Special Message to the Congress on the First Day of the Special Session

[As delivered in person before a joint session.]

Mr. President, Mr. Speaker, Members of the 80th Congress:

The Congress has been convened to consider two problems of major concern to the citizens of the United States and to the peoples of the world. The future of the free nations of Europe hangs in the balance. The future of our own economy is in jeopardy. The action which you take will be written large in the history of this Nation and of the world.

The Secretary of State and other representatives of the executive branch have appeared before the committees of Congress during the past week to present the facts regarding the necessity for immediate assistance by the United States to certain European countries. Austria, France, and Italy have nearly exhausted their financial resources. They must be helped if their peoples are to survive the coming winter, and if their political and economic systems are not to disintegrate. Exceedingly bad weather has brought on crop failures and fuel shortages, and has caused intense suffering. The food and fuel stocks of these countries are now near the vanishing point. Their peoples are in a dangerously weakened condition, due to years of short rations. Additional medical supplies and facilities are urgently necessary.

Austria needs $42 million, Italy needs $227 million, and France needs $328 million to buy food, fuel, and other essential goods during the next 4½ months. Detailed information has been presented to your committees concerning these needs and the purposes for which the funds to be appropriated by the Congress would be spent.

Additional funds will also be required to maintain our position in occupied countries.

Emergency assistance by itself will not solve the European problems. Emergency aid is no substitute for a long-range recovery program, but it is a vital prerequisite to such a program. If the Western European nations should collapse this winter, as a result of our failure to bridge the gap between their resources and their needs, there would be no chance for them--or for us--to look forward to their economic recovery. The providing of interim aid will give us time to plan our part in an economic recovery program and it will give the peoples of Europe the strength to hold out until such a program begins.

I will shortly submit to the Congress recommendations concerning the long-range European Recovery Program. This program is the result of the combined efforts of thoughtful men of two continents whose concern has been the most effective manner in which 16 European nations, Western Germany, and the United States can work together for European recovery, world prosperity, and lasting peace.

It is a tribute to the strength of our democracy that we are able to make so great a contribution to the freedom and welfare of other nations and other peoples. This Nation is strong both in material resources and in the spirit of its people. Our economic strength, born of our system of free institutions, has contributed to raising the standard of living the world over. Our moral strength, resulting from our faith in human rights, is the inspiration of free men everywhere.

I refer to the strength of this Nation with humility, for it is an awe-inspiring truth that the manner in which we exert our strength now, and in the future, will have a decisive effect upon the course of civilization.

There is a truth whose significance grows with the experience of each passing day. The American people are becoming more and more deeply aware of their world position. They are learning that great responsibility goes with great power.

Our people know that our influence in the world gives us an opportunity--unmatched in history--to conduct ourselves in such a manner that men and women of all the world can move out of the shadows of fear and war and into the light of freedom and peace.

We must make the most of that opportunity.

For we have learned, by the costly lesson of two world wars, that what happens beyond our shores determines how we live our own lives. We have learned that, if we want to live in freedom and security, we must work with all the world for freedom and security.

Human misery and chaos lead to strife and conquest.

Hunger and poverty tempt the strong to prey upon the weak.

Twice within this generation we have had to take up arms against nations whose leaders, misled by the hope of easy conquest, sought to dominate the world.

We are convinced that the best way to prevent future wars is to work for the independence and well-being of all nations. This conviction guides our present efforts, and will guide our future decisions. We have participated fully and gladly in the growth of the United Nations and we seek now to strengthen and improve it. We are assisting free nations who have sought our aid in maintaining their independence. We have contributed large sums to help rebuild countries devastated by war. We have taken the lead in breaking down barriers to world trade.

In our efforts, however, to achieve the conditions of peace for all the world, we have encountered unforeseen and most unwelcome obstacles.

We have found that not all nations seem to share our aims or approve our methods. We regret the differences which have arisen and the criticisms so loudly expressed. Yet we cannot afford, and we do not intend, to let current differences with some nations deter our efforts to cooperate in friendly fashion and to assist other nations who, like us, cherish freedom and seek to promote the peace and stability of the world.

The actions of this Government must be of a stature to match the dignity and influence of the United States in world affairs. The prompt provision by the Congress for interim aid will be convincing proof to all nations of our sincere determination to support the freedom-loving countries of Western Europe in their endeavors to remain free and to become fully self-supporting once again.

If that action is followed by the enactment of the long-range European Recovery Program, this Congress will have written a noble page in the world annals.

I have spoken of the economic and moral strength of the United States and of the way in which we must use that strength if we are to build a world community of free, strong, and independent nations.

The strength of the United States is not due to chance. It is due to the wise decisions and bold actions taken by free and courageous men throughout the history of our democracy.

The time is at hand for new decisions and new actions of equal wisdom.

On several occasions during the past year I have reported to the Congress and to the Nation on our general economic situation. These reports have told of new high levels of production and employment. Farmers are producing 37 percent more than in 1929. Industry is producing 65 percent more. In terms of actual purchasing power, the average income of individuals, after taxes, has risen 39 percent. The rapid growth of our postwar economic activity has exceeded expectations and has revealed anew the potentialities of our economy.

