Economic Conversion and Labor Discontent
Before the Cold War became the focus of U.S. foreign policy in 1947, Americans worried more about economic security than about fighting communism. In the absence of war-driven production and with the return of millions of veterans to the job market, Americans feared massive unemployment and another depression. Many families had managed to save money during the war with rationing in place, and they looked forward to spending it on consumer goods. Instead, they found shortages of manufactured items and foodstuffs as the economy moved slowly to peacetime production. Workers who had remained on the home front enjoyed rising incomes from overtime pay, but they worried about holding on to their increased earnings in peacetime.
Even before the war ended, the U.S. government took some steps to meet postwar economic challenges. In 1944, for example, Congress passed the Servicemen’s Readjustment Act, commonly known as the GI Bill, which offered veterans educational opportunities and financial aid as they adjusted to civilian life. Overall, however, the Truman administration did not handle the economic problems of reconversion well. In the face of shortages and high prices for available commodities, the president wavered between retaining World War II price controls to benefit consumers and eliminating them to help corporate industrialists. He satisfied neither. Nor did the Employment Act of 1946 improve matters. Contrary to its name, the legislation did not guarantee jobs but merely recommended using tax policies to make adjustments to the economy and created a three-member Council of Economic Advisors to make suggestions to the president.
The president also ran into serious difficulty with labor unions. In the years immediately following the war, real incomes fell, undermined by inflation and reduced overtime hours. As corporate profits rose, workers in the steel, automobile, and fuel industries struck for higher wages and a greater voice in company policies. Truman responded harshly. Labor had been one of Franklin Roosevelt’s strongest allies, but his successor put that relationship in jeopardy. In 1946 the federal government took over railroads and threatened to draft workers into the military until they stopped striking. Truman took a tough stance, but in the end union workers received a boost in pay, though it did little to relieve inflation.
Political developments forced Truman to change course. In the 1946 midterm elections, Republicans won control of the Eightieth Congress (1947–1949). Stung by this defeat, Truman sought to repair the damage his anti-union policies had done to the Democratic Party coalition. In 1947 Congress passed the Taft-Hartley Act. The act hampered the ability of unions to organize and limited their power to go on strike if larger, national interests were seen to be at stake. Seeking to regain labor’s support, Truman vetoed the measure. Congress, however, overrode the president’s veto, and the Taft-Hartley Act became law.
