Mr. Truman’s Wrong Remedies

January 22, 1951

President Truman’s tremendous economic demands on this country, in his State of the Union message to Congress, are so closely related to his foreign policy that it is difficult to discuss them purely on their own merits. Mr. Truman chooses to ignore the fact (pointed out by Mr. Hoover) that this country is already bearing an altogether disproportionate share of the burden of the collective defense of the 53 “democracies.” What the President now proposes, in effect, is that we assume an even more disproportionate share of that burden.

Even today, for example, Mr. Truman blandly recommends that we continue the Point Four program. Our government is to “help people who are striving to advance from misery, poverty and hunger”—all over the world. And it is to do this by forcing the American taxpayers to drop still more money into “underdeveloped” countries so that their governments will not have to make the reforms necessary to attract private capital, either domestic or foreign. The Point Four program not only puts an added strain on our own economy; it retards world production. It bypasses the prods and incentives of free enterprise to substitute the principle of the free lunch.

Mr. Truman lists ten subjects “on which legislation will be needed.” These include still bigger appropriations and still higher taxes—but not government economy. As an afterthought, however, he declares that the government “must practice rigid economy in its nondefense activities.”

Unfortunately, too much weight cannot be attached to this single sentence of lip-service. Mr. Truman has been making similar declarations over a long time now, yet on net balance the very opposite continues to happen. It is to be observed, further, that in this message Mr. Truman did not specify just what nondefense expenditures were to be cut. He did specify, on the other hand, many non-defense expenditures that were not to be cut. He even spoke of “rounding out,” “improving,” and adding—in other words, of making bigger—social insurance, old-age pensions, unemployment benefits, government health insurance and socialized medicine.

Mr. Truman asked for “improvement of our labor laws” to increase production in the emergency. If taken seriously, this proposal would mean the suspension of the present legal penalty rate on all weekly working hours above 40. He asked for “improvement of our agricultural laws, to help obtain the kinds of farm products we need for the defense effort.” By far the best way to do that would be to repeal all our “parity,” control, and subsidy laws and let the supply and kinds of farm products be determined by demand through free prices.

Mr. Truman asked for “revision and extension of the authority to expand production and to stabilize prices, wages, and rents.” Congress should not extend this authority but contract it. If Congress could force the Administration to abandon its policies of monetary inflation, none of these price-fixing powers would be needed.

To quote from a statement by the Committee for Economic Development on “Paying for Defense”:

“Experience in the United States and in other countries has demonstrated that this [a system of general price and wage controls and rationing] is not an effective solution to the inflation problem, especially if the problem lasts for a long time. Even while the controls are nominally in effect, price increases break through in black markets, in deterioration of quality, and in the disappearance of low-priced goods from the market. Price ceilings and wage rates come to be determined in a political bargaining process which pushes up the prices and incomes of the groups most powerful politically at the expense of those less powerful. And when the controls finally come to an end, either by formal decision or by erosion in fact, the dammed-up inflationary pressure breaks out in open inflation. [Meanwhile] prices are prevented from performing their economic function of directing production . . . and economizing the use of scarce resources.”