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------------------ |ppifMBWr.... _1 L . V . .' ;:r&r':" ,,"r'*i'tf!1'".': . t%f e ’* STRICTLY CONFIDENTIAL *. *.. 5 '& |g * I I i ./'■• . I' - ^ v ,- ! ? '5 V'c;'’ » fcV*T-o ' S-, . c 1 Kay 1 1 , 'W i 9 ....,. ■.'■•■V ' ■ - '-V - cojenaits os pR-siPf. t ' s economic peocram pi 'M*rl JJ* /-'•- SE*-V* ' - • ' * • ' ■' ~"Sggv ’'•V-R*'! Bine® 1945, the P r e s id e n t has r e p e a te d ly ai*d* i t c l e a r to the C ongress, to th e A f r i c a n people and to the world th a t the © l a b i l i t y o f the American economy, p r o te c tio n a g a in s t d e p r e ss io n , and expansion and growth a t iim&Mm r a te s c o n s is t e n t v i t h our r e so u r ce s, i s our "dom estic problem Ho* I . * Not o n ly has the P r e s id e n t made t h i s c l e a r , but he has alw ays had an a f f i n i t i v e program in support o f t h i s o b j e c t i v e , examples o f t h i s are p a r t i c u l a r l y to ijgp ■ in iQ/v" J u / f ^ S U t* ° f th e ;Jnion Economic Reports in 1V 4 7, lV4b and 19 4 9 J in the D em ocratic p la tf o p a o f 1948; and in the rep ea te d r e q u e sts f o r an a n t i - i n f l a t i o n a r y program in l a t e 19-47, s e v « r * l tim es in 1948, and 9g a in e a r ly in 1949. •0<0 • Trw recoiaaendations aad® by th * P r e s id e n t on- -these r e c u r r e n t o c c a sio n s were n o t l a r g e l y acce p te d * the C o n gress. But th e y gave h e a r t to the oeo ple o f t h i» country and to our a l l i e s throughout the fro rld , they d « a o n e tr*te d the P r e s id e n t e le a d e r s h ip tnrougfa d is p la y in g his. a b i l i t y to a c t in sdw--.ee o f tr o u b le l a t h e r than a . t e r the e v e n t, ana they were e v i t a l f a c t o r in o b ta in in g p o p u la r ap proval o f th e P r e s i d e n t 's course o f a c tio n l a s t ;'ovesiber. . ^ e economic s i t u a t i o n now does -not c a l l f o r r e la x a tio n o f such le a d e r sh ip o r abandonment o f an a f f ir m a t iv e program. On the c o n tr a r y , w h ile economic volum^ ^ 8 " I a» P * eood*» J*1® r i 8 l a * aa0Uiil- o;" - e m p l o y ^ r .t and tiw d e c lin in g volume o . prod u ction are cau sin g m illio n s o f p e o p le to look to th e A d m in istra tio n of r ? »nd w ith a deeper concern than d u rin g the period f l.» * la tx o n . Such le & a e r sn ip now w x ll have even so re b o n e f i c i a l r e s u l t s than d u rin g the period o f i n f l a t i o n , because i t i s e s a i e r t o g e t C o n g re ssio n a l response to concern abput p r o s p e c tiv e d e f la t io n and unemployment than to Pet response d u rin g a "booa" period when the dangers u n d e rlyin g the boo* *ro l i k e l y to be n e g le c t e d . In any e v e n t, the absence o f le a d e r s h ip nov c a r r i e s the danger co more s e r io u s consequences to the A d m in istra tio n than i f th ere had been an ab&ence o f le a d e r s h ip durin g th e i n f l a t i o n a r y p e r io d . The fo r e g o in g g e n e ra l p r i n c i p le s 0 -. ' % * * « * « b« lesd to the fo llo w in g ■ -*vo: specific sugreationsi <*««•• that the anu-inflntionary pros re* - - r e p e a t e U y . o r a. y e a r and a h a l f b eg in n in g w ith l a t * 1947 was n o t la c k in g in T econoai“ hsve chaogod vithout tfeat p r a g m a adoj. „ed. If prices vere falling vlfnout increases in unenployffient or declines in production, it night have been Seld that the econoay h i righted [ t ^ K rf* tT ,,!’*10 v a } g e rs OT iallation without any programs being adopted. Bat when «-d «ed f l i r f l r 7 ficf'~?*?ief by locre»Bing unemployment and declining production Z i r ? / ' leTOl af bl,. l ne‘ a m « * t o e n t , the only thing that truly be said is t,ist toe economy M beginning to feel the evil conseoueecee the t f 1^ ?“ n r1 , th * t th e « eonswu#no* * m1«h t h3V* avoid ed or i ? T 0 [ ?’,I7 * o tlo n hsd been taken In t l a e . T h is d o *s n o t mean th a t a labored e i f o r t should be uade to any »I to ld you so") but i t i t n e c e ssa ry aalorHon/ih f f f * ™ * crltlc* fjra* =«PJtall,teg on the f-.lse President's economic prograa has been vrone and that the rtT i * fa ilu r e to secure i t s enactment was im m aterial. More Im portant h* t ;i l a assert'l^d th®.fc:and5tloR to v th‘ ^ . d of affirantlve pra«r«t recuired to a s s e r t le a d e r s h ip now. it . I 2' .W ? i l 8 „ the a n t l - l n a e t i o n s r y program nov r e c a ir e s a o d l f l c e t i o n , ■le l0V8tf r e -f o r a u ln t e d p ro g ra a , 40 e S p lr e v U i!o a t the s u b s titu tio r . o f * ouch a ecu >v would be g r o s s ly ln o o n ^ la te n t, It ‘ o -c a u s . a L i n a t 'w h i S ; £ * h “ ®*re ^ t c «»« dancers— s e r io u s u n esp lcyr.en t, e t c — ' a * » m » t which the a n t i - i n f l a t i o n a r y program v s s p o in te d . Should more s e r io u s m » » p lo y a e n t r e s u l t in l n t e 1949, e