Barry Bosworth, director of the White House's Council on Wage and Price Stability, told Congress yesterday that "the fight against inflation is not going well," although it is not as bad as recent double-digit surges in consumer prices suggest.
Presidential inflation counselor Robert Strauss, who also testified before the House Banking Committee's subcommittee on economic stabilization, was slightly more optimistic.
Strauss noted that the rate of inflation will be lower in the final three months of the year than it is now because "natural forces are working on our side. We'll get over some of the first quarter's food problems."
But Strauss did not say how much lower the inflation rate would be in the last months of the year.
Even with the big increases in food prices behind the nation, Bosworth said, the inflation rate will still be near 7 percent this year, meaning inflation "is getting a little worse when we would like to see it getting a little better."
Bosworth warned that "there is serious concern that continuing inflation is going to mean the end of the economic expansion" and a return to a recession.
Bosworth said that the administration is having the least success so far in its attempts to moderate the growth of wages, in part, he said, because of an understandable skepticism on the part of labor leaders.
He said that the biggest unions have been receiving wage increases in the neighborhood of 10 percent a year and must now lower their demands to the 7 percent level most nonunion workers and members of smaller unions have been receiving.
In part because these other workers received smaller increases, inflation did not accelerate in 1976 and 1977, Bosworth noted. But as the unemployment rate drops, workers who are not in the big unions will begin to raise their wage demands, adding to the inflation problem, he said.
In this year's first major settlement, 180,000 coal miners received wage and benefit increases averaging nearly 40 percent over three years. Coal operators were under heavy pressure from the White House to give in to the miners' demands, a posture Bosworth has since criticized. The Council on Wage and Price Stability has called the coal pact highly inflationary.
The Teamsters union has indicated it will seek similar wage increases next year, and railroad and postal workers are seeking large increases this year.
Both Bosworth and Strauss denied charges from Rep. Paul Rogers (D-Fla.) that the administration was abandoning health and environmental standards to ease inflationary pressures on corporations.
"This administration is in no way trying to back off on the goals and the mandates in the environmental field," Strauss said. "This administration - in terms of its regulatory responsibility - is examining and re-examining the things we are doing to see if they are being done in the most efficient, most effective and most responsible way."
Bosworth said a new regulatory analysis group, headed by Charles Schultze, chairman of the Council of Economic Advisers, will try to insure that regulations are written in the most-cost-effective way.
Strauss also reiterated the administration's opposition to wage and price controls. But he said he personally has an open mind on proposals that would use the tax system to elicit desirable wage and price behavior - such as not allowing a company to deduct from its taxes wage increases in excess of a certain level.
"But I don't see how these proposals can be put into effect without a terribly difficult bureaucratic set-up," Strauss said.
Bosworth said that the "inflation problem is not going to cure itself" and that most people who claim to have solutions proffer ones that are "too simplistic."
"Inflation is endemic to modern industrial societies. Over the last 30 years the problem has been getting worse," he said.
That is why the president has proposed a four-part program to fight the complex inflation problem: eliminating the government as a source of inflation, gaining cooperation from businesses to hold down costs and prices, seeking assurances from workers to restrain wage demands and tackling inflation problems in specific problem sectors such as medical care.
Bosworth said he too was encouraged by pledges from the automobile, steel and aluminium industries, but cautioned that it "may be more words than deeds. We'll know in the last half of the year."