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?
Mr. ARNALL. We will be glad to do that.

(The list referred to follows:)

STATUS OF CASES UNDER INDUSTRY-EARNINGS STANDARD

I. Price increases granted under industry-earnings standard:
Beer wholesalers

Cigarettes

III. Surveys in process or approved by clearance committee
Semivitreous dinnerware

V. Sample of requests for price increase turned down unless or until evidence is available that industry would qualify under earnings standard:

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.

Senator CAPEHART. How can you use both?

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.

Senator CAPEHART. But up until then the Capehart amendment repealed the formula you are talking about?

Mr. ARNALL. No, no, no.

The formula which we have came about in April 1951, whereas the Defense Production Act was signed by the President on another date.

Senator CAPEHART. The Congress passed the Capehart amendment, which directed you to permit all increases in costs that occurred from Korea up to July 26 if the companies wished it?

Mr. ARNALL. That is right.

Senator CAPEHART. How, under those circumstances, then, could you apply any other formula?

Mr. ARNALL. Because you gave us an additional mandate, Senator Capehart. You said that our prices should be "generally fair and equitable," and under that provision we have established this formula.

The Capehart provision was not the only provision. There was an additional one, to be fair and equitable, and that is the one that we used.

Listen, Senator, you members of the committee have been after me about being fair and equitable. We want to be.

So then we come to the steel case. Now, forget the labor dispute. Forget the wage issue. We take this standard that we have and apply it to the steel companies if they ask us for a price increase. We find that under that standard, as applied to the steel companies, they are not entitled to a price increase. It is that simple.

If they are entitled to it, they get it. If they are not entitled to it, they do not get it.

Now, let me give you the figures. During the base period, 1947-49, we estimate that the steel companies made, before taxes, on each ton of finished steel produced, on the average, $11.22 per ton. After taxes they made $6.59 per ton during the three of the best 4 years' normal operations.

In 1951, before taxes, the steel companies made profits on each ton of steel on the average amounting to $20.26. That is an accurate estimate, I believe.

Senator CAPEHART. What year is that?

Mr. ARNALL. 1951. They averaged $20.26 per ton of steel. After taxes their average last year was $7.07 per ton.

Now, if the steel companies accepted the WSB recommendationsand please understand I am not telling the steel companies what to do, I just have to tell you what would happen

Senator ROBERTSON. At first you did think that the recommendation was too high?

Mr. ARNALL. That is right. I thought it was, but I will likewise tell you since I have gone into the matter fully I am not at all sure that is true and I am showing you that by these figures.

Senator ROBERTSON. All right.

Mr. ARNALL. The profits per ton in 1952, if the wage increaseabout $5 per ton-recommended by WSB were put into effect, and the steel companies took their Capehart adjustment, which we estimate-it has not been completed, but we estimate it a little under $3 a ton-it would mean that before taxes the steel companies would make $18.26 a ton and after taxes $6.47 a ton.

Senator ROBERTSON. Let me ask you this, for what period? Does that include the final increase or not, or just the immediate situation?

Mr. ARNALL. That is for 1952.

Senator DOUGLAS. Then we cannot include the 21⁄2-cent increase of January 1?

Mr. ARNALL. No, sir.

Senator DOUGLAS. Or the 32-cent increase caused by time and a quarter for Sundays.

Mr. ARNALL. This figure covers the average for the entire 18 months.

Senator SPARKMAN. Do you mean the figures you gave us?

Mr. ARNALL. Then after taxes the steel companies would have a profit per ton of $6.47. That would mean that after taxes this entire wage increase package would cost the steel companies exactly 60 cents per ton.

The CHAIRMAN. Do the steel officials agree with you?

Mr. ARNALL. Yes, sir.

The CHAIRMAN. In other words, Mr. Fairless?

Mr. ARNALL. Yes, sir. Their economists worked together with ours about 3 weeks ago on estimating the cost of the WSB package. The CHAIRMAN. I understand you to say that the steel representatives, Mr. Moreell, Mr. Fairless, and others are in agreement with the figures?

Mr. ARNALL. I have not discussed that with the presidents of the companies. My economists and their economists agree on the amount of the cost increase.

