financing for the overwhelming majority of our citizens should be done
by private enterprise. They contemplate also that we afford governmental
encouragement to privately financed house construction for families of
moderate income, through extension of the successful system of insurance
of housing investment; that research be undertaken to develop better and
cheaper methods of building homes; that communities be assisted in
appraising their housing needs; that we commence a program of Federal
aid, with fair local participation, to stimulate and promote the
rebuilding and redevelopment of slums and blighted areas--with maximum
use of private capital. It is equally essential that we use public funds
to assist families of low income who could not otherwise enjoy adequate
housing, and that we quicken our rate of progress in rural housing.
Legislation now under consideration by the Congress provides for a
comprehensive attack jointly by private enterprise, State and local
authorities, and the Federal Government. This legislation would make
permanent the National Housing Agency and give it authority and funds
for much needed technical and economic research. It would provide
additional stimulus for privately financed housing construction. This
stimulus consists of establishing a new system of yield insurance to
encourage large-scale investment in rental housing and broadening the
insuring powers of the Federal Housing Administration and the lending
powers of the Federal savings and loan associations.
Where private industry cannot build, the Government must step in to do
the job. The bill would encourage expansion in housing available for the
lowest income groups by continuing to provide direct subsidies for
low-rent housing and rural housing. It would facilitate land assembly
for urban redevelopment by loans and contributions to local public
agencies where the localities do their share.
Prompt enactment of permanent housing legislation along these lines will
not interfere with the emergency action already under way. On the
contrary, it would lift us out of a potentially perpetual state of
housing emergency. It would offer the best hope and prospect to millions
of veterans and other American families that the American system can
offer more to them than temporary makeshifts.
I have said before that the people of the United States can be the best
housed people in the world. I repeat that assertion, and I welcome the
cooperation of the Congress in achieving that goal.
(j) Social security and health.
Our Social Security System has just celebrated its tenth anniversary.
During the past decade this program has supported the welfare and morale
of a large part of our people by removing some of the hazards and
hardships of the aged, the unemployed, and widows and dependent
children.
But, looking back over 10 years’ experience and ahead to the future, we
cannot fail to see defects and serious inadequacies in our system as it
now exists. Benefits are in many cases inadequate; a great many persons
are excluded from coverage; and provision has not been made for social
insurance to cover the cost of medical care and the earnings lost by the
sick and the disabled.
In the field of old-age security, there seems to be no adequate reason
for excluding such groups as the self-employed, agricultural and
domestic workers, and employees of nonprofit organizations. Since many
of these groups earn wages too low to permit significant savings for old
age, they are in special need of the assured income that can be provided
by old-age insurance.
We must take urgent measures for the readjustment period ahead. The
Congress for some time has been considering legislation designed to
supplement at Federal expense, during the immediate reconversion period,
compensation payments to the unemployed. Again I urge the Congress to
enact legislation liberalizing unemployment compensation benefits and
extending the coverage. Providing for the sustained consumption by the
unemployed persons and their families is more than a welfare policy; it
is sound economic policy. A sustained high level of consumer purchases
is a basic ingredient of a prosperous economy.
During the war, nearly 5 million men were rejected for military service
because of physical or mental defects which in many cases might have
been prevented or corrected. This is shocking evidence that large
sections of the population are at substandard levels of health. The need
for a program that will give everyone opportunity for medical care is
obvious. Nor can there be any serious doubt of the Government’s
responsibility for helping in this human and social problem.
The comprehensive health program which I recommended on November 19,
1945, will require substantial additions to the Social Security System
and, in conjunction with other changes that need to be made, will
require further consideration of the financial basis for social
security. The system of prepaid medical care which I have recommended is
expected eventually to require amounts equivalent to 4 percent of
earnings up to $3,600 a year, which is about the average of present
expenditures by individuals for medical care. The pooling of medical
costs, under a plan which permits each individual to make a free choice
of doctor and hospital, would assure that individuals receive adequate
treatment and hospitalization when they are faced with emergencies for
which they cannot budget individually. In addition, I recommended
insurance benefits to replace part of the earnings lost through
temporary sickness and permanent disability.
Even without these proposed major additions, it would now be time to
undertake a thorough reconsideration of our social security laws. The
structure should be expanded and liberalized. Provision should be made
for extending coverage credit to veterans for the period of their
service in the armed forces. In the financial provisions we must
reconcile the actuarial needs of social security, including health
insurance, with the requirements of a revenue system that is designed to
promote a high level of consumption and full employment.
(k) Education.
Although the major responsibility for financing education rests with the
States, some assistance has long been given by the Federal Government.
Further assistance is desirable and essential. There are many areas and
some whole States where good schools cannot be provided without imposing
an undue local tax burden on the citizens. It is essential to provide
adequate elementary and secondary schools everywhere, and additional
educational opportunities for large numbers of people beyond the
secondary level. Accordingly, I repeat the proposal of last year’s
Budget Message that the Federal Government provide financial aid to
assist the States in assuring more nearly equal opportunities for a good
education. The proposed Federal grants for current educational
expenditures should be made for the purpose of improving the educational
system where improvement is most needed. They should not be used to
replace existing non-Federal expenditures, or even to restore merely the
situation which existed before the war.
In the future we expect incomes considerably higher than before the war.
Higher incomes should make it possible for State and local governments
and for individuals to support higher and more nearly adequate
expenditures for education. But inequality among the States will still
remain, and Federal help will still be needed.
As a part of our total public works program, consideration should be
given to the need for providing adequate buildings for schools and other
educational institutions. In view of current arrears in the construction
of educational facilities, I believe that legislation to authorize
grants for educational facilities, to be matched by similar expenditures
by State and local authorities, should receive the favorable
consideration of the Congress.
The Federal Government has not sought, and will not seek, to dominate
education in the States. It should continue its historic role of
leadership and advice and, for the purpose of equalizing educational
opportunity, it should extend further financial support to the cause of
education in areas where this is desirable.
(l) Federal Government personnel.
The rapid reconversion of the Federal Government from war to peace is
reflected in the demobilization of its civilian personnel. The number of
these employees in continental United States has been reduced by more
than 500,000 from the total of approximately 2,900,000 employed in the
final months of the war. I expect that by next June we shall have made a
further reduction of equal magnitude and that there will be continuing
reductions during the next fiscal year. Of the special wartime agencies
now remaining, only a few are expected to continue actively into the
next fiscal year.
At the same time that we have curtailed the number of employees, we have
shortened the workweek by one-sixth or more throughout the Government
and have restored holidays. The process of readjustment has been
complicated and costs have been increased by a heavy turn-over in the
remaining personnel--particularly by the loss of some of our best
administrators. Thousands of war veterans have been reinstated or newly
employed in the civil service. Many civilians have been transferred from
war agencies to their former peacetime agencies. Recruitment standards,
which had to be relaxed during the war, are now being tightened.
The elimination last autumn of overtime work for nearly all Federal
employees meant a sharp cut in their incomes. For salaried workers, the
blow was softened but by no means offset by the increased rates of pay
which had become effective July 1. Further adjustments to compensate for
increased living costs are required. Moreover, we have long needed a
general upward revision of Federal Government salary scales at all
levels in all branches--legislative, judicial, and executive. Too many
in Government have had to sacrifice too much in economic advantage to
serve the Nation.
Adequate salaries will result in economies and improved efficiency in
the conduct of Government business--gains that will far outweigh the
immediate costs. I hope the Congress will expedite action on salary
legislation for all Federal employees in all branches of the Government.
The only exception I would make is in the case of workers whose pay
rates are established by wage boards; a blanket adjustment would destroy
the system by which their wages are kept aligned with prevailing rates
in particular localities. The wage boards should be sensitive now, as
they were during the war, to changes in local prevailing wage rates and
should make adjustments accordingly.
I hope also that the Congress may see fit to enact legislation for the
adequate protection of the health and safety of Federal employees, for
their coverage under a system of unemployment compensation, and for
their return at Government expense to their homes after separation from
wartime service.
(m) Territories, insular possessions, and the District of Columbia.
The major governments of the world face few problems as important and as
perplexing as those relating to dependent peoples. This Government is
committed to the democratic principle that it is for the dependent
peoples themselves to decide what their status shall be. To this end I
asked the Congress last October to provide a means by which the people
of Puerto Rico might choose their form of government and ultimate status
with respect to the United States. I urge, too, that the Congress
promptly accede to the wishes of the people of Hawaii that the Territory
be admitted to statehood in our Union, and that similar action be taken
with respect to Alaska as soon as it is certain that this is the desire
of the people of that great Territory. The people of the Virgin Islands
should be given an increasing measure of self-government.
We have already determined that the Philippine Islands are to be
independent on July 4, 1946. The ravages of war and enemy occupation,
however, have placed a heavy responsibility upon the United States. I
urge that the Congress complete, as promptly and as generously as may be
possible, legislation which will aid economic rehabilitation for the
Philippines. This will be not only a just acknowledgment of the loyalty
of the people of the Philippines, but it will help to avoid the economic
chaos which otherwise will be their heritage from our common war.
Perhaps no event in the long centuries of colonialism gives more hope
for the pattern of the future than the independence of the Philippines.
The District of Columbia, because of its special relation to the Federal
Government, has been treated since 1800 as a dependent area. We should
move toward a greater measure of local self-government consistent with
the constitutional status of the District. We should take adequate steps
to assure that citizens of the United States are not denied their
franchise merely because they reside at the Nation’s Capital.
III. THE BUDGET FOR THE FEDERAL PROGRAM
FOR THE FISCAL YEAR 1947
SUMMARY OF THE BUDGET
For the first time since the fiscal year 1930 the Budget for the next
fiscal year will require no increase in the national debt.
Expenditures of all kinds, authorized and recommended, in the next year
are estimated at just above 35.8 billion dollars. Net receipts are
estimated at 31.5 billion dollars. The estimated difference of 4.3
billion dollars will be met by a reduction in the very substantial
balance which will be in the Treasury during the next fiscal year.
A large part of the activities outside defense and war liquidation,
aftermath of war, and international finance, classified as “other
activities” in a following table, is still due to repercussions of the
war. These “other activities” include more than 2 billion dollars for
aids to agriculture and net outlays for the Commodity Credit
Corporation-almost double the expenditures for the same purposes in
prewar years. This increase is due mainly to expenditures for purposes
of price stabilization and price support resulting from the war food
production program. Other increases in this category are due to the fact
that certain wartime agencies now in the process of liquidation are
included in this group of activities. If all expenditures for those
activities which are directly or indirectly related to the war are
excluded, the residual expenditures are below those for corresponding
activities in prewar years. In making this comparison account should be
taken of the fact that, while prewar expenditures were affected by
direct relief and work relief for the unemployed, the postwar budgets
are affected by the considerable increase in pay rates and other
increases in costs and prices.
To elaborate, the Budget, as I have remarked above, reflects on both
sides of the ledger the Government’s program as recommended by the
Executive. It includes estimates not only of expenditures and receipts
for which legislative authority already exists, but also of expenditures
and receipts for which authorization is recommended.
The Budget total for the next fiscal year, the year that ends on June
30, 1947, is estimated at just above 35.8 billion dollars-about a third
of the budgets for global war, although nearly four times the prewar
budgets. This estimate is based on the assumption that a rapid
liquidation of the war program will be associated with rapid
reconversion and expansion of peacetime production. The total includes
net outlays of Government corporations.
