TIME: Almanac 1993/TIME Almanac 1993.iso/time/election/68elect/68elect.016

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                                                                                August 30, 1971

THE ECONOMY

Nixon's Grand Design for Recovery


     For the second time in two months, President Richard Nixon
reversed his own and his party's policies with a swiftness and
style that is virtually unmatched in modern American politics.
What he did in foreign policy with his approach to Peking he
outdid in domestic affairs last week. Casting aside "the game
plan" he has so long and implacably pursued, the President
announced "the most comprehensive New Economic Policy to be
undertaken by this nation in four decades." The claim was
merited. A show of firm leadership was clearly needed in order
to get the U.S. industrial machine running smoothly once more.

     He indeed laid out the most sweeping changes since the
Hundred Days of the New Deal in 1933, when Franklin Roosevelt
took the U.S. off the gold standard and began to get the
Depression-racked economy into gear. The Nixon program had
immediate and dramatic impact at home: on the first day the
Dow- Jones average took a record jump on the New York Stock
Exchange. But abroad there was consternation. Nixon's measures
threatened a serious reversal of the postwar trend toward freer
trade. They also ripped the fraying international monetary
agreements that have made expanded trade possible. Canada and
Japan, America's two largest trading partners, sent anxious
emissaries to plead for explanations.


Declining Confidence

     The Tokyo exchange led other overseas markets into a
disastrous slide. Foreign exchange markets shut down, helpless
in the currency confusion. Europe's finance ministers
interrupted their vacations and rushed to Brussels to try to
patch up the international monetary order. Only three years ago,
U.S. Treasury Secretary John Connally had stoutly told a Munich
bankers' convention that the dollar would not be devalued. Now
it almost certainly will be.

     Many factors coalesced to force the swift move. Pollster-
Analyst Albert Sindlinger found early in August that the
consumer confidence index had fallen to 55% -- lower, he said,
than during the 1957 recession. Only 27% of those he interviewed
wanted to see Nixon re-elected. Secretary of Commerce Maurice
Stans warned that this year the U.S. may be running a trade
deficit for the first time since 1893. House Ways and Means
Chairman Wilbur Mills was getting ready to hold hearings on his
own proposals for the economy. The final blow was a devastating
new attack on the long- weakened dollar in the world's money
markets.

     Nixon imposed direct controls on prices and wages for the
first time since the Korean War. Confronted with a situation of
inflation-cum-unemployment in which the old textbook remedies
were no longer working, he seemed to be committing the Federal
Government to an intimate role in major pay and pricing
decisions by U.S. business for some time to come. The changes
were all the more remarkable for having been agreed to in the
course of one short weekend at Camp David.

     Politically, it was a particularly satisfying coup for the
Republicans, as the President's measures were in several cases
neatly lifted from the proposals of his Democratic critics. Not
only did he take the Democrats' advice, but he also used as his
authority for a key order legislation that the Democrats had
forced upon him. And the stakes were high. His trip to China is
almost certain to bring him political rewards, but come
Election Day in 1972, mending the nation's pocketbook could pay
off at the polls as Peking never would.


The President's Package

     The program the President has ordered, or asked Congress
for, separates into eight parts:

     -- The U.S. will no longer convert foreign-held dollars
into gold; temporarily, at least, the dollar will no longer be
the foundation of international monetary dealings, as it has
been since 1944.

     -- With minor exceptions, all prices, wages, rents and
dividends are frozen at present levels for 90 days.

     -- A Cabinet-level Cost of Living Council, headed by
Treasury Secretary John Connally, will preside over the freeze.

     -- Government spending will be reduced by $4.7 billion.
Federal payrolls will be cut 5%; foreign aid will be pared by
10%; and the effective dates of Nixon Administration programs
for revenue sharing and welfare reform will be pushed back.

     -- The 7% excise tax on automobiles will be repealed
retroactive to Aug. 15; that means an average saving of $200
per car, which should be passed along to the buyer.

     -- Industry will get a 10% tax credit on new investment
for one year; the credit will thereafter become 5%.

     -- A $50 increase in the federal personal income tax
exemption will take effect at the beginning of 1972 instead of
a year later; this should release an extra $2 billion to
consumers next year.

