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No. 34 "Extension Of The NRA: A Recommendation for Action to Rescue American Business from a Quicksand of Bureaucracy and Visionary Experimentation," May 13, 1935. American Liberty League. 400dpi TIFF G4 page images Digital Library Services, University of Kentucky Libraries Lexington, Kentucky Am_Lib_Leag_34 These pages may freely searched and displayed. Permission must be received for subsequent distribution in print or electronically. No. 34 "Extension Of The NRA: A Recommendation for Action to Rescue American Business from a Quicksand of Bureaucracy and Visionary Experimentation," May 13, 1935. American Liberty League. American Liberty League. Washington, D.C. 1935. This electronic text file was created by Optical Character Recognition (OCR). No corrections have been made to the OCR-ed text and no editing has been done to the content of the original document. Encoding has been done through an automated process using the recommendations for Level 1 of the TEI in Libraries Guidelines. Digital page images are linked to the text file. that production has not advanced sufficiently to sustain the higher wages. The average index of production for the entire calendar year 1934, in all of which the NBA was in full operation, was only 124 as compared with 119 for the entire year 1933, nearly half of which preceded enactment of the NIRA. The average of weekly payrolls increased meanwhile from 105.2 in 1933 to 139 in 1934. Production increased only 4 per cent while payrolls were advancing 32 per cent. Industrial codes could scarcely fail to collapse under such an oppressive burden. Industry can go forward more surely if it is less hampered by governmental restrictions. It is essential that the Congress should move cautiously in any extension of the NRA. Final conclusions as to a proper relationship between government and business consistent with constitutional principles can be reached more intelligently at a later period in the light of further experience and the interpretations of the courts. â˜… â˜… EXTENSION OF THE NRA â˜… â˜… â˜… A Recommendation for Action to Rescue American Business from a Quicksand of Bureaucracy and Vision-ary Experimentation AMERICAN LIBERTY LEAGUE Rational Headquarters NATIONAL PRESS BUILDING WASHINGTON, D. C. Document No. 34 May, 1935 Extension of the NRA â˜… As the most feasible method for rescuing American business from a quicksand of bureaucracy and visionary experimentation, the American Liberty League urges enactment of the joint resolution (S. J. Res. 113), introduced by Senator Clark of Missouri, providing for an extension of the National Industrial Recovery Act only to April 1, 1936. Commendation is due to members of the Senate Finance Committee who voted to report out this resolution in preference to the administration bill (S. 2445), introduced by Senator Harrison of Mississippi, which revises the language of the present law, enlarges the powers of the Executive and proposes a two-year extension. The bill has all the earmarks of a tricky attempt to avoid a definite determination of the constitutional validity of the Recovery Act through a decision by the Supreme Court. The shifting of the legal foundation for the NRA might permit its continuance, following an adverse decision, until new test cases could be advanced through successive steps to the highest court. The Clark resolution, aside from its other advantages, is free from any attempt to prevent the courts of the nation from fulfilling their constitutional duty of passing upon the validity of legislation. The effort of the administration to avoid a decision in the Belcher Case is fresh in the minds of the American people. Friends and foes of the administration joined in condemnation of that procedure. After more than two years of experimentation it is time to find out whether or not many of the projects and policies adopted can stand the test of constitutionality in the Supreme Court. The Clark resolution makes it practically certain that there will be such a test and that in the event of a decision adverse to the administration it will not be necessary to start this long and tedious process all over again. The administration bill, on the contrary, might make it possible, even should the present law be invalidated, to harass the American people with unwarranted and unconstitutional bureaucratic interference for a considerable period in the future. 2 The American Liberty League early in January set forth guiding principles which should be adhered to in the determination of a future program for the National Recovery Administration. In general the League insisted that if any legislation were enacted at this time it should be of a temporary character, that regulation must be brought within constitutional bounds and that a relaxation rather than a tightening of the existing rigid control over industry must be the objective. It was urged that the adoption of permanent policies must await a clarification of constitutional questions by the Supreme Court. Developments in the four months since the issuance of the League's first declaration have given added force to the principles then set forth. These principles as applied to the pending legislation are: 1. Continuance of any unusual executive authority should be for a limited period. Desirability of such a procedure has come to be generally recognized. 2. The Congress should guard zealously its prerogatives under our plan of government in which there are three coordinate branches, the legislative, the executive and the judicial. S. J. Res. 113 maintains the status quo while the administration bill, S. 2445, besides perpetuating in different language a system of doubtful constitutionality, would give the President even greater authority to make law by executive order. 