"Out of Ideas"

"Out of Ideas" Candor on prices and policy

Despite a broad consensus among non-Government economists that prices will rise by at least 8% this year, Jimmy Carter and his chief aides have insisted that the inflation rate could be held to 7.4%. Now one Administration member has dared to discuss reality out loud. Testifying before the Senate appropriations subcommittee, Treasury Secretary Michael Blumenthal said that the rate of price rises in 1979 will be "at least 8% to 8.5%" and maybe "slightly higher."

Blumenthal's forecast was not gloomy. Late in the week, the Business Council, a group of high-powered corporate chiefs, issued a prediction of a 9.5% inflation rate for the year, along with a "pronounced, although mild recession." But the Treasury Secretary's candor raised hackles at the White House, which is sticking with its inflation forecast despite much evidence that it is overly optimistic. During the first quarter the annualized rate hit a scary 13%. The Treasury chiefs frankness will surely increase resistance to the "voluntary" wage-price guidelines among both labor and business.

The Administration has been critical of business, which it claims has been widely flouting the price standards. As evidence, Government inflation fighters point to the explosive increase in corporate profits in the first quarter. One result: the Council on Wage and Price Stability (COWPS) has been intensifying its pressure on business. Two weeks ago, it strong-armed Sears Roebuck and Co. into rolling back its catalogue prices by 5%, and last week Giant Food Inc., the Washington, D.C.-based supermarket chain, agreed under Government pressure to reduce prices on a number of items. Following up on a longstanding threat, COWPS also released the name of a company it considered a major price offender, Denver-based Ideal Basic Industries, Inc., one of the nation's largest cementmakers.

Labor unions, for their part, seem even less disposed to hold increases in their wages and benefits to the guideline ceiling of 7% a year, which is below the officially predicted inflation rate. The immediate threat to the wage standards is the demand of the United Rubber Workers, who are seeking an estimated 40% increase in pay and benefits over the next three years. Last week, failing to reach agreement with Uniroyal, Inc., rubber workers struck the company's unionized plants. Uniroyal negotiators complain that they are "being hammered by the Government" to hold the 7% line.

The guideline policy has probably held pay increases to levels below what they might have been. Thus the Administration shows every indication of sticking with the program longer. In any event the White House seems to have little choice. As COWPS Director Barry Bosworth admits: "We seem to have run out of ideas."

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