President Kennedy's Attack On The Steel Companies 10/22/62
The President: I have several announcements to make.
[I.] Simultaneous and identical actions of United States Steel and other leading steel corporations increasing steel prices by some $6 a ton constitute a wholly unjustifiable and irresponsible defiance of the public interest. In this serious hour in our Nation's history, when we are confronted with grave crises in Berlin and Southeast Asia, when we are devoting our energies to economic recovery and stability, when we are asking reservists to leave their homes and families for months on end and servicemen to risk their lives- and four were killed in the last 2 days in Vietnam-and asking union members to hold down their wage requests at a time when restraint and sacrifice are being asked of every citizen, the American people will find it hard, as I do, to accept a situation in which a tiny handful of steel executives whose pursuit of private power and profit exceeds their sense of public responsibility can show such utter contempt for the interests of 185 million Americans. If this rise in the cost of steel is imitated by the rest of the industry, instead of rescinded, it would increase the cost of homes, autos, appliances, and most other items for every American family. It would increase the cost of machinery and tools to every American businessman and farmer. It would seriously handicap our efforts to prevent an inflationary spiral from eating up the pensions of our older citizens, and our new gains in purchasing power.
It would add, Secretary McNamara informed me this morning, an estimated $1 billion to the cost of our defenses, at a time when every dollar is needed for national security and other purposes. It would make it more difficult for American goods to compete in foreign markets, more difficult to withstand competition from foreign imports, and thus more difficult to improve our balance of payments position, and stem the flow of gold. And it is necessary to stem it for our national security, if we're going to pay for our security commitments abroad. And it would surely handicap our efforts to induce other industries and unions to adopt responsible price and wage policies.
The facts of the matter are that there is no justification for an increase in steel prices. The recent settlement between the industry and the union, which does not even take place until July 1st, was widely acknowledged to be non-inflationary, and the whole purpose and effect of this administration's role, which both parties understood, was to achieve an agreement which would make unnecessary any increase in prices. Steel output per man is rising so fast that labor costs per ton of steel can actually be expected to decline in the next 12 months. And in fact, the Acting Commissioner of the Bureau of Labor Statistics informed me this morning that, and I quote, "employment costs per unit of steel output in 1961 were essentially the same as they were in 1958."
The cost of the major raw materials, steel scrap and coal, has also been declining, and for an industry which has been generally operating at less than two-thirds of capacity, its profit rate has been normal and can be expected to rise sharply this year in view of the reduction in idle capacity. Their lot has been easier than that of one hundred thousand steel workers thrown out of work in the last 3 years. The industry's cash dividends have exceeded $600 million in each of the last 5 years, and earnings in the first quarter of this year were estimated in the February 28th Wall Street Journal to be among the highest in history.
In short, at a time when they could be exploring how more efficiency and better prices could be obtained, reducing prices in this industry in recognition of lower costs, their unusually good labor contract, their foreign competition and their increase in production and profits which are coming this year, a few gigantic corporations have decided to increase prices in ruthless disregard of their public responsibilities.
The Steelworkers Union can be proud that it abided by its responsibilities in this agreement, and this Government also has responsibilities which we intend to meet. The Department of Justice and the Federal Trade Commission are examining the significance of this action in a free, competitive economy. The Department of Defense and other agencies are reviewing its impact on their policies of procurement. And I am informed that steps are under way by those members of the Congress who plan appropriate inquiries into how these price decisions are so quickly made and reached and what legislative safeguards may be needed to protect the public interest.
Price and wage decisions in this country, except for a very limited restriction in the case of monopolies and national emergency strikes, are and ought to be freely and privately made. But the American people have a right to expect, in return for that freedom, a higher sense of business responsibility for the welfare of their country than has been shown in the last 2 days.
Some time ago I asked each American to consider what he would do for his country and I asked the steel companies. In the last 24 hours we had their answer. [2.] I've got one other statement here. Mr. Hatcher is going to release a statement in regard to the release of the Guards. Let me say in summary that Secretary McNamara and I have carefully reviewed our progress in achieving permanent increases in our military strength. We have concluded that the rate of progress of this effort is such that if there is no serious deterioration in the international situation between now and August, we shall be able in that month to release all those who were called involuntarily. Our continuing strength after this release will be much increased over what it was a year ago.
Just as an example, the number of our combat-ready Army divisions in active service after the release will be 16, as against 11 a year ago. The release is not the result of any marked change in the international situation, which continues to have many dangers and tensions. It is the result, rather, of our successful buildup of permanent in
stead of emergency strength.
