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by Harry S. Truman
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Title: State of the Union Addresses of Harry S. Truman

Author: Harry S. Truman

Release Date: February, 2004  [EBook #5039]
[Yes, we are more than one year ahead of schedule]
[This file was first posted on April 11, 2002]
[Date last updated: December 16, 2004]

Edition: 11

Language: English

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*** START OF THE PROJECT GUTENBERG EBOOK OF ADDRESSES BY HARRY S. TRUMAN ***




This eBook was produced by James Linden.

The addresses are separated by three asterisks: ***

Dates of addresses by Harry S. Truman in this eBook:
  January 21, 1946
  January 6, 1947
  January 7, 1948
  January 5, 1949
  January 4, 1950
  January 8, 1951
  January 9, 1952
  January 7, 1953



***

State of the Union Address
Harry S. Truman
January 21, 1946

To the Congress of the United States:

A quarter century ago the Congress decided that it could no longer consider
the financial programs of the various departments on a piecemeal basis.
Instead it has called on the President to present a comprehensive Executive
Budget. The Congress has shown its satisfaction with that method by
extending the budget system and tightening its controls. The bigger and
more complex the Federal Program, the more necessary it is for the Chief
Executive to submit a single budget for action by the Congress.

At the same time, it is clear that the budgetary program and the general
program of the Government are actually inseparable. The president bears the
responsibility for recommending to the Congress a comprehensive set of
proposals on all Government activities and their financing. In formulating
policies, as in preparing budgetary estimates, the Nation and the Congress
have the right to expect the President to adjust and coordinate the views
of the various departments and agencies to form a unified program. And that
program requires consideration in connection with the Budget, which is the
annual work program of the Government.

Since our programs for this period which combines war liquidation with
reconversion to a peacetime economy are inevitably large and numerous it is
imperative that they be planned and executed with the utmost efficiency and
the utmost economy. We have cut the war program to the maximum extent
consistent with national security. We have held our peacetime programs to
the level necessary to our national well-being and the attainment of our
postwar objectives. Where increased programs have been recommended, the
increases have been held as low as is consistent with these goals. I can
assure the Congress of the necessity of these programs. I can further
assure the Congress that the program as a whole is well within our capacity
to finance it. All the programs I have recommended for action are included
in the Budget figures.

For these reasons I have chosen to combine the customary Message on the
State of the Union with the annual Budget Message, and to include in the
Budget not only estimates for functions authorized by the Congress, but
also for those which I recommend for its action.

I am also transmitting herewith the Fifth Quarterly Report of the Director
of War Mobilization and Reconversion.[1] It is a comprehensive discussion of
the present state of the reconversion program and of the immediate and
long-range needs and recommendations.

[Footnote 1: The report dated January 1, 1946, and entitled "Battle for
Production" is printed in House Document 398 (79th Cong., 2d sess.).]

This constitutes, then, as complete a report as I find it possible to
prepare now. It constitutes a program of government in relation to the
Nation's needs.

With the growing responsibility of modern government to foster economic
expansion and to promote conditions that assure full and steady employment
opportunities, it has become necessary to formulate and determine the
Government program in the light of national economic conditions as a whole.
In both the executive and the legislative branches we must make
arrangements which will permit us to formulate the Government program in
that light. Such an approach has become imperative if the American
political and economic system is to succeed under the conditions of
economic instability and uncertainty which we have to face. The Government
needs to assure business, labor, and agriculture that Government policies
will take due account of the requirements of a full employment economy. The
lack of that assurance would, I believe, aggravate the economic
instability.

With the passage of a full employment bill which I confidently anticipate
for the very near future, the executive and legislative branches of
government will be empowered to devote their best talents and resources in
subsequent years to preparing and acting on such a program.

I. FROM WAR TO PEACE--THE YEAR

OF DECISION

In his last Message on the State of the Union, delivered one year ago,
President Roosevelt said:

"This new year of 1945 can be the greatest year of achievement in human
history.

"1945 can see the final ending of the Nazi-Fascist reign of terror in
Europe.

"1945 can see the closing in of the forces of retribution about the center
of the malignant power of imperialistic Japan.

"Most important of all--1945 can and must see the substantial beginning of
the organization of world peace."

All those hopes, and more, were fulfilled in the year 1945. It was the
greatest year of achievement in human history. It saw the end of the
Nazi-Fascist terror in Europe, and also the end of the malignant power of
Japan. And it saw the substantial beginning of world organization for
peace. These momentous events became realities because of the steadfast
purpose of the United Nations and of the forces that fought for freedom
under their flags. The plain fact is that civilization was saved in 1945 by
the United Nations.

Our own part in this accomplishment was not the product of any single
service. Those who fought on land, those who fought on the sea, and those
who fought in the air deserve equal credit. They were supported by other
millions in the armed forces who through no fault of their own could not go
overseas and who rendered indispensable service in this country. They were
supported by millions in all levels of government, including many
volunteers, whose devoted public service furnished basic organization and
leadership. They were also supported by the millions of Americans in
private life--men and women in industry, in commerce, on the farms, and in
all manner of activity on the home front--who contributed their brains and
their brawn in arming, equipping, and feeding them. The country was brought
through four years of peril by an effort that was truly national in
character.

Everlasting tribute and gratitude will be paid by all Americans to those
brave men who did not come back, who will never come back--the 330,000 who
died that the Nation might live and progress. All Americans will also
remain deeply conscious of the obligation owed to that larger number of
soldiers, sailors, and marines who suffered wounds and sickness in their
service. They may be certain that their sacrifice will never be forgotten
or their needs neglected.

The beginning of the year 1946 finds the United States strong and
deservedly confident. We have a record of enormous achievements as a
democratic society in solving problems and meeting opportunities as they
developed. We find ourselves possessed of immeasurable advantages--vast and
varied natural resources; great plants, institutions, and other facilities;
unsurpassed technological and managerial skills; an alert, resourceful, and
able citizenry. We have in the United States Government rich resources in
information, perspective, and facilities for doing whatever may be found
necessary to do in giving support and form to the widespread and
diversified efforts of all our people.

And for the immediate future the business prospects are generally so
favorable that there is danger of such feverish and opportunistic activity
that our grave postwar problems may be neglected. We need to act now with
full regard for pitfalls; we need to act with foresight and balance. We
should not be lulled by the immediate alluring prospects into forgetting
the fundamental complexity of modern affairs, the catastrophe that can come
in this complexity, or the values that can be wrested from it.

But the long-range difficulties we face should no more lead to despair than
our immediate business prospects should lead to the optimism which comes
from the present short-range prospect. On the foundation of our victory we
can build a lasting peace, with greater freedom and security for mankind in
our country and throughout the world. We will more certainly do this if we
are constantly aware of the fact that we face crucial issues and prepare
now to meet them.

To achieve success will require both boldness in setting our sights and
caution in steering our way on an uncharted course. But we have no luxury
of choice. We must move ahead. No return to the past is possible.

Our Nation has always been a land of great opportunities for those people
of the world who sought to become part of us. Now we have become a land of
great responsibilities to all the people of all the world. We must squarely
recognize and face the fact of those responsibilities. Advances in science,
in communication, in transportation, have compressed the world into a
community. The economic and political health of each member of the world
community bears directly on the economic and political health of each other
member.

The evolution of centuries has brought us to a new era in world history in
which manifold relationships between nations must be formalized and
developed in new and intricate ways.

The United Nations Organization now being established represents a minimum
essential beginning. It must be developed rapidly and steadily. Its work
must be amplified to fill in the whole pattern that has been outlined.
Economic collaboration, for example, already charted, now must be carried
on as carefully and as comprehensively as the political and security
measures.

It is important that the nations come together as States in the Assembly
and in the Security Council and in the other specialized assemblies and
councils that have been and will be arranged. But this is not enough. Our
ultimate security requires more than a process of consultation and
compromise.

It requires that we begin now to develop the United Nations Organization as
the representative of the world as one society. The United Nations
Organization, if we have the will adequately to staff it and to make it
work as it should, will provide a great voice to speak constantly and
responsibly in terms of world collaboration and world well-being.

There are many new responsibilities for us as we enter into this new
international era. The whole power and will and wisdom of our Government
and of our people should be focused to contribute to and to influence
international action. It is intricate, continuing business. Many
concessions and adjustments will be required.

The spectacular progress of science in recent years makes these necessities
more vivid and urgent. That progress has speeded internal development and
has changed world relationships so fast that we must realize the fact of a
new era. It is an era in which affairs have become complex and rich in
promise. Delicate and intricate relationships, involving us all in
countless ways, must be carefully considered.

On the domestic scene, as well as on the international scene, we must lay a
new and better foundation for cooperation. We face a great peacetime
venture; the challenging venture of a free enterprise economy making full
and effective use of its rich resources and technical advances. This is a
venture in which business, agriculture, and labor have vastly greater
opportunities than heretofore. But they all also have vastly greater
responsibilities. We will not measure up to those responsibilities by the
simple return to "normalcy" that was tried after the last war.

The general objective, on the contrary, is to move forward to find the way
in time of peace to the full utilization and development of our physical
and human resources that were demonstrated so effectively in the war.

To accomplish this, it is not intended that the Federal Government should
do things that can be done as well for the Nation by private enterprise, or
by State and local governments. On the contrary, the war has demonstrated
how effectively we can organize our productive system and develop the
potential abilities of our people by aiding the efforts of private
enterprise.

As we move toward one common objective there will be many and urgent
problems to meet.

Industrial peace between management and labor will have to be
achieved--through the process of collective bargaining--with Government
assistance but not Government compulsion. This is a problem which is the
concern not only of management, labor, and the Government, but also the
concern of every one of us.

Private capital and private management are entitled to adequate reward for
efficiency, but business must recognize that its reward results from the
employment of the resources of the Nation. Business is a public trust and
must adhere to national standards in the conduct of its affairs. These
standards include as a minimum the establishment of fair wages and fair
employment practices.

Labor also has its own new peacetime responsibilities. Under our collective
bargaining system, which must become progressively more secure, labor
attains increasing political as well as economic power, and this, as with
all power, means increased responsibility.

The lives of millions of veterans and war workers will be greatly affected
by the success or failure of our program of war liquidation and
reconversion. Their transition to peacetime pursuits will be determined by
our efforts to break the bottlenecks in key items of production, to make
surplus property immediately available where it is needed, to maintain an
effective national employment service, and many other reconversion
policies. Our obligations to the people who won the war will not be paid if
we fail to prevent inflation and to maintain employment opportunities.

While our peacetime prosperity will be based on the private enterprise the
government can and must assist in many ways. It is the Government's
responsibility to see that our economic system remains competitive, that
new businesses have adequate opportunities, and that our national resources
are restored and improved. Government must realize the effect of its
operations on the whole economy. It is the responsibility of Government to
gear its total program to the achievement of full production and full
employment.

Our basic objective--toward which all others lead--is to improve the
welfare of the American people. In addition to economic prosperity, this
means that we use social security in the fullest sense of the word. And
people must be protected from excessive want during old age, sickness, and
unemployment. Opportunities for a good economy and adequate medical care
must be readily available. Every family should build a decent home. The new
economic rights to which I have referred on previous occasions is a charter
of economic freedom which seeks to assure that all who will may work toward
their own security and the general advancement; that we become a
well-housed people, a well-nourished people, an educated people, a people
socially and economically secure, an alert and responsible people.

These and other problems which may face us can be met by the cooperation of
all of us in furthering a positive and well-balanced Government program--a
program which will further national and international well-being.

II. THE FEDERAL PROGRAM

INTERNATIONAL AFFAIRS

I. FOREIGN POLICY

The year 1945 brought with it the final defeat of our enemies. There lies
before us now the work of building a just and enduring peace.

Our most immediate task toward that end is to deprive our enemies
completely and forever of their power to start another war. Of even greater
importance to the preservation of international peace is the need to
preserve the wartime agreement of the United Nations and to direct it into
the ways of peace.

Long before our enemies surrendered, the foundations had been laid on which
to continue this unity in the peace to come. The Atlantic meeting in 1941
and the conferences at Casablanca, Quebec, Moscow, Cairo, Tehran, and
Dumbarton Oaks each added a stone to the structure.

Early in 1945, at Yalta, the three major powers broadened and solidified
this base of understanding. There fundamental decisions were reached
concerning the occupation and control of Germany. There also a formula was
arrived at for the interim government of the areas in Europe which were
rapidly being wrested from Nazi control. This formula was based on the
policy of the United States that people be permitted to choose their own
form of government by their own freely expressed choice without
interference from any foreign source.

At Potsdam, in July 1945, Marshal Stalin, Prime Ministers Churchill and
Attlee, and I met to exchange views primarily with respect to Germany. As a
result, agreements were reached which outlined broadly the policy to be
executed by the Allied Control Council. At Potsdam there was also
established a Council of Foreign Ministers which convened for the first
time in London in September. The Council is about to resume its primary
assignment of drawing up treaties of peace with Italy, Rumania, Bulgaria,
Hungary, and Finland.

In addition to these meetings, and, in accordance with the agreement at
Yalta, the Foreign Ministers of Great Britain, the Soviet Union, and the
United States conferred together in San Francisco last spring, in Potsdam
in July, in London in September, and in Moscow in December. These meetings
have been useful in promoting understanding and agreement among the three
governments.

Simply to name all the international meetings and conferences is to suggest
the size and complexity of the undertaking to prevent international war in
which the United States has now enlisted for the duration of history.

It is encouraging to know that the common effort of the United Nations to
learn to live together did not cease with the surrender of our enemies.

When difficulties arise among us, the United States does not propose to
remove them by sacrificing its ideals or its vital interests. Neither do we
propose, however, to ignore the ideals and vital interests of our friends.

Last February and March an Inter-American Conference on Problems of War and
Peace was held in Mexico City. Among the many significant accomplishments
of that Conference was an understanding that an attack by any country
against any one of the sovereign American republics would be considered an
act of aggression against all of them; and that if such an attack were made
or threatened, the American republics would decide jointly, through
consultations in which each republic has equal representation, what
measures they would take for their mutual protection. This agreement
stipulates that its execution shall be in full accord with the Charter of
the United Nations Organization.

The first meeting of the General Assembly of the United Nations now in
progress in London marks the real beginning of our bold adventure toward
the preservation of world peace, to which is bound the dearest hope of
men.

We have solemnly dedicated ourselves and all our will to the success of the
United Nations Organization. For this reason we have sought to insure that
in the peacemaking the smaller nations shall have a voice as well as the
larger states. The agreement reached at Moscow last month preserves this
opportunity in the making of peace with Italy, Rumania, Bulgaria, Hungary,
and Finland. The United States intends to preserve it when the treaties
with Germany and Japan are drawn.

It will be the continuing policy of the United States to use all its
influence to foster, support, and develop the United Nations Organization
in its purpose of preventing international war. If peace is to endure it
must rest upon justice no less than upon power. The question is how justice
among nations is best achieved. We know from day-to-day experience that the
chance for a just solution is immeasurably increased when everyone directly
interested is given a voice. That does not mean that each must enjoy an
equal voice, but it does mean that each must be heard.

Last November, Prime Minister Attlee, Prime Minister MacKenzie King, and I
announced our proposal that a commission be established within the
framework of the United Nations to explore the problems of effective
international control of atomic energy.

The Soviet Union, France, and China have joined us in the purpose of
introducing in the General Assembly a resolution for the establishment of
such a commission. Our earnest wish is that the work of this commission go
forward carefully and thoroughly, but with the greatest dispatch. I have
great hope for the development of mutually effective safeguards which will
permit the fullest international control of this new atomic force.

I believe it possible that effective means can be developed through the
United Nations Organization to prohibit, outlaw, and prevent the use of
atomic energy for destructive purposes.

The power which the United States demonstrated during the war is the fact
that underlies every phase of our relations with other countries. We cannot
escape the responsibility which it thrusts upon us. What we think, plan,
say, and do is of profound significance to the future of every corner of
the world.

The great and dominant objective of United States foreign policy is to
build and preserve a just peace. The peace we seek is not peace for twenty
years. It is permanent peace. At a time when massive changes are occurring
with lightning speed throughout the world, it is often difficult to
perceive how this central objective is best served in one isolated complex
situation or another. Despite this very real difficulty, there are certain
basic propositions to which the United States adheres and to which we shall
continue to adhere.

One proposition is that lasting peace requires genuine understanding and
active cooperation among the most powerful nations. Another is that even
the support of the strongest nations cannot guarantee a peace unless it is
infused with the quality of justice for all nations.

On October 27, 1945, I made, in New York City, the following public
statement of my understanding of the fundamental foreign policy of the
United States. I believe that policy to be in accord with the opinion of
the Congress and of the people of the United States. I believe that that
policy carries out our fundamental objectives.

1. We seek no territorial expansion or selfish advantage. We have no plans
for aggression against any other state, large or small. We have no
objective which need clash with the peaceful aims of any other nation.

2. We believe in the eventual return of sovereign rights and
self-government to all peoples who have been deprived of them by force.

3. We shall approve no territorial changes in any friendly part of the
world unless they accord with the freely expressed wishes of the people
concerned.

4. We believe that all peoples who are prepared for self-government should
be permitted to choose their own form of government by their own freely
expressed choice, without interference from any foreign source. That is
true in Europe, in Asia, in Africa, as well as in the Western Hemisphere.

5. By the combined and cooperative action of our war allies, we shall help
the defeated enemy states establish peaceful democratic governments of
their own free choice. And we shall try to attain a world in which nazism,
fascism, and military aggression cannot exist.

6. We shall refuse to recognize any government imposed upon any nation by
the force of any foreign power. In some cases it may be impossible to
prevent forceful imposition of such a government. But the United States
will not recognize any such government.

7. We believe that all nations should have the freedom of the seas and
equal rights to the navigation of boundary rivers and waterways and of
rivers and waterways which pass through more than one country.

8. We believe that all states which are accepted in the society of nations
should have access on equal terms to the trade and the raw materials of the
world.

9. We believe that the sovereign states of the Western Hemisphere, without
interference from outside the Western Hemisphere, must work together as
good neighbors in the solution of their common problems.

10. We believe that full economic collaboration between all nations, great
and small, is essential to the improvement of living conditions all over
the world, and to the establishment of freedom from fear and freedom from
want.

11. We shall continue to strive to promote freedom of expression and
freedom of religion throughout the peace-loving areas of the world.

12. We are convinced that the preservation of peace between nations
requires a United Nations Organization composed of all the peace-loving
nations of the world who are willing jointly to use force, if necessary, to
insure peace.

That is our foreign policy.

We may not always fully succeed in our objectives. There may be instances
where the attainment of those objectives is delayed. But we will not give
our full sanction and approval to actions which fly in the face of these
ideals.

The world has a great stake in the political and economic future of
Germany. The Allied Control Council has now been in operation there for a
substantial period of time. It has not met with unqualified success. The
accommodation of varying views of four governments in the day-to-day civil
administration of occupied territory is a challenging task. In my judgment,
however, the Council has made encouraging progress in the face of most
serious difficulties. It is my purpose at the earliest practicable date to
transfer from military to civilian personnel the execution of United States
participation in the government of occupied territory in Europe. We are
determined that effective control shall be maintained in Germany until we
are satisfied that the German people have regained the right to a place of
honor and respect.

On the other side of the world, a method of international cooperation has
recently been agreed upon for the treatment of Japan. In this pattern of
control, the United States, with the full approval of its partners, has
retained primary authority and primary responsibility. It will continue to
do so until the Japanese people, by their own freely expressed choice,
choose their own form of government.

Our basic policy in the Far East is to encourage the development of a
strong, independent, united, and democratic China. That has been the
traditional policy of the United States.

At Moscow the United States, the Union of Soviet Socialist Republics, and
Great Britain agreed to further this development by supporting the efforts
of the national government and nongovernmental Chinese political elements
in bringing about cessation of civil strife and in broadening the basis of
representation in the Government. That is the policy which General Marshall
is so ably executing today.

It is the purpose of the Government of the United States to proceed as
rapidly as is practicable toward the restoration of the sovereignty of
Korea and the establishment of a democratic government by the free choice
of the people of Korea.

At the threshold of every problem which confronts us today in international
affairs is the appalling devastation, hunger, sickness, and pervasive human
misery that mark so many areas of the world.

By joining and participating in the work of the United Nations Relief and
Rehabilitation Administration the United States has directly recognized and
assumed an obligation to give such relief assistance as is practicable to
millions of innocent and helpless victims of the war. The Congress has
earned the gratitude of the world by generous financial contributions to
the United Nations Relief and Rehabilitation Administration.

We have taken the lead, modest though it is, in facilitating under our
existing immigration quotas the admission to the United States of refugees
and displaced persons from Europe.

We have joined with Great Britain in the organization of a commission to
study the problem of Palestine. The Commission is already at work and its
recommendations will be made at an early date.

The members of the United Nations have paid us the high compliment of
choosing the United States as the site of the United Nations headquarters.
We shall be host in spirit as well as in fact, for nowhere does there abide
a fiercer determination that this peace shall live than in the hearts of
the American people.

It is the hope of all Americans that in time future historians will speak
not of World War I and World War II, but of the first and last world wars.

2. FOREIGN ECONOMIC POLICY

The foreign economic policy of the United States is designed to promote our
own prosperity, and at the same time to aid in the restoration and
expansion of world markets and to contribute thereby to world peace and
world security. We shall continue our efforts to provide relief from the
devastation of war, to alleviate the sufferings of displaced persons, to
assist in reconstruction and development, and to promote the expansion of
world trade.

We have already joined the International Monetary Fund and the
International Bank for Reconstruction and Development. We have expanded the
Export-Import Bank and provided it with additional capital. The Congress
has renewed the Trade Agreements Act which provides the necessary framework
within which to negotiate a reduction of trade barriers on a reciprocal
basis. It has given our support to the United Nations Relief and
Rehabilitation Administration.

In accordance with the intentions of the Congress, lend-lease, except as to
continuing military lend-lease in China, was terminated upon the surrender
of Japan. The first of the lend-lease settlement agreements has been
completed with the United Kingdom. Negotiations with other lend-lease
countries are in progress. In negotiating these agreements, we intend to
seek settlements which will not encumber world trade through war debts of a
character that proved to be so detrimental to the stability of the world
economy after the last war.

We have taken steps to dispose of the goods which on VJ-day were in the
lend-lease pipe line to the various lend-lease countries and to allow them
long-term credit for the purpose where necessary. We are also making
arrangements under which those countries may use the lend-lease inventories
in their possession and acquire surplus property abroad to assist in their
economic rehabilitation and reconstruction. These goods will be accounted
for at fair values.

The proposed loan to the United Kingdom, which I shall recommend to the
Congress in a separate message, will contribute to easing the transition
problem of one of our major partners in the war. It will enable the whole
sterling area and other countries affiliated with it to resume trade on a
multilateral basis. Extension of this credit will enable the United Kingdom
to avoid discriminatory trade arrangements of the type which destroyed
freedom of trade during the 1930's. I consider the progress toward
multilateral trade which will be achieved by this agreement to be in itself
sufficient warrant for the credit.

The view of this Government is that, in the longer run, our economic
prosperity and the prosperity of the whole world are best served by the
elimination of artificial barriers to international trade, whether in the
form of unreasonable tariffs or tariff preferences or commercial quotas or
embargoes or the restrictive practices of cartels.

The United States Government has issued proposals for the expansion of
world trade and employment to which the Government of the United Kingdom
has given its support on every important issue. These proposals are
intended to form the basis for a trade and employment conference to be held
in the middle of this year. If that conference is a success, I feel
confident that the way will have been adequately prepared for an expanded
and prosperous world trade.

We shall also continue negotiations looking to the full and equitable
development of facilities for transportation and communications among
nations.

The vast majority of the nations of the world have chosen to work together
to achieve, on a cooperative basis, world security and world prosperity.
The effort cannot succeed without full cooperation of the United States. To
play our part, we must not only resolutely carry out the foreign policies
we have adopted but also follow a domestic policy which will maintain full
production and employment in the United States. A serious depression here
can disrupt the whole fabric of the world economy.

3. OCCUPIED COUNTRIES

The major tasks of our Military Establishment in Europe following VE-day,
and in the Pacific since the surrender of Japan, have been those of
occupation and military government. In addition we have given much needed
aid to the peoples of the liberated countries.

The end of the war in Europe found Germany in a chaotic condition.
Organized government had ceased to exist, transportation systems had been
wrecked, cities and industrial facilities had been bombed into ruins. In
addition to the tasks of occupation we had to assume all of the functions
of government. Great progress has been made in the repatriation of
displaced persons and of prisoners of war. Of the total of 3,500,000
displaced persons found in the United States zone only 460,000 now remain.

The extensive complications involved by the requirement of dealing with
three other governments engaged in occupation and with the governments of
liberated countries require intensive work and energetic cooperation. The
influx of some 2 million German refugees into our zone of occupation is a
pressing problem, making exacting demands upon an already overstrained
internal economy.

Improvements in the European economy during 1945 have made it possible for
our military authorities to relinquish to the governments of all liberated
areas, or to the United Nations Relief and Rehabilitation Administration,
the responsibility for the provision of food and other civilian relief
supplies. The Army's responsibilities in Europe extend now only to our
zones of occupation in Germany and Austria and to two small areas in
northern Italy.

By contrast with Germany, in Japan we have occupied a country still
possessing an organized and operating governmental system. Although
severely damaged, the Japanese industrial and transportation systems have
been able to insure at least a survival existence for the population. The
repatriation of Japanese military and civilian personnel from overseas is
proceeding as rapidly as shipping and other means permit.

In order to insure that neither Germany nor Japan will again be in a
position to wage aggressive warfare, the armament making potential of these
countries is being dismantled and fundamental changes in their social and
political structures are being effected. Democratic systems are being
fostered to the end that the voice of the common man may be heard in the
councils of his government.

