Beefsteak and the Cost of Living
The cost of living figures for February are a severe blow to the administration and its political standing. More broadly, they are a severe blow to the country generally in its struggle with inflation. The upward creep of prices is proving less manageable than most Americans had expected. The increase, seasonally adjusted, was 0.2 per cent in November, the month when the freeze ended on wages and prices. It was 0.4 per cent in December, 0.3 per cent in January, and now we learn that it was 0.5 per cent last month. The explanation that we are experiencing merely a transient ÛÏbulgeÛ following The freeze has worn very thin.</br></br>About three-fourths of the February increase was generated by higher food prices, a particularly sensitive matter for politicians, and more than two-thirds of the increase in food prices was owed to the cost of meat. Mr. Grayson, the chairman of the Price Commission, has called hearings in April to inquire into meat prices. He is likely to discover that one explanation of the mystery lies no farther away than the White House, where President Nixon has been urging his Secretary of Agriculture, Mr. Butz, to keep farm income up while he simultaneously urges Mr. Grayson to keep prices d6wn.</br></br>The Grayson hearings will doubtless also be told what agricultural economists have been saying very clearly, and what Congressman RosenthalÛªs hearings for the Democratic Study Group learned last week. Meat pricing is a classic example of the workings of supply and demand, with no very satisfactory solution in sight. The national system of controls is now moving from the broad, confident generalizations of last fall to the minute, skull-splitting particulars of administration and enforcement. The meat business is a splendid example of the difficulty.</br></br>Americans like red meat, and are eating more of it than ever. Consumption of beef in this country rose from 63 pounds per capita in 1950 to 113 pounds last year. The prices of meat on the hoof are now moving through the upswing of a fairly normal cycle. The causes go back to corn blight and dry weather in the Midwest two summers ago. The supply of grain fell, the price rose, and farmers cut back the number of animals that they, were feeding for the market. But there is also evidence that in the past several months a most unusual thing has happened: the retailers appear to have widened their margins in a time of rising prices. The explanation is that consumer demand is now so strong that the stores can sell their meat even at higher markups. As one economist puts it, people</br></br>Mr. Stein, the chairman of the Council of Economic Advisers, offers the hopeful forecast that ÛÏmarket forcesÛ will pull down meat prices by encouraging fanners to produce more. As usual, there is not much reason to hope that Mr. Stein is right. A relatively small increase in beef Is now in the feed yards, enough to bring down the price several cents a pound this spring. But, at the same time, the supply of pork will decline because the breeding of pigs is seasonal. Any significant increase In the number of hogs on their way to the butcher will require about a full year. Since cattle grow and breed more slowly, it will take several years to increase the supply of beefsteak and roasts more than marginally. It would also take, of course, a sharp change of heart at the Agriculture Department, where Secretary Butz is still advising farmers to hold down supply to hold up prices.