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STEMMING
NFLATION
The Office of
Emergency Preparedness
and the 90-Day Freeze
Harry B. Yoshpe
John F. Allums
Joseph E. Russell
Barbara A. Atkin
EXECUTIVE OFFICE OF THE PRESIDENT
OFFICE OF EMERGENCY PREPAREDNESS
WASHINGTON, D.C.
1972
For sale by the Superintendent of Documents, U.S. Government Printing Office
Washington, D.C. 20402 - Price $2.25 (paper cover)
Stock Number 4102-00008
iv
THE WHITE HOUSE
WAS H I N G T O N
On August 15, 1971, I announced a series of measures
designed to stabilize the economy at home and to help our
country maintain its rightful economic position in the
world. Among these measures was the first peacetime wageprice freeze in our history.
In prescribing the 90-day freeze, I set down several
guiding principles: we would move toward a greater stability of wages and prices, but we would do this without
fastening on the Nation a permanent straitjacket of controls and without creating a huge bureaucracy. These
principles prompted the establishment of the interagency
Cost of Living Council under the chairmanship of the
Secretary of the Treasury, the designation of the Office
of Emergency Preparedness as the central instrument to
administer the freeze, and the reliance upon the coordinated teamwork of the other Federal departments and
agencies.
Under the leadership of Director George A. Lincoln,
the Office of Emergency Preparedness succeeded in holding
the line while we worked out the longer term measures
needed to maintain wage-price moderation and improve our
position in the changing world economy. All Americans
can take pride in this accomplishment, for it was their
splendid cooperation and support that, in the final
analysis, made it possible for the program to succeed.
As we take the road back toward wage-price stability
and the operation of free market forces, it is important
that we provide, for the benefit of future generations,
a full record of this experience. I am pleased that a
comprehensive history of the management of the wage-price
freeze has been prepared. And I hope that this book will
promote a more general appreciation and a deeper understanding of the problems encountered and the lessons
learned in this undertaking.
August 1972
Foreword
On Sunday night, August 15, 1971, President Nixon announced
a "New Economic Policy"—a comprehensive program of interlocking measures designed to bring inflation under control, stimulate
the economy, and correct the acute disequilibrium that had developed in the Nation's international economic position. Included
in this program was a provision for a 90-day wage-price freeze as
a necessary first step to curb the persistent inflation and to buy
time during which a longer-term and more flexible policy for
reasonable wage and price behavior would be worked out.
Here was a new initiative, unprecedented in America's peacetime experience. To be sure, authorizing legislation had been enacted a year earlier, and even before then there was strong public
sentiment for curbing inflation. Yet, few people in the Summer
of 1971 expected the President to take the course of direct government intervention in private wage-price decisions. By his action
President Nixon took the question of direct stabilization controls
in a nonwar setting out of the realm of political .and academic
debate and made it a new chapter in American economic history.
It is a chapter replete with unique experience in organization,
management, policy, and operations; we should not ignore it in
setting public economic policy in the future. In my capacity as
Director of the President's Office of Emergency Preparedness, I
was privileged to have been charged with the administration of
the wage-price freeze. Early in the freeze I directed the compilation
of a comprehensive historical record of the experience, so that we
may determine what has been good and bad, useful and harmful,
and so that we may have, for our future guidance, a better appreciation of the causes and conditions for both our successes and shortcomings.
Such a record should be of considerable interest—to public
officials charged with planning and administering government programs; to scholars interested in the Government's efforts to fashion
and implement public policy; and to the general public concerned
with the performance of its Government, particularly in fields like
economic stabilization which so intimately affect their daily lives.
vii
Publication of this historical record, it is hoped, will help to meet
these needs by providing a deeper appreciation and understanding
of OEP's role in the wage-price freeze.
G. A. LINCOLN
Director
Office of Emergency Preparedness
Executive Office of the President
Washington, D.C.
August 15, 1972.
VIII
Preface
A few days after the President's announcement of the wage-price
freeze, Mr. George A. Lincoln, Director of the Office of Emergency
Preparedness, asked me to take the lead in planning and developing a comprehensive historical account of the Agency's experience
in managing this program. Such an account, he felt, would serve
the public interest, and the most favorable time to prepare it was
while the experience was fresh in the minds of the participants
and the records were most readily available.
The project was carried out by a small team of professional
historians. Besides directing and coordinating the undertaking, I
wrote Chapters I, VIII, and IX. John F. Allums collaborated with
me in the overall planning of the task and contributed Chapters
II and III. Joseph E. Russell wrote Chapters IV, V, and VI and
lent strong editorial support to the entire work. Barbara A. Atkin
wrote Chapter VII, prepared the Chronology, and assisted Mr.
Russell with the heavy burdens of editing the final manuscript
and preparing it for the printer. All worked together as a team,
sharing sources of information and commenting on one another's
draft manuscripts. While each assumes responsibility for his or her
chapters, the total history represents contributions of ideas and
labor from the entire group.
Of special significance was the cooperation and encouragement
we received from the Director and the entire staff at every stage
in the preparation of this history. Being on the scene almost from
the outset of the freeze and set up strategically with a Special Staff
relationship to the Director, the historians had ready access to all
official files. They were in an extraordinarily good position to
collect, screen, and organize important materials relating to the
freeze while it was still in progress. They supplemented the written
record with interviews with key personnel to clarify facts and
round out their interpretation. The historians visited four Regional Offices and obtained comprehensive after-action reports
from all 10 Regional Directors.
The historians' indebtedness to the Director and the staff both
at the headquarters and in the field is immeasurable; without this
top-level interest and support, this volume could not have been
produced in its present scope and depth or completed in the time
ix
allotted for the purpose. The "Bibliographical Note" at the end of
this volume names some of the people who reviewed our manuscripts and offered many helpful suggestions for their improvement. It would not be feasible to list the many additional people
who provided assistance. We do wish to single out, however,
Jerome Brussell, who designed the cover and produced all the
organization charts; Alice Bandy, who made available the basic
documentation in the Director's files; Carol Wanner and Nan
Dever, who provided us with library and congressional materials;
and Theresa Moorleghen, Jeanne Criss, and Anne Lockhart, who
steadfastly and patiently typed manuscripts and provided secretarial assistance.
The authors sought to observe the standards of scholarship
associated with the historical profession. They made every effort
not merely to chronicle the events, but to analyze objectively the
problems encountered, show how they were met, and explain the
reasons underlying policy and administrative decisions. Whatever
merit this book may have is due in no small measure to the cooperation and assistance we received from all who participated in
administering the freeze. Needless to say, the authors assume full
responsibility for the organization and presentation of the subject,
for any opinions expressed or implied, and for any errors of detail
or judgment.
HARRY B. YOSHPE
Historian
Contents
PRESIDENTIAL STATEMENT
FOREWORD by George A. Lincoln, Director, Office of
Emergency Preparedness
PREFACE
I. T H E PRESIDENT'S ECONOMIC PROGRAM . . .
Historical Context
Problems Besetting the Nixon Administration . . . .
The Decision at Camp David
The New Economic Policy
The Wage-Price Freeze
Legislative Base
The Freeze Order
Apparatus for Administering the Freeze
The Cost of Living Council
OEP: The "Operating Agency" for CLC
II. ORGANIZATION: STRUCTURE, STAFFING,
SUPPORT
Underlying Concepts
Nature of the Task
Environment of the Freeze
Resources Available for the Task
Lincoln's Concept of Crisis Management
National Office Organization
Field Organization
Building an Operational Staff
General Policy on Staffing
The Staff Expands
Integrating the Newcomers
Staffing Problems
Evaluation of Staffing Policy
Administrative, Logistical, and Technical Support
Administrative and Logistical Support
Technical Support
III. MANAGING T H E FREEZE
Directing the Program
vii
ix
1
1
4
8
11
12
14
17
19
19
21
26
26
26
26
28
28
29
36
42
42
44
45
47
49
50
50
52
53
53
xi
Page
Setting the Course and Pace
Techniques and Instruments of Control
Coordination and Liaison
National Office
Regional Offices
Communications and Operational Control
Operations Center
Communications Section
Communications within the System
Communications with the Public and Outside
Agencies
Responding to Public Inquiries
Correspondence Section
Congressional and Public Affairs Office
Inquiry Review Section
Operational Feedback and Reporting
Daily Economic Stabilization Report
Daily and Weekly Reports to CLC
IV. POLICY AND GUIDANCE
Legal Base
Operative Principles
Formulation of Guidance
Dissemination and Interpretation of Policy
Major Policy Determinations
Transaction and Seasonality Rules
Prices
Wages
Teachers' Salaries
Rents
Looking Forward
53
54
55
55
58
60
60
61
61
65
66
66
67
68
70
71
71
74
74
75
76
78
80
80
82
86
89
91
92
V. EXCEPTIONS AND EXEMPTIONS
Authority
Policy
Organization
The Statistical Picture
Significant Cases
Wages and Fringe Benefits
Government Service Charges
Prices and Rents
Transition
Conclusions
96
96
97
99
101
105
105
107
109
114
VI. COMPLIANCE AND ENFORCEMENT
The Goal: Voluntary Compliance
117
117
XII
Page
Authority and Procedures
The Record of Compliance
Enforcement
Rent Cases
Wages and Salaries
Price Lists
Price Violations
Sporting Events
The Question of Constitutionality
Conclusions
VII. BUILDING PUBLIC UNDERSTANDING
Initial Response to the Freeze
Freeze Requirements and Public Information . . . .
Public Information Network
National Office Organization
Field Network
Public Information Activities
Relations with the News Media
Press Releases
Coverage by the News Media
The Speakers' Program
Trade Associations and the Spread of Information
Coordination with State and Local Governments
Congressional Relations
Responding to Public Concerns
VIII. PLANNING FOR T H E POSTFREEZE PERIOD . .
Looking Beyond the Freeze
What Comes Next?
OEP Inputs to Phase II Planning
The Postfreeze Program
OEP Links to the Postfreeze Program
Continuity of Freeze Rules
Issue Papers
Detail of Personnel
Planning for IRS Takeover
Redirection of OEP Efforts
IX. CONCLUDING OBSERVATIONS
Benchmarks of Success
Consumer Price Index
Wholesale Price Index
Other Encouraging Signs
Points of Conflict
OEP Management of the Freeze
118
121
123
127
127
131
133
135
138
141
143
143
145
147
147
148
150
150
151
153
155
157
159
161
162
168
168
168
170
172
178
179
179
181
182
186
189
190
190
191
192
193
194
xiii
Page
Organization
Administrative Management
Policy Guidance
Exceptions and Exemptions
Compliance and Enforcement
Informing the Public
Transition to Phase II
Overall Assessment
LIST OF ABBREVIATIONS
CHRONOLOGY
EXHIBITS
1. Economic Stabilization Act of 1970 (Public Law
91-379), August 15, 1970
2. Executive Order No. 11588, Providing for the Stabilization of Wages and Prices in the Construction
Industry, March 29, 1971
3. Public Law 92-15, May 18, 1971, amending Section
202 of the Economic Stabilization Act of 1970
4. Executive Order No. 11615, Providing for Stabilization of Prices, Rents, Wages, and Salaries, August
15, 1971
5. Cost of Living Council Order No. 1, August 17, 1971,
delegating authority to the Director, Office of Emergency Preparedness
6. OEP Economic Stabilization Order No. 1, August 19,
1971, delegating to the Secretary of the Treasury
"certain administrative and operating functions
relating to the implementation of the program" ..
7. Treasury Department Order No. 150-75, August 19,
1971, delegating authority to the Commissioner of
Internal Revenue
8. Internal Revenue Service Delegation Order No. 117,
August 20, 1971, delegating authority to IRS
Regional Commissioners, District Directors, and
Service Center Directors
9. OEP Economic Stabilization Regulation No. 1,
Stabilization Regulations for Prices, Rents, Wages,
and Salaries, August 20, 1971
10. Executive Order No. 11627, Further Providing for
the Stabilization of the Economy, October 15, 1971
11. Economic Stabilization Act Amendments of 1971
(Public Law 92-210), December 22, 1971
BIBLIOGRAPHICAL NOTE
INDEX
xiv
195
196
198
199
200
200
201
202
205
206
223
224
225
228
229
231
232
233
233
234
239
244
257
271
Illustrations
Page
Frontispiece-The Cost of Living Council Meeting with
the President
Figures
1- Office of Emergency Preparedness (Organization
Chart)
•
2- OEP Organization for Economic Stabilization
Activities
3 - Office of Emergency Preparedness Regions
4 - OEP Regional Office Organization for Economic
Stabilization
5 - Wage-Price Freeze Organization
6- Flow of Communications
7- Postfreeze Organization
Tables
1- Detailed Personnel: Agency Affiliation
2 - Detailed and Appointed Personnel: OEP Office
Assignment
3 - Number of Inquiries by OEP Regions and Percentages by Category, August 28-November 9
4 - Correspondence on Exception /Exemption Requests. .
5- National Office Review of Regional Denials of
Exemption Requests
6- Disposition of Complaints by IRS
7- OEP's Disposition of Potential Court Cases
8- Phase I Suits Filed by the U.S. Government
9- All Phase I Suits
10- Availability of Ceiling Price Information,
November 1-5, 1971
11- Required Reporting of Price and Wage Increases . . .
12- Changes in Consumer Prices, Selected Months, 1971..
13- Changes in Wholesale Industrial Commodity Prices,
Selected Months, 1971
ii
31
34
37
38
41
62
175
45
47
68
102
104
122
122
126
126
133
173
190
192
xv
The President's Economic Program
HISTORICAL CONTEXT
The President's prescription of a wage-price freeze on August 15,
1971 marked the first time America had undertaken a program of
this sort in peacetime. Such action had been taken during World
War II and again during the Korean War as part of a kit of direct
controls which, together with various indirect controls, were designed to achieve economic stabilization.1 In both instances, a
wage-price freeze was imposed when the country mobilized for
war. Productive capacity was being fully utilized, unemployment
was low, and increased demands for goods and services coupled
with shortages or the anticipation of shortages had produced unacceptable "demand-pull" inflation.
