Mr. ROGERS. Judge Lobingier in testifying before the committee urged legislation, either in the form of fundamental law, or on an appropriation bill, which would permit the courts to exact an inheritance tax from estates which come before his court for administration. (In his testimony before the committee, he urged legislation, either in the form of fundamental law, or on an appropriation bill, which would permit the court to exact an inheritance tax from estates which come before his court for administration In his testimony before the committee in October he laid great stress on that point, and he proposed that this language should be put in as a proviso on the diplomatic and consular appropriation bill:

Provided, That in probate and administration proceedings there shall be collected by said clerk before entering the order of final distribution and paid into the Treasury of the United States a percentage of the value of the estate in China, as follows: One per cent where such value does not exceed $50,000; 2 per cent where such value exceeds $50,000 and does not exceed $150,000; 3 per cent where such value exceeds $150,000.

His viewpoint was that a decedent in China was able to leave his property untaxed, whereas if that same man happened to die in the United States he would have left an estate subject to quite a heavy tax, and further, that if this sum of money should be obtained through the medium of an inheritance tax it would make this court self-supporting and would make Congress feel that it could allow the court to branch out in new directions. I notice the Secretary of State does not recommend that legislative provision. Is that because he is opposed to it or because he thought it was useless to try to put it into an appropriation bill?

Mr. CARR. In the first place, as the judge had the proposition phrased, the Secretary did not quite approve of it. My recollection is that the amount or percentages which the judge specified exceeded the inheritance tax prescribed by the Government of the United States and that the feeling in the department was that if an inheritance tax was to be collected it should be not in excess of that collected by virtue of any act of Congress applicable elsewhere. And second, that if a tax of that character were to be collected—indeed, if any fees of the sort were to be collected-they should be made returnable direct to the Treasury of the United States, and that that should be very clear, which it was not in the language of the proposal submitted by the judge, as I remember it. The matter was discussed as to whether

Mr. ROGERS (interposing). On that point, Mr. Carr, the language of the proposal "There shall be collected and paid into the Treasury of the United States a percentage," and so forth.

Mr. CARR. That is very clear there. It was not in the first draft of the proposition which I saw, and which I discussed with the judge to the best of my recollection. There was also another question, to answer your inquiry, precisely. We doubted whether that was a thing to put in this bill, and we did not submit it on that account. We thought that if it were a proper thing to put into a bill it would be better to put it into a bill revising the law with reference to the courts, and such a bill is already pending before Congress.

Mr. ROGERS. In other words, is the policy of the department to recommend as little new legislation as possible?

Mr. CARR. Yes. The only reason for recommending this paragraph in reference to a commission is to get rid of what appears now to be a very conflicting procedure and one not calculated to serve the interests of the country in Shanghai.

Mr. ROGERS. Is the item at the top of page 18 in italics subject to a point of order?

Mr. CARR. I think not.

Mr. ROGERS. It may be subject to a point of order as far as the reference to June 30, 1920, is concerned, but it would not be subject to a point of order otherwise.

Mr. CARR. It might be subject to a point of order in so far as specific acts are concerned, although in its general nature it has already been included in the last bill.

Mr. ROGERS. The provision of the current act is, "In settling the salaries for the fiscal year ending June 30, 1918, by the disbursing officers to the officials of the United States Court for China, the same rate of exchange used in the payment of salaries to consular officers in China for said fiscal year is hereby authorized and approved, these settlements to be made from the total amounts appropriated for salaries and court expenses for the fiscal years ending June 30, 1918, and June 30, 1919." I think that language is identical with the language in italics on page 18, except the changes in dates.

Mr. CARR. That is my understanding, in which case, I take it, it would not be subject to a point of order.

Mr. ROGERS. Not so far as June 30, 1919, is concerned.

Mr. CONNALLY. I want to ask you a question about the rate of exchange. We have that proposition every year regarding the rate of exchange on silver in China. When money goes up in China, do not other things go down? That is the experience in every other part of the world. Money is a relative thing; when money is high other things are cheap, and when money is cheap other things are high?

Mr. CARR. In this situation in China, the medium of exchange in China is silver. A given amount of silver, ordinarily, in China will buy a given amount of any commodity.

Mr. CONNALLY. By weight, or otherwise?