     -- Most imports will be subjected to a 10% surcharge,
which in most cases will make U.S. goods more competitive in
the domestic market with those from overseas.

     Nixon's proposals were designed 1) to stimulate the
domestic economy by encouraging industrial investment and
consumer spending and making imported goods more expensive, and
2) to blunt the mounting attack on the wavering dollar. Said
the President: "Every action I have taken tonight is designed
to nurture and stimulate [the] competitive spirit, to help us
snap out of the self-doubt, the self-disparagement that saps
our energy and erodes our confidence in ourselves." Once more,
Nixon was handling a crisis, and he seemed to be enjoying it
all hugely. Observes TIME Washington Bureau Chief Hugh Sidey:
"Nixon clings to what is familiar until the last moment. Then,
when the evidence overwhelms him or something happens in his
gut, he decides to act, and nothing stands very long in his way.
He abandons his philosophy, his promises, his speeches, his
friends, his counselors. He marches out of one life into a new
world without any apologies or glancing back."


Basic Ingredients

     What prompted the turnabout? Earlier in the year, Nixon
ruled out a tax cut as a means of restarting the economy. Over
objections from his Council of Economic Advisers, headed by
Paul McCracken, Nixon took the advice of George Shultz, chief
of the Office of Management and Budget. Shultz thought that
large doses of money from the Federal Reserve, presided over by
Nixon's old economic mentor Arthur Burns, would be enough to get
things moving. Besides, a tax cut would require a trek up to
Capitol Hill, a humiliating concession that all was not well.

     The Fed put more money into the economy, but Burns himself
knew that it could do so only temporarily without having an
inflationary effect. He went to see shrewd, conservative Wilbur
Mills, whose word on economic matters is virtually law in the
House. Mills agreed to promote an investment-credit bill,
should one be needed. Burns also opened communications with
John Connally, the Texas Democrat whom Nixon had just made
Secretary of the Treasury.

     But Shultz still had Nixon's ear. With Nixon's express
approval, he proclaimed in April that no changes were
contemplated in the Administration's approach. "Steady as she
goes" was the watchword, said Shultz.

     At first, Connally went along with the Shultz conclusions;
then he started boning up on reports dealing with the nation's
economic miseries. Urged on by two deputies -- Paul Volcker, an
expert in international monetary affairs, and Murray
Weidenbaum, a specialist in the domestic economy -- Connally
soon found himself studying a package of proposals that
contained the basic ingredients of the New Economic Policy.
Early in July, Connally asked his staff for weekly memos on
anything that was on their minds. "I wanted their opinions on
where we are," he recalls, "on the President, the Congress, the
economy, what should be done, anything." The recommendations he
got included wage and price guidelines, freezes, tax cuts. A
month ago, Weidenbaum began working out the details of a
wage-price freeze; at the same time Volcker stepped up his study
of the specifics of cutting the dollar loose from gold. More
planning followed, though few of those doing the staff work were
told that what they were handling was anything more than a
contingency plan. Indeed, a contingency plan was all it was
until the last minute, when the President was persuaded that he
should act.

     On short notice, Nixon summoned his key economic advisers
to a climactic weekend gathering at Camp David, his Catoctin
Mountain retreat. Burns and McCracken were there; so were
Shultz and his deputy, Caspar Weinberger, and the two Teutons
who guard Nixon's gates, H.R. Haldeman and John Ehrlichman.
Peter Peterson, a presidential aide for international economic
affairs, joined the sessions. Volcker and Speechwriter Bill
Safire sneaked across Washington to the Anacostia Naval Air
Station, where they boarded a helicopter for Camp David. John
Connally, who had no way of knowing that the pressure on the
dollar would propel him into prominence so soon, had just gone
to his Texas ranch for a vacation. He jetted hastily back, and
when the first meeting began Friday afternoon, he sat at Nixon's
right.


Remembered Weekend

     "It was tough," Connally, says. "A damn tough
re-evaluation and re-analysis." But, says another participant,
"We all knew there had to be change." Nixon made it plain from
the beginning that the time had come to try a new strategy. When
it was all over, when the draft of his Sunday television speech
was finished, he gave each man a Camp David jacket, a blue
windbreaker that bears the presidential seal. It was, said
Nixon, "a weekend that would long be remembered."

