Radio and Television Address to the American People Following the Signing of the Defense Production Act

[Broadcast from the President's Office in the White House at 10:30 p.m.]

My fellow citizens:

Last week I talked to you about Korea, and about our efforts to maintain peace and freedom in the world.

Tonight I want to talk to you about what we must do here at home to support our fighting men and to build up the strength which the free world needs to deter Communist aggression.

The leaders of Communist imperialism have great military forces at their command. They have shown that they are willing to use these forces in open and brazen aggression, in spite of the united opposition of all the free nations. Under these circumstances the free nations have no alternative but to build up the military strength needed to support the rule of law in the world. Only in this way can we convince the Communist leaders that aggression will not pay.

To do our part in building up our military strength and the military strength of the free nations throughout the world, the United States must more than double its defense efforts. We have been spending about $15 billion a year for defense. We are stepping up this rate rapidly. By next June, under our present plans, we expect to be spending at the rate of at least $30 billion a year. In the year after that we shall probably have to spend more than $30 billion. And we must be prepared to maintain a very strong defense program for many years to come.

This defense program cannot be achieved on the basis of business as usual. All of us-whether we are farmers, or wage earners, or businessmen--must give up some of the things we would ordinarily expect to have for ourselves and our families.

The danger the free world faces is so great that we cannot be satisfied with less than an all-out effort by everyone. We have not given up our goal of a better life for every citizen in this great country of ours. But, for the time being, we have to make absolutely sure that our economy turns out the guns, the planes and tanks, and other supplies which are needed to protect the world from the threat of Communist domination.

To do this job we must meet and solve three harsh, tough problems.

First, we must produce the materials and equipment needed for defense.

Second, we must raise the money to pay the cost of our increased defense efforts.

Third, we must prevent inflation.

Solving these three problems is the challenge we face on the home front. And we must solve them if we are to preserve our freedom and the peace of the world.

First is the problem of producing the materials and equipment we need for defense. We can do that. But it will impose great demands upon the productive power of our economy.

To meet these demands we must do everything we can to expand our total production. This will require harder work and longer hours for everybody. It will mean additional jobs for women and older people.

It means that businessmen should expand productive facilities, develop new techniques, and increase efficiency in every way possible. It means enlarging our capacity to produce basic materials such as steel, aluminum, and copper.

America's productive ability is the greatest in the history of the world, and it can be expanded a great deal more to meet the conditions with which we are faced. With our economy now producing at an annual rate approaching $275 billion, the goal I set last year of a $300 billion economy by 1954 will undoubtedly be far surpassed. With this kind of dynamic growth, we can arm ourselves and help arm the free world. We can improve our industrial plant and maintain the civilian efficiency and morale which underlie our defensive strength.

But we cannot get all the military supplies we need now from expanded production alone. This expansion cannot take place fast enough. Therefore, to the extent necessary, workers and plants will have to stop making some civilian goods and begin turning out military equipment.

This job of building new plants and facilities and changing over to defense production is a challenge to our free economy.

Management and labor can and will do most of this defense production job on their own initiative. But there are certain steps which the Government must take to see that the job is done promptly and well.

Yesterday I signed a new law, the Defense Production Act of 1950. This law will enable the Government to provide special financial help to businessmen where that is necessary to enlarge the production of our mines and factories for defense purposes.

This law also will enable the Government to make sure that defense orders have top priority, and that manufacturers get the steel, aluminum, copper, and other materials they need to fill such orders. This law gives the Government the power to prevent the hoarding of raw materials essential to defense. It also enables the Government to cut down the production of nonessential civilian goods that use up critical materials.

I have today issued an Executive order authorizing the appropriate agencies of the Government to exercise these new defense production powers. The administration of these and other powers granted by the new law will be coordinated by the Chairman of the National Security Resources Board, Mr. Stuart Symington.

I have directed the agencies to exercise these production powers vigorously and promptly, making use of every resource of American business, large and small. These powers will be administered with one paramount purpose in mind: to produce the defense equipment we need as rapidly as possible.

Our second problem is to pay for our increased defenses. There is only one sensible way to do this. It is the plain, simple, direct way. We should pay for them as we go, out of taxes.
There are very good reasons for this.

To the extent that we finance our defense effort out of taxes now, we will avoid an enormous increase in the national debt. During World War II, we borrowed too much and did not tax ourselves enough. We must not run our present defense effort on that kind of financial basis.

