CORNELL UNIVERSITY LIBRARY GIFT OF Republican National CoFiraittee The original of this book is in the Cornell University Library. There are no known copyright restrictions in the United States on the use of the text. http://www.archive.org/details/cu31924030485522 C. B. Miller, acting secretary Will H. Hays, chairman Fred W. Upham, treasurer JOHN T. Adams, vice-chairman Reeve Schley, eastern treasurer Republican IVational Committee ADVISORY COMMITTEE ON POLICIES AND PLATFORM GDEN L.MILLS I9 WEST 44TH STREET SAMUEL McCUNE LINDSAY CHAIRMAN, EXECUTIVE COMMITTEE STAFF DIRECTOR JOHN CALLAN O'LAUGHLIN NEW YORK CITY JACOB H. HOLLANDER SECRETARY, EXFCUTIVE COMMITTEE ASSOCIATE STAFF DIRECTOR FOREWORD The above questionnaires have been prepared by the Committee on Policies and Platform of the Republican National Committee, for the purpose of ascer- taining public opinion and of eliciting such facts and data as would enable the National Convention to frame the party program and platform on a sound and constructive basis. Some 100,000 copies have been circulated. The response has been most gratifying, and much valuable data has been received. We republish these questionnaires in pamphlet form because of the numer- ous requests received for complete sets, and in the hope tEat this analysis of the many complex and novel economic problems which confront the country will contribute to a better understanding of the fundamental factors and may arouse fruitful public discussion leading to sound solutions. Nothing in the questionnaires should be construed in any way to indicate the views of the committee or the sub-committees, the purpose being merely to elicit information and to ascertain opinion. OGDEN L. MILLS, May 1, 1920. Chairman of Executive Committee. QUESTIONNAIRES Pages 1. Industrial Relations and the Problems of Capital and Labor 3 2. International Trade and Credits 8 3. Limitations of Federal and State Control and Regulation 12 4. The High Cost of Living 15 5. Banking and Currency 19 6. The Immigration Situation • • 21 7. Agricultural Policies 24 8. The Merchant Marine 27 9. The Regulation of Commerce and Industry 30 10. The Railroad Problem 34 11. Federal Taxation 37 12. Conservation of National Resources 45 \' ^\' QUESTIONNAIRE ON INDUSTRIAL RELATIONS AND THE PROBLEMS OF CAPITAL AND LABOR It is generally recognized that the promotion of "good will" on the part of those engaged in industry, the reduction in the number and frequency of strikes and periods of unemployment, the improvement of working conditions, the protection of the health and welfare of wage-earners, and the increase of production, are aims which call for the thoughtful and patriotic consideration of all associated in industrial effort and of every citizen. The interest of the public is direct but there is a real division of opinion as to the extent of Government participation in the solution of these problems as well as to the best means of reaching ends universally admitted to be desir- able. This questionnaire is submitted in the hope that the answers will define a proper Governmental policy and will suggest remedies which the Govern- ment and those most directly interested may profitably consider. Promotion of "Good- Will" in Industry 1. — How far is "good-will" inside the plant a valuable economic factor in pro- duction and how can it best be secured? 2. — Can the permanent interest and "good-will" of those of us who are wage- earners be developed by, and how relatively important are, any or all of the following methods? (a) Technical training to increase productive efficiency, wages, chances of promotion, etc., without making the work less attractive. (b) Systematic information concerning, and better understanding of the problems and point of view of business management. (c) Training managers, foremen, and superintendents in better under- standing of problems and point of view of employees. (d) Joint conferences of representatives of the management and of the workers to carry out such mutual understandings, (e) Collective cooperation through (1) Trade Unions (2) Shop Committees (3) Combination of 1 and 2 (4) Comprehensive organizations of both employers and em- ployed (f) Welfare Work — medical care, sick benefits, unemployment bene- fits, invalidity, retirement, old age, and death benefits — provided and administered by — (1) Employers' organizations (2) Employees or trade union organizations (3) Joint organizations of those associated as employers and employees (g) Profit sharing, bonus distribution, gain sharing, parity of wages and profits, etc. Trade Unions and Employers' Organizations 3.— Should trade unions and organizations of employers be incorporated with right to sue and be sued? 3 4. — In the event of incorporation should the power of injunction be limited? 5. — Should such organizations come within the provisions of, or be specifically exempt from, anti-trust laws? 6. — In joint conferences should the general principle be recognized that em- ployees have the right to choose their own representatives from within or without the plant involved? Industrial Disputes 7. — Do you approve the general principles of the Kansas Court of Industrial Relations law and if so should they be adopted by other states and by the Federal Government as far as applicable?* 8. — Should lockouts and strikes be restricted by law and if so, how? (a) In Government employment (b) In public utilities (c) In private employments 9. — What, if any, is the proper function of the secondary strike or boycott ?t Tribunals 10. — Should an impartial board be established to deal with conditions of em- ployment and if so with what powers ? (a) In government employments (b) In public utilities and industries declared to be affected with a public interest (c) In private employments 11. — Should industrial tribunals be established as agencies for conciliation and voluntary arbitration? 12. — Should the establishment of such tribunals be left to private initative, or should provision be made by law for their establishment? Scope of 13. — Should a national tribunal be established to direct the organization of industrial tribunals in regions and industries where they are desired? 14. — Should the number of the regional and local industrial tribunals be spe- cially organized for each dispute, or should they be permanent to deal with all questions? How Chosen 15. — Should the national, regional and local industrial tribunals be composed of representatives of employers and employees, and how should they be selected ? 16. — Should representatives of organized labor be chosen by the unions, and the representatives of unorganized labor by those employees working un- der shop-representation plans? 17. — Should the public be represented on any or all of the tribunals — national, regional, local? 18. — How should representatives of the public be chosen? •NOTE — Thla law establishes a court succeeding to, and with powers of. the Public Utilities Comnil*- alon, extended to cover manufacture of food and clothing, mining of fuel, and transportation of food, cloth- ing, and fuel: powers of full investigation, modlflcatlon of labor contracts, issuing of orders and reffulattona with compulsory taking and operation of the Industry after proper court proceedings under certain guaran- tees to workers and capital Invested in case of non-compliance or suspension of work. Collective bargain- ing with representatives of incorporated unions or registered agents of unincorporated groups of workers recognized. Strikes and picketine unlawful. Worliers protected in giving testimony or makine oomplainU. fNOTE.— The secondary strike or boycott should be distinguished from the sympathetic strike and re- fers to cases where several allied unions are federated by agreements whereby the members of all auto- matically strike when a strike arises between the members of one and their employers though thera may bo no grievanoe between the employers and the members In any of the others. Compulsory Powers 19. — ^Where the parties do not agree to submit their differences to the appro- priate tribunal, should the tribunal have the right, through compulsory process, to investigate the matter and make public recommendations ? Decisions 20. — Should the decisions of the national, regional or local industrial tribunals be by a majority vote, or by a unanimous vote? 21. — Should the parties maintain continuous production pending decision by the tribunals and how can this best be secured? 22. — Should the continuance of production be a condition precedent to the tri- bunals taking jurisdiction as a board of arbitration? Appeals 23. — Should there be a right of appeal where the local tribunal is unable to reach a decision? 24. — ^If the decision is by majority vote, should there be any right of appeal to the national tribunal? Injunctions 25. — What is the proper scope of injunction in labor disputes? 26. — What abuses of injunctions in labor disputes suggest remedies or re- strictions of this power? Protection of Workers' Health 27. — Should sickness insurance be established in industry, and if so, how? (a) Compulsory or Voluntary? (b) Jointly managed by employers and employees or by either sep- arately? 28. — Should entire cost of sick benefits be borne by industry as part of cost of production or divided between employers and employees? 29. — Should the Government assist in the organization and development of sickness insurance? Unemployment 30. — Would a system of local, state and federal public employment exchanges, such as is operating successfully in Great Britain today, be desirable? 31. — ^Would such a system of local, state and federal public employment ex- changes be more desirable if administered by a joint commission of em- ployers and employees rather than by Government agencies? 32. — ^What is the most practical plan of bringing the worker and the job auto- matically together? Unemployment Insurance 33. — Should unemployment insurance be established in industry and if so, how? 34. — ^Is it practical to put part of the cost of unemployment benefits on the in- dustry in the proportion of two-thirds to be paid by the employer and one- third by the employee or in any other proportion ? Invalidity Retirement Old Age 35. — Would it be advisable to provide for invalidity, retirement and old age benefits in the same way, as suggested above for sickness and unemploy- ment benefits and insurance? Maternity Insurance 36. — Should maternity insurance and provision for compulsory rest periods, before and after childbirth, be established as a charge upon the industry? Restrictive Legislation for Women Workers 37. — How and by whom should standards for restrictive legislation for women be determined with respect to (a) Limitation of hours (b) Night work (c) Dangerous and unhealthy occupations 38. — Is the principle of equal pay for equal work correct and, if so, how can it be made effective? Child Labor 39.— Should the standards of the Federal Child Labor Law be raised with respect to existing prohibitions? (a) Employment in mills, canneries, workshops, factories or manu- facturing establishments prohibited for children under 14. (b) Employment between 14 and 16 years of age not more than 8 hours per day nor more than 6 days per week, or after 7 P. M. or before 6 A. M. (c) Mines and quarries — employment under 16 years of age prohib- ited. 40. — Should scope of Federal Child Labor Law as indicated above in question 39 be extended with respect to (a) Additional occupations (b) Agricultural labor (c) Mercantile establishments (d) Specially dangerous or morally hazardous employment (e) Educational and physical qualifications for employment 41. — Should higher age requirements or greater restrictions be imposed for girls than for boys? One-Day-of-Rest in Seven 42. — Should one day's rest in seven be compulsory for all workers? Hours 43. — Is the standard eight hour day desirable in all industries? 44. — Would the recognition of a standard eight hour day with a temporary general agreement to work nine hours with one hour overtime pay be de- sirable under present industrial conditions, and would such understand- ing serve to increase production and reduce high cost of living? 45. — Should the three shift system be compulsory in continuous industries? 46. — What should be the standard number of hours in the working week ? Minimum Wage 47. — Should minimum wage boards be established ? (a) For all wage-earners (b) For women and minors only (c) For all industries or only for specified industries 48. — Should the decisions of such boards be enforced by law as at present in District of Columbia, Oregon and other states, or by public opinion after publication of names of those who do not comply, as in Massachusetts law? Workmen's Compensation and Accident Insurance 49. — Should the principle of workmen's compensation for accidents be ex- tended to cover occupational diseases? 50. — Should the Federal Workmen's Compensation Act now applicable to civil employees be extended (a) To railroad employees (b) To other employees (c) With respect to any other hazards of industry Thrift and Investment of Savings 51. — How can thrift be encouraged among wage-earners ? 52. — What form of profit sharing, if any, will promote thrift, co-operation, and a better understanding of the function of the capitalist as trustee and administrator of wealth in the interest of producers and consumers alike? 53. — What kind of "blue sky" laws or other measures wiU best protect small investors from worthless investments and at the same time secure their participation and co-operation in industrial enterprises ? 54. — Should all issues of securities be subject to government scrutiny? Prison Labor 55. — Should the labor of prisoners be utilized for their physical and industrial training in production of goods for government uses (the state-use sys- tem) and paid for so as to provide (a) For the support of their dependent families (b) A fund to start them in an honest livelihood upon release from prison. 2 QUESTIONNAIRE ON INTERNATIONAL TRADE AND CREDITS The broad swings of our foreign trade in the last twenty-five years are divided into two distinct movements. In the twenty-year period up to the out- break of the war we showed a large excess of exports. For the period from 1896 to 1914 inclusive our exports of merchandise and silver exceeded our im- ports by $9,262,000,000. That favorable trade balance was wholly consumed and more by our invisible payments, that is, items that did not appear in the Government's statement of imports and exports. Our national foreign trade balance for that period might be stated in rough approximation as follows : Foreign Trade Favorable trade balance (silver in- cluded) $9,262,000,000 Gold imports 174,000,000 $9,088,000,000* Interest items owed to various coun- tries $3,040,000,000 Remitted from United States by emigrants 2,850,000,000 Expended by American tourists . . . 3,230,000,000 Ocean freights paid to various for- eign shippers 641,000,000 Customs, commissions and miscel- laneous items 570,000,000 ' 10,331,000,000* Increase in our foreign indebtedness $ 1,243,000,000* This indicates that in this period prior to the outbreak of the war we in- creased our indebtedness to the world about a billion and a quarter dollars, in spite of the great foreign trade balanc which our excess of exports over im- ports created. At the outbreak of the war it wa estimated that we were in debt to the world between four billion and five billion dollars. Then came a fundamental change in our foreign trade situation. In the period from 1915 to 1919 inclu- sive, our position changed as follows: Total exports of merchandise and silver $30,041,000,000 Total imports 14,339,000,000 Favorable trade balance $15,702,000,000 This favorable trade balance was settled by the re-sale to us of American securities owned abroad, by the sale to private investors in the United States of foreign government and municipal obligations, by loans made by the gov- ernment of the United States to foreign governments to the amount of $9,700,- 000,000, and by net gold shipments to us of $861,000,000. From the position of a nation debtor to the world to the amount of four to five billion dollars, we became a creditor nation to an amount of approxi- mately $11,000,000,000. The annual interest charge calculated at 5% would •These figures do not take into account capital exported, for which figures are not available. 