September 25, 1973
Page 31275
A CRISIS OF CONSUMER ECONOMICS: FAILURE OF THE NIXON ADMINISTRATION
Mr. MUSKIE. Mr. President, the statistics released last week on the current state of our economy confirm that our Nation continues to face a consumer economic crisis. The final price figures for the month of August show an inflation rate without recent historical precedent: consumer prices up that month 1.8 percent, wholesale prices up 5.8 percent, retail food prices up 6 percent, and wholesale food prices up 17.6 percent.
And these 1-month figures are merely the peak of a recent trend. Based on figures for the last 6 months, the annual inflation rate for all consumer prices is 10 percent; for all wholesale prices, the annual inflation rate is almost 25 percent. And annual inflation rates for food prices are phenomenal: 28 percent at the retail level, and 59 percent at the wholesale level.
I share the hope of most Americans that we will emerge from this economic crisis quickly. But this administration's record of handling the economy gives no reason for confidence in their performance.
On economic matters, the President has been acting like a whirling dervish. He had no economic philosophy when he began and he has got none now. The continued abandonment of old positions and the enthusiastic embrace of new positions by the President has created some of the uncertainties that have led to many of our economic difficulties.
Because recent price increases have been so dramatic, we forget that inflation has not just been a phenomenon of recent months, but has clouded the entire record of this administration.
Since the beginning of Mr. Nixon's first term, the cost of living has gone up twice as fast as in the same period before his administration.
Food prices, of course, have gone up over one-third since Nixon's first inaugural.
Some individual items have gone much higher: the average price of hamburger across the Nation was 58.4 cents per pound in January 1969, but increased 60 percent with Nixon in office, to 93.7 cents per pound in July; a few weeks ago, in my home State of Maine, it was selling for $1.29 per pound, over twice the pre-Nixon price.
Chicken is up 54 percent in the Nixon era, 36 percent since his second inaugural – from 39 cents a pound in January 1969, to 44 cents a pound in January 1973, to 60 cents a pound in July – and 79 cents to Maine consumers last week.
Meat is not the only food item to skyrocket. While Nixon has been handling the economy, fruits and vegetables went up 42 percent. Onions are up 80 percent, cabbage up 30 percent, and potatoes up 145 percent.
And rampant cost increases extend beyond the supermarket:
If you go to the hospital, you will find operating room charges up 48 percent.
If you try to buy a house, you may be asked to pay interest on your mortgage of over 9 percent – if you can get a mortgage.
If you try to relax with a round of golf, you will find greens fees up almost one-third.
And if you begin to worry about your future and ask a lawyer to write your will, you will find his fee has increased over 50 percent.
All of these price increases came under the economic leadership of President Nixon.
The burden of this Nixon inflation has fallen squarely on the backs of American working people.
Average weekly earnings have increased only about 5 percent in real purchasing power since President Nixon took office, less than one-fourth as fast as inflation.
And since Nixon was inaugurated for his second term, the real purchasing power of the average worker's weekly earnings has actually declined by almost 2 percent.
But while the individual worker's purchasing power has declined, corporate profits have jumped: they were up 23 percent in the first 6 months of the second Nixon term.
In view of this history of failure, the academic rules of phase IV are probably as good as the administration can put together. Whether these rules will succeed will depend on how they are administered. Price controls and economic restraints work only to the extent that the people perceive that they are firm and evenhanded. We will have to wait and see the results.
But a special problem is posed by high food prices.
Our country has suddenly moved from a society of abundance to one of scarcities. We are not accustomed to that.
The problem now is how do we produce enough to meet not only our domestic needs, but also the needs of those overseas who have come to rely on our agricultural abundance.
Some statistics on food supply and demand illustrate the problem. Food production has increased steadily in the United States, about 4 percent per year since 1968. But because of the dollar devaluation, and the increased world demand for food, our agricultural exports have climbed much more rapidly. The total value of our food exports have almost doubled in the past year, while food production increased only 3 percent.
One year ago we were importing more food than we were exporting, as we have in every year since 1967. But beginning last October we began to experience a tremendous net export drain of food.
So even though production has increased, food exports have taken a bigger and bigger chunk out of domestic food supply. For instance, in the case of wheat, we exported an amount equal to 77 percent of our crop in the past crop year, compared with only 39 percent in the previous year. But our production of wheat in that period increased only about 5 percent. We used our wheat reserves to meet the export demand, but, clearly, continued large exports will affect domestic supply. And the impact of such large foreign purchases is felt by the American family – in the form of higher prices and scanty supplies.
I have consistently supported the philosophy of free trade as an ideal to guide us in our commercial relations with other nations. But it would be foolish to adhere stoically to this ideal in the world food market, at the cost of outrageous domestic food prices, while we cannot reap its benefits in other areas of commerce. We should instead take the responsible position of allocating our food exports, insuring both sufficient domestic supply and respect for our historical trade partners. And allocation should be planned with enough flexibility and advance notice to avoid the disruptive effects of precipitous action.
The President has export allocation authority now, but he has refused to use it effectively – just as he repeatedly refused to recognize until too late the need for firm wage and price controls. It may be necessary for Congress to force the President's hand on the issue of export allocation.
But in addition to planning allocation of our exports we must plan ahead to insure adequate food production. The agricultural policy of the Government in the past has been geared to a domestic market of chronic food surpluses. National agricultural policy was directed to keeping those surpluses down – by limiting production – to insure food price levels adequate to support the farmer. But now that we have experienced a shift in the balance of food demand and supply, we must begin thinking in terms of maximizing the production of food, so that we will have enough food to meet our domestic needs, and our foreign trade commitments.
So far, we have seen no signs that the Nixon administration is making comprehensive plans to meet the long-term problems of food supply and food prices – or that they are effectively
meeting the immediate problems of inflation.