Progress on Several Fronts

Thanks to laws that are already on the books, and because of the sheer power of his office, President Nixon has had virtually a free hand in setting strategy to revive the economy and retard inflation. But key sections of the plan, notably some stimulative tax cuts, still need the consent of Congress. Last week Nixon's legislative proposals moved measurably closer to reality. After three months of highly partisan debate, they still bore a remarkable resemblance to Nixon's original package.

A $15.8 billion tax-reduction bill passed a House-Senate conference vote, and will probably be on Nixon's desk by the end of this week. By whittling down some of the larger tax breaks allowed by the Senate, the conference members kept the total loss in federal revenue to almost exactly the level requested by Nixon, though the bill is now weighted more in favor of individual taxpayers than the President wanted. It remains to be seen whether the tax measure contains enough horsepower to do its part in stimulating the nation's economy. That is an increasingly urgent task; in November, despite the President's program, unemployment rose .2% from the previous month to 6%.

The tax bill's main provisions:

> An increase in the personal income tax exemption from $650 to $675 this year, and to $750 in 1972. The taxes of a childless couple earning $15,000 would be cut by $12 this year and another $22 next year; for a couple with two children in the same income bracket, the reductions would be $22 and an additional $44.

> A repeal of the 7% excise tax on new cars, retroactive to Aug. 15. All automakers except American Motors, which decided on its own to stop charging the tax, will be required to make refunds averaging $200 per car.

> An investment tax credit that will allow businessmen to deduct 7% of the cost of all new plants and domestically produced equipment for which they contracted after last April 1.

> A plan that will allow corporations to set up domestically located international sales corporations (DISCs), which could defer taxes indefinitely on half of their earnings from export sales, provided that the funds are used in ways that will expand overseas sales still further.

Meanwhile, a bill extending Nixon's wage-price authority through April 30, 1973, was passed by both the full Senate and the House Banking Committee. It probably will go before the full House next week, and should be ready for Nixon's signature before Christmas. Very importantly, both Senate and House versions provide for retroactive payment of most wage increases that came due during the freeze. Nixon reluctantly agreed to payment of as much as half a billion dollars in back wages and benefits, which union leaders regard as part of an unbreakable contract, in order to erase labor's last reasonable excuse for balking at Phase II controls.

Price of Weakness. The three-week-old coal industry settlement continued to dominate Phase II wage-price rulings. In a brave move, the Price Commission, headed by tough-minded C. Jackson Grayson, voted to allow coal company operators to pass on to consumers only three-fifths of the inexcusably inflationary 15% wage-and-benefit raise that the Pay Board had approved for coal miners. But three days later, without explanation and with very little note, it reconsidered its own decision and asked coal companies to resubmit their proposals with "more data." Commission staff members hinted that the final ruling will allow companies to raise their prices "about a hair" more than the first decision. Any further increase would severely dampen the much-needed message contained in the commission's initial vote--that large employers may well have to pay out of their own pocket for weakness at the bargaining table. By its earlier decision, the commission also tossed a well-earned rebuke at the business representatives on the Pay Board, who had joined with labor members in approving the coal wage contract.

Thus chastised, business members of the Pay Board apparently became more determined to be effective. They hauled up for review a second high settlement: a three-year agreement reached Nov. 11 between Chicago's Carey Grain Corp. and a Longshoremen's local, providing for increases in wages and benefits of about 40%. The Board was tipped off to the contract by Carey's competitors, who feared that they would be forced to accept the same terms.

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