     Next day, speaking to a group of second-echelon
Administration officials, Nixon was quick to pay tribute to
Connally's forcefulness and expertise. "This kind of program
doesn't come off the top of a President's head," he said. "It
was developed by a great team quarterbacked by Secretary
Connally. I was more like the coach. I learned as much from the
quarterback as he learned from me." Two days after the
President's television broadcast, vacationing congressional
leaders, hastily rounded up and flown to Washington in five
planes that had been dispatched by Nixon, filed into the White
House for a briefing. Nixon nodded in Mills' direction. "We can
all take credit for this program," Nixon said. "Wilbur, these
are some of your ideas." Mills smiled wanly. The moment of glory
was Nixon's, but Mills will have plenty to say about those parts
of the program that require congressional consent.


Evangelical Fervor

     At the briefing, Burns said of Nixon's proposals: "This
has electrified the nation." It had obviously electrified Nixon
too. Before settling into San Clemente for a rest, he spent the
rest of the week barnstorming the U.S. with the fervor of a
newly sawdusted evangelist. He had the Knights of Columbus
standing on their chairs to applaud him in New York. In
Springfield, Ill., Nixon invoked "Lincoln's legacy." America,
said the President, needs sacrifice and competition: "We can at
this point in our history nobly save, or meanly lose, man's last
best hope." Nixon capped his week with a gesture of
reconciliation toward the nation most aggrieved by his recent
acts. He revealed that he will meet Emperor Hirohito in
Anchorage, Alaska, on Sept, 26 -- the first U.S. visit of a
Japanese emperor.

     While the President was trumpeting his rhetorical ruffles
and flourishes, his dramatic new plan left many Americans
confused about just how it will affect them. The confusion
began with the Government itself. At first the word was that
state and local government employees who had pay raises in the
works would be allowed to get them during the freeze; that
decision was reversed. Most embarrassing to the Administration,
the Pentagon announced that an Oct. 1 pay boost would go through
despite the freeze; John Connally ruled that out too --
vehemently.

     The task of trying to interpret the wage-price freeze fell
to the little-known Office of Emergency Preparedness. The OEP
aims to answer all the questions raised by the freeze. But no
structure is contemplated that would be remotely similar to
that of the Office of Price Administration, which at its peak
during World War II included 63,000 paid and over 200,000
volunteer employees. In 1942, one of those OPA employees was a
young lawyer named Richard Nixon. He stayed just long enough to
build an abiding dislike for the ponderous bureaucratic
mechanism. So it was with some feeling that Nixon said in his
television address: "While the wage-price freeze will be backed
by Government sanctions, if necessary, it will not be
accompanied by the establishment of a huge price-control
bureaucracy. I am relying on the voluntary cooperation of all
Americans."

     He is not likely to get it from all Americans. The first
strident objections came from labor leaders. The Government's
rule is that no wage increase scheduled to take effect during
the freeze period may be paid, even if it has already been
agreed to in a contract. United Auto Workers President Leonard
Woodcock noted that two of his contracts -- with Caterpillar and
John Deere -- call for raises during the three-month freeze. He
threatened to sue, and added: "If this Administration thinks
that just by issuing an edict they can tear up contracts, they
are saying they want war. If they want war, they can have war."

     Another loud demurrer came from A.F.L.-C.I.O. President
George Meany. Shultz and Labor Secretary James Hodgson
explained the Nixon program to the 35-member A.F.L.-C.I.O.
executive council, but they might as well have saved their
breath. Meany called the wage freeze "patently discriminatory"
against labor. Hodgson insisted that the rank-and-file union man
would back the Nixon plan and accused Meany of being "out of
step" with the average working man. That struck a raw nerve, for
the aged Meany, 77, feels his leadership threatened by younger
union Turks. He sneered: "I don't pay too much attention to the
Secretary. If you have a problem with the landlord, you don't
discuss it with the janitor."


