Address to Congress on Aid to United States Merchant Marine
Members of the Congress:
Late last February I reported to you relative to the American merchant marine, and recommended legislation which the executive branch of the Government deemed essential to promote our merchant marine and with it our national welfare. Other problems were pressing and other questions pending, and for one reason or another, which need not be recited, the suggested legislation has not progressed beyond a favorable recommendation by the House committee.
The committee has given the question a full and painstaking inquiry and study, and I hope that its favorable report speedily will be given the force of law.
It will be helpful in clearing the atmosphere if we start with the frank recognition of divided opinion and determined opposition. It is no new experience. Like proposals have divided the Congress on various previous occasions. Perhaps a more resolute hostility never was manifest before, and I am very sure the need for decisive action—decisive, favorable action—never was so urgent before.
We are not now dealing with a policy founded on theory, we have a problem which is one of grim actuality. We are facing insistent conditions, out of which will come either additional and staggering Government losses and. national impotence on the seas, or else the unfurling of the flag on a great American merchant marine commensurate with our commercial importance, to serve as carrier of out cargoes in peace and meet the necessities of our defense in war. There is no thought here and now to magnify the relation of a merchant marine to our national defense. It is enough to recall that we entered the World War almost wholly dependent on our allies for transportation by sea. We expended approximately three billions; feverishly; extravagantly, wastefully, and unpractically. Out of our eagerness to make up for the omissions of peace and to meet the war emergency we builded and otherwise acquired the vast merchant fleet which the Government owns to-day.
In the simplest way I can say it, our immediate problem is not to build and support a merchant shipping, which I hold to be one of the highest and most worthy aspirations of any great people; our problem is to deal with what we now possess. Our problem is to relieve the Public Treasury of the drain it is already meeting. Let us omit particulars about the frenzied war-time building. Possibly we did full as well as could have been done in the anxious circumstances. Let us pass for the moment the vital relationship between a merchant marine and a commercially aspiring nation. Aye, let us suppose for a moment the absurdity that with one $3,000,000,000 experience, and with the incalculable costs in lives and treasure which may be chargeable to our inability promptly to apply our potency— which God forefend happening again—let us momentarily ignore all of these and turn to note the mere business problem, the practical question of dollars and cents with which we are confronted.
The war construction and the later completion of war contracts, where completion was believed to be the greater economy to the Public Treasury, left us approximately 13,200,000 gross tonnage in ships. The figures arc nearer 12,500,000 tons now, owing to the scrapping of the wooden fleet. More than half this tonnage is Government-owned, and approximately 2,250,000 tons are under Government operation in one form or another. The net loss to the United States Treasury—sums actually taken therefrom in this Government operation—averaged approximately $16,000,000 per month during the year prior to the assumption of responsibility by the present administration. A constant warfare on this loss of public funds, and the draft to service of capable business management and experienced operating directors, have resulted in applied efficiency and enforced economies. It is very gratifying to report the diminution of the losses to $4,000,000 per month, or a total of $50,000,000 a year; but it is intolerable that the Government should continue a policy from which so enormous a Treasury loss is the inevitable outcome. This loss, however, attends operation of less than a third of the Government-owned fleet.
It is not, therefore, a question of adding new Treasury burdens to maintain our shipping; we are paying these burdens now. It is not a question of contracting an outlay to support our merchant shipping, because we are paying already. I am not asking your authorization of a new and added draft on the Public Treasury; I am appealing for a program to diminish the burden we are already bearing.
When your executive Government knows of public expenditures aggregating fifty millions annually, which it believes could be reduced by half through a change of policy, your Government would be unworthy of public trust if such a change were not commended, nay, if it were not insistently urged.
And the pity of it is that our present expenditure in losses is not constructive. It looks to no future attainments. It is utterly ineffective in the establishment of a dependable merchant marine, whereas the encouragement of private ownership and the application of individual initiative would make for a permanent creation, ready and answerable at all times to the needs of the nation.