Furthermore, if we tax ourselves enough to pay for defense, we will help hold down prices. Inflation would hurt us more in the long run than higher taxes now. Inflation would benefit the few and hurt the many. Taxation--just and equitable taxation--is the way to distribute the cost of the defense fairly.

This means heavier taxes for everybody. It will mean a hard fight against those unpatriotic people who try, by every possible means, to make exorbitant profits out of the emergency and escape their fair share of the load.
But we can and we will win that fight.

No one should be permitted to profiteer at the expense of others because of our defense needs. Nobody should get rich out of this emergency.

Congress is now considering my request to increase corporation and individual income taxes about $5 billion a year. This is only the first installment. I believe the Congress should enact further tax legislation as soon as possible. Among other things this should include a just and fair excess profits tax, which will recapture excess profits made since the start of the Communist aggression in Korea.

I hope that every one of you will get behind this plan of "pay as we go" for the defense program. I hope you will give your full support to your representatives in, Congress in enacting legislation to pay for this defense effort out of current income.

Our third problem is to carry out the defense program without letting inflation weaken and endanger our free economy.

Everybody must understand just why we have this problem and why it is so important to solve it.

The defense program means that more men and women will be at work, at good pay. At the same time, the supply of civilian goods will not keep pace with the growth of civilian incomes. In short, people will have more money to spend, and there will be relatively fewer things for them to buy. This inevitably means higher prices, unless we do something about it. Higher prices would lead to higher wages which in turn would lead to still higher prices. Then we would be started on the deadly spiral of inflation.

Everybody would lose if we let inflation go unchecked.

Workers would be hurt. The extra dollars in Saturday's pay check would be taken away by the higher prices for Monday's groceries.

The wives and children of our fighting men would be hurt even more. They would suffer far worse than our workers, because many of them are dependent on fixed family allowances.

Everybody living on a pension, on retirement benefits, or a fixed income of any kind would be hurt in the same way.

Millions of individuals would be caught between spiralling prices and lagging incomes.

The Government--and that means all of us--would be hurt because the cost of our defense program would skyrocket.

We must not let these things happens.

The new Defense Production Act provides the Government with certain powers to stabilize prices and wages. But the fight against inflation is not just the Government's fight. It cannot be won just by issuing Government regulations.

It is your fight, the fight of all of us, and it can be won only if all of us fight it together.

I want to talk with you, first of all, about what we must do as loyal, intelligent, responsible citizens, quite apart from any Government regulations.

For the consumer the guiding principle must be: Buy only what you really need and cannot do without.

Every American housewife has a most important responsibility. She must not buy more than she needs. She must put off buying whenever she can. If she does this, there will be enough of the essentials--in fact, enough of almost everything--to go around. If the housewife insists on buying more than she needs, there will not be enough to go around, and prices will go up.

For example, there was a rise of about 2 1/2 percent in retail food prices between June 15 and July 15. Most of this rise was due to panic buying and profiteering. We are finding out now that there was no reason for panic. The ample supplies of sugar, for instance, show how foolish it was for some people to hoard sugar last June and July. We have plenty of food.

As foolish panic buying has subsided, retail food prices have declined more than 1 ½ percent from their high levels of last July.

I am glad to see that people have stopped most of the scare buying that started right after the outbreak of Communist aggression in Korea. A lot of credit should go to those people throughout the country who have organized movements against hoarding and panic buying.

To take one example, housewives in Portland, Maine, signed and carried out an anti-hoarding pledge. This was a real service--a real public service. It was a patriotic act, and I hope that other groups elsewhere are doing the same kind of thing to hold prices on an even keel.

For businessmen the guiding principle must be: Do not pile up inventories; hold your prices down.

There is obviously no excuse for price increases where costs have not risen--and in many industries costs have not risen since the outbreak of fighting in Korea. Where costs have risen, there is no excuse for price increases which go beyond the amount of the rise in cost. Individual price adjustments may have to be made here and there to correct inequities, but there is no need for general price increases. In fact, many businesses are enjoying large enough margins of profit so that they do not need to raise their prices even though they have incurred higher costs.

In cases where price increases have already been made without being justified by higher costs, businessmen should reduce these prices immediately. I have been told about companies that have increased the prices of all their products--all the way across the board--without corresponding increases in costs. That is just plain profiteering, and should not be tolerated.

If businessmen will conscientiously review their price's, we shall see fewer price increases in the days and weeks to come, and a good many price reductions.