Open Defiance

     The Nixon Administration pleaded with labor leaders to
make a voluntary end to existing strikes in order to help the
economy pick up at the maximum possible speed. The most
devastating strike under way is the West Coast dock stoppage,
now eight weeks old, led by Harry Bridges. It is likely to
continue. Bridges wired Nixon that the freeze "favors the rich,"
and he added: "We are with you in your desire to stop inflation
in our country, but it is wrong to pick on the workers, who
suffer first and the most from inflation."

     Other complaints came in from Ralph Nader, who told a
congressional committee that he suspected General Motors had
been given advance notice of the price freeze, possibly during
a recent meeting between Connally and G.M. President James
Roche. (G.M. had raised prices on its 1972 models before the
freeze went into effect, but agreed to rescind the increases.)

     In some political quarters there was open defiance:
Democrat Preston Smith, John Connally's successor as Governor
of Texas, announced that he had ordered state officials to
proceed with scheduled 6.8% pay raises for teachers and other
state government workers. There are problems with teacher
contracts elsewhere. Most of them take effect at the start of
the school year. Nixon took Smith's defiance calmly. "I think
Governor Connally can take care of him," Nixon said. The Justice
Department intends to ask for an injunction against Smith this
week.

     Connally may have a somewhat more difficult time taking
care of congressional objectors to the President's New Economic
Policy. Nixon held the Hill leaders' feet to the fire at their
briefing early last week. "The basis of this program is
legislation," he said. "If you don't hurry, it will hurt. We've
got to do these things and we've got to do them now. Now."

     Democrats hastened to spell out their objections. Wages
are frozen, but not interest rates; strikes are discouraged,
but profits are free to rise; the Administration's chief social
welfare innovation, the family assistance program, carrying a
guaranteed minimum income, has been deferred for a year as part
of the price of economic stability. Said a Muskie aide: "You
create enough money for millionaires to buy Cadillacs, and you
create jobs for chauffeurs." Senator Muskie was more guarded,
but he made approximately the same point. Said Muskie: "I don't
believe that the best way or the fairest way to stimulate the
economy is a series of large tax breaks for industry which far
exceed their ability to expand, and which will depend on
benefits trickling down to the consumer." Oklahoma's Senator
Fred Harris described Nixon's program as "an economic fan dance
which attempts to hide the pro-business bias of his proposals."
TIME correspondent Simons Fentress summed up: "The Democrats
have been embarrassed by this President who opened their closet
and stole their shoes. They are by no means boxed in, however,
and they are opening up alternate lines of attack."


Post-Freeze Problems

     Neither the narrower political consequences nor the
broader effectiveness of the New Economic Policy will be known
for some time. Nixon's store of national good will is not
overwhelming, but it should be enough to persuade most Americans
to go along for the initial 90-day period, given the near
universal dissatisfaction with the way the economy stood. More
important, though, is what happens after the freeze expires --
and that is a problem that the Administration is already
worrying about.

     The immediate post-freeze period is already known around
the White House as "Phase 2." It is of vital importance. For if
controls are suddenly lifted, without any transitional
mechanism or any ongoing wage-price review board to hold
increases firmly within acceptable limits, there would be no
point to the freeze in the first place. All the gains would
evaporate at once; prices would rise sharply to make up for the
hold-down, and wages would jump to keep pace. The federal
official charged with special responsibility for Phase 2 is
Herbert Stein of the Council of Economic Advisers, an outspoken
economist who was a vigorous opponent of wage-price regulation
only a few months ago.


Elusive Mood

     When the freeze expires in min-November, how will anyone
know whether or not it has been a success? Phase 2 will be the
real test, but at the end of the first 90 days there will be
several useful points at which to apply the economic litmus.
Part of the test will be psychological: there will have to be
a popular consensus that the program is working, some feeling
that things look better. Even before then, there will have to
have been serious negotiations between labor, management and
Government to get Phase 2 under way. If Phase 1 has been a
success, wages, of course, will be steady; so should the cost
of living, particularly since automobile prices will remain
level or even decrease. If there is a resurgence in consumer
confidence, the high rate of savings should have come down and
retail sales should have picked up well before the freeze
expires. If labor costs are stable, as they should be, even a
modest increase in productivity will mean higher profits for
manufacturers. That, in turn, means a net gain in real income
across the U.S. For whom? If prices are frozen beyond the end
of Phase 1 and wages are allowed to rise moderately -- say, by
4% -- that would distribute the net gain fairly widely. At best,
there will be a good start toward building a new international
monetary structure, and the U.S. will avoid touching off a
protectionist trade war.

