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Frank Demby

New Price Bill Fails to Solve the Problem
of the Rising Cost of Living

(December 1941)

From Labor Action, Vol. 5 No. 49, 8 December 1941, p. 2.
Transcribed & marked up by Einde O’Callaghan for the Encyclopaedia of Trotskyism On-Line (ETOL).

Faced with the dilemma of serious price inflation or taking “steps in the direction of establishing totalitarian controls, the House of Representatives passed a weak-kneed compromise last Friday by, a vote of 224 to 161. After some fancy political maneuvering, the question of price control raised as long ago as last July, has now been referred to the Senate where, it is expected, a “real” price control bill will be passed.

The House bill declares that in the interests of “national defense” it is necessary to prevent price and credit inflation. Its provisions, however, cannot possibly achieve this objective. In fact, if the House bill becomes law it will definitely result in further substantial increases in prices. As always, the working people will suffer.

Farm Bloc Blackmail

The congressional farm bloc, operating in the interests of the rich commercial farmers, has put into the bill a provision concerning, the prices of farm products that constitutes one of the best illustrations of congressional blackmail in a long, long time. A ceiling is to be established on farm prices, but this upper limit cannot be lower than the highest of the following three levels:

  1. A price equal to 110 per cent of parity;
  2. The market price prevailing on October 1, 1941;
  3. The average price for the period 1919–1929.

The original draft of the price control bill called for a ceiling on farm prices to be based on the price as of July 28, 1941, or 100 per cent of parity, whichever was higher. Parity, as I have previously explained, was the slogan of the Farm Bureau, to give the commercial farmers the same purchasing power as they possessed in the period from 1909–1914, which is the highest on record for the 20th century.

This meant, in many cases, price increases above those existing on July 28 running from 10 to 30 per cent. And, of course, prices on July 28 already reflected a substantial wartime inflation. While the House Banking and Currency Committee deliberately stalled for several months, under the pretext of a “thorough” consideration of the matter of price control, prices rose substantially. This prompted the farm bloc to demand that the prevailing price level be changed from July 28 to October 1. Not satisfied with this, and being in the position to hold up indefinitely any legislation at all unless its demands were granted, the farm bloc then raised the ante on the alternative parity ceiling from 100 per cent of parity to 110 per cent.

This means an additional 10 per cent increase for many basic farm prices.

The Third Wrinkle

Intoxicated with their easy success, the farm bloc introduced a third wrinkle. For some farm products, the average price from 1919 to 1929 was much higher than either 110 per pent of parity or the price on October 1. This is particularly true in the case of cotton. Where a ceiling based on the 1919–1929 average would mean an additional increase of some 30 per cent. The representatives from the cotton states demanded that this be included as a third alternative and the demand was granted.

As a result, the provision of the House Price Control Bill in regard to farm prices, far from preventing prices rises, actually guarantees tremendous price increases, amounting to a wage cut for the workers of at least 20 per cent.

As for prices of industrial products, the price administrator (it is assumed by everyone that Roosevelt will appoint Leon Henderson to this position) is permitted to set a ceiling, or a top price, on any commodity threatening to reach the “inflation point.” The effectiveness of this measure, in preventing inflation is exceedingly dubious. First of all an awful lot will depend on the judgment of one man, Leon Henderson. Even if he should be motivated by a sincere desire to prevent inflation, he still has virtually no power to do this, for the House bill establishes a five man board of review with broad power to overrule decisions by the price administrator. Moreover, a manufacturer or profiteer can appeal any case to the courts, where it could undoubtedly be dragged out for months or years. The provision giving the price administrator power to license business men and to revoke their licenses if they violated the price ceilings was defeated by the House. Thus, there is no effective means of enforcing any of these maximum prices.

Another Administration Defeat

The Administration suffered another, defeat on the proposal to give the government power to buy and sell any product in any market for the purpose of stabilizing its price. This provision was changed so that the government only has the power to buy and sell in the DOMESTIC market to stimulate production of HIGH-COST producers. This power cannot thus be used to lower prices. If used, it will only raise prices further.

A final provision of the bill permits the establishment of ceilings on rents in defense areas and gives such tenants the right of appeal if they think their rents are too high. This in no way will stop the rent gouge now going on in defense areas in view of the fact that the rents are already sky high. Nor will it help prevent a general rise in rents throughout the country, which is clearly indicated as a next step in the developing inflationary process.

About all that can be said in favor of the action of the House of Representatives is that the House recognizes the danger of inflation and is on record as being in favor, presumably, of doing something to prevent it.

Politics Behind the Bill

As important as the Price Control Bill itself is the politics which surrounded its passage by the House. It is clear that the question of inflation, which, of course, means the living standards of the masses, is to be the political football in the 1941 congressional elections. The Republicans hope to make a political comeback by accusing the Administration of being responsible for the failure to prevent inflation. They expect to escape the counter-charge that they sabotaged the Price Control Bill by claiming that they were for a “real” price control bill as introduced by Representative Gore. Gore’s bill, following the ideas of Bernard Baruch, called for an overall price ceiling on everything, including wages. This would be an exceptionally reactionary measure. The House had, at least, the political sense to defeat this proposal, for they knew how opposed the workers are to any attempt to control wages.

Now Before Senate

The Senate now become the next stage where the battle of inflation is to be fought. The workers, particularly the organized workers, must pay very close attention to the deliberations of the Senate. The representatives of the bosses will make every attempt to unload the tremendous cost of the war onto the workers. It is the desire of the bosses to maintain and increase profits that is the main driving force in bringing about rising prices and inflation. Every worker must see to it that his union takes action on this question.

The first demand of the unions must be for a 100 per cent excess profits tax. The second demand must be to limit all profits to a maximum of 6 per cent. The third demand must be for the establishment of workers’ control of prices!

Unless the workers take action along these lines, the fight to maintain living standards through wage increases will become a steadily losing fight.

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