A fresh start or a false start? That is the question that has to be asked about the administration's latest move to cope with inflation. For apart from the presence of Prof. John Dunlop, virtually everything about the new arrangements for wage and price restraint smells of trouble.
To be sure, some kind of change in the voluntary wage-price guidelines was necessary at this time. The first year of the program, which ended yesterday, was not exactly an unmitigated success.
During that period prices were supposed to rise by under 7 percent. They went up by more than 13 percent.
Wage increases were not much above the guideline figure of 7.5 percent. But organized labor fought the program to the point of contesting its legality in the courts.
The most recent big labor bargain -- the General Motors settlement of last month -- was negotiated as if the guidelines didn't exist. It provides for an increase of 34 percent over the next three years.
Round 2 of the program, announced at the White House last week, features the return of the unions to the fold. The announcement was made by Lane Kirkland, the secretary-treasurer of the AFL-CIO and heir apparent to president George Meany. In making the announcement, Kirkland spoke of a "national accord" in the interest of fighting inflation.
The structure of the "national accord" is not particularly novel. There will be a 15-member wage board made up of representatives of labor, business and the public. There will be a five-member advisory price commission, composed entirely of public members. The Council on Wage and Price Stability (CWPS) will continue to monitor wages and prices with Alfred Kahn as its chairman.
Dunlop, the former secretary of labor in the Ford administration, will be the head of the new wage board. He is so experienced in labor-management negotiations, so ingenious in avoiding confrontation and so secretive in his ways that no one can safely write off any venture with which he is associated. If anybody can pull the sword from the stone, he is the man.
Still, many signs suggest that the administration has paid a very high price for winning labor's participation in the guideline program. For one thing, the use of a particular number as the guide to what is permissible or not permissible in the way of wage increases will be dropped. Instead, the standard will be whatever emerges from negotiations between Dunlop and the union leaders.
Additionally, there is the government's use of its procurement powers as a sanction against companies not complying with the guidelines. Labor fought that sanction in the courts and, while the case is still pending, the indications are that the government will now give way on the issue.
Finally, the administration has undoubtedly agreed to take a more helpful stance on various bits of legislation sought by labor and not exactly anti-inflationary in impact. One is a bill to expand benefits for workers hurt by foreign competition. Another would provide more generous terms for triggering unemployment insurance.
The administration's tilt toward labor has put off business. For example, Thomas Murphy of General Motors, the present chairman of the Business Roundtable, was an enthusiastic supporter of the guidelines program in its first round. He has taken a very cool position on the second round and refused to participate actively in the program.
The resulting problem is not that there will be a sudden upsurge in wages. The onset of a recession and rising unemployment will prevent that.
The difficulty is that the government is already near the edge of its capacity to contain inflation. Money rates are at record highs and cannot easily go much higher without very bad consequences for the recession. Unemployment puts new pressure on the federal budget, which is already being strained by demands for more defense spending.
In this stretched-out condition, any easing up in the pressure on uages and prices can prove very costly. So even with due regard for Dunlop's extraordinary talents, it appears that the administration made the kind of bargain a weak president seeking reelection always has to make. Labor support may pay off for the president in the political contests coming up in the next few weeks. But the country will have to foot the bill in inflation for a long time to come.