plies only to foods, drugs, cosmetics, and therapeutic devices, and does more to protect consumers' health from injury than to protect their pocketbooks from loss. Commodities in other lines which are dangerous or injurious may be marketed, and so may commodities that are so worthless in character that their sale for any purpose at any price is necessarily fraudulent in effect if not at law.

In the control of representations made in the sale of goods a major defect is the limited extent of policing of unfair and deceptive practices. Government activities of this kind cover a very small part of the area in which consumers are exposed to such practices. Much of that field, of course, lies outside of Federal jurisdiction. Another major defect is that the laws fail, with some exceptions, to require that consumers be given even a minimum of essential information concerning the goods they buy.

To make such a requirement of law feasible, standards would be necessary. To date most standards evolved through Government process are designed for use in Government purchases, or in a manufacturing process, or in wholesale transactions. Many of the standards for farm products are designed primarily to aid the producer in his marketing rather than the consumer in his buying, and some of them are definitely unsuited to the latter purpose. Minimum standards now authorized for foods and drugs are serviceable to consumers. But a major gap with respect to foods is the lack of authority for establishing mandatory standards for quality grades above the minimum. Minimum standards tell the consumer the food is good enough, but tell him nothing about its relative quality. Such standards, it should be noted, apply only to descriptions used on the label or container. There is no requirement that they be used in advertisements. Grade standards are available for canned fruits and vegetables, meats, eggs, and butter, but the use of these in sales to consumers is voluntary and consequently infrequent. In short, the food standards that must be used provide only part of the information consumers need, while those that provide more useful information need not be used, and for the most part are not. For almost all other types of consumer goods no standards are regularly employed.

A beginning has been made by Government to define standards for containers, but here again the commercial buyer is served and the household buyer is neglected. Most of the standardized containers for fruits and vegetables are of sizes not purchased by ultimate consumers. Practically all of the containers in which consumers do purchase foods are not standardized, but on the contrary are manufactured in an array of shapes and sizes confusing to the careful buyer who wishes to compare costs of rival products. Deceptive containers, however, of foods, drugs, and cosmetics are banned under the new Food, Drug, and Cosmetic Act.

Another gap in consumer protection against deceptive methods of sale is the neglect of the Federal Government to exercise its constitutional power to fix standards of weight and measure. Apart from coinage weights, less than a score of such standards have received congressional approval during the Nation's history, many of these are for a limited purpose only, and only two or three bear any direct relation to consumer transactions. Likewise the Federal Government has left wholly to State and local governments the application and en

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forcement of the customary weights and measures. Throughout large areas of the United States practically no effort is made to see that consumers get pounds when they pay for pounds or yards when they buy yards. Through an additional sizable territory the policing of weights and measures is so fragmentary as to favor the probability that consumers will get less than they pay for. In the absence of adequate supervision of weights and measures, the force of competition is inevitably on the side of short weight, and absence of supervision is more the rule than the exception in this field of consumer experience. The outstanding defect in the most valuable of consumer protections the antitrust laws-is not what the laws fail to provide but insufficient appropriation with which to provide it. Although funds available to the Department of Justice for antitrust enforcement are from 4 to 6 times what were provided prior to 1936, the total seems small for the purpose in view. Of the $1,325,000 appropriation to the Antitrust Division of the Department of Justice, probably not more than $1,000,000 is available for antitrust enforcement as such, the remainder being required for enforcement of the many other laws which come under its jurisdiction. A sum of $1,000,000 for keeping open the channels of trade of American industry and commerce promises little practical aid to consumers from that source when it is contrasted with $5,330,000 for the Securities and Exchange Commission, $6,800,000 for the Fair Labor Standards Act, $4,600,000 for the Patent Office, and $2,100,000 for the Bureau of Foreign and Domestic Commerce. In addition to the antitrust work of the Department of Justice, it should be noted that some part of the $2,300,000 appropriation of the Federal Trade Commission is expended on actions against restraints of trade in violation of the provisions of the Clayton Act and the Federal Trade Commission Act.

Finally, among the protective services, should be the provision for specialized personnel to represent the interests of consumers in governmental procedures. As the Government assumes increasing responsibilities in the Nation's economic affairs, an increasing number of administrative determinations are made which decide issues as between consumers and other economic interests. Whatever the tradition of public office may be, the actual exercise of administrative discretion in matters affecting the wealth and income of various groups is bound to be conditioned by the ability of those groups to impress their particular wishes upon the administrative agency. Consumers enter that arena under the basic handicap that many such determinations are made by Government agencies which by name and tradition and as a condition of appropriation are held accountable for service to a particular economic interest. For example, determination of the balance of interest between producers and consumers of fluid milk is assigned to the Department of Agriculture in its power to fix prices which milk distributers shall pay to producers. Consumers face the further handicap that, being unorganized, they cannot send representatives to the council table where administrative determinations are informally but forcefully discussed.

