Well, folks, this is your basic Christmas party column: the one that you write between drinks, rummaging through your notebooks, looking for all those items that you never reported but wished you had, or, better yet, the ones that you reported but that still need repeating.
We start with our annual award for the most memorable statement made by an executive of a major corporation. Now there is a lot of competition in this category, but in our book the award has to go to Thomas A. Murphy, chairman of General Motors Corp. Congratulations, Tom.
Murphy wins for his repeated insistence on Meet the Press in September that the labor agreement his company had just signed with the United Auto Workers was "not inflationary." That agreement, you may recall, provides for wage and fringe increases over three years of 30 percent to 35 percent depending on inflation's effect on the contract's cost-of-living clause.
Murphy argued that "if you take inflation out of the picture -- both past inflation and future inflation -- this is the most reasonable, and most responsible and most responsive settlement." Presumably if inflation were running at 100 percent, a 115 percent increase would be "reasonable, responsible and responsive." It is statements of such clarity and logic that have won corporate executives the high public esteem they now enjoy.
Next we'd like to turn to our favorite table. It shows the Carter administration's record at predicting inflation and, even if you haven't been drinking, it's worth a good laugh or cry. The left-hand column lists the inflation forecast made early in the year, and the right-hand column gives the actual December-to-December increase in the consumer price index. Predicted Actual (TABLE) 03,00,06,18 1977(COLUMN)5.3%(COLUMN)6.8% 1978(COLUMN)6.1(COLUMN)9.0 1979(COLUMN)7.4(COLUMN)12.2 (Oct.-Oct.) 1980 (Jan. '79 est)(COLUMN)6.3(COLUMN)8.15?(END TABLE)
We mean no disrespect to the Carter economists, who are all sincere men and who work longer hours than is good for any of them. But if you had picked 10 people at random on Pennsylvania Avenue in front of the White House, they probably wouldn't have guessed any worse -- and might have done much better.
Why do economists seem so much less useful and less knowing than they did 10 years ago?
Our explanation isn't very original. The major economic phenomenon of the day, inflation, is increasingly political and psychological in nature. Who can tell how high the Organization of Petroleum Countries is going to raise the price of oil (which more than doubled in 1979 from $12 a barrel) or how nuch Congress might increase farm support prices? Inflation has altered the way people and firms spend and save. Computers aren't quick enough to capture these shifts in mood and politics. Maybe economists should stop pretending they can.
The next citation on our holiday list involves an event that surprised a lot of normally cynical and unflappable people. This was the twin enlistment of Herbert Schmertz and James Flug in the presidential campaign of Sen. Edward M. Kennedy (D-Mass.). For those of you who may not know, Flug had headed Energy Action, a "public interest" group here dedicated to keeping energy prices down. Schmertz, on the other hand, took a leave of absence as the chief public relations executive for Mobil Oil Corp., a firm whose interests lie in somewhat the other direction.
How, you might ask, could these two hitch up to the same wagon?
Easy. Ou have to remember that most people get involved in politics because they enjoy the game, which, of course, is sports for adults (a metaphor we do not claim is original). Flug and Schmertz are basically cut from the same cloth; they are both ambitious, skillful media manipulators who happen to have personal ties to Kennedy. Calling them political mercenaries would be a bit unfair because they wouldn't work for just anyone. Yet it's the emotional lure of combat that draws them into political and media life. The issues are secondary.
On the subject of Flug, you ought to pray that he doesn't have much to do with energy policy if Kennedy is ever elected. He preaches what, for lack of a better phrase, might be called the policies of delusion. Flug notwithstanding, higher energy costs are real. They reflect not only our dependence on foreign oil but also political constraints -- some wise, some not so wise -- that we place on domestic coal, nuclear and oil production. Attempting to avoid these costs by restraining prices artificially invites trouble, which is what we have.
People adapt. This is a small truth that somehow seems to have missed a lot of Washington officials. President Carter, among others, expressed mild astonishment that higher gasoline prices had dampened demand as much as they had. Gasoline consumption is now running about 10 percent below year-earlier levels. Did Carter think people were crazy: that they would use more gasoline after a third increase in prices?
Crazy. Mere mention of the word sends our thoughts running to Capitol Hill and the notable congressional debate over the Home Energy Assistance Act. That proposal sought to provide federal funds to the poor for their home heating bills -- in the name of keeping them from freezing to death -- but debate over its details soon deteriorated into a regional contest over what was "fair" and "equitable."
In practice, this meant mostly that all members had to be seen as getting something for their constituents. Sen. Lloyd Bentsen (D-Texas) argued to the Senate that people die from not having air conditioning he might simply have said that people die. Congress spent an enormous amount of time acrimoniously disputing rival formulas. In the end, Texas got nearly $28 million of $1.6 billion. Next will come energy stamps, the equivalent of food stamps, which would be a bad program but good copy.
One more thought. The lowest form of the human species? A columnist who has nothing good to say about anyone. Happy New Year, folks.