"America in a War Economy"
CONTROL INFLATIONARY FACTORS NOW
By JAMES SCOTT KEMPER, President, Lumbermens Mutual Casualty Company of Chicago
Delivered before Bar Association of Tennessee, Chattanooga, Tenn., June 5, 1942. Broadcast over Station WSOD (C.B.S.)
Vital Speeches of the Day, Vol. VIII, pp. 601-604.
YOUR President has asked me to discuss with you today some of the economic aspects of the war. I agreed to do this because of my high regard for him, and in the hope that out of our consideration we might develop something that would be helpful. Helpful in the effort to win this war—helpful in the effort to preserve our American way of life.
I do not claim to be an economist. Such interest as I have in figures probably can be attributed to my Scotch ancestry, and to the fact that in my business we live in a world of percentages.
But, as an American citizen and an insurance executive with responsibility for the investment of funds upon which widows and orphans are depending, I do have a very real interest in our war economy. So, also, have I an interest in the effect which our federal fiscal policy may have upon our way of life.
Now that we are in the war, our job is to get victory in a minimum of time and with a minimum loss of the lives of our young men and, secondarily, with a minimum expenditure of, and mortgage on, the savings of generations of frugal Americans.
In making our contribution to the winning of the war, we stand together—shoulder to shoulder as good Americans, as good citizens—united in a common purpose for the duration. We shall extend every effort for victory. We shall sacrifice in any and every way that may be necessary.
We expect from our servants in government the same interest, the same devotion, and the same sacrifice.
I have no patience with those who are injecting into the war effort partisan political issues. This is no time for petty politics.
Unfair criticism and political name calling should be "tabooed." This applies to those in the government as well as those who foot the bills.
At this point I should like to make one thing clear. When I speak of criticism based on petty political considerations, I am not referring to constructive criticism. That—constructive criticism—is essential, I think, to a proper prosecution of the war. And, besides that, free and fair debate is the democratic way. We may jest about the discussions aroundthe stove in the country store and think they contribute principally to proficiency in spittoon marksmanship, but underneath we know that they are a symbol of the freedom of speech and representative government that typify America.
You may remember that when Ben Franklin was a lad of but sixteen years of age he found himself in charge of his brother's newspaper. This because his brother, James, was thrown into jail for writing some articles which ridiculed those in charge of the city government of Philadelphia. Evidencing the philosophy which remained with him through life, and protesting the injustice done his brother, Franklin said:
"Without freedom of thought there can be no such thing as wisdom; and no such thing as public liberty without freedom of speech; . . . Whoever would overthrow the liberty of a nation must begin by subduing the freedom of speech: a thing terrible to traitors."
During World War No. 1—Woodrow Wilson said:
"While exercising the great powers of the office I hold, I would regret in the crisis like the one through which we are now passing to lose the benefit of patriotic and intelligent criticism." Wilson could, as he said, "imagine no greater disservice than to deny to the people of a free republic, like our own, their indisputable prerogatives."
I make the distinction between unfair political criticism and constructive criticism and include the references to the importance of constructive criticism and complete freedom of speech and press because I think they have a very definite bearing on our war economy and upon the state in which the nation will find itself when the war is over.
The President of the United States is an extremely busy man always. In time of war the burdens on him are tremendous. He cannot be expected to keep a personal eye on everything that the multitude of departments, divisions, bureaus, and agencies is doing. That job falls upon Congress and upon the citizens and that includes the press. They must do the watching; they must call attention to mistakes. They must decry waste and extravagance. They must demand improvement where improvement is necessary—changes where changes are necessary—and prompt action always.
For example, Senator Byrd of Virginia and your ownSenator McKellar of Tennessee certainly have had a very sound and patriotic approach to the question of waste and extravagance in government.