3. Undue encroachment upon the sovereignty of the states should be avoided. S. J. Res. 113 definitely prohibits the application of codes to businesses which are wholly intrastate. The provisions of the administration bill relating to interstate commerce purport to be restrictive but in effect attempt to legalize an encroachment upon states' rights. 4. Self-government of industry should be the goal in any plan for concerted action in promoting recovery. The administration bill would extend bureaucratic regulation. By a revision of codes under present law individual initiative can be given greater freedom. The prohibition in S. J. Res. 113 against price fixing recognizes the desirabilty of free competition. 5. Provisions of law respecting the relations of employers and employees should be fair to both parties. S. J. Res. 113 carries forward the pres- 3 ent collective bargaining provision while the administration bill stiffens it slightly to the possible disadvantage of industry. Neither would be so objectionable as the pending Labor Relations Bill which proposes permanent provisions placing industry at the mercy of organized labor. 6. Emergency recovery legislation should not be susceptible of use as a vehicle for experimentation with untried theories. S. J. Res. 113, while permitting a temporary continuance of present experimentation, at least has the merit of not widening the field for the trial of new theories. Some of the objectionable features of the present NRA can be eliminated by a change of policy under existing law. Pending Legislation Senate Joint Resolution 113, approved by the Senate Finance Committee, is simple in its terms. Section 1 amends the present act by providing for its expiration on April 1, 1936, instead of June 16, 1935. Section 2 modifies the present law in two particulars. First, it stipulates that no price fixing shall be permitted or sanctioned under the provisions of any code except as to mineral natural resource industries in which prices are now fixed and which the President finds to be so affected with a public interest that such regulation is necessary and proper. Second, it stipulates that no code of fair competition shall be applicable to any person whose business is wholly intrastate. Section 3 provides for review of all codes within 30 days to insure compliance with the requirements of Section 2. In contrast to S. J. Res. 113, the administration bill, S. 2445, rejected by the Senate Finance Committee, follows the general lines of the present law but contains much new language for the obvious purpose both of tightening governmental control over industry and of continuing the present NRA regardless of the nature of imminent court decisions. Constitutionality The National Industrial Recovery Act is predicated upon legal theories of doubtful validity. 4 The power of the Federal government is exerted over industry heretofore considered beyond its jurisdiction. Constitutionality of certain features of the Act is involved in the Schecter Case now before the Supreme Court. The forthcoming decision of this court should clear up some doubtful points but may not touch other phases of the law which are involved in cases now in the lower courts and in which there cannot be a final adjudication before next winter. It would be a serious mistake to do more than continue temporarily the present law pending a ruling on all disputed questions by the highest court. Two decisions of the Supreme Court in recent weeks give reason for serious doubt as to the constitutionality of the NIRA. The first was in the so-called "hot oil" case in which one section of the NIRA was invalidated. The second was in the case in which the Railroad Retirement Act was held to be unconstitutional under the commerce and due process clauses. In the latter case a pension plan was held to be "in no proper sense a regulation of interstate transportation." The regulation of industry attempted in the NIRA is as far removed from interstate commerce as the pension plan applying to railroad employees. The language in the administration bill, S. 2445, by which it is sought to provide a new legal basis for the recovery law, would merely confuse the issue. The present law declares the broad purposes of the Congress in seeking to deal with a national emergency productive of widespread unemployment and disorganization of industry. S. 2445 enumerates "limitations and standards" to guide the President in approving codes and agreements. The "limitations and standards" are so general as to be meaningless and, if anything, broaden rather than restrict executive authority. The obvious purpose is to avoid invalidation of the law on the ground of an improper delegation of legislative power. It was on this basis that the Supreme Court held invalid the section of the NIRA relating to oil. The people of the United States cherish the principles upon which the Constitution was founded. Interference by the government in business is contrary to these principles. Postponement of new legislation will provide time 5 in which to reach a proper determination of what should be done in the light of court decisions. Delegation of Power Law-making by executive order has become a commonplace under the NRA. Hundreds of executive orders and thousands of administrative orders have been issued. Violations of rules and regulations issued by the President have been punishable by fines or imprisonment. The rules and regulations have been so numerous that it has been impossible for interested persons to keep fully informed. A temporary extension of the present law will not wipe out the abuses which now exist but an improved administration of the act may help to do so. On the other hand, enactment of the administration bill, S. 2445, would merely aggravate a bad condition. It would delegate additional powers to the President. The new powers include authority to examine books and records of industry. It is provided that