A Bias Toward Inflation ...
THE ADMINISTRATION i9 turning up the volume of its campaign against the Federal Reserve Board. The accusation is that the Federal Reserve is deliberately holding the money supply excessively low and driving up interest rates. The further implication, increasingly audible, is that itÛªs being done as an attack on President Reagan, to interfere with his reelection campaign.</br></br>The charge is false, and the implication is disgraceful. ThereÛªs another explanation for the rise in interest , ratesÛÓless conspiratorial but a good deal more accurate.</br></br>From the beginning there has been a strongly inflationary component in the Reagan economic plan. The administration has never acknowledged it. But the administrationÛªs emphasis on tax cuts and high spendingÛÓfederal spending under Mr. Reagan has reached the highest levels since World War IIÛÓconstitutes a sure formula for fast and grossly inflationary expansion of the economy. The past recession brought the inflation rate down and until recently veiled the consequences of this plan. But with the recovery now in its second year, the symptoms are becoming unmistakable.</br></br>Interest rates are rising because a great borrowing boom has begun. The federal government is borrowing extremely heavily to cover its budget deficits, and now business and consumer borrowing are ac- celerating rapidly as well. The effects on interest are compounded by a rising fear of inflation ahead.</br></br>The administration says that it wants the Federal Reserve to supply only enough money to the banking system to permit ÛÏnon-inflationary growthÛ of the economy. But how much growth is that? In the first three months of this year, file growth rate was 8.3 percent a year. True non-inflationary growth is less than half that rate. But the secretary of file Treasury, Donald Regan, launched an unusually explicit attack on the Federal Reserve yesterday with the assertion that no signs of rising inflation are visible.