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“When infirmary records are compared, it is readily seen that the margarine. group fared much better than the butter group. We are not making claims that the margarine group were healthier simply because their diet contained margarine. Other variables are more likely to account for their better health.”
In 1886, it was contended that margarine was an unhealthy food and was being sold fraudulently as butter. In 1902, when the original law—which imposed a 2-cent tax on all margarine-was amended to reduce the tax on uncolored margarine and place an almost prohibitive impost on the artificially colored yellow product, the argument was again made that consumers must be protected from fraud. In 1931, when the 10-cent tax was imposed on all yellow margarine whether artificially or naturally colored—the contention was made that margarine was a foreign product since a great deal of it was then being made from imported palm and coconut oil.
I should like to point out here that the “foreign" argument is of no importance today. More than 95 percent of all margarine is now made of domestic ingredients. This argument is as archaic today as the contention that margarine is an unhealthy food.
Equally invalidated is the contention that the antimargarine laws are needed to protect consumers from the possible fraudulent sale of yellow margarine as butter. There were no pure-food laws when Congress passed the antimargarine law in 1836, and both butter and margarine were sold in bulk, or tub form. Now margarine is sold only in cartons, specifically and properly labeled.
Nowadays the Federal pure-food laws and similar pure-food laws in 47 of the 48 States guarantee the proper labeling and standard of purity of food products, including margarine, thus adequately protecting consumers. There are also, of course, criminal statutes in every State against fraud and misrepresentation.
Of course, no law was ever passed which would prevent lawless men from breaking it. But few risks were ever so well guarded against as the possibility that margarine would be sold fraudulently to any widespread extent if these discriminatory taxes were repealed. If we have any doubts on that score, however, there is no reason why we cannot further strengthen the already extensive labeling and marketing requirements to achieve even greater safeguards. I am sure many Members would agree to the general principle that direct legislation of this sort is preferable to the use of the taxing power of the Government to accomplish a similar purpose indirectly.
A dairy organization cites six cases of the fraudulent sale of margarine as butter. This record actually shows there is little danger of fraud. The cases represent the isolated actions of a very few individuals over a period of 20 or 30 years. The amount of margarine involved was infinitesimal by comparison with the amount of the product which was manufactured. The records of judgments under the Federal Food, Drug, and Cosmetic Act, published by the Food and Drug Administration, show that from 1930 through 1947 butter was seized for various violations 2,292 times; margarine only 21 times during this period. In only 2 cases was margarine seized for contamination, filth, addition of foreign matter, decomposition, or similar reasons. Butter was so seized in 652 cases. Margarine's few seizures under the Food and Drug Administration have been mainly because of slightly less than 80 percent fat content.
During the period mentioned butter volume was 4 to 5 times that of margarine. But the seizures were at a ratio for butter of 100 to 1 for margarine.
In this connection, only butter is exempt from certain labeling requirements of the Federal Food, Drug, and Cosmetic Act. The artificial color may be, and is, added without stating this fact on the label. Special dairy interests that put through the legislation on margarine were able to prevent butter from having to be accurately labeled. Likewise, the label states no grade or other value by which the contents—a pound of butter-may be judged by the consumer. Furthermore, much butter is artificially flavored without so stating on the label.
I think it should be made clear here, so that there may be no concern on the point, that no responsible margarine manufacturer or distributor of margarineno proponent of repeal of these discriminatory tax laws—is opposed to the labeling and marking provisions of the pure-food laws. Margarine wants to be known as margarine, labeled as margarine, sold as margarine. I am afraid some spokesmen for the butter interests have conjured up a specter of “fear” on this particular issue that is almost as fraudulent as the thing they say they want to prevent.
Closely allied with the contention that these Federal margarine taxes are necessary to prevent the widespread fraudulent sale of yellow margarine as butter is the claim of the proponents of these laws that butter has some kind of preemptive
right to the use of yellow. Indeed, in 1902, when the tax of 10 cents a pound was laid against yellow margarine, the claim was freely made that yellow was butter's color, and the tax was actually justified as a kind of impost imposed for the use of that color.
Representative Wadsworth, of New York, chairman of the House Agriculture Committee, answered this contention when it was first made with a clarity and cogency that seems to me still convincing :
"If that claim is right,” he asked, “what shade of yellow is it (butter) entitled to. It is only in the months of May and June and I speak as a practical butter maker myself when I make the assertion—that creamery butter, and that, of course, is the butter of commerce, has a decided yellow color or tint, and that color disappears entirely, or almost so, when the fall and winter sets in
"I deny that butter has the copyright, patent right, or any other right to any particular color, whether yellow or otherwise
*. If coloring oleomargarine helps to perpetrate a fraud, then the coloring of butter is actually a fraud, because it makes the consumer believe, and necessarily, that fall or winter, or white butter of any season of the year, June butter, which is generally considered the best."
