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members of the industries. They affect directly the interests of every consumer. They affect directly the interests of hundreds of thousands, if not millions of persons depending upon these industries.
If you are going to impose on that administrator any such responsibility as that, you must be perfectly sure that you give him corresponding authority, that you do not make him responsible for that which
you do not empower him to do. In the second section of the bill, you have provided that the administration is to be set up as a division in the Treasury Department. With that section, in itself, I have no quarrel. I do not care what you call this thing, and I do not think anybody in the present office of the Federal Alcohol Control Administration cares. That is not the point. The point is, what is the burden placed upon the administrator, and what are the powers given to him to carry that burden,
Mr. CROWTHER. May I interrupt you? I am somewhat nonplussed as to whether you are an advocate of this bill, or whether you are criticizing it.
Mr. CHOATE. I am very much an advocate of every part of the bill, in general, except the provision placing it as a division in the Treasury Department, and the two provisions which I shall come to in a minute.
Mr. CROWTHER. Did not you folks prepare this bill, yourself
Mr. CHOATE. No, oh, no; by no means. This is not our bill. This is the committee's own bill.
Mr. CROWTHER. Well, did you have a bill?
Mr. CHOATE. We had a bill submitted, which we submitted upon request, and a great deal of that bill, the most valuable part of that bill has got into this.
Mr. CROWTHER. I am sorry I am exposing the ignorance of the minority. Who did prepare this bill?
Mr. CHOATE. The committee, so far as I know. It came down from above, anyhow.
Mr. VINSON. I want to disavow any imputation that it was the fault of the minority.
Mr. CROWTHER. I was wondering whether we could not have the original bill or the original recommendations put into the record, so we could see what it was.
Mr. FULLER. It is not an official document.
The Administrator shall, with the approval of the Secretary of the Treasury, but without regard to the civil-service laws and the Classification Act of 1923, as amended, appoint and fix the compensation and duties of such officers and employees as he deems necessary to carry out his powers and duties.
The next section, section D, provides:
The Administrator is authorized and directed to prescribe such rules and regulations as may be necessary to carry out his powers and duties. All rules and regulations prescribed by the Administrator shall be subject to the approval of the Secretary of the Treasury.
In other words, the Administrator's job is made a division of the Treasury. The Treasury's approval is required before the administrator can appoint or fix the salary of any of his staff, and the approval of the Secretary of the Treasury is required before he can promulgate any regulation.
Now, no one has a higher respect for the Secretary of the Treasury than I have. We have agreed beautifully on all points except the
single point of the volume of taxation. There is no dispute between us whatever. I should not anticipate the slightest difficulty, here, under present circumstances, but I want to point out to you the position that puts the Secretary of the Treasury in, and the position that it puts the Administrator in. The Treasury has from time immemorial-really not very long, only since the Civil War-administered the only form of Federal liquor control-which happened to be taxation. In that capacity, as collector of the revenue, the Treasury has supervised the distillers; to a very minor extent, the rectifiers; and has collected taxes from the brewers and the wine growers. It has been an organization whose duty was to bear down upon the lawbreaker. It has not been an organization whose duty it was to study and understand the liquor business, the interests of the public in that business, or the methods by which that business ought to be carried on in order to subserve the interests of both the public and the State governments.
It has been a creature of one idea, quite properly, that one idea being to get the revenue and get it as fast and as copiously as it could. It knows nothing whatever about the jobs which in this bill you
have put upon the administrator, the jobs of regulating advertising and labeling, of suppressing unfair trade practices, of suppressing the attempts to revive the "tied house."
The Treasury, as I say, is an organism with one purpose in the liquor field, and one purpose only. Now, you have set up, or you propose to set up by this bill, another organization with these widely different purposes, these purposes which were intended to bring the liquor industries into good repute and into good conduct, to protect the customer, and to prevent the arising of unfortunate and disastrous conditions.
To illustrate the unfortunate effects of requiring Federal approval upon the Administrator's regulations, let me give an example. Just before the fatal decision, the Federal Alcohol Control Administration was about to institute a series of hearings, leading to a revision of three or four of the most important parts of the labeling regulations and standards of identity. I am going to cite, as the single instance, the definitions of “whisky."
