Kennedy: The Classic Biography (83 page)

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 two 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.

Seated in the audience, I heard a gasp from the reporters around me as the President continued:

If this rise in the cost of steel is imitated by the rest of the industry, instead of rescinded, it would increase the cost of…most…items for every American family…businessman and farmer. It would seriously handicap our efforts to prevent an inflationary spiral… 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….

Price and wage decisions in this country, except for very limited restrictions 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 two 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 twenty-four hours we had their answer.

The words italicized above were among those added to the statement by the President just prior to the conference or inserted spontaneously as he delivered it. Less pointed remarks, he was convinced, would have been noted, answered and then forgotten.

The statement also cited convincing and detailed facts on the industry’s strong economic position without an increase, on the widespread damage the increase would cause and on the various branches of the government already looking into the matter; and it was followed by equally harsh comments in answer to all questions. Example:

… the suddenness by which every company in the last few hours…came in with…almost identical price increases…isn’t really the way we expect the competitive private enterprise system to always work.

Even answers to unrelated questions on service wives and Vietnam were related by the President to the actions of the steel companies. From the moment of that press conference on, he had the initiative in the fight.

But as we discussed the situation back in his office, the steady parade of companies rushing to imitate precisely U.S. Steel’s increase cast gloom over his hopes for a rescission. Nevertheless he was determined to fight on, and he asked me to call a meeting for him in the Cabinet Room early the next morning to coordinate the various efforts needed or already under way, some of them initiated the previous evening.

Days later, when it was all over, several Republicans—who had remained discreetly silent during the fight, refusing to approve either the price hike or the President’s opposition to it—would term these various administration efforts an example of “overreacting,” “tyranny” and “executive usurpation.” Roger Blough spoke of “retaliatory attacks,” and said that “never before in the nation’s history had so many forces of the Federal Government been marshaled against a single industry.” Clearly there was at the time an atmosphere of mobilization and crisis, much of it more apparent than real, based on words rather than actions, and deliberately designed to encourage rescission. But once the smoke of battle had blown away, it should have been clear to all—as it had been clear to the group which met Thursday morning in the Cabinet Room—that the only concrete governmental actions available were two rather modest steps, neither representing “Illicit coercion” or “intemperate retaliation”:

First, the Defense Department sought to meet its obligation to the taxpayers to purchase steel at the lowest available price. Secretary McNamara reported to the President that the steel industry’s action could increase the cost of national defense by one billion dollars, not, as widely reported, merely because of increased steel costs, which were but a fraction of that total, but because of increased costs in all other sectors of the economy which followed steel. “To minimize the effect of the price increase on Defense costs,” McNamara directed, the use of alternative materials would be studied, and “where possible, procurement of steel for Defense production shall be shifted to those companies which have not increased prices.”

Any prudent steel customer would have done the same. McNamara, whom the President had called regarding this approach after Blough’s visit, underscored his intentions by announcing the award of a small Polaris armor-plate contract to the tiny Lukens Steel Company, which had not raised prices. He noted publicly that U.S. Steel and Lukens were the only producers of this kind of high-strength steel. Similar announcements were planned for the General Services Administration, the Agency for International Development and others. But this was not a massive weapon. It was insufficient by itself to persuade the few holdout companies not to join the price increase parade and wholly useless once they did. The Lukens award, in fact, was announced after the fight was almost over.

Second, the Justice Department sought to meet its obligation to law enforcement by initiating an inquiry as to whether a series of simultaneous and identical price increases, justified neither by cost nor by demand, and undertaken by companies in totally different financial positions, reflected normal free market behavior, coincidence, collusion or monopoly. Whatever the answer, I doubt that any self-respecting Antitrust Division under any administration could have sat back and idly watched this occur, given the long history of price conspiracies in steel. In no fully competitive industry could one company raise its prices in confidence that virtually all others would follow. The Federal Trade Commission, which had ordered the industry in 1951 to halt certain monopolistic practices, also announced a reopening of its inquiry. “Steel,” said an eminent scholar commending the President’s action, “is not really a competitive market. It’s one big company.” And a leading professor of antitrust law wrote us:

Price leadership without overt collusion is inevitable in tightly organized oligopolies, schooled to habits of cooperation, afraid to discriminate, without possible new entrants…. Using the latent powers of the Sherman Act…the Courts have plenty of power…to reorganize industry leaders.

No such reorganization was attempted. Those who assailed the Kennedys for immediately summoning a Grand Jury investigation, however, had less to say when seven major antitrust indictments for secret price-fixing conspiracies were returned against the steel industry in the two years that followed. The largest indictment was returned in April, 1964, by a Grand Jury receiving information from its predecessor organized by the Kennedys.