8 be $550,000,000. Of the amount of our world credit, however, $9,700,000,000 is comprised in loans by the government of the United States to European na- tions. These debtors have paid no interest and are not for the present likely to be in a position to pay interest. The annual interest charge due to the gov- ernment of the United States of $485,000,000 will therefore be added to our foreign credits, but there must remain a doubt (considering the financial posi- tion of some of the debtor nations) as to whether our government will ever receive all of the principal of these loans. We are now entering upon another distinct swing in our foreign trade position. The extreme need of Europe for food and raw material, and her in- creasing difficulty in getting credit to provide those necessities, will make it necessary for Europe to do everything in its power to stimulate exports to us to counter-balance such imports as she obtains from us. She must have those imports in some measure to live and to feed her industries with raw material. If she can obtain no further credit in important amounts her im- ports from us can only be measured by her exports. It would seem, there- fore, that the volume of our exports in the period ahead of us must be limited to the volume of imports, plus such credits as we may grant. It is only from those two sources that our exports can be paid for unless we ask a further shipment of gold from the depleted stocks of the world. In the light of this situation our foreign trade policy will evidently be governed by our views in respect to the following subjects: 1. — Have our industrial plants been so enlarged that we need a foreign trade demand to keep them occupied? 2. — Would a decrease in our exports to a point where a balance of trade is established so decrease the market for our food products and raw materi- als and manufactures as to cause serious disarrangement of our markets? 3. — Should we restrict exports to balance imports, visible and invisible, or should we endeavor to organize our financial resources so as to make large foreign loans that would finance an amount of exports in excess of im- ports? 4. — Is it desirable that the United States should become still further a creditor nation ? 5. — Taking into account political and other considerations, would you regard in- creasing by large amounts the world's debt to us as likely to lead to un- fortunate international complication? 6.^ — Do you regard a policy looking toward a continued excess of exports over imports, visible and invisible, accompanied as it would have to be by a continued increase of the world's debt to us, as desirable? 7. — If you answer the above questions in the negative would you modify your opinion in so far as food and raw materials necessary fully to re-establish the industrial processes in Europe are concerned? 8. — Is there danger that the withholding of such credit will lead to such finan- cial and political disaster in Europe as might upset the existing economic and political structure and so affect unfavorably our own national financial and political life? 9. — Having in mind that it is impossible for Europe to buy from us more in amount than she herself exports unless she can obtain credit to pay for the balance, ought we from purely selfish interests to contribute financial aid to re-establish European industry, so that her exports may increase and her ability to buy be equally increased? 9 10. — Is it to our interest to use every endeavor to establish markets for our products in the non-European countries of the world, competing success- fully wherever possible with European exporters to those markets? 11. — In the long run, will it be to our interest to help re-establish European industrial capacity, even though in so doing we build up successful com- petitors with our own great industries that manufacture for the non- European markets? 12. — In view of the fact that from our size and the homogeneous character of our people, and the resulting uniformity in their wants, we have un- questionably a superior position in all forms of industry lending them- selves to mass production, would it be a wise policy to confine our efforts to increasing our world market for articles of mass production where machinery and large scale manufacturing permit high wages to be paid, and leave to other countries the field for those articles where a large pro- portion of hand labor gives to manufacturers having a low labor cost distinct advantage? 13. — If Europe can buy from us only as much as she exports to us, should our national attitude be sympathetic towards stimulating European sales in our markets for those articles in which a large proportion of the cost is represented by the hand labor involved, while we attempt to take a posi- tion in the world's markets for those articles where labor represents a less proportion of the cost, and in the production of which, organization, the economies of large scale production and the highest development of labor-saving machinery give special grounds of advantage? 14. — Should combinations of importers be recognized by law as those of ex- porters are now legalized by the Webb-Pomerene act ? 15. — Is the information regarding foreign markets obtained through our con- sular agents and the commercial attaches connected with our foreign lega- tions of a satisfactory character? 16. — Have you any suggestions in regard to improving the character of such information and making it of more practical value? 17. — ^What suggestions can you make regarding a more sympathetic and help- ful attitude of the government in connection with our foreign trade? 18. — Do you believe our foreign trade should be fostered by the negotiation of reciprocal trade agreements with foreign countries, giving to us special advantages in exchange for special advantages? 19. — Can you make any observations regarding the relation of our policy in connection with an American Mercantile Marine to the development of our foreign trade? 20. — K you believe it is desirable for this country to make further loans to Europe, should they be made by the Government? 21. — If it is desirable that new foreign loans should be taken up by American investors, what suggestions would you make as to the form of security to be asked? 22. — Should such loans have a lien underlying all existing indebtedness, includ- ing the indebtedness of those governments to our government? 23. — ^What governmental activities of foreign countries (such as those of the British Board of Trade) to assist business men in developing their for- eign trade do you think that the United States Department of Commerce might adopt to serve American business interests? 24. — Should the prevalent system in some of our states and in many foreign 10 countries of appointing special non-partisan commissions to deal with complicated economic and trade questions and to advise the legislature and executive be adopted as a national policy in the United States ? 25. — ^If such commissions should be established how should they be appointed and constituted ? (a) Appointed on Congressional initiative (b) Appointed on Executive initiative (c) Constituted with exclusively Congressional representation (d) Constituted with mixed Congressional and business or public rep- resentation 26. — Do you regard any scheme for Government insurance of foreign trade credits as a desirable means for aiding foreign trade ? 27. — Have you any suggestions regarding the administration or scope of the War Finance Corporation ? 11 3 QUESTIONNAIRE ON LIMITATIONS OF FEDERAL AND STATE CONTROL AND REGULATION I. Introductory Statement: What should be the attitude of the Republican Party toward the tendency to centralize power in the Federal Government? It is the old question of state rights born in the first Constitutional Con- vention and now revivified and brought home to the individual citizen by the sharp pressure of centralized authority made necessary in some measure by the demands of war. Now as in the past those who give serious study to the problem separate into three distinct schools of thought. First, there are those who welcome the subordination of State to Federal authority on the ground that changed economic and social conditions and "paramount neces- sity" compel the interference of the Federal government in the domestic con- cerns of the several states. The members of this group believe in the liberal interpretation of the Constitution, and approve of widening the scope of Fed- eral authority under the so-called "welfare clause" of the Constitution, and the implied powers derived therefrom. Second, there are those who repel the idea of centralization as tending toward the socialistic state, and as destruc- tive of the proper theory of local self government, and as likely to lead to the breakdown of the Federal government through over expansion. Third, there are those who believe the Federal government should be clothed with power to undertake any governmental function which experience indicates from time to time it can administer in the interests of the whole people more effectively than the individual states. ,- The policy of the Republican Party in the past has been stated in its platform of 1884, as follows: "The people of the United States in their organized capacity constituted a nation and not an American Federation of states. The National government is supreme within the sphere of its national duties, and the states have re- served rights which should be faithfully maintained; each should be guarded with jealous care that harmony throughout the system of government may be preserved and the union kept inviolate." In order to determine the views of the Republican voters as to what the proper attitude of the party should now be on this important issue, the fol- lowing questions have been formulated to bring out a few of the more impor- tant concrete aspects of the conflict between Federal and state control and regulation. II. General Questions: 1. What is your general attitude toward the tendency to centralize power in the Federal Government? 2. Under the war power and war time legislation, the following powers, among others, were vested in the President: (a) To control absolutely the transportation and distribution of food stuffs (b) To fix prices (c) To license importation, exportation, manufacture, storage and distribution of the necessaries of life 12 (d) To operate the railw)ads (e) To issue passports (f) To control cable and telegraph lines (g) To declare embargoes (h) To determine priority of shipments (i) To lend money to foreign governments (j) To enforce prohibition Should any or all of these and similar powers conferred up&xi the President be: (a) Terminated at the earliest possible moment (b) Be allowed to run as provided in most of the legislation now authorizing them, until the termination of the present war emergency or until six months after the formal proclama- tion of peace by the President (c) Be continued indefintely, as far as constitutionally permis- sible, for peace time uses 3. How far does such federal legislation as that establishing or pro- viding for the following services represent desirable activities of the Federal government or matters which should be left, as far as possible, to state control and regulation: (a) A federal employment bureau and service (b) The investigation of the causes of infant mortality (c) The Federal Trade Commission (d) The regulation of the hours of labor on interstate railroads (e) The pure food and drugs regulation 4. Did you approve the passage of the Federal Farm Loan Act? If not, please state your reason. 5. Did you approve the passage of the Federal Reserve Act? If so, please state how you distinguish between the principles involved in questions 4 and 5. 6. Do you believe the Federal Government should license all corpora- tions organized for profit, and engaged in interstate commerce? III. Labor: 7. Assuming that child labor should be regulated, should such regula- tion be extended as a federal function, or should it be developed more largely by the several states? 8. Should the federal government have a housing policy and assist in providing model homes for wage-earners by: (a) Construction, sale and leasing of model homes (b) Lending money on mortgage security to assist workers to build their own homes on some plan analogous to that of the Farm Loan Bureau (c) Through a publicity and information housing bureau, which would conserve and make available the housing experience of the special war activities of the United States Housing Corporation, and other governmental agencies, in provid- ing housing for workers in shipyards, munition plants and other war industries (d) Other means of recognizing the need for better housing conditions and aiding in securing them 13 IV. Public Health. 9. To-day, broadly speaking, the U. S. Public Health Service performs the following functions: (a) Conducts the quarantine system insofar as the prevention of the spread of disease from abroad is concerned, and co- operates with State Health Departments in preventing the interstate spread of disease (b) Collects data and information regarding the prevalence of disease (c) Conducts a research bureau for the investigation of diseases (d) Conducts educational campaigns for the control and pre- vention of disease Would you favor the extention of the powers of the U. S. Public Health Service ? If so, in what particulars ? 10. Would you favor the creation of a United States Health Admini- stration with the following powers: (a) To supervise the health departments of the several states and supplement their work when necessary (b) To cooperate with state departments of health in the pre- vention of disease, and to appropriate funds therefor to be expended by the states under Federal supervision (c) To supervise the expenditure by the states of federal money to be appropriated by Congress for public health work in the states, and perhaps conditioned upon the appropriation of like or proportionate amounts by the several states ac- cepting such federal aid 11. Should the whole matter of public health regulation be left to the states without federal supervision or control: (a) Excepting only international quarantine regulations (b) With other exceptions, and if so what (c) With no exceptions V. Education. 12. Do you approve of the extension of the policy which provides for federal aid to education in the several states, and if so, to what ex- tent, and in what particular directions?* 13. Do you approve of applying the principle of Federal aid to primary and elementary education? 14. Do you think there should be a Federal Department of Education; (a) With a Cabinet position? (b) Without a Cabinet position? 