The Next Step

On the inflation front, the Administration won two skirmishes last week.

>By a single Senate vote (34-to-33) Congress finally reversed itself, allowed the Administration $350,000,000 for subsidies to "roll back" food prices.

>In a decision on New York City printers, the harassed War Labor Board stuck doggedly to its "Little Steel" formula, which limits wage rises to 15% over the Jan. 1, 1941 level.

Did these victories mean that the battle had turned? Economic Stabilizer Fred M. Vinson thought so. He told a radio audience: "We have not won the fight, but we are making progress. ... We have begun to roll back the tide. . . ."

Most economists disagreed. The Administration's current anti-inflation strategy, as laid down in the President's hold-the-line order, is to keep prices and wages at the level of last Sept. 15. Actually, under the pressure of the nation's great wartime purchasing power, food prices have jumped 13% since September, and the cost of living as measured by the Bureau of Labor Statistics* is up 6%.

Even with subsidies (against which Congress may again revolt) it is unlikely that the cost of living can be pushed back to September's level, or even held where it is now. C.I.O. and A.F. of L., which promised to abide by the "Little Steel" formula only as long as prices stayed down, watch the indexes closely for the signal to press new wage demands.

The next step will probably be abandonment of the "hold-the-line" order some time next fall or winter, followed by a new attempt to stabilize wages and prices at a higher level. How successfully the next line can be held depends largely on the size of the new tax bill which Congress will try to pass this autumn.

Great Britain and Canada, which have held prices level with remarkable success, paid approximately half of their war expenditures out of revenues in the last fiscal year. Their taxes attacked inflation at its source by draining off purchasing power--something that the U.S., which paid only 28% of its expenditures out of last year's revenues, has yet to do.

*Food accounts for nearly one-third of the BLS index. Other important components, and their rise since September: Rent 0%, clothing 1.6%, fuel and lighting 1.3%, furniture 3%.

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