But I have not properly portrayed all the current losses to the Public Treasury. We are wearing out our ships without any provision for replacement. We are having these losses through deterioration now, and are charging nothing against our capital account. But the losses are there, and regrettably larger under Government operation than under private control. Only a few years of continued losses on capital account will make these losses through depreciation alone to exceed the fifty millions a year now drawn to cover losses in operation.
The gloomy picture of losses does not end even there. Notwithstanding the known war cost of three billions of dollars for the present tonnage, I will not venture to appraise its cash value to-day. It may as well be confessed now as at some later time that in the mad rush to build, in establishing shipyards wherever men would organize to expend Government money, when we made shipbuilders overnight quite without) regard to previous occupations or pursuits, we builded poorly, often very poorly. Moreover, we constructed without any formulated program for a merchant marine. The war emergency impelled, and the cry was for ships, any kind of ships. The error is recalled in regret rather than criticism. The point is that our fleet, costing approximately three billions, is worth only a fraction of that cost, to-day. Whatever that fraction may be, the truth remains that we have no market in which to sell the ships under our present policy, and a program of surrender and sacrifice and the liquidation which is inevitable unless the pending legislation is sanctioned, wilt cost scores of millions more.
When the question is asked, Why the insistence for the merchant marine act now? the answer is apparent. Waiving every inspiration Which lies in a constructive plan for maintaining our flag on the commercial highways of the seas, waiving the prudence in safeguarding against another $3,000,000,000 madness if war ever again impels, we have the unavoidable task of wiping out a $50,000,000 annual loss in operation, and losses aggregating many hundreds of millions in worn- out, sacrificed, or scrapped shipping. Then the supreme humiliation, the admission that the United States—our America, once eminent among the maritime nations of the world—is incapable of asserting itself in the peace triumphs on the seas of the world. It would seem to me doubly humiliating when we own the ships and fail in the genius and capacity to turn their prows toward the marts of the world.
This problem can not longer be ignored, its attempted solution can not longer be postponed. The failure of Congress to act decisively will be no less disastrous than adverse action.
Three courses of action are possible, and the choice among them is no longer to be avoided.
The first is constructive—enact the pending bill, under which, I firmly believe, an American merchant marine, privately owned and privately operated, but serving all the people and always available to the Government in any emergency, may be established and maintained.
The second is obstructive—continue Government operations and attending Government losses and discourage private enterprise by Government competition, under which losses are met by the Public Treasury, and witness the continued losses and deterioration until the colossal failure ends in sheer exhaustion.
The third is destructive—involving the sacrifice of our ships abroad or the scrapping of them at home, the surrender of our aspirations, and the confession of our impotence to the world in general, and our humiliation before the competing world in particular.
A choice among the three is inevitable. It is unbelievable that the American people or the Congress which expresses their power will consent to surrender and destruction. It is equally unbelievable that our people and the Congress which translates their wishes into action will longer sustain a program of obstruction and attending losses to the Treasury.
I have come to urge the constructive alternative, to reassert an American "We Will." I have come to ask you to relieve the responsible administrative branch of the Government from a program upon which failure and hopelessness and staggering losses are written for every page, and let us turn to a program of assured shipping to serve us in war and to give guaranty to our commercial independence in peace.
I know full well the hostility in the popular mind to the word "subsidy." It is stressed by the opposition and associated with "special privilege" by those who are unfailing advocates of Government aid whenever vast numbers are directly concerned. "Government aid" would be a fairer term than "subsidy" in defining what we are seeking to do for our merchant marine, and the interests are those of all the people, even though the aid goes to the few who serve.
If "Government Aid" is a fair term—and I think it is—to apply to authorizations aggregating $75,000,000 to promote good roads for market highways, it is equally fit to be applied to the establishment and maintenance of American market highways on the salted seas.
If Government aid is the proper designation for fifteen to forty millions annually expended to improve and maintain inland waterways in aid of commerce, it is a proper designation for a needed assistance to establish and maintain ocean highways where there is actual commerce to be carried.
