative to what is put back: over a recent period of 18 years, leading industrial States in the South received back 3 times as much as the 3 major New England States relative to what was paid in to the Treasury. We are now studying how each of our New England States has fared under more than 100 important Federal programs over a period of 21 years. In general, we did not fare well. The relevant facts will soon be released.

4. Federal agricultural policies not only raise the prices of raw materials and food and notably prices of cotton and wool which are a large part of total costs of textile products and thus put us at a competitive disadvantage, but in the course of recent legislation (e. g., the Agricultural Trade Development Act) and proposed policy, the Government seeks to dump cotton on foreign markets at low prices. Such policies should not be tolerated unless corresponding restrictions on United States imports of finished products made with this cheap, raw material are imposed.

5. In taking this position, we are not unaware of the international responsibilities of this country. But we insist that tariff cuts should not stand an excessive part of the burden of adjustments; that New England already greatly injured by Federal policies should receive special consideration here and at any rate this burden of reduced tariffs should be concentrated more on the strong industries; that just because textiles are the important export of Japan and Japan needs bolstering, it does not follow that therefore New England and textiles should bear the brunt of these adjustments. Note in particular European countries in 1955 refuse to grant concessions to Japan as we did.

6. No matter how we look at it, the textile industry is in trouble-with prices generally rising by 15 percent since 1947-49, prices of cotton goods are down by about 10 percent; with world trade up since prewar by about 40 percent in volume, trade in cotton goods is down by 25 percent and cotton and rayon by 10 percent; world raw cotton production is up 22 percent since prewar, but world trade in raw cotton is down by about 15 percent; textile profits in this country are less than one-half those of all manufacturing goods; and though all plant and equipment investment in the United States is up in 1952-54 about 25 percent since the early postwar years, in textiles these investments in the last few years are down by 30 percent.

"RESOLUTION II-FLOOD CONTROL

"We invite attention to the resolution of the New England Governors' Conference of September 23 in favor of additional outlays for flood control, provision of navigation and beach erosion projects and additional outlays for planning, new flood projects and for a hurricane survey.

"In addition, we urge consideration of flood-control projects which involve further compacts between northern and southern New England (beyond those suggested by the Army engineers) and especially the projects that are revelant to prevent floods of the 1955 vintage."

Support of resolution II

Here again we should note that, as Senator Kennedy showed (release of October 14, 1955), New England with unusual vulnerability to floods has received but 3 percent of the $10 billion (in 1955 prices) authorized since 1936 for flood control. In fact, in the last 5 years $1.8 billion were appropriated for flood control according to Senator Kennedy; but this region received but $19 million, or about one-half of 1 percent. This compares with 6.5 percent, New England's share of national income, 9.3 percent, her share of manufacturing employment, and 7.5 percent, her share of Federal tax burdens. Hence, we received from one-thirteenth to one-eighteenth of the amount suggested by these variables.

The projects planned on the basis of the difficulties of 1927 and the 1930's are not exactly suited to deal with the floods of 1955, though the earlier type of catastrophe may be repeated.

"RESOLUTION III-FLOOD INSURANCE

"We urge a Federal program of flood insurance and reinsurance, the Federal government to participate insofar as private companies are unprepared to make flood insurance available."

Support of resolution III

In this connection we are pleased to note that Senators Saltonstall and Kennedy have prepared a bill to be submitted early in 1956 to deal with the problem of flood insurance, and Congressman Philbin had introduced a bill for insurance and relief 2 years ago. These proposals mark a great step forward.

Though agreeing in general with the Saltonstall-Kennedy bill, we raise the following issues.

1. Is a program of $500 million for both insurance and reinsurance adequate to cover property losses-even if items in excess of $250,000 are not covered? Note that the $10 billion collected from the general property tax suggests real property of $300-350 billion, even if it is assumed that property is taxed only at the rate of 3 percent of real value ($30 per $1,000). Even in 1937 taxable real property and improvements inclusive of public utilities were estimated at $190 billion. Since that year prices have doubled, and new construction (to be offset by depreciation) rose by about $250 billion. Hence it must be clear that real property is worth substantially more than $350 billion and New England's share substantially more than $20 billion.

Note also that the Government-insured mortgages outstanding under FHA and VA amount to $35 billion, and the responsible Government officials are unable to estimate the risks involved for the Federal exchequer. Housing insurance is for houses to be built and improved, and not for dealing with disasters, which should have an even higher priority than new construction.

