Address Before the American Society of Newspaper Editors.

Mr. Chairman, distinguished guests, fellow Americans:

I am glad to be here tonight to speak to the American Society of Newspaper Editors. You editors make a distinct and important contribution to the operation of government in the United States. Your frank expression of views on current affairs has great value to our people in helping them to form their judgments.

I am amazed, sometimes, when I find that some of you disagree with me. When I consider how you disagree among yourselves, I am somewhat comforted. I begin to think that maybe I'm all right, anyway!

It is because of the influence you have upon the course of our democracy that I am glad to have this opportunity to discuss with you one of the major problems confronting our country today.

I am going to talk to you about inflation.

All of us have the foreign situation very much in our minds these days. This is proper, for we must devote a great deal of thought to our foreign relations if we are to succeed in working out the difficult international problems facing us. But we cannot afford to neglect our problems at home.

The success of our foreign policy depends to a very large extent upon the strength and stability of our domestic economy. The plain fact is, however, that our economy is in serious danger as a result of high prices and inflation.

Inflation may seem to you to be an old story. But there are some men in this country--men who happen to be in influential positions--who still fail to understand or who deliberately ignore the gravity of the situation and the need for forthright measures to meet it. They have tinkered with the problem of inflation--they have even taken some feeble steps in the right direction. But they have taken other steps in the wrong direction--steps that have made the problem much worse.

For my part, I believe that inflation is so grave a menace to this country and to the world that I do not propose to let it be forgotten.

I believe that the Government has a clear-cut responsibility to deal with high prices. I believe that we know what measures the Government should take. I cannot sit by silently while inflation continues to creep up on the American people.

The basic facts which make this problem of such fundamental importance are plain. The world stands now at one of the decisive points in history. Emerging from the most terrible of all wars, people all over the earth are fixing anew the pattern of civilization.

By virtue of the strength with which we have been blessed, the United States is the chief support of those people of the world who are seeking to rebuild their civilization in accordance with the principles of democracy and freedom. The heart of our support is economic assistance. To be effective, it must be coupled with sufficient military strength to give the free peoples of the world some sense of security while they rebuild.

These requirements must be met in large part from the production of American mines and factories and farms. Thus, a strong American economy is the bedrock upon which rest the hopes for establishing a peace of free men in the world. Without it we can provide neither aid, nor leadership, nor example.

The strength and vitality of our economy are being undermined by inflation. High prices are now working real hardship upon most American families. If unchecked, inflation will bring on economic consequences which will hurt every one of us.

This is not a new situation, but it is getting worse.

I have been calling attention to the hardships and dangers of high prices for a long time. I have repeatedly urged businessmen to exercise voluntary restraint in setting prices. Many of them have courageously done what they could to hold prices down. But they were not strong enough to stem the tide, and prices have continued to rise.

By last fall, it had become clear that we could not place our main reliance on voluntary methods. On November 17th, I presented to the Congress a 10-point legislative program for dealing with inflation. This program has not been enacted. And prices have continued to rise.

The program which I presented to the Congress was sound and necessary last November. It is still sound and it is even more necessary now.

The total demand for goods is still outrunning production. Competition for scarce items is still pushing prices up. Employment is at record levels, but the real purchasing power of most of our people is still losing ground to inflation.

In February, there was a break in the market for wheat, corn, and other agricultural products. But agricultural prices did not drop for long, and they did not drop very far. The prices paid by housewives were affected hardly at all. The general level of prices has remained wall above the already excessive level which prevailed in 1947.

And now there are new factors that have made the outlook for inflation considerably worse.

Some key prices have been increased, unwisely and unnecessarily. The outstanding case was, of course, the increase in some important steel prices. I believe that the businessmen who made these increases did not consider their far-reaching effect on the rest of the economy. They made the regrettable decision to increase prices even though they were already making record profits. In the face of these actions, other businessmen, with a greater regard for the public welfare, have fought a losing battle to keep their prices down.

