50% more than it should have cost. They found that even as George Washington had bitterly complained in the days of the Revolution of people who "would build their greatness upon their country's ruin" many people had built their greatness upon the sacrifices, the heartaches and the sufferings of the World War. The veterans, through their organization, The American Legion, declared that if this Nation ever had to go to war again there should be no such profiteering, but that there should be equal burdens and equal sacrifices for all.

BRIEF HISTORY OF EFFORTS TO SECURE LEGISLATION

At the request of the American Legion there was introduced in Congress in 1922 the Capper-Johnson Bill, seeking to enact legislation to the desired end. Both, Senator Arthur Capper of Kansas and Representative Royal C. Johnson of South Dakota, worked diligently in an effort to secure favorable action on the bill. The bill, however, was so far reaching, and there were so many other matters pressing upon Congress at the time that it never received favorable consideration. At the same time, the late Representative John J. McSwain of Scuth Carolina introduced a joint resolution providing for the creation of a special Federal commission to study the whole subject and to recommend legislation. Through the years the American Legion sought to secure favorable action in the matter and finally in 1931 the McSwain Resolution, then known as the Wainwright-Snell Resolution, was passed, and the so-called War Policies Commission was established. The extensive hearings before the Commission particularly the testimony of Mr. Bernard M. Baruch focused attention on the subject and provided information which laid much of the groundwork for the bill H. R. 6704. During the last Congress the House of Representatives by the overwhelming vote of 368 to 15 passed a bill sponsored by the American Legion and introduced by Representative McSwain, the then Chairman of the Committee on Military Affairs of the House. The bill as it passed the House was in principle and in substance the same as the bill H. R. 6704. It is the feeling of your Committee, however, that the bill H. R. 6704 in its provision as to taxation and in a number of minor ways is infinitely stronger and better than the bill passed by the House last Congress. Permit us to say here, that too much honor and credit cannot be given to the late gentleman from South Carolina, Mr. McSwain, who for years labored and wrought in an effort to bring about legislation on the subject. The bill H. R. 6704 is more nearly his bill than that of any member of the present Congress. The passage of the bill would be a monument to his untiring efforts and his devoted work.

DIFFICULTIES OF WORKING OUT A PLAN

All men will agree that a plan to mobilize effectively the resources of the Nation for war which shall eliminate war-time profiteering, prevent war-time inflation and equalize war-time burdens is devoutly to be desired. The difficulties come and the differences of opinion arise over just what the plan should be and how the plan should be written into the law of the land. Even casual thought on the subject will readily suggest the many problems that necessarily arise in an effort to effectively inobilize the many and varied resources of a

nation as great and complex in its industrial life and in its population as is ours. One way that quickly suggested itself in the beginning to the proponents of the idea was to have the Government through conscription take over everything. The more study and thought that has been given to this plan, the less desirable the plan has seemed and the more its original advocates have chilled to it. In the first place, such a plan would mean that upon a declaration of war there would be a complete disruption and dislocation of the entire industrial and economic life of the Nation because of the Government's taking over and attempting to operate everything. Such a fundamental and revolutionary change of our whole industrial and economic life might bring about such an upheaval as would mean the loss of the war for us. As Woodrow Wilson said at the beginning of the World War, "In the sense in which we have been wont to think of armies there are no armies in this struggle there are entire nations armed". In the second place, such a plan would virtually mean the communizing or sovietizing of American life and once this step was taken, even though the war were won, how could the eggs ever be unscrambled, and our Nation returned to the American system? Your Committee, therefore, definitely eschewed any such plan.

THE PLAN

The Committee after weeks of devoted work proceeded to adopt a plan that would neither militarize industry nor American life on the one hand nor industrialize the Army on the other hand, a plan that would hold prices to a normal basis, eliminate profiteering and prevent inflation, that would mean the elimination of waste, loss and unnecessary accumulation through frantic competition by procurement agencies, a plan for the rationing and allocation of shortage items, in order that more necessitous uses might have priority with avoidance of undue hardships to the civilian population, a plan of conservation by which is meant standardization of types and designs, elimination of any but necessitous uses, prevention of hoarding and accumulation, postponement of deferrable uses, thus increasing supply by sharply curtailing demand.