2. Is it appropriate to rule out all subsidies by the Federal Government as the Saltonstall-Kennedy bill proposes? First, if rates are based on vulnerability, the effect would be an additional stimulus to migration. (Would it not be better to vary rates to some extent according to vulnerability?) Actuarial rates might indeed be paid by new plants that seek to move into vulnerable areas. Second, surely the Federal Government might be asked to pay at least what it would otherwise have to pay to finance disasters in the absence of insurance. Third, in the light of the payments by the Federal Government to other sections of the country at the expense of the Northeast, would not some small repayment be justified?

Another approach to this subject was suggested in my letter and memo to Arthur S. Flemming, Director of ODM, of October 5. Here I assumed that insurance would cover all the wealth of the Nation (roughly $1,000 billion); that rates would vary to some extent with vulnerability; that through a grant-inaid program the Federal Government would help finance the program and also use this device to induce States to join the program. Since the cost of floods over 25 years has averaged only $150 million a year and on the assumption that the Federal Government carries at least one-third the cost, the average charge per $1,000 would be $1, or $10 per average home. (Rates might vary from 50 cents to $1.50 per $1,000.)

"RESOLUTION IV-FEDERAL FLOOD AID

"Acknowledging gratefully the help proposed by the Federal Government under ODM regulation I, amendment I (accelerated amortization), Executive Order No. 10,634 (loans to aid in reconstruction, rehabilitation, and replacement of facilities), and under ODM order VII-7, supplement I (favoring disaster areas in Federal procurement), we nevertheless urge the Federal Government to move further. In particular, it is imperative that tax allowances be given to the textile and other industries damaged by the floods but not eligible for accelerated tax amortization under ODM regulation I, because no expansion goals have been set for them by the ODM; that the Government specifically state that the textile industry is eligible for loans under Order 10634 and especially that the Bureau of Internal Revenue allow as offsets for tax payments from current income any private outlays incurred to reduce the danger and damage of floods."

69096-56-pt. 1-33

Support of resolution IV

Note that the textile industry has no expansion goal under regulations of the ODM. But an industry like airplanes with a net profit in 1954 of more than 60 percent of net worth before taxes receives this tax aid.

Note also that loans are available only for "facilities which are destroyed or damaged by a major disaster and which are required for national defense." Finally, we are no longer assured by the promises coming from high sources in Washington for years that distressed areas would be given preferential aid by Government procurement agencies. "Only two preference contracts valued at $100,000 or more were awarded to New England firms in labor surplus areas in 1954. The entire program of granting tax amortization assistance [in labor surplus area] was expected to create 9,000 jobs. ***” (U. S. Monthly Labor Review, June 1955).

"RESOLUTION V-TRANSPORTATION RATES

"We urge the Southwestern Freight Bureau, the eastern railroads, the trucking industry, and the ICC to bring rates on transportation by motor carrier and railroads within the southern areas in due proportion to rates in the North and between North and South. We insist that any concessions in freight by the Southwest Freight Bureau on the shipment of raw cotton within the South (a 20-cent reduction on raw cotton-$1 per bale was granted by the Southwest bureau in August for shipments to southeastern points) should be matched by similar concessions on cotton shipped to the North. We hope that the executive committee of the Southwestern Freight Bureau (and the eastern railroads) will consider this matter seriously in its meeting of November 28. We would also like to know why truck rates to the Middle West from the South are lower than from New England. (See Report of New England Governors' Committee on New England Textile Industry, 1952, pp. 203-204.)" Support of resolution V

It is significant that the lower motor freight rates from the South than from New England (noted by the New England Governors' Textile Committee in 1952) has been the occasion for a reduction in railroad rates, so that now a single disadvantage has been multiplied into a double disadvantage.

The chairman of the Southwestern Freight Bureau wrote the chairman of the New England Governors' Textile Committee (September 27, 1955) as follows: "Reduced rates were published to become effective September 30 on cotton, carloads, from the eastern portion of Arkansas and Louisiana, also from southeastern Missouri to destinations in the South in an effort by the southwestern and southern railroads to meet the competition of motor carriers. Those rates were reduced in the same amounts as the reductions made in the rates from Memphis, Tenn., to the same destinations in the South by railroads in the South. Petitions have been filed with the Interstate Commerce Commission to suspend the proposed rates because of restrictions in the railroads' routes via which they are to apply. Consideration was not given to making reductions in the rates to New England because the competition with motor carriers was limited to the origins and destinations covered by the reduced rates. Should there be any further consideration of proposal 74698 by the Southwestern carriers, I should be very pleased to inform you."

