For example, the first thing that I decontrolled was Sigma oscillometers. That was no great impact, but I told the press it would be easier to control than to learn how to spell it.

Mr. BARRETT. Will the gentleman yield?

Mr. WYLIE. Yes; I will yield.

Mr. BARRETT. Do you have any other questions?
Mr. WYLIE. Yes; I have another question.

Mr. BARRETT. Go ahead.

Mr. WYLIE. You indicated, and Mr. Roosa indicated, that you are in favor of title II of this bill and did in fact endorse it. But during the course of your testimony and Mr. Roosa's testimony I think you both indicated that something should be done now in the way of wages and price controls. Is that a fair statement?

Mr. DISALLE. Yes.

Mr. WYLIE. Would you favor, in lieu of the section that is written into the law-that is what I am getting at-mandatory wage and price controls imposed by law as of a certain date rather than giving the discretionary authority to the President?

Mr. DISALLE. I would give it to the President.

I have one reservation on title II. And that is the limitation, the 8-month limitation.

Mr. WYLIE. You don't think it is long enough?

Mr. DISALLE. I think it ought to become a part of the permanent law. I think the debate that goes on every time we are considering it is inflationary in and of itself.

Mr. WYLIE. Thank you very much. I think that is an addition that has not been brought out before. Thank you, gentlemen.

The CHAIRMAN. Mr. Moorhead?

Mr. MOORHEAD. Thank you, Mr. Chairman.

And thank you, Governor DiSalle, and Mr. Roosa, for your very helpful testimony.

The real guts of this legislation, at least the economic stabilization title, is the section in which we give the President authority to stabilize prices, rents, wages and salaries.

I notice, Mr. Roosa, that you state that we are becoming a serviceoriented economy. Should we include the word "services" or appropri ate language in there? And if we do, is it enforceable?

Mr. ROOSA. That is the area that I had to confess originally that I feel less sure about, and I feel that all of us probably, certainly, need more thinking. It is so difficult to know what it is you are freezing in the case of services. I certainly think that all scheduled charges in the freeze we are talking about should be considered frozen, and I would interpret the present language to authorize that.

Mr. MOORHEAD. To include that?

Mr. ROOSA. The regular fee for any doctor's office visit, if it is $8 o $10, ought to stay there. But no one can tell you how much you are go ing to get for an $8 or $10 visit. That is the aspect of the service that we will never be able to quantify in a way even as crudely as between a Model T and a modern Ford.

Mr. MOORHEAD. Do you have any comments, Governor?

Mr. DISALLE. We interpret the freeze to include services.

Mr. MOORHEAD. Mr. Roosa, I think on page 2 of your testimony you mentioned control over dividends. This is not mentioned in section 2

Do you think we should include besides prices, rent, wages, and so forth, dividends?

Mr. Roosa. I think it is a matter of equality; yes. There is a shortrun requirement which is being imposed on other sources of income, and I think it should be here.

Mr. MOOREHEAD. And it would be relatively easy to enforce, with the dividends they paid the year before, would it not?

Mr. ROOSA. Yes.

Mr. MOORHEAD. Now, the more difficult issue, should we keep the word "profits" in section 202?

Mr. Roosa. I didn't go that far, because profits are themselves a residual. And they are not subject to the same determined controls. I sit on the board of four companies in which the managements at least quarterly and usually monthly attempt to give us a projection of what earnings are going to be. And not once has the projection the following month proved to be what it was indicated to be in the previous month. And this is no discredit to the able managements that I am acquainted with.

It is the residual

Mr. MOORHEAD. I am inclined to think we ought to err on the side of being sure that we have got everybody in there that we intend to. I would certainly think that services and dividends

Mr. ROOSA. I have no objection at all, I just assumed that it was there, but if there is any doubt, put it in.

Mr. MOORHEAD. Profits, as you point out, would be much more difficult to enforce. And, since it is temporary, the limit on dividends would accomplish a good part of our purpose.

Mr. Roosa, I am intrigued also with your National Economic Commission, and particularly the ecological impact of the marketplace. Wouldn't it be also necessary for us to consider the international economics of this? In other words, we can clean up our pollution of the air, of the oceans, but if other nations are not doing this, all we are doing is handicapping ourselves.

Mr. ROOSA. By all means, yes. I know that some efforts governmentally have been initiated in this area. But personally I am participating in one, too, actually of a privately organized nature, one of them in which we have a distinguished group of Americans discussing this with, if they may be so referred to, private Russian citizens on a scientific level. And I think this must be done worldwide eventually. But we have to know how and what we in the United States would think is best before we have a negotiating ground. I do not mean to say that we shouldn't start. But it is most important to do our own homework first.

