The Carter administration is facing a new political testing-time in its debate over the economy, with the key question how to avoid panicking in the face of continuing bad news.
Yesterday's report that consumer prices rose another 1.2 percent in February was the latest in a series of discouraging economic reports that can only heighten the pressure for some dramatic new action.
Yet, in reality Carter actually has very few options left, either to defuse the overheated economy or to still the public clamor.
There's some apprehension -- among some of Carter's own advisers as well as analysts outside the government -- that the White House will panic and adopt a new set of policies that ultimately may make matters worse.
Barry P. Bosworth, director of the Council on Wage and Price Stability, noted pointedly the other day that "history is full of instances in which the government has overreacted. We want to avoid that."
The administration's latest scurrying stems from public reaction to two key economic statistics reported this week -- yesterday's inflation statistics and figures Tuesday on corporate profits.
The profits report showed company earnings rose by 9.7 percent in the final three months of last year, capping a 26.4 percent jump from the same period in 1977. That was the steepest rise in 29 years.
Although both statistics sparked an uproar around the nation, the concern over each is on a different level. The inflation figures mainly reflect an economic dilemma: Prices are soaring and no one knows when they'll slow.
The flap over profits is primarily political. The figures came just as the White House was trying to prod labor into holding to the 7 percent wage increase guideline. With profits surging, that notion is more difficult to sell.
The administration's initial reaction was to skirt all sides of every issue. On Tuesday, chief Carter political aide Hamilton Jordan denounced the profits figures as "unnecessarily high," and vowed new action to hold them down.
Since then, however, key administration officials have been backing and filling. Anti-inflation adviser Alfred E. Kahn took a middle ground -- at least, if all his remarks are averaged. Other top advisers pooh-poohed the Jordan remark.
But policymakers also have plunged into still another full-scale review of the economic program, to decide if any changes are needed. Carter met with Cabinet-level officials on Monday. Staffers have been locked in meetings all week.
Most of the debate involves relatively minor options. Some aides have suggested lifting quotas on imported beef. Others want a showy "crackdown" on a big corporation. Some want Carter to wield the anti-inflation cudgel himself.
But perhaps the most serious proposal is one by Treasury Secretary W. Michael Blumenthal that the administration consider tightening fiscal policy further, by trimming its new fiscal 1980 budget proposals.
Blumenthal also wants the administration to prod the independent Federal Reserve Board into tightening its money and credit policies further -- principally by raising interest rates, but also by slowing money-supply growth.
The rationale is two faceted: First, the secretary is said to agree with some outside analysts that the economy is overheating and shows no signs yet of slowing down enough to ease inflationary pressures.
Second, the price surge appears to be continuing with no real indication yet that it is about to abate. Blumenthal fears that unless some actions is taken soon, the guidelines wikl burst at the seams and inflation will get out of hand.
However, a second group in top policymaking circles is urging a more cautious policy -- to ride out the current political storm at least long enough to see what lies on the other side.
These analysts argue thers now are some initial signs that the overheating may be dampening somewhat, and that the economy is headed for a slowdown. Their prescription is to sit tight until April or May.
In truth, no one really knows whether Blumenthal's proposal would prove right for the economy. In the first place,. most analysts believe the statistics still are too clouded. Policymakers won't have a clear reading until May.
Second, even if the administration tightened its policies now, the impact wouldn't show up in the economy for several more months. By then, the economy could be in a recession. A cutback then would not be wanted.
To a degree, the situation is reminiscent of the one that confronted the Nixon administration in mid-1971 when it, too, was beset by mounting economic difficulties that sparked a scuffle for new policies.
The problems then may sound familiar to today's policymakers: The dollar was in trouble abroad. A new round of inflation threatened to wreak havoc in the next election. And the Teamsters had just won an outsized wage boost.
Panicked by the spate of bad statistics, the White House searched frantically for a new policy, and by August Nixon had a decision: He imposed the first peacetime wage-price controls in the nation's history.
There seems little immediate threat of mandatory controls in this year's economic picture.For one thing, there's no legislation on the books to authorize such a move, even if Carter wanted it.
And the circumstances are different: In 1971, inflation was continuing even though the economy had just come out of a recession. Today, it's a more classic case of simple overheating.