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the free competitive system. I believe that we can all agree that this is a desirable goal.
The basic policy of the National Association of Manufacturers bearing directly upon this matter of Government competition is as follows:
The function of government is primarily political rather than economic. While certain activities must be regulated by the Government for the public good, its responsibilities do not encompass competition with its own citizens in the fields of production and distribution. Insofar as governmental activity invades the field of private enterprise, it threatens the other elements-civil rights and civil liberties—inherent in our system of government. Given the same conditions, there are no circumstances 'under which private enterprise cannot operate in the field of the production and distribution of goods and services more efficiently than can Government. The only cases where, on the surface, this is not apparent are those in which through subsidies, freedom from taxation, or improper allocation of costs, government enjoys a definite competitive advantage. The hidden deficits resulting almost inescapably from Government-operated business competing with private business are always paid by the taxpayer.
Thus Government enterprise must necessarily choke out competing private enterprise. The consequent diminished area of taxation intensifies the tax burden upon remaining private enterprise and further increases the handicaps under which private enterprise is unfairly required to compete with the Government.
Private enterprise is constantly studying the need for additional plant capacity and has demonstrated its ability to meet the most difficult of production problems. Government can assist in providing additional facts regarcing problems of capacity and supply but its traditional function does not include the buil'ing and operating of its own plants in competition with private industry. Increasing Government competition with private enterprise is a major deterrent to the flow of job creating capital into private enterprise. It destroys private capital investment incentives and can only lead to a state ownership of all enterprise.
Your committee has expressed a number of similar views in your numerous intermediate reports on Government in business, and it is clear that you recognize the basic principles which are at stake.
Your committee has already developed a very substantial body of factual information. The excellent investigations and reports by your Subcommittee on Intergovernmental Relations, of which Representative Cecil M. Harden is chairman, have revealed the seriousness of this problem and the urgent need for continued investigation and study of the nature and extent of Government competition with private business, and directly related problems, which we recommend be made.
In addition to the broad policy position which I have read, you may be interested in the National Association of Manufacturers' views with respect to the electric power field. The National Association of Manufacturers' policy on hydroelectric power development by investor-owned utilities and the Federal Government is as follows:
The preservation of the American system of free, private, competitive enterprise depends upon the limitation of governmental activities in proprietary undertakings.
We are alarmed at the rapid encroachment of the Federal Government in the exploitation of the power resources of the country and at the concomitant control the Federal agencies are able thereby to exercise over all industry. The Niagara River redevelopment project and the Hell's Canyon project on the Snake River in Idaho should be left to the investor-owned utility companies which are able, willing and have offered to construct all the facilities for the production of electric power involved in said projects without drain upon the Federal Treasury and by means of properties subject to taxation. The plans proposed in each instance by the investor-owned companies will produce the same amounts of electric energy as are claimed under the plans of the Federal Government.
We believe that the power developments made subject to the duly constituted regulatory authorities will inure to the benefit of all users of the power and thereby
be free from the controls which can be and have been exercised by the Federal agencies where power is now manufactured and distributed by them.
We further believe that developments by investor-owned companies are in keeping with the democratic principles of the free-enterprise system as opposed to national controls which follow the federalization of the energy resources.
The National Association of Manufacturers supports the investor-owned companies in the positions they have taken before the Congress with reference to the Niagara River redevelopment project and the Hell's Canyon project.
Over the past 20 years we have witnessed the creation and expansion of tremendous Government business enterprises. Some were designed to bolster economy; some were wartime expediencies. Government corporations have been a prominent feature of this trend. The Military Establishment has participated extensively. Various governmental departments and agencies have played important parts. The tenacity of these enterprises, when once begun, has been remarkable. For example, in 1945 there were 101 separate Government corporations, many of which were war-born, but 9 years later we find about 80 of these corporations still in existence.
Today, however, there appears to be a growing tendency to curtail and to cut down the size and scope of governmental operations, and to reverse the trend. The progress that has been made is gratifying, but much more needs to be accomplished.
I believe that the taxpayers of the Nation are becoming increasingly conscious of the unreasonableness and unfairness of tax-exempt, publicly financed competition. I think they are becoming more aware of the inefficiencies and high cost-all things considered-of Government operation of business-type facilities and services. They have seen that losses of such Government operations are often charged off to the taxpayers, both operating losses and capital losses.
There are enormous sums of money involved in these problems. Only last Monday, July 12, 1954, the New York Times reported some tentative estimates which have been made in the absence of a comprehensive factual survey, indicating that the sale value of the Government's commercial-type enterprises to private owners may be as great as $25 billion to $40 billion. The article went on to point out another tentative estimate that in the Defense Department alone the gross annual output of all military, commercial, and industrial type operations is about $10 billion, and there is no estimate of the capital investment behind this figure.
