level over all, and it is likened to a great pie. There will always be an upper crust; there will always be a lower crust. The meat is in the center. When the lower crust saps all the meat and all the fruit out of the center, and all the richness that it has passes out of the crust, we will have nothing left but the bottom of the pan-and we are getting awfully close to that. Mr. HOFFMAN. Do you know of any pie that was ever made that way? Mr. KANE. Yes; the social pie. It is the pie of legislation that they are making right now. Mr. HOFFMAN. Mr. Reuther puts out a pamphlet, a blue-covered book, of 32 pages, which is entitled "How to Raise Wages Without Increasing Prices." He refers to William H. Davis on page 1. He says: Mr. Davis asked how it is possible to increase wages without causing price rises? Over on page 3 he says: The answer to Mr. Davis is that he can tell industry to pay higher wages out of the higher profits it is making. It will not have to charge higher prices. I have in mind that improvements in methods of production—— Mr. KANE. Technological improvements. Mr. HOFFMAN. I just use little words. Mr. KANE. I did not mean to be offensive. Mr. HOFFMAN. I have no objection. I have no objection to anybody using all they want. I just use little ones, because I can understand them. Now, getting back: I realize that when methods of production are improved you get more for your hours and more for your dollar. But I wish that some of your organizations and some of the corporations referred to would tell us how much of truth there is in that statement of Mr. Reuther. I wish you would submit something of that kind to us. He refers to General Motors and Chrysler. I would like to have you tell us about that. Mr. KANE. I shall undertake to provide you with that information. Mr. HOFFMAN. In one of the daily papers there was an advertisement by the Union Oil Co. of California. It was entitled "Who Gets the Money Union Oil Makes?" There is a break-down. I would like, Mr. Chairman, to insert that at this point in the record. The CHAIRMAN. Without objection it will be inserted. (The advertisement referred to and submitted by Mr. Hoffman is as follows:) UNION OIL CO. OF CALIFORNIA WHO GETS THE MONEY UNION OIL MAKES? 1. Arithmetic sometimes makes more sense than headlines. The following figures are a matter of public record-checked and verified by Uncle Sam's tax men. If you have 2 minutes to spare we think you'll find them rather interesting. 2. Last year Union Oil Co. took in 1271⁄2 million dollars in round figures. This was from all sales of its products and services. Ninety-one million dollars of this was promptly paid out for things-rent, materials, transportation, equipment, depreciation, interest, and taxes. 3. This left 361⁄2 million dollars to be divided among people-the employees and the owners. Of this sum 271⁄2 million dollars went to the employees in wages, salaries, and employee benefits. Four and three-quarter million went to the owners in dividends. Four and one-quarter million was left in the business. 4. In other words the employees got 75 percent of what money there was to distribute, the owners 13 percent and the business 12 percent. This doesn't mean that the owners got 13 percent on their investment. They got 13 percent of the dollars left over after the company's expenses were met. 5. On the capital invested in the company the owners received just 3.2 percent in dividends. For that 3.2 percent they have financed all the oil wells, service stations, equipment, etc., with which the employees work-$43,525 worth of tools for each employee. 6. It also happens that the 44 million was divided among 32,000 Union Oil stockholders, whereas the 271⁄2 million was divided among less than 9,000 employees. Consequently, the employees got an average of $3,108 apiece—$259 per month. UNION OIL. Co. OF CALIFORNIA. Mr. HOFFMAN. Here is another little booklet. This is 23 pages long. It is entitled "Five Years of War Profits, 1940 to 1944, Compared With Five Years of Peacetime Profits, 1935 to 1939." It is put out by United Steel Workers of America, 1900 Commonwealth Building, Pittsburgh, Pa. In the booklet there are tables claiming to show excessive war profits. For instance, on page 16 it shows profits, dividends, and depreciation of certain named companies, the United States Steel Corporation heading the list of 12 or 15, ending with the Rustless Iron & Steel Corporation. If this bill ever gets out on the floor there will be a great deal of discussion about the charges of the proponents of the bill as to these figures. The average Congressman does not know anything about the facts. We hear that corporations have made large profits, and the men who are interested in the corporations say they have not, or if they have, they have had to spend it or the Government