September 7, 1942: Fireside Chat 22: On Inflation and Food Prices
I wish that all (the) Americans (people) could read all the citations for various medals recommended for our soldiers and sailors and marines. I am picking out one of these citations which tells of the accomplishments of Lieutenant John James Powers, United States Navy, during three days of the battles with Japanese forces in the Coral Sea.
During the first two days, Lieutenant Powers, flying a dive-bomber in the face of blasting enemy anti-aircraft fire, demolished one large enemy gunboat, put another gunboat out of commission, severely damaged an aircraft tender and a twenty-thousand-ton transport, and scored a direct hit on an aircraft carrier which burst into flames and sank soon after.
The official citation then describes the morning of the third day of battle. As the pilots of his squadron left the ready room to man their planes, Lieutenant Powers said to them, "Remember, the folks back home are counting on us. I am going to get a hit if I have to lay it on their flight deck.
He led his section down to the target from an altitude of 18,000 feet, through a wall of bursting anti-aircraft shells and swarms of enemy planes. He dived almost to the very deck of the enemy carrier, and did not release his bomb until he was sure of a direct hit. He was last seen attempting recovery from his dive at the extremely low altitude of two hundred feet, amid a terrific barrage of shell and bomb fragments, and smoke and flame and debris from the stricken vessel. His own plane was destroyed by the explosion of his own bomb. But he had made good his promise to "lay it on the flight deck."
I have received a recommendation from the Secretary of the Navy that Lieutenant John James Powers of New York City, missing in action, be awarded the Medal of Honor. I hereby and now make this award.
You and I are "the folks back home" for whose protection Lieutenant Powers fought and repeatedly risked his life. He said that we counted on him and his men. We did not count in vain. But have not those men a right to be counting on us? How are we playing our part "back home" in winning this war?
The answer is that we are not doing enough.
Today I sent a message to the Congress, pointing out the overwhelming urgency of the serious domestic economic crisis with which we are threatened. Some call it " inflation," which is a vague sort of term, and others call it a "rise in the cost of living," which is much more easily understood by most families.
That phrase, "the cost of living," means essentially what a dollar can buy.
From January 1, 1941, to May of this year, nearly a year and a half, the cost of living went up about 15%. And at that point last May we undertook to freeze the cost of living. But we could not do a complete job of it, because the Congressional authority at the time exempted a large part of farm products used for food and for making clothing, although several weeks before, I had asked the Congress for legislation to stabilize all farm prices.
At that time I had told the Congress that there were seven elements in our national economy, all of which had to be controlled; and that if any one essential element remained exempt, the cost of living could not be held down.
On only two of these points -- both of them vital however -- did I call for Congressional action. These two vital points were: First, taxation; and, second, the stabilization of all farm prices at parity.
"Parity" is a standard for the maintenance of good farm prices. It was established as our national policy way back in 1933. It means that the farmer and the city worker are on the same relative ratio with each other in purchasing power as they were during a period some thirty years (ago) before -- at a time then the farmer had a satisfactory purchasing power. 100 percent of parity, therefore, has been accepted by farmers as the fair standard for the prices they receive.
Last January, however, the Congress passed a law forbidding ceilings on farm prices below 110 percent of parity on some commodities. And on other commodities the ceiling was even higher, so that the average possible ceiling is now about 116 percent of parity for agricultural products as a whole.
This act of favoritism for one particular group in the community increased the cost of food to everybody -- not only to the workers in the city or in the munitions plants, and their families, but also to the families of the farmers themselves.
Since last May, ceilings have been set on nearly all commodities, rents (and) services, except the exempted farm products. Installment buying, for example, has been (effectively) effectually stabilized and controlled.
Wages in certain key industries have been stabilized on the basis of the present cost of living.
But it is obvious to all of us (however) that if the cost of food continues to go up, as it is doing at present, the wage earner, particularly in the lower brackets, will have a right to an increase in his wages. I think that would be essential justice and a practical necessity.
Our experience with the control of other prices during the past few months has brought out one important fact -- the rising cost of living can be controlled, providing that all elements making up the cost of living are controlled at the same time. I think that also is an essential justice and a practical necessity. We know that parity prices for farm products not now controlled will not put up the cost of living more than a very small amount; but we also know that if we must go up to an average of 116% of parity for food and other farm products -- which is necessary at present under the Emergency Price Control Act before we can control all farm prices -- the cost of living will get well out of hand. We are face to face with this danger today. Let us meet it and remove it.
