Progress on Inflation

In his effort to check inflation, Richard Nixon has relied heavily on the extension of the $8 billion-a-year income tax surcharge to reduce the economy's fever. Last week, assured by House leaders that the surtax would be continued into the fiscal year beginning July 1, the President confidently predicted that its impact--and that of other fiscal measures--would be felt in "two or three months." If it is not, he warned, more stringent action will be necessary.

What gave Nixon his confidence was the decision by the House Ways and Means Committee to report out the bill exactly as he had requested--extending the surtax at its present 10% rate for six months and continuing it for another half-year at 5%. The bill also eliminates the 7% tax credit for business investment. The committee vote of 16 to 9 was the result of prodding by Chairman Wilbur Mills, a Democrat, some nudging by John Byrnes, the ranking Republican, and a last-minute thrust by the President himself. Nixon sent Treasury Secretary David Kennedy and Paul McCracken, chairman of the Council of Economic Advisers, out to warn the public of the perils that would result if Congress continued its inaction on inflation.

Outmaneuvered Opposition. The committee's approval caught the surtax's opponents by surprise. Some conservatives who oppose high taxation and spending were disarmed by the bill's bipartisan support and by the nation's growing concern about inflation. Liberals, who proposed to support the bill only in exchange for broad reform of the tax structure, were also outmaneuvered. To minimize their resistance, the committee added a provision reducing or eliminating the federal taxes of 13 million low-income people--a feature the liberals could hardly oppose. To ease the reformers' consciences further, Mills pledged a major tax-revision program by year's end. This compromise, originally suggested by Nixon, will cost the Treasury an estimated $625 million a year. The elimination of the investment credit will offset that by bringing in $1.5 billion a year.

The bill now goes to the House Rules Committee, which seems likely to grant Mills' request that debate be limited to four hours and that no amendments be allowed. From there, it will go to the full House, where Mills and Byrnes are certain of passage this week. In fact, Mills is so sure of his votes that he did not even bother to take his usual meticulous head count.

Such confidence is justified. Inflation has reached the point where many Congressmen feel that a vote against the President will be tantamount to a vote for higher prices and interest rates. Says Mills: "The House rises and discharges its responsibilities when it has to, and this is an emergency."

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