April 11, 1974
Page 10865
By Mr. MUSKIE (for himself, Mr. MANSFIELD, Mr. ROBERT C. BYRD, Mr. CANNON, Mr. STEVENSON, Mr. JOHNSTON, Mr. HATHAWAY, Mr. JAVITS, Mr. MONDALE, Mr. BIDEN, Mr. HASKELL, Mr. HUDDLESTON, Mr. HART, Mr. HUMPHREY, Mr. SYMINGTON, and Mr. STAFFORD)
S. 3352. A bill to provide for continued monitoring of the economy, and for other purposes. Referred to the Committee on Banking, Housing and Urban Affairs.
THE COST OF LIVING ACT OF 1974
Mr. MUSKIE. Mr. President, I introduce today the Cost of Living Act of 1974, cosponsored by Senators MANSFIELD, ROBERT C. BYRD, JOHNSTON, HATHAWAY, JAVITS, MONDALE, BIDEN, HASKELL, HUDDLESTON, STEVENSON, HART, HUMPHREY, SYMINGTON, and STAFFORD.
This bill would provide a structure in the executive branch to monitor inflation and other critical problems in the economy. It does not extend the Economic Stabilization Act. And it allows no continuation, imposition, or reimposition of controls, except on petroleum prices under the authority of the Emergency Petroleum Allocation Act of 1973.
But it would provide a mechanism for identifying and bringing Government attention to bear on the critical problems of inflation and shortages which the Nation faces.
Our experience with mandatory controls since the abandonment of phase II has not worked. The dislocations which have developed under the administration's helter-skelter imposition of phases and freezes since 1971 have created an apparently irresistible momentum toward decontrol of the economy. Even where some control authority might still be justified, the record of the past 3 years has made the word "control" anathema to labor, business, and many consumers. And the Congress has demonstrated that it is in no mood to continue the President's authority to control wages and prices after April 30, when the Economic Stabilization Act expires.
But even though the Economic Stabilization Act will expire, the threat of inflation will not. The Consumer Price Index in February rose 10.1 percent over its level 1 year before and 15.6 percent over the previous month on an annual basis. The Wholesale Price Index rose 1.3 percent between March and February, 15.6 percent on an annual basis. It is now 19 percent higher than 1 year ago.
This Nation faces the specter of double digit inflation – an inflation that could cripple the stability of employment, investment, production, and income. Such serious dislocations are already a numbing reality in a number of European countries.
We do not know what the current year will bring. The soothing words of the administration, that inflation will taper off later this year, are comfortable predictions. But the administration's projections have been wrong before. And we cannot take the chance that they will be wrong again.
For the post-Economic Stabilization Act picture of the American economy is a highly problematic one. Today, a large portion of the economy still remains under controls – 24 percent of the Consumer Price Index, 37 percent of the Wholesale Price Index, and 27 percent of the labor force. But controls will end on April 30, when the Economic Stabilization Act expires. We saw at the end of phase II how inflation could bulge when controls were lifted – price rises were at an annual rate of 3.6 percent until phase III let prices take off so fast that a freeze was required. A similar escalation of inflation, from our current already high levels, could be a much greater disaster.
With the possibility of such drastically aggravated inflation, we have a responsibility to take some action. I believe we have a responsibility to enact standby control authority. But in view of the votes already taken by the Banking Committees of both Houses of Congress, that appears to be a dim possibility. The Cost of Living Act, which I am introducing today, would, I believe, avoid the objections of those who oppose control authority of any sort. It is the least we can do to satisfy our responsibilities to meet inflationary dangers.
The Cost of Living Act would direct the President to monitor the economy generally, with particular attention to the problems which make for inflation, shortages, and economic dislocations. It would allow him to establish an agency to carry out the functions of the act, similar to the existing Cost of Living Council. This agency would collect data on the economy, identify potential shortages, and assess the impact of Government and private policies and decisions on the economic health of the Nation. And it would require the President to present to Congress reports of its work every 3 months.
