THE RECESSION: Ford's Risky Plan Against Slumpflation

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must reduce its imports of oil—which are now 7.3 million bbl. per day—by 1 million bbl. per day this year, and by 2 million bbl. in 1977. The way to do it is to make energy so expensive that consumers and businessmen cannot afford to burn as much oil as they do now.

The President will start by using his power to impose a $1-per-bbl. tariff on imported petroleum beginning Feb. 1, then raising it to $2 on March 1 and $3 on April 1. He also will ask Congress to enact a $2-per-bbl. tax on U.S.-produced crude, and an equivalent amount—370 per 1,000 cu. ft.—on natural gas piped across state lines. If and when Congress agrees to that, the tariff on foreign crude would drop back to $2. Finally, Ford plans to remove all price controls on domestically produced oil on April 1—a move that he can take on his own but that is subject to congressional veto.

Net result: the average price of gasoline, heating oil and other petroleum products would rise by about 100 per gal. Oil companies would reap huge additional gross profits, but Ford proposes to snatch them away by imposing a "windfall-profits tax," that, combined with regular taxes, would pull in $12 billion this year.

The Government would put the $30 billion raised by the new energy taxes back into the economy in several ways. Some $22.5 billion would be distributed to individuals and corporations by the permanent cuts in income taxes; another $2 billion would go to the people too poor to pay taxes, through the $80-perperson cash grants. State and local governments would get $2 billion of extra revenue-sharing money to help pay their higher fuel costs. Homeowners who invest in insulation, storm windows and doors, and other fuel-saving equipment could deduct 15% of the cost from their tax bills up to a maximum of $150; the total tax saving would be $500 million. That still leaves $3 billion, which the Government will "reserve" to pay its own higher fuel and electric costs.

Ford proposed a wide range of other programs to reduce energy consumption or increase supplies. Among them: opening to commercial drilling the Navy's Petroleum Reserve No. 4 in Alaska; amending the Clean Air Act and other legislation to enable utilities to burn more coal; enacting heat-saving standards for all new buildings; budgeting more federal money for energy research and development. He set a list of specific goals to be achieved by 1985: production of 1 million bbl. per day of synthetic fuels and shale oil; construction of 150 "major" coal-fired power plants, 30 new refineries and 20 synthetic-fuel plants, in addition to the new nuclear plants and coal mines. Picking a rare hero for a Republican President, Ford compared his goals to Franklin D. Roosevelt's 1942 pledge to build 60,000 military aircraft a year; actual production in 1943, Ford recalled, hit 125,000 aircraft annually. "They did it then," he said. "We can do it now."

Will It Work? In totality, the economic-energy package is nothing if not comprehensive. But will it restore the economy to health? It might—but there is an uncomfortably strong chance that the program, if enacted intact by Congress, would produce far more inflation than economic recovery.

The program could actually depress the economy a bit further for a few months. Ford's tariff on imported oil will push up