Mr. HETZEL. We did not, sir, come before the Ways and Means Committee and make that kind of statement; we simply backed up the position of the President, as I understood it.

Mr. MILLS. You told us yesterday you backed up the position of the Secretary of the Treasury when he appeared before the committee?

Mr. HETZEL. Yes; when he appeared before the committee. He has not appeared before the committee on this 6-percent limitation. Mr. MILLS. No.

Mr. HETZEL. And what we said was-we backed up the position of the President of the United States.

Mr. MILLS. I thought the spokesman of the C. I. O. made the statement during the course of the discussion of the tax bill on the floor of the House, or the Senate, that it was not a fair tax bill. Mr. HETZEL. That is true.

Mr. MILLS. And was not one of the reasons why you stated that it was unfair was because it broadened the tax base so as to take too much from the wage earner, too much of his earnings?

Mr. HETZEL. That is true.

Mr. MILLS. It brought more of them into the picture and, at the same time, did not increase the excess-profits tax?

Mr. HETZEL. That is exactly true.

Mr. MILLS. You believe in an excess-profits tax, then, more than we have on the books today?

Mr. HETZEL. Yes, sir.

Mr. MILLS. Would you come before the Congress and support legislation or an amendment which would take from industry excess profits?

Mr. HETZEL. I certainly hope so, and we did our part.

Mr. MILLS. Now, you are recommending the passage of this or some similar legislation which places a ceiling on agricultural commodities?

Mr. HETZEL. Which gives the Administrator the right to prevent undue price rises; yes, sir.

Mr. MILLS. In agricultural commodities?

Mr. HETZEL. Yes, sir.

Mr. MILLS. But the legislation reads if the Administrator wants to fix the price on agricultural commodities at not less than 110 percent of parity, he can do so, or whatever the price was on July 29, 1941, if that was greater?

Mr. HETZEL. Just referring back, while I have this figure here, I see the September 15 index price of meat animals was 166 percent of the 5-year average of August 1909 to August 1914. You were discussing the rise in meat prices, and I just wanted to get that in. Mr. MILLS. Mr. Hetzel, I hope you do not place the C. I. O. and organized labor in the position, by your testimony, of being against the best interests of the agricultural producers of this country, because you have had no stronger group backing you in the gains you have made. I do not mean the Representatives of those folks in Congress, but I mean the folks back home who are in the business of producing. You know that as well as I do. I wonder if this emergency justifies any sacrifice whatsoever on the part of labor? Do you think it does?

Mr. HETZEL. Well, I wish you could see some of our people now who are working in armament plants, and working 50, 60, and 65 hours.

Mr. MILLS. At what rate, Mr. Hetzel?

Mr. HETZEL. They get overtime.

Mr. MILLS. At what pay?

Mr. HETZEL. At the ordinary, usual rates of pay. At the end of 4 or 5 weeks those men have been through something.

Mr. MILLS. I know they have and I am not belittling their effort

at all.

Mr. HETZEL. And they are not saying a word about it.

Mr. MILLS. I am not belittling their effort, because I am very proud of what they are doing.

Mr. HETZEL, I think they are doing a grand job.

Mr. MILLS. Mr. Hetzel. let me ask you this question: You believe in sound economy in government, do you not?

Mr. HETZEL. That is right, sir.

Mr. MILLS. When Judge Patterson was before the committee a few days ago, I asked him the question what the increased cost in government might be because of uncontrolled increases in wages. He said it was possible, and he thought he was very conservative, that it might mean an additional cost to the Government of $10,000,000,000 if wages were allowed to increase without some control. As a result of that, he urged, in connection with price control, that we place some control upon wages, and I asked him which one of three or more methods of doing that job would he agree to. First, of course, is to leave it just like it is-the Mediation Board, voluntary agreements, collective bargaining. And that would be your attitude?

Mr. HETZEL. Yes, sir.

Mr. MILLS. To leave it like it is?

Mr. HETZEL. Yes, sir.

Mr. MILLS. You would not go along, then, with the Farm Bureau in its proposal?

Mr. HETZEL. No.

Mr. MILLS. I assume you have read that?

Mr. HETZEL. Yes. I spoke about it yesterday and I do not think it is a sound or workable proposal.

Mr. MILLS. You do not think it would do the job; you do not think it would afford any controls over wage increases?

Mr. HETZEL. I do not think it would afford any controls, and I do not think there ought to be any controls over increases.

Mr. MILLS. Well, if it does not afford any controls, why would you object to it?

