Message to the Congress of the United States
For Immediate Release
Office of the Press Secretary
September 6, 1945
TO THE CONGRESS OF THE UNITED STATES:
I regret that you have been compelled to cut short your recess period. I know, however, that you have been just as eager as any of us to meet the problems which naturally have crowded down upon us with the surrender of the Japanese.
You have cut short a well-merited vacation in order to do so. I hope that the American people realize as fully as I do, that from the very first days of the emergency, the Congress has most energetically and patriotically devoted its time, energies, and capabilities to the immediate problems of war and to the long-range problems of peace. The legislative branch of the Government is entitled to its full share of credit and glory for the victory of the Allied armies. I wish to take this opportunity on behalf of the Nation to congratulate you on the great victory which has been won – in which you played so important a part.
The Congress reconvenes at a time of great emergency. It is an emergency about which, however, we need have no undue fear if we exercise the same energy, foresight, and wisdom as we did in carrying on the war and winning this victory.
The sudden surrender of the Japanese has not caught us unawares. President Roosevelt, as early as the Fall of 1943, began to set up machinery which he foresaw would become necessary to meet the reconversion period. The Congress in its wisdom has adopted some of that machinery by statute, and has improved and added to it. As a result, Government agencies, for some time, have been able to plan for the immediate and long-range steps which now have to be taken.
As the Congress has undoubtedly noticed many steps were taken immediately after the surrender of the Japanese. Many more have been taken since.
The process of reconversion will be a complicated and difficult one. The general line of approach to the problem is to achieve as full peacetime production and employment as possible in the most efficient and speedy manner. The following policies have been laid down and will be followed:
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Demobilize as soon as possible the armed forces no longer needed.
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Cancel and settle war contracts as quickly as possible.
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Clear the war plants so as to permit contractors to proceed with peacetime production.
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Hold the line on prices and rents until fair competition can operate to prevent inflation and undue hardship on consumers.
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Hold wages in line where their increase would cause inflationary price rises. Where price ceilings would not be endangered, collective bargaining should be restored.
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Remove all possible wartime government controls in order to speed and encourage reconversion and expansion.
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Keep only those controls which are necessary to help reconversion and expansion by preventing bottlenecks, shortages of material, and inflation.
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Prevent rapid decrease of wage incomes or purchasing power.
The major objective, of course, is to reestablish an expanded peacetime industry, trade, and agriculture, and to do it as quickly as possible.
Obviously during this process there will be a great deal of inevitable unemployment. What we must do is to assist industry to reconvert to peacetime production as quickly and effectively as possible so that the number of unemployed will be swiftly and substantially reduced as industry and business and agriculture get into high production.
The Government is now doing what it can to hurry this reconversion process.
Through contract termination procedures it is providing quick payment to contractors.
It has released controls on practically all materials which are necessary for peacetime production, reserving only those few in which there is still a critical shortage.
It has made arrangements for credit facilities for industry.
By plant and surplus property disposal, it is helping private enterprise to get started again.
In the consumer field the Government has released controls over articles which were needed for the war in such large quantities that civilians had to go without.
For the information of the Congress, I am submitting as an appendix to this message a report by the Director of War Mobilization and Reconversion showing what has already been done by the Federal Government in reconversion.
There is much that the Congress can do to help this process and to tide over the period between now and the time when reconversion is completed and civilian jobs are plentiful in a stable economy that provides full production, full employment, and a high standard of living.
1. UNEMPLOYMENT COMPENSATION
The end of the war came more swiftly than most of us anticipated. Widespread cutbacks in war orders followed promptly. As a result, there has already been a considerable number of workers who are between jobs as war industries convert to peace. Other workers are returning to a forty-hour week and are faced with a corresponding reduction in take-home pay.
This has led to a natural feeling of uneasiness among the rank and file of our people. Let me emphasize that there will be no reason for undue timidity. A vast backlog of orders may soon make possible the greatest peacetime industrial activity that we have ever seen. But this can happen only if the Congress and the administration move vigorously and courageously to deal with the economic problems which peace has created. Then there need be no reason to fear either the immediate future or the years that lie ahead of us.
Determined action now will create the atmosphere of confidence which is so vital to a rapid reconversion with a minimum of unemployment and hardship.
No matter how rapidly reconversion proceeds, however, no amount of effort or planning will be able immediately to provide a job for everyone displaced from war work. Obviously, displaced war workers cannot find jobs until industry has been regeared and made ready to produce peacetime goods. During this lag the Government should provide help. The cost of this transition from war to peace is as much a part of the cost of war as the transition from peace to war – and we should so consider it.
