The Great Whatizzit

As the new controls law took effect last week, the big question was: How tightly will it control the economy? The Defense Production Act Amendments of 1952 were patched together in such last-minute haste and compromise and with such pressure from lobbies that not even their authors knew exactly what many of the clauses meant. The important provisions:

Rent Controls. As of Sept. 30, federal controls go off 80% of U.S. housing now controlled. The bill keeps federal rent controls only for 1) the 116 areas officially declared to have "critical" shortages, 2) incorporated cities, towns and villages whose local governing bodies request continued federal control. The critical areas contain only 1,150,000 units of rental housing; 6,000,000 other units will be decontrolled unless local action is taken.

Credit. Although the Federal Reserve Board had already removed its curbs on consumer credit, the law strips the FRB of power to reimpose them. Some of the bill's authors also thought that they had removed the FRB's Regulation X, which curbs housing credit, and many newspapers so reported. Later, Congressmen discovered that the bill actually preserves this regulation. However, it provides that the President must suspend the regulation after any quarter in which the annual rate of housing starts falls below 1,200,000. Since this is the second highest rate in history, and starts are now slightly below that level, it looked as if the regulation would go off in October and houses could again be bought for only 5% down.

Price Controls. No prices were lowered by the bill, but many will probably be raised because of it. The bill sensibly prohibits controls on fresh fruits and vegetables, since the recent potato scandal demonstrated that they don't work. But the bill also took controls off processed fruits and vegetables, including frozen foods, baby food, soups and most canned goods. Since most such foods were already pressing against their ceilings, OPS predicted they would go higher. An amendment tying ceiling prices to state minimum price laws is also expected to boost the price of milk in 17 states.

Wage Controls. Wage and salary ceilings in a diluted form were continued. But the Wage Stabilization Board, which has done a poor job, was abolished in favor of a new board. The new board was given no powers to settle wage disputes, so labor unions promptly announced they would boycott it. Moreover, wage controls on millions of workers on farms and in companies where there are fewer than nine workers were dropped entirely. (Present limitations on salary increases remain but a new wage board will probably make its own rules on wages.)

Materials. The tight control of raw materials through the Controlled Materials Plan was continued.

One reason for some of the absurdities in the bill was that Congressmen loaded it with amendments to benefit favored constituents. For example, Nebraska's Congressman Howard H. Buffett got through an amendment permitting fertilizer companies to sell at "retail" prices to farmers, instead of the lower "wholesale" prices which the old bill called for. Apparent reason: Nebraska's Paige-Hall Seed Co. had been cited by OPS for selling fertilizer at retail prices. Result: the price of fertilizer to all farmers may be boosted as much as 14%. The Pennsylvania Railroad, which had been sued for $384,245 triple damages by OPS for raising its station pay-toilet rate from 5-c- t010-c- can now do so, thanks to an amendment tacked on by Delaware's Democratic Senator J. Allen Frear Jr.

The root of the trouble was that even the enemies of controls were afraid to junk them completely lest a new puff of inflation make the authors politically vulnerable. Thus, the bill was chiefly a gesture which would actually not check inflation if prices start up again. Both Congress and the President had talked a good fight against inflation. Both, by their Actions in the controls fight or steel strike, had continued to abet it.

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