SOMETHING . PECULIAR had happened to Eugene Sussman's jewelry business in Cedarhurst, N.Y., something which may be a clue to understanding the tricky politics of inflation in the 1970s.

As a manufacturer of expesive fashion jewelry, Sussman figured his luxury product would be the first casualty of inflation. Every time he raised his prices to keep up with the cost of labor and diamonds and gold, he worried. But people kept buying more and more of his jewelry, and Sussman isn't sure why.

"i'm talking about average working girls," Sussman said with wonder. "I see them on the street, wearing my jewelry. They're making $250 or $300 a week and they're spending it on jewelry. They have to have it. It's like food.

"I'm paying 120 percent more for my diamonds thant I did last year, my labor is up 35 to 40 percent. My product gets marked up again and again. Rings that sold for $170 four years ago are $350, maybe $400. I can sell all I can make."

Sussman's experience is not an aberration. A number of economic expers are in the same quandry, unable to explain why Americans have kept borrowing and buying in recent years when the fever charts of inflation said they should pull back. The economic puzzle of this era. The economic puzzle of his era, one which confuses political decision-making, is the paradox of prosperity amid the general pain. New money and new suffering are being distributed through the American society by inflation in uneven ways which make a jumble of old assumptions of class and status.

In the quality Los Angeles suburb of Sun Valley, Roland Murphy and his wife Joan borrowed this year to redo their kitchen for $10,000. Last year, they bought a new Dodge Aspen to go with their old Dodge and their Ford pic-up truck. When hay got too expensive, they gave up their horse.

Murphy is not rich. He's a union machinist who works in an aerospace factory checking out jet engines. But his wages, together with Joan Murphy's part-time job as a school clerk, put the family around $25,000 a year-in the top 25 percent of family incomes in Americe.

In Chicago, Derotha Rogers, and English teacher, and her husband Bev, a pipefitter, just bought a $19,000 Cadillace Seville. They concede this "impulse" purchase was imprudent, considering that Mr.Rogers is temorarily out of a job.

"We realize we made a mistake," she said. "But we've never taken anything we eve bought back, and we're not going to do it now. I think it's going to last for a hell of a long time and we're going to get our moneh's worth out of it. We call it our 'second home.'"

In Houston, 35-year-old computer analyst Jack West and his wife Rosean are taking their daughter and their credit cards to Disney World this Christmas. The winter vacation will cost about $1,500, but it's their first major trip in three years, so they figure they owe it to themselves.

Mrs.West explained a new American attitude toward spending and credit and enjoying the good life: "For our parents, everthing went to the kids and nothing for themselves. But I think those of us who have grown since World War II just don't watn to live like that. We want to enjoy some of it too."

As these glimpses of the American consumer suggrst, there's a lot of money rolling around in this country, real money buying real goods. Beyond the big headlines on inflation, beyond the public's general aggravation with rising prices, millions of families have learned that they can live well in this decade of high inflation, even stay ahead in their own real terms, while Uncle Sam's dollars get funnier and funnier.

The consumer response to persistent inflation seems to be: Why no? Why not buy not instead of later-jewelry, cars, houses, boats, creditcard vacations? Tomorrow it will only cost more, much more. Tomorrow the paycheck wil be much larger. Tomorrow these debts will seem much smaller.

Nobody fully understands it, but some authorities are convinced that this decade of high inflation has produced historic changes in how Americans feel about money-the psychology which governs personal debt and purchasing and savings. To put it bluntly, skeptical Americans don't really expect President Carter to do much about inflation. They've heard that song before Washington, several times, and inflation persists. So they act accordingsly. They buy now. They go deeper in debt. It makes sense.

"The brake is off," said Jay Schmiedeskamp, research director of theGallup Economic Service, which studies consumer attitudes. "Inflation doesn't slow people down the way it always has. That's rather historic change. There used to be a brake-inflation came along and people stopped buying. That isn't happening now."

American consumers, he said, have "learned from experience. People have given up on the idea of wrestling with inflation because so many people have tackled it and come back with their swords bent. High inflation-it's bad again. So what else is new? You can't blame people for becoming skeptical."

The skeptical learn to go with the flow, borrowing and buying. It scares many of them, especially the older people who remember when inflation was not the expected future. But they also recognize that being in debt is a good deal if infalion continues.