The mechanism established by this bill would provide an economic "early warning system," to alert us to special inflationary and shortage problems.
The energy crisis provides a perfect example of the necessity for such an information system. Many people in and out of Government foresaw the development of fuel shortages years ago. But since there was no central, independent agency monitoring the development of the shortage, and because of the suddenness of the Arab oil embargo, it appeared to spring from nowhere. This in turn led to the spectacle of the Government scurrying in every direction at once, searching not only for information, explanations and policies, but for scapegoats as well. That is not a course we can afford to repeat. And the mechanism of the Cost of Living Act would give us some hope to avoid a repetition in some future economic problem area.
In addition, the agency established by the act would provide us with insight into the long-run problems of inflation and shortages in America. The inflationary trend of the past few years is too serious to ignore. There are no proposals which promise to cure it instantly or entirely.
But the absence of a cure does not preclude the need for diagnosis. Continued study could give us important understanding of how to fashion our long-run economic policy.
When the Economic Stabilization Act expires on April 30, no other agency in the Federal Government will perform these functions. The Council of Economic Advisers, for instance, has a staff of 46 permanent positions. The Cost of Living Council, which has until now been charged with monitoring the economy and administering controls, has a total staff under its jurisdiction of about 900 persons. While far fewer would be needed to perform the monitoring functions under the Cost of Living Act, a separate, competently staffed office would be needed.
Finally, Mr. President, the psychology of the American economy could only be helped if a monitoring agency kept track of inflation. No one will ask for higher wages, or higher prices, merely because it exists. But its activities could help promote a responsible attitude toward inflation on the part of business, labor, and the public at large.
Mr. President, the Cost of Living Act I introduce today is a simple and straightforward proposal to give our economic problems the attention they deserve. Responsibility requires that we take this minimum step to guard against the economic dangers which face us.
Mr. President, I ask unanimous consent that a fact sheet on the Cost of Living Act, a section-by- section analysis, and the text of the bill be printed in the RECORD.
There being no objection, the material and bill were ordered to be printed in the RECORD, as follows:
COST OF LIVING ACT OF 1974 FACT SHEET
Provides for the President to monitor inflation through COLC-type structure.
Controls
Allows no continuation, imposition or reimposition of controls. Does not affect control authority on petroleum under Emergency Petroleum Allocation Act of 1973. [See 3(b) and Sec. 12]
Basic Authority and Direction to President Monitor economy [Sec. 3 generally, especially Sec. 3(a) (6) ]
Discretion to require reports and record keeping from private sector [Sec. 4(a) ]
Discretion to hold public hearings [Sec. 3(a)(4)]
Other Authority and Direction to President
Review and recommend changes in programs and activities of federal government and private sector [Sec. 3(a) (1) ]
Review and work with industry and government to encourage price restraint [Sec. 3(a)(2)]
Improve wage and price data bases [Sec. 3(a)(3)]
Focus attention on need for increased productivity [Sec. 3(a) (5) ]
Review and make recommendations on economic concentration and anti-competitive practices [Sec. 3(a) (7) ]
Administrative and Other Provisions [similar to existing Economic Stabilization Act]
Delegation of functions by President [Sec. 5 ]
Subpoena power [Sec. 6]
Personnel: employment, appointment and detail [Sec. 7]
Employment of experts and consultants [Sec. 8 ]
Reports by President quarterly and in annual Economic Report [Sec. 9]
Funding authorized "as may be necessary" [Sec. 10]
Severability [Sec. 14]
Expiration April 30, 1975 [Sec. 11]
Effective Date
May 1, 1974, or upon enactment if later [Sec. 13]
Name
As in the Economic Stabilization Act, no name is given to the monitoring agency.
SECTION-BY-SECTION ANALYSIS OF THE COST OF LIVING ACT of 1974
[Sec. 1] Short Title: Cost of Living Act of 1974
Sec. 2. Findings and Purposes. – States that inflation poses a danger to the nation, that the federal government must have continuing concern with inflation and other economic factors, that the Executive should monitor the economy, and that the President is in a position to implement the Act.
