War Measures—Or Hysteria?

August 7, 1950

From laxity and unconcern prior to June 25, Washington has swung over to hysteria. Technically we are still fighting only a “police action” in a tiny country. Yet Washington acts as if our only hope of national survival lay in immediately turning our whole economy inside out and frightening to death the very corporations responsible for our unparalleled production. The proposed measures into which Congress is being stampeded reflect not so much real war necessities as the familiar demands of a statist and controlist ideology.

Congress should, of course, appropriate without delay whatever additional amounts can be spent quickly without misdirection or gross waste. But even if all of the President’s additional appropriation request of $10,500,000,000 is really necessary, is it also necessary that the Federal government should add that net amount to the expenditures it had already planned? Most of the bureaucrats and congressmen who are so sternly calling on the consumers and taxpayers for more sacrifices are singularly silent about any cut in their own pet programs for handing out taxpayers’ money to pressure groups or diverting resources to inessential “welfare” or pork-barrel projects. Apparently, aside from mere token cuts, these are to go on as usual.

Yet Arthur Krock, writing in The New York Times, considers $7,000,000,000 a “moderate” estimate of what could be cut from the Fair Deal budget if some of its programs were suspended during the crisis.

Nor is the nonmilitary budget the only one that needs to be critically examined. The American public is entitled to a much more convincing explanation than has yet been offered of why the almost $50,000,000,000 spent on “defense” in the four fiscal years since July 1946 bought apparently so little of it. The sum is not negligible. We spent on defense in the last fiscal year alone as much as we spent in the whole sixteen fiscal years before Pearl Harbor.

The chairman of the House Armed Services Committee now wants to know “just what” there is on hand to show for the military expenditures of the last four years. This is a laudable, if belated, curiosity. One would have supposed that a committee properly carrying out its responsibilities to the American people would have been checking on this at least every quarter. The armed services committees urgently need a numerically adequate permanent full-time staff of military experts and investigators, responsible to Congress alone, to check on the requests from the services and to know at all times how much defense the people are getting for their money.

The ideological hysteria of the moment is reflected in the demands, even on the part of so-called conservatives and professed believers in a free enterprise system, for overall government economic controls, including a blanket “freeze” of prices and wages. Such demands stem from a complete misreading of the lessons of the last war. These controls and freezes would tie the economy in red tape. They would delay or prevent the very price and wage readjustments that are most necessary. It cannot be pointed out too often that the only way to control the general level of prices is through money and credit policy.

The Administration has still to show real awareness of how serious, compared with present practices and proposals, money and credit control would have to be to accomplish this purpose. It must begin with restraints on the Treasury and Federal Reserve System. We must severely limit the expansion of credit by the Federal Reserve Banks themselves. These banks must abandon the inflationary policy of cheap money rates and government bond-pegging. The government must shut down on all new loans from the RFC or the Export-Import Bank. Commercial bank credit must be restricted by allowing interest rates to rise, by tightening reserve requirements, and by scrutinizing new loans. Demands for installment-credit and real-estate mortgage control only divert attention from these more serious credit controls.