takes away from them in taxes. We would like to know the facts. At least I would. Mr. KANE. Mr. Hoffman and Mr. Manasco, for the committee's purposes we will undertake to give you some kind of an opinion on that question, because I think you are very, very sound in assuming that these things are eventually going to be brought out as eontradictory of some of the statements that might otherwise be made generally. The only way you can act wisely-and men who are properly informed can act wisely, which does not impugn the intentions of men who do not act wisely; their motives may be just as sincere-is to have the full facts, and we will try to get them for you. Mr. HOFFMAN. In that connection, if you could without too much trouble give us the number of stockholders who are interested in these various corporations, we would like to have that information, because when they say a corporation made that much money, there are many of us who are inclined to look at that corporation as some swollen individual who is getting an excess profit at the expense of the poor man who works. Mr. KANE. That is right. Mr. HOFFMAN. I noticed one advertisement that gave the number of stockholders and the number of employees and the proportion of the money that was taken in that went to each. The CHAIRMAN. I think the daily stock quotations in the Washington Star show the stock dividends paid by all the companies listed. I think it would be fair to say that those dividends rarely achieved 4 percent in the war years. Mr. KANE. That is right. Chrysler Corp. had a strike prewar. During the strike Mr. K. T. Keller, president of that corpora tion, was denied access to the premises by the picket line. The strike was precipitated by a statement by Reuther following an announcement of $26,000,000, in round figures, of the Chrysler Corp. published in the papers the evening before. He said it was too much money for that corporation. The investment was over $450,000,000. Mr. HOFFMAN. I heard over the radio one Sunday night not long ago a discussion between Mr. Reuther and another gentlemen, in which Mr. Reuther called attention to the fact that Mr. Wilson draws a very large salary. I wish you would tell us the amount that Mr. Wilson and some of these other gentlemen who are charged with receiving such exorbitant salaries, actually receive. Give us Mr. Wilson's take-home pay. Mr. KANE. If he will supply that information, we will supply it to you. He would probably be very glad to supply that. Mr. HOFFMAN. It is just a matter of figures. Mr. KANE. Yes; but it is a matter of enlightenment to somebody that is under illusions. There is a great tendency on the part of the leaders of labor to stress these figures such as Mr. Hoffman has been talking about. They place emphasis, Mr. Chairman, on what appears to be exorbitant profit, between the cost of producing an article and the cost of selling that article. They overlook the fact that this is a Nation on wheels, with beautiful highways, and the greatest number of homes owned, and children with shoes on their feet, with carpet on the floor, a piano in the home, and they take music lessons, and more young people go to high school, because of one fact-that spread between the actual cost of producing the article and the selling price that is distributed over a large area in what is called marketing operations. The CHAIRMAN. Most of us lose sight of the fact, when we look at some large salary of $200,000 for a man like Mr. Wilson or Mr. Sloan of General Motors, or young Henry Ford, that those men are paid for their ability. They might be worth that amount to the company. It might cause the company to go broke if I were president of it at $1,000 a year. Mr. KANE. The minute the organization fails to operate at a profit, it becomes insolvent and it closes up and the jobs are lost. When you examine that a little bit further, the point is that the earnings of these corporations are considerably at variance with the earnings of the worker himself. The only thing that the worker has is his labor. That is his investment in the undertaking to produce the product. The employer has to supply the investment and the equipment so that the worker himself can use his investment of labor; and he is biting the hand that feeds him and does not have foresight enough to see it. Inevitably it will be like a stake having its tail in its mouth. If he gets more than the employer can afford to pay him, just because he is getting a full meal by eating his own tail the first thing he knows there will not be any snake. The CHAIRMAN. If you had a $10,000 man at the head of the company the workers might be 10 cents an hour men. Mr. KANE. Yes. That is brought out in different ways. We often hear talk of what we call advertising as an economic waste. I think you gentlemen of the