15. Do you think the powers and provision for the present Bureau of Education are edequate to meet present needs? Remarks : 1. General 2. Labor 3. Public Health 4. Education 5. Other subjects involving relations of federal and state control or regulation •NOTE — The Smith-Lever Act proYlfles for cooperative extension work In iigrlculture and home maklne through the Department of Agriculture and the agrtoultural colleges of the sevor&l states. The Bmlth-Hughei Act provides for federal aid to the several states tor vocational tralnlnc In agriculture, horns making, and the trades and Industries. Varloua bills and propoaali now before Congress provide for federal aid to th» several states in the conduct of public school education, the tralnia^i^fc^aaah*Bifa^Mi^»th^sst«hTfn^wnmf -' stations for sclentlflG research. 4 QUESTIONNAIRE ON THE HIGH COST OF LIVING THE FACT: The "High Cost of Living" is the usual term for describing the extraordin- ary rise in the prices of commodities and services in the United States since the outbreak of the World War. The accepted measure of this rise is the Index Number computed by the United States Bureau of Labor of (a) wholesale com- modity prices and of (b) retail food prices. According to this measure the in- crease in prices from a base line of 100 in 1913, to January, 1920, has been to 248 for wholesale commodity prices ; to 201 for retail food prices, and to 183 (October, 1919) for an aggregate of the several items (food, clothing, fuel and light, housing, furniture and fui^ishings, miscellaneous) that enter into an or- dinary family budget. COURSE OF WHOLESALE AND RETAIL PRICES' IN THE UNITED STATES- JANUARY, I9I1T0 JANUARY, 1920 [Averane Prices, 1913 - lOO] 270 260 250 240 230 220 1 LEGEND Retail Prices fs, f Wholesale Prioes 1 200 190 BO A -^ f^ / / /' \ ^ ^ ,' ,j t 1 / / ' / / -' \ ' / ' ' J / r' ^ "^ 100 90 ao ID GO SO 40 30 2D -- R .-, > ^ _ _j _ _ _ (916 tgi7 19)6 1919 l9Z0 (013 1914 t9l& * Retail prices represent prices of the principal articles of Food, wholesale prices include articles of all ktnds Figures from the U. S. Bureau of Labor Statistics THE EFFECTS: Injuries Suffered The effect of this abrupt increase has been to inflict tremendous injury upon all classes dependent upon fixed incomes or slowly adjustable earnings. Wages and to a less extent salaries have been brought up, approximately, to the new level of prices, but only with an accompaniment of industrial struggle. No such relief has been afforded those in receipt of (a) pensions and annuities, and (b) fixed allowances of all kinds ; nor to those in possession of (a) savings deposits, (b) insurance policies, (c) investment holdings. Affecting both rich and poor, the relative deprivation suffered by those of modest income and earn- ings has been unavoidably greater. 15 Swollen Profits Just as swiftly rising prices have inflicted injury upon particular classes they have conferred unmerited gains upon favored groups of (a) manufactur- ers, (b) wholesalers, (c) retailers. This has been in consequence of the upward movement of prices in the interval between production and purchase by the ul- timate consumer. In so far as "profiteering" has been an element in high prices it has largely been made possible in this way. Social Unrest The bitter struggle of industrial classes to increase their money earnings so as to keep pace with rising living costs and the parallel exhibit of huge business profits growing out of advancing prices are responsible for much of the social unrest with which the country is now beset. It has involved not only acute labor disputes but a more dangerous challenging of the political and in- dustrial order under which such evils are possible. THE CAUSES: Inflation The prime cause of rising prices in the United States has been the expan- sion of our currency and the inflation of our credit. From the outbreak of the World War to the entry of this country into the great struggle, this took the form of an uncorrected flood of gold imports ; during the period of actual war financing, the lavish supply of fiat credit by bank loans through certificate bor- rowing was the direct cause of needless inflation; since the armistice the poli- cies of the Federal Reserve Board as to credit control have been frankly dom- inated by the convenience of the Treasury. The results have been an increase in the actual circulating medium of the country from $3,402,015,427 on June 30, 1914, to $5,846,171,213 on February 1, 1920; an increase in the deposits of national banks, state banks and trust companies from $13,430,000,000 on June 30, 1914, to $25,731,000,000 on June 30, 1919, and an increase in the individual deposits subject to check of the national banks alone from $8,470,747,000 on June 30, 1919, to $9,682,618,000 on November 17, 1919. Altogether it is likely that the country is now transacting its business with $15,000,000,000 more circulating medium and deposits than five years ago. Production Curtailed While the volume of credit and currency has undergone tremendous ex- pansion, the volume of goods and commodities to be exchanged has shown less than proportionate increase. This disproportion has become greater in conse- quence of (a) diversion of the nation's productive efforts to war requirements, (b) unprecedented volume of exports, (c) practices tending to restrict output so as to affect profits, wages or prices. Abnormal Wages and War Taxes Abnormally high wages in certain industries and the burden of excess pro- fits taxes have aggravated these tendencies. Such wages and taxes have often been included as fixed charges in the cost of production. They have been re- sponsible for further price advances by encouraging business men to over- protect themselves by "discounting" the likelihood of still higher wages and heavier taxes. THE REMEDIES: Among the remedies suggested for the evils thus set forth are the follow- ing: 16 (a) courageous but intelligent deflation of credit and contraction of cur- rency (b) avoidance of further credit inflation by discontinuing Treasury certi- ficate borrowing (c) increased production of goods and services (d) reduction in government expenditure and increase in public thrift (e) revision of taxation as to basis and incidence (f) more economical distribution of goods and services from the original producers to the ultimate consumers. 1. — Do you understand the "high cost of living" to mean (a) the rise in the prices of ordinary goods and services, irrespective of increases in wages and incomes (b) the failure of wages and incomes to increase in the same propor- tion as general prices ? 2. — Has the rise in prices from 1913 to 1920, shown by the United States Bureau of Labor index number, been (a) realized in your own experience (b) confirmed by facts within the range of your observation Please give illustrations. 3. — Have rising prices affected certain economic groups more unfavorably than others: (a) wage earners (b) salaried classes (c) public employees (d) farmers Please give your reasons. 4, — Has the adjustment of wage rates to the increased cost of liAong been (a) partial (b) complete (c) excessive Please give specific instances. 5. — Assuming that savings depositors, insurance policy holders, investors, and those in possession of pensions, annuities and fixed allowances gen- erally are injured by rising prices — ^by what means can protection or re- lief be afforded? 6. — To what extent do you regard social unrest as a consequence of (a) the hurtful effects of rising prices upon the general body of con- sumers (b) the struggle of wage-earners to bring money wages up to the new price level? 7. — ^Is the enormously increased volume of deposits and circulating medium, relative to the mass of commodities to be circulated, the primary explana- tion of high prices? 8. — ^What do you understand by "profiteering," and how important a factor has it been in high prices? Please give particular instances. 9. — ^Do you regard "profiteering" as a result of (a) the upward movement of prices in the interval between produc- tion and purchase by the consumer (b) the government's excessive and wasteful demand for materials 17 (c) the extravagant demand of individual consumers? Please give your reasons. 10. — ^In what manner — ^if at all — have income and excess profits taxes been a direct cause of higher prices? 11. — Have high wages been (a) the cause (b) the effect of higher commodity prices Please give the evidence or experience upon which your opinion rests. 12. — Can high wages be maintained and labor costs be reduced so that consum- ers' prices will not be increased? 13. — How can the production of raw materials and manufactured products be increased with a view to lower prices ? 14. — Assuming that credit inflation and currency expansion are largely re- sponsible for high prices, is some limitation of business credit desirable? 15. — ^In what other manner can deflation be brought about? 18 QUESTIONNAIRE ON BANKING AND CURRENCY The outstanding features of the banking situation since 1914 have been the installation of the Federal Reserve Banking System, the change in our na- tional laws regarding bank reserves, the opportunity which the Federal Re- serve Act offered for the inflation of currency and credits, and the great infla- tion of both currency and credits that has taken place during that period. Under the National Banking Act the average reserve requirements for the whole country provided minimum reserves in lawful money held in the banks' vaults amounting to about one-seventh of the deposits. Deposits are, in the main, created by the granting of bank credits. The possible expansion of bank credits was limited by the law which prescribed this minimum reserve. Under the Federal Reserve Act, as amended, all reserves beyond such till money as each bank chose to keep must be in the form of a deposit in a Feder- al Reserve Bank. The law prescribes that the Federal Reserve Banks shall have a minimum of 35% of lawful money reserves against deposits. The Fed- eral Reserve Act reduced the percentage of reserves so that the member banks, as a whole, must maintain an actual net balance with the Federal Re- serve Banks, ranging from 7% to 13%, with an average of about 9i^% as a minimum of their net deposit liabilities. Under existing reserve provisions, therefore, the amount of laAvful money in the vaults of the Federal Reserve Banks may be only 1/30 of the net de- posits of the member banks, as compared with minimum reserve requirements of 1/7 under the National Banking Act. This change in the reserve requirements opened the way to vast expan- sion. Advantage was taken of the opportunity. In the four years from June 30, 1914, to June 30, 1919, deposits in national banks, state banks and trust companies increased from $13,430,000,000 to $25,731,000,000, an increase of $12,301,000,000. From just before the Armistice of November 11, 1918, to November 17, 1919, there was an increase of $2,416,000,000 in the total deposits of national banks alone. From June 30 1914, to February 1, 1920, the amount of money in circulation increased from $3,402,000,000 to $5,846,000,000. The Federal Reserve Board had the power to control expansion by advanc- ing the Federal Reserve discount rate. Treasury influence in the Board was opposed to that course, and to the economic and banking judgment in the Board. It resisted the advance and controlled the Board's action. 1. — Do you regard this expansion of currency and bank credits as having taken place more rapidly than our production increased? 2. — Was this expansion, which put into the hands of our people an added pur- chasing power of, roundly, $15,000,000,000, the main cause of the general rise in prices ?* 3. — Could the war have been financed, and could our after-war requirements have been met without any, or with very much less credit inflation and currency expansion? 4. — Was Treasury judgment in respect to the Federal Reserve rate of dis- count influenced, after the Armistice, by the fact that the Treasury con- stantly needed to make fresh borrowings? • NOTE — The U. S. Bureau of Lai)or Statistics indicates an advance In the general level of wholesale prices from July, 1S14, to January, 1920, from 100 to 248. 19 5. — Did the action of the Federal Reserve Board in holding down the rate of discount stimulate to an excessive and harmful extent the provision of credits and financial facilities for the promotion and flotation of corpor- ate issues ? 6. — Ought the Federal Reserve Act to be modified so as to minimize the polit- ical influence in the management of the banks? 7. — Ought further inflation of currency and bank credits to cease? 8. — Ought there to be deflation by reducing the amount of currency and bank credits ? 9. — Do you believe that the amount saved the Government by the low rate of interest on Treasury loans was lost many times over through the higher cost to the Government of purchases, as a result of the rise in the general price level, due to inflation? 10. — Are you familiar with the plans that have been suggested for stabilizing the dollar, notably the one advanced by Professor Irving Fisher, of Yale University, and if so, what is your opinion as to the merits of such a pro- posal ? 11. — Has the sudden advance in the Federal Reserve rate of discount resulted in loss to investors, who, in good faith, purchased securities during the period when such promotions and flotations were made easy by the pre- vailing low rate of rediscount ? 12. — Ought Congress to revise the Federal Reserve Act in the light of five years' experience in operating the system? 13. — If there should be a revision of the Federal Reserve Act. what changes would you suggest? 14. — Have you any suggestions for new financial legislation in view of the rise in the price of silver? 15. — What, in your opinion, is the explanation of the phenomenon that while the outstanding volume of currency and credit has been vastly inereased, yet money is scarce, the prevailing rate of interest (which, of course, en- ters into the cost of all products) has been largely increased, and the sup- ply of funds available for business and investment has largely decreased? 20 QUESTIONNAIRE ON THE IMMIGRATION SITUATION BEJ'ORE THE WAR: In the past one hundred years over thirty-three million people from for- eign lands have come as immigrants to the United States. In 1910 the foreign- bom population of the United States amounted to 13,515,886 or 14.7 per cent, of the entire population. Although these individuals represented practically every foreign country, the great bulk of them were born in Europe. Asiatics are practically excluded by our laws and regulations, and few immigrants from Africa, Australia, and South America seek admission. There has been a marked shift in the sources of immigration from north- western Europe to southern and eastern Europe. While this change progressed rapidly, it had been in operation for so short a time before the Census of 1910 that practically half of our foreign-bom population were still from northwest- ern Europe (18.5 per cent, being from Germany, 10 per cent, from Ireland, 9.3 per cent from the Scandinavian countries, and 9 per cent, from Great Britain) . But this proportion changed rapidly from 1910 to 1914, during which the im- migrants from southern and eastern Europe were 69.8 per cent, of the whole number while those from northwestern Europe were only 17.6 per cent. This change has introduced races and nationalties differing radically from those which constituted the bulk of the population of the United States at the time of the Revolution, and of the immigration stream from 1776 to 1882. The Federal government took control of immigration in 1882, since which time an elaborate immigration law has been built up by successive steps. The principle underlying this law is that of exclusion of undesirables, that is, the admission of immigrants on the basis of certain te.?tii of Quality. These tests, culminating in the literacy test of 1917, now include almost every conceivable criterion of desirability, — ^physical, intellectual, moral, and educational. There is nowhere in the law any section seeking directly to secure restriction, that is, the limitation of numbers, though the literacy test operates in this direction. The Federal government has almost completely ignored the foreigner after admission. Practically no measures are established for his protection, guid- ance, advancement, or control so long as he does not break the law. The principle of deportation was introduced into the immigration law early in its existence, and has been extended until it provides for the deporta- tion of all aliens who have entered in violation of law, and also of those who for a variety of causes have become a burden on the community. In some cases there is a time limit, in others not. For many years the chief motive of immigration has been economic. Al- though there has been political and religious oppression in Europe, aliens have come here mainly in the hope of bettering their economic position. There has been a keen demand in the United States for their services, and at the present time a very high percentage, probably a majority of our industrial laborers are foreign-bom. The competition of foreign and American standards of living in many places has been so keen that American labor as a whole has arrayed itself against unrestricted immigration. Capital, on the other hand, in its search for a large cheap labor supply has encouraged immigration. 