One of the items that particularly interested the trust-busters in April, 1962, was the statement by Bethlehem President Martin, made shortly before the Blough announcement, that this was no time to raise prices. Bethlehem was the first to join U.S. Steel in the increase. Was this evidence of conspiracy, monopoly power, deliberate deceit or, as claimed, a misquotation? The Antitrust Division had an obligation to find out. Federal Bureau of Investigation agents, in their normal role as investigators and fact-finders for all divisions of the department, interviewed not only all company officials (U.S. Steel’s General Counsel told them that he and his associates were “too busy” to talk to them then) but also the three reporters who had covered the Bethlehem meeting (all of whom stood by their stories).

Unfortunately, two overzealous agents, misunderstanding either their role or their instructions, called and visited one of the reporters in the middle of the night to check his story, and telephoned another who put them off. The latter, as well as the third reporter, were interviewed at their offices, although subsequent reports talked of “state security police” swooping down unannounced to grill all three in their beds. Some members of the newspaper fraternity—who never, as the President pointed out, showed the slightest hesitation in waking anyone else up at night—encouraged violent Republican talk about “Gestapo tactics,” “press suppression” and accusations that the Kennedy brothers had personally ordered a 3
A.M.
“third degree.” As always, neither of the Kennedys would publicly blame the career men responsible, but the Attorney General’s deputy had in fact specified to the FBI that all those to be interviewed should be telephoned at their place of business, not their homes, for an appointment in the usual hours. No orders were ever given to awaken anyone or to obtain the information by 7
A.M.
, and neither Kennedy knew about the calls until the next day.

The antitrust and Defense procurement actions were the only two tangible items on the list I drew up for Thursday’s meeting in the Cabinet Room, and, although both contributed to the general atmosphere of concern, neither provided a means of rescission. Among those present at 8:50 that morning, in addition to the President and myself, were Messrs. Robert Kennedy, Goldberg, McNamara, Hodges, Under Secretary of the Treasury Fowler, FTC Chairman Dixon, Walter Heller, Larry O’Brien and several sub-Cabinet members and assistants. Roughly the same strategy group met the following day as well.

The only other concrete action available, it appeared, would be new legislation. The President regarded this as a difficult route, despite early Democratic support for his stand on the Hill. Remembering Truman’s ill-fated move to draft railroad strikers, and having reconsidered his position of the previous morning, he did not want to act in haste. The Steelworkers having fulfilled their obligations, he did not want to take action against the industry—on its tariffs or tax proposals, for example—that would diminish its employment. Secretary Dillon, on vacation in Florida, argued against any change for the time being in the proposed investment tax credit and depreciation reform. But if rescission could not be obtained soon, said the President, he would go to Congress. His press conference statement had not been an act.

But the legislative alternatives, canvassed in a meeting in my office Friday morning, were not too promising. They ranged all the way from a simple resolution condemning the price rise to permanent legislation placing steel and similar price and wage decisions under various degrees of governmental supervision. A proposed ninety-day “Steel Price Emergency Act of 1962” would have temporarily rolled back prices to their April 9 level until a Presidential board of inquiry could report on what increase, if any, was proper and in the national interest; and the industry, though not bound to accept the Board’s recommendations, would be on notice that further legislation was the alternative. A proposed amendment to the existing Defense Production Act would have revived Presidential authority to stabilize, with a March, 1962, base, prices and wages either in all industries or in those producing basic commodities. Other suggestions called for a variety of Executive Orders, Presidential panels, court reviews or temporary roll-backs and controls. Most suggestions were too little, too late or too much. They either failed to assure correction of the immediate problem or went so far as to be undesirable.

The President was left chiefly with his effort to obtain a voluntary rescission without legislation through both public and private appeals. At our Thursday morning meeting Secretary of Commerce Hodges was designated to hold a press conference in reply to one scheduled by Roger Blough that afternoon. Arrangements were made to supply Hodges with rebuttal material, and to supply a few friendly reporters at the Blough conference with pertinent questions. Other Cabinet members and agency heads were asked to hold press conferences on the impact of a steel price increase on their various concerns—defense, balance of payments, farmers, small businessmen.

All the economists in government were to pull together a “Fact Book” or “White Paper” on steel to be widely distributed. Democratic governors were asked through the National Committee to deplore the increase and request local steel men not to join in it. Administration spokesmen were to be supplied to the various TV interview shows.

On Capitol Hill Senator Kefauver had already welcomed the President’s call to arms and scheduled an investigation by his Anti-Trust Subcommittee. The House Anti-Trust Subcommittee, the Small Business Committees in both houses and other committees and individual members threw their weight behind the President. The Republican candidates for Senator and Governor of Pennsylvania, Congressmen Van Zandt and Scranton, wired Roger Blough that the increase was “wrong for Pennsylvania, wrong for America and wrong for the free world.” With a handful of expected exceptions, the nation’s editorial writers and columnists refused to support the price rise and most supported the President.

Blough’s press conference statements that afternoon were defensive but mild. Hodges in his reply struck back hard against a “handful of men who said in effect that United States Steel comes first, the United States of America second.” He ridiculed Blough’s contention that price
increases
were justified by foreign competition, and refuted the corporation’s plea that increasing the cost of everyone else’s machinery was the only way U.S. Steel could obtain enough funds to modernize its own.