The estimated expenditures in the next and current fiscal year compare
as follows with those of a year of global war and a prewar year:
Total Budget expenditures
Fiscal year: (in millions)
1947 $35, 860
1946 67,229
1945 100, 031
1940 9,252
Although allowances for occupation, demobilization, and defense are
drastically reduced in the fiscal year 1947, they will still amount to
42 percent of the total Budget. The so-called “aftermath of war”
expenditures account for a further 30 percent of the total. The total of
all other programs, which was drastically cut during the war, is
increasing again as liquidation of the war program proceeds and renewed
emphasis is placed on the peacetime objectives of the Government.
On the other side of the ledger, net receipts are estimated at 31.5
billion dollars. This estimate assumes that all existing taxes will
continue all through the fiscal year 1947. Included are the
extraordinary receipts from the disposal of surplus property.
As a result, estimated expenditures will exceed estimated receipts by
4.3 billion dollars. This amount can be provided by a reduction in the
cash balance in the Treasury. Thus, after a long period of increasing
public debt resulting from depression budgets and war budgets, it is
anticipated that no increase in the Federal debt will be required next
year.
FEDERAL BUDGET EXPENDITURES AND BUDGET RECEIPTS
Including net outlays of Government corporations and credit agencies
(based on existing and proposed legislation)
Fiscal year
Expenditures: 1946 1947
Defense, war, and war liquidation $49,000 $15,000
Aftermath of war: Veterans, interest, refunds 10,813 10,793
International finance (including proposed legislation) 2,614 2,754
Other activities 4,552 5,813
Activities based on proposed legislation
(excluding international finance) 2501,500
Total expenditures 67, 229 35, 860
Receipts (net) 38, 60931,513
Excess of expenditures 28,620 4,347
The current fiscal year, 1946, is a year of transition. When the year
opened, in July 1945, we were still fighting a major war, and Federal
expenditures were running at an annual rate of about 100 billion
dollars. By June 1946 that rate will be more than cut in half. The
Budget total for the current fiscal year is now estimated at 67.2
billion dollars, of which more than two-thirds provides for war and war
liquidation. Since net receipts are estimated at 38.6 billion dollars,
there will be an excess of expenditures of 28.6 billion dollars for the
current fiscal year.
For all programs discussed in this Message I estimate the total of
Budget appropriations and authorizations (including reappropriations and
permanent appropriations) at 30,982 million dollars for the fiscal year
1947. Of this amount, present permanent appropriations are expected to
provide 5,755 million dollars, principally for interest. This leaves
24,224 million dollars to be made available through new appropriations,
exclusive of appropriations to liquidate contract authorizations; 900
million dollars in new contract authorizations; and 103 million dollars
through the reappropriation of unliquidated balances of previous
appropriations. The appropriations needed to liquidate contract
authorizations are estimated at 1,113 million dollars.
In the Budget for the year ahead only over-all estimates are included at
this time for the major war agencies and for net outlays of Government
corporations. Detailed recommendations will be transmitted in the spring
for the war agencies; and the business-type budgets of Government
corporations will likewise be transmitted in accordance with the
recently adopted Government Corporation Control Act.
Similarly, only over-all estimates are provided for new programs
recommended in this Message; detailed recommendations will be
transmitted after authorizing legislation has been enacted. It should be
recognized that many of the estimates for new programs recommended in
this Message are initial year figures. These figures will be affected by
the date the legislation is enacted and by the time needed for getting a
program under way. New programs, such as that for a national research
agency, will require larger amounts in later years. The estimates
exclude major elements of the proposed national health program since the
greater part of these will be covered by expenditures from trust funds.
The Budget total includes expenditures for capital outlay as well as for
current operations. An estimated 1,740 million dollars will be expended
in the fiscal year 1947 for direct Federal public works and for loans
and grants for public works.
THE ECONOMIC IMPACT Of THE LIQUIDATION
OF THE WAR PROGRAM
Government programs are of such importance in the development of
production and employment opportunities--domestic and
international--that it has become essential to formulate and consider
the Federal Budget in the light of the Nation’s budget as a whole. The
relationship between the receipts, expenditures, and savings of
consumers, business, and government is shown in the accompanying table.
Considering the whole Nation, total expenditures must equal the total
receipts, because what any individual or group spends becomes receipts
of other individuals or groups. Such equality can be achieved on either
a high level of incomes or on a low or depression level of incomes.
Tremendous orders for munitions during the war shifted production and
employment into high gear. Total goods produced and services rendered
for private as well as for Government purposes--the Nation’s
budget-reached about 200 billion dollars in the calendar year 1944.
Federal, State, and local government expenditures represented half of
this total.
Corresponding estimates for the past 3 months depict the national
economy in the process of demobilization and reconversion.
The wartime annual rate of Federal expenditures has been reduced by 32
billion dollars, while the Nation’s budget total has dropped only half
as much. The drop in total value of production and services has been
less drastic because increasing private activities have absorbed in
large measure the manpower and materials released from war production
and war services.
The largest increase in private activities has occurred in business
investments, which include residential and other construction,
producers’ durable equipment, accumulation of inventories, and net
exports. Under conditions of global war, expenditures for private
construction and equipment were held to a minimum and inventories were
depleted. With the beginning of reconversion these developments have
been reversed. Residential construction and outlays for plant and
equipment are on the increase; inventories, too, are being replenished.
International transactions (excluding lend-lease and international
relief which are included under war expenditures) showed an import
surplus under conditions of global war. In the past 3 months private
exports have been slightly in excess of imports, for the first time
since 1941.
Consumers’ budgets show a significant change. On the income side, their
total has declined but little because the reduction in “take-home” pay
of war workers is, to a large extent, offset for the time being by the
mustering-out payments received by war veterans and by unemployment
compensation received by the unemployed. On the expenditure side,
however, consumers’ budgets, restricted during the war, have in creased
substantially as a result of the fact that scarce goods are beginning to
appear on the market and wartime restraints are disappearing. Thus,
consumers’ current savings are declining substantially from the
extraordinarily high wartime rate and some wartime savings are beginning
to be used for long-delayed purchases.
THE GOVERNMENT’S BUDGET AND THE NATION’S BUDGET
Calendar year 1944 and October-December 1945
Oct.-Dec. 1945 (start of
reconversion) (in seasonally
Calendar Year 1944 (global war) adjusted annual rates)
______________________ ____________________
Excess Excess
Expendi- (+), def- Expendi- (+),def-
Economic Group Receipts tures icit(-) Receipts tures icit(-) CONSUMERS
Income after taxes $134 ....... ...... $132 ...... .......
Expenditures ......$98............$107 .......
Excess of receipts, savings (+) ...... ...... +$35 ...... ...... +$25
BUSINESS
Undistributed profits and reserves $13 ...... ...... $9 ...... ......
Gross capital formation:
Domestic ...... $4 ...... ...... $15 ......
Net exports1 ......--2............1......
Total, gross capital formation ......2............16......
Excess of receipts (+) or capital
formation (--) ...... ...... +$11 ...... ...... --$7
STATE AND LOCAL GOVERNMENT
Receipts from the public, other
than borrowing $10 ...... ...... $11 ...... ......
Payments to the public ...... $8............$9......
Excess of receipts (+) ............+$2............+$2
FEDERAL GOVERNMENT
Receipts from the public, other
than borrowing $48 ...... ....... $44 ...... ......
Payments to the public ......$96 .............$64......
Excess of payments (--) ............--$48............. --$20
Less: Adjustments2 $7 $7 ....... $14 $14 .......
TOTAL: GROSS NATIONAL PRODUCT
Receipts $198 ....... ...... $182 ...... ......
Expenditures ......$198............ $182......
Balance ...... ...... 0 ...... ...... ......
1 Excludes exports for lend-lease and relief which are included in
Federal Government expenditures.
2 Mainly government expenditures for other than goods and services, such
as mustering-out pay and unemployment compensation.
Unemployment has increased less than was expected during this first
period of demobilization and reconversion. It is true that 6 million men
and women have been discharged from the armed forces since May 1945 and
more than 5 million have been laid off from war work. On the other hand,
more than a million civilians have been enlisted in the armed forces, a
considerable number of war veterans have not immediately sought jobs,
and many war workers, especially women, have withdrawn from the labor
force. In addition, many industries, and especially service trades which
were undermanned during the war, are beginning now, for the first time
in years, to recruit an adequate labor force. The reduced workweek has
also contributed to the absorption of those released from war service
and war work.
In general, the drastic cut in war programs has thrown the economy into
lower gear; it has not thrown it out of gear. Our economic machine
demonstrates remarkable resiliency, although there are many difficulties
that must still be overcome. The rapid termination of war contracts,
prompt clearance of unneeded Government-owned equipment from private
plants, and other reconversion policies have greatly speeded up the
beginning of peacetime work in reconverted plants.
Although the first great shock of demobilization and war-work
termination has thus been met better than many observers expected,
specific industries and specific regions show much unevenness in the
progress of reconversion.
The Quarterly Report of the Director of War Mobilization and
Reconversion analyzes the difficulties in recruiting personnel and
obtaining materials that hamper reconversion in certain industries and
proposes policies to deal with these situations. The lack of adequate
housing is one of the main factors checking the flow of workers into
areas where job opportunities exist.
FEDERAL REVENUE, BORROWING, AND THE
PUBLIC DEBT
I. FINANCIAL REQUIREMENTS AND TAX POLICY
Recommendations for tax legislation should be considered not only in the
light of the financial requirements of the ensuing year, but also in the
light of future years’ financial requirements and a full consideration
of economic conditions.
Expenditures are estimated at nearly 36 billion dollars in the fiscal
year 1947; they can hardly be expected to be reduced to less than 25
billion dollars in subsequent years. Net receipts in the fiscal year
1947 are estimated at 31.5 billion dollars.
Included in this estimate are 2 billion dollars of receipts from
disposal and rental of surplus property and 190 million dollars of
receipts from renegotiation of wartime contracts. These sources of
receipts will disappear in future years. Tax collections for the fiscal
year 1947 also will not yet fully reflect the reduction in corporate tax
liabilities provided in the Revenue Act of 1945. If the extraordinary
receipts from the disposal of surplus property and renegotiation of
contracts be disregarded, and if the tax reductions adopted in the
Revenue Act of 1945 were fully effective, present tax rates would yield
about 27 billion dollars.
These estimates for the fiscal year 1947 are based on the assumption of
generally favorable business conditions but not on an income reflecting
full employment and the high productivity that we hope to achieve. In
future years the present tax system, in conjunction with a full
employment level of national income, could be expected to yield more
than 30 billion dollars, which is substantially above the anticipated
peacetime level of expenditures.
In view of the still extraordinarily large expenditures in the coming
year and continuing inflationary pressures, I am making no
recommendation for tax reduction at this time.
We have already had a substantial reduction in taxes from wartime peaks.
The Revenue Act of 1945 was a major tax-reduction measure. It decreased
the total tax load by more than one-sixth, an amount substantially in
excess of the reductions proposed by the Secretary of the Treasury to
congressional tax committees in October 1945. These proposed reductions
were designed to encourage reconversion and peacetime business
expansion.
The possibility of further tax reductions must depend on the budgetary
situation and the economic situation. The level of anticipated
expenditures for the fiscal year 1947 and the volume of outstanding
public debt require the maintenance of large revenues.