Sec. 3. Presidential Authority. – This section gives the President authority to review and recommend changes in the programs and activities of the federal government and the private sector; review industrial capacity, demand and supply, and work with government agencies and industrial groups to encourage price restraint; improve wage and price data bases; conduct public hearings; focus attention on needed increased productivity; monitor the economy; and review economic concentration and anti-competitive practices. This section specifies that this Act does not provide mandatory economic control authority, except with regard to petroleum under the Emergency Petroleum Allocation Act of 1973.
Sec. 4. Acquisition of Economic Information.– This section grants the President authority to obtain information and require reports and record keeping.
Sec. 5. Delegation.– This section authorizes the President to delegate functions under the Act to officers, departments, and agencies of the federal government.
Sec. 6. Subpoena Power.– This section gives subpoena power to the head of an agency exercising authority under the Act, with enforcement by United States District Courts.
Sec. 7. Personnel.– This section gives authority for the employment, detail and appointment of employees to carry out the Act, including the appointment of an officer at Level II of the Executive Schedule with the advice and consent of the Senate. The section also gives authority for appointment of advisory committees.
Sec. 8. Experts and Consultants. – This section gives authority for the employment and compensation of experts and consultants.
Sec. 9. Reports.– This section requires that the President report on and assess actions taken under this Act in his annual Economic Report and in quarterly reports to Congress. Reports shall include study and evaluation of relationships between excess profits, economic stabilization, and job creation, and review appraisal of federal government activities.
SEC. 10. Funding.– This section authorizes the appropriation of such sums as may be necessary to carry out the provisions of the Act, and allows the acceptance and use of gifts or other contributions.
Sec. 11. Expiration.– This section provides that authority under the Act expires on April 30, 1975, except for pending civil or criminal proceedings or actions or proceedings based upon acts committed prior to the expiration date.
See. 12. Effect on Petroleum Allocation Act of 1973 – This section makes clear that this Act does not infringe on the price control and other authority contained in the Emergency Petroleum Allocation Act.
Sec. 13. Effective Date. – This section provides for an effective date of May 1, 1974, or upon enactment if later.
Sec. 14. Severability.– This section provides for general severability for provisions of this Act.
S. 3352
Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That this Act may be cited as the "Cost of Living Act of 1974."
FINDINGS AND PURPOSES
SEC. 2. It is hereby determined that inflation poses a danger to the economic wellbeing of the Nation, and that the Federal Government should have a continuing concern with the rate of inflation, supply, industrial capacity and means of increasing productivity, to constrain domestic inflation. To contribute to the moderation of inflation, a body within the executive branch should monitor public and private economic activity. The President is in a position to implement the program authorized by this Act.
PRESIDENTIAL AUTHORITY
SEC. 3. (a) To carry out the purposes of this Act, the President shall–
(1) review the programs and activities of Federal departments and agencies and the private sector which may have adverse effects on supply and cause increase in prices and make recommendations for changes in such programs and activities to increase supply and restrain prices;
(2) review industrial capacity, demand, and supply in various sectors of the economy, working with the industrial groups concerned and appropriate governmental agencies to encourage price restraint;
(3) improve wage and price data basis for the various sectors of the economy to improve collective bargaining and encourage price restraint;
(4) conduct public hearings when appropriate to provide for public scrutiny of inflationary problems in various sectors of the economy;
(5) focus attention on the need to increase productivity in both the public and private sectors of the economy;
(6) monitor the economy as a whole, including such matters as wages, costs, productivity, prices, sales, profits, imports and exports; and
(7) conduct a continuing review of the effect of economic concentration and anticompetitive practices on price and wage inflation and recommend legislation and other appropriate action to reduce the impact of such concentration or practices on inflation.
(b) Nothing in this Act authorizes the continuation, imposition, or reimposition of any mandatory economic controls with respect to prices, rents, wages, salaries, corporate dividends, interest rates, or any similar transfer, except as provided under Section 13 (relating to continuation of authority under the Emergency Petroleum Allocation Act of 1973) of this Act.