The CHAIRMAN. The economists of the industry and the Government both agree that the figures you are now talking about are correct? Mr. ARNALL. That is my understanding, Senator.

Senator ROBERTSON. You have gotten down to 60 cents a ton. We want to know how that is going to compare with his formula, and what the effect is that it will have on invested capital.

Senator SPARKMAN. This is 12 cents a ton less than their three best base years.

Mr. ARNALL. In their base years they were making $11 a ton. Senator SPARKMAN. I am talking about after taxes because I think that is what happens.

Mr. ARNALL. It is perfectly all right for you to say that, but I want to talk a little bit about profits after taxes. They do not fix your salary in the Senate after taxes. You get a salary and you pay your taxes. I thought the Congress of the United States, in passing the tax laws, provided that everybody should pay whatever you said to pay.

Senator SPARKMAN. Applying your 85 percent formula, is that not after taxes?

Mr. ARNALL. We apply it before taxes, but if we were to apply it after taxes they are still not entitled to a price increase, so you can apply it either way. It does not matter.

Senator MOODY. Mr. Chairman, I would like to make this suggestion: A statement has been made here by some responsible officials that the steel companies concur in the analysis of the price-profit-wage situation here as put forth by the officials and by the President.

If that is so, it seems to me a very clear-cut case has been made in which their strike and that seizure could be ended very quickly. I think since that is true it might be a very good idea for us to call in the steel companies at the same time that Mr. Arnall, Mr. Putnam,

and Mr. Feinsinger are here, perhaps tomorrow or the next day, and let's have this out right here around the table and find out if this thing should not be settled now.

It is a terrible thing for the steel plants to have to be seized by the President of the United States, but if these facts are true, I think the public should know it and I think the proceedings of this hearing should be made public so that the public can get the facts.

Senator ROBERTSON. He did not finish his analysis of these steel prices and it is a very valuable thing for the record.

Mr. ARNALL. I think you ought to know it.

The CHAIRMAN. And how much more is it going to cost the users of the country?

Mr. ARNALL. There are 550,000 steelworkers involved in the plants in this dispute. Now, they have a union to look after them and an able president of their union. There are 675,000 stockholders in these plants in dispute. I happen to be one of them. I have small savings in United States Steel, Jones & Laughlin, and Inland, up in your part of the country, Senator Dirksen, Acme, National. I can go right down the line. I would not say that I am a big stockholder, but I am a little stockholder.

There are 675,000 of us and we have officials to look after our interests; good officials. They are fine gentlemen. But, after you add the steel stockholders and the steelworkers together and subtract it from the number of people in our country, you get 154 million who do not have anybody to look after them.

Now, it is my job, I believe, under your mandate, while being "fair and equitable" in prices, nevertheless to give consideration to this great mass of American people. In my own estimate, if steel breaks the line here in prices and we pass those prices on, then, in my figures, the cost of living will go up on an average of about $300 for every American family. I do not believe Congress wants that to happen. Now, if our standards are wrong, you ought to tell me and let's work out some standards that will give the steel people an adjustment in price, but I do not think we can apply one set of standards to a favored industry and a different set to another.

I want to point out to you that the three best years the steel people had up until Korea were 1947-49; and those were the best 3 years the industry had had since 1918. This is not an impoverished industry. I do not believe that because they are profitable they ought to be penalized. Of course not, but when you consider whether or not they are entitled to a price increase, we have to apply our standards.

Senator FULBRIGHT. Does the main part of this come out of the taxes that the steel companies would have paid?

Mr. ARNALL. Yes, sir. Listen to this. This will be interesting to you. If the steel companies give the entire WSB recommendation, which we, with the steel companies' statisticians, believe will be a maximum of about $6 a ton cost increase, that would actually reduce the profits of the steel companies, after taxes, by about $1.80 per ton. The CHAIRMAN. The staff has been working for quite some time on this and our figures show that the Government loses about $90 million. Is that right?

Mr. ARNALL. Let me state it another way. If you gave them a $12 a ton price increase the steel companies would keep $3.50 and $8.50 would be paid in excess-profits taxes.