Inflation is more than an economic problem, Alfred E. Kahn warned yesterday. It is both a symptom and a reflection of a society that is to some degree in a "state of dissolution."

In a speech to the Washington Press Club, the President's chief advisor on inflation said yesterday the fundamental problem is that Americans have come to expect what has become impossible: to always be doing better every year.

"I think it comes down to the nature of our society," Kahn said, "to the commitments we have made to ourselves, to the general expectation on the part of all of us that we are entitled every year to an increase in our real living standard, so that if the cost of living has increased, then we are entitled to get the cost of living - plus something."

Looking back at 10 years of inflationary expectations, Kahn said breaking that "spiral of me-tooism" or "catch-up" is not going to be easy because no one ever wants to give up anything.

In addition to a demand for insulation against a decline in living standards plus more improvement every year along with demands for increased wages and profit margins, Americans as a group also insist on tax reductions, tax loopholes, particular itemizable deductions, particular government expenditures. "It's the aggregate of all those things that represent the ways in which we as a society demand more by way of real income and real benefits than society is in a position to supply,"Kahn said. "It seems to me fundamentally that is our basic inflation problem."

In the month since he's been in his new post, Kahn said the one declaration he makes in speeches around the country that invariably generates wild applause is the assertion that the president is going to cut the budget. It enables everybody to bask in "a glow of self-satisfaction" and blame the bureaucrats in Washington for proliferating programs and spending wastefully.

"I always find myself saying to them, 'don't sit back there and say it's them. Them is you,'" Kahn said.

Just wait until you hear the "howls" from all those people who are arguing that it's the government's fault when the government tries to cut a program or alter its expenditures, tax or subsidy policies or protective policies, Kahn predicted. Everytime you do succeed, "you add to the list of your enemies," he noted.

Right now, Kahn said, he feels inflation both contributes to and reflects a weakening of the bounds on individual actions that an orderly society has to accept.