The inflation situation in the summer of 1971 was significantly
different from the wartime situations mentioned above. The
United States was winding down its involvement in the Vietnam
War. It was a period of slack demand, idle productive capacity,
and high unemployment (although the economy had definitely
turned upward into the rising phase of the business cycle). And
yet, to the dismay of many observers in our society, including
economists in and out of government, it was also a period of
excessive inflation—an aftermath of the war-stimulated excessive
demand of 1966-1968, unrestrained by existing fiscal policy.
Containment of the destabilizing forces was first sought through
the application of indirect controls, embracing first restrictive and
later expansive fiscal and monetary policies.2 The Administration's
1
For a discussion of the use of direct and indirect controls under wartime conditions, see Thomas B. Worsley, Emergency Economic Stabilization
(Washington:
Industrial College of the Armed Forces, 1971).
2
These policies operate by decreasing or increasing total demand and the effective
money supply of the economy, without interfering directly with the operation of
the market mechanism and its system of making choices competitively. For a comprehensive discussion of the role and use of these indirect stabilization instruments,
see G. L. Bach, Making Monetary and Fiscal Policy (Washington: Brookings
Institution, 1971).
474-893 O - 72 - 2
PRESIDENTS ECONOMIC
PROGRAM
"game plan," involving use of fiscal and monetary instruments,
however, failed to achieve an acceptable combination of reduced
inflation and acceleration of the economy's economic growth rate.
It was this shortfall in the operation of the indirect controls in an
environment of comparative peace, rather than any parallels to
the conditions prevailing in 1942 or 1951, that accounted for
President Nixon's recourse, in 1971, to a new economic policy
embracing an integrated package of measures designed to bring
the Nation to higher employment, greater price stability, and a
stronger international position. The precipitating factor in this
decision was the progressive deterioration of the U.S. balance of
payments and attendant pressures on the dollar at mid-year.
The use of indirect stabilization tools in the period after World
War II was a recognition of the Government's responsibility even
in peacetime for helping to maintain sustained economic growth
and stability.3 The remarkable achievements of the free enterprise
system had always been marred by periods of economic stagnation,
recession, and depression. Prior to the 1930's, cyclical fluctuations
with alternating periods of prosperity and depression had come to
be accepted as normal; and the Federal Government did little
to counter these. The Great Depression of the Thirties opened a
new era in American economic thinking. That depression dragged
on for a dozen years; at its lowest point, nearly one out of four of
the labor force was unemployed. The Government's response to
this situation was to intervene extensively in the American
economy; but even so, the depression lingered on until it was
ended by the mobilization demands of World War II.
With the close of that war, Congress resolved to take more
direct responsibility for ensuring continued economic growth and
checking the recurrence of severe economic fluctuations. This
resolution was embodied in the Employment Act of 1946, which
declared it to be "the continuing policy and responsibility of the
Federal Government to use all practicable means . . . to promote
maximum employment, production, and purchasing power." The
Act ranks as a landmark in the history of American economic
policy, symbolizing national aspirations and a new responsibility
of government to promote economic stability at high levels of
employment. These objectives have had widespread support. The
design of policies that would achieve these objectives and reconcile
8
For a good compilation of select materials on this subject, see Economic Policies
for National Strength: The Quest for Sustained Growth and Stability, Stephen R.
Chitwood, ed. (Washington: Industrial College of the Armed Forces. 1968).
PRESIDENTS ECONOMIC
PROGRAM
conflicts among them, however, has posed a challenge of formidable
proportions.4
In the quarter century since the passage of the Employment Act,
the indirect monetary, fiscal, and debt management policies were
preferred over direct controls as the appropriate tools for promoting economic growth and stability. Except for the Korean War
years, direct controls were avoided. Each succeeding Federal administration, Republican and Democratic alike, acknowledged the
Government's responsibility to maintain maximum employment,
production, and purchasing power. There were differences in the
extent of the commitment and in the particular policies and
techniques used, but each administration acknowledged the first
importance of a strong, growing, and stable national economy.
Indeed, such an economic environment had come to be viewed not
only as a domestic imperative, but also as essential to the stature,
power, and security of the United States in the international
arena.5
Efforts to promote economic growth and stability for much of
the period following the enactment of the Employment Act were
reasonably successful. The Nation avoided a major depression.
Recessions were shallow and of short duration. Real output grew
markedly, and until 1965 the rate of price increases (other than
the surge in 1950-51—the first year of the Korean War) was kept
within tolerable bounds.
But there were difficulties ahead in ensuring a continued fullemployment and non-inflationary environment. The Nation in
1965 already faced a serious balance-of-payments problem with no
real solution in sight. The increased influx of young people into
the labor force—a result of the baby boom in the late 1940's—
threatened to create undesirable levels of unemployment. And the
deepening involvement of the United States in the Vietnam conflict
increased government spending which was not offset by increased
revenues. These fiscal trends resulted in a Federal Government
budget deficit of $25 billion in Fiscal Year 1968.6 There was no
4
Lester V. Chandler, "Economic Stability," in The Nation's Economic Objectives,
Edgar O. Edwards, Editor (Chicago: University of Chicago Press, 1964.)
5
Useful sources on direct and indirect stabilization tools are Maurice W. Lee,
Toward Economic Stability (New York: John Wiley & Sons, Inc., 1966) ; Clifton H.
Kreps, Jr., and Olin S. Pugh, Money, Banking and Monetary Policy, 2d ed. (New
York: Ronald Press Co., 1967); Lester C. Thurow, ed., American Fiscal Policy
(Englewood Cliffs, New Jersey: Prentice Hall, Inc., 1967).
6
Economic Impact of the Vietnam War, Special Report Series No. 5, Center for
Strategic Studies, Georgetown University (New York: Renaissance Editions, Inc.,
1967); U.S. Congress, Joint Economic Committee, Economic Effect of Vietnam
Spending, Senate Report No. 394, 90th Cong., 1st Sess. (Washington: Government
Printing Office, 1967).
PRESIDENTS ECONOMIC
PROGRAM
desire to invoke direct price and wage controls; at the same time,
adequate fiscal and monetary restraints were applied too late to
cope effectively with the inflation. Quasi-voluntary restraints
through wage-price guideposts and moral suasion by the President introduced in the early sixties, had little real effect after 1965,
in the face of the Vietnam War situation.7 At the time President
Lyndon B. Johnson left office, the economy had been brought to
practically full employment, but not without significant inflation.8
PROBLEMS BESETTING THE NIXON ADMINISTRATION
The Nixon Administration embarked on restrictive fiscal and
monetary policies in the hope of cooling the overheated economy
and achieving gradual disinflation. Unemployment, which had
reached a low of 3.3 percent in February 1969, was expected to
increase somewhat, but the Administration accepted this as a
"trade-off" for greater price stability. A gradual expansion of the
economy would be sought after mid-1970. The Administration
rejected proposed remedies by way of direct wage and price controls
or an "incomes policy" such as the guideposts and moral suasion
strategy of earlier administrations.
The new administration was soon confronted, however, with a
perverse combination of what came to be called "the worst of both
worlds"—recession and inflation. The economy began to slip into
recession in late 1969. Monetary and fiscal policies were reversed
to provide stimulus in place of restraint, but recovery was too slow.
In mid-1971, about one-fourth of the Nation's manufacturing
capacity was idle. Unemployment was estimated at about 6 percent
7
John Sheahan, The Wage-Price Guideposts (Washington: Brookings Institution,
1967); George P. Shultz and Robert Z. Aliber, eds., Guidelines, Informal Controls,
and the Market Place: Policy Choices in a Full Employment Economy (Chicago:
University of Chicago Press, 1966) ; U.S. Congress, Joint Economic Committee, The
Wage-Price Issue: The Need for Guideposts (Washington: Government Printing
Office, 1968) .
8
Robert J. Gordon, "The Recent Acceleration of Inflation and Its Lessons for
the Future," Brookings Papers on Economic Activity, Arthur M. Okun and George
L. Perry, editors. (1:1970) , pp. 8-47; Gottfried Haberler, Inflation: Its Causes and
Cures; With a New Look at Inflation in 1966 (Washington: American Enterprise
Institute for Public Policy Research, 1966) ; Walter W. Heller, New Dimensions of
Political Economy (Cambridge, Mass.: Harvard University Press, 1966) ; Arthur M.
Okun, The Political Economy of Prosperity (Washington: The Brookings Institution,
1970) ; Arthur M. Okun and others, Inflation: The Problems It Creates and the
Policies It Requires, Charles C. Moskowitz Lectures, No. 10 (New York: New York
University Press, 1970).
PRESIDENTS ECONOMIC
PROGRAM
of the Nation's labor force, and inflation remained near the 4
percent annual rate level.9
By then, it was clear, the upward wage-price spiral had long
lost any war-induced "demand-pull" character. Here was a new
virus of inflation. Few economists could speak with confidence
about its causes or its cure. It seemed to have become a selfsustaining process, living on its own momentum under "cost-push"
—a direct result of wage and price increases in excess of gains
in productivity. This new type of inflation seemed to lend support
to the thesis of John Kenneth Galbraith and others that market
competition was a thing of the past. The economy, they contended,
had come to be dominated by giant firms and strong unions; and
the public was being victimized by their monopoly power.10 How
else could one explain the fact that even in the midst of substantial
unemployment the unions were demanding and getting wage increases in excess of average increases in productivity per man-hour?
Or how could one explain that the prices of manufactured goods
continued to rise while some 25 percent of the plant capacity for
producing these goods remained idle?
In the face of mounting inflation, the Nixon Administration
found itself under pressure to adopt an incomes policy, even
though experience with such a policy at home and abroad was far
from a happy one.11 Nonetheless, the public was in a mood for
more direct action to cope with the twin evils of inflation and
unemployment. In the judgment of Herbert Stein, member of
President Nixon's Council of Economic Advisers and one of the
principal architects of the Administration's stabilization program,
the clamor for an incomes policy was in part, at least, politically
motivated.
. . . The opposition to the Administration found it very convenient and effective
to take this line because it made them the champions of price stability and full
employment without having to accept any responsibility. As long as the President
didn't accept the advice to use an income policy, he was responsible for the performance of the economy. And if he did take the advice, he would be responsible
for the difficult task of making it work.12
Actually, the Nixon Administration did take several steps along
•On the Nixon economic game plan see Herbert Stein, "Beyond Inflation/'
Remarks at the 17th Southern Trust Conference, Chattanooga, Tennessee, May
15, 1969; Worsley, Emergency Economic Stabilization, pp. 95-107.
10
John K. Galbraith, "Wage-Price Controls—The Cure for Runaway Inflation,*'
The New York Times Magazine, June 7, 1970.
11
On the experience of other countries with controls, see Lloyd Ulman and
Robert Flanagan, Wage Restraint: A Study of Incomes Policies in Western Europe
(Berkeley: University of California Press, 1971).
""What's Next for the American Economy," Remarks at Pepperdine University,
Los Angeles, Calif., November 1, 1971.
PRESIDENTS ECONOMIC
PROGRAM
the lines of an incomes policy. In an address to the Nation on June
17, 1970, the President announced a number of actions "that will
help to move us ahead more quickly towards our goal of full
employment, economic growth, and reasonable price stability in
peacetime." Three actions were keyed to the fight against inflation:
(1) Appointing a National Commission on Productivity, composed
of representatives from business, labor, the public, and government, to explore means of improving productivity in the economy
and achieving "a balance between costs and productivity that will
lead to more stable prices"; (2) Instructing the Council of
Economic Advisers to prepare "inflation alerts," to be made public
by the Productivity Commission, spotlighting significant wage and
price increases and analyzing their impact on the general price
level; and (3) Establishing a Regulations and Purchasing Review
Board within the Federal Government to examine all government
actions "to determine where Federal purchasing and regulations
drive up costs and prices." U.S. import policy, the President added,
would be reviewed "to see how supplies can be increased to meet
rising demand, without losing jobs here at home/'
While taking these steps to combat inflation and calling on
business and labor to help hold down the cost of living, the President was opposed to the imposition of wage and price controls,
"however politically expedient that may seem."
Controls and rationing may seem like an easy way out but they are really
an easy way into more trouble—to the explosion that follows when you try to
clamp a lid on a rising head of steam without turning down the fire under the
pot. Wage and price controls only postpone a day of reckoning, and in so doing
they rob every American of a very important part of his freedom.
This was not the time, the President asserted, for Congress to
"play politics with inflation" by granting him standby authority
to impose wage and price controls. Rather, he hoped that Congress
would cooperate with him on a program specifically designed "to
help the people who need help in a period of economic transition
from a wartime to a peacetime economy." While pressing for that
program, the President emphasized: "There is no more important
goal than to curb inflation without permitting severe disruption.
This is an activist administration, and should new developments
call for new action in the future, I shall take the action needed
to attain that goal." 13 Despite President Nixon's avowed opposi13
"Economic Policy and Productivity," The President's Address to the Nation,
June 17, 1970, in Weekly Compilation of Presidential Documents, June 22, 1970, pp.
774-781.
PRESIDENTS ECONOMIC
PROGRAM
tion to direct controls, Congress enacted the Economic Stabilization Act of 1970, granting him standby powers to impose wage and
price controls.
The Council of Economic Advisers proceeded with inflation
alerts—the first two in August and December, 1970. Leaders of
the opposition in Congress, however, criticized these "after-the-fact
handslappings," and urged the President to institute a 30- to 60-day
freeze on wage and price increases, using his standby authority,
and then to formulate guidelines for longer-range wage and price
restraints.14
In a speech before the National Association of Manufacturers in
December 1970, outlining stabilization actions and proposals to
stimulate the economy toward full growth and employment, President Nixon sharply criticized the bargaining processes and extraordinarily high wage settlements in the construction industry. And
in March 1971 he issued an Executive order, based on the Economic Stabilization Act of 1970, establishing a tripartite Construction Industry Stabilization Committee to moderate wage-price
increases in that industry.15
Along with these difficult problems on the domestic scene, the
United States' international economic position approached a point
of crisis by mid-1971. Inflation at home was pricing the country's
goods out of the world market and exacerbating the existing trade
deficit. The balance of payments, already unfavorable in the sixties,
deteriorated sharply and dangerously in 1970-71. This erosion
in the United States' trade and balance-of-payments position
triggered and was accentuated by enormous outflows of short-term
capital, which placed severe strains on America's international
"Worsley, op. cit., pp. 103-104. For a discussion of the enactment of the Economic
Stabilization Act of 1970, see below, pp. 14-17.
