Statement by the President on the Defense Production Act Amendments.

YESTERDAY I signed S. 2594, the Defense production Act Amendments of 1952, passed by the Congress late Saturday. If I had not approved this measure, our powers to continue the defense production program and the stabilization program would have expired at midnight last night.

This new law makes few changes in the production and allocation provisions of the Defense Production Act. As a result, we shall be able to continue our programs for expanding America's defensive strength, for extending military support to the free world, and for cooperating with our allies in the orderly distribution of scarce materials through the International Materials Conference. Moreover, our farm production programs have been strengthened, as I have repeatedly urged, by repealing the sliding scale in our agricultural laws during this emergency period. In addition, the Congress has made some slight improvement in the so-called cheese amendment, which limits our foreign trade and has been so harmful to our relations with friendly nations.

Unfortunately, however, the new law weakens our ability to hold down prices and stabilize our economy. At a time when our defense production is still expanding and necessarily contributing to inflationary pressures, the Congress has weakened price controls, has limited the effectiveness of wage controls, has invited widespread abandonment of rent control, and has virtually cancelled selective credit controls. I asked the Congress to strengthen our stabilization machinery and remove some of the "built-in" inflationary features, like the Capehart amendment. But instead the Congress has moved in the other direction.

This law gives the American people only very limited protection against the dangers of inflation. If the Congress provides sufficient funds for proper administration of this weakened act, and if we have no sudden worsening of the international crisis, and no panic buying, we may be fortunate enough to get through the next 10 months without serious damage to our economy. But this act, nevertheless, forces us to take a serious gamble with inflation, and all of us should CRCs that fact.

This bill was the target of every favorseeking lobby of the special interests in this election year. If they had had their way, the law would be much worse than it is. The American people should be grateful to Senator Maybank and Representative Spence, and to the other Members of Congress who fought for an effective law and were successful, against great odds, in keeping the bill from being a total loss.

One of the bad things the law does is to exempt all fruits and vegetables, fresh, canned and frozen, from price control. This means that the housewife will be exposed to higher prices on fully 20 percent of her market basket. It is very likely that in many areas the price of milk will go up as the result of another amendment. Farmers will have to pay more for fertilizer as a result of still another amendment. Many other changes have been made in the law, all having the effect of making the administration and enforcement of price controls more difficult.

The act exempts from Federal rent control all communities except those designated as critical defense housing areas, unless the local governing bodies affirmatively request continuation of controls prior to September 30, 1952. This opens the way for increases in rents for some 6,000,000 families if the real estate lobbies are able to forestall positive action by local bodies.

Credit controls have heretofore played an important role in stabilizing our economy during this emergency, but S. 2594 removes much of the authority for those controls. The act completely eliminates power to reimpose controls on consumer credit. It restricts residential real estate credit controls by requiring that such controls be suspended if the construction of houses in any 3 consecutive months should fall below a rate of 1.2 million houses a year. This is an annual rate that has been exceeded only once in our history. In practical effect, this probably means that the power to control real estate credit expansion will also be eliminated.

There is another respect in which this law weakens our defense program. The Congress has forbidden the Wage Stabilization Board to make recommendations for the settlement of labor disputes which threaten the defense program. This means that the Wage Stabilization Board method of settling disputes is for all practical purposes abolished, even though it has been effective in every case but one. If the Congress has a better way of dealing with labor disputes in defense plants, it should write its views into law. But this new act destroys the existing system without providing any substitute. Thus, the Congress has opened a dangerous gap in the mobilization program.

These are some of the problems created by this act. We are less able to do an effective job of stabilization than we would have been had the Congress followed the recommendations which I made last February. But I want to make one point absolutely clear. The agencies of the Government given responsibilities under the Defense Production Act will do everything in their power to see to it that the authority they do have to combat inflation will be effectively and vigorously exerted.

If we are to have any chance of success, we must have adequate appropriations. The Congress is now considering appropriations for the stabilization agencies. If the Congress fails to provide sufficient funds, even the limited program of controls which this law authorizes will collapse.

In the last analysis, economic stabilization and defense production are not the responsibility of Government alone. They require the full and unceasing cooperation of every one of our citizens. The law under which we must operate makes it even more important that all Americans join in the effort to keep prices down by buying carefully, by continuing to save, and by doing their part to keep production at the high levels required if our Nation is to be secure.