For the first time in history the legal culpability of war makers is being
determined. The trials now in progress in Nurnberg-and those soon to begin
in Tokyo--bring before the bar of international justice those individuals
who are charged with the responsibility for the sufferings of the past six
years. We have high hope that this public portrayal of the guilt of these
evildoers will bring wholesale and permanent revulsion on the part of the
masses of our former enemies against war, militarism, aggression, and
notions of race superiority.

4. DEMOBILIZATION OF OUR ARMED FORCES

The cessation of active campaigning does not mean that we can completely
disband our fighting forces. For their sake and for the sake of their loved
ones at home, I wish that we could. But we still have the task of clinching
the victories we have won--of making certain that Germany and Japan can
never again wage aggressive warfare, that they will not again have the
means to bring on another world war. The performance of that task requires
that, together with our allies, we occupy the hostile areas, complete the
disarmament of our enemies, and take the necessary measures to see to it
that they do not rearm.

As quickly as possible, we are bringing about the reduction of our armed
services to the size required for these tasks of occupation and
disarmament. The Army and the Navy are following both length-of-service and
point systems as far as possible in releasing men and women from the
service. The points are based chiefly on length and character of service,
and on the existence of dependents.

Over 5 million from the Army have already passed through the separation
centers.

The Navy, including the Marine Corps and the Coast Guard, has discharged
over one and a half million.

Of the 12 million men and women serving in the Army and Navy at the time of
the surrender of Germany, one-half have already been released. The greater
part of these had to be brought back to this country from distant parts of
the world.

Of course there are cases of individual hardship in retention of personnel
in the service. There will be in the future. No system of such size can
operate to perfection. But the systems are rounded on fairness and justice,
and they are working at full speed. We shall try to avoid mistakes,
injustices, and hardship--as far as humanly possible.

We have already reached the point where shipping is no longer the
bottleneck in the return of troops from the European theater. The governing
factor now has become the requirement for troops in sufficient strength to
carry out their missions.

In a few months the same situation will exist in the Pacific. By the end of
June, 9 out of 10 who were serving in the armed forces on VE-day will have
been released. Demobilization will continue thereafter, but at a slower
rate, determined by our military responsibilities.

Our national safety and the security of the world will require substantial
armed forces, particularly in overseas service. At the same time it is
imperative that we relieve those who have already done their duty, and that
we relieve them as fast as we can. To do that, the Army and the Navy are
conducting recruiting drives with considerable success.

The Army has obtained nearly 400,000 volunteers in the past four months,
and the Navy has obtained 80,000. Eighty percent of these volunteers for
the regular service have come from those already with the colors. The
Congress has made it possible to offer valuable inducements to those who
are eligible for enlistment. Every effort will be made to enlist the
required number of young men.

The War and Navy Departments now estimate that by a year from now we still
will need a strength of about 2 million including officers, for the armed
forces--Army, Navy, and Air. I have reviewed their estimates and believe
that the safety of the Nation will require the maintenance of an armed
strength of this size for the calendar year that is before us.

In case the campaign for volunteers does not produce that number, it will
be necessary by additional legislation to extend the Selective Service Act
beyond May 16, the date of expiration under existing law. That is the only
way we can get the men and bring back our veterans. There is no other way.
Action along this line should not be postponed beyond March, in order to
avoid uncertainty and disruption.

DOMESTIC AFFAIRS

I. THE ECONOMIC OUTLOOK

Prophets of doom predicted that the United States could not escape a
runaway inflation during the war and an economic collapse after the war.
These predictions have not been borne out. On the contrary, the record of
economic stabilization during the war and during the period of reconversion
has been an outstanding accomplishment.

We know, however, that nothing is as dangerous as overconfidence, in war or
in peace. We have had to fight hard to hold the line. We have made
strenuous efforts to speed reconversion. But neither the danger of a
postwar inflation nor of a subsequent collapse in production and employment
is yet overcome. We must base our policies not on unreasoning optimism or
pessimism but upon a candid recognition of our objectives and upon a
careful analysis of foreseeable trends.

Any precise appraisal of the economic outlook at this time is particularly
difficult. The period of demobilization and reconversion is fraught with
uncertainties. There are also serious gaps in our statistical information.
Certain tendencies are, however, fairly clear and recognition of them
should serve as background for the consideration of next year's Federal
Program. In general, the outlook for business is good, and it is likely to
continue to be good--provided we control inflation and achieve peace in
management labor relations.

Civilian production and employment can be expected to increase throughout
the next year. This does not mean, however, that continuing full employment
is assured. It is probable that demobilization of the armed forces will
proceed faster than the increase in civilian employment opportunities. Even
if substantial further withdrawals from the labor market occur,
unemployment will increase temporarily. The extent to which this
unemployment will persist depends largely on the speed of industrial
expansion and the effectiveness of the policies of the Federal Government.

Along with extraordinary demand there are still at this time many critical
shortages resulting from the war. These extraordinary demands and shortages
may lead to a speculative boom, especially in the price of securities, real
estate, and inventories.

Therefore, our chief worry still is inflation. While we control this
inflationary pressure we must look forward to the time when this
extraordinary demand will subside. It will be years before we catch up with
the demand for housing. The extraordinary demand for other durable goods,
for the replenishment of inventories, and for exports may be satisfied
earlier. No backlog of demand can exist very long in the face of our
tremendous productive capacity. We must expect again to face the problem of
shrinking demand and consequent slackening in sales, production, and
employment. This possibility of a deflationary spiral in the future will
exist unless we now plan and adopt an effective full employment program.

2. GENERAL POLICIES--IMMEDIATE AND LONG-RANGE

During the war, production for civilian use was limited by war needs and
available manpower. Economic stabilization required measures, to spread
limited supplies equitably by rationing, price controls, increased taxes,
savings bond campaigns, and credit controls. Now, with the surrender of our
enemies, economic stabilization requires that policies be directed toward
promoting an increase in supplies at low unit prices.

We must encourage the development of resources and enterprises in all parts
of the country, particularly in underdeveloped areas. For example, the
establishment of new peacetime industries in the Western States and in the
South would, in my judgment, add to existing production and markets rather
than merely bring about a shifting of production. I am asking the
Secretaries of Agriculture, Commerce, and Labor to explore jointly methods
for stimulating new industries, particularly in areas with surplus
agricultural labor.

We must also aid small businessmen and particularly veterans who are
competent to start their own businesses. The establishment and development
of efficient small business ventures, I believe, will not take away from,
but rather will add to, the total business of all enterprises.

Even with maximum encouragement of Production, we cannot hope to remove
scarcities within a short time. The most serious deficiencies will persist
in the fields of residential housing, building materials, and consumers'
durable goods. The critical situation makes continued rent control, price
control, and priorities, allocations, and inventory controls absolutely
essential. Continued control of consumer credit will help to reduce the
pressure on prices of durable goods and will also prolong the period during
which the backlog demand will be effective.

While we are meeting these immediate needs we must look forward to a
long-range program of security and increased standard of living.

The best protection of purchasing power is a policy of full production and
full employment opportunities. Obviously, an employed worker is a better
customer than an unemployed worker. There always will be, however, some
frictional unemployment. In the present period of transition we must deal
with such temporary unemployment as results from the fact that
demobilization will proceed faster than reconversion or industrial
expansion. Such temporary unemployment is probably unavoidable in a period
of rapid change. The unemployed worker is a victim of conditions beyond his
control. He should be enabled to maintain a reasonable standard of living
for himself and his family.

The most serious difficulty in the path of reconversion and expansion is
the establishment of a fair wage structure.

The ability of labor and management to work together, and the wage and
price policies which they develop, are social and economic issues of first
importance.

Both labor and management have a special interest. Labor's interest is very
direct and personal because working conditions, wages, and prices affect
the very life and happiness of the worker and his family.

Management has a no less direct interest because on management rests the
responsibility for conducting a growing and prosperous business.

But management and labor have identical interests in the long run. Good
wages mean good markets. Good business means more jobs and better wages. In
this age of cooperation and in our highly organized economy the problems of
one very soon become the problems of all.

Better human relationships are an urgent need to which organized labor and
management should address themselves. No government policy can make men
understand each other, agree, and get along unless they conduct themselves
in a way to foster mutual respect and good will.

The Government can, however, help to develop machinery which, with the
backing of public opinion, will assist labor and management to resolve
their disagreements in a peaceful manner and reduce the number and duration
of strikes.

All of us realize that productivity--increased output per man--is in the
long run the basis of our standard of living. Management especially must
realize that if labor is to work wholeheartedly for an increase in
production, workers must be given a just share of increased output in
higher wages.

Most industries and most companies have adequate leeway within which to
grant substantial wage increases. These increases will have a direct effect
in increasing consumer demand to the high levels needed. Substantial wage
increases are good business for business because they assure a large market
for their products; substantial wage increases are good business for labor
because they increase labor's standard of living; substantial wage
increases are good business for the country as a whole because capacity
production means an active, healthy, friendly citizenry enjoying the
benefits of democracy under our free enterprise system.

Labor and management in many industries have been operating successfully
under the Government's wage-price policy. Upward revisions of wage scales
have been made in thousands of establishments throughout the Nation since
VJ-day. It is estimated that about 6 million workers, or more than 20
percent of all employees in nonagricultural and nongovernmental
establishments, have received wage increases since August 18, 1945. The
amounts of increases given by individual employers concentrate between 10
and 15 percent, but range from less than 5 percent to over 30 percent.

The United States Conciliation Service since VJ-day has settled over 3,000
disputes affecting over 1,300,000 workers without a strike threat and has
assisted in settling about 1,300 disputes where strikes were threatened
which involved about 500,000 workers. Only workers directly involved, and
not those in related industries who might have been indirectly affected,
are included in these estimates.

Many of these adjustments have occurred in key industries and would have
seemed to us major crises if they had not been settled peaceably.

Within the framework of the wage-price policy there has been definite
success, and it is to be expected that this success will continue in a vast
majority of the cases arising in the months ahead.

However, everyone who realizes the extreme need for a swift and orderly
reconversion must feel a deep concern about the number of major strikes now
in progress. If long continued, these strikes could put a heavy brake on
our program.

I have already made recommendations to the Congress as to the procedure
best adapted to meeting the threat of work stoppages in Nation-wide
industries without sacrificing the fundamental rights of labor to bargain
collectively and ultimately to strike in support of their position.

If we manage our economy properly, the future will see us on a level of
production half again as high as anything we have ever accomplished in
peacetime. Business can in the future pay higher wages and sell for lower
prices than ever before. This is not true now for all companies, nor will
it ever be true for all, but for business generally it is true.

We are relying on all concerned to develop, through collective bargaining,
wage structures that are fair to labor, allow for necessary business
incentives, and conform with a policy designed to "hold the line" on
prices.

Production and more production was the byword during the war and still is
during the transition from war to peace. However, when deferred demand
slackens, we shall once again face the deflationary dangers which beset
this and other countries during the 1930's. Prosperity can be assured only
by a high level of demand supported by high current income; it cannot be
sustained by deferred needs and use of accumulated savings.

If we take the right steps in time we can certainly avoid the disastrous
excesses of runaway booms and headlong depressions. We must not let a year
or two of prosperity lull us into a false feeling of security and a
repetition of the mistakes of the 1920's that culminated in the crash of
1929.

During the year ahead the Government will be called upon to act in many
important fields of economic policy from taxation and foreign trade to
social security and housing. In every case there will be alternatives. We
must choose the alternatives which will best measure up to our need for
maintaining production and employment in the future. We must never lose
sight of our long-term objectives: the broadening of markets--the
maintenance of steadily rising demand. This demand can come from only three
sources: consumers, businesses, or government.

In this country the job of production and distribution is in the hands of
businessmen, farmers, workers, and professional people-in the hands of our
citizens. We want to keep it that way. However, it is the Government's
responsibility to help business, labor, and farmers do their jobs.

There is no question in my mind that the Government, acting on behalf of
all the people, must assume the ultimate responsibility for the economic
health of the Nation. There is no other agency that can. No other
organization has the scope or the authority, nor is any other agency
accountable, to all the people. This does not mean that the Government has
the sole responsibility, nor that it can do the job alone, nor that it can
do the job directly.

All of the policies of the Federal Government must be geared to the
objective of sustained full production and full employment-to raise
consumer purchasing power and to encourage business investment. The
programs we adopt this year and from now on will determine our ability to
achieve our objectives. We must continue to pay particular attention to our
fiscal, monetary, and tax policy, programs to aid business--especially
small business--and transportation, labor-management relations and
wage-price policy, social security and health, education, the farm program,
public works, housing and resource development, and economic foreign
policy.

For example, the kinds of tax measures we have at different times--whether
we raise our revenue in a way to encourage consumer spending and business
investment or to discourage it--have a vital bearing on this question. It
is affected also by regulations on consumer credit and by the money market,
which is strongly influenced by the rate of interest on Government
securities. It is affected by almost every step we take.

In short, the way we handle the proper functions of government, the way we
time the exercise of our traditional and legitimate governmental functions,
has a vital bearing on the economic health of the Nation.

These policies are discussed in greater detail in the accompanying Fifth
Quarterly Report of the Director of War Mobilization and Reconversion.

3. LEGISLATION HERETOFORE RECOMMENDED

AND STILL PENDING

To attain some of these objectives and to meet the other needs of the
United States in the reconversion and postwar period, I have from time to
time made various recommendations to the Congress.

In making these recommendations I have indicated the reasons why I deemed
them essential for progress at home and abroad. A few--a very few--of these
recommendations have been enacted into law by the Congress. Most of them
have not. I here reiterate some of them, and discuss others later in this
Message. I urge upon the Congress early consideration of them. Some are
more urgent than others, but all are necessary.

(1) Legislation to authorize the President to create fact-finding boards
for the prevention of stoppages of work in Nationwide industries after
collective bargaining and conciliation and voluntary arbitration have
failed--as recommended by me on December 3, 1945.

(2) Enactment of a satisfactory full employment bill such as the Senate
bill now in conference between the Senate and the House--as recommended by
me on September 6, 1945.

(3) Legislation to supplement the unemployment insurance benefits for
unemployed workers now provided by the different States--as recommended by
me on May 1945.

(4) Adoption of a permanent Fair Employment Practice Act--as recommended by
me on September 6, 1945.

(5) Legislation substantially raising the amount of minimum wages now
provided by law--as recommended by me on September 6, 1945.

(6) Legislation providing for a comprehensive program for scientific
research--as recommended by me on September 6, 1945.

(7) Legislation enacting a health and medical care program--as recommended
by me on November 19, 1945.

(8) Legislation adopting the program of universal training--as recommended
by me on October 23, 1945.

(9) Legislation providing an adequate salary scale for all Government
employees in all branches of the Government--as recommended by me on
September 6, 1945.

(10) Legislation making provision for succession to the Presidency in the
event of the death or incapacity or disqualification of the President and
Vice President--as recommended by me on June 19, 1945.

(11) Legislation for the unification of the armed services--as recommended
by me on December 19, 1945.

(12) Legislation for the domestic use and control of atomic energy--as
recommended by me on October 3, 1945.

(13) Retention of the United States Employment Service in the Federal
Government for a period at least up to June 30, 1947--as recommended by me
on September 6, 1945.

(14) Legislation to increase unemployment allowances for veterans in line
with increases for civilians--as recommended by me on September 6, 1945.

(15) Social security coverage for veterans for their period of military
service--as recommended by me on September 6, 1945.

(16) Extension of crop insurance--as recommended by me on September 6,
1945.

(17) Legislation permitting the sale of ships by the Maritime Commission at
home and abroad--as recommended by me on September 6, 1945. I further
recommend that this legislation include adequate authority for chartering
vessels both here and abroad.

(18) Legislation to take care of the stock piling of materials in which the
United States is naturally deficient--as recommended by me on September 6,
1945.

(19) Enactment of Federal airport legislation-as recommended by me on
September 6, 1945.

(20) Legislation repealing the Johnson Act on foreign loans--as recommended
by me on September 6, 1945.

(21) Legislation for the development of the Great Lakes-St. Lawrence River
Basin-as recommended by me on October 3, 1945.

4. POLICIES IN SPECIFIC FIELDS

(a) Extension of Price Control Act.

Today inflation is our greatest immediate domestic problem. So far the
fight against inflation has been waged successfully. Since May 1943,
following President Roosevelt's "hold the line" order and in the face of
the greatest pressures which this country has ever seen, the cost of living
index has risen only three percent. Wholesale prices in this same period
have been held to an increase of two and one-half percent.

This record has been made possible by the vigorous efforts of the agencies
responsible for this program. But their efforts would have been fruitless
if they had not had the solid support of the great masses of our people.
The Congress is to be congratulated for its role in providing the
legislation under which this work has been carried out.

On VJ-day it was clear to all thinking people that the danger of inflation
was by no means over. Many of us can remember vividly our disastrous
experience following World War I. Then the very restricted wartime controls
were lifted too quickly, and as a result prices and rents moved more
rapidly upward. In the year and a half following the armistice, rents,
food, and clothing shot to higher and still higher levels.

When the inevitable crash occurred less than two years after the end of the
war, business bankruptcies were widespread. Profits were wiped out.
Inventory losses amounted to billions of dollars. Farm income dropped by
one-half. Factory pay rolls dropped 40 percent, and nearly one-fifth of all
our industrial workers were walking the streets in search of jobs. This was
a grim greeting, indeed, to offer our veterans who had just returned from
overseas.

When I addressed the Congress in September, I emphasized that we must
continue to hold the price line until the production of goods caught up
with the tremendous demands. Since then we have seen demonstrated the
strength of the inflationary pressures which we have to face.

Retail sales in the closing months of 1945 ran 12 percent above the
previous peak for that season, which came in 1944. Prices throughout the
entire economy have been pressing hard against the price ceilings. The
prices of real estate, which cannot now be controlled under the law, are
rising rapidly. Commercial rents are not included in the present price
control law and, where they are not controlled by State law, have been
increasing, causing difficulties to many businessmen.

It will be impossible to maintain a high purchasing power or an expanding
production unless we can keep prices at levels which can be met by the vast
majority of our people. Full production is the greatest weapon against
inflation, but until we can produce enough goods to meet the threat of
inflation the Government will have to exercise its wartime control over
prices.

I am sure that the people of the United States are disturbed by the demands
made by several business groups with regard to price and rent control.

I am particularly disturbed at the effect such thinking may have on
production and employment. If manufacturers continue to hold back goods and
decline to submit bids when invited--as I am informed some are doing--in
anticipation of higher prices which would follow the end of price controls,
we shall inevitably slow down production and create needless unemployment.
On the other hand, there are the vast majority of American businessmen who
are not holding back goods, but who need certainty about the Government
pricing policy in order to fix their own long-range pricing policies.

Businessmen are entitled therefore to a dear statement of the policy of the
Government on the subject. Tenants and housewives, farmers and
workers--consumers in general--have an equal right.

We are all anxious to eliminate unnecessary controls just as rapidly as we
can do so. The steps that we have already taken in many directions toward
that end are a clear indication of our policy.

The present Price Control Act expires on June 30, 1946. If we expect to
maintain a steady economy we shall have to maintain price and rent control
for many months to come. The inflationary pressures on prices and rents,
with relatively few exceptions, are now at an all-time peak. Unless the
Price Control Act is renewed there will be no limit to which our price
levels would soar. Our country would face a national disaster.

We cannot wait to renew the act until immediately before it expires.
Inflation results from psychological as well as economic conditions. The
country has a clear right to know where the Congress stands on this
all-important problem. Any uncertainty now as to whether the act will be
extended gives rise to price speculation, to withholding of goods from the
market in anticipation of rising prices, and to delays in achieving maximum
production.

I do not doubt that the Congress will be beset by many groups who will urge
that the legislation that I have proposed should either be eliminated or
modified to the point where it is nearly useless. The Congress has a clear
responsibility to meet this challenge with courage and determination. I
have every confidence that it will do so.

I strongly urge that the Congress now resolve all doubts and as soon as
possible adopt legislation continuing rent and price control in effect for
a full year from June 30, 1946.

(b) Food subsidies.

If the price line is to be held, if our people are to be protected against
the inflationary dangers which confront us, we must do more than extend the
Price Control Act. In September we were hopeful that the inflationary
pressures would by this time have begun to diminish. We were particularly
hopeful on food. Indeed, it was estimated that food prices at retail would
drop from 3 to 5 percent in the first six months following the end of the
war.

In anticipation of this decline in food prices, it was our belief that food
subsidies could be removed gradually during the winter and spring months,
and eliminated almost completely by June 30 of this year. It was our
feeling that the food subsidies could be dropped without an increase to the
consumer in the present level of food prices or in the over-all cost of
living.

As matters stand today, however, food prices are pressing hard against the
ceilings. The expected decline in food prices has not occurred, nor is it
likely to occur for many months to come. This brings me to the reluctant
conclusion that food subsidies must be continued beyond June 30, 1946.

If we fail to take this necessary step, meat prices on July 1 will be from
3 to 5 cents higher than their average present levels; butter will be at
least 12 cents a pound higher, in addition to the 5 cents a pound increase
of last fall; milk will increase from 1 to 2 cents a quart; bread will
increase about 1 cent a loaf; sugar will increase over 1 cent a pound;
cheese, in addition to the increase of 4 cents now planned for the latter
part of this month, will go up an additional 8 cents. In terms of
percentages we may find the cost-of-living index for food increased by more
than 8 percent, which in turn would result in more than a 3-percent
increase in the cost of living.

If prices of food were allowed to increase by these amounts, I must make it
clear to the Congress that, in my opinion, it would become extremely
difficult for us to control the forces of inflation.

None of us likes subsidies. Our farmers, in particular, have always been
opposed to them.

But I believe our farmers are as deeply conscious as any group in the land
of the havoc which inflation can create. Certainly in the past eighteen
months there has been no group which has fought any harder in support of
the Government's price control program. I am confident that, if the facts
are placed before them and if they see clearly the evils between which we
are forced to choose, they will understand the reasons why subsidies must
be continued.

The legislation continuing the use of food subsidies into the new fiscal
year should be tied down specifically to certain standards. A very proper
requirement, in my opinion, would be that subsidies be removed as soon as
it is indicated that the cost of living will decline below the present
levels.

(c) Extension of War Powers Act.

The Second War Powers Act has recently been extended by the Congress for
six months instead of for a year. It will now expire, unless further
extended, on June 30, 1946. This act is the basis for priority and
inventory controls governing the use of scarce materials, as well as for
other powers essential to orderly reconversion.

I think that this Administration has given adequate proof of the fact that
it desires to eliminate wartime controls as quickly and as expeditiously as
possible. However, we know that there will continue to be shortages of
certain materials caused by the war even after June 30, 1946. It is
important that businessmen know now that materials in short supply are
going to be controlled and distributed fairly as long as these war-born
shortages continue.

I, therefore, urge the Congress soon to extend the Second War Powers Act.
We cannot afford to wait until just before the act expires next June. To
wait would cause the controls to break down in a short time, and would
hamper our production and employment program.

(d) Small business and competition.

A rising birth rate for small business, and a favorable environment for its
growth, are not only economic necessities but also important practical
demonstrations of opportunity in a democratic free society. A great many
veterans and workers with new skills and experience will want to start in
for themselves. The opportunity must be afforded them to do so. They are
the small businessmen of the future.

Actually when we talk about small business we are talking about almost all
of the Nation's individual businesses. Nine out of every ten concerns fall
into this category, and 45 percent of all workers are employed by them.
Between 30 and 40 percent of the total value of all business transactions
are handled by small business.

It is obvious national policy to foster the sound development of small
business. It helps to maintain high levels of employment and national
income and consumption of the goods and services that the Nation can
produce. It encourages the competition that keeps our free enterprise
economy vigorous and expanding. Small business, because of its flexibility,
assists in the rapid exploitation of scientific and technological
discoveries. Investment in small business can absorb a large volume of
savings that might otherwise not be tapped.

The Government should encourage and is encouraging small-business
initiative and originality to stimulate progress through competition.

During the war, the Smaller War Plants Corporation assisted small concerns
to make a maximum contribution to victory. The work of the Smaller War
Plants Corporation is being carried on in peacetime by the Federal Loan
Agency and the Department of Commerce. The fundamental approach to the job
of encouraging small concerns must be based on:

1. Arrangements for making private and public financial resources available
on reasonable terms.

2. Provision of technical advice and assistance to business as a whole on
production, research, and management problems. This will help equalize
competitive relationships between large and small companies, for many of
the small companies cannot afford expensive technical research, accounting,
and tax advice.

3. Elimination of trade practices and agreements which reduce competition
and discriminate against new or small enterprises.

We speak a great deal about the free enterprise economy of our country. It
is competition that keeps it free. It is competition that keeps it growing
and developing. The truth is that we need far more competition in the
future than we have had in the immediate past.

By strangling competition, monopolistic activity prevents or deters
investment in new or expanded production facilities. This lessens the
opportunity for employment and chokes off new outlets for idle savings.
Monopoly maintains prices at artificially high levels and reduces
consumption which, with lower prices, would rise and support larger
production and higher employment. Monopoly, not being subject to
competitive pressure, is slow to take advantage of technical advances which
would lower prices or improve quality. All three of these monopolistic
activities very directly lower the standard of living--through higher
prices and lower quality of product--which free competition would improve.

The Federal Government must protect legitimate business and consumers from
predatory and monopolistic practices by the vigilant enforcement of
regulatory legislation. The program will be designed to have a maximum
impact upon monopolistic bottlenecks and unfair competitive practices
hindering expansion in employment.

During the war, enforcement of antimonopoly laws was suspended in a number
of fields. The Government must now take major steps not only to maintain
enforcement of antitrust laws but to encourage new and competing
enterprises in every way. The deferred demand of the war years and the
large accumulations of liquid assets provide ample incentive for expansion.
Equalizing of business opportunity, under full and free competition, must
be a prime responsibility in the reconversion period and in the years that
follow. Many leading businessmen have recognized the importance of such
action both to themselves and to the economy as a whole.