"I have more credit than money," said Roland Murphy. "I could buy far more things than I could ever pay for. When I thin about what Sears says I could buy on credit, it's frightening. We could cart way $7,000 worth of their stuff."

This shift in buying habits conincides with profound changes in traditional social arrangements that have also emerged in this decade, helping to encourage the "why not" response to inflation and making it easier for millions of families to evade the real stagnation of individual wages. Wives are going to work. Today 58 percent of them are working wives, an increase of 26 percent since 1970. For many of these families with two paychecks, the cure may be worse than the ailment, if curbing inflation means that htey lose on of their incomes.

In Cleveland, patrolman Michael C. Edikiz is hurting on his police salary ( $874 net a mont). He hasn't taken a vacation for years. Last Christmas he sold his stereo and camera equipment to buy presents for his wife and two small children. He and his wife Judy are putting off $2,200 in dental work. Cleveland voters repealed the automatic pay escalator for policemen; Edikiz is studying real estate.

Judy Edikiz is a beautician, but her husband doesn't want her to work because he believes it would threaten the family's solidarity. "The police profession," Edikiz explained, "has the highest divorce rate, and that's because we're way from home so much. . .My wife laughs at my paychecks, but she is understanding."

In Washington, D.C., Norman Griffiths is a 26 year old policeman with about the same pay but with substantial financial advantages over Edikiz. Mrs.Griffiths is a police officer, too. The twin incomes put the Griffiths in the top 20 percent of family incomes. They earned the savings to by a house with an income-producing rental unit. Mrs.Griffiths had a baby girl recently but plans to resueme work after her maternity leave. Their major disadvantage is living in one of the nation's recession-proof boom cities, where everything from houses to food costs more.

A Confusion of Interests

For POLITICIANS, the net effect of all this is a terrible confusion of interests. This may help explain why solutions for inflation have been applied so erratically throughout the 1970s. Neither liberals nor conservatives nor nervous centrists can make easy formulations about their own constituencies. The old political categories-blue-collar versus professional, rich versus poor, young versus old-simply don't tell them very much about who is hurting and who isn't.

The general prosperity confuses the questions further. It has been masked somewhat by the gloomy reports which come out of Washington every month rising prices and stagnated wages. Individual wages, on the average, have been sitting still, more of less, for five years-no real gians if you deduct the effects of inflation. For a nation used to constatn gain, this stagnation sows disappointment and anger across the economy, from the well-to-do to the working poor.

Today , if one tires to rank a family on the ladder of U.S. incomes it makes more sense to ask first how many people in the family are working before you ask what they do for a living. Thus, the "bottom" class has no earners, depends on pension checks of Social Security or welfare and has a poverty-level median income of $5,594.

The new "middle" class has one wage arner-usually a husband, but increasingly a single or divorced woman-and a below-averaged income of $13,218.

The "upper middle" family has two or more workers and a media income of $20,415, which puts in the top 40 percent.

Very few of those folks feel rich, of course (the top 5 percent of wage incomes starts at $40,000). They, too, have to give up things because of inflation-small creature comforts on large social exchanges like a wife's tima at home traded for extra cash. Nonetheless, these families seem to have the best chance of keeping up, of acquiring the good things they want in life, despite the general affliction of inflation.

But, as a whole, the economy had been working its way upward-slowly but steadily-since the recession of 1974-75 a recovery which has created more jobs, more income to spend. In gross terms, 10 million more people have gotten jobs and are earning wages since 1973 (including those working wives). The total disposable income in real terms-the money which Americans have to spend after taxes, after inflation-has increased by nearly 10 percent since 1974.

That's not exactly spectacular growth, but it helps explain why, for instance, auto sales climbed to a record in 1978 or the housing industry is booming or Americans are spending more bucks on "luxury" items like European vacations or jewelry or art.

I you examine the "demand" side of the economy, the things people are buying this year, it does not sound like a nation in deep pain. The hottest item in Detroit's sales in the light-body truck, starting at $7,000, a vehicle devoted more to recreation than to work. Auto features regarded as "luxury" a few years ago are becoming standard-82 percent of the new cars having air-conditioning, 30 percent have stereo, 41 percent have adjustable steering wheels.

Americans spent $11.8 billion traveling abroad last year, and foreign travel is up again this year. American bought $1.2 billion worth of boats this year, up 14 percent from 1977. Houseboat sales increased 23 percent.

