Galesburg Register-Mail from Galesburg, Illinois on July 19, 1973 · Page 10
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Galesburg Register-Mail from Galesburg, Illinois · Page 10

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Galesburg, Illinois
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Thursday, July 19, 1973
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M jaaigsbuffl J^gistef*Mail,Gdlesbufg,lll t Thursday, July J?,; 1973 11 lim By United Press International Questions and answers eon* corning President Nixon's Phase IV eoMomic controls: Q. What Is Phase IV? A. It's a complex set of wage and price controls imposed on most of the economy in the next two months, the object, as in Phases I, It and III, is to slow down the rate of inflation, Q. What happened to the price freeze? A. Prices are still frozen until Aug. 12 except in the food and health industries. Are Questions, Answers Phase IV Q. Do«s that mean grocery prices are free to rite again? A. Yes, many food prices will go up, some of them sharply. Beef prices will remain under ceiling rules until Sept. 12. But grocers and food wholesalers may raise prices only to reflect increased cost of raw agricultural products since June 8. Q. Will nonfood prices also start going up Immediately? A. No. Industrial, wholesale, retail and service prices in most cases will remain frozen until Aug. 12. Q. What happens after Aug. 12? A. The price freeze is lifted on the rest of the economy on a sector-hy-sector basis. Each sector or industry will be governed by a special set of rules dictating how much prices can go up. The administration has put forward a set of preliminary regulations in each case and will allow the public to comment on them until July 31. Then the rules will be revised, if necessary, and will take effect Aug. 12. Q. How about wages?. A. The familiar 5.5 per cent standard for annual Wage increases, plus 0.7 per cent for fringe benefits, still applies, It was mandatory during Phase II (November l^Wfanuary 1973), voluntary in Phase HI (Janu* ary-May 1973) and now it's mandatory again. Q. Do the rules cover everybody? A. The Economic Stabiliza­ tion Law itself requires that workers earning $3.50 an hour or less be exempt. Q. What about my apartment rent? A. Rents are exempt, just as they were during Phase III. Q. Is the government going to ration gasoline? A. Despite repeated rumors, administration officials insist there is no plan to Impose a World War II style gas rationing system. However, the proposed Phase IV rules contain an elaborate control system that would place ceiling prices on the petroleum industry. In addition, beginning Aug. 12, you should see a sign listing ceiling price and octane rating on every pump at retail gasoline stations. Q. Do the Phase IV rules cover everything? A. The new regulations continue to exempt raw agriculture products. They will also exempt on Aug. 12 lumber and plywood, long-term coal production contracts, public utility fates and all businesses with 60 or fewer employes. Mow long Is all this going to last? A. The President didn't say and urged citizens to have "patience" while the controls do their work. But a top-level committee of labor and business leaders has urged Nixon to scrap the whole system by the end of the year and Nixon indicated he is leaning that way, provided there is progress against inflation. Republicans Laud Tough 9 New Plan; Democrats, Others Quiz Effectiveness •« By LEONARD CURRY WASHINGTON (UPI)- R<ftp u b 1 i c a n legislators are praising Phase IV as "tough," g|it many Democrats and spokesmen for business and labor question its effectiveness and say it will hurt city flwellers and consumers gene- «Jiy. ^Agnate Republican Leader Hugh-Scott and.House GOP fiaoer Gerald R. Ford both placed up the administraltion's "tough," to describe the ram. SfcjOtt said it "should avoid explosive increases in the price oftfoodj" although he conceded there would be short term food price increases during the last half of this year. Ford called it the "best program." AFL-CIO President George Meany declined comment for the time being, but several leaders of individual unions denounced the policy for allowing food price increases in the months ahead. Means Only One Thing "Higher prices for food and other necessities plus retention of the 5.5 per cent wage guideline can mean only one thing," said Paul Jennings, president of the International: Union of Electrical Workers,] "further falling behind for working families." "If prices of food increase as anticipated, the government might find it necessary to issue because of high prices," said James H. Rademadier, president of the National Association of Letter Carriers. The letter carriers recently negotiated a 6.8 per cent first year increase with the U.S. Postal Service, despite the government's plea to hold wage increases to 5.5 per cent. Rademachtr said he is "fearful" the government will now order the agreement rolled back. "Phase IV is a new summer offensive agaisnt the consumer," said Patrick E. Gorman, secretary-treasurer of the Meatcutters. "It will permit most food prices to rise. It will presumably seek to keep wages stabilized at unrealistic levels that are rapidly losing their buying power in this inflationary era." House