Is Jimmy Carter really serious about fighting inflation?
That question was still on the minds of policil leaders and analysts here last week in the wake of the president's new anti-inflation announcement. Although the speech generally was hailed as wee-drafted and well-delivered, reaction to the Carter program was one of disappointment and continued skepticism. The consensus was cautious: Let's see how he carries it out.
Admittedly, the president's new package contained some nuggets for would-be inflation-fighters: Although most of the proposals were modest and long-familiar retreads, Carter was unexpectedly tough in pledging to hold down the budget deficit and vote costly new legislation. And, conspicuously, he appointed a tough new anti-inflation czar - his special trade negotiator, Robert Strauss.
But analyst say the real test of the new Carter anti-inflation effort will be not in its impact on the general public, but in how moch the new initiative will result in a change of attitudes inside the White House - specifically those of Carter's chief polical adviser, led by Vice President Mondale and domistic aide Stuart Eizenstat.
In the view of many economists. Carter's most visible failing as an inflation fighter so far has been to yeild to these advisers and ignore inflation in day-to-day policy decisions. Analysts say if the speech means the White House now is willing to get tough on inflation, the program may work. If not, it could be just another campign gesture.
Carter's proposals essentially fell into four categories:
A new effort to have the federal government "set an example" for private industry's wage-price decisions by holding down federal pay increases for white collar workers. The president announced he will seek to limit next October's pay boost to 55 percent instead of the 6.75 percent expected, and will freeze federal staff salaries. In turn, he called on industry to follow suit.
A pledge to hold the federal budget deficit to the $60.6 billion projected in his January spending plan - and to veto new programs that might threaten it, including tutition tax credits, farm legislation, highway and urban transit programs, added defense spending, and postal service financing. Aides say to $13 billion to spending.
The usual list of modest anti-inflation measures by government, from opening up more federal timber lands to help reverse the rise in lumber prices to eliminating "unnecessary" regulations and using government purchasing power to boycott goods whose prices are rising excessively. Carter also exhorted Congress to pass his medical-cost-containment and airline bills.
A pledge to get to work seriously on his long-stillborn January proposal to begin talks with business and labor to try to iron out structural policies and practices that contribute to inflation. The vow was backed up with the appointment of Strauss, who has substantial internal clout, as anti-inflation chief. And Carter himself appears to be taking a more active role.
To many observers, the speech showed as much about what government can't do about inflation as what it might - or will - accomplish. Economists virtually agree that the major thrust behind the present price surge is the continued pusth of high wage settlements. Short of massive new wage controls, however, there's little the government can do about it. Jaw-boning may help only margainally.
Apart from that, however, the biggest inflationary bugbear, in the minds of many analysts, has been the administration's own actions or inactions in day-to-day policymaking - from embracing costly new legislation such as the minmium wage and farm bills to proposing new measures such as tariffs that themselves contribute to inflation.
The president's COuncil on Wage and Price Stability, the inflation watchdog agency, estimated in a recent report that these White House policy decisions will add a starting 2 to 2.5 percentage points to the nation's inflation rate in the next three to four years - a half-percentage-point-a-year increase that already nullifies the anti-inflation goal Carter set in January.
John Dunlop, the Ford administration secretary of Labor, whose long-time contention has been that quiet labor-management bargaining offered the best hope of slowing the wage-price spiral, says he now believes the government's own policies have become the biggest culprit.
Other economists differ over which of the factors behind the new inflationary surge is the most critical. But nearly all have warned repeatedly that the president - and his political staff - must muster the gumption to pass up politically attractive proposals that are inflationary if they're going to be able to slow the wage price spiral. In effect, they must learn to say no.
On this score, the Carter proposals seem to be mixed. on one hand, the administration's top economic advisers won some sympbolic victories: The whole emphasis given to inflation as a major economic problem was decidedly more than political staffers had wanted. And Carter's language in promising to hold the deficit down was the toughest of several alternative drafts.
But as conservative analysts point out, the president made no basic sacrifices in his own domestic programs and waffled in places over whether he actually might veto expensive bills.
Moreover, hard-liners complain Carter is continuing to sidesstep potential actions that really might make a difference in slowing the inflation rate - such as supporting a rollback of social Security taxes, which would reduce labor costs for business and help hold prices down. (The administration opposed the payroll tax rise in the first place, but now has changed its mind.)
Insiders say the White House opposes a Social Security tax rollback mainly because it fears it would threaten its tax reduction and "tax reform" package. But to some analysts, the argument is a hollow one. "With the little Carter has proposed in tax reform, it shouldn't be much of a decision to scrap it in favor of slowing inflation," one analyst says.
And, while Carter was talking tough in threatening to veto the farm bill, White House liaison men were telling lawmakers privately the administration would accept a sharp increase in target prices for farm subsidies if the conferees would scrap other expensive provisions. Only fears in the House of constituent concern over inflation finally defeated the bill.
To some outside onlookers, one key sign of hope for the new program could be the appointment of Strauss as the administration's anti-inflation chief.THe politically shrew trade negotiator is one of the few men in the administration with enough clout both internally and publicly to make the splash that's needed to give the White House an "anti-inflation" image.
He also may be the one man in the administration able to pressure White House political aides into recognizing the need to get tough on inflation.
(Ironically, Strauss himself has been responsible for some of Carter's most inflationary policies - such as a proposal to require use of U.S. flag vessels in transoceanic shipping, and several tariffs and import quotas. As one wag put it last week: "Making Bob Strauss the anti-inflation czar is like taking the class troublemaker and appointing him proctor.)
Still, the hedging by the White House staff appears to be contiuing. In its latest bout, Secretary of the Treasury W. Michael Blumenthal is running into difficulty trying to persuade political aides to pare the Carter tax cut by $5 billion to $7 billion as an anti-inflation gesture. Insiders say Mondale and Eizenstat are reluctant to appear too hard-line on the inflation issue.
Whatever the outcome it's clear that the proof of the new Carter anti-inflation pudding is going to be in the eating, not in the table-setting that went on last week. The stock market, often quick both to discount new measures and overstate them later, first reacted glumly to hte Carter plan and then staged a record trading-day.
But G. William Miller, the moderate Carter just appointed to head the Federal Reserve Board, summed the whole thing up more cautiously in a meeting with reporters on Wednesday when he praised the speech as "a good beginning." As his comments implied, the question of whether the administration is indeed finally serious about the inflation issue still is open.