There is no consumer establishment in Government in the sense there are farm, labor, commerce, investor, mining, oil, bituminous coal, merchant marine, and fish and wild life establishments. As already noted, the independent consumer representation once provided for by Congress with reference to Government fixing of bituminous

coal prices is now vested in the Department of the Interior which determines those prices. In the Department of Agriculture the Consumers' Counsel, existing only by virtue of administrative order, expresses opinions only to officials within the Department on the consumer aspects of decisions made in administering the farm programs. Many governmental agencies render services or administer regulations for the general public welfare, but without specialized attention to the consumer phases of that welfare. Ultimate consumers are not, for example, deemed parties at interest in a proceeding before the Interstate Commerce Commission on the raising of railroad tariffs. Nor does any Government agency appear on their behalf, except formerly in cases involving rates on bituminous coal for which the National Bituminous Coal Act authorized the Consumers' Counsel of the Bituminous Coal Commission to appear and be heard. Farmers, however, as shippers or receivers of railroad freight may be represented in I. C. C. hearings by the Secretary of Agriculture or his agent, because Congress has specifically authorized such representation of farm interests.

As there is no one Government agency charged with the duty of giving independent representation to the interest of consumers in administrative procedures, likewise there is no source to which Congress can turn for informed counsel on the consumer aspects of proposed legislation, should it desire to do so. The increasingly complex character of economic legislation has made it the usual practice of congressional committees to refer pending bills to the executive department or administrative agency competent in the field to which the bills relate. The bearing of many measures upon the interest of consumers may also be a question for expert analysis, since casual examination will not always reveal what its consumer effect will be. In the legislative as in the administrative process advancement of the general welfare is always the primary purpose in view, but the average citizen as a money spender sometimes pays dearly for advancement of his general welfare at the expense of his consumer interests.

This bill of particulars on what the Federal Government omits from its service to consumers suggests that at least passing mention be made of Government measures, both State and Federal, which work definitely against the interest of consumers. Trade-barrier laws and regulations of many kinds have been much publicized in recent years. They are special instances, operating at State boundaries, of the power of some interests to prevail upon legislatures to use their public power for private purposes.15 Other laws, such as those which legalize artificial pricing, are adopted as a means of settling commercial disputes rooted in competitive inequalities. Still others, like the local measures enacted to safeguard the sanitary quality of milk, may embody a necessary public service but restrict trade and burden consumers beyond what is necessary to accomplish their primary purpose. Laws of this kind provide illustrations of a general principle. Because consumers do not have that degree of organization which compels consideration of their interest at every stage in the governmental process, they stand to suffer injury from governmental actions, which, though not directed against them, overlook their interest and let the burden fall upon them simply as a by-product of the producer purposes which the actions are intended to serve.

15 See ch. VI, supra.

CHAPTER XVI

FISCAL POLICY AND TAXATION 1

FISCAL POLICY

Current Controversies over National Fiscal Policies.

Recent years have witnessed a greater expansion in Federal expenditures, taxation, and borrowing than ever before, except in times of war. It resulted originally from the distressing impact of the depression on entrepreneurs, farmers, home owners, industrial wage earners, and even State and local communities. Such was the plight of these groups that the Government came to their rescue in order to prevent general economic and financial chaos. It extended loans to business and property owners saddled with heavy debts and threatened with bankruptcy; disbursed large sums in benefits to farmers, and for the relief of the unemployed; and launched a vast program of Federal or Federally aided public works to provide employment to millions of

workmen.

The Government financed these large outlays in a manner expedient at the time-by borrowing. Had it done otherwise and resorted instead to taxation, it would have imposed serious hardships on business and consumers, aggravated the depression and so nullified the salutary effects of its expenditures and loans, without securing all of the necessary funds. By borrowing the money, the Government avoided these deflationary effects for it used money which otherwise would have remained idle, for neither private enterprise nor the States and municipalities were willing or able to employ it.

In making these large outlays and borrowing these vast sums, the Government expected, however, that it would not only relieve immediate distress and stop the spiral of deflation, but also stimulate recovery. In a word, it was believed that the depression responsibilities of Government were largely temporary and that it would be able eventually to curtail expenditures and restore budgetary balance within a short period.

The depression, however, proved to be no ordinary one. Though business did respond to the spending and lending activities of the Government, its response did not result in full recovery. What is more, when as in 1937, the Government sought to retrench on its relief and public works expenditures and at the same time to increase

1This chapter is the product of close collaboration among the following persons: Dr. Dewey Anderson, executive secretary, Temporary National Economic Committee; Dr. Paul Studenski, professor of public finance, New York University; Dr. Gerhard Colm, fiscal expert, Bureau of the Budget, Washington; Dr. Richard V. Gilbert, Director, Defense Economics Section, Price Stabilization Division; and Clifford Hynning, senior economic analyst, Price Section, Price Stabilization Division, Office for Emergency Management. In addition to the expert knowledge of the authors, it is based on the series of tax monographs of the Temporary National Economic Committee, especially Monograph No. 3, Who Pays the Taxes? by Gerhard Colm and Helen Tarasov; Monograph No. 9, Taxation of Corporate Enterprise, by Clifford Hynning; and Monograph No. 20, Taxation, Recovery, and Defense, by Dewey Anderson.