Memorandum from the Council of Economic Advisers to President Harry S. Truman

pride EXECUTIVE OFFICE OF THE PRESIDENT to ARGHIVES HATIONAL AMD RECORDS COUNCIL OF ECONOMIC ADVISERS WASHINGTON 25, D.C. à LEON H. KEYSERLING, CHAIRMAN JOHN D. CLARK ROY BLOUGH November 15, 1951 1 HE WHITE HOUSE MEMOR.ANDUM FOR THE PRESIDENT Nov 16 956 AM 55 RECEIVED From: Council of Economic Advisers Subject: Forthcoming Steel Negotiations The Council is deeply concerned that the forthcoming steel negotiations may again, as last year, result in excessive wage and price increases, and ring the bell for another round of inflation. We regard this to be an outstanding issue at the current time, affect- ing the whole economy. Our concern is increased, because stabilization officials thus far have not announced a sufficiently consistent and determined adherence to a price and wage policy suitable to the steel negotiations and to others which will follow. For example, on the wage side, despite the recognized need, there is as yet no adequate general policy on pro- ductivity and fringe issues. We strongly urge that policies on these matters be determined without further delay. Moreover, on the price side, it has not yet been made clear that price and wage stabilization, being interrelated, require coordination of decisions in the two fields. The outline for such policies, however, does not need to be discovered afresh. It is stated clearly in the last three Economic Reports of the President, beginning with Midyear 1950. Consequently, the Council recommends that the appropriate stabiliza- tion officials make clear to the interested parties and to the public that these basic policy considerations shall serve as guides within which to conduct the steel negotiations: (1) The price line in steel is to be firmly held. There should be no wage settlement of a size necessitating or resulting in general price increases in the steel industry. Current and prospective steel profits are high enough to absorb such wage increases as are desirable and to attract the new capital needed for the steel industry's expansion program; (2) The general price line is to be firmly held. It should be made clear that wage increases in the steel industry should be held within confines which do not lead to general price increases. Within these