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States over the South and Middle West will go out of business; Boston and other big cities will have the business, and our workers and their families will be on relief.
STATEMENT OF Hox. DANIEL A. REED, A REPRESENTATIVE IN CONGRESS
FROM THE STATE OF NEW YORK
Mr. REED. Mr. Chairman and gentlemen of the committee: I appreciate the courtesy extended to me by the chair and by the committee. I come from western New York. I believe that the district which I have the honor to represent is typical of most congressional districts of this country. My district is made up, of course, of both agriculture and industry. I am thinking now in terms of 2 cities, one being the city of Jamestown, N. Y., about 40,000 population, and the city of Salamanca, N. Y., about 12,000 population. Each of those cities has its fine schools, its playgrounds, its fine homes, its recreation facilities, and all has been the result of the frugality and the thrift of the people.
Jamestown was settled very early, largely by Swedish people. They ille thrifty people. Little groups from time to time started into the furniture business, until Jamestown became the second largest furniture-manufacturing city in this country.
Those people saved their money. They built up their homes. They built up a city of which they might well be proud. The depression came. They little by little exhausted their bank accounts; then they mortgaged their homes, and finally they lost their homes, many of them, and several thousand of those thrifty, industrious Swedish workers went on the relief rolls.
At that very time the Government started into competition in the furniture business with the furniture manufacturers of Jamestown, N. Y. They attempted to establish a furniture factory at Reedisville, W. Va. That was blocked by Congress with the aid of Members on each side of the House.
Now the Resettlement Administration is setting up a furniture factory to employ 150 people at Tygart Valley, W. Va., and it is the plan to manufacture furniture at other Resettlement projects. I have an official communication saying that this is an established fact. You will recall that the Shannon Committee, headed by Judge Shannon of Missouri, a very able man with an able committee, found that the Government was engaged in 240 different activities in competition with private business, using the taxpayers' money to compete with the taxpayers who are manufacturers.
Now, what I see in this bill--and I am not going into detail on it-is a set-up which, as the last speaker pointed out, will make it utterly impossible for the small industry, the small manufacturing plant, the furniture plant, to bid for Government work. Perhaps that is what this administration wants.
Not only that: the small industries of the country under this bill cannot receive one dollar of loans from banks and Federal agencies unless they comply with the provisions of this code.
It means that all over this land in every State in this Union people who supply materials to the Government or to industries that are manufacturing materials for the Government cannot bid.
What does that mean? Why, it means that a group here who are interesteil in socializing the situation and putting the Government farther into business will say, “ Well, we can't get our materials from private industry. They won't bid. So we will set up a manufacturing plant and we will proceed to manufacture our own goods."
I say to you gentlemen that thing has gone far enough. Men on both si'es of the House are interested in this. I never expected to live to see the clay when an American citizen, a citizen in a free country, would have to have his Representative come before a committee of the Congress of the United States to endeavor to protect him against legislation of this character.
I cannot believe that the sponsor of this bill, from the great State of Massachusetts, a great manufacturing State, literally filled with little manufacturing plants that supply goods to the Federal Government, would ever present a bill here seriously and expect the Congress of the United States, a free country, to adopt such a program as is set forth in that bill. It is arbitrary, it is dictatorial, it is tyrannical, and it is unfair to the small industries of this country who bear the load.
Take cities like Rochester, cities like Buffalo, Jamestown, and your Pittsfield, Mass., and Springfield, Mass. cities that are supplying materials for the Government—they will be absolutely foreclosed from doing business with the Government and you will soon have these bureaucrats down here saying, just as they are doing with the furniture business today, “ Well, we will manufacture our furniture just for our own use."
Today about the only market that industries now have is the market they are getting in supplying the United States Government out of the large funds that are appropriated.
Gentlemen, I am here to protest against the passage of this bill as unfair to the taxpayers of this country and as a bill that is absolutely, on the face of it, in every particular, an un-American bill. I thank you.
The CHAIRMAN. Who else is here in opposition to the bill?
in opposition to the bill.
The CHAIRMAN. We called you this morning and you were not here.
Mr. HAAKE. I was here before the committee was here. I was here before 10 o'clock. Perhaps I did not hear your call.
The CHAIRMAN. Yes. All right. You want 10 minutes, don't you ! Mr. HAAKE. All right, sir.