the President as a condition of his approval of a code may impose conditions "including requirements for the making of reports and the keeping of books and records and the examination thereof." This invasion of the private affairs of American business men is repugnant to the guarantees of the Fourth Amendment to the Constitution with respect to unreasonable searches and seizures. Authorizations of this character form an objectionable feature of several other pending bills, including the AAA amendments and the Labor Relations Bill. The President under the administration bill would have greater power in the imposition of a code upon an industry than in the present law. There would be less voluntary action and more arbitrary compulsion by a bureaucracy. The effect of the bill, if enacted into law, would be to draw tighter the cords which bind American business in a strait-jacket. Decisions of the courts with respect to the old statute might be ignored while the officials to whom the President's power is delegated continue to issue administrative orders which have the force of law. It would be maintained in such circumstances that the new law rested upon an adequate constitutional basis by reason of the enumeration of 14 "limitations and standards" in the exercise of authority delegated by the Congress to the Executive. The officials could force business men aggrieved by burdensome regulation to commence anew litigation in the lowest courts. It has required nearly two years for cases involving fundamental constitutional issues under the present law to reach the Supreme Court. If as long a period is necessary to obtain a ruling on a revised NIRA, it means that the present system can be perpetuated for the two years specified in S. 2445. Under such a scheme it matters not that the Supreme Court may hold the present law to be un-American and in violation of the Constitution. Interstate Commerce The clause in S. J. Res. 113 that "no code of fair competition shall be applicable to any person whose business is wholly intrastate" marks a return to constitutional government. The Federal government never should have attempted to exercise control over business of this character. S. 2445, while purporting to restrict the application of codes to industries within the scope of the commerce clause of the Constitution, actually is so broad as to include almost any form of retail trade and local business. The President is given judicial power to construe the law. Under the terms of the bill the President might hold that conditions existing in an industry would affect interstate commerce so as to make necessary the establishment and enforcement of standards of fair competition. The inclusion of a new definition of interstate commerce in S. 2445 is intended to make it possible to circumvent an adverse decision affecting present codes. The different language might shift the legal ground sufficiently to enable the NRA to go forward pending the progress of new cases through the courts. Self-Government of Industry In theory under the present NIRA, industry was to rule itself. The government was to act in a supervisory capacity only. In actual practice the terms of codes have been dictated by the government. Under the administration bill little would remain of the voluntary code. It restricts 6 the discretion of code authorities, which represent industry rather than the government. Temporary continuance of the present law at least would offer no bar to a change of administrative policy involving less of bureaucratic regulation. Enactment of S. 2445 would furnish a mandate for a stiffening of control. In S. 2445 there is a legalization of boycotts which are abhorrent to American traditions. Such boycotts could be ordered by the President under authority to make provision for the promotion and maintenance of codes and agreements by means of distinctive insignia or labels and by requirements that government departments purchase only from persons who comply with all rules and regulations. The purpose is to facilitate regimentation of industry. In the revision of codes the NRA, if it is to continue, should be limited to large groups of industries which voluntarily submit to regulation. Nothing short of a Soviet system of complete regimentation of industry and trade could hope to obtain enforcement of such a vast network of codes as originally contemplated. The Federal government has meddled, not only needlessly but to the positive detriment of business, in affairs which are the concern only of the states and in which there is little reason even for the states to interfere. Price and Production Control Devices for control of prices and production have caused more harm than good. They interfere with the maintenance of free competition with its assurance of protection to consumers. In operation they have as a rule failed to aid industry and instead have retarded recovery. The prohibition of price fixing in S. J. Res. 113 except in mineral natural resource industries reflects the widespread sentiment that it has proved injurious. The language may not be sufficiently broad to apply to many schemes which are not ostensibly price fixing but which tend to have that effect. The mandate against price fixing should cause administrative officials to avoid anything that goes further than the prevention of destructive price cutting. In its pamphlet on price control the American Liberty League said: "Price fixing, whether by government or by combinations within industries, causes the most vicious inflation, because government-fixed prices are bound to be high enough to sustain the inefficient, while giving excess rewards to the efficient. They destroy the incentive to invention, enterprise, progress. They protect the laggard, the waster and the incompetent, whose energies are devoted to maintaining higher prices through monopolies, instead of attaining