Nixon's New Keep-Them-Guessing Policy

ONE thing President Nixon vowed not to do when he took office was to "jawbone"--to bring direct presidential pressure to bear against companies or unions that seek big price or wage boosts. Yet the President and his advisers are now busily shaping a technique for doing just that. Their plans strongly resemble the Lyndon Johnson policies that Nixon has often scorned as inequitable and ineffective. The reason is simple: two weeks ago, the President was finally provoked into swinging the jawbone hard--and last week his effort yielded him a much-needed gain in the campaign against inflation.

Bethlehem Steel had no sooner posted a 121% boost in the price of structural steel than Nixon denounced it as "enormous" and threatened to suspend the so-called "voluntary" quotas under which foreign countries hold down shipments of low-priced steel to the U.S. Other companies were expected to follow Bethlehem. But the President's threat and gentlemanly chats with White House aides led U.S. Steel Corp., for one, to raise its prices by only 6.8%. Early last week Bethlehem bowed to the inevitable and scaled its increase down to 6.8%.

Don't Go Too Far. The President is about to propose an expansionary budget aimed at stimulating the economy and reducing unemployment. That will surely intensify wage-price pressures unless the Government takes direct steps to contain them: The action against Bethlehem could be the first such step, but only if businessmen and unionists can be convinced that it is not an isolated incident.

Nixon is letting word spread that he will indeed act against other wage or price hikes that go too far. He and his advisers are formulating a keep-them-guessing strategy. Unlike John Kennedy and L.B.J., the President will not proclaim any formal guidelines for noninflationary wage and price boosts. Union leaders and businessmen will be left to figure out for themselves just which rises might draw presidential wrath and what form the White House reaction might take.

The President moved quickly to begin putting this policy into effect. Last week Nixon:

> Summoned the Construction Industry Collective Bargaining Commission, a panel of industry, union and public representatives, to the White House. He read his visitors a list of recommendations he had collected for breaking the dizzying construction wage-price spiral. He could, for example, suspend the Davis-Bacon Act, which requires payment of "prevailing" local wages on federally assisted construction, or he could cancel federal building in areas of excessive wage boosts. Nixon insisted that he was making no threats. "I'm not suggesting that if you don't do this, I'll do that," he said. Nevertheless, he asked the group to work out its own plan for holding down construction wage-price boosts and bring it back to him in 30 days. The commission set up a "working group," composed of industry, union and public members, as a first step toward some sort of wage-stabilization board for construction.

> Began setting up machinery for facilitating further jawboning. The Cabinet Committee on Economic Policy asked the Council of Economic Advisers to supply more frequent and detailed private versions of the quarterly "inflation alerts" that it issues publicly. Press Secretary Ronald Ziegler said that the advisories would contain recommendations for "further action where that seems appropriate."

>151; Kept up the heat on steel. The Cabinet Committee let it be known that it was still studying steel prices, and the Administration did not hurry to resume talks with foreign governments about ex tending the import quotas. Steelmen expect to raise prices on bars, rods, pipe and sheet this spring. The obvious message from the White House is that the companies had better not boost them more than 6% or so.

Something to Worry About. Administration officials set no limits on how far jawboning might go. Initially, they talked of attacking only those industries in which the Government has some direct leverage--such as oil and steel, which are protected by import quotas, and construction, in which Washington finances some 20% of all building. Last week Nixon men were dropping reminders that all things considered there are few if any industries in which the Government does not have some influence on prices.

The tactic of threatening everyone generally and few people specifically has its dangers. In order to work, a jawboning policy must appear fair. The President cannot afford to look as if he is capriciously singling out industries that are in the public eye or susceptible to pressure. More important, he must act against excessive wage boosts as well as price increases. And even if the President can persuade union leaders to hold down wage demands, the leaders may be unable to control a rebellious rank and file. Nixon might do better to reinstate wage-price guidelines for all unions and industries. Such guidelines would at least establish a goal for the executive or labor leader who is not particularly vulnerable to presidential prodding but who fears inflation enough to respond to White House leadership.

At minimum, Nixon's emerging policy will give company and union leaders something new to worry about when they decide on price and wage policies. Walter Heller, chairman of the Council of Economic Advisers under Presidents Kennedy and Johnson, says that Nixon's new policy "might repair some of the damage he did" by announcing at the outset of his Administration that he would go easy with exhortation. When Nixon made that statement, Pierre Rinfret, a Manhattan economic consultant and sometime Nixon adviser, flashed all his clients to put through any price increases they might have in mind. Last week Rinfret was advising them to think again, because "the days of being able to raise prices as much as you want are over."

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