A Strange Mix of Confidence and Doubt

There is more than a touch of schizophrenia in America's midyear mood. The nation remains well disposed toward Jimmy Carter, yet lacks confidence in his ability to handle the uncertain economy. Americans complain that the Government is not doing enough to whip inflation, yet want the Government to quit meddling so much in their lives. They want Carter to do something, yet doubt that any one individual--even a President--can solve the nation's problems.

According to a survey conducted for TIME by Yankelovich, Skelly & White, 58% of the people regard Carter as a leader who can be trusted, down only 4 percentage points since March (see following story). At the same time Americans are increasingly uneasy about inflation, and only 25% of those surveyed expressed confidence in Carter's ability to handle the economy, a plunge of 8 points since March. That general skepticism appears to be reflected in the skittish behavior of the stock market, a pretty fair indicator of business confidence. The Dow Jones average has slid steadily, hitting a low of 898.66 last week then burping back slightly to 912.23; at the end of 1976, the Dow stood at 1,004.65.

The public's apprehensions are not shared by economists interviewed by TIME correspondents across the country. Most agree with the Administration that inflation, now at an annual rate of 10%, will be slowed in the second half of the year--unless wage settlements in labor negotiations get out of hand. Last week the Labor Department released two figures that strongly buttressed the Administration view. Wholesale prices rose in May by only .4%, the smallest rise in nine months and less than half the 1.1% rise in April. At the same time, the unemployment rate dropped to 6.9% in May from April's 7%, the lowest level since November 1974 and a heartening decline from January's 7.3% figure.

Winter's Cold. "The worst is over," says United California Bank Economist Raymond Jallow in Los Angeles. Jallow and other economists believe that the price spurt in the past months was due mainly to the economic effects of last winter's cold weather. Moreover, Townsend-Greenspan & Co., the New York consulting firm headed by Alan Greenspan, a member of TIME'S Board of Economists and formerly Gerald Ford's chief economic adviser, notes that "the chances of a significant acceleration in inflation rates as the economy moves into 1978 appear to be diminishing."

One reason: the shift by Federal Reserve Board Chairman Arthur Burns to a tighter monetary policy. Burns fears that an overly rapid expansion of the money supply might fuel inflation (TIME, June 6). His view was disputed last week by Budget Director Bert Lance, who complained that the Fed's stinginess has prompted major banks to raise lending rates for their best customers to 6.75%, up from 6.25%. Lance believes that the increases could worsen inflation and weaken the recovery by pricing loans out of many businessmen's reach.

Many business and financial leaders remain skeptical about the Administration, despite Carter's conservative economic policies. Says Albert H. Cox Jr., chief economist at Merrill Lynch in New York: "The spending plans of Congress and the proposals by the Administration are a parade of inflationary announcements. Somebody has got to hold the line on spending." Carter has promised to do just that by vetoing bills that he considers to be too costly. But he further added to businessmen's fears last week by stepping up his support for a consumer protection agency, which most of them believe would increase their costs (see story page 16).

Carter's advisers are banking on his broad popularity to offset the business community's concerns. A majority of Americans seem willing, so far, to give him the benefit of ihe doubt. Carter also benefits from a post-Viet Nam, post-Watergate, post-Richard Nixon phenomenon: lowered expectations. Few Americans feel that a President can work magic or cure all ills. "That may be a plus," says Carter Pollster Pat Caddell. At the moment, it may be one of the biggest that Jimmy Carter has going for him.

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