OF WAR AND INFLATION

WAR and inflation, those classic corrosives of society, last week sorely agitated the nation. From New York to San Francisco, tens of thousands of demonstrators paraded to protest the Viet Nam conflict, which now ranks as the fourth costliest war in U.S. history in terms of lives. As of the week ending March 29, combat deaths totaled 33,641, surpassing the Korean War total by 12. Of these dead, 10,000 have fallen since the Paris peace talks began. These grim figures provided an added spur for the peace marchers. With banners demanding BRING THE TROOPS HOME and END THE WAR, they swept down broad avenues, through thick Easter crowds, in Chicago and Atlanta, Seattle and Los Angeles.

The war, with its politically damaging casualty lists and its endless thirst for dollars, was also agitating Richard Nixon. But his prime concern appeared to be inflation. With the Administration barely ten weeks old, throttling inflation has plainly emerged as the President's No. 1 priority, and the word has gone out from the White House that until the economy is cooled off every other problem, however pressing, must be subordinate to it. "It has to be dealt with," Urban Adviser Pat Moynihan said last week. "There is no liberal or conservative position on it. Only a damned fool would ignore the problem."

Far from ignoring it, the President last week confronted it directly with action on two fronts: 1) With his approval, the Federal Reserve Board moved to intensify the squeeze on cred it. 2) At a meeting with domestic policymakers at his Key Biscayne retreat, he reviewed efforts to trim the budget enough to produce a surplus of at least $4 billion. Earlier, the Pentagon announced some cutbacks in Viet Nam spending that might be merely budgetary --but might also be a signal to Hanoi of deescalation.

Out of Reach. Nixon's determination to do something about the overheated economy was prompted by a realization that an "inflationary psychology" is taking hold among Americans. The 10% tax surcharge enacted last June has not slowed spending. Prices continue to rise at the briskest pace since the Korean War. Corporations, borrowing to expand their capacity by 14% this year, are pricing money out of the reach of home buyers, small businessmen, school districts and local governments.

Disturbed by the corporate borrowing, Federal Reserve Board Chairman William McChesney Martin Jr. warned that it was time to "pressure banks to ration credit." After the stock exchanges had closed for the three-day Easter weekend, the board moved on two fronts. First, it raised the discount rate (the interest that banks pay for the money they borrow) from 5 1/2% to 6%. The increase, second in four months, brought the rate to its highest level since the 1929 crash. To make money more scarce as well as more costly, the board also increased the amount of cash that banks are required to keep in reserve. In effect, the board "froze" some $650 million in lendable funds, which translates into a withdrawal of more than $2 billion in credit from the economy.

As a result, housing, which has only recovered from the 1966 squeeze, seems certain to suffer again (see BUSINESS). Car sales may also slow down. But no one seems very alarmed. "I don't see any drastic reaction," says Economist Beryl Sprinkel of Chicago's Harris Trust & Savings Bank. "It just seems to confirm the view that this time the policymakers really mean business."

Nixon does, certainly. When he took office, he inherited a $195 billion budget with a projected surplus of $3.4 billion. But in a matter of weeks, he realized that "uncontrollable" increases in debt interest and other costs would inflate the budget to $197 billion and trim the surplus to a bare $1.7 billion. Nor did Nixon's own department heads prove very sharp with their pencils. Their recommendations totaled $1 billion more than the original Johnson budget.

Very Disappointing. In a sharply worded memo, Nixon termed the economizing effort "very disappointing" and ordered another try. A prime target, of course, is the Defense Department. Nixon wants Defense Secretary Melvin Laird to sweat $2 billion out of the $80 billion budget. In his first attempt, Laird managed to cut only $550 million. Nixon told him to try again, and this time Laird brought the reductions up to $1.1 billion, chiefly in "ground munitions," including the anti-ballistic missile (ABM) system, which will take a $34 million cut.

Most startling, Laird proposed saving $185 million a year by curtailing one of the more effective weapons that the U.S. has in Viet Nam: B-52 raids. Despite what he called a "strong recommendation" from General Creighton Abrams, the U.S. commander in Viet Nam, Laird suggested reducing B-52 sorties by more than 10%, from 1,800 to 1,600 per month. The savings would come chiefly in the planes' 30-ton bomb loads, which cost $42,000. There would be little tactical impact; probably the same number of B-52 missions will be flown as before, but they may involve five planes rather than the standard six.

Both the White House and the Pentagon publicly insisted that the B-52 move was "strictly budgetary." But there was considerable speculation that the cutback, coming at a time when the Communists are pressing an offensive, was intended primarily as a political signal to Hanoi, indicating Washington's eagerness to end the war. Fueling such speculation was Laird's admission that "private"--i.e., secret--talks aimed at a settlement are under way in Paris. In addition, New York Times Columnist James Reston claimed that Nixon may go further, by withdrawing as many as 100,000 troops this year.

No Action. The Administration's emphasis on economy fairly guarantees that there will be no "Nixon domestic program" worthy of the name for the foreseeable future. Head Start, about which Nixon is enthusiastic, appears safe. The Job Corps is in disfavor, but will be retained, on a somewhat reduced scale until an alternative is worked out. Programs to subsidize hiring of hardcore unemployed will be expanded.

But Nixon has shelved plans for linking social security payments to cost-of-living increases, which would cost perhaps $4 billion a year. He may settle for no more than a pilot program to start off his ghetto-industry tax-incentive scheme. Moynihan will get no action on his guaranteed annual income plan. George Romney, Secretary of Housing and Urban Development, will get more funds to work on the technology of low-cost housing, but less for the Model Cities program. Health programs will probably concentrate on existing services. Even in the Justice Department, where a new, high-priority anticrime program is being fashioned, an effort is being made to hold down costs.

Elbow Room. While the inflation fight is necessary, it will obviously aggravate impatience with delays in domestic programs and with the war. The Democrats are losing no time in warning that Nixon's anti-inflationary efforts could also cause a spurt in unemployment. But the extremely low rate of joblessness (currently 3.3%) should give the Administration a bit of elbow room to fight inflation. The consequences of dodging the fight have already been serious enough. After three years of steady inflation, a family that had an income of $10,000 in 1965 would need $11,330 today just to stay in place.

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