The potters herald. [volume] (East Liverpool, Ohio) 1899-1982, 1942-08-27
THE NEED FOR PRICE SUBSIDIES

III Is BECOMlNG more apparent every DAY tnaL
drastic steps must be taken by the government
if living costs not to stage runaway this Fall
Among the actions required is subsidy plan to
maintain price ceilings.
1t is needed if the growing tendency to pierce
ceilingS-about 400 food items are scheduled to be
hiked upward next months to be stopped.
Subsidies might not be necessary if OPA at
the outset of price control had rolled back manu-
facturers' and wholesalers prices to, say, the
levels of September, 1941 That would have elimi-
mated some of the speculative rises that took place
after this date; it would have prevented retailers
from being squeezed too hard between their own
ceiling prices and the maximum prices they pay
wholesalers.
Unfortunately, that is all water over the dam.
The problem now is to protect existing retail cell
ngs even though they are too high IN many cases.
OPA'S policy to date has been to raise prices at
manufacturing and wholesale levels by use of a
formula involving present costs plus last years
mark-ups. And this has led to the piercing of one
retail ceiling after another.
If the policy is not changed, we will have a
spiral of inllatlonary price increases 1T is import
ant that we maintain present ceilings because war
shortages Of all kinds-from materials to labor
exert constant pressure on prices and, to keep IN
creases from developing all along the line, we
must subsidize those producers whose costs rise
through fault Of their own. To pierce price cell
ings is simply to legaze imitation.
Subsidies would work like this. Certain Gamers
for example, would report to OPA that their costs
had risen. OPA would verify the amount of the
actual increase and pay subsidy to the Gamers
to cover it, or any part of it which the Gamers
could not cover BY keeping prices stable at the
producing end, OPA could avoid raising them at
the wholesale and retail levels
The subsidy plan has two advantages 1t pro-
tects price ceilings and 1t is far less costly than
piercing ceilings. A 20 subsidy at the producing
end would cost much less than piercing the ceiling
by 1870 at the retail end.
A 1870 subsidy on 81 600 worth of goods at
the manufacturing level amounts to $l5O,0OO But
if ceilings pierced all along the line by 1870
the total Increase to the consumer would be over
100000 because Of progressive mark-ups by
wholesalers and retailers. The actual increase
would probably be even larger because of the
difficulty in controlling the different maik-ups be-
fore the commodity reaches the ultimate con-
sumCr
Furthermore, the piercing of one retail ceiling
would lead to the piercing of others, and thus the
way would be paved for spiral of initiation. With
subsidies the whole price structure be kept
under control.
The government could also use its subsidy as
a potent argument in scaling down out-of-llne
profits. If the people were paying taxes for sub
sides it would be expected that their sacrifice
would be matched by rolbacks on profits and
mark-upS.
The food industly-where most ceiling pierre
ing is going on-haS been foremost in opposing
the plan. Obviously, it feels that the amount of
money it would receive in subsidies would not be
anywhere near as much as the profits it can make
under the cOSt-DuS pricing formulas. But that at
ttude hardly holds water unless we believe that
the war is being fought to protect business-as-
usual.
The cry of bureaucracy is raised in opposition
to subsidies Of course and also the argument that
costs of administration would be exorbtant. But
the government has been subsidizng farmers for
almost decade. The WPB pays premiums to high
cost copper and other metal producers. And the
RFC IS paying subsidies to keep down the prices of
fuel oil and gasoline shipped to the East. The job
can obviously be done.
And if a subsidy program stabilized living
costs, as an effective would, its cost would be
only small fraction of the cost to the war effort
and to living standards from the ravages of in
flation.
Congress should stop stalng -as-usual Funds
for a subsidy program arc urgently needed.