5. A main purpose of the statute was to strengthen the economy of the Nation against possible war threats. Price control on meat and meat animals will weaken the national economy by discouraging farmers, discouraging feeding, and in addition it is bringing the threat of insolvency to hundreds and hundreds of slaughterers. This is not strengthening the national economy.

Pounds of meat that 1 hour of factory labor will buy

1 As reported by Department of Agriculture. The current figure is $1.57. Other figures above are from President's Economic Report, July 1950, and Statistical Abstract, U. S. Department of Commerce.

THE UNFAIRNESS OF OPS

OPS caused a very serious beef price squeeze by freezing the price of beef while letting the price of beef animals rise without limit.

A similar price squeeze is now beginning on pork, and will grow more acute during the next few weeks with the normal summer rise in hog prices.

To our knowledge the pork and hog ceiling prices have been practically ready for issuance for more than a month, but they have not yet been issued although we continue to suffer under a very unfair and one-sided price freeze.

The sausage price situation is dangerously bad, with losses to independent packers running as high as 5 cents per pound. One of our strongest and finest members phoned on May 10 that he is worried about the serious threat to the solvency of his excellent business. Yet OPS will not act, and Congress has closed the door to relief by injunction.

As regimentation increases, unfairness increases. With compulsory grading of beef comes a rule that if the local plant cannot get a grader, it may grade its own beef provided it grades nothing above commercial. This forces a small country slaughterer to grade Good, Prime, and Choice beef as Commercial simply because the Government cannot supply a Federal grader. This is nothing less than confiscation.

The very severe and unfair roll-back in the prices of hides and tallow was made without any consultation with independent meat packers in violation of section 404 of the act which provides for consultation with committees of those affected by regulations.

Many members, especially in the Southwest, are suffering for lack of veal ceilings which OPS has been earnestly asked to announce but which it has not announced in spite of the pleas.

THE PUBLIC IS ENTITLED TO MORE MEAT

There is no sound reason why the per capita consumption of meat should be only 148 pounds when it has been as high as 155 pounds.

We have had as high as 10.4 billion pounds of beef slaughtered (1947), as compared with only 9.5 billion in 1950.

We have had as high as 13.6 billion pounds of pork slaughtered as compared with only 10.8 billion pounds in 1950.

Our Government should lay its emphasis on getting larger production and not on roll-backs and other restrictive measures which curtail production.

Almost contemporaneously with beef price control the newspapers reported beef shortages in many cities. The Washington Post had a leading article on May 10, 1951, entitled, "Beef Supply Off 25 Percent to 75 Percent Here as Ceilings Take Effect."

Why these shortages resulting from restrictive measures when what we need is more meat animals and more meat? How can price roll-backs be expected to encourage production?

THE REAL CAUSES OF INFLATION REMAIN UNTOUCHED

Price roll-backs on meat and meat animals leave the great causes of inflation untouched.

The real causes of inflation are the volume of money and credit, increased purchasing power, and commodity shortages.

To roll back the price of live animals and meat not only leaves these basic causes of inflation untouched but contributes to them by discouraging production. The best weapon with which to fight inflation is abundant production. The worst policy in dealing with inflation is to discourage production.

THERE IS KEEN COMPETITION IN THE MEAT PACKING INDUSTRY

Ten big packers compete with each other in the greater part of the Nation. There are approximately 3,100 smaller packers competing in local areas and competing also with the national packers in every local area.

In addition there are 15,000 local butchers.

Monopoly is unknown as to our products. Supply and demand determine price levels in the absence of Government restrictions.

The keen competition assures protection to the consumer and maximum prices to livestock producers.

The housewife is the best price regulator.

THE RUINOUS BLACK MARKET

There was a shameful black market during the last period of price control. The Government contributed to this by the careless licensing of 27,000 new slaughterers.

Animals were slaughtered under trees and in dirty barns, with grave danger to public health, while established plants stood idle and meat counters were bare. Enormous supplies of therapeutic glands, hides (needed for shoes), and other valuable products were wasted.

OPS is now encouraging the black market by making the meat animal price ceilings mandatory only upon slaughterers, with the producers free to sell to any other buyers at any price whatsoever. This is an engraved invitation to the black market.

