A Call for Action


By HAROLD D. SMITH, Director of the Bureau of the Budget

Delivered over the Mutual Broadcasting System, July 1, 1942

Vital Speeches of the Day, Vol. VIII, pp. 639-640.

TWO months ago the President of the United States called upon the civilians of our Nation, each of us, to take our places on a new battle front—a domestic front which must be held against the rising cost of living. This front is not as spectacular as the fronts of Kharkov or Midway. Yet it is a front which must be held just as firmly and courageously.

We can hold this front—but not the way we have been going. I am making this talk tonight to express a warning, as solemn a warning as I can, that we have not yet overcome the dangers of inflation.

We have had one initial success. Prices we pay for many goods in the stores today are lower than they were at the time of the announcement of the President's program. Rents are being stabilized or even lowered. For the first time since the autumn of 1940, the general price level ceased to rise.

Because of this some people think that a miracle happened. The President announced his program, and presto— the price rise stopped. But such miracles simply do not occur. We cannot rely upon chance. We must face the fact that one skirmish does not win a war, especially if the major campaign fails to develop. Let us tonight review the facts of our attack on the rising prices.

The President showed in his program how the cost of living could be stabilized. Lasting success, however, depends on the determined work of the legislative and executive branches of the Government, on the cooperation of all groups and organizations, and above all on the enlistment of each family and individual in this campaign.

The President mapped seven routes along which our anti-inflationary army must march to these seven points of attack: (1) Stiffer taxes; (2) Ceilings on prices and rents; (3) Stabilization of wage rates; (4) Stabilization of farm prices; (5) More investment in war bonds with less consumption of goods; (6) Rationing of scarce commodities; and (7) Less instalment buying and more repayment of debt.

What has happened to this all-embracing offensive?

Seven divisions of one army set out to march toward the goal. One of these seven marching divisions attacked first. General price ceilings were set for all commodities except certain foods on the basis of law enacted by Congress early this year. This is the most direct assault on rising prices. It is showing success—thanks to the energetic execution of this part of the President's program by Leon Henderson, and thanks to the full cooperation of retailers and other business men, and of the consumers all through the country.

This initial success of the fastest column can be sustained, however, only if the other divisions catch up and come to its support. This puts a heavy responsibility on the officers and soldiers of the other divisions of our anti-inflation army.

Thus far too many "you-go-first" arguments are being made. Farm organizations are reluctant to accept the stabilization of farm prices because they feel that wages should be stabilized first. Labor organizations for their part, are reluctant to accept wage stabilization until farm products are brought under the general price ceiling first.

We must accept the President's formula and stabilize farm prices and wage rates at the same time. We must do it now.

Price ceilings cannot be maintained if costs of production —for raw materials or for labor—are pushed up. It is a plain fact that food prices in the stores cannot be kept stable if prices received by farmers are permitted to rise.

It is equally plain that prices in the stores cannot be kept stable if a general wage rise is permitted to take place. Adjustments of substandard wages are necessary in the interest of fairness and of maximum production, but general wage advances at this time will force prices up and must be avoided.

In accepting wage stabilization, labor may reasonably expect equal sacrifice from corporate officials and stockholders. No one can deny that there have been too many excessive increases in high salaries and bonuses. The Treasury Department has announced a policy of vigorously applying the penalty provided for such cases in the existing income tax law.

Corporate profits are being heavily taxed. The Congress is now considering legislation greatly to increase those taxes. After the taxes are levied, profits remaining for the stockholders on this year's business will be substantially lower than

they were last year. That is as it should be, since the profits are coming mainly from Government business.

Three of the anti-inflation divisions set to march by the President have the main duty of absorbing excess spending power. War expenditures are now running about one billion dollars per week, steadily augmenting the national income. Farmers, workers, and business men have more money to spend than ever before; at the same time the quantity of goods which they can buy is decreasing. Excess spending will press hard against the price ceiling; unless it is curtailed, it may break through. Or it may find its way around the price ceiling and create black markets, with all the unfairness and insidious evils of bootleg markets.

Taxation is not only a method for equalizing sacrifice. It is also a drastic but necessary device for curtailing spending. Investing money in war bonds and postponing purchases for a later date are other attacks on the same problem. Rationing of scarce goods also blocks spending and induces people to save. People who refrain from borrowing and pay off their debts are marching in the seventh division of the anti-inflationary army.

Every thinking American must realize that the seven divisions will not march automatically simply because of the President's announcement. In each case the understanding, self-restraint, and collaboration of many groups and individuals are necessary. The Cost-of-Living Stabilization Program is not only the President's program. Not merely the Government's program. It is the people's program.

Only the Congress has the power to make possible the stabilization of farm and food prices; it alone can enact those tax measures which are an essential element in the whole plan; its action is required to authorize such subsidies as are necessary for maximum production under the stabilization

program. Thus far the President's program has not yet been fully implemented by the necessary legislation.

The Executive Branch must work the limits of the policies set by the Congress and the President. An immense task of administration has necessarily been entrusted to the new war agencies. They are working hard on a tough assignment. But here, too, we still find hesitancy and inconsistency. These must be eliminated. Much remains to be done by those agencies dealing with contracts and purchases, labor relations and prices if the goal of the President's program is to be reached—and we are determined it will be reached.

However, this is not a program which can be executed by Government agencies alone. Farmers, workers, business men, and housewives occupy decisive positions. Without their active support, the program will fail.

They must make it clear that they want no special advantages from the war effort. The farmer who applauds his organization or his representative for trying to force up prices must know that he acts against his own best interests in the long run. He also undermines the President's effort to stabilize wages. Labor cannot be expected to forego wage increases unless food prices are being stabilized at the same time.

The wage earner, in turn, who expects his union to fight for higher wages now, must know that he, too, is acting against his own best interests. He makes it more difficult to control the prices of food. He undermines the effort to stabilize the cost of living.

The employer who offers increases in wage rates in order to lure workers away from other plants undermines the wage stabilization program.

The consumer who, instead of buying: war bonds, buys a new suit, for example, though he still could use last year's suit must know that he impedes the President's program.

This war, it is true, is first of all a war of fighting men; it is, second, a war of production; and, third, a war of transportation. It is also a war of the consumer, a total war in which everything one buys or doesn't buy affects our war effort. So tremendous is the fighting task that he must divert everything possible from peacetime to war use. A large scale reduction in how much each of us can buy, wear, and use is inevitable. An uncontrolled price rise is the most inequitable and costly method of distributing the necessary sacrifice. It will not increase the available goods one iota, but it will deny the fair sharing of what goods we have.

On the other hand, the Cost-of-Living Stabilization Program is the only equitable way of letting everybody share the burden. But it can only be done if all seven points of the program are attacked vigorously and simultaneously. For, as the President declared in his radio message: "The only effective course of action is a simultaneous attack on all of the factors which increase the cost of living, in one comprehensive, all-embracing program covering prices, profits, wages, taxes, and debts."

This is a tough program, indeed—a program forced on us because we are engaged in a war of survival. But democracy is of tough fiber, too, and will meet this challenge.

Because this is the program of equality of sacrifice, it is the people's program for financing the people's war. It is designed to stabilize prices now and thereby to reduce the danger of a post-war collapse. It is designed to hold down the cost of the war and the size of our national debt. It helps to win the people's war and helps to win the people's peace. But it can be accomplished only by the peoples' united determination and effort.