Excerpts from the Press Conference

MR. EARLY: (to the President) Look at these financial experts, sir! (Indicating press association newsmen in the front row)

THE PRESIDENT: I think it's fine.

Q. We are already groggy.

THE PRESIDENT: A very small group. I am very glad to welcome the financial editors of the country! (Laughter)

Q. We will be after this.

THE PRESIDENT: Of course, very few newspapermen know the difference between a dollar and a dime, anyway. But then, on the other hand, very few Presidents do. (Laughter) So we start even.

This is probably the biggest Budget in the history of any Nation, any time. I have no information about the Roman budgets. They were said to have been very high. . . .

By the way, I have always felt uncertain as to whether to write a Message to Congress, or a speech, on New Year's. I always get mixed up—and you do, and the public does—between fiscal year and calendar year. I don't think the public understands the difference. You don't all understand the difference, and I don't understand the difference half the time. I make mistakes.

And I think it would be a great reform that might come out of this situation, to make the fiscal year of the United States—and a lot of State governments, and municipal governments-conform to the calendar year. It is a thing, of course, that will require legislation. I have talked to some leaders about it lately, and they had all been talking in the same terms to get that change made.

(Reading of excerpts from the Budget Message) . . .

Q. Will there be published and made available records of Committee hearings or Committee reports on war appropriations? Those appropriations will provide, say, for 3,000 airplanes, and 3,000 tanks, et cetera? It will be a lump sum for the Army?

THE PRESIDENT: Very largely, because- well, we all know the practical problem. So does every member of the Committee on the Hill.

Q. But there will be hearings?

THE PRESIDENT: Oh yes. Oh my, yes. Heavens, yes.

Q. All that information made available?

THE PRESIDENT: For example, if we would ask for 3,000 airplanes, I doubt if we would get a breakdown on the types of those planes. On one particular supplemental bill it might be a majority of pursuit planes. On another supplemental hearing it might be a majority of bombers, or something like that. Now those things are details you can't give out, and that is one reason why, quite frankly, when you say 3,000 planes it may mean an awful lot, and it may not.

I have been rather considering the idea, so as to give people a chance to see whether the step-up is a constant step-up month by month, of using, instead of the terms of planes, or ships, which may be large or small, of using "manhours." In other words, if we see that this country is every week increasing the man-hours, we know we are going places. But it is a fantastic term when you talk of man-hours. I don't get it. I still don't understand what ten million man-hours means. And I am open to suggestions.

There is an old crossword puzzle word called an "erg,"-an e-r-g—a unit of work. I don't know what an erg is. If somebody could get that across in simpler terms than man-hours, it would be an awfully good thing. It is something that we need to have invented. We might all be thinking about it. I think I might almost offer a prize.

Lloyd George, in '18, when I went to the other side, said, "You Americans have got inventive genius. Invent me a term to take the place of the word 'cooperation.'" Nobody has done it yet. It is an amazing thing. It is a horrible word, but we haven't got a substitute yet. . . .

(Alter continuing to read) I don't know whether it's the appropriate place, but I see no reason why you shouldn't know the fact that during the past two weeks, in talking to these various people, I was a bit appalled by the fact that so much of our production was still going into civilian use. We knew, for instance, last September, that out of the total production of steel in the United States, only about 25 percent of it was going into war production.

And it was a large question, at that time, as to whether we shouldn't start new steel plants, to get more steel production. And we have started a few, but it takes a year and a half to build a steel plant before it starts turning things out.

So we adopted the only other possibility, besides adding a little to existing production. And that was to cut more deeply into civilian production. I can't give you the exact figures, but from last September the percentage of defense steel has risen from about 25 percent first, to 30 percent, then to 35 percent, which still means that 65 percent is going into civilian use.

So when Lord Beaverbrook first got over here, I said, "What are your percentages? .... Well," he said, "our percentages are very nearly turned around. Seventy-five percent of all the steel made in England is going into war use, and 25 percent to civilian use."

Now this program will not get us as high as 75 percent of steel production for war use, but it will be a whole lot higher than the present 35 percent. My own estimate is that it will run probably as high as 55 percent, or even 60 percent, meaning that the civilian use of steel has got to be cut a lot more than it has been cut already.