Mr. HETZEL. It just makes a mess.

Mr. MILLS. Well, I am afraid if we pass the legislation without some controls, Mr. Hetzel, we are going to make a worse mess out of it.

Mr. HETZEL. I honestly do not believe so, Mr. Mills.

Mr. MILLS. That is a difference in point of view that I want to talk to you about sometime, but I am not going to take any more of the time of the committee now.

Mr. ROLPH. Mr. Hetzel, you spoke about your experience with small business firms. Have you any suggestion of a section to be in this bill that would facilitate taking care of small business?

Mr. HETZEL. I do not have any suggestion now. I think that the Price Administrator already has had to consider problems particularly with relation to the smaller high-cost units which were not able to compete on the basis of more efficiency and larger outfits.

Mr. ROLPH. In order to take care of those people and enable them to succeed in business, could you suggest an amendment or any section to be put in this bill?

Mr. HETZEL. I would like to think about that a little more and make further comment on that in the record.

(The matter referred to follows:)

MEMORANDUM-EFFECT OF DEFENSE PROGRAM ON THE SMALL BUSINESSMAN

Small businessmen are being seriously affected by the national-defense program. It has been clearly evident from the very beginning that a shortage of basic metals and materials would seriously curtail consumer production. As consumer production is curtailed, small businessmen must of necessity suffer.

From the very early stages of the defense program, the Congress of Industrial Organizations has consistently urged that subcontracting be more widely practiced in the production of defense material. Up through July of this year some 56 corporations held almost three-fourths of the entire dollar value of the prime defense contracts let by the purchasing agents of the Federal Government. This meant that the small businessman was not given an opportunity from the very beginning to participate in defense production. He had to continue to produce his nondefense materials, but as the supply of metals and materials became critical he was forced to curtail production and eventually to go out of business. The only way to preserve the small businessman is to grant him prime contracts where he is able to fulfill them, and to expand subcontracting so as to enlist the small businessman's participation.

It was at labor's urgings in the very beginning that Mr. Morris L. Cooke was brought down to Washington to encourage subcontracting of defense orders. Mr. Cooke did a great deal of pioneering work with the Army and Navy people, but subcontracting was not spread widely enough in American industry. Other subcontracting divisions were established, headed by various people, including the Trecker Bros., from Milwaukee; Richard L. Mehornay, from Kansas City; and others. The efforts of these men were not at all successful.

Finally, as it became very evident that something had to be done in order to preserve the small businessman, the Defense Contracts Distribution Division was established on September 4, 1941. Mr. Floyd Odlum, a large Wall Street operator, was brought down to Washington to head up this new service. The main function of this Division is, first, to encourage prime contractors to let out their subcontracts or substitute contracts to the small businessman; and, second, to encourage the Army and Navy to let contracts to the smaller companies. It is too early yet to judge the success of this new Division.

While labor has been pushing for subcontracting, they have also realized that the basic problem is the expansion of capacity so that there shall be no shortage of basic metals and materials. With the tremendous resources of our Nation, there is no reason why we cannot maintain an economy of both defense and civilian production, with the small businessman continuing to play his important role. But because industry has refused to expand capacity and because government has failed to realize that this would be necessary, it has become vitally necessary now to attempt to make the best of a scandalous situation by forcing the wider distribution of contracts.

Labor fully realizes that unless the small businessman is preserved in business his many employees, who can materially contribute to building the defenses of our country, are deprived of employment. Labor will continue to urge, as it has done in the past, that subcontracting be so encouraged as to enable the small businessman and his employees to continue to operate. Simultaneously, we vigorously insist that an immediate large-scale expansion of the supply of all raw materials necessary to the production of defense and civilian products is absolutely necessary to a stable American economy.

OCTOBER 30, 1941.

Mr. ROLPH. Thank you.

Mr. LYNCH. Mr. Hetzel, in connection with this bill, it seems to me, if you are going to have a control of wages, that that spells

the end of collective bargaining and labor unions. Is that your opinion?

Mr. HETZEL. That is right, sir.

Mr. LYNCH. If you have a control of wages, or a ceiling fixed upon wages, that means eventually, I think you said, that the controlled wage would be the standard wage. Is that right?

Mr. HETZEL. It would tend to be the maximum and the minimum. Mr. LYNCH. The maximum and the minimum?

Mr. HETZEL. Yes.

Mr. LYNCH. Now, then, one of the real purposes of labor unions, as I understand them, is to better the condition of the workingman. Is not that right?

