The Fight Against Inflation: A Report
About a year ago, I proposed an alternative to mandatory wage and price controls, to help the country fight inflation. The alternative is known as a Tax Incomes Policy (TIP), in which both business and labor are granted tax incentives (and disincentives) to encourage them to bring wage and price increases within certain guidelines each year.
This approach has a lot of appeal. For one, it calls for for no new bureaucracy. The machinery under which it would operate is already in place; it would work much the same as investment tax credits already work.
A big part of inflation today is caused by events over which the federal government has little control. An erratic world climate has played havoc with food supplies. Foreign oil has skyrocketed in cost, continuing to seriously drain our balance of trade. And unions and business seem trapped in a "push-pull" game of raising wages and prices not to meet the costs of today, but to anticipate the expected increases of tomorrow. It's a ruinous game, and we all lose.
What a TIP would do is help induce noninflationary behavior into the economy -- by rewarding those who hold prices and wages down. It wouldn't mean an explosion of profits. But I think it could work. And I think it's a far better mechanism than "voluntary restraints" (which don't seem to work very well) or mandatory controls (which don't work well either, and require a mammoth new layer of bureaucrats.)
Senator William Proxmire has looked at TIP, and may introduce his measure in the Senate in this session of the Congress. I want to introduce the same bill here in the House. The legislation has required more time to draft than expected, but it is nearly ready to go in the hopper. By the same token, if the Administration announces their own tough moves before that time, TIP may not be necessary. We'll see.
In the meantime, there have been some other developments on the anti-inflation front that are worth noting.
Both of those areas represent
broad national concerns. On a smaller scale, however, I think it important
that we in the Congress set an example. There have been developments there
Inflation didn't hit us overnight,
and it won't go away overnight. But the Congress and the President had
better keep at it hard. Solutions don't come fast enough for many of us
-- Congress included. But I think we are moving in the right direction.