One small indicator of America's hopeful commerce is the fact that RCA and Sony and Zenith, among others, are trying to create, via TV advertising, a mass market for their new video cassette recorders, at $500 to $1,000 each. Half a million American families own one; next year a million, if a recession doesn't scare them off.

Schmiedeskamp and som other business analysts are now warning that the Carter administration may "talk" the nation into a recession by undermining consumer confidence with all of its alarums about dark days ahead. If inflation fighter Alfred Khan's wisecracks about depression convince people not to buy cars next spring, nobody will be laughing in Detroit.

Many Feel Better Off

SO FAR, people have separated the nation's economic fortune's from their own material well-being. It's true that the public is nearly unanimous in tis complaints about inflation and that people have a gloomy outlook for the nation's economy. But if asked about their own family finances, more people feel that they are better off than worse off today.

An @nbc-Associates Press poll last month asked people "if your family is financially better off today, about the same or worse thnn it was a year ago?

Better off today 34 percent

About the same 44 percent

Worse off today 21

When asked about the future, those polled responded with an almost identical mix of optimism and pessimism.

This sense of economic well-being don't usually get much political expression because people don't usually write their senator about the new car they bought or the kitchen renovation. Everybody talks about inflation and what they have given up.

In Chicago, Stephen C.Mitchell, a 35-year-old engineering executive, and his wife Cindy are an upper-income family, but they are postponing remodeling their 100-year-old townhouse. They entertain less ofthe, dinner parties twice a month instead of three times. They serve wine instead of hard liquor.

On the other hand, they just purchased a $2,000 oil painting by the prominent Mexican-American artist Emilio Cruz.

They are paying the gallery in installments.

An economist at the Brookings Instutions, Joseph J. Minarik, has tried to define the question of winners and lsosers in a deeper way, calculating the net effect of inflation's gains and losses, from prices and taxes, wages and assets, on different income groups over a six-year peroid. He concluded that, in relative terms, the very high-income households lose most, essentially because they have more to lose-more assets that lose their value. The elderly of all income classes lose baldy; so do the working poor, families who earn a little too much to qualify for government aid but are still far below the median income of $16,4339.

But Minarik's stunning conclusion is that, on the average, the broad upper-middle income families don't really lose from persistent inflation-they about even over time or actually get a little ahead. This conflicts directly with the prevailing political wisdom which holds that the ill-defined "middle class" is the most angry about inflation, as inflated pay and property values push them into higher and higher tax brackets.

Minarik's calculations included those damaging effects, but he found, nevertheless, that "middle-income households. . . fare well, benefiting from home ownerhsip and keepeing even through wage increases." These are the families who face periodic cash squeezes, but are rich in credit. It is difficult to be precise, but Minarik estimates that this "upper middle" range from about $15,000 to about $25,000 and $30,000 in family incomes. Above and below are the average losers. If he is right, inflation's long-term effect is to redistribute income, modestly, toward that upper middle.

The current politics of inflation turns this upside down. When the "upper middle" complains, politicians of most stripes will respond, perhaps by apportioning still more pain to the bottom of the working ladder where people are already hurt worse. Unorganized and under-represented, the working poor get poorer while the fortunate buy fancy trucks and complain about inflationary taxes.

Selling Hot Dogs at the Ballpark

THE GALLUP research on "consumer confidence" seems to bolser Minarik's conclusions. Schmiedes kamp said that, during an economic recovery, high-income families always regain their confidence as buyers first, then the optimism spreads downward to include the lower-income groups. This time, however, the "confidence" did not really penetrate below $15,000, he said, "Below $15,000, they're still having a helluva time balancing the budget," he remarked.

A just-released national survey of worker attitudes, commissioned by the Labor Department, provides additional evidence of the uneven distribution of inflationary pain. The study, conducted by the University of Michigan's Survey Research Center in 1977, found that only one out of five American workers he feel that family income is inadequate to meet monthly expenses-precisely the same as in 1973 and slightly fewer than in 1969. About 55 percent of the workers said their family income doesn't allow them to "live as comfortably as they would like"-a level of discontent which hasn't changed since 1969.

The deepest pain is registered where it always has been/among the elderly, the low-income families, the less educated, the racial minorities. Three of every five black workers, or 61 percent, reported inadequate family income, compared with 17 percent for white workers.