Mr. HETZEL. Yes, sir.

Mr. LYNCH. And if you had a ceiling on wages so that the wage would be both the maximum and the minimum, what effective purpose could labor unions have then-any at all?

Mr. HETZEL. Well, the whole function would be wiped out.

Mr. LYNCH. So that at the end of this emergency we would then be back in the dark days that we had before labor unionism? Is not that correct?

Mr. HETZEL. That is right, sir. If you think of labor unions, of organized labor, as a function in society, then I think you have to reach that conclusion.

Mr. LYNCH. So that the effect of it would be that in order to stop inflation everything that labor has gained would have been sacrificed if we put a ceiling on wages in this bill? Is that correct?

Mr. HETZEL. That is right, sir-and without the guaranty that inflation would be stopped.

Mr. LYNCH. Without the guaranty that inflation would be stopped? Mr. HETZEL. Yes.

Mr. LYNCH. Now, if you had an over-all price control, including wages, the only certainty that there would not be bootlegging would be insofar as there would not be any bootlegging in wages? In other words, the employer would certainly keep the compact and not pay more than the law allows; is not that right?

Mr. HETZEL. You can be sure that would be certain that they would try to enforce the law.

Mr. LYNCH. There is no doubt in your mind or mine about that! Mr. HETZEL. Although, Mr. Lynch, the experience even under the Nazis indicates that every effort was made to break through their wage control, even, on the part of the employers; because, otherwise, they were not able to hold their workers and, even with compulsion, they were not able to hold their workers.

Mr. LYNCH. That might be true of a Nazi, but the American businessman, as a rule, has been able to get labor when he required it, and that is the reason why so many of them have been looking upon labor as a commodity. Is not that so?

Mr. HETZEL. I think so.

Mr. LYNCH. Now, when you have a situation where you have a price control or ceiling over labor or, rather, the wages of labor, it would seem to me that you are going to have either a concentration of labor in certain places, or you are not going to have anybody working at all. Do you come to that conclusion?

Mr. HETZEL. That would be one among many of the problems to arise.

Mr. LYNCH. Now, suppose a situation such as this, that a person wanted to change his position because of a higher scale of wage in another industry, would not the tendency be to syphon out the labor in the lower-paid groups so that, even in those industries, no matter how essential they might be to the defense, you would not be able to get men to serve? Is not that correct?

Mr. HETZEL. I think that raises a very important point.

Mr. LYNCH. Will you develop it, then?

Mr. HETZEL. One of the things that keeps men in the automobile industry and industries under contract is the effectiveness of the union in making what they regard as a fair wage scale, on the one hand, and also maintaining a seniority system which guarantees them the right to a certain job in relation to the length of time they have been in that industry. And if you destroy the unions' bargaining right on wages, you break down this seniority position also, which means you have destroyed one of the major incentives for men to stay in that industry, and I think you would loose upon the country the situation where the maintenance of that working force on any kind of a continuing basis will be much more difficult than it has been under present circumstances.

Mr. LYNCH. Now, the question was asked just a few minutes ago as to whether or not labor was willing to make any sacrifices. Have you attended all of these hearings that we have had on the bill? Mr. HETZEL. Not all of them.

Mr. LYNCH. Have you read the testimony?

Mr. HETZEL. I have followed it; yes, sir.

Mr. LYNCH. Did you see anywhere any testimony where any leaders of industry came here and offered to make sacrifices?

Mr. HETZEL. I have not seen it yet, but perhaps the National Association of Manufacturers is here for that purpose. [Laughter.] They are here to testify.

Mr. LYNCH. For the purpose of making sacrifices; is that it?

Mr. HETZEL. I do not know.

Mr. LYNCH. That is all.

Mr. DEWEY. Mr. Hetzel, I would like to continue a little bit the general subject matter of the questions that were propounded by Mr. Mills. Evidently, from your answers, you are not in favor of any kind of price ceiling over wages?

Mr. HETZEL. No.

Mr. DEWEY. I notice on page 5 of Mr. Murray's statement, the last paragraph or part of the last paragraph, he said the only way to maintain the effective cooperation of the working people in a productive effort is to strengthen the system of free collective bargaining. And then in this C. I. O. defense plan, on page 7, section 3, to paraphrase that, it says to preserve the basic democratic rights of the American people, such as the right of labor to organize into unions of its own choosing for collective bargaining and their mutual protection. Dr. Smith also, in his questions to you, made a suggestion that there had been a movement toward the centralization of authority in the central Government and I am wondering, and I ask you the