In each of my reports, however, I have had to warn of dangers which lay ahead.

Today, inflation stands as an ominous threat to the prosperity we have achieved. We can no longer treat inflation--with spiraling prices and living costs--as some vague condition we may encounter in the future. We already have an alarming degree of inflation. And even more alarming, it is getting worse.

Since the middle of 1946, fuel has gone up 13 percent; clothing prices have gone up 19 percent; retail food prices have gone up 40 percent. The average for all cost of living items has risen 23 percent.

The housewife who goes to buy food today must spend $10 to buy what $7 bought a year and a half ago. She must spend $10 to buy what $7 would have bought a year and a half ago!

The cost of living is still climbing. In the past 4 months it has risen at a rate of 16 percent a year.

Wholesale prices are rising, too. They affect every industry and trade, and they are soon translated into retail prices.

Since the middle of 1946, wholesale textile prices have gone up 32 percent; metals have gone up 36 percent; building materials have gone up 42 percent. Wholesale prices on the average have gone up 40 percent.

The harsh effects of price inflation are clear. They are felt by wage earners, farmers, and businessmen. Wage earners are finding that bigger pay checks this year buy less than smaller pay checks bought last year. Despite generalities about high farm prices, the income of many farm families cannot keep up with the rising costs of the things they buy. Small business men are being squeezed by rising costs. Even those who are well off are asking, "How long can it last? When is the break coming?"

In addition, price inflation threatens our entire program of foreign aid. We cannot abandon foreign aid, nor can we abandon our own people to the ravages of unchecked inflation.

We cannot allow the strength of this Nation to be wasted and our people's confidence in our free institutions to be shaken by an economic catastrophe. We shall be inviting that catastrophe unless we take steps now to halt runaway prices.

Our immediate approach to the problems of high prices and inflation should consist of three types of measures: one, to relieve monetary pressures; two, to channel scarce goods into the most essential uses; three, to deal directly with specific high prices.

The way to reduce monetary pressure is by restraining the excessive use of credit. At a time when the economy is already producing at capacity, a further expansion of credit simply gives people more dollars to use in bidding up the prices of goods.

Consumer credit is increasing at a disturbing rate. The amount outstanding has risen from $6 1/2 billion in 1945 to more than $11 billion today. Even more rapid expansion is under way now, because the controls on consumer credit exercised by the Federal Reserve System expired November 1. These credit controls should be restored. Also, some restraint should be placed on inflationary bank credit.

Legislation is required, moreover, to prevent excessive speculation on the commodity exchanges.

Another effective weapon against inflation is increased savings by the public. Every dollar that is saved instead of spent is a dollar fighting against inflation. In order to encourage additional savings, the Government should intensify its vigorous efforts to sell savings bonds.

The second part of the program to curb inflation is to secure the most efficient use of scarce goods and otherwise channel their flow so as to relieve inflationary pressures. Grain, for example, is too badly needed to permit wasteful feeding to livestock. Steel, as another example, is too scarce to be used for nonessential purposes.

Legislation is required to authorize the allocation of scarce commodities which basically affect the cost of living, or basically affect industrial production. In these limited areas inventory control powers are also needed.

Authority to allocate transportation services should be extended.

In addition, existing export controls should be continued and strengthened. Goods that we cannot wisely export must be kept here, and the shipments we make must go where they are needed most. Profiteering in exports must be prevented.

The measures which I have already discussed will, when taken together, aid substantially in relieving inflationary pressures. For large segments of the economy, they should be adequate to meet the requirements of the present situation. However, there are limited areas of acute danger in which these measures cannot be regarded as guaranteeing adequate protection.

For example, present forecasts indicate that we are likely to have less grain and meat next year than we have this year. The pressure on the prices of these foods would then become increasingly great. If these pressures are permitted to bring further sharp increases in food prices, they may well set off a chain reaction that would spread throughout the economy. It is surely better to take timely action to check adverse forces at particular trouble spots than to wait until general inflation has become so serious as to require drastic controls over the whole economic life.

Therefore, we need a third group of measures to combat inflation. Legislation should be enacted, authorizing the Government to impose price ceilings on vital commodities in short supply that basically affect the cost of living. Basic elements in the cost of living are food, clothing, fuel, and rent. In addition, the legislation should be broad enough to authorize price ceilings on those vital commodities in short supply that basically affect industrial production. This will enable us to stamp out profiteering and speculation in these important areas.

This does not mean that price ceilings should be imposed on all items within the classes I have mentioned. For example, price ceilings would not be necessary for staple food and clothing items not in short supply or for any delicacies or luxuries. The same principle of selective treatment would apply to industrial items. This selective treatment of a relatively few danger spots is very different from overall wartime price controls.

Even should the shortages of a few commodities at the consumer level remain serious for a time, I believe that the fair distribution of such commodities can be largely accomplished without consumer rationing. But no one can foretell exactly how serious some shortages may become next year. With serious shortages, a free market works cruel hardships on countless families and puts an unbearable pressure on prices. I therefore recommend that authority be granted, as a preparedness measure, to ration basic cost of living items on a highly selective basis.