I hope that even those who contend that the antimargarine laws should be continued will not deny that modern margarine is a nutritious and high-quality food, equal in every respect to the butter product.
HOW THE ANTIMARGARINE LAWS PENALIZE MARGARINE
Why, then, does the Federal Government impose the following taxes and license fees on margarine?
10 cents per pound
14-cent per pound. $600 per year. $200 per year. $6 per year.
In addition, Federal Regulation No. 9, promulgated and enforced by the Bureau of Internal Revenue, imposes very burdensome restrictions on those engaged in the manufacture and distribution of margarine.
The law imposing the $600 tax on manufacture of colored margarine has been interpreted to mean that private hospitals, private charitable institutions, public eating places, and others which buy and color margarine must pay the yearly manufacturers' licence fee of $600 plus the 10-cents-per-pound tax.
WHY WERE THOSE LAWS ENACTED?
There are, of course, no sound reasons for the imposition of these taxes and license fees on margarine. Both margarine and butter are colored yellow to meet food habits.
We are accustomed to yellow table spreads just as we are used to white milk. We would look with distaste upon green milk-though in every respect except color it might be identical with other milk. Our housewives do not object to white margarine for cooking purposes. They are accustomed to white cooking fats—such as lard. But they do want their margarine yellow for table use. There is no valid reason why their preference should be ignored or thwarted.
Margarine looks like butter. Furthermore, it imitates and is substitute for butter but what is wrong with that? If we are to levy a tax on all products which imitate the original, in color and other characteristics, we are going to stifle competition. The very essence of competition is to develop new products which are like the old but which are better and cheaper.
Of course, the supreme irony of this amazing claim of butter to a monopoly on yellow, is that the fats and oils used in the manufacture of margarine contain some naturally yellow color. Under Federal regulations, however, these fats and oils must be bleached, a process which adds to the cost of manufacture, in order to make white margarine. Otherwise, the margarine resulting would have to pay the 10-cents-a-pound Federal tax.
DO THESE LAWS PROTECT THE DAIRY INDUSTRY? There is little question that the purpose of the 10-cents-a-pound Federal tax on colored margarine and the license fees imposed on wholesalers and retailers, as well as the bulk of State legislation penalizing margarine, is to favor the butter industry and to limit the production and distribution of margarine.
Indeed, a careful study of the congressional debates in 1886, 1902, and 1931 will convince almost anyone that the fundamental reason back of this legislation was not the desire to protect consumers from potential fraud—there were other more direct ways to do that; nor was it that margarine was unhealthy-in which case its sale should have been prohibited; nor was it because margarine, for a time, was manufactured largely from imported oils—a higher import duty could have stopped that. The fundamental, underlying reason was a desire to protect the dairy industry in general and the butter industry in general and the butter industry in particular against competition from margarine.
In 1886, Representative Millard, of New York, a leading proponent of the original bill told the House : "Either oleomargarine must go or the great dairy industry of the country must be wiped out, utterly destroyed.” This argument was repeated over and over. We are still hearing it today.
A report made in 1939 to the Secretary of Agriculture, Barriers to Internal Trade in Farm Products, says:
“Generally, those favoring margarine legislation have been frank to say that their object is to 'protect the dairy industry. When the Washington tax of 15 cents per pound was carried to the Supreme Court, the sponsors of the act candidly stated that their purpose was to help the butter industry and they made their arguments on that basis.”
The Dairy Record, a magazine representing the dairy industry, said in an editorial on June 18, 1941 :
“The dairy industry must set as its goal the complete extermination of oleomargarine. It must never rest until the manufacture and sale of oleomargarine have been outlawed in this country.”
And Hoard's Dairyman, another well-known spokesman for dairy interests, said, on January 25, 1948: “The tax of 10 cents a pound on oleomargarine colored in semblance of yellow butter is to stop the sale of this product. The tax should be higher
*. It seems to us the dairy industry has a right to protect its products.”
I could cite scores of similar statements which make it very clear that the basic reason for the antimargarine laws was to protect the dairy industry.
Leaving aside consideration of the wisdom or jusiice of legislation which seeks to protect one domestic product against another or one group of American farmers against another, let us consider whether antimargarine legislation has accomplished its avowed purpose. Has it “protected” the dairy industry?
