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In the Douglas Aircraft case it was the company. The union resisted very vigorously.
In the Borg-Warner case-Senator Moody, I think you may know the history of that—the union fought against having the case referred to the Board. They had an all-night session before they agreed to go along with the Board's handling of the case. In the executive committee the vote was only four to three, and so on down the line.
We have 15 cases or better in which the companies and the union have joined voluntarily in submitting the case to us for our recommendations or decisions. If they thought we were partial or biased, I doubt very much whether they would have done it. So there are two things I would like to point out. First, that the record shows that in many of the cases, the union has resisted. They wanted to strike. They did not want a Government agency to ask them to stay at work. Secondly, we have had more cases voluntarily submitted to us by the parties because they had confidence in the tripartite system-even the nasty public members of the Board-than the President has referred to us.
The CHAIRMAN. Senator Sparkman--
Senator SPARKMAN. Mr. Chairman, I am not going to ask any questions. It seems to me that regardless of the legality of this thing -I realize that you have a very hard job; all of you have. But it seems to me that the one who is forgotten in this thing is the great public that is being caught in the squeeze.
It seems to me that something went wrong in the manner in which this matter was handled.
Mr. Putnam says there was coordination. Apparently there was not sufficient coordination. It may be a weakness in the law or in the set-up, I do not know what, but something, it seems to me, ought to be done so that the person who has to buy the articles that are manufactured is not going to be caught in the lurch.
It seems to me we have almost reached an impasse in that the recommendation has been made for the wage boost. Steel says they cannot give the wage boost without boosting the prices. We know if the prices are boosted appreciably, the line is broken and we are off on another spiral.
It seems to me that there could have been closer coordination that would have withheld those recommendations until some kind of a formula could have been worked out.
I will even go further than that. It seems to me that even before the case was handled there should have been a very definite formula established, as was done during World War II. În World War II you had a formula to work under.
Mr. FEINSINGER. We have a formula now. The cost of living.
SENATOR SPARKMAN. Wait a minuite. Wait a minute. Where? On wages? But how about over here in price stabilization?
Mr. ARNALL. I have a wonderful formula and I want to tell you about it.
Senator SPARKMAN. That is what I am talking about, you have two formulas and they are not coordinated.
In World War II we had a formula that went across the board. Now, why hasn't somebody worked out a similar formula this time so that the two would work together.
Mr. ARNALL. Senator, when we get into that, I want to demonstrate to you that we have exactly what you are talking about.
Senator SPARKMAN. Who has? Mr. ARNALL. This whole set-up. All of us. Senator SPARKMAN. Why didn't it work in this case? Mr. ARNALL. It will work, if you will let us show you the facts. When you see it, it will work.
Mr. Putnam. May I just walk over here to thec hart (p. 1972) for one second ?
These white extensions are the fringe benefits and the black the cash payments. They are wage increases given since January 1, 1950. You can see from January to June the period before Korea there was very little change. Then you had this upsurge.
I want to show in the first place how steel-that is steel, the black line here—this is the recommendation for steel-how all these others are very much higher and here, for instance, is International Harvester, which I am bringing out as a particular example. There is where International Harvester will be in May.
All those companies have received only the price increases that come according to our rules.
Senator ROBERTSON. Maybe that is true, but is it not a fact that if you put into effect this new Wage Stabilization Board recommendation for steel they will then be the highest paid industrial workers in the Nation?
Mr. Putnam. No, sir; not nearly. Look at the others that are much higher. It has not been nearly so. All of those have had no more increase than in our regular formulas. Take the top one of all, International Harvester.
Senator SPARKMAN. Mr. Putnam, I go along with you on that, and I think, perhaps, from the figures that I have seen that a case has been made out, but that relates only to the increase of wages. We saw in 1946 and we saw in 1948 and we saw in 1950, when wages were increased in coal and steel, prices went up and wages and everything else went up, and it seems to me that inevitably we are going to see the same thing again unless we balance off.
You have shown us the wage increase. Now, I wish Governor Arnall would show us how the price increase is balanced against that. It seems to me it is inevitable.
Mr. PUTNAM. Before I turn it over to him, may I say just one thing?
Senator SPARKMAN. All right.
Mr. Putnam. It is simply as I said earlier, I make the broad policies. He carries them out in the details, and Dr. Feinsinger and I work out the broad policies on wages.
Now, Governor Arnall carries out the price policies and he can go on from there and explain the price situation. We have fair standards on both sides. They are not the same standards because they deal with entirely different things.
The CHAIRMAN. Mr. Arnall.
Mr. ARNALL. Mr. Chairman and members of the committee, I want to talk just for a minute, if you will permit me to, so I can point out what we have been reaching for here.
I would like for you at the outset to forget about this wage business. Let's just forget completely about it and let me talk to you about some of my problems. Let's forget about Mr. Putnam, the stabilizer.