But we must do more than break up trusts and monopolies after they have
begun to strangle competition. We must take positive action to foster new,
expanding enterprises. By legislation and by administration we must take
specific steps to discourage the formation or the strengthening of
competition-restricting business. We must have an over-all antimonopoly
policy which can be applied by all agencies of the Government in exercising
the functions assigned to them--a policy designed to encourage the
formation and growth of new and freely competitive enterprises.

Among the many departments and agencies which have parts in the program
affecting business and competition, the Department of Commerce has a
particularly important role. That is why I have recommended a substantial
increase in appropriations for the next fiscal year for this Department.

In its assistance to industry, the Department of Commerce will concentrate
its efforts on these primary objectives: Promotion of a large and
well-balanced foreign trade; provision of improved technical assistance and
management aids, especially for small enterprises; and strengthening of
basic statistics on business operations, both by industries and by regions.
To make new inventions and discoveries available more promptly to all
businesses, small and large, the Department proposes to expand its own
research activities, promote research by universities, improve Patent
Office procedures, and develop a greatly expanded system of field offices
readily accessible to the businesses they serve.

Many gaps exist in the private financial mechanism, especially in the
provision of long-term funds for small- and medium sized enterprises. In
the peacetime economy the Reconstruction Finance Corporation will take the
leadership in assuring adequate financing for small enterprises which
cannot secure funds from other sources. Most of the funds should and will
be provided by private lenders; but the Reconstruction Finance Corporation
will share any unusual risks through guarantees of private loans, with
direct loans only when private capital is unwilling to participate on a
reasonable basis.

(e) Minimum wage.

Full employment and full production may be achieved only by maintaining a
level of consumer income far higher than that of the prewar period. A high
level of consumer income will maintain the market for the output of our
mills, farms, and factories, which we have demonstrated during the war
years that we can produce. One of the basic steps which the Congress can
take to establish a high level of consumer income is to amend the Fair
Labor Standards Act to raise substandard wages to a decent minimum and to
extend similar protection to additional workers who are not covered by the
present act.

Substandard wages are bad for business and for the farmer. Substandard
wages provide only a substandard market for the goods and services produced
by American industry and agriculture.

At the present time the Fair Labor Standards Act prescribes a minimum wage
of 40 cents an hour for those workers who are covered by the act. The
present minimum wage represents an annual income of about $800 to those
continuously employed for 50 weeks--clearly a wholly inadequate budget for
an American family. I am in full accord with the proposal now pending in
the Congress that the statutory minimum be raised immediately to 65 cents
an hour, with further increases to 70 cents after one year and to 75 cents
after two years. I also favor the proposal that the industry committee
procedure be used to set rates higher than 65 cents per hour during the
two-year interval before the 75-cent basic wage would otherwise become
applicable.

The proposed minimum wage of 65 cents an hour would assure the worker an
annual income of about $1,300 a year in steady employment. This amount is
clearly a modest goal. After considering cost-of-living increases in recent
years, it is little more than a 10-cent increase over the present legal
minimum. In fact, if any large number of workers earn less than this
amount, we will find it impossible to maintain the levels of purchasing
power needed to sustain the stable prosperity which we desire. Raising the
minimum to 75 cents an hour will provide the wage earner with an annual
income of $1,500 if he is fully employed.

The proposed higher minimum wage levels are feasible without involving
serious price adjustments or serious geographic dislocations.

Today about 20 percent of our manufacturing wage earners--or about 2
million-earn less than 65 cents an hour. Because wages in most industries
have risen during the war, this is about the same as the proportion-17
percent--who were earning less than 40 cents an hour in 1941.

I also recommend that minimum wage protection be extended to several groups
of workers not now covered. The need for a decent standard of living is by
no means limited to those workers who happen to be covered by the act as it
now stands. It is particularly vital at this period of readjustment in the
national economy and readjustment in employment of labor to extend minimum
wage protection as far as possible.

Lifting the basic minimum wage is necessary, it is justified as a matter of
simple equity to workers, and it will prove not only feasible but also
directly beneficial to the Nation's employers.

(f) Agricultural programs.

The farmers of America generally are entering the crop year of 1946 in
better financial condition than ever before. Farm mortgage debt is the
lowest in 30 years. Farmers' savings are the largest in history. Our
agricultural plant is in much better condition than after World War I. Farm
machinery and supplies are expected to be available in larger volume, and
farm labor problems will be less acute.

The demand for farm products will continue strong during the next year or
two because domestic purchases will be supplemented by a high level of
exports and foreign relief shipments. It is currently estimated that from 7
to 10 percent of the total United States food supply may be exported in the
calendar year 1946.

Farm prices are expected to remain at least at their present levels in the
immediate future, and for at least the next 12 months they are expected to
yield a net farm income double the 1935-39 average and higher than in any
year prior to 1943.

We can look to the future of agriculture with greater confidence than in
many a year in the past. Agriculture itself is moving confidently ahead,
planning for another year of big production, taking definite and positive
steps to lead the way toward an economy of abundance.

Agricultural production goals for 1946 call for somewhat greater acreage
than actually was planted in 1945. Agriculture is prepared to demonstrate
that it can make a peacetime contribution as great as its contribution
toward the winning of the war.

In spite of supplying our armed forces and our allies during the war with a
fifth to a fourth of our total food output, farmers were still able to
provide our civilians with 8 percent more food per capita than the average
for the five years preceding the war. Since the surrender of Japan,
civilian food consumption has risen still further. By the end of 1945 the
amount of the increase in food consumption was estimated to be as high as
15 percent over the prewar average. The record shows that the people of
this country want and need more food and that they will buy more food if
only they have the jobs and the purchasing power. The first essential
therefore in providing fully for the welfare of agriculture is to maintain
full employment and a high level of purchasing power throughout the
Nation.

For the period immediately ahead we shall still have the problem of
supplying enough food. If we are to do our part in aiding the war-stricken
and starving countries some of the food desires of our own people will not
be completely satisfied, at least until these nations have had an
opportunity to harvest another crop. During the next few months the need
for food in the world will be more serious than at any time during the war.
And, despite the large shipments we have already made, and despite what we
shall send, there remain great needs abroad.

Beyond the relief feeding period, there will still be substantial foreign
outlets for our farm commodities. The chief dependence of the farmer,
however, as always, must be upon the buying power of our own people.

The first obligation of the Government to agriculture for the reconversion
period is to make good on its price-support commitments. This we intend to
do, with realistic consideration for the sound patterns of production that
will contribute most to the long-time welfare of agriculture and the whole
Nation. The period during which prices are supported will provide an
opportunity for farmers individually to strengthen their position in
changing over from a wartime to a peacetime basis of production. It will
provide an opportunity for the Congress to review the needs of agriculture
and make changes in national legislation where experience has shown changes
to be needed. In this connection, the Congress will wish to consider
legislation to take the place of the 1937 Sugar Act which expires at the
end of this year. During this period we must do a thorough job of basic
planning to the end that agriculture shall be able to contribute its full
share toward a healthy national economy.

Our long-range agricultural policies should have two main objectives:
First, to assure the people on the farms a fair share of the national
income; and, second, to encourage an agricultural production pattern that
is best fitted to the Nation's needs. To accomplish this second objective
we shall have to take into consideration changes that have taken place and
will continue to take place in the production of farm commodities--changes
that affect costs and efficiency and volume.

What we seek ultimately is a high level of food production and consumption
that will provide good nutrition for everyone. This cannot be accomplished
by agriculture alone. We can be certain of our capacity to produce food,
but we have often failed to distribute it as well as we should and to see
that our people can afford to buy it. The way to get good nutrition for the
whole Nation is to provide employment opportunities and purchasing power
for all groups that will enable them to buy full diets at market prices.

Wherever purchasing power fails to reach this level we should see that they
have some means of getting adequate food at prices in line with their
ability to buy. Therefore, we should have available supplementary programs
that will enable all our people to have enough of the right kind of food.

For example, one of the best possible contributions toward building a
stronger, healthier Nation would be a permanent school-lunch program on a
scale adequate to assure every school child a good lunch at noon. The
Congress, of course, has recognized this need for a continuing school-lunch
program and legislation to that effect has been introduced and hearings
held. The plan contemplates the attainment of this objective with a minimum
of Federal expenditures. I hope that the legislation will be enacted in
time for a permanent program to start with the beginning of the school year
next fall.

We have the technical knowledge and the productive capacity to provide
plenty of good food for every man, woman, and child in the United States.
It is time we made that possibility a reality.

(g) Resource development.

The strength of our Nation and the welfare of the people rest upon the
natural resources of the country. We have learned that proper conservation
of our lands, including our forests and minerals, and wise management of
our waters will add immensely to our national wealth.

The first step in the Government's conservation program must be to find out
just what are our basic resources, and how they should be used. We need to
take, as soon as possible, an inventory of the lands, the minerals, and the
forests of the Nation.

During the war it was necessary to curtail some of our long-range plans for
development of our natural resources, and to emphasize programs vital to
the prosecution of the war. Work was suspended on a number of flood control
and reclamation projects and on the development of our national forests and
parks. This work must now be resumed, and new projects must be undertaken
to provide essential services and to assist in the process of economic
development.

The rivers of America offer a great opportunity to our generation in the
management of the national wealth. By a wise use of Federal funds, most of
which will be repaid into the Treasury, the scourge of floods and drought
can be curbed, water can be brought to arid lands, navigation can be
extended, and cheap power can be brought alike to the farms and to the
industries of our land.

Through the use of the waters of the Columbia River, for example, we are
creating a rich agricultural area as large as the State of Delaware. At the
same time, we are producing power at Grand Coulee and at Bonneville which
played a mighty part in winning the war and which will found a great
peacetime industry in the Northwest. The Tennessee Valley Authority will
resume its peacetime program of promoting full use of the resources of the
Valley. We shall continue our plans for the development of the Missouri
Valley, the Arkansas Valley, and the Central Valley of California.

The Congress has shown itself alive to the practical requirements for a
beneficial use of our water resources by providing that preference in the
sale of power be given to farmers' cooperatives and public agencies. The
public power program thus authorized must continue to be made effective by
building the necessary generating and transmission facilities to furnish
the maximum of firm power needed at the wholesale markets, which are often
distant from the dam sites.

These great developmental projects will open the frontiers of agriculture,
industry, and commerce. The employment opportunities thus offered will also
go far to ease the transition from war to peace.

(h) Public works.

During the war even urgently needed Federal, State, and local construction
projects were deferred in order to release sources for war production. In
resuming public works construction, it is desirable to proceed only at a
moderate rate, since demand for private construction will be abnormally
high for some time. Our public works program should be timed to reach its
peak after demand for private construction has begun to taper off.
Meanwhile, however, plans should be prepared if we are to act promptly when
the present extraordinary private demand begins to run out.

The Congress made money available to Federal agencies for their public
works planning in the fiscal year 1946. I strongly recommend that this
policy be continued and extended in the fiscal year 1947.

State and local governments also have an essential role to play in a
national public works program. In my message of September 6, 1945, I
recommended that the Congress vote such grants to State and local
governments as will insure that each level of government makes its proper
contribution to a balanced public construction program. Specifically, the
Federal Government should aid State and local governments in planning their
own public works programs, in undertaking projects related to Federal
programs of regional development, and in constructing such public works as
are necessary to carry out the various policies of the Federal Government.

Early in 1945 the Congress made available advances to State and local
governments for planning public works projects, and recently made
additional provision to continue these advances through the fiscal year
1946. I believe that further appropriations will be needed for the same
purpose for the fiscal year 1947.

The Congress has already made provision for highway programs. It is now
considering legislation which would expand Federal grants and loans in
several other fields, including construction of airports, hospital and
health centers, housing, water pollution control facilities, and
educational plant facilities. I hope that early action will be taken to
authorize these Federal programs.

With respect to public works of strictly local importance, State and local
governments should proceed without Federal assistance except in planning.
This rule should be subject to review when and if the prospect of highly
adverse general economic developments warrants it.

All loans and grants for public works should be planned and administered in
such a way that they are brought into accord with the other elements of the
Federal Program.

Our long-run objective is to achieve a program of direct Federal and
Federally assisted public works which is planned in advance and
synchronized with business conditions. In this way it can make its greatest
contribution to general economic stability.

(1) National housing program.

Last September I stated in my message to the Congress that housing was high
on the list of matters calling for decisive action.

Since then the housing shortage in countless communities, affecting
millions of families, has magnified this call to action.

Today we face both an immediate emergency and a major postwar problem.

Since VJ-day the wartime housing shortage has been growing steadily worse
and pressure on real estate values has increased. Returning veterans often
cannot find a satisfactory place for their families to live, and many who
buy have to pay exorbitant prices. Rapid demobilization inevitably means
further overcrowding.

A realistic and practical attack on the emergency will require aggressive
action by local governments, with Federal aid, to exploit all opportunities
and to give the veterans as far as possible first chance at vacancies. It
will require continuation of rent control in shortage areas as well as
legislation to permit control of sales prices. It will require maximum
conversion of temporary war units for veterans' housing and their
transportation to communities with the most pressing needs; the Congress
has already appropriated funds for this purpose.

The inflation in the price of housing is growing daily.

As a result of the housing shortage, it is inevitable that the present
dangers of inflation in home values will continue unless the Congress takes
action in the immediate future.

Legislation is now pending in the Congress which would provide for ceiling
prices for old and new houses. The authority to fix such ceilings is
essential. With such authority, our veterans and other prospective home
owners would be protected against a skyrocketing of home prices. The
country would be protected from the extension of the present inflation in
home values which, if allowed to continue, will threaten not only the
stabilization program but our opportunities for attaining a sustained high
level of home construction.

Such measures are necessary stopgaps-but only stopgaps. This emergency
action, taken alone, is good--but not enough. The housing shortage did not
start with the war or with demobilization; it began years before that and
has steadily accumulated. The speed with which the Congress establishes the
foundation for a permanent, long-range housing program will determine how
effectively we grasp the immense opportunity to achieve our goal of decent
housing and to make housing a major instrument of continuing prosperity and
full employment in the years ahead. It will determine whether we move
forward to a stable and healthy housing enterprise and toward providing a
decent home for every American family.

Production is the only fully effective answer. To get the wheels turning, I
have appointed an emergency housing expediter. I have approved
establishment of priorities designed to assure an ample share of scarce
materials to builders of houses for which veterans will have preference.
Additional price and wage adjustments will be made where necessary, and
other steps will be taken to stimulate greater production of bottleneck
items. I recommend consideration of every sound method for expansion in
facilities for insurance of privately financed housing by the Federal
Housing Administration and resumption of previously authorized low-rent
public housing projects suspended during the war.

In order to meet as many demands of the emergency situation as possible, a
program of emergency measures is now being formulated for action. These
will include steps in addition to those already taken. As quickly as this
program can be formulated, announcement will be made.

Last September I also outlined to the Congress the basic principles for the
kind of decisive, permanent legislation necessary for a long-range housing
program.

These principles place paramount the fact that housing construction and
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.

The development of a trained citizen reserve is also vital to our national
security. This can best be accomplished through universal training. I have
appointed an Advisory Commission on Universal Training to study the various
plans for a training program, and I expect that the recommendations of the
Commission will be of benefit to the Congress and to me in reaching
decisions on this problem.

The cost of the military establishment is substantial. There is one certain
way by which we can cut costs and at the same time enhance our national
security. That is by the establishment of a single Department of National
Defense. I shall communicate with the Congress in the near future with
reference to the establishment of a single Department of National Defense.

National security does not consist only of an army, a navy, and an air
force. It rests on a much broader basis. It depends on a sound economy of
prices and wages, on prosperous agriculture, on satisfied and productive
workers, on a competitive private enterprise free from monopolistic
repression, on continued industrial harmony and production, on civil
liberties and human freedoms-on all the forces which create in our men and
women a strong moral fiber and spiritual stamina.

But we have a higher duty and a greater responsibility than the attainment
of our own national security. Our goal is collective security for all
mankind.

If we can work in a spirit of understanding and mutual respect, we can
fulfill this solemn obligation which rests upon us.

The spirit of the American people can set the course of world history. If
we maintain and strengthen our cherished ideals, and if we share our great
bounty with war-stricken people over the world, then the faith of our
citizens in freedom and democracy will be spread over the whole earth and
free men everywhere will share our devotion to those ideals.

Let us have the will and the patience to this job together.

May the Lord strengthen us in our faith.

May He give us wisdom to lead the peoples of the world in His ways of
peace.

***

State of the Union Address
Harry S. Truman
January 7, 1948

Mr. President, Mr. Speaker, and Members of the 80th Congress:

We are here today to consider the state of the Union.

On this occasion, above all others, the Congress and the President should
concentrate their attention, not upon party but upon the country; not upon
things which divide us but upon those which bind us together--the enduring
principles of our American system, and our common aspirations for the
future welfare and security of the people of the United States.

The United States has become great because [p.2] we, as a people, have been
able to work together for great objectives even while differing about
details.

The elements of our strength are many. They include our democratic
government, our economic system, our great natural resources. But these are
only partial explanations.

The basic source of our strength is spiritual. For we are a people with a
faith. We believe in the dignity of man. We believe that he was created in
the image of the Father of us all.

We do not believe that men exist merely to strengthen the state or to be
cogs in the economic machine. We do believe that governments are created to
serve the people and that economic systems exist to minister to their
wants. We have a profound devotion to the welfare and rights of the
individual as a human being.

The faith of our people has particular meaning at this time in history
because of the unsettled and changing state of the world.

The victims of war in many lands are striving to rebuild their lives, and
are seeking assurance that the tragedy of war will not occur again.
Throughout the world new ideas are challenging the old. Men of all nations
are reexamining the beliefs by which they live. Great scientific and
industrial changes have released new forces which will affect the future
course of civilization.

The state of our Union reflects the changing nature of the modern world. On
all sides there is heartening evidence of great energy--of capacity for
economic development-and even more important, capacity for spiritual
growth. But accompanying this great activity there are equally great
questions, great anxieties, and great aspirations. They represent the
concern of an enlightened people that conditions should be so arranged as
to make life more worthwhile.

We must devote ourselves to finding answers to these anxieties and
aspirations. We seek answers which will embody the moral and spiritual
elements of tolerance, unselfishness, and brotherhood upon which true
freedom and opportunity must rest.

As we examine the state of our Union today, we can benefit from viewing it
on a basis of the accomplishments of the last decade and of our goals for
the next. How far have we come during the last 10 years and how far can we
go in the next 10?

It was 10 years ago that the determination of dictators to wage war upon
mankind became apparent. The years that followed brought untold death and
destruction.

We shared in the human suffering of the war, but we were fortunate enough
to escape most of war's destruction. We were able through these 10 years to
expand the productive strength of our farms and factories.

More important, however, is the fact that these years brought us new
courage, new confidence in the ideals of our free democracy. Our deep
belief in freedom and justice was reinforced in the crucible of war.

On the foundations of our greatly strengthened economy and our renewed
confidence in democratic values, we can continue to move forward.

There are some who look with fear and distrust upon planning for the
future. Yet our great national achievements have been attained by those
with vision. Our Union was formed, our frontiers were pushed back, and our
great industries were built by men who looked ahead.

I propose that we look ahead today toward those goals for the future which
have the greatest bearing upon the foundations of our democracy and the
happiness of our people.

I do so, confident in the thought that with clear objectives and with firm
determination, we can, in the next 10 years, build upon the [p.3]
accomplishments of the past decade to achieve a glorious future. Year by
year, beginning now, we must make a substantial part of this progress.

Our first goal is to secure fully the essential human rights of our
citizens.

The United States has always had a deep concern for human rights. Religious
freedom, free speech, and freedom of thought are cherished realities in our
land. Any denial of human rights is a denial of the basic beliefs of
democracy and of our regard for the worth of each individual.

Today, however, some of our citizens are still denied equal opportunity for
education, for jobs and economic advancement, and for the expression of
their views at the polls. Most serious of all, some are denied equal
protection under laws. Whether discrimination is based on race, or creed,
or color, or land of origin, it is utterly contrary to American ideals of
democracy.

The recent report of the President's Committee on Civil Rights points the
way to corrective action by the Federal Government and by State and local
governments. Because of the need for effective Federal action, I shall send
a special message to the Congress on this important subject.

We should also consider our obligation to assure the fullest possible
measure of civil rights to the people of our territories and possessions. I
believe that the time has come for Alaska and Hawaii to be admitted to the
Union as States.

Our second goal is to protect and develop our human resources.

The safeguarding of the rights of our citizens must be accompanied by an
equal regard for their opportunities for development and their protection
from economic insecurity. In this Nation the ideals of freedom and equality
can be given specific meaning in terms of health, education, social
security, and housing.

Over the past 12 years we have erected a sound framework of social security
legislation. Many millions of our citizens are now protected against the
loss of income which can come with unemployment, old age, or the death of
wage earners. Yet our system has gaps and inconsistencies; it is only half
finished.

We should now extend unemployment compensation, old age benefits, and
survivors' benefits to millions who are not now protected. We should also
raise the level of benefits.

The greatest gap in our social security structure is the lack of adequate
provision for the Nation's health. We are rightly proud of the high
standards of medical care we know how to provide in the United States. The
fact is, however, that most of our people cannot afford to pay for the care
they need.

I have often and strongly urged that this condition demands a national
health program. The heart of the program must be a national system of
payment for medical care based on well-tried insurance principles. This
great Nation cannot afford to allow its citizens to suffer needlessly from
the lack of proper medical care.

Our ultimate aim must be a comprehensive insurance system to protect all
our people equally against insecurity and ill health.

Another fundamental aim of our democracy is to provide an adequate
education for every person.

Our educational systems face a financial crisis. It is deplorable that in a
Nation as rich as ours there are millions of children who do not have
adequate schoolhouses or enough teachers for a good elementary or secondary
education. If there are educational inadequacies in any State, the whole
Nation suffers. The Federal Government has a responsibility for providing
financial aid to meet this crisis.

In addition, we must make possible greater equality of opportunity to all
our citizens for education. Only by so doing can we insure that our
citizens will be capable of understanding and sharing the responsibilities
of democracy.

The Government's programs for health, education, and security are of such
great importance to our democracy that we should now establish an executive
department for their administration.

Health and education have their beginning in the home. No matter what our
hospitals or schools are like, the youth of our Nation are handicapped when
millions of them live in city slums and country shacks. Within the next
decade, we must see that every American family has a decent home. As an
immediate step we need the long-range housing program which I have
recommended on many occasions to this Congress. This should include
financial aids designed to yield more housing at lower prices. It should
provide public housing for low-income families, and vigorous development of
new techniques to lower the cost of building.

Until we can overcome the present drastic housing shortage, we must extend
and strengthen rent control.

We have had, and shall continue to have, a special interest in the welfare
of our veterans. Over 14 million men and women who served in the armed
forces in World War II have now returned to civilian life. Over 2 million
veterans are being helped through school. Millions have been aided while
finding jobs, and have been helped in buying homes, in obtaining medical
care, and in adjusting themselves to physical handicaps.

All but a very few veterans have successfully made the transition from
military life to their home communities. The success of our veterans'
program is proved by this fact. This Nation is proud of the eagerness shown
by our veterans to become self-reliant and self-supporting citizens.

Our third goal is to conserve and use our natural resources so that they
can contribute most effectively to the welfare of our people.

The resources given by nature to this country are rich and extensive. The
material foundations of our growth and economic development are the bounty
of our fields, the wealth of our mines and forests, and the energy of our
waters. As a Nation, we are coming to appreciate more each day the dose
relationship between the conservation of these resources and the
preservation of our national strength.

We are doing far less than we know how to do to make use of our resources
without destroying them. Both the public and private use of these resources
must have the primary objective of maintaining and increasing these basic
supports for an expanding future.

We must continue to take specific steps toward this goal. We must
vigorously defend our natural wealth against those who would misuse it for
selfish gain.

We need accurate and comprehensive knowledge of our mineral resources and
must intensify our efforts to develop new supplies and to acquire
stockpiles of scarce materials.

We need to protect and restore our land-public and private--through
combating erosion and rebuilding the fertility of the soil.

We must expand our reclamation program to bring millions of acres of arid
land into production, and to improve water supplies for additional millions
of acres. This will provide new opportunities for veterans and others,
particularly in the West, and aid in providing a rising living standard for
a growing population.

We must protect and restore our forests by sustained-yield forestry and by
planting [p.5] new trees in areas now slashed and barren.

We must continue to erect multiple-purpose dams on our great rivers--not
only to reclaim land, but also to prevent floods, to extend our inland
waterways and to provide hydroelectric power. This public power must not be
monopolized for private gain. Only through well-established policies of
transmitting power directly to its market and thus encouraging widespread
use at low rates can the Federal Government assure the people of their full
share of its benefits. Additional power--public and private--is needed to
raise the ceilings now imposed by power shortages on industrial and
agricultural development.

We should achieve the wise use of resources through the integrated
development of our great river basins. We can learn much from our Tennessee
Valley experience. We should no longer delay in applying the lessons of
that vast undertaking to our other great river basins.

Our fourth goal is to lift the standard of living for all our people by
strengthening our economic system and sharing more broadly among our people
the goods we produce.

The amazing economic progress of the past 10 years points the way for the
next 10.

Today 14 million more people have jobs than in 1938.

Our yearly output of goods and services has increased by two-thirds.

The average income of our people, measured in dollars of equal purchasing
power, has increased--after taxes--by more than 50 percent.

In no other 10 years have farmers, businessmen, and wage earners made such
great gains.

We may not be able to expand as rapidly in the next decade as in the last,
because we are now starting from full employment and very high production.
But we can increase our annual output by at least one-third above the
present level. We can lift our standard of living to nearly double what it
was 10 years ago.

If we distribute these gains properly, we can go far toward stamping out
poverty in our generation.

To do this, agriculture, business, and labor must move forward together.

Permanent farm prosperity and agricultural abundance will be achieved only
as our whole economy grows and prospers. The farmer can sell more food at
good prices when the incomes of wage earners are high and when there is
full employment. Adequate diets for every American family, and the needs of
our industries at full production, will absorb a farm output well above our
present levels.