Let us grant at once—what cannot be doubted for a moment—that antimargarine legislation—both State and Federal-has hurt the margarine industry. It has made margarine more expensive for the manufacturer to make and the consumer to buy; it has made it less attractive to users—especially through the 10-cent tax and other drastic restrictions on yellow margarine; it has curtailed margarine's retail outlets ; it has discouraged expansion of the industry. In short, it has limited both the production and distribution of margarine. But, despite this fact, the production of margarine has expanded steadily and the 1947 output of 725,000,000 pounds is the highest on record, exceeding the next highest year, 1946, by 100,000,000 pounds.
But what of the dairy industry, particularly those farmers who earn the major part of their livelihood from the sale of milk for butter making?
In 1901, the year preceding the passage by Congress of the most drastic of the antimargarine laws-the 10-cent tax on yellow margarine---per capita consumption of butter was 19.9 pounds. It has never been that high since.
Following the enactment of the last Federal antimargarine legislation in 1931, per capita butter consumption fluctuated within narrow limits—dropping from 18.1 in 1932 to 17.8 in 1933, rising briefly to 18.2 in 1934, and then dropping to 17.1 in 1935. With one exception—when it rose to 17.3 in 1939—it continued to drop steadily until 1945.
And then, in 1946, it dropped again—this time to 10.5, the lowest per capita butter consumption in our history. I mention this particularly because the butter lobby has advanced, against all the evidence, the argument that wartime conditions-price control, rationing, and other emergency factors—were largely responsible for declining butter consumption.
The record shows, on the contrary, that total butter production, as well as per capita consumption, has shown a fairly steady decline for many years.
In the 10-year period between 1936 and 1946, total butter production, including both creamery and farm manufacture, declined from 2,131,000,000 pounds to 1,501,000,000 pounds or approximately 29 percent. At the same time total milk production, for all purposes including butter, increased from 102,410,000,000 pounds in 1936 to 120,276,000,000 pounds in 1946. While there was more milk available for butter manufacture, then, the percentage of this milk made into butter decreased from approximately one-third in 1936 to one-fifth in 1946.
Wartime conditions undoubtedly had some effect on butter production but they were not controlling; nor were they all disadvantageous to butter. For from June 1, 1943, until October 31, 1945, butter producers received a subsidy of 5 cents a pound.
In 1947, with wartime controls removed, per capita butter consumption is estimated to have been 11.5 pounds. This represented a very moderate increase over 1945 and 1946 but not even the most ardent butter advocate could take much encouragement from it.
It was the third lowest rate since 1896.
It is not margarine that has driven more and more butter out of the market. If this were the reason for declining butter consumption, we should have expected margarine to have occupied that portion of the market vacated by butter. But no such thing has occurred.
Margarine per capita consumption in 1946 was 3.8 pounds higher than it had been in any previous year except 1945. But this represented an increase of only 0.8 pound per capita since 1936. During the same 10-year period butter consumption dropped 5.9 pounds. In other words, the American people, on an average, bought about 6 pounds less butter per person in 1946 than they did in 1936, but they did not fill this gap-and it is a definite nutritional gap—with a corresponding increase in margarine purchases. Only one-seventh of the lost butter consumption was replaced during these 10-years by margarine.
The fact is that butter has been taking itself out of the market. The high cost of producing butter as compared with the more profitable uses of milk; the price at which butter is sold—and for the most part, be sold—to enable butter producers to compete with other purchasers of feed and farm labor and land—these are the factors that, largely of necessity, have given us dollar butter and deprived the butter industry of approximately 30 percent of the market which it had 10 years ago.
Actually, margarine production does not materially affect the price of butter though, as we have seen, when butter prices are very high, some consumers, who cannot afford butter, turn to margarine. A study, published in 1942 by the Wisconsin College of Agriculture, in the heart of the dairy country, found no relation between margarine and butter prices :
“There is no evidence in the past that oleomargarine has been the important factor in causing low butter prices. In 1932 there were about 111/2 pounds of butter consumed for every pound of oleomargarine, and consumers spent $15 for butter for every dollar spent for oleomargarine. If all the money spent for pleomargarine that year had been spent for butter, the retail price of butter would have been increased 1.7 cents per pound. This would not have solved the dairy farmer's problem.”
From the record it seems abundantly clear that antimargarine legislation has failed to aid butter producers. It has simply prevented margarine from occupying the market for table spreads which butter could not fill.