ACQUISITION OF ECONOMIC INFORMATION
SEC. 4. (a) For purposes of carrying out this Act, the President may by regulation, order, or otherwise obtain such information from, require such reports and the keeping of such records by, make such inspections of the books, records and other writings, premises, or property of and take the sworn testimony of, and administer oaths and affirmations to, any person as may be necessary or appropriate. The authority to obtain information under this subsection or section 6 of this Act does not extend to copies of disclosures to departments or agencies of the United States excepted from disclosure under subsection (b) of this Section.
(b) For purposes of carrying out this Act, the President may request from any department or agency of the United States, and that department or agency shall provide him, economic information except:
(1) information, the disclosure of which to another Federal agency is expressly prohibited by law, or
(2) trade secrets, commercial, financial, or demographic information which is privileged or confidential and obtained by an agency from a person for statistical or law enforcement purposes, the disclosure of which to another Federal agency would frustrate development of accurate statistics or proper law enforcement.
(c) For purposes of carrying out this Act, the President may request economic information from State and local governments, including agencies and instrumentalities thereof.
DELEGATION
SEC. 5. The President may delegate the performance of any function under this Act to such officers, departments, and agencies of the United States as he deems appropriate.
SUBPOENA POWER
SEC.6. The head of an agency exercising authority under this Act, or his duly authorized agent, shall have authority, for any purpose related to this Act, to sign and issue subpoenas for the attendance and testimony of witnesses and the production of relevant books, papers, and other documents, and to administer oaths. Witnesses summoned under the provisions of this section shall be paid the same fees and mileage as are paid to witnesses in the courts of the United States. In case of refusal to obey a subpoena served upon any person under the provisions of this section, the head of the agency authorizing the subpoena, or his delegate, may request the Attorney General to seek the aid of the United States district court for any district in which such person is found to compel that person, after notice, to appear and give testimony, or to appear and produce documents before the agency.
PERSONNEL
SEC. 7. (a) Any agency or officer of the Government carrying out functions under this Act is authorized to employ such personnel as the President deems necessary to carry out the purposes of this Act.
(b) The President may appoint five officers to be responsible for carrying out functions of this Act, one of whom shall be appointed by and with the advice and consent of the Senate and who shall be compensated at the rate prescribed for level II of the Executive Schedule (5 U.S.C. 5313) one of whom shall be compensated at the rate prescribed for level III of the Executive Schedule (5 U.S.C. 5314) and three of whom shall be compensated at the rate prescribed for level V of the Executive Schedule (5 U.S.C. 5316). Appropriate titles and the order of succession among such officers may be designated by the President.
(c) Any member of a board, commission, or similar entity established by the President pursuant to authority conferred by this Act who serves on less than a full-time basis shall receive compensation from the date of his appointment at the rate equal to the per diem equivalent of the rate prescribed for level IV of the Executive Schedule (5 U.S.C. 5315) when actually engaged in the performance of his duties as such member.
(d) (1) In addition to the number of positions which may be placed in GS-16, GS-17, and GS-18, under section 5108 of title 5, United States Code, not to exceed twenty positions may be placed in GS-16, GS-17, and GS-18, to carry out the functions under this Act.
(2) The authority under this subsection shall be subject to the procedures prescribed under section 5108 of title 5, United States Code, and shall continue only for the duration of the exercise of functions under this Act.
(e) The President may require the detail of employees from any executive agency to carry out the purposes of this Act.
(f) The President is authorized to appoint, without regard to the civil service laws, such advisory committees as he deems appropriate for the purpose of consultation with and advice to the President in the performance of his functions under this Act. Members of advisory committees, other than those regularly employed by the Federal Government, while attending meetings of such committees or while otherwise serving at the request of the President may be paid compensation at rates not exceeding those authorized for individuals under section 5332 of title 5, United States Code, and, while so serving away from their homes or regular places of business, may be allowed travel expenses, including per diem as authorized by section 5703 of title 5, United States Code, for persons in the Government Service employed intermittently.
