THE IMPRESSION that President Carter intended to deliver, when he spoke to the International Monetary Fund, was one of firm and clear economic policy. But the impression that most of his audience carried away was rather dirrerent. Mr. Carter reiterated, without qualification, the pledges that he gave at the Bonn meeting last July. The United States will hold down its excessively high oil imports, he repeated, and it will being its inflation under control. But his listeners were left with the thought that, 10 weeks after Bonn, the Carter administration still has not worked out a strategy for doing either of those things. Within the administration, the debate goes on. On the international markets, the dollar drifts down a little.
The White House seems not to have come entirely to terms with the rapid swing in opinion that has been accelerating since early in the year. The budget deficit is coming down a great deal faster than anyone would have thought likely last January. Interest rates are goint up. But the administration has not had much to do with either of those developments.
It is chiefly Congress that is pulling down the deficit. As for the interest rates, they do not seem - so far so an outsider can tell - thr result of any calculated policy at all. Instead, they are the consequence of a scramble by borrowers for credit. People are, in effect, bidding against each other for the limited money available for loans. The phenomenon illustrates the circular nature of the present inflation.
After five years of high inflation, a great many people apparently expect it to continue indefinitely. As a result, instead of saving, they are borrowing heavily to buy things - houses, for instance - the value of which, they expect, will keep rising. Meanwhile, they can pay off their debts in depreciating dollars and deduct the interest payments from their income taxes. That kind of massive gambling on inflation is hardly a healthy trend.The question for the Federal Reserve Board is whether to tighten rates quickly and sharply enough to break it, or to continue to follow along behind it. The Fed, like the White House, does not yet seem to have made up its mind. It is correct to say that a great surge of borrowing is, eventually, self-correcting in the manner of a wave cresting as it comes to shore. But there is nothing in economic theory to suggest that the process is necessarily a benign or gentle one.
The White House has answers, up to a point, on both energy and inflation. The compromise gas bill is now creaking and groaning toward - we hope - final passage. The administration is evidently sticking to its plans for wage and price guidelines. But the gas bill is only a beginning toward the kind of action Mr. Carter promised at Bonn. As for voluntary guidelines, they will work only if a very large majority of the country want them to work. Unfortunately, an increasing number of people are beginning to have a vested interest in continuing inflation - the people, for example, who are borrowing money for long terms at high rates, counting on inflation to help them pay it back.
In the absence of other inspiration, it is clear that national economic policy is moving in the direction of the old-fashioned wringer. One roller of the wringer is high interst rates; the other is a very tight federal budget. As the economy gets rolled between them, the inflation is supposed to be wrung out. But like the ringer on the old washing machines, it is exceedingly inefficient. It is slow and produces vast misery, in the form of unemployment and business losses, in relation to its effects in stabilizing prices. It promises low, or perhaps negative, growth rates for the U.S. economy for, conceivably, quite a long time. The U.S. economy sets the pace for the rest of the industrial world, and that's why Mr. Carter's audience at the IMF was not reassured.