Holding Down Those Prices

PHASE II

FOR all the criticism, confusion and even chaos generated by Phase II controls, they nonetheless seem to be working. Last week President Nixon, who has no love for the controls, hinted that they might be dropped in 1972. He expressed hopes that the campaign to curb inflation "can be continued and completed in the coming year."

The nation was particularly cheered by last week's report that in November, the month in which Phase II got started, the Consumer Price Index rose at an annual rate of about 2.4%. That was roughly double the October rate but well below the 4.1% average earlier this year. Indeed, from September through November, living costs went up at a rate of only 1.7%. Herbert Stein, the President's chief economist, warns that prices may spurt briefly during December and January because some previously frozen increases will be allowed to rise in Phase II. Still, President Nixon said that he is confident that consumer prices will drop to an annual rate of 2% to 3% for the coming year--a figure that he holds would amount to victory over inflation. Economists generally predict that the overall rate of inflation in 1972 can be held to 3% or a bit more.

Rent Rules. Contributing to the spreading belief that living costs can be contained was the Price Commission's long-awaited rent decision. The commission calls for guidelines to hold rent increases to a maximum of 3% or 3 1/2% for the coming year. A major exception: more than a million rent-controlled units in New York City. The city government will be allowed to permit rent hikes of up to 7.5% for these units beginning Jan. 1 as previously planned.

Landlords seeking rent boosts on the basis of increased operating costs --labor, fuel, loan interest--are limited to only 2.5%. If expenses rise above that figure, they must be absorbed by the landlord himself. He will, however, be allowed to pass on to tenants the cost of increases in property taxes or municipal services. Beyond that, landlords can get rent rises of up to 10% for capital improvements, such as remodeling and installing air-conditioning systems. Any demands above that must be approved by the Internal Revenue Service. The IRS will investigate complaints from tenants who believe their rent adjustments are illegally high.

Tougher Stand. A stiffening attitude is also evident on the Pay Board. In two previous rulings, the board's five business representatives sided with its five labor representatives in approving coal miners' and railway signalmen's contracts that were far above its 5.5% limit. Stung by criticism that they were knuckling under to labor to avoid strikes, the businessmen are now taking a tougher stand. They plan automatically to challenge all wage settlements above 7% in the second and third years of long-term contracts signed before the August freeze. Getting such boosts approved has been a prime goal of labor members, who have been ready from the start to scuttle the controls--if they could get away with it. If businessmen persist in this challenge, labor members could possibly quit the board. In that unfortunate event, the President might have to go directly to the people and seek to rally public opinion against the willful actions of some labor leaders.

Significantly, the Pay Board's business members also joined with the public members in refusing to approve a settlement granting aerospace workers a 12% wage rise next year. Though the board adjourned without reaching a decision, the business members made it clear that they want to limit the aerospace workers to an 8% increase; labor representatives are holding out for 12%. The public members are suggesting a mediating 10%. If labor is beaten down, an aerospace strike could erupt; but with unemployment already so high in the industry, there is a big question as to what--if anything--the workers stand to gain by a walkout.

Pay Board members were much more amenable in another matter: a request from the Salvation Army to raise its officers' salaries. Though members of the charitable organization are exempt from controls, Board Chairman George H. Boldt--infused with the holiday spirit--granted formal approval anyhow. Married officers who formerly earned $57.50 a week will now go to $60.50--with a guarantee of advancement to $66 in 15 years.

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