But call it "subsidy," since there are those who prefer to appeal to mistaken prejudice rather than make frank and logical argument. We might so call the annual loss of fifty millions, which we are paying now without protest by those who most abhor, we might as well call that a "subsidy." If so, I am proposing to cut it in half, approximately, and to the saving thus effected there would be added millions upon millions of further savings through ending losses on capital account—Government capital, out of the Public Treasury, always remember—and there would be at least the promise and the prospect of the permanent establishment of the needed merchant marine.
I challenge every insinuation of favored interests and the enrichment of the special few at the expense of the Public Treasury. I am, first of all, appealing to save the Treasury. Perhaps the unlimited bestowal of Government aid might justify the apprehension of special favoring, but the pending bill, the first ever proposed which carries such a provision, automatically guards against enrichment or perpetuated bestowal. It provides that shipping lines receiving Government aid must have their actual investment and their operating expensed audited by the Government, that Government aid will only be paid until the shipping enterprise earns 10 per cent on actual capital employed, and immediately that when more than 10 per cent earning is reached, half of the excess earnings used must be applied to the repayment of the Government aid which has been previously advanced. Thus the possible earnings are limited to a- very reasonable amount if capital is to be risked and management is to be attracted. If success attends, as we hope it will, the Government outlay is returned, the inspiration of opportunity to earn remains, and American transportation by sea is established.
Though differing in detail, it. is not more in proportion to their population and capacity than other great nations have done in aiding the establishment of their merchant marines, and it is timely to recall that we gave them our commerce to aid in their upbuilding; while the American task now is to upbuild and establish in the face of their most active competition. Indeed, the American development will have to overcome every obstacle which may be put in our path, except as international comity forbids. Concern about our policy is not limited to our own domain, though the interest abroad is of very different character. I hope it is seemly to say it, because it must be said, the maritime nations of the world are in complete accord with the opposition here to the pending measure. They have a perfect right to such an attitude. When we look from their view-points we can understand. But I wish to stress the American viewpoint. Ours should be the viewpoint from which one sees American carriers at sea, the dependence of American commerce, and American vessels for American reliance in the event of war. Some of the costly lessons of war must be learned again and again, but our shipping lesson in the World War was much too costly to be effaced from the memory of this or future generations.
Not so many months ago the head of a company operating a fleet of ships under our flag called at the Executive Offices to discuss a permit to transfer his fleet of cargo vessels to a foreign flag, though he meant to continue them in a distinctly American service. He based his request for transfer on the allegation that by such a transfer he could reduce his labor costs alone sufficiently to provide a profit on capital invested. I do not vouch for the accuracy of the statement nor mean to discuss it. The allusion is made to recall that in good conscience Congress has created by law conditions surrounding labor on American ships which shipping men the world over declare result in higher costs of operation under our flag. I frankly rejoice if higher standards for labor on American ships have been established.
Merest justice suggests that when Congress fixes these standards, it is fair to extend Government aid in maintaining them until world competition is brought to the same high level, or until our shipping lines are so firmly established that they can face world competition alone.
Having discussed in detail the policy and provisions of the pending bill when previously addressing you, I forbear a repetition now. In individual exchanges of opinion not a few in House or Senate have expressed personal sympathy with the purposes of the bill, and then uttered a discouraging doubt about the sentiment of their constituencies. It would be most discouraging if a measure of such transcending national importance must have its fate depend on geographical, occupational, professional, or partisan objections. Frankly I think it loftier statesmanship to support and commend a policy designed to effect the larger good of the nation than merely to record the too hasty impressions of a constituency. Out of the harmonized aspirations, the fully informed convictions, and the united efforts of all the people will come the greater Republic. Commercial eminence on the seas, ample agencies for the promotion and carrying of our foreign commerce, are of no less importance to the people of Mississippi and the Missouri Valley, the great Northwest, and the Rocky Mountain states, than to the seaboard states and industrial communities building inland a thousand miles or more. It is a common cause, with its benefits commonly shared. When people fail in the national viewpoint, and live in the confines of community selfishness or narrowness, the sun of this republic will have passed its meridian, and our larger aspirations will shrivel in the approaching twilight.