STATEMENT OF A. P. HAAKE, REPRESENTING THE NATIONAL
ASSOCIATION OF FURNITURE MANUFACTURERS
Mr. HAAKE. If the committee will indulge me, I am going to ask you to believe that one man who has been before this committee is not trying to think in terms of any particular selfish interest but is trying to put himself in your place and see just exactly what would be the consequences of such a piece of legislation.
After all, it seems to me—and I may say it in all candor—so often there are facts and statements made to committees which are not as helpful as they might be, because the person making those statements is trying to avoid admitting things he thinks may hurt his case and say only those things that help his case. It seems to me a frank statement of exactly what happens is by far the better thing to have, and I am not afraid of doing that, in view of my own convictions with respect to this measure.
I am satisfied that the honored Senator from Massachusetts offered this measure with the highest of motives. I believe it was offered because
Senator WALSH. May I interrupt you?
Senator Walsh. The bill was presented to me by the President, and it is an administration bill. My service has been simply as a Senator who became interested in the bill and became a sponsor for it. But it originated not with me, although I am very proud of my being connected with it.
Mr. HAAKE. I am very glad to have you correct me. I am more than glad to be corrected. I may say that my respect for the Senator is not diminished by learning that fact. The President can speak for himself.
The N. R. A. was a failure. N. R. A., however, was desired by business men. I do not think it is fair to say that N. R. A. was pushed down the throat of business. That is not true. Business wanted N. R. A. And the reason business wanted N. R. A. was that for years we have been bothered by the specific thing that President Roosevelt called attention to in one of his radio talks, that 90 percent of an industry might behave itself and that a 10-percent minority could wreck the entire structure.
For 7 years or more we have been trying in a number of industries to find some way of curbing what we call “recalcitrant minorities”, so that the fellow who wants to play fair can play fair and remain in business. We tried out the Federal trade-practice conference, played it with glee, held it in Washington in the best spirit likewise. We set the thing up, and then there was bitter disappointment because we found that the good fellows observed it and the recalcitrants paid no attention to it, and that little fringe could still raise the mischief on many occasions and in many places.
N. R. A. came along and here was the President of the United States—I am quoting from what he said--assuring us over the radio—and we took him seriously—that“ too long we have permitted a small minority of business to wreck the set-up for the great majority", and that we were going to make things safe for those who wanted to play fair. General Johnson promised to "crack down” on the fellows who would not behave, and a lot of fellows in the position that I am in, wanting to believe that—and, believe me, there is a lot of wisher-thinking yet, even in Congress—wanting to believe that, went out and told our fellows “At last utopia is here. We have found a way to make the recalcitrant behave."
And so we went into the N. R. A. believing that might happen, and as is so often the case in an effort to cure a minor ill, we sometimes produce evils that are far worse than the thing that we are trying to cure; N. R. A. was never enforced.
N. R. A. could not be enforced. N. R. A. was dead before the Schechter case ever happened. What kind of a law is it that cannot be enforced and its enforcement is necessary to respect for the law itself?
For example, in the State of Indiana a manufacturer who was disposed to be decent violated some minor provisions of the code and paid something over a thousand dollars because of those violations. In Muscoda, Wis., a manufacturer thumbs his nose at the code authority, thumbs his nose at the administration, and gets away with it, because, in the last analysis, he has political immunity, and when N. R. A. went out of business the Compliance Division of N. R. A. had not been able to touch that man.
In a town in Pennsylvania the National Wood Pipe Co.-I don't mind mentioning names—was able to escape because we were afraid to push the issue. That particular fellow owned a newspaper, a rabid, hot-headed fellow who could arouse a lot of influence, and he was not touched and we played with him and plead with him. The little honest fellow was punished, and the fellow who could afford to thumb his nose got away with it.
In other words, that thing could not work because there was not any way of making it work short of using a gun, as perhaps is threatened in Germany and done in Russia.
Now comes along this bill, and I repeat, I am so glad that Senator Walsh did not write it. I think it was written by some bright young college man.
Senator Walsh. I had only to do with rewriting it.
Mr. HAAKE. It was drafted by some bright young college man, who, like myself, before he got some practical business experience, knew just exactly how to cure all the ills of the world, and who, if he lives long enough and perhaps some day has the experience of meeting actual pay rolls, may discover that there are some things still to learn, even for bright young men who think that there is a way for a group of men to take the place of law in the operation of business.