Roland Murphy and his wife, the machinist and clerk from Los Angeles, are one of those families in the broad "upper millde" who have stayed even or a little ahead. They bought their house in 1960 for $13,500, and now it's worth $90,000. Taxes keep going up, but so do the wages and assets which the Murphys can borrow agains. They have a secon mortgages plus $4,000 loan from the company credit union. Their collection of antiques keeps getting more valuable, too. When things get tight, he works more overtime; last summer she sold hot dogs at Dodger Stadium ( $27 a night) to pay for the kitchen.

As a member of a premier union, the International Association of Machinists, Murphy starts out way ahead of tradeunion members in the garment business or low-paid service industries like hotels and restaurants.Muphy gets further ahead of them because his union contract is "indexed" against inflation. Edvery three months, he gets an automatic cost-of-living increase on his paychecks.

Cost-of-living escalators now protect nearly 60 percent of the organized workers in major U.S. labor contracts. The weak unions, bargaining in highly competitive industries, can't win them, but strong unions like those in autos, steel, machinist and communications, bargaining in concentrated industries, demand them. To make and extreme comparison, average wages in the apparel industry have increased only 21 percent since 1974, from $6,500 to $8,000. In the auto industaverage wages and salaries incerased 20 percent, from $13,900 to $19,800.

"I've been on one nine-week strike and one five-week strike the last few years," said Murphy, "when the company tired to take the cost-living away from ust. I don't believe in strikes, you understand, but for that I fell I must.".tIn next year's bargaining, the United Auto Workers will be pushing further toward a four-day work week, partly to create more jobs slots for UAW members, but also because many auto jobs slot for UAW members, but alos becuase many auto workers want more leisure time it lieu of more cash. The Uam is already part way ther-its members at the major companies now get 20 paid holiday a year in addition o their vacations.

Thus, there is anatural political tension within organized labor itself. The UAW and other premier unions can take care of themselves, regardless, unless the government fouls up their bargaining position with its guidelines. The "have not" unions tend to favor direct government controls. A controlled economy can't be any worse for their members than runaway infaltion has been.

"I've been pretty fortunae," Roland Murphy said. "I'm a group leader and we are pretty well established. We've made all the big purchases already that we've had to make, and we can afford the improvements. But I don't know how a younger guy starting out could get away with it."

A squeeze on the Young.

Young families do face a special, especially if they have only one paycheck. If they can't save the cash for a down payment on a house or borrow it from relatives, they can't get into big debt and its advantages in inflationary times. Instead of owning a home, they are paying rent, which keeps going up and offers no tax breaks.

A study by the U.S. League of Savings and Loan Associations found that young, first-time buyers stretch their finances in order to become homeowners-40 percent of them bread the old rule of thumb that a family should not spend more than 25 percent of household income on hossing expenses. The American people in general are substantially deeper in hock for their housing now-outstanding mortages are close to 48 percent of aggregate disposal income, compared with 41 percent in 19759

Even so, the children of the Sixties have turned out to be good consumers, Despite the squeeze of inflation, they are buying cars, houses, and other major goods at a younger age than their parentd did. Many young families postpone having children, but they do not postpone buyin.

They have been assisted by liberalized rules for borrowing that their parents did not enjoy. If both husband and wife work, both incomes can now be counted to support a home mortgage. The standard car loan used to run for three years; now it is four years. Consumer credits, excluding home mortgages, is up to nearly 20 percent of disposbale income, but this is not much higher than it was 10 years ago. Savings, conversely, are down to 5.1 percent of disposable income, compared with the flush year of 1973 when people saved 7.8 percent of their incomes.

Dennis J.Jacobe, economist for the savings and loan league, said: "One of the paradoxes is that a young couple will go out and buy a house with $400 or $500 monthly payment. Their parents think that is unbelievable that hey're making that kind of payment. Yet the younger person has adopted a new inflation outlook and sees it differently.

Why shouldn't young people see it differently? If they grew up and became adult consumers during the past 10 years, persistent inflation is the only economic condition they have known. Like everyone else, they act on their own experience, and their experience tells them to buy now and their experience tells them to buy now and get into debt, for tomorrow's dollar will be worth less than today's.

Maybe there is a day of reckoning ahead, a time when the bubble bursts and the "why not" philosophy goes crash. But, meanwhile, Brookings economist Minarik has a cautionary word for politicians who think that slowing the economy is theonly solution:

"That's a bad buy. For most people you're saying that you're going to save them from inflation, which really doesn't hurt that much, by throwing them out of work."