Evening star., 1951-04-27
Partial Text of Truman Message on Production Act Extension


to a halt--and hold the line. 1t wi
take strong and determined meas
ures to do that.
/ /. Most important of all, we muI
increase taxes quickly and ade
quately-paying for Governmer
expenditures as we go, through
fair tax program. This win sprea
the cost of defense equitably an
help stop the inflationary spiral.
2. We must increase persona
savings dollars saved now are sut
| tracted from the buying powe
pushing prices upward. and will b
available later when more con
sumer goods will be produced.
3. We must reduce borrowing an
buying on credit for non-defens
purposes--by consumers and busi
nessmen-since borrowed none
adds to the pressure on prices.
4. We must have fair ceilings o
prices, including the prices of farr
products, and on rents, in order
stabilize the cost of living durin
the defense period, to hold down tn
cost of the defense program t
the taxpayers, and to proven
profiteering.
5. We must stabilize wages an
salaries at fair levels, to RESTRAIN
excessive consumer demand and t
prevent rising business costs from
forcing price increases.
Taxes.
A large Federal deficit would b
a powerful inflationary force be
cause the Government would b
pouring more money into the econ
omy than it was taking from il
The effects would be multiplied /,
a period of rising expenditures
when Government orders and tn
private borrowing and spenuin,
which they stimulate exceed The &C
tual budget expenditure figures
An effective stabilization program
requires that we hold Federal ex
penditures to the minimum neces
sary for national security ana
strong Nation. The January bud
get reflects such policy, and
know the Congress will apply tn,
same standard in reviewing it.
An effective stabilization program
also requires that taxes be higi
enough at least to balance the bud
get.
The Federal Government viii
show surplus for the curren
fiscal year, ending on June 30. Thi
is a good record. But, unfortun.
ately it does not mean we are on /,
y-as-we-go basis. During tn,
present quarter and from here OF
out, until taxes are raised, we will
be operating at deficit. The lat,
est figures show that to balance tn,
budget as defense outlays continu,
to rise will require the Congress K
enact during this year at least tn,
$40 billion in additional taxes
have recommended. -
Savings.
This is also the sensible time t.
put every possible dollar into saw.
ings. Every additional dollar savec
helps hold down the cost of living
and puts aside money that will be
available later on, when consumer
goods are again plentiful.
During World War II, the Ameri.
can people invested unprecedented
amounts in savings bonds, thus
billions of dollars
which otherwise would have pushed
prices upward during the war; after
the war those savings helped many
a family. It is vital again now tc
encourage savings-through payroll
savings plans and other regular
methods of savings bond purchase
and through encouraging people tc
hold on to their savings bonds as
they come due, and thereby earn
more interest.
Credit Controls.
Credit controls, like taxation and
savings, attack imitation at the
source, by reducing purchasing
power which would otherwise be
used to bid up the prices
of goods.
A good deal has been done since
last June to curtail the expansion
Of consumer and real estate credit,
Higher down payments and quicker
of balances are being re-
quired of buyers of new houses,
automobiles, household appliances,
and other durable goods. These
credit controls are already showing
good reSultS-for example, the
amount of credit outstanding to
buyers of automobiles, which had
risen steadily since 1915, has de-
clined every month since last Oc-
tober and total installment credit
dropped by about half billion dol
lars in the first three months of
this year. -
Several steps have been taken to
dampen bank credit expansion
The discount rates of the Federal
Reserve banks have been raised.
The Federal Reserve Board has in
creased the reserve requirements of
member banks almost to the legal
maximum. The Treasury has Of
fered long-term non-marketable
bonds in exchange for long-term
marketable bonds, in order to cut
down the supply of securities that
might be used for credit expansion.
In addition, the Federal Reserve
Board has recently requested all
banks and other lenders to cut
down on their on-essential lend
Ing. Government lending agencies
are already applying strict stan
dards in screening and limiting
their loans.
1t is not yet clear whether fur
ther actions will be needed, but we
should obviously be prepared to
take them. The Government has
certain emergency powers it can
use to place direct controls over
bank lending, if that proves to be
necessary. In addition, l believe
that the Federal Reserve Board
should be given authority by the
Congress to impose additional re-
quirements for bank reserves. I ex-
pect to transmit specific recon-
on this subject to the