Democratic Leader Thomas P. O'Neill said, "There is no question but ithat it is an increase (in the cost of living) for the city fellow. I just hope it is not unbearable." ; "City People Disappointed" Sen. Jacob K. Javits, R-N.Y., said, "The city people are disappointed that raw agricultural products are uncontrolled." Sen. Russell Long, D-La., chairman of the Senate Finance Committee, said he doubted Phase IV would work. "There remain inequities and shortcomings," he said. Arch N. Booth, president of the U.S. Chamber of Commerce, said Phase IV "is another in a, series of charades that prolongs the dangerous illusion that economic problems can be solved by government edict rather than government responsibility." Rep. Jerry Litton, D-Mo., a cattleman serving his first term in Congress, said continued controls on beef "show the government's ability to make the same economically idiotic mistake three, times in 111 days." Dr. John Meunch, economics chief for the National Forrest exemption of lumber and plywood prices from controls "is welcome recognition" that Wood products will benefit a free market. "I hope the President's luck turns," said Sen. Philip A Hart, D-Mich. "It will be good for everybody." Dollar Slides in First Tpst Since Support Policy Told LONDON (UPI) — The dollar fell again ort European money markets today, in the first test of confidence since the United States publicly announced that it was supporting its ailing currency. "The intervention was too weak and ineffective," said a trader in the Paris branch of a big New York bank. He said the intervention "has been known in the market since Monday." After money markets closed in Europe Wednesday, the U. S. Federal Reserve Board and the Treasury Department said the United States had been intervening in the New York market on the dollar's behalf since July 10, hoping to push up the currency's value overseas. (te r_ mxeerpts From Nixon Statement on Economic Plan ^WASHINGTON (UPD - Excerpts of President Nixon's sT£tesnent Wednesday on the 3Uns and actions of Phase IV of economic stabilization program:' w-toe American people now &©e a profoundly im(portant decision'. We have a freeze on prices which is holding back a s3ifcge of inflation ithat would lg-eak out if the controls were removed. At the same time the freeze is holding down production and creating shortages whjeh threaten to get worse, |n# cause Still higher prices, as | $3 freeze and controls continue... : What's Needed main elements in the policy we need are these: eftirst, the control system ]ft4st be tough. It has to hold ttatk and phase in gradually a l^rge part of the built-in pressure for higher prices which already exists in the economy. ^Second, the system must be ^elpctive. It must permit relaxation of those restraints and it is only fair to those who pi f "The which interfere most with production, and it must not vSgfete effort on sectors of the e^gnomy where stability of prices exists. The control system should also be designed to. - accommodate the special problems of various sectors of the economy under the strains of" high use of capacity. ^Third, the system must contain sufficient assurance of i(§ termination at an appropriate time to preserve incentives for investment and production and guard against tendencies for controls to be perpetuated. fourth, the control system mjist be backed up by firm steps to balance the budget, so • that excess demand does not regenerate inflationary pressures which make it difficult either to live with the controls o£ to live without them. J *• The Program "The Cost of Living Council will describe the Phase IV cfjgitrols program in detail in statements and regulations. These will take effect at various times between now and Sgbt. 12. They will include sgpeial regulations dealing with tjje petroleum industry, published for comment. Here I will only review the general fea- tijfes of the program, to indicate its basic firmness and the efforts that have been made ta- assure that production continues and shortages are a|oided. ^fie controls will be mandatory. The success of the Program, however, will depend upbn a high degree of voluntary cfljpipliance. We have had that iigfche past. Study of the reports on- business behavior during Pljase II shows that voluntary compliance was almost univer- will comply voluntarily to assure that mere is compulsion for the others. Until Aug. 12 Except for foods, the freeze oh prices will remain in effect until Aug. 12. However, modifications of the freeze rules will be made to relieve its most serious inequities. The fundamental pricing rule of jPhase IV is that prices are permitbed to rise as much as costs rise, in dollars per unit of output, without any profit margin on the additional costs. Cost increases will be counted from the end of 1972; cost increases which occurred earlier but had not been reflected in prices may not be passed on. In addition to the cost rule, there remains the previous limitation on profit margins. Large firms, those with annual sales in excess of $100,000,000, will be required to notify the Cost of Living Council of intended price increases and may not put them into effect for 30 days. During that period, the council may deny or suspend the proposed increase. The wage standards of