Nixon imposes freeze on prices for 60 days

Press, Volume CXIII, Issue 33252, 15 June 1973, Page 9

Nixon imposes freeze on prices for 60 days

'N.Z.P.. A. -Reuter—Copyright) WASHINGTON, June 14. President Nixon slapped a 60-day price freeze on virtually all products in the United States last night, applying dramatic “shock treatment’’ to deal with a new surge of inflation in the country.

It was Mr Nixon’s second price freeze in less than two years and signified a major effort to halt the upward spiral of prices and combat attacks on the once mighty dollar, which has been devalued twice recently.

He said in a nation-wide' 'television broadcast that the; ’freeze, effective immediately,! (covered all prices paid by (consumers. The only prices not affec-l ited are rents and raw agri-' (cultural products. Even! (though farmers can still charge more for their products, any increases will not be permitted to be passed on to the consumer. Mr Nixon’s strong medi-j cine to deal with a new wave; of inflation —which has been' pushing up consumer prices! at an annual rate of more; than 9 per cent—was also designed to strengthen confidence in the dollar. The American currency, which United States officials believe is basically strong, has been under fierce speculative attack abroad because of the uncertainty caused by the Watergate scandal and a belief that the Nixon Administration was showing weakness in its anti-inflation fight. Mr Nixon’s decision to clamp a lid on virtually all prices at their level in the first week in June was a tougher step than most I officials and economists had (predicted. No wage control He took no action to con-! trol wages, which he said had not been rising unacceptably fast, but he made clear that labour unions must continue to show moderation in their pay demands if they

wanted to escape mandatory wage controls. The President, in his fourth major change in economic policy in less than (two years, asked Congress Ito give him authority to (strengthen export controls on food products so that producers did not switch to (overseas markets to beat the; (price freeze. ; In ordering the freeze on! (prices at their early June, (level, Mr Nixon also promised to reduce price in-1 creases that have already (taken place this year if they! are found to have exceeded (a H per cent rise on their (January levels. I Congress in favour I Congress generally wel- | corned the decision to impose la price freeze, although some (Democrats complained the (step should have been taken (three months ago. ' Senator William Proxmire,! a Wisconsin Democrat who! wields considerable influence in economic matters, said: “The President’s call for a freeze was the right medicine, dramatic and defensive, and just what we in Congress have been calling for during the last three months.” A Congressman, Mr Carl Albert (Democrat, Oklahoma), Speaker of the House of Representatives, welcomed Mr Nixon’s action, but said: “My only reservation (is that it comes too late and I am fearful it may not be broad enough.” Mr Nixon’s decision to freeze prices for up to 60 days acknowledged the (failure of his previous anti(inflationary policy, introduced last January, which relied on voluntary wage-price restraint. The Treasury Secretary (Mr George Shultz) who described the freeze as "shock

’ treatment,” told a White House press conference that ; everybody agreed the system • of voluntary restraint was a i failure. “We are not arguing : about that,” he said. i( Mr Nixon announced that i'the price freeze would be followed by new economic > controls, still to be formulated. But he said: "We must not ; I let controls become a nari|cotic — and we must not become addicted.” Mr Nixon said that the new ’(system would be designed to ’ I find a better way “to get us 1 out of a controlled economy : and to return us as quickly as possible to the free market system.” Mr Nixon said in his television speech, broadcast live ( from the White House, that ( the country had every reason (‘to be optimistic about its ( economic future, but be was taking strong action now to Ideal with the “one great ( problem that rightly concerns , every one of us.” “This is rising prices, and especially rising food prices," he said. Reaction among economists, labour leaders, and politicians to President Nixon’s announcement of a price freeze ranged from wholehearted approval to unconcealed displeasure. Among the key points emphasised by those who approved of the President’s announcement was that they believed that the President was in a position in which he had to take some action or risk another run on the dollar, a further tightening in the Federal reserve's monetary policy and a further deterioration of the stock and money markets. Mr Arthur Okun of the Brookings Institution and a former chairman of the Council of Economic Advisers,

e(generally welcomed the Pretjsident's action. But he ex--11 pressed some disappointment a that Mr Nixon had not taken ? some fiscal measure such as (cutting the defence budget t|by several thousand million -‘dollars. c | Labour leaders’ first reac■tion was generally negative, 'several of them following the 11 theme of Mr Leonard Wood•(cock, president of the United - Auto Workers, that the acItion “will not solve the v 'nation’s problems." 3 1 “The sooner we all get s i back to a free economy, the better off we will be," said y|Mr Woodcock in Detroit '•“Unfortunately, the Presi (dent’s announcement is a “ step in the opposite direce ition." t| One of the strongest ConTgressional critics was a Des mocrat, Mr Henry Reuss, who ” said that Mr Nixon "has a ’'damaging economic packcage.”