The bill under consideration here today-H. R. 8832-proposes to establish an Anti-Government Competition Board which can serve a number of useful purposes, not the least of which is to increase the knowledge of the taxpayers on this vital subject through published studies and periodic reports. This is a highly commendable purpose because the taxpayers--and all of the people-need and are entitled to a comprehensive and penetrating analysis of the facts as they are developed. I think the people of this country would be grateful for more information of this kind.
The basic purpose of the proposed Board is to collect, collate, and analyze information on Government competition with business. The need for such study, on a continuing basis, is very great. The facts must be made available as a basis for policy decisions and specific action. There is a real need, for example, to obtain further information on such matters as the operations and costs of Government. business activities.
Such study would provide invaluable aid, not only in examining and curtailing existing instances of Government competition but also in preventing new or expanded forms of this kind of competition from establishing themselves.
The proposed Board, with the Secretary of Commerce as Chairman, would provide various industry representatives with a definite place to turn in presenting any suggestions or complaints about the Government's competition with their particular business. Moreover, the proposed advisory committees could help bring about maximum cooperation and understanding in the many phases of the Board's work. For example, the advisory committees would be in a position to suggest where Government competition could be limited or terminated and where private facilities, products, or services could be used instead.
The inclusion of the Director of the Bureau of the Budget in the makeup of the four-member board is a wise choice in view of the extensive work by that Bureau on these problems and the vital tie-in with matters of economy, revenues, and reduction of expenditures. Likewise, the inclusion of the Secretary of the Treasury and the Comptroller General on the proposed Board indicates sound and realistic selections.
Additional features of the plan such as public hearings and semiannual reports soem: to offer a fair and democratic method of procedure in carrying out the purposes of the proposed Anti-Government Competition Board.
The problem of divesting the Government of commercial and industrial-type business operations is not simple. The first great need is to get the facts. This bill has a good many teeth in it to make sure that the proposed Board gets the kind of information and help it needs in order to make sound recommendations to the President.
The National Association of Manufacturers regards this bill as a highly constructive and important proposal. We wish to praise and encourage your committee's efforts in developing the subject of Government competition with private business. We believe this bill should be enacted as a major step toward the elimination of Government competition with private business.
Before concluding, I would like to say that my attention has been called to two additional bills, H. R. 9834 and H. R. 9835, introduced last week by Representative Clare Hoffman, chairman of the Committee on Government Operations. These bills also have for their objective getting the Government out of business and, as we have already stated, this association supports this objective.
We thank you for this opportunity to present our views.
I would like to have the record show that Congressman Stauffer has participated in this hearing this morning, and also to thank Congressman Stauffer for his continued interest and help to the committee in connection with this subject.
Are there any questions of Mr. Munce?
Mr. Munce, that was a very fine statement and we are happy to have it, and thank you very much.
Mr. MUNCE. Thank you very much, Mr. Chairman.
(Whereupon, at 12:27 p. m., the hearing was recessed until 2 p. m., of the same day.)
(The committee reconvened at 2 p. m., pursuant to recess.)
The CHAIRMAN. The committee will come to order. The next witness is Mr. Elton Kile. Please identify yourself and proceed with your statement.
STATEMENT OF ELTON KILE, PRESIDENT, NATIONAL ASSOCIATED
BUSINESSMEN, INC., KILEVILLE, OHIO Mr. Kile. My name is Elton Kile. I live at Kileville, Ohio. I am president of National Associated Businessmen, Inc., an organization of businessmen which was established in 1946 to study and report on unfair competition and the inequities of taxation that operate to the detriment of the taxpaying businesses of this country. I am in the grain and feed business, and I have been, for a number of years, a member of the Ohio State Legislature.
Mr. SMERS. Mr. Kile, the organization which you head, the N tional Associated Businessmen, Inc., is that an organization which is sponsoring the so-called Wilson plan?
Mr. KILE. That is right.
Mr. KILE. I have a complete statement which has been filed with the committee, but I have a much shorter statement I wish to bring to the attention of the committee now.
The CHAIRMAN. You wish to have your statement accepted and incorporated in the record?
Mr. KILE. I do.
Mr. CHAIRMAN. In addition to that you wish to make a short statement?
Mr. KILE. Yes.
(The statement is as follows:) STATEMENT OF Elton KILE PRESIDENT, NATIONAL AssociaTED BUSINESSMEN,
Inc., KILEVILLE, Ohio I am president of National Associated Businessmen, Inc., an organization of businessmen which was established in 1946 to study and report on unfair competition and the inequities of taxation that operate to the detriment of the taxpaying businesses of this country. I am in the grain and feed business and I have been, for a number of years, a member of the Ohio State Legislature.
