"I'm not fighting steel," insisted President Johnson. "I'm fighting inflation!"
That was undoubtedly true—though the fact was of small solace to the steel industry, which once again found itself publicly cast as villain in a U.S. economic melodrama. It began on the last day of 1965, when the Bethlehem Steel Corp. announced that it was raising its prices on structural steel by $5 a ton, to an average $119. Poor "Bessie." No sooner had the word hit the wire-service tickers than Gardner Ackley, chairman of the President's Council of Economic Advisers, denounced the increase as inflationary; he later charged that Bethlehem was profiteering from the Viet Nam war. And from his Texas ranch, President Johnson called Bethlehem's move "unnecessary" and "unwarranted."
The Summons. The nation's second largest steel company, Bethlehem is the leader in structural shapes, with 38% of production. But structural steel itself comprises a mere 7% of total production—and Bethlehem's hike would have added only one-fourth of 1% to the Government's steel price index. Moreover, Bethlehem pointed out, because of new, stronger, lighter structural steels, construction users now pay less than they did five years ago for equivalent jobs.
Such explanations seemed to go unheard. Bethlehem Board Chairman Edmund Martin was summoned to Washington for a confrontation with Ackley and White House Aide Joseph Califano. After 90 minutes, Ackley called in newsmen to repeat his foregone conclusion: Bethlehem's price move was unjustifiable. Meanwhile, other Administration officials warned executives of other steel companies against following Bethlehem's line. Labor Secretary Willard Wirtz, for one, tried to persuade Chicago's Inland Steel, next only to Bethlehem and U.S. Steel as a producer of structural shapes, to stand pat. Wirtz had every reason to believe that Inland and its Chairman Joseph L. Block would cooperate: after all, it had been Block's refusal to go along with a proposed across-the-board price increase that forced the rest of the industry to knuckle under to Jack Kennedy in 1962.
Not this time. Bethlehem's move, said Block, would not be a cause of inflation; rather, it was "the result of inflationary forces already let loose. It seems most unfair to relate higher living costs to steel prices when the average steel price has remained steady for several years." Block thereupon announced that Inland too was raising its price on structural steel by $5 a ton; little Colorado Fuel & Iron followed by posting a $3-per-ton increase on structurals.
The Pressures. The Johnson Administration stepped up its attack. Part of the Administration's pique, it developed, came from the fact that Bethlehem had not informed the White House in advance of its plans—though no law or custom yet dictates such action by U.S. businessmen. Lacking stockpiles such as it employed last fall to roll back aluminum and copper prices, the Administration now ordered key Government agencies to buy structural steel only from companies that held the price line. On top of that, Pentagon officials hinted that Bethlehem might lose $50 million in contracts to build two ammunition ships.