21 The granting of citizenship to aliens has been carried on under the pro- visions of a naturalization law which has been almost unchanged for over one hundred years. The tests and requirements for citizenship are therefore very much out of date. SINCE THE WAR: The Great War introduced certain new features into the immigration situation, and brought into prominence other features which had long been in existence but had nearly escaped observation. The interruption of communication with Europe reduced immigration to almost negligible proportions. Most of those who did enter came from Canada or Mexico. The application of the selective draft and other emergency measures showed that uncounted thousands of foreigners, however well disposed, had experienced only the faintest initiation into the real life of the nation. The cutting-off of fresh importations of foreign labor gave the laborers al- ready in the country a great advantage in industrial opportunity. The recognition of the failure of assimilation occasioned a vigorous move- ment for "Americanization." In some quarters it has taken the form of a de- mand for the enforced naturalization of aliens. The increased prominence and activity of ultra-radical elements has led to the extension and application of the deportation law, particularly with refer- ence to anarchists. Proposals have been made to prohibit absolutely the immigration of labor- ers for a term of years. Other proposals call for a limitation of the immigra- tion of any national group on the basis of a percentage of those already here. As a temporary measure Congress has extended the war time passport regula- tions for one year. 1. — What reasons, if any, are there for believing that the agricultural and industrial development of the United States would be seriously retarded by the complete suspension of immigration of unskilled laborers? 2. — If you object to complete suspension of immigration, what degree of re- striction could be allowed without serious economic consequences ? 3. — Have you observed any unfortunate social or political consequences as a re- sult of our past immigration policy? Give concrete instances, if possible. 4.— To what extent would the social and political advantages of a marked re- striction of immigration offset the economic disadvantages ? 5. — What is there in the "land of refuge" argument in favor of a non- restrictive immigration policy? 6. — All things considered, do you favor a decisive restriction of immigration by further legislation? If so, which of the methods frequently proposed do you prefer? 7. — What is your attitude upon Asiatic immigration? 8. — What plan for the better distribution of immigrants would overcome some of the evils of immigration? 9. — AVhat is your opinion of the success of the Americanization measures which have come under your notice and what improvements can you suggest? 10. — Has immigration in the past resulted in lowering the wages or stand- ard of living of American workingmen, or has it prevented them from rising? 22 11. — In what particulars do you regard our present naturalization procedure as unsatisfactory, and what improvements can you recommend? 12. — ^Would you favor taxing aliens until they take out citizenship papers ? 13. — Should we make it harder or easier for an alien to acquire citizenship? 14. — Do we need a thorough revision of our naturalization laws ? 15. — Should aliens be positively encouraged, or even coerced, to take out citi- zenship papers, and in what manner? 16. — Do you favor the deportation of aliens who have not become citizens with- in a reasonable period ? 17. — What is your opinion with reference to the deportation of "alien reds," anarchists and similar classes after they have been admitted ? 18. — Do you approve of the deportation law relating to anarchists and radicals, as now interpreted and applied (a) by the Department of Justice, (b) by the Department of Labor ? If not, what changes in interpretation or pro- cedure would you recommend ? 19. Would you favor the amendment of the immigration law in the following particulars ? (a) to provide the immigration authorities with information contained in foreign criminal and police records. (b) re-phrasing that part of the law which excludes criminals. (c) to provide a moderate increase in the physical requirements for ad- mission. (d) to require all aliens to register and report once a year to some govern- mental authority. (e) to strengthen the law with respect to the inspection of alien seamen. ( f ) to provide for the examination, as to eligibility of aliens seeking ad- mission into the United States, by consular or American immigration officials stationed abroad. 23 QUESTIONNAIRE ON AGRICULTURAL POLICIES The war years put to the test the productive power of American farms and the loyalty of American farmers. Every effort must now be made to rehabili- tate American farms throughout the reconstruction years already upon us. One great change brought by the war in our market for agricultural products which none must overlook is the growth of export trade. Thus be- fore the war we sent practically no dairy products to Europe. During the war we exported large quantities of manufactured dairy products. In value and in quantities our export trade in agricultural products during the war period in- creased several fold. Another vital change brought by the war is the necessity for increased in- vestments in labor saving machinery and devices made necessary because of the difficulties of getting and keeping an adequate supply of properly trained labor on the farms. Just as after the Civil War, therefore, credit and labor problems both assume a new importance. Our growing city populations are (Bering an ever-widening market to American farmers. Hence marketing facilities, co-operation, collective bargain- ing and other problems of that kind are given a new significance. This questionnaire is sent out in order to get concrete and definite proposals for the practical solutions of the difficulties which our farmers are facing at this time. It is the special desire of the committee that these questions be put before the rank and file of farmers in every section of the United States. 1. — Is the information as to crop conditions put out by the national Depart- ment of Agriculture satisfactory? If not what changes do you suggest? 2. — Is the market news service of the federal Department of Agriculture satis- factory? If not what changes do you suggest? 3. — Are the other services of the national Bureau of Markets satisfactory ? If not state particulars or give suggestions for improvements. 4. — Are there any special policies as to marketing and market facilities that should be adopted by state or national governments? 5.^ — Are any changes needed regarding standards as to grades of grains or as to containers for fruit and produce? 6. — Do you have suggestions as to policies regarding fertilizers? 7. — Have you any definite suggestions as to labels for feeds, fertilizers, in- secticides, etc? 8. — Any suggestions as to rural deliveries or parcel post? 9. — Are the services of the Farm Bureaus and county agents satisfactory? Give any suggestions. 10. — Have the operations of the Farm Loan Board been beneficial? 11. — ^What suggestions do you have regarding policies as to credits and loans to farmers ? 12. — Is there any special need for permissive legislation as to co-operative credit associations? 13. — Do you have any definite policies to suggest that will encourage and en- able tenants to buy farms ? 14. — Should co-operative organizations among producers be encouraged? 15. — ^If so are any special changes in state or national laws necessary or ad- visable? 24 16. — Should collective bargaining by organizations of farmers be legalized as proposed in the Capper-Hersmanbill?* 17._Four proposals have been advanced in case of disagreement under collec- tive bargaining whether by laborers in cities or by farmers : (1) To leave the power to strike uncontrolled by law (2) To require by law that there shall be no strike for a stated period such as thirty or sixty days until a public tribunal can hold public hearings and advise the public as to the merits of the controversy (3) To make arbitration compulsory (4) To make it unlawful to call a strike and to provide for judicial set- tlement of controversies as under the Kansas Industrial Relations Court law.f (5) Which of these plans would you think best suited to farmers organiza- tions? 18. — Should the above plans vary with the product? (Such as corn, wheat, to- bacco and other products that can be stored, and milk, fruits or other products that must be marketed immediately.) 19. — To what extent would you apply the conclusions you reach in questions 16, 17 and 18 to labor organizations in cities ? 20. — ^Were the services of Federal Employment Bureaus satisfactory so far as agricultural labor was concerned? 21. — Should there be a special railway rate for agricultural laborers traveling upon certificates issued by the U. S. employment service? 22. — Have you any evidence as to the proportion of boys leaving farms to join the army who did not return to the farms ? 23. — Have you any suggestions to make as to how the necessary supply of labor can be obtained and maintained on American farms? 24. — ^Would a non-restrictive immigration policy be beneficial to American farmers ? 25.. — Should we adopt a national policy that will tend to encourage American industry and manufactures so that the products of American farmers may be consumed primarily in this country? 26. — Are there special products of American farmers, such as cotton, tobacco and dairy products, for which we should develop foreign markets ? 27,— Should the products of American farms be protected against competition from similar products of other countries? 28.— Should the national government push large reclamation projects at this time? 29.— Do you believe that the farmer's interests would be furthered by an im- partial determination of the cost of production and of distribution of farm products by competent experts representing producers, distributors and the general public? •The bill provides for the existence and operation of labor, agricultural, vlneyardlsts, dairy, or horti- cultural organizations, corporate or otherwise, with or without capital, for the purpose of making collective sales of farm, orchard, plantation, ranch, dairy or vineyard products, produced by members or shareholders In the association. Contracts, agreements or combinations, made by members, shareholders, ofCIcers or di- rectors of such associations in making collective sales and prescribing conditions thereof, will not be regarded as combinations and conspiracies in restraint of trade, or an attempt to monopolize any part of trade or com- merce, and win not be in violation of any law of the United States. tNOTB. This law establishes a court succeeding to, and with powers of, the Public Utilities Commis- sion extended to cover manufacture of food and clothing, mining of fuel, and transportation of food, cloth- ing, and fuel; powers of full investigation, modification of labor contracts, issuing of orders and regulations with compulsory taking and operation of the industry after proper court proceedings under certain guaran- tees to workers and capital Invested in case of non-compliance or suspension of work. Collective bargain- ing with representatives of Incorporated unions or registered agents of unincorporated groups of workers recognized. Strikes and picketing unlawful Workers protected in giving testimony or making complaints. 25 30. — Should the distribution of garden seed by members of Congress be dis- continued ? 31. — ^What as to poHcies for eradication of tuberculosis and other animal dis- eases ? 32. — Do you favor stringent sedition laws? 33. — Should we adopt a policy of compulsory military training? 34. — Did you approve of the repeal of the daylight saving law ? 35. — Have you any suggestions as to Federal and State policies as to rural schools, and rural community centers? 36. — ^Are you in favor of appropriations by Congress for building national high- ways? 37. — Should the policy of the government as to its remaining natural resources be that of leasing to private operators or that of sales as heretofore ? 38. — Should there be governmental supervision (a) of monopolies affecting farm products and (b) of the products bought by farmers ? 39. — Should a supervisory body for such a purpose be instructed to give full publicity to all facts pertinent to such monoplies ? 40. — Shall the work of the Federal Trade Commission be abolished, continued or extended? 41. — Have you any suggestions as to any other points not covered in the above, such as taxation, transportation, and international relations. 42. — ^What are the chief farm products of your (a) farm. (b) section. 26 8 QUESTIONNAIRE ON THE MERCHANT MARINE The period of the Worid War witnessed an extraordinary change in Amer- ican sea-power. On July 1, 1914, there were 2,070,000 gross tons of ocean- going steam tonnage under United States registry.