(g) (1) Under such regulations as the President may prescribe, officers and employees of the Government who are appointed, without a break of service of one or more workdays, to any position for carrying out functions under this Act are entitled, upon separation from such position, to re-employment in the position occupied at the time of appointment or in a position of comparable grade and salary.
(2) An officer or employee who, at the time of his appointment under paragraph (1) of this subsection, is covered by section 8336(c) of title 5, United States Code, shall continue to be covered thereunder while carrying out functions under this Act.
EXPERTS AND CONSULTANTS
SEC. 8. Experts and consultants may be employed, as authorized by section 3109 of title 5, United States Code, for the performance of functions under this Act, and individuals so employed may be compensated at rates not to exceed the per diem equivalent of the rate for grade 18 of the General Schedule established by section 5332 of title 5, United States Code. Such contracts may be renewed from time to time without limitation. Service of an individual as an expert or consultant under this section shall not be considered as employment or the holding of an office or position bringing such individual within the provisions of section 3323(a) of title 5, United States Code, Section 872 of the Foreign Service Act of 1946, or any other law limiting the re-employment of retired officers or employees.
REPORTS
SEC. 9(a). In transmitting the Economic Report required under section 3(a) of the Employment Act of 1946 (15 U.S.C. 1022), the President shall include a section describing the actions taken under this Act during the preceding year and giving his assessment of the progress attained in achieving the purposes of this Act. The President shall also transmit quarterly reports to the Congress not later than thirty days after the close of each calendar quarter describing the actions taken under this Act during the preceding quarter and giving his assessment of the programs attained in achieving the purpose of this Act.
(b) In carrying out his authority under this Act, the President shall study and evaluate the relationship between excess profits, the stabilization of the economy, and the creation of new jobs. The results of such study shall be incorporated in the reports referred to in subsection (a) of this section.
(c) The President shall review and appraise the programs and activities of the departments and agencies of the United States in light of the policies set forth in section 2 of this Act for the purpose of determining the extent to which those programs and activities contribute to the achievement of those policies and shall report his conclusions to the Congress in the reports required by subsection (a) of this section.
FUNDING
SEC. 10. (a) There are authorized to be appropriated to the President to remain available until expended, such sums as may be necessary to carry out the provisions of this Act.
(b) The President may accept and use in furtherance of the purposes of this Act money, funds, property, and services of any kind made available for such purposes by gift, devise, bequest, grant, or otherwise.
EXPIRATION
SEC. 11. The authority under this Act expires at midnight April 30, 1975, but such expiration shall not affect any action or pending proceeding, civil or criminal, not finally determined on such date, nor any action or proceeding based upon any act committed prior to May 1, 1975.
EFFECT ON PETROLEUM ALLOCATION ACT OF 1973
SEC. 12. For purposes of administering and enforcing the Emergency Petroleum Allocation Act of 1973, nothing in this Act alters the Economic Stabilization Act of 1970 as incorporated by reference in the Emergency Petroleum Allocation Act.
EFFECTIVE DATE
SEC. 13. This Act shall become effective May 1, 1974, or upon enactment if enacted after that date.
SEVERABILITY
SEC. 14. If any provision of this Act or the application of such provision to any person or circumstances is held invalid, the remainder of this Act, and the application of such provision to persons or circumstances other than those as to which it is held invalid, shall not be affected thereby.
Mr. HARTKE. Mr. President, will the Senator yield?
Mr. MUSKIE. I yield.
Mr. HARTKE. Mr. President, I commend the Senator from Maine on the statement he has just made, and I compliment him for his outstanding leadership in the field of tax reform.
I think the time for tax reform is long past due. If there is one thing we hear at this moment out in the streets of the United States it is about what can be done to close some of the tax loopholes. It is bad enough that taxes are as high as they are; but when we see people avoiding taxes and not paying their fair share, the public becomes very upset.