     Administration experts have already started speculating
about the shape of Phase 2. There will be neither a return to
the pre-freeze status quo nor permanent imposition of a
thoroughgoing control system. Instead, the President is likely
to pick one or more intermediate devices within the first 60
days of the freeze period, thus leaving the final 30 days for
setting up whatever administrative machinery is required. He
will probably make use of wage-price review boards for various
industries, selective controls for others, economic sanctions
through withholding or awarding Government buying contracts, and
just plain jawboning. Quite possibly the freeze could be
extended for a time beyond the end of the 90-day period, then
lifted industry by industry as continuing arrangements are
worked out.

     If, in the end, the New Economic Policy is a failure, then
John Connally's brightening star will surely fade, Shultz could
re-emerge with new political clout, and Spiro Agnew -- who was
consulted in the New Economic Policy deliberations, as he never
was about the overtures to Peking -- would find himself no
longer threatened by Connally for the vice-presidential
nomination in 1972. In that case, however, even the Republican
presidential nomination would be worth very little, for Nixon's
best chance to get the U.S. economy under control would have
failed.

     In the dismal and difficult science of economics, one of
the most important factors is the elusive matter of the public
mood. Already there is an indication that Nixon's program is
what Americans think they want. Pollster Sindlinger's consumer
confidence index had climbed back to 64% by the middle of last
week. Now 40% of Sindlinger's sample want Nixon re-elected. The
White House men are guardedly optimistic. Says one: "Economics
isn't chemistry. You can take any theory you've got. If people
think it's going to work, it will work. If they don't, it
won't." If it does work, Nixon's program will pay off
politically for him, and economically for most Americans.

_______________________________________________________________
Putting on the Freeze

     The task of making the wage-price freeze work -- deciding
who and what is covered by it, improvising compromises,
enforcing the rule -- will be one of the most complex of
bureaucratic exercises. Who's Who in running the show for the
Administration:

     TREASURY SECRETARY JOHN CONNALLY, as head of the Cost of
Living Council, has overall authority to wheedle, cajole, crack
heads and otherwise employ his considerable political skills in
imposing the freeze. He has moved briskly. When the Pentagon
announced that certain servicemen's pay raises would go through
on schedule, Connally called Deputy Defense Secretary David
Packard and said: "You rescind those raises or I will." After
Texas Governor Preston Smith declared that his state employees
would received their regular pay increases, Connally signed an
order directing the Attorney General to see that Texas complied
with the freeze.

     A thoroughgoing practical activist with a lawyer's talent
for bending the System to his advantage, Connally, 54, has
become one of the strong men of the Nixon Cabinet since he
joined it last February. Although a Democrat and former L.B.J.
man, Texan Connally is increasingly mentioned as the man who may
replace Spiro Agnew on the G.O.P. ticket next year.

     ARNOLD WEBER, executive director of the Cost of Living
Council, is acting as policy and planning director, overseeing
the council's staff of about 40. A wry, 41-year-old labor
economist, Weber is a protege of George Shultz, the
Administration's director of the Office of Management and
Budget; he worked for Shultz as Assistant Secretary of Labor for
Manpower. Weber had already packed his family off and was
preparing to return to his University of Chicago teaching post
when he was tapped for the council job. "We froze my leave of
absence," Weber says.

     GEORGE LINCOLN, 64, a retired Army brigadier general, will
disseminate the policy guidelines framed by the Cost of Living
Council. He will also monitor the questions and complaints that
flow in, administer the information and investigative network,
which now includes the Internal Revenue Service and the
Department of Agriculture as well as the Office of Emergency
Preparedness.

     White-haired and scholarly, Lincoln spent 15 years as a
professor and head of the social sciences department at West
Point before becoming director of the OEP in the Nixon
Administration's first year. His work at OEP, notably in the
wake of Hurricane Camille two years ago, gained him a reputation
as an able administrator. But as director of the President's Oil
Policy Committee, he has been criticized by some as too
sympathetic to the oil industry.

