THE FARMERS ARGUE that they, like everyone else, are entitled to their annual raise. Since the president's guidelines suggest that a wage increase of 7 percent is permissible, what about farmers' wages? Responding to that logic, the House Agriculture Committee voted to raise the target prices of wheat and corn by 7 percent.
The committee can defend itself by pointing out that of all the ways to increase farmers' incomes, raising target prices has the least effect on the cost of groceries. The target price is the base for the direct subsidies that the federal government pays to farmers.Most farmers dislike these payments on principle, deriding them as welfare. The farmers would greatly prefer to have the government intervene directly to raise market prices, but that's horrendously inflationary. The Agriculture Committee's choice of direct subsidies is, in a manner of speaking, a compromise. the cost is carried, not by the consumer at the grocery store, but by the taxpayer through the federal budget. It would add $400 million to the deficit.
It's not very likely that the committee's bill will ever be enacted, since a wider budget deficit would also be inflationary. But the farmers' demands for fair treatments, and the committee's struggles to meet them, illustrate the way in which inflation is being perpetuated in this country-and, for that matter, in most of the other industrial democracies. The same process can be seen at work in the negotiations over the next Teamsters contract, in which the union is looking for a raise on top of all the various inflation adjustments.
After six years' experience with high inflation rates, just about every American considers it a matter of simple justice that he sould be compensated, routinely and promptly, for inflation. If prices rise 7 percent, not only the farmers but almost everyone considers it only reasonable that his income should go up by 7 percent. Most Americans are pretty well equipped to enforce that claim. Some of them do it through bargaining, like the Teamsters, and some work through the political system, like the farmers. But hardly anyone stops to ask how the inflation will end if no one ever absorbs high costs.
When OPEC raises the price of oil-as it did last month, by a huge amount-that is a cost to the country as a whole. Everybody pays it, and everybody's getting very good at passing the burden on to someone else. It keeps being passed around and around, and that's why inflation has become remarkably persistent and endemic.
Should farm and truck drivers be required to do without cost-of-living raises, to break the circle and end the inflation? Hardly. They do valuable work, and the country needs them. Ideally, everyone ought to agree to accept raises equally pegged below the inflation rate, to spread the burden equitably over the whole population. But so far people haven't been terribly receptive to anything so pure and altruistic. On the contrary, they have retreated separately into their own unions, companies, lobbies, trade associations and caucuses to sharpen their own capacities for self-protection. You can read the result in the monthly price statistics.