Address in New York City at the Annual Luncheon of the Associated Press.

Mr. President, ladies and gentlemen:

I appreciate most highly your cordial welcome. I appreciate the toast very much, and I thank you.

It is a very great pleasure for me to be here today, and I am going to make some statements which will affect the whole Nation, from this platform.

Freedom, in the American tradition, is always coupled with service. The American press--a free press--must never forget its obligation to the American people. Its treatment of the recent war and its discussion of our present foreign policy are examples of the finest effort of a free, responsible press. Without abandoning constructive criticism, the press, with rare exceptions, has carried the facts fully and fairly to the American people, so that they could be the judge.

We are now at a stage in our national economic life when the American press can render similar service.

The manner in which the American press makes clear to our citizens the problems that we face in maintaining our prosperity--and the reasons why it is essential to advance that prosperity--can help determine the future welfare of every family in the United States.

We all want continued and ever-increasing prosperity. It is a simple, normal, human desire to want to improve the standards of living of all our people. The desire for better living conditions is not the only reason, however, why continued prosperity in this country is essential.

We know that the freedom and integrity of the United States are safe only in a world of free peoples living at peace with their neighbors and engaging in free and friendly commerce. Hence, it is our policy to aid the free peoples of the world in their efforts to maintain their freedom.

Many of these peoples are confronted with the choice between totalitarianism and democracy. This decision has been forced upon them by the devastation of war which has so impoverished them that they are easy targets for external pressures and alien ideologies.

By providing economic assistance, by aiding in the tasks of reconstruction and rehabilitation, we can enable these countries to withstand the forces which so directly threaten their way of life and, ultimately, our own well-being. But we can provide the necessary assistance only if we ourselves remain prosperous.

And only if we maintain and increase our prosperity can we expect other countries to recognize the full merits of a free economy. We know that our system of private competitive enterprise has produced the highest standard of living the world has ever seen. By steadily raising this standard, we can demonstrate to all other nations the vitality and superiority of a free economy. Our system of private enterprise is now being tested before the world. If we can prove that it is more productive and more stable, more generous and more just than any other economic system, we shall have won the test.

But if we ignore the needs and shirk the responsibilities of our economy, we shall lose both our power to help others and our capacity to inspire others. Economic trouble in the United States would provide agitators with the opportunity they seek.

It is necessary that we develop a new realization of the size and strength of our economy. Our tremendous production during the war astounded the world. It was a phenomenon which no one thought could endure after hostilities ceased.

We are beginning to sense the fact, however, that our peacetime economy can not only equal our wartime economy, but can surpass it.

The progress we have made is demonstrated by comparing the present time with the year 1929, which was the year of highest economic activity before the war.

The physical volume of industrial production is now 71 percent greater than it was in 1929. This is actual physical volume. It is not dollar value.

The physical volume of agricultural production is now 32 percent greater.

Civilian employment is now 10 million greater.

Our national income--including individuals and corporations--is now running at an annual rate of 176 billion, contrasted with only $83 billion in 1929.

Now, what have these great gains since 1929 meant to all of us?

In 1929 the average income of individuals in this country was $654, after taxes. Today it is $1,090, after taxes. Expressed in dollars of equal purchasing power, the increase has been from $825 in 1929 to $1,090 today. This means, on the average, for every man, woman, and child in the country, an increase of 32 percent in the power to buy goods and services with current income. This is the measure of the rise in our standard of living in less than one generation.

This is not a record of war production. It is an unparalleled record for peacetime goods and services, devoted to the needs and enjoyments of our people.

But I must say in all frankness that the economic skies are not entirely clear. One cloud is shadowing our economic future.

That cloud is caused by the sharp and rapid rise in prices.

Some say this cloud is certain to burst. They are sure of a recession or a depression. I do not share their belief that either of these is inevitable.

I believe that we, as a Nation, can prevent this economic cloudburst. But it requires prompt, preventive steps.