As you know, the question, "What is whisky?" has raised cain with the public for the last 40 years. It has been the prime difficulty in devising labeling regulations that would inform the public as to what was in the bottle.
Following the Taft decision, in the light of a most careful study, with the aid of everyone in the industry, the Federal Alcohol Control Administration devised definitions which it was expected would enable the purchaser at once to tell whether what he was getting was the kind of whisky which needed aging, and which would therefore profit by the age shown on the labels, or was another and lighter bodied type of whisky which is almost alcohol, and which does not improve with age, and is as good as it is going to be, almost immediately.
No sooner had we got those regulations well under way, when the scientists got busy and devised new forms of stills, which would enable the distiller to produce a whisky within our definition of a straight whisky, which was to all intents and purposes a pure, neutral spirit.
In other words, this improvement enabled them to obey the letterof the labeling regulation, and absolutely defeat its spirit.
In order to obtain a better definition, which would coincide with the real needs of the trade as well as with the needs of the consumer, a definition which would protect the consumer without ruining the industry, we had just appointed a committee of, I think, 10 or 12 experts, who were to meet and devise a chemical definition that would really settle the question for the purposes of the business, of what "straight whisky" is.
If the decision had not arrived, we should just about now be reaching an amendment of our regulations, which would settle that vexed question, and which would determine the whole efficiency and success of our labeling regulation campaign, so far as it concerned the protection of the consumer on whiskies.
Now, under your bill, here, what would happen? The Administrator would adopt that regulation. He would adopt it all alone. .. I think he ought to be a board, perhaps for his own and the public's protection, but never mind, I do not much care. He would adopt such a regulation, all by himself, and his adoption would have noeffect whatever.
Mr. VINSON. Of course, Mr. Choate, you do not intimate that the Administrator of this Division in the Treasury would not have the opportunity to study that problem, to have hearings upon that problem?
Mr. CHOATE. Certainly not.
Mr. VINSON. For instance, if you were the Administrator of the Division, I feel certain that you could do just as splendid a work and reach just as proper a conclusion, in that capacity, as if it were an independent agency.
Mr. CHOATE. Undoubtedly, Mr. Vinson, as far as that goes.
I will assume that your new Administrator tackles this problem, that he holds hearings for 6 months, that he consults with everybody, that he imports all the greatest whisky chemists in the known world, that he gets all the available knowledge into his head, and with that knowledge, and with, if you like, perfect wisdom, he frames a set of regulations. Have they any effect? They have not. Until they are approved by the Secretary of the Treasury they are waste paper.
Now, what does that do? It puts up to the Secretary of the Treas-ury, who has no knowledge of any of these things, except as he may chance to have it by accident, the question of whether these regulations shall become, in effect, the law of the land, or not.
Now, what kind of a job is that to inflict upon a man? There is the perfect example of divorcing power and responsibility. The Secretary of the Treasury would have no power to modify the thing. He could approve or disapprove, but the ultimate responsibility for the approval will be upon him, and yet you have not placed upon him the other duties which would give him the training necessary to perform that work. That is merely one of the thousands of cases of that kind that could arise.
Mr. KNUTSON. This bill, H. R. 8539, is not the draft that you set up. It is your thought, as I understand it, to have an independent
bureau administer the F. A. C. A., rather than have the Treasury Department?
Mr. ChoATE. I say this: If there was ever a case in this world that required an individual, independent bureau, responsible only to the President, it is this job. Now, see what kind of a job it is.
Mr. Knutson. Well, may I pursue my question just a little further?
Now, as I understand it, the draft that you set up was referred to & subcommittee, and it was quite generously torn apart and reassembled, and this is the result?
Mr. CHOATE. You will have to ask the chairman that. I do not know. I know it is not the draft we sent up.
Mr. Knutson. It is not the draft you sent up?
Mr. CHOATE. Not as it stands. I think, with a few minor changes, and with this single major change, of making it an independent institution, it is about what should be passed.
Mr. Knutson. Well, I am in sympathy with your view, but I just wanted to make that inquiry.
Mr. VINSON. It is the thought of some of us that this bill, H. R. 8539, in many respects protects the revenue. Do you agree with that?
Mr. CHOATE. I agree with that entirely.