And the other thing I think I can bring out is that in making up these total estimates, of course I sent for the Budget people who were responsible. For example, I sent for the Maritime Commission, and I pointed out to them that one of the really vital things we have got to get is more tonnage, and while on the relative sinkings and buildings at the present time we are holding even, we have got to make substantial gains of building over losses.

And I said to them, "What are you making now?" "Well, we are making over one million tons this year." I said, "What can you step it up to?" "Well," they said, "we can step it up to five million tons." I said, "Not enough. Go back and sharpen your pencils." That is just illustrative of the method. So they went back and sharpened their pencils, and they came back, and they said, "It will hurt terribly, but we believe that if we are told to we can turn out six million tons of shipping this year." I said, "Now you're talking." And I said, "All right now, for '43 what can you do? Can you turn out four million more tons, to a total of ten million tons of shipping?" And they scratched their heads, and came back and said, "Aye, aye, sir, we will do it." That's just an illustration.

Then it came to planes, tanks, anti-aircraft guns. And I have been at them for two weeks, sometimes telling them to go back and sharpen their pencils.

The other day I had a final conference with Knudsen and Nelson, and I gave them what I would like to see done—I knew it would be awfully hard work for them—and outlined the 60,000 planes this year, of which 45,000 would be combat planes. And I nearly took their breath away: "Can you make 125,000 planes next year, of which 100,000 would be combat planes?" And they talked it over awhile, and finally they came back, to give me the green light when I go up to Congress, and again they said, "Aye, aye, sir. We will do it, sir."

Now that has been the result of the last two weeks, and it is a very magnificent thing that they are doing, because they are accepting probably the most difficult production job in all history. And if we get them—and I think we will—it will put us in the position to win the war. . . .

(After continuing to read) Right in there- neither here nor there—but it is one of those specific cases that sometimes crop up. It's a good illustration.

I was home about four months ago, and a fellow from Poughkeepsie came to see me. He, and his father, and grandfather, ran a window sash and window blind works. The firm is a little over a hundred years old. And he came to me, and he said, "I am all out of orders. There is no more private building in Dutchess County. What will I do? We have got thirty first-class carpenters and cabinetmakers that have been with me for years and years." "Well," I said, "can't you do some war work?" He said, "I don't know. Are they ordering any wood cabinet work for this war?" " I don't think so. We use all steel."

I brought him down here to Washington and explained the situation. And I got busy on this thing. I said, when I was getting my nose done, to Ross McIntire [Admiral Ross T. McIntire, White House physician and Surgeon General of the Navy], "You are just a little tiny cog in the Navy Department. Are you still buying steel medicine cabinets to put up on the wall?"

And he said, "Yes."

"Couldn't you use a wooden medicine cabinet?"

He said, "Sure."

"Are you still buying steel bookcases, and steel desks, for your hospitals?

"He said, "Yes."

"Couldn't you use wooden ones just as well?"

"Sure."

Well, that's just one illustration.

Then I sent for the Maritime Commission. I said, "On your ships, in the Officers' quarters or the Messes or the First Mate's, do you use wooden wainscoting?

"They said, "Yes."

"And where are you getting it?"

"I don't know."

The net result was that this man in Poughkeepsie came down here, and he was handed a list of wooden cabinet work that could be used for the Government, substitutes mostly. And he was asked, "Aren't there any other woodworking companies like yours in Hudson Valley that are going out of business for lack of work?"

And he said, "Yes. One in Newburgh, one in Kingston, one in Hudson, and I think one in Peekskill that I know of. They are all in the same fix I am in."

So they said to him, "All right. How much can the five companies in the Hudson River Valley take?"

And he went back there, and they have got enough Government orders to keep 150 men steadily at work for at least a year on building wooden substitutes for the Government. And there are 150 skilled workers employed by the use of a little ingenuity.

Now on that sort of thing we are beginning to get into our stride, but as you know, it means going and searching out the places where that kind of solution of the problem is needed. And, well, we are doing it as fast as we can. . . .

(Continuing to read): "Civil departments and agencies.- The work of the civil departments and agencies is undergoing thorough reorientation. Established agencies will be used to the greatest possible extent for defense services. Many agencies have already made such readjustment. All Civil activities of the Government are being focused on the war program."

Q. Mr. President, in that connection, I have heard it from friends who ask: As long as we are spending all this money for war, why do we need all these bureaus in the Commerce Department and the Agriculture Department, and so forth? Does this paragraph mean that?

