‘In the Public Interest’

May 7, 1962

Unless prompt and convincing steps are taken to offset the consequences of the President’s “cold fury” press conference of April 11 and the punitive measures that followed, unmeasurable harm may be done to American industry.

In that press conference Mr. Kennedy denounced the steel price increase as “a wholly unjustifiable and irresponsible defiance of the public interest.” His private expressions appear to have been even more sweeping. The New York Times reports him as having said: “My father always told me that all businessmen were sons-of-bitches but I never believed it till now.”

In a belated statement on April 19, the Joint Senate- House Republican leadership listed nine actions that followed this conference, ending with that of the FBI in “routing newspapermen out of bed at 3 a.m.” for questioning. The Republican group declared that collectively these actions “imperiled basic American rights, went far beyond the law, and were more characteristic of a police state than a free government.” The Democratic leadership denied none of the Republican allegations of fact. It simply “commended” the President “for taking every appropriate step he could to . . . preserve the public interest.”

SHOCK TO CONFIDENCE

Where does this leave us? It leaves us with an illegal form of price control enforced by denunciation, threat, and intimidation. And nobody knows the new rules. Which businessman can raise the price of his product? By how much? When? In the steel industry we now have a price freeze of unpredictable duration. Under what circumstances, and at what level of labor costs, will a rise in steel prices—or in any other price—cease to be a crime? What is the standard? The personal opinion of the President? Must every price or wage rise be submitted to him in advance?

The President’s action has given a severe shock to business confidence. There is already a profit squeeze. In the last sixteen years corporate profits have been dropping both as a percentage of national income and as a percentage of sales. As a McGraw-Hill compilation has shown, profits dropped from 5 percent of sales during the years 1946–50 to 3.6 percent during 1951–55, to 3.2 percent during 1956–60, and down to 3.1 percent last year. Last year, also, the steel industry stood only 33rd out of 41 manufacturing industries in return on net assets.

A leading Soviet ideologist has just repeated that Russia is “further expanding heavy industry, the cornerstone . . . of the defense of the country.” The President wants faster economic growth and especially a growing steel industry. Yet our expansion can only be financed out of profits. How many steel men—or any other businessmen—will go ahead with heavy capital spending programs when they do not know whether they will be allowed to set prices, subject only to keeping competitive, or where they will be allowed to set them?

UNKNOWN RULES

Sensing the disquiet and fears to which his actions have given rise, and their threat to economic growth, the President on April 18 announced that his Administration “harbors no ill will against any individual, any industry, corporation, or segment of the American economy.” He admitted “the steel industry’s need for profit, modernization, and investment capital.” He declared that “this is a free economy.” He insisted that his action had not set a precedent. “I have not suggested that . . . we have powers to set or that those powers would be desirable to set—prices or to set wages.” But he repeated that he had a “responsibility” to intervene in steel prices because “the public interest” was “mandatory.” Thus one thing contradicts another and everything is left ambiguous.

And the central question remains unanswered. Which is really in “the public interest”? That prices be fixed in accordance with the President’s personal opinion? That profit margins in steel be squeezed tighter, investors frightened, and investment in new steel plant discouraged? Or that industry management be free to try to set prices to yield profit margins that encourage the industry to grow, with a rise in employment and real wages?