ECONOMIC

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to the economy but also in the sense that consumers' attention focused onthem. Retail meat prices rose 5.4 percent a month in February and March asa result of a 39 percent increase in livestock prices from November 1972 toMarch 1973. Shortages of crude oil pushed up retail fuel oil prices 7.4percent during the winter, and a rise of 16 percent in prices of lumber andwood products was reflected in the prices of new houses and indirectly influencedthe prices of existing houses.As a result of the acceleration of inflation, pressures mounted to tightencontrols. While Phase II controls were in effect, public opinion polls indicatedthat the popularity of a return to a price freeze diminished, reachinga point in the last quarter of 1972 at which only about a fourth of the populationsupported such an action. According to the polls, however, by February,43 percent of the population wanted a return to a price freeze, and thesepressures for stricter controls were reflected within the Congress. One effectof this sentiment among the public and the Congress may have been to encourageprice increases in anticipation of a freeze.The Administration was sensitive to the growing pressures from consumersand Congress and was also concerned that the acceleration of inflationwould undo the gains achieved by slowing the private nonfarm wagerate increases, as measured by average hourly earnings adjusted for interindustryshifts and overtime in manufacturing, from a peak annual rate of8.5 percent for the third quarter of 1970 to 5.0 percent for the first quarterof 1973. The situation posed a dilemma for policy makers, however, becausethe major source of inflation was in commodity markets, in which controlshave only limited usefulness. The problems of hides and lumber that wereencountered during Phase II had made this apparent. The most effectiveway to slow price increases for raw commodities is to increase their supply.Numerous actions, detailed in Table 24, were taken by means of agriculturalprograms, foreign trade policy instruments, and stockpile policies toexpand supplies of lumber, agricultural products, metals, and petroleumproducts. While some of these policies increased supply quickly, others requiredmore time to take effect and had little immediate impact on therate of inflation.PHASE III IS TIGHTENEDThe Administration recognized that controls were unlikely to be effectivein holding down prices of those consumer goods that are derived almostdirectly from crude commodities. Nonetheless, in the face of mountingpressure, selected changes in the administration of controls were institutedin order to assure labor and consumers that everything possible was beingdone to contain price increases. Thus, on March 6, cost justification wasrequired of major producers of crude oil and petroleum products whosought price increases yielding more than a 1 percent yearly addition to theirrevenues; for increases greater than 1.5 percent prenotification was required.This deterred price increases which would otherwise have been useful94
TABLE 24.—Supply-increasing actions of the Federal Government during 1973Commodity Date of action ActionFood.Metals..Lumber..PetroleumJanuary 11January 31March 8.March 26April5April 19April 25.May 10June 27July 5..July 6July 18..July 19August 10August 28October 3October 25....November l._November 27.December 20..December 21_.April 16May 22July 2April 12May 15May 29April 18August 19November 27..Direct subsidies ended for farm product exports.Mandatory wheat acreage set-asides suspended for 1973 crop.Grain to be sold from Government CCC reserves.Loans terminated on farm-stored grain.Review of Federal marketing orders initiated to encourage additional supply offruits and vegetables.Livestock grazing permitted on set-aside acreages.Cabinet-level CLC Committee on Food established.CLC public Food Advisory Committee established.Feed grain acreage set-asides reduced for 1973 crop.Dairy price supports increased to mandatory minimums.Feed grain set-aside acreage further reduced.Interagency Task Force established to coordinate grain transportation policies.Rice acreage allotments increased for 1973 crop.Cheese import quotas increased.Import quotas increased on dry milk.Temporary export restrictions imposed on oilseed crops.Temporary export restrictions extended to 41 categories of agricultural commoditiesincluding edible oils, animal fats, and livestock protein feed.Exports of food under P.L. 480 reduced to minimum levels.Import quotas further increased on dry milk.Wheat and feed grain set-asides suspended for 1974 crops.Agriculture and Consumer Protection Act signed, establishing target price systemto support farm incomes.Import quotas increased further for nonfat dry milk.Agricultural production and food processing given high priority in propane allocationprogram.Fertilizer price decontrolled by CLC; export monitoring system established.Butter import quotas increased.Sugar import quotas increased.Loans on 1973 crop wheat called for January 15,1974 delivery.Meat import quotas suspended for 1974.President requests authority to sell excess stockpile items; sales of tin, aluminum,lead, zinc, magnesium, rubber, cobalt, manganese ore made throughout the year.Reporting requirements imposed for ferrous scrap exports.Licensing requirements set up for ferrous scrap exports.Japan agreed voluntarily to limit imports of U.S. ferrous scrap in second half of 1973.Japan agreed voluntarily to reduce imports of U.S. softwood logs in second half of1973.More efficient use of railroad cars as result of ICC changes in rail rates for lumbershipments.Increased sales of timber by Forest Service from national forests.Mandatory Oil Import Program quotas and tariffs suspended by Presidential order.Unlimited imports of crude oil and petroleum products permitted, subject tolicense fees on imports above former quota levels.Phase IV regulations removed ceiling price from "new" crude oil.Ceiling price removed from crude oil from stripper wells.Source: Council of Economic Advisers.in encouraging additional supplies from domestic sources and signaling therising costs of petroleum products to consumers.Meat prices were also singled out for additional control. Meats account forabout one-fourth of the consumer food budget. Consumer complaints abouthigh meat prices had become widespread; there was concern that they wouldadd to inflationary expectations and accelerate wage demands. On March29, ceilings on prices of red meats at all levels of processing and distribution95