Moreover, inflationary pressures still appear dangerously powerful, and
ill-advised tax reduction would operate to strengthen them still
further.
My decision not to recommend additional tax reductions at this time is
made in the light of existing economic conditions and prospects.
2. BORROWING AND THE PUBLIC DEBT
The successful conclusion of the Victory loan marked the end of war
borrowing and the beginning of the transition to postwar debt
management.
Because of the success of the Victory loan, I am happy to report that
the Treasury will not need to borrow any new money from the public
during the remainder of the present fiscal year except through regular
sales of savings bonds and savings notes. Furthermore, a part of the
large cash balance now in the Treasury will be used for debt redemption
so that the public debt which now amounts to about 278 billion dollars
will decrease by several billion dollars during the next 18 months. The
present statutory debt limit of 300 billion dollars will provide an
ample margin for all of the public-debt transactions through the fiscal
year 1947. The net effect of the excess of expenditures and debt
redemption on the Treasury cash balance, as compared with selected
previous years, is shown in the following table:
EXCESS Of BUDGET EXPENDITURES, THE PUBLIC DEBT, AND THE TREASURY CASH
BALANCE IN SELECTED YEARS
Excess of At end of period
Budget ex- _____________________
penditures Public Cash bal-
Fiscal Year over receipts debt ance
1940 $3. 9 $43. 0 $1. 9
1945 53. 6 258. 7 24. 7 1946:
July-Dec. 1945 18. 1 278. 1 26. 0
Jan.-June 1946 10. 5 275. 0 11. 9
1947 4. 3 271. 0 3. 2
Although the public debt is expected to decline, a substantial volume of
refinancing will be required, because of the large volume of maturing
obligations. Redemptions of savings bonds also have been running high in
recent months and are expected to remain large for some time. The
issuance of savings bonds will be continued. These bonds represent a
convenient method of investment for small savers, and also an
anti-inflationary method of refinancing. Government agencies and trust
funds are expected to buy about 2.5 billion dollars of Government
securities during the next 6 months, and 2.8 billion dollars more during
the fiscal year 1947. Through these and other debt operations, the
distribution of the Federal debt among the various types of public and
private owners will change, even though the total is expected to
decline.
The interest policies followed in the refinancing operations will have a
major impact not only on the provision for interest payments in future
budgets, but also on the level of interest rates prevailing in private
financing. The average rate of interest on the debt is now a little
under 2 percent. Low interest rates will be an important force in
promoting the full production and full employment in the postwar period
for which we are all striving. Close wartime cooperation between the
Treasury Department and the Federal Reserve System has made it possible
to finance the most expensive war in history at low and stable rates of
interest. This cooperation will continue.
No less important than the level of interest rates paid on the debt is
the distribution of its ownership. Of the total debt, more than half
represents direct savings of individuals or investments of funds
received from individual savings by life insurance companies, mutual
savings banks, savings and loan associations, private or Government
trust funds, and other agencies.
Most of the remaining debt--more than 100 billion dollars--is held by
the commercial banks and the Federal Reserve banks. Heavy purchases by
the banks were necessary to provide adequate funds to finance war
expenditures. A considerable portion of these obligations are short-term
in character and hence will require refinancing in the coming months and
years. Since they have been purchased out of newly created bank funds,
continuance of the present low rates of interest is entirely
appropriate. To do otherwise would merely increase bank profits at the
expense of the taxpayer.
The 275-billion dollar debt poses a problem that requires careful
consideration in the determination of financial and economic policies.
We have learned that the problem, serious as it is, can be managed. Its
management will require determined action to keep our Federal Budget in
order and to relate our fiscal policies to the requirements of an
expanding economy. The more successful we are in achieving full
production and full employment the easier it will be to manage the debt
and pay for the debt service. Large though the debt is, it is within our
economic capacity. The interest charges on it amount to but a small
proportion of our national income. The Government is determined, by a
resolute policy of economic stabilization, to protect the interests of
the millions of American citizens who have invested in its securities.
During the past 6 months the net revenue receipts of the Federal
Government have been about 20 billion dollars, almost as much as during
the closing 6 months of 1944 when the country was still engaged in
all-out warfare. The high level of these receipts reflects the
smoothness of the reconversion and particularly the strength of consumer
demand. But the receipts so far collected, it must be remembered, do not
reflect any of the tax reductions made by the Revenue Act of 1945. These
reductions will not have their full effect on the revenue collected
until the fiscal year 1948.
It is good to move toward a balanced budget and a start on the
retirement of the debt at a time when demand for goods is strong and the
business outlook is good. These conditions prevail today. Business is
good and there are still powerful forces working in the direction of
inflation. This is not the time for tax reduction.
RECOMMENDATIONS FOR SPECIFIC FEDERAL ACTIVITIES
1. WAR LIQUIDATION AND NATIONAL DEFENSE
(a) War expenditures.
The fiscal year 1947 will see a continuance of war liquidation and
occupation. During this period we shall also lay the foundation for our
peacetime system of national defense.
In the fiscal year that ended on June 30, 1945, almost wholly a period
of global warfare, war expenditures amounted to 90.5 billion dollars.
For the fiscal year 1946 war expenditures were originally estimated at
70 billion dollars. That estimate was made a year ago while we were
still engaged in global warfare. After victory over Japan this estimate
was revised to 50.5 billion dollars. Further cut-backs and accelerated
demobilization have made possible an additional reduction in the rate of
war spending. During the first 6 months 32.9 billion dollars were spent.
It is now estimated that 16.1 billion dollars will be spent during the
second 6 months, or a total of 49 billion dollars during the whole
fiscal year.
For the fiscal year 1947 it is estimated, tentatively, that expenditures
for war liquidation, for occupation, and for national defense will be
reduced to 15 billion dollars. The War and Navy Departments are expected
to spend 13 billion dollars; expenditures of other agencies, such as the
United States Maritime Commission, the War Shipping Administration, and
the Office of Price Administration, and payments to the United Nations
Relief and Rehabilitation Administration are estimated at 3 billion
dollars. Allowing for estimated net receipts of 1 billion dollars
arising from war activities of the Reconstruction finance Corporation,
the estimated total of war expenditures is 15 billion dollars. At this
time only a tentative break-down of the total estimate for war and
defense activities can be indicated.
An expenditure of 15 billion dollars for war liquidation, occupation,
and national defense is a large sum for a year which begins 10 months
after fighting has ended. It is 10 times our expenditures for defense
before the war; it amounts to about 10 percent of our expected national
income. This estimate reflects the immense job that is involved in
winding up a global war effort and stresses the great responsibility
that victory has placed upon this country. The large expenditures needed
for our national defense emphasize the great scope for effective
organization in furthering economy and efficiency. To this end I have
recently recommended to the Congress adoption of legislation combining
the War and Navy Departments into a single Department of National
Defense.
A large part of these expenditures is still to be attributed to the
costs of the war. Assuming, somewhat arbitrarily, that about one-half of
the 15-billion-dollar outlay for the fiscal year 1947 is for war
liquidation, aggregate expenditures by this Government for the second
World War are now estimated at 347 billion dollars through June 30,
1947. Of this, about 9 billion dollars will have been recovered through
renegotiation and sale of surplus property by June 30, 1947; this has
been reflected in the estimates of receipts.
Demobilization and strength of armed forces.--Demobilization of our
armed forces is proceeding rapidly. At the time of victory in Europe,
about 12.3 million men and women were in the armed forces; 7.6 million
were overseas. By the end of December 1945 our armed forces had been
reduced to below 7 million. By June 30, 1946, they will number about 2.9
million, of whom 1.8 million will be individuals enlisted and inducted
after VE-day. Mustering-out pay is a large item of our war liquidation
expense; it will total 2.5 billion dollars in the fiscal year 1946, and
about 500 million dollars in the fiscal year 1947.
In the fiscal year 1947 the strength of our armed forces will still be
above the ultimate peacetime level. As I have said, War and Navy
Department requirements indicate a strength of about 2 million in the
armed forces a year from now. This is necessary to enable us to do our
share in the occupation of enemy territories and in the preservation of
peace in a troubled world. Expenditures for pay, subsistence, travel,
and miscellaneous expenses of the armed forces, excluding mustering-out
pay, are estimated at 5 billion dollars.
Contract settlement and surplus property disposal.--The winding up of
war procurement is the second most important liquidation job. By the end
of November a total of 301,000 prime contracts involving commitments of
64 billion dollars had been terminated. Of this total, 67,000 contracts
with commitments of 35 billion dollars remained to be settled.
Termination payments on these contracts are estimated at about 3.5
billion dollars. It is expected that more than half of these terminated
contracts will be settled during the current fiscal year, leaving
payments of about 1.5 billion dollars for the fiscal year 1947.
Another important aspect of war supply liquidation is the disposal of
surplus property. Munitions, ships, plants, installations, and supplies,
originally costing 50 billion dollars or more, will ultimately be
declared surplus. The sale value of this property will be far less than
original cost and disposal expenses are estimated at 10 to 15 cents on
each dollar realized. Disposal units within existing agencies have been
organized to liquidate surplus property under the direction of the
Surplus Property Administration. Overseas disposal activities have been
centralized in the State Department to permit this program to be carried
on in line with over-all foreign policy. Thus far only about 13 billion
dollars of the ultimate surplus, including 5 billion dollars of
unsalable aircraft, has been declared. Of this amount, 2.3 billion
dollars have been disposed of, in sales yielding 600 million dollars.
The tremendous job of handling surplus stocks will continue to affect
Federal expenditures and receipts for several years. The speed and
effectiveness of surplus disposal operations will be of great importance
for the domestic economy as well as for foreign economic policies.
War supplies, maintenance, and relief.-Adequate provision for the
national defense requires that we keep abreast of scientific and
technical advances. The tentative estimates for the fiscal year 1947
make allowance for military research, limited procurement of weapons in
the developmental state, and some regular procurement of munitions which
were developed but not mass-produced when the war ended. Expenditures
for procurement and construction will constitute one-third or less of
total defense outlays, compared to a ratio of two-thirds during the war
years.
The estimates also provide for the maintenance of our war-expanded naval
and merchant fleets, military installations, and stocks of military
equipment and supplies. Our naval combatant fleet is three times its
pre-Pearl Harbor tonnage. Our Merchant Marine is five times its prewar
size. The War Department has billions of dollars worth of equipment and
supplies. Considerable maintenance and repair expense is necessary for
the equipment which we desire to retain in active status or in war
reserve. Expenses will be incurred for winnowing the stocks of
surpluses, for preparing lay-up facilities for the reserve fleets, and
for storage of reserve equipment and supplies.
Military expenditures in the current fiscal year include 650 million
dollars for civilian supplies for the prevention of starvation and
disease in occupied areas. Expenditures on this account will continue in
the fiscal year 1947. The war expenditures also cover the expenses of
civilian administration in occupied areas.
During the war, 15 cents of each dollar of our war expenditures was for
lend-lease aid. With lend-lease terminated, I expect the direct
operations under this program to be substantially completed in the
current fiscal year. The expenditures estimated for the fiscal year 1947
under this program are mainly interagency reimbursements for past
transactions.