This was in reply to the following (letter of S. E. H., September 19, 1955, to Mr. Knobeloch):

"On behalf of the New England Governors, I am writing you concerning a proposed 20 percent reduction in the freight rates on some 600,000 bales of raw cotton shipped to New England points annually (docket No. 74698 emergency). "A rise in the differential between New England and the South by 20 points per pound of cotton or $1 per bale has resulted from a decision of August 1955 to reduce the freight on cotton shipped to Southeastern points.

"It is our view that unless a similar reduction is allowed for cotton shipped to New England, the railroads will have seriously injured the competitive position of the New England mills. A loss of New England business is serious for the railroads as well as for the cotton-manufacturing industry of New England Per bale of cotton the railroads gain much more on cotton shipped to New England than on that shipped to the South. Higher costs to New England mean not only losses of business to regions closer to the sources of supply but also to foreign competitors.

"In a prewar study it was found that freight charges were 22 percent of the value of baled cotton at destination and for cotton and cotton cloth about 1.9 percent. An increased differential in favor of the South of 20 percent on the raw cotton, in a highly competitive industry, may be the decisive matter in a loss of markets and a loss of business for railroads in shipments of both raw material and finished products. Cost differentials of 1 percent are very large indeed when the margin of profit may be but a few percent and frequently is even less than that.

"We urge you strongly to report favorably on the 20 percent reduction for cotton shipped to New England."

"RESOLUTION VI-MINIMUM WAGES

"We welcome the recent rise of minimum wages, from 75 cents to $1 per hour, supported by every New England Congressman and by a majority of southern Congressmen and even by the southern industrialized States. We urge the Congress to appropriate adequate funds to enforce the minimum (as has not been done in recent years) and to relate the minimum more frequently than in the past to the rise of wage rates in the economy." Support of resolution VI

In a statement before the Senate Labor and Welfare Committee (May 12, 1955), the chairman of the New England Governors' Committee made clear why a rise in the minimum was required. (Also see letter to Boston Herald, August 28, 1955.) It was pointed out that a higher minimum was one way of moderating the reduction of working standards, the low social security standards, and the pouring of cash into, and the provision of other Federal aids on behalf of, newly industrialized States. A rise from 40 cents to $1 since 1938 and 75 cents to $1 since 1949 was not commensurate with the gains in wages and those expected in the next 5 years; but since 25 percent of the southern workers were earning less than $1 in 1954, it would not be wise to move beyond $1 too rapidly. The great gains of the South despite the increase in the minimum from 40 cents to 75 cents, and an examination of vulnerable industries in earlier years showed clearly that rises in the minimum have not substantially destroyed jobs. Minimum pay is still far from what is required to cover minimum consumption budgets; but some progress is being made. The competitive advantage resulting from reduced standards has in part been removed.

"RESOLUTION VII-MERGERS

"The Conference of New England Governors has been greatly disturbed by the large number of mergers in recent years that have culminated in the shutting down of plants and especially textile plants in the Northeast. Since tax laws which, for example, enable the absorbing firm to set off losses of the absorbed firms against its profits, often make the mergers possible, we request the Justice Department, the Treasury Department, and the congressional Committtes on the Judiciary to stop manufacturers which are based primarily on tax avoidance and not on genuine economic considerations. We remind them that promises have been made to watch this situation and if necessary ask for and pass new legislation."

Support of resolution VII1

Mergers and regional migrations.-One aspect of the merger movement has received no attention in the two postwar reports of the Federal Trade Commission, and in fact nowhere else. That is the contribution of the merger movement toward the displacement of the textile industry in the North and its migration to the South. It is primarily firms operating in the South which acquire northern plants. Most of the northern plants are shut down and the plants and machinery auctioned off, part of the latter moved to the South. (Some crude estimates of disposal of machinery are presented.)

Mergers, taxes, and other Federal policies.-We stress the point that the merger movement accelerates the shift of industry from North to South; that this shift, partly related to genuine advantages of the South, also feeds on low-wage standards, strong anti-trade-unionism, low standards of social security,. large inflows of Federal cash (in 17 years 3 large New England States received

1 Excerpts from statement of S. E. H. in the staff report, House Committee on the Judielary, The Merger Movement in the Textile Industry, 1955, pp. 36-37.