This thing simply cannot be enforced. We are not concerned with the wages. Good heavens! I get weary sometimes when I hear men worried about the differential, for example. So far as our industry is concerned, that is not a problem. A differential does not exist in the North for furniture. Thirty-four cents is a minimum. But, believe me, there is a differential. Manufacturers today are moving from big cities to small cities, not because there is a differential in the code but because in the big cities they are able to make 60 and 65 and 70 cents an hour, and in the small towns the wages are closer to the code minimum.
I think the Senator perhaps had in mind, and I might well point out, that the bill concerns itself with minimum wages and not with actual wages, and the differential is taken care of by natural conditions. We are not worrying about that at all, because most of us are paying more wages than the codes called for anyhow.
But with respect to the hours, elasticity of hours, and the various interferences that come with business, this thing does become serious. I have heard it said-heard it said yesterday, heard the question raised by members of the committee-“ Don't you think something ought to be done to stop the chiseler?” As a matter of fact, gentlemen, this bill encourages the chiseler. In our industry, for example, it is not true that the majority of the business is secured from the Government. Perhaps 10 percent, 15 percent—at a generous estimate I would say 20 percent—it comes a lot closer to 10. The man who takes a little Government business may take it to keep his plant operating for 2 or 3 months. Otherwise he has to meet wage conditions-he is meeting then now, just as we are under the code. But he has got to restrict his business, and the strait-jacket on factory operation is infinitely more serious than the matter of wages. The moment that he is subject to provisions which prevent him from getting out his orders on time, which prevent him from running his factory efficiently, he immediately is unable to compete with other manufacturers for that big chunk of the market which is to be secured from furniture stores, mail-order houses, and the like.
I will give you just one example by way of illustration : Here are a number of processes in a factory. There are a number of calculations, and there is some one little department which die Fork that is necessary to all of the rest. Under the restrictions of this measure there would be a limitation on hours for all of those men. They could not work any more unless he got another shift in, but they are not always available, and because it is impossible for the manufacturer to work perhaps a half a dozen men a couple of hours overtime some night or on Saturday morning when his 40 hours are already exhausted, he may hold up operation for 150 or 200 men and increase his cost accordingly.
Ye gods, men ! You and I know that business and production has not yet been so standardized that anyone can put down the operation on a piece of paper and A and B and C and D and E and Ė and G all appear according to schedule every day that that factory runs. You know as well as I do that decisions and changes and adjustments are made almost daily, and it is utterly impossible. This is not theory; it is fact; and when the facts interfered with law, the law was violated under N. R. A., and even N. R. A. didn't do anything about it, and could not do anything about it.
What has to be done will be done, and no man is going to shut down his factory just because the law says, “ You have worked that man 40 hours. You can't work him 41 ”—when working another hour may keep a dozen or more men at work for a day or longer. You cannot put industry in a strait-jacket, and the only effect of the operation of that thing in our industry would be to penalize the man who tried to get Government business, because he would immediately be put out of the running for the worth-while business on the outside.
And if you want to know how much profit there is in Government business, let me show you the records of what happens to manufacturers who take the Government business. They are the fellows that send the preferred invitations to the sheriff when they get through with that business. There is no profit in Government business, and the only reason a man takes it is he wants to keep his plant going, and he is a plain, ornery fool to take that kind of business when he can get the kind of business that pays him his profit.
But he does not even have to bid for the Government business. He has got his neck in the noose already. I don't mind telling you men candidly that one of the very few common-sense measures of this administration has been the Federal Housing Administration. They have been some real help. It is well worked out. I was enthusiastic for it because I saw the possibility of providing manufacturers with additional working capital and to keep everything going. And yet I circularized our industry, with the permission of our directors, pleading with our people, "For Heaven's sake, don't make any loans with the Government. Don't even use the F. H. A., because if you do you are sticking your neck straight into a noose, and one of these days, if and when this bill S. 3055 passes, you will find that because you accepted some help you will have to operate under conditions that will put you out of business."
And it happens that in our industry the amount of money loaned from the Government is 3 percent of the capitalization, which is approximately three times that of the average industry. We did not want the fellows to use it, in order to keep their necks out of a noose. The moment that a man makes a loan from the Government, or has made one, he has either got the choice of paying it right away, which he cannot do, or wiping himself off the map so far as worth-while business is concerned. And he is not going to do it.
That means that so far as furniture is concerned the Government is going to find itself limited to a constantly decreasing number of manufacturers who will dare take the risk of bidding on Government