Relief and rehabilitation expenditures are increasing. It is imperative
that we give all necessary aid within our means to the people who have
borne the ravages of war. I estimate that in the fiscal year 1946
expenditures for the United Nations Relief and Rehabilitation
Administration will total 1.3 billion dollars and in the following year
1.2 billion dollars. Insofar as possible, procurement for this purpose
will be from war surpluses.
(b) Authorizations for war and national defense.
During the war, authorizations and appropriations had to be enacted well
in advance of obligation and spending to afford ample time for planning
of production by the procurement services and by industry. Thus our
cumulative war program authorized in the period between July 1, 1940,
and July 1, 1945, was 431 billion dollars, including net war commitments
of Government corporations. Expenditures against those authorizations
totaled 290 billion dollars. This left 141 billion dollars in
unobligated authorizations and unliquidated obligations.
With the end of fighting, it became necessary to adjust war
authorizations to the requirements of war liquidation and continuing
national defense. Intensive review of the war authorizations by both the
executive and the legislative branches has been continued since VJ-day.
As a result, the authorized war program is being brought more nearly
into line with expenditures.
Recisions and authorizations through the fiscal year 1946.--Readjusting
the war program, as the Congress well knows, is not an easy task.
Authorizations must not be too tight, lest we hamper necessary
operations; they must not be too ample, lest we lose control of
spending. Last September, I transmitted to the Congress recommendations
on the basis of which the Congress voted H.R. 4407 to repeal 50.3
billion dollars of appropriations and authorizations. I found it
necessary to veto this bill because it was used as a vehicle for
legislation that would impair the reemployment program. However, in
order to preserve the fine work of the Congress on the recisions, I
asked the Director of the Bureau of the Budget to place the exact
amounts indicated for repeal in a nonexpendable reserve, and to advise
the departments and agencies accordingly. This has been done.
In accord with Public Law 132 of the Seventy-ninth Congress, I have
transmitted recommendations for additional rescissions for the current
fiscal year of appropriations amounting to 5.8 billion dollars and of
contract authorizations totaling 420 million dollars. The net reduction
in authority to obligate will be 5.0 billion dollars, because, of the
appropriations, 1.2 billion dollars will have to be restored in
subsequent years to liquidate contract authorizations still on the
books.
The appropriations recommended for repeal include 2,827 million dollars
for the Navy Department, 1,421 million dollars for the War Department,
850 million dollars for lend-lease, 384 million dollars for the War
Shipping Administration, and 260 million dollars for the United States
Maritime Commission. The contract authorizations proposed for repeal are
for the Maritime Commission.
In addition, there are unused tonnage authorizations for construction of
naval vessels now valued at 5.4 billion dollars. In September 1945, I
suggested that this authority be reviewed by the appropriate committees
of the Congress, and the Congress has moved to bar construction under
these authorizations during the remainder of the fiscal year 1946. I
propose to continue this prohibition in the Navy budget estimates for
the fiscal year 1947 and now renew my recommendation that legislation be
enacted at the earliest time to dear the statute books of these
authorizations.
The amounts indicated for repeal in H.R. 4407 and the further
rescissions which I have recommended, excluding duplications and
deferred cash payments on existing authorizations, represent a cut in
the authorized war program of 60.8 billion dollars. The war
authorizations will also be reduced 3.7 billion dollars by carrying
receipts of revolving accounts to surplus, by lapses, and by
cancellation and repayment of commitments of the Government war
corporations.
On the other hand, supplemental appropriations of 600 million dollars
will be required for the United Nations Relief and Rehabilitation
Administration.
In the net, it is estimated that the cumulative authorized war and
national defense program will amount to 368 billion dollars on June 30,
1946. Expenditures of 49 billion dollars during the fiscal year 1946
will have pushed cumulative expenditures to 339 billion dollars. The
unexpended balances will be down to 28 billion dollars on June 30, 1946.
New authorizations for national defense and war liquidation in the
fiscal year 1947.-The expenditures of 15 billion dollars for national
defense and war liquidation in the fiscal year 1947 will be partly for
payment of contractual obligations incurred in the past, and partly for
the payment of new obligations. The unexpended balances on June 30,
1946, will be scattered among hundreds of separate appropriations. Thus,
while some appropriation accounts will have unused balances, others will
require additional appropriations.
It is estimated that authorizations to incur new obligations of 11,772
million dollars will be needed during the fiscal year 1947, mainly for
the War and Navy Departments. Of the required authorizations, 11,365
million dollars will be in new appropriations, 400 million dollars in
new contract authority, and 7 million dollars in reappropriations of
unobligated balances. In addition, appropriations of 825 million dollars
will be needed to liquidate obligations under existing contract
authorizations.
Taking into account the tentative authorizations and expenditures
estimated for the fiscal year 1947, and offsets of 3 billion dollars in
war commitments of Government corporations, the cumulative authorized
war and national defense program on June 30, 1947, will be 376 billion
dollars; total expenditures, 354 billion dollars; and unexpended
balances, 22 billion dollars.
The 22 billion dollars of unexpended balances tentatively indicated as
of June 30, 1947, comprise both unobligated authorizations and
unliquidated obligations. Most of the unliquidated obligations result
from transactions booked during the war years. A large part of the 22
billion dollars would never be spent even if not repealed, for the
appropriations will lapse in due course. For example, several billion
dollars of these unliquidated obligations represent unsettled inter- and
intra-departmental agency accounts for war procurement. Legislation is
being requested to facilitate the adjustment of some of these
inter-agency accounts. Another 6 billion dollars is set aside for
contract termination payments. If contract settlement costs continue in
line with recent experience, it is likely that part of the 6 billion
dollars will remain unspent.
On the other hand, some of the 22 billion dollars would be available for
obligation and expenditure unless impounded. In certain appropriations,
such as those for long-cycle procurement, considerable carry-over of
unliquidated obligations into future years is to be expected and is
necessary. However, substantial further rescissions can and should be
made when the war liquidation program tapers off and budgetary
requirements for national defense are clarified. As I have said, I shall
continue to review the war authorizations and from time to time
recommend excess balances for repeal.
As in recent years, detailed recommendations concerning most
appropriations for the national defense program are postponed until the
spring. In connection with the war activities of the United States
Maritime Commission and certain other agencies, however, I now make
specific recommendations for the fiscal year 1947. No additional
authorizations or appropriations will be necessary for the Maritime
Commission since sufficient balances will be left after the
above-mentioned rescissions to carry out the program now contemplated
for the fiscal year 1947.
2. AFTERMATH OF WAR
Nearly one-third--11 billion dollars--of estimated Federal expenditures
in the fiscal year 1947 will be for purposes that are largely inherited
from the war--payments to veterans, interest on the Federal debt, and
refunds of taxes.
(a) For veterans.
“Veterans’ pensions and benefits” has become one of the largest single
categories in the Federal Budget. I am recommending for this purpose
total appropriations of 4,787 million dollars for the fiscal year 1947.
Expenditures in the fiscal year are estimated, under present
legislation, at 4,208 million dollars. These expenditures will help our
veterans through their readjustment period and provide lasting care for
those who were disabled.
The Congress has provided unemployment allowances for veterans during
their readjustment period. Expenditure of 850 million dollars for this
purpose is anticipated for the fiscal year 1947. In addition,
readjustment allowances for self-employed veterans are expected to cost
340 million dollars in the fiscal year 1947.
On May 28, 1945, in asking the Congress to raise the ceiling on benefits
for civilian unemployed to not less than 25 dollars a week during the
immediate reconversion period, I suggested that the Congress also
consider liberalizing veterans’ allowances. Elsewhere in this Message I
reiterate my recommendation with respect to emergency unemployment
compensation. I also recommend increasing veterans’ unemployment
allowances from 20 dollars to 25 dollars a week. This would involve
additional expenditures estimated at approximately 220 million dollars
for the fiscal year.
Included in the 1947 Budget is an expenditure of 535 million dollars for
veterans’ education under provisions of the Servicemen’s Readjustment
Act. This amount includes both tuition expenses and maintenance
allowances. It is expected that half a million veterans will be enrolled
in our schools and colleges during the year.
The ultimate benefit which veterans receive from the loan guarantee
provisions of the Servicemen’s Readjustment Act depends largely on the
success of our stabilization program in restraining building costs and
real estate values. Under the revised procedure contained in recent
amendments, the administrative workload will be minimized by the almost
complete transfer of authority for approving the guarantees to private
lending agencies and private appraisers designated by the Veterans
Administration. This authority carries with it the responsibility for
restricting the guarantees to loans on reasonably valued properties.
Costs of the program, other than for administration, are estimated at 21
million dollars in the fiscal year 1947.
Pensions for veterans will require expenditures estimated at 1,748
million dollars for the fiscal year 1947. Two-thirds of this amount will
be received by veterans of the war which we have just won. This figure
includes 55 million dollars of increased pensions for student-veterans
in our vocational rehabilitation program. In addition, 170 million
dollars will be expended in transfers to the National Service Life
Insurance fund from general and special accounts.
Expenditures under the appropriation for salaries and expenses of the
Veterans Administration are estimated at 528 million dollars in the
fiscal year 1947. This includes 260 million dollars for medical care and
the operation of some 103,000 hospital and domiciliary beds.
A separate appropriation for hospital and domiciliary facilities,
additional to the total for veterans’ pensions and benefits, covers
construction that will provide some 13,000 hospital beds as part of the
500-million dollar hospital construction program already authorized by
the Congress. The estimated expenditures of 130 million dollars for this
purpose are classified in the Budget as part of the general public works
program for the next fiscal year.
(b) For interest.
Interest payments on the public debt are estimated at 5 billion dollars
in the fiscal year 1947, an increase of 250 million dollars from the
revised estimate for the current fiscal year. This increase reflects
chiefly payment of interest on additions to the debt this year. Assuming
continuance of present interest rates, the Government’s interest bill is
now reaching the probable postwar level.
(c) For refunds.
An estimated total of 1,585 million dollars of refunds will be paid to
individuals and corporations during the fiscal year 1947. Slightly over
half of this amount, or 800 million dollars, will be accessory to the
simplified pay-as-you-go method of tax collection, and will be the
result of overwithholding and over declaration of expected income. Most
of the remainder will arise from loss and excess-profits credit
carrybacks, recomputed amortization on war plants, and special relief
from the excess profits tax.
This category of expenditures is thus losing gradually its
“aftermath-of-war” character, and by the succeeding year will reflect
almost entirely the normal operation of loss carry-backs and current tax
collection.
3. AGRICULTURAL PROGRAMS
The agricultural programs contemplated for the fiscal year 1947 are
those which are essential for the provision of an adequate supply of
food and other agricultural commodities with a fair return to American
farmers. To support these objectives, expenditures by the Department of
Agriculture estimated at 784 million dollars from general and special
accounts will be required in the fiscal year 1947. This compares with
estimated expenditures of 676 million dollars in 1946. These figures
exclude expenditures by the Department of Agriculture on account of
lend-lease, the United Nations Relief and Rehabilitation Administration,
and other war expenditures. The expenditure for the fiscal year 1947 is
composed of 553 million dollars for “aids to agriculture,” 35 million
dollars for general public works, and 196 million dollars for other
services of the Department.
Net outlays for the price stabilization, price support, and other
programs of the Commodity Credit Corporation are expected to increase
from about 750 million dollars in the fiscal year 1946 to about 1,500
million dollars in 1947. Cash advances made on loans by the farm
Security Administration and the Rural Electrification Administration are
expected to amount to 266 million dollars in the fiscal year 1946 and
351 million dollars in 1947; and after receipts from principal and
interest are taken into account, net loan expenditures of these two
agencies will amount to 120 and 209 million dollars in the two fiscal
years.