* The world's fleet of steam vessels on the same date totaled 43,140,000 tons ; Great Britain's fleet, 20,520,000 tons; Germany's, 5,140,000 tons. Thus the American ocean-going steam mer- chant marine comprised less than 1/20 of the world's total ; and was only 1/10 as large as Great Britain's, and 2/5 the size of Germany's. In the years before the war the United States relied upon other nations for overseas transportation. Less than 1/10 of our imports and exports during the first half of 1914 moved in American bottoms. American goods and American citizens ordinarily traveled the high seas under foreign flag. Five years later, on July 1, 1919, the situation was fundamentally different. The merchant steam fleet under United States registry had increased nearly five-fold to 9,820,000 gross tons. Instead of constituting only 1/20 of the world's total, it was more than 1/5, the world's total having increased but slightly on account of war losses. Instead of standing a poor third among the leading merchant marines, the American fleet now stood a strong second. Ger- many, second in importance in 1914, had been practically swept from the seas by the war. Great Britain's fleet, instead of being ten times as large as the American fleet as in 1914, was now only twice as large. In 1919 American goods once more moved in American vessels, nearly thirty per cent, of the imports and exports of the country being shipped under the American flag. After half a century of decline and decay, the United States merchant marine was back in great strength upon the high seas. Nor was this the full story. In the summer of 1919, the war shipbuilding program of the Federal Government was still proceeding apace. Despite the cancellations and suspensions of the months following the signing of the armis- tice, the program on July 1 was expected to add approximately 3,750,000 gross tons more to the American fleet. It was calculated that by the fall of 1920 the fleet would amount to not less than 13,000,000 gross tons. Great Britain's fleet at the same date could not much exceed 21,000,000 gross tons. The American merchant marine was certain to offer formidable challenge to Eng- land's mastery of the sea. The ownership and operation of the new American fleet are matters of vital importance. At present the vessels are owned predominantly by the United States Government. The sales policy of the United States Shipping Board has not been devised to transfer a large amount of tonnage to private hands. Not less than half the total fleet, and substantially more than that proportion of the larger vessels, will remain under government ownership at the middle of this year. This fleet is being managed and operated by private companies on gov- ernment account. Government and private-owned vessels ply the same trades and compete for the same business. The size of the new fleet, ownership of so large a part of it by the Federal Government, and the conditions under which the government vessels are being operated, present issues of the first magni- tude. • Salllngr vessels are omitted because of their relatively small and declining significance in overseas .tranaportatlon. The data are from Lloyd's Register of 1914-15. Lloyd's returns Include all vessels of over 100 gross tons, exclusive of those on the Caspian Sea and the Great Lakes of North America. 27 In the settlement of these issues, most careful consideration must be given to the following questions: Relating to Possible Policies of the Federal Government: 1. — Should the Federal Government retain title to the merchant vessels it now owns? If so, why? (a) If not, should the transfer of vessels to foreign registry be per- mitted? (b) Upon what terms as to (1) price, (2) period of payment, and (3) subsequent employment should the vessels be offered for sale ? 2. — If, in your opinion, the Government should continue to own the vessels, should it operate them? If so, why? If not, upon what general terms should the vessels be placed for private operation ? 3. — If the vessels are to be operated on private account, should there be a sub- sidy for the operators? If so, upon what should it be based, and how should it be administered? 4. — Should the Federal Government promote the establishment of important liner services ? If so, where and by what means ? 5. — What should be the policy of the United States Government with regard to : (a) the regulation of the freight rates (b) shipping pools and conferences (c) combinations of competing shipping companies (d) foreign combinations and pools 6. — Should the Federal Government (a) foster, or (b) actually provide, facili- ties for marine insurance in the United States? 7. — To what extent, and for what reasons, if at all, is a considerable merchant marine under the United States flag essential to the satisfactory develop- ment of our export trade? 8. — Should the United States maintain a seagoing merchant fleet even if the fleet cannot, under the competitive conditions of the present or near future, be self-supporting ? If so, what are the reasons for maintaining the fleet and what should be its size and composition? 9. — What should be the permanent policy of the Federal Government toward the shipbuilding industry in the United States? Relating to Fundamental Factors in the Shipping Situation : 10. — Is an excess or a deficiency of shipping the probable Outcome of the next three years ? In your opinion, what factors will contribute to the outcome you foresee? 11. — Are the vessels built on contract for the Emergency Fleet Corporation satisfactory from the point of view of the ship operator ? If not, in what respects are the ships unsatisfactory? 12. — Why has the sale of ships by the United States Shipping Board proceeded so slowly ? Specify the measures you think best designed to expedite sales. 13. — How rapidly can the American investment market be led to take ships ? What measures are most needed to increase investment in shipping capital in this country? 14. — In what proportion, if at all, do ship operating costs under United States registry exceed costs under foreign registry? Answer explicitly for each of the following elements : 28 (a) capital cost of the vessel (b) wages and accommodations for seamen (c) cost of fuel and supplies (d) total cost 15. — To what extent, and in what particulars, if at all, does the Seamen's Act place the American ship operator at a disadvantage in competition with foreign operators? 16. — Are the present American registry requirements prejudicial to the suc- cess of the American merchant marine ? 17. — What changes, if any, in the existing regulations should be made at this time? 18. — To what extent, and in what ways, if at all, do American ships suffer from lack of satisfactory agency connections in foreign ports? 19. — What are the best means for securing better agency connections? 29 9 QUESTIONNAIRE ON THE REGULATION OF COMMERCE AND INDUSTRY During the war the various governments of the world exercised greater control over business than before. Where a considerable amount of regulation had previously existed it was increased and in many, lines it was introduced for the first time. It is now necessary for the United States to determine its permanent policy and this questionnaire attempts to include the most impor- tant points to be considered in arriving at a conclusion. Had the war not occurred we could perhaps have settled these matters more slowly, gradually adjusting our policies as decisions became necessary. As it is, we must promptly reach conclusions on the large number of difiicult questions involved. We must determine to what extent government regulation should be continued, curtailed or expanded; over what classes of industries and activities it should be exercised; what agencies for regulation should be employed, and what devices they should use. On all of those mat- ters our judgments will be influenced by our views on the advantages and disadvantages of government ownership, operation and control. In answering the following questions, it is very important, first, to read carefully the entire list as, in some cases, opinions on the later ques- tions will have a distinct bearing on the earlier. If for any reason you do not find it convenient to answer all the questions here submitted, those printed in smaller type may be disregarded without prejudice to the others. THE FIELD OF REGULATION 1. What classes of business* should be subject to regulation? 2. What classes of business should be subject to no regulation or to a minimum ? 3. Are there any classes of business affected with a public interest, whose classification along the above lines is not entirely clear? If so, name several illustrations and indicate briefly the reasons for your uncertainty. 4. The Webb-Pomerene Act allows combinations for export trade but not for domestic trade. Do you approve of this distinction? 5. Do you consider the Webb-Pomerene Act effective in the sense that it is satisfactorily accomplishing the purpose for which it was enacted? 6. Do you think it is feasible to draw this distinction between combinations for ex- port trade and combinations not formed for that purpose or will the distinction necessarily disappear in a short time? 7. Are the classes of business properly subject to regulation somewhat permanently fixed or does the number change from time to time? 8. If the number is subject to change, has the tendency recently (during say the last 20 or 25 years) been to increase or to decrease the number which should be subjected to regulation? 9. What lines of government control, encouraged by the war, would you continue and what ones would you discontinue? 10. If some of them were a failure, how if at all could that failure have been prevented? 11. Which cases of increased regulation meet your approval and which your dis- approval? *For convenience the word business la used to Include all forma of commerce and Industzy. 30 THE EXTENT OF REGULATION 12. Does the growth in size in certain lines of business make advisable a larger amount of regulation than formerly? Give a separate answer for each of the following cases: (a) An increase in physical equipment and in volume of output but with no tendency toward monopoly. (b) An increase in equipment and in output accompanied by a tendency toward monopoly. (c) A combination of units formerly under separate control but without any increase in equipment or in output, the combination being formed for some other purpose than monopoly. 13. Is mere size the occasion for regulation or is size significant only in so far as it develops a power that must be regulated? 14. Does the growth in the number of organizations and associations of manu- facturers and others in similar or related lines of business, such as the various manufacturers' associations, make necessary or advisable a larger amount of regulation? 15. Should or should not the Government undertake to stimulate or stabi- lize industry by tariffs, subsidies, guarantee of return, or in other ways? If so, what classes of business should be thus stimulated or stabilized ? 16. Do you favor federal incorporation or license for those lines of business whose activities are clearly interstate ? Would the issue of a federal charter or license presumably be accompanied by some degree of regulation ? 17. Are the financial needs of the public utilities and especially of the railroads pressing at the present time? 18. Is there or is there not a probability that they will have some difficulty in marketing their securities in competition with those domestic industries which are subject to little or no regulation? 19. Will they probably encounter difficulty because of the higher yield on many for- eign securities and the growing tendency of Americans to invest abroad? 20. We are now a creditor nation and will not have to send large sums of money abroad each year to meet interest and dividend payments on our securities owned in foreign countries. Will this give a sufficient amount of new capital each year to oflfset the competition mentioned in questions 18 and 19 21. Presumably higher earnings would make possible the payment of such rates of return as would make the securities of these regulated companies a more attractive investment. Do you favor increases in prices, rates and fares that will make this possible and do you believe public opinion will support these in- creases? 22. If these increases are impracticable do you think it will be necessary and de- sirable for the government to furnish the needed funds which it can probably borrow from the public at a relatively low rate by the sale of government bonds? 23. (a) Combinations of exporters are permitted by the Webb-Pomerene Act. Does the fact that such combinations are permitted indicate that they may properly be subjected to regulation? (b) Should the provisions of the Webb-Pomerene Act be extended to permit combinations of importers and if so should they be regulated? (c) Under the direction or with the approval of their respective governments, manufacturing, commercial and banking concerns in foreign countries are organizing on a large scale to capture world trade. Should similar or- ganizations be encouraged in the United States? 24. Would such a step necessitate regulation of these large units? 25. The Supreme Court of the United States recently refused to dissolve the United States Steel Corporation, holding that "the law does not make mere size an offense or the existence of unexerted power an 31 offense." Assuming that this assurance will encourage the formation of large organizations, will this make necessary a larger amount of regulation than in the past or do you think the public interests are sufficiently protected by existing legislation? 26. To what extent should the Government encourage co-operative organi- zations of the sort illustrated by our Farm Loan System? 27. Irrespective of your personal convictions on the subject of regulation, do you think that public opinion strongly favors or disapproves of it? THE CHARACTER OF THE REGULATORY BODY 28. In cases where Federal and State authorities each have regulatory power over the same subject and you believe there should be regula- tion, do you favor the exercise of power by the State or by the Federal authority? 29. There are four leading methods of regulation: (a) through mere statutory en- actment interpreted by judicial decision, (b) by statutory grant of regulatory authority to an individual, as for example, the Secretary of Commerce, (c) through statutory grant of regulatory authority to a special commission created for the purpose, as the Interstate Commerce Commission, the Federal Trade Commission and the various public service commissions and (d) through the ex- ercise of the tax power. In general, which of these methods do you prefer? 30. Do you prefer one of these methods in some cases and another in others? Explain. 31. Is the public, in your judgment, prejudiced against the courts? If so, is this public prejudice so pronounced as seriously to impair the value of the courts as regulatory agencies ? Can you suggest methods of adequately counteracting this prejudice? 32. Do you favor the grant of regulatory authority to a single individual, such as the Secretary of Commerce or of Labor? If so, for what classes of business? What are your reasons for or against such an arrange- ment? 33. Do you favor the repeal of the Sherman Act, the Clayton Act and other anti-trust legislation without the enactment of other regulatory legisla- tion? 34. In view of the recent decision of the United States Supreme Court in the case against the United States Steel Corporation, do you favor the enactment of leg- islation forbidding more specifically than does the Sherman Act the creation of combinations? 35. If so, what criteria do you suggest for distinguishing those combinations you wish to prohibit from those you do not wish to prohibit? 36. Does the present type of Public Service Commission furnish reasonably satisfactory machinery for the regulation of rates and services of public service corporations? 37. Would the creation of a board or boards on which the public and the public service companies were equally represented, such boards to be charged with the duty of regulating service or with the duty of suggesting regulations of service to a public service commission, be an improvement on the present method of regu- lating service? PRACTICES TO BE REGULATED 38. In what classes of business should prices, rates or fares be regulated? 39. In what ones should the quality of service be subject to regulation? 40. Should accounting methods be supervised or controlled? If so, for what classes of business? 