Although the average farmer is now better off than ever before, farm
families as a whole have only begun to catch up with the standards of
living enjoyed in the cities. In 1946, the average income of farm people
was $779, contrasted with an average income of $1,288 for nonfarm people.
Within the next decade, we should eliminate elements of inequality in these
living standards.

To this end our farm program should enable the farmer to market his varied
crops at fair price levels and to improve his standard of living.

We need to continue price supports for major farm commodities on a basis
which will afford reasonable protection against fluctuations in the levels
of production and demand. The present price support program must be
reexamined and modernized.

Crop insurance should be strengthened and its benefits extended in order to
protect the farmer against the special hazards to which he is subject.

We also need to improve the means for getting farm products into markets
and into the hands of consumers. Cooperatives which [p.6] directly or
indirectly serve this purpose must be encouraged--not discouraged. The
school lunch program should be continued and adequately financed.

We need to go forward with the rural electrification program to bring the
benefits of electricity to all our farm population.

We can, and must, aid and encourage farmers to conserve their soil
resources and restore the fertility of the land that has suffered from
neglect or unwise use.

All these are practical measures upon which we should act immediately to
enable agriculture to make its full contribution to our prosperity.

We must also strengthen our economic system within the next decade by
enlarging our industrial capacity within the framework of our free
enterprise system.

We are today far short of the industrial capacity we need for a growing
future. At least $50 billion should be invested by industry to improve and
expand our productive facilities over the next few years. But this is only
the beginning. The industrial application of atomic energy and other
scientific advances will constantly open up further opportunities for
expansion. Farm prosperity and high employment will call for an immensely
increased output of goods and services.

Growth and vitality in our economy depend on vigorous private enterprise.
Free competition is the key to industrial development, full production and
employment, fair prices, and an ever improving standard of living.
Competition is seriously limited today in many industries by the
concentration of economic power and other elements of monopoly. The
appropriation of sufficient funds to permit proper enforcement of the
present antitrust laws is essential. Beyond that we should go on to
strengthen our legislation to protect competition.

Another basic element of a strong economic system is the well-being of the
wage earners.

We have learned that the well-being of workers depends on high production
and consequent high employment. We have learned equally well that the
welfare of industry and agriculture depends on high incomes for our
workers.

The Government has wisely chosen to set a floor under wages. But our
40-cent minimum wage is inadequate and obsolete. I recommend the lifting of
the minimum wage to 75 cents an hour.

In general, however, we must continue to rely on our sound system of
collective bargaining to set wage scales. Workers' incomes should increase
at a rate consistent with the maintenance of sound price, profit, and wage
relationships and with increase of productivity.

The Government's part in labor-management relations is now largely
controlled by the terms of the Labor-Management Relations Act of 1947. I
made my attitude clear on this act in my veto message to the Congress last
June. Nothing has occurred since to change my opinion of this law. As long
as it remains the law of the land, however, I shall carry out my
constitutional duty and administer it.

As we look ahead we can understand the crucial importance of restraint and
wisdom in arriving at new labor-management contracts. Work stoppages would
result in a loss of production--a loss which could bring higher prices for
our citizens and could also deny the necessities of life to the
hard-pressed peoples of other lands. It is my sincere hope that the
representatives of labor and of industry will bear in mind that the Nation
as a whole has a vital stake in the success of their bargaining efforts.

If we surmount our current economic difficulties, we can move ahead to a
great increase [p.7] in our national income which will enable all our
people to enjoy richer and fuller lives.

All of us must advance together. One-fifth of our families now have average
annual incomes of less than $850. We must see that our gains in national
income are made more largely available to those with low incomes, whose
need is greatest. This will benefit us all through providing a stable
foundation of buying power to maintain prosperity.

Business, labor, agriculture, and Government, working together, must
develop the policies which will make possible the realization of the full
benefits of our economic system.

Our fifth goal is to achieve world peace based on principles of freedom and
justice and the equality of all nations.

Twice within our generation, world wars have taught us that we cannot
isolate ourselves from the rest of the world.

We have learned that the loss of freedom in any area of the world means a
loss of freedom to ourselves--that the loss of independence by any nation
adds directly to the insecurity of the United States and all free nations.

We have learned that a healthy world economy is essential to world
peace--that economic distress is a disease whose evil effects spread far
beyond the boundaries of the afflicted nation.

For these reasons the United States is vigorously following policies
designed to achieve a peaceful and prosperous world.

We are giving, and will continue to give, our full support to the United
Nations. While that organization has encountered unforeseen and unwelcome
difficulties, I am confident of its ultimate success. We are also devoting
our efforts toward world economic recovery and the revival of world trade.
These actions are closely related and mutually supporting.

We believe that the United States can be an effective force for world peace
only if it is strong. We look forward to the day when nations will decrease
their armaments. Yet so long as there remains serious opposition to the
ideals of a peaceful world, we must maintain strong armed forces.

The passage of the National Security Act by the Congress at its last
session was a notable step in providing for the security of this country. A
further step which I consider of even greater importance is the early
provision for universal training. There are many elements in a balanced
national security program, all interrelated and necessary, but universal
training should be the foundation for them all. A favorable decision by the
Congress at an early date is of world importance. I am convinced that such
action is vital to the security of this Nation and to the maintenance of
its leadership.

The United States is engaged today in many international activities
directed toward the creation of lasting peaceful relationships among
nations.

We have been giving substantial aid to Greece and Turkey to assist those
nations in preserving their integrity against foreign pressures. Had it not
been for our aid, their situation today might well be radically different.
The continued integrity of those countries will have a powerful effect upon
other nations in the Middle East and in Europe struggling to maintain their
independence while they repair the damages of war.

The United States has special responsibilities with respect to the
countries in which we have occupation forces: Germany, Austria, Japan, and
Korea. Our efforts to reach agreements on peace settlements for these
countries have so far been blocked. But we [p.8] shall continue to exert
our utmost efforts to obtain satisfactory settlements for each of these
nations.

Many thousands of displaced persons, still living in camps overseas, should
be allowed entry into the United States. I again urge the Congress to pass
suitable legislation at once so that this Nation may do its share in caring
for the homeless and suffering refugees of all faiths. I believe that the
admission of these persons will add to the strength and energy of this
Nation.

We are moving toward our goal of world peace in many ways. But the most
important efforts which we are now making are those which support world
economic reconstruction. We are seeking to restore the world trading system
which was shattered by the war and to remedy the economic paralysis which
grips many countries.

To restore world trade we have recently taken the lead in bringing about
the greatest reduction of world tariffs that the world has ever seen. The
extension of the provisions of the Reciprocal Trade Agreements Act, which
made this achievement possible, is of extreme importance. We must also go
on to support the International Trade Organization, through which we hope
to obtain worldwide agreement on a code of fair conduct in international
trade.

Our present major effort toward economic reconstruction is to support the
program for recovery developed by the countries of Europe. In my recent
message to the Congress, I outlined the reasons why it is wise and
necessary for the United States to extend this support.

I want to reaffirm my belief in the soundness and the promise of this
proposal. When the European economy is strengthened, the product of its
industry will be of benefit to many other areas of economic distress. The
ability of free men to overcome hunger and despair will be a moral stimulus
to the entire world.

We intend to work also with other nations in achieving world economic
recovery. We shall continue our cooperation with the nations of the Western
Hemisphere. A special program of assistance to China, to provide urgent
relief needs and to speed reconstruction, will be submitted to the
Congress.

Unfortunately, not all governments share the hope of the people of the
United States that economic reconstruction in many areas of the world can
be achieved through cooperative effort among nations. In spite of these
differences we will go forward with our efforts to overcome economic
paralysis.

No nation by itself can carry these programs to success; they depend upon
the cooperative and honest efforts of all participating countries. Yet the
leadership is inevitably ours.

I consider it of the highest importance that the Congress should authorize
support for the European recovery program for the period from April 1,
1948, to June 30, 1952, with an initial amount for the first 15 months of
$6.8 billion. I urge the Congress to act promptly on this vital measure of
our foreign policy--on this decisive contribution to world peace.

We are following a sound, constructive, and practical course in carrying
out our determination to achieve peace.

We are fighting poverty, hunger, and suffering.

This leads to peace--not war.

We are building toward a world where all nations, large and small alike,
may live free from the fear of aggression. This leads to peace--not war.

Above all else, we are striving to achieve a concord among the peoples of
the world based upon the dignity of the individual and the brotherhood of
man.

This leads to peace--not war.

We can go forward with confidence that we are following sound policies,
both at home and with other nations, which will lead us toward our great
goals for economic, social and moral achievement.

As we enter the new year, we must surmount one major problem which affects
all our goals. That is the problem of inflation.

Already inflation in this country is undermining the living standards of
millions of families. Food costs too much. Housing has reached fantastic
price levels. Schools and hospitals are in financial distress. Inflation
threatens to bring on disagreement and strife between labor and
management.

Worst of all, inflation holds the threat of another depression, just as we
had a depression after the unstable boom following the First World War.

When I announced last October that the Congress was being called into
session, I described the price increases which had taken place since June
1946. Wholesale prices had increased 40 percent; retail prices had
increased 23 percent.

Since October prices have continued to rise. Wholesale prices have gone up
at an annual rate of 18 percent. Retail prices have gone up at an annual
rate of 10 percent.

The events which have occurred since I presented my 10-point anti-inflation
program to the Congress in November have made it even clearer that all 10
points are essential.

High prices must not be our means of rationing.

We must deal effectively and at once with the high cost of living.

We must stop the spiral of inflation.

I trust that within the shortest possible time the Congress will make
available to the Government the weapons that are so desperately needed in
the fight against inflation.

One of the most powerful anti-inflationary factors in our economy today is
the excess of Government revenues over expenditures.

Government expenditures have been and must continue to be held at the
lowest safe levels. Since V-J day Federal expenditures have been sharply
reduced. They have been cut from more than $63 billion in the fiscal year
1946 to less than $38 billion in the present fiscal year. The number of
civilian employees has been cut nearly in half--from 3 3/4 million down to
2 million.

On the other hand, Government revenues must not be reduced. Until inflation
has been stopped there should be no cut in taxes that is not offset by
additions at another point in our tax structure.

Certain adjustments should be made within our existing tax structure that
will not affect total receipts, yet will adjust the tax burden so that
those least able to pay will have their burden lessened by the transfer of
a portion of it to those best able to pay.

Many of our families today are suffering hardship because of the high cost
of living. At the same time profits of corporations have reached an
all-time record in 1947. Corporate profits total $17 billion after taxes.
This compared with $12.5 billion in 1946, the previous high year.

Because of this extraordinarily high level of profits, corporations can
well afford to carry a larger share of the taxload at this time.

During this period in which the high cost of living is bearing down on so
many of our families, tax adjustments should be made to ease their burden.
The low-income group particularly is being pressed very hard. To this group
a tax adjustment would result in a saving that could be used to buy the
necessities of life.

I recommend therefore that, effective January 1, 1948, a cost of living tax
credit be extended to our people consisting of a credit of $40 to each
individual taxpayer and an additional credit of $40 for each dependent.
[p.10] Thus the income tax of a man with a wife and two children would be
reduced $160. The credit would be extended to all taxpayers, but it would
be particularly helpful to those in the low-income group.

It is estimated that such a tax credit would reduce Federal revenue by $3.2
billion. This reduction should be made up by increasing the tax on
corporate profits in an amount that will produce this sum--with appropriate
adjustments for small corporations.

This is the proper method of tax relief at this time. It gives relief to
those who need it most without cutting the total tax revenue of the
Government.

When the present danger of inflation has passed we should consider tax
reduction based upon a revision of our entire tax structure.

When we have conquered inflation, we shall be in a position to move forward
toward our chosen goals.

As we do so, let us keep ever before us our high purposes. We are
determined that every citizen of this Nation shall have an equal right and
an equal opportunity to grow in wisdom and in stature and to take his place
in the control of his Nation's destiny.

We are determined that the productive resources of this Nation shall be
used wisely and fully for the benefit of all.

We are determined that the democratic faith of our people and the strength
of our resources shall contribute their full share to the attainment of
enduring peace in the world.

It is our faith in human dignity that underlies these purposes. It is this
faith that keeps us a strong and vital people.

This is a time to remind ourselves of these fundamentals. For today the
whole world looks to us for leadership.

This is the hour to rededicate ourselves to the faith in mankind that makes
us strong.

This is the hour to rededicate ourselves to the faith in God that gives us
confidence as we face the challenge of the years ahead.

***

State of the Union Address
Harry S. Truman
January 5, 1949

Mr. President, Mr. Speaker, Members of the Congress:

I am happy to report to this 81st Congress that the state of the Union is
good. Our Nation is better able than ever before to meet the needs of the
American people, and to give them their fair chance in the pursuit of
happiness. This great Republic is foremost among the nations of the world
in the search for peace.

During the last 16 years, our people have been creating a society which
offers new opportunities for every man to enjoy his share of the good
things of life.

In this society, we are conservative about the values and principles which
we cherish; but we are forward-looking in protecting those values and
principles and in extending their benefits. We have rejected the
discredited theory that the fortunes of the Nation should be in the hands
of a privileged few. We have abandoned the "trickledown" concept of
national prosperity. Instead, we believe that our economic system should
rest on a democratic foundation and that wealth should be created for the
benefit of all.

The recent election shows that the people of the United States are in favor
of this kind of society and want to go on improving it.

The American people have decided that poverty is just as wasteful and just
as unnecessary as preventable disease. We have pledged our common resources
to help one another in the hazards and struggles of individual life. We
believe that no unfair prejudice or artificial distinction should bar any
citizen of the United States of America from an education, or from good
health, or from a job that he is capable of performing.

The attainment of this kind of society demands the best efforts of every
citizen in every walk of life, and it imposes increasing responsibilities
on the Government.

The Government must work with industry, labor, and the farmers in keeping
our economy running at full speed. The Government must see that every
American has a chance to obtain his fair share of our increasing abundance.
These responsibilities go hand in hand.

We cannot maintain prosperity unless we have a fair distribution of
opportunity and a widespread consumption of the products of our factories
and farms.

Our Government has undertaken to meet these responsibilities.

We have made tremendous public investments in highways, hydroelectric
power projects, soil conservation, and reclamation. We have established a
system of social security. We have enacted laws protecting the rights and
the welfare of our working people and the income of our farmers. These
Federal policies have paid for themselves many times over. They have
strengthened the material foundations of our democratic ideals. Without
them, our present prosperity would be impossible.

Reinforced by these policies, our private enterprise system has reached new
heights of production. Since the boom year of 1929, while our population
has increased by only 20 percent, our agricultural production has increased
by 45 percent, and our industrial production has increased by 75 percent.
We are turning out far more goods and more wealth per worker than we have
ever done before.

This progress has confounded the gloomy prophets--at home and abroad who
predicted the downfall of American capitalism. The people of the United
States, going their own way, confident in their own powers, have achieved
the greatest prosperity the world has even seen.

But, great as our progress has been, we still have a long way to go.

As we look around the country, many of our shortcomings stand out in bold
relief.

We are suffering from excessively high prices.

Our production is still not large enough to satisfy our demands.

Our minimum wages are far too low.

Small business is losing ground to growing monopoly.

Our farmers still face an uncertain future. And too many of them lack the
benefits of our modern civilization.

Some of our natural resources are still being wasted.

We are acutely short of electric power, although the means for developing
such power are abundant.

Five million families are still living in slums and firetraps. Three
million families share their homes with others.

Our health is far behind the progress of medical science. Proper medical
care is so expensive that it is out of the reach of the great majority of
our citizens.

Our schools, in many localities, are utterly inadequate.

Our democratic ideals are often thwarted by prejudice and intolerance.

Each of these shortcomings is also an opportunity-an opportunity for the
Congress and the President to work for the good of the people.

Our first great opportunity is to protect our economy against the evils of
"boom and bust."

This objective cannot be attained by government alone. Indeed, the greater
part of the task must be performed by individual efforts under our system
of free enterprise. We can keep our present prosperity, and increase it,
only if free enterprise and free government work together to that end.

We cannot afford to float along ceaselessly on a postwar boom until it
collapses. It is not enough merely to prepare to weather a recession if it
comes. Instead, government and business must work together constantly to
achieve more and more jobs and more and more production--which mean more
and more prosperity for all the people.

The business cycle is man-made; and men of good will, working together, can
smooth it out.

So far as business is concerned, it should plan for steady, vigorous
expansion--seeking always to increase its output, lower its prices, and
avoid the vices of monopoly and restriction. So long as business does this,
it will be contributing to continued prosperity, and it will have the help
and encouragement of the Government.

The Employment Act of 1946 pledges the Government to use all its resources
to promote maximum employment, production, and purchasing power. This means
that the Government is firmly committed to protect business and the people
against the dangers of recession and against the evils of inflation. This
means that the Government must adapt its plans and policies to meet
changing circumstances.

At the present time, our prosperity is threatened by inflationary pressures
at a number of critical points in our economy. And the Government must be
in a position to take effective action at these danger spots. To that end,
I recommend that the Congress enact legislation for the following
purposes:

First, to continue the power to control consumer credit and enlarge the
power to control bank credit.

Second, to grant authority to regulate speculation on the commodity
exchanges.

Third, to continue export control authority and to provide adequate
machinery for its enforcement.

Fourth, to continue the priorities and allocation authority in the field of
transportation.

Fifth, to authorize priorities and allocations for key materials in short
supply.

Sixth, to extend and strengthen rent control.

Seventh, to provide standby authority to impose price ceilings for scarce
commodities which basically affect essential industrial production or the
cost of living, and to limit unjustified wage adjustments which would force
a break in an established price ceiling.

Eighth, to authorize an immediate study of the adequacy of production
facilities for materials in critically short supply, such as steel; and, if
found necessary, to authorize Government loans for the expansion of
production facilities to relieve such shortages, and to authorize the
construction of such facilities directly, if action by private industry
fails to meet our needs.

The Economic Report, which I shall submit to the Congress shortly, will
discuss in detail the economic background for these recommendations.

One of the most important factors in maintaining prosperity is the
Government's fiscal policy. At this time, it is essential not only that the
Federal budget be balanced, but also that there be a substantial surplus to
reduce inflationary pressures, and to permit a sizable reduction in the
national debt, which now stands at $252 billion. I recommend, therefore,
that the Congress enact new tax legislation to bring in an additional $4
billion of Government revenue. This should come principally from additional
corporate taxes. A portion should come from revised estate and gift taxes.
Consideration should be given to raising personal income rates in the
middle and upper brackets.

If we want to keep our economy running in high gear, we must be sure that
every group has the incentive to make its full contribution to the national
welfare. At present, the working men and women of the Nation are unfairly
discriminated against by a statute that abridges their rights, curtails
their constructive efforts, and hampers our system of free collective
bargaining. That statute is the Labor-Management Relations Act of 1947,
sometimes called the Taft-Hartley Act.

That act should be repealed!

The Wagner Act should be reenacted. However, certain improvements, which I
recommended to the Congress 2 years ago, are needed. Jurisdictional strikes
and unjustified secondary boycotts should be prohibited. The use of
economic force to decide issues arising out of the interpretation of
existing contracts should be prevented. Without endangering our democratic
freedoms, means should be provided for setting up machinery for preventing
strikes in vital industries which affect the public interest.

The Department of Labor should be rebuilt and strengthened and those units
properly belonging within that department should be placed in it.

The health of our economy and its maintenance at high levels further
require that the minimum wage fixed by law should be raised to at least 75
cents an hour.

If our free enterprise economy is to be strong and healthy, we must
reinvigorate the forces of competition. We must assure small business the
freedom and opportunity to grow and prosper. To this purpose, we should
strengthen our antitrust laws by closing those loopholes that permit
monopolistic mergers and consolidations.

Our national farm program should be improved-not only in the interest of
the farmers, but for the lasting prosperity of the whole Nation. Our goals
should be abundant farm production and parity income for agriculture.
Standards of living on the farm should be just as good as anywhere else in
the country.

Farm price supports are an essential part of our program to achieve these
ends. Price supports should be used to prevent farm price declines which
are out of line with general price levels, to facilitate adjustments in
production to consumer demands, and to promote good land use. Our price
support legislation must be adapted to these objectives. The authority of
the Commodity Credit Corporation to provide adequate storage space for
crops should be restored.

Our program for farm prosperity should also seek to expand the domestic
market for agricultural products, particularly among low-income groups, and
to increase and stabilize foreign markets.

We should give special attention to extending modern conveniences and
services to our farms. Rural electrification should be pushed forward. And
in considering legislation relating to housing, education, health, and
social security, special attention should be given to rural problems.

Our growing population and the expansion of our economy depend upon the
wise management of our land, water, forest, and mineral wealth. In our
present dynamic economy, the task of conservation is not to lockup our
resources but to develop and improve them. Failure, today, to make the
investments which are necessary to support our progress in the future would
be false economy.

We must push forward the development of our rivers for power, irrigation,
navigation, and flood control. We should apply the lessons of our Tennessee
Valley experience to our other great river basins.

I again recommend action be taken by the Congress to approve the St.
Lawrence Seaway and Power project. This is about the fifth time I have
recommended it.

We must adopt a program for the planned use of the petroleum reserves under
the sea, which are--and must remain--vested in the Federal Government. We
must extend our programs of soil conservation. We must place our forests on
a sustained yield basis, and encourage the development of new sources of
vital minerals.

In all this we must make sure that the benefits of these public
undertakings are directly available to the people. Public power should be
carried to consuming areas by public transmission lines where necessary to
provide electricity at the lowest possible rates. Irrigation waters should
serve family farms and not land speculators.

The Government has still other opportunities--to help raise the standard of
living of our citizens. These opportunities lie in the fields of social
security, health, education, housing, and civil rights.

The present coverage of the social security laws is altogether inadequate;
the benefit payments are too low. One-third of our workers are not covered.
Those who receive old-age and survivors insurance benefits receive an
average payment of only $25 a month. Many others who cannot work because
they are physically disabled are left to the mercy of charity. We should
expand our social security program, both as to the size of the benefits and
the extent of coverage, against the economic hazards due to unemployment,
old age, sickness, and disability.

We must spare no effort to raise the general level of health in this
country. In a nation as rich as ours, it is a shocking fact that tens of
millions lack adequate medical care. We are short of doctors, hospitals,
nurses. We must remedy these shortages. Moreover, we need--and we must have
without further delay--a system of prepaid medical insurance which will
enable every American to afford good medical care.

It is equally shocking that millions of our children are not receiving a
good education. Millions of them are in overcrowded, obsolete buildings. We
are short of teachers, because teachers' salaries are too low to attract
new teachers, or to hold the ones we have. All these school problems will
become much more acute as a result of the tremendous increase in the
enrollment in our elementary schools in the next few years. I cannot repeat
too strongly my desire for prompt Federal financial aid to the States to
help them operate and maintain their school systems.

The governmental agency which now administers the programs of health,
education, and social security should be given full departmental status.

The housing shortage continues to be acute. As an immediate step, the
Congress should enact the provisions for low-rent public housing, slum
clearance, farm housing, and housing research which I have repeatedly
recommended. The number of low-rent public housing units provided for in the
legislation should be increased to 1 million units in the next 7 years.
Even this number of units will not begin to meet our need for new housing.

Most of the houses we need will have to be built by private enterprise,
without public subsidy. By producing too few rental units and too large a
proportion of high-priced houses, the building industry is rapidly pricing
itself out of the market. Building costs must be lowered.

The Government is now engaged in a campaign to induce all segments of the
building industry to concentrate on the production of lower priced housing.
Additional legislation to encourage such housing will be submitted.

The authority which I have requested, to allocate materials in short supply
and to impose price ceilings on such materials, could be used, if found
necessary, to channel more materials into homes large enough for family
life at prices which wage earners can afford.

The driving force behind our progress is our faith in our democratic
institutions. That faith is embodied in the promise of equal rights and
equal opportunities which the founders of our Republic proclaimed to their
countrymen and to the whole world.

The fulfillment of this promise is among the highest purposes of
government. The civil rights proposals I made to the 80th Congress, I now
repeat to the 81st Congress. They should be enacted in order that the
Federal Government may assume the leadership and discharge the obligations
dearly placed upon it by the Constitution.

I stand squarely behind those proposals.

Our domestic programs are the foundation of our foreign policy. The world
today looks to us for leadership because we have so largely realized,
within our borders, those benefits of democratic government for which most
of the peoples of the world are yearning.

We are following a foreign policy which is the outward expression of the
democratic faith we profess. We are doing what we can to encourage free
states and free peoples throughout the world, to aid the suffering and
afflicted in foreign lands, and to strengthen democratic nations against
aggression.

The heart of our foreign policy is peace. We are supporting a world
organization to keep peace and a world economic policy to create prosperity
for mankind. Our guiding star is the principle of international
cooperation. To this concept we have made a national commitment as profound
as anything in history.

To it we have pledged our resources and our honor.

Until a system of world security is established upon which we can safely
rely, we cannot escape the burden of creating and maintaining armed forces
sufficient to deter aggression. We have made great progress in the last
year in the effective organization of our Armed Forces, but further
improvements in our national security legislation are necessary. Universal
training is essential to the security of the United States.

During the course of this session I shall have occasion to ask the Congress
to consider several measures in the field of foreign policy. At this time,
I recommend that we restore the Reciprocal Trade Agreements Act to full
effectiveness, and extend it for 3 years. We should also open our doors to
displaced persons without unfair discrimination.

It should be clear by now to all citizens that we are not seeking to freeze
the status quo. We have no intention of preserving the injustices of the
past. We welcome the constructive efforts being made by many nations to
achieve a better life for their citizens. In the European recovery program,
in our good-neighbor policy and in the United Nations, we have begun to
batter down those national walls which block the economic growth and the
social advancement of the peoples of the world.

We believe that if we hold resolutely to this course, the principle of
international cooperation will eventually command the approval even of
those nations which are now seeking to weaken or subvert it.

We stand at the opening of an era which can mean either great achievement
or terrible catastrophe for ourselves and for all mankind.