In addition to these price increases, inflation has been encouraged by some unnecessary interruptions to production. The outstanding example, of course, was the work stoppage in the coal industry. The serious effect of the loss of coal production shows the narrow margin of supply on which we are operating, and how quickly shortages of basic materials can cripple our entire economy.

Another new factor making for inflation is the bill recently enacted by the Congress reducing Government revenues by $5 billion. This is dangerous from the standpoint of the Government's financial stability, because it is likely to result in a deficit in the next fiscal year. This is also dangerous from the standpoint of high prices, for the additional billions of dollars of purchasing power will not be accompanied by any significant increase in production. It means simply that more dollars will be bidding for the same goods, and prices will be bid up accordingly. Furthermore, by eliminating the Government's surplus of receipts over expenditures, the tax reduction bill will remove the most important single factor which has helped to hold prices in check during recent months.

At the same time that taxes are being reduced, we are undertaking a program of assistance to foreign countries. We are also considering certain necessary additions to our national defense program. Both of these programs are of utmost importance, and we must have them. But they will result in strains on parts of our economy, which can add to inflation if we do not have the proper controls.

In considering the effects of these programs, it is extremely important to realize that we now have practically no slack in our economy. We have substantially full employment. Factories already are operating at top capacity. We cannot increase our plant capacity rapidly. We have only the normal growth in the labor force to count on for new manpower.

Under these circumstances, new demands for material and production necessarily have a direct and telling effect on prices--unless the proper anti-inflation steps are taken.

It is apparent, when all these factors are considered, that the danger of inflation has not diminished in the last few months. On the contrary, the need for the legislation I requested is even more urgent.

It seems to me that the basic question is clear. It is whether we take action in time to do some good or whether we delay until a crisis is upon us. It is simply a matter of taking out insurance before the house catches fire.

If the cost of living continues to climb, wages and prices will continue to chase each other upward. The unhealthy boom will impose further hardships upon those who fall behind in the race. The greater the inflation and the longer it lasts, the greater the danger that it will end in unemployment, business distress, and a recession or depression. It is of little significance that no one can forecast the exact time when this will happen. The important point is that we cannot afford to let it happen at all.

Since I addressed the Congress one month ago today on the need for prompt action on the European recovery program, and on universal training and selective service, there has been a greatly increased interest by our citizens in national defense and in our foreign policy. This interest has been reflected by the enactment of legislation to aid European recovery. But our domestic economy has been dangerously neglected. It should be neglected no longer.

I believe that the anti-inflation program I recommended to the Congress last November should be enacted at once. That program is balanced and well-rounded. It includes measures to reduce the excessive amounts of money and credit which are lifting prices. It includes measures to see that scarce goods are distributed fairly and to their most important uses. It includes measures to deal directly with specific high prices.

All these measures are reasonable and practical. They attack inflation in a direct manner. They offer a complete and consistent program to strike at the heart of the problem of high prices.

The measures I proposed are designed to hold prices down while keeping production up, and increasing it as rapidly as possible. They are designed to stop runaway prices, so that great numbers of American families will not be priced out of the market for things they need. These measures are designed to insure that scarce goods are not wasted, but are used where they will be of the greatest benefit.

I wish to emphasize that the situation has already been made more difficult by delay. Additional delay will only add to the danger.

The American people must not be misled by those who oppose a reasonable anti-inflation program and a reasonable defense program. It has been said that the present administration is trying to create an economic crisis or an international crisis. The exact opposite is the truth. We are striving to avoid an economic crisis by protecting our prosperity while we still have it. We are striving to avoid a war crisis by being firm before it is too late.

The welfare of our own people, the effectiveness of our foreign policy, and the strength of our defenses all depend on our prosperity. Only if we preserve the soundness of our economy, through prompt and adequate measures to control inflation, can we contribute our full share to a peace in which freedom and democracy will be secure.

I believe that the people of the United States understand that we have a great opportunity and a great responsibility to lead the world through these changing and difficult times. I believe that our people have the faith, the wisdom, and the unselfish devotion to the common good to take whatever actions are necessary to meet that responsibility.

We can succeed if we act courageously and act in time.