Fighting Inflation--Mildly
TRUE, THEREÛªS not much that a President can do ÛÓdirectly, at leastÛÓabout inflation. Also true, itÛªs better for a President not to promise big things .that he canÛªt produce. Further true, thereÛªs a lot to be said for restraint in fiddling with the American economy in its present uncertain condition. Mr. Carter accepts all of those truths. ThatÛªs why his various proposals to hold down inflation are not going to change very much, very quickly. Meanwhile, the inflation rate seems to be rising.</br></br>Consumer prices have risen 6 per cent over the past year. But during the winter they were rising at an annual rate of 9 per cent. Some of that acceleration was due to cold weather, but not all of it. Mr. Carter has set himself the target of reversing this trend and getting the rate down to 4 per cent by the end of 1979. How?</br></br>HeÛªs right in excluding mandatory controls. Aside from any questions of policy, the legal authority to impose them has expired. If Mr. Carter tried to get a new law, the first reaction would be a wildfire of anticipatory price increases. All the people who were taken by surprise in 1971 by the Nixon controls are determined not to let it happen again. Politicians sometimes think of the economy as a great machine. But the machine has a memory.</br></br>That memory would even make it perilous for Mr. Carter to try to set wage and price guideposts. The guidepostsÛª maximum increase immediately becomes everybodyÛªs minimum increase. If a President has blessed a certain figure as permissible, who will settle for less? Then a competition begins to see who can bust the limit. President Johnson got two and a half yearsÛª use out of his wage guidepost before it exploded in 1966. The process would run much faster if Mr. Carter tried to repeat it, because the machine remembers what happened the last time.</br></br>ItÛªs wiser to try to change the ways in which certain sensitive parts of the economic machinery work. But this kind of reform is slow, unspectacular and uncertain. For example, Mr. Carter mentioned the administrationÛªs attempt to change airline regulations to make the system less expensive and more efficient. That idea is now moving along, but the road is uphill and it moves in low gear. The question is whether Mr. Carter has enough time to permit himself that strategy alone.