Letter to the Speaker of the House and to the Majority Leader of the Senate on the Steel Price Increases.
As you know, two of the Nation's largest steel producers have announced general price increases of about five percent. This represents the largest single price increase in the steel industry since 1958. My economic advisers consider it the largest inflationary price increase for the nation in this decade.
I believe it is my duty to inform the Congress of the dire consequences which would result if these increases are allowed to stand.
The first is a clear and immediate threat to our efforts to restore price stability.
The second is the added danger to our balance of payments.
Just six weeks ago, the Congress enacted a tax and expenditure reduction bill. Nobody likes to pay more taxes. Nobody likes belt-tightening in needed Government services. But the health of our economy demanded strong fiscal medicine.
In signing that measure, I called upon business and labor to exercise the utmost restraint in price and wage decisions.
Clearly neither Bethlehem nor Republic has heeded this appeal. If their increases are allowed to stand--and if the other major steel companies follow suit--the immediate result will be $600 million in increased costs. The ultimate cost to the American consumer will exceed $1.1 billion in higher prices, as the increase is reflected in products containing steel.
Across-the-board, inflationary price increases in steel products seriously impair our efforts to overcome the nation's balance of payments problems.
We have been making progress on this front--and the tax bill promises even greater improvement. But a five percent increase would be a clear and unnecessary setback. Higher domestic prices would invite larger imports of steel. And key exports, such as machinery and transportation equipment, would be placed at a severe competitive disadvantage.
Thus action of a single industry could injure all Americans by weakening the dollar both at home and abroad.
As I said yesterday, these price increases should not be permitted to stand.
Steel profits are up. This morning's newspapers, reporting on the price rise, noted that second quarter profits for Bethlehem were up 47 percent from the year before, and that U.S.. Steel's second quarter profits were up 79 percent.
Just last May I said that, "The relative stability of steel prices has been one of the key favorable factors in our recent price record and it must be preserved."
This record is now in danger. The Congress which has acted in the national interest to help stem inflation by passing the recent tax bill, should be informed of the inflationary threat that the actions of a few pose for us all. The American people, who are now buying insurance against inflation through higher taxes, should not have another tax imposed upon them by unjustified steel price increases.
LYNDON B. JOHNSON
Note: This is the text of identical letters addressed to the Honorable John W. McCormack, Speaker of the House of Representatives, and to the Honorable Mike Mansfield, Senate Majority Leader.
For the President's remarks upon signing the Revenue and Expenditure Control Act of 1968, see Item 343.
The following related releases are printed in volume 4 of the Weekly Compilation of Presidential Documents: a press briefing by key congressional and administration leaders following their meeting with the President on the steel price increases (p. 1188); an announcement of the President's approval of a General Services Administration order concerning steel procurement by civilian agencies (p. 1206); and a statement by George E. Christian, Special Assistant to the President, announcing price rollbacks by three major steel producers (p. 1209). The rollback by the United States Steel Corporation, Mr. Christian said, would prevent some $500 million in inflationary price rises. Bethlehem Steel and Inland Steel, he added, had also announced rollbacks, and others were expected. The President was encouraged, Mr. Christian concluded, that the inflationary threat had substantially receded since his meeting with congressional leaders, though he stressed the need for continued efforts by the administration and for restraint by business and labor in their price and wage actions.
Lyndon B. Johnson, Letter to the Speaker of the House and to the Majority Leader of the Senate on the Steel Price Increases. Online by Gerhard Peters and John T. Woolley, The American Presidency Project https://www.presidency.ucsb.edu/node/237749