Mr. MOORHEAD. And I believe we should also study our relationships with other money markets and financial markets and international financial institutions.

Thank you, Mr. Chairman.

The CHAIRMAN. Mr. Crane.

Mr. CRANE. Thank you, Mr. Chairman.

I would like to welcome the two distinguished gentlemen to the committee this morning as well.

I have just a couple of brief questions that I think are in some measure redundant. But just for clarification, may I address those questions to Mr. Roosa, because he has touched upon them.

47-076-70-5

The logic of imposing a freeze on prices, wages, rents and dividends suggests to me extending that also to include a freeze on interest rates. Would you agree to that?

Mr. ROOSA. Yes. The only trouble there is that, the same as in the services item, we have to be sure what it is you are getting. You cannot freeze rates of discount. Those are going to be varying in the market. There is no reason at all, though, if you make a maturity break and apply it to new issues, you cannot do that. That will have the effect of probably just drying up the new issue market. And that wouldn't do too much harm. I even debated putting that in my statement, but I thought my banker friends would lynch me. So I welcome the opportunity to add it.

Mr. CRANE. Very good.

May I then ask the question about freezing credit to the same PMC extent-freezing credit on a national basis both private and public?

Mr. ROOSA. We cannot freeze the economy to death. There has to be credit provided for the flow of goods and trade. And that wil not be a constant, as things move around. So that I feel we are doing the best we can as a nation by having the Federal Reserve maintain an overall control over the total. Beyond that, as I have indicated I think it is both more difficult and perhaps more disruptive to try to allocate or to impose controls on individual sectors of credit.

I would rather put a ceiling on the total, and where an individua sector is pinched too hard, provide some relief.

Mr. CRANE. This, then, would suggest that to the extent possibl it would be very important to try and avoid any increased indebted ness at this time. And I think that is what I understood by your re marks to my colleague Congressman Ashley, that we scrupulousl avoid further indebtedness during this period as far as Governmen spending goes?

Mr. ROOSA. Yes.

Mr. CRANE. And in addition to this, presumably a freeze would b retained on the present tax levels. I am thinking specifically of th

surtax.

Mr. Roosa. This may be heresy, but I would favor a renewal the surtax at the 5 percent rate prevailing until the end of this mont Mr. CRANE. And then my last question is, finally a freeze on th money supply at the present level?

Mr. Roosa. I don't think that would be feasible. What we are fa ing here within the economy is a pattern, apart from everything els of seasonal change. And I think if we tried to put an absolute freez we would find that we were impairing just the normal day-to-da function of those elements in the economy that by God-given natu happen to have a seasonal pattern.

Mr. CRANE. If we took into consideration this natural fluctuatio on the basis of 1969 ?

Mr. ROOSA. We have to flow from where we are. I think. A rollbac in this area would be pretty chaotic.

Mr. CRANE. Thank you.

The CHAIRMAN. Mr. Stephens?

Mr. STEPHENS. Thank you, Mr. Chairman.

I have enjoyed listening to you gentlemen and your testimony. have been thinking along the line of price controls or any kind controls in the light of the fact that if you are going to have son

controls, it was brought out that you are going to have to control food prices as well as other kinds of prices.

But the thing that has disturbed me in that discussion is the implication that the real cost of food to the housewife is based upon the fact that the farmer is getting a parity price or some kind of subsidy. First of all, the parity is to protect the farmer, and acknowledgeably so. He has no way of bargaining for his wage. When you find a farm striking, that just means he quits farming. The Farm Bureau and the Farmers Union and other farm organizations are not union combinations that control the wages and prices. They are not bargaining for the farmer. And I would say that the farmers in the Farm Bureau are just about as widely divided as the Democrats are in their ideas about what is best for the country.

The increase of payment per unit of production to the farm producer in the past 20 years has been astoundingly small. The high price paid by the ultimate consumer—and I would like to have you comment on this is not primarily from the farmer's income, that is not where the cost comes from, it is from the steps to process that product between the farmer and the consumer.

I will give you an example of that. In the broiler industry, which is a very important economic factor in my section of the country and in Georgia, the grower, the fellow that does the work-he looks after the chickens, he cleans the chickenhouse and he sees that the heat is proper, and the water is there the grower is receiving about 17 to 19 cents a pound. And the housewife is paying 30 to 40 cents a pound. And yet, there has been a reduction per pound to the grower in the last 15 years.

