By: Franklin D. Roosevelt
Date: September 7, 1942
Source: Roosevelt, Franklin D. Fireside Chat on the Cost of Living and the Progress of the War. Radio address delivered on September 7, 1942. Reprinted in The Public Papers and Addresses of Franklin D. Roosevelt, 1942 Volume: Humanity on the Defensive. New York: Harper & Brothers Publishers, 1950, 368–72, 374, 376–77.
About the Author: Franklin D. Roosevelt (1882–1945) was born at Hyde Park, New York. Educated at Harvard, Roosevelt was elected to the New York Senate in 1910, and served as assistant secretary of the navy from 1913–1920. After losing a bid for vice president in 1920, Roosevelt contracted polio, leaving his legs permanently paralyzed. Returning to politics, Roosevelt was elected governor of New York in 1928, and he defeated Herbert Hoover for the presidency in 1932. Roosevelt was reelected in 1936, 1940, and 1944. The only president to serve more than two terms, Roosevelt led the nation through the Great Depression and during World War II.
The Roosevelt administration's response to the early success of the Axis powers in World War II (1939–45) was to increase defense spending significantly and set aggressive production targets for American rearmament efforts in 1941. Even before the Japanese attack on Pearl Harbor on December 7, 1941, brought America into the war, unemployment was on the decline. After the attack, widespread unemployment ceased to be a major concern for the first time in more than a decade. The nation's factories now furiously produced unprecedented quantities of war materiel. Inflation (a general rise in prices making the cost of living greater), an historic wartime scourge, surfaced quickly as the primary economic problem.
The high demand for labor in defense industries meant that workers received higher wages, production bonuses, and significant overtime pay. Businesses that had suffered for a decade during the Great Depression finally had customers with money to spend, and it was inevitable that they began to raise their prices. At the same time, the devotion of the economy to producing war goods meant fewer consumer items were available, driving up their prices as well. The result of all this was a steep jump in the cost of living, driving up food prices, rents, and an array of consumer items.
Several policy measures were instituted to reduce what was termed "excess consumer purchasing power." These included mandatory rationing of certain items, increasing taxes, and encouraging citizens to buy war bonds. However, the most controversial measure was the imposition of wage and price controls. As early as August 1941, Roosevelt responded to the onset of higher inflation by establishing an independent agency to address the crisis—The Office of Price Administration (OPA). The agency initially lacked statutory authority to control prices directly. Although the United States had experienced severe inflation during previous wars— most notably during the Revolutionary War, the Civil War, and World War I—the national government previously had never sought to impose strict price controls. A few weeks after Pearl Harbor, Congress passed the Emergency Price Control Act. This represented a step, however tentative, towards a comprehensive system of price controls. On September 7, 1942, Roosevelt asked Congress to enact the Stabilization Act. Later that evening in a fireside chat, Roosevelt explained to the American people the need for the legislation. Subsequently, Congress approved the legislation quickly, and the president signed the bill into law on October 2, 1942. The legislation granted the OPA unprecedented authority to stabilize both wages and prices.
Controls, especially on wages, appear to have "worked" during World War II, slowing the rate of inflation although they could not eliminate it completely. It was not that such action constituted sound economics, but, rather, that the American people recognized the gravity of the situation and patriotically agreed to work for less than they ordinarily might have commanded. The Truman administration's Korean War-era controls, imposed in January 1951, gave a similar illusion of "success." On the other hand, President Nixon's attempt to impose wartime price controls during the unpopular Vietnam War, the Wage and Price Freeze Act, was an economic disaster.
Although Roosevelt's price and wage controls were successful, they were not without critics. Historically, wartime controls have placed a burden on citizens, and World War II was no exception. Willing to sacrifice some material comforts to help the war effort, the daily reality of the inconvenience caused by the controls tempted some to circumvent the measures. Predictably, a thriving black market emerged, as people sought to get around price controls and mandatory rationing.
Many observers objected to what they characterized as America's "partial economic controls" during World War II. Some wondered why wages and prices were controlled, but corporate profits were not. The slogan, "Draft soldiers, draft capital" highlighted the irony of asking soldiers to sacrifice their lives, while the wealthy avoided contributing their "fair share" of profits earned from business generated by the war. Proposals to limit corporate profits and to limit individual salaries to $25,000, touched on in Roosevelt's address, failed to garner sufficient support in Congress.
Primary Source: Fireside Chat on the Cost of Living and the Progress of the War [excerpt]
SYNOPSIS: On September 7, 1942, President Roosevelt requested that Congress pass the Stabilization Act, granting the OPA statutory authority to control wages and prices. The president then explained the proposed legislation in one of his famous "fireside chats," a national radio broadcast delivered that evening.
Today I sent a message to the Congress, pointing out the over-whelming urgency of the serious domestic economic crisis with which we are threatened. Some call it "inflation," which is a vague sort of term, and others call it a "rise in the cost of living," which is much more easily understood by most families.
That phrase, "the cost of living," means essentially what a dollar can buy.
From January 1, 1941, to May of this year, nearly a year and a half, the cost of living went up about 15 percent. And at that point last May we undertook to freeze the cost of living. But we could not do a complete job of it, because the Congressional authority at the time exempted a large part of farm products used for food and for making clothing, although several weeks before, I had asked the Congress for legislation to stabilize all farm prices.
