Beettmann
President Nixon meets with a group of labor leaders — including Teamsters President Frank Fitzsimmons and AFL-CIO President George Meany — to discuss what kind of economic controls would follow the 90-day wage-price freeze , September 10 , 1971 .
controls did not apply to raw agricultural products , imports or exports . The wage controls did not apply when they conflicted with other government programs . Beyond those general statements , however , CLC and OEP officials had to spend considerable time dealing with individual requests for an exception or an exemption from the rules and regulations the OEP published in a series of Economic Stabilization Orders .
As far as enforcement was concerned , the August 15 Executive Order authorized civil and criminal suits against violators . When the threat of a government lawsuit against a suspected violator did not work , the Justice Department did indeed file suits to prevent pay increases or price increases from being implemented . Most were resolved through compromises or out-of-court settlements .
The legal action most threatening to the entire program was the one filed by the Amalgamated Meat Cutters and Butchers Workingmen on September 10 . It contended that both the Economic Stabilization Act of 1970 and Executive Order 11615 were unconstitutional . The plaintiffs alleged that Congress could not delegate the power to impose wage and price controls to the President , and that the President did not have the authority to deprive anyone of their rights under an existing contract . ( The OEP was preventing many previously agreed-to increases in wages , prices or rents from taking effect .)
In late October , US Circuit Judge Harold Leventhal , acting as chairman of a special three-judge panel of a US District Court , announced the unanimous decision to uphold the rights of both the Congress and the President to take their unprecedented actions . Congress had followed the applicable rules governing the delegation of legislative power ; and the President had done the same in imposing the freeze .
The OEP eventually employed 485 people from more than two dozen federal agencies to assist its own expanded employment base of 560 full-time and temporary staff members . During its 90 days of existence , the agency fielded more than one million inquiries , 80 % of which were sent through offices of the IRS and ASCS . The questions about the freeze were split among concerns over prices ( 39 %), wages ( 30 %) and rents ( 31 %), although the ratio of questions varied quite a bit among the OEP ’ s 10 regional offices .
One sign of the public ’ s general acceptance of the freeze was the relatively small number of requests for exceptions or exemptions the OEP received . Some 2,500 businesses ( out of 11.6 million ) asked for price relief . About 2,000 workers ( out of 78 million ) asked for higher wages . Fewer than 1,000 renters ( out of 23.6 million ) asked for rent relief . OEP or CLC officials did approve a small number of exemptions . Construction workers , teachers , those earning less than the minimum wage and those recently promoted could receive a wage increase ; a life insurance company could implement a price increase on a group health policy ; and municipalities could increase water or sewer rates .
On September 9 , the President told Congress he would not extend the freeze beyond its scheduled expiration date of November 13 . A month later , he unveiled the details of Phase II of his program to control inflation . Its “ not quite mandatory but more than merely voluntary ” guidelines would be aimed at cutting the rate of inflation to 2 – 3 % within a year . This phase of the program would end only when a reasonable degree of continuing price stability could be assured after its restrictions were lifted .
In a narrow sense , the 90-day Phase I of President ’ s Nixon ’ s New Economic Policy was a success . Wages , salaries , prices and rents remained largely unchanged while the freeze was in effect . However , from November 1971 to April 1974 , actions taken by the CLC ’ s new Pay Board and Price Commission failed to control the contemporaneous rise in inflation or the country ’ s inflationary expectations . So , in a larger sense , this peacetime example of an incomes policy did not achieve its objectives .
Michael A . Martorelli is a Director Emeritus at Fairmount Partners and a frequent contributor to Financial History . He earned his MA in History from American Military University .
Sources
Cagan , Philip , et al . A New Look at Inflation : Economic Policy in the Early 1970s . American Enterprise Institute for Public Policy Research . 1973 .
Executive Office of the President , Office of Emergency Preparedness . Stemming Inflation : The Office of Emergency Preparedness and the 90-day Freeze . US Government Printing Office . 1972 .
Kosters , Marvin H . Controls and Inflation : The Economic Stabilization Program in Retrospect . American Enterprise Institute for Public Policy Research . 1975 .
McCracken , Paul W . “ Economic Policy in the Nixon Years .” Presidential Studies Quarterly . Winter 1996 .
US Congress . Congressional Budget Office . Incomes Policies in the United States : Historical Review and Some Issues . May 1977 . Weber , Arnold R . In Pursuit of Price Stability : The Wage-Price Freeze of 1971 . The Brookings Institution . 1973 .
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