Donee to the live sounds
Wallace peterson
A look at Ph
Wallace Peterson is chairman of the UNL
Economics Department and a Democratic
candidate for the U.S. Senate. The following
are excerpts from a recent speech he delivered
in Blair.
Nov. 14 is only a few days away, which
means the end of the 90 day "freeze" and the
beginning of Phase II of the Nixon
Administration's New Economic Policy. What
will happen after Nov. 14--whether the freeze
will become a "frost" or melt
altogether-remains to be seen. But of one thing
we can be certain. And that is the American
economy won't be the same as it was before
last Aug. 15.
It is appropriate to take a hard look at the
chances for success of the current program. In
spite of the public's faith in Phase II, I think it
necessary to face two blunt facts: First, the Pay
Board and the Price Commission will probably
not succeed in getting inflation under control;
and, second, Phase II is taking the economy
down a road that very few in the nation are
going to like once they see where we are really
going. Unfortunately,' it will be 12 to 18
months before these results are fully apparent,
when it may be too late to reverse course...
Phase II: a domestic Vietnam?
One of the reasons the public applauded the
"freeze" was the desire for action in a situation
where we seemed to be drifting in leaderless
fashion. This is understandable, but sometimes
our desire for action- any action-leads us to do
things we later regret. Vietnam is a case in
point. I fear that in many ways Phase II may
turn out to be a domestic Vietnam-a program
that began with dramatic action directed to a
good purpose -ending inflation-but which will
wind up in a quagmire of doubt and
disillusionment...
So it goes with Phase II. The Administration,
I fear, has a bear by the tail and will not be able
to let go. If wage-price controls are even
moderately successful-say they get the
inflation rate down to between 3 and 4 -there
will be enormous pressure to keep them in
place until inflation is completely ended. But if
they are not so successful, there will be pressure
for more stringent controls. And, finally, if
they do by chance happen to work, then the
pressure to make them permanent will be
almost irresistible because of the fear that if
they are removed, inflation will once again
burst over the dikes.
What all this means is that we shall slip little
by little into a wholly controlled peacetime
economy-something, surely, that few in this
Administration really want any more than
those in the Johnson Administration wanted an
unwinnable war on their hands...
Will Phase II work?
Of more immediate and practical concern to
many people is the question of whether Phase
II will work...
There are good reasons for skepticism. First,
we are expecting a relative handful of men to
oversee price and wage movements for more
than 6 million nonagricultural business
firms...Moreover, there is really no effective
enforcement machinery, for it is not realistic to
expect the approximately 3,000 employees of
the Internal Revenue Service-most of whom
are busy with income tax matters-to be able to
police effectively Phase II...
Second, the success of postfreeze price
stability depends upon the continued
cooperation of organized labor, which may be
difficult to achieve. Labor is convinced-with
considerable justice, I might add-that the tax
part of the new economic policy is rigged in
favor of big business. Further, the issue of
whether wage increases negotiated before the
"freeze" and which were deferred will be
granted is, at this time, unresolved...
Third, the program rests upon a
misconception concerning the nature of
inflationary pressures in recent years. The new
game plan is built on the assumption that price
and wage decisions for the whole economy can
be controlled by controlling the actions of
approximately 200 giant corporations and the
THURSDAY, NOVEMBER 11, 1971
labor that they deal witha view strongly
promoted by Harvard economist John Kenneth
Galbraith...Most recently, the upward push in
prices has been led by services-especiaily fees
and payments to physicians, hospitals, auto
repair shops, barbers places of
entertainment--none of which are much
affected by the activity of the corporate
giants...
Finally, we are likely to see under any
circumstances a lot of "hidden inflation."
Prices may not go up, but quality will go
down. ..There are ways, too, to push wage and
salary increases beyond accepted limits. "Phony"
promotions will become more commonplace,
as well as more time off with pay for a variety
of reasons...
What is wrong?
The thing that is really wrong with the new
economic program and Phase II is that it deals
with symtoms and not the basic causes of
inflation. Moreover, the Administration's
notion of the root cause of inflation is wrong.
The reason for inflation, according to
Nixonomics, is essentially psychological- which
is to say we have inflation because people
expect inflation...
In my judgement this is wrong. Inflation is
the consequence of a number of "built-in"
features of the economy, and it won't be
lessened or ended until fundamental changes
are made...
If we want to look for fundamental causes, I
should list at least four.
First, there is our overblown military
budget, which for more than a quarter of a
century has diverted 8 to 9 percent of our
output to essentially unproductive purposes...
Second, there is the existence of effective
monopoly power in key sectors of the
economy, which, over the long haul, has
probably pushed prices higher than they would
have been under more competitive conditions.
Third, we have a federal tax structure that,
increasingly, is inflationary rather than the
reverse. This is because of the growing
importance of payroll and sales taxes in the
federal picture, both of which are generally
passed on to consumers in the form of higher
prices.
Finally, there is a growing dissatisfaction
with the distribution of income and wealth -a
dissatisfaction that leads individuals and
organized groups to push ard to improve their
own wages and incomes as compared to
everyone else...
If we really want to do something
meaningful, we have to attack these fundamental
causes. This means less military spending,
combined with a real attack on concentrated
economic power and a return to a competitive
market economy. This is something that
everyone pays lip service to, but few really
want because the adjustments may be too
painful. It also would involve real rather than
token tax reform, for unless we rid federal
income taxes of the many loopholes which still
exist, there isn't much hope of getting rid of
inflation-prone sales and payroll taxes. Tax
reform, too, would be the one single, effective
measure we could take to lessen the existing
maldistribution of income and wealth.
If we do not make the effort to return to
our historic tradition of a competitive
economy, the alternative is the corporate state
that we see looming ahead on the route laid out
by Phase II. I don't believe that this is the price
we really want to pay for an anti-inflationary
program that probably can't succeed under the
best of circumstances!
THE DAILY NEBRASKAN
of
Jack Nolan Trio
Friday and Saturday Nite
8:30-12:30
appearing at the
RENDEZVOUS LOUNGE
NORTHEAST LANES
HIGHWAY 6 and 77
DAILY AT- 12:30,
2:00, 3:30, 5:00, 6:30,
8:00, 6:30
fTH till .MM I,. ! illii'l l l 1.
LATE SHOWING
& SAT.
00 P.M.
HELD OVER 2ND HILARIOUS WEEK
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Irtnt and starlets In non-stop
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HARRY NOVAK PRESENTS
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RATED X
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and
$100,000.00 RUG
One of the most historical rugs
to be presented to
Czar Nicholas II will be on
display during the exposition
to be held at the Holiday Inn
at the Airport
(1101 West Bond)
SUMDA Y
NOVEMBER 14, 7977
at 7:00 pm
The exposition will be followed
by an auction at 8:00 pm of a
collection of fine hand women
rugs from Persia including
Kerman, Kashant Bokhara, Tabriz,
and also, for the first time, rugs
from Romania.
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