15
See "The President's Remarks" at the annual meeting of the National Association of Manufacturers in New York City, December 4, 1970, reprinted in Weekly
Compilation of Presidential Documents, December 7, 1970, pp. 1623-1629; Executive
Order 11588, March 29, 1971 (Exhibit 2) . For a comprehensive report on this
program, see Harry Lenhard, Jr., "Economic Report—Construction Wage Stabilization
Efforts Provide Tests for Nixon's Phase 2," National Journal, November 6, 1971.
PRESIDENTS ECONOMIC PROGRAM
financial status.16 This mounting financial crisis, Stein reflected
later, dictated the timing of the decision to institute wage-price
controls and perhaps the decision to do it at all. As he put it:
. . . The outflow of dollars from the United States reached flood proportions
in the Summer (of 1971) , there was some loss of gold and a further and larger
loss of gold was at least a danger. Some decisive action had to be taken on that
front. The action taken was to close the gold window, suspending the convertibility of dollars into gold . . . The decision to close the gold window opened
the prospect of all kinds of panicky reactions including a massive flight from
the dollar at home and abroad. Action that would unmistakably indicate the
government's determination to protect the real value of the dollar was needed,
and nothing could serve this function so well as a wage-price freeze.17
THE DECISION AT CAMP DAVID
All the above mentioned considerations converged in the President's decision, August 15, 1971, to change his economic "game
plan." That Sunday evening, after a busy weekend at Camp David,
the President made a dramatic announcement of a "New Economic
Policy" designed to achieve, as he told the Nation, "a new prosperity without war." Such a program, he said, would require action
on three fronts—creating new jobs, halting inflation, and protecting
the position of the American dollar "as a pillar of monetary
stability around the world." The range of actions taken and proposed that evening, the President observed, was "the most comprehensive New Economic Policy to be undertaken by this Nation
in four decades." 18
This momentous change in course was effected in a surprisingly
short time and in complete secrecy. Only some two weeks before
the August 15 announcement, Dr. Paul W. McCracken, Chairman
of the Council of Economic Advisers, had entered a strong rebuttal
of John K. Galbraith and other advocates of wage-price controls.19
36
See Statements by Paul A. Volcker, Under Secretary of Treasury for Monetary
Affairs, before the Subcommittee on Internation Trade of the Senate Finance Committee, September 13, 1971, and the Subcommittee on Foreign Economic Policy,
House Foreign Affairs Committee, September 21, 1971; see also Paul W. McCracken,
Chairman, Council of Economic Advisers, "Can Economic Stability and Progress Be
Achieved?," Remarks before the Economic Club of Detroit, Detroit, Michigan,
November 1, 1971; Current Foreign Policy—International
Aspects of President
Nixon's New Economic Policy, Department of State Publication 8619, Economic
Foreign Policy Series 3, November 1971 (Washington: Government Printing Office,
1971) ; Peter G. Peterson, "A Foreign Economic Perspective," and "The United
States in the Changing World Economy: Statistical Background Material," both
dated December 21, 1971.
""What's Next for the American Economy," November 1, 1971.
18
"The Challenge of Peace," address by the President on nationwide radio and
television, Sunday, August 15, 1971, White House press release.
""Galbraith and Price-Wage Controls," Washington Post, July 28, 1971.
8
PRESIDENTS ECONOMIC
PROGRAM
In the two weeks before the fateful weekend at Camp David, few
people had been privy to the President's determination on a new
course of action. Necessary planning and studies proceeded secretly
in various agencies and offices of the Federal Government.20
Still, there were indications that the President was considering,
if not actually moving toward, a change in policy. To be sure, on
June 29th Treasury Secretary John B. Connally announced the
President's rejection of wage and price controls along with several
other proposals to stimulate the economy and curb inflation.21
Less than one month later, however, Federal Reserve Board Chairman Arthur F. Burns urged the Administration to take further
steps to control inflation. Testifying before the Joint Economic
Committee on July 23, Burns said: "In my judgment, and in the
judgment of the Board as a whole, the present inflation in the
midst of substantial unemployment poses a problem that traditional monetary and fiscal remedies cannot solve as quickly as the
national interest demands/' He added:
The inflation we are confronted with has become deeply rooted since its
beginning in 1965. The forces of excess demand that originally led to price
inflation disappeared well over a year ago. Nevertheless, strong and stubborn
inflationary forces, emanating from rising costs, linger on. I wish I could report
that we are making substantial progress in dampening the inflation spiral. I
cannot do so.
The Administration, Burns felt, should establish a wage-price review board and resort to compulsory arbitration to keep wages
and prices down in industries that especially affected the public
interest.22
Though he kept reiterating his dislike for wage and price controls, President Nixon, at an impromptu news conference held
August 4th, indicated that he would reconsider his position if a
full-scale Congressional debate convinced him that controls could
be enforced without putting the economy in a straitjacket.
. . . with regard to wage-price boards, I have still not been convinced that we
can move in that direction and be effective. . . . As far as we are concerned, we
have an open mind in terms of examining various proposals to see if there is a
new approach which we may not have thought of.
I have serious doubts that they will find such a new approach, but I do want
to indicate that we will examine it because we all agree that the wage-price
30
"The Presidency—Recollections of Camp David," National Journal, September
18, 1971, p. 1934.
81
Congressional Quarterly Almanac, 92nd Congress, 1st Session . . . 1971 (Washington: Congressional Quarterly, 1972), pp. 691, 692.
10
Ibid., p. 692.
9
PRESIDENTS ECONOMIC
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spiral is a significant danger to this expanding economy. The question is what
do we do about it, without going all the way to a totally controlled economy.28
The same day Treasury Secretary John B. Connally elaborated
on this theme and even posed some of the specific questions in the
price-wage control field "which need exploring." Among these, he
told the press, were:
1. How effective have various approaches been?
2. What type of organization would be set up to administer the program?
Would there be only one national Board, or many regional and local ones? How
would they be staffed, by volunteers, government employees?
3. How would legislation be implemented? How would it be enforced? What
would be the penalties for violation? Would there be roll back authority? What
if workers strike against a decision? What type of appeal from decisions would
there be?
4. What will be the criteria for appropriate wage and price action? How
would it affect escalator clauses in existing wage pacts? Will industries be
allowed price increases where prices and profits are low to start? Would low
wage workers, say those at the poverty level, be denied wage increases?
5. How comprehensive should the scope of these measures be? Would interest
rates, both rates paid and received, be controlled? If interest rates were controlled,
would there also have to be controls on allocation of credit determining who
was or wasn't eligible? Would legal and medical fees be included? Taxes? Prices
of homes, businesses, stocks, bonds, tuition, rents, trade-in's?
6. What would be the effects upon our balance of trade? Would any form
of controls build in a significant disadvantage for our goods relative to those
imported into this country and to the competitive position of our products
abroad?
7. What happens when such legislation is no longer needed? How will we
tell when such legislation is no longer needed?
"If these questions are objectively and exhaustively pursued,
analyzed and discussed/' Connally asserted, "the result undoubtedy
will be a clearer definition of terms and conditions presently under
discussion and bring into clearer focus the actual economic situation of the nation/' 24
Still, few even among the economists had any notion that a
radical change in policy was in the offing. The White House
moved with utmost secrecy for fear that premature disclosure
might have adverse effects both on the international and domestic
scenes. Most of the individuals who worked on various parts of
the new policy were not fully aware of what was involved until
they heard or read the President's speech.
23
See Weekly Compilation of Presidential Documents, August 9, 1971, Vol. 7,
No. 32, p. 1124. Extracts reprinted in U.S. News and World Report, August 16,
1971, pp. 76-80.
* Department of the Treasury News Release, August 4, 1971.
10
PRESIDENTS ECONOMIC
PROGRAM
THE NEW ECONOMIC POLICY
The President's program had several objectives: (1) to deal with
the problem of inflation; (2) to stimulate the economy immediately and improve efficiency and competitiveness over the long-run;
and (3) to strengthen America's position in the world economy by
improving the international monetary and trading system and
providing relatively quick balance-of-payments benefits. These
objectives and the specific measures announced for their implementation were deemed interlocking and mutually reinforcing. In
testimony before a subcommittee of the House Foreign Affairs
Committee, Paul A. Volcker, Under Secretary of the Treasury for
Monetary Affairs, emphasized the interrelationship of the steps in
the domestic and international areas:
. . . success in the domestic elements of the program is essential to lasting success
in the international sphere. Domestic stability is a prerequisite to international
stability. If we do not resolve the problems of eliminating inflation and improving
our productive efficiency while creating more jobs at home, we will not maintain
the improved competitive position which is necessary to genuine and lasting
improvement in our international financial position.25
Indeed, Administration spokesmen asserted, each element of the
President's program interlocked with other elements in such a way
that the effectiveness of the whole would be greater than the sum
of the parts, taken individually.26
Specifically, the program consisted of the following:
1) A 90-day freeze of all prices, rents, wages, and salaries.
2) Creation of a Cabinet-level Cost of Living Council to make
the basic decisions concerning the 90-day freeze, the postfreeze
economic stabilization program, and the eventual transition back
to a free-market economy.
3) Temporary suspension of the full convertibility of the dollar
into gold, thus letting it "float" to its own level in relation to
foreign currencies.
4) Imposition of a temporary surcharge on imports into the
U.S., generally at a rate of 10 percent.
5) A recommendation for changes in the tax laws which would:
a) restore, effective August 15, 1971, an accelerated investment tax
25
Statement before the Subcommittee on Foreign Economic Policy of the House
Foreign Affairs Committee, September 21, 1971.
28
Release of White House press conference of Hon. John B. Connally, Secretary
of the Treasury, Hon. George P. Shultz, Director, Office of Management and Budget,
and Hon. Paul W. McCracken, Chairman, Council of Economic Advisers, August
15, 1971; Volcker, Statement before the Subcommittee on International Trade of the
Senate Finance Committee, September 13, 1971.
n
PRESIDENTS ECONOMIC PROGRAM
credit at the rate of 10 percent for one year, followed by a
permanent credit at the rate of 5 percent; b) repeal the 7 percent
excise tax on automobiles as of August 15, 1971; and c) advance
to January 1, 1972 the increase in personal income tax exemptions
then scheduled to take effect a year later.
6) Reduction of Federal expenditures in Fiscal Year 1972 by
$4.7 billion, to be achieved mainly by a 5 percent cut in Federal
employment and a postponement for 6 months of the Federal pay
increase scheduled for January 1, 197?. Further, the President
proposed a 3-month deferral of the effective date of general revenue
sharing, and a one-year postponement of welfare reform.27
THE WAGE-PRICE FREEZE
In this August 15 announcement, President Nixon emphasized
two characteristics of the freeze. First, it was to be temporary. "To
put the strong vigorous American economy into a permanent
straitjacket," he said, "would lock in unfairness and stifle the expansion of our free enterprise system." Second, while Government
sanctions would be invoked if necessary to support the freeze, the
President did not anticipate the establishment of a huge pricecontrol bureaucracy. Reliance would be placed on the voluntary
cooperation of all Americans to make this freeze work. "Working
together," he was confident, "we will break the back of inflation,
and we will do it without the mandatory wage and price controls
that crush economic and personal freedom/'
Further insights into the plans for implementing the freeze were
presented in various briefings given immediately after August 15 by
Mr. Arnold Weber, who became the Executive Director of the Cost
of Living Council. His description may be summarized as follows:
a. The freeze order was comprehensive in scope.
b. Although simple in concept, the freeze was inherently complex in implementation.
c. The Administration did not institute a system of controls in the sense that
there were rules to permit the dynamic adjustment of wages and prices. The
system of controls that would permit such movement would fall in the planning
27
For a detailed exposition, see "Explanatory Material on the President's Economic
Program," White House release, August 15, 1971. The freeze action was spelled out
the same day by Executive Order 11615, issued under the authority of the Economic
Stabilization Act of 1970 as amended. The imposition of the temporary surcharge
on imports was announced by Presidential Proclamation 4074, also on August 15,
1971, by which the President declared a "national emergency" and called upon
the public and private sectors "to make the efforts necessary to strengthen the international economic position of the United States."
12
PRESIDENTS ECONOMIC
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for Phase II [the postfreeze Economic Stabilization Program]. Clearly, the freeze
was a "control" in the technical sense but not to the degree of establishing a set
of criteria to permit adjustments.
d. The Cost of Living Council was also charged with the development of
Phase II policy.
e. The freeze was imposed with little warning because of the desire to avoid
anticipatory wage and price increases. That is, if firms and unions were aware
that a freeze would be imposed some undoubtedly would have raised wages and
prices in anticipation. This is what happened in the Korean War and it created
a sharp sense of inequity while giving further impetus to inflation in the shortrun.
f. Many policy decisions were still to be made. Policy had already been
promulgated on some issues, such as the disallowance of deferred wage increases
and of price increases where substantial transactions had not occurred during
the preceding 30 days. No one, however, as yet presumed to have answers to all
the questions that would arise.
g. Since the President did not want a large bureaucracy, and since part of the
program involved a five percent cut in Government personnel and other budgetary
stringencies, available resources had to be used. The Office of Emergency Preparedness was therefore given the responsibility for setting up the national
service and compliance machinery, with ten Regional Centers. An 'in-place'
structure was thus used, and other departments and agencies were asked to
provide resources to augment this structure as needed.28
The Administration saw the freeze as providing "shock treatment" to the escalation of wages and prices. It was hoped that this
treatment would be temporary and would have beneficial therapeutic effects. It was obvious from the first that, in an economy as
complex and diverse as that of the United States, the freeze could
only serve as a holding operation, administering a temporary
restraint. Imbalances of all sorts would be frozen into the system,
and the longer the freeze went on the more serious would become
the resulting inequities. Complaints and petitions for relief could
be expected to mount and require an ever-increasing apparatus
for administration and enforcement.
