home | history

The Economy and Politics during the Truman Years

In a message to Congress on 5 September 1945 President Truman outlined a 21-point program for transition to a peace-time economy, which he named the "Fair Deal," replacing Roosevelt's "New Deal": Congress was to hold the line on prices and rents until fair competition could operate to prevent inflation; wages were to be held "in line" to control inflation, but there was to be a higher minimum wage to increase purchasing power, and there were to be supplements to unemployment insurance. Truman spoke of the right of every family to a "decent" home, adequate medical care, the opportunity to achieve and enjoy good health, the right "to adequate protection from the economic fears of old age, sickness, accident, and unemployment" and a "right to a good education."

But by the end of 1945 the economy was in decline, and Truman was having trouble with organized labor. The Harvard historian Samuel Eliot Morison was to write that "management did not attempt to reduce wages but [it did] cut out overtime, and many workers were furious at having their 'take home pay' thus reduced by as much as 50 percent." Worker families were also annoyed by rising prices. Unions were demanding better pay and better working conditions. There were accusations that Big Business was acquiring excessive profits. In 1946 there were more than 5,000 strikes in the coal, electrical, steel and other industries. Labor was to a great extent the Democratic Party's constituency, but Truman was concerned about the economy and he ordered strikers back to work, and he broke strikes by ordering government forces to take over the railroads and the coal mines.

Going into 1946 the economy was in a recession, an economic decline said to have resulted from a drop in demand for military weapons fell off and government spending. Also there were meat shortages, and some consumers were blaming the Democrats. Campaigns for the mid-term elections for seats in Congress, Republicans were playing the blame game, including blaming Truman. They asked voters whether they had had enough: enough inflation, high taxes, enough price controls, enough coddling of unions, enough strikes and enough union entanglement with Communists. Republicans promised to cut income taxes – while Truman wanted enough taxes to balance the budget and pay off the national debt. Republican rhetoric had some effect. A Gallup Poll in October (a month before the elections) indicated that those preferring debt reduction rather than lowering of taxes had dropped from 71 percent the month before to just 49 percent. In the elections, the Democrats lost 54 seats and control of the House. Republicans gained control of the Senate, 51 to 45 seats.

Truman had been in office only 19 months. His approval rating had sunk to 32 percent. The mid-term elections were seen by many as a referendum on President Truman, who was being touted as inept. A Republican slogan was "to err is Truman."

Truman and the 80th Congress

The recession ended in 1947. Prices did not rise as steeply in 1947 as they had in '46, but price increases — inflation — continued to be a concern, especially food prices. Truman suggested a return to price controls, and Republicans went along and passed a bill with controls and rationing that Truman said were "pitifully inadequate." But he signed their bill.

In 1947, Truman attacked the Republican claim that income tax reductions were needed for businesses to invest and expand. He claimed that "There is no shortage of funds for this purpose in any wide sector of our economy." He vetoed Republican tax-reduction bills that he thought favored the rich.

The 80th Congress mustered the two-thirds majority needed to override Truman's veto of their Labor Management Labor Relations Act, also known as the Taft-Hartley Act. The bill was created, it said, "To promote the full flow of commerce, to prescribe the legitimate rights of both employees and employers in their relations affecting commerce." Organized Labor hated it because it outlawed their ability to maintain all union shops. The bill gave workers the right to choose whether to belong to a union or not and weakened labor's ability to organize.

Meanwhile, a growth in home building and suburbs was underway, and there was a big shift in education. Both were stimulated by billions in federal spending. The suburbs had been largely the domain of the wealthy, and academia had been peopled mostly by men from wealthy families, but change came with the G.I. Bill, the Servicemen's Readjustment Act of 1944. The historian Stephen Ambrose writes:

The suburbs, starting with Levittown and others, were paid by GIs borrowing on their G.I. Bill at a very low interest rate. Thousands and thousands of small businesses were started in this country and are still there thanks to the loans from the G.I. Bill. It transformed our country.

The bill G.I. Bill passed by a slim margin, and, said historian Michael Beschloss, "a lot – particularly Republicans – said let's not pass this thing ... They felt that it would encourage sloth; that people would not try to get jobs. They thought this would extend the welfare state, rather than do the opposite."

The G.I. Bill became a model for liberals supporting government investing. It was to be claimed that "for every dollar invested in the GI's higher education the government and the economy received at least $6.90 in return." (Deb-Jones-Douglass Institute, www.djdinstitute.org/h_gifact.html)

Truman and the economy to 1953

In 1948, Truman campaigned hard for reelection. He called the Republican-controlled 80th Congress a "do-nothing" Congress, characterizing the Republicans as obstructionist and failing to produce substantive legislation. Some were to guess that voters were giving Truman credit for the economic recovery — as well as credit for success against Stalin with the Berlin Airlift. And many Democrats were still associating the Democratic party with prosperity. One voter was quoted by a journalist, Sidney Label, as saying, "I own a nice home, have a new car and am much better off than my parents were. I've been a Democrat all my life. Why should I change?"

Truman surprised many by winning the election. The Democrats won back the House of Representatives with a 93-seat majority and the Senate with a 12-seat majority. The new Congress pursued Truman's "Fair Deal." This included federal spending to stimulate new home construction and urban renewal and the expansion of public housing. The new Congress passed the Social Security Act of 1950, which extended social security coverage to domestic labor, nonprofit workers and the self-employed. The economy was booming not only with housing but also the buying of automobiles. During the Truman years the economy had an average annual growth rate of around 5 percent.

When Truman left office in January 1953 the national debt was at 71.4 percent of GDP, down from 117.5 percent when he took office in April 1945.

CONTINUE READING: War in Korea and Communist China

comment | to the top | home

Copyright © 2018 by Frank E. Smitha. All rights reserved.