This leads to another question, more important than the first. We have already seen that antimargarine legislation has not aided that dwindling portion of the dairy industry which produces butter. But what of the much larger portion, those dairy farmers who depend mainly upon fluid milk and whole milk products for their livelihood ? Has antimargarine legislation “protected" them?
There are, in the United States, some 2412 million dairy cattle owned by approximately 5,000,000 farmers. Of the farmers, 1,176,000—a little more than one-fifth-receivé some income from butter manufacture, either on the farm or through sale of milk to creameries. For only half, or approximately 600,000. does butter represent the chief source of income. The others, roughly 85 percent of all dairy farmers, receive their principal income, or all of it, from the sale of the products of the cow in fluid milk form or for manufacture into cheese, dried whole milk, evaporated milk, condensed milk, skim milk, or ice cream.
But butter's importance to dairy farmers generally has been accentuated by certain other factors.
For it was, and still is, the use of butter as a price “stabilizer” and “balance wheel," as it is variously called, which has led many dairy farmers to insist upon special protection for butter against margarine competition.
For if, when depression comes, butter cannot recapture the table spread market because of the possible encroachment of margarine, then butter prices, it is contended, will fall abnormally and carry down with them the whole dairy price structure.
This argument, of course, does not stand up under examination. In the first place, as we have seen, margarine has never taken over more than a small portion of the table-spread market vacated by butter. But even if margarine, upon the repeal of this discriminatory legislation, took over a much larger share of the table-spread market vacated by butter or all of it, there is no reason why these formulas cannot be changed, so that the prices of dairy products would be tied to some more stable and profitable product than butter. Indeed, there is every reason why they should be changed if they injure the dairy farmer.
Recently, in the Western Dairy Journal, a prominent dairy farmer, Merrit Nash, wrote:
"My interest in the oleomargarine question is primarily selfish. As a person who gets his entire income from a dairy farm, I felt that I have a right to voice my opinion regarding what I think to be the soundest way in which to improve that field of endeavor and to make it more profitable for myself. Butter is our price stabilizer
and I object to exactly that. It stabilizes our prices at levels which are generally most unprofitable. Why do we not select a dairy product that will reflect a more advantageous stabilizing effect?"
Even more significant is a report by the Boston Milkshed Pricing Committee, published in September 1947. This committee, composed of a number of outstanding dairy economnists, was appointed by Richard D. Aplin, acting market administrator, in response to criticisms of the fluid milk pricing formula used in the Boston market by representatives of cooperative milk associations. This formula called for a change of 22 cents a hundredweight in the class I milk price for each 5-cent change in the New York wholesale butter price, for each 3-cent change in the New York wholesale price of nonfat dry milk solids, or for any equivalent combination of the two.
The committee, with Dr. George F. Dow, chairman of the dairy committee of the New England Research Council on Marketing and Food Supply, in charge, worked on their report for 312 months. They studied the milk-pricing situation in general with particular reference, of course, to the Boston market. They recommended that the butter formula for setting class I milk prices in the Boston milkshed be abandoned.
I think you will be interested in some of their reasons for this recommendation:
“For many years until 1946 the class I prices in the Federal order for the Boston market have been related roughly to butter prices, over a narrow range of prices. Since June 1, 1946, there has been in the order of a full-fledged formula for establishing class I prices * *. It has been unsatisfactory Since the end of the war, butter and powder prices have proved to be erratic and unreliable measures of general economic conditions which should be used as a guide to sound fluid milk prices
To cite an example : Consumer buying power was about the same in October 1946 as in March 1947, and the supply of butter moving into trade channels was almost the same in these 2 months; yet the price of butter was 84 cents in October and 64 cents in March. The difference was due apparently to the advance psychological appraisal of demand-and-supply prospects for butter by the forces that make the wholesale butter market. There is no reason why such errors of judgment should affect fluid milk prices in Boston by 2 cents a quart."
The report, after discussing the advantages and disadvantages of formula price fixing for fluid milk as opposed to public hearings or other means for setting prices, recommended the establishment of a new formula for the Boston milkshed based, not on butter prices at all, but on the "composite level of United States wholesale prices, New England department store sales, and Boston milkshed grain-labor costs.”
It seems fairly clear that, today, butter is no longer a desirable price stabilizer for milk products. Indeed, it seems to have become such a liability as a price fixer that the sooner it is abandoned the better for the dairy industry. I think it is fair to conclude that to the extent that antimargarine laws encourage dairy farmers to stick to butter as a price stabilizer—under the mistaken belief that butter is protected by such laws—they are definitely harmful to the dairy industry.