GOVERNMENT ADMISSION THAT BLACK MARKET COULD NOT BE CONTROLLED

On April 10, 1945, the Chief of OPA's Enforcement Division said to the Senate Committee on Agriculture:

"We have requested the assistance of the FBI at various points. In fact, directly in connection with the black market in meat. They refused to take any cases because they already had more work than they could do with their present available manpower. We would be glad to have the FBI work with us. But they do not have the staff to do it. Neither do we."

PRICE CONTROL BEING IMPRACTICAL, HOW CAN THE PUBLIC BE PROTECTED? We start with the proposition proved on sheet 2 that the average worker can buy more meat with his hourly wage today than ever before. Increasing production of live animals, made possible by the play of economic forces in a free system, has prevented meat prices from rising nearly as much as wages have risen.

The best protection to the public lies in a continuing increase in livestock production and in keeping meat in legitimate channels from farm to table.

If this is done, the price level will be kept under control by the law of supply and demand and by the extensive competition within the industry shown on sheet 6.

Price control, even if it were practicable, would not produce a single additional steer or a single additional hog, but on the contrary experience proves eloquently and tragically that price control discourages production.

What we need is maximum production and assurance that the entire supply is kept in legitimate channels.

Mr. LAROE. If you will look at page 1, the principal argument against meat price control is that it will not work. That ought to be a good argument against anything.

Uniform grading is impossible. Even Government experts often cannot agree on the grade of a beef animal.

This matter of grading, trying to grade this beef makes the whole control program messy and we do not know of any way to avoid that mess in trying to grade these animals.

Uniformity in cuts is unattainable, and if attainable cannot be policed.

Just suppose that one packer wants to be dishonest and leave a little more fat on a cut than he is supposed to do under the regulations. Who is going to catch him? It is just impractical.

Third:

There are hundreds of different sausage formulas, most of them secret and constituting part of the good will of business. How can uniform prices be imposed on sausage?

I do not think I am telling tales out of school when I say that sausage is what many meat packers depend upon for their principal revenue, and also for their good will. They take great pride in their sausage, the quality of it, just as a chef does in the quality of what he prepares.

If the formula is secret, as it usually is, how are you going to make prices on that sausage? Are you going to require uniform sausage to be made by Government fiat, and thereby deprive the sausage maker of his good will?

The CHAIRMAN. Did you call that to the attention of the Price Administrator?

Mr. LAROE. We have.

The CHAIRMAN. How can they have an answer?

Mr. LAROE. They have not made their sausage regulations. We have been pleading for them, and we do not know what they are going to be, but we now, Mr. Chairman, are losing 5 cents a pound on sausage, because our beef has gone up that goes into sausage, our pork has gone up that goes into sausage, and we have been pleading for sausage prices, or temporary relief, and we cannot get either one. We are caught in a squeeze on pork and sausage, and cannot get the administrator to act. To our knowledge these pork regulations have been practically ready for distribution for 6 or 7 weeks, and we cannot get them.

Senator DIRKSEN. Mr. LaRoe, are you familiar with the number of prices and classifications they had under the old OPA?

Mr. LAROE. Yes; in a general way.

The CHAIRMAN. How many were there; have you any idea? Mr. LAROE. Of course, if you take those regulations, it makes a book as big as Webster's Dictionary. I cannot answer the question in just that way.

I will put it this way, Senator Dirksen, that I, as a lawyer, am supposed to try to understand these regulations, and my clients are sup

posed to understand them, but they are so massive, and so difficult, that I, as a lawyer, cannot understand them, and I do not think I am unusually dumb, but I just cannot understand them.

Now, how can my clients comply with them?

The CHAIRMAN. As I understand it, they have a ceiling on sausage? Mr. LAROE. We have no ceiling on sausage, except for the price freeze.

The CHAIRMAN. Well, the price freeze is on meat.

Mr. LAROE. The freeze applies to everything that we produce, and we are frozen there with our prices, and cannot get them to give us dollars and cents' tailored ceilings to relieve us from the squeeze. The CHAIRMAN. Then sausage is frozen?

Mr. LAROE. That is right; it is frozen.

The CHAIRMAN. And in the meantime, beef has gone up 5 cents a pound?

Mr. LAROE. Yes.

The CHAIRMAN. And pork has gone up?

