(1) That legislation dealing with present farm surpluses and farm price supports is not perfect.

(2) That the objective of these hearings is not to hear criticisms of the faults of the present law, but rather to get constructive suggestions for its improvement.

(3) The problem involved is primarily economic. That a political approach to solving an economic problem will be more effective if it interferes as little as possible with recognized economic facts.

We are increasingly disturbed about a growing super-abundance of crops, commonly referred to as a surplus. In times of emergency, however, these troublesome surpluses suddenly become highly desirable "strategic reserves." I observe a growing trend of thought that it would be in the best interest of our entire population to have a constant reserve of farm products, just as we are stockpiling other strategic reserves. If this is correct, Congress should determine the quantity of each product which should go into this reserve. This should be pointedly set aside as a definite reserve, never to be used except for certain emergencies specifically named in the legislation creating the reserve.

Being clearly for the benefit of our entire population, the use of Federal funds for this purpose could not be criticized. Funds used for creation of such a strategic reserve of agricultural products should never be referred to or even considered as any type of subsidy to farmers. Such expenditures are simply part of the expense involved in the creation of a national reserve for the benefit of the entire population.

The establishment of such a national strategic reserve of agricultural products would not permanently solve tthe problem of surpluses which would result from production of certain commodities in excess of current demand. It is an unalterable economic fact that a satisfactory price cannot be maintained if production exceeds demand. Our existing law attempts to deal with this problem. The present great public interest in the farm problem is prima facie evidence that existing laws are not doing the job too well. I am not allotted time enough to discuss defects in the present law even if such discussion were desirable, and I do not think it is. However, there is a solution to this problem that is so simple that I am amazed that it has not been used. Briefly, this is it: First, set up the national strategic reserve of agricultural products I have already mentioned. Then, instead of "diverted acres" have production from acres producing surpluses completely removed from the market. The following relatively simple procedure will do this:

(1) Determine what is the surplus above current needs for each agricultural product.

(2) Add all these surpluses together and determine what percent the total surplus is of total current needs-domestic use and possible exports.

(3) Apply this percentage to the productive acres on every farm in the Nation. Instead of having "diverted acres," you would then have acres completely removed from production for market. Permit nothing to be marketed from these "surplus acres" in any way, shape, or

manner.

(4) Federal Government should pay rental on these surplus acres. This can be justified as being for the general public welfare.

(5) For a period of 3 to 5 years it would probably be desirable to use the principle of variable price supports to encourage needed adjustments. However, if burdensome surpluses are honestly removed by the method outlined, resulting in total production meeting total current demand, adjustment between crops will be rapidly made without arbitrary control or artificial stimulation.

I am encouraged to believe that this is a practical solution to the problem by finding that many men thinking and working entirely independently in all parts of the United States, both farmers and economists, are suggesting plans essentially the same as this one. This will not only solve the problem of crop surpluses, but will automatically take care of surpluses of livestock, dairy, et cetera, for feed is an essential for all production. Thank you.

The CHAIRMAN. Thank you very much, Mr. Woods. We will be glad to hear from you, Mr. Walter.

STATEMENT OF PAUL W. WALTER, REPRESENTING MILK MARKET SURVEY COMMITTEE OF CLEVELAND AND CANTON, OHIO

Mr. WALTER. Mr. Hope and members of the House Agriculture Committee, this testimony is in the nature of a position taken by handlers of milk in the Cleveland market and in the Canton market. I also submitted for the record a copy of a statement made by Mr. Darold Greek on behalf of the Columbus handlers submitted to Mr. Gaumnitz, chairman of a committee now studying the Federal Milk Marketing Act. I do not have extra copies of my oral statement but will submit a copy for the record, if I may. This statement may take longer than 5 minutes, and if the committee will indulge me I would appreciate it. If you want me to stop at any time, I will stop.