     LOUIS PATRICK GRAY III, 55, Assistant Attorney General in
charge of the Civil Division, will be responsible for enforcing
the council's policies. Under Gray, Justice Department
attorneys, one assigned to each of the OEP's ten regional
offices, will ask for the injunctions and fines required by the
law and Nixon's executive order. They will concentrate on cases
involving substantial violations.

     An Annapolis graduate and onetime submarine commander,
Gray is preeminently a Nixon man, an old friend who has known
the President since they met at a Washington party in 1947.
Since he left the Navy in 1960, he has alternated between
practicing law in New London, Conn., and working for Nixon.
Skilled at negotiation, he is so self-confident that this week
he is going ahead with a planned vacation in Connecticut, where
he will give his house a coat of price-frozen paint.

     HERBERT STEIN, 55, an owlish and acerb economic
theoretician, is a member of the President's Council of Economic
Advisers. He is now responsible for planning Phase 2 of the
Nixon strategy: what comes after the 90-day freeze. Known for
an intellectual agility that some dismiss as sophistry, he will
need to be nimble in the task; for several years he has been a
determined spokesman against the sort of policy Nixon finally
adopted.

     Before joining the Council of Economic Advisers, Stein was
chief economist for the Committee for Economic Development, an
organization of business leaders. He is the author of "The
Fiscal Revolution in America," an elegantly written study that
reflects among other things a distaste for economists who
confuse rhetoric with action. In his present job he will need
both.

_______________________________________________________________
The Law Nixon Used

     When he announced the wage-price freeze, President Nixon
based his action on the Economic Stabilization Act of 1970. The
law gives stand-by powers to the President to "issue such
orders as he may deem appropriate to stabilize prices, rents,
wages and salaries." The irony is that Nixon vigorously opposed
the bill when it was debated in Congress and said he would not
use it.

     It was passed as part of the continuing cat-and-mouse game
between Congress and the President. In August 1970 inflation
was climbing and job rolls were shrinking. Anxious about the
economy, Wright Patman, the aged and wily chairman of the House
Banking and Currency Committee, decided to put the President on
the spot. He maneuvered to attach the Economic Stabilization Act
with its wage and price controls as an amendment to a bill
extending the life of the Defense Production Act, which was
about to expire. The provision was approved by both
Democrat-controlled houses of Congress.

     Nixon was forced to sign the bill because it provides for
the procurement of basic resources needed for national defense.
But he was quick to express his disapproval of the move. If
Congress believes that controls are needed, he said, it should
"face up to its own responsibilities and make such controls
mandatory." Congress preferred to let Nixon take the
responsibility. In March it voted to extend the Economic
Stabilization Act, and Nixon once more protested, although this
time the Administration softened its position somewhat; it was
growing less confident about its own economic policies.
Treasury Secretary Connally told the Patman committee that the
White House would "accept" the bill rather than fight it. And
last week Nixon enthusiastically assumed the powers that he had
once brusquely turned down.

_______________________________________________________________
Taking Out The Chill

     Ordinarily, the 325-man Office of Emergency Preparedness
deals with damage done by such natural disasters as hurricanes
and earthquakes. Last week OEP suddenly found itself handling
the results of a man-made storm for which it was decidedly
unprepared. Without warning, President Nixon plucked the tiny
agency out of the anonymity of the "U.S. Government
Organization Manual" to supervise the wage-price freeze.

     The OEP director, Brigadier General George Lincoln, was on
his ranch near Denver when he got the White House call to
action. He phoned his eight regional directors and sent them
scurrying. "Get a bunch of borrowed people," he advised. "We
don't want to pay them." The morning after the President's
announcement, Lincoln's men set up improvised regional offices
in ten major cities. In the Midwest, the branch moved from
Battle Creek, Mich., to Chicago. In Georgia, OEP-ers transferred
from Thomasville to Atlanta, where they found room in an
insurance office sandwiched between two topless restaurants, one
of them called The Booby Hatch. They were scarcely settled
before the telephones started ringing.

     Nixon's mandate was a tall order for one of the smallest
agencies in the federal establishment. Set up in 1961, OEP's
primary duty is preparing for civilian defense in case of
nuclear attack. It has been given the additional jobs of
stockpiling strategic materials and coordinating disaster
relief.

