Business: Trying Anew to Bash Inflation

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There is plenty of room to cut and trim in Carter's bulging budget. A study by the Congressional Budget Office shows that $50 billion could be saved in the 1981 budget, and fully $544 billion over the following five years, by trimming such boondoggles as impact aid for schools, a program that dishes out tens of millions of dollars yearly to some of the richest school districts in the nation. Carter aides last week were examining potential cuts in Social Security programs, food stamps and veterans' benefits. A whopping $6.9 billion could be saved by discontinuing federal grants to often wealthy state and local governments, but the President has avoided that politically unpopular move.

Despite the new frugal spirit on Capitol Hill, Congress may still blink when it comes to actual budget reductions. Senators and Congressmen have long records of willingness to cut every program —except ones that affect them or their districts. The result is lots of spending and few cuts. But if inflation is ever to be controlled, Congress must be willing to reduce even its sacred pork-barrel programs.

Cutting the budget and reducing the explosive growth of money and credit are both essential to the long-term improvement in the nation's inflation prospects. But the most vital task of all is the adoption of an energy policy that sharply and lastingly reduces dependence on foreign oil. During 1980, the nation's ever climbing bill for imported oil will rise to $90 billion, a 20-fold increase since the 13-nation OPEC cartel first began pushing up its prices seven years ago.

Last week a House-Senate conference committee approved a key measure in President Carter's energy program by adopting a $227.3 billion windfall-profits tax on oil companies. This tax is part of the phased decontrol of oil prices. By allowing the controlled U.S. price to rise to the world level, which now averages $30 per bbl, the Administration hopes that energy consumption will be reduced and domestic production increased. The President is expected to sign the bill later this month.

Foreign money markets and finance ministries will be closely watching the development of the new Carter anti-inflation program. Although the dollar has remained strong on exchange markets during the past few weeks, a weak policy from Washington could set off another run on the dollar. Former West German Central Bank President Otmar Emminger urged the President to adopt an "emergency package." Said he: "Gradualism is not the answer when you have such a deeply embedded inflationary psychology." But officials abroad remain skeptical. Concluded a top official in the West German Economics Ministry: "They know what they have to do in Washington. But they're afraid to bite the bullet."

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