Is President Carter caving in under pressure and abandoning the economic policy to which he has long and stubbornly clung? The question springs from a key compromise, involving the words "high interest rates and unemployment," wrought by aides to Mr. Carter and Sen. Edward M. Kennedy.
The Democratic Party, the compromise says, pledges not to use interest rates and unemployment as weapons in the fight against inflation.
This sounds innocuous but, in fact, a lot of social and political dynamite is packed behind the words.
The same is true of a second compromise, intended -- like the first -- to be written into the Democratic Party platform on which the presidential nominee is supposed to run.
The second item, while praising fiscal restraint, says the party will not support reductions in any programs serving the "basic human needs of the most needy in our society."
The President bought the Kennedy positions "lock, stock, and barrel," Senator Kennedy is quoted as saying of the platform amendments, designed by White House aides to win the senator's campaign support for Carter.
"This," said Kennedy, "is getting to be the kind of platform that I welcome to run on and take across the country."
Carter's commitment to the platform changes, said his chief domestic adviser, Stuart E. Eizenstat, is not "cosmetic," but serious.
If that is true, the President appears to be sliding away from fiscal and monetary policies that he and his economic aides insist are the best ways to fight inflation.
Carter's fiscal 1981 budget calls for an increase in defense spending but dictates cuts in outlays for many other programs in nonmilitary areas.
"There will be very little room," budget director James T. McIntyre Jr. has said, "for new [social] initiatives in the foreseeable future."
One result of fiscal austerity in a time of recession is higher unemployment. The jobless rate, now 7.8 percent, may rise by White House calculations to 8.5 percent and stick there through much of next year.
White House officials also support the Federal Reserve Board's determination to keep a tight rein on the growth of the money supply, a policy that puts upward pressure on interest rates.
Carter's aides reject the notion that they are "using" unemployment to whip inflation, as Kennedy charges. But a consequence of fiscal austerity -- that is , the refusal to pump money into the economy to overcome recession -- is that more people lose their jobs.
Such a policy, according to the Massachusetts senator, ignores the "anguish and suffering that millions of people are experiencing today" and does not belong in the Democratic Party.
It remains to be seen how high a price Carter is prepared to pay to obtain the support of Kennedy and other liberal Democrats, committed to more spending to help the disadvantaged.
Kennedy does not make things easier for the President by using words like "capitulation" to describe White House acceptance of platform changes.
So far, Carter aides reject another key Kennedy platform plank calling for creation of a $12 billion federal jobs program. Such a program, in the White House view, would deepen budgetary red ink and prove to be inflationary.
Among White House advisers, men like Charles L. Schultze, chairman of the Council of Economic Advisers, and chief inflation fighter Alfred E. Kahn stress the inflationary impact of opening the government's spending sluice gates.
Such spending, they claim, might hasten the end of recession and keep unemployment a bit lower, but would saddle the United States with higher built-in inflation.
Mr. Eizenstat, by contrast, often buttressed by Vice-President Walter F. Mondale, insists on the need to hold voter support among working-class and minority groups.
Kennedy, speaking Aug. 10 on the CBS-TV program "Face the Nation," said that Carter economic policies -- if adhered to -- would risk turning over the White House to Ronald Reagan and cause Democratic losses in both houses of Congress.
Brooding on the sidelines, as it were, is the formidable figure of Paul A. Volcker, chairman of the Federal Reserve Board (Fed), who is determined to help starve inflation through monetary restraint.
Kennedy's policies, if put into practice, would deepen the government's operating deficit, forcing the US Treasury to borrow more heavily in capital markets to finance government programs.
The Fed could either accommodate such spending by printing more money, or it could restrict the money supply, thus forcing up interest rates.
Then the Treasury and millions of private borrowers -- from individuals to huge corporations -- would be competing for slices of a limited credit pie.
Currently, the White House, Congress, and the Fed are working generally in harmony, with the aim of cooling inflation. Mr. Volcker appears ready to persist with monetary restraint, no matter what the other branches of government might do.