'Gradualism' -- puny inflation fighter
Washington — The United States is losing the battle against inflation because its elected leaders -- the President and Congress -- are failing to take the tough, painful steps urgently needed.
One such step, according to key administration officials, would be a retail gasoline tax stiff enough to force American drivers to burn less fuel.
President Carter has ruled out a tax on gasoline, though all of his top energy and economic advisers favor such a levy, in the range of 50 cents a gallon.
"The President," a key aide said, "realized he could not, in an election year , get such a tax through Congress. To him, there was no point in being quixotically right, while going down to defeat."
Once the election is out of the way, another top official predicts, whoever is elected president may push for such a tax, as a way to cut the Gordian knot of inflation.
What emerges from talks with top Carter administration and Federal Reserve Board officials is that "gradualism" in the fight against inflation is not working.
These officials warn that prices now are rising faster than they were at the end of 1979, when consumer prices were soaring at a 13.5 percent pace.
Nonetheless, President Carter -- preoccupied by foreign policy crises pressing upon him -- reportedly plans no new anti-inflation measures in the next few weeks.
Foreign crises worsen the inflation problem, by forcing the United States to spend more on defense, when the battle against inflation normally would dictate less government spending.
The President, according to top sources in and out of government, is under pressure to hang tough in conflicting ways:
* Foreign affairs advisers urge Mr. Carter to rebuild US conventional and nuclear forces over a period of years, despite the cost.
* Economic aides plead with Mr. Carter not to allow the fiscal 1981 budget deficit to balloon beyond the projected $15.8 billion, despite larger defense outlays.
To follow both courses would require the President -- and Congress, which would have to support him -- to slash spending for nondefense programs, including welfare, education, the environment, and others.
A fresh Gallup poll shows public support for increased defense spending to be higher than at any time in more than a decade.
Yet Mr. Carter's 1981 budget is attacked by critics, including Sen. Edward M. Kennedy (D) of Massachusetts, as being stingy with low-income Americans and others in need.
The Federal Reserve Board, meanwhile, finds itself in the lonely position of taking bold and unpopular steps -- notably the pushing of interest rates to record highs -- in an effort to get at least a partial grip on inflation.
Already the Fed's tight credit policy has hit the housing industry hard and makes it nearly impossible for countless young families to buy a home.
"There is no way," said a top government official, "that the Fed by itself can cool the economy sufficiently to make a real dent in inflation, without plunging the country into deep recession."
Yet the gradualist approach adopted by Mr. Carter -- relatively austere budgets and voluntary wage and price guidelines, supplementing the Fed's tight credit moves -- manifestly does not work, say these officials.
What more should be done?
"Basically," a senior administration official said, "there are two routes to follow. One is mandatory wage and price controls, plus gasoline rationing."
This path, he said, has a surface gloss of equity, but in fact creates tensions between those who are favored by the rules and those who are benefitted less.
The second route, the official said, includes a stiff gasoline tax that would rise year by year, federal budgets austere enough to be balanced or nearly so, and a Federal Reserve "credit structure tough enough to really hurt."
Key to this strategy is to reduce imports of foreign oil. This year Americans are expected to sent more than $80 billion out of the country into oil cartel coffers.
Meanwhile, the gradualist approach prevails, both in the White House and Congress, and inflation mounts.