For months Senator Byrd and his associates have been trying to get some action with respect to a reduction in non-defense and non-war expenditures. I know of no student of the situation who is not convinced that at least 2 billion dollars could be saved through a thorough overhauling and renovating of our non-war governmental activities. In this day, when the word "billions" rolls off peoples' tongues and on to legislative bills so easily, 2 billion dollars may not sound like very much. And yet, when we remember that the nation's debt at the beginning of World War No. 1 was only a billion and a quarter dollars, we certainly should not lightly pass by the opportunity for this saving. And I might observe that today there are two life insurance companies each of which has loaned to the government through bond purchases more than the entire federal debt prior to World War No. 1.
Recently, in a speech before the Senate, Senator Byrd called attention to a number of specific expense items which in his judgment were indefensible. He called attention to the fact that the federal government had 2,895 persons employed full time on publicity and 31,618 employed on part time producing the publicity and propaganda. In the last fiscal year this publicity cost the taxpayers 27 million 770 thousand dollars. Over 6 million dollars was spent for coordination of information alone. As one editorial writer expressed it, this "apparently means for getting information about information other bureaus of information have been getting information about, or, in other words, for duplication and triplication of repetitious information and misinformation."
And then the Senator had something to say about traveling expenses. Believe it or not, his figures showed that in the last fiscal year the federal government had spent almost 150 million dollars for traveling expenses. The Department of Agriculture alone disbursed over 16 and one-half millions for this purpose. Senator Byrd declared that Congress could save "millions of unnecessary expenditures for traveling, long distance telephoning, and overlapping and unnecessary agencies conducting publicity or propaganda activities." The tremendous outlay for traveling expenses and publicity bureaus declared Senator Byrd "very nearly approaches a national scandal in waste of public funds."
The country is entitled to know how much of this organization really is necessary.
Now, it is quite possible that part of our difficulty lies in the fact that we have too many people on the government payroll, many of whom have nothing really important to do. And so, in an effort partly at least to justify their employment, they do things that are unimportant and beyond that inexcusable in a time like this.
Here's a rather interesting example of what I am talking about. In circular No. W55-37558, issued May 15th by the O. P. A. (Office of Price Administration), we find a dissertation on the subject of how women of America should wear their girdles. If this circular had been addressed to the men of America, it might have been informative because I rather imagine it is a subject on which, if desired, we could learn a great deal. In any event, the authors of the circular arrive at the profound conclusion that a woman should buy a girdle that fits.
They tell the women—and I quote: "Try the girdle on . . . the best way to test a girdle for fit is to sit down in it. The garters should fasten securely and should be comfortable. The top of the girdle should not roll. If your waist is more than nine inches smaller than your hips, thechances are you won't fit a high-waisted girdle. You will find the waist too large. In that case, buy a girdle that sits low in the hips. If your thighs are large, make sure that the girdle comes well below your hips.
Don't pull or stretch them any more than you have to . . . roll an all-fabric girdle before you step into it, then unroll over your hips. If the girdle has rigid support, ease it gently into place, first on one side, then on the other."
So much for bulletin W55-37558. I'll leave to you the question of its importance in the war effort.
Now, let us have a look at our over-all war cost. Under date of May 10th a Washington dispatch reported that the United States spending program for World War No. 2, as developed up to this time, is greater than all the money which the government spent for all purposes from the time George Washington was inaugurated President until Pearl Harbor. May I repeat—the United States spending program for World War No. 2, as developed up to this time, is greater than all the money which the government spent for all purposes from the time George Washington was inaugurated until Pearl Harbor. From 1789 to December 7, 1941, the Treasury paid out a total of 197 billion 180 million dollars. Remember the 180 million because it is important in making the comparison. The current war program of appropriations and authorizations, including the President's last 35 billion dollar army request totals 197 billion 267 million dollars. The same number of billions and 87 more millions than the total disbursements of the government from the inauguration of Washington to December 7, 1941.
