Prices: Aluminum Foiled

(3 of 3)

Subtle Shift. Through it all, Lyndon Johnson kept both his thoughts and deeds about the aluminum squabble cloaked in silence. Yet even by proxy, the President had shown that business men with the sturdiest of convictions are no match for the economic muscle of the White House. "It's very unfortunate," says Inland Steel Chairman Joe Block, "to have such consistent and strong Government intervention in both wages and prices." Chairman Richard Chapman of Boston's New England Merchants National Bank called the episode an "overuse of federal power in what should be normal procedures in a competitive private economy."

The real significance of aluminum's defeat is that it signals a new hardening of the Administration's intention to hold down price hikes at any cost. Subtly shifting the emphasis of Government policy, the economic advisers now believe that this, rather than more pressure on the economy to grow faster, is the way to ensure continued prosperity. Johnson's tougher stance may produce more tests of his relationship with businessmen, including sterner measures to discourage overseas investment by U.S. firms. If the President is really intent on heading off serious inflation, however, he will have to consider using his indirect powers to let the U.S. banking system raise its interest rates—a move he has so far resolutely opposed. That would not only serve to keep a restraining lid on the economy's exuberance, but it might materially help the balance of payments problem that is also a major concern of the Administration.