The Administration hoped for public acceptance of this temporary restraint until means could be designed to alter permanently
the pressures that fanned the inflation. If the inflation were not
to flare up anew, the freeze would have to be followed by a
stabilization program that would be fair to all segments of the
economy and still be firm enough to be effective. Unless it were
fair in dealing with the inevitable and irresistible pressures for
change, it would not be acceptable and it would not work. And
unless it had force behind it, it would suffer the same fate as other
toothless schemes tried in this country and abroad in the past.
28
Arnold R. Weber, University of Chicago Graduate School of Business, Chicago,
111., Letter to G. A. Lincoln, Director, Office of Emergency Preparedness, January 7,
1972.
13
PRESIDENTS ECONOMIC
PROGRAM
The President made clear from the outset that governmental restraints upon free-market forces would be necessary until the
inflationary pressures were brought under control. The Nation had
been operating under the freeze only some 3 weeks when the
President announced before a special joint session of Congress
that the freeze would not be extended beyond the 90 days. But he
assured the Congress and the American people that with the expiration of the freeze the necessary steps would be taken to prevent
the recurrence of runaway inflation.
As we consider what follows the freeze, let us bear in mind that prosperity is
a job for everyone—and that fighting inflation is everybody's business.
Let us remember, also, that nothing would be more detrimental to the new
prosperity in the long-run than to put this Nation's strong free enterprise system
in a straitjacket of Government controls.
Regimentation and Government coercion must never become a way of life in
the United States of America. That means that price and wage stabilization, in
whatever form it takes, must be only a way station on the road to free markets
and free collective bargaining in a new prosperity without war.29
The challenge for the Administration was to make the freeze
work and, looking beyond its expiration on November 13, to
design a strategy of controls that would be equitable and still avoid
the central planning, regimentation, and compulsion that may be
inevitable under emergency conditions but which would be clearly
unacceptable as a permanent feature.
Legislative Base
The President imposed the wage-price freeze under authority
provided in the Economic Stabilization Act of 1970. First enacted
on August 15, 1970, this Act was extended and amended on three
occasions. At the time of the freeze, the Act was not due to expire
until midnight April 30, 1972.30
The policy of having standby legislation to permit the imposition
of a general freeze at the onset of an emergency had been the
subject of extensive Congressional study and debate. No President
29
A New Prosperity Without War and Without Inflation. Message from the
President of the United States Concerning His Economic Policies, House Doc. No.
92-162, 92nd Cong., 1st Sess., September 9, 1971 (Washington: Government Printing
Office, 1971), pp. 3-4.
30
See P u b l i c L a w 9 1 - 3 7 9 , 84 Stat. 799 (as a m e n d e d b y P . L . 9 1 - 5 5 8 , 8 4 Stat. 1468;
P.L. 9 2 - 8 , Stat. 13, a n d P.L. 9 2 - 1 5 , 85 Stat. 3 8 ) .
14
PRESIDENTS ECONOMIC
PROGRAM
had been disposed to ask for such authority, and until mid-1970,
no Congress was disposed to grant it.31
In mid-1970, with the persistence of inflation despite fiscal and
monetary restraints, the issue again came up for Congressional
consideration. A number of economists (notably John Kenneth
Galbraith), labor leaders, mayors of large cities, and others came
out strongly for a temporary freeze on prices and wages. Some
directed their fire specifically at unions and large corporations,
while others supported a more general approach to controls.82
Seemingly convinced that the indirect approach would not suffice, Congress moved to give the President standby authority to
use a freeze as a check on inflation. In support of the legislation,
House Majority Leader Carl Albert argued that the President and
his advisers "are prescribing the wrong medicine for the particular
inflationary virus now infecting the Nation/' Restrictive fiscal and
monetary policies, Albert noted, were appropriate for combating
traditional demand-pull inflation, but the cost-push inflation then
besetting the country required the imposition of direct controls.33
On August 15, 1970, the President signed the measure into law,
though he gave notice that he did not want the freeze authority
and would not use it. Were it not for the need to renew some
important provisions of the Defense Production Act, Nixon said,
he would have vetoed the bill. A freeze on wages and prices, he
said, "simply does not fit the economic conditions which exist
today." If Congress felt that wage-price controls should be mandatory, the President added, it should "face up to its responsibilities
and make such controls mandatory." 34
The Act authorized the President to "issue such orders and
regulations as he may deem appropriate to stabilize prices, rents,
wages and salaries," but not at levels below those prevailing on
May 25, 1970. Such orders and regulations, the Act stipulated,
"may provide for the making of such adjustments as may be neces81
Bernard M. Baruch, Chairman of the War Industries Board in World War I,
was the leading exponent of standby authority and fought for it consistently over
the years. For Baruch's proponency of this concept, see Harry B. Yoshpe, A Voice
in the Wilderness: Baruch's Proposals for an Overall Price Ceiling and Standby
Control Authority. (Washington: Industrial College for the Armed Forces, March
1964) (Publication No. R-232). For a discussion of a Congressional attempt to
legislate standby authority early in 1953, with the lifting of price and wage controls
under the Defense Production Act, see ibid., pp. 84-91; see also "The Question of
Standby Controls for Emergencies," Ch. IX in Emergency Economic
Stabilization,
Harry B. Yoshpe, editor (Washington: Industrial College of the Armed Forces,
1964) pp. 91-98.
^Worsley, Emergency Economic Stabilization, pp. 100-101.
88
Congressional Record, July 31, 1970, p. H7508.
84
Congressional Quarterly Almanac, 91st Congress, 2nd Session, 1970 (Washington: Congressional Quarterly, Inc., 1971), p. 435.
15
PRESIDENTS ECONOMIC
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sary to prevent gross inequities." Willful violations of any orders
or regulations were made punishable by fines up to $5,000, and
injunctions might be obtained to enforce them.
An amendment to the Economic Stabilization Act, adopted on
May 18, 1971, precluded the President from singling out "a particular industry or sector of the economy upon which to impose
controls" unless he made a specific finding that the wages or prices
in that industry or sector had increased at a rate which was grossly
disproportionate to the rate for the economy as a whole. The
legislators imposed this limitation on the President's power because
they had reservations about applying specific controls to a single
industry, as the President had done in March 1971 with respect
to union-negotiated wages in the building construction industry.
Workers subject to wage controls, the Congress feared, would have
no protection against the continued rise in the cost of living. And
an industry subject to price controls would lack protection against
increases in the prices of products or materials it purchased. For
these reasons, sponsors of this legislation blocked the President
from applying controls to any one sector of the economy.
The economic stabilization legislation continued to be a matter
of political dispute. Before its enactment, President Nixon had
stated emphatically that he would not take the Nation down the
road of wage and price controls. Actually, direct controls had been
no less repugnant to the Johnson Administration. As early as the
winter of 1967-68, there was speculation in the press and hints by
some public officials that if the inflation continued or got worse,
the President might seek authority to impose wage and price controls. There were then, as later in the Nixon Administration*
divergent views as to how the growing inflation might be best
restrained. Most economists in and out of the Government, however, continued to view direct controls over prices and wages as
the tools of last resort.35 The 1968 Report of the Council of
Economic Advisers made clear the Johnson Administration's opposition to wage-price controls:
While such controls may he necessary under conditions of an all-out war, it
would be folly to consider them as a solution to the inflationary pressures that
accompany high employment under any other circumstance. They distort resource
allocation; they require reliance either on necessarily clumsy and arbitrary rules
or the inevitably imperfect decisions of government officials; they offer countless
35
Chamber of Commerce of the United States of America, "What's the Issue,"
transcript of radio broadcast, Mutual Broadcasting System, December 7, 1967; see
also A Perspective
on Wage and Price Controls, proceedings of a conference held
by the Chamber of Commerce of the United States of America, April 5, 1968.
16
PRESIDENTS ECONOMIC
PROGRAM
temptations to evasion or violation; they require a vast administrative apparatus.
All these reasons make them repugnant. Although such controls may be unfortunately popular when they are not in effect, the appeal quickly disappears
once people live under them.36
Subsequently, Republicans called the freeze measure a "political
charade" intended to embarrass the President. By early 1971, however, the Administration supported the extension of this standby
authority. 37
The Freeze Order
Executive Order 11615, promulgated by the President on August
15, 1971, established a general freeze on prices, rents, wages and
salaries. These were to be "stabilized" for 90 days at levels
no greater than the highest of those pertaining to "a substantial
volume of actual transactions" by the seller of commodities or
services during the 30-day period ending at midnight, August 14,
1971, for the same commodities or services. If no transaction occurred in that period, the ceiling was to be "the highest price,
rent, salary or wage in the nearest preceding 30-day period in
which transactions did occur." The freeze order covered all commodities and services with the exception of raw agricultural products. Persons selling or providing commodities or services were to
maintain records of their highest price or recent charges during the
specified base period, and were to have these available for public
inspection. Violators of the freeze were made subject to injunction
actions by the Department of Justice or to a fine of up to $5,000
for each violation.
It is significant to note that Executive Order 11615, based as
't was on the Economic Stabilization Act of 1970, covered only
prices, rents, wages, and salaries; it did not cover interest rates,
dividends, or profits. Extension of the freeze to these areas was
considered at the August 13-15 meetings at Camp David, but was
rejected. Whatever the merits of this decision, critics of the Administration's program charged that these omissions made it evident that the entire program was slanted in favor of big business.
Asked about "a freeze on interest" at the White House news
conference on August 15, just before the President's announcement, Treasury Secretary Connally replied:
. . . We didn't include the freeze on interest for the simple reason that it was
the combined judgment of everyone that it might work at cross-purposes. . . . We
88
Annual Report of the Council of Economic Advisers, 1968, p. 119.
"Worsley, op. cit., p. 102.
17
474-893 O - 72 - 3
PRESIDENTS ECONOMIC
PROGRAM
did not do it because we didn't know how to effectively do it. It is almost impossible to make it apply to interest rates.38
The Administration in mid-August 1971, Connally later indicated,
felt that interest rates in the 30 days preceding the freeze were too
high, and those existing on May 25, 1970—the basic base periodwere even higher. Any announced ceilings on interest rates, Administration spokesmen feared, might rapidly become "floors," as
had been the case in the past. "We did not want to risk stabilizing
interest rates at those high levels," Connally said later. "We took
the risk of excluding interest from the freeze and we were right."89
While interest was thus excluded from the freeze, Connally made
a special plea to lending institutions to go along with the antiinflation program. "We certainly expect that they will live up to
the wage-price freeze in the interest they charge," he said. "It's my
hope that interest rates will come down." 40
Dividends were, like interest, excluded from the freeze order.
But in his address of August 15, announcing the freeze action,
President Nixon did call upon corporations "to extend the wageprice freeze to all dividends." 41 The Cost of Living Council put
out guidelines on the subject; and at a news conference held
September 28, 1971, Commerce Secretary Maurice H. Stans reported that pledges had been obtained from all but 38 of 1,250 of
the Nation's largest corporations to refrain from dividend increases
during the freeze.42
In the case of profits, the Administration opposed the imposition
of an excess profits tax. Profits were declining at the time anyway,
and the Administration feared that a freeze on profits would discourage the capital investment needed to create new jobs.43 Even
some Democratic economists like Gardner Ackley and Arthur
Okun took a dim view of an excess profits tax.44 President Nixon's
attitude was clear on this point. In his address to the Nation on
"White House press conference cited in note 26 above. The Credit Control Act
of 1969 (Public Law 91—151) did authorize the President to delegate to the Federal
Reserve Board authority to regulate interest rates as part of a credit control program, which may be instituted under certain circumstances. These circumstances
require a Presidential determination that controls are necessary to prevent inflation
generated by the extension of credit in an excessive volume. Such a determination
did not appear to be justified under the conditions in the Summer of 1971.
89
Statement before the House Banking and Currency Committee, October 27,
1971.
40
Bureau of National Affairs, A Special Report, August 16, 1971.
41
"The Challenge of Peace," August 15, 1971.
48
New York Times, September 29, 1971.
48
"The Presidency—Recollections of Camp David," National Journal, September
18, 1971, p. 1934; "Putting a Lid on Profits: Who Gets Squeezed?/' U.S. News and
World Report, November 29, 1971, p. 551.
44
"The Freeze: Planning for Thin Ice," Newsweek, September 13, 1971, p. 83
18
PRESIDENTS ECONOMIC PROGRAM
October 7, 1971, announcing his decisions on the postfreeze program, he explained why he would not fix limits on profits.
. . . Many of my good friends in the field of politics have advised me that the
only politically popular position to take is to be against profits.
But let us recognize an unassailable fact of economic life. All Americans will
benefit from more profits. More profits fuel the expansion that generates more
jobs.
More profits means more investment, which will make our goods more
competitive in America and in the world.
And more profits means there will be more tax revenue to pay for the programs that help people in need. That's why higher profits in the American
economy would be good for every person in America.
With the Government's putting a lid on wages and other costs,
however, it was conceivable that in some circumstances exorbitant
profits could be made. Rather than tax such excess or "windfall"
profits, Nixon expected that under governmental policy in the
Phase II program business "should pass along a fair share of its
cost savings by cutting prices.'*45
APPARATUS FOR ADMINISTERING THE FREEZE
The Cost of Living Council
By Executive Order 11615, the President established the Cost of
Living Council (CLC) and delegated to it the authority conferred
on him by the Economic Stabilization Act of 1970. The President
designated Treasury Secretary John B. Connally to head the Council. A Texas Democrat, Connally had joined the Nixon Administration in February 1971 and soon emerged as the President's leading
spokesman on the economy.46
Executive Order 11615 further designated a Special Assistant to
the President to serve, under the direction of the Chairman, as
Executive Director of the Council. The President appointed
Arnold R. Weber to this job. A 42-year-old economist from the
45
See text of President Nixon's address in New York Times, October 8, 1971.
