They, like my myself, are investing in Government bonds, because we want a secure return until there is some balance established in the economy and we can get away from the threat of an impending economic crisis.

The CHAIRAN. Do you challenge the statistics which have been offered here bearing on the subject of shortage of risk capital?

Mr. SILBERSTEIN. I do not, sir. Not that I acknowledge them, but I do not know what the facts are. However, I am willing to accept them. What I quarrel with is the conclusion drawn from the facts that there is a lack of equity capital because the returns, after taxes, are inadequate. I believe that that is refuted by the fact that we have an $18,000,000,000 corporate income after taxes and a 911⁄2 percent return on invested capital.

The CHAIRMAN. If the returns were adequate, is it not perfectly apparent to you, under you own theory, with all this money available for investment which you portray as a result of these profits, that people would be buying those equities?

Mr. SILBERSTEIN. No, sir.

The CHAIRMAN. Do you attribute to the capitalistic system the kind of stupidity represented by a man's failure to buy a good equity if he thinks he can make money out of it?

Mr. SILBERSTEIN. Sir, I do not believe that that is stupidity. That is the view which I have and which many people have, and I have had occasion to advise investors. They feel, and many very well qualified economists feel, that with the inflation we have now we are heading toward a bust.

The CHAIRMAN. What good will your Government bonds be then? Mr. SILBERSTEIN. Your Government bonds will be the most secure investment that one can possibly make. We have had busts before and our Government bonds have not failed. I do not know that in our history Government bonds have not been paid fully.

The CHAIRMAN. But in history they have failed when the depression has been deep enough. Is that not correct?

Mr. SILBERSTEIN. Not to my knowledge, sir.

The CHAIRMAN. The whole world is full of worthless government bonds.

Mr. SILBERSTEIN. I am referring to the United States.

The CHAIRMAN. The United States is not immune from the same laws that destroy other countries; is it?

BERSTEIN. That is very true, but it still seems to me perfectly logical for an investor to withhold investment from something which is more risky and to put it into the least risky thing.

CHAIRMAN. Do you not agree with me that the United States bond in the end is no better than the economy of the country? Where will the validity of the bond generate its strength?

Mr. SILBERSTEIN. What you say is completely true if we have a total collapse of our economy. But we are not likely to have that situation. The CHAIRMAN. And if everybody puts their money in Government bonds you will have a total collapse of your economy; will you not? Mr. SILBERSTEIN. But I do not think that is what is going to happen. I think if we have an adjustment in our economy, which is the thing that we should strive for, that this capital investment fund which is available will be invested with the feeling that there is some security

in it. But people feel now that the conditions we have are temporary. It is unnatural.

We have an inflationary situation in which we are likely at any moment to have a recession, or perhaps a depression. They are reluctant at this point to invest. I think they want something to be done which will contribute toward the stabilization of the economy. And we think the kind of a tax plan we propose will do that.

The CHAIRMAN. During the course of your remarks will you delineate for us just how we can make this economy stable so that people will not fear it any longer?

Mr. SILBERSTEIN. Sir, it is my understanding that the major factor contributing to instability and uncertainty at the moment is excessive prices, inflation, and as to that we advocate controls to be sure that prices do not go higher.

And the other side of the picture, we feel that there is a declining purchasing power which is diminishing the sound market which is available for the enormous productive capacity of our industry. And we believe that steps which tend to increase purchasing power in the hands of the masses of the people increase the possibility of continuing high levels of production.

The CHAIRMAN. If we are going to increase purchasing power you have to increase production; do you not?

Mr. SILBERSTEIN. Not necessarily.

The CHAIRMAN. Please explain that.

Mr. SILBERSTEIN. If in the existing situation we increase the purchasing power in the hands of the lowest income groups, which we are proposing the people who do not have enough income to buy the necessities of life-we will have a larger stable market for the things which are produced.

The CHAIRMAN. You would have to increase production, would you not?

Mr. SILBERSTEIN. We do have certain shortages at this time. But we do not believe that the prices which prevail are necessary as a working out of the law of supply and demand in an abnormal situation such as we have now with a pent-up demand.