This course is recommended not only as a matter of justice and humanity, but also as a matter of sound business. Nothing would be more harmful to our economy than to have every displaced war worker stop buying consumer goods. And nothing would be more conducive to a large-scale cessation of buying than the feeling on the part of displaced war workers that all their income had stopped and that their remaining financial resources had to be hoarded.
For one group of those who may become unemployed in the near future – the demobilized veterans – the Congress has already made special provision. Any veteran who has satisfactorily completed ninety days of service is now entitled by law to a weekly unemployment allowance of $20 for as much as fifty-two weeks depending on the length of his service.
By contrast, there are more than 15,000,000 workers not protected under our present unemployment insurance laws. There are many millions more for whom protection is inadequate. Many of these have been unable to accumulate adequate savings.
On May 28, 1945, I recommended to the Congress that the Federal Government immediately supplement the unemployment insurance benefits now provided by the several States. That is the only feasible way to provide at least a subsistence payment in all parts of the United States during this coming unemployment period.
As I pointed out then, the existing State laws relative to unemployment insurance are inadequate in three respects:
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Only about 30,000,000 of our 43,000,000 nonagricultural workers are protected by unemployment insurance. Federal Government employees, for example, such as Federal shipyard and arsenal workers, are not covered. Nor are employees of small businesses and small industrial establishments. Nor are the officers and men of the merchant marine who have braved enemy torpedoes and bombs to deliver supplies and the implements of war to our armed services and our Allies.
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The weekly benefit payments under many of the State laws are now far too low to provide subsistence and purchasing power for the workers and their families. Almost half of the States have the clearly inadequate maximum of $15 to $18 a week.
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Many of the States pay benefits for too short a period. In more than one-third of the States, for example, eighteen weeks is the maximum.
I recommended then, and I urgently renew my recommendation now, that the Congress take immediate action to make good these deficiencies for the present emergency period of reconversion.
Specifically, coverage should be extended to include Federal employees, maritime workers, and other workers not now insured. This additional compensation during the present emergency will have to be financed entirely by the Federal Government, but the benefits should appropriately be administered by the States.
I also recommended, and I now repeat that recommendation, that the Congress provide, through supplementary Federal emergency benefit payments, additional unemployment benefits so as to bring them up to adequate standards in all the States. All payments, however, should be made through the existing unemployment compensation machinery of the several States.
During this emergency every eligible worker should be entitled to twenty-six weeks of unemployment benefits in any one year. The maximum weekly payment for those workers whose previous earnings were high enough, should be not less than $25 per week.
If the Congress decides to take this very necessary step, it will also wish to reconsider and increase the unemployment allowance provided for veterans.
There has been so much misrepresentation about this temporary proposal that I think I should categorically state what the bill does not do.
It does not give everyone $25 a week. Under it, an applicant must be ready, willing, and able to work and must have earned wages high enough so that the percentage rate will yield this maximum figure.
It does not federalize the unemployment compensation system. It leaves it with the States.
It is not intended to take the place of the permanent amendments to the unemployment compensation system which are now being studied by the Congress. It is an emergency measure designed to expand the present system without changing its principles. It is designed only to meet the immediate pressing human problems of reconversion.
This recommendation is not to be confused with the broader question of extending, expanding, and improving our entire social security program of which unemployment insurance is only a part. I expect to communicate with the Congress on this subject at a later date. But I sincerely urge that we do not wait for consideration of such a complex question before enacting this much needed emergency legislation.
2. FAIR LABOR STANDARDS ACT
In addition to those workers who will temporarily lose their jobs, there will be millions of others whose incomes will fall sharply with the end of war production. These will be added to the several million wage earners who even now have hourly earnings much below what is necessary for a decent standard of living.
The inadequacy of these wages, in many cases, has been temporarily concealed by wartime increases in take-home pay resulting from overtime work. As these props to income are removed, however, low-wage earners will be hard pressed to feed, clothe, and house their families. This flies in the face of a sound public policy. Failure to correct this situation will slow down, if it will not actually stop, our drive toward an expanding market for business and agriculture.
The foundations of a healthy national economy cannot be secure so long as any large section of our working people receive substandard wages. The existence of substandard wage levels sharply curtails the national purchasing power and narrows the market for the products of our farms and factories.
In the Fair Labor Standards Act of 1938, the Congress adopted a program intended to provide a minimum wage standard for a large number of American workers.
In that statute, the Congress declared it to be our national policy to eliminate, from interstate industry, wage levels detrimental to the maintenance of minimum standards of living. The establishment then of a minimum wage of twenty-five cents per hour represented a first step toward the realization of that policy. The goal of forty cents per hour, which under the act was to be made effective by 1945, was actually made fully effective more than a year ago by the voluntary action of the industry committees.