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ECONOMICTRANSMITTEDTO THE CONGRESSF
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CONTENTSPageECONOMIC REPORT OF THE
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ECONOMIC REPORT OF THE PRESIDENTTo
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of the inflation rate of 1973, and
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or permit incentives—including hi
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people of an easy time. Like our pa
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THE PRESIDENT:LETTER OF TRANSMITTAL
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CHAPTER 3. INFLATION CONTROL UNDER
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Page7. Unemployment Rates by Sex an
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Page53. Maximum Percent Change in E
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We have specific problems, too, asi
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This curtailment of supply does, of
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consumption we would not have chose
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outside the food and fuel sectors a
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about $14 billion from deficit to s
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8 percent, at annual rates. Continu
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A third method, which seems to have
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DEVELOPMENT OF LOW-COST ENERGY FOR
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would otherwise have been invested
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TRANSPORTATION REFORMLast year the
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constraints. Restrictions on entry
Page 50 and 51: In early 1974 the Commerce Departme
Page 52 and 53: Consumer SpendingConsumer expenditu
Page 54 and 55: Chart 1Changes in GNP, Real GNP, GN
Page 56 and 57: During the fourth quarter the downt
Page 58 and 59: A number of points may be noted abo
Page 60 and 61: income do not appear to have played
Page 62 and 63: Chart 2Changes in Real GNPPERCENTUN
Page 64 and 65: of essentially declining participat
Page 66 and 67: The unemployment rate for adult mal
Page 68 and 69: from job losers, the remainder of t
Page 70 and 71: to maintain a somewhat larger work
Page 72 and 73: Chart 3Changes in Selected Price Me
Page 74 and 75: TABLE 12.—Changes in selected pri
Page 76 and 77: production workers, and it is sensi
Page 78 and 79: the profits that companies report a
Page 80 and 81: Two measures of changes in income t
Page 82 and 83: About $8 billion of the growth in e
Page 84 and 85: effect of covered wage and employme
Page 86 and 87: Since these apparent stabilization
Page 88 and 89: MONETARY POLICY AND FINANCIAL MARKE
Page 90 and 91: lation requiring ceilings on all CD
Page 92 and 93: TABLE 19.—Offerings of new securi
Page 94 and 95: CHAPTER 3Inflation Control Under th
Page 96 and 97: (A more detailed presentation of th
Page 98 and 99: ate of advance in grocery store foo
Page 102 and 103: were imposed, limiting prices to th
Page 104 and 105: spurring of domestic inflation by e
Page 106 and 107: was more than twice as high in 1973
Page 108 and 109: wage increases in many cases, const
Page 110 and 111: TABLE 26.—Behavior of items in co
Page 112 and 113: Chart 6Changes in RelatedWholesale
Page 114 and 115: and natural gas. A complex set of f
Page 116 and 117: CHAPTER 4Energy and AgricultureFOR
Page 118 and 119: al gas have contributed to the low
Page 120 and 121: TABLE 30*—Wholesale prices, all i
Page 122 and 123: tion sector, which in 1972 accounte
Page 124 and 125: United States on oil imports, OPEC
Page 126 and 127: of old oil and prices of imported a
Page 128 and 129: LONG-TERM PROSPECTSThe price of imp
Page 130 and 131: important that the higher costs be
Page 132 and 133: improving the environment. The fund
Page 134 and 135: pollutants into the atmosphere will
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Page 138 and 139: lion in fiscal 1972. Actually the a
Page 140 and 141: a minimum income. Unless prices fal
Page 142 and 143: The Administration supports the exa
Page 144 and 145: and estimates of some of these effe
Page 146 and 147: Since families typically pool their
Page 148 and 149: ability were not perfectly correlat
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Farm wages and farm income received
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TABLE 37.—Average usual weekly ea
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Chart 9Real Incomes for Men in Diff
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ecause they have acquired more expe
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whose owners or white workers have
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Several factors can be mentioned to
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y social pressures, however, which
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TABLE 42.—Relation of wage and sa
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ferences in their mix of occupation
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for public housing may be valued by
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8 to 20 percent for black females.