The CHAIRMAN. Do you not agree that if you want to increase the purchasing power of the people you are talking about, in real terms, you have to increase production?

Mr. SILBERSTEIN. There are two ways in which that can be done. I believe, sir. One thing that we can do is to decrease prices. That will increase their purchasing power.

Another thing that we can do is to take out of the hands of people who have more than enough for their needs, and put it into the hands of people who have less than enough, and create a stability in the economy-a really large, stable purchasing power-which we believe will bring out investment capital and make possible increased production.

The CHAIRMAN. Which way do you propose to do it? Do you propose to do it by arbitrarily decreasing prices or how do you propose to do it?

Mr. SILBERSTEIN. We propose, first-I did not think that we were going to get into this, but I am very happy to be given the opportunity. The CHAIRMAN. I want your thoughts on this.

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Mr. SILBERSTEIN. We are proposing, on the one hand, that prices be not permitted to rise further. In other words, a price freeze. We are proposing further that profit margins be reduced to a reasonable level.

The CHAIRMAN. In every business?

Mr. SILBERSTEIN._Yes; in every business.

The CHAIRMAN. In every single business?

Mr. SILBERSTEIN. Every business, based on a normal period of income.

The CHAIRMAN. You would then have to have a control system competent to analyze the price margin in every single business of the United States. Is that not right?

Mr. SILBERSTEIN. Sir, what we would have is a situation-
The CHAIRMAN. Is that correct?

Mr. SILBERSTEIN. What we would have, sir, is a situation substantially the same as we had before price controls were done away with.

The CHAIRMAN. Are you advocating a resumption of that?

Mr. SILBERSTEIN. We are, sir.

The CHAIRMAN. And do you think that that will increase the goods for the people you are talking about?

Mr. SILBERSTEIN. It will not increase the goods for the people that we are talking about-well, it would increase the purchasing power that is available to the people in the lowest income brackets.

The CHAIRMAN. What good does that do if you do not have the goods to buy?

Mr. SILBERSTEIN. We have now a higher level of production than we have had, I believe, at any other time in our history.

The CHAIRMAN. Do you believe that the more production the greater the cost?

Mr. SILBERSTEIN. No; we believe, sir, that if there is not this rising inflation on the one hand, and a decreasing purchasing power on the other hand, in the average citizen, then there will be a real incentive for increased production because there will not then be the need to feel that an investment may be an extremely risky thing as we are heading toward economic collapse.

The CHAIRMAN. That has been tried since the beginning of time. Give me a citation where you have achieved the objectives to which you talk under the controls of the kind that you have referred to. Mr. SILBERSTEIN. Sir, we found that under this system of controls, which we have had only one time during the war, and

The CHAIRMAN. The world is full of instances.

Mr. SILBERSTEIN. Where we have had abnormal shortages and in that situation it was found that prices were held substantially in line. The CHAIRMAN. And you could not get the goods.

Mr. SILBERSTEIN. And you could not get the goods. That is true. The CHAIRMAN. That is what you call a desirable objective? That is what you want to go back to?

Mr. SILBERSTEIN. No; that is not, sir. We do not believe that you are going to have a reduced amount of goods if you have an establishment of control which stops any further inflation, and which keeps profit margins at a reasonable level.

Now, our production under price control in the period of the war was very great. I think the greatest we have ever known in history and of course, in the short period following the war we had a reconversion which was holding back production of civilian goods which created some shortages. And also we had a hold-back on production or at least on things which were put on the market, as soon as it became apparent that there was a possibility, of weakening or doing away with price controls, in order to create pressure in that direction.

But prior to that we did not have a shortage of production. As I understand it, according to the figures of governmental agencies. The CHAIRMAN. During OPA we did not have a shortage of production?

Mr. SILBERSTEIN. We did not.

The CHAIRMAN. You had the kind of production then that you want for your people?

Mr. SILBERSTEIN. During most of the period, sir, during the period of the war we had war production and naturally we had great shortages in civilian goods. We are not talking about that.

The CHAIRMAN. That is bound to follow because you are putting your emphasis on war production.

