Business: Inflation's Sacred Cows

To the longtime despair of critics, the American political system often functions like a gigantic lubricating station for squeaky wheels. Responding to the skillful pressure of special-interest lobbyists, Congress and successive U.S. Administrations have put into effect myriad federal laws and regulations that stifle competition and tend to raise prices to consumers for the benefit of groups ranging from fruitgrowers in Florida to maritime unions in San Francisco and New York. Regulatory agencies, too, frequently act as guardians of the industries that they are supposed to regulate rather than as protectors of the consumer's interest.

The list of special-interest laws and regulations is still growing, despite howls from economists that they are serious contributors to double-digit inflation. Last week, for example, the Civil Aeronautics Board approved guidelines that would put a floor under fares charged by charter airlines on flights to Europe. Its action sets the stage for a possible 35% rate rise by 1975. A bill that is now in Senate-House conference and is expected to speed to the White House shortly would require that almost one-third of all oil imported into the U.S. be brought in aboard American-made ships, rather than lower-cost foreign vessels. The measure surely would cause the price of landed foreign oil to shoot still higher; whether President Ford vetoes it will provide a test of how much political flak he is willing to brave in order to keep living costs down.

Still, pressures are mounting as never before for a broad-scale attack on all the regulatory and legislative rigidities that grant unions and industries favors at consumers' expense.

In presenting his economic program to Congress, President Ford urged creation of a National Commission on Regulatory Reform to undertake a "long-overdue and total reexamination" of regulatory agencies. The commission would identify federal rules and regulations that increase costs to consumers and work to get them dropped. Even some regulators are pressing for change, violating Washington's unwritten rule that no regulatory agency speaks out against another. In a recent Detroit speech, Federal Trade Commission Chairman Lewis A. Engman lashed out at most regulatory agencies, particularly the Interstate Commerce Commission and the Civil Aeronautics Board. He said that their practices raise prices and shelter producers from the competitive consequences of "lassitude and inefficiency" (TIME Essay, Oct. 21).