For wage earners the guiding principle must be: Do not ask for wage increases beyond what is needed to meet the rise in the cost of living.

Our defense effort means that there will be an increasing number of jobs. If wage earners on that account ask for higher and higher wages, they will be driving prices up all along the line. For the time being, therefore, wage increases should not be sought beyond what is necessary to keep wages in line with the cost of living. Existing inequities in wage rates, of course, can and should be corrected, with due consideration for recognized interindustry relationships.

There is another guiding principle that applies to all of us--consumers, wage earners, farmers, and businessmen. It is this: We should save as much as we can out of current income. Every dollar of saving now will serve several purposes. It will help hold prices down. It will help every family .provide for the future. And it will also help provide investment funds needed to expand production.

The principles I have outlined will not be easy to maintain. They will require patriotism and self-restraint. But we are all in this situation together. We must be prepared to accept some reduction in our standards of living. I am sure that we will be willing to make sacrifices here at home, if we think of the much greater sacrifices being made by our sons and brothers and husbands who are fighting at the front.

If we adhere faithfully to the principles of self-restraint I have outlined, we can lessen the need for controls. But controls will still be necessary in some cases where voluntary individual action is not enough or where the honest majority must be protected from a few chiselers. In those cases, the Government will not hesitate to use its powers.

Government controls are needed right now to cut the volume of easy credit buying. Many of us would like to buy new household appliances, new automobiles, or new houses on easy terms--and pay for them out of future income. But at a time like the present, easy credit buying is a dangerous inflationary threat. It will drive prices up. Furthermore, it will use up materials that we need for defense.

To prevent this the Government is issuing an order requiring people to make higher down payments than usual, and to pay off the balance faster, when they buy such things as automobiles and refrigerators. The Government is also tightening up on easy credit for houses, especially higher-priced houses, and this, too, will save materials for defense.

As for prices and wages, the Government is not putting on mandatory ceilings at this time. But we will impose ceilings vigorously and promptly when the situation calls for them.

So that we may be ready to impose price ceilings when they are needed, I have today issued an order under the Defense Production Act requiring businessmen to preserve the records of their 'prices and costs during the base period of May 24 to June 24, 1950. This means that information will be available to set ceilings at fair levels, and to identify the sellers who have taken advantage of the present emergency.

I have also issued an order establishing an Economic Stabilization Agency, to be headed by a Stabilization Administrator. This Administrator will guide our voluntary efforts to hold down inflation. It will also be his task to find out where and when price and wage controls are needed.

The Administrator will have under him a Director of Price Stabilization, who will help him determine what should be done to hold prices in line. He will also have under him a Wage Stabilization Board composed of representatives of labor, management, and the public. This board will help determine wage policies.

The Stabilization Agency will go to work first on present danger spots. The Agency will consult with management and labor and will attempt to work out the necessary safeguards without compulsion. However, if these efforts fail, price ceilings and wage restrictions will have to follow.

The law which the Congress has passed will enable us to get ahead with the defense production job. It will be faithfully administered. There are two matters, however, which give me particular concern.

We cannot yet be sure that the new law permits effective use of selective controls. As a result we might have to resort to general controls before they are really necessary. This may prove to be a serious defect in the law which will require correction.

Secondly, we do not have authority for adequate rent control. What we gain in holding down other cost-of-living prices must not be lost by failure to hold down the cost of shelter. The existing rent law is inadequate to meet the present situation and should be improved. Meanwhile, State and local governments should take the necessary steps to keep present rent controls in effect.

We will undoubtedly need further legislation as we go along later. Right now, there is work enough and responsibility enough for all of us.

Our goals are plain.

We must produce the goods that are needed.

We should pay for our defense as we go.

We must hold the cost of living steady, and keep down the cost of the defense items.

All these things we can do if we work together, and share the sacrifices that must be made. We can and must submerge petty differences in the common task of preserving freedom in the world.

The enormous resources and vitality of our free society have been proved. In World War II we astonished the world and astonished ourselves by our vast production. Since then our rate of growth has exceeded our expectations.

Today, spurred by the worldwide menace of Communist imperialism, we can surpass every previous record. I am certain that the American people, working together, can build the strength needed to establish peace in the world.

Every American must ask himself what he can do to help keep this Nation strong and free. We should ask God to give us the faith and courage we need. We should ask Him for that help which has preserved our Nation in the past, and which is our great reliance in the years to come.