Evening star., 1962-04-12
SteeI's Shocker

If Big Steels price hike was the
opening gun in a planned war with the
Kennedy administration, as some people
believe, the battle now has been fully
joined. And nothing could be more
certain than the ultimate clobbering
Of the industry.
United States Steel attempts to
justify its S6-per-ton price increase.
It says that in the past three years
1t has spent $1,185 100000 to modernize
and replace facilities and to develop
new sources of raw materials. This was
essential in order to remain competitive,
the company says, and for this and
other reasons it had to borrow $500
million during the three-year period
a loan which must be repaid out of
profits which have not yet been
earned. During these years, the COM
pany adds, its profits have dropped to
the lowest levels since 1852, it has
had to meet four industry-wide wage
increases aggregating about 40 cents
an hour, and, in all, it experienced
a net increase of about 6 per cent in
costs" prior to this new contract despite
cost reductions resulting from improved
facilities, better techniqueS, etc. In the
face of this, the company concludes,
its 3.5 per cent price increase was fully
justified.
The Presidents dissenting opinion
came through loud and clear. The price
boosts by U. S. Steel and the other
companies, he declared, constitute
wholly unjuStifiable and irresponsible
defiance of the public interest" A
tiny handful of steel executives" have
shown utter contempt for the interests
of 185 million Americans" Steel costs
do not justify price increase. EN-
ployment costs per unit of steel output
in 1861 were essentially the same as
they were in 1883" And the cost of
the major raw materials, steel scrap
and coal, has also been declining.
This seemingly irreconcilable con-
flict arises, we suppose, from the fact
that U. S. Steel and the President
were not talking about precisely the
same things. But the Presidents highly
emotional message will stick in the
public mind long after steel's story has
been forgotten.
This is so because the public in
tereSt almost surely will suffer from
the steel price boost. 1t will add an
estimated 81 billion to defense costs.
If it spreads throughout industry, as
steel hikes historically have done, it
will mean higher prices to the consumer
for all commodities in which steel is
a significant element. It will adversely
affect our ability to compete in foreign
markets and to meet competition from
abroad in our domestic markets. It
will make it harder to stem the out
flow of gold which is threatening the
value of the dollar. Finally, it could
well be a fatal blow to whatever hope
there was of Stabilizing our economy
and holding the line on prices. For
there is little prospect now of self
restraint on anyone'S part. More prob
able is a renewal of the Spiraling race
between higher prices and higher wages,
with an accompanying initiation which
will deal harshly with most Americans
In the face of all this, the manner
and the timing of the steel increase
are very hard to understand. Not only
steel, but all industry, may suffer from
the threatful implications of the Pres
ident's remarks. Even if one accepts
SteelS arguments, the price boost still
is a performance which brings to mind
the old ditty about the man who was
determined to maintain his right-of-
way-the man who was right, quite
right, as he drove along, but who's just
as dead as if he'd been wrong.