Adequate protection from high prices and unfair distribution can be assured only by establishing authority for price ceilings and rationing in the fields of critical importance. It takes several months to set up an organization and make the administrative arrangements necessary to put price control and rationing into effect. Thus, the only prudent course is to establish the authority at this time so the necessary preparations can be started. If we fail to prepare and disaster results from our unpreparedness, we shall have gambled with our national safety-and lost.

If the Government imposes price ceilings covering a specific area of production, it should in all fairness have the authority, in that same area, to prevent wage increases which will make it impossible to maintain price ceilings. This authority should be granted, although I believe that there would be few occasions for its use.

I am confident that, if the cost of living can be brought and held in reasonable relationship to the incomes of the people, wage adjustments through collective bargaining will be consistent with productivity and will avoid an inflationary round of wage increases.

Next to food, the most important element in the cost of living is rent. Under the modified rent control law, rents are rising at the rate of about 1 percent a month. A 12-percent annual increase in rents imposes an intolerable strain upon the family budget. The rent control law should be extended and the weaknesses in the present law should be corrected.

I am well aware that some of my proposals are drastic measures. No one regrets more than I the necessity for considering their use. But if we face the facts squarely, it is apparent that no other methods can safely be counted upon to protect our people from the dangers of excessively high prices and ruinous inflation.

The American people want adequate protection from these dangers and they are entitled to it. It should not be denied them. Nor should they be misled with half measures.

Even with the authority to impose price ceilings, the Government will intensify its efforts to obtain voluntary action. Wherever voluntary action will do the job there will be no necessity to impose the Government's authority. But the very existence of these powers should have a salutary effect. They will demonstrate to each of our citizens the importance of carefully weighing each step that might lead to higher prices. They will support expanded and more specific efforts to obtain voluntary action by businessmen, labor leaders, farmers, and consumers to hold prices down.

All the actions I have described are essential to a fair and effective anti-inflation program. I look upon them as short-run insurance against the impairment of our prosperity and the threat to our future development.

We should all ponder the following questions:

What would it avail the farmer, in the long run, if farm prices should go substantially higher only to be followed by a disaster such as occurred after the first World War?

What would it avail the worker, in the long run, to obtain inflationary wage increases, if they were followed by a repetition of the bitter experience when 15 million workers were out of jobs?

What would it avail the businessman to have record breaking profits soar even higher, if they were followed by a depression which would imperil our whole system of enterprise ?

The program which I have outlined is one designed to meet the existing emergencies of inflation and exorbitant price levels. It is an emergency program which should be adopted to protect our standard of living for the immediate present and to make possible economic security in the future.

But a program designed to meet a crisis cannot by itself be a program designed to build for the future. We must also make plans to prevent future difficulty of the same nature.

Our long-range programs must stress ever-increasing production.

To accomplish this for agriculture, we need a comprehensive farm program. We shall need programs to increase the use of farm products by industry and the consumers in this country when other countries become more nearly self-sufficient. Long-range national measures will be needed to protect the farm population against ruinous deflation in farm production and prices.

To expand industrial output, we need a long-range program to overcome basic shortages in capacity and equipment. To provide markets for increased output of farm and factory, we shall need long-range programs to raise the standard of living, particularly for families of low income.

But the first step toward this progress in the future is to deal with the critical present. We must win the battle against inflation, so that our long-range efforts may start from high levels of prosperity and not from the depths of a depression.

In summary, the immediate anti-inflation program that I recommend calls for the following legislative action:

1. To restore consumer credit controls and to restrain the creation of inflationary bank credit.

2. To authorize the regulation of speculative trading on the commodity exchanges.

3. To extend and strengthen export controls.

4. To extend authority to allocate transportation facilities and equipment.

5. To authorize measures which will induce the marketing of livestock and poultry at weights and grades that represent the most efficient utilization of grain.

6. To enable the Department of Agriculture to expand its program of encouraging conservation practices in this country, and to authorize measures designed to increase the production of foods in foreign countries.

7. To authorize allocation and inventory control of scarce commodities which basically affect the cost of living or industrial production.

8. To extend and strengthen rent control.

9. To authorize consumer rationing on products in short supply which basically affect the cost of living.

10. To authorize price ceilings on products in short supply which basically affect the cost of living or industrial production, and to authorize such wage ceilings as are essential to maintain the necessary price ceilings.

If we neglect our economic ills at home, if we fail to halt the march of inflation, we may bring on a depression from which our economic system, as we know it, might not recover. And if we turn our backs on nations still struggling to recover from the agony of war, not yet able to stand on their own feet, we may lose for all time the chance to obtain a world of free peoples that can live in enduring peace.

The freedom that we cherish in our own economy and the freedom that we enjoy in the world today are both at stake.

I have recommended interim aid for certain Western European countries and a program to curb inflation in the United States. I regard the measures which I have presented to you as vital and essential to the welfare of this Nation.

When the American people have faced decisions of such magnitude in the past, they have taken the right course.

I am confident that the Congress, guided by the will of the people, will take the right course on this occasion.