I again congratulate the Senator from Maine for being the leader in this field. This is not a new venture for him. It is a renewal of an old cry, and it is a renewal of a cry which should be heard throughout the United States, especially as we approach April 15, which happens to be a very significant date to the taxpayers of this country.
Mr. MUSKIE. I appreciate that compliment from one who has had a longstanding commitment to the cause of tax reform. I hope, as he does, that forces have been unleashed this year in connection with public awareness and public concern and public determination that will move us toward a clearer tax policy, and that this year, this round robin will lead not to another round robin next year but to some meaningful tax reform this year. If we do, I know that the distinguished Senator from Indiana will make a significant contribution in the future, as he has in the past.
Mr. HARTKE. I thank the Senator from Maine.
Mr. STEVENSON. Mr. President, today I am joining the distinguished Senator from Maine, Senator MUSKIE, to introduce a bill to improve our capacity to deal with inflation. Inflation erodes earnings, robs individuals of hard-earned savings, puts planned-for homes and vacations out of reach, threatens the long-sought security of the retired, and wreaks havoc with business planning. With wage and price control authority due to expire in less than 3 weeks and prices rising at double digit rates for the first time in history – and more of the same in prospect – it is critical that we redouble our efforts to fight inflation.
As I pointed out in March, when I introduced S. 3114 along with Senator MUSKIE to provide for an orderly end to wage and price controls, Congress must take the lead in the fight against inflation. Over the last 3½ years, the economy has gone from bad to worse. In August of 1971, when wage and price controls were first imposed, consumer prices were rising at an annual rate of 4.4 percent. Today, they are rising at an annual rate of over 15 percent. They are 10 percent above their levels just a year ago and 15 percent above their level in August of 1971. In March, the wholesale price index, which is a barometer of future price increases at the consumer level, also rose at an annual rate of over 15 percent, and wholesale prices were over 19 percent above their levels a year ago. Meanwhile, real incomes, the amount individuals can effectively buy with their take-home pay, have fallen. At the end of 1973, they were 3 percent below their level at the beginning of the year, and by February of this year they had fallen still further to 4.5 percent below their levels a year ago.
All this adds up to serious economic mismanagement , and demonstrated incapacity to govern. The economic stabilization program was characterized by fitful starts and stops. No sooner had price controls been imposed than Mr. Nixon let it be known that they would be dismantled at the earliest opportunity, regardless of the consequence.
And dismantled they were – abruptly – just 16 months after they had begun, despite strong inflationary pressures. Consumer prices immediately took off and quickly rose to an annual rate of 11 percent by March of 1973. A freeze ensued with inevitable confusion, disruption, and shortages.
Now the statutory authority to continue the economic stabilization program approaches its end, the administration has simply given up the fight, despite pervasive shortages and the Cost of Living Council's acknowledgement that the end of the controls program will unleash "suppressed inflation," bring substantial price boosts in the steel, copper, and health industries, and fuel inflation throughout much of the rest of the economy. It was for this very reason that Senator MUSKIE and I introduced S. 3114 to provide for orderly decontrol accompanied by price and wage restraint, increased production of commodities in short supply, expanded industrial capacity, and power to enforce industry commitments given in exchange for exemption from controls.
When this approach was rejected, I predicted that the price increases which even the Cost of Living Council now agrees will occur when the economic stabilization program is ended could lead to new pressures to reimpose controls. I fervently hope this does not happen. But there is no certainty. With the precipitous abandonment of the economic stabilization program, meaningful decontrol commitments can no longer be obtained. Those which have been given will be impossible to enforce. Prices will continue their climb; real earnings will continue their decline. All those who cannot readjust their incomes rapidly enough will continue to suffer and even more than in the past.
While our efforts to provide for orderly decontrol have been thwarted, we must not abandon the effort to fight inflation. On the contrary, because the prospects for a smooth transition to a decontrolled economy are so grim, it is all the more important that we make a renewed commitment to solve the root causes of inflation, for inflation has become pervasive, it has permeated the Nation's psychology, it is worldwide, and will be with us for a long time to come.