32 41. Should securities be issued only after approval? If so, in what classes of business and upon what basis should approval be given? 42. There are three main types of pools as indicated below, all of which are today forbidden. Do you consider any of them beneficial? If so indicate which you think should be permitted: (a) Output or traffic pools whose members consider their output as forming an imaginary fund or pool which they divide among themselves according to some agreed basis. (b) Territorial or market pools whose members divide the market on a terri- torial basis, each reserving to himself the exclusive privilege of sales in an agreed area. (c) Income and profits pools whose members concentrate in the hands of a cen- tral board all requests for bids. The contracts are assigned by this board to one of its members, the other bidders deliberately submitting high es- timates. All receipts are pooled and divided among the members on an agreed basis. DEVICES TO BE EMPLOYED IN REGULATION 43. Is enforced publicity effective in dealing with undesirable practices? If so, what methods of securing publicity would you recommend? 44. Should regulatory bodies have power to impose uniform methods of ac- counting? 45. Should some regulatory individual or body be empowered to advise concerning the legality of proposed practices? 46. What is your opinion of the way in which the Federal Trade Commis- sion has functioned? If it has failed, is this due to defects in the law or to the way in which the law is administered? 47. Should the power to tax be used by the Government for purposes of regulation? If so, in what cases do you think it applicable? 33 10 QUESTIONNAIRE ON THE RAILROAD PROBLEM After twenty-six months of government operation of the railroads, the sys- tems were, on March 1, 1920, returned to their owners for private operation under government regulation. The scope of the future regulation of the railroads has been determined by the "Transportation Act of 1920" which was approved by the President just before the return of the railroads to their corporate owners. In legislating for the termination of government operation of railroads, Congress definitely decided in favor of private ownership and operation. The conditions under which private operation was resumed on March 1, 1920, and the obligations of the government to the railroads and the railroad companies and the public were set forth in detail in the Transportation Act. Experience will show whether this act has dealt correctly and adequately with the problems of the future regulation of the railroads. The railroads are the largest and most important of all public utilities, but they are only one of many classes. For the most part public utilities, other than the railroads, are regulated solely by the several states. The legislation of the states for the regulation of public utilities differs widely in the several commonwealths, but the laws that have been enacted are concerned mainly with the charges and services of the utilities, and with the problem of determining the value of the properties subject to regulation. For many years earnest consideration has been given to the waterway policy that should be adopted by the United States. To what extent should in- land waterways and water terminal facilities be developed by the Federal Gov- ernment and by the states ? Should the country adopt the policy of co-ordinated development and use of waterways and railroads ? The experience of the United States Railroad Administration in organizing transportation upon certain of the inland waterways has attracted attention to the possibilities of increasing the use of waterways and to the importance of co-ordinating railroads and water- ways, with a view to combining them into a unified transportation system. The policy of the United States towards waterways is, however, for the most part yet to be determined. 1. — What is the preferable policy, government or corporate ownership and op- eration of railroads in the United States? 2. — Did the Government act wisely in returning the railroads, March 1, 1920, to their corporate owners for operation ? 3. — Do you approve of the policy of railroad rate-making and regulation es- tablished by the "Transportation Act of 1920," — ^the policy that the rates shall be designed to yield net railway operating income for railroads (as a whole, not for individual companies) of 51/^ to 6 per cent per annum upon the actual aggregate value (not upon the capitalization) of the railroads, and that individual companies having a railway operating income above 6 per cent shall turn half of their surplus earnings into a fund administered by the Interstate Commerce Commission and used principally to provide additional equipment or facilities and to make loans to companies requiring capital ? 4. — Do you favor the determination of the working conditions of railroad em- ployees by negotiations of employees and employers and the settlement of 34 disputes as to working conditions (not including wage questions) by dual boards created by agreements of the men and the companies and composed of an equal representation of the employees and the employers ? 5. — Ought railroad wages to be fixed by negotiations of the employees and the companies — ^with a compulsory appeal, in case of disagreement, to a tri- partite Labor Board of nine men, three representing the employees, three the companies, and three the public? 6. — Should the findings of such a Labor Board be made legally binding on the parties concerned, or should public opinion be relied upon to enforce the decisions ? 7. — What is your opinion as to the wisdom of requiring a railroad company to secure from the Interstate Commerce Commission a certificate declaring that a proposed extension of the carrier's line, or the construction of a new railroad or the abandonment of an existing line is a public necessity or con- venience ? 8. — ^What is your opinion as to the policy of requiring a railroad company to allow its terminals to be used by other rail carriers upon the payment of a reasonable rental for such use ? 9. — (a) Is it desirable that railroads should be required to make physical con- nection of their lines with the terminals of carriers by water at sea- board, lake, river, and canal ports? (b) Is it practicable to enforce such a requirement? 10. — The "Transportation Act of 1920" provided that upon the termination of Federal control, the boats, barges, tugs and transportation facilities on in- land, canal, and coastwise waterways that had been acquired and operated by the Railroad Administration should be turned over to the Secretary of War to operate : (a) Is it your opinion that it should be the permanent policy of the Fed- eral Government to conduct transportation upon any of the inland waterways in the United States? (b) If you favor such a policy, upon what waterways should the service be performed? (c) Should Congress make appropriations for the construction, by the Secretary of War, of terminal facilities at river and canal ports ? 11. — The "Transportation Act of 1920" gives the Interstate Commerce Commis- sion power to fix the maximum and minimum rates by an all-rail route, and maximum rates, only, by a joint rail-and-water route. Should government regulation of the rates of domestic carriers by water be as complete as the regulation of railroad charges ? 12. — What measures, if any, in addition to those that have been adopted by Con- gress, should be enacted to further the co-ordinated development and use of railroads and waterways in the United States ? 13. — The "Transportation Act of 1920" requires the Interstate Commerce Com- mission to prepare and adopt a plan for the grouping, or consolidation, of the many existing railroad lines into a limited number of strong competi- tive systems — ^the consolidated systems to preserve, as far as possible, the present competing routes and channels of traffic by rail. Voluntary con- solidations of railroads, in accordance with this general plan, may be per- mitted by the Commission. 35 Should the railroads be compelled to consolidate in accordance with the plan adopted by the Commission? 14. — Should the consolidated railroad companies of the future, whether formed voluntarily or upon compulsion, be required to secure a Federal charter? 15. — If Federal Incorporation of railroads is required should the law provide for the retention by the states of the powers of police regulation and local taxation ? 16.— Has Congress acted wisely or unwisely in giving the Interstate Commerce Commission power to compel a change in an interstate rate which, in the judgment of the Commission, causes an undue discrimination because of its relation to interstate rates that the Commission may hold to be reason- able? 36 11 QUESTIONNAIRE ON FEDERAL TAXATION In discussing the federal tax system and its revision, it is necessary to consider (a) the amount that must be provided by taxation, and (b) the particular taxes that are to be used. The amount that must be provided by taxation turns on the matter of actual and prospective expenditures. As to these no one can speak with au- thority; uncertainty is the one indispensable and controlling fact in this con- nection. After careful consideration it is believed that the general statements set forth in the Appendix (pages 43-44) are as fair and precise as circum- stances permit. As to the particular taxes that may be used, the estimates for receipts for 1920 indicate that $5,159,000,000, or practically 85% of the ordinary re- ceipts of the federal government will be derived from internal taxes. Some idea of the relative importance of the several taxes or groups of taxes which make up this stupendous tax budget may be derived from the detailed state- ment of estimated internal revenue receipts given below. These figures may be grouped or combined in a variety of classifications, which though necessa- rily rough, bring out with substantial accuracy the principal characteristics of the federal system of internal taxes. The income and excess profits taxes are expected to yield $3,750,000,- 000, or nearly 73.7% of the total; this indicates the extent to which our reve- nue system rests on the basis of income taxes alone. If we combine the in- come, profits and estate taxes as representing what are often roughly called "taxes on wealth and income," it follows that practically 75% of the total is collected from this source. Of the $3,750,000,000 from income and profits taxes it is estimated that about $1,400,000,000 will be derived from the individual income tax, $650,000,- 000 from the corporation income tax, and $1,700,000,000 from the war-profits and excess-profits tax. The corporation income tax and the profits tax repre- sent a draft of $2,350,000,000 (45% of the total), levied directly on the in- come of corporations. If we add the capital stock tax, the levy on corpora- tions rises to 47% of the total; and if we throw together the corporation in- come tax, the profits tax, the tax of transportation and insurance, the special taxes on business and the stamp taxes — adding as the facts warrant $460,- 000,000 (or a little less than 1-3) from the individual income tax as being derived from trade and business — we arrive at a combined levy of $3,260,700,- 000, or more than 63% of the total, laid upon the business of the country or upon the necessary processes of trade and commerce. The taxes imposed on beverages, on tobacco, on admissions and dues, and the various excises imposed, represent roughly and in the main the im- post on articles of non-essential consumption. They amount in the aggregate to $851,100,000 or over 16% of the total. These facts may be summarized as follows: ESTIMATED INTERNAL REVENUE RECEIPTS For the fiscal year ending June 30, 1920 Sources of Revenue Estimated (Arranged in accordance with titles of the Revenue Act of 1918) Receipts TITLES II AND III Income and profits tax $3,750,000,000 37 ESTIMATED INTERNAL REVENUE RECEIPTS— Continued Sources of Revenue Estimated (Arranged in accordance with titles of the Revenue Act of 1918) Receipts TITLE IV Estate tax $100,000,000 TITLE V Transportation of freight $115,000,000 Transportation of express 18,000,000 Transportation of persons 95,000,000 Seats, berths and staterooms 6,000,000 Oil by pipelines 10,000,000 Telegraph, telephone and radio messages 25,000,000 Leased wires, or talking circuits Insurance (life, marine, inland, fire and casualty) 15,000,000 Total $284,000,000 TITLE VI Distilled spirits and alcoholic beverages $76,000,000 Non-beverage alcohol 44,000,000 Beverages, etc., non-alcoholic, Sec. 628 35,000,000 Beverages, etc., non-alcoholic, Sec. 630 35,000,000 Total $190,000,000 TITLE VII Cigars $51,000,000 Cigarettes 160,000,000 Snuff 6,500,000 Tobacco, chewing and smoking 73,000,000 Cigarette papers and tubes 2,000,000 Floor taxes 3,700,000 Total $296,200,000 TITLE VIII Admissions to theaters $76,000,000 Club dues 4,000,000 Total $80,000,000 TITLE IX Automobiles, etc $150,000,000 Pianos, organs, phonographs, etc 7,600,000 Tennis rackets, sporting goods, etc 1,250,000 Chewing gum 1,000,000 Cameras ' 750,000 Photographic films and plates 400,000 Candy 40,000,000 Firearms, shells, etc 4,000,000 Hunting knives, dirk knives, daggers, etc 20,000 Portable electric fans 400,000 Thermos bottles, etc 160,000 Cigar or cigarette holders and pipes 70,000 Automatic slot device vending and weighing machines 100,000 Liveries, livery boots and hats 200,000 Hunting and shooting garments, etc 500,000 Articles made of fur, etc 20,400,000 Yachts, motor boats, etc 100,000 Toilet soap and toilet soap powders 3,000,000 Motion-picture films leased 3,500,000 Sculpture, paintings, etc 1,250,000 Carpets and rugs, wearing apparel, etc 20,000,000 Jewelry, watches, clocks, etc 20,000,000 Perfumes, cosmetics, and patent and proprietary medicines 8,000,000 Excise taxes collected under repealed law 2,400,000 Total $285,100,000 38 ESTIMATED INTERNAL REVENUE RECEIPTS— Continued Sources of Revenue Estimated (Arranged in accordance with titles of the Revenue Act of 1918) Receipts TITLE X (Special taxes, including taxes under certain other acts) Corporations, capital stock tax $75,000,000 Brokers, stock, etc 3,000,000 Theaters, museums, etc 3,500,000 Bowling alleys, billiard and pool tables 3,000,000 Shooting galleries and riding academies 100,000 Passenger automobiles for hire 3,500,000 Use of pleasure boats, etc 1,500,000 Manufacturers of cigars, cigarettes and tobacco 2,100,000 Narcotics, including special taxes 1,500,000 Total $93,200,000 TITLE XI Documentary stamps, etc $50,000,000 Capital stock transfers 15,000,000 Sales of produce, etc. (future deliveries) 8,000,000 Playing cards 2,500,000 Total $75,500,000 MISCELLANEOUS Adulterated and process or renovated butter; mixed flour $140,000 Oleomargarine 2,360,000 Sales of condemned Government property ; receipts under repealed laws ; and other receipts not provided for herein 2,500,000 Total $5,000,000 Grand Total $5,159,000,000 The following questions are submited in the hope that the answers will throw light upon the matters specified: 1. In view of commercial and industrial conditions and the budgetary pro- spects noted in the Appendix, should the aggregate tax burden be reduced in the near future? (The question of substitutes for particular taxes is taken up separately below.) (a) Do you favor such a reduction, even though it would necessitate further borrowing? (b) Should Congress abandon or suspend the sinking fund provi- sions of the Victory Loan Act approved March 3, 1919, in ac- cordance with which an expenditure of $287,500,000 is included in the estimates for 1921? 