ECONOMIC

CHAPTER 3Inflation Control Under theEconomic Stabilization ActPublic Law 93-28, the Economic Stabilization Act Amendments of197.1, as amended, requires that the Economic Report of the Presidentinclude a section "describing the actions taken under this title during thepreceding year and giving his assessment of the progress attained inachieving the purposes of this title." This chapter is intended to fulfillthat requirement. There is, however, no intent to represent the descriptionof the control regulations contained herein as legally bindinginterpretations.PRICE AND WAGE CONTROLS, administered by the Cost of LivingCouncil (CLC) under authority of the Economic Stabilization Act,remained in effect throughout 1973 but underwent several substantialmodifications. After the move to Phase III early in the year, the changeswere in the direction of greater stringency. They reflected the strain placedon the program when economic forces caused a sharp acceleration of inflationbeginning early in the year and when this in turn generated public andpolitical demand for changes in the nature of controls. However, the extentto which these changes could contain the inflation in 1973 was limited bythe serious risks of disrupting markets and adversely affecting supply.THE ECONOMIC STABILIZATION PROGRAM IN 1973As 1973 began, economic conditions seemed propitious for a substantialmodification in the Phase II system of controls. The rate of inflation hadbeen moderate in 1972. The consumer price index (CPI) rose 3.4 percentduring the year (Table 21). Wage increases had moderated from theirvery high rates of early 1971, a sign that expectations of future price increaseshad diminished. Industrial price increases had slowed to a 2.9 percentannual rate in the last half of 1972 3Tij$$ fiscal and monetary policy supplementedby the controls program had approximately achieved their interimgoals by the end of 1972.as