The membership of National Associated Businessmen is made up of both big and small businesses, including banks, insurance companies, construction companies, publishers, mines and metal workers, oil companies, coffee roasters, manufacturers of cement, dairy equipment, lumber, boxes, paperboard, machine tools and hand tools, chemicals, clothing, machinery, paper, shoes, medical instruments, bricks, and a great many other products.
I am appearing on behalf of the many members of our organization in favor of H. R. 8832, the Anti-Government-Competition Act. In that bill, we especially like the firm declaration of national policy by the Congress that Government should get out and stay out of competitive business. We like the proposed AntiGovernment-Competition Board of Cabinet rank, and we very greatly approve the powers and authority given to that Board—to require the listing of all business activities engaged in by the various departments and agencies; to hear the complaints of businessmen who are being harmed by bureaucratic competition; and to recommend veto of proposed new business activities by any Government agency when they are contrary to the public interest.
Those powers, Mr. Chairman, to demand a full and complete listing of all Government's businesses and to urge veto of further expansion, exist nowhere today—not even in the White House or in the Bureau of the Budget. It is, we believe, of the utmost importance that such authority be vested in a publicminded and highly responsible Board--the more so, if we are to preserve the freedom of private enterprise and to protect our people from the Socialistic system into which so much of the world is slipping.
It is an amazing fact that no one knows the size or complexity of Government's enterprises in the fields of commerce, industry, and finance. No one knows, within x billions of dollars, how much money has been invested in these various businesses. Estimates of their current value vary from $25 billion to $50 billion or more. There is not even a responsible figure as to the number of persons employed in these bureaucratic activities. Search as you will in the voluminous Federal budget, you will find little evidence of the Government's business activities. Whether by design or by one of those mysterious accidents of bookkeeping, these enterprises are most frequently hidden so that even the watchdogs of the congressional appropriations committees are unable to detect them.
This should not be so—but it is so and it has been so for a verv long time.
Twenty-two years ago, the Shannon committee of the House of Representatives investigated what Government was doing in business. A. competent report wes submitted, listing about 100 enterprises which appeared to be in competition with privately owned business. But nothing was ever done to correct the unfair competitive situation that was shown to exist.
In 1952, the Bonner subcommittee held exhaustive hearings on Government's competitive business enterprises. Four thick volumes of testimony were printed; about 100 enterprises were listed; and a report was written, with recommendations for action. But the report was never printed or publicized-and again nothing whatsoever was done to correct the situation.
Happily, the story is different this year. Mrs. Harden's Subcommittee on Intergovernmental Relations has held hearings; a vast amount of evidence has been presented; findings have been published and given wide distribution and out of the recommendations has come H. R. 8832.
Mr. Chairman, the Government has been in one sort of business or another for a very long time. The postal service dates from the very beginning of the Republic; it is and always has been a business enterprise, though it is only since the establishment of the parcel post that it has been in actual competition with a taxpaying business.
It is certain, at any rate, that the founding fathers were without exception of the firm belief that, as Thomas Jefferson said, "Agriculture, manufactures, commerce and navigation, the four pillars of our prosperity, are most thriving when left most free to individual enterprise." Far from encouraging expansion into commerce or industry or banking, it was Mr. Jefferson's idea that the general Government should "be reduced to a very simple organization, and a very inexpensive one; a few plain duties to be performed by a few servants."
I imagine Mr. Jefferson would be quite shocked if he could see how our governmental activities have expanded.
The first commercial activity in direct competition with private enterprise appears to have been the setting up of a ropewalk by the Navy in Boston, during the administration of Andrew Jackson. That was about 120 years ago; the reason was a desire to escape dependence upon Russia for hemp. It was, in all probability, considered to be a purely temporary arrangement - but in the vocabulary of bureaucracy there is no such word as “temporary.” The Boston ropewalk is still doing business, though its product is indistinguishably mixed with rope bought from taxpaying concerns and even the Navy is hard put to it to find valid reasons for its continuance.
From that rather small industrial beginning, Government has plunged on into businesses of a great many kinds-always expensively, because capital is quite easily raised from the Treasury, and interest, taxes and profits need never be considered; generally inefficiently, because there are no dividend-minded directors and stockholders to demand that the job be done in the best possible way.
The list of "Commercial and industrial-type activities in the Federal Governo ment, 1953,” to be found on page 12 of your committee's excellent report of "The Government in Business: Part 1,” dated February 9, 1954, is astonishing, but as you well know it is by no means complete. In the months since our organization has been studying this competitive situation in our own independent way, there has been hardly a week that our attention has not been called to some other unlisted activity which is stepping on someone's taxpaying toes.