I realize that it may seem out of proportion to you to be (worrying about) over-stressing these economic problems at a time like this, when we are all deeply concerned about the news from far distant fields of battle. But I give you the solemn assurance that failure to solve this problem here at home -- and to solve it now -- will make more difficult the winning of this war.
If the vicious spiral of inflation ever gets under way, the whole economic system will stagger. Prices and wages will go up so rapidly that the entire production program will be endangered. The cost of the war, paid by taxpayers, will jump beyond all present calculations. It will mean an uncontrollable rise in prices and in wages, which can result in raising the overall cost of living as high as another 20 percent soon. That would mean that the purchasing power of every dollar that you have in your pay envelope, or in the bank, or included in your insurance policy or your pension, would be reduced to about eighty cents worth. I need not tell you that this would have a demoralizing effect on our people, soldiers and civilians alike.
Overall stabilization of prices, and salaries, and wages and profits is necessary to the continued increasing production of planes and tanks and ships and guns.
In my Message to Congress today, I have (told the Congress) said that this must be done quickly. If we wait for two or three or four or six months it may well be too late.
I have told the Congress that the Administration can not hold the actual cost of food and clothing down to the present level beyond October first.
Therefore, I have asked the Congress to pass legislation under which the President would be specifically authorized to stabilize the cost of living, including the price of all farm commodities. The purpose should be to hold farm prices at parity, or at levels of a recent date, whichever is higher. The purpose should also be to keep wages at a point stabilized with today's cost of living. Both must be regulated at the same time; and neither one of them can or should be regulated without the other.
At the same time that farm prices are stabilized, I will stabilize wages.
That is plain justice -- and plain common sense.
And so I have asked the Congress to take this action by the first of October. We must now act with the dispatch, which the stern necessities of war require.
I have told the Congress that inaction on their part by that date will leave me with an inescapable responsibility, a responsibility to the people of this country to see to it that the war effort is no longer imperiled by the threat of economic chaos.
As I said in my Message to the Congress:
In the event that the Congress should fail to act, and act adequately, I shall accept the responsibility, and I will act.
The President has the powers, under the Constitution and under Congressional Acts, to take measures necessary to avert a disaster which would interfere with the winning of the war.
I have given the most careful and thoughtful consideration to meeting this issue without further reference to the Congress. I have determined, however, on this vital matter to consult with the Congress.
There may be those who will say that, if the situation is as grave as I have stated it to be, I should use my powers and act now. I can only say that I have approached this problem from every angle, and that I have decided that the course of conduct which I am following in this case is consistent with my sense of responsibility as President in time of war, and with my deep and unalterable devotion to the processes of democracy.
The responsibilities of the President in wartime to protect the Nation are very grave. This total war, with our fighting fronts all over the world, makes the use of the executive power far more essential than in any previous war.
If we were invaded, the people of this country would expect the President to use any and all means to repel the invader.
Now the Revolution and the War between the States were fought on our own soil, but today this war will be won or lost on other continents and in remote seas. I cannot tell what powers may have to be exercised in order to win this war.
The American people can be sure that I will use my powers with a full sense of responsibility to the Constitution and to my country. The American people can also be sure that I shall not hesitate to use every power vested in me to accomplish the defeat of our enemies in any part of the world where our own safety demands such defeat.
And when the war is won, the powers under which I act will automatically revert to the people of the United States -- to the people to whom (they) those powers belong.
I think I know the American farmers. I know (that) they are as wholehearted in their patriotism as any other group. They have suffered from the constant fluctuations of farm prices -- occasionally too high, more often too low. Nobody knows better than farmers the disastrous effects of wartime inflationary booms, and post-war deflationary panics.
So I have also suggested today (suggested) that the Congress make our agricultural economy more stable. I have recommended that in addition to putting ceilings on all farm products now, we also place a definite floor under those prices for a period beginning now, continuing through the war, and for as long as necessary after the war. In this way we will be able to avoid the collapse of farm prices (which) that happened after the last war. The farmers must be assured of a fair minimum price during the readjustment period which will follow the great, excessive world food demands (which) that now prevail.
We must have some floor under farm prices, as we must have under wages, if we are to avoid the dangers of a post-war inflation on the one hand, or the catastrophe of a crash in farm prices and wages on the other.
Today I have also advised the Congress of the importance of speeding up the passage of the tax bill. The Federal Treasury is losing millions of dollars (a) each and every day because the bill has not yet been passed. Taxation is the only practical way of preventing the incomes and profits of individuals and corporations from getting too high.