The CHAIRMAN. Hold to the 5-minute rule as closely as you can. We will not hold to it too tightly. Hold it down as well as you can. Mr. WALTER. Thank you. My name is Paul W. Walter, attorney at law, of the firm of Walter & Haverfield, 1215 Terminal Tower, Cleveland, Ohio, general counsel and secretary for the Cleveland Milk Market Survey Committee, which represents 21 handlers who market approximately 80 percent of the milk being regulated by order No. 75 for the Cleveland, Ohio, marketing area under the Agricultural Marketing Agreement Act of 1937, as amended, which I will hereinafter refer to as the act. This committee was formed in the latter part of 1945, when it became known that an attempt was going to be made to promulgate a Federal milk order in Cuyahoga County. The committee participated actively in the promulgation hearings held in the latter part of 1945 and early part of 1946, and has been a party to nearly all administrative proceedings involving order No. 75 since its effective date on August 1, 1946. The views expressed here may be fairly stated as representing those of the vast majority of handlers who have been operating in the Cleveland, Ohio, marketing area under order No. 75 since its inception.

A perusal of the act by anyone who has been subject to a Federal milk order and has participated in Federal milk order administrative hearings leads on inevitably to the conclusion that the act is outdated and needs a thorough revamping. In many respects the Federal milk orders issued pursuant to the act bear no resemblance to the mandates of the Congress but rather reflect the philosophy of the persons

charged with the administration of the act. There has been a strong tendency by the administrators to ignore the original purposes and to adopt provisions in orders which they think are necessary to accomplish what they think ought to be accomplished, which may or may not be in accordance with the aims of the act or the evidence of record. Entirely too much authority has been seized under section 8c (7) (D), which authorizes only such additional powers as are incidental to and not inconsistent with the powers expressly conferred on the Secretary which powers are enumerated and limited to certain purposes and functions.

It is declared in section 2 of the act that the purpose is to insure prices to farmers that would give them purchasing power equivalent to the purchasing power they had during a specified base period. Rarely, if ever, is equivalent purchasing power or the base period or the cost to farmers in that period given any consideration at any amendment hearing at the present time. The Government usually inserts in the record an exhibit showing the prices of many agricultural commodities and other data and a general finding is made that the parity prices of milk as determined pursuant to section 2 will be brought about by the proposed amendments. Parity is rarely, if ever, mentioned at a hearing. The findings are a mere parroting of the statute and a technical compliance with the act but of no material

consequence.

The second avowed purpose of the act is to protect the interest of the consumer. The consumer has no part in the administrative proceedings under the act and he gets very little consideration from the Secretary. He is the forgotten man.

Another example of the fact that the act has become outmoded is that considerable language is devoted to the matter of entering into marketing agreements with handlers. In Cleveland, for example, very few, if any, handlers have ever entered into an agreement for the marketing of milk under the Federal order under which they operate. Under section 8c (9) the Secretary is permitted to issue an order without marketing agreements if he finds that their refusal tends to prevent the effectuation of the declared policies of the act, and if he finds that the issuance of the order is the only practical means of advancing the interests of the producers of such commodity. The Secretary always so finds. The providing for marketing agreements, at least with respect to milk or milk products, has become meaningless.

Some very sweeping changes must be made to insure that orders bring about equity among all parties concerned, including the consuming public. We doubt whether this can be accomplished by amendments to the act or by changes in procedure. What is needed is a thorough reconsideration of the entire milk-marketing problem and the adoption of a new act, limited possibly only to the dairy problem, which would be more in keeping with the times and which would put all factors in the milk industry on an equal plane. We have reached the point where abuses have become as bad as they were in the field of labor-management relations under the old Wagner Act. A bill of rights for producers, handlers, and the public, similar to the TaftHartley law, is needed for the milk industry.

There is no room in American jurisprudence for the open and flagrant favoring of one group over another such as has been the very

patent practice of the Department of Agriculture in the formulation of milk orders.

Whether we start from scratch or attempt to effect the cures within the present framework, there are some very definite changes which must be effected to bring some semblance of equity and justice in the whole Federal milk order structure.

I. Suggested statutory changes: Appeal of actions of the Secretary. Section 8c (15) (A) provides the manner in which any handler subject to an order may file an appeal to the Secretary to determine whether the order about which he is complaining is in accordance with law. The decision of the Secretary is appealable to the district courts under subparagraph (B). However, the district court is limited in its ruling to a determination of whether the proposed order of the Secretary is in accordance with law.