Mr. Vinson. Now, certainly the Bureau of Internal Revenue is interested in protecting the revenue and collecting revenue. understood it, it was necessary for the rules and regulations promulgated in the Bureau of Internal Revenue to be approved by the Secretary of the Treasury. Now, if you had an agency, either entirely separate and apart from the Treasury, or in the Treasury, who could promulgate rules and regulations affecting its conduct and operation, it seems to me that you might have one set of rules in the Bureau of Internal Revenue, protecting revenue, and another set of rules and regulations in this alcohol-control agency, and they would be working at cross-purposes.
Now, under the set-up in this bill, with the Secretary of the Treasury approving rules and regulations in the two instances, for each agency, there should not be, and it is not reasonable to assume that there would be any rules and regulations in either one of these activities, inconsistent or in conflict with the rules and regulations of the other activity.
Mr. CHOATE. I think, Mr. Vinson, that the fields are so separate that there is no possibility of conflict. If you will examine the things which the Administrator under this bill is called upon to do, you will realize, I think, that there is practically no respect in which regulations promulgated by him could conflict with regulations promulgated by the Secretary of the Treasury, or by the Alcohol Tax Unit, or by any of the subordinates engaged in the collection of revenue.
Mr. Vinson. Do you recall any particular instances where the Secretary of the Treasury, in any major point at issue, reversed the Commissioner of Internal Revenue, in rules and regulations sent up by him to the Secretary for his approval?
Mr. CHOATE. Now, let me see. I think I do. Let me answer that, later.
Mr. Vinson. It just occurred to some of us that there ought to be teamwork down there, and that it would be natural for the Secretary of the Treasury to review the rules and regulations that the Administrator would send up, mainly for the purpose of avoiding any inconsistencies.
Mr. CHOATE. I would agree that that would be very desirable in itself, but I do not agree that there is any such similarity or such close approach in the fields of these two organizations, that any such situation would ever arise.
Mr. McCORMACK. Mr. Choate, do you know of any other activity in the Treasury Department where the rules and regulations are not subject to the approval of the Secretary of the Treasury?
Mr. CHOATE. I do not, but I do not think this ought to be in the Treasury Department.
Mr. McCORMACK. I know, but assuming it stays in there. I recognize that, but assuming it stays in there, should they not be subject to the same regulations as all other departments?
Mr. CHOATE. I think that might be a fair test. I think perhaps, if you come to the conclusion that the regulations ought not to be placed there—that the final say as to the regulations ought not to be placed in the hands of the man who does not know about them, then you
will conclude necessarily, I think, that the body does not belong in the Treasury Department.
Mr. McCORMACK. Well, I mean, of course, assuming it stays there. My mind is open-somewhat. [Laughter.]
Assuming it stays there, should we not put this in the same category as all other activity of the Treasury?
Mr. CHOATE. I would say not, because every other activity of the Treasury Department that I know of, customs, internal revenue, income tax department, Alcohol Tax Unit-all the rest of it--are all revenue-collecting jobs. They are all part of the Secretary of the Treasury's jobs. He is bound to know about it.
Here, you put up to him the unfortunate necessity of finding out whether a regulation which the Administrator proposes to promulgate is a good regulation or not.
Now, see what that will do to him. Just as soon as the regulation is adopted and sent to him for approval, what happens? Everybody rushes upon him at once. Every particle of political pressure which these people who are interested-and there is somebody vitally interested in every one of these regulations-every particle of political pressure which can be brought to bear upon the Secretary of the Treasury is brought to bear upon him. In the meantime the prestige of the Administrator—which is a very valuable thing, gentlemen-is completely destroyed. I say it is a valuable thing, because even such mild prestige as the Administrator of the Federal Alcohol Control Administration contrived to get, on the quite doubtful basis of the codes, enabled him to accomplish all sorts of things, which could not possibly have been done by force of arms.
Mr. McCORMACK. Would not some pressure be on him with respect to regulations of another bureau?
Mr. CHOATE. I would say not. I would say that in all cases the Secretary of the Treasury would have the materials for making a judgment. The Secretary is necessarily a tax man. He is necessarily an income tax man. He is an internal-revenue man. He is a customs man. He knows about those things. They are his field; but he is