Mr. LAROE. Practically everything that goes into sausage has gone up, but we cannot get any relief.

The CHAIRMAN. So sausage is frozen, and everything else that goes into sausage has gone up?

Mr. LAROE. That is right.

I would like to emphasize the number 5 on page 1:

This is a seasonal industry, with many factors, including demand, changing from month to month. It is impossible to devise regulations which reflect all the economic changes.

May I just give you one illustration of the last 2 weeks? There has been for some reason unknown to us a very pronounced shift in demand to the higher cuts of pork, pork loins, for example.

Now, ordinarily when that thing happens, and there is a corresponding decline in the demand for the lower kinds of pork, we can raise the price on the pork loins, and cut the price on the lower kinds of pork in order to get rid of the lower kind.

Now, today, with this heavy increase in demand on the pork loins, we cannot raise the price. That price is frozen, and we cannot get rid of the lower types readily because the demand has fallen off, so we are just stuck with a loss, and price control does not reflect those seasonal conditions, and cannot do it.

On page 2, if the committee please, I show that "Price control of meat is not required according to the standards of the act." The main purpose of the act was to increase production. The effect of price roll-backs is to reduce production and to block channels of distribution. Senator Maybank correctly says: "The effect of the beef order will be to cut back production, thus defeating the primary purpose of the Defense Production Act."

The CHAIRMAN. Well, that is only my opinion of what happened last time, referring particularly to the roll-back I think they should have put a price on beef, and not say in the month of May, "We are going to put a price on in September and October." That is what concerns me, when the feeders in between have bought the animals at prices then existent, and are told that when they fatten them up they will get less for them in September and October.

Mr. LAROE. In order to show that Senator Maybank is right about that, I would like to have the privilege of incorporating in the record

some figures from the Washington Times-Herald editorial of May 14, which show that in 1946, the last year of price control, the production in federally inspected houses went down from 1,000,000 in January, to 360,000 in September, the shelves were almost bare. Compare that with 1947, when price control was taken off, and in September 1947 the figure was 1,407,000 instead of 360,000 under price control.

There is something about price control that has a deadening restrictive effect on our industry, and I want to tell you it is serious when production is reduced from 1,000,000 to 360,000 at a time when people want meat.

Senator MOODY. Mr. Chairman, may I ask a question?

The CHAIRMAN. Certainly.

Senator MOODY. Mr. LaRoe, do you believe in wage controls?

Mr. LAROE. Now you are getting me out of my field. I can only say that the less Government control there is, the better. We believe in a free economy. We believe that we have such a great Nation, with such tremendous potential powers of production, that supply and demand will take care of the situation, including wages, and if you can defer your question for just a moment, Senator, I am going to take up the question of inflation, and the relation of meat-price control to it, and I believe that your question will be answered under that.

Senator MOODY. I agree with you, that under normal economy inflation can be best taken care of by production. But at a time when we are about to take $50 billion worth of consumer goods out of the market, and leave that much of an inflationary gap in the economy, I am wondering whether you think that inflation can be avoided in the United States without some control over it?

Mr. LAROE. I believe that inflation can be avoided if you will strike at the roots of inflation instead of the symptons of it. I will deal with that in just a few moments, if you do not mind my deferring the answer. It is discussed on page 6.

I would like to say this, however, on that point that I have heard the argument made that if you have wages and other commodities controlled you must have meat prices controlled. The answer to that is that meat is so different, meat and live animals are so different from other commodities that it is absolutely impracticable to have successful meat price controls, and simply because meat price control is unworkable is a good reason for making it an exception, no matter what you do to other parts of the economy.

Senator MOODY. Do you think it is fair to the other farmers to have a situation where prices have increased for other agricultural products by 15 percent over January 1950, when the price of meat has increased 52 percent in the same period? Is that fair to either the consumers, or to the other farmers?

Mr. LAROE. May I answer your question by calling your attention to page 3 of my statement?

Senator MOODY. Yes; please go ahead. Perhaps I was a little bit. premature.

Mr. LAROE. I do not mind interruption. I will answer your questions as best as I can. There will be a lot I cannot answer.

Your last question is partly answered on page 3. Because the price has not kept pace with the general economy, I believe the public is under the impression, honestly, that meat prices have spiraled out