Fighting inflation is now the administration's chief economic concern.
Late last week, President Carter received a long memo detailing a set of options for an anti-inflation strategy that could be announced as early as this week.
The memo - from his two top economic advisers, Treasury Secretary W. Michael Blumenthal and Council of Economic Advisers Chairman Charles L. Schultze - details steps tha president can take by himself or in conjunction with Congress, as well as methods of enlisting private-sector support in slowing inflation.
Carter announced an anti-inflation program in broad outline last January as part of a complicated economic package that also contained a $25 billion net tax cut and "lean" 1979 budget with a deficit of $80 billion.
But the broad concept of "deceleration," slowing the rate of inflation gradually rather than precipitously (as President Nixon tried with only transitory success in 1971), contained only sketchy details. There would be consultation with business and industry to try to get voluntary cooperation in reducing wage and price demands. There would be no formal controls and no "yardstick" against which wage and price changes could be measured.
Beyond that, the formal tactics had to be filled in. The program lacked flesh in part because the administration wanted to give business and labor plenty of time to digest the notion without upsetting them (and fermenting opposition) with any particular tactic. But the program also was announced without the usual spadework done prior to major presidential initiatives.
The reason? The president's top economic advisers reached agreement among themselves only shortly before the president's economic addresses. Those who favored the minimum amount of intervention, such as Treasury's Blumenthal, won out over those who, like CEA's Schultze, opted for a more activist approach, such as a type of wage-price guideline attempted by the Kennedy-Johnson administrations in the early 1980s.
Fleshing out the program had been proceeding at a "reasonable" if not a leisurely pace in January and February, according to one official. The work was being done by top deputies - Barry Bosworth, director of the Council on Wage and Price Stability, Treasury Assistant Secretary Daniel H. Brill and Economic Council member Lyle Gramley - with some, but not much, involvement by the top officials.
But then there were two consecutive bad inflation numbers (a 0.8 percent rise in the January consumer price index and a 1.1 percent jump in February wholesale prices), and the prospect of continuing jumps in inflation for the next several months at least. Added to that was heightened concern over the dollar (whose decline in part is due to the lack of an inflation policy here), and the realization on the part of policymakers that the coal strike and the energy bill will have a greater inflationary impact than first recognized. Formalizing the anti-inflation strategy was moved from the middle to the front burners in early March.
At his first appearance before Congress on March 9, new Federal Reserve Board Chairman G. William Miller said inflation had become the most serious problem confronting the nation and called on the president to put a serious anti-inflation effort in place. The same day, the Economic Policy Group (the cabinet-level body that thrashes out administration economic moves) debated the anti-inflation program.
By last weekend, Treasury Secretary Blumenthal was calling inflation, not unemployment, the number one economic problem faced by the Carter administration.
Publication last week by The Washington Post of one of several option memos prepared for the Economic Policy Group by Bosworth gave further push to the effort.
Most of the options Blumenthal and Schultze presented the president in their memorandum are not new, and the fundamental strategy is clear.The government itself must take steps to retard price increases before it can lean on the private sector to moderate wage demands or price increases.
The first government action probably would be a 1 percent reduction in the pay raise scheduled for federal workers later this year. Although federal workers are likely to fight sch a move, the administration feels it can make a strong case, especially because federal workers do not face the same increases in Social Security taxes that their private sector counterparts do.
There is also an executive order that the president can "let go" shortly, one source said, to "put some life into regulatory reform" and take the inflation bias out of federal rule-making. Agencies would be required to evaluate the price impact of regulations they write.
The administration wants to avoid a program that is perceived as antilabor, although one official laments that any private-sector program is almost "bound to sound that way." That's partly because "prices are a pretty good function of wage changes," and partly because most of the visible targets a hortatory program can find are wage negotiations, the official said.
While some price increases - such as steel, cars and aluminum - come in big, easy-to-spot chunks, prices move up slowly for the most Part, little bits at a time. That contrasts with labor settlements that are easy to notice and that set lasting patterns.
One way of softening the approach is to divide the economy up by sectors, officials advise, getting each of the cabinet members involved in the area of the economy that is within his or her purview: for example, transportation, health, energy or construction.
"You'd cover quite a bit of the economy this way," another official maintains. And diffusing the consultative process across the government could avoid the seeming antilabor tinge that the Labor Department especially fears any voluntary program could acquire, several officials argue.
Officials think President Carter could announce the details of the plan he outlined in mid-January within a few days. And they deny that the program will be a hurried-up one. Although recent events might have given some immediacy to the announcement (and some worry that the Post's leak of the Bosworth memo may blunt some of the "announcement" impact a presidential address otherwise might have), officials insist that the anti-inflation program always had the highest priority - if not always the highest attention.
They say that there had never been any intention to put the specifics into the program until March.
But another official concedes that, "While everybody agreed that (the anti-inflation program) was the thing to do, 5 million other things preoccupied us."
And even if the administration had had a program in hand, the president would have been hard-pressed to find an opportune time to announce a strategy that had government restraint as a centerpiece when nearly every economic action it took or urged was inflationary.
Although any coal settlement may not be precedent-setting, it is hard for the administration to ask labor to trim wage demands from 7.8 percent to 7.3 percent at the same time it is urging coal operators to agree to a package containing a 38 percent boost for miners over the next three years. Or to urge price restraint on industry while it is erecting artificial price supports for the steel industry or buying copper for government stockpiles.
But there was no program in hand anyway, in part because top-level attention was absorbed first by the need to outline overall economic strategy and the need to fight hard for the tax proposals, which have been having a hard time in Congress.
Then the coal strike hit a crisis and nearly all the economic policy-making machinery was diverted to making an economic case for invoking the Taft-Hartley Act to send striking coal miners back to work for 80 days. The Panama Canal treaty fight and, most recently, the crisis in the Middle East also have laid claim to top-level attention spans.
If devising the program is difficult, making it work will be even more difficult. For the political consequences of almost any individual anti-inflation move the president would have to make would seem to be more disastrous than the inflationary impact.
And despite the "tight-as-a-tick" image the president would like to portray, most of the time his decisions have been to take the inflationary, not the political, heat.
In the face of virulent farm opposition, he failed to fight against a multi-billion-dollar increase in farm price supports and set-asides last year. He buckleed under to Congress on boosting. Social Security taxes late last year, and now finds himself in the curious position of arguing against congressional proposals to reverse themselves and adopt a plan similar to the one he proposed last year."
Buying copper probably helped assure some Panama Canal Treaty votes, but it also keeps copper prices from falling.
But who knows, one observer said, tongue partially in cheek, whether the born-again president is finally waking up to the impact of those decisions and recognizes that, if inflation is to be beaten without the harsh consequences of a recession, actions will speak louder than words.