To provide for the expenditures from general and special accounts, I
recommend for the fiscal year 1947 appropriations of million dollars
(including the existing permanent appropriation of an amount equal to 30
percent of estimated annual customs receipts) and a reappropriation of
88 million dollars of prior-year balances from customs receipts. In
addition there is a recommended authorization of 367.5 million dollars
for borrowing from the Reconstruction finance Corporation for the loan
programs of the farm Security Administration and the Rural
Electrification Administration. It is expected that the operations of
the Commodity Credit Corporation will be financed during the coming year
through the 500 million dollars of lend-lease funds which the Congress
has earmarked for price support purposes, a supplemental appropriation
to restore impaired capital of the Corporation, and the borrowing
authority of the Corporation.
Some detailed recommendations follow for major agricultural programs.
Conservation and use of land.--I am recommending that 270 million
dollars be appropriated for “conservation and use of agricultural land
resources”--the so-called AAA program--for the fiscal year 1947,
compared with 356 million dollars in the current year. This reduction of
86 million dollars is in large part accounted for by elimination of the
wartime flax production incentive project and other nonrecurring items;
the proposed reduction in normal activities is less than 33 million
dollars.
For the past several years, this program has consisted largely of
payments to farmers for application of fertilizer and other approved
soil management practices. I am convinced that farmers generally are now
fully alert to the benefits, both immediate and long-term, which they
derive from the practices encouraged by this program. I believe,
therefore, that this subsidization should continue to be reduced.
Rural electrification.--It is proposed that the loan authorization for
the Rural Electrification Administration for the fiscal year 1947 be
increased from 200 million dollars to 250 million dollars. During the
war period, REA was limited by the scarcity of materials and manpower.
But that situation is rapidly changing, and the REA program, which was
materially stepped up for the fiscal year 1946, can be increased still
more. It is my belief that a feasible and practical rural
electrification program should be carried forward as rapidly as
possible. This will involve total loans of approximately 1,800 million
dollars over the next 10 years, much of which will be repaid during that
period.
Other programs.--It is recommended that the continuing forest
land-acquisition program be resumed at the rate of 3 million dollars
annually, which is about the minimum rate at which this program can be
economically carried on. The lands involved in this program can
contribute fully to the national welfare only when brought into the
national forest system for protection and development.
Such programs as those of the farm Security Administration and the farm
Credit Administration are estimated to be continued during the fiscal
year 1947 at about the same level as in the fiscal year 1946. Recent
action by the Congress has Permitted some expansion of the school lunch
program. I hope it will be continued and expanded. The budgets of the
Federal Crop Insurance Corporation and the federal farm Mortgage
Corporation will be transmitted in the spring under the terms of the
Government Corporation Control Act.
4. TRANSPORTATION
Transportation is one of the major fields for both public and private
investment. Our facilities for transportation and communication must be
constantly improved to serve better the convenience of the public and to
facilitate the sound growth and development of the whole economy.
Federal capital outlays for transportation facilities are expected to
approximate 519 million dollars in the fiscal year 1947. State and local
governments may spend 400 million dollars. Private investment, over half
of it by railways, may approach 1,150 million dollars.
The Congress has already taken steps for the resumption of work on
improvement of rivers and harbors and on the construction of new
Federal-aid highways. Much needed work on airports can begin when the
Congress enacts legislation now in conference between the two Houses.
The Federal expenditure estimates for the fiscal year 1947 include 53
million dollars for new construction in rivers, harbors, and the Panama
Canal and 291 million dollars for highways and grade-crossing
elimination, assuming that the States expend some 275 million dollars on
the Federal-aid system. Additional expenditures for highways totaling 36
million dollars are anticipated by the forest Service, National Park
Service, and the Territory of Alaska. Civil airways and airports will
involve expenditures of 35 million dollars under existing authority.
Additional Federal expenditures exceeding 20 million dollars (to be
matched by States and municipalities) may be made during the fiscal year
1947 under the airport legislation now in conference between the two
Houses of the Congress.
The United States now controls almost two-thirds of the world’s merchant
shipping, most of it Government-owned, compared with little more than
one-seventh of the world’s tonnage in 1939. This places a heavy
responsibility upon the Nation to provide for speedy and efficient world
commerce as a contribution to general economic recovery.
The estimates for the United States Maritime Commission and War Shipping
Administration provide for the transition of shipping operation from a
war to a peace basis; the sale, chartering, or lay-up of much of the
war-built fleet; and for a program of ship construction of some 84
million dollars in the fiscal year 1947 to round out the merchant fleet
for peacetime use.
Federal aids, subsidies, and regulatory controls for transportation
should follow the general principle of benefiting the national economy
as a whole. They should seek to improve the transportation system and
increase its efficiency with resulting lower rates and superior service.
Differential treatment which benefits one type of transportation to the
detriment of another should be avoided save when it is demonstrated
clearly to be in the public interest.
5. RESOURCE DEVELOPMENT
Total capital outlays for resource development are estimated at 653
million dollars in the fiscal year 1947 as compared with 452 million
dollars in 1946. These include capital expenditures by the Rural
Electrification Administration and expenditures for resource development
by other organizational units in the Department of Agriculture which are
also mentioned above under “agricultural programs.”
The reclamation and flood control projects which I am recommending for
the fiscal year 1947 will involve capital outlays of approximately 319
million dollars as compared with 245 million dollars in the fiscal year
1946. These expenditures cover programs of the Corps of Engineers, the
Bureau of Reclamation, the Bureau of Indian Affairs, the Department of
Agriculture, and the International Boundary and Water Commission, United
States and Mexico. A number of these projects are multiple-purpose
projects, providing not only for reclamation and irrigation of barren
land and flood control, but also for the production of power needed for
industrial development of the areas.
Expenditures for power transmission and distribution facilities by the
Bonneville Power Administration are expected to increase from 12 million
dollars in the fiscal year 1946 to 15 million dollars in the next fiscal
year. In addition, the Southwestern Power Administration will undertake
a new program involving expenditures of about 16 million dollars in the
fiscal year 1947. The Rural Electrification Administration will require
expenditures during the current fiscal year estimated at 156 million
dollars; in the fiscal year 1947, at 241 million dollars.
The TVA program includes completion of major multiple-purpose
projects--navigation, flood control, and power facilities--and additions
to chemical plants and related facilities. Expenditures for these
capital improvement programs are estimated at 30 million dollars in the
fiscal year 1946 and 39 million dollars in the fiscal year 1947.
Expenditures for construction of roads and other developmental works in
the national forests, parks, and other public lands, and for capital
outlays for fish and wildlife development will increase from below 9
million dollars in the fiscal year 1946 to 24 million dollars in the
fiscal year 1947.
6. SOCIAL SECURITY AND HEALTH
Benefit payments out of the Old-Age and Survivors Insurance Trust fund
during 1947 are estimated at 407 million dollars, while withdrawals by
the States from the Unemployment Trust fund for compensation payments
are expected to total 1 billion dollars. These disbursements are
financed out of social security contributions.
The appropriations from general and special accounts for the social
security program, which cover Federal administrative expenses and grants
to States for assistance programs, are estimated at 593 million dollars
for the fiscal year 1947, an increase of 57 million dollars over the
current year. The increase anticipates greater administrative workload
and higher grants to match increasing State payments. The social
security program does not include all the Federal health services under
existing legislation. For the other health services classified under
general government and national defense, appropriations are estimated at
102 million dollars for the fiscal year 1947.
Some expansion in peacetime medical research and other programs of the
Public Health Service is provided for in the appropriation estimates for
these purposes totaling approximately 87 million dollars for the fiscal
year 1947 which are submitted under provisions of existing law. Part of
this will be provided through the social security appropriations, the
remainder through other appropriations. About 28 million dollars is
recommended for maternity care and health services for children under
existing law, mainly under the emergency provision for the wives and
infants of servicemen. While we should avoid duplication of maternity
and child health services which will be provided through the proposed
general system of prepaid medical care, legislation is needed to
supplement such services. For medical education, I have recommended
legislation authorizing grants-in-aid to public and nonprofit
institutions. The existing sources of support for medical schools
require supplementation to sustain the expansion that is needed.
Hospitals, sanitation works, and additional facilities at medical
schools will be required for an adequate national health program.
Legislation is now pending in the Congress to authorize grants for the
construction of hospitals and health centers and grants and loans for
water-pollution control. I hope the Congress will act favorably on
generous authorizing legislation.
7. RESEARCH AND EDUCATION
The Budget provides for continuation and desirable expansion of the
research activities that are carried on throughout the Federal
establishment and through previously authorized grants to the States.
Additional appropriations will be required for the proposed central
Federal research agency which I recommended last September 6. That
agency will coordinate existing research activities and administer funds
for new research activities wherever they are needed; it will not itself
conduct research. The plan contemplates expenditures through the new
research agency of approximately 40 million dollars for the first year.
These amounts are small in relation to the important contribution they
can make to the national income, the welfare of our people, and the
common defense. Expenditures must be limited for the time being by the
capacity of research agencies to make wise use of funds. The maintenance
of our position as a nation, however, will require more emphasis on
research expenditures in the future than in the past.
Educational expenditures will require a significant share of the
national income in the fiscal year 1947. State, local, and private
expenditures for the current support of elementary, secondary, and
higher education are expected to be substantially above 3 billion
dollars in that year. These nonfederal expenditures will be supplemented
by Federal expenditures estimated at 625 million dollars in the present
Budget. Of this amount, the estimate for veterans’ education, as
previously mentioned, is 535 million dollars. Other amounts include 21
million dollars for the support of vocational education in public
schools, 5 million dollars for the land-grant colleges, 50 million
dollars for the present school-lunch and milk program, 1 million dollars
for the Office of Education, and approximately 13 million dollars for
various other items. In view of the major policy issues which are still
under study by the Congress and the Administration, no specific amount
has been determined for the Federal grants, previously recommended in
this Message, which would assist the States generally in assuring more
nearly equal opportunities for a good education.
Notwithstanding the urgent need for additional school and college
buildings, careful planning will be required for the expenditures to be
made under the proposed legislation to aid the States in providing
educational facilities. A major share of the grants for the first year
would be for surveys and plans.
I have already outlined the broad objectives of our foreign economic
policy. In the present section I shall indicate the Federal outlays
which the execution of these programs may require in the fiscal years
1946 and 1947.
(a) On the termination of lend-lease, the lend-lease countries were
required to pay for goods in the lend-lease pipe line either in cash or
by borrowing from the United States or by supplying goods and services
to the United States. Credits for this purpose have already been
extended to Soviet Union, France, the Netherlands, and Belgium amounting
to 675 million dollars. The settlement credit of 650 million dollars to
the United Kingdom includes an amount preliminarily fixed at 118 million
dollars which represents the excess of purchases by the United Kingdom
from the pipe line over goods and services supplied by the United
Kingdom to the United States since VJ-day and the balance of various
claims by one government against the other.
Credits are also being negotiated with lend-lease countries to finance
the disposition of lend-lease inventories and installations and property
declared to be surplus. For instance, 532 million dollars of the
settlement credit to the United Kingdom is for this purpose. These
credits will involve no new expenditures by this Government, since they
merely provide for deferred repayment by other governments for good:
services which have been financed from war appropriations.
