Cosmetics for Consumers

FACED with a tidal surge of public worry about inflation, President Nixon last week moved to shore up the sagging voluntary price controls of Phase III. But he stopped far short of reimposing the tough controls of Phase II--let alone ordering the temporary wage-price freeze that more and more of his economic critics are demanding. His actions brought some cheer to Wall Street, where stock prices recovered somewhat from what had become a headlong rout, but elsewhere left as much doubt as ever that the rise in living costs can be checked.

The President's most important move was to require the 600 or so U.S. companies that have annual sales of $250 million or more to give the Cost of Living Council 30 days' advance notice of substantial price boosts. Prenotification will be demanded if an increase would raise the average price of all products sold by a company more than 1.5% above the level of Jan. 10. During the 30 days, the COLC can reject the boost or investigate its justification--but if it does not move, the company will be free to make its increase. That is a pallid version of the system in effect during most of Phase II, when companies with sales of $100 million or more had to get explicit prior approval to make any price increases at all, and had to back their applications with detailed figures to prove that the boosts were forced by higher costs.

The President also ordered big companies to make "full and detailed" reports on all price hikes that they have already put into effect during Phase III; if these boosts are found to be excessive the COLC can roll them back. But at a White House briefing, Treasury Secretary George Shultz indicated that he does not expect that to happen often. He denied that price increases by large corporations have contributed much to the scorching inflation rate. Nonetheless, consumers continue to struggle with oppressive living costs. Nixon himself conceded in a statement that "price increases will probably be higher than we would want for some months."

That may well understate the case. Last week's price news was a mixture of good and bad, but the bad predominated. The Wholesale Price Index for April jumped 1%, well below the record 2.3% rise of March but still a huge increase for a single month. Food prices declined slightly for the first time in months, led by a drop in meat that partly reflected the recent nationwide meat boycott. But prices for a broad range of industrial commodities leaped 1.4%, the largest one-month rise since 1951 and an ominous indication that inflation is spreading from farm to factory. Another portent of gathering inflation: major New York banks last week lifted their prime lending rate to businessmen by one-fourth of 1%, to 7%.

David Grove, a member of TIME'S Board of Economists, dismissed the President's moves as "mere cosmetics." Walter Heller, another board member, asserted that their success will depend on "labor and the weather." So far, union chiefs have shown marked restraint in pay demands, but their forbearance is unlikely to continue unless flyaway prices can be brought back to earth. Last week, for example, the United Rubber Workers, after settling with Goodyear on a relatively moderate contract, suddenly set a strike deadline against Goodrich, indicating that the union is jacking up its demands.

The weather threatens to reverse the recent slight drop in food prices by causing crop shortages. Disastrous floods in the Mississippi and Missouri valleys have sharply curtailed planting of corn, grain and other feed crops. Bad weather is also decimating livestock herds. In some places, cattle are starving because feed cannot be brought to them. So far, farmers are cultivating only about 20% of the land supposedly opened to planting early this year by the Administration's suspension of acreage restrictions. Heller, noting that the President had appealed to farmers to raise production, quipped: "I think Nixon should have appealed to the deity."

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