Our economy is strong, expanding, and fundamentally sound.  But in any realistic appraisal, even the optimistic analyst will realize that in a prosperous period the principal threat to efficient functioning of a free enterprise system is inflation.  We look back on four years of prosperous activities during which prices, the cost of living, have been relatively stable—­that is, inflation has been held in check.  But it is clear that the danger is always present, particularly if the government might become profligate in its expenditures or private groups might ignore all the possible results on our economy of unwise struggles for immediate gain.

This danger requires a firm resolution that the Federal Government shall utilize only a prudent share of the Nation’s resources, that it shall live within its means, carefully measuring against need alternative proposals for expenditures.

Through the next four years, I shall continue to insist that the executive departments and agencies of Government search out additional ways to save money and manpower.  I urge that the Congress be equally watchful in this matter.

We pledge the Government’s share in guarding the integrity of the dollar.  But the Government’s efforts cannot be the entire campaign against inflation, the thief that can rob the individual of the value of the pension and social security he has earned during his productive life.  For success, Government’s efforts must be paralleled by the attitudes and actions of individual citizens.

I have often spoken of the purpose of this Administration to serve the national interest of 170 million people.  The national interest must take precedence over temporary advantages which may be secured by particular groups at the expense of all the people.

In this regard I call on leaders in business and in labor to think well on their responsibility to the American people.  With all elements of our society, they owe the Nation a vigilant guard against the inflationary tendencies that are always at work in a dynamic economy operating at today’s high levels.  They can powerfully help counteract or accentuate such tendencies by their wage and price policies.

Business in its pricing policies should avoid unnecessary price increases especially at a time like the present when demand in so many areas presses hard on short supplies.  A reasonable profit is essential to the new investments that provide more jobs in an expanding economy.  But business leaders must, in the national interest, studiously avoid those price rises that are possible only because of vital or unusual needs of the whole nation.

If our economy is to remain healthy, increases in wages and other labor benefits, negotiated by labor and management, must be reasonably related to improvements in productivity.  Such increases are beneficial, for they provide wage earners with greater purchasing power.  Except where necessary to correct obvious injustices, wage increases that outrun productivity, however, are an inflationary factor.  They make for higher prices for the public generally and impose a particular hardship on those whose welfare depends on the purchasing power of retirement income and savings.  Wage negotiations should also take cognizance of the right of the public generally to share in the benefits of improvements in technology.