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sufficiently high to cover the addi
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TABLE 45.—Federal Government tran
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given to the problems of poverty du
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TABLE 47.—Trends in the employmen
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enefit increases greater than the i
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(Table 45). Medicare is chiefly des
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Public assistance is specifically d
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Then, subtracting equation (4) from
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policies, and the tensions among co
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In the fourth quarter the dollar ro
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which include trade, grants and oth
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tarily by foreign central banks, ev
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ply of oil, and by domestic price c
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in the United States. In view of th
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TABLE 52.—U.S. balances on intern
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esult from changes in market value
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TABLE 54.—Major changes in capita
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attempt was made to agree on a code
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The official price of gold was rais
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system, these demand changes were a
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What Pressures Should Be Exerted on
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The composition of reserves among d
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prices of approximately the same or
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tained, they would probably be felt
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Reducing Nontariff BarriersIn order
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Structural problems. Agreements on
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arrangements which are designed to
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capital and the means of putting th
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Canada and four smaller countries u
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currencies have appreciated relativ
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Effective Changes in Other Currenci
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Activities of the Advisory Committe
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Appendix BREPORT TO THE PRESIDENT O
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Report to the President on the Acti
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govern the exploitation of the reso
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Manpower and Social Affairs Committ
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Junior Staff EconomistsJames S. Fac
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Appendix CSTATISTICAL TABLES RELATI
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PRODUCTION AND BUSINESS ACTIVITY:Pa
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NATIONAL INCOME OR EXPENDITURETABLE
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TABLE C-2.—Gross national product
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TABLE C-3.—Implicit price deflato
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TABLE C—8.—Gross national produ
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TABLE C-10.—Gross national produc
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TABLE C-12.—Personal consumption
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TABLE C-14.—Relation of gross nat
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TABLE C—16.—Relation of nationa
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TABLE C-18.— Total and per capita
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TABLE C-19.—Sources of personal i
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TABLE C-21.—Saving by individuals
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POPULATION, EMPLOYMENT, WAGES, ANDP
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TABLE C-24.—Noninstitutional popu
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TABLE C-26.— Selected unemploymen
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TABLE C—28.—Unemployment insura
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TABLE C-29.—Wage and salary worke
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TABLE C-31.—.•Average weekly ea
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TABLE C-33.—Changes in output per
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TABLE C—35.—Industrial producti
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TABLE C-37.—Capacity utilization
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TABLE C—38.—New construction ac
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TABLE C-39.—New housing starts an
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TABLE C-41.—Sales and inventories
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TABLE C-43.—Manvjacturers* new an
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TABLE O45.—Consumer price indexes
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TABLE C—47.—Consumer price inde
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TABLE C~49.—Wholesale price index
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TABLE C-50.—Wholesale price index
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194819491950.,1951195219531954Yearo
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TABLE C-53.—Commercial bank loans
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TABLE G-54.—Total funds raised in
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TABLE C-56.—Federal Reserve Bank
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TABLE C-58.—Bond yields and inter
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TABLE C-59.—Short- and intermedia
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TABLE C-61.—Mortgage debt outstan
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TABLE C-63.—Net public and privat
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TABLE C-65.—Federal budget receip
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TABLE C-66.—Relation of the Feder
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TABLE C-68.—Receipts and expendit
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TABLE C-10.—State and local gover
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TABLE C-72.—Estimated ownership o
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CORPORATE PROFITS AND FINANCETABLE
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TABLE C-76.—Relation of profits a
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TABLE C-77.—Sources and uses of f
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TABLE C-79.—State and municipal a
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TABLE C-81.—Business formation an
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Year1929...1933...1939...1940...194
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TABLE C-85.—Indexes of prices rec
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TABLE G-87.—Comparative balance s
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TABLE G-88.— U.S. balance of paym
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TABLE C-90.— U.S. merchandise exp
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TABLE C-92.—International reserve
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TABLE G-94.—International investm
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TABLE C-96.—Consumer price indexe
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ECONOMIC

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