     Some 35 economists specializing in stabilization under
emergency conditions serve on OEP's staff, and their training
was recognized as an invaluable asset for the current task. So,
too, was the agency's reputation for moving quickly into a
disaster area and getting out just as fast when a job was done.
That sort of experience doubtless appealed to President Nixon,
who at the moment has little intention of setting up a
bureaucracy on the scale of the OPA, or even the Korean War
wage-price control boards.

     For all its practice in emergencies, though, OEP quickly
showed the strain of its first days on the new job. Manpower
was urgently needed, and was borrowed haphazardly from other
Government agencies. Highly paid federal economists, HUD
officials and even agriculture experts found themselves
answering phones in regional offices. Nevertheless, OEP could
not cope with the flood of inquiries. In the Washington
headquarters a block from the White House, confusion was
compounded as cameramen tangled lines with telephone installers.

     Even when they had time to answer the phones, OEP staffers
often could not answer the questions. They had to wait for the
Cost of Living Council to provide guidelines for a wide variety
of puzzlers. Chrysler Corp., for example, asked if the import
surcharge applied to tax-free automobiles that were supplied to
the diplomatic community. (Answer: maybe.) Many people wanted
to know how to distinguish between raw foods, which are not
subject to price control, and processed foods, which are. In
some cases, that was easy to answer. Whatever is totally
unprocessed -- eggs, oranges, fresh fish -- escapes control.
Most meats are processed and therefore subject to the freeze.
Still, the status of many foods remained in doubt. Does shelling
almonds amount to processing? one caller wanted to know. Again
the answer was maybe. Government Economist Sidney L. Jones
offered a tongue-in-cheek rule of thumb for baffled consumers:
"Anything that snaps, crunches, bites or quivers when you eat
it is not frozen."

    Uncertain how to handle reports of freeze violations, OEP
simply recorded them and filed them away. Later, the Justice
Department will decide whether to prosecute. The first
complaint to Washington came from an irate consumer of
cigarettes that had cost him only $2.60 the week before. Next
came a call from a boarder who said that his landlord told him
either to pay more rent or eat one less meal a day. By and
large, the complaints were low-keyed and did not involve
extravagant sums of money.

     When they could not provide answers, OEP staffers tried at
least to be reassuring. After all, everyone was in the same
boat. In Chicago, Michael Sanders, an attorney in the
Agriculture Department, commiserated with a man who complained
about not getting his raise. "I know," said Sanders, "I had an
increase coming. This freeze has thrown a monkey wrench into the
whole thing." Helen Balch, an appraiser on loan from HUD,
discussed with a caller whether to put off a trip to Europe.

     Eventually, guidelines began to take shape. Prices and
wages are frozen at their highest level during the 30 days
ending Aug. 14; imported goods are excepted. Included are most
wholesale and retail goods; rents; bus, air and train fares;
doctor, dentist and lawyer fees; telephone, electricity and gas
costs; commission and insurance rates. Exempt from control are
previously announced school tuition rates, even though they have
not yet become effective, and state and local taxes.

     No raises or cost of living increases will be allowed
except in cases of promotions to jobs with more responsibility.
Thus those railroad workers of the United Transportation Union
who had not yet ratified an agreement reached on their behalf
on Aug. 2 will not get their raises until Nov. 12 at the
earliest. In California, employees of General Telephone Co. had
reached a tentative agreement giving them about the same pay
raise granted to employees of the Bell System. The Bell workers
ratified their agreements the day before the freeze took effect;
the General Telephone employees, on the other hand, delayed. "So
General workers doing the same work that Bell workers are doing
will get lower wage rates during the freeze," noted a
communications union spokesman. "We're sorry, but that's it."

     At the end of the week OEP remained swamped by far more
work than it could handle. Other agencies were recruited to come
to the rescue. In some 200 cities, Taxpayer Assistance offices
of the Internal Revenue Service began to take over some of the
inquiries that were flooding into OEP. The Agriculture
Department's Stabilization and Conservation Service started
fielding questions in rural areas. All together, some 1,500
federal employees are now feeding out information and relaying
it back to Washington in a unique operation of improvisation.