Presidential anti-inflation chief Alfred E. Kahn admitted publicly yesterday that the administration "bent" its 7 percent wage guideline to accommodate the new Teamsters' union settlement.
At a news conference in Boston, Kahn told reporters: "You can say with honesty there has been bending of the standards." He also predicted another surge soon in wholesale industrial prices.
Kahn's statement marked the first public admission by a high official that the White House "bent" the guidelines in the case of the Teamsters' settlement, and amounted to a complete reversal of his earlier stance on the pact.
On Wednesday, the anti-inflation chief told a White House briefing the Teamsters' settlement fell within the guidelines. He even praised the pact then as costing "substantially less" than the contract it replaced.
It was not immediately clear what impact Kahn's statement might have on the wage-price program. Officials had been skirting any admission that the guidelines were "bent" to avoid opening the door to future concessions.
Kahn's fulsome blessing of the Teamsters' settlement on Wednesday had drawn sharp criticism from the union's leaders, who are trying to tout the still-tentative pact as a rich one to help sell it to their members.
Yesterday, Kahn said that "from the point of view of the Teamsters, they got a very good contract and I hope they ratify it." He said the increase amounted to 8.3 percent a year - higher than he estimated on Wednesday.
Separately, the administration's Council on Wage and Price Stability issued a formal statement by Kahn asserting the hospital industry's voluntary cost-control program "is not working," and endorsing new legislation.
Kahn noted in his statement that despite the industry effort, hospital costs had risen by 14.4 percent between January 1978 and January 1979 - about one-and-a-half times the pace for the rest of the economy.
Kahn described himself as "very distressed" about the sharp increase. He said it "clearly illustrates the importance of taking firm action. . . . It shows that the industry's voluntary program . . . is not working."
Meanwhile, the Council announced that 48 of the 50 state governments, along with "a majority" of the nation's largest cities and counties, had pledged to comply with the anti-inflation program.
The two states missing from the total were Louisiana and Maryland. Kahn said Louisiana has not answered the agency's request for a compliance pledge, and Maryland has been given an extension.
Kahn's prediction that wholesale industrial prices would begin soaring again came as a jolt to inflation-watchers. Until now, food and fuel have provided the sharpest price hikes in the index.
Kahn said yesterday that when the Council looks at business price increases, "we see the basic problem is an overheated economy." He said most business price hikes appear to reflect sharply rising raw materials prices.
Top Carter administration policy-makers have concluded they are going to have to do something to cool the economy's overheating, and are considering a series of new measures, from raising interest rates to imposing credit controls.
So far, the independent Federal Reserve Board has seemed reluctant to embark on either course, but most observers believe it will accede if Carter requests it. The President is expected to decide on any new moves soon.