THE PRESIDENT: The answer is that it is awfully easy to say a broad, general thing like that, but when you come down to actual cases—well, for instance, we know that the Department of Agriculture has all kinds of bureaus in it. The Bureau of Animal Inspection— My goodness, can't we let that go until the end of the war? When you come down to it, ought we to let that stop during the period of the war? Oughtn't we to protect the health of the people? Oughtn't we to see to it? Look at the bureaus—the Bureau to Eliminate Ticks on Cattle, to Eliminate the Boll Weevil, to Eliminate the Peach Moth, and so forth and so on.

The answer is that we are fighting nature all the time along those lines. The pine blister rust—they are fighting nature, in order to keep from getting overwhelmed by nature.

And if we once let up on the fight, it means that the work will be just twice as hard. There will be an awful lot of ultimate damage caused by the pests of nature. We are cutting them. We are cutting all those bureaus, but we are still keeping the service going on. . . .

(Continuing to read): "I favor an amendment to the Social Security Act which would modify matching grants to accord with the needs of the various States. Such legislation would probably not affect expenditures substantially during the next fiscal year."

Well, you know what we have been trying to do on that. It is going to be a hard thing to get through a State like Georgia, which hasn't got the taxable values in the State. And therefore, when they come to a matching program with the Federal Government, their total is very, very low, if judged on a per capita basis. That does not take care of their sick, and blind, and unemployed, and relief people, and so forth and so on, because the State hasn't got the taxable values.

In a State like New York, on the other hand, they have got the taxable values. They can put up much larger funds, again on a per capita basis, than the State of Georgia.

Now the objective is that the Federal grants will be so distributed as to help the poorer States more greatly than the richer States. And that would not be left to the discretion of the State legislature, because a lot of them might try to save money on that basis, but would be based on some kind of an index figure, which in turn would be based on the per capita income of the individuals in all of the States. The States that have the highest per capita income would get the least, and the States that have the lowest income would get the most. Well, that is something we are shooting for, and have been for the last year. . . .

(Continuing to read): "Progressive taxes are the backbone of the Federal tax system. In recent years much progress has been made in perfecting income, estate, gift, and profit taxation but numerous loopholes still exist. Because some taxpayers use them to avoid taxes, other taxpayers must pay more. The higher the tax rates the more urgent it becomes to close the loopholes. Exemptions in estate and gift taxation should be lowered. The privileged treatment given certain types of business in corporate income taxation should be reexamined." . . .

Q. Did you have in mind the average annual income?

THE PRESIDENT: No. I tell you what I have in mind. I don't know whether it's this clause, or one further on. You take a corporation. Call it corporation X. I am thinking of Coca Cola. Now, what is the total amount of money, not confined to any rich people- widows and orphans- that ever went into X? Well, it is probably 10 percent of the capitalization of X. Now they plowed back profits, that is perfectly true, but nothing like to an amount equal to the total of their capitalization.

Now, how do you value X? Do you value it on the profit they make every year? While on the original stock the payments that went in there were 100 percent, they are making this year the same amount that they made on the average of the past four years. So under the present law, they very largely escape any additional taxes.

Now the question is: Should an original investor be entitled to 100 percent without any further penalty? There are any number of corporations of that kind. It was one of the well-recognized devices—it was not dishonest, everybody did it in the Golden Age of the twenties. And it is a question as to whether people should get 100 percent on their money year in and year out, or whether they should pay somewhat higher taxes on that enormous yield. And of course I failed, as you know, in the last tax bill to have anything done about it. I am still at it.

Q. You mean a corporation, Mr. President, with a large fixed capitalization should not be penalized the same way, as far as taxes are concerned, as a company with smaller capitalization and larger earnings?

THE PRESIDENT: That's right too. Now of course there are a lot of very small companies and individual businesses today that we all feel terribly sorry for, because they have certain debts, which under the present tax law they are absolutely unable to cut down. At the present time, under the present law, they can't spend any of their money for reduction of debt, and these companies are companies of very small capitalization. It is a real hardship on them.

Q. You speak, Mr. President, of loopholes, here again, in the tax law. Would that include tax laws on community property that they tried to correct last year? Would you happen to have that in mind?

THE PRESIDENT: No. I haven't had it in mind, but I have always thought that we should have exactly the same basis in all the States, instead of having four or five States with a separate kind of law.

Q. May I interrupt, Mr. President? In that statement you mean to imply that you advocate one method of computing excess profits taxes, rather than in existing law?

