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Whatever their merit, such arguments now seem somewhat irrelevant. Jawboning may indeed only divert inflationary pressure during a period of excess demand, but Arthur Burns, chairman of the Federal Reserve Board, believes that the deflationary policies of the last year have already succeeded in wringing excess demand out of the economy. Inflationary pressure now comes from 1) union drives for huge wage increases to catch up with past price boosts, and 2) businessmen's insistence on passing along pay increases by raising prices. It is precisely in such a situation that jawboning and the use of guidelines can be most effective.
Tough on Consumers. White House guidelines for noninflationary wage increases could give businessmen a bargaining point to use in labor negotiations. Labor's official position is that it will oppose any guidelines for wages unless there are equivalent restraints on prices, profits, dividends, rents and executive salaries and bonuses (see following story). Even so, presidential guidelines could give union leaders at least a talking point in trying to restrain their own rebellious members. Wage increases might go beyond the guidelines, but they probably would be smaller than if there were no guidelines at all.
Furthermore, continued inflation works far greater inequity on the consumer than jawboning does on any union or company. And jawboning need not lead to spectacular White House-industry battles. In 1968, for example, when the Council of Economic Advisers expected auto prices to go up an average $100 per car, Lyndon Johnson's CEA invited General Motors Chairman James Roche to Washington for a private session. G.M. and CEA technicians exchanged figures on how much higher production costs would force G.M. to raise prices on its 1969 models. No explicit promises or threats were made, but G.M. wound up raising prices only an average $52 per car.
Sometimes the mere threat of jawboning has been effective. Manhattan Economic Consultant Pierre Rinfret recalls that during the Kennedy-Johnson years, he frequently advised corporate clients that they would be "bombed" by the White House if they put through planned price boosts. In some cases, he says the clients did not raise prices; in others they did, but told him later that they wished they had not. After Nixon's press-conference remark discarding the jawbone, Rinfret sent telegrams to all his corporate clients advising them to go ahead and make any price boosts they had in mind. Some did.
Given Nixon's commitments, it is unrealistic to expect him to use public jawboning on any wide scale. But he might at least modify his insistence that he will never jawbone at all. Such a change would keep union and business leaders guessing as to how big a wage or price boost might draw presidential wrath. And that unccrtainty might serve to help slow the rate of inflation.