(b) Expenditures from the appropriations to United Nations Relief and
Rehabilitation Administration, which were discarded under war
expenditures above, are estimated to be 1.3 billion dollars in the
fiscal year 1946 and 1.2 billion dollars in the fiscal year 1947.
(c) To assist other countries in the restoration of their economies the
Export-Import Bank has already negotiated loans in the fiscal year 1946
amounting in total to about 1,010 million dollars and an additional 195
million dollars will probably be committed shortly. The Bank is also
granting loans to carry out its original purpose of directly expanding
the foreign trade of the United States. In this connection the Bank has
established a fund of 100 million dollars to finance the export of
cotton from the United States. The Export-Import Bank has thus loaned or
committed approximately 1,300 million dollars during the current fiscal
year and it is expected that demands on its resources will increase in
the last 6 months of the fiscal year 1946. Requests for loans are
constantly being received by the Bank from countries desiring to secure
goods and services in this country for the reconstruction or development
of their economies. On July 31, 1945, the lending authority of the
Expert-Import Bank was increased to a total of 3,500 million dollars. I
anticipate that during the period covered by this Budget the Bank will
reach this limit. The bulk of the expenditures from the loans already
granted will fall in the fiscal year 1946 while the bulk of the
expenditures from loans yet to be negotiated will fall in the fiscal
year 1947. In view of the urgent need for the Bank’s credit, I may find
it necessary to request a further increase in its lending authority at a
later date.
(d) The proposed line of credit of 3,750 million dollars to the United
Kingdom will be available up to the end of 1951 and will be used to
assist the United Kingdom in financing the deficit in its balance of
payments during the transition period. The rate at which the United
Kingdom will draw on the credit will depend on the rapidity with which
it can reconvert its economy and adapt its trade to the postwar world.
The anticipated rate of expenditure is likely to be heaviest during the
next 2 years.
(e) Since the Bretton Woods Agreements have now been approved by the
required number of countries, both the International Monetary fund and
the International Bank for Reconstruction and Development will commence
operations during 1946. The organization of these institutions will
undoubtedly take some time, and it is unlikely that their operations
will reach any appreciable scale before the beginning of the fiscal year
1947.
Of the 2,750 million dollars required for the fund, 1,800 million
dollars will be provided in cash or notes from the exchange
stabilization fund established under the Gold Reserve Act of 1934. The
remaining 950 million dollars will be paid initially in the form of
non-interest-bearing notes issued by the Secretary of the Treasury. It
is not anticipated that the fund will require in cash any of the 950
million dollars during the fiscal years 1946 and 1947. Consequently, no
cash withdrawals from the Treasury will be required in connection with
the fund in these years.
The subscription to the Bank amounts to 3,175 million dollars. Of this
total, 2 percent must be paid immediately and the Bank is required to
call a further 8 percent of the subscription during its first year of
operations. The balance of the subscription is payable when required by
the Bank either for direct lending or to make good its guarantees. It is
likely that the United States will be required to pay little if any more
than the initial 10 percent before the end of the fiscal year 1947.
I anticipate that net expenditures of the Export-Import Bank and
expenditures arising from the British credit and the Bretton Woods
Agreements will amount to 2,614 million dollars, including the noncash
item of 950 million dollars for the fund, in the fiscal year 1946, and
2,754 million dollars in the fiscal year 1947.
GENERAL GOVERNMENT
The responsibilities of the Government, in both domestic and
international affairs, have increased greatly in the past decade.
Consequently, the Government is larger than it was before the war, and
its general operating costs are higher. We cannot shrink the Government
to prewar dimensions unless we slough off these new
responsibilities--and we cannot do that without paying an excessive
price in terms of our national welfare. We can, however, enhance its
operating efficiency through improved organization. I expect to make
such improvements under the authority of the Reorganization Act of 1945.
The appropriations which I am recommending for general government for
the fiscal year 1947 are 1,604 million dollars under existing
legislation. This is an increase of 458 million dollars over the total
of enacted appropriations for the current fiscal year, but a substantial
part of this increase is due to the fact that the appropriations for the
fiscal year 1946 were made prior to the general increase of employees’
salaries last July 1, for which allowance is made in the anticipated
supplemental appropriations for 1946. The recommended total for 1947 for
general government, like the estimates for national defense and other
specific programs, does not allow for the further salary increases for
Government employees which, I hope, will be authorized by pending
legislation, but-the tentative lump-sum estimates under proposed
legislation contemplate that such salary increases will be effective
almost at once.
Expenditures for general government in the fiscal year 1947 are expected
to continue the slowly rising trend which began in 1943. This category
includes a great variety of items--not merely the overhead costs of the
Government. It includes all the expenditures of the Cabinet departments,
other than for national defense, aids to agriculture, general public
works, and the social security program. It includes also expenditures of
the legislative branch, the Judiciary, and many of the independent
agencies of the executive branch. Consequently, the estimated increase
in 1947 in the total of general government expenditures reflects a
variety of influences.
Now included in general government are certain activities formerly
classified under national defense. Some of these, such as certain
functions of the former foreign Economic Administration and the War
Manpower Commission, are still needed during the period of reconversion;
others are in the process of liquidation. A few wartime activities, for
example, the international information and foreign intelligence services
and some of the wartime programs for controlling disease and crime, have
become part of our regular government establishment. Expenditures for
these former wartime functions explain about 40 percent of the increase
in expenditures for general government.
Other increases are for civil aeronautics promotion, the business and
manufacturing censuses, and other expanded business services of the
Department of Commerce which have been referred to above; the forest and
Soil Conservation Services and other committees of the Department of
certain conservation activities of the Department of the Interior; and
the collection of internal revenue in the Treasury Department.
The necessity for reestablishing postal services curtailed during the
war and advances in the rates of pay for postal employees have increased
substantially the estimated expenditures for postal service for both the
current and the next fiscal year. It is not expected that this increase
will cause expenditures to exceed postal revenues in either year,
although an excess of expenditures may occur in the fiscal year 1947 if
salaries are increased further.
Expenditures for our share of the administrative budgets of the United
Nations and other permanent international bodies will increase sharply
in the fiscal year 1947, yet will remain a small part of our total
Budget. The budget for the United Nations has not yet been determined;
an estimate for our contribution will be submitted later. Our
contributions to the food and Agriculture Organization, the
International Labor Office, the Pan American Union, and other similar
international agencies will aggregate about 3 million dollars for the
fiscal year 1947. The administrative expenses of the International
Monetary fund and the International Bank will be met from their general
funds.
We have won a great war--we, the nations of plain people who hate war.
In the test of that war we found a strength of unity that brought us
through--a strength that crushed the power of those who sought by force
to deny our faith in the dignity of man.
During this trial the voices of disunity among us were silent or were
subdued to an occasional whine that warned us that they were still among
us. Those voices are beginning to cry aloud again. We must learn
constantly to turn deaf ears to them. They are voices which foster fear
and suspicion and intolerance and hate. They seek to destroy our
harmony, our understanding of each other, our American tradition of
“live and let live.” They have become busy again, trying to set race
against race, creed against creed, farmer against city dweller, worker
against employer, people against their own governments. They seek only
to do us mischief. They must not prevail.
It should be impossible for any man to contemplate without a sense of
personal humility the tremendous events of the 12 months since the last
annual Message, the great tasks that confront us, the new and huge
problems of the coming months and years. Yet these very things justify
the deepest confidence in the future of this Nation of free men and
women.
The plain people of this country found the courage and the strength, the
self-discipline, and the mutual respect to fight and to win, with the
help of our allies, under God. I doubt if the tasks of the future are
more difficult. But if they are, then I say that our strength and our
knowledge and our understanding will be equal to those tasks.
As printed above, references to tables appearing in the budget document
have been omitted.
***
State of the Union Address
Harry S. Truman
January 6, 1947
Mr. President, Mr. Speaker, Members of the Congress of the United
States:
It looks like a good many of you have moved over to the left since I was
here last!
I come before you today to report on the State of the Union and, in the
words of the Constitution, to recommend such measures as I judge
necessary and expedient.
I come also to welcome you as you take up your duties and to discuss
with you the manner in which you and I should fulfill our obligations to
the American people during the next 2 years.
The power to mold the future of this Nation lies in our hands--yours and
mine, and they are joined together by the Constitution.
If in this year, and in the next, we can find the right course to take
as each issue arises, and if, in spite of all difficulties, we have the
courage and the resolution to take that course, then we shall achieve a
state of well-being for our people without precedent in history. And if
we continue to work with the other nations of the world earnestly,
patiently, and wisely, we can--granting a will for peace on the part of
our neighbors-make a lasting peace for the world.
But, if we are to realize these ends, the Congress and the President,
during the next 2 years, must work together. It is not unusual in our
history that the majority of the Congress represents a party in
opposition to the President’s party. I am the twentieth President of the
United States who, at some time during his term of office, has found his
own party to be in the minority in one or both Houses of Congress. The
first one was George Washington. Wilson was number eighteen, and Hoover
was number nineteen.
I realize that on some matters the Congress and the President may have
honest differences of opinion. Partisan differences, however, did not
cause material disagreements as to the conduct of the war. Nor, in the
conduct of our international relations, during and since the war, have
such partisan differences been material.
On some domestic issues we may, and probably shall, disagree. That in
itself is not to be feared. It is inherent in our form of Government.
But there are ways of disagreeing; men who differ can still work
together sincerely for the common good. We shall be risking the Nation’s
safety and destroying our opportunities for progress if we do not settle
any disagreements in this spirit, without thought of partisan advantage.
THE GENERAL DOMESTIC ECONOMY
As the year 1947 begins, the state of our national economy presents
great opportunities for all. We have virtually full employment. Our
national production of goods and services is 50 percent higher than in
any year prior to the war emergency. The national income in 1946 was
higher than in any peacetime year. Our food production is greater than
it has ever been. During the last 5 years our productive facilities have
been expanded in almost every field. The American standard of living is
higher now than ever before, and when the housing shortage can be
overcome it will be even higher.
During the past few months we have removed at a rapid rate the emergency
controls that the Federal Government had to exercise during the war. The
remaining controls will be retained only as long as they are needed to
protect the public. Private enterprise must be given the greatest
possible freedom to continue the expansion of economy.
In my proclamation of December 31, 1946 I announced the termination of
hostilities. This automatically ended certain temporary legislation and
certain executive powers.
Two groups of temporary laws still remain: the first are those which by
Congressional mandate are to last during the “emergency”; the second are
those which are to continue until the “termination of the war,”
I shall submit to the Congress recommendations for the repeal of certain
of the statutes which by their terms continue for the duration of the
“emergency.” I shall at the same time recommend that others within this
classification be extended until the state of war has been ended by
treaty or by legislative action. As to those statutes which continue
until the state of war has been terminated, I urge that the Congress
promptly consider each statute individually, and repeal such emergency
legislation where it is advisable.
Now that nearly all wartime controls have been removed, the operation of
our industrial system depends to a greater extent on the decisions of
businessmen, farmers, and workers. These decisions must be wisely made
with genuine concern for public welfare. The welfare of businessmen,
farmers, and workers depends upon the economic well-being of those who
buy their products.
