Letter to C. S. Jones in Response to Questions on the Steel Situation.

Dear Mr. Jones:

I have your letter concerning my radio address on the steel situation and I was very interested in the questions you raised. I wish I could take the time to write to the many hundreds of people who have written me about the steel situation. The majority of the letters I have received indicated approval of the action I took. From the letters indicating disapproval, it is quite apparent that many of the writers based their disagreement on a misunderstanding of the facts. Unfortunately, in the limited radio time I had, I could not possibly go into detail on all phases of the steel case. But I am going to take the time now to answer the specific questions in your letter.

The first question you raised relates to steel company profits. The profits figures which I used in my radio address were profits before taxes.

There has been a lot of discussion of this, but it should be clear that if you are going to establish fair price ceilings, you have to figure on the basis of income before taxes. If you took income after taxes, you would have to raise price ceilings to compensate for income tax increases. And if we let prices--and wages--go up to compensate for bigger income taxes, we would obviously not be preventing inflation, we would be encouraging it.

This is the reason we have to use profits before taxes in determining whether an industry is entitled to a price increase. It is the same with all other groups in the economy. The wage increases recommended by the Wage Stabilization Board for the steelworkers were based on wages before taxes-not on take-home pay after tax deductions. In adjusting wage rates to the cost of living, which is the practice in many industries, the standard used is the Consumers Price Index-which does not take account of the increased income taxes paid by workers. In determining fair price supports for farm products, the law does not take into account the income taxes that farmers pay.

Obviously, if we are going to be fair, business must be governed by the same stabilization principles applicable to wage earners, salaried persons and farmers.

It is true that the steel companies are paying high taxes. So is everybody else. If we allowed the steel companies to get price increases to cover their higher taxes, we would simply be shifting the tax burden to those less able to afford it.

As a matter of fact, the steel companies are making so much money that even with today's high taxes their profits after taxes are greater now than the profits they made after taxes in the three years before the Korean outbreak--and those were very profitable years. The Iron and Steel Institute has reported that its members--some 90% of the industry--averaged 494 million dollars in profits after taxes for the three years before Korea. That comes to about $6.59 per ton. And for 1951, the Institute reports profits after taxes of 668 million dollars--or $7.07 per ton.

So you see that whether you take profits before or after taxes, the conclusion is still the same. We will never be able to prevent profiteering in this emergency if we give the steel industry special treatment and immunity from the price control rules.

Second, you ask whether the "closed shop" was involved in this case. The "closed shop" is not an issue in this case, but the "union shop" is. I can understand your confusion on this point. The closed shop and the union shop are actually quite different. However, the two are commonly confused, and this confusion has been deliberately exploited in the propaganda of the steel industry. The dosed shop, which requires a person to belong to a union before he can be hired by an employer, is forbidden by Federal law. However, the Taft-Hartley Act specifically authorizes the union shop, under which employers and unions make an agreement requiring that workers become union members after they have been hired. There are many variations of such agreements. It is not uncommon to excuse old employees from joining the union, or even to allow a person to drop out of the union after the first year if he chooses.

The union shop was definitely an issue in this case. The Wage Stabilization Board felt that the issue was important enough to require a recommendation. The dispute obviously could not have been settled if this issue were not settled. It should be noted that the Board did not recommend any particular form of union shop. It recommended that the parties negotiate the form of union shop to be adopted.

Incidentally, the union shop is not new to the steel industry. Twenty-seven steel companies already have some kind of union shop arrangements in effect and some of the leading steel companies--including the United States Steel Corporation--which are objecting to signing union shop contracts with the steelworkers, already have union shop contracts with other workers they, employ.

Third, you asked about the Taft-Hartley Act. A work stoppage would have occurred December 31, if the union had not acceded to the Government's request to postpone strike action so that the Wage Stabilization Board could hear the dispute and recommend a fair settlement. By this means strike action was delayed, before April 8, for 99 days--voluntarily--whereas the Taft-Hartley Act could have delayed it only 80 days--by compulsion. I don't think it makes sense to use force when you can get cooperation by free consent.