Other members of the Council included the following: Dr. Paul W. McCracken,
Chairman of the Council of Economic Advisers, designated as Vice Chairman;
Clifford M. Hardin, Secretary of Agriculture; Maurice H. Stans, Secretary of Commerce; James Hodgson, Secretary of Labor; George Romney, Secretary of Housing
and Urban Development; George P. Shultz, Director, Office of Management and
Budget; George A. Lincoln, Director, Office of Emergency Preparedness; and Virginia
H. Knauer, Special Assistant to the President for Consumer Affairs. Dr. Arthur F.
Burns, Chairman of the Board of Governors of the Federal Reserve System, was
designated to serve as "adviser" to the Council. Executive Order 11615 inadvertently
omitted the Secretary of Housing and Urban Development from the Council's membership; this was corrected by Executive Order 11617, dated September 2, 1971.
46
19
PRESIDENTS ECONOMIC
PROGRAM
University of Chicago, Weber had joined the Nixon Administration in January 1969 as Assistant Secretary of Labor for Manpower.
In July 1970 he was appointed Associate Director of the Office of
Management and Budget. Weber was at the point of returning to
his teaching post when he was recruited for the Council job.
Along with the delegation of the President's powers under the
Economic Stabilization Act of 1970, Executive Order 11615 specified the following responsibilities of the Council:
a) Development and recommendation to the President of "additional policies, mechanisms, and procedures to maintain economic
growth without inflationary increases in prices, rents, wages, and
salaries after the expiration of the 90-day period specified in Section
I of this Order."
b) Consultation with labor, industry, business, farm, and public
representatives concerning the design of such policies, mechanisms,
and procedures.
c) Guidance in all its actions by "the need to maintain consistency of price and wage policies with fiscal, monetary, international and other economic policies of the United States/'
d) Informing the agricultural, industrial, and labor sectors and
the public at large concerning "the need of controlling inflation"
and encouraging and promoting voluntary action to that end.
The Council was thus to be the policy body for the freeze program. It could define terms, make exceptions or exemptions, issue
regulations or orders, and take other necessary actions. The Council
was authorized to redelegate any of its authority and to call on
other Federal or State agencies for help in administering the order.
Further, the Council could require the maintenance of appropriate
records or other evidence needed in carrying out the provisions
of the Executive order and request the submission of such information for examination.
To assist the Council in day-to-day policy and administrative
decisions, Connally established an Executive Policy Committee
(EPC) under the chairmanship of the Council's Vice Chairman,
Dr. McCracken. Other members were Weber, George A. Lincoln,
Director of the Office of Emergency Preparedness, and Charls E.
Walker, Under Secretary of the Treasury. Meeting almost daily,
EPC reviewed and resolved many policy issues and presented others
to the Council for consideration in developing freeze policies and
regulations.
20
PRESIDENTS ECONOMIC
PROGRAM
OEP: The "Operating Agency" for CLC
At the White House press conference on the evening of August
15, Connally mentioned the creation of the Council to supervise
the freeze and the decision to "delegate" the administrative management task to the Office of Emergency Preparedness. The fact
that OEP had only about 300 people in its employment, Connally
emphasized, should make it evident that "we don't anticipate that
there is going to be any building up of any huge bureaucracy
throughout the country" to administer the freeze. "It is a different
animal entirely," he added, "from wage-price controls as we normally speak in those terms." 47
OEP Director George A. Lincoln was spending the weekend
on his ranch near Denver, Colorado, when he got word from
the White House late on August 14 to return to Washington the
following day. He came back in time to alert his staff and Regional
Directors to the impending message from the President and the
call to action. Thus, "without warning," one periodical noted,
"President Nixon plucked the tiny agency out of the anonymity of
the U.S. Government Organization Manual to supervise the wageprice freeze." 48 In the same vein, another periodical characterized
the assignment of "so vast and complex an undertaking" to Lincoln
and his "tiny cadre of trouble-shooters," as a seemingly "implausible piece of casting." The article continued:
. . . The OEP is a flyspeck on the Federal table of organization—an obscure
bureaucratic cranny with a meager staff (308) , a modest budget ($9.5 million) ,
an ancient headquarters (the Army of the Potomac used it during the Civil War)
and only eight regional offices in all the wrong places (e.g., Olney, Md., Denton,
Texas, and Maynard, Mass.) . Its expertise, moreover, consists mostly of directing
recovery operations after hurricanes, tornadoes and earthquakes and making
contingency plans for stabilizing the economy in case of nuclear war. Its directorship was once one of Washington's least glamorous jobs. But Mr. Nixon has
grown fond of his man Lincoln, a retired Army brigadier general of 64 with an
imposing personnel file (Rhodes scholar, West Point professor, co-author of five
books) and a deceptively countrified manner. And OEP's lean, limber look
obviously appealed to the President in contrast to the elephantine price-control
bureaucracies of the World War II and Korean War eras.49
Addressing the National Association of Food Chains some three
weeks after OEP's assumption of this management task, OEP Director Lincoln observed, "I have . . . been asked why we are so
charged." His response was as follows:
. . . Perhaps by a process of elimination. We had the only economic stabilization
planning mission in Government—for use in wartime. So we had a little capital.
47
White House press conference
48
Time, August 30, 1971.
49
cited in note 26 above.
"OEP: Disaster is Its Speciality," Newsxueek, August 30, 1971.
21
PRESIDENTS ECONOMIC PROGRAM
We are a part of the President's Executive Office. We are accustomed to calling
on and coordinating the great Federal agencies in connection with natural disaster
operations. We are accustomed to getting to the emergency situation quickly and,
perhaps equally important, getting out quickly. We have no vested interest in
staying with an emergency task after it is done.50
Lincoln had many years' experience as a national security specialist, defense economist, and military planner. He served in
several strategic planning and military-political-economic assignments during and after World War II under Generals George C.
Marshall and Dwight D. Eisenhower, and as an adviser to several
Presidents and Secretaries of State and Defense. Just prior to his
appointment as Director of OEP in January 1969, Lincoln retired
from the Army. He came to OEP from the faculty of the U.S.
Military Academy, where he had headed the Department of Social
Sciences. In his capacity as Director of OEP, he was a statutory
member of the National Security Council and assisted the President
in coordinating the Federal response to economic crises and natural
disasters, and in planning the national non-military defense efforts
toward meeting contingencies ranging from limited war to all-out
nuclear attack.
Lincoln had gained a reputation as an able administrator. He
developed a broader concept of OEP's mission in the area of
preparedness for, and management of, emergencies involving the
President and his Executive Office. This "crisis management"
extended to actively involving OEP in current emergencies. Thus,
by special Presidential assignment, Lincoln was charged with policy
direction, coordination, and surveillance of the Nation's oil import
program, with the advice of an interagency committee under his
chairmanship. Similarly, he came to chair a Joint Board of Fuel
Supply and Fuel Transport, which identified short-term energy
fuels and power problems and coordinated Federal remedial action.
Also, in the face of recurring rail strikes, Lincoln, under assignment
from the President, developed the priorities to guide the Secretary
of Transportation in allocating means of transportation and directing the movement of essential goods. OEP's effectiveness as a
troubleshooter in these crisis situations unquestionably had an
important bearing on the President's decision to charge the agency
with the management of the freeze program.
Over the years, too, the OEP's Economic Stabilization Division,
under the leadership of Mr. Leonard A. Skubal, had been developing and coordinating government plans for maintaining and
50
Remarks before the National Association of Food Chains, September 8, 1971.
22
PRESIDENTS ECONOMIC
PROGRAM
stabilizing the civilian economy under emergency conditions. These
plans included measures for both direct and indirect controls, draft
legislation, the charting of the organizational structure, and
preparations to staff it. The planning in the stabilization area, as
in all other fields of the OEP mission, was in terms of three principal contingencies: international tension that would call for some
tentative measures; so-called "limited war" mobilization; and general war, including massive nuclear attack.
The OEP Economic Stabilization Division developed and refined
general programs for direct stabilization controls in limited war
situations, as well as preparedness capabilities for the administration of controls at State and local levels in nuclear attack situations.
With the advice and assistance of consultants and advisory committees, OEP staffers developed concepts for standby controls in
specific industries, with regulations tailored to their unique characteristics. Much was done to design the structure and plan for
the manning and logistic support of the Economic Stabilization
Agency proposed for activation in an emergency. The Division's
plans contemplated a general freeze or stop order covering all
prices, wages, salaries, and rents immediately upon the onset of a
substantial mobilization, to be followed by the spot handling of
urgent problems arising under the freeze and by the rapid development of standards for adjustments, exemptions, and refinements
that would be required.
The plans and programs that the Economic Stabilization Division had on hand had been prepared primarily upon the basis
of wartime scenarios. They had only to be adapted to meet the
needs of the non-mobilization situation in which they now were
to be used. The advance work of the OEP planners, therefore,
provided valid concepts that were useful from the outset.51
The Office of Management and Budget and the Council of Economic Advisers brought Skubal into the planning prior to the
freeze. He served as a member of a task force that developed
a number of papers reviewing and assessing U.S. and foreign experience with wage-price constraints, the peculiar set of factors
which induced the President to create the Construction Industry
61
Enclosure to Memorandum, W. C. Truppner, Assistant Director for Resource
Analysis, to Laurent E. Morin, Planning Review, November 16, 1971, Subj: AfterAction Reports on OEP's Role in the Wage-Price Freeze; F. Joseph Russo, "Phase
II of the New Economic Program," presentation at the University of Denver Symposium, Denver, Colo., November 18, 1971; Darrell M. Trent, Deputy Director,
OEP, Statement before the House Armed Services Committee's Subcommittee on
Civil Defense, December 9, 1971; Leonard A. Skubal, "Critique of OEP's Role and
Performance in the Economic Stabilization Program of the New Economic Policy,"
January 1972.
23
PRESIDENTS ECONOMIC PROGRAM
Stabilization Committee, and problems and alternatives in wageprice stabilization. The group also set out the major options in the
form of guidelines with explicit criteria: a wage-price review
board, a temporary freeze, selective industry actions, and general
wage-price controls. For each of these options, they set forth their
views on structure, implementation, required resources, anticipated
operational problems, and probable effectiveness.
In presenting the staffing requirements in connection with the
basic options, the task force proposal ranged up to 13,000. The
President, in choosing his options, settled on a Phase I staff of fewer
than 4,000. Using OEP's preparedness concepts, Skubal made a
useful contribution to the work of the task force in shaping the
President's freeze program. He had a direct role in the design of
stabilization regulations and in shaping some of the thinking that
went into the organizational structuring and policies of the freeze
and the postfreeze stabilization programs.52
OEP's activities in managing the freeze began immediately after
the President's August 15th pronouncement. On August 17, the
Cost of Living Council formally delegated to the Director of OEP
"responsibility and authority to implement, administer, monitor,
and enforce the stabilization of prices, rents, wages and salaries," as
directed by Section 1 of Executive Order 11615. Significant policy
decisions were to be made only after consultation with the Council.
Other departments and agencies were expected to provide necessary
assistance, and the Director was authorized to redelegate administrative and operative functions relating to the implementation of
the program.53
OEP was thus charged with managing the freeze. It was authorized to:
1) Provide overall management and direction from Washington
for the operations based there and for field operations, generally
through ten Regional Offices, which were to work in cooperation
with 360 local offices of the Internal Revenue Services (IRS),
Treasury Department, and 2,819 local offices of the Agricultural
Stabilization and Conservation Service (ASCS), Department of
Agriculture.
2) Develop, in conjunction with other Federal agencies, critical
policy questions and issues and suggest to CLC the answers to
these questions and issues.
82
Interviews with Leonard A. Skubal, September 21, 1971, and January 14, 1972;
"Pre-Freeze Activity," Enclosure to Memo, Truppner to Morin, November 16, 1971,
Subj: After-Action Reports on OEP's Role in the Wage-Price Freeze.
68
Cost of Living Council Order No. 1, August 17, 1971, Subj: Delegation of
Authority to the Director, Office of Emergency Preparedness.
24
PRESIDENTS ECONOMIC
PROGRAM
3) Respond to queries at both the national and local levels on
the application and interpretation of policy.
4) Ensure, through the OEP network of Regional Offices and
with the assistance of IRS, that there was compliance with the
wage-price-rent freeze, and enforce compliance when necessary.
5) Receive and consider requests for exceptions and exemptions.
6) Keep the public fully and promptly informed of the freeze
policies and procedures, the decisions made, and the guidelines
developed in response to questions and answers raised, and gain
general public understanding and acceptance of the program.
7) Monitor the progress of the program, determine how well
and how rapidly requests for exceptions and exemptions were being
processed and how promptly inquiries were being answered, and
maintain a full record of these for analysis and formal reporting.
8) Collaborate with other Federal agencies in planning the postfreeze policy and procedures and give advice and assistance to the
Council in this regard.
The role of OEP in these mission areas will be the subject of
subsequent chapters in this history.
25
Organization: Structure, Staffing,
Support
UNDERLYING CONCEPTS
Four factors influenced the development of OEP organization
and staffing arrangements for administering the wage-price-rent
freeze: the nature of the task, the environment of the freeze, the
resources available to do the job, and the Director's concept of
crisis management.
Nature of the Task
OEP's mission was to administer a freeze on wages, salaries,
prices, and rents; its principal task was to hold the line for 90
days while the Administration was preparing for the following
stage. Although the freeze lacked the complexity of a system of
detailed controls with provisions for extensive adjustments to
changing economic conditions, its administration was still a massive
undertaking. Moreover, the task was complicated by the continuing
requirements of OEP's ongoing programs, some of which were too
important to be shunted aside, even for a few days. Because of
these other responsibilities, the Director wore two distinct operational hats: one as administrator of the freeze and the other as
Director of OEP's regular programs. For this reason, he wanted
OEP's organization and staffing arrangements during the 90-day
freeze to reflect two major considerations: they had to expedite the
achievement of freeze objectives, and they had to permit OEP's
most important regular programs to continue without major interruptions.