The strength of our Nation must continue to be used in the interest of all
our people rather than a privileged few. It must continue to be used
unselfishly in the struggle for world peace and the betterment of mankind
the world over.

This is the task before us.

It is not an easy one. It has many complications, and there will be strong
opposition from selfish interests.

I hope for cooperation from farmers, from labor, and from business. Every
segment of our population and every individual has a right to expect from
our Government a fair deal.

In 1945, when I came down before the Congress for the first time on April
16, I quoted to you King Solomon's prayer that he wanted wisdom and the
ability to govern his people as they should be governed. I explained to you
at that time that the task before me was one of the greatest in the history
of the world, and that it was necessary to have the complete cooperation of
the Congress and the people of the United States.

Well now, we are taking a new start with the same situation. It is
absolutely essential that your President have the complete cooperation of
the Congress to carry out the great work that must be done to keep the
peace in this world, and to keep this country prosperous.

The people of this great country have a right to expect that the Congress
and the President will work in closest cooperation with one objective--the
welfare of the people of this Nation as a whole.

In the months ahead I know that I shall be able to cooperate with this
Congress.

Now, I am confident that the Divine Power which has guided us to this time
of fateful responsibility and glorious opportunity will not desert us now.

With that help from Almighty God which we have humbly acknowledged at every
turning point in our national life, we shall be able to perform the great
tasks which He now sets before us.

***

State of the Union Address
Harry S. Truman
January 4, 1950

Mr. President, Mr. Speaker, Members of the Congress:

A year ago I reported to this Congress that the state of the Union was
good. I am happy to be able to report to you today that the state of the
Union continues to be good. Our Republic continues to increase in the
enjoyment of freedom within its borders, and to offer strength and
encouragement to all those who love freedom throughout the world.

During the past year we have made notable progress in strengthening the
foundations of peace and freedom, abroad and at home.

We have taken important steps in securing the North Atlantic community
against aggression. We have continued our successful support of European
recovery. We have returned to our established policy of expanding
international trade through reciprocal agreement. We have strengthened our
support of the United Nations.

While great problems still confront us, the greatest danger has
receded--the possibility which faced us 3 years ago that most of Europe and
the Mediterranean area might collapse under totalitarian pressure. Today,
the free peoples of the world have new vigor and new hope for the cause of
peace.

In our domestic affairs, we have made notable advances toward broader
opportunity and a better life for all our citizens.

We have met and reversed the first significant downturn in economic
activity since the war. In accomplishing this, Government programs for
maintaining employment and purchasing power have been of tremendous
benefit. As the result of these programs, and the wisdom and good judgment
of our businessmen and workers, major readjustments have been made without
widespread suffering.

During the past year, we have also made a good start in providing housing
for low-income groups; we have raised minimum wages; we have gone forward
with the development of our natural resources; we have given a greater
assurance of stability to the farmer; and we have improved the organization
and efficiency of our Government.

Today, by the grace of God, we stand a free and prosperous nation with
greater possibilities for the future than any people ever had before in the
history of the world.

We are now, in this year of 1950, nearing the midpoint of the 20th
century.

The first half of this century will be known as the most turbulent and
eventful period in recorded history. The swift pace of events promises to
make the next 50 years decisive in the history of man on this planet.

The scientific and industrial revolution which began two centuries ago has,
in the last 50 years, caught up the peoples of the globe in a common
destiny. Two world-shattering wars have proved that no corner of the earth
can be isolated from the affairs of mankind.

The human race has reached a turning point. Man has opened the secrets of
nature and mastered new powers. If he uses them wisely, he can reach new
heights of civilization. If he uses them foolishly, they may destroy him.

Man must create the moral and legal framework for the world which will
insure that his new powers are used for good and not for evil. In shaping
the outcome, the people of the United States will play a leading role.

Among all the great changes that have occurred in the last 50 years, none
is more important than the change in the position of the United States in
world affairs. Fifty years ago we were a country devoted largely to our own
internal affairs. Our industry was growing, and we had new interests in the
Far East and in the Caribbean, but we were primarily concerned with the
development of vast areas of our own continental territory.

Today, our population has doubled. Our national production has risen from
about $50 billion, in terms of today's prices, to the staggering figure of
$255 billion a year. We have a more productive economic system and a
greater industrial potential than any other nation on the globe. Our
standard of living is an inspiration for all other peoples. Even the
slightest changes in our economic and social life have their effect on
other countries all around the world.

Our tremendous strength has brought with it tremendous responsibilities. We
have moved from the outer edge to the center of world affairs. Other
nations look to us for a wise exercise of our economic and military
strength, and for vigorous support of the ideals of representative
government and a free society. We will not fail them.

Our objective in the world is peace. Our country has joined with others in
the task of achieving peace. We know now that this is not an easy task, or
a short one. But we are determined to see it through. Both of our great
political parties are committed to working together--and I am sure they
will continue to work together--to achieve this end. We are prepared to
devote our energy and our resources to this task, because we know that our
own security and the future of mankind are at stake.

Right here, I want to say that no one appreciates more than I the
bipartisan cooperation in foreign affairs which has been enjoyed by this
administration.

Our success in working with other nations to achieve peace depends largely
on what we do at home. We must preserve our national strength. Strength is
not simply a matter of arms and force. It is a matter of economic growth,
and social health, and vigorous institutions, public and private. We can
achieve peace only if we maintain our productive energy, our democratic
institutions, and our firm belief in individual freedom.

Our surest guide in the days that lie ahead will be the spirit in which
this great Republic was rounded. We must make our decisions in the
conviction that all men are created equal, that they are equally entitled
to life, liberty, and the pursuit of happiness, and that the duty of
government is to serve these ends.

This country of ours has experienced many blessings, but none greater than
its dedication to these principles. At every point in our history, these
ideals have served to correct our failures and shortcomings, to spur us on
to greater efforts, and to keep clearly before us the primary purpose of
our existence as a nation. They have enshrined for us, a principle of
government, the moral imperative to do justice, and the divine command to
men to love one another.

These principles give meaning to all that we do.

In foreign policy, they mean that we can never be tolerant of oppression or
tyranny. They mean that we must throw our weight on the side of greater
freedom and a better life for all peoples. These principles confirm us in
carrying out the specific programs for peace which we have already begun.

We shall continue to give our wholehearted support to the United Nations.
We believe that this organization can ultimately provide the framework of
international law and morality without which mankind cannot survive. It has
already set up new standards for the conduct of nations in the Declaration
of Human Rights and the Convention on Genocide. It is moving ahead to give
meaning to the concept of world brotherhood through a wide variety of
cultural, economic, and technical activities.

The events of the past year again showed the value of the United Nations in
bringing about the peaceful adjustment of tense international
controversies. In Indonesia and in Palestine the efforts of the United
Nations have put a stop to bloodshed and paved the way to peaceful
settlements.

We are working toward the time when the United Nations will control weapons
of mass destruction and will have the forces to preserve international law
and order. While the world remains unsettled, however, and as long as our
own security and the security of the free world require, we will maintain a
strong and well-balanced defense organization. The Selective Service System
is an essential part of our defense plans, and it must be continued.

Under the principles of the United Nations Charter we must continue to
share in the common defense of free nations against aggression. At the last
session this Congress laid the basis for this joint effort. We now must put
into effect the common defense plans that are being worked out.

We shall continue our efforts for world economic recovery, because world
prosperity is the only sure foundation of a permanent peace.

As an immediate means to this end we must continue our support of the
European recovery program. This program has achieved great success in the
first 2 years of its operation, but it has not yet been completed. If we
were to stop this program now, or cripple it, just because it is
succeeding, we should be doing exactly what the enemies of democracy want
us to do. We should be just as foolish as a man who, for reasons of false
economy, failed to put a roof on his house after building the foundation
and the walls.

World prosperity also requires that we do all we can to expand world trade.
As a major step in this direction we should promptly join the International
Trade Organization. The purpose of this organization, which the United
States has been foremost in creating, is to establish a code of fair
practice, and an international authority for adjusting differences in
international commercial relations. It is an effort to prevent the kind of
anarchy and irresponsibility in world trade which did so much to bring
about the world depression of the 1930's. An expanding world economy
requires the improvement of living standards and the development of
resources in areas where human poverty and misery now prevail. Without such
improvement the recovery of Europe and the future of our own economy will
not be secure. I urge that the Congress adopt the legislation now before it
to provide for increasing the flow of technical assistance and capital
investment in underdeveloped regions.

It is more essential now than ever, if the ideals of freedom and
representative government are to prevail in these areas, and particularly
in the Far East, that their peoples experience, in their own lives, the
benefits of scientific and economic advances. This program will require the
movement of large amounts of capital from the industrial nations, and
particularly from the United States, to productive uses in the
underdeveloped areas of the world. Recent world events make prompt action
imperative.

This program is in the interest of all peoples-and has nothing in common
with either the old imperialism of the last century or the new imperialism
of the Communists.

Our aim for a peaceful, democratic world of free peoples will be achieved
in the long run, not by force of arms, but by an appeal to the minds and
hearts of men. If the peace policy of the democratic nations is to be
successful, they must demonstrate that the benefits of their way of life
can be increased and extended to all nations and all races.

In the world today we are confronted with the danger that the rising demand
of people everywhere for freedom and a better life may be corrupted and
betrayed by the false promises of communism. In its ruthless struggle for
power, communism seizes upon our imperfections, and takes advantage of the
delays and setbacks which the democratic nations experience in their effort
to secure a better life for their citizens. This challenge to us is more
than a military challenge. It is a challenge to the honesty of our
profession of the democratic faith; it is a challenge to the efficiency and
stability of our economic system; it is a challenge to the willingness to
work with other peoples for world peace and for world prosperity.

For my part I welcome that challenge. I believe that our country, at this
crucial point in world history, will meet that challenge successfully. I
believe that, in cooperation with the other free nations of the world, we
shall extend the full benefits of the democratic way of life to millions
who do not now enjoy them, and preserve mankind from dictatorship and
tyranny.

I believe that we shall succeed in our struggle for this peace, because I
have seen the success we have had in our own country in following the
principles of freedom. Over the last 50 years, the ideals of liberty and
equal opportunity to which this Nation is dedicated have been increasingly
realized in the lives of our people.

The ideal of equal opportunity no longer means simply the opportunity which
a man has to advance beyond his fellows. Some of our citizens do achieve
greater success than others as a reward for individual merit and effort,
and this is as it should be. At the same time our country must be more than
a land of opportunity for a select few. It must be a land of opportunity
for all of us. In such a land we can grow and prosper together.

The simple truth that we can all go forward together is often questioned by
selfish or shortsighted persons. It is strange that this is so, for this
proposition is so clearly demonstrated by our national history. During the
last 50 years, for example, our Nation has grown enormously in material
well-being. This growth has come about, not by concentrating the benefits
of our progress in the hands of a few, but by increasing the wealth of the
great body of our Nation and our citizens.

In the last 50 years the income of the average family has increased so
greatly that its buying power has doubled. The average hours of work have
declined from 60 to 40 a week, the whole hourly production of the average
worker has tripled. Average wages, allowing for price changes, have
increased from about 45 cents an hour to $1.40 an hour.

We have accomplished what to earlier ages of mankind would have been a
miracle--we work shorter hours, we produce more, and we live better.

Increasing freedom from poverty and drudgery has given a fuller meaning to
American life. Our people are better educated; we have more opportunities
for travel and recreation and enjoyment of the arts. We enjoy more personal
liberty in the United States today than ever before.

If we can continue in the spirit of cooperative adventure which has marked
the recent years of our progress, we can expect further scientific
advances, further increases in our standard of living, and a still wider
enjoyment of democratic freedom.

No one, of course, can foretell the future exactly. However, if we assume
that we shall grow as fast in the future as we have grown in the past, we
can get a good idea of how much our country should grow in the next 50
years.

At present our total national production is $255 billion a year. Our
working population and our output per worker are increasing. If our
productive power continues to increase at the same rate as it has increased
over the past 50 years, our total national production 50 years from now
will be nearly four times as much as it is today. Allowing for the expected
growth in population, this would mean that the real income of the average
family in the year 2000 A.D. would be about three times what it is today.

These are estimates of what we can do in the future, but we can reach these
heights only if we follow the right policies. We have learned by bitter
experience that progress is not automatic--that wrong policies lead to
depression and disaster. We cannot achieve these gains unless we have a
stable economy and avoid the catastrophes of boom and bust that have set us
back in the past.

These gains cannot be achieved unless our businessmen maintain their spirit
of initiative and enterprise and operate in a competitive economy. They
cannot be achieved unless our workingmen and women and their unions help to
increase productivity and obtain for labor a fair share of the benefits of
our economic system. They cannot be achieved unless we have a stable and
prosperous agriculture. They cannot be achieved unless we conserve and
develop our natural resources in the public interest. Our system will not
work unless our people are healthy, well-educated, and confident of the
future. It will not work unless all citizens can participate fully in our
national life.

In achieving these gains the Government has a special responsibility to
help create and maintain the conditions which will permit the growth we
know is possible. Foremost among these conditions is the need for a fair
distribution of our increasing prosperity among all the great groups of our
population who help to bring it about-labor, business, agriculture.

Businessmen must continue to have the incentives necessary for investment
and for the development of new lines of enterprise. In the future growth of
this country, lie possibilities for hundreds of thousands of new and
independent businesses. As our national production increases, as it doubles
and redoubles in the next 50 years, the number of independent and competing
enterprises should also increase. If the number does not increase, our
constantly growing economy will fall under the control of a few dominant
economic groups whose powers will be so great that they will be a challenge
to democratic institutions.

To avoid this danger, we must curb monopoly and provide aids to independent
business so that it may have the credit and capital to compete in a system
of free enterprise. I recommend that the Congress complete action at this
session on the pending bill to close the loopholes in the Clayton Act which
now permit monopolistic mergers. I also hope before this session is over to
transmit to the Congress a series of proposals to strengthen the
antimonopoly laws, to assist small business, and to encourage the growth of
new enterprises.

In the case of labor, free collective bargaining must be protected and
encouraged. Collective bargaining is not only a fundamental economic
freedom for labor. It is also a strengthening and stabilizing influence for
our whole economy.

The Federal statute now governing labor relations is punitive in purpose
and one-sided in operation. This statute is, and always has been,
inconsistent with the practice of true and effective collective bargaining.
It should be repealed and replaced by a law that is fair to all and in
harmony with our democratic ideals.

A full understanding of the problems of modern labor relations is of such
importance that I recommend the establishment of a labor extension service
to encourage educational activities in this field.

Another essential for our continued growth is a stable and prosperous
agriculture. For many years we have been building a program to give the
farmer a reasonable measure of protection against the special hazards to
which he is exposed. That program was improved at the last session of the
Congress. However, our farm legislation is still not adequate.

Although the Congress has properly declared as a matter of national policy
that safeguards must be maintained against slumps in farm prices, there are
serious shortcomings in the methods now available for carrying out this
policy. Mandatory price supports should be provided for the commodities not
now covered which are major sources of farm income.

Moreover, we should provide a method of supporting farm income at fair
levels which will, at the same time, avoid piling up unmanageable surpluses
and allow consumers to obtain the full benefit of our abundant agricultural
production. A system of production payments gives the greatest promise of
accomplishing this purpose. I recommend that the use of such a system be
authorized.

One of the most important factors in our continued growth is the
construction of more good, up-to-date housing. In a country such as ours
there is no reason why decent homes should not be within the reach of all.
With the help of various Government programs we have made great progress in
the last few years in increasing the number of homes.

Despite this increase, there is still an acute shortage of housing for the
lower and middle-income groups, especially in large metropolitan areas. We
have laid the groundwork for relieving the plight of lower-income families
in the Housing Act of 1949. To aid the middle-income families, I recommend
that the Congress enact new legislation authorizing a vigorous program to
help cooperatives and other nonprofit groups build housing which these
families can afford.

Rent control has done a great deal to prevent the housing shortage from
having had worse effects during this postwar period of adjustment. Rent
control is still necessary to prevent widespread hardship and sharp
curtailment of the buying power of millions of consumers in metropolitan
areas. I recommend, therefore, that rent control be continued for another
year.

If we are to achieve a better life for all, the natural resources of the
country must be regarded as a public trust. We must use our precious assets
of soil, water, and forest, and grassland in such a way that they become
constantly more productive and more valuable. Government investment in the
conservation and development of our resources is necessary to the future
economic expansion of the country.

We need to enlarge the production and transmission of public power. That is
true not only in those regions which have already received great benefits
from Federal power projects, but also in regions such as New England where
the benefits of large-scale public power development have not yet been
experienced.

In our hydroelectric and irrigation undertakings, as well as in our other
resource programs, we must continue policies to assure that their benefits
will be spread among the many and not restricted to the favored few.

Important resource legislation which should be passed at this session
includes the authorization of the St. Lawrence seaway and power project and
the establishment of the Columbia Valley Administration--the establishment
of the Columbia Valley Administration, I don't want you to miss that.

Through wise Government policies and Government expenditures for the
conservation and development of our natural resources, we can be sure of
transmitting to our children and our children's children a country far
richer and more productive than the one we know today.

The value of our natural resources is constantly being increased by the
progress of science. Research is finding new ways of using such natural
assets as minerals, sea water, and plant life. In the peaceful development
of atomic energy, particularly, we stand on the threshold of new wonders.
The first experimental machines for producing useful power from atomic
energy are now under construction. We have made only the first beginnings
in this field, but in the perspective of history they may loom larger than
the first airplane, or even the first tools that started man on the road to
civilization.

To take full advantage of the increasing possibilities of nature we must
equip ourselves with increasing knowledge. Government has a responsibility
to see that our country maintains its position in the advance of science.
As a step toward this end, the Congress should complete action on the
measure to create a National Science Foundation.

Another duty of the Government is to promote the economic security, the
health, and the education of its citizens. By so doing, we strengthen both
our economy and the structure of our society. In a nation as rich as ours,
all citizens should be able to live in decency and health.

Our Social Security System should be developed into the main reliance of
our people for basic protection against the economic hazards of old-age,
unemployment, and illness. I earnestly hope that the Congress will complete
action at this session on legislation to increase the benefits and extend
the coverage of old-age and survivors' insurance. The widespread movement
to provide pensions in private industry dramatizes the need for
improvements in the public insurance system.

I also urge that the Congress strengthen our unemployment compensation law
to meet present-day needs more adequately. The economic downturn of the
past year was the first real test that our system of unemployment insurance
has had to meet. That test has proved the wisdom of the system, but it has
also made strikingly apparent the need for improving its operation and
increasing its coverage and its benefits.

In the field of health there are immense opportunities to extend to more of
our people the benefits of the amazing advances in medical science. We have
made a good beginning in expanding our hospitals, but we must also go on to
remedy the shortages of doctors, nurses, and public health services, and to
establish a system of medical insurance which will enable all Americans to
afford good medical care.

We must take immediate steps to strengthen our educational system. In many
parts of our country, young people are being handicapped for life because
of a poor education. The rapidly increasing number of children of school
age, coupled with the shortage of qualified teachers, makes this problem
more critical each year. I believe that the Congress should no longer delay
in providing Federal assistance to the States so that they can maintain
adequate schools.

As we go forward in achieving greater economic security and greater
opportunity for all our people, we should make every effort to extend the
benefits of our democratic institutions to every citizen. The religious
ideals which we profess, and the heritage of freedom which we have received
from the past, clearly place that duty upon us. I again urge the Congress
to enact the civil rights proposals I made in February 1948. These
proposals are for the enactment of Federal statutes which will protect all
our people in the exercise of their democratic rights and their search for
economic opportunity, grant statehood to Alaska and Hawaii, provide a
greater measure of self-government for our island possessions, and accord
home rule to the District of Columbia. Some of those proposals have been
before the Congress for a long time. Those who oppose them, as well as
those who favor them, should recognize that it is the duty of the elected
representatives of the people to let these proposals come to a vote.

Our democratic ideals, as well as our best interests, require that we do
our fair share in providing homes for the unfortunate victims of war and
tyranny. In so doing, we shall add strength to our democracy through the
abilities and skills which these men and women will bring here. I urge the
prompt enactment by the Congress of the legislation now before it to extend
and broaden the existing displaced persons law and remove its
discriminatory features.

The measures I am recommending to the Congress concerning both our foreign
and our domestic policies represent a carefully considered program to meet
our national needs. It is a program which necessarily requires large
expenditures of funds. More than 70 percent of the Government's
expenditures are required to meet the costs of past wars and to work for
world peace. This is the dominant factor in our fiscal policy. At the same
time, the Government must make substantial expenditures which are necessary
to the growth and expansion of the domestic economy.

At present, largely because of the ill-considered tax reduction of the Both
Congress, the Government is not receiving enough revenue to meet its
necessary expenditures.

To meet this situation, I am proposing that Federal expenditures be held to
the lowest levels consistent with our international requirements and the
essential needs of economic growth, and the well-being of our people. I
think I had better read that over; you interrupted me in the middle.

To meet this situation, I am proposing that Federal expenditures be held to
the lowest levels consistent with our international requirements and the
essential needs of economic growth, and the well-being of our people. Don't
forget that last phrase. At the same time, we must guard against the folly
of attempting budget slashes which would impair our prospects for peace or
cripple the programs essential to our national strength.

The budget recommendations I shall shortly transmit to the Congress show
that we can expect a substantial improvement in our fiscal position over
the next few years, as the cost of some of our extraordinary postwar
programs declines, and as the Government revenue rises as a result of
growth in employment and national income. To further improve our fiscal
outlook, we should make some changes in our tax system which will reduce
present inequities, stimulate business activity, and yield a moderate
amount of additional revenue. I expect to transmit specific recommendations
to the Congress on this subject at a very early date.

The fiscal policy I am recommending is the quickest and safest way of
achieving a balanced budget.

As we move forward into the second half of the 20th century, we must always
bear in mind the central purpose of our national life. We do not seek
material prosperity for ourselves because we love luxury; we do not aid
other nations because we wish to increase our power. We have not devised
programs for the security and well-being of our people because we are
afraid or unwilling to take risks. This is not the meaning of our past
history or our present course.

We work for a better life for all, so that all men may put to good use the
great gifts with which they have been endowed by their Creator. We seek to
establish those material conditions of life in which, without exception,
men may live in dignity, perform useful work, serve their communities, and
worship God as they see fit.

These may seem simple goals, but they are not little ones. They are worth a
great deal more than all the empires and conquests of history. They are not
to be achieved by military aggression or political fanaticism. They are to
be achieved by humbler means-by hard work, by a spirit of self-restraint in
our dealings with one another, and by a deep devotion to the principles of
justice and equality.

It should make us truly thankful, as we look back to the beginnings of this
country, that we have come so far along the road to a better life for all.
It should make us humble to think, as we look ahead, how much farther we
have to go to accomplish, at home and abroad, the objectives that were set
out for us at the founding of this great Nation.

As we approach the halfway mark of the 20th century, we should ask for
continued strength and guidance from that Almighty Power who has placed
before us such great opportunities for the good of mankind in the years to
come.

***

State of the Union Address
Harry S. Truman
January 8, 1951

Mr. President, Mr. Speaker, Members of the Congress:

This 82d Congress faces as grave a task as any Congress in the history of
our Republic. The actions you take will be watched by the whole world.
These actions will measure the ability of a free people, acting through
their chosen representatives and their free institutions, to meet a deadly
challenge to their way of life.

We can meet this challenge foolishly or wisely. We can meet it timidly or
bravely, shamefully or honorably.

I know that the 82d Congress will meet this challenge in a way worthy of
our great heritage. I know that your debates will be earnest, responsible,
constructive, and to the point. I know that from these debates there will
come the great decisions needed to carry us forward.

At this critical time, I am glad to say that our country is in a healthy
condition. Our democratic institutions are sound and strong. We have more
men and women at work than ever before. We are able to produce more than
ever before--in fact, far more than any country ever produced in the
history of the world.

I am confident that we can succeed in the great task that lies before us.

We will succeed, but we must all do our part. We must all act together as
citizens of this great Republic.

As we meet here today, American soldiers are fighting a bitter campaign in
Korea. We pay tribute to their courage, devotion, and gallantry.

Our men are fighting, alongside their United Nations allies, because they
know, as we do, that the aggression in Korea is part of the attempt of the
Russian Communist dictatorship to take over the world, step by step.

Our men are fighting a long way from home, but they are fighting for our
lives and our liberties. They are fighting to protect our right to meet
here today--our right to govern ourselves as a free nation.

The threat of world conquest by Soviet Russia endangers our liberty and
endangers the kind of world in which the free spirit of man can survive.
This threat is aimed at all peoples who strive to win or defend their own
freedom and national independence.

Indeed, the state of our Nation is in great part the state of our friends
and allies throughout the world. The gun that points at them points at us,
also. The threat is a total threat and the danger is a common danger.

All free nations are exposed and all are in peril. Their only security lies
in banding together. No one nation can find protection in a selfish search
for a safe haven from the storm.

The free nations do not have any aggressive purpose. We want only peace in
the world--peace for all countries. No threat to the security of any nation
is concealed in our plans and programs.

We had hoped that the Soviet Union, with its security assured by the
Charter of the United Nations, would be willing to live and let live. But I
am sorry to say that has not been the case.

The imperialism of the czars has been replaced by the even more ambitious,
more crafty, and more menacing imperialism of the rulers of the Soviet
Union.

This new imperialism has powerful military forces. It is keeping millions
of men under arms. It has a large air force and a strong submarine force.
It has complete control of the men and equipment of its satellites. It has
kept its subject peoples and its economy in a state of perpetual
mobilization.

The present rulers of the Soviet Union have shown that they are willing to
use this power to destroy the free nations and win domination over the
whole world.

The Soviet imperialists have two ways of going about their destructive
work. They use the method of subversion and internal revolution, and they
use the method of external aggression. In preparation for either of these
methods of attack, they stir up class strife and disorder. They encourage
sabotage. They put out poisonous propaganda. They deliberately try to
prevent economic improvement.