An important present source of danger to our economy is the possibility
that prices might be raised to such an extent that the consuming public
could not purchase the tremendous volume of goods and services which
will be produced during 1947.
We all know that recent price increases have denied to many of our
workers much of the value of recent wage increases. Farmers have found
that a large part of their increased income has been absorbed by
increased prices. While some of our people have received raises in
income which exceed price increases, the great majority have not. Those
persons who live on modest fixed incomes--retired persons living on
pensions, for example--and workers whose incomes are relatively
inflexible, such as teachers and other civil servants--have suffered
hardship.
In the effort to bring about a sound and equitable price structure, each
group of our population has its own responsibilities.
It is up to industry not only to hold the line on existing prices, but
to make reductions whenever profits justify such action.
It is up to labor to refrain from pressing for unjustified wage
increases that will force increases in the price level.
And it is up to Government to do everything in its power to encourage
high-volume Production, for that is what makes possible good wages, low
prices, and reasonable profits.
In a few days there will be submitted to the Congress the Economic
Report of the President, and also the Budget Message. Those messages
will contain many recommendations. Today I shall outline five major
economic policies which I believe the Government should pursue during
1947. These policies are designed to meet our immediate needs and, at
the same time, to provide for the long-range welfare of our free
enterprise system:
First, the promotion of greater harmony between labor and management.
Second, restriction of monopoly and unfair business practices;
assistance to small business; and the promotion of the free competitive
system of private enterprise.
Third, continuation of an aggressive program of home construction.
Fourth, the balancing of the budget in the next fiscal year and the
achieving of a substantial surplus to be applied to the reduction of the
public debt.
Fifth, protection of a fair level of return to farmers in post-war
agriculture.
LABOR AND MANAGEMENT
The year just past--like the year after the first World War--was marred
by labor management strife.
Despite this outbreak of economic warfare in 1946, we are today
producing goods and services in record volume. Nevertheless, it is
essential to improve the methods for reaching agreement between labor
and management and to reduce the number of strikes and lockouts.
We must not, however, adopt punitive legislation. We must not in order
to punish a few labor leaders, pass vindictive laws which will restrict
the proper rights of the rank and file of labor. We must not, under the
stress of emotion, endanger our American freedoms by taking
ill-considered action which will lead to results not anticipated or
desired.
We must remember, in reviewing the record of disputes in 1946, that
management shares with labor the responsibility for failure to reach
agreements which would have averted strikes. For that reason, we must
realize that industrial peace cannot be achieved merely by laws directed
against labor unions.
During the last decade and a half, we have established a national labor
policy in this country based upon free collective bargaining as the
process for determining wages and working conditions.
That is still the national policy.
And it should continue to be the national policy!
But as yet, not all of us have learned what it means to bargain freely
and fairly. Nor have all of us learned to carry the mutual
responsibilities that accompany the right to bargain. There have been
abuses and harmful practices which limit the effectiveness of our system
of collective bargaining. Furthermore, we have lacked sufficient
governmental machinery to aid labor and management in resolving their
differences.
Certain labor-management problems need attention at once and certain
others, by reason of their complexity, need exhaustive investigation and
study.
We should enact legislation to correct certain abuses and to provide
additional governmental assistance in bargaining. But we should also
concern ourselves with the basic causes of labor-management
difficulties.
In the light of these considerations, I propose to you and urge your
cooperation in effecting the following four-point program to reduce
industrial strife:
Point number one is the early enactment of legislation to prevent
certain unjustifiable practices.
First, under this point, are jurisdictional strikes. In such strikes the
public and the employer are innocent bystanders who are injured by a
collision between rival unions. This type of dispute hurts production,
industry, and the public--and labor itself. I consider jurisdictional
strikes indefensible.
The National Labor Relations Act provides procedures for determining
which union represents employees of a particular employer. In some
jurisdictional disputes, however, minority unions strike to compel
employers to deal with them despite a legal duty to bargain with the
majority union. Strikes to compel an employer to violate the law are
inexcusable. Legislation to prevent such strikes is clearly desirable.
Another form of inter-union disagreement is the jurisdictional strike
involving the question of which labor union is entitled to perform a
particular task. When rival unions are unable to settle such disputes
themselves, provision must be made for peaceful and binding
determination of the issues.
A second unjustifiable practice is the secondary boycott, when used to
further jurisdictional disputes or to compel employers to violate the
National Labor Relations Act.
Not all secondary boycotts are unjustified. We must judge them on the
basis of their objectives. For example, boycotts intended to protect
wage rates and working conditions should be distinguished from those in
furtherance of jurisdictional disputes. The structure of industry
sometimes requires unions, as a matter of self-preservation, to extend
the conflict beyond a particular employer. There should be no blanket
prohibition against boycotts. The appropriate goal is legislation which
prohibits secondary boycotts in pursuance of unjustifiable objectives,
but does not impair the union’s right to preserve its own existence and
the gains made in genuine collective bargaining.
A third practice that should be corrected is the use of economic force,
by either labor or management, to decide issues arising out of the
interpretation of existing contracts.
Collective bargaining agreements, like other contracts, should be
faithfully adhered to by both parties. In the most enlightened
union-management relationships, disputes over the interpretation of
contract terms are settled peaceably by negotiation or arbitration.
Legislation should be enacted to provide machinery whereby unsettled
disputes concerning the interpretation of an existing agreement may be
referred by either party to final and binding arbitration.
Point number two is the extension of facilities within the Department of
Labor for assisting collective bargaining.
One of our difficulties in avoiding labor strife arises from a lack of
order in the collective bargaining process. The parties often do not
have a dear understanding of their responsibility for settling disputes
through their own negotiations. We constantly see instances where labor
or management resorts to economic force without exhausting the
possibilities for agreement through the bargaining process. Neither the
parties nor the Government have a definite yardstick for determining
when and how Government assistance should be invoked. There is need for
integrated governmental machinery to provide the successive steps of
mediation, voluntary arbitration, and--ultimately in appropriate
cases--ascertainment of the facts of the dispute and the reporting of
the facts to the public. Such machinery would facilitate and expedite
the settlement of disputes.
Point number three is the broadening of our program of social
legislation to alleviate the causes of workers’ insecurity.
On June 11, 1946, in my message vetoing the Case Bill, I made a
comprehensive statement of my views concerning labor-management
relations. I said then, and I repeat now, that the solution of
labor-management difficulties is to be found not only in legislation
dealing directly with labor relations, but also in a program designed to
remove the causes of insecurity felt by many workers in our industrial
society. In this connection, for example, the Congress should consider
the extension and broadening of our social security system, better
housing, a comprehensive national health program, and provision for a
fair minimum wage.
Point number four is the appointment of a Temporary Joint Commission to
inquire into the entire field of labor-management relations.
I recommend that the Congress provide for the appointment of a Temporary
Joint Commission to undertake this broad study.
The President, the Congress, and management and labor have a continuing
responsibility to cooperate in seeking and finding the solution of these
problems. I therefore recommend that the Commission be composed as
follows: twelve to be chosen by the Congress from members of both
parties in the House and the Senate, and eight representing the public,
management and labor, to be appointed by the President.
The Commission should be charged with investigating and making
recommendations upon certain major subjects, among others:
First, the special and unique problem of nationwide strikes in vital
industries affecting the public interest. In particular, the Commission
should examine into the question of how to settle or prevent such
strikes without endangering our general democratic freedoms.
Upon a proper solution of this problem may depend the whole industrial
future of the United States. The paralyzing effects of a nationwide
strike in such industries as transportation, coal, oil, steel, or
communications can result in national disaster. We have been able to
avoid such disaster, in recent years, only by the use of extraordinary
war powers. All those powers will soon be gone. In their place there
must be created an adequate system and effective machinery in these
vital fields. This problem will require careful study and a bold
approach, but an approach consistent with the preservation of the rights
of our people. The need is pressing. The Commission should give this its
earliest attention.
Second, the best methods and procedures for carrying out the collective
bargaining process. This should include the responsibilities of labor
and management to negotiate freely and fairly with each other, and to
refrain from strikes or lockouts until all possibilities of negotiation
have been exhausted.
Third, the underlying causes of labor management disputes.
Some of the subjects presented here for investigation involve long-range
study. Others can be considered immediately by the Commission and its
recommendations can be submitted to the Congress in the near future.
I recommend that this Commission make its first report, including
specific legislative recommendations, not later than March 15, 1947.
RESTRICTION Of MONOPOLY AND PROMOTION OF PRIVATE ENTERPRISE
The second major policy I desire to lay before you has to do with the
growing concentration of economic power and the threat to free
competitive private enterprise. In 1941 the Temporary National Economic
Committee completed a comprehensive investigation into the workings of
the national economy. The Committee’s study showed that, despite a half
century of anti-trust law enforcement, one of the gravest threats to our
welfare lay in the increasing concentration of power in the hands of a
small number of giant organizations.
During the war, this long-standing tendency toward economic
concentration was accelerated. As a consequence, we now find that to a
greater extent than ever before, whole industries are dominated by one
or a few large organizations which can restrict production in the
interest of higher profits and thus reduce employment and purchasing
power.
In an effort to assure full opportunity and free competition to business
we will vigorously enforce the anti-trust laws. There is much the
Congress can do to cooperate and assist in this program.
To strengthen and enforce the laws that regulate business practices is
not enough. Enforcement must be supplemented by positive measures of aid
to new enterprises. Government assistance, research programs, and credit
powers should be designed and used to promote the growth of new firms
and new industries. Assistance to small business is particularly
important at this time when thousands of veterans who are potential
business and industrial leaders are beginning their careers.
We should also give special attention to the decentralization of
industry and the development of areas that are now under-industrialized.
HOUSING
The third major policy is also of great importance to the national
economy: an aggressive program to encourage housing construction. The
first federal program to relieve the veterans’ housing shortage was
announced in February 1946. In 1946 one million family housing units
have been put under construction and more than 665,000 units have
already been completed. The rate of expansion in construction has broken
all records.
In the coming year the number of dwelling units built will approach, if
not surpass, the top construction year of 1926. The primary
responsibility to deliver housing at reasonable prices that veterans can
afford rests with private industry and with labor. The Government will
continue to expedite the flow of key building materials, to limit
nonresidential construction, and to give financial support where it will
do the most good. Measures to stimulate rental housing and new types of
housing construction will receive special emphasis.
To reach our long-range goal of adequate housing for all our people,
comprehensive housing legislation is urgently required, similar to the
non-partisan bill passed by the Senate last year. At a minimum, such
legislation should open the way for rebuilding the blighted areas of our
cities and should establish positive incentives for the investment of
billions of dollars of private capital in large-scale rental housing
projects. It should provide for improvement of housing in rural areas
and for the construction, over a 4-year period, of half a million units
of public low-rental housing. It should authorize a single peacetime
federal housing agency to assure efficient use of our resources on the
vast housing front.
FISCAL AFFAIRS
The fourth major policy has to do with the balancing of the budget. In a
prosperous period such as the present one, the budget of the Federal
Government should be balanced. Prudent management of public finance
requires that we begin the process of reducing the public debt. The
budget which I shall submit to you this week has a small margin of
surplus. In the Budget Message I am making recommendations which, if
accepted, will result in a substantially larger surplus which should be
applied to debt retirement. One of these recommendations is that the
Congress take early action to continue throughout the next fiscal year
the war excise tax rates which, under the present law, will expire on
June 30, 1947.
