The Let's-Talk Strategy

The misnamed tin can, symbol of Americans' compulsion to litter, took on a new kind of emblematic role last week. In a rare display of Government-industry amity, U.S. Steel Corp. announced that it will raise the price of the tin-plated steel used to make most beer, vegetable and fruit cans by an average of 4.8%, and the White House publicly bestowed its blessing on the increase as a relatively moderate one. More important, TIME has learned that the Carter Administration got U.S. Steel to shave down the increase as a result of private talks that constituted a model of how the Administration's policy of "prenotification" of wage and price boosts is supposed to work.

Prenotification is a key part of Carter's anti-inflation strategy. The President does not want to let wage and price boosts follow their own course; yet he has ruled out controls, and is reluctant to proclaim hard-and-fast guidelines businessmen and labor leaders would be expected to follow. That leaves jawboning against individual pay and price hikes, but Carter would like to avoid noisy public confrontations. So his advisers have been passing the word that corporate and union chiefs planning increases that could significantly affect the economy should talk them over with Administration officials privately in advance.

First Feelers. Even before his Inauguration, Carter put out the first feelers. When steel mills in December raised prices 6% on the flat-rolled metal that goes into autos and appliances, Carter discreetly asked through intermediaries if executives would be willing to reduce the raise. Steelmen refused but got the point for the future. In mid-January, U.S. Steel Chairman Edgar B. Speer visited Bert Lance, who was about to become director of the Office of Management and Budget, to tell him that a raise on tin plate was coming. Lance asked him to return to Washington to talk about it, and a week after the Inauguration, Speer met with Lance, Treasury Secretary Michael Blumenthal and Council of Economic Advisers Chairman Charles Schultze in Lance's office. They agreed that a 4.8% increase would be justified by rising costs.

U.S. Steel President David M. Roderick says the talks were "notification, not negotiation." But Administration officials told TIME Correspondent Philip Taubman that Speer had initially proposed an increase substantially larger than 4.8%, and was talked out of it--by arguments that are still unknown. The White House, in publicly approving the boost, noted that it was considerably lower than the average 6.5% rise in industrial products in 1976. Informally, Lance was jubilant. "This is a major milestone," he says. "It shows that there can be cooperation between business and Government and they can work together to reduce the threat of inflation."

Perhaps--but many problems with the prenotification strategy remain to be worked out. Union leaders wonder how they can reasonably be expected to notify the White House of coming wage boosts that must be negotiated with management. Businessmen are generally dubious about anything that smacks of controls, and some fear prenotification may be a step in that direction. Others are willing to talk increases over with the Administration in advance--provided that they are asked to do so. Many say they have not been as yet.

Eventually, notifications of planned price increases are supposed to come to the Council on Wage and Price Stability, a body that Gerald Ford deliberately kept powerless. Carter intends to double the council's staff to 90 and is looking for a topnotch economist to head the body. When he finds one, Administration strategists fear, COWPS may be deluged by notices of price increases from thousands of eager-to-please widget makers; Carter's people will have to work out rules specifying just which major businesses ought to tell COWPS about what price boosts. And, despite its reluctance to proclaim guidelines, the Administration has to set for itself some standards to gauge which increases would be justified and which would be inflationary.

Loud Fights. For all that, Administration officials are sure that the prenotification strategy will work. Says one White House aide: "Once word gets around that the President wants notification and is serious about COWPS, there will be plenty of response." Du Pont Chairman Irving Shapiro says industry can live with the program, "if it is carefully tailored" to products that have a major effect on the economy. Many businessmen are likely to agree when they consider the alternatives: loud fights with the White House or controls.

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