After the Board made its recommendations, late in March, the parties resumed negotiations and Government negotiators on the scene were hopeful of settlement right up to the evening of April 8. A resort to the Taft-Hartley machinery during the time the parties were meeting, of course, would have stopped negotiations and destroyed any chance of settlement.

If I had used the Taft-Hartley Act April 8, there inevitably would have been a work stoppage--because under the Taft-Hartley Act, there is an elaborate procedure which must be observed before an injunction can be sought. A Board of Inquiry must be appointed, must hold hearings, and must prepare a report to the President. Only then may the President instruct the Attorney General to seek an injunction. All this takes time. On previous occasions, when I have used the Taft-Hartley Act, it has taken on the average from a week to days from the time a Board of Inquiry is appointed until the time the Attorney General may get an injunction. The Taft-Hartley Act simply would not have prevented a shutdown of essential steel production in this case.

Your fourth question is whether the public members of the Wage Stabilization Board were appointed on the recommendation labor. They were not. The public members of the Board were appointed to their positions because they were experienced and qualified men to represent the public interest. Most of them have a firsthand familiarity with labor-management relations. As a matter of fact, their acceptability to both industry and labor is evidenced by the fact that several of them have frequently served as arbitrators of industrial disputes. In such situations, the arbitrator is the choice of both the union and the management, and his compensation is paid for jointly by the parties.

Those who seek to discredit the Board by charges that the public members are "prolabor" don't know what they are talking about. You may be interested to know that the National Advisory Board on Mobilization policy--composed of outstanding leaders from industry, labor, agriculture, and the public--reported to me only this week that they had considered this matter and unanimously found "the attacks on the integrity of the public members of the Wage Stabilization Board to be unfair and unsubstantiated by fact."

Finally, you ask whether the recommendations of the Board exceeded the demands of the union. They were in fact substantially less than what the union wanted. There were over a hundred issues in this dispute. On many of the union demands, the Board declined to take action or recommended that they be withdrawn. On others, the Board recommended that the parties settle for much less than the union asked for. This is only natural. The parties to a labor dispute rarely get all they want or feel they should have. Neither the union nor the steel companies could expect to be satisfied with the recommendations which would, all things considered, be fair to both parties.

I hope this letter will give you a better understanding of the steel controversy. I know the American people will make the proper judgment if only they get all the facts and see the issues. Your Government is doing all in its power to get the facts to the people. The officials of the Government are laying out the essential facts on wages and on prices before a number of Congressional committees. I can only hope that the newspapers of the country will give as much attention to those facts as they do to the paid political ads of the steel companies.

I realized that the action I was taking in this case was very drastic, and I did it only as a matter of necessity to meet an extreme emergency. In so doing, I believe that I was acting within the powers of the President under the Constitution--and indeed, that it was the duty of the President under the Constitution to act to preserve the safety of the Nation. The powers of the President are derived from the Constitution, and they are limited, of course, by the provisions of the Constitution, particularly those that protect the rights of individuals. The legal problems that arise from these facts are now being examined in the courts, as is proper, but I feel sure that the Constitution does not require me to endanger our national safety by letting all the steel mills shut down in this critical time.

I have repeatedly stated that the idea of Government operation of the steel mills is distasteful to me. I have twice sent messages to the Congress asking it to prescribe a course to be followed to achieve a solution of this case, if the Congress disagreed with the action I was taking. The Congress has not done so.

I want to end Government operation at the earliest possible moment, and I will do everything I can to end it as soon as that can be done without irreparable harm to the national interest.

I am taking the liberty of making my letter to you public in the hope that the information will be helpful to others who are equally anxious to know the real facts in this controversy.

Very sincerely yours,

HARRY S. TRUMAN

[Mr. C. S. Jones, Washington Crossing, Pennsylvania]