Now, we, over in our shop, operate under your law and we are going to continue to do it. Whenever you tell me what to do I am going to do it gladly.
Now, under the Defense Production Act, we have these positive provisions of the law with reference to price increases:
First, we have the Capehart amendment, so-called, and that has absolutely nothing in the world to do with this wage dispute. The steel companies are entitled to whatever they are entitled to under Capehart as a matter of law, with no reference to the wage dispute.
Senator ROBERTSON. They have not asked for any increase. How are you going to give it after July 26?
Mr. ARNALL. We cannot give it until they ask for it.
Mr. ARNALL. That is when they would be eligible to ask for it, Senator. They would not be eligible until July 26 because it takes care of the increased costs from Korea until July 26, 1951.
Now, let me point this out to you: There are between 300,000 and 400,000 manufacturing companies in America, and only a very small percentage of them have asked for Capehart increases. But let us forget Capehart for a minute.
The second provision of the law that you gave me is that our ceiling prices shall be "generally fair and equitable."
Now, acting under the clear-cut mandate of the Congress, we have provided standards. The standard under which we operate which is relevant to this case is called the Industry Earnings Standard. promulgated last April a year ago, by Mr. Eric Johnston, who was then Economic Stabilizer. Mr. Putnam has confirmed and approved that standard.
Mr. PUTNAM. After much searching for a better one.
Mr. ARNALL. My predecessor, Mike DiSalle, thought well of that standard and I feel so good about it that I bow down to it every morning when I come in because it is the only protection the public has.
The standard is modeled very much after the standard in the excess profits tax law. We take the 4 years, 1946, 1947, 1948, and 1949. We tell any industry, “You can take the best 3 of those 4 years and if, after your cost increase, your wage increase, or any other business cost you have, you fall below 85 percent of your average earnings for the best 3 of the 4 years in that base period, then we will give you a price increase to restore that level of earnings.' Senator ROBERTSON. “If you are losing money”? Mr. ARNALL. No, no, no, no. Let me again say this.
We guarantee under our Earnings Standard that they will make at least 85 percent of what they made in the three best pre-Korean normal years.
Now, that is a standard that applies to all American business. It is modeled, again I tell you gentlemen, very closely upon your excess profits tax formula.
Now then, whenever an industry comes over to our shop, whether they have had a material cost increase, supply cost increase, labor cost increase—whatever it is—we apply that yardstick to that industry and if they are entitled to price increases, we give it to them. If on the other hand they are not entitled to it, we deny them.
Now, in this business of price stabilization, if you are going to do a good job I have found that most of the time the answer is “No”; it has to be. But if, on the other hand, “Yes” is the answer, Senator Robertson, we give it to industry. We do not want to penalize industry. At the same time I know it is your belief as distinguished representatives of your people that you want us to use the same spoon to feed every American industry. You do not want special treatment; you do not want preferential treatment; you want the rules to apply to everyone alike.
Now, that brings you to steel. I want you to understand that formula. It is a wise formula. If it is unwise, we ought to change it, but thus far it has worked very successfully. Senator CAPEHART. Would you yield just one moment? Senator ROBERTSON. Yes, sir.
Senator CAPEHART. Have you increased any prices under that formula-or decreased any?
Mr. ARNALL. Yes, yes, yes, there have been some, but they have been very rare instances.
Senator CAPEHART. What industries?
Mr. ARNALL. I will be glad to submit you a list. I remember storage batteries as one, also die castings, glass containers, and china of certain types. In any event, that is the standard.
The CHAIRMAN. Will you submit the entire list?
STATUS OF CASES UNDBR INDUSTRY-EARNINGS STANDARD
Motorized fire apparatus
Zinc die-castings (second increase)
IV. Proposed by industry-pending:
Wire and cable
is available that industry would qualify under earnings standard:
Entire paper industry
Pennsylvania crude oil The CHAIRMAN. That is what you worked out under statutory law?
Mr. ARNALL. Well not statutory law, but let me say we have to have standards. If the criteria over in OPS are that we are going to give price increases to people we like, or people who belong to the right political party, or who can scream the loudest, we will have no price control. There is no way you can do it. You have to have formulas.
Senator CAPEHART. I would like to ask you one more question at this point.
Mr. ARNALL. Yes, sir; Senator Capehart.
Senator CAPEHART. Did the Capehart amendment, for all practical purposes, not technically repeal this formula that you are talking about?
Mr. ARNALL. No, sir.
Mr. ARNALL. Because the Capehart formula is an automatic passthrough from pre-Korea—up to July 26, 1951- of all cost increases. That is separate and apart from this. That is set out in the law.
Now, this standard is applied, for example, to cost increases that have occurred since your cut-off date of July 26.
Senator CAPEHART. The formula you are talking about is applied since July 26, 1951?
Mr. ARNALL. Yes..