Business: President's Prices

Often and earnestly did President Roosevelt talk about prices during the early years of the New Deal. In those days the gist of his press conference remarks was that prices were entirely too low. Last week after prefacing pronouncements from two of his most trusted ministers, Secretary of Agriculture Wallace and Chairman Marriner Stoddard Eccles of the Federal Reserve Board (TIME, March 29), President Roosevelt declared that prices—at least of certain durable goods—were entirely too high. As a corrective the Government would drop its hitherto basic policy of stimulating heavy industry, direct its spending toward consumer industries (see p. 15).

While a timely warning against the inflationary upward spiral in commodities was admittedly in order, President Roosevelt moved onto spongy ground in some of his examples and explanations. Commenting on the President's observation that trouble followed when the curve of durable goods industries passed the curve of consumer goods industries, Cleveland Trust Co.'s Leonard P. Ayres noted: "The recovery in durable goods is always faster than in nondurable goods. ... It is true that improvement in durable goods is greater than in nondurable, but it is also true that most of the men still unemployed need to be employed in durable goods industries."* Since the pump of heavy industry had been fully primed, no one seriously objected to a cessation of Government spending for that purpose. But to shift the spending into consumer channels only delayed the effect, since increased consumption would soon lead to expansion and modernization of nondurable goods industries, thus in turn stimulating the demand for durable goods. What seemed to be needed at this stage of Recovery, said most economists, was less Government spending all around. Cried President Frank Purnell of Youngstown Sheet & Tube: "If the President means to save money by not buying steel, and applies the savings to reduce Government expenditures and balance the Budget, I can heartily commend the action!"

A private bone to pick had the steel industry, for the President singled it out along with copper, as one of the commodities which had soared too high. The recent $6-per-ton boost, said he, was far more than was needed to cover increased labor costs. But the American Iron & Steel Institute figures that while higher prices will yield an additional $200,000,000, wages will be up $130,000,000; raw materials $85,000,000, leaving the industry $15,000,000 the worse. These calculations were on the basis of 1936 operations. With steel production now running at a belching 90% capacity, the Institute's picture may be unduly pessimistic.

In copper the President had an airtight case, for that metal has been squeezed up by pure speculation. Anaconda, he said, could make money on 8¢ or 9¢ copper.