Mr. SILBERSTEIN. That is right.

The CHAIRMAN. But when we got rid of that, and continued those controls, we did not get rid of our goods shortages because we did not get our production going.

Mr. SILBERSTEIN. We did not get rid of our goods shortages because, during most of the period following the war, we were in a reconversion stage and in the very short period beyond that, up to the end of controls, there was a situation existing which indicated the possibility of doing away with controls or weakening them. Under that situation it was quite natural that business people should hold back production in order to augment this shortage and increase the pressure for doing away with controls. And beyond that, the quite natural economic incentive, that if you can make a much larger profit without controls you are going to hold back for that.

The CHAIRMAN. I have no doubt that when we got to the teeter stage of decision in the matter that there might have been some speculative holding back. But we went into that with the greatest detail, we challenged the people that were in charge of the warehouses of this country to come forward with inventories showing hold-back and they did not come forward with any.

The people that you are talking for knew more about it than anyone else. There were some little speculative hold-backs. It did not amount to a drop in the ocean.

Mr. SILBERSTEIN. We do know that while it was almost impossible to buy meat, because we were told that people just were not going to produce because of the controls that existed, as soon as they went off, the market was practically flooded and we have not had a shortage since.

The CHAIRMAN. The meat was there all the time and it was in the market all the time, but your' people could not buy it. Is that the thing you want to go back to?

Mr. SILBERSTEIN. Are you suggesting they can buy it now?

The CHAIRMAN. They can buy it right now in any butcher shop they want if they will pay the price.

Mr. SILBERSTEIN. Yes.

The CHAIRMAN. Then they could not buy it, although they had the money in their pocket to buy it. Which is preferable, if you want to eat meat?

Mr. SILBERSTEIN. I think that the situation today is that there are relatively few workers who can afford to buy meat as often as they could afford to buy it and actually get it, in the period of the war. The CHAIRMAN. But you will admit it is easier to get now. Mr. SILBERSTEIN. Yes; there is no question about that.

The CHAIRMAN. The meat was in full existence during the period of control, but it was not where the worker could buy it, even though he had the money in his pocket.

Mr. SILBERSTEIN. In the black market, you mean?

The CHAIRMAN. Now he can buy it and he has to pay more for it. Which is preferable; no meat, if you want meat, or meat that you get if you pay for it?

Mr. SILBERSTEIN. I think the black market accounted for an extremely small percentage of production and that workers were able to buy it, even during that period.

However, I wish to emphasize that none of this is really germane to the position we are taking. Fundamentally our position is extremely simple. I say on the one hand

The CHAIRMAN. I am sorry to interrupt you, but I respect your viewpoints and I want to get the full benefit of them.

Mr. SILBERSTEIN. I greatly appreciate that.

The CHAIRMAN. I do not want to harass you with interruptions. Go ahead.

Mr. SILBERSTEIN. I would like to make very briefly what I believe is our central point. We have on the one hand the great mass of the taxpayers who, in a period of inflation, do not have a sufficient income to maintain a decent standard of living. And we say that to the degree that the Congress finds in its wisdom that reductions can be granted, the reductions should be granted to the people who are most In need of it, the people who do not have a decent standard of living under existing inflationary conditions.

That runs us into the problem of incentives.

The CHAIRMAN. That throws your whole economy on the basis of need; does it not?

Mr. SILBERSTEIN. We are not suggesting any change in the whole economy, but simply in this one sector.

The CHAIRMAN. A change would occur in your whole economy if you took the number of people that you are talking about and ran the whole economy on a strict basis of need. Would not that make a change in the economy?

Mr. SILBERSTEIN. I believe that it would not. Of course, if you did run your whole economy that way it would make an enormous difference. But we are not proposing that. We are dealing only with this one small problem and we think that pretty nearly everybody would agree that if you are able to give relief you ought to give it to the people who need it most, to the people who now suffer a hardship. And I am aware of the problem that I run into there.

We are told, as we heard this morning, that if you do not give relief and a lot of it, even more than you are giving now, there will not be incentives for production and that that is what we need most.