If their efforts are successful, they foment a revolution, as they did in
Czechoslovakia and China, and as they tried, unsuccessfully, to do in
Greece. If their methods of subversion are blocked, and if they think they
can get away with outright warfare, they resort to external aggression.
This is what they did when they loosed the armies of their puppet states
against the Republic of Korea, in an evil war by proxy.

We of the free world must be ready to meet both of these methods of Soviet
action. We must not neglect one or the other.

The free world has power and resources to meet these two forms of
aggression--resources that are far greater than those of the Soviet
dictatorship. We have skilled and vigorous peoples, great industrial
strength, and abundant sources of raw materials. And above all, we cherish
liberty. Our common ideals are a great part of our strength. These ideals
are the driving force of human progress.

The free nations believe in the dignity and the worth of man.

We believe in independence for all nations.

We believe that free and independent nations can band together into a world
order based on law. We have laid the cornerstone of such a peaceful world
in the United Nations.

We believe that such a world order can and should spread the benefits of
modern science and industry, better health and education, more food and
rising standards of living--throughout the world.

These ideals give our cause a power and vitality that Russian communism can
never command.

The free nations, however, are bound together by more than ideals. They are
a real community bound together also by the ties of self-interest and
self-preservation. If they should fall apart, the results would be fatal to
human freedom.

Our own national security is deeply involved with that of the other free
nations. While they need our support, we equally need theirs. Our national
safety would be gravely prejudiced if the Soviet Union were to succeed in
harnessing to its war machine the resources and the manpower of the free
nations on the borders of its empire.

If Western Europe were to fall to Soviet Russia, it would double the Soviet
supply of coal and triple the Soviet supply of steel. If the free countries
of Asia and Africa should fall to Soviet Russia, we would lose the sources
of many of our most vital raw materials, including uranium, which is the
basis of our atomic power. And Soviet command of the manpower of the free
nations of Europe and Asia would confront us with military forces which we
could never hope to equal.

In such a situation, the Soviet Union could impose its demands on the
world, without resort to conflict, simply through the preponderance of its
economic and military power. The Soviet Union does not have to attack the
United States to secure domination of the world. It can achieve its ends by
isolating us and swallowing up all our allies. Therefore, even if we were
craven enough I do not believe we could be--but, I say, even if we were
craven enough to abandon our ideals, it would be disastrous for us to
withdraw from the community of free nations.

We are the most powerful single member of this community, and we have a
special responsibility. We must take the leadership in meeting the
challenge to freedom and in helping to protect the rights of independent
nations.

This country has a practical, realistic program of action for meeting this
challenge.

First, we shall have to extend economic assistance, where it can be
effective. The best way to stop subversion by the Kremlin is to strike at
the roots of social injustice and economic disorder. People who have jobs,
homes, and hopes for the future will defend themselves against the
underground agents of the Kremlin. Our programs of economic aid have done
much to turn back Communism,

In Europe the Marshall plan has had an electrifying result. As European
recovery progressed, the strikes led by the Kremlin's agents in Italy and
France failed. All over Western Europe the Communist Party took worse and
worse beatings at the polls.

The countries which have received Marshall plan aid have been able, through
hard work, to expand their productive strength-in many cases, to levels
higher than ever before in their history. Without this strength they would
be completely incapable of defending themselves today. They are now ready
to use this strength in helping to build a strong combined defense against
aggression.

We shall need to continue some economic aid to European countries. This aid
should now be specifically related to the building of their defenses.

In other parts of the world our economic assistance will need to be more
broadly directed toward economic development. In the Near East, in Africa,
in Asia, we must do what we can to help people who are striving to advance
from misery, poverty, and hunger. We must also continue to help the
economic growth of our good neighbors in this hemisphere. These actions
will bring greater strength for the free world. They will give many people
a real stake in the future and reason to defend their freedom. They will
mean increased production of goods they need and materials we need.

Second, we shall need to continue our military assistance to countries
which want to defend themselves.

The heart of our common defense effort is the North Atlantic community. The
defense of Europe is the basis for the defense of the whole free
world--ourselves included. Next to the United States, Europe is the largest
workshop in the world. It is also a homeland of the great religious beliefs
shared by many of our citizens beliefs which are now threatened by the tide
of atheistic communism.

Strategically, economically, and morally, the defense of Europe is a part
of our own defense. That is why we have joined with the countries of Europe
in the North Atlantic Treaty, pledging ourselves to work with them.

There has been much discussion recently over whether the European countries
are willing to defend themselves. Their actions are answering this
question.

Our North Atlantic Treaty partners have strict systems of universal
military training. Several have recently increased the term of service. All
have taken measures to improve the quality of training. Forces are being
trained and expanded as rapidly as the necessary arms and equipment can be
supplied from their factories and ours. Our North Atlantic Treaty partners,
together, are building armies bigger than our own.

None of the North Atlantic Treaty countries, including our own country, has
done enough yet. But real progress is being made. Together, we have worked
out defense plans. The military leaders of our own country took part in
working out these plans, and are agreed that they are sound and within our
capabilities.

To put these plans into action, we sent to Europe last week one of our
greatest military commanders, General Dwight D. Eisenhower.

General Eisenhower went to Europe to assume command of the united forces of
the North Atlantic Treaty countries, including our own forces in Germany.

The people of Europe have confidence in General Eisenhower. They know his
ability to put together a fighting force of allies. His mission is vital to
our security. We should all stand behind him, and give him every bit of
help we can.

Part of our job will be to reinforce the military strength of our European
partners by sending them weapons and equipment as our military production
expands.

Our program of military assistance extends to the nations in the Near East
and the Far East which are trying to defend their freedom. Soviet communism
is trying to make these nations into colonies, and to use their people as
cannon fodder in new wars of conquest. We want their people to be free men
and to enjoy peace.

Our country has always stood for freedom for the peoples of Asia. Long,
long ago it stood for the freedom of the peoples of Asia. Our history shows
this. We have demonstrated it in the Philippines. We have demonstrated it
in our relations with Indonesia, India, and with China. We hope to join in
restoring the people of Japan to membership in the community of free
nations.

It is in the Far East that we have taken up arms, under the United Nations,
to preserve the principle of independence for free nations. We are fighting
to keep the forces of Communist aggression from making a slave state out of
Korea.

Korea has tremendous significance for the world. It means that free
nations, acting through the United Nations, are fighting together against
aggression.

We will understand the importance of this best if we look back into
history. If the democracies had stood up against the invasion of Manchuria
in 1931, or the attack on Ethiopia in 1935, or the seizure of Austria in
1938, if they had stood together against aggression on those occasions as
the United Nations has done in Korea, the whole history of our time would
have been different.

The principles for which we are fighting in Korea are right and just. They
are the foundations of collective security and of the future of free
nations. Korea is not only a country undergoing the torment of aggression;
it is also a symbol. It stands for right and justice in the world against
oppression and slavery. The free world must always stand for these
principles--and we will stand with the free world.

As the third part of our program, we will continue to work for peaceful
settlements in international disputes. We will support the United Nations
and remain loyal to the great principles of international cooperation laid
down in its charter.

We are willing, as we have always been, to negotiate honorable settlements
with the Soviet Union. But we will not engage in appeasement.

The Soviet rulers have made it clear that we must have strength as well as
right on our side. If we build our strength--and we are building it--the
Soviet rulers may face the facts and lay aside their plans to take over the
world.

That is what we hope will happen, and that is what we are trying to bring
about. That is the only realistic road to peace.

These are the main elements of the course our Nation must follow as a
member of the community of free nations. These are the things we must do to
preserve our security and help create a peaceful world. But they will be
successful only if we increase the strength of our own country.

Here at home we have some very big jobs to do. We are building much
stronger military forces--and we are building them fast. We are preparing
for full wartime mobilization, if that should be necessary. And we are
continuing to build a strong and growing economy, able to maintain whatever
effort may be required for as long as necessary.

We are building our own Army, Navy, and Air Force to an active strength of
nearly 3 1/2 million men and women. We are stepping up the training of the
reserve forces, and establishing more training facilities, so that we can
rapidly increase our active forces far more on short notice.

We are going to produce all the weapons and equipment that such an armed
force will need. Furthermore, we will make weapons for our allies, and
weapons for our own reserve supplies. On top of this, we will build the
capacity to turn out on short notice arms and supplies that may be needed
for a full-scale war.

Fortunately, we have a good start on this because of our enormous plant
capacity and because of the equipment on hand from the last war. For
example, many combat ships are being returned to active duty from the
"mothball fleet" and many others can be put into service on very short
notice. We have large reserves of arms and ammunition and thousands of
workers skilled in arms production.

In many cases, however, our stocks of weapons are low. In other cases,
those on hand are not the most modern. We have made remarkable technical
advances. We have developed new types of jet planes and powerful new tanks.
We are concentrating on producing the newest types of weapons and producing
them as fast as we can.

This production drive is more selective than the one we had during World
War II, but it is just as urgent and intense. It is a big program and it is
a costly one.

Let me give you two concrete examples. Our present program calls for
expanding the aircraft industry so that it will have the capacity to
produce 50,000 modern military planes a year. We are preparing the capacity
to produce 35,000 tanks a year. We are not now ordering that many planes or
that many tanks, and we hope that we never have to, but we mean to be able
to turn them out if we need them.

The planes we are producing now are much bigger, much better, and much more
expensive than the planes we had during the last war.

We used to think that the B-17 was a huge plane, and the blockbuster it
carried a huge load. But the B-36 can carry five of these blockbusters in
its belly, and it can carry them five times as far. Of course, the B-36 is
much more complicated to build than the B-17, and far more expensive. One
B-17 costs $275,000, while now one B-36 costs $3 1/2 million.

I ask you to remember that what we are doing is to provide the best and
most modern military equipment in the world for our fighting forces.

This kind of defense production program has two parts.

The first part is to get our defense production going as fast as possible.
We have to convert plants and channel materials to defense production. This
means heavy cuts in civilian uses of copper, aluminum, rubber, and other
essential materials. It means shortages in various consumer goods.

The second part is to increase our capacity to produce and to keep our
economy strong for the long pull. We do not know how long Communist
aggression will threaten the world.

Only by increasing our output can we carry the burden of preparedness for
an indefinite period in the future. This means that we will have to build
more power plants and more steel mills, grow more cotton, mine more copper,
and expand our capacity in many other ways.

The Congress will need to consider legislation, at this session, affecting
all the aspects of our mobilization job. The main subjects on which
legislation will be needed are:

First, appropriations for our military buildup.

Second, extension and revision of the Selective Service Act.

Third, military and economic aid to help build up the strength of the free
world.

Fourth, revision and extension of the authority to expand production and to
stabilize prices, wages, and rents.

Fifth, improvement of our agricultural laws to help obtain the kinds of
farm products we need for the defense effort.

Sixth, improvement of our labor laws to help provide stable
labor-management relations and to make sure that we have steady production
in this emergency.

Seventh, housing and training of defense workers and the full use of all
our manpower resources.

Eighth, means for increasing the supply of doctors, nurses, and other
trained medical personnel critically needed for the defense effort.

Ninth, aid to the States to meet the most urgent needs of our elementary
and secondary schools. Some of our plans will have to be deferred for the
time being. But we should do all we can to make sure our children are being
trained as good and useful citizens in the critical times ahead.

Tenth, a major increase in taxes to meet the cost of the defense effort.

The Economic Report and the Budget Message will discuss these subjects
further. In addition, I shall send to the Congress special messages
containing detailed recommendations on legislation needed at this Session.

In the months ahead the Government must give priority to activities that
are urgent--like military procurement and atomic energy and power
development. It must practice rigid economy in its nondefense activities.
Many of the things we would normally do must be curtailed or postponed.

But in a long-term defense effort like this one, we cannot neglect the
measures needed to maintain a strong economy and a healthy democratic
society.

The Congress, therefore, should give continued attention to the measures
which our country will need for the long pull. And it should act upon such
legislation as promptly as circumstances permit.

To take just one example--we need to continue and complete the work of
rounding out our system of social insurance. We still need to improve our
protection against unemployment and old age. We still need to provide
insurance against the loss of earnings through sickness, and against the
high costs of modern medical care.

And above all, we must remember that the fundamentals of our strength rest
upon the freedoms of our people. We must continue our efforts to achieve
the full realization of our democratic ideals. We must uphold the freedom
of speech and the freedom of conscience in our land. We must assure equal
rights and equal opportunities to all our citizens.

As we go forward this year in the defense of freedom, let us keep dearly
before us the nature of our present effort.

We are building up our strength, in concert with other free nations, to
meet the danger of aggression that has been turned loose on the world. The
strength of the free nations is the world's best hope of peace.

I ask the Congress for unity in these crucial days.

Make no mistake about my meaning. I do not ask, or expect, unanimity. I do
not ask for an end to debate. Only by debate can we arrive at decisions
which are wise, and which reflect the desires of the American people. We do
not have a dictatorship in this country, and we never will have one in this
country.

When I request unity, what I am really asking for is a sense of
responsibility on the part of every Member of this Congress. Let us debate
the issues, but let every man among us weigh his words and his deeds. There
is a sharp difference between harmful criticism and constructive criticism.
If we are truly responsible as individuals, I am sure that we will be
unified as a government.

Let us keep our eyes on the issues and work for the things we all believe
in.

Let each of us put our country ahead of our party, and ahead of our own
personal interests.

I had the honor to be a Member of the Senate during World War II, and I
know from experience that unity of purpose and of effort is possible in the
Congress without any lessening of the vitality of our two-party system.

Let us all stand together as Americans. Let us stand together with all men
everywhere who believe in human liberty.

Peace is precious to us. It is the way of life we strive for with all the
strength and wisdom we possess. But more precious than peace are freedom
and justice. We will fight, if fight we must, to keep our freedom and to
prevent justice from being destroyed.

These are the things that give meaning to our lives, and which we
acknowledge to be greater than ourselves.

This is our cause--peace, freedom, justice. We will pursue this cause with
determination and humility, asking divine guidance that in all we do we may
follow the will of God.

***

State of the Union Address
Harry S. Truman
January 9, 1952

Mr. President, Mr. Speaker, Members of the Congress:

I have the honor to report to the Congress on the state of the Union.

At the outset, I should like to speak of the necessity for putting first
things first as we work together this year for the good of our country.

The United States and the whole free world are passing through a period of
grave danger. Every action you take here in Congress, and every action that
I take as President, must be measured against the test of whether it helps
to meet that danger.

This will be a presidential election year-the year in which politics plays
a large part in our lives--a larger part than usual. That is perfectly
proper. But we have a greater responsibility to conduct our political
fights in a manner that does not harm the national interest.

We can find plenty of things to differ about without destroying our free
institutions and without abandoning our bipartisan foreign policy for
peace.

When everything is said and done, all of us--Republicans and Democrats
alike--all of us are Americans; and we are all going to sink or swim
together.

We are moving through a perilous time. Faced with a terrible threat of
aggression, our Nation has embarked upon a great effort to help establish
the kind of world in which peace shall be secure. Peace is our goal-not
peace at any price, but a peace based on freedom and justice. We are now in
the midst of our effort to reach that goal. On the whole, we have been
doing very well.

Last year, 1951, was a year in which we threw back aggression, added
greatly to our military strength, and improved the chances for peace and
freedom in many parts of the world.

This year, 1952, is a critical year in the defense effort of the whole free
world. If we falter we can lose all the gains we have made. If we drive
ahead, with courage and vigor and determination, we can by the end of 1952
be in a position of much greater security. The way will be dangerous for
the years ahead, but if we put forth our best efforts this year--and next
year--we can be "over the hump" in our effort to build strong defenses.

When we look at the record of the past year, 1951, we find important things
on both the credit and the debit side of the ledger. We have made great
advances. At the same time we have run into new problems which must be
overcome.

Now let us look at the credit side first.

Peace depends upon the free nations sticking together, and making a
combined effort to check aggression and prevent war. In this respect, 1951
was a year of great achievement.

In Korea the forces of the United Nations turned hack the Chinese Communist
invasion-and did it without widening the area of conflict. The action of
the United Nations in Korea has been a powerful deterrent to a third world
war. However, the situation in Korea remains very hazardous. The outcome of
the armistice negotiation still remains uncertain.

In Indochina and Malaya, our aid has helped our allies to hold back the
Communist advance, although there are signs of further trouble in that
area.

In 1951 we strengthened the chances of peace in the Pacific region by the
treaties with Japan and the defense arrangements with Australia, New
Zealand, and the Philippines.

In Europe combined defense has become a reality. The free nations have
created a real fighting force. This force is not yet as strong as it needs
to be; but it is already a real obstacle to any attempt by hostile forces
to sweep across Europe to the Atlantic.

In 1951 we also moved to strengthen the security of Europe by the agreement
to bring Greece and Turkey into the North Atlantic Treaty.

The United Nations, the world's greatest hope for peace, has come through a
year of trial stronger and more useful than ever. The free nations have
stood together in blocking Communist attempts to tear up the charter.

At the present session of the United Nations in Paris, we, together with
the British and the French, offered a plan to reduce and control all
armaments under a foolproof inspection system. This is a concrete,
practical proposal for disarmament.

But what happened? Vishinsky laughed at it. Listen to what he said: "I
could hardly sleep at all last night .... I could not sleep because I kept
laughing." The world will be a long time forgetting the spectacle of that
fellow laughing at disarmament.

Disarmament is not a joke. Vishinsky's laughter met with shock and anger
from the people all over the world. And, as a result, Mr. Stalin's
representative received orders to stop laughing and start talking.

If the Soviet leaders were to accept this proposal, it would lighten the
burden of armaments, and permit the resources of the earth to be devoted to
the good of mankind. But until the Soviet Union accepts a sound disarmament
proposal, and joins in peaceful settlements, we have no choice except to
build up our defenses.

During this past year we added more than a million men and women to our
Armed Forces. The total is now nearly 3 1/2 million. We have made rapid
progress in the field of atomic weapons. We have turned out billion worth
of military supplies and equipment, three times as much as the year
before.

Economic conditions in the country are good. There are 61 million people on
the job; wages, farm incomes, and business profits are at high levels.
Total production of goods and services in our country has increased 8
percent over last year--about twice the normal rate of growth.

Perhaps the most amazing thing about our economic progress is the way we
are increasing our basic capacity to produce. For example, we are now in
the second year of a 3-year program which will double our output of
aluminum, increase our electric power supply by 40 percent, and increase
our steelmaking capacity by 15 percent. We can then produce 120 million
tons of steel a year, as much as all the rest of the world put together.

This expansion will mean more jobs and higher standards of living for all
of us in the years ahead. At the present time it means greater strength for
us and for the rest of the free world in the fight for peace.

Now, I must turn to the debit side of the ledger for the past year.

The outstanding fact to note on the debit side of the ledger is that the
Soviet Union, in 1951, continued to expand its military production and
increase its already excessive military power.

It is true that the Soviets have run into increasing difficulties. Their
hostile policies have awakened stern resistance among free men throughout
the world. And behind the Iron Curtain the Soviet rule of force has created
growing political and economic stresses in the satellite nations.

Nevertheless, the grim fact remains that the Soviet Union is increasing its
armed might. It is still producing more war planes than the free nations.
It has set off two more atomic explosions. The world still walks in the
shadow of another world war.

And here at home, our defense preparations are far from complete.

During 1951 we did not make adequate progress in building up civil defense
against atomic attack. This is a major weakness in our plans for peace,
since inadequate civilian defense is an open invitation to a surprise
attack. Failure to provide adequate civilian defense has the same effect as
adding to the enemy's supply of atomic bombs.

In the field of defense production we have run into difficulties and delays
in designing and producing the latest types of airplanes and tanks. Some
machine tools and metals are still in extremely short supply.

In other free countries the defense buildup has created severe economic
problems. It has increased inflation in Europe and has endangered the
continued recovery of our allies.

In the Middle East political tensions and the oil controversy in Iran are
keeping the region in a turmoil. In the Far East the dark threat of
Communist imperialism still hangs over many nations.

This, very briefly, is the good side and the bad side of the picture.

Taking the good and bad together, we have made real progress this last year
along the road to peace. We have increased the power and unity of the free
world. And while we were doing this, we have avoided world war on the one
hand, and appeasement on the other. This is a hard road to follow, but the
events of the last year show that it is the right road to peace.

We cannot expect to complete the job overnight. The free nations may have
to maintain for years the larger military forces needed to deter
aggression. We must build steadily, over a period of years, toward
political solidarity and economic progress among the free nations in all
parts of the world.

Our task will not be easy; but if we go at it with a will, we can look
forward to steady progress. On our side are all the great resources of
freedom--the ideals of religion and democracy, the aspiration of people for
a better life, and the industrial and technical power of a free
civilization.

These advantages outweigh anything the slave world can produce. The only
thing that can defeat us is our own state of mind. We can lose if we
falter.

The middle period of a great national effort like this is a very difficult
time. The way seems long and hard. The goal seems far distant. Some people
get discouraged. That is only natural.

But if there are any among us who think we ought to ease up in the fight
for peace, I want to remind them of three things--just three things.

First: The threat of world war is still very real. We had one Pearl
Harbor--let's not get caught off guard again. If you don't think the threat
of Communist armies is real, talk to some of our men back from Korea.

Second: If the United States had to try to stand alone against a
Soviet-dominated world, it would destroy the life we know and the ideals we
hold dear. Our allies are essential to us, just as we are essential to
them. The more shoulders there are to bear the burden the lighter that
burden will be.

Third: The things we believe in most deeply are under relentless attack. We
have the great responsibility of saving the basic moral and spiritual
values of our civilization. We have started out well--with a program for
peace that is unparalleled in history. If we believe in ourselves and the
faith we profess, we will stick to that job until it is victoriously
finished.

This is a time for courage, not for grumbling and mumbling.

Now, let us take a look at the things we have to do.

The thing that is uppermost in the minds of all of us is the situation in
Korea. We must, and we will, keep up the fight there until we get the kind
of armistice that will put an end to the aggression and protect the safety
of our forces and the security of the Republic of Korea. Beyond that we
shall continue to work for a settlement in Korea that upholds the
principles of the United Nations.

We went into Korea because we knew that Communist aggression had to be met
firmly if freedom was to be preserved in the world. We went into the fight
to save the Republic of Korea, a free country, established under the United
Nations. These are our aims. We will not give up until we attain them.

Meanwhile, we must continue to strengthen the forces of freedom throughout
the world.

I hope the Senate will take early and favorable action on the Japanese
peace treaty, on our security pacts with the Pacific countries, and on the
agreement to bring Greece and Turkey into the North Atlantic Treaty.

We are also negotiating an agreement with the German Federal Republic under
which it can play an honorable and equal part among nations and take its
place in the defense of Western Europe.

But treaties and plans are only the skeleton of our defense structure. The
sinew and muscle of defense are the forces and equipment which must be
provided.

In Europe we must go on helping our friends and allies to build up their
military forces. This means we must send weapons in large volume to our
European allies. I have directed that weapons for Europe be given a very
high priority. Economic aid is necessary, too, to supply the margin of
difference between success and failure in making Europe a strong partner in
our joint defense.

In the long run we want to see Europe freed from any dependence on our aid.
Our European allies want that just as bad as we do. The steps that are now
being taken to build European unity should help bring that about. Six
European countries are pooling their coal and steel production under the
Schuman plan. Work is going forward on the merger of European national
forces on the Continent into a single army. These great projects should
become realities in 1952.

We should do all we can to help and encourage the move toward a strong and
united Europe.

In Asia the new Communist empire is a daily threat to millions of people.
The peoples of Asia want to be free to follow their own way of life. They
want to preserve their culture and their traditions against communism, just
as much as we want to preserve ours. They are laboring under terrific
handicaps--poverty, ill health, feudal systems of land ownership, and the
threat of internal subversion or external attack. We can and we must
increase our help to them.

This means military aid, especially to those places like Indochina which
might be hardest hit by some new Communist attack.

It also means economic aid, both technical know-how and capital
investment.

This last year we made available millions of bushels of wheat to relieve
famine in India. But far more important, in the long run, is the work
Americans are doing in India to help the Indian farmers themselves raise
more grain. With the help of our technicians, Indian farmers, using simple,
inexpensive means, have been able since 1948 to double the crops in one
area in India. One farmer there raised 63 bushels of wheat to the acre,
where 13 bushels had been the average before.

This is point 4--our point 4 program at work. It is working--not only in
India but in Iran, Paraguay, Liberia--in 33 countries around the globe. Our
technical missionaries are out there. We need more of them. We need more
funds to speed their efforts, because there is nothing of greater
importance in all our foreign policy. There is nothing that shows more
clearly what we stand for, and what we want to achieve.

My friends of the Congress, less than one-third of the expenditure for the
cost of World War II would have created the developments necessary to feed
the whole world so we wouldn't have to stomach communism. That is what we
have got to fight, and unless we fight that battle and win it, we can't win
the cold war or a hot one either.

We have recently lost a great public servant who was leading this effort to
bring opportunity and hope to the people of half the world. Dr. Henry
Bennett and his associates died in line of duty on a point 4 mission. It is
up to us to carry on the great work for which they gave their lives.

During the coming year we must not forget the suffering of the people who
live behind the Iron Curtain. In those areas minorities are being
oppressed, human rights violated, religions persecuted. We should continue
to expose those wrongs. We should continue and expand the activities of the
Voice of America, which brings our message of hope and truth to those
peoples and other peoples throughout the world.

I have just had an opportunity to discuss many of these world problems with
Prime Minister Churchill. We have had a most satisfactory series of
meetings. We thoroughly reviewed the situation in Europe, the Middle East,
and the Far East. We both look forward to steady progress toward peace
through the cooperative action and teamwork of the free nations.

Turning from our foreign policies, let us consider the jobs we have here at
home as a part of our program for peace.

The first of these jobs is to move ahead full steam on the defense
program.

