First the Administration of John F. Kennedy, and then the Administration of Lyndon Johnson, tied up to "guide-posts." Under these, the U.S. Government tried to fight inflation by urging both labor, in its wage demands, and industry, in its pricing, to hold to annual increases of no more than 3.2%. Kennedy used them as a talking point; Johnson attempted to turn them into gospel. Last week, the guideposts were shredded and, ironically, the tearing blow had been delivered by none other than L.B.J.
In his abortive effort to settle the airline strike, the President had persuaded carriers to accept a package settlement amounting to a 4.3% increase in machinists' wages and other benefits. It actually made little difference that the machinists, defying their own union leadership, later voted down even that hefty hike. The fact was that Johnson himself had ignored the guideposts—withal his rationale about airline "productivity"—and now the doors were wide open to above-the-line moves by both labor and management in all industries. That point was soon proved when the steel industry last week imposed major price increases, and the Johnson Administration could not in conscience do anything except complain.
Food for Confusion. There were other even more immediate straws of inflation in the wind. Food prices are up all around the country. Last week Agriculture Secretary Orville Freeman traveled to New York for a well-publicized look at the high price of food in the nation's biggest metropolitan area (an Agriculture Department spokesman, trying to stress the significance of Freeman's visit, rather ineptly announced that the Secretary was so concerned that he had already been "watching the situation for the last two days"). Leaving New York, Freeman said only that he had asked the Federal Trade Commission to "investigate" food prices throughout the U.S.
More inflationary effects may be expected to set in soon. Electrical workers (who have been watching the airline negotiations with considerable interest) will soon start contract bargaining with General Electric and Westinghouse. Last week their union leaders noted that Westinghouse President Donald C. Burnham recently got his salary raised from $198,000 to $223,000 a year. That figured out at about 12.6%—and the electricians would like to get as much for themselves. After them the militant Communications Workers of America will negotiate with telephone companies and beginning in January with the Long Lines department of A. T. & T. Also, starting early next year, unions representing some 2.1 million men, including teamsters and autoworkers, are scheduled to go to the bargaining table, and it is unlikely that they will have ears for government pleas.
The present and the prospect left U.S. investors in a state of some confusion. Last week the Dow-Jones industrial average plunged by 14.81 points to a two-year low of 832.57. When the steel industry started announcing its price increases, the market turned up, actually ending the week at five points higher than it started.