The units we release will remain available, in a new and heightened state of combat readiness if a new crisis should arise requiring their further service. I know that I speak for all of our countrymen in expressing our appreciation to all those who've served under the adverse conditions of living in camps and being taken away from their families. And their service and the willingness of the great, great majority of all of them to do this uncomplainingly, I think, should be an inspiration to every American.
[3.] And lastly, last Saturday I issued an Executive order creating a Board of Inquiry to inquire into the issues involved in the current labor dispute in the west coast maritime industry. The Board of Inquiry filed its written report with me today. In its unanimous report, the Board stated:
"The current strike, if continued, will affect approximately 130 cargo and passenger ships, including those which constitute the principal mode of transportation of passengers and vital cargo to and from the State of Hawaii." Other reports I have received clearly manifest that a continuation of this strike imperils the national health and safety.
I have therefore instructed the Attorney General to seek an injunction against this strike under the national emergency provisions of the Labor-Management Relations Act of 1947- While an injunction will restore the west coast maritime industry to full operation and return the striking members to work for 8o days, it should not, and I hope will not, interfere in any way with efforts towards full settlement.
I call upon the parties to make that effort, to achieve that settlement quickly. However, the public interest does not permit further delay in applying for an injunction. Consequently, I have made the decision to direct the Attorney General to apply for an appropriate order.
[4.] Q. Mr. President, the unusually strong language which you used in discussing the steel situation would indicate that you might be considering some pretty strong action. Are you thinking in terms of requesting or reviving the need for wage-price controls?
THE PRESIDENT. I think that my statement states what the situation is today. This is a free country. In all the conversations which were held by members of this administration and myself with the leaders of the steel union and the companies, it was always very obvious that they could proceed with freedom to do what they thought was best within the limitations of law. But I did very clearly emphasize on every occasion that my only interest was in trying to secure an agreement which would not provide an increase in prices, because I thought that price stability in steel would have the most far-reaching consequences for industrial and economic stability and for our position abroad, and price instability would have the most far-reaching consequences in making our lot much more difficult.
When the agreement was signed, and the agreement was a moderate one and within the range of productivity increases, as I've said, actually, there will be reduction in cost per unit during the next year-I thought, I was hopeful, we'd achieved our goal. Now the actions that will be taken will be- are being now considered by the administration. The Department of Justice is particularly anxious, in view of the very speedy action of the companies who have entirely different economic problems facing them than did United States Steel-the speed with which they moved, it seems to me, to require an examination of our present laws, and whether they're being obeyed, by the Federal Trade Commission and particularly the Department of Justice. I'm very interested in the respective investigations that will be conducted in the House and Senate, and whether we shall need additional legislation, which I would come to very reluctantly. But I must say the last 24 hours indicates that those with great power are not always concerned about the national interest.
Q. In your conversation with Mr. Blough yesterday, did you make a direct request that this price increase be either deferred or rescinded?
THE PRESIDENT. I was informed about the price increase after the announcement had gone out to the papers. I told Mr. Blough of my very keen disappointment and what I thought would be the most unfortunate effects of it. And of course we were hopeful that other companies who, as I've said, have a different situation in regard to profits and all of the rest than U.S. Steel, they're all-have a somewhat different economic situation. I was hopeful particularly in view of the statement in the paper by the president of Bethlehem in which he stated-though now he says he's misquoted- that there should be no price increase, and we are investigating that statement. I was hopeful that the others would not follow the example, that therefore the pressures of the competitive marketplace would bring United States Steel back to their original prices. But the parade began. But it came to me after the decision was made. There was no prior consultation or information given to the administration.
[5.] Q. Mr. President, now that General Clay is coming home from Berlin, don't you think that the service wives have borne the brunt of our gold shortage long enough, and should be permitted to join their soldier husbands in Europe? After all, you can almost say that service couples have had to bear a cross of gold alone, and in a very lonely way. And spring is here and every. one knows that the Gl's-[Iaughterl get into much less trouble and do their jobs better if their wives and kids are with them.
THE PRESIDENT. I agree. And, we're very sympathetic. We are trying to make an analysis of how important this saving is to our general problem. As I've said, it costs us $3 billion to maintain our forces and bases overseas. That money must be earned by a surplus of exports over imports. And that's– I've asked Secretary McNamara to try to reduce that in the next 12 to 18 months by $1,100,000,000, in order to try to bring this gold flow into balance. And that means taking a third out of the Defense Department without reducing its strength. So that's why these women are bearing hard. ships-and these families. And that's why I contrasted such unhappiness to the last 24 hours, because the fact of the matter is, if we're not able to compete, this results in a larger increase of imports from foreign markets, and therefore lowers our dollar values-and those wives are going to have to stay home.