And as to the dairyman, the prices that the dairyman is receiving per unit for his production-I doubt if the production unit has risen 5 cents per unit in the last 10 years.

So the farmer's subsidies are a type of actual price control that the Government has, in my opinion, to keep the farmer wanting to farm, to keep the dairyman wanting to get up. He is going to milk one time in the dark, it doesn't make any difference whether he milks in the morning or at night-to keep a person going who is interested in feeding the rest of us. And that is not a farm subsidy and a farm price increase so much as it is the interim processing in between.

Would you like to comment on that as to whether you would agree? Mr. DISALLE. Mr. Stephens, in all the price regulations of the Korean war we only had three agricultural commodities under ceilings. Hogs, for example, never reached parity. And so there is no question that your conclusion is correct as to where the real cost is. The real cost is in processing, transportation, retailing, wholesaling. Mr. STEPHENS. Thank you.

That is all I have, Mr. Chairman.

Mr. BARRETT (now presiding). Thank you, Mr. Stephens.

I have a very short question for each of you.

But I do want to say, Mike, it is nice to see you back here. I had to look out there for 2 or 3 minutes before I identified you. My Sullivan is laughing about this, because I told her that your cheeks are rosier and you are more handsome since the last time we saw you.

Mr. DISALLE. Forty pounds ago.

Mr. BARRETT. Mr. Roosa, I want to ask you a question. In your earlier comment concerning Government guarantees being proposed

under the Defense Production Act to the Penn Central Railroad, would you consider, as a possible serious alternative in the public interest, receivership and reorganization of the Penn Central Railroad under section 77 of the Bankruptcy Act?

Mr. Roosa. I am afraid I haven't explored the position of the road and its finances well enough to be able to answer that question.

Mr. BARRETT. Mr. Roosa, may I give you an opportunity to answer that more fully for the record in writing, give us your comments on that as quickly as you can in writing?

Mr. Roosa. All right, sir. Fine.

Mr. BARRETT. Thank you very much.

(The following letter from Mr. Roosa in response to Mr. Barrett's question was received by the committee:)

Hon. WILLIAM A. BARRETT,
U.S. House of Representatives,

BROWN BROTHERS HARRIMAN & Co.,

New York, N.Y., June 18, 1970.

Rayburn House Office Building, Washington, D.C.

DEAR CONGRESSMAN BARRETT: In response to your request, I am writing to reply as best I can, and in necessarily general terms, to the question of whether the use of Federal funds or Federal credit is appropriate to aid the Penn Centra in its present difficulty, or whether that Company might better be reorganized under Court protection. Apart from my daily sufferings on the New Haven Divi sion of the Penn Central, I have utterly no claim to expertise in railroad eco nomics and, within the time available (I leave for London this evening), hav not been able to make any study of the matter.

I do certainly think that the public interest is deeply involved. On quic checking I have learned, for example, that transportation costs of various kind account for about 20% of the cost of anything anyone buys today. This is on measure why it should be in everyone's interest that all major means of trans portation run, and run efficiently.

On the question of governmental involvement, some figures which I have no had an opportunity to check do highlight the heavy financial outlays the Federa State and local governments have made since World War II to develop additiona facilities in every area of transportation.

In relation to actual expenditures of this enormous size, I am not quite frightened at the prospect of a guarantee by the Government for several hundr million, which hopefully would not ever have to result in an actual cash di bursement by the Government itself. So, I am inclined to think that the questi of whether the public interest would be better served by a reorganization of t Penn Central under the supervision of a Court should be resolved on oth grounds-will that assure a better railroad?

My own general impression is that bankruptcy represents primarily an eff to preserve the operational status quo while assets available for the payment debt are liquidated and applied pro rata in satisfaction of the claims of credito In the public interest, the last thing that I would think the Penn Central nee is preservation of the operational status quo. It does need very badly the abil to find operating management of a quality which would be highly unlikely work under the restrictive atmosphere necessarily created by a trustee in ba ruptcy. On asking about other bankruptcy proceedings, I have been told that Missouri Pacific was in reorganization for 23 years. I surely doubt whether a thing like that length of time is available to solve the problems of the Penn C tral. I have been hearing about a shortage of freight cars and about cars "gett lost" inside the Penn Central network ever since the merger, indeed earli This shortage and inefficiency would be bound to increase under the aegis o trustee in bankruptcy. Routing cars around the Penn Central System might h other railroads but it would be costly in time and energy.