Economic Controls

August 13, 1969

Report Outline
Debate Over Ways to Combat Inflation
Direct Economic Controls in Past Wars
Wage-Price Guideposts and Alternatives

Debate Over Ways to Combat Inflation

Talk About Wage, Price and Credit Controls

Talk among economists is turning to the possibility that the federal government will have to invoke wartime controls over wages, prices, rents, bank lending and so on. The talk is stimulated by the inability of monetary and fiscal restraints thus far in 1969 to halt the nation's worst inflation in two decades. “If by the year-end the inflationary spiral shows no sign of responding to general monetary-fiscal restraint,” the monthly Economic Letter of the Cleveland Central National Bank observed in June, “new approaches will have to be considered, and direct controls is one method that has worked in the past.”

A Gallup Poll published in early July indicated that the American public was inclined to favor a freeze on prices and wages and to oppose an extension of the 10 per cent surcharge on federal income taxes. Economist Robert Lekachman commented that “The public… may have a better grasp of the necessities of national economic policy than do the professional economists, who are perhaps too bedazzled by the beauties of free markets to notice how little of the economy matches their ideal.”

But in government, only Treasury Secretary David M. Kennedy has publicly suggested that direct controls over the economy might be forthcoming. President Nixon has specifically and strongly rejected the notion. “The Administration has ruled out wage and price controls as a way of dealing with inflation under conditions that are now foreseeable,” a White House press statement said on July 16. Presidential press secretary Ronald L. Ziegler added that Nixon was “not for controls” and had “consistently taken this position.” It was recalled that Nixon served for eight months in 1942 as a lawyer in the Office for Emergency Management—an experience that is known to have instilled in him a strong distaste for the complex and sometimes cumbersome economic control machinery.

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Economic Analyses, Forecasts, and Statistics
Inflation