Jimmy Carter has recieved the first year's report card on his wage-and-price guidelines; he got an "A" for effort, but flunked the course.
We've had access to the report card, which was presented to Carter in the form of a confidential memo, dated Oct. 23, from his wage-and-price chief, Alfred Kahn. Kahn reports on the 12-month operation of the voluntary guidelines. He tries delicately not to award Carter a dunce cap, but there's no disguising the low grades. The economy is faltering; inflation is rocketing; a recession almost surely lies ahead.
The administration set guidelines that were intended to keep wages and prices from rising above 7 percent. Instead, inflation is soaring at an annual rate of 13 percent.
The Kahn report blames the high costs of energy, food and homes. Without these increases, the report suggests, prices would merely have gone up 7.5 percent, an undramatic one percentage point more than in the previous year.
But if Carter has failed to hold down prices, he has been more successful at restraining wages. This has caught America's working families in a cost-of-living squeeze. And every dollar they lose in purchasing power could be a vote he'll lose in the 1980 primaries.
In 1978, hourly wages plus fringe benefits increased about 8.3 percent. During the 12 months of the Carter guidelines, they averaged only 7.9 percent. Contracts covering 1.5 million workers were in compliance with guideline ceilings in the first year of Kahn's controls, as compared with only 200,000 who benefited more than the govenment advocated. One administration source told my associate Tony Capaccio that "labor took it in the neck last year."
This slight success, Kahn has said, is "nothing to write home about." Administration sources and other economists have told us that if labor pushes for higher wages next year to make up the lost ground caused by gasoline, heating oil and food price increases, this could cause double-digit inflation to last well into the 1980s.
The average factory worker trying to make ends meet saw energy costs shoot up 48 percent, and he's blaming the gouge as much, if not more, on U.S. refineries as on the Arab oil potentates.
Here's how Big Oil marked up its refinery margins in this country: 10 percent higher between January and March; 15 percent between March and June; 37 percent in the three months ending in September. That amounts to a 100 percent margin markup in the first nine months of 1979.
According to internal White House estimates, only 35 percent of the cost of gasoline and other petroleum products can be attributed to OPEC price hikes. Kahn told Congress that "so far as we can tell at this time, we cannot reconcile the assertion by the major oil refiners that they are complying with our voluntary price standards."
Kahn and Carter will try to persuade workers in the oil, chemical and atomic industries to keep faith with guidelines early in 1980. Later in the year will come major contract negotiations with communication, construction and aluminum industries.
Carter advisers are cautious about his chances of keeping the lid on wage settlements. A few early defeats at the hands of Sen. Edward Kennedy may render him a White House lame duck. So by next April or May, Carter's rhetorical war of words on inflation may be reduced to futile quacking.
Meanwhile, for the average American consumer, the prospect is almost equally bleak. The year 1980 is shaping up as a time for joblessness, belt-tightening and economic distress.
The predicted Carter recession has yet to hit home with full impact, and administration sources have confided that they are surprised at just how strong the economy has been.
Eonomists say that in recent months the buying public has been overspending on many goods for fear that inflation will continue to soar. The average shopper has developed a panicky buy-it-now-before-the-prices-go-up psychology.
But the administration is worried that, if the wage guidelines are ignored next year, businesses will jack up prices to keep up with the wage increases. This could replace excessive consumer spending as the main inflation bugaboo.
Then Carter's next report card will be even worse.