[6.] Q. Mr. President, when the Strategic Air Command had a false alarm for a few moments last fall, were you notified? And if not, do you think you should have been? And have you made arrangements to be, if there are any cases in the future?
THE PRESIDENT. That story, in my opinion, was overstated. There was a breach in the communications between the base at Thule and at-and our Continental Command. As you know, we were in a 15 minute alert. This lasted for a few seconds. General Power alerted those forces which were on a standby basis. There are constant drills. It was not that we were, as I saw in some papers-primarily those in Europe-a few seconds from war, because the fact of the matter is it would have taken many, many-several hours before they could have taken off and begun to fly, and we were always in control. So that I thought General Power took the right action before anything was done which would in any way have threatened the security of the United States. Of course, the communication would have come immediately. But there is always this problem of being on the alert.
[7.] Q. Mr. President, if I could get back to steel for a minute, you mentioned an investigation into the suddenness of the decision to increase prices. Did you-is the position of the administration that it believed it had the assurance of the steel industry at the time of the recent labor agreement that it would not increase prices?
THE PRESIDENT. We did not ask either side to give us any assurance, because there is a very proper limitation to the power of the Government in this free economy. All we did in our meetings was to emphasize how important it was that there be price stability, and we stressed that our whole purpose in attempting to persuade the union to begin to bargain early and to make an agreement which would not affect prices, of course, was for the purpose of maintaining price stability. That was the thread that ran through every discussion which I had or Secretary Goldberg had. We never at any time asked for a commitment in regard to the terms, precise terms, of the agreement from either Mr. McDonald or Mr. Blough, representing the steel company, because in our opinion that is-would be passing over the line of propriety. But I don't think that there was any question that our great interest in attempting to secure the kind of settlement that was finally secured was to maintain price stability, which we regard as very essential at this particular time. That agreement provided for price stability-up to yesterday.
[8.] Q. Mr. President, could you interpret for us the significance of General Clay's return? Does it mean that the administration now believes that the Berlin crisis is negotiable?
THE PRESIDENT. No, no. When he came with us, as you know, he was the responsible officer in the Continental Can Company. And he said he would take a leave of absence to January. And then in January we asked him to stay further. But he has said for several months now that he really felt that his obligation was to return. We have-he's recommended very highly the responsible Americans who are there. When he comes back tomorrow I'm going to ask him, and I'm sure he will respond, to continue to act as consultant to me on the matter of Berlin; to make periodic visits and to be available to return there at any time that we should conclude that his presence would be valuable. So that we have-I notice Mayor Brandt said that General Clay might be more helpful to the cause here than he would be even there. And I think what the Mayor meant was that his experience there and his work in the last 7 months would be very valuable to the administration. So his service continues and the problem of Berlin continues.
[9.] Q. In your statement on the steel industry, sir, you mentioned a number of instances which would indicate that the cost of living will go up for many people if this price increase were to remain effective. In your opinion, does that give the steelworkers the right to try to obtain some kind of a price-or a wage increase to catch up?
THE PRESIDENT. No. Rather interestingly, the last contract was signed on Saturday with Great Lakes, so that the steel union is bound for a year, and of course, I'm sure would have felt like going much further if the matter had worked out as we had all hoped. But they've made their agreement and I'm sure they are going to stick with it. It does not provide for the sort of action you've suggested.
Q. Still on steel, Senator Gore advocated today legislation to regulate steel prices somewhat in the manner that public utility prices are regulated and his argument seemed to be that the steel industry had sacrificed some of the privileges of the free market because it wasn't really setting its prices on a supply and demand, but what he called administered prices. Your statement earlier, and your remarks since, indicate a general agreement with that kind of approach. Is that correct?
THE PRESIDENT. No, I don't think that I'd stated that. I'd have to look and see what Senator Gore has suggested, and I'm not familiar with it. What I said was that we should examine what can be done to try to minimize the impact on the public interest of these decisions, but though we had, of course, always hoped that those involved would recognize that. I would say that what must disturb Senator Gore and Congressman Celler and others-Senator Kefauver-will be the suddenness by which every company in the last few hours, one by one as the morning went by, came in with their almost, if not identical, almost identical price increases, which isn't really the way we expect the competitive private enterprise system
[10.] Q. Mr. President, would you clarify, please, the United States position in the New Guinea dispute between the Netherlands and Indonesia? Recently there have been reports of displeasure from the Netherlands that proposals put forward by the United States were not fair to the Netherlands.
