Evening star., 1942-04-10
Government Hostile to
Fixed Profits CEILING
Writer Says Administration
And Congress Avoid Freezing
Wartime Wages and Prices
By Bertrdn, Benedict.


By Bertran, Benedict.
Congress evidently Is set to limit profits
on war contracts. Exactly what form
the limitation Is to take probably will
be worked out In conference commit
tee. The House voted by 10 to 8 on
March % to restrict to fiat per cent
the profits on any contract under the
pending $4,000, 100000 Army Navy ap-
preparation bill. The Senate has rejected
the House proposal, and on Tuesday,
April 7, voted for renegotiations for
limiting profits on all war contracts.
The Administration is opposed to any
hard-and-fast method Of limiting profits
in war contracts at the present time.
The War Production Board, the Army,
and the Navy are understood to take
the position that conditions vary too
widely among individual plants to war
rant any gauge of profits applicable
to all. w. P. B. and the Army Navy
procurement officers prefer the present
system of individually negotiated con-
tracts. The Treasury takes the position
that undue profits can be reached by
the excess profits tax which, under the
proposals advanced by the Treasury on
March 3, would reach a maximum of
IS per cent. Until 1910 a fiat profit
percentage was in forcec on airplane,
naval and shipbuilding contracts. This
limitation was suspended by the Excess
Profits Act of October 8, 1910.
In the First World War, cost -plus-l0-
percent generally was allowed in max
ing war contracts, but today this system
Is agreed to have been faulty, as allow
ing inordinate padding of costs. On
February is last the Supreme Court, in a
to decision, refused to upset a con-
tract OF the last war whereby the Beth
leham Steel Co. made a profit of over
20 per cent. The couSt found that this
profit was not high in comparison with
other profits realized during the war
period. The principle now generally
being applied to war contracts Is cost
plus-flxed-fee. In number Of contracts
later found to be too high, the Govern
ment has been able to obtain adjust
ments. The Second War Powers Act Of
March 81, 1912, gives the Government
additional powers to investigate all ele-
ments Of cost involved in war contracts.
On April Senator Pepper Of Florida,
who often seems to act as a sounding
board for the Administration, proposed
an amendment to the pending $1,000
100000 Army-Navy appropriation bill
whereby all prices and wages would be
frozen as Of a definite date. Up to
the present, the Administration has op-
posed any freezing plan. Freezing of
prices, wages and profits has been advo-
Gated persistently by Bernard NJ Baruch,
chairman Of the War Industries Board
in the last war. The Price Control Act
of January 80 last does require that In
fixing maximum prices, the prices on or
about October lis. 1941, must be con-
sidered, after which adjustments must
be made for later compensating factors.
For rents, the levels as OF April /, 1911,
similarly must be taken into account.
And agricultural prices fixed shall not
be lower than on October or December
is, 1941 (two Of the four measuring
rods fixed in the law for q floor for
agricultural prices).
In the debate on the price control law
the point was made that obviously prices
could not be frozen unless wages also
were frozen. Representative Gore of
Tennessee offered a substitute bill to
freeze all prices, wages and rents (not
profits as of a certain date but, with
the Administration opposing wage-con-
troll, the Gore proposal went down to
defeat in 81 to / vote (218 to 63).
Even If some form Of wage-control
now should be enacted into law, the law
might prove hard to enforce without
some provision for tying workers to
war jobs. Otherwise, they could shop
around for new Jobs at higher wage
rates, or be solicited for such Jobs. A
considerable amount OF such shopping
around and solicitation Is believed al
ready to be presenting a serious problem
for many plants. In Great Britain
workers In essential industries are for
hidden to shift jobs without Government
permission. and employers are allowed to
hire new workers only through Govern
ment labor exchanges.