The new chairman of the Federal Reserve Board said yesterday that President Carter must act on his own to reduce U.S. imports of oil if Congress fails to agree on an energy bill within the next few weeks.
G. William Miller told the Senate Budget Committee that reducing oil consumption and getting an anti-inflation program in place are essential if the strength of the dollar it to be restored.
He said the president should impose oil import fees or quotas and said he personally favors putting additional levies on each barrel of oil imported into the United States. He did not specify how big the fee should be. Sen Ernest F. Hollings (D-S.C.) suggested $5 a barrel.
Miller testified that it would be preferable if Congress were to shape the nation's energy policy. House and Senate conferees have been at loggerheads for months trying to reach a compromise on a bill designed to reduce domestic oil comsumption, stimulate domestic production and encourage a shift from oil and gas to coal.
But Miller told reporters later that the president should "not wait very much longer" before imposing fees ot quotas on imported oil. "I don't he has a great deal of time," Miller said.
He said that a strong policy aimed at reducing consumption of oil is needed to add credibility to U.S. efforts to keep the dollar from declining in value. The steadily declining dollar is making the nation's already severe inflation problems worse, Miller maintained.
He admitted that any program to discourage oil consumption also would be inflationary, but said it was one of the policy dilemmas the nation faces.
Miller, the former chief executive of Textron Corp., was as adamant as Arthur Burns, his predecessor that inflation is the nation's chief problem and that government policy must focus on holding down price increases.
He told Chairman Edmund Muskie (D-Maine) that the central bank had been intervening only reluctantly to support the dollar because speculation against the nation's currency often has been excessive when judged against the basic U.S. economy.
To restore the dollar's soundness and to give some credibility to what he called "bringing actions" to shore up the dollar's value, the nation must take hard, unpopular steps such as passing the energy bill or imposing import curbs and putting an anti-inflation effort in place.
Miller said he would encourage restraining federal pay increases as a first step. He said it may be better to take that medicine now because medicine taken much later would be more "bitter".
He told Sen. Henry Bellmon (R-Okla.) that it is fair to ask the private sector to take moderating steps only if the federal government is willing to take steps to hold down federal salaries.
He noted that it is difficult to convince business and labor that wage and price restraint is in their best interest as well as the best interest of the nation. He noted as "fractured series of interest and self interests" in the private sector and said that it is important to "get people through the door" to provide a public model or restraint for others to follow.
Miller said he feared that the underlying 6 percent rate of inflation would accelerate "with the new influences" of the declining dollar and continuing cost increases in the economy.
The declining dollar makes imports more expensive and therefore adds to the overall inflation rate. Miller said that, since mid-year, the dollars's drop value had added three-fourths percent to the inflation rate.
Actions taken to reduce oil imports would help stabilize the dollar's value but would add to the domestics inflation rate as well. Miller estimated that the energy bill would add about four-tenths percent to the nation's inflation rate.
But he noted that, if the dollar were to keep falling, it would add more than the three-fourths percent to inflation it already had added. Miller said it would be worth it to wean the nation from foreign oil.
Miller told the committee that, in the days since he was nominated (on Dec. 28), the news on inflation had become "discouraging." He said he thinks the administration is putting an anti-inflation program high in its priority list.
Since he was sworn in last week, Miller said, he has been in frequent touch with administration officials about inflation and has the Federal Reserve staff drawing up a list of options that govenment can take to help hold down price increases.
He told Muskie that the projected $60 billion federal deficit is of "concern" and said he hopes it can be reduced. If the deficit goes much beyond $60 billion - as many congressional leaders have said is possible - Miller said the "Federal Reserve will not be able to prevent the market from putting pressure on interest rates . . . giving us consequences just the opposit of what we intend."
Miller said it would "be very unfortunate if inflation brings on recession."
He said he thinks it would be bad if the Humphrey-Hawkins bill now being debated in Congress eroded the role of the budget committees in setting federal spending and taxing policies.