At that time I had told the Congress that there were seven elements in our national economy, all of which had to be controlled; and that if any one essential element remained exempt, the cost of living could not be held down.
On only two of these points—both of them vital, however—did I call for Congressional action. These two vital points were: first, taxation; and second, the stabilization of all farm prices at parity.
"Parity" is a standard for the maintenance of good farm prices. It was established as our national policy in 1933. It means that the farmer and the city worker are on the same relative ratio with each other in purchasing power as they were during a period some thirty years before—at a time when the farmer had a satisfactory purchasing power. One hundred percent of parity, therefore, has been accepted by farmers as the fair standard for the prices they receive.
Last January, however, the Congress passed a law forbidding ceilings on farm prices below 110 percent of parity on some commodities. And on other commodities the ceiling was even higher, so that the average possible ceiling is now about 116 percent of parity for agricultural products as a whole.
This act of favoritism for one particular group in the community increased the cost of food to everybody—not only to the workers in the city or in the munitions plants, and their families, but also to the families of the farmers themselves.
Since last May, ceilings have been set on nearly all commodities, rents, and services, except the exempted farm products. Installment buying, for example, has been effectively controlled.
Wages in certain key industries have been stabilized on the basis of the present cost of living.
But it is obvious to all of us that if the cost of food continues to go up, as it is doing at present, the wage earner, particularly in the lower brackets, will have a right to an increase in his wages. I think that would be essential justice and a practical necessity.
Our experience with the control of other prices during the past few months has brought out one important fact—the rising cost of living can be controlled, providing that all elements making up the cost of living are controlled at the same time. I think that also is an essential justice and a practical necessity. We know that parity prices for farm products not now controlled will not put up the cost of living more than a very small amount; but we also know that if we must go up to an average of 116 percent of parity for food and other farm products—which is necessary at present under the Emergency Price Control Act before we can control all farm prices— the cost of living will get well out of hand. We are face to face with this danger today. Let us meet it and remove it.
I realize that it may seem out of proportion to you to be over-stressing these economic problems at a time like this, when we are all deeply concerned about the news from far distant fields of battle. But I give you the solemn assurance that failure to solve this problem here at home—and to solve it now— will make more difficult the winning of this war.
If the vicious spiral of inflation ever gets under way, the whole economic system will stagger. Prices and wages will go up so rapidly that the entire production program will be endangered. The cost of the war, paid by taxpayers, will jump beyond all present calculations. It will mean an uncontrollable rise in prices and in wages, which can result in raising the over-all cost of living as high as another 20 percent soon. That would mean that the purchasing power of every dollar that you have in your pay envelope, or in the bank, or included in your insurance policy or your pension, would be reduced to about eighty cents' worth. I need not tell you that this would have a demoralizing effect on our people, soldiers and civilians alike.
Over-all stabilization of prices, salaries, wages, and profits is necessary to the continued increasing production of planes and tanks and ships and guns.
In my Message to Congress today, I have said that this must be done quickly. If we wait for two or three or four or six months it may well be too late.
I have told the Congress that the Administration cannot hold the actual cost of food and clothing down to the present level beyond October first.
Therefore, I have asked the Congress to pass legislation under which the President would be specifically authorized to stabilize the cost of living, including the price of all farm commodities. The purpose should be to hold farm prices at parity, or at levels of a recent date, whichever is higher. The purpose should also be to keep wages at a point stabilized with today's cost of living. Both must be regulated at the same time; and neither one of them can or should be regulated without the other.
At the same time that farm prices are stabilized, I will stabilize wages.
That is plain justice—and plain common sense.
And so I have asked the Congress to take this action by the first of October. We must now act with the dispatch which the stern necessities of war require.
I have told the Congress that inaction on their part by that date will leave me with an inescapable responsibility to the people of this country to see to it that the war effort is no longer imperiled by the threat of economic chaos.
As I said in my Message to the Congress:
In the event that the Congress should fail to act, and act adequately, I shall accept the responsibility, and I will act.
The President has the powers, under the Constitution and under Congressional Acts, to take measures necessary to avert a disaster which would interfere with the winning of the war.…
Today I have also advised the Congress of the importance of speeding up the passage of the tax bill. The Federal Treasury is losing millions of dollars each and every day because the bill has not yet been passed. Taxation is the only practical way of preventing the incomes and profits of individuals and corporations from getting too high.
I have told the Congress once more that all net individual incomes, after payment of all taxes, should be limited effectively by further taxation to a maximum net income of $25,000 a year. And it is equally important that corporate profits should not exceed a reasonable amount in any case.
The Nation must have more money to run the war. People must stop spending for luxuries. Our country needs a far greater share of our incomes.…
Battles are not won by soldiers or sailors who think first of their own personal safety. And wars are not won by people who are concerned primarily with their own comfort, their own convenience, their own pocketbooks.…
All of us here at home are being tested—for our fortitude, for our selfless devotion to our country and to our cause.
Graham, Otis I. Jr. Toward a Planned Society: From Roosevelt to Nixon. New York: Oxford University Press, 1976.
Vatter, Harold G. The U.S. Economy in World War II. New York: Columbia University Press, 1985.
Ware, Caroline Farrar. The Consumer Goes to War: A Guide to Victory on the Home Front. New York: Funk & Wagnalls, 1942.