Carter Takes On Inf lation-At Last

Small but concrete steps are meant to set a federal example

This week, barring a last-minute change of plans, President Jimmy Carter was to make his first substantive statement about an issue that suddenly has become the nation's No. 1 worry: inflation. In a speech to the American Society of Newspaper Editors in Washington, Carter was also to discuss some of the nation's other pressing economic problems: energy and the fall in value of the dollar overseas. But the stress was to be on combatting the rise in prices that threatens to undermine all the achievements of the Administration in promoting economic growth and reducing unemployment.

As Carter put it last week in a kind of warmup talk to the Communications Workers of America at a White House reception, "The inflation rate is creeping up. And unless we stand firm, cut out waste, have a sound economy, stabilize the dollar, have the energy package passed, cut down unnecessary spending and hold down the budget deficit, we are all going to be robbed of the [economic] improvements we made with your help during the last year."

That this week's speech was to be made at all constitutes something of a victory for Carter's economic advisers--and for reality--over his political counselors, who have been arguing that anything the President might do about inflation would offend powerful constituencies. Nonetheless, the speech would probably be no bombshell. Rather than outline a comprehensive, drastic policy, Carter was expected to announce a series of small but symbolic, and concrete, steps that the Government would take in order to set an example of anti-inflationary restraint for the rest of the nation. Some probable highlights of the talk: > A pledge to hold the federal budget for fiscal 1979 within the targeted $60 billion range. That would at least imply a threat to veto any spending bill that seems likely to push the deficit higher. Leading candidate for a Presidential turndown: a farm bill that would pay grain and cotton farmers subsidies on an escalating scale for keeping land out of production. The prices that Americans pay for food are likely to rise 6% to 8% this year; the Administration calculates that the farm bill would tack perhaps another three points onto that increase. The bill cleared a House-Senate conference two weeks ago, and whether the President would mention it specifically in his speech was uncertain. But at a White House breakfast last week, Carter told congressional leaders that he will veto the bill if it reaches his desk.

> An announcement that the 6% pay increase scheduled this fall for 1.4 million federal civilian employees and 2 million military personnel will be trimmed to 5.5%. Not only that, says one Treasury official, but "you can look for him to call on state and local governments to do the same thing." All Carter's advisers agree that the President must scale down the federal pay raise if he is to have any hope of getting unions in the private sector to take his pleas for wage-price restraint seriously; federal workers are widely believed to be overfed and underworked. And the threat of escalating wage demands has become very real in the wake of the boost in pay and benefits--estimated as high as 39% over three years--that the White House swallowed as the price of ending the coal strike. Teamster President

Frank Fitzsimmons has announced that he will shoot for a similar increase when the truckers negotiate next year. Said Fitzsimmons: "You think I'm going to the table for anything less? Somebody's got to be crazy!"

> A confession that many well-intentioned federal regulatory efforts contribute to inflation by raising industries' costs, and a pledge to change. Carter is considering several regulatory reforms suggested by Barry Bosworth, head of the Council on Wage and Price Stability (see box), including the opening of more federally owned timberland to cutting by private companies in order to increase the supplies of lumber and thereby hold down those prices.

Which of the specific reforms, if any. Carter would announce in his speech remained unclear; as usual, the President was reserving decision until the last moment. But his direction was not in doubt.

> A renewed plea to unions and industry to hold down wage-price boosts, at least implying more frequent and vigorous Administration jawboning of offenders. The Administration last week did score a preliminary jawboning victory. After President Carter himself and some other officials had denounced as inflationary an average $10.50-a-ton price increase by U.S. Steel, the company announced that it would peel back to be "competitive" with other steelmakers that raised prices only $5.50 a ton.

One thing that decidedly will not be in the program is any rollback of giant Social Security tax increases already legislated to take effect beginning next year. The House Democratic caucus voted last week to press for a reduction --mostly out of simple fear of voter anger, but also on the well-justified philosophical ground that the tax is inflationary (it will raise businessmen's payroll costs, and the increase will be passed on in higher prices). Carter, however, just does not want to reopen the subject. He told congressional leaders last week that doing so would be "a very serious mistake."

Carter's plans could scarcely be called either a drastic or a comprehensive program. Cartoonists already are comparing Carter's anti-inflation approach to Gerald Ford's ineffective WIN (for Whip Inflation Now) program -- an overly ballyhooed melange of tax recommendations and pleas for restraint in buying that was quickly scuttled because of the deepening recession. But the outlines of Carter's plan, if they hold, do at least constitute a useful recognition that the Government must begin any attack on inflation by getting its own house in order.

Action of some sort is surely needed. The Government reported last week that wholesale prices in March rose at an annual rate of 7.4%--seemingly encouraging, since the February rate had been a staggering 14%. But the increase for the whole first quarter ran at an annual rate of 9.6%, within reach of the double-digit range that separates merely unacceptable from runaway inflation. G. William Miller, the new chairman of the Federal Re serve Board, projects that inflation for the year is likely to average 6.5% to 7%. a higher forecast than the Administration's official prediction, but one that seems more likely to be right.

Unemployment increased slightly to 6.2% of the labor force in March, from 6.1% in February, but the rise was insignificant. Moreover, economic growth is likely to rebound sharply in the second quarter after a winter lull caused by snowstorms and the coal strike. The threat to the economy is less stagflation than plain old inflation.

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