Congress are fully aware of the fact that industry underwrote all of the undertakings to sell all of the different campaigns for war bonds or Liberty bonds and now the peace loan; 1 and the amount that was put behind them could not have been bought by the Government at a multiple of millions of dollars. In the meantime, that has been put together, as you might say; it is a rider on entertainment and education, and if they once lose that they will set up the biggest howl you ever heard in your life; and the cost of that behind the article will even go out on seven decimal points per unit of products sold by the undertaking. The CHAIRMAN. When a corporation pays out $300,000 in advertising its automobile, for instance, we do not tell the people at the same time that the newspapers and magazines and others pay income taxes on that money. Mr. KANE. That is right. That is what I mean by the difference between the actual production cost of any article and the selling price, whether it is a refrigerator or an automobile or a hot-water bottle. The difference between the actual cost and the selling price is spread in the market operation, and in that campaign known as advertising and sales effort the salesmen buy automobiles and burn up tires and gasoline and patronize restaurants and hotels, and they pay for rent and light and gas and taxes and build homes and raise families out of that spread. The CHAIRMAN. We have a lot of people in this country who advocate the removal of so-called middlemen. They say it will make things cheaper for the consumer. But is it not true that those traveling men make it possible for products in a remote part of the country to find their way into trade channels? Mr. KANE. That is right. The CHAIRMAN. And if we had the Federal Government supervising distribution, if we had a meat shortage or a sugar shortage or a coffee shortage Mr. KANE. Only certain people would be benefited, because the operation would create a specially favored class. The CHAIRMAN. I certainly have enjoyed your statement and I thank you very much. Mr. KANE. Thank you very kindly for the privilege and the very obvious patience that you have shown and the courtesy of yourself and the members who were in attendance. It is unfortunate that there were not more members in attendance. The CHAIRMAN. The committee will stand adjourned until 10 o'clock tomorrow morning. (Whereupon, at 5: 10 p. m., the committee adjourned until, Wednesday, October 24, 1945, at 10 a. m.) FULL EMPLOYMENT ACT OF 1945 WEDNESDAY, OCTOBER 24, 1945 HOUSE OF REPRESENTATIVES, COMMITTEE ON EXPENDITURES IN THE EXECUTIVE DEPARTMENTS, Washington, D. C. The committee met at 10 a. m., Hon. Carter Manasco (chairman) presiding. The CHAIRMAN. The committee will come to order. Our first witness this morning is Mr. Hudson G. Hastings, professor of economics, Yale University. You have a prepared statement, Dr. Hastings? STATEMENT OF HUDSON G. HASTINGS, PROFESSOR OF ECONOMICS, YALE UNIVERSITY Mr. HASTINGS. I do not have a prepared statement. I simply have some notes, Congressman. The CHAIRMAN. You may proceed to make whatever statement you wish. Mr. HASTINGS. Gentlemen, the first thing I want to point out the reasons why this bill, either one of these two bills, is advocated, and to discuss them very briefly with you. I am sorry that I shall have to make some rather dogmatic statements as an economist, without going into complete economic analyses of it, because time does not permit that. I shall be glad to answer any questions, though, when I get through with my statement. It is advocated by many who say that the increasing technological efficiency of business and industry is bound to create a certain amount of permanent unemployment, and therefore unless we have the Government coming along to provide jobs for those that are permanently thrown out of work by technological improvements, they will remain permanently unemployed. That is the proposition, gentlemen, on which there is no difference of opinion among economists. The history of our economic life, industrial life, in this country proves that that is not true. It is true that locally and for certain individuals, for a certain period of time, technological improvements will unquestionably, and do, throw a man out of work, but as far as creating permanent unemployment is concerned, that has never been true and will never be true. Secondly, this bill is proposed by those who say that the United States has reached a stage of economic maturity, that there is no longer an adequate outlet for the savings of the people that are put into savings banks and individual savings, because the country's capital equipment is built up and we are now a mature economic nation, and therefore, unless there is an outlet for these savings by buying Government 79103-45-43 669 |