United States

Containment worked less well in Asia. In December 1945 Truman sent General Marshall to China with instructions to work out an agreement between the communist rebels and the Nationalist government of Chiang Kai-shek. This was an impossible task, and in the subsequent fighting Mao Zedong’s communist forces prevailed. The Nationalist government fled to Taiwan in 1949, and the United States then decided to concentrate its East Asian policy upon strengthening occupied Japan, with much better results.

Postwar domestic reorganization

After the end of World War II the vast U.S. military establishment was dismantled, its strength falling from 12 million men and women to about 1.5 million in 1947. The navy and army air forces remained the world’s strongest, however, and the U.S. monopoly of atomic weapons seemed to ensure security. In 1946 the United States formed an Atomic Energy Commission for purposes of research and development. The armed forces were reorganized under a secretary of defense by the National Security Act of 1947, which also created the U.S. Air Force as an independent service. In 1949 the services were brought together in a single Department of Defense, though each retained considerable autonomy. In that same year the Soviet Union exploded its own atomic device, opening an era of intense nuclear, and soon thermonuclear, competition.

Peace brought with it new fears. Demobilizing the armed forces might result in massive unemployment and another depression. Or, conversely, the huge savings accumulated during the war could promote runaway inflation. The first anxiety proved groundless, even though government did little to ease the transition to a peacetime economy. War contracts were canceled, war agencies diminished or dissolved, and government-owned war plants sold to private parties. But, after laying off defense workers, manufacturers rapidly tooled up and began producing consumer goods in volume. The housing industry grew too, despite shortages of every kind, thanks to mass construction techniques pioneered by the firm of Levitt and Sons, Inc., and other developers. All this activity created millions of new jobs. The Serviceman’s Readjustment Act of 1944, known as the G.I. Bill of Rights, also helped ease military personnel back into civilian life. It provided veterans with loans, educational subsidies, and other benefits.

Inflation was more troublesome. Congress lacked enthusiasm for wartime price controls and in June 1946 passed a bill preserving only limited controls. Truman vetoed the bill as inadequate, controls expired, and prices immediately soared. Congress then passed an even weaker price-control bill, which Truman signed. Nevertheless, by the end of the year, most price and wage controls had been lifted. In December the Office of Price Administration began to close down. As a result, the consumer price index did not stabilize until 1948, when prices were more than a third above the 1945 level, while wage and salary income had risen by only about 15 percent.

Truman’s difficulties with Congress had begun in September 1945 when he submitted a 21-point domestic program, including proposals for an expansion of social security and public housing and for the establishment of a permanent Fair Employment Practices Act banning discrimination. These and subsequent liberal initiatives, later known as the Fair Deal, were rejected by Congress, which passed only the Employment Act of 1946. This clearly stated the government’s responsibility for maintaining full employment and established a Council of Economic Advisers to advise the president.

Truman’s relations with Congress worsened after the 1946 elections. Voters, who were angered by the price-control debacle, a wave of strikes, and Truman’s seeming inability to lead or govern, gave control of both houses of Congress to Republicans for the first time since 1928. The president and the extremely conservative 80th Congress battled from beginning to end, not over foreign policy, where bipartisanship prevailed, but over domestic matters. Congress passed two tax reductions over Truman’s vetoes and in 1947, again over Truman’s veto, passed the Taft–Hartley Act, which restricted unions while extending the rights of management. Congress also rejected various liberal measures submitted by Truman, who did not expect the proposals to pass but wanted Congress on record as having opposed important social legislation.