But let us momentarily put aside the aspiring and inspiring viewpoint. The blunt, indisputable fact of the loss of fifty millions a year under Government operations remains; likewise the fast diminishing capital account, the enormous war expenditure, to which we were forced because we had not fittingly encouraged and builded as our commerce expanded in peace. Here are facts to deal with, not fancies wrought out of our political and economic disputes. The abolition of the annual loss and the best salvage of the capital account are of concern to all the people.
It is my firm belief that the combined savings of operating losses and the protection of the capital account through more advantageous sales of our war-built or war-seized ships, because of the favoring policy which the pending bill will establish, will more than pay every dollar expended in Government aid for twenty-five years to come.
It should be kept in mind that the approximate sum of five millions annually paid for the transport of ocean mails is no new expenditure. It should be kept in mind that the loan fund to encourage building is not new; it is the law already, enacted by the essentially unanimous vote of Congress. It is only included in the pending bill in order to amend so as to assure the exaction of a minimum interest rate by the Government, whereas the existing law leaves the grant of building loans subject to any whim of favoritism.
It should be kept in mind, also, that there are assured limitations of the Government aid proposed. The direct aid, with ocean carrying maintained at our present participation, will not reach twenty millions a year, and the maximum direct aid, if our shipping is so promoted that we carry one-half of our deep-seas commerce, will not exceed thirty millions annually. At the very maximum of outlay we should be saving twenty millions of our present annual operating loss. If the maximum is ever reached, the establishment of our merchant marine will have been definitely recorded and the Government-owned fleet fortunately liquidated.
From this point of view it is the simple, incontestable wisdom of businesslike dealing to save all that is possible of the annual loss and avoid the millions sure to be lost to the Government's capital account in sacrificing our fleet. But there is a bigger, broader, more inspiring viewpoint, aye, a patriotic viewpoint. I refer to the constructive action of to-day, which offers the only dependable promise of making our war-time inheritance of ships the .foundation of a great agency of commerce in peace and an added guaranty of service when it is necessary to our national defense.
Thus far I have been urging Government aid to American shipping, having in mind every interest of our producing population, whether of mine, factory, or farm, because expanding commerce is the foremost thought of every nation in the world to-day.
I believe in Government aid becomingly bestowed. We have aided industry through our tariffs; we have aided railway transportation in land grants and loans. We have aided the construction of market roads and the improvement of inland waterways. We have aided reclamation and irrigation and the development of water power; we have loaned for seed grains in anticipation of harvests. We expend millions in investigation and experimentation to promote a common benefit, though a limited few are the direct beneficiaries. We have loaned hundreds of millions to promote the marketing of American goods. It has all been commendable and highly worth while.
At the present moment the American farmer is the chief sufferer from the cruel readjustments which follow war's inflations, and befitting Government aid to our farmers is highly essential to our national welfare. No people may safely boast a good fortune which the farmer does not share.
Already this Congress and the administrative branch of the Government have given willing ear to the agricultural plea for postwar relief, and much has been done which has proven helpful. Admittedly, it is not enough. Our credit systems, under Government provision and control, must be promptly and safely broadened to relieve our agricultural distress.
To this problem and such others of pressing importance as reasonably may be dealt with in the short session I shall invite your attention at an early day.
I have chosen to confine myself to the specific problem of dealing with our merchant marine because I have asked you to assemble two weeks in advance of the regularly appointed time to expedite its consideration. The executive branch of the Government would feel itself remiss to contemplate our yearly loss and attending failure to accomplish if the conditions were not pressed for your decision. More, I would feel myself lacking in concern for America's future if I failed to stress the beckoning opportunity to equip the United States to assume a befitting place among the nations of the world whose commerce is inseparable from the good fortunes to which rightfully all peoples aspire.
Warren G. Harding, Address to Congress on Aid to United States Merchant Marine Online by Gerhard Peters and John T. Woolley, The American Presidency Project https://www.presidency.ucsb.edu/node/329278