I believed that the goal of a forty-cent minimum was inadequate when established. It has now become obsolete.
Increases in the cost of living since 1938 and changes in our national wage structure, require an immediate and substantial upward revision of this minimum. Only in that way can the objectives of the Fair Labor Standards Act be realized, the national purchasing power protected, and an economy of full production and abundance preserved and maintained for the American people.
The high prosperity which we seek in the postwar years will not be meaningful for all our people if any large proportion of our industrial wage earners receive wages as low as the minimum now sanctioned by the Fair Labor Standards Act.
I therefore recommend that the Congress amend the Fair Labor Standards Act by substantially increasing the minimum wage specified therein to a level which will eliminate substandards of living, and assure the maintenance of the health, efficiency, and general well-being of workers.
The scope of the Fair Labor Standards Act also should be clarified and extended. In view of changes which have occurred since 1938, I believe it is no longer necessary to exclude from the minimum wage program the large number of workers engaged in agricultural processing who are now excluded. There now exists a twilight zone in which some workers are covered, and others, doing similar work, are not. Extension of coverage would benefit both workers and employers, by removing competitive inequities.
Our achievements in this field during the last seven years of establishing minimum wages have been gratifying; but we must continue to move forward, step by step.
I urge that the Congress act promptly. The wage structure on which business men may make future plans should be settled quickly.
3. WARTIME CONTROLS
One of the outstanding achievements of the war has been the success of the Government in holding the line against inflation. This is the first time in any major war that the United States has been able substantially to stabilize its economy.
That fact now permits us to enter into the difficult period of readjustment without the threat of a disastrous price collapse.
For this result much credit is due to the Congress, which in the face of great insistence from many interested pressure groups refused steadfastly to take the easy way.
Great credit is due to the Office of Economic Stabilization, the War Labor Board the Office of Price Administration, the War Food Administration, the War Production Board, and the other stabilization agencies. Despite great pressure and often unjust abuse, they continued to hold the line for the benefit of the great mass of Americans.
And above all, great credit is due to the people of the United States. the great body of average citizens, who, for four difficult years and with only a few exceptions, subordinated their personal interest to the long-range interest of the Nation as a whole.
Many of the demands of the war for commodities have now decreased. They will decrease further during the initial period of unemployment which will come with the cancellation of war contracts. As a result, prices of some commodities are bound to soften. But if that happens in the next few months, we cannot allow ourselves to be misled. We must keep in mind the experience of the period immediately after the first World War. After a lull of a few months following the Armistice of 1918, prices turned upward, scrambling for inventories started, and prices soon got completely out of hand. We found ourselves in one of the worst inflations in our history, culminating in the crash of 1920 and the disastrous deflation of 1920 and 1921.
We must be sure this time not to repeat that bitter mistake. When reconversion really gets under way, and men go back to work, and payrolls increase, and the pent-up demands of the war years at home and abroad for peacetime products begin to make themselves felt, we shall face the same scramble for goods, the same speculative excesses that developed in 1919. We must be in a position to overcome that danger if we expect to achieve an orderly transition to peacetime levels of full production and full employment. However, we must not allow inflationary dangers to obscure our vision of the possibilities of lower incomes and widespread unemployment. Our policy must guard against both contingencies.
Immediately after the Japanese decision to surrender, the Office of Price Administration moved promptly to eliminate rationing on gasoline, fuel oil, stoves, and processed foods.
During the transition period the Price Administrator, of course, will eliminate rationing and price controls on one commodity after another just as soon as supply comes into balance with demand. At the same time he will make whatever price adjustments are required to facilitate rapid reconversion and reemployment.
However, it will be necessary for him to continue to resist unreasonable pressures for higher prices on some commodities, just as he has resisted them all through the war. In resisting these pressures and in carrying out his difficult responsibilities, I must state clearly that he has both my backing and my confidence
It will similarly be necessary for the Government to resist pressures for increases in wage rates which would imperil price ceilings.
Without some general stabilization the consumer cannot be protected. Without stabilization, reconversion cannot proceed as rapidly as it should; for stability of cost is indispensable to sound business planning.
The price control and stabilization program has received the backing of the great majority of businessmen throughout the war period. With few exceptions, business groups have realized clearly their own personal stake and the stake of our basic economy in the success of the anti-inflation program.
During the months that lie ahead, however, some groups in business may be tempted to substitute for this long-range wartime thinking, a short-range policy designed to secure prices high enough to provide immediate profits over and above their temporarily high costs of production due to their initial low volume.
