Why Prices Are Going Up

The U.S. housewife is beginning to stew about food prices. "We ate better four years ago, when my husband was still a student," says Mrs. Roberta Pearson, wife of a junior bank executive in Chicago. "These prices are robbery. The Government seems more interested in the price of rice in Saigon than in food costs in New York," says Manhattan-dwelling Mrs. Joan Lester. Says Boston's Mrs. Irene Krutt: "If I were younger, I'd grab a placard and picket."

When housewives grumble, politicians tremble. Thus the Federal Trade Com mission has launched a full-scale investigation into milk and bread price increases. A House subcommittee has held hearings about bread costs. In New York City, the city council has undertaken an all-out probe of food prices; and State Attorney General Louis Lefkowitz has filed suit seeking a court injunction against further milk price hikes. In Pennsylvania, where dairymen recently posted a 2-c--per-qt. milk price raise, Lieutenant Governor Raymond P. Shafer, the G.O.P. candidate for Governor, persuaded them to roll back to the old 28-c--qt. line until such time as the State Milk Control Commission could hold hearings to determine "a fair price." Last week the commission started its hearings--whereupon some 200 dairymen stomped out and set up picket lines to agitate for higher milk prices.

Seeking a Scapegoat. No investigation is needed to establish the major point: for the first time since the inflationary Korean War period, food prices are climbing faster than overall retail prices. According to the Bureau of Labor Statistics, food has gone up by 3 1/2% in the past year; meat, fish and poultry 7 1/2%, dairy products 5 1/2%. Local situations dramatize the difficulty. In Chicago last week the retail price of butter was 93-c- per lb., up 12 1/2-c- from last year. In Detroit, lettuce has gone from 20-c- a head to 29-c-, cabbage from 10-c- to 15-c- a head, carrots from 19-c- to 25-c- per lb. At Boston's Stop & Shop supermarkets, bacon has soared from 39-c- to 98-c- per lb. within the past four years.

In seeking explanations for the food-price leap, everyone seems to have a scapegoat. Agriculture Secretary Orville Freeman puts at least part of the blame on the housewife. After all, Freeman notes, she insists on buying such processed meals as TV dinners, when the same ingredients would cost her one-third as much if she were willing to cook for herself. The housewife tends to castigate the retail groceryman. Says New York City Markets Commissioner Samuel J. Kearing Jr.: "When the housewife finds that she has to pay 2-c- more for bread, her immediate reaction is that the store owner must be making more. That's unfair." Grocers agree: they in their turn point a finger at the so-called middlemen--the wholesalers, packagers and transportation types. These are indeed charging more for their services, but at the same time they themselves are paying higher labor and tax tabs.

And what about the farmer? Secretary Freeman insists that the farmer is responsible for only a small part of the rising price of food. Figures from his own department contradict him. They show that since 1964, farmers have actually raised their cut of the housewife's grocery dollar from 37-c- to 40-c-; they also show that average farm-family net income has gone from $3,642 to $4,785 in the past two years.

Killing the Cows. In fairness, the farmer should not be blamed for food prices. The real culprit is the Government itself. Since the '30s, Washington has been subsidizing farmers in order to reduce food production. As New York's Kearing explains: "Where the U.S. once had food surpluses, we now have scarcities--scarcities induced by the Department of Agriculture." It should go without saying that food in relatively short supply costs more than food in surplus.

Through Government-subsidized production controls and giveaways to friendly but needy foreign countries, the U.S.'s once-mountainous grain surplus has dwindled to a point below what is needed as a strategic reserve; as one result, domestic wheat prices are up 20% since May. Livestock prices stand at a 14-year high. Because meat is so profitable, many dairymen have decided to slaughter their cows instead of milk them; the 14.6 million dairy cows in the U.S. today represent the fewest since 1900. That in itself has created a new shortage--which at least partly explains the increase in milk prices.

More than anything else, the food-price spiral is part of a broader inflationary pattern that has been stitched by Government policy. Considering the cost of other things, today's food prices are far from exorbitant: the ordinary American family spends 18% of its after-tax income to eat--and that average is the world's lowest.

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