If the current high inflation rae continues or rises further, political pressures will grow on President Carter to call for mandatory wage-price controls, as now advocated by his Democratic rival, Sen. Edward M. Kennedy.
Despite strong public support for controls, as measured by opinion surveys, they are still opposed by Congress, the Carter administration, the business community, and organized labor.
Checks with key congressional committees that deal with controls legislation find little movement toward Mr. Kennedy's proposal at this time.
the senator proposes that the President "imposed an immediate six-month freeze on inflation, followed by mandatory controls, as long as necessary, across the board -- not only on prices and wages, but also on profits, dividends , interest rates, and rent."
President Carter, however, has said over and over he will not impose controls. The administration's voluntary wage-price guidelines program, begun in October 1978, was looked upon as a way of tackling inflation without having to go the "controls route."
Most economists expect some reduction in the inflation rate from the 13.3 percent of last year, as measured by the consumer price index, to perhaps 9 to 11 percent this year. One reason is that the broader inflation indexes known as the gross national product "deflators" have been running at 9 to 10 percent. It is unusual for the price index and the deflators to diverge for long.
There are at least three bills in Congress that would provide standby authority to the president to initiate controls. In the Senate, a bill introduced by George Mcgovern (D) of South Dakota, is before the Banking Committee. In the House, two controls bills have been introduced, both by New York Democrats, Ted S. Weiss and Samuel S. Stratton.
Interestingly, Senator Kennedy has not introduced standby controls legislation. According to a Kennedy spokesman, the senator does not feel it would be "realistic" at this time to introduce such a proposal, given the "opposition of the administration."
According to a source with the House Banking Committee, a congressional sentiment remains solidly against either a freeze -- or mandatory controls. At the same time, the source notes, if the US were to have the type of high double-digit inflation during 1980 that it had in '79, political pressures for controls would be expected to grow sharply.
That feeling is shared by most major business organizations, which uniformly oppose a mandatory controls program. For instance, Richard Landry, head of the economic policy divison of the Chamber of Commerce of the US, agrees continued high inflation could change congressional opinion on the need for controls.
Mr. Landry, however, maintains that impostion of controls would be taken by the world financial community as a sign of "weakness" on the part of the US -- an indication that the government's current fiscal- monetary policies had "failed." And the administration, he says, can be expected to take all the steps it can, including deferring the controls issue, so as not to convey that impression.
Both the US Chamber and the National Association of Manufacturers tend to look upon Mr. Kennedy's proposals as more in the area of "political posturing" than a substantive call for controls at this time, given the current strong congressional-labor opposition. Both groups are particularly wary about one key Kennedy proposal -- that controls be placed on profits.
How, in a technical sense, asks the chamber's Mr. Landry, can a company put a freeze on profits, since they are dependent on a borad range of variables?
for example, merely lowering its operating cost, given the same level of gross income as in a prior year, can in effect raise profit margins.
Proponents of controls, however, argue that there are a number of steps that could be taken, including the most severe -- some form of excess-profits tax.
Congress adopted such a tax in 1951 during the Korean war.
The Nixon administration, in its controls program in the early 1970s, adopted a complicated "profit-margin rule." Under the rule, companies that did not raise prices were exempted. All the same, the rule was an indirect -- as opposed to direct -- control on the lvel of profits a company might make.
A spokesman for the AFL-CIO noes that big labor continues to support a voluntary wage-price guidelines program while opposing mandatory controls. But, he points out, if the time ever came when inflationary levels wre so severe that controls seemed to be the only answer, then the Kennedy plan would seem to satisfy the contention of labor that controls would have to be applied "evenly to all parts of the economy."
Perhaps underscoring the lack of zeal in Congress for controls is the slow movement so far of the bill introduced by Representative Weiss. He first introduced a controls bill in the prior, 95th Congres. It went nowhere. A bill was reintroduced in 1979 but is languishing in a subcommittee of the House Banking Committee.
Meanwhile, Mr. Weiss sought to have the House Democrtic Caucus go on record as supporting controls in caucus meetings in June 1979 and again just last month. The June effort failed because of the lack of a quorum. The more recent effort failed because the motion was tabled.
Undaunted, Mr. Weiss is expected to try again at a caucus meeting in February.