Schizophrenia

The mellow voice of Price Administrator Ellis Arnall rose tremulously as he discussed the inflationary effects of the steel price increase. It will "set off another round of inflation," said Arnall, and add $100 a year to the average family's budget. The echo of Arnall's tones had hardly died when his boss, Economic Stabilizer Roger L. Putnam, flatly contradicted him. There had been a "lot of talk" about steel setting off a round of inflation, Putnam said evenly, and it just isn't so. Although big steel had held "a loaded gun" at the Government's head to get the increase, Putnam said, the industry will be forced to absorb most of the cost.

Slapped, Ellis Arnall sounded another warning. The drought in Southern and Eastern states, said the former governor of Georgia, will cause food prices to "skyrocket." His lips were hardly closed before bald Secretary of Agriculture Charles Brannan baldly contradicted him. Said Brannan: The drought will not drive food prices up; its most serious impact has not been on food crops.

The Albatross. Behind this administrative schizophrenia (a word put in the campaign by Democratic Candidate Stevenson) lies a serious tactical problem for the Democrats. The Administration realizes that inflation, the high and heightening cost of everything, will be an issue when the voters go to the polls Nov. 4. The Administration wants to take the issue from around the Democrats' neck and hang it on the Republicans'. Putnam and Brannan did not agree with Arnall on how that should be done.

Arnall himself came forward with a suggestion for transferring the albatross. He strode in to see Harry Truman, suggested that the President call Congress back into session to strengthen price controls. The President could call on Congress to reverse the "crippling amendments" adopted last spring with Republican support. Truman, who knows how to get votes out of a can of peas, promptly announced that he was "considering" such a call. That brought the inflation issue from the household arts and financial pages to Page One.

But Harry Truman was more apt to consider than he was to call. He had made political hay with his dramatic call of a special session on "Turnip Day" 1948, but the situation is quite different in 1952. There is no Republican 80th Congress to blame for all the things that have gone wrong; the Democrats have had a clear majority for four years. Because of the shotgun reconciliation at Chicago, the Truman Democrats cannot gracefully belabor their much-whipped boy, the Republican-Southern Democrat coalition. The Southern Democrats are back in the family, and one of them is even on the ticket.

This troublesome situation was quickly illustrated when South Carolina's Senator Burnet R. Maybank, chairman of the controls-controlling Banking & Currency Committee, spoke up. Present controls are adequate, he said. Then he talked about inflation in terms of wages, which is almost heresy in the Truman Administration: "The wage increases which recently have been allowed in the steel industry and in other industries are certain to have an inflationary effect." A special session, with Maybank and other Southerners talking like that, would de-unify the Democratic Party in short order. Adlai Stevenson, who had officiated at the reconciliation ceremonies in Chicago, obviously would not want that to happen.

Inflation by Law. There was no doubt that the 82nd Congress this year weakened the price-control structure (e.g., controls on canned foods were wiped out), as Ellis Arnall and others charged. But the foundation was a crumbling mass before that happened. Some of the crumbles:

1) Congress and the Administration, always mindful of the farm vote, had never established any effective control of farm prices, which are food prices in the raw;

2) the Administration, never forgetting the labor vote, had never held effective control over wages; 3) the Federal Reserve Board, under congressional pressure, lifted credit controls last May, after FRB had made a brilliant demonstration of how tighter credit lowers prices. The month after FRB abandoned its orthodox policy, installment credit jumped $593 million to an alltime high of $14.4 billion.

These inflationary actions illustrate the Administration's policy: yammer against inflation, but actually let it ride. There is no indication of a will to change that policy. Last week, realizing that he was getting nowhere, Arnall resigned as of Sept. 1, with a pointed comment: "Inflation will be constant and steady for the months ahead. I say to those who decry this prediction, just wait and see."

Another American troubled by the political and official inflation of U.S. economy spoke up on the subject last week. Said Elder Statesman Bernard Baruch: "Inflation has been legalized by the Government itself." Between now and November, it will not be easy for the Democrats to place the blame for that legalization on anyone but themselves.

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