Mr. CARR. Yes. For instance, let us say, you are buying a bag of rice in Shanghai, a Chinese product, and it was worth, let us say, a Mexican dollar in 1914. But the value of silver in its relation to gold, which is not used in China for the settlement of accounts, has completely changed. The price has gone up, so that a Mexican. dollar which you use in exchange in China would cost now approximately twice the amount in gold which it cost in 1914.

Mr. CONNALLY. I understand that. That demand for silver and that value for silver is not restricted to China. Why does not that rise in the value of silver make silver worth twice as much everywhere else in the world?

Mr. CARR. It is.

Mr. TEMPLE. The trouble is you can not buy as many silver dollars in gold as formerly.

Mr. CONNALLY. I understand that. If silver is worth more than other things are worth, and other things are worth less, it looks to me as if it would buy more.

Mr. CARR. You are dealing in China, a silver country, with precisely the thing you were dealing with before 1914, and the only

consideration you are met with in China is the increased cost of producing the article which you wish to purchase, but when you bring that cost into relationship with gold by selling the article to another country or buying something from another country on a gold basis, then you get into the difficulty growing out of the increased value of silver with relation to gold. It has more than doubled since 1914. Mr. TEMPLE. Is not this another way of saying the same thing, that in this country we buy silver as a commodity because gold is the standard? In China silver is the standard and gold is the commodity. You trade a commodity with no standard of value for their standard, and our men can not buy as much salary; that is, they can not buy as many silver dollars for their gold salary as they could in 1914.

Mr. CONNALLY. Why will not that silver dollar buy twice as much goods as it would before?

Mr. TEMPLE. For the same reason that the gold dollar will buy twice as much in this country.

Mr. BEGG. Suppose my salary, for instance, in 1914 would get me one silver dollar. To-day it gets me 50 cents, one-half of a silver dollar. In 1914 that silver dollar bought me a pound of rice. How much rice will it buy me to-day? That is the proposition.

Mr. TEMPLE. Yes; a half dollar will buy half the amount of rice.
Mr. BEGG. Will it, or will it buy me still a pound of rice?
Mr. CONNALLY. That is it.

Mr. HOUGHTON. Are you not leaving out the question of the volume of trade in the two countries? If you buy in China there are going to be a certain amount of bills in this country.

Mr. BEGG. On that particular proposition there is just one element in adjusting a man's salary: How much can he buy to-day out of his salary in comparison with what he could buy five years ago? We are confronted constantly with the proposition to raise salaries because of high prices. Have prices risen in China as in other places, or have prices relatively gone down, and can a man live on half as much?

Mr. TEMPLE. To measure it in silver they have gone up.

Mr. BEGG. It is not a question of that; it is a question of pounds. Mr. TEMPLE. You can not buy as many pounds in silver money. Mr. BEGG. Is it a fact that their 50 cents in silver to-day, which represented a dollar in silver a year ago or 10 years ago, will still pay for a pound of rice?

Mr. CARR. No. In the first place, it costs more to-day to raise a pound of rice in China.

Mr. BEGG. I do not care about that. The question is whether he can get a pound of rice for the same proportion of his salary check that he could get before?

Mr. CARR. If a man is paid a salary of $3,000 in gold, before he can use it in China he has to get the equivalent of the gold in the silver money of China. In getting the equivalent of that gold in China he gets half as much silver for the gold as he previously got.

Mr. BEGG. How much does he get in living items which he needs every day?

Mr. CARR. He gets half as many of the Mexican dollars in silver for the amount of gold which he has. Then he pays as many Mexican dollars for an article, and a little more than he paid in 1914.

Mr. BEGG. That answers my question.

Mr. CARR. There is not any question at all about the depreciation of gold salaries in China and some of the other countries where silver is at a premium.

Mr. CONNALLY. I am in favor of fixing proper salaries in United States money all over the world, and if the salary is too low I would make it higher, and if the salary is too high I want to lower it. I am not in favor of this kind of a policy. If a consul who is living over there and getting $2,500 salary and can not live on it, let us give him whatever is necessary for him to live on, and let him look after the exchange. I do not believe in doing business in this way. It is not a fair test, because you only get the testimony of a lot of fellows in China who are out of joint, and you get the testimony of some other fellows in some other place who are out of joint, and we have to take what they say about it. It seems to me that the best way to do is to add this difference brought about by the difference in the exchange rate to their salaries, and not to legislate in this way. You can not take the conditions that exist in one country and legislate to meet those conditions and then apply that to conditions in the rest of the world.