197 billion dollars is a powerful lot of money! One simple illustration, if any be necessary. 197 billion dollars is as much as the value of all the real property in America, and by that I mean all the homes, and all the office buildings, and all the hotels, and all the factories, and all the farms, and all the stores, and all railroad and public utility property, and all the plantations, and all the ranches, and all the vacant property (and this on the gross basis of assessed valuation without any deduction whatever for mortgages); plus all the assets which all the life insurance companies in America have accumulated from the organization of the first company to this moment; plus all the savings of all the American people represented by savings accounts in national, state and private banks, building and loan associations, and postal savings. When you consider this comparison, don't overlook the fact that it is to life insurance and savings accounts that the vast majority of our citizens look for relief in time of need.
Now, of course, we are willing to spend whatever may be necessary to do the job. But, necessary war costs should not be made the excuse for waste and extravagance in any non-essential.
Unless national solvency can be assured and unless the war ends with the preservation of the principles of free and individual enterprise, the people of America will have lost this war regardless of whose flag it is that waves from the top of the masthead at the conclusion of international hostilities. Free enterprise is a system of self-governing unit which provides a means of livelihood and service for the members of the enterprise, consistent with willingness to work, and general usefulness to society. When and if free enterprise breaks down, governmental regimentation take its place.
I submit that regimented people might be as unhappy and as frustrated under a dictator from within as they would be as colonials of a foreign power.
Much of the discussion regarding our war economy relates to the dangers of inflation and the steps that should be taken to forestall it. Obviously a large increase in onnational income, coming at a time when production of things people can use is restricted, is bound to result in more competition for these things. Even so, this problem, so far as supply and demand are concerned, is less serious here than in countries that are less self-contained than the United States.
In its approach to this problem I fear the government frequently has put the cart before the horse. In other words, we have talked about doing this or that before action has been taken. As a result there has been much advance purchasing by wholesalers, retailers and the consuming public. This has resulted in price increases. On the other hand, these same purchases will act as an automatic check against further advances—at least for a time.
You are familiar with the steps already taken to keep prices under control. So far, except for delayed action, they appear good. But they don't go far enough. They should cover those two important cost factors—wages, and prices of farm products.
The heart of any anti-inflation program is to siphon off as much excess purchasing power as possible. That can be done through taxes and through savings. Under our present tax program the job is being done only in part. This because the tax set-up does not reach the extra purchasing power which is coming from the wages paid by war industries. In this connection, the tremendous betting at race tracks representing all-time highs is significant.
If these extra funds are to find their way into the Federal Treasury new methods must be employed. One important effort is the campaign to sell stamps and bonds on a voluntary basis. If this fails to produce 1 billion a month it may be necessary to substitute a compulsory savings plan.
Beyond that however, it would appear that we should adopt both a sales tax and an income withholding tax.
Ordinarily I am opposed to sales taxes. But in the inverted economy required by total war a sales tax hits the nail right on the head for the very reason that it discourages consumption of non-essentials and produces substantial revenue. It falls less harshly than the income tax because the consumer has some leeway as to what he must have and what he can do without.
An income withholding tax not on salaries and wages alone, but on income from securities would produce substantial revenue. Beyond that it would give every citizen a real opportunity to contribute to the war effort. Such a tax could be applied as a credit against regular income taxes payable during the succeeding year. It would make available to the government a very large sum and at an earlier date than the present method.
If these things are done, and promptly done, much of the travail and agony of post-war readjustment can be avoided. And we must not forget that if we control the inflationary factors now it will be much simpler to meet possible deflation later.
The tremendous problems of our nation place upon us a great burden and a great responsibility. No segment of American life so well is equipped to assist in their solution as you men of the Bar.
In the first chapter of the American story the genius of the American lawyer furnished the brains and the skill which built a mere paper Constitution into a living instrument of just, effective government. They accomplished a rare thing. They conceived a charter adequate to govern a continent because it successfully reconciled executive efficiency, popular control and personal freedom.
It was no Carl Marx formula or any variation thereof which transformed thirteen bankrupt colonies into the great Republic we know. The great Republic whose power andeconomic might now are the crucial factors in shaping the destiny of every quarter of the globe.