Environment of the Freeze
Coming as it did in a period of relative international calm (and
26
ORGANIZATION
not in the midst of a large-scale war or in the wake of a nuclear
attack as contemplated in OEP's economic stabilization planning),
the freeze had no rival for public attention. Of particular moment
was the fact that it was the first time in the history of the United
States that wages and prices had been frozen for reasons other than
the economic dislocation caused by large-scale military procurement in wartime.
The public generally welcomed the freeze as a positive step by
the President to come to grips with the continuing problems of
inflation. Support of the program, however, was not unanimous.
Spokesmen for organized labor, who had been urging the President
to impose direct controls on the economy, claimed that the freeze
imposed inequitable sacrifices on working people. The reaction
of some Governors, mayors, and other political leaders was influenced by considerations of how the freeze would affect their
particular responsibilities and constituents. The media saw the
freeze as the outstanding news event of the year and reacted accordingly. Everyone—business leaders, labor spokesmen, Congressmen, government officials, small businessmen, landlords, tenants,
school teachers, housewives, and reporters—looked to Lincoln and
his small agency for answers to their questions about the freeze.
Many of the questions that deluged OEP on August 16 and the
next few days reflected concern over the unequal impact of the
freeze on individuals and different sectors of the economy. The
complex U.S. economy is constantly changing and the freeze unavoidably caught some individuals, businesses, and industries in a
less advantageous position than others. The freezing of this imbalance for 90 days inevitably produced inequities and hardships.1
Since the success of the freeze depended largely on voluntary
compliance, it was imperative that the public be strongly encouraged to continue to support the freeze despite the uneven
hardships resulting from it. An immediate and overriding task was
to convince the public that the freeze was necessary to the economic
health of the Nation and that it would be administered fairly,
consistently, and effectively. Lincoln saw his part of this task
mainly in terms of: rapidly developing rules more specific than
the generalities in the legislation and Executive order; quickly
disseminating information about the freeze to the public; encouraging voluntary compliance; receiving, investigating, and forwarding
complaints of noncompliance; and placing pressure on those who
did not comply voluntarily.
1
See pp. 97-98, 115-116.
27
ORGANIZATION
Resources Available for the Task
Because of the President's opposition to building up a large
bureaucracy, Lincoln knew he would have to achieve the desired
public impact and other aspects of his mission with the resources
of his small agency, supplemented by the resources available to
him as a member of the President's staff. These resources were
substantial. With the cloak of Presidential authority, Lincoln's
strength was not measured by the small number of people in his
agency; it was measured by the size of the mission assigned him
and by the resources which he could draw from the departments
and other agencies of the U.S. Government. During the first few
days of the freeze, Lincoln tapped this vast Federal reservoir and
soon found that it would supply the resources needed to supplement those of his own agency.
Even the resources of his own agency were more valuable than
its small size might indicate to the casual observer. Among his staff
of some 300 persons (professional and clerical) were many with
extensive experience in coordinating and managing government
programs to cope with wartime emergencies, natural disasters, rail
strikes, national fuel and power shortages, and other crises. Some
staff professionals were specialists in particular areas, but most
were generalists, able to operate effectively in crisis situations of
varying kinds. Further, the agency and its staff were experienced in
working with members of other Federal agencies as a team in
planning for and reacting to emergency situations and had a clearly
defined and periodically exercised cross-agency emergency network.
OEP had an Operations Center and a communications system
which were immediately modified to cope with the new demands
put upon them. Finally, OEP's small field organization was highly
experienced in interagency coordination, in dealing with State
and local governments, and in adapting to emergencies.
The situation had required the President to depend on an existing agency to administer the freeze—one that could start operating
on the day following his declaration. Fortunately, OEP proved
to be such an agency. As Lincoln expressed it, "When the freeze
hit, OEP was already an operating outfit, and I was confident that
my people could do the job/' 2
Lincoln's Concept of Crisis Management
During his 2i/£ years as Director, Lincoln had oriented OEP
2
Lincoln, interview with OEP historical staff, February 3, 1972.
28
ORGANIZATION
toward an operational approach that emphasized quick conversion
of activities and resources from a normal to a crisis footing and had
developed a staff trained and experienced in his concept of crisis
management. He had come to believe that effective management of
a crisis situation depends on action consistent with certain principles. Briefly, these principles are:
1. Make your mission in the crisis the central guide to your
actions—focus on the objective.
2. Respond to the crisis quickly and positively and keep the
action moving—don't let the workload pile up—stay up on the
power curve.
3. Keep the future open as long as you can; don't limit your
operations or field of maneuver until you have to.
4. Make your administration fair, consistent, and credible to
the public.
5. Exercise central control and establish single, direct lines of
control over the resources under your direct command.
6. Delegate to other agencies responsibility for managing their
own applicable resources while maintaining a strong coordinating
role over the use of these resources.
7. Delegate responsibility for routine matters to lower echelons
when feasible.
8. Keep organizational changes to a minimum, making only
those necessary to accommodate important changes in your mission—adapt what exists rather than trying to create something new.
9. Provide for effective coordination at all echelons. Teamwork
is the key to success. Stress routine lateral coordination as well as
that emanating from higher levels.
10. Dispatch immediately all information to everyone who needs
it.
11. Insure continuous, reliable, and fast feedback from your
operations. Follow up quickly to avert bottlenecks and crises.
12. As the one in charge, keep yourself free to orchestrate the
entire operation—don't get mired down in details.
Lincoln's implementation of these concepts of crisis management
will be noted from time to time in this and succeeding chapters of
the history.
NATIONAL OFFICE ORGANIZATION
Lincoln's task was complicated by his continuing responsibility
for a wide range of functions other than the freeze. OEP's normal
29
ORGANIZATION
role includes: developing policy, plans, and programs to deal with
wartime emergencies, certain peacetime crises, and natural disasters; coordinating and guiding the activities of Federal agencies
in preparing for and dealing with these emergency and crisis
situations, including plans for continuity of government and for
resource management; and, in the case of natural disasters, managing the President's Disaster Relief Fund. The Director of OEP
also has major responsibilities involving oil import policy and related energy problems, stockpiles of strategic and critical materials,
and industrial mobilization planning, as well as those flowing from
his membership on the National Security Council.
To carry out these responsibilities, Lincoln had developed a
headquarters organization with command lines and functional
assignments as shown in Figure 1. This organization had served
him well, and he wanted the freeze to disturb it as little as possible.
In his opinion sudden and drastic organizational changes confuse
the staff, confuse the many Federal agencies with routine relationships with OEP, and result in lost motion. Also, he foresaw that
the full impact of OEP's new mission and the resources needed
to carry it out would not be clear for several days. Meanwhile, he
wanted to avoid precipitate actions that would narrow his field of
maneuver.
At the same time, Lincoln recognized that OEP's normal organization was not adequate for administering the freeze. He was also
aware that OEP's prior planning for economic stabilization, while
valuable in several respects, did not offer a ready solution to his
organizational problem, particularly at the national level. This
planning had been directed toward a wartime situation, either
nuclear or limited, and contemplated establishment of an Office of
Defense Resources (ODR) at the apex of a system of control
agencies (including an Economic Stabilization Agency) superimposed on the regular Federal structure.3 Such a system would take
months to activate. Lincoln needed an immediate solution, and
he decided for the moment to solve his problem by setting up a
provisional organization to keep things under control while a more
suitable organization was being devised in the light of emerging
developments.
The provisional freeze organization with which OEP set forth
on August 16 was roughly its regular organization, with important
changes. One of the first and most important of these changes was
*See Office of Defense Resources, Resource Mobilization for Limited War, July
1966, and the Manual for Regional Emergency Operations, Economic Stabilization
Agency, August 1969.
30
FIGURE 1
OFFICE OF EMERGENCY PREPAREDNESS
DIRECTOR
Deputy Director
ASSISTANT DIRECTOR
ASSISTANT DIRECTOR
ASST. TO THE DIRECTOR
ASST. TO THE DIRECTOR
FOR
PLANNING REVIEW
GENERAL COUNSEL
ASSISTANT DIRECTOR
FOR
GOVERNMENT PREPAREDNESS
ASST. TO THE DIRECTOR
FOR
AUDIT
ASST. TO THE DIRECTOR
FOR
ADMINISTRATION
ASSISTANT DIRECTOR
FOR
RESOURCE ANALYSIS
ASSISTANT DIRECTOR
FOR
DISASTER PROGRAMS
DEPUTY ASSISTANT DIRECTOR
FOR
INFORMATION AND ANALYSIS
1
PLANS AND
PROCEDURES
DIVISION
1
EXERCISES AND
FACILITIES
DIVISION
1
IMPLEMENTATION
AND REVIEW
DIVISION
1
ECONOMIC
STABILIZATION
DIVISION
1
DISASTER
PREPAREDNESS
DIVISION
1
DISASTER
ASSISTANCE
DIVISION
SYSTEMS EVALUATION
DIVISION
INFORMATION SYSTEMS
DIVISION
CO
REGIONAL OFFICES
1
ORGANIZATION
the transformation of the Government Preparedness Office into an
Operations Office.4 From the first day of the freeze and throughout
the 90-day period that office was the main link between Washington and the field. The Operations Office dispatched messages and
directives to the field and received inquiries, reports, and requests
for assistance from the field. The office processed these messages to
OEP staff divisions and appropriate Federal agencies, and followed
up to assure rapid response. In the first 2 weeks of the freeze, this
office also handled direct inquiries from the public.
Another important and early change was the reordering of OEP's
priorities to give prime emphasis to the wage-price stabilization
mission, while continuing with minimal disruption certain essential
activities. The natural disaster, oil policy, and stockpile activities
were carried on at essentially prefreeze levels; but all other activities were subordinated to the freeze. This reordering of priorities
made most OEP personnel available temporarily for staffing the
new freeze functions. At the same time, since the regular organization was not radically altered, some staff members could conveniently devote part of their time to OEP's continuing functions.
The freeze had been under way only a few days when it became
evident that further organizational changes were needed in the
National Office. Lincoln asked the Deputy Director, Mr. Darrell M.
Trent,5 to give his personal attention to the matter and propose
the necessary changes. By August 21 the situation had developed
sufficiently to delineate the substantive activities involved in managing the freeze: overall management and operational direction;
participation in policy formulation and rulemaking; responding to
questions on the application and interpretation of policy; processing requests for exceptions and exemptions; informing the public
of freeze policies and procedures and gaining public understanding and support of the freeze; enforcing compliance with freeze
policies, rules, and directives; and monitoring, reporting, and recording the progress of the freeze.
4
This office was headed by Mr. Eugene Quindlen, who had directed Government
Preparedness activities since the inception of OEP. His 30 years of Federal servicemost of it in the fields of government preparedness, program planning, and evaluation activities—included active duty as an officer in the U.S. Army (1942-46) and
assignments with the Office of Emergency Preparedness, the Office of Civil and
Defense Mobilization, the Federal Civil Defense Administration, the Veterans Administration, and the Federal Security Agency.
5
Trent became Deputy Director of OEP in August 1970, while continuing to
serve as Executive Secretary of the President's Property Review Board, a post he
was appointed to in April 1970. Over the previous year he had served as Deputy
Assistant to the President, with policy responsibilities involving development and
coordination of domestic affairs programs and with responsibility for White House
liaison with certain Federal agencies, including OEP.
32
ORGANIZATION
It was apparent by this time that other Federal agencies would
support OEP by assigning high-caliber personnel to help administer the freeze. It had also been agreed that the Internal
Revenue Service and the Agricultural Stabilization and Conservation Service would become part of the field structure, as discussed
below.
The organizational structure that Trent proposed reflected these
developments.6 It also reflected an awareness of Lincoln's concept of crisis management and of his directive that certain of
OEP's day-to-day missions continue with minimum disruption.
Lincoln approved the new organization on August 21, 1971; with
a few minor changes this organization remained in effect throughout the freeze. The organization for economic stabilization activities is shown in Figure 2.
Natural disaster personnel continued their normal duties relatively undisturbed by the freeze, although they did have to move
their quarters to another building to make room for Federal agency
personnel brought into the OEP National Office. Their duties kept
them fully occupied throughout the freeze period, for during that
period the President declared seven major disaster areas in the
United States.
The impact of the freeze on the Resource Analysis Office, headed
by Mr. William C. Truppner,7 varied from activity to activity. As
indicated above, the Oil and Energy and Stockpile Policy activities
continued without substantial interruption.
Most of the remainder of Resource Analysis personnel participated actively in the freeze, although some were able to continue at
least part of their normal duties. The Office of Resource Evaluation, called the Policy Questions Office during the freeze, drafted
policy statements for consideration by CLC and produced the
Stabilization Program Guidelines. The Office of Information and
Analysis created a computer-based reporting system to facilitate
OEP management of the freeze and keep CLC apprised of freeze
developments. The Economic Stabilization Division was temporarily transferred from the Government Preparedness Office to
'Trent was assisted by J. Ray O'Connell, Assistant to the Director for Administration, John P. Cannon, Special Assistant for Regional Affairs, and E. R. Heiberg
and Anthony A. Smith, Special Assistants to the Director for coordination and other
purposes.
7
Since joining OEP in 1967, Truppner had served as Assistant Director for
Resource Analysis. He also chaired the Working Group of the President's Oil Policy
Committee. His previous government experience included positions with the War
Production Board in World War II, the National Production Authority and Defense
Production Administration in the Korean War, and 8 years as Director of the Office
of Industrial Mobilization, Department of Commerce.