Phase II and Phase HI will remain in force. Notification of wage increases will continue to be required for large employment] units. Special Case of Food Nowhere have the dilemmas of price control been clearer than in the case of food. In the early part of this year, rising food prices were the largest part of the inflation problem, statistically and psychologically. If price restraint was needed anywhere, it . was needed for food. But since the ceilings were placed on meat prices on March 29, and especially since the freeze was imposed on June 13, food has| given the clearest evidence of the harm that controls do to supplies. We have seen baby chicks drowned, pregnant sows and cows, bearing next year's food, slaughtered, and packing plants closed down. This dilemma is no coincidence. It is because food prices were rising most rapidly that the freeze held prices most below their natural level and' therefore had the worst effect on supplies We must pick our way carefully between a food price policy so rigid as to cut production sharply and to make shortages inevitable within a few months and a food price policy so loose as to give us an unnecessary and intolerable bulge. On this basis we have decided on the following special rules for food: Special Rules 1. Effective immediately processors and distributors of food, except beef, may increase increase of costs of raw sa|. Nevertheless, the rules we their prices, on a cents-per-unit a$ now proposing are stricter, basis, to the extent of the agricultural products since the freeze base period (June 1-8) 2. Beef prices remain under present ceilings. 3. The foregoing special rules expire on September 12, after which time the same rules that apply to other products will apply to foods. 4. Raw agricultural products remain exempt from price control. ;•*>' To relieve the extreme high prices of feeds, which have an important effect on prices of meat, poultry, eggs, and dairy products, we have placed limitations on the export of soybeans and related products until the new crop comes into the market. These limitations will remain in effect for that period. But permanent control of exports is not the policy of this government, and we do not intend at this time to broaden the controls beyond those .now in force... Process of Decontrol There is no need for me to reiterate my desire to end controls and return to the free market. I believe that a large proportion of' the American people, when faced with a rounded picture of the options, share that desire. Our experience with the freeze has dramaticzed the essential difficulties of a controlled system —its interference with produc Hon; its inequities, its distortions, its evasions, and the obstacles it places in the way of good international relations. And yet, I must urge a policy of patience. The move to freedom now would most likely turn into a detour, back into swamp of even more lasting controls. I am impressed by the unanimous recommendation of the leaders of labor and business who constitute the Labor Management Advisory Committee that the controls should be terminated by the end of 1973. I hope it will be possible to do so and I will do everything in my power to achieve that goal. However, I do not consider it wise to commit ourselves to a specific date for ending all controls at this time. Balancing the Budget The key to success of our anti-inflation effort is the budget. If federal spending soars and the deficit mounts, the control system will not be able to resist the pressure of demand. The most common cause of the breakdown of control systems has been failure to keep fiscal and monetary policy under restraint. We must not let that happen to us. j I am assured that the; Federal Reserve will cooperate j in the anti-inflation effort by j slowing down the expansion of money and credit. But monetary policy should not, and cannot, be expected to exercisetions and choices we now the needed restraint alone. A further contribution from the budget is needed. Goal for Year I propose that we should now take a balanced budget as our goal for the present fiscal year- Achieving that goal will be difficult, more difficult than it seems at first. My original expenditure budget for fiscal 1974 was $268.7 billion. Since that budget was submitted economic expansion, inflation and other factors have raised the estimated revenues to about the level of the original expenditure estimate. However, while that- was happening the probable expenditures have also been rising as a result of higher interest rates, new legislation enacted, failure of Congress to act on some of my recommendations, and congres sional action already far advanced but not completed It is clear that several billion dollars will have to be cut from the expenditures that are already probable if we are to balance the budget. That will be hard, because my original budget was tight. However, I regard it as essential and pledge myself to work for it. Despite the difficult condi- confront, the American economy is strong. Total production is about 6.5 per cent above a year ago, employment has risen by 3 million, real incomes are higher than ever. There is every prospect for further increases of output, employment and incomes. 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