THE PRESIDENT: No. Have some kind of provision that will help some of the smaller companies, providing some method by which they can pay down a little on their debts. Remember that smaller companies' debts are in most cases loans from banks, callable at any time. Well, the bank is all right if it will renew the loan when it comes due—short term—one-year note—three-year note- they will be glad to renew the note if something has been paid down on the note toward its reduction. Whereas the larger companies—their debt is largely to their stockholders, and in very long-term bonds. They are not frightfully concerned about paying down on their debt.

My family still has some bonds of the New York Central that are the direct lineal descendants of some bonds that my great-grandfather bought in 1841 to help build the railroad up the Hudson River. And we have still got them, and they have never paid off one cent of that capitalization in a hundred years, because it was the financial policy of railroads always to refund the debt, and never pay it off. Now that's an advantage that a big corporation has, but the little firm can't do that. The bank says, "No, no.". . .

(Continuing to read): "All through the years of the depression I opposed general excise and sales taxes and I am as convinced as ever that they have no permanent place in the Federal tax system. In the face of the present financial and economic situation, however, we may later be compelled to reconsider the temporary necessity of such measures.

"Selective excise taxes are frequently useful for curtailing the demand for consumers' goods, especially luxuries and semi-luxuries. They should be utilized when manufacture of the products competes with the war effort."

Now don't go out and say that I am coming out for a sales tax. Oh no. I am talking about a selective excise tax, which is in a sense like the tax on your cigarettes. It is a selective excise tax. And I believe that we will have to go into that field more largely on a selective excise tax and sales tax on certain carefully selected things which now don't bear that burden.

For three reasons: The first is to raise revenue; the second is to put a brake on inflation problems; and the third—at the end of this war- the ability to take that brake off if we run into a period of deflation. . . .

(Alter continuing to read) I may say on this Budget Message that there are two outstanding things that I am very, very much encouraged about, when I draw comparison with'17 and '18, and '19 and '20.

As some of you remember, we were getting out our bonds at 4 1/4 percent rate. Today we are getting out our bonds, and notes, and bills, at an average of about 2 1/2 percent for the entire national debt. That is a very, very big saving over the conditions at that time.

Furthermore, the reason I stress price control is that, as some of us remember, the prices of certain things went clear out of line, both during the first World War and after it. Two dollars for wheat. Thirty-five cents for cotton, and so forth and so on. Well, as a result of things getting out of line, through the failure of price control at that period, which was based, however, on things that happened before '17, a whole lot of other things were thrown out of line, to the ruination of millions of people. Some of those agricultural prices went up in '14 and '15 and '16, before we got into the war. Wheat got up two dollars and a half a bushel, and the price of any land that grew these things went up to a perfectly fantastic figure. Fifty-dollar land was selling at two-hundred dollars. And of course the financing of it had been mostly by mortgage or some kind of an obligation. And at the end of the period when, say, wheat dropped down from two dollars to forty or fifty cents a bushel, that land reverted to its original value. And the fellow that had bought it lost it, and then a whole chain of things happened.

I remember in the 1920 campaign, when I started out west on my first trip, I realized that there was quite a lot of trouble among the cattle growers of the West. They had been encouraged to add to their herds, to get all the new calves that they possibly could. And the whole West was flooded with calves and cows.

And I knew that I would run into trouble, and the reason was that the people who had lent them the money—the banks, which had been encouraged by the Treasury Department—were calling loans.

So I wrote a letter to the Secretary of the Treasury, Mr. Houston, and said, "Now, what will I say in my speeches to these cattle growers?" And I got back a letter—imagine my using it in the campaign—saying, "Dear Mr. Secretary, tell them the truth. Tell them that they have to be the vicarious sacrifice for a restoration of the country to normal financial positions."

Well, I didn't use it. (Laughter)

Now we want to avoid having cattle growers, and lots of other people, put in the same bad fix they were in at the end of the first World War. And we are thinking ahead. And I am perfectly convinced that even if the debt does go to 110 billion dollars, we will be able to pay it; partly because of the very much lowered cost of interest to the people of the country, and secondly by a scheme of taxation, a scheme of price control that will keep up the national income and enable us to reduce that debt in a relatively short time, just as we were reducing it up to '26, when we rescinded a whole lot of taxes and left the country burdened with a debt of somewhere around 21 or 22 billion dollars. . . .