June 5, 1974

Inflation Fighters Doing Great So Far

Three cheers for the smartest and best inflation team in the world:

• George Meany, president of the AFL-CIO labor unions;
• Arthur F. Burns, chairman of the Federal Reserve Banking System;
• Richard Nixon, president of the United States.

It would be hard to find more unlikely companions. Each is convinced the other two have rocks in their heads.

And therein lies our economic salvation.

If they were ever to stop insulting each other, and agree on a common course of action, 1929 would soon look like a vintage year.

We moan a lot about inflation and point an accusing finger at the fellow we know the least about.

Yet, two giant facts stand out clearly above the rhetoric of our partisan attempts to pin blame on the other guy:

• Inflation is a world wide problem bigger than the United States and cannot be solved unilaterally by any one leader.
• U.S. inflation is the lowest in the world, for which we should give somebody a bushel of gratitude.

When we look at inflation in the over-all, we find our 8 percent annual rate is envied by Germany with 12 percent, France with 15 percent, Great Britain with 18 percent and Japan with 26 percent.

Certainly every nation, the U.S. included, should exercise the most stringent measures to slow inflation. The present mad race leads straight over the cliff. However, we Americans would be stupid to shoot our champion inflation fighters simply because they didn’t set a new world record in winning.

* * *

George Meany heaps abuse on Nixon for the “economic mess” the president has created, supposedly single-handed. But the powerful labor leader has a hard time convincing even his own union members.

Unemployment is at the peacetime low of five percent. Current Labor Department figures show hourly pay of workers increased at an annual rate of 6.7 percent in the first quarter of 1974, up from 6.0 from the previous three months. This while the output per man-hour suffered the worst drop on record.

Arthur Burns ties another knot in the national purse strings and proclaims gloomily, “The gravity of our current inflationary problem can hardly be overestimated … If past experience is any guide, the future of our country is in jeopardy. If long continued, inflation at anything like the present rate would threaten the very foundation of our society.”

With this dire prediction, the banks shove the prime lending rate to near 12 percent, double the traditional rate of a couple of years ago.

President Nixon pooh-poohs both his other team members and takes to network radio to assert, “The worst is behind us. The storms are abating…Our efforts to dampen inflation are also beginning to pay off.”

To increase his odds he puts on controls and takes them off, cuts the budget here and primes the pump there, impounds funds and releases them.

Herbert Stein, chairman of the Council of Economic Advisers on which Nixon leans heavily, declared that Burns and Nixon are not too far apart. “We don’t all talk with the language of an Old Testament prophet, but we mean the same thing,” he said.

* * *

It is hard to get a handle on our economic problem because we confuse “inflation” and “depression.”

Inflation is too little production and-or too much purchasing power.

Depression is the opposite-too little purchasing power and-or too much production.

Economic collapse can come from either extreme, and low-income consumers suffer either way. However, it is essential that we know which economic malady afflicts us so we can apply the proper remedy.

All of us feel financially pinched these days. Actually we have enough money to bid up the price of scarce products - food, steel, paper, oil, bicycles, computers - you name it. Orders for these products are stacked up in the front office but finished items are not coming out the back door fast enough to meet the demand.

In theory the solution is clear-cut: reduce demand and-or increase output.

In practice the solution runs up hard against human nature and is, therefore, extremely difficult to implement.

No one likes to do without well-marbled steaks, or new cars, or gasoline. Restraining demand is for the guy next door, not me. So Burns attempts to make us do what we will not do voluntarily-cut down on our demands. He makes credit costly so we will buy only what our cash in hand will permit.

By the same token, no one likes to work faster or harder for the same amount of money. Long hours and sweat is for the worker on the next machine, not me. So, Meany calls for a strike vote but settles for contracts that are relatively moderate in comparison to his foreign counterparts.

Nixon stands in the middle, toeing first the brakes and then the accelerator as he guides the U.S. economic engine. What his critics term indecisiveness is an effective job of balancing production and demand that would be stifled completely by the other members of the inflation-fighting team.

If we can just keep the politicians out of the act with their tax cuts, and massive spending, and self-serving statements of doom, our disparate inflation fighters undoubtedly will keep us in a relatively favorable economic position.

So far they’re doing great!

By Lindsey Wilger Williams, retired newspaper publisher and syndicated columnist