33
474-893 O - 72 - 4
FIGURE 2
00
p
O
OEP ORGANIZATION FOR ECONOMIC STABILIZATION ACTIVITIES
DIRECTOR
HISTORIAN
Deputy Director
ASST. DIRECTOR
_L
COORDINATION
GENERAL COUNSEL
RESOURCE ANALYSIS
CORRESPONDENCE
EXCEPTIONS &
EXEMPTIONS
OPERATIONS
1 **•
POLICY &
GUIDANCE
LIAISON
POLICY QUESTIONS
INFORMATION &
ANALYSIS
INFO. SYSTEMS
LONG RANGE
PLANNING
WAGES
OPERATIONS CENTER
PRICES/ RENTS
COMMUNICATIONS
RULE MAKING
AGENCY COORDINATION
COMPLIANCE
INQUIRY REVIEW
>3**
REPORTS
CONGRESSIONAL &
PUBLIC AFFAIRS
SPECIAL ASST. FOR
REGIONAL AFFAIRS
ADMINISTRATIVE
SUPPORT
CONGRESSIONAL
MEDIA
L
—\
SPEAKER BUR.
NOTES:
1 - Ad hoc organization
2 - Normal function (augmented)
3 • Normal function (greatly augmented)
* Primary liaison with IRS and Dept. of Justice
* * Primary liaison with other departments, agencies
* * * Primary liaison with CLC staff
10 REGIONS
October 18,1971
ORGANIZATION
Resource Analysis, where it assisted in the planning for Phase II.
This division was returned to Government Preparedness on July
25, 1972.
The Office of the General Counsel, under Mr. Elmer F. Bennett,8 was given several tasks. It reviewed draft policy proposals for
legality and consistency before they were sent to CLC for consideration. It converted CLC policy into regulations in a form suitable
for publication in the Federal Register. Further, the General Counsel's Office advised the OEP Regional Offices and the headquarters
staff on interpretation of CLC rulings.
A greatly expanded Office of Congressional and Public Affairs
was charged with responding to congressional inquiries, pressing
a vigorous public information program through the public media,
and providing staff guidance and materials to regional public information officers. The public information effort included a Speakers' Bureau to arrange speaking engagements and provide speech
material.
The Special Assistant for Regional Affairs monitored and reported on developments in the Regional Offices. He served as a
coordinator and trouble shooter for regional matters at the National headquarters, assisted in inspections of the Regions, and
advised on regional staffing and organizational matters.
Several activities unique to the freeze resulted in the creation of
completely new staff elements. A special Coordination Office, under
Assistant Director Haakon Lindjord,9 exercised continuous overview of operations, coordinated the work of the various staff elements, eliminated bottlenecks, and generally sought to improve
OEP's administration of the freeze. A Policy and Guidance Liaison
Office developed policy proposals for consideration by CLC and
served as OEP's interface with that agency. An Exceptions and
Exemptions Office staffed all requests for exceptions and exemptions from the freeze. A Correspondence Section expedited responses to all correspondence concerning the freeze coming into
8
Bennett's career includes several years of private law practice dealing primarily
with antitrust and natural resource problems; service as General Counsel and subsequently Under Secretary of the Department of Interior; and service as General
Counsel and Assistant to the Director of the Public Land Law Review Commission.
He left the latter position in May 1970 to become Special Assistant to the Director
of OEP for oil and energy matters. He became General Counsel in July 1971 and
was sworn in as an Assistant Director of OEP on November 29, 1971.
9
Before coming to OEP in January 1969, Lindjord was on the professional staff
of the U.S. Senate Subcommittee on National Security and International Operations,
having joined the staff upon retirement as a Colonel, U.S. Army, in 1968. During
his 27 years in the Army he served in various command and staff positions, including
that of Director, Policy Planning Staff, Office of the Assistant Secretary of Defense
(International Security Affairs) .
35
ORGANIZATION
the National Office. A Compliance Branch, established in the Office
of the General Counsel, processed those compliance cases forwarded
by the OEP Regional Offices and maintained liaison on legal
matters with the Regional Offices, the Internal Revenue Service,
the Justice Department, and CLC. Separate sections were also
established in the General Counsel's Office to deal with rulemaking,
wages, and prices and rents. A Historian's Office was immediately
established to record the story of OEP management of the freeze.
FIELD ORGANIZATION
Another important development was the expansion of the OEP
field organization from eight to 10 regions to conform with the
10-region structure of several other Federal agencies. Immediately
following the President's speech on the evening of August 15,
Lincoln held a telephone conference with his Regional Directors,
who had been directed to listen to the speech. He ordered them
to move their headquarters from their isolated locations to the
large cities in which the Federal Regional Councils 10 were located
and to set up regional service centers in these cities.
The uniform Federal regional structure called for 10 uniform
regions for all affected agencies, with regional offices all located in
the same 10 major cities. On March 1, 1971, OEP had realigned its
regional boundaries to conform substantially to this pattern, but
with only eight regions. Upon the advent of the freeze, Regions 1
and 6 were split to form two new regions with headquarters in
New York City and Kansas City. Regional Service and Compliance
Centers, renamed "OEP Regional Offices" on August 30, were
established in the 10 major cities designated in the uniform structure.11 All 10 of the relocated Regional Offices were open for
business by Wednesday, August 18, as ordered by the Director.
Figure 3 shows the regional boundaries and the location of the 10
Regional Offices.
The Regional Directors were told to use the organization chart
in the Manual for Regional Emergency Operations—Economic
Stabilization Agency as a guide in organizing for their new mission
10
Federal Regional Councils are composed of the senior field representatives of
the Federal agencies administering grant programs in the respective regions.
"Before the freeze, OEP Regional Offices were generally established in isolated
locations at Federal relocation sites. These were maintained to provide Federal
departments and agencies with alternate operating and communications facilities
under certain conditions of national emergency.
36
FIGURE 3
OFFICE OF EMERGENCY PREPAREDNESS REGIONS
Puerto Rico, Virgin Islands. . . .
District of Columbia
Canal Zone
American Samoa, Guam, Trust
Territory of the Pacific Islands . .
CO
J
Region 2
Region 3
Region 4
Region 9
x7
\
\
\
V
1
ORGANIZATION
FIGURE 4
OEP REGIONAL OFFICE ORGANIZATION
FOR ECONOMIC STABILIZATION
REGIONAL DIRECTOR
Deputy Regional Director
1
REPORTS &
ANALYSIS
1
1
LIAISON & PUBLIC
INFORMATION
LEGAL COUNSEL
1
PRICE
1
ADMINISTRATIVE
SERVICES
1
RENT
WAGE AND
SALARY
(see Figure 4). Some Regional Directors added an OperationsCommunications Section and an Office of Exceptions and Exemptions. They were to look to the field offices of the General
Services Administration (GSA) for administrative support and of
the Civil Service Commission (CSC) for help in obtaining an
expanded staff. Concurrently, the Washington offices of GSA and
CSC issued instructions to their regional offices to give OEP
Regional Directors the highest priority assistance.
During the first 2 weeks of the freeze the principal business of
the Regional Offices was to answer questions and inform the public
about the freeze; to serve as focal points for receiving complaints
and reports of alleged violations; and to act as channels for transmitting information and queries on various aspects of the freeze
to the National Office.12 The initial public impact on these offices
is indicated by the telephone company's estimate that as many as
10,000 calls an hour were dialed to OEP's New York office on the
day it opened.
Lincoln did not intend, however, for OEP's Regional Offices to
carry the full load of information and compliance activities. As
12
Implementing Instructions to OEP Regional Directors, Message No. 2, August
15, 1971.
38
ORGANIZATION
early as the evening of August 15, he agreed to the idea of getting
another agency to assist in these activities.13 After considering the
pros and cons of delegation to various agencies, he decided on the
Internal Revenue Service (IRS). In his view, the IRS appeared to
be most suitable because it had:
a. A nationwide network of offices readily accessible to most
Americans.
b. A large and widely distributed staff with requisite skills and
experience in investigation and compliance procedures and in dealing with the public.
c. A somewhat seasonally reduced workload on income tax activities, which permitted a substantial number of the field personnel
to assume additional duties during the 90-day freeze.
For the above reasons the Director on August 19, after consulting
with the Secretary of the Treasury, delegated to that official "the
responsibility and authority for the establishment, operation and
maintenance of local service and compliance centers." The functions exercised by these centers included: dissemination of information and guidance to the public; receipt, analysis and evaluation
of complaints concerning violations; and, under the coordination
and policy guidance of the Director of OEP, the investigation of
complaints and enforcement of the stabilization of prices, rents,
wages and salaries.14 On the same day, the Secretary of the Treasury
charged the taxpayer assistance network of the Internal Revenue
Service with operating these local service and compliance centers.15
Also on August 19, the Director arranged for the county offices of
the Agricultural Stabilization and Conservation Service (ASCS)
to function as information centers for the rural areas of the United
States.16 A few days later, on August 25, Lincoln requested that
IRS officers, incidental to their visits on tax matters, make spot
checks to help monitor compliance with the freeze.17
As a result of these developments, the field organization for
administering, implementing, monitoring, and enforcing the economic stabilization program was completed and was functioning
satisfactorily by the end of the second week of the freeze. The
relationship of the field organization to the National Office of OEP
13
The proposal was contained in Leonard Skubal's Memorandum for the Director,
August 15, 1971, Subj: Action Items and Required Policy Guidance.
14
OEP Economic Stabilization Order No. 1, August 19, 1971.
15
Treasury Department Order No. 150-75, August 19, 1971.
19
Lincoln, Memorandum for the Record, August 19, 1971, Subj: Telecon with
Secretary Hardin.
17
Ltr, Lincoln to Connally, August 25, 1971.
39
ORGANIZATION
and CLC is shown in Figure 5. The field organization remained
essentially unchanged throughout the remainder of the freeze.
OEP Regional Offices conducted intensive public information
programs; coordinated and monitored the information and enforcement activities of the IRS and the information activities of
the ASCS offices; and gave the IRS and ASCS offices policy guidance, technical assistance, and other forms of support related to the
economic stabilization program. Following CLC and OEP National
Office guidelines, the Regional Offices gave interpretations of specific freeze situations and problems. They identified and sent to the
National Office those policy issues that could not be resolved in
the field, and after September 3, 1971, they were authorized to
deny requests for exemptions in cases where clear precedents had
been established.18 They reported on a daily, weekly, and ad hoc
basis to the Director and other National Office officials on various
aspects of the program, including its effectiveness and its impact
on the public. Furthermore, the Regional Offices maintained continuous contact with the regional offices of other Federal agencies
and with Governors, Attorneys General, and other State officials.19
Seven IRS Regional Offices monitored and supported the economic stabilization activities of 58 IRS District and 302 Subdistrict
Offices. All IRS offices responded to direct public requests for
information and supported the ASCS county offices in their responses to such requests. The IRS offices investigated allegations of
noncompliance and reported each week to the OEP Regional
Offices on economic stabilization activities.
The ASCS county offices responded to direct public requests for
information, handled local media contacts, transmitted complaints
to the nearest IRS office and reported, as requested by OEP, on
economic stabilization activities within their respective counties.
The completed freeze organization afforded a framework within
which Lincoln could effectively discharge his dual responsibilities
during the 90-day freeze. It reflected sensitivity to the peculiar
conditions of the 90-day period, particularly the need to provide
a rapid response to public concerns over various implications of
the freeze. It facilitated the task of welding together an operating
staff composed largely of persons from other agencies and allowed
OEP to coordinate smoothly with the agencies associated with it in
18
See Chapter V.
At the request of OEP, each State Governor (and the Governor of Puerto
Rico) appointed a person to serve as official liaison between his office and the
respective OEP Regional Office; see Lincoln, Memo for the Chairman, CLC, August
25, 1971.
19
40
ORGANIZATION
FIGURE 5
WAGE-PRICE FREEZE ORGANIZATION
COST OF LIVING
COUNCIL
OTHER
DEPARTMENTS
EXECUTIVE
POLICY
COMMITTEE
AND
AGENCIES
NATIONAL
OFFICE OF EMERGENCY
PREPAREDNESS
ASCS
NATIONAL
OFFICE
ASCS
50 STATE
OFFICES
ASCS
2819 COUNTY
OFFICES
IRS
NATIONAL
OFFICE
OEP
10 REGIONAL OFFICES
IRS
7 REGIONAL AND
58 DISTRICT
OFFICES
IRS
302 SUBDISTRICT
OFFICES
41
ORGANIZATION
administering the freeze. Finally, the organizational structure reflected the Director's precepts of crisis management.
BUILDING AN OPERATIONAL STAFF
General Policy on Staffing
OEP's policy for developing an operational staff for the freeze
differed greatly from that reflected in OEP's economic stabilization
plans developed to meet war emergencies. As mentioned earlier,
these plans called for a system of control agencies, one of which
was an Economic Stabilization Agency. Under this system, important operational responsibilities would have been delegated to
Federal agencies consistent with their normal peacetime functions.
OEP would have been abolished, and its personnel used to help
staff the Office of Defense Resources, the Economic Stabilization
Agency, and other elements of the control structure. Key positions
in the new agencies, however, would have been filled by activating
the National Defense Executive Reserve (NDER) at both national
and regional levels.20 Additional staffing would have been provided
by detailing predesignated technical personnel from Federal agencies and by recruiting technical and clerical personnel from the
private sector.
The game plan actually used for the freeze was vastly different.
The President placed the OEP Director in charge of administering
the freeze under the general guidance of the Cost of Living Council, and the only delegations of operational functions to other
Federal agencies were those that Lincoln made to the Secretary of
the Treasury (for IRS) and the Secretary of Agriculture (for
ASCS). Furthermore, the President had stated emphatically that
he did not want a large bureaucracy administering the freeze and
that he intended that the other Federal agencies provide the personnel needed to augment OEP's staff. It is not surprising, then,
that OEP's staffing policy varied so much from the advance script
and that Executive Reservists saw little action in the freeze.
In addition to the President's views on staffing, there were several
cogent reasons for not giving the Executive Reservists a more
prominent role. Lincoln summarized these reasons as follows:
20
The NDER is a pool of key personnel from industry and other sectors of
society selected and trained to fill important positions in the Federal Government in
time of emergency.
42
ORGANIZATION
While I was pressed by some to. activate the NDER immediately, I postponed
action for several reasons. First, we did not know the magnitude of the undertaking. Second, most of the Executive Reservists had responsible jobs in industry
and would have had difficulty in getting detached. They could not go to work
the next morning (Monday, August 16) and we needed people immediately.