THE PRESIDENT. Well, I agree, I think everybody is displeased, really, with our role because our role is an attempt-Ambassador Bunker's role has been, under the direction of U Thant, to try to see if we can bring some adjustment to prevent a military action which would be harmful to the interests both countries, with which we desire to be friendly. So I suppose it's hard to think of any proposal that we could make which would be welcome on both sides.
I'm hopeful that if we can be useful, we' continue to try to be. If both sides feel that we cannot be, then perhaps others can take on this assignment, or perhaps it can be done bilaterally. But I-Ambassador Bunker is a diplomat of long experience and great skill and our only interest is to see if we can have a peaceful solution which we think is in the long-range interest of the free world, of our allies-with whom we're allied- the Dutch and the Indonesians, whom we would like to see stay free. So that the role the mediator is not a happy one, and we're prepared to have everybody mad, if it makes some progress.
[11.] Q. Mr. President, in connection with the steel situation again, is there not action that could be taken by the executive branch in connection with direct procurement of steel under the administration of the Agency for International Aid- I mean the aid agency. For example I think the Government buys about a million tons of steel. Now, could not the Government decide that only steel- that steel should be purchased only at the price, say, of yesterday, rather than today?
THE PRESIDENT. That matter was considered, as a matter of fact, in a conversation between the Secretary of Defense and myself.
Now, at no time did anyone suggest that if such an agreement was gained that it would be still necessary to put up prices. That word did not come until last night.
[12.] Q. Mr. President, there has bee a price increase in Cuba as well. Mr. Castro has increased the price that he's put on human life in the release or tentative release of the prisoners captured in the abortive invasion attempt last year. Would you comment on this, please?
THE PRESIDENT. Well, I think that all of us had hoped that the day when men were put on the block had long ago passed from this hemisphere. And it had from every country, until very recently in Cuba. I think Mr. Castro knows that the United States Government cannot engage in a negotiation like that, and he knows very well that the families cannot raise these millions of dollars. It's rather interesting, so what he has done really in effect is sentence them to 30 years in prison. It's rather interesting that Castro himself, when he engaged in an operation under a dictator whom we've been harshly critical of- that he was let out of prison after an open trial in 15 months. He regards for his own countrymen- not the countrymen who from his point of view may have been wrong, but who fought in the open, and who took their chances, and were young men- he regards the appropriate treatment for them and for thousands of other Cubans to be this long prison sentence of 30 years which, in my opinion, is why Mr. Castro is increasingly isolated in the company of free men.
[13.] Q. Mr. President, the steel industry is one of a half dozen which has been expecting tax benefits this summer through revision of the depreciation schedules. Does this price hike affect the administration's actions in this area?
THE PRESIDENT. Well, it affects our budget. Secretary Dillon and I discussed it this morning. Of course, all this matter is being very carefully looked into now.
[14.] Q. The Presidents of Mexico and of Brazil announced a principle of adherence to non-intervention between the Communist and the capitalist blocs. Does this accord with what President Goulart told you when he was here in Washington?
THE PRESIDENT. Yes. I haven't seen the joint statement, but I'm sure it does. I think we are bound together through the Organization of American States, and it's difficult to comment on a joint statement that I've not read, but I think President Goulart says the same in Mexico as he does in Washington.
[15.] Q. Mr. President, General Lemnitzer has recently conferred our Legion of Merit on a Japanese officer who apparently planned the Pearl Harbor attack. Can you think of any particular reason for this award?
THE PRESIDENT. Yes. The reason given was that he had been a distinguished officer of the Japanese Air Force; that his relations with the United States had been extremely cooperative. He was acting as a military officer. And I- I think that this kind of the days of the war are over, and I thought that it was appropriate. He's a distinguished flyer, and while we all regret Pearl Harbor and everything else-but we are in a new era in our relations with Japan, fortunately.
[16.] Q. Sir, what are you going to do about the American soldiers getting killed in Viet-Nam?
THE PRESIDENT. Well, I'm extremely concerned about American soldiers who are in a great many areas in hazard. We are attempting to help Viet-Nam maintain its independence and not fall under the domination of the Communists. The Government has stated that it needs our assistance in doing it. It's very-and it presents a very hazardous operation, in the same sense that World War II, World War I, Korea- a good many thousands and hundreds of thousands of Americans died. So that these four sergeants are in that long roll. But we cannot desist in Viet-Nam. And I think that it is the fact that these men, operating very far from home, very far indeed from Saigon, under great danger-and there are many others-the fact of their contributions, as well as the Wisconsin and Texas National Guard, it is in that setting that I look at the present actions.
Reporter: Thank you, Mr. President.
NOTE: President Kennedy's thirtieth news conference was held in the State Department Auditorium at : o o'clock on Wednesday afternoon, April 11, 1962.