Prices Leap, Tempers Rise

Pushing through supermarket aisles thronged with anxious shoppers last week. Housewife Katie Wolff of Winnetka, Ill., an affluent Chicago suburb, was exasperated. "Nixon has lost control of things," she said. "Prices are so high we haven't had pork chops or steak in a month." Mrs. Joan Sheets of Los Angeles had the same complaint: "They tell us to eat less expensively, but just try finding a cheaper cut of meat. Even bologna is $1.30 a pound."

In the first full week of Phase IV, each costly ring of the check-out cash register seemed to eat away at public patience with the Administration far more than the revelations of the Watergate scandal. To beat the worst of the expected price bulge, shoppers crammed into supermarkets, piled their carts high and left empty spaces on the shelves. Appliance dealers in Atlanta could not meet demand for freezers from consumers wanting to stock up on meat.

Food processors, wholesalers and retailers, freed from the freeze that remains on most of the economy until Aug. 12, moved swiftly to pass along all increased costs of uncontrolled raw farm goods. In New York and other large cities, eggs rose from about 89-c- per doz. in supermarkets to 98-c-, and as high as $1.19 at small groceries. Center-cut pork chops in Chicago climbed 20-c- per lb., to $1.69; they were $1.89 in Los Angeles. The Hormel Co. fattened the price of a 12-oz. can of pork-based Spam by 16-c-; it is now selling for about 85-c-. Chicken was up 10-c- per lb., to about 65-c- in Atlanta, 69-c- in New York --and rising.

Prices for fresh produce in season--lettuce, sweet corn and squash--remained stable or even dipped as supplies increased. But canned fruits and vegetables rose slightly, and are expected to jump in the months ahead, in part because of the Teamsters' strike against West Coast canners. Wheat farmers are holding on to much of their harvests in hope of even higher prices later, and flour and bread snowed no decline, as they usually do in summer.

Treasury Secretary George Shultz and Herbert Stein, chairman of the Council of Economic Advisers, cling to the fragile hope that consumers will simply refuse to buy costlier foods and thus slow price rises soon. Portents are not good, partly because of the sharp slowdown in beef production, which remains under freeze until Sept. 12.

Some shortages are certain; though they are not likely to be as serious as cattlemen and other food sellers claim. Ranchers are holding back steers so that they can get a better price after the freeze. Packinghouses in Kansas, Iowa and elsewhere are closing, causing big layoffs and cuts in output. In the first two days of last week, 200,000 cattle were slaughtered--only three-quarters of the usual number. Clarence G. Adamy, president of the National Association of Food Chains, predicts a "severe shortage" of beef by this week. One result: prices of pork and poultry will go even higher.

Farmers have been the main beneficiaries of the surge; the Agriculture Department estimates that their income this year will be more than $22 billion, up a hefty 40% since 1970. To its credit, the Nixon Administration is working to eliminate all farm subsidies and planting limitations. Its goal is to boost production enough to hold domestic prices down and meet growing foreign demand. Yet the still powerful farm lobby has just pushed a bill through both houses of Congress that would continue the unfair handouts--and base them on something close to today's oppressively inflated farm prices.

The bill would cost an estimated $3 to $4 billion a year. It provides for a direct dole to growers of wheat, cotton and feed grains when prices drop below fixed target levels. The targets are much higher than the historical market price of these commodities, thus increasing the chances for bigger handouts and locking an inflationary bias into farm policy for the next four years. For example, at this time last year the selling price of wheat was $1.69 a bushel: corn was $1.30 and cotton 35 cents. In the Senate version of the bill, the Government would make up the difference to farmers if the price of wheat fell under $2.28 a bushel, corn below $1.53 and cotton under 43 cents.

Moreover, the bill contains an escalator that would raise these targets as the cost of farming increases. The bill limits subsidy payments to a single farmer to $20,000 per crop. In the Senate version, big farmers could sidestep the law by temporarily parceling some of their land out to relatives and collecting the maximum subsidy four or five times on the same crop. Though the White House has threatened to veto the measure unless subdivisions are specifically barred and the escalator clause scrapped, there is no chance now to eliminate farm subsidies entirely.

Meanwhile, consumers are confronted with the prospects of more expense in nonfood areas. The Cost of Living Council last week lifted the freeze on clothing manufacturers, a move that will soon be reflected in the price tags of the new fall lines. Uncontrolled interest rates keep soaring; major banks last week raised their prime lending rate to businessmen from 8 1/4% to 8 1/2% and let it be known that they will soon lift it again to 8 3/4%--equaling the record set just before the money crunch of 1969. This is helping pull mortgage rates up to 8 1/2% in some parts of the country amid predictions that even higher home-loan fees are imminent. Thus the American consumer enters Phase IV with only three things to worry about: the rising cost of food, clothing and shelter.

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