2. Is the preesnt system of internal taxation, with its emphasis upon the in- come basis and its levy (at least in the first instance) upon business and commercial processes, in the main sound? If not, what general changes in the tax system would you recommend? (Opportunity for criticism and suggestion in connection with particular taxes is given below.) 3. It is widely charged that the income surtaxes (rising to 65^) are exces- sive and beyond the point of maximum productivity; that they cannot be collected since the wealthier taxpayers can invest their money in munici- pal bonds and "tax-free" securities; that such wealthier taxpayers offer an important and indispensible market for industrial securities; and that the high surtaxes are thus seriousl preventing the expansion of industry and foreign trade: (a) Is this criticism sound in whole or part? (b) If the higher surtaxes be reduced would it be necessary to find alternative sources of revenue? If so, indicate in general the re- 39 ductions you would recommend in the surtax rates and what alternative sources of revenue should be utilized. (c) Should efforts be made to subject to the federal income tax in- terest from tax-free securities (except Liberty Bonds and Victory Notes wholly exempt from the federal income tax) ? 4. Should there be a differentiation of rates in favor of so-called "earned" as distinguished from "unearned" income? If so, indicate the important classes of income which should be treated as "unearned," classifying in particular the more difficult kinds of income, such as profits from a large manufacturing business (not incorporated) ; dividends from stock in a small incorporated business ; farm rents : interest from small savings bank deposits, etc. 5. Should there be complete exemption of, or a lower rate of taxation on, that part of the net income which is left in the business or saved and reinvested ? (a) In the case of business concerns. (b) In the case of wage earners, salaried and profesisonal men. 6. Is amendment or revision desirable in the following features of the indi- vidual income tax? If so, indicate briefly the nature of the change rec- ommended : (a) In the personal exemptions (§1,000 for a single person, $2,000 in the case of the head of the family or a married person living with husband or wife). (b) In the $200 credit or allowance for "each person dependent upon and receiving his chief support from the taxpayer, if such de- pendent person is under 18 years of age or is incapable of self- support because mentally or physically defective. (c) In the normal tax rates (4% upon the first $4,000, and 8% there- after) . 7. Is amendment or revision desirable in the following features or provi- sions of the corporation income tax? (a) Should corporations be exempt as corporate entities, leaving their stockholders subject to full normal tax and surtaxes upon divi- dends received? (b) If answer to (a) is affirmative, what new source of revenue is suggested as a substitute for the loss of the present tax on the undistributed profits of corporations? (c) If answer to (a) is negative, should the corporation tax of 10% be reduced to correspond to the 4-8% normal tax applicable to the income of individuals? (d) Should the specific exemption of $2,000 be abolished, retained, or increased ? (e) Should the provisions of the law (Section 202) or of the regula- tions relating to the exchange of stock or securities in connection with the reorganization, merger, or consolidation of corporations, be modified? And if so, in what way? (f) Should corporations be allowed to treat as deductions, gifts or subscriptions to the Red Cross and other organizations operated for religious, charitable, scientific, or educational purposes, etc.? (g) Other suggested changes in the income tax as applied to corpo- rations. 40 8. Do you regard the income tax (individual and corporation) as unneces- sarily complicated? And if so, would you secure simplification: (a) By the sacrifice of complicating provisions inserted to make the tax more equitable (please specify). (b) By the sacrifice of administrative safeguards at the expense or risk of evasion (please specify). (c) By substituting taxes which are held to be simple of operation, such as taxes on sales, land, "breakfast-table taxes," etc. (please specify) . EXCESS PROFITS TAX: (Friends of the excess profits tax defend it on the ground that it raises a very large and needed revenue from corporations which make abnormal profits, primarily at present because of conditions created by the war; that abnormal gains frequently result in whole or part from activities and expenditures of the Government; that the tax curbs and falls in large part upon the profiteer, while it protects the corporation with low or merely normal profits (below 8% of the invested capital) ; and that as applied to corporations it serves as a balance or equivalent for the heavy surtaxes im- posed upon that part of the profits of partnerships and individual business men which is left in the business, and not withdrawn for consumption. Critics of the tax charge that the attempt to tax high profits is an "attack on success," and based on false principles; that it does not curb the profiteer, but is shifted with additions to the general consumer, thus aggravating the high cost of living; that it is so complicated that it can neither be obeyed nor administered intelligently; and that the "invested capital" on which it rests is not only complex but in its effects capricious, unequal, and demoralizing — penalizing small, conservative, and undercapitalized corporations, and putting a premium on overcapitalization, combination, and doubtful methods of financiering.) 9. Surveying all aspects of the excess profits tax, should it be repealed or retained? State briefly the principal grounds on which your conclusion rests : (a) If you favor its repeal, what tax, or source or revenue, would you substitute for it? (b) If you are in favor of its retention do you recommend its modi- fication, and if so, in what general respect? (c) If you have had personal experience with the application of this tax to particular corporations, state whether such corporations have secured a fair and reasonable allowance of invested capital. SUBSTITUTES FOR THE EXCESS PROFITS TAX: (In his letter of March 17, 1920, to Chairman Fordney of the Committee on Ways and Means, the Secretary of the Treasury recommended as a substitute for the excess profits tax a flat tax of 20% on the undistributed profits of corporations, with a reduc- tion of the (individual) surtaxes attributable to that part of the net income which is saved and reinvested in business or property yielding taxable income, and with a limita- tion upon the total amount of such (reduced) surtaxes to the same percentage (i. e., 20%) of the reinvested income, as the rate imposed upon the undistributed profits of corporations. "The maximum upon such saved income would thus be approximately the same whether reinvested by the individual, the partnership, or the corporation, and whether reinvested personally by the stockholders of a corporation, or by such corpo- ration for its stockholders." The purpose of this proposal is to simplify the excess profits tax, put corporations and partnerships or individual business men on the same basis, so far as may be, with respect to the taxation of profits left in the business, or saved and reinvested, and to stimulate saving and reinvestment by a reduction of the surtaxes attributable thereto.) 10. Do you favor amendatory legislation along the above lines? 11. It is widely proposed to substitute for the excess-profits tax and for other of the more obnoxious taxes now collected, a tax at a low rate on sales. 41 (a) As bearing on this proposal, have you reason to beheve that the income and profits taxes (one or both) are in material part shifted to consumers? (b) In particular, would prices have been materially lower since the United States entered the war, if income and profits taxes had not been increased; and would the repeal or substantial reduc- tion of these taxes operate to bring about materially lower prices in the future? (c) Do you favor or oppose the introduction of a tax on sales? Give general grounds of approval or disapproval. 12. If in favor of a sales tax, indicate the form of the tax which you recom- mend in the following particulars: (a) Should it be confined to sales of commodities; or include sales of personal services (e. g. of lawyers, actors, commission men, etc.) and sales of the use of property or capital (i. e. for which rent is paid to landlords, interest to bankers, etc.) (b) Should it be confined to sales (retail) for purposes of personal consumption; or be applied to wholesale dealers, to sales of ma- terials and supplies (e. g. coal) to be used in manufacturing or other "productive consumption," and to sales of capital as- sets (e. g. an entire manufacturing plant, land, securities sold by brokers, underwriters, etc.) ? (c) Should small dealers be exempt — e. g. newsboys, peddlers, small farmers, domestic servants (if sales of service are to be in- cluded), etc.? (d) Should the tax be imposed on each sale, or upon the aggregate monthly or quarterly "sales" of dealers? 13. What tax or taxes should be repealed (or reduced) if a tax on sales is introduced ? CONSUMPTION TAXES OTHER THAN A GENERAL TAX ON SALES: 14. Should the following taxes on articles of consumption be repealed, re- tained with substantially their present form and rates, or essentially modified? Please specify how: (a) Taxes on alcohol and beverages imposed by Title VI, particu- larly the tax on cereal b verages, etc. imposed by Section 628, and the tax on soft drinks, ice-cream, etc. imposed by Section 630. (b) Taxes on cigars, tobacco, and manufacturers thereof imposed by Title VII. (c) Tax on admissions and dues imposed by Title VIII. (d) Excise taxes on automobiles, pianos, etc. imposed by Section 900 (Title IX). (e) The "excess-price" or "luxury taxes" imposed by Section 904 (Title IX). OTHER TAXES: 15. Should the following taxes be repealed, retained with substantially their present form and rates, or essentially modified? If in favor of repeal, please explain briefly the reason for your conclusion; and if in favor of modification, indicate briefly the changes desired: 42 (a) Estate tax (Title IV). (b) Tax on transportation and other facilities, and on insurance (Title V). (c) Special taxes including the capital stock tax (Title X). (d) Stamp taxes (Title XI). (e) Tax on employment of child labor (Title XII). 16. Do you regard the administration of the income tax as unduly central- ized at Washington? If so, (a) Would you favor larger appropriations for the employment of a larger force of skilled assessors to be located at the various collectors' offices? (b) Or should the present force be redistributed so as to give better local service, even at some sacrifice of uniformity of treatment? (c) Do you regard strict enforcement of federal tax laws as unde- sireable, desirable, or desirable only if it can be secured at a moderate cost? (d) Should tax collectors of internal revenue be "taken out of poli- tics" and placed on a civil service basis? QUESTIONS OF ADMINISTRATION: 17. Please state your attitude on any of the following administrative ques- tions about which you have a definite opinion: (a) Should changes in Treasury Decisions and Regulations not im- mediately caused by court decisions or opinions- of the Attorney General, be made effective only from the date of approval? (b) Should the Commissioner of Internal Revenue with the consent of the taxpayer and the approval of the Secretary of the Treasury (or under other public safeguards) be empowered to make a final and conclusive settlement of any tax claim or assessment, which shall not thereafter be reopened by the Government nor modified by any officer or court of the United States, except upon a showing of fraud or misrepresentation of fact materi- ally affecting such settlement? (c) Should an Advisory Tax Board or Board of Review (or region- al boards of the same character) be created, to which the tax- payer may appeal in an informal way, and upon which the tax- paying public shall have adequate representation? If so, de- scribe briefly the character of the board or agency desired, (d) Other questions of administration. APPENDIX RECEIPTS AND EXPENDITURES FISCAL YEAR 1920: The indications now are that the ordinary receipts for the year ending June 30, 1920, will equal, or slightly exceed the ordinary and special disbursements for the same period, excluding the substantial railroad deficiency now under consideration, the floating debt and unliquidated war claims. Inasmuch as deferred installments of the Victory Liberty Loan, aggregating $1,032,000,000 were paid during this fiscal year, with drastic economy on the part of the administration, it should be possible during this year to pay all ordinary disburse- ments from the ordinary receipts, and to reduce the outstanding floating debt by approxi- mately $1,000,000,000. The floating debt (including $3,633,804,490 certificates of indebted- ness on June 30, 1919) should, it is generally agreed, be extinguished as soon as possible. 43 The preceding conclusions rest on the following estimates: In the first eight months of the fiscal year 1920 (i. e., to the close of February, 1920), the total ordinary receipts, plus receipts from the Panama Canal, amounted to $3,714,928,461 ; whereas the total ordinary and special disbursements for the same period amounted to $4,490,636,239. The total ordinary and special disbursements for the month of February, 1920, amounted to $295,457,433. As- suming that the ordinary and special disbursements will continue at the rate of $300,000,000 a month and that $200,000,000 should be added as a factor of safety and for special dis- bursements from new appropriations, the total ordinary and special expenditures for the fiscal year 1920 will amount, in round figures, to $5,900,000,000. The total ordinary receipts (including receipts from the Panama Canal) for the entire fiscal year 1920 are estimated at $6,100,000,000. This estimate of receipts assumes that the customs revenue, miscellaneous revenue and tolls from the Panama Canal will continue for the remainder of the year at sub- stantially the same rate at which they have flowed in during the first eight months of the fiscal year, and that the internal receipts, based upon latest official estimates, will amount to $5,159,000,000. In the estimates of receipts considerable uncertainty attaches to the install- ments of the income and profits taxes payable on March 15 and June 15, 1920; and the official estimates of the internal revenue receipts may fall short by $100,000,000 or $200,000,000. The preceding figures are exclusive of transactions involving the principle of the public debt except the purchase of obligations of foreign governments during the present fiscal year. FISCAL YEAR 1921: Departmental estimates of expenditures and receipts for the year ending June 30, 1921, will be found in the Annual Report of the Secretary of the Treasury, for 1919, pages 200- 206. The estimated receipts, on the basis of existing tax laws, are there placed at $5,620,350,000 and the estimated expenditures (incomplete) at $3,973,797,985, leaving an excess of estimated receipts over estimated expenditures (incomplete) of $1,646,552,015. The estimates of expenditures are probably adequate for those public functions and activities which it is known will be continued. They include $287,500,000 for the institution and main- tenance of a sinking fund; but they contain nothing for soldiers' bonus, railroad guarantee, increased compensation for Government employees, or new construction in the navy, and only $34,590,100 for the United