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June 15, 1973 - Image 8

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Text
Publication:
Michigan Daily, 1973-06-15

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gage Eight

THE SUMMER DAILY

Friday, une 15, 1973

Reaction unfavorable to

Nixon's
By The AP and UP1
On balance, reaction - to Phase
4 - President Nixon's 60-day
pricefreeze - was sharply criti-
cal yesterday. Labor leaders,
politicians and economists were
virtually unanimous in their
skepticism concerning the Presi-
dent's new economic initiatives.
Two basic themes were heard
repeatedly in reaction to the new
policy:
-It was too late. Many said if
the President had acted earlier,
the freeze would have had a
better chance of working, and
-It will be a disaster for food
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economic plans

prices. The fear is being widely
expressed that controls on retail
and wholesale food prices with-
out corresponding controls on un-
processed food could result in ar-
tificial shortages.
"THE PRESIDENT waited too
long to do something," accord-
ing to University economist
Gardner Ackley. "Some action
should have been taken soon after
the first of the year"
"Too little, too late, too com-
plicated, too political," said econ-
omist Eliot Janeway.
United Steel Workers President
I. W. Abel agreed. "I for one
think there should have been
action earlier"
tN EUROPE, reaction of gold
dealers echoed the theme.
While the dollar started out
strongly, by mid-morning yes-
terday it was beginning to slump.
Most experts agreed the reason
for the poor performance is a
continuing lack of faith in the
U. S. economy.
"NIXON'S FREEZE was too
little too late," one London gold
dealer said. "And, there is still
Watergate and the question of
whether he has the long-term au-
thority to set the American econ-
omy straight"
For economists and labor lead-
ers as well, food prices were a
major area of concern.
United AutodWorkers President
Leonard Woodcock blasted the
Nixon move as "a retreat from
Phase 3" which "will not solve
the nation's problems"
"A PRICE FREEZE on food
at the wholesale and retail level
will only create artificial short-
ages and black market prices,"
he said.

In a similar vein, Barney -
Weeks - president of the Ala-
bama Labor Council, AFL-CIO,-
asked, "How long can you freeze
grocery prices while unprocessed
farm goods are going up?"
H e n d r i k Houthakker -
an economist at Harvard - com-
plained that the program was too
superficial, that the President
"has not come to any firm view
as to what is necessary."
HOUTHAKKER SAID he was
disappointed that the President
did not come up with structural
changes for the economy, espe-
cially in the area of farm policy.
"It doesn't seem to me like a
very serious- effort," economist
John Kenneth Galbraith com-
mented.
Reaction from Capitol Hill was
predictable.
HOUSE GOP Leader Gerald -
Ford called the move, "right on
target," while House Speaker -n
Carl Albert (D-Oklahoma) said it -
was "not broad enough" AP Photo
In sum, almost no one of any PRESIDENT NIXON poses for pictures Wednesday night after
importance was standing up and delivering a nationwide television address on the economy. His
cheering yesterday in the wake measure for dealing with inflation - a 60-day price freeze - met
of the Nixon announcement. with unfavorable comment from labor leaders and economists.
Nixon move reflects aiure

.t

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By BILL NEWKIRK
WASHINGTON - In freezing
prices for up to 60 days, Presi-
dent Nixon may have permanent-
ly etched wage-price controls in-
to the U. S. economy, a result he
deeply wants to avoid.
The President admitted the
failure of his largely voluntary
Phase 3 program, the system of
wage - price restraints he de-
vised as a transition to a free
economy.
B U T RUNAWAY inflation
changed his plans. Nixon chose
the strongest option before him,
a new price freeze, and said it
would be followed by a tough,
new mandatory system of wage-
price controls to be known as
Phase 4.
In announcing his new program
Wednesday night, Nixon was
haunted by his words of assur-
ance about the economy only a
few months ago.
When he dumped the manda-
tory wage - price- control sys-
tem, in favor of Phase 3 on
Jan. 11, Nixon said his move
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could "mean ever greater price
stability with less restrictive
bureaucracy."
HE P R E D I C T E D
Phase 3 would hasten the return
of the nation's free-market sys-
tem.
But inflation exploded in the
first four months of the year.
Consumer prices rose at an an-
nual rate of 9.2 per cent. Food
prices alone went up at an an-
nual rate of 25.4 per cent.
"Everybody admits Phase 3
was a failure," Treasury Secre-
tary George Shultz told news-
men. "Let's not argue about
that."
NIXON SOUGHT to assure the
American people that the tough
new controls that will be upcom-
ing "will not be designed to get
us permanently into a controlled
economy"
That was also the purpose of
Phase 3.
Nixon began his experiment
with wage - price controls, on
Aug. 15, 1971, freezing wages,
prices and rents for 90 days.
That was followed by a 14-month
Phase 2 system of mandatory
controls, a span when the rate
of inflation was cut significantly.
T H E ADMINISTRATION'S
experience with controls has
shown how difficult it is to get
rid of them once they are in
place.
Before Nixon imposed controls
in 1971, the economy was
plftgued with the worst of both

controls
worlds, high inflation and high
unemployment - the situation
known as "stagflation." the rise
in prices had become more im-
mune to the traditional inflation-
fighters, tight money and tight
spending practices by the gov-
ernment.
Shultz conceded there will be a
large increase in the federal bu-
reaucracy once Phase 4 is insti-
tuted. He didn't say how many
people will be added, but it is
clear that much-tighter enforce-
ment is expected.
THE SUCCESS of Nixon's
freeze on food prices depends
heavily on a related action, his
request to Congress to give him
the power to control exports or
such agricultural products as
feed grains.
Shultz said it "will be very
difficult" to hold down food
prices if Congress fails to pass
export controls. If the freeze
holds the domestic price of food
below the higher world-market
price, "then all our commodities
would go abroad," he said.
That would dry up supplies in
the United States, he indicated,
and would defeat the purpose of
the freeze.
NIXON'S DECISION repre-
sented a triumph for former
Treasury Secretary John Con-
nally, who had urged strong ac-
tion, over milder proposals urged
by Shultz and Herbert Stein,
chairman of the Council of Eco-
nomic Advisers.

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With CARY GRANT, INGRID BERGMAN,
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TONIGHT-JUNE 15
8 and 10 p.m.' Architecture Auditorium $1.00

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