Price Fight: Some Hope

First, the good news: President Carter's friendly persuasion strategy for fighting inflation seems finally to be gaining momentum. Now, the bad news: inflation will probably get worse.

The consumer price index for April, due out this week, will be a "disaster," warns Barry Bosworth, director of the Council on Wage and Price Stability (COWPS). May's figures will not look much better, he adds, and prices will not start to level out until June at the earliest. Partly because of last winter's blizzards, food prices climbed 16.4% in the first quarter. Beef has jumped at an annual rate of 41 % since January, and wholesale prices are spurting, meaning that retail prices will continue to rise.

The Carter Administration is paying dearly for its past support of inflationary increases in such areas as farm price props, the minimum wage, and Social Security benefits and taxes. "It will take a long time to overcome the inflationary actions of last year," says Bosworth, but he adds that the Administration is at last "taking a tougher line on anything inflationary." Indeed, the President and private business people were pressing the anti-inflation campaign on several fronts last week:

The Budget. More than $50 billion in deficit spending is projected for the fiscal 1979 budget that is now before Congress, and both Carter and his Budget Director, James Mclntyre, are under attack for being unable to reduce the volume of the red ink any more than that. Last week Carter pledged to do better in his 1980 budget, saying that new spending will be severely restricted. Meanwhile, the President's chief inflation fighter, Robert Strauss, predicted that the deficit in the 1980 budget will be "well below" $40 billion.

Regulation. Carter's Regulatory Analysis Review Group made its debut by persuading Labor Secretary Ray Marshall to put off new federal regulations against cotton dust in mills. Those regulations, proposed by the Occupational Safety and Health Administration, would have helped reduce lung disease among cotton-mill workers, but at an annual cost of $200 million.

Executive Pay. Responding to Carter's call, several companies volunteered to hold pay raises of high executives to 5% or less this year. General Motors and Time Inc. joined the list. So did A T & T, after its chairman, John deButts, got a wheedling phone call from Bob Strauss, who typically asks business leaders, "What can you put in the pot?" Ford, R.C.A., Westinghouse and some other companies were studying the idea. Meanwhile, the House Appropriations Committee voted to deny scheduled pay increases this year to some 16,000 federal executives earning more than $47,500.

Wages. In its first public blast at a labor negotiation, Bosworth's COWPS condemned as "clearly inflationary" a 25.5% three-year wage offer that West Coast employers presented to 21,000 pulp-and-paper mill workers. Both Bosworth and Charles Schultze, the President's chief economic adviser, fear that labor is coming to take for granted annual 10% wage increases. Unless the trend is reversed, says Bosworth, "we might as well forget about decelerating inflation any time in the near future."

The big battles ahead will be with labor unions, and the White House is gearing for a major fight with postal workers as the deadline approaches next month on a new contract. Since 1971 postal workers' wages have risen 86.9%, to an average of $8 an hour, vs. $5.51 for private nonfarm workers. Unions resent being singled out as the culprits, and they have a point. Though Carter has asked that companies promise to hold down prices as well as wages, few have done so. None have been so direct as U.S. Steel, whose chairman, Edgar Speer, threatened last week to raise prices 7% by year's end if inflation is not brought under control.

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