Buyers waiting for the word
President Carter's inflation fighters were frankly stunned by the American public's vigorous response to White House calls in March for consumers to lay off their credit cards for awhile and curb their spending. What the administration got was a jolting drop in borrowing that set officials to scrambling in May to loosen credit controls imposed only two months earlier. Their concern was that too sudden and sharp a drop in consumer buying might turn the predicted mild recession this year into a severe depression.
Is it any wonder that many Americans are baffled by this sudden, seemingly inexplicable flipflop in White House policy? Can anyone be blamed for asking: If it was patriotic to stop spending in March, is it a patriotic duty to start speding again now? Alfred Kahn, Mr. Carter's chief inflation fighter, told Monitor correspondent Harry Ellis earlier this week that it was never the intention of the administration to label all credit card use as bad. Excessive reliance on credit -- abuse -- was the intended target, he explained.
Whether or not economists and politicians can agree on how best to battle inflation and recession at the same time, at least one clear message comes through the public reaction to this latest anti-inflation maneuver: Americans are willing, perhaps even eager, to respond to calls from the President to alter their buying habits, to scale down spending on luxuries, if they are convinced such frugality is in their and the nation's best interest. The public, in short , appears to be open to responsible guidance from their elected representatives, and the White House ought to seize this opportunity to provide stronger leadership on the economic front.
Even officials within the administration concede the President has not done a good job of articulating a vision -- a long-term plan -- for reshaping the US economy. Too much of his economic policy has been reactive. The White House moved in the right direction by agreeing with the AFL-CIO to create two joint panels on economic policy. One group will study short-term antirecession measures and make specific proposals for helping the unemployed, the poor, the elderly, and others hardest hit by the current slowdown. The other panel will study structural problems in the automobile, steel, and other major industries and devise a long-range plan for the "reindustrialization" of America.
The fact is that the underlying inflation in the economy will not be solved by the current drop in interest rates. Past experience has taught that recessions are not a long-term answer. The basic inflation rate continues to rise after each slowdown. Long-range solutions will require greater attention to increasing productivity, to encouraging savings and investment, to simplifying the tax system, to reducing the impact of indexing on wages and prices. Americans have shown they will respond to presidential leadership on the economy. The next move is Mr. Carter's -- and the Congress's.