In short, the American economy is in trouble. The most resourceful industrialized country on earth ranks among the last in the rate of economic growth. Since last spring our economic growth rate has actually receded. Business investment is in a decline. Profits have fallen below predicted levels. Construction is off. A million unsold automobiles are in inventory. Fewer people are working—and the average work week has shrunk well below 40 hours. Yet prices have continued to rise—so that now too many Americans have less to spend for items that cost more to buy.
Economic prophecy is at best an uncertain art—as demonstrated by the prediction one year ago from this same podium that 1960 would be, and I quote, “the most prosperous year in our history.” Nevertheless, forecasts of continued slack and only slightly reduced unemployment through 1961 and 1962 have been made with alarming unanimity—and this Administration does not intend to stand helplessly by.
We cannot afford to waste idle hours and empty plants while awaiting the end of the recession. We must show the world what a free economy can do—to reduce unemployment, to put unused capacity to work, to spur new productivity, and to foster higher economic growth within a range of sound fiscal policies and relative price stability.
I will propose to the Congress within the next 14 days measures to improve unemployment compensation through temporary increases in duration on a self-supporting basis—to provide more food for the families of the unemployed, and to aid their needy children—to redevelop our areas of chronic labor surplus—to expand the services of the U.S. Employment Offices—to stimulate housing and construction—to secure more purchasing power for our lowest paid workers by raising and expanding the minimum wage—to offer tax incentives for sound plant investment—to increase the development of our natural resources—to encourage price stability—and to take other steps aimed at insuring a prompt recovery and paving the way for increased long-range growth. This is not a partisan program concentrating on our weaknesses—it is, I hope, a national program to realize our national strength.
II.
Efficient expansion at home, stimulating the new plant and technology that can make our goods more competitive, is also the key to the international balance of payments problem. Laying aside all alarmist talk and panicky solutions, let us put that knotty problem in its proper perspective.
It is true that, since 1958, the gap between the dollars we spend or invest abroad and the dollars returned to us has substantially widened. This overall deficit in our balance of payments increased by nearly $11 billion in the 3 years—and holders of dollars abroad converted them to gold in such a quantity as to cause a total outflow of nearly $5 billion of gold from our reserve. The 1959 deficit was caused in large part by the failure of our exports to penetrate foreign markets—the result both of restrictions on our goods and our own uncompetitive prices. The 1960 deficit, on the other hand, was more the result of an increase in private capital outflow seeking new opportunity, higher return or speculative advantage abroad.
Meanwhile this country has continued to bear more than its share of the West’s military and foreign aid obligations. Under existing policies, another deficit of $2 billion is predicted for 1961—and individuals in those countries whose dollar position once depended on these deficits for improvement now wonder aloud whether our gold reserves will remain sufficient to meet our own obligations.
All this is cause for concern—but it is not cause for panic. For our monetary and financial position remains exceedingly strong. Including our drawing rights in the International Monetary Fund and the gold reserve held as backing for our currency and Federal Reserve deposits, we have some $22 billion in total gold stocks and other international monetary reserves available—and I now pledge that their full strength stands behind the value of the dollar for use if needed.
Moreover, we hold large assets abroad—the total owed this nation far exceeds the claims upon our reserves—and our exports once again substantially exceed our imports.