The AFL-CIO spurned President Carter's voluntary anti-inflation program as unfair to workers yesterday and called for a special session of Congress to enact binding controls on all sectors of the economy.
The rebuff by the AFL-CIO's Executive Council was the gravest single blow thus far to the president's week-old program of wage and price guidelines, which has drawn lukewarm support from business and other union groups and an almost daily vote of no confidence from the stock and money markets.
In other economic news yesterday, almost all of it bad:
The Department of Agriculture reported that farm prices jumped a full percentage point last month, and are now 23 percent higher than a year ago.
The stock market continued its prolonged slide; the Dow Jones industrial average was down 19.40 points when trading closed on the New York Stock Exchange. The Dow average has dropped more than 100 points in the last 2 1/2 weeks.
Chase Manhattan Bank raised its prime interest rate from 10 1/4 percent to 10 1/2 percent amid signs that the Federal Reserve Board has taken further steps to tighten credit in an effort to combat inflation. Market analysts pointed to signs the Fed has raised the important federal funds rate from 9 3/8 percent to 9 1/2 percent.
The dollar, in the closest thing to good news for the day, showed some signs of stabilizing on European money markets. In Tokyo, however, the dollar continued its plunge. At the close of yesterday's trading the dollar was worth 176 yen.
Cooperation from the 14-million-member labor federation had been viewed by administration officials as critical to the success of the new anti-inflation program. But about all they could take cheer from yesterday was AFL-CIO President George Meany's assertion that he was not advocating defiance of the guidelines by individual unions in their contract bargaining.
Alfred Kahn, the administration's chief inflation fighter, said he believes most unions will comply but acknowledged he was disappointed by the AFL-CIO's response. Barry Bosworth, director of the Council on Wage and Price Stability, conceded the program was "off to a bit of a rocky start."
Labor Secretary Ray Marshall accused the AFL-CIO of failing to give the program a "fair test" and said he expects "increasing cooperation as we demonstrate that the president's program will work in a fair and equitable way."
Meanwhile, there appeared to be some discrepancy within the administration over when the guidelines might result in a tapering off of inflation. Kahn said yesterday it could take more than a year. Marshall said last week the results might be visible in six to eight months.
The AFL-CIO's official response came after a 2 1/2-hour meeting of its 35-member Executive Council representing most of the federation's major unions. Meany said it was unanimously endorsed, although at least one leading union president, Glenn Watts of the Communications Workers, said he dissents from the implied criticism of Carter himself.
In its statement, the council said it does not like controls but considers them preferable to guidelines, which it described as "unfair and inequitable" because they would hold down wages but not necessarily prices.
Carter's program - his third since taking office - calls for a 7 percent ceiling on wage increases next year along with a more flexible formula for restraining prices, with limited government sanctions for non-compliance and tax rebate for workers who abide by the wage standard.
It is aimed at reducing the underlying inflation rate from roughly 7.5 percent to 6.5 percent or less over the next year.
As an alternative, the AFL-CIO council advocated prompt congressional enactment of "full economic controls covering every source of income - profits, dividends, rents, interest rates, executive compensation, professional fees, as well as wages and prices."
It called on Carter to call a special session of Congress to enact the controls. Meany said the AFL-CIO will push for controls in Congress next year if Carter rejects the special session idea - which he is considered likely to do.
Controls, which Carter has said he would seek only in a national emergency, were last imposed by President Nixon, who withdrew them two years later.
"In spite of all its shortcomings, the 1971 Nixon control program dealt more fairly with wage and fringe benefit adjustments," the council asserted in one of several asides that compared Carter's approach unfavourably with Nixon's..
Although the tax rebate or "real wage insurance" idea was aimed in part at picking up labor support, the council said it "poses huge and complicated administrative questions and there is no guarnatee of congressional enactment." Meany said he is always leery of a carrot-and-stick approach, saying it is usually "used on a beast of burden . . . and I've never heard a horse say it approved of the idea."
The council said it was rejecting the president's program "with reluctance," and said it subscribes to Carter's conclusion that it is a problem requiring prompt action. But in its formal statement and a more detailed "background paper," the council found virtually nothing good to say about the program, including the planned deficit reductions, curbs on costly government regulations and the "low-wage" exemption for workers earning less than $4 an hour (which it said was too low).
"While the program demonstrates the president's desire to address the problem of inflation, the plan his advisers have devised is unfair and inequitable and the end result of their ill-considered proposals could well be another recessions, with mass unemployment . . .," the council said.
The council went on to say that controls are probably inevitable anyway and added: "Since we believe the administration is already headed in the direction of overall controls in piece-meal and ill-designed stages, America might as well do it right and do it now."
Meany tried to push this idea, to no avail, in earlier deliberations with the administration. No other major union group has embraced it. In earlier reponses, the Teamsters and United Auto Workers, big independent unions with major contract negotiations next year, gave President Carter's program qualified support.
The administration had long since abandoned any hope of a warm embrace from the AFL-CIO but hoped its delay in commenting, coupled with the semi-encouraging responses from the Teamsters and UAW, might signal a less damaging rebuff.
Labor Secretary Marshall, meeting with reporters to respond to the AFL-CIO action, said it was too early to tell how serious the rejection is."We have to wait and see how much cooperation we get throughout the country," he said, adding that individual unions have offered cooperations and the administration intends to work closely with them.
"We will not hesitate to use our full authority to encourage compliance with these guidelines," Marshall said.
He reiterated the administration's aversion to controls, saying they "will not be imposed" because they disrupt the economy along with "virtually destroying collective bargaining." Kahn also said Carter would reject the call for a special session. "I am as certain as I can be that he is not going to convene Congress now and ask for a mandatory program," he said.
Meanwhile, the administration released details of its guidelines program specifying that agricultural prices, industrial raw materials prices and interest rates are exempt. The detailed guidelines also confirm union fears that cost increases to maintain existing fringe benefits, such as pensions and health insurance, will count against the 7 percent wage and benefit ceiling. (Details on Page F1).
Bosworth, the Council on Wage and Price Stability director, told reporters that the council will spend 80 percent of its time monitoring prices rather than wages. He said the 400 firms with annual sales of $500 million or more would get the closest attention and added that periodic lists of price guideline violators would be made public.
Bosworth also said a $1.7 billion rate increase that the rail industry is expected to request from the Interstate Commerce Commission appears to exceed the guidelines, meaning the case could be the first test of the new policy at the regulatory level.
Bosworth said interest rates have about hit their limit and may invite withdrawals from savings and loan association if they go any higher - implying risk of a recession.
As for the Wall Street decline, he said: "It is almost like they're not satisfied unless you get a Great Depression."
Meanwhile Carter named Douglas Costle, head of the Environmental Protection Agency, as chief of a new council that will monitor the economic impact of government regulations.
The council will be composed of representatives of all departments and agencies that normally issue regulations, and independent commissions will be invited to participate.
One of the council's chief duties will be to issue a calendar of upcoming regulations twice a year. "The council will help ensure that regulations are well coordinated, do not conflict, and do not impose excess burdens on particular sectors of the economy," Carter said.