INFLATION: Ford's Plan: (Mostly) Modest Proposals

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In all, the package is not very remarkable, though Administration officials insist that they plan to remain flexible and swiftly make changes when they are needed. During the months ahead Ford and his advisers may well find that despite their ideological objections they will have to move to selective wage-price controls. As the program stands, it is not likely to do much to immediately deter inflation.

The tax surcharge does have virtues. If it stands, a conservative Republican President will be asking Congress to increase the progressiveness of the income tax system for the express purpose of aiding the poor. Because lower-income people tend to spend a larger proportion of their income than higher earners do, the tax changes should encourage consumer spending. Thus the surcharge should not hasten or deepen a recession.

Promising Measure. The tax changes, while helpful, are so relatively modest that they can hardly be expected to substantially help low-income people. The public-service jobs program is not likely to solve the problems of a large proportion of unemployed workers. Some state, city and town administrations will probably try to use the money to subsidize the wages of people whom they would have hired anyhow. As for the calls for voluntary fuel conservation, they are likely to draw big yawns in the absence of any mandatory moves.

A most promising measure is the increase in the investment tax credit for new equipment. Capital investment in the U.S. has been slipping behind the rest of the industrialized world for several years. Dwindling production capacity has been a major contributor to the nation's inflationary shortages of semifinished industrial goods, including steel, copper and paper.

Not surprisingly, the program reflects more of the thinking of the President's political operatives than of his economic aides, who are deeply concerned about inflation. White House political advisers are primarily worried about the danger of recession, and they pressed for stimulative measures to head it off and help the people who would be most hurt. Arguing for this were Donald Rumsfeld, new staff coordinator, and Robert Hartmann, Presidential Counsellor. They were joined by Economist Paul McCracken, who as Nixon's first chairman of the CEA, helped formulate the original "game plan" strategy of combatting inflation with budget and monetary restraints; that policy slowed the economy but did not do enough to brake prices.

Within the Administration, the major policy dispute focused on whether to call for a new gasoline tax, instead of an income tax surcharge, to make up revenue lost in the relief moves. The gas tax has been promoted by Simon and Federal Energy Administration Chief John Sawhill. An added tax of 100 per gal. could have raised about $10 billion a year, and much of this money would have been returned to low-income people through income tax rebates, which they would have collected after submitting their tax forms next year.

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