Our objective is to have a well-equipped active defense force large
enough--in concert with the forces of our allies--to deter aggression and
to inflict punishing losses on the enemy immediately if we should be
attacked. This active force must be backed by adequate reserves, and by the
plants and tools to turn out the tremendous quantities of new weapons that
would be needed if war came. We are not building an active force adequate
to carry on full scale war, but we are putting ourselves in a position to
mobilize very rapidly if we have to.

This year I shall recommend some increases in the size of the active force
we are building, with particular emphasis on air power. This means we shall
have to continue large-scale production of planes and other equipment for a
longer period of time than we had originally planned.

Planes and tanks and other weapons-what the military call "hard goods"--are
now beginning to come off the production lines in volume. Deliveries of
hard goods now amount to about a billion and a half dollars worth a month.
A year from now, we expect that rate to be doubled.

We shall have to hold to a high rate of military output for about a year
after that. In 1954 we hope to have enough equipment so that we can reduce
the production of most military items substantially. The next 2 years
should therefore be the peak period of defense production.

Defense needs will take a lot of steel, aluminum, copper, nickel, and other
scarce materials. This means smaller production of some civilian goods. The
cutbacks will be nothing like those during World War II, when most civilian
production was completely stopped. But there will be considerably less of
some goods than we have been used to these past 2 or 3 years.

The very critical part of our defense job this year is to keep down
inflation.

We can control inflation if we make up our minds to do it.

On the executive side of the Government, we intend to hold the line on
prices just as tightly as the law allows. We will permit only those wage
increases which are clearly justified under sound stabilization policies;
and we will see to it that industries absorb cost increases out of earnings
wherever feasible, before they are authorized to raise prices. We will do
that, at any rate, except where the recent amendments to the law
specifically require us to give further price increases.

Congress has a tremendous responsibility in this matter. Our stabilization
law was shot full of holes at the last session. This year, it will be one
of the main tasks before the Congress to repair the damage and enact a
strong anti-inflation law.

As a part of our program to keep our country strong, we are determined to
preserve the financial strength of the Government. This means high taxes
over the next few years. We must see to it that these taxes are shared
among the people as fairly as possible. I expect to discuss these matters
in the Economic Report and the Budget Message which will soon be presented
to the Congress.

Our tax laws must be fair. And we must make absolutely certain they are
administered fairly, without fear or favor of any kind for anybody. To this
end, steps have already been taken to remedy weaknesses which have been
disclosed in the administration of the tax laws. In addition, I hope the
Congress will approve my reorganization plan for the Bureau of Internal
Revenue. We must do everything necessary in order to make just as certain
as is humanly possible that every taxpayer receives equal treatment under
the law.

To carry the burden of defense we must have a strong, productive, and
expanding economy here at home. We cannot neglect those things that have
made us the great and powerful nation we are today.

Our strength depends upon the health, the morale, the freedom of our
people. We can take on the burden of leadership in the fight for world
peace because, for nearly 20 years, the Government and the people have been
working together for the general welfare. We have given more and more of
out citizens a fair chance at decent, useful, productive lives. That is the
reason we are as strong as we are today.

This Government of ours--the Congress and the executive both--must keep on
working to bring about a fair deal for all the American people. Some people
will say that we haven't the time or the money this year for measures for
the welfare of the people. But if we want to win the fight for peace, this
is a part of the job we cannot ignore.

We will have to give up some things, we will have to go forward on others
at a slower pace. But, so far as I am concerned, I do not think we can give
up the things that are vital to our national strength.

I believe most people in this country will agree with me on that.

I think most farmers understand that soil conservation and rural
electrification and agricultural research are not frills or luxuries, but
real necessities in order to boost our farm production.

I think most workers understand that decent housing and good working
conditions are not luxuries, but necessities if the working men and women
of this country are to continue to out-produce the rest of the world.

I think our businessmen know that scientific research and transportation
services and more steel mills and power projects are not luxuries, but
necessities to keep our business and our industry in the forefront of
industrial progress.

I think everybody knows that social insurance and better schools and health
services are not frills, but necessities in helping all Americans to be
useful and productive citizens, who can contribute their full share in the
national effort to protect and advance our way of life.

We cannot do all we want to in times like these--we have to choose the
things that will contribute most to defense--but we must continue to make
progress if we are to be a strong nation in the years ahead.

Let me give you some examples.

We are going right ahead with the urgently needed work to develop our
natural resources, to conserve our soil, and to prevent floods. We are
going to produce essential power and build the lines that are necessary and
that we have to have to transmit it to our farms and factories. We are
going to encourage exploration for new mineral deposits.

We are going to keep on building essential highways and taking any other
steps that will assure the Nation an adequate transportation system--on
land, on the sea, and in the air.

We must move right ahead this year to see that defense workers and
soldiers' families get decent housing at rents they can afford to pay.

We must begin our long deferred program of Federal aid to education--to
help the States meet the present crisis in the operation of our schools.
And we must help with the construction of schools in areas where they are
critically needed because of the defense effort.

We urgently need to train more doctors and other health personnel, through
aid to medical education. We also urgently need to expand the basic public
health services in our home communities--especially in defense areas. The
Congress should go ahead with these two measures immediately.

I have set up an impartial commission to make a thorough study of the
Nation's health needs. One of the things this commission is looking into is
how to bring the cost of modern medical care within the reach of all the
people. I have repeatedly recommended national health insurance as the best
way to do this. So far as I know, it is still the best way. If there are
any better answers, I hope this commission will find them. But of one thing
I am sure: something must be done, and done soon.

This year we ought to make a number of urgently needed improvements in our
social security law. For one thing, benefits under old-age and survivors
insurance should be raised $5 a month above the present average of $42. For
another thing, the States should be given special aid to help them increase
public assistance payments. By doing these things now, we can ease the
pressure of living costs for people who depend on those fixed payments.

We should also make some cost-of-living adjustments for those receiving
veterans' compensation for death or disability incurred in the service of
our country. In addition, now is the time to start a sensible program of
readjustment benefits for our veterans who have seen service since the
fighting broke out in Korea.

Another thing the Congress should do at this session is to strengthen our
system of farm price supports to meet the defense emergency. The "sliding
scale" in the price support law should not be allowed to penalize farmers
for increasing production to meet defense needs. We should also find a new
and less costly method for supporting perishable commodities than the law
now provides.

We need to act promptly to improve our labor law. The Taft-Hartley Act has
many serious and far-reaching defects. Experience has demonstrated this so
clearly that even the sponsors of the act now admit that it needs to be
changed. A fair law, fair to both management and labor, is indispensable to
sound labor relations and to full, uninterrupted production. I intend to
keep on working for a fair law until we get one.

As we build our strength to defend the freedom in the world, we ourselves
must extend the benefits of freedom more widely among all our own people.
We need to take action toward the wider enjoyment of civil rights. Freedom
is the birthright of every American.

The executive branch has been making real progress toward full equality of
treatment and opportunity--in the Armed Forces, in the civil service, and
in private firms working for the Government. Further advances require
action by Congress, and I hope that means will be provided to give the
Members of the Senate and the House a chance to vote on them.

I am glad to hear that home rule for the District of Columbia will be the
first item of business before the Senate. I hope that it, as well as
statehood for Hawaii and Alaska, will be adopted promptly.

All these measures I have been talking about--measures to advance the
well-being of our people--demonstrate to the world the forward movement of
our free society.

This demonstration of the way free men govern themselves has a more
powerful influence on the people of the world--on both sides of the Iron
Curtain--than all the trick slogans and pie-in-the-sky promises of the
Communists.

But our shortcomings, as well as our progress, are watched from abroad. And
there is one shortcoming I want to speak about plainly.

Our kind of government above all others cannot tolerate dishonesty among
public servants.

Some dishonest people worm themselves into almost every human organization.
It is all the more shocking, however, when they make their way into a
Government such as ours, which is based on the principle of justice for
all. Such unworthy public servants must be weeded out. I intend to see to
it that Federal employees who have been guilty of misconduct are punished
for it. I also intend to see to it that the honest and hard-working great
majority of our Federal employees are protected against partisan slander
and malicious attack.

I have already made some recommendations to the Congress to help accomplish
these purposes. I intend to submit further recommendations to this end. I
will welcome the wholehearted cooperation of the Congress in this effort.

I also think that the Congress can do a great deal to strengthen confidence
in our institutions by applying rigorous standards of moral integrity to
its own operations, and by finding an effective way to control campaign
expenditures, and by protecting the rights of individuals in congressional
investigations.

To meet the crisis which now hangs over the world, we need many different
kinds of strength--military, economic, political, and moral. And of all
these, I am convinced that moral strength is the most vital.

When you come right down to it, it is the courage and the character of our
Nation--and of each one of us as individuals-that will really decide how
well we meet this challenge.

We are engaged in a great undertaking at home and abroad--the greatest, in
fact, that any nation has ever been privileged to embark upon. We are
working night and day to bring peace to the world and to spread the
democratic ideals of justice and self-government to all people. Our
accomplishments are already remarkable. We ought to be full of pride in
what we are doing, and full of confidence and hope in the outcome. No
nation ever had greater resources, or greater energy, or nobler traditions
to inspire it.

And yet, day in and day out, we see a long procession of timid and fearful
men who wring their hands and cry out that we have lost the way, that we
don't know what we are doing, that we are bound to fail. Some say we should
give up the struggle for peace, and others say we should have a war and get
it over with. That's a terrible statement. I had heard it made, but they
want us to forget the great objective of preventing another world war--the
objective for which our soldiers have been fighting in the hills of Korea.

If we are to be worthy of all that has been done for us by our soldiers in
the field, we must be true to the ideals for which they are fighting. We
must reject the counsels of defeat and despair. We must have the
determination to complete the great work for which our men have laid down
their lives.

In all we do, we should remember who we are and what we stand for. We are
Americans. Our forefathers had far greater obstacles than we have, and much
poorer chances of success. They did not lose heart, or turn aside from
their goals. In the darkest of all winters in American history, at Valley
Forge, George Washington said: "We must not, in so great a contest, expect
to meet with nothing but sunshine." With that spirit they won their fight
for freedom.

We must have that same faith and vision. In the great contest in which we
are engaged today, we cannot expect to have fair weather all the way. But
it is a contest just as important for this country and for all men, as the
desperate struggle that George Washington fought through to victory.

Let us prove, again, that we are not merely sunshine patriots and summer
soldiers. Let us go forward, trusting in the God of Peace, to win the goals
we seek.

***

State of the Union Address
Harry S. Truman
January 7, 1953

To the Congress of the United States:

I have the honor to report to the Congress on the state of the Union.

This is the eighth such report that, as President, I have been privileged
to present to you and to the country. On previous occasions, it has been my
custom to set forth proposals for legislative action in the coming year.
But that is not my purpose today. The presentation of a legislative program
falls properly to my successor, not to me, and I would not infringe upon
his responsibility to chart the forward course. Instead, I wish to speak of
the course we have been following the past eight years and the position at
which we have arrived.

In just two weeks, General Eisenhower will be inaugurated as President of
the United States and I will resume--most gladly--my place as a private
citizen of this Republic. The Presidency last changed hands eight years ago
this coming April. That was a tragic time: a time of grieving for President
Roosevelt--the great and gallant human being who had been taken from us; a
time of unrelieved anxiety to his successor, thrust so suddenly into the
complexities and burdens of the Presidential office.

Not so this time. This time we see the normal transition under our
democratic system. One President, at the conclusion of his term, steps back
to private life; his successor, chosen by the people, begins his tenure of
the office. And the Presidency of the United States continues to function
without a moment's break.

Since the election, I have done my best to assure that the transfer from
one Administration to another shall be smooth and orderly. From General
Eisenhower and his associates, I have had friendly and understanding
collaboration in this endeavor. I have not sought to thrust upon him--nor
has he sought to take--the responsibility which must be mine until twelve
o'clock noon on January twentieth. But together, I hope and believe we have
found means whereby the incoming President can obtain the full and detailed
information he will need to assume the responsibility the moment he takes
the oath of office.

The President-elect is about to take up the greatest burdens, the most
compelling responsibilities, given to any man. And I, with you and all
Americans, wish for him all possible success in undertaking the tasks that
will so soon be his.

What are these tasks? The President is Chief of State, elected
representative of all the people, national spokesman for them and to them.
He is Commander-in-Chief of our armed forces. He is charged with the
conduct of our foreign relations. He is Chief Executive of the Nation's
largest civilian organization. He must select and nominate all top
officials of the Executive Branch and all Federal judges. And on the
legislative side, he has the obligation and the opportunity to recommend,
and to approve or veto legislation. Besides all this, it is to him that a
great political party turns naturally for leadership, and that, too, he
must provide as President.

This bundle of burdens is unique; there is nothing else like it on the face
of the earth. Each task could be a full-time job. Together, they would be a
tremendous undertaking in the easiest of times.

But our times are not easy; they are hard-as hard and complex, perhaps as
any in our history. Now, the President not only has to carry on these tasks
in such a way that our democracy may grow and flourish and our people
prosper, but he also has to lead the whole free world in overcoming the
communist menace--and all this under the shadow of the atomic bomb.

This is a huge challenge to the human being who occupies the Presidential
office. But it is not a challenge to him alone, for in reality he cannot
meet it alone. The challenge runs not just to him but to his whole
Administration, to the Congress, to the country.

Ultimately, no President can master his responsibilities, save as his
fellow citizens-indeed, the whole people--comprehend the challenge of our
times and move, with him, to meet it.

It has been my privilege to hold the Presidential office for nearly eight
years now, and much has been done in which I take great pride. But this is
not personal pride. It is pride in the people, in the Nation. It is pride
in our political system and our form of government--balky sometimes,
mechanically deficient perhaps, in many ways--but enormously alive and
vigorous; able through these years to keep the Republic on the right
course, rising to the great occasions, accomplishing the essentials,
meeting the basic challenge of our times.

There have been misunderstandings and controversies these past eight years,
but through it all the President of the United States has had that measure
of support and understanding without which no man could sustain the burdens
of the Presidential office, or hope to discharge its responsibilities.

For this I am profoundly grateful--grateful to my associates in the
Executive Branch--most of them non-partisan civil servants;
grateful--despite our disagreements-to the Members of the Congress on both
sides of the aisle; grateful especially to the American people, the
citizens of this Republic, governors of us all.

We are still so close to recent controversies that some of us may find it
hard to understand the accomplishments of these past eight years. But the
accomplishments are real and very great, not as the President's, not as the
Congress', but as the achievements of our country and all the people in
it.

Let me remind you of some of the things we have done since I first assumed
my duties as President of the United States.

I took the oath of office on April 12, 1945. In May of that same year, the
Nazis surrendered. Then, in July, that great white flash of light, man-made
at Alamogordo, heralded swift and final victory in World War II--and opened
the doorway to the atomic age.

Consider some of the great questions that were posed for us by sudden,
total victory in World War II. Consider also, how well we as a Nation have
responded.

Would the American economy collapse, after the war? That was one question.
Would there be another depression here--a repetition of 1921 or 1929? The
free world feared and dreaded it. The communists hoped for it and built
their policies upon that hope.

We answered that question--answered it with a resounding "no."

Our economy has grown tremendously. Free enterprise has flourished as never
fore. Sixty-two million people are now gainfully employed, compared with 51
million seven years ago. Private businessmen and farmers have invested more
than 200 billion dollars in new plant and equipment since the end of World
War II. Prices have risen further than they should have done--but incomes,
by and large, have risen even more, so that real living standards are now
considerably higher than seven years ago. Aided by sound government
policies, our expanding economy has shown the strength and flexibility for
swift and almost painless reconversion from war to peace, in 1945 and 1946;
for quick reaction and recovery--well before Korea--from the beginnings of
recession in 1949. Above all, this live and vital economy of ours has now
shown the remarkable capacity to sustain a great mobilization program for
defense, a vast outpouring of aid to friends and allies all around the
world--and still to produce more goods and services for peaceful use at
home than we have ever known before.

This has been our answer, up to now, to those who feared or hoped for a
depression in this country.

How have we handled our national finances? That was another question
arising at war's end. In the administration of the Government, no problem
takes more of the President's time, year in and year out, than fashioning
the Budget, and the related problem of managing the public debt.

Financing World War II left us with a tremendous public debt, which reached
279 billion dollars at its peak in February, 1946.

Beginning in July, 1946, when war and reconversion financing had ended, we
have held quite closely to the sound standard that in times of high
employment and high national income, the Federal Budget should be balanced
and the debt reduced.

For the four fiscal years from July 1, 1946, to June 30, 1950, we had a net
surplus of 4.3 billion dollars. Using this surplus, and the Treasury's
excess cash reserves, the debt was reduced substantially, reaching a low
point of 251 billion dollars in June, 1949, and ending up at 257 billion
dollars on June 30, 1950.

In July of 1950, we began our rapid rearmament, and for two years held very
close to a pay-as-we-go policy. But in the current fiscal year and the
next, rising expenditures for defense will substantially outrun receipts.
This will pose an immediate and serious problem for the new Congress.

Now let me turn to another question we faced at the war's end. Would we
take up again, and carry forward, the great projects of social welfare--so
badly needed, so long overdue--that the New Deal had introduced into our
national life? Would our Government continue to have a heart for the
people, or was the progress of the New Deal to be halted in the aftermath
of war as decisively as the progress of Woodrow Wilson's New Freedom had
been halted after the first world war?

This question, too, we have answered. We have answered it by doubling old
age insurance benefits and extending coverage to ten million more people.
We have answered it by increasing our minimum wage. We have answered by the
three million privately constructed homes that the Federal Government has
helped finance since the war--and the 155 thousand units of low rent public
housing placed under construction since 1949.

We have answered with the 42 thousand new hospital beds provided since 1946
through the joint efforts of the Federal Government and local communities.

We have answered by helping eight million veterans of World War II to
obtain advanced education, 196 thousand to start in business, and 64
thousand to buy farms.

We have answered by continuing to help farmers obtain electric power, until
today nearly 90 per cent of our farms have power line electric service.

In these and other ways, we have demonstrated, up to now, that our
democracy has not forgotten how to use the powers of the Government to
promote the people's welfare and security.

Another of the big post-war questions was this: What we would do with the
Nation's natural resources--its soils and water, forests and grasslands.
Would we continue the strong conservation movement of the 1930's, or would
we, as we did after the First World War, slip back into the practices of
monopoly, exploitation, and waste?

The answer is plain. All across our country, the soil conservation movement
has spread, aided by Government programs, enriching private and public
lands, preserving them from destruction, improving them for future use. In
our river basins, we have invested nearly 5 billion dollars of public funds
in the last eight years--invested them in projects to control floods,
irrigate farmlands, produce low-cost power and get it to the housewives and
farmers and businessmen who need it. We have been vigilant in protecting
the people's property--lands and forests and oil and minerals.

We have had to fight hard against those who would use our resources for
private greed; we have met setbacks; we have had to delay work because of
defense priorities, but on the whole we can be proud of our record in
protecting our natural heritage, and in using our resources for the public
good.

Here is another question we had to face at the war's close: Would we
continue, in peace as well as war, to promote equality of opportunity for
all our citizens, seeking ways and means to guarantee for all of them the
full enjoyment of their civil rights?

During the war we achieved great economic and social gains for millions of
our fellow citizens who had been held back by prejudice. Were we prepared,
in peacetime, to keep on moving toward full realization of the democratic
promise? Or would we let it be submerged, wiped out, in post-war riots and
reaction, as after World War I?

We answered these questions in a series of forward steps at every level of
government and in many spheres of private life. In our armed forces, our
civil service, our universities, our railway trains, the residential
districts of our cities--in stores and factories all across the Nation--in
the polling booths as well--the barriers are coming down. This is
happening, in part, at the mandate of the courts; in part, at the
insistence of Federal, State and local governments; in part, through the
enlightened action of private groups and persons in every region and every
walk of life.

There has been a great awakening of the American conscience on the issues
of civil rights. And all this progress--still far from complete but still
continuing--has been our answer, up to now, to those who questioned our
intention to live up to the promises of equal freedom for us all.

There was another question posed for us at the war's end, which equally
concerned the future course of our democracy: Could the machinery of
government and politics in this Republic be changed, improved, adapted
rapidly enough to carry through, responsibly and well, the vast, new
complicated undertakings called for in our time?

We have answered this question, too, answered it by tackling the most
urgent, most specific, problems which the war experience itself had brought
into sharp focus. The reorganization of the Congress in 1946; the
unification of our armed services, beginning in 1947; the closer
integration of foreign and military policy through the National Security
Council created that same year; and the Executive reorganizations, before
and after the Hoover-Acheson Commission Report in 1949--these are landmarks
in our continuing endeavor to make government an effective instrument of
service to the people.

I come now to the most vital question of all, the greatest of our concerns:
Could there be built in the world a durable structure of security, a
lasting peace for all the nations, or would we drift, as after World War I,
toward another terrible disaster--a disaster which this time might be the
holocaust of atomic war?

That is still the overriding question of our time. We cannot know the
answer yet; perhaps we will not know it finally for a long time to come.
But day and night, these past eight years, we have been building for peace,
searching out the way that leads most surely to security and freedom and
justice in the world for us and all mankind.

This, above all else, has been the task of our Republic since the end of
World War II, and our accomplishment so far should give real pride to all
Americans. At the very least, a total war has been averted, each day up to
this hour. And at the most, we may already have succeeded in establishing
conditions which can keep that kind of war from happening, for as far ahead
as man can see.

The Second World War radically changed the power relationships of the
world. Nations once great were left shattered and weak, channels of
communication, routes of trade, political and economic ties of many kinds
were ripped apart.

And in this changed, disrupted, chaotic situation, the United States and
the Soviet Union emerged as the two strongest powers of the world. Each had
tremendous human and natural resources, actual or potential, on a scale
unmatched by any other nation.

Nothing could make plainer why the world is in its present state--and how
that came to pass--than an understanding of the diametrically opposite
principles and policies of these two great powers in a war-ruined world.

For our part, we in this Republic were-and are--free men, heirs of the
American Revolution, dedicated to the truths of our Declaration of
Independence:

"... That all men are created equal, that they are endowed by their Creator
with certain unalienable rights... That to secure these rights, governments
are instituted among men, deriving their just powers from the consent of
the governed."

Our post-war objective has been in keeping with this great idea. The United
States has sought to use its pre-eminent position of power to help other
nations recover from the damage and dislocation of the war. We held out a
helping hand to enable them to restore their national lives and to regain
their positions as independent, self-supporting members of the great family
of nations. This help was given without any attempt on our part to dominate
or control any nation. We did not want satellites but partners.

The Soviet Union, however, took exactly the opposite course.

Its rulers saw in the weakened condition of the world not an obligation to
assist in the great work of reconstruction, but an opportunity to exploit
misery and suffering for the extension of their power. Instead of help,
they brought subjugation. They extinguished, blotted out, the national
independence of the countries that the military operations of World War II
had left within their grasp.

The difference stares at us from the map of Europe today. To the west of
the line that tragically divides Europe we see nations continuing to act
and live in the light of their own traditions and principles. On the other
side, we see the dead uniformity of a tyrannical system imposed by the
rulers of the Soviet Union. Nothing could point up more clearly what the
global struggle between the free world and the communists is all about.

It is a struggle as old as recorded history; it is freedom versus tyranny.

For the dominant idea of the Soviet regime is the terrible conception that
men do not have rights but live at the mercy of the state.

Inevitably this idea of theirs--and all the consequences flowing from
it--collided with the efforts of free nations to build a just and peaceful
world. The "cold war" between the communists and the free world is nothing
more or less than the Soviet attempt to checkmate and defeat our peaceful
purposes, in furtherance of their own dread objective.

We did not seek this struggle, God forbid. We did our utmost to avoid it.
In World War II, we and the Russians had fought side by side, each in our
turn attacked and forced to combat by the aggressors. After the war, we
hoped that our wartime collaboration could be maintained, that the
frightful experience of Nazi invasion, of devastation in the heart of
Russia, had turned the Soviet rulers away from their old proclaimed
allegiance to world revolution and communist dominion. But instead, they
violated, one by one, the solemn agreements they had made with us in
wartime. They sought to use the rights and privileges they had obtained in
the United Nations, to frustrate its purposes and cut down its powers as an
effective agent of world progress and the keeper of the world's peace.

Despite this outcome, the efforts we made toward peaceful collaboration are
a source of our present strength. They demonstrated that we believed what
we proclaimed, that we actually sought honest agreements as the way to
peace. Our whole moral position, our leadership in the free world today, is
fortified by that fact.

The world is divided, not through our fault or failure, but by Soviet
design. They, not we, began the cold war. And because the free world saw
this happen because men know we made the effort and the Soviet rulers
spurned it--the free nations have accepted leadership from our Republic, in
meeting and mastering the Soviet offensive.

It seems to me especially important that all of us be clear, in our own
thinking, about the nature of the threat we have faced-and will face for a
long time to come. The measures we have devised to meet it take shape and
pattern only as we understand what we were--and are--up against.

The Soviet Union occupies a territory of 8 million square miles. Beyond its
borders, East and West, are the nearly five million square miles of the
satellite states--virtually incorporated into the Soviet Union--and of
China, now its close partner. This vast land mass contains an enormous
store of natural resources sufficient to support an economic development
comparable to our own.

That is the Stalinist world. It is a world of great natural diversity in
geography and climate, in distribution of resources, in population,
language, and living standards, in economic and cultural development. It is
a world whose people are not all convinced communists by any means. It is a
world where history and national traditions, particularly in its
borderlands, tend more toward separation than unification, and run counter
to the enforced combination that has been made of these areas today.

But it is also a world of great man-made uniformities, a world that bleeds
its population white to build huge military forces; a world in which the
police are everywhere and their authority unlimited; a world where terror
and slavery are deliberately administered both as instruments of government
and as means of production; a world where all effective social power is the
state's monopoly--yet the state itself is the creature of the communist
tyrants.

The Soviet Union, with its satellites, and China are held in the tight grip
of communist party chieftains. The party dominates all social and political
institutions. The party regulates and centrally directs the whole economy.
In Moscow's sphere, and in Peiping's, all history, philosophy, morality and
law are centrally established by rigid dogmas, incessantly drummed into the
whole population and subject to interpretation--or to change by none except
the party's own inner circle.

