A federal judge dealt a severe blow to President Carter's already shaky wage-price guidelines program yesterday in ruling that the president exceeded his constitutional authority by threatening violators with denial or federal contracts.
In response to challenges raised by the AFL-CIO and 24 Republican members of Congress, U.S. District Judge Barrington D. Parker held that Carter has no legal power to invoke economic sanctions in trying to enforce his supposedly voluntary guidelines.
Unless reversed on appeal, the ruling in effect knocks the teeth out of the program by stripping it of its only direct, tangible penalties.
While downplaying the impact of the decision on winning voluntary Carter administration said it will seek Judge Parker's ruling while the appeal is heard.
Beyond that, officials indicated no immediate fallback plans aside from continued "jawboning" and "adverse publicity" against violators. They said one possible option to ask Congress to pass a law legalizing the sanctions, but they reiterated that mandatory wage and price controls have been ruled out"This is an obvious blow to us," said presidential anti-inflation adviser Alfred E. Kahn. "But it does not strike down wage and price guidelines. They are alive and well - I guarantee it." Said presidental press secretary Jody Powell: "it does not invalidate the voluntary guidelines either in fact or in law."In ruling that Carter exceeded his constitutional powers by imposing sanctions without legal authority, Partner took a rare step for a federal judge. Legal scholars could remember no such a clear-cut judical rebuff toa president since the Supreme Court overturned Predident Truman's steel company seizure in 1952, although Presedient Nixon ran afoul of the courts on numerous occasions in disputed with Congress.
"the question of whether the president has exceeded permisssible limits of statutory or constitutional authority isinfrequently presented for judicial determination and is one which the court approaches with great caution," Parker noted.
While acknowledging that inflation is a "vexing and festering domestic problem" and the Carter's efforts may be "well-intentioned and commenable," Parker asserted bluntly in summing up his ruling
"President Carter has exceeded the authority conferred on him by the Constitution by seeking to control incomes and thereby prices through the procurement power. The program established a mandatory system of wage and price controls, unsupported by law. The court, thereforereluctuantly concludes that the president's anti-inflation program cannot be sustained." Arguing for the government, the Justice Department had contented that the sanctions did not make the program a mandatory one, as the AFL-CIO charged. To this, Parker responded: "A mandatory program is distinguished by the fact that failure to comply brings a penalty" and "the threat of . . . loss of government contracts is for some companies the most severe possible sanction the government could impose."
The Justice Department had also argued that presidential power to impose contract sanctions to fight inflation was rooted in the same kind of statutory authority as executive orders aimed at ending racial discrimination by government contractors. Parker held this was not the case.
Congress gave "tacit, positive endorsement of these [antidiscrimination] programs by appropriating funds for them and rejecting efforts to scuttle them, said Parker. "By contrast," he said, "in the area of wage and price control, Congress historically has occupied the field, delegating power to the executive branch very sparingly. Nor is there any evidence of tacit congressional approval of the president's current wage-price control programs. Indeed, the evidence is contrary."
Tracing the history of wage-price controls from World War II through the Nixon controls program, Parker said Congress has always expressly limited the scope and duration of any controls. He noted that Congress specifically rejected a continuation of the Nixon controls in creating the Council on Wage and Price Stability in 1974.
Although the procurement sanction has never been used and only two companies are now immediately threatened with loss of contracts, the penalty has hung over the heads of union and industry bargainers as they negotiated new wage contracts.
"if you have a big enough club behind your back, you don't have to hit anyone with it," said AFL-CIO counsel Laurence Gold in assessing the importance of the sacntion program.
It was cited specifically by the United Rubber Workers, now on strike against Uniroyal inc., as an obstacle to reading a settlement. The International Union of Elextrical Workers, which, like the AFL-CIO suit, has also said it has been a major impediment in bargaining with General Electric and Westinghouse.
Under the procurement sanction which was imposed after Carter proposed his wage and price guidelines last fall, companies that exceed either guideline were to be barred from receceiving government contracts in excess of $5 million. More than $40 billion in federal contracts was involved.
The guidelines call for limiting price increase to one-half a percentage point less than average increases for 1976 and 1977 and restricting wage and benefit increases to 7 percent a year.
The program has been battered by steadily rising prices, union vows of defiance, a Teamster settlement that stretched the wage standard to the breaking point and a three-week URW - Uniroyal strike attributable largely to the guidelines.
Some administration officials have expressed fear that a ruling against the procurement sanction might trigger a chain-reaction of union settlements that would bust the guidelines wide open, starting with the URW and ending with the United Auto Workers this fall.
URW President Peter Bommarito said he was "elated" by the ruling, and a Uniroyal spokesman said the "environment of the talks has been somewhat affected by the decision." URW-Uniroyal talks were suspended shortly after the ruling until Tuesday, amid reports of the first bargaining progress since the strike began May 9.
Said UAW President Douglas A. Fraser: "For practical purposes, the decision served as the final nail in the coffin. The program was dead before the decision was handed down. . . ."
Commenting on Parker's ruling, Council on Wage and Price Stability Director Barry Bosworth said the council will continue to apply the guidelines as before but acknolwedged the program has been "weakened." "The procurement program was important to show that big labor and big business could go along with this program and that they would sacrifice just as much as the average American is," he said.
The AFL-CIO - for which the ruling was major although tentative victory - called on Carter again to abandon his guidelines program. "We urge the administration without delay to develop an anti-inflation program that deals effectively with the real causes of inflation within the constitutional limits Judge Parker has articulated," said federation president George Meany, who has previously proposed that Congress enact across-the-board economic controls.
While characterizing the ruling as "disappointing," anti-inflation adviser Kahn said it "does not mean that the voluntary pay and price standards have failed or will be abandoned." He said "publicity from being identified as a non-complier" remains as an effective tool, and claimed there have been "significant price rollbacks by companies that have disclaimed any interest in obtaining government contracts."