Expenditures relating to the war are still high. Considerable sums are
required to alleviate world famine and suffering. Aid to veterans will
continue at peak level. The world situation is such that large military
expenditures are required. Interest on the public debt and certain other
costs are irreducible. For these reasons I have had to practice
stringent economy in preparing the budget; and I hope that the Congress
will cooperate in this program of economy.
AGRICULTURE
The fifth major policy has to do with the welfare of our farm
population.
Production of food reached record heights in 1946. Much of our
tremendous grain crop can readily be sold abroad and thus will become no
threat to our domestic markets. But in the next few years American
agriculture can face the same dangers it did after World War I. In the
early twenties the Nation failed to maintain outlets for the new
productive capacity of our agricultural plant. It failed to provide
means to protect the farmer while he adjusted his acreage to peacetime
demands.
The result we all remember too well. Farm production stayed up while
demand and prices fell, in contrast with industry where prices stayed up
and output declined, farm surpluses piled up, and disaster followed.
We must make sure of meeting the problems which we failed to meet after
the first World War. Present laws give considerable stability to farm
prices for 1947 and 1948, and these 2 years must be utilized to maintain
and develop markets for our great productive power.
The purpose of these laws was to permit an orderly transition from war
to peace. The Government plan of support prices was not designed to
absorb, at great cost, the unlimited surpluses of a highly productive
agriculture.
We must not wait until the guarantees expire to set the stage for
permanent farm welfare.
The farmer is entitled to a fair income.
Ways can be found to utilize his new skills and better practices, to
expand his markets at home and abroad, and to carry out the objectives
of a balanced pattern of peacetime production without either undue
sacrifice by farm people or undue expense to the Government.
HEALTH AND GENERAL WELFARE
Of all our national resources, none is of more basic value than the
health of our people. Over a year ago I presented to the Congress my
views on a national health program. The Congress acted on several of the
recommendations in this program-mental health, the health of mothers and
children, and hospital construction. I urge this Congress to complete
the work begun last year and to enact the most important recommendation
of the program--to provide adequate medical care to all who need it, not
as charity but on the basis of payments made by the beneficiaries of the
program.
One administrative change would help greatly to further our national
program in the fields of health, education, and welfare. I again
recommend the establishment of a well-integrated Department of Welfare.
VETERANS
Fourteen million World War II servicemen have returned to civil life.
The great majority have found their places as citizens of their
communities and their Nation. It is a tribute to the fiber of our
servicemen and to the flexibility of our economy that these adjustments
have been made so rapidly and so successfully.
More than two million of these veterans are attending schools or
acquiring job skills through the financial assistance of the Federal
Government. Thousands of sick and wounded veterans are daily receiving
the best of medical and hospital care. Half a million have obtained
loans, with Government guarantees, to purchase homes or farms or to
embark upon new businesses. Compensation is being paid in almost two
million cases for disabilities or death. More than three million are
continuing to maintain their low-cost National Service Life Insurance
policies. Almost seven million veterans have been aided by unemployment
and self-employment allowances.
Exclusive of mustering-out payments and terminal leave pay, the program
for veterans of all wars is costing over seven billion dollars a
year--one-fifth of our total federal budget. This is the most
far-reaching and complete veterans program ever conceived by any nation.
Except for minor adjustments, I believe that our program of benefits for
veterans is now complete. In the long run, the success of the program
will not be measured by the number of veterans receiving financial aid
or by the number of dollars we spend. History will judge us not by the
money we spend, but by the further contribution we enable our veterans
to make to their country. In considering any additional legislation,
that must be our criterion.
CIVIL RIGHTS
We have recently witnessed in this country numerous attacks upon the
constitutional rights of individual citizens as a result of racial and
religious bigotry. Substantial segments of our people have been
prevented from exercising fully their right to participate in the
election of public officials, both locally and nationally. Freedom to
engage in lawful callings has been denied.
The will to fight these crimes should be in the hearts of every one of
us.
For the Federal Government that fight is now being carried on by the
Department of Justice to the full extent of the powers that have been
conferred upon it. While the Constitution withholds from the Federal
Government the major task of preserving peace in the several States, I
am not convinced that the present legislation reached the limit of
federal power to protect the civil rights of its citizens.
I have, therefore, by Executive Order,[1] established the President’s
Committee on Civil Rights to study and report on the whole problem of
federally-secured civil rights, with a view to making recommendations to
the Congress.
[Footnote 1: Executive Order 9808 (3 CFR, 1943-1948 Comp., p. 590.)]
NATURAL RESOURCES
In our responsibility to promote the general welfare of the people, we
have always to consider the natural resources of our country. They are
the foundation of our life. In the development of the great river
systems of America there is the major opportunity of our generation to
contribute to the increase of the national wealth. This program is
already well along; it should be pushed with full vigor.
I must advise the Congress that we are rapidly becoming a “have not”
Nation as to many of our minerals. The economic progress and the
security of our country depend upon an expanding return of mineral
discovery and upon improved methods of recovery. The Federal Government
must do its part to meet this need.
FOREIGN AFFAIRS
Progress in reaching our domestic goals is closely related to our
conduct of foreign affairs. All that I have said about maintaining a
sound and prosperous economy and improving the welfare of our people has
greater meaning because of the world leadership of the United States.
What we do, or fail to do, at home affects not only ourselves but
millions throughout the world. If we are to fulfill our responsibilities
to ourselves and to other peoples, we must make sure that the United
States is sound economically, socially, and politically. Only then will
we be able to help bring about the elements of peace in other
countries--political stability, economic advancement, and social
progress.
Peace treaties for Italy, Bulgaria, Rumania, and Hungary have finally
been prepared. Following the signing of these treaties next month in
Paris, they will be submitted to the Senate for ratification. This
Government does not regard the treaties as completely satisfactory.
Whatever their defects, however, I am convinced that they are as good as
we can hope to obtain by agreement among the principal wartime Allies.
Further dispute and delay would gravely jeopardize political stability
in the countries concerned for many years.
During the long months of debate on these treaties, we have made it
clear to all nations that the United States will not consent to
settlements at the expense of principles we regard as vital to a just
and enduring peace. We have made it equally dear that we will not
retreat to isolationism. Our policies will be the same during the
forthcoming negotiations in Moscow on the German and Austrian treaties,
and during the future conferences on the Japanese treaty.
The delay in arriving at the first peace settlements is due partly to
the difficulty of reaching agreement with the Soviet Union on the terms
of settlement. Whatever differences there may have been between us and
the Soviet Union, however, should not be allowed to obscure the fact
that the basic interests of both nations lie in the early making of a
peace under which the peoples of all countries may return, as free men
and women, to the essential tasks of production and reconstruction. The
major concern of each of us should be the promotion of collective
security, not the advancement of individual security.
Our policy toward the Soviet Union is guided by the same principles
which determine our policies toward all nations. We seek only to uphold
the principles of international justice which have been embodied in the
Charter of the United Nations.
We must now get on with the peace settlements. The occupying powers
should recognize the independence of Austria and withdraw their troops.
The Germans and the Japanese cannot be left in doubt and fear as to
their future; they must know their national boundaries, their resources,
and what reparations they must pay. Without trying to manage their
internal affairs, we can insure that these countries do not re-arm.
INTERNATIONAL RELIEF AND DISPLACED PERSONS
The United States can be proud of its part in caring for the peoples
reduced to want by the ravages of war, and in aiding nations to restore
their national economies. We have shipped more supplies to the hungry
peoples of the world since the end of the war than all other countries
combined!
However, insofar as admitting displaced persons is concerned, I do not
feel that the United States has done its part. Only about 5,000 of them
have entered this country since May, 1946. The fact is that the
executive agencies are now doing all that is reasonably possible under
the limitation of the existing law and established quotas. Congressional
assistance in the form of new legislation is needed. I urge the Congress
to turn its attention to this world problem, in an effort to find ways
whereby we can fulfill our responsibilities to these thousands of
homeless and suffering refugees of all faiths.
INTERNATIONAL TRADE
World economic cooperation is essential to world political cooperation.
We have made a good start on economic cooperation through the
International Bank, the International Monetary fund, and the
Export-Import Bank. We must now take other steps for the reconstruction
of world trade and we should continue to strive for an international
trade system as free from obstructions as possible.
ATOMIC ENERGY
The United States has taken the lead in the endeavor to put atomic
energy under effective international control. We seek no monopoly for
ourselves or for any group of nations. We ask only that there be
safeguards sufficient to insure that no nation will be able to use this
power for military purposes. So long as all governments are not agreed
on means of international control of atomic energy, the shadow of fear
will obscure the bright prospects for the peaceful use of this enormous
power.
In accordance with the Atomic Energy Act of 1946, the Commission
established under that law is assuming full jurisdiction over domestic
atomic energy enterprise. The program of the Commission will, of course,
be worked out in close collaboration with the military services in
conformity with the wish of the Congress, but it is my fervent hope that
the military significance of atomic energy will steadily decline. We
look to the Commission to foster the development of atomic energy for
industrial use and scientific and medical research. In the vigorous and
effective development of peaceful uses of atomic energy rests our hope
that this new force may ultimately be turned into a blessing for all
nations.
MILITARY POLICY
In 1946 the Army and Navy completed the demobilization of their wartime
forces. They are now maintaining the forces which we need for national
defense and to fulfill our international obligations.
We live in a world in which strength on the part of peace-loving nations
is still the greatest deterrent to aggression. World stability can be
destroyed when nations with great responsibilities neglect to maintain
the means of discharging those responsibilities.
This is an age when unforeseen attack could come with unprecedented
speed. We must be strong enough to defeat, and thus forestall, any such
attack. In our steady Progress toward a more rational world order, the
need for large armed forces is progressively declining; but the
stabilizing force of American military strength must not be weakened
until our hopes are fully realized. When a system of collective security
under the United Nations has been established, we shall be willing to
lead in collective disarmament, but, until such a system becomes a
reality, we must not again allow ourselves to become weak and invite
attack.
For those reasons, we need well-equipped, well-trained armed forces and
we must be able to mobilize rapidly our resources in men and material
for our own defense, should the need arise.
The Army will be reduced to 1,070,000 officers and men by July 1, 1947.
Half of the Army will be used for occupation duties abroad and most of
the remainder will be employed at home in the support of these overseas
forces.
The Navy is supporting the occupation troops in Europe and in the Far
East. Its fundamental mission--to support our national interests
wherever required--is unchanged. The Navy, including the Marine Corps,
will average 571,000 officers and men during the fiscal year 1948.
We are encountering serious difficulties in maintaining our forces at
even these reduced levels. Occupation troops are barely sufficient to
carry out the duties which our foreign policy requires. Our forces at
home are at a point where further reduction is impracticable. We should
like an Army and a Navy composed entirely of long-term volunteers, but
in spite of liberal inducements the basic needs of the Army are not now
being met by voluntary enlistments.
The War Department has advised me that it is unable to make an accurate
forecast at the present time as to whether it will be possible to
maintain the strength of the Army by relying exclusively on volunteers.
The situation will be much clearer in a few weeks, when the results of
the campaign for volunteers are known. The War Department will make its
recommendations as to the need for the extension of Selective Service in
sufficient time to enable the Congress to take action prior to the
expiration of the present law on March 31st. The responsibility for
maintaining our armed forces at the strength necessary for our national
safety rests with the Congress.