And lest their people learn too much of other ways of life, the communists
have walled off their world, deliberately and uniformly, from the rest of
human society.

That is the communist base of operation in-their cold war. In addition,
they have at their command hundreds and thousands of dedicated foreign
communists, people in nearly every free country who will serve Moscow's
ends. Thus the masters of the Kremlin are provided with deluded followers
all through the free world whom they can manipulate, cynically and quite
ruthlessly, to serve the purposes of the Soviet state.

Given their vast internal base of operations, and their agents in foreign
lands, what are the communist rulers trying to do?

Inside their homeland, the communists are trying to maintain and modernize
huge military forces. And simultaneously, they are endeavoring to weld
their whole vast area and population into a completely self-contained,
advanced industrial society. They aim, some day, to equal or better the
production levels of Western Europe and North America combined--thus
shifting the balance of world economic power, and war potential, to their
side.

They have a long way to go and they know it. But they are prepared to levy
upon living generations any sacrifice that helps strengthen their armed
power, or speed industrial development.

Externally, the communist rulers are trying to expand the boundaries of
their world, whenever and wherever they can. This expansion they have
pursued steadfastly since the close of World War II, using any means
available to them.

Where the Soviet army was present, as in the countries of Eastern Europe,
they have gradually squeezed free institutions to death.

Where post-war chaos existed in industrialized nations, as in Western
Europe, the local Stalinists tried to gain power through political
processes, politically-inspired strikes, and every available means for
subverting free institutions to their evil ends.

Where conditions permitted, the Soviet rulers have stimulated and aided
armed insurrection by communist-led revolutionary forces, as in Greece,
Indo-China, the Philippines, and China, or outright aggression by one of
their satellites, as in Korea.

Where the forces of nationalism, independence, and economic change were at
work throughout the great sweep of Asia and Africa, the communists tried to
identify themselves with the cause of progress, tried to picture themselves
as the friends of freedom and advancement--surely one of the most cynical
efforts of which history offers record.

Thus, everywhere in the free world, the communists seek to fish in troubled
waters, to seize more countries, to enslave more millions of human souls.
They were, and are, ready to ally themselves with any group, from the
extreme left to the extreme right, that offers them an opportunity to
advance their ends.

Geography gives them a central position. They are both a European and an
Asian power, with borders touching many of the most sensitive and vital
areas in the free world around them. So situated, they can use their armies
and their economic power to set up simultaneously a whole series of
threats--or inducements--to such widely dispersed places as Western
Germany, Iran, and Japan. These pressures and attractions can be sustained
at will, or quickly shifted from place to place.

Thus the communist rulers are moving, with implacable will, to create
greater strength in their vast empire, and to create weakness and division
in the free world, preparing for the time their false creed teaches them
must come: the time when the whole world outside their sway will be so torn
by strife and contradictions that it will be ripe for the communist
plucking.

This is the heart of the distorted Marxist interpretation of history. This
is the glass through which Moscow and Peiping look out upon the world, the
glass through which they see the rest of us. They seem really to believe
that history is on their side. And they are trying to boost "history"
along, at every opportunity, in every way they can.

I have set forth here the nature of the communist menace confronting our
Republic and the whole free world. This is the measure of the challenge we
have faced since World War II--a challenge partly military and partly
economic, partly moral and partly intellectual, confronting us at every
level of human endeavor and all around the world.

It has been and must be the free world's purpose not only to organize
defenses against aggression and subversion, not only to build a structure
of resistance and salvation for the community of nations outside the iron
curtain, but in addition to give expression and opportunity to the forces
of growth and progress in the free world, to so organize and unify the
cooperative community of free men that we will not crumble but grow
stronger over the years, and the Soviet empire, not the free world, will
eventually have to change its ways or fall.

Our whole program of action to carry out this purpose has been directed to
meet two requirements.

The first of these had to do with security. Like the pioneers who settled
this great continent of ours, we have had to carry a musket while we went
about our peaceful business. We realized that if we and our allies did not
have military strength to meet the growing Soviet military threat, we would
never have the opportunity to carry forward our efforts to build a peaceful
world of law and order--the only environment in which our free institutions
could survive and flourish.

Did this mean we had to drop everything else and concentrate on armies and
weapons? Of course it did not: side-by-side with this urgent military
requirement, we had to continue to help create conditions of economic and
social progress in the world. This work had to be carried forward alongside
the first, not only in order to meet the non-military aspects of the
communist drive for power, but also because this creative effort toward
human progress is essential to bring about the kind of world we as free men
want to live in.

These two requirements--military security and human progress--are more
closely related in action than we sometimes recognize. Military security
depends upon a strong economic underpinning and a stable and hopeful
political order; conversely, the confidence that makes for economic and
political progress does not thrive in areas that are vulnerable to military
conquest.

These requirements are related in another way. Both of them depend upon
unity of action among the free nations of the world. This, indeed, has been
the foundation of our whole effort, for the drawing together of the free
people of the world has become a condition essential not only to their
progress, but to their survival as free people.

This is the conviction that underlies all the steps we have been taking to
strengthen and unify the free nations during the past seven years.

What have these steps been? First of all, how have we gone about meeting
the requirement of providing for our security against this world-wide
challenge?

Our starting point, as I have said on many occasions, has been and remains
the United Nations.

We were prepared, and so were the other nations of the free world, to place
our reliance on the machinery of the United Nations to safeguard peace. But
before the United Nations could give full expression to the concept of
international security embodied in the Charter, it was essential that the
five permanent members of the Security Council honor their solemn pledge to
cooperate to that end. This the Soviet Union has not done.

I do not need to outline here the dreary record of Soviet obstruction and
veto and the unceasing efforts of the Soviet representatives to sabotage
the United Nations. It is important, however, to distinguish clearly
between the principle of collective security embodied in the Charter and
the mechanisms of the United Nations to give that principle effect. We must
frankly recognize that the Soviet Union has been able, in certain
instances, to stall the machinery of collective security. Yet it has not
been able to impair the principle of collective security. The free nations
of the world have retained their allegiance to that idea. They have found
the means to act despite the Soviet veto, both through the United Nations
itself and through the application of this principle in regional and other
security arrangements that are fully in harmony with the Charter and give
expression to its purposes.

The free world refused to resign itself to collective suicide merely
because of the technicality of a Soviet veto.

The principle of collective measures to forestall aggression has found
expression in the Treaty of Rio de Janeiro, the North Atlantic Treaty, now
extended to include Greece and Turkey, and the several treaties we have
concluded to reinforce security in the Pacific area.

But the free nations have not this time fallen prey to the dangerous
illusion that treaties alone will stop an aggressor. By a series of
vigorous actions, as varied as the nature of the threat, the free nations
have successfully thwarted aggression or the threat of aggression in many
different parts of the world.

Our country has led or supported these collective measures. The aid we have
given to people determined to act in defense of their freedom has often
spelled the difference between success and failure.

We all know what we have done, and I shall not review in detail the steps
we have taken. Each major step was a milepost in the developing unity,
strength and resolute will of the free nations.

The first was the determined and successful effort made through the United
Nations to safeguard the integrity and independence of Iran in 1945 and
1946.

Next was our aid and support to embattled Greece, which enabled her to
defeat the forces threatening her national independence.

In Turkey, cooperative action resulted in building up a bulwark of military
strength for an area vital to the defenses of the entire free world.

In 1949, we began furnishing military aid to our partners in the North
Atlantic Community and to a number of other free countries.

The Soviet Union's threats against Germany and Japan, its neighbors to the
West and to the East, have been successfully withstood. Free Germany is on
its way to becoming a member of the peaceful community of nations, and a
partner in the common defense. The Soviet effort to capture Berlin by
blockade was thwarted by the courageous Allied airlift. An independent and
democratic Japan has been brought back into the community of free nations.

In the Far East, the tactics of communist imperialism have reached heights
of violence unmatched elsewhere--and the problem of concerted action by the
free nations has been at once more acute and more difficult.

Here, in spite of outside aid and support, the free government of China
succumbed to the communist assault. Our aid has enabled the free Chinese to
rebuild and strengthen their forces on the island of Formosa. In other
areas of the Far East-in Indo-China, Malaya, and the Philippines--our
assistance has helped sustain a staunch resistance against communist
insurrectionary attacks.

The supreme test, up to this point, of the will and determination of the
free nations came in Korea, when communist forces invaded the Republic of
Korea, a state that was in a special sense under the protection of the
United Nations. The response was immediate and resolute. Under our military
leadership, the free nations for the first time took up arms, collectively,
to repel aggression.

Aggression was repelled, driven back, punished. Since that time, communist
strategy has seen fit to prolong the conflict, in spite of honest efforts
by the United Nations to reach an honorable truce. The months of deadlock
have demonstrated that the communists cannot achieve by persistence, or by
diplomatic trickery, what they failed to achieve by sneak attack. Korea has
demonstrated that the free world has the will and the endurance to match
the communist effort to overthrow international order through local
aggression.

It has been a bitter struggle and it has cost us much in brave lives and
human suffering, but it has made it plain that the free nations will fight
side by side, that they will not succumb to aggression or intimidation, one
by one. This, in the final analysis, is the only way to halt the communist
drive to world power.

At the heart of the free world's defense is the military strength of the
United States.

From 1945 to 1949, the United States was sole possessor of the atomic bomb.
That was a great deterrent and protection in itself.

But when the Soviets produced an atomic explosion--as they were bound to do
in time--we had to broaden the whole basis of our strength. We had to
endeavor to keep our lead in atomic weapons. We had to strengthen our armed
forces generally and to enlarge our productive capacity-our mobilization
base. Historically, it was the Soviet atomic explosion in the fall of 1949,
nine months before the aggression in Korea, which stimulated the planning
for our program of defense mobilization.

What we needed was not just a central force that could strike back against
aggression. We also needed strength along the outer edges of the free
world, defenses for our allies as well as for ourselves, strength to hold
the line against attack as well as to retaliate.

We have made great progress on this task of building strong defenses. In
the last two and one half years, we have more than doubled our own
defenses, and we have helped to increase the protection of nearly all the
other free nations.

All the measures of collective security, resistance to aggression, and the
building of defenses, constitute the first requirement for the survival and
progress of the free world. But, as I have pointed out, they are interwoven
with the necessity of taking steps to create and maintain economic and
social progress in the free nations. There can be no military strength
except where there is economic capacity to back it. There can be no freedom
where there is economic chaos or social collapse. For these reasons, our
national policy has included a wide range of economic measures.

In Europe, the grand design of the Marshall Plan permitted the people of
Britain and France and Italy and a half dozen other countries, with help
from the United States, to lift themselves from stagnation and find again
the path of rising production, rising incomes, rising standards of living.
The situation was changed almost overnight by the Marshall Plan; the people
of Europe have a renewed hope and vitality, and they are able to carry a
share of the military defense of the free world that would have been
impossible a few years ago.

Now the countries of Europe are moving rapidly towards political and
economic unity, changing the map of Europe in more hopeful ways than it has
been changed for 500 years. Customs unions, European economic institutions
like the Schuman Plan, the movement toward European political integration,
the European Defense Community-all are signs of practical and effective
growth toward greater common strength and unity. The countries of Western
Europe, including the free Republic of Germany are working together, and
the whole free world is the gainer.

It sometimes happens, in the course of history, that steps taken to meet an
immediate necessity serve an ultimate purpose greater than may be apparent
at the time. This, I believe, is the meaning of what has been going on in
Europe under the threat of aggression. The free nations there, with our
help, have been drawing together in defense of their free institutions. In
so doing, they have laid the foundations of a unity that will endure as a
major creative force beyond the exigencies of this period of history. We
may, at this close range, be but dimly aware of the creative surge this
movement represents, but I believe it to be of historic importance. I
believe its benefits will survive long after communist tyranny is nothing
but an unhappy memory.

In Asia and Africa, the economic and social problems are different but no
less urgent. There hundreds of millions of people are in ferment, exploding
into the twentieth century, thrusting toward equality and independence and
improvement in the hard conditions of their lives.

Politically, economically, socially, things cannot and will not stay in
their pre-war mold in Africa and Asia. Change must come--is coming--fast.
Just in the years I have been President, 12 free nations, with more than
600 million people, have become independent: Burma, Indonesia, the
Philippines, Korea, Israel, Libya, India, Pakistan and Ceylon, and the
three Associated States of Indo-China, now members of the French Union.
These names alone are testimony to the sweep of the great force which is
changing the face of half the world.

Working out new relationships among the peoples of the free world would not
be easy in the best of times. Even if there were no Communist drive for
expansion, there would be hard and complex problems of transition from old
social forms, old political arrangements, old economic institutions to the
new ones our century demands--problems of guiding change into constructive
channels, of helping new nations grow strong and stable. But now, with the
Soviet rulers striving to exploit this ferment for their own purposes, the
task has become harder and more urgent--terribly urgent.

In this situation, we see the meaning and the importance of the Point IV
program, through which we can share our store of know-how and of capital to
help these people develop their economies and reshape their societies. As
we help Iranians to raise more grain, Indians to reduce the incidence of
malaria, Liberians to educate their children better, we are at once helping
to answer the desires of the people for advancement, and demonstrating the
superiority of freedom over communism. There will be no quick solution for
any of the difficulties of the new nations of Asia and Africa--but there
may be no solution at all if we do not press forward with full energy to
help these countries grow and flourish in freedom and in cooperation with
the rest of the free world.

Our measures of economic policy have already had a tremendous effect on the
course of events. Eight years ago, the Kremlin thought post-war collapse in
Western Europe and Japan--with economic dislocation in America--might give
them the signal to advance. We demonstrated they were wrong. Now they wait
with hope that the economic recovery of the free world has set the stage
for violent and disastrous rivalry among the economically developed
nations, struggling for each other's markets and a greater share of trade.
Here is another test that we shall have to meet and master in the years
immediately ahead. And it will take great ingenuity and effort--and much
time--before we prove the Kremlin wrong again. But we can do it. It is true
that economic recovery presents its problems, as does economic decline, but
they are problems of another order. They are the problems of distributing
abundance fairly, and they can be solved by the process of international
cooperation that has already brought us so far.

These are the measures we must continue. This is the path we must follow.
We must go on, working with our free associates, building an international
structure for military defense, and for economic, social, and political
progress. We must be prepared for war, because war may be thrust upon us.
But the stakes in our search for peace are immensely higher than they have
ever been before.

For now we have entered the atomic age, and war has undergone a
technological change which makes it a very different thing from what it
used to be. War today between the Soviet empire and the free nations might
dig the grave not only of our Stalinist opponents, but of our own society,
our world as well as theirs.

This transformation has been brought to pass in the seven years from
Alamogordo to Eniwetok. It is only seven years, but the new force of atomic
energy has turned the world into a very different kind of place.

Science and technology have worked so fast that war's new meaning may not
yet be grasped by all the .peoples who would be its victims; nor, perhaps,
by the rulers in the Kremlin. But I have been President of the United
States, these seven years, responsible for the decisions which have brought
our science and our engineering to their present place. I know what this
development means now. I know something of what it will come to mean in the
future.

We in this Government realized, even before the first successful atomic
explosion, that this new force spelled terrible danger for all mankind
unless it were brought under international control. We promptly advanced
proposals in the United Nations to take this new source of energy out of
the arena of national rivalries, to make it impossible to use it as a
weapon of war. These proposals, so pregnant with benefit for all humanity,
were rebuffed by the rulers of the Soviet Union.

The language of science is universal, the movement of science is always
forward into the unknown. We could not assume that the Soviet Union would
not develop the same weapon, regardless of all our precautions, nor that
there were not other and even more terrible means of destruction lying in
the unexplored field of atomic energy.

We had no alternative, then, but to press on, to probe the secrets of
atomic power to the uttermost of our capacity, to maintain, if we could,
our initial superiority in the atomic field. At the same time, we sought
persistently for some avenue, some formula, for reaching an agreement with
the Soviet rulers that would place this new form of power under effective
restraints--that would guarantee no nation would use it in war. I do not
have to recount here the proposals we made, the steps taken in the United
Nations, striving at least to open a way to ultimate agreement. I hope and
believe that we will continue to make these efforts so long as there is the
slightest possibility of progress. All civilized nations are agreed on the
urgency of the problem, and have shown their willingness to agree on
effective measures of control--all save the Soviet Union and its
satellites. But they have rejected every reasonable proposal.

Meanwhile, the progress of scientific experiment has outrun our
expectations. Atomic science is in the full tide of development; the
unfolding of the innermost secrets of matter is uninterrupted and
irresistible. Since Alamogordo we have developed atomic weapons with many
times the explosive force of the early models, and we have produced them in
substantial quantities. And recently, in the thermonuclear tests at
Eniwetok, we have entered another stage in the world-shaking development of
atomic energy. From now on, man moves into a new era of destructive power,
capable of creating explosions of a new order of magnitude, dwarfing the
mushroom clouds of Hiroshima and Nagasaki.

We have no reason to think that the stage we have now reached in the
release of atomic energy will be the last. Indeed, the speed of our
scientific and technical progress over the last seven years shows no signs
of abating. We are being hurried forward, in our mastery of the atom, from
one discovery to another, toward yet unforeseeable peaks of destructive
power.

Inevitably, until we can reach international agreement, this is the path we
must follow. And we must realize that no advance we make is unattainable by
others, that no advantage in this race can be more than temporary.

The war of the future would be one in which man could extinguish millions
of lives at one blow, demolish the great cities of the world, wipe out the
cultural achievements of the past--and destroy the very structure of a
civilization that has been slowly and painfully built up through hundreds
of generations.

Such a war is not a possible policy for rational men. We know this, but we
dare not assume that others would not yield to the temptation science is
now placing in their hands.

With that in mind, there is something I would say, to Stalin: You claim
belief in Lenin's prophecy that one stage in the development of communist
society would be war between your world and ours. But Lenin was a
pre-atomic man, who viewed society and history with pre-atomic eyes.
Something profound has happened since he wrote. War has changed its shape
and its dimension. It cannot now be a "stage" in the development of
anything save ruin for your regime and your homeland.

I do not know how much time may elapse before the communist rulers bring
themselves to recognize this truth. But when they do, they will find us
eager to reach understandings that will protect the world from the danger
it faces today.

It is no wonder that some people wish that we had never succeeded in
splitting the atom. But atomic power, like any other force of nature, is
not evil in itself. Properly used, it is an instrumentality for human
betterment. As a source of power, as a tool of scientific inquiry, it has
untold possibilities. We are already making good progress in the
constructive use of atomic power. We could do much more if we were free to
concentrate on its peaceful uses exclusively.

Atomic power will be with us all the days of our lives. We cannot legislate
it out of existence. We cannot ignore the dangers or the benefits it
offers.

I believe that man can harness the forces of the atom to work for the
improvement of the lot of human beings everywhere. That is our goal. As a
nation, as a people, we must understand this problem, we must handle this
new force wisely through our democratic processes. Above all, we must
strive, in all earnestness and good faith, to bring it under effective
international control. To do this will require much wisdom and patience and
firmness. The awe-inspiring responsibility in this field now falls on a new
Administration and a new Congress. I will give them my support, as I am
sure all our citizens will, in whatever constructive steps they may take to
make this newest of man's discoveries a source of good and not of ultimate
destruction.

We cannot tell when or whether the attitude of the Soviet rulers may
change. We do not know how long it may be before they show a willingness to
negotiate effective control of atomic energy and honorable settlements of
other world problems. We cannot measure how deep-rooted are the Kremlin's
illusions about us. We can be sure, however, that the rulers of the
communist world will not change their basic objectives lightly or soon.

The communist rulers have a sense of time about these things wholly unlike
our own. We tend to divide our future into short spans, like the two-year
life of this Congress, or the four years of the next Presidential term.
They seem to think and plan in terms of generations. And there is,
therefore, no easy, short-run way to make them see that their plans cannot
prevail.

This means there is ahead of us a long hard test of strength and stamina,
between the free world and the communist domain-our politics and our
economy, our science and technology against the best they can do--our
liberty against their slavery--our voluntary concert Of free nations
against their forced amalgam of "people's republics"--our strategy against
their strategy-our nerve against their nerve.

Above all, this is a test of the will and the steadiness of the people of
the United States.

There has been no challenge like this in the history of our Republic. We
are called upon to rise to the occasion, as no people before us.

What is required of us is not easy. The way we must learn to live, the
world we have to live in, cannot be so pleasant, safe or simple as most of
us have known before, or confidently hoped to know.

Already we have had to sacrifice a number of accustomed ways of working and
of living, much nervous energy, material resources, even human life. Yet if
one thing is certain in our future, it is that more sacrifice still lies
ahead.

Were we to grow discouraged now, were we to weaken and slack off, the whole
structure we have built, these past eight years, would come apart and fall
away. Never then, no matter by what stringent means, could our free world
regain the ground, the time, the sheer momentum, lost by such a move. There
can and should be changes and improvements in our programs, to meet new
situations, serve new needs. But to desert the spirit of our basic
policies, to step back from them now, would surely start the free world's
slide toward the darkness that the communists have prophesied-toward the
moment for which they watch and wait.

If we value our freedom and our way of life and want to see them safe, we
must meet the challenge and accept its implications, stick to our guns and
carry out our policies.

I have set out the basic conditions, as I see them, under which we have
been working in the world, and the nature of our basic policies. What,
then, of the future? The answer, I believe, is this: As we continue to
confound Soviet expectations, as our world grows stronger, more united,
more attractive to men on both sides of the iron curtain, then inevitably
there will come a time of change within the communist world. We do not know
how that change will come about, whether by deliberate decision in the
Kremlin, by coup d'etat, by revolution, by defection of satellites, or
perhaps by some unforeseen combination of factors such as these.

But if the communist rulers understand they cannot win by war, and if we
frustrate their attempts to win by subversion, it is not too much to expect
their world to change its character, moderate its aims, become more
realistic and less implacable, and recede from the cold war they began.

Do not be deceived by the strong face, the look of monolithic power that
the communist dictators wear before the outside world. Remember their power
has no basis in consent. Remember they are so afraid of the free world's
ideas and ways of life, they do not dare to let their people know about
them. Think of the massive effort they put forth to try to stop our
Campaign of Truth from reaching their people with its message of freedom.

The masters of the Kremlin live in fear their power and position would
collapse were their own people to acquire knowledge, information,
comprehension about our free society. Their world has many elements of
strength, but this one fatal flaw: the weakness represented by their iron
curtain and their police state. Surely, a social order at once so insecure
and so fearful, must ultimately lose its competition with our free
society.

Provided just one thing--and this I urge you to consider
carefully--provided that the free world retains the confidence and the
determination to outmatch the best our adversary can accomplish and to
demonstrate for uncertain millions on both sides of the iron curtain the
superiority of the free way of life.

That is the test upon all the free nations; upon none more than our own
Republic.

Our resources are equal to the task. We have the industry, the skills, the
basic economic strength. Above all, we have the vigor of free men in a free
society. We have our liberties. And while we keep them, while we retain our
democratic faith, the ultimate advantage in this hard competition lies with
us, not with the communists.

But there are some things that could shift the advantage to their side. One
of the things that could defeat us is fear--fear of the task we face, fear
of adjusting to it, fear that breeds more fear, sapping our faith,
corroding our liberties, turning citizen against citizen, ally against
ally. Fear could snatch away the very values we are striving to defend.

Already the danger signals have gone up. Already the corrosive process has
begun. And every diminution of our tolerance, each new act of enforced
conformity, each idle accusation, each demonstration of hysteria-each new
restrictive law--is one more sign that we can lose the battle against
fear.

The communists cannot deprive us of our liberties--fear can. The communists
cannot stamp out our faith in human dignity-fear can. Fear is an enemy
within ourselves, and if we do not root it out, it may destroy the very way
of life we are so anxious to protect.

To beat back fear, we must hold fast to our heritage as free men. We must
renew our confidence in one another, our tolerance, our sense of being
neighbors, fellow citizens. We must take our stand on the Bill of Rights.
The inquisition, the star chamber, have no place in a free society.

Our ultimate strength lies, not alone in arms, but in the sense of moral
values and moral truths that give meaning and vitality to the purposes of
free people. These values are our faith, our inspiration, the source of our
strength and our indomitable determination.

We face hard tasks, great dangers. But we are Americans and we have faced
hardships and uncertainty before, we have adjusted before to changing
circumstances. Our whole history has been a steady training for the work it
is now ours to do.

No one can lose heart for the task, none can lose faith in our free ways,
who stops to remember where we began, what we have sought, and what
accomplished, all together as Americans.

I have lived a long time and seen much happen in our country. And I know
out of my own experience, that we can do what must be done.

When I think back to the country I grew up in--and then look at what our
country has become--I am quite certain that having done so much, we can do
more.

After all, it has been scarcely fifteen years since most Americans rejected
out-of-hand the wise counsel that aggressors must be "quarantined". The
very concept of collective security, the foundation-stone of all our
actions now, was then strange doctrine, shunned and set aside. Talk about
adapting; talk about adjusting; talk about responding as a people to the
challenge of changed times and circumstances--there has never been a more
spectacular example than this great change in America's outlook on the
world.

Let all of us pause now, think back, consider carefully the meaning of our
national experience. Let us draw comfort from it and faith, and confidence
in our future as Americans.

The Nation's business is never finished. The basic questions we have been
dealing with, these eight years past, present themselves anew. That is the
way of our society. Circumstances change and current questions take on
different forms, new complications, year by year. But underneath, the great
issues remain the same--prosperity, welfare, human rights, effective
democracy, and above all, peace.

Now we turn to the inaugural of our new President. And in the great work he
is called upon to do he will have need for the support of a united people,
a confident people, with firm faith in one another and in our common cause.
I pledge him my support as a citizen of our Republic, and I ask you to give
him yours.

To him, to you, to all my fellow citizens, I say, Godspeed.

May God bless our country and our cause.



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