On July 20, Labor Secretary Ray Marshall sent a four-page memo to President Carter outlining suggestions for a new anti-inflation effort - a voluntary wage - price guidelines program similar to that of the Kennedy and Johnson administrations in the early 1960s.
"The proposal may not be ideal," Marshall wrote, "but it is preferable to the other methods that have been suggested for reducing inflation. If these other methods receive serious discussion, then this proposal should . . . "
The memo raised some eye-brows at first, but, to some advisers' surprise, it quickly won Carter's backing. In late July, a subcabinet task force was formed to draft a rough proposal. By early September, the structure was in shape.
Yesterday, Carter made the plan a reality, by formally announcing a guidelines program fashioned essentially as Marshall envisioned. The final structure was worked out by a group under Charles L. Schultze, the president's chief economist.
Marshall's proposal marked a turnabout for the usually liberal labor secretary. But Marshall had come to a hard conclusion: continuing high inflation would bring on a recession that would blunt new social initiatives he was supporting.
The guidelines Marshall proposed were similar to the Kennedy-Johnson standards, but with a new wrinkle: although billed as "voluntary," they would be enforced by government sanctions and economic pressure. Violators would suffer a loss.
The theory was that violations of the new guidelines would be viewed by the government as evidence of a shortage or bottleneck, which the administration would feel compelled to try to relieve. If auto prices soared, the government would buy fewer autos. And so on.
The program that finally emerged was much more elaborate than the one Marshall suggested. Moreover, Marshall had estimated optimistically that the plan might slow inflation to 5.5 per cent in 1979. The goal now is 6 to 6.5 percent.