a r ly 1950 or tfc a r e .b o u U , the P r M id e n t i f n o v ^ in a c tiv e on t h i s fr o n t vould then be ir. the unfortunate p o s itio n o f not tT J h f o f f« c h an e v e n t u a l it y end would be vu ln e ra b le to t h . Charge t h a t he nad erro n e o u sly wanted to do something abo u t " i n f l a t i o n " when the r e e l danger a l l alo n g was " d e f l a t i o n . * I t would then be. aach too £ 2 ^ l al * VOuld n o t have h*ppened i f program hao been adopted* ,v" ' the a n t i - i n f l x t i o n a r y * (3) The b a s ic o u t l i n e * of a re -fo rm u la te d program are set fo r th in th e ®e::ior»ndura o f the C o u n cil o f Economic A d v is e r s to the P r e s id e n t, dated Hay 5$ 1949* The Spence B i l l m ight fee r e c a s t so as to o a i t insistence upon selective p r ic e and wage c o n t r o ls . But th e emphasis upon stimulation and expansion of in vestm en t end capacity, a s i d e n t i f i e d in T i t l e II o f t h a t bill, is sore Im portant now than b efore i f we are to strive even eiore vigorously for the goal o f maximum employment and production instead of surrendering the t goal in defeat just because v@ a re no longer reaching it automatically by the momentum of the vsr-creftted •boom.* Further, certain other provisions should now be added to th o se In the Spence Bill* to put th© President aggressively on r^eor^ in ffivor of preparatory action against the possibility of a further downturn# (4 ) The wmim argument which say be advanced against suets a courge 1® that any recognition that economic conditions could worsen later on would have a psychologically bad effect. It should m pointed oat that just such an argument was the nost profound mistake of the Hoover Administration, which thought that rising unemployment could be stopped if nobody took notice of it# The main emphasis, It ia true, should be placed upon the fact taut conditions of b u sin e ss and employment are still good, and that b^ prompt preventive action they can be xept good and even improved toward the point where laueUnss production and eoploysaent are restored. But along with this major enphaala, the jcnowledg# that preparations were feein? made for less favorable possibilities would give confidence to oustn ess and iaoor and thus males these less favorable things less likely to occur. More important from the viewpoint of the national interest, if these less favorable eventualities should occur, the G o n a a w t would be prepared to deal with the®, and the Administration would not find Itself in a position of having been neglectful. If economic conditions are as good or better in 1950 than they &re now, nothing will have b^en lo«t by the preparation of such a program! if they are not as good, everything will have been gained by the preparation of such a program. It say b@ unlikely that the Congress would act on such a program at this session, but that doe a not reduce the strength of the preceding argument. ( 5 ) Such a program could receive added vigor and appeal by tying together of the affirmative things which the President has previously stated as being necessary for an economy having the constant goal of expansion and improved living standards. Most relevant to this would be the creation of :.i?chinery for setting expansion targets in vital areas and providing the tools with which to achieve the®. G o als for resource development, small business opportunity, and improved standards of living should a l s o be incorporated. Measures should also be included to treat s p o t areas of heavy unemployment before these spread by contagion, and measures to encourage the more rapid economic development and expansion of underdeveloped or declining areas or regions. Such a program, in addition to it* substantive merit, would have the advantage of providing a basis for the restoration of a workable majority in the Congress through the joint interest of Northerner®, Southerners, and Westerners. some (6 ) The mechanics for the initiation of such a To-formulated program might be in two parts* (a) A Presidential messag (b) The introduction of legislation by a representative group of Seriators to carry out the President^ program so that the difficulty would not be repeated of a program in search of sponsorship. Conditions favorable to this have already revealed themselves, (7) It is deemed important that consideration be given to the foregoing suggestions before there is premature announcement which might commit th© Administration to & different course. Ho problem likely to confront the Administration in 1950 is lively to h® ®o vital as the one arising out of whether the Administration maintains it® leadership in developing and recommending m economic program before the need becomes acute or whether it allows the need to become acute and is thus thrown into a defensive or apologetic position.
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