The bill which I am cosponsoring with Senator MUSKIE today is a first step in that direction. It expressly recognizes that inflation poses a danger to the economic well-being of the Nation and that the Federal Government should have a continuing concern with the rate of inflation, supply, industrial capacity, and means of increasing productivity.
To help in the fight against inflation, the bill gives the President the authority to review and recommend changes in the programs and activities of the Federal Government and the private sector; review industrial capacity, demand, and supply; work with Government agencies and industrial groups to encourage price restraint; improve wage and price data bases; conduct public hearings; focus attention on needed increased productivity; monitor the economy; and review economic concentration and anticompetitive practices. In addition, the bill grants the President the power to obtain necessary economic data and information and requires reports and record keeping to assist in that effort.
This bill will not prevent the expected surge of inflation when all restraints are removed on April 30. It contains no authority to impose wage and price controls or enforce decontrol commitments. But through the creation of a monitoring agency, it will help to provide warning of special inflationary and shortage problems. It will help to provide insight into longrun inflationary and shortage problems. It will establish as a high national priority a concerted and continuing effort to work on the underlying, factors which have brought us so much distress over the last 3½ years.
No other agency in the executive branch now performs this function. No other agency is equipped to perform this function. There is a glaring gap in our ability to deal with inflation effectively, and this bill will help to fill it.
All too often in the past few years we have seen a steadfast refusal to face up to the Nation's economic ills. Policy has consisted largely of hope that things will right themselves without intervention on the part of those charged with responsibility for the Nation's affairs. It may be that our current troubles are a temporary aberration. But much of the evidence is otherwise. This bill will help give us the tools for the careful analysis required for the development of effective policy.
Mr. JAVITS. Mr. President, at a time when inflation rates in this country are higher than at any period since the First World War, the House and Senate Banking Committees have decided to drop controls – current or standby – over wages and prices. I believe that the abrogation of such governmental authority at this time could prove disastrous to the Nation if no residual power is retained.
There is little doubt that labor has been held back much more than business under the present administration controls program. This is undoubtedly why organized labor has joined with business in taking a position against an extension of wage and price controls or standby controls. Says Barry Bosworth of the Brookings Institution:
The industrial worker has, indeed, lost ground, and there is simply no way to get it back out of the hide of business but labor will try.
He then predicts that even after the economy adjusts to the current supply shortage-generated inflation, which most economists agree will work its way through the economy by the end of the summer, that large wage increases will also ratchet their way through the economy and together promulgate a surge of inflation which just cannot be tolerated.
We know that food and fuel are still important factors in the giant monthly increases in the Consumer Price Index. In February the Consumer Price Index rose 1.3 percent, with the food component leading all other sectors in rising prices. Food and housing are the two largest monthly outlays of any American family. Even if pressure on food raw commodities eases, as is expected, in the next several months, I believe that we must be concerned about what will happen to the nondirect costs of food. Food processors and manufacturers have been held under more stringent controls than the economy as a whole under phase IV. As soon as the control program becomes defunct, I think we can expect those in the food industry to try to catch up for increased costs, such as transportation and energy, which they have been unable to pass on as yet to the consumer.
The Wholesale Price Index in March increased 1.2 percent, or at an annual rate of 15.6 percent at seasonally adjusted rates. While prices for farm products and processed foods and feeds were down from February, industrial commodities rose 2.9 percent in this month alone, foreshadowing major increases in retail products which have been projected to take place this fall. According to a recent Wall Street Journal article:
Today's prices on the general run of goods in department and discount stores are a mere 5% to 7% higher than a year ago ... Price controls have kept the lid on. With controls now off, however, retail-store buyers who are ordering their inventories for fall are having to pay much higher manufacturers' prices.
These higher prices will be passed on to the consumer. Clothing prices especially were singled out as being likely to take off this fall, and this is especially onerous to the consumer who has postponed many clothing purchases as long as possible.