lower prices through reduced costs. Honest competition cannot exist under a regime of fixed prices; it can only prevail in an atmosphere of freedom." Labor Relations The collective bargaining provisions of the present law have served to foment industrial strife and thus have been an obstacle to recovery. Under a proper revision of the law amendments should be adopted to impose a greater degree of responsibility upon labor and to provide a larger measure of protection to industry against racketeering and strikes. If the NIRA is to be continued, the legislation should not go beyond the retention of the existing collective bargaining section. The enactment of the Labor Relations Bill with permanent provisions even more unfair to industry than present law would have disastrous consequences. S. 2445 purports to continue the present collective bargaining provisions without substantial change. There are, however, changes in language which possess more significance than would appear on the surface. While the present law provides that every code or agreement shall contain "the following conditions," the new administration bill requires every code or agreement to contain "the following statement of rights of employees, which are hereby declared and affirmed." In the view of spokesmen for the automobile industry the purpose of the change is to eliminate the so-called merit clause in the automobile code which permits employers to employ, promote and discharge employees on the basis of merit. The change in language would emphasize that the section deals with rights of employees only and might furnish ground for a ruling against a clause safeguarding the rights of employers. Although the difference in language is not great, it may be sufficient to furnish a basis for continuance of present policies if decisions in the Weirton and Houde cases, still in the lower courts, are adverse to the government. Provisions of codes with respect to hours and wages have proved too inflexible. The provision in the administration bill for fixed maximum and minimum weekly hours with time and one-half pay for overtime does not meet the needs of industries with seasonal fluctuations. Experimentation Throughout the life of the NRA reform has occupied too prominent a role. Recovery has been held back by dislocations in industry caused by efforts to revolutionize social conditions. Repeatedly in the testimony before the Senate Finance Committee it was brought out that reform was a fundamental motive in the formulation of codes affecting large industries. In many instances reform is desirable. Experience, however, has demonstrated that it should not be pursued to such extremes as to interfere with recovery. If the forces of depression are to be overcome, experimentation based either on a desire to bring about reform or to try out new theories must be put aside. A primary purpose of the NRA was to enlarge purchasing power by raising wages. The theory, which was one with which the NRA experimented in the face of the advice of recognized authorities, was that the greater purchasing power would revive industry. The Brookings Institution in its recent study found that prices rose on the average more than wages. Price and wage levels both moved to higher ground with no real gain for labor. "Not only did the program fail to work out as planned," says the Brookings Institution, "but the plan itself was in our judgment a mistaken one." The present head of the NRA has ridiculed the theory of the Brookings Institution as "the old deflation theory of recovery, naked and unashamed," while the original Recovery Administrator has denounced the Brookings premise as "100 per cent untrue." The continued adherence to theories found by an independent research organization of the highest standing to be to fallacious casts doubt upon any useful possibilities of the NRA for the future. Mr. Richberg's savage attack upon the Brookings Institution is another striking evidence of the administration's un-American policy of attempting to strifle all criticism. This Institution has issued fact-finding reports from time to time on various governmental activities. The fairness of these reports has not been challenged by responsible and informed persons. However, as soon as one report painted an accurate and uncomplimentary picture of the operations of a particular agency of government, the Institution was traduced as a political hireling. Of course, it is nothing of the kind. Official Data Highly significant data on "Employment, Hours, Earnings and Production Under the NRA" are contained in the March issue of the Monthly Labor Review of the Department of Labor. The figures indicate that under the NRA the average weekly hours of industrial workers have decreased and the number of employees and earnings by the hour, week and per capita have increased. Against these favorable indicators the cost of living has increased for the worker while industry has been burdened with increased payrolls for total man-hours of work slightly less and total production considerably less than at the beginning of the experiment. The following are index numbers, based upon 100 for 1932, for specified industries for June, 1933, the month in which the National Industrial Recovery Act was approved, and for January, 1935: June, 1983 January, 19SS Average weekly hours.......... 111.5 94.3 Number of employees.......... 104.4 122.6 Total man-hours .............. 116.4 115.6 Weekly payrolls .............. 102.4 139 Per capita weekly earnings.... 98.1 113.4 Average hourly earnings........ 89 118.8 Cost of living ................. 93.4 99.5 Production ................... 146 138 The Brookings Institution defined the term "recovery" as "the expansion of the aggregate production of goods and services." Its conclusion was that the NRA on the whole had retarded recovery. The statistical data just quoted show