We provide a plan whereby the management runs industry and the Government runs the management, having in mind the words of Woodrow Wilson when he said, "The highest and the best form of efficiency is the spontaneous cooperation of a free people". To carry out the plan the bill gives to the President the authority to put a ceiling over prices, beyond which they may not rise. Prices are not fixed but may fluctuate as they see fit beneath the ceiling. The ceiling is placed by selecting prices at a previous date or dates determined by the President, and the President is given authority to adjust when necessary by public proclamation the ceiling on any particular article or thing. Back in 1780 in the days of the Revolution the State of New York enacted a law by which the profits of manufacturers, wages of mechanics and laborers, and prices of a long list of commodities were fixed at a figure "not to exceed twenty fold of the prices paid in 1774"-the latter date was taken as reflecting the normal operation of the law of supply and demand, and the twenty fold as measuring the debasement of the continental currency. This was an attempt to check inflation after it had occurred. The plan of your Committee is

basically the same, except that we now propose to check inflation before it occurs.

The bill gives to the President such control over the material resources, industrial organizations, public services, and security or commodity exchanges as he shall determine and publicly proclaim from time to time to be necessary. The President is also authorized under such rules and regulations as he may establish to require the registration of any or all individuals engaged in the management or control of any industrial establishment designated by him. Such individuals may be required to enter into the service of the Government as civilians for the duration of the war under such rules and regulations as the President may prescribe. The President is authorized from time to time to determine and to publicly proclaim what classes of public service, real and personal property or rights or interest therein, and what classes of owners, dealers, exporters, importers, manufacturers, or producers of any article or commodity shall be required to operate under licenses, to fix the conditions of such licenses and to grant licenses under such conditions. Newspapers, periodicals, and books, however, are specifically exempted from this provision of the bill so that there may be no interference with the freedom of the press. The President is authorized to determine and publicly proclaim the order or priority in which orders shall be filled, or articles, services or things transported or delivered. The President is given authority to create agencies and boards, to make temporary transfer of existing agencies and boards, and to employ the necessary personnel for the administration of the Act.

THE PROVISION AS TO TAXATION

Consideration of the subject will reveal that even though a ceiling is placed over prices and the other provisions in the bill for controlling and licensing are carried out, there may yet be some profiteering due to the fact that some producers can produce more cheaply than others and due to the further fact that war means increased production in many industries, and this means increased profits.

As a back-stop and catch-all to prevent profiteering the Committee proposes that in time of war there shall be in effect a system of taxaLion, which, without preventing a fair normal return to labor, management, and invested capital, such return to be fixed by Congress, shall absorb all surplus profits above such return, and the bill directs the Secretary of the Treasury to cause a continuing study to be made from year to year, to be the basis for such a system of taxation which the bill requires the Secretary of the Treasury to transmit to Congress within thirty days after the declaration of the war.

The question naturally arises why the system of taxation should not now be written into the law. In the first place, the Committee Las no jurisdiction over the writing of tax bills as this is a matter under the jurisdiction of the Ways and Means Committee. In the second place, your Committee after considerable consultation with tax experts, and after careful consideration of the matter, is of the opinion that it will be practically impossible to write at this time a wise and effective tax bill for some unknown and uncertain date in the future. No one at this time can know what the tax structure of the country will be, what the best sources of revenue will be, what

the needs of the war will be or many of the other factors which must enter into the writing of a wise and effective tax system.

THE PRESIDENT'S COMMITTEE REPORT

Mr. Bernard M. Baruch was by appointment of President Wilson the Chairman of the War Industries Board during the World War, and in that position he undoubtedly acquired a background and a knowledge of the industrial, financial and economic life of America at war, greater than that possessed by any other living American. This was doubtless the reason for his appointment some two and a half years ago by President Roosevelt as Chairman of the Committee to prepare a plan for the effective mobilization of the Nation for war which should eliminate war-time profiteering, prevent war-time inflation and equalize war-time burdens. Mr. Baruch was of indispensable help to the Committee in the preparation of the plan embodied in H. R. 6704. His first-hand experience during the World War, his comprehensive and unerring grasp of the whole situation, and his unselfish and devoted efforts to bring about legislation made possible the plan. Speaking of the plan and the benefits the country would achieve under it he said:

(1) "It would pass from a peace to a war status with a minimum of confusion, waste and loss.

(2) "It would mobilize war supplies almost as quickly as it could mobilize men. (3) "It would reduce the cost of war by 50% and I believe by an even greater figure.

(4) "It would eliminate war profits and inflation.

