Ike’s New Program

January 21, 1957

Mr. Eisenhower’s State of the Union message is a curious document, praising free enterprise and government economy in general terms while recommending more government controls and special spending.

His discussion of inflation was typical. He admitted the government’s duty not to become “profligate in its expenditures.” But then he called upon business to “avoid unnecessary price increases” and upon labor to refrain from “wage increases that outrun productivity.” He implied that, if these two groups do not exercise “self-discipline,” the Federal government might be forced to return to price and wage controls.

The truth is that government policy, particularly fiscal and monetary policy, must bear nine-tenths of the responsibility for inflation. Businessmen could not get higher prices for their goods unless government policy provided consumers with more money to buy the goods. Labor could not get excessive wage rates without bringing about unemployment unless government policy pumped out enough new money and credit to pay higher wages and raise prices. And it is inconsistent for the government to ask unions to refrain from higher wage demands while it retains a network of Federal statutes which make it almost impossible for employers to refuse to yield to higher wage demands.

INVESTIGATING THE FED

The President went on to recommend creation of a commission to inquire into the “nature, performance, and adequacy of our financial system.” Any assumption that such a group would consist of disinterested “experts” without already-formed conclusions, and that they would discover hitherto unknown truths, is unrealistic. Once membership of the commission is known, it should not be too difficult to make a shrewd guess concerning its “findings.” We will be fortunate indeed if the proposed commission does not advocate “reforms” that would only make inflation easier.

But the most important immediate decision before Congress, even from the economic point of view, is still the President’s proposal for discretionary power to commit American troops to “protect the territorial integrity and political independence” of any Middle Eastern nation requesting aid against Communist “armed aggression.” This proposal seems to be a belated effort to correct the disastrous blunder the Administration made when it voted with Egypt and Soviet Russia in the U.N. to demand that Britain, France and Israel, as “aggressors,” withdraw from Egypt, and do so without any assurance whatever of a settlement of the Suez Canal problem or the problem of Egyptian-Israeli relations.

WHAT WE DID AT SUEZ

Had we kept out of the situation altogether (or had we at least insisted on a two-sided resolution for the withdrawal of British, French, and Israeli troops from Egypt at the same rate as Russian troops withdrew from Hungary), it is probable that the canal would now be under the control of the British and French, and that Nasser, instead of Eden, would be “discredited.” As it is, Nasser has become impossible; the canal is still blocked, huge oil reserves are cut off and in grave peril of falling under Russian control. The President seems to be proposing to try to do with American money and at the risk of American lives the very things he prevented Britain, France, and Israel from doing with their own money and at the risk of their own soldiers’ lives.

There is grave doubt, even so, that the lone-hand policy now proposed by the President is the best alternative left to us. A much better course might be our simple adherence to the Baghdad pact. In any case there is no need whatever to authorize a bigger and special foreign-aid program. Resumption of Suez Canal traffic and the enormously profitable oil production and oil flow will give the Middle East all the economic aid it needs. If Congress does feel obliged to give the President discretionary power to commit foreign troops abroad, that power should be as restricted and temporary as it can be made. There is no good reason why every foreign crisis should lead to more powers for the executive branch at the expense of Congress particularly when it is the executive branch’s blunders that have helped produce the crisis.