I have told the Congress once more that all net individual incomes, after payment of all taxes, should be limited effectively by further taxation to a maximum net income of ($25,000) 25 thousand dollars a year. And it is equally important that corporate profits should not exceed a reasonable amount in any case.
The nation must have more money to run the War. People must stop spending for luxuries. Our country needs a far greater share of our incomes.
For this is a global war, and it will cost this nation nearly one hundred billion dollars in 1943.
In that global war there are now four main areas of combat; and I should like to speak briefly of them, not in the order of their importance, for all of them are vital and all of them are interrelated.
(1) The Russian front. Here the Germans are still unable to gain the smashing victory which, almost a year ago, Hitler announced he had already achieved. Germany has been able to capture important Russian territory. Nevertheless, Hitler has been unable to destroy a single Russian Army; and this, you may be sure, has been, and still is, his main objective. Millions of German troops seem doomed to spend another cruel and bitter winter on the Russian front. Yes, the Russians are killing more Nazis, and destroying more airplanes and tanks than are being smashed on any other front. They are fighting not only bravely but brilliantly. In spite of any setbacks Russia will hold out, and with the help of her Allies will ultimately drive every Nazi from her soil.
(2) The Pacific Ocean Area. This area must be grouped together as a whole --every part of it, land and sea. We have stopped one major Japanese offensive; and we have inflicted heavy losses on their fleet. But they still possess great strength; they seek to keep the initiative; and they will undoubtedly strike hard again. We must not over-rate the importance of our successes in the Solomon Islands, though we may be proud of the skill with which these local operations were conducted. At the same time, we need not under-rate the significance of our victory at Midway. There we stopped the major Japanese offensive.
(3) In the Mediterranean and the Middle East area the British, together with the South Africans, Australians, New Zealanders, Indian troops and others of the United Nations, including ourselves, are fighting a desperate battle with the Germans and Italians. The Axis powers are fighting to gain control of that area, dominate the Mediterranean and the Indian Ocean, and gain contact with the Japanese Navy. The battle in the Middle East is now joined. We are well aware of our danger, but we are hopeful of the outcome.
(4) The European area. Here the aim is an offensive against Germany. There are at least a dozen different points at which attacks can be launched. You, of course, do not expect me to give details of future plans, but you can rest assured that preparations are being made here and in Britain toward this purpose. The power of Germany must be broken on the battlefields of Europe.
Various people urge that we concentrate our forces on one or another of these four areas, although no one suggests that any one of the four areas should be abandoned. Certainly, it could not be seriously urged that we abandon aid to Russia, or that we surrender all of the Pacific to Japan, or the Mediterranean and Middle East to Germany, or give up an offensive against Germany. The American people may be sure that we shall neglect none of the four great theaters of war.
Certain vital military decisions have been made. In due time you will know what these decisions are -- and so will our enemies. I can say now that all of these decisions are directed toward taking the offensive.
Today, exactly nine months after Pearl Harbor, we have sent overseas three times more men than we transported to France in the first nine months of the first World War. We have done this in spite of greater danger and fewer ships. And every week sees a gain in the actual number of American men and weapons in the fighting areas. These reinforcements in men and munitions are continuing, and will continue to go forward.
This war will finally be won by the coordination of all the armies, navies and air forces of all of the United Nations operating in unison against our enemies.
This will require vast assemblies of weapons and men at all the vital points of attack. We and our allies have worked for years to achieve superiority in weapons. We have no doubts about the superiority of our men. We glory in the individual exploits of our soldiers, our sailors, our marines, our merchant seamen. Lieutenant John James Powers was one of these -- and there are thousands of others in the forces of the United Nations.
Several thousand Americans have met death in battle. Other thousands will lose their lives. But many millions stand ready to step into their places -- to engage in a struggle to the very death. For they know that the enemy is determined to destroy us, our homes and our institutions -- that in this war it is kill or be killed.
Battles are not won by soldiers or sailors who think first of their own personal safety. And wars are not won by people who are concerned primarily with their own comfort, their own convenience, their own pocketbooks.
We Americans of today bear the gravest of responsibilities. And all of the United Nations share them.
All of us here at home are being tested -- for our fortitude, for our selfless devotion to our country and to our cause.
This is the toughest war of all time. We need not leave it to historians of the future to answer the question whether we are tough enough to meet this unprecedented challenge. We can give that answer now. The answer is "Yes."