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Truman called on his economic advisers to plan how to transition from a wartime economy to peacetime production of goods, without mass unemployment for returning veterans. Unfortunately, economists rarely agree on what the best measures to take are, and Truman's advisers did not have a clear consensus as to what economic course the postwar U.S. economy should chart. To add to his problems, Truman faced a Congress that was no longer unified against a foreign enemy and factional politics were back in play. Truman faced a combination of Republicans and conservative southern Democrats that formed powerful voting blocs.
The return of soldiers to peacetime employment was complicated for Truman, as labor-management conflicts that had lain dormant during the war years, began to reemerge. Labor-management peace was seen as patriotic when the war was on, but now that the war was over, laborers whose wages were kept low now wanted to play catch up. This meant increased prices and inflation. The nation also had severe shortages in housing and consumer products for returning servicemen. At one point, the inflation rate hit 6% in a single month.
As if Truman didn't have enough problems, the nation was hit with a wave of destabilizing strikes in major industries. Many people viewed Truman's response to these strikes as ineffective. When wartime price and wage controls were removed, the nation saw a rapid increase in costs on most items, and labor sought wage increases to keep up with the increased cost of living.
Perhaps the most notorious of these strikes was the steel strike which began in January 1946. It involved 800,000 workers and it was the largest strike in the nation's history. This was followed by a coal strike in April and a rail strike in May. The strikes were met with a wave of anger from the public. Polling showed that a majority of people favored a ban on strikes by public service workers and a year's moratorium on labor actions generally.
For some commodities, price controls remained in place. This led to producers being unwilling to sell their products at artificially low prices. Farmers refused to sell grain for months in 1945 and 1946 until payments were significantly increased, even though grain was desperately needed, not just at home, but to those starving in post-war Europe.
When a national rail strike threatened in May 1946, Truman took action. He issued an executive order in which seized control of the railroads. On August 25, 1946 he issued his order putting America’s railroads under the control of the U.S. Army, as of August 27, at 4:00 p.m. Two key railway unions ignored Truman's edict and struck anyway, leading to a shutdown in the entire national railroad system. Some 24,000 freight trains and 175,000 passenger trains stopped moving each day. For two days public anger mounted, with the angriest man in the country being one Harry S. Truman. He drafted a message to Congress that actually called for drastic action against union leaders, including hanging them if necessary. He wrote:
"Every single one of the strikers and their demagogue leaders have been living in luxury. Now I want you who are my comrades in arms to come with me and eliminate the Lewises, the Whitneys, the Johnstons, the Communist Bridges [the leading union officials of the day] and the Russian Senators and Representatives. Let's put transportation and production back to work, hang a few traitors and make our own country safe for democracy."
Fortunately Truman had cooler heads around him. His top aide Clark Clifford rewrote and toned down the speech to Congress. Truman addressed Congress and called for a new law to draft all the railroad strikers into the Army. News of his request had leaked in advance and as he was concluding his speech, a message was dramatically handed to him that said the strike was settled on the president's terms. Truman nevertheless finished the speech, and a few hours later the House voted to draft the strikers. The bill was killed in the Senate.
Truman's calls for drastic measures seemed to have an effect on labor militancy. But even after the settlement of the railway strike, more labor unrest continued. Truman's approval rating dropped from 82% in January 1946 to 52% by June. This was followed by large Democratic losses in the 1946 midterm elections, when Republicans took control of Congress for the first time since 1930. The 80th Congress included Republican freshmen included Wisconsin Senator Joe McCarthy and California Congressman Richard Nixon.
Truman's unpopularity continued, dropping to 32% in the polls. Democratic Arkansas Senator William Fulbright suggested that Truman resign. In response, the unflappable Truman told the media that he did not care what Senator "Halfbright" had to say.
Truman's dealings with the new Republican-controlled Congress were amicable when it came to foreign policy, but he fought them bitterly on domestic issues. To control the power of the labor unions, the Republican congress passed the Taft–Hartley Act, and the law was enacted in spite of Truman's veto. Truman twice vetoed bills to lower income tax rates in 1947. Although the initial vetoes were sustained, Congress overrode his veto of a tax cut bill in 1948.
As the 1948 election approached, Truman stuck to his roots as a New Deal Democrat. He called for national health insurance, and repeal of the Taft–Hartley Act. He also called for an aggressive civil rights program. All of these measures were known by what Truman called the "Fair Deal." It was met with opposition from many sides including Republicans and by southern Democrats in states still enforced segregation. It looked like Truman did not have a snowball's chance in hell of being elected President in 1948, given all the labor unrest and the split in his own party. And then came election day of 1948. But that's another story.
Truman's labor troubles didn't end in his first term. On September 8, 1950, Congress passed the Defense Production Act. Part of this law permitted the president to requisition any facilities, property, equipment, supplies, component parts of raw materials needed for the national defense. It also gave the president the authority to impose wage and price controls in essential industries related to national defense.
On September 9, Truman issued Executive Order 10161, which established the Economic Stabilization Agency. This agency was tasked with coordinating and supervising wage and price controls. Based on the wage and price control model developed in World War II, Truman created two sub-agencies: (1) the Office of Price Stabilization (OPS) was given the power to regulate prices; and (2) the Wage Stabilization Board (WSB) oversaw the creation of wage stabilization rules. By October 1950, inflation had abated and shortages were easing.
When China entered the Korean War on behalf of North Korea on October 19, and fought with American troops on October 25, the Truman administration accelerated its rearmament plans, and the economy went into an upward inflationary spiral. By December, public support for the war had fallen significantly. Truman declared a national emergency on December 16, 1950.
In response to a labor unrest that resulted from the bitter disagreements over wage and price controls, Truman instructed his Secretary of Commerce, Charles W. Sawyer, to take control of a number of the nation's steel mills in April 1952. Truman said that his authority as Commander in Chief and the need to maintain an uninterrupted supply of steel for munitions for the war in Korea justified the move.
But Truman's plan was thwarted when the Supreme Court found Truman's actions unconstitutional and reversed the order in its decision in Youngstown Sheet & Tube Co. v. Sawyer (1952). The 6–3 decision held that Truman's assertion of authority was too vague and was not rooted in any legislative action by Congress. Ironically the decision was delivered by a Court composed entirely of Justices appointed by either Truman or Franklin Roosevelt. The high court's reversal of Truman's order was one of the notable defeats of his presidency. He did not run for re-election in 1952.