(5) "It would preserve its credit and its economic prestige throughout the world.

(6) "Its war effort would be conducted with less interference with normal economic processes and the lives of the civil population than has ever been the experience of any nation in the history of the world.

(7) "It would conserve its resources and preserve the morale of its people to such an extent that it would be able to outlive any antagonist in a long-drawn struggle.

(8) "It could pass from a war status back to a peace status with a minimum of the prostrating economic aftermath that has hitherto been the invariable experience of every ex-belligerent in a great war.

(9) "The efficiency of the combined military and economic machine that could be derived from these policies would constitute this nation an instrument for war effective beyond the imagination of any military expert even of this advanced date powerful beyond the possibilities of any antagonist and perhaps of any combination of antagonists.

(10) "Considering the obvious fact that the military aspirations of this nation will never disturb the peace of the world, the mere acceptance of (and deliberate provision for) the kind of organization here suggested, would go very far toward keeping the peace of the world."

WHAT THE BILL DOES NOT DO

There is absolutely nothing in the bill that would in any shape, fashion, or form draft or force any person to work in any factory, workshop, or industry, or on any farm The bill does not draft any person into the military or naval forces. There is nothing in the bill that would in any way interfere with the freedom of the press. The bill does not become effective until the Congress of the United States shall have declared war. It does not cost anything or authorize any appropriation.

POWER IN HANDS OF THE PRESIDENT

The bill does vest great power in the hands of the President of the United States, but if profiteering is to be eliminated, war time inflation prevented and war-time burdens equalized the power to effect these results must be in the hands of someone and surely the President is the proper person. He is the Commander in Chief of the Army and the Navy, and in time of war has the power to mobilize armies and to send human beings to their death in battle. Why should he not have the power to say to the selfish and the avaricious, "Thou shalt not profiteer from the misery and suffering of your fellow men"? Furthermore, in time of war it is absolutely essential that full authority and control over materials, services, and supplies required to support the Army and maintain the Navy be placed in the hands of the Chief Executive, who is the constitutional head of the defense forces. Such concentration of power in the hands of the Chief Executive has always proved necessary in the wars of the past.

CONSTITUTIONALITY OF THE BILL

If anyone has any doubt as to the power of the Congress to enact legislation such as H. R. 6704, we believe such doubt will be readily dispelled by the reading of the decisions in the following cases:

United States v. McIntosh 283 U. S. 205, 222;

United States v. McFarland (C. C. A., 1926), 15F (2d) 823;

Moore & Tierney (Inc.) v. Roxford Knitting Co. (D. C. 1918), 250 Fed. 278; certiorari denied (1919), 253 U. S. 498.

THE RIGHT TO COMMANDEER UNDER EXISTING LAW

In connection with H. R. 6704 it might be of interest to review existing law as to the right to commandeer, Sec. 120, National Defense Act:

PROVISIONS Of National DEFENSE ACT Of June 3, 1916

SEC. 120. PURCHASE OR PROCUREMENT OF MILITARY SUPPLIES IN TIME OF ACTUAL OR IMMINENT WAR.-The President, in time of war or when war is imminent, is en powered, through the head of any department of the Government, in addition to the present authorized methods of purchase or procurement, to place an order with any individual, firm, association, company, corporation, or organized manufacturing industry for such product or material as may be required, and which is of the nature and kind usually produced or capable of being produced by such individual, firm, company, association, corporation, or organized manufacturing industry.

Compliance with all such orders for products or material shall be obligatory on any individual, firm, association, company, corporation, or organized manufacturing industry or the responsible head or heads thereof and shall take precedence over all other orders and contracts theretofore placed with such individual firm, company, association, corporation, or organized manufacturing industry, and any individu il, firm, association, company, corporation, or organized manufacturing industry or the responsible head or heads thereof owning or operating any plant equipped for them inufacture of arms or ammunition or parts of ammunition, or any necessary supplies or equipment for the Army, and any individual, firm, association, company, corporation, or organized manufacturing industry or the responsible head or heads thereof owning or operating any manufacturing plant, which, in the opinion of the Secretary of War shall be capable of being readily transformed into a plant for the manufacture of arms or ammunition, or parts thereof, or other necessary supplies or equipment, who shall refuse to give to the United States such preference in the matter of the execution of orders, or who shall refuse to manufacture the kind, quantity, or quality of arms