These pressures must be resisted. Prices must be held firmly on reconversion items as well as on cost of living items during the coming months.
The American people are entitled to a firm assurance not only on the part of the Administration, but from the Congress itself, that rents and the prices of clothing, food, and other essentials will be held in line. They are also entitled to buy washing machines, vacuum cleaners, automobiles and other products at prices based on our traditional system of high output and low unit costs.
The promise of good profits for businessmen must not be based on small initial volume. It must be based on the full all-out production which it is my belief that American industry will rapidly achieve.
Because of heavy wartime needs, it has been necessary to allocate available supplies of many foods among various claimants within this country, and among other countries. It has been necessary to set aside large blocks of specified commodities in order to make these commodities available for military and other essential needs. Rationing of food for consumers has been necessary in the interest of fair distribution.
Many of these controls have already been eliminated and all remaining allocations, set-asides, and rationing will be removed as rapidly as the supply situation will permit.
However, supplies of some of our principal foods will continue beyond the end of 1945 to be too small for the demand.
For example, the world will be short of requirements for fats and oils and sugar for some months, and allocations and rationing will probably have to be continued into 1946. We must not move so rapidly as to endanger the orderly distribution of goods on which we have based our living during the emergency.
Let me add that in no case should rationing controls be removed if by so doing we should jeopardize our relief shipments to Europe and other distressed war areas. We have a moral obligation to the people of these liberated areas. More than that, our own enlightened self-interest tells us that hungry people are rarely advocates of democracy. The rehabilitation of these countries, and indeed the removal of American occupational troops, may be unnecessarily delayed if we fail to meet these responsibilities during the next few months.
During the reconversion period and as long as shortages in certain materials other than food continue, the War Production Board will have to support the stabilization program as it has done during the past four years.
It must be in a position to take action where necessary, to increase scarce materials and facilities, break bottlenecks, channel production to meet essential needs, safeguard the opportunities for small business concerns, and, above all, to control inventories so as to prevent speculative hoarding and unbalanced distribution.
As the Congress knows, the War Production Board has already removed a great majority of the controls which were in force during the war, and many more will be removed during the next few months.
I trust that the Congress will agree, however, that the controls which still remain and which are still considered necessary by the agency charged with responsibility should not be removed until the need for them disappears. The need to control a few critical materials which the war has caused to be in short supply will continue for some time until adequate supplies are again available. Foremost among these materials are tin and crude rubber.
It will also be necessary for some period to prevent the hoarding of items now badly needed and in great demand for the civilian economy. Many critical shortages can be avoided by the extension of general inventory controls which would prevent the accumulation of unreasonably large stocks in the hands of a few. This will speed the reconversion program and will also greatly assist in avoiding inflation of the price structure.
The extension of one further type of control should have consideration at this time. In the national interest, this Government has made and should continue to make agreements for securing our fair share of materials from certain foreign sources and also agreements for supplying various materials and products abroad. The Government should have authority to assure the carrying out of such commitments.
These production and inventory controls, as well as the allocations of food, set-asides of commodities, and rationing among consumers have been set up under the Second War Powers Act.
Most of the provisions of this act expire on December 31, 1945.
I am convinced that an orderly transition to a peacetime economy will require the use of some of these controls after the first of the year.
I request the Congress, therefore, to extend the provisions of the Second War Powers Act, either in its present form or with appropriate limitations, preserving the powers necessary to achieve the objectives I have outlined.
The Congress has my definite assurance that none of these war powers will be exercised by the executive branch of the Government unless they are deemed essential to the attainment of the objective of an orderly stabilized reconversion. The Congress should, of course, if it extends the statute, reserve the right to terminate it by legislation at any time it deems necessary.
I hope that the Congress will not delay the extension of this authority. Delay would retard reconversion by creating uncertainty on the part of business as to whether necessary controls will be retained or not. Businessmen, in planning for next year’s activities, will be assisted greatly by knowing in advance whether or not the Government is going to keep a firm hand at the brakes to prevent inflation.
The termination of the wartime food subsidies, for which a total of $1,798,000,000 has been authorized for the current year, is one of the important problems in reconversion. Agencies dealing directly with this problem are now meeting jointly to determine in what order and at what time these food subsidies may be eliminated without an undue disturbance to farm income or living costs.
Subsidies for purposes other than food are also being reviewed by the agencies concerned, who are collecting the necessary data for an orderly liquidation at the earliest date compatible with the stabilization program.
Those subsidies which were designed originally to stimulate increased production should not be removed at a time or in a manner to incite inflation and upset our economy.
I have directed that early reports be made on this important problem.