Price increases have been felt by every American family. No one needs to tell them how much the cost of living has increased!

House furnishings, for example, have gone up 25 percent above the 1945 average. Clothing has gone up 24 percent.

Food has risen 31 percent. Just before I came down here from the apartment upstairs, I was informed that the latest figures show that the food rise has been 36 percent!

Only rent, because it is under rent control, has remained practically stable.

Even more dangerous than the rise in retail prices is the sharp rise in wholesale prices since 1945. Here are examples: Textiles--up 39 percent. Farm products--up 40 percent. Building materials--up 51 percent. Food--up 53 percent.

Excessive wholesale prices are translated inevitably into higher retail prices. With higher and higher retail prices, families can buy less and less. Thus, excessive wholesale prices are hitting at the foundation of our prosperity, for we can be prosperous only when business activity is at its maximum.

There are some who say that prices are not too high, so long as buying stays at high levels.

From the human standpoint, I reject this argument.

It provides no answer to those living on fixed incomes, such as teachers, civil servants, and widows.

It provides no answer to those veterans who must pay substantially more for houses than they are able to afford.

It provides no answer to many millions of American families in every city, town, and rural area. Because of high prices, too many of these families are spending their meager savings and cashing their war bonds. They are postponing necessary medical care. They have gone into debt in an amount 50 percent greater than a year ago. They are doing this, not through choice, but in order to make both ends meet. And most of these many millions have no one, except their Government, to speak for them.

In addition to this human aspect, it is a dangerous economic fallacy to say that prices are not too high, simply because people are still buying. A bridge designed to carry 10 tons is not safe with 15 tons on it even though it has not yet begun to cave in. The excess weight must be taken off the bridge in time. When it begins to crack, it is too late.

There is one sure formula for bringing on a recession or a depression: that is to maintain excessively high prices. Buying stops, production drops, unemployment sets in, prices collapse, profits vanish, businessmen fail.

That formula was tried after the First World War. And we paid for it. Between 1920 and 1921, annual national income fell by $18 billion. Industrial production dropped 23 percent. Unemployment increased by more than 4 million. Business failures more than doubled. Farm losses were appalling.

We must not choose that formula again.

If we are to avoid a recession we must act before it starts.

Prices must be brought down.

I speak first to those businessmen who have it within their power to reduce their prices.

Price reductions will bring more prosperity and profits in the long run. Lower prices will sustain further increase in the present high volume of sales and stimulate greater production. This Nation will grow only through increased productivity and more and more production. Higher prices for the same amount of goods will lead only to an artificially inflated economy, not a sound economy.

Present business conditions permit--in fact, they require--lower prices in many important fields.

Profits in the aggregate are breaking all records although profit margins vary greatly in individual cases. In 1946, corporate profits, after taxes, were 33 percent higher than in 1945. In the first quarter of 1947 they ran even higher. These figures are total figures and do not, of course, apply to every industry or every business.

I do not have to name the particular industries or the particular businesses. The men who run them know exactly which are included and which are not.

Our private enterprise system now has the responsibility for prices. During the war the Government shared that responsibility through the mechanism of price control. In the spring of 1946 I strongly recommended the continuation of price control so that we could attain an orderly withdrawal from control of prices as supply approached demand. A group saw fit to sabotage price control and represented to the public that prices would come down in a free market.

This has not taken place. On the contrary, prices rose sharply after controls were taken off and they have continued to rise. Private enterprise must display the leadership to make our free economy work by arresting this trend. Some price reductions have already shown that this leadership does exist. I commend what has been accomplished. I ask other business leaders to step forward in the same direction.

In the present economic situation, labor also has a responsibility.

I said, in January of this year, that excessive wage demands would threaten another inflationary wage-price spiral. I said also that some moderate wage increases were justified by economic or equitable considerations.

Since then, this counsel of moderation has generally been followed by wage earners and their leaders.