The foregoing review procedure has proved to be very inadequate and in most instances a complete waste of time and money. Using the Cleveland market again as an example, handlers filed a so-called 15A petition with the Secretary on August 1, 1946, and shortly thereafter filed an action in the Federal district court seeking to enjoin the Market Administrator from collecting certain assessments under the order until after there had been a judicial determination that the Secretary had jurisdiction to put the order into effect under the Interstate Commerce clause of the Constitution. The injunction was sought under the Administrative Procedure Act pending judicial review. The district court refused to allow the injunction on the basis of United States of America v. Joseph Ruzicka (329 U. S. 287), which was decided by the Supreme Court on the day of the hearing on handlers' motion for an injunction.

Dealers were then compelled to comply with Order No. 75 during the pendency of their 15A petitions. The Secretary did not issue a decision on the 15A petitions until over 1 year later at a time when the same handlers were engaged in an amendment hearing involving the same order. Nevertheless, the handlers in Cleveland filed a 15B petition in district court within 20 days after the ruling of the Secretary and again filed a motion for preliminary injunction to restrain the Market Administrator from collecting administrative assessments until after the court had declared the order either legal or illegal. While handlers' motion was pending the Government filed a motion to require handlers to comply with the order. An injunction was granted by the court forthwith. The court then denied handlers' motion for an injunction principally on the theory that there would be no irreparable injury because the order had already been in effect for over a year, and to do otherwise would upset the status quo. A final decision was not made by the district court until well over a year later, to be exact on September 29, 1949. The court handed down a very brief memorandum decision stating that Order No. 75 was in accordance with law and with no further elaboration. Handlers know that the court was reluctant to disturb the status quo because the Federal order had already been in existence for over 2 years. This was in spite of the fact that the administrative record showed a very slight and inconsequential trickle of milk, less than one-half of 1 percent, in interstate commerce.

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In the short period of 2 years, the Cleveland market had so markedly changed under the Federal order that the court could not turn back the clock. A great number of smaller handlers had already gone out of business, there was a complete shifting of the Cleveland milkshed causing Cleveland to extend its milkshed westerly into Indiana and Michigan, forcing interstate commerce in milk which did not exist at the time the order was promulgated. The market had so changed that it was impractical for the court to review the situation as it existed when the Secretary exercised the power which was being questioned in the court proceedings. From a practical standpoint, handlers never had their day in court.

First of all, the 15A appeal to the Secretary is a meaningless procedure because the Secretary is not very apt to overrule himself, and the very people who made the initial decision are the ones who will make the decision on the administrative appeal to the Secretary. This ridiculous situation was the subject of some caustic comment by a district court judge in Toledo, Ohio, when he asked questions of Government lawyers recently as to a procedure which required an appeal to the very person who rendered the initial adverse decision. To correct this situation it is felt that a review by the courts should be afforded by the statute immediately after a ruling by the Secretary to determine not only whether the ruling is in accordance with law but whether the ruling is arbitrary, unreasonable, capricious or contrary to the record evidence.

Certainly an immediate and prompt review by the courts should be had on the important question of whether or not the Secretary has jurisdiction to issue the order in the first place. This important jurisdictional question should not be postponed until years after the order is in effect. An illegal order should never be permitted to go into effect and only the courts should have the power to determine whether the order is legal or illegal.

If it should be felt that the review of all orders of the Secretary other than the question of jurisdiction should be handled by somebody more acquainted with the intricate details of the marketing of milk and the regulation thereof, a different method of handling such appeals should be prescribed by the statute. The hearing officers should be constituted as entirely independent personnel as contemplated under the McCarran Act now pending before the Congress. Only then will they rule on the evidence fairly and without bias. They should be charged with the responsibility of writing an opinion based on the evidence adduced in the record. They should be appointed by and employed by somebody other than the Secretary.

At the present time the hearing examiners are but rubber stamps for the Secretary and by their very conduct in many instances show their bias toward the rulings and orders of the Secretary. They should be permitted to act independently so that if they should make a decision which is not entirely in line with the desire of the Secretary, they cannot be punished, dismissed, or discriminated against in their jobs. They should be assigned to hearings by lot and they should not travel or associate with the Secretary's agents and lawyers.

Very definite time limits should be set forth in the act, prescribing the time within which actions must be taken upon a petition for review of any order of the Secretary. As the act now stands a handler must file his petition in the district court within 20 days after the ruling