Carter's loose reins on economy defended
President Carter intends the United States to weather its economic storms without recourse to wage and price controls or the rationing of gasoline. This emerges from talks with top administration officials, who believe that contrary proposals by Sen. Edward M. Kenndy (D) of Massachusetts would not work.
Senator Kennedy, among other things, would clamp mandatory controls across the range of the US economy, ration gasoline, and retain price controls on domestic crude oil.
Mr. Carter, while rejecting a retail tax on gasoline, hopes that price increases already under way will force Americans to burn less automobile and home fuel.
Over the past year, said Treasury Secretary G. William Miller in an interview , a "virtual doubling" of the price of gasoline has caused a 10-percent drop in consumption.
"We see," said Mr. Miller, "tremendous conservation in home heating oil this year.A lot is going on, and no doubt we'll need to do more.
"But faced with the unacceptability of rationing, except with a 20-percent shortfall [of gasoline], or with the inflationary problems of a gas tax, I think we're saying: 'Let's reserve judgement until we see if something more is needed and, if so, what is best.'"
A 50-cent-per-gallon tax on gasoline, according to White House officials, would add a net of nearly two percentage points to the Consumer Price Index (CPI), even if the tax were rebated to consumers in other ways.
"That influence on the CPI," said the Treasury chief, "ratcheting into other indixes, also would have a secondary inflationary impact."
His objection to gasoline rationing, widely shared among Carter administration aides, centers on "lack of consensus" among Americans as to what form rationing should take, except in grave emergency, and the difficulty of allocating gasoline fairly among citizens with greatly differing needs.
As to mandatory wage and price controls, said Mr. Miller, "Our experience -- not our theory, but our experience -- proves they don't work."
Foreign commodities on which the US depends, including oil and a range of minerals, could not be price-controlled, nor could domestic food.
This, in Mr. Miller's view, would distort the US economy, bottling up inflationary pressures which would burst forth when controls were lifted.
At any point that wages are frozen, he said, inequities are created, which "tears at the willingness to comply" and compounds administrative problems.
All of Mr. Carter's close advisers on this subject -- including Charles L. Schultze, chairman of the President's Council of Economic Advisers -- form a solid wall of opposition to mandatory controls, stressing instead the President's voluntary wage-and-price program, coupled with paring down the federal budget deficit and supporting a tight credit policy on the part of the Federal Reserve System.
Even if this combination cuts the inflation rate, such a policy means less money for new social initiatives, exposing Mr. Carter to attacks from traditional elements of the Democratic Party, led by Senator Kennedy.
As the election year rolls on, the President's political difficulties may grow, if -- as widely expected -- defense spending rises more than the White House now wants, or if inflation fails to subside.
Administration officials, on the other hand, insist that voters should realize what a different country they would live in if Senator Kennedy's mandatory controls and gasoline rationing should become law.
White House aides also challenge the Massachusetts senator to explain how Americans could be persuaded to save gasoline, if domestic oil were artificially priced several dollars a barrel below the world level.