Economic Advisers Pessimistic Oil Halting Wage-Price Spiral
THE ANNUAL REPORT of the Council of Economic Advisers contains a reasonably good discussion of inflation in a chapter entitled "The Problem of Rising Prices.Û It begins by calling the continuation of creeping inflation the "most disturbingÛ economic news in 1967.</br></br>The chapter ends by describing the proposed activities of a newly established Cabinet Committee on Price Stability. However, it is observed that the new committee, ÛÏwill not become involved in specific current wage and price matters.Û</br></br>The Annual Report appears to be pessimistic about the prospects for checking the wage-price spiral. ".If new union settlements were to average even higher in 1968 than in 1967, a clear acceleration of price increases would be likely in 1968.	Such an acceleration in 1968ÛÓor even a continuation of the 1967 rate of price increasesÛÓwould have a major impact on the prospects for prices in 1969 and even 1970. It would push the ultimate restoration of reasonable stability further into the future. And as the momentum of the spiral became built into attitudes, expectations and practices of business, labor and consumers, the restoration of stability would not merely be pushed further into the future but would become progressively more difficult to achieve.Û</br></br>TAKEN LITERALLY, this is hardly a reassuring prospect. Yet, aside from the usual exhortations for restraint and sacrifices on the part of business and labor, the CEA has little to say In a positive way about how to check the wage-price spiral, except to urge "other policiesÛÛÓthat Is, policies other than by creating a wide margin of underutilization of resources and other than imposing mandatory controls on wages and prices.</br></br>The Annual Report sets forth statistical data on wages and prices that amply document the fact that the wage-price spiral is already serious and is continuing to gain momentum. In 1967, average hourly compensation in the private non-farm sector in the economy climbed