Wait & See

By last week, the fear of a new wave of inflation from the coal wage pact became great enough to bring a special plea from President Truman to businessmen. He asked industrialists to withhold immediate increases in the price of coal and in the price of steel, "until the actual increases in costs are determined. It is only reasonable," said he, "to ask coal and steel producers to wait until a fair test has been made."

It was so reasonable that U.S. Steel Corp.'s President Benjamin F. Fairless, on vacation in Honolulu, said: "That's exactly what we intend to do." Big Steel, the bellwether of the industry, could well afford to wait. Its first-quarter profits totaled $39,234,000, nearly half as much as in all of record-high 1946, and the second quarter was expected to be just about as high. Smaller producers, not nearly so well fixed, boosted prices here & there, but most of them too held the line.

Too Late. For the coal industry, the plea came too late. Pittsburgh Consolidation Coal Co., the country's largest producer of bituminous coal, had already raised its prices an average of 73-c- a ton. But Chairman George M. Humphrey, who had helped negotiate the wage contract, told Senator Robert A. Taft's Joint Committee on the Economic Report that the rises might prove temporary. He promised to reduce prices by Aug. 15 if costs rose less than 73-c- a ton, absorb the difference if they rose more. Pittsburgh Consolidation's first-quarter earnings--up some 40% over the same period last year--provided an ample cushion.

Retail coal dealers showed no such caution. Many of them boosted prices far more than the increases which, in fact, they had not yet received. Nevertheless, many businessmen began to feel that inflationary fears were largely unfounded.

The Council of Economic Advisers, which sent its midyear report to Congress this week, thought so too. The change from fear of recession to fear of inflation "has been unduly stimulated by such events as the corn crop scare," it said, "and an exaggerated interpretation of the effects of the coal mine wage adjustment. Some persons have scoffed at the idea that businessmen could or would follow a stabilizing course. Yet the reaction among progressive business leaders [in the last six months] was such as to make new possibilities of orderly price corrections in a free economy through the voluntary action of individual firms."

Too High? In the main, the report set forth what businessmen already knew: that the U.S. economy was turning out $225 billion in goods and services annually, highest in U.S. history. There were some trouble spots. Many prices, said the report, were still too high. Exports, which had done much to ward off any recession, were bound to fall off by year's end. But inventories had been brought into reasonable balance, credit buying was again within healthy bounds, and things in general, said the report, were in excellent shape.

Not everyone agreed with this cheerful view. Using the same set of figures on which the report was based, ex-OPA Boss Leon Henderson made an entirely different case last week before Senator Taft's Committee. A sharp drop in exports and a movement to liquidate inventories, Henderson warned, "can touch off disaster." With his hands clasped in supplication, he asked Congress to do something to prevent "a repetition of the collapse which followed World War I."

Thus, threatened by both deflation and inflation, most businessmen for the time being were too confused to do much more than what the President asked: wait & see.

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