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Both men were obviously waving red flags at Congress, which in economic matters often has a low level of sophistication and which has been delaying consideration of the tax extension. The main trouble lies in the House, where many Democrats demand broad-scale and much-needed tax reform as their price for supporting the surcharge. Hoping to avoid a rapidly developing impasse, President Nixon called House leaders of both parties to the White House. Over coffee, they agreed to make the extension bill more attractive by adding a Nixon proposal to drop 2,000,000 poverty-level families from the federal income tax rolls. That should assure passage when the measure reaches the House floor this week.
Tighter money, the tax fight and the mere talk of controls made investors highly nervous about the future. On the New York Stock Exchange, the Dow Jones industrial average fell four days out of five last week. Altogether, it declined 30 points, to 895. In four weeks, the average has fallen 72 points, or 7%, and is now at its lowest level since last August. All the signals from Wall Street and Washington say that more strain, sacrifice and hard decisions lie ahead for the economy.
Inflation is to the economy what pollution is to the environment—a corrosive force that unbalances everything. Though 16% of the nation's plant capacity stands idle, businessmen have been expanding their factories at a record rate, buying machines and materials now to beat further price rises and economize on scarce and costly labor. Export prices have risen more during the past year in the U.S. than in any other major country but Canada and Britain, and the nation's traditional trade surplus has all but disappeared. Wage gains are exceeding the increase in workers' productivity, pushing up costs all around. Some of the fastest rises are in pay for service workers—laundry men, bus drivers, retail clerks—who produce no more than before and sometimes much less. "That," says Yale Economist William Fellner, "is what makes life less and less comfortable in a rich, industrial country."
Inflation has damaged the quality of life in the U.S., particularly in cities, and is cutting into the social fabric. Companies find it increasingly difficult to lure employees from field offices to head quarters cities where prices are highest, particularly in New York and Chicago. Lofty interest rates and fast-rising land and construction costs aggravate the na tion's shortage of modern housing and put homes beyond the financial reach of many people.
Who Gets Hurt