Another problem with allowing controls simply to die is that the Congress has given Dr. Dunlop, Director of the Cost of Living Council, no authority to enforce the decontrol commitments he has obtained from any major industries over the past several months. These commitments are the product of hard work in bargaining between Dr. Dunlop and crucial industries which account for a significant portion of the price indices. If industry was held accountable to their decontrol commitments, increased supplies of important commodities would result, with an ultimate impact of moderating the prices of final products. However, if these commitments are allowed to go by the boards, not only will Dr. Dunlop's efforts have been in vain, but the economy may suffer significantly.
In this connection I should like to call to the attention of my colleagues an article from the Wall Street Journal today, in which Dr. Dunlop expressed his fear of higher inflation if controls are lifted completely.
Before the Cost of Living Council came into existence, we had no institutional focus on the role of Government in fighting inflation. This is similar to the fact that there was no Government body which was constantly dealing with the problems of the environment prior to the establishment of the Environmental Protection Agency. I believe that it is essential, at a time when our Nation's most prominant economists are bluntly stating that the inflation we have been experiencing in the United States over the past several years is a new and unique phenomenon which to date has no real solution, that we not cut off any of our options with which to deal with this problem that afflicts every American family.
I commend Senator MUSKIE for introducing legislation today which would provide for continued monitoring by the executive branch of our inflationary problems. I am pleased to be a cosponsor of this legislation. I should also like to commend Senators STEVENSON and JOHNSTON for their efforts in the Senate Banking Committee to obtain standby control legislation and am pleased that they have also cosponsored Senator MUSKIE's legislation.
I ask unanimous consent an article from the Wall Street Journal be printed in the RECORD.
There being no objection, the article was ordered to he printed in the RECORD, as follows:
DUNLOP PREDICTS INFLATION-FUELING BOOSTS IN SOME WAGES, PRICES AFTER CONTROLS END
WASHINGTON.– The Cost of Living Council director, with his program of wage and price controls dying around him, sketched a gloomy inflation picture for the rest of 1974.
Although he wouldn't specifically forecast prices, John Dunlop's view of an uncontrolled economy was clearly darker than that of other Nixon administration economists. The end of the controls program, the council director said, will trigger bursts of price boosts in the steel, copper and health industries and substantial wage boosts in the construction industry. And he indicated he believes these increases in turn will fuel inflation throughout much of the rest of the economy.
The administration's economic stabilization program is scheduled to die after April 30 unless Congress unexpectedly extends the authority in certain sectors, namely health and construction, as the administration has requested. Congress so far has adamantly refused.
Mr. Dunlop has been lobbying hard for continuation of selective controls in inflation-prone areas, or at least for legislation permitting his agency to monitor inflation. The pessimism he expressed to reporters yesterday may have been a last-ditch attempt to sell his program to a reluctant Congress, despite the willingness of other administration officials to let it die.
Mr. Dunlop divorced himself from price projections such as those made recently by Herbert Stein, chairman of the President's Council of Economic Advisers, who predicted a slowing of price increases to an annual rate "in the general ballpark of half" the current 10%. Mr. Stein explained that moderate food and fuel price increases would slow inflation's rise after midyear.
But Mr. Dunlop said, "I don't want to be associated in any way with predictions for the second half of the year." He asserted that if construction and medical costs rise "as I truly believe they will, I don't know what the consequences for the general level of prices will be."
Mr. Dunlop reiterated his belief that hospital costs could soar 16% to 18% a year if controls are lifted, compared with 9% to 10% if restraints are maintained.
He also said removal of controls will unleash "suppressed inflation" for some major products, primarily copper, steel and related items, and that the impact "in May, June and July is going to be appreciable." He also said he expects further price increases on some products, including cement, steel and paper, where producers haven't yet been able to recover higher fuel costs.
However, Mr. Dunlop indicated he thinks the food-price picture is encouraging, especially if the coming harvests are as big as administration officials anticipate.