St. Paul boasted that he came from no mean city. Let us, too, remember the greatness of our past and draw from that past and nowhere else the experience we shall need to master the future.
Lincoln expressed the whole thing in one tremendous sentence. "What is the cause," inquired Lincoln, "of our greatness and prosperity?" He answered in one line that we never should forget: "That cause is that in America every man can make himself."
Today, in almost every gathering of men and women, we hear the defeatist whisper that socialistic experiments on a vast scale are certain to usher in to the post-war era. If those experiments should find acceptance through failure on our part to perform as good citizens should, they fatally may damage the system of government that has meant happiness to Americans for over 150 years.
No one knows what the pattern of things to come will be. The economic dislocation may be terrific. Consequently, I think it is of the utmost importance that we shake off the defeatist attitude which is gaining such momentum.
We must resolve to work out our difficulties by keeping within the general framework of the American way of life, which has been the source of our greatness and the reason why our country, despite its faults, has been the best place on earth to live and to rear a family.
"Precedent" is a big word in the life of the lawyer. That is as it should be for a sound use of precedent implies a grasp on what is good in the experience of the past. It is not empty prophesying but the solid achievements of that past which persuade me that the overwhelming chances are that the American people can win a higher standard of living and put it on a sounder basis by holding fast to that which is good in their experience instead of seeking short cuts to wealth and happiness in far-fetched political and economic experiments.
America must win this war. But the margin between victory and defeat is not so wide that we can afford to overlook anything that will contribute to victory. That victory should not be impeded by efforts of minority groups which wish to advance selfish objectives at a time when the nation is imperilled. We must win the war, and we must preserve the Republic as a nation of free men. These are the things that count now.
We must be sure that the victory we confidently expect to win shall not have been in vain. Our soldiers, and our sailors and our marines apparently are going to be fighting all over the world to protect and defend the things we hold dear. We are menaced on many fronts. The military battle we must and shall win. But, it would be futile to win the war and at the same time to lose the battle on the Home Front.
The real contest that has been going on in the world with, as well as without, the might of military power is the fight of the State to increase its authority over the lives of the citizens. Even in our own country we have repeated evidence that there are amongst our citizens many who would substitute State Socialism for the Republican form of government.
I, for one, have no doubt about the ultimate outcome, I am confident that when the men on the firing line come back home they are going to ask for a very strict accounting on the part of those who remain for all the things that happen while they are away. They will be looking for a country of hope and of freedom and of opportunity. They are doing and will do their part. We should and I believe will do ours.
Lawyers made the Constitution of the United States. It is their creation—the child of their brains. We look to them for leadership in preserving the liberties it gave us. Every man in your profession has important public contacts—political, civic, philanthropic, business. In every sphere of these activities each of you has a definite responsibility. That responsibility is to fight for the preservation of the American way of life.
How can that fight be waged? By discussing it at every opportunity with every citizen. You lawyers almost without exception take some interest in politics. In the final signing of our great Constitution over one-half of those present were lawyers. Your heritage from those lawyers of the early days is a heritage of sound government.
So, your interest in politics and in government is a natural one. I feel that the business man has an equal responsibility. And I think also that when opportunity offers, you should tell him so. Party labels are of minor significance. The important thing to know—and that particularly is true in the coming Congressional election—is whether the candidatebelieves in American principles—whether he is honest—and whether he has ability.
Perfection in government like any other activity of life probably never will be achieved. But the government will not be any better than the caliber of the men who make it up and the citizens who hold them responsible. The Congress of the United States has tremendous responsibilities in these critical times. The situation calls for—indeed demands—the very best ability, the highest integrity and the greatest devotion to the Republic that can be had.
No more important job ever has been given you or any of our citizens who are not in the immediate war effort than to see to it that while others are fighting and working to make America victorious, the evil influences that would re-make our form of government do not succeed.
Yours is a great profession. You have given America important leadership in its hours of need. You will not fail now to measure up to your opportunity and, may I say your responsibility.