THE PRESIDENCY: The Gradual Way

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All around Washington the rumor went: wage and price controls would be here by Labor Day, and ration books were already being printed. The rumor even turned up at the President's press conference. May Craig, a chipper grandmother in a blue gingham dress and a correspondent for a string of Maine newspapers, asked Harry Truman about it.

Answered the President, smiling: They know more about it than I do, Miss May.

The questions came thick & fast. Finally, the President added a detail: whenever it is necessary for price controls, wage controls and manpower controls, why, the steps will be taken all together.

"Do you think it will be necessary?"

He did not, said the President, flatly. That would be an all-out mobilization, and he hoped the U.S. would not have to make an all-out mobilization.

More Money. There the President stood, but how long he could stand there, no one could tell. Already, the bill for the U.S.'s new posture of readiness was over $15 billion—and every dollar that was not recovered in taxes added to the pressure on prices. But taxes were considered politically painful. Last week, with his request for a modest $5 billion in new taxes, Harry Truman made it all seem as painless as possible.

For speed and convenience, Truman suggested that the excise-tax bill now in Congress be turned completely around. Drop entirely the proposed tax cuts for furs, purses, leather goods, the President told Congress, but keep that part of the bill which would have made up $500 million by closing tax loopholes. He recommended 1) an increase of $1.5 billion in corporation taxes and 2) return of individual tax rates to 1945 levels, to produce $3 billion. He suggested that corporations begin paying the new rates retroactively from Jan. 1, 1950, but that personal taxes not be increased until October.

For the taxpayer, the income-tax jump would not hurt as much as it sounded. The present $600 exemption for dependents would remain, as would the privilege of splitting income between husband & wife. Though rates themselves would be back near wartime peaks, the tax actually paid by each taxpayer would be far less—roughly 14% to 20% more than his present tax in most brackets.

But there would be more taxes later. At the moment, Harry Truman saw no need to request such unpleasant things until after the elections.

Strongest Ever. How would the nation take its new tax load? In his midyear economic report, which was completely rewritten after the Korean attack, Harry Truman reported confidently that the economy "is stronger for whatever tasks lie ahead" than ever before. The world's mightiest economy was producing goods and services at the prodigious rate of $267 billion a year—an alltime high and (measured in a new term called "constant dollars," i.e., 1949 dollars) some $107 billion higher than 1939. Employment was at a peak of 61.5 million. Productivity of U.S. labor had risen nearly 32% since 1939. In short, the arguments the President made to justify his tax load actually justified a bigger one.