Some moderate wage adjustments have already been made this year--peacefully. Some others may be expected. Price adjustments and wage adjustments have been the traditional method of sustaining mass buying power and sharing the benefits of our increasing wealth. In our immensely productive economy, fair prices and good wages are the earmarks of American prosperity.

To wage earners and their leaders I repeat my counsel of moderation.

But it does not require much foresight see that, if the cost of living does not come down, the size of wage demands might be magnified. Peaceful management-labor relations would be jeopardized. Bitterness and strife would become harder to avert.

This is another reason--and a most compelling one--for bringing prices and the cost of living down. This will help wage negotiations to proceed toward peaceful adjustments beneficial to all. Another important contribution in bringing about lower prices is increased productivity on the part of labor. Higher productivity results in greater production, which in turn leads to lower prices to the public.

After the war and postwar inflation it is difficult to find solutions fair to the consumer, fair to the worker, and fair to business. Employers and workers must both give to this task all their energies, good will, and understanding of their country's best interests.

In considering the high cost of living we must also examine prevailing food prices. The phenomenal world demand for farm products is maintaining farm prices at present levels. The unprecedented purchasing power of our own people and the needs of war-devastated countries abroad have combined to force farm products upward. The Government policy of supporting farm prices at 90 percent of parity is not the cause. Of the major food commodities potatoes are the only crop currently being given Government support. The support price of wheat, for example, is $1.82 a bushel, while wheat is currently selling at about $2.50 a bushel. The support price of hogs is $14.94 per hundred pounds. The recent price has been around $25•

Let me repeat: the Government policy of supporting farm prices is not the cause of prevailing high food prices.

Without the support program, farmers, mindful of the disastrous farm collapse shortly after World War I, would not have planted their tremendous recent crops. The consequence would have been smaller acreage, greater excess of demand over supply, and prices much higher than they are now. Because of the support program, the consumer is better off and the world food situation is more manageable.

With this sound bulwark against a repetition of the agricultural depression which started in 1920, farmers should continue their efforts to bring about maximum production.

I have been speaking about the role of businessmen, workers, and farmers in maintaining our present prosperity. The Government also has responsibilities. It is an axiom of good economics and good business that, in times of great inflationary pressures, taxes should not be reduced. Any surplus which the Treasury can secure should be applied to the reduction of the Federal debt. Reduction of the debt reduces the annual interest obligations of the Government and also tends to check inflationary forces. When we are over the hump of inflation, tax reduction will be feasible and proper. It should then be extended first to those who need relief most.

Additional weapons which the Government possesses in its fight against inflation are rent control, export controls, and credit control.

Rent control is vitally necessary until construction costs are lower and the present acute housing shortage has been eased.

Export controls must be maintained to avoid price increases arising from uncontrolled foreign purchases in this country.

Credit control cannot be relaxed so long as prices are so high that many consumers must go into debt to make both ends meet. Making more money available on easier credit terms would only enable people to go into debt at a faster rate. Over-extension of credit to support over-extension of prices is fuel on the inflationary fires. It would help no one in the long run. It is in the tradition of "boom and bust." The Government should retain and use its measures for wise credit control.

The economic policies here discussed have not been devised hastily to meet a situation which has just appeared. I have been urging them for many months. The reiteration of these policies is made necessary by the acute situation existing today.

The responsibility of preserving our free enterprise system will continue to rest upon the joint efforts of business, labor, the farmers, and the Government.

There must be moderation on the part of business, forbearance on the part of labor, all-out effort on the part of the farmer, and wise guidance and action on the part of the Government.

There must be unity of effort and a willingness to cooperate in the achievement of our goal of a strong, stable economy.

The men and women here today, and the rest of the press of the Nation, have a great opportunity for service at this time. Not only must the facts be presented, but there must be brought home to our people the seriousness of the issue and the need for united effort for the good of all, rather than separate effort for the benefit of any single group.

I take comfort in the knowledge that the press of this country will accept this opportunity for service in the same high spirit which it has always served our Nation.