Mr. CARR. If you will permit me a word there, I would like to say that within seven or eight months-I think it can be done in that time-the State Department will, I hope, have a system worked out by which we will do practically what Bradstreets and other agencies of that kind do, fix an index number for each country, based upon a certain number of commodities entering into the cost of living there. I think we will be able to give you a pretty close mathematical rule for measuring the correctness of the amounts: we ask you to appropriate. If you attempt to fix salaries in China. and exchange goes wrong in Chile, you have two fixed salaries then, and if you want to transfer a man from China to Chile, you will have a man in China getting $5,000 a year according to the salary fixed by Congress, when he ought to have only $2,500 a year in Chile, and you will be wasting $2,500 a year; whereas, if in addition to a moderate salary you had a lump sum distributable upon the basis of a definite system such as I suggest, we will have a perfectly flexible method, one which has been adopted and which was used very greatly by Germany before the war and which will continue to be used by France, and by Italy, and which is admitted to be the most feasible and really the soundest method of arranging the salaries in the service where you are dealing with so many different conditions.

(Whereupon, the committee adjourned to meet to-morrow, Tuesday, January 13, 1920, at 10 o'clock a. m.)

COMMITTEE ON FOREIGN AFFAIRS,

HOUSE OF REPRESENTATIVES,
Tuesday, January 13, 1920.

DIPLOMATIC AND CONSULAR APPROPRIATION BILL FOR 1921.

The CHAIRMAN. Mr. Carr, I believe you were down to line 17 on page 18 at the conclusion of the hearing yesterday.

STATEMENT OF MR. WILBUR J. CARR, DIRECTOR OF THE
CONSULAR SERVICE-Resumed.

Mr. CARR. Mr. Chairman, if I may ask the indulgence of the committee for just a moment I would like to correct my testimony with regard to the first paragraph on page 18, which is with regard to the settlements of salaries of officers of the United States Court for China, expenses for two preceding years. That item originated in this way: There was formerly a post-allowance appropriation made for the officers in China, based upon exchange, but did not include officers of the court for China. The instructions, however, were inadvertently conveyed to the officers of the court by the legation, and the officers collected their post allowance according to the rule laid down for the diplomatic and consular officers. Their accounts were disallowed and they were held indebted to the Government for that amount of money. They came before Congress and asked for the insertion of this provision in the appropriation act for the settlement of those accounts out of the appropriation already made by Congress. The post-allowance expenses have since been extended to the court officers. This paragraph may very well come out of the bill.

Mr. BROWNE. Which paragraph is that?

Mr. CARR. The first paragraph on page 18. I am sorry I did nót recall that yesterday when I testified before the committee:

Mr. MOORES. I move that it be taken out, Mr. Chairman.

The CHAIRMAN. We can do that when we mark up the bill, Mr. Moores.

Mr. MOORES. It can be done by consent.

Mr. ROGERS. Mr. Carr, there is just one more inquiry on that point that I would like to make. In the current post allowance, is a provision included for the officers for the court for China?

Mr. CARR. Yes, sir.

Mr. ROGERS. Because, of course, it is a retroactive provision.
Mr. CARR. Quite so.

Mr. ROGERS. For the fiscal year ending last June.

Mr. CARR. Last June, but it was inserted in the current appropriation in moving the court for China.

Mr. ROGERS. In the acts for 1918?

Mr. CARR. 1918-19.

Mr. ROGERS. Yes.

Mr. MASON. What is the next item, Mr. Chairman?

Mr. CARR. Yes, sir; that is my recollection.

INTERNATIONAL OFFICE OF PUBLIC HEALTH.

The CHAIRMAN. Line 17, page 18, "International Office of Public Health." Have you anything to say with regard to that, Mr. Carr.

Mr. CARR. Nothing other than that it is included with the first item on page 19 in this general statement. That is one of those international obligations which we incurred by virtue of a treaty and to which we are as a government expected to pay a certain membership fee. This is our membership fee in that organization, and it is a legal as well as a moral obligation on the Government.