States Shipping Board. However, there is little likelihood that omitted or incomplete items of expenditures will exceed or even reach the balance of $1,646,552,015 noted above. Accordingly, unless the income and profits taxes fall off seri- ously because of business depression, or unless unexpected appropriations of great size are authorized and spent in this year, there will be a comfortable margin over disbursements to be used in reducing the public debt. While there is in this forecast no reason for apprehen- sion, there is also no reason for undue optimism. The factors of uncertainty are not only numerous but they are serious. The "incomplete" or omitted items of expenditure are likely to be heavy when they materialize. A falling off in the yield of the income tax is possible, and in the yield of the excess profits tax it is highly probable. Moreover, the floating debt must be reduced and should, if possible, be extinguished. It cannot be carried indefinitely without forcing a funded loan, which, under existing conditions, would present serious diffi- culties. Furthermore, it is important to remember that there mature on January 1, 1923, approximately $750,000,000 of War Savings Certificates, and on May 20, 1923, nearly $4,500,000,000 of Victory Notes, and that either to extinguish these obligations in part or to refund them on favorable terms at maturity, it is necessary to have had for sometime in advance a substantial excess of current receipts over current disbursements. FISCAL YEAR 1922: After the fiscal year 1921 we enter the field of mere conjecture. A large shrinkage in one source of revenue — salvage of war materials and repayment of special appropriations by the Wheat Director, etc. — may confidently be expected, and this shrinkage, as compared with estimated receipts from this source in 1921, may reach as high a figure as $800,000,000. Among those who have ventured to make estimates on the subject, a majority have expressed the opinion that the expenditures for 1921 are not likely to be less than $4,000,000,000. If the receipts for 1922 — on the basis of present tax laws — are not likely to fall short of the receipts of 1921 by more than $800,000,000; and if the expenditures are not likely materi- ally to exceed $4,000,000,000, there remains a comfortable margin of probable receipts over probable expenditures which would warrant plans for a reasonable reduction in the burden of taxation for the fiscal year 1922 and thereafter. 44 12 QUESTIONNAIRE ON CONSERVATION OF NATIONAL RESOURCES Our natural resources are those material elements and material products upon which man must depend primarily for the maintenance of life in reason- able comfort, and of prosperous commercial activity, such as air, water, soil, fuel and fertilizer minerals and forests. Grain, cattle, orchards, and the like, are not regarded as natural resources, although their production depends on nat- ural resources. Forests, however, take so long to mature that, although analogous to orchards, they must be classed and conserved with other natural resources. The natural resources of our country were once so plentiful that only the farseeing and cautious realized their possible exhaustion. Until recently, the general thought was that we could never use up our coal, natural oil and gas, and phosphates and other fertilizer bases ; that we would always have plentiful forests, usable waterways and sufficiently productive soils. The conservationists, under Koosevelt's leadership, realized that the safety and welfare of our country, ourselves, and our posterity, depended on stopping waste, conserving natural resources, and restoring what had been impaired. The Roosevelt conservation policies thus born are epitomized below. Our prodigal use of natural resources has been the principal factor in the huge wealth we have piled up. Accumulations from that source are at length foreshadowing their end. We can no longer safely shut our eyes to the fact that the end is in sight for timber, oil and gas, iron ore, and many other nat- ural resources, and that conservative economy and foresight alone can ward off national disaster. Conservation does not contemplate non-use. It is simply the wise use of our natural wealth, so that the irreplaceable resources like oil and coal may last as long as such use will permit, and particularly so that the replaceable re- sources, like the soil and the forests, may be assured (and even improved) for an time in condition and in quantities to meet the needs of the public. NON-METALLIC MINERALS An admirable leasing law for oil, gas and coal, and for the bases of fer- tilizers like phosphates, in land belonging to the United States, has been passed this winter by a Republican Congress, fifteen years after it was first advocated by President Roosevelt. It will not only conserve these minerals on the public domain, but will undoubtedly yield in royalties to the people of the United States, as against the old law which it replaces, money enough from coal, and again enough from oil, to pay for our share in the war. Wasteful methods of mining and producing prevail on private land, how- ever, and there has been no effort as yet, other than educational, to conserve these privately-owned natural resources. Oil and gas may not last in this country in abundance more than twenty-five years. Our best coal will be mined in less than one hundred years. 1. — Should our Government require from lessees of the public non-metallic minerals such methods of mining and producing as will insure the least waste consistent with practical production of the oil, gas, coal, phosphate, etc. 2. — Should miners and producers of privately-owned non-metallic minerals be required by law to practice similar avoidance of waste in production ? 45 3. — Should there be restriction of export of oil, coal, phosphates, etc., mined or produced in this country by lessees from the Government? 4. — Do you favor Government ownership of: (a) All or any oil and gas properties? (b) All or any coal properties ? (c) All or any deposits of phosphates and other deposits of minerals which form bases for fertilizers ? FOREST PRODUCTS Our most pressing conservation question relates to our forests. Out of 850 million acres of virgin timber we have but 150 million left. We have effectu- ally exhausted the timber lands of the Northeast and of the once magnificent forest States of Pennsylvania, Wisconsin, Michigan and Minnesota. About ten years will see the Southeast, which has been our greatest producer of saw tim- ber for years, out of the running as a serious competitor in the lumber markets. Already much of the timber for the thickly populated East and Middle West comes from beyond the Rocky Mountains. Ninety-seven per cent of our lumber is cut from privately owned land. Private owners of commercial timber land regularly ignore conservation prin- ciples, and have thereby reduced more than 100 million acres capable of growing timber to desolate, unproductive wastes, barren of trees, and worthless for any other purpose. They neither cut so as to insure reproduction, nor will they assist nature by preventing forest fires on cut-over lands. This does not refer to the owners of farm wood lots. We cut annually 100 billion feet of wood. We grow now only 35 billion feet. At this rate we shall exhaust the forests of the Pacific Slope, our one considerable remaining supply, soon, and with cer- tainty. It may be they will last 40 years; it may be 75 years. When the pinch comes, neither wood substitutes nor foreign supplies can relieve the scarc- ity at home. Only wise and vigorous conservation measures can prevent a grave timber famine — the beginnings of which are already felt. The practice of conservation in lumbering, coupled with the prevention of forest fires, will mitigate the coming shortage materially and hasten its cure. The growing of timber on all land in the United States chiefly valuable for that purpose would in time bring the annual growth up to the present annual consumption. 5. — Do you favor laws to insure the lumbering of commercial timber without waste, the reproduction of forests on cut-over land, and the protection of all forests from devastation by fire? 6. — If so, do you favor bringing this about (a) By the Nation and the States expanding their forest holdings to cover all commercial timber lands chiefly valuable for forest pur- poses not conservatively protected and managed by private own- ers? (b) By the Nation and States holding large reserve areas of forest land, and enacting laws requiring private owners to protect and reforest their timberland? 7. — If the latter, do you favor the enactment of a separate law by each of the States, or one law by the National Congress ? 8. — Do you believe that this country should cut annually more wood than it produces, without making provision for the future ? 9. — If not, what provision should be made for another source of timber supply when the present is exhausted? 46 10. — What factors other than underproduction and the growing shortage of standing timber are responsible for the high prices of lumber? 11. — Do you believe that lumber producers and manufacturers should be per- mitted, under Government supervision, to control overproduction in times of business depression? 12. — Do you believe that the combination of lumber producers and manufactur- ers, under thorough Government supervision, would or would not work both for the good of the industry and the public? 13. — Mention briefly what are the principal changes needed in methods of tax- ing forest lands, in order to encourage protection and reproduction and deal fairly with the private owner. 14. — Is the insurance of standing timber practicable, and, if so, should it be undertaken by private or Government agencies? 15. — If it is true that we are growing annually only about one-third of the tim- ber we use, and that our timber supply must be thus exhausted, do you favor restriction of the export of forest products ? 16. — If forest land is to be bought by either Nation or States, should the pur- chase money be raised by long-term serial bonds, the first series falling due far enough in the future so that timber produced on the land purchased may have opportunity to contribute toward paying the serial bonds as they fall due? WATER POWER Water and water power are not, like forests, exhaustible resources. There are over sixty million horsepower to be developed from running water in this country. Every million horsepower developed will, in the gross, take the place of thirty million tons of coal, saving not only the coal but about one hundred million dollars besides, per year, and releasing for other work about ten thou- sand miners, twenty-five thousand coal cars, eight hundred engines, one thou- sand engineers, firemen and train conductors, and five thousand other railroad employees. Development of water power is absolutely essential. Such development will promote also the other uses of water for transportation and domestic and commercial supply, and help to control floods and prevent low water in our streams. A water power biU has passed both Houses of Congress and is now in conference. If it shall be brought, before flnal passage, into conformity with the Roosevelt conservation policy, it, too, as with coal and oil, will be worth to the American people as much as their share of the cost of the war. The danger here is from unregulated monopoly and the possible oppression of the general public by the owners of water power rights acquired from the public. If the Roosevelt type of water power legislation becomes law, our posterity will be secure as to power and light, and even heat, at reasonable prices, both before and after the coal, oil and gas have grown scarce or have become exhausted. 17. — Should any water-power rights (except, perhaps, non-commercial ones on small source streams) be granted, except by license from the National Government as to those on navigable streams and on the publicly-owned lands, and by license from the States as to all others ? 18. — Do you believe that such water-power licenses should be granted subject to the following conditions: (a) Prompt development? (b) Continuous operation, if market available? 47 (c) Certain termination, say at the end of fifty years ? (d) Reasonable payment for the privileges granted, if licensees oper- ate for profit ? (e) Reasonable provisions for compensation for plant and equipment, to the extent not depreciated or amortized, when the license ends? 19. — Do you favor giving, free of charge, preference to municipalities and dis- tricts and associations of users for mutual direct use, as compared with licenses for business exploitation? 20. — Do you favor laws compelling water users lower down a stream to recom- pense, pro rata, any developer of extra water by reservoirs, etc., to the extent that the lower water user enjoys the use of the extra water thus made available? WATER TRANSPORTATION While we have a finer system of natural waterways than any other conti- nent, waterways are neither constructed nor used in this country as freely as they are in Europe. Most of the early canals were abandoned because our transportation needs in the first half of the twentieth century did not reason- ably occupy both railroads and canals. Now, however, the magnitude of our in- land shipping would amply support both. It was found in France and Germany that water transportation improvement, instead of destroying or injuring par- allel railroads, made them more prosperous. The waterways carried the heavy slow freight, and the railroads were devoted to an increasing carriage of higher class, better paying commodities. When the channel of the River Elbe was improved, about 1890, the freight carried by water increased five times in fifteen years and the business of com- peting railways increased eleven times. When the River Main was improved, in 1886, its traffic increased over 100 per cent in two years, and that of parallel railroads increased 94 per cent. Beginning with 1887, France made a large development of her rivers and canals. The Northern Railway of France, in direct competition with 43 per cent of all these inland waterways, was the only French railroad that did not need to ask Government aid during the next twenty years. The channel of the Monongahela River for 131 miles above Pittsburgh has been improved as a waterway, and carries millions of tons of heavy freight an- nually. Nevertheless, two prosperous railroads follow the two banks of this much-used waterway, and the resulting industrial development along the river is remarkable. Experts believe that it would pay the Nation, to spend the amount necessary to improve thoroughly the beds of our principal rivers, connect them up by means of high-capacity canals, and complete inland waterways capable of carrying ocean-going vessels along the Atlantic seaboard from Maine to the Gulf of Mexico, and from Chicago, Kansas City and Pittsburgh to the Gulf. 21. — Do you favor active development by the National Government of transpor- tation on interstate and navigable streams and waters ? 22.^ — Do you favor the development of local canals and navigable waterways by States ? 23. — Do you favor the co-operation of States, municipalities and Nation for in- terstate assistance in the development of navigation, water power, domes- tic and commercial water supply, irrigation and flood control? 24. — Do you favor serial bonds over a long term of years as a substitute for sinking fund arrangements for repayment of loans to develop waterways and water storage by the National Government? ^Sypacosa, ; Sleckton, '. N. Y. I . Collfc I DATE DUE a ^S====^~«^ i 1 j GAYLORD PH1NTEDINU.8.A.