Third, the Executive Reservists are generally senior people in their organizations
and would have wanted to work with major policy determination. But we had
a freeze, not a system of economic controls, and what we needed most was
operators in the field, not experts advising on policy. Fourth, I saw a real conflict
of interest developing if we used Executive Reservists over a period as long as
the 90-day freeze. We had to keep the public with us, and I wanted to give the
press no opportunity to allege conflict of interest. Finally, within 24 hours it
was clear to me that I was going to get excellent cooperation from the Federal
agencies and that this would do the job. So, I told each Regional Director
to bring in his Executive Reservists, brief them thoroughly, and add them to
his communications net—to keep them posted, get them to help us keep the
public informed, and to the extent feasible use them for speaking engagements.21
Having decided against the formal activation of the Executive
Reservists, Lincoln laid down the following policy for expanding
the staff. First, the greatest possible use would be made of OEP
personnel. Second, the freeze organization would be fleshed out
with personnel detailed from other agencies. Third, as a last resort,
personnel would be recruited on a temporary basis from the private
sector.
In genera], Lincoln left the implementation of this policy to
subordinates in the National Office and to the Regional Directors.
He did, however, take a personal hand in a few instances. In his
telephone conference on Sunday night, August 15, he advised the
Regional Directors to look to the Civil Service Commission (CSC)
at the regional level for primary assistance in staffing. Also, during
the early days of the freeze, he personally enlisted the help of a few
high-level government officials in other agencies in overcoming
some especially critical personnel shortages. His policy, however,
was to depend on the cooperation of the Federal agencies represented on CLC, the substantial pressure that the Office of Management and Budget (OMB) could bring to bear on Federal agencies
when necessary, the active support of the Civil Service Commission
both in Washington and in the field, and the hard work of his
own Personnel Office.
The OEP Personnel Office in Washington shouldered the burden
of arranging for Federal agency personnel to work with OEP. The
first morning of the freeze, Mr. J. Ray O'Connell, Assistant to the
Director for Administration, and Mr. Charles Pierce, Chief of the
OEP Personnel Division, visited key officials of the Civil Service
Commission and obtained their assurance of full cooperation in
21
Lincoln, interview with the OEP historical staff, February 3, 1972.
43
ORGANIZATION
meeting OEP's manpower needs at both the national and regional
levels.
OMB also helped to solve OEP's staffing problems. Heads of
Federal agencies were asked to instruct their regional directors to
provide OEP Regional Offices with the personnel they needed.
OMB also requested the Regional Councils and the Federal Executive Boards to give all possible assistance. OMB sent a representative to each of OEP's new Regional Offices to help with the
liaison activities involved in the massive borrowing of personnel.
This added assistance aided the OEP Regions in forming their
staffs and becoming operational in record time.
The Regional Directors depended heavily on the initiative and
assistance of the Regional CSC personnel. In a number of instances,
OEP Regional Directors asked the Federal agencies to assign specified individuals, and these requests were usually honored. CSC was
highly cooperative in working with OEP Regional Offices. The
CSC Regional Directors participated in the staffing process, advising on the kind of persons to get from each agency, and contacting
Federal agencies to encourage their cooperation. In some Regions,
the Chairman of the Federal Executive Board helped out by contacting Federal agencies and by encouraging them to comply with
OEP's staffing requests.
The Staff Expands
Vigorous implementation of this policy of drawing on other
agencies led to a rapid increase of OEP's staff. The National Office
staff, which numbered about 230 at the beginning of the freeze,
expanded to 381 by the end of the first week and leveled off at
about 415 during September and October.22 About 185 of these
people were on loan from other agencies.23
The regional staff expanded even more dramatically. On August
15, the total force for the eight-region structure was about 70,
ranging from six to nine at each office. By the end of the first week
the total strength for the new 10-region structure was just over
280, with staffs ranging from 18 to 36. On October 1, near the height
of operations, total strength in the Regional Offices was about 390.
Persons detailed to OEP came from some 40 Federal agencies. On
22
This figure of 415 includes those OEP employees who had no part in administering the freeze and those who devoted only part of their time to it. When
appropriate adjustments are made for these employees, the strength of the freeze
staff in the National Office was about 340 at the peak of activity.
23
See Table 1.
44
ORGANIZATION
October 22, the Defense Department headed the list with 98, the
Department of Labor was second with 49, and the Department of
Health, Education, and Welfare was third with 43. Table 1 gives a
breakdown of Agency personnel detailed to OEP at the national
and regional levels.
TABLE I—Detailed Personnel: Agency
(October 22, 1971)
Department/Agency
Defense:
Army
Air Force
Navy
Other
(Sub-total from Defense)
Labor
Health, Education, and Welfare
Agriculture
Treasury
General Services Administration
Commerce
Housing and Urban Development
Interior
Office of Economic Opportunity
Justice
Transportation
Small Business Administration
Veterans Administration
Federal Trade Commission
Central Intelligence Agency
Civil Service Commission
All other agencies
Totals
Affiliation
National Office
Regions
Total
24
6
4
12
(46)
15
10
13
12
5
23
8
8
4
3
2
2
—
3
6
—
25
28
1
3
20
(52)
34
33
25
22
29
10
21
7
11
9
10
9
11
3
—
6
8
52
7
7
32
(98)
49
48
38
34
34
33
29
15
15
12
12
11
11
6
6
6
33
185
300
485
Integrating the Newcomers
The persons detailed from Federal agencies brought to OEP a
wide range of professional, technical, operational, management,
administrative, and clerical skills, and they were urgently needed in
all these categories. At the National Office detailed clerical personnel were assigned to almost all offices concerned with freeze activities, with the largest share of them going to the offices responsible
for legal interpretations, correspondence, and exceptions and exemptions. Professionals from other Federal agencies were used principally in a liaison capacity with their respective agencies and in
providing technical advice in their particular areas of expertise. A
few, however, were used in management and operational roles.
45
ORGANIZATION
At General Lincoln's personal request, the Department of Defense detailed a few officers who played key management roles
throughout the freeze. These skilled staff officers had previously
served with OEP and were familiar with its procedures and policies.
Several of the professionals from the Office of Civil Defense (since
redesignated Defense Civil Preparedness Agency) helped manage
the Operations Center; they were able to fit readily into this assignment because their normal duties bring them in close contact with
OEP's Government Preparedness Office. The U.S. Army Interagency Communications Agency (USAICA), an element of the
U.S. Army Strategic Communications Command, provided skilled
operators to augment OEP's communications capability.
Some thought was given to putting the detailed agency personnel
into separate groups according to areas of expertise. The Director
rejected this course, however, because he believed it would unnecessarily prolong the period of adjustment that would have to
take place before the newcomers became useful to the organization.
Integration of the incoming personnel into the appropriate OEP
offices from the outset put the newcomers immediately into the
center of action; this practice probably was an important factor in
maintaining high morale throughout the freeze. It also enabled OEP
to weed out and expedite the return to their home agencies of the
small number of detailees who did not adjust readily to the demands of the situation.
The largest number of individuals detailed to the National
Office were integrated into the Operations Center, with the General Counsel's Office and the Resource Analysis Office respectively
in second and third place, as shown in Table 2.
Detailed personnel played different and relatively more important roles at the regional level. The OEP contingent in most
Regions was only large enough to staff the offices of the Regional
Director and the Deputy Director and in some Regions to provide
the cadre for operations-communications and administrative services. Thus, at the regional level, detailed personnel filled all professional and almost all clerical spaces in the offices dealing with
freeze functions. They filled all but one public information slot,
all but one exceptions and exemptions slot, and a substantial
number of positions in the operations-communications and administrative services categories.
46
ORGANIZATION
TABLE 2.—Detailed and Appointed Personnel: OEP Office Assignment
(October 8, 1971)
Agency Details
Temporary Hires
Office
Professional Clerical Professional
Director
Assistant Director
Historian
Resource Analysis
Exceptions & Exemptions
General Counsel
Congressional &
Public Affairs
Correspondence
Government Preparedness
(Operations Center)
Administration
Regional Affairs
Disaster Programs
Oil & Energy
Subtotal
Region
Region
Region
Region
Region
Region
Region
Region
Region
Region
1
2
3
4
5
6
7
8
9
10
Region Offices
Subtotal
Grand Total
Clerical Consultants
—
3
1
21
10
32
—
—
1
4
4
16
—
—
—
1
—
-
—
—
—
1
4
1
—
2
2
—
1
12
5
1
15
1
2
3
3
1
—
48
1
8
—
1
3
3
1
1
—
—
—
—
—
-
2
5
—
1
-
—
—
—
—
—
142
49
4
19
7
24
28
22
23
25
14
24
21
18
13
9
19
16
11
9
8
10
1
11
9
1
—
—
—
—
3
1
—
4
2
8
—
1
1
2
—
1
—
—
212
103
1
18
5
354
152
5
37
12
Staffing Problems
OEP encountered a few significant problems in developing an
operational staff. One problem arose from the assignment of some
persons who proved to be unsuitable for the rigorous work of the
freeze. Most agencies realized from the beginning the importance
of sending motivated and well qualified persons. When those assigned failed to measure up, OEP used several means to correct the
situation. In some cases they were returned to their agencies as
being unsuitable for the assignment, and the sending agencies were
asked to replace them with individuals better equipped for the
47
ORGANIZATION
assignment. Another approach sometimes found feasible was to
bring such persons to required effectiveness by on-the-job training.2*
Initially, many agencies detailed personnel on a short-term basis
—1 to 2 weeks in some cases, and 1 to 2 months in others. One
agency sent a different person every day to fill its contribution of
one clerk-typist to Region I.25 This rapid turnover of personnel
negated the value of expertise gained on the job, expertise sorely
needed as the freeze progressed and technical questions became
increasingly difficult.
By September 3, the turnover problem had become acute, and
Lincoln called on OMB for help. He cited OEP's need for an
expanding reservoir of expertise to cope with the increasingly
difficult problems of the freeze. Unnecessary rotation of personnel,
he emphasized, was highly prejudicial to this requirement. He
suggested that all agencies be directed to assign personnel for the
duration of the freeze at both national and regional levels. A few
days later, he raised the problem at a CLC meeting and was
promised cooperation from those members whose agencies were
contributing personnel to OEP.26 At about the same time, the
Director sent to each agency that had persons detailed to OEP a
list of that agency's personnel whom he wished to retain for the
duration of the freeze. These actions, supplemented by cross-training of specialists at the regional level, substantially solved the turnover problem.27
The problem of personnel shortages was much harder to solve.
While shortages existed until the final days of the freeze, the problem was serious in only two categories: clerk-typists and lawyers.
The shortage of typists became evident fairly early; on August 27
the Director told representatives of CLC, OMB, IRS, and ASCS
that the most important personnel problem at that time was a
shortage of secretarial help.28 The Director told OEP's Personnel
Office to appeal to the Federal agencies generally but to concentrate
on the Department of Defense and the Civil Service Commission,
and, if this proved insufficient, to run ads in the newspapers. The
2
* One Region reported that some of its offices obtained excellent results from
a "buddy" system—that is, an inadequately qualified person was assigned to work with
a highly qualified person in the same specialty. Allums Report on visit to Region
3, November 11, 12, 1971.
25
After-Action Report from Region 1.
26
These agencies were the Departments of the Treasury, Agriculture, Commerce,
Labor, and HUD and the Federal Reserve System.
27
Lincoln, Weekly Report to Chairman, CLC, October 9, 1971.
28
Lincoln, Memorandum for the Record, August 28, 1971, Subj: Meeting on
Management of Economic Stabilization Program.
48
ORGANIZATION
shortage of clerk-typists was never completely eliminated, but the
most pressing needs were met, principally through contributions
by the Department of Defense and through recruitment from the
private sector.
Although OEP officials welcomed several Federal Power Commission lawyers who volunteered their services on August 16, they
did not foresee, during the first days, the need for such numbers of
lawyers as were later required. At the outset of the freeze, the
OEP General Counsel, Mr. Elmer Bennett, had only two attorneys.
The Office expanded slowly at first, and on September 3 had eight
attorneys, far too few to keep up with the workload. By midSeptember a backlog of 400 requests for legal interpretations had
piled up. Following an urgent appeal from Lincoln to the Chairman of CLC, additional attorneys and other specialists were made
available from several Federal agencies.
The General Counsel's Office eventually reached a peak strength
of 28 attorneys, 11 specialists, and 20 secretaries. This staff began
to reduce the backlog of work and kept the situation under fair
control until the last two weeks of the freeze. At that time another
shortage of attorneys developed, mostly as a result of the departure
of several attorneys to private employment and transfer of several
others to the staffs being recruited by the Pay Board and Price
Commission.29
Evaluation of Staffing Policy
OEP Regional Directors and key officials in the National Office
unanimously endorsed the policy of augmenting OEP's operational
staff with personnel detailed from other Federal agencies.30 In their
judgment, the detailed personnel, with a few exceptions, were
capable, highly qualified, cooperative, enthusiastic about their assignments, and dedicated to making the freeze a success. Most
Regional Directors attested to the cooperative spirit of the contributing agencies and the excellent work of Civil Service Commission officials in making these high-caliber people available to
them.
OEP officials at headquarters and in the Regions commented on
the high morale of both detailed and regular personnel throughout
the freeze, despite the long hours and hectic pace. Regional Direc29
Bennett, Memorandum for the Director, November 10, 1971, Subj: The Conduct
of the Freeze, Office of the General Counsel.
30
See the After-Action Reports from National Office divisions and Regional
Offices.
49
474-893 O - 72 - 5
ORGANIZATION
tors noted that morale of detailed personnel declined somewhat
during the last few weeks and attributed this to the letdown to be
expected as one nears the completion of a highly challenging undertaking and to uncertainty on the part of some as to their status
in the next phase of the program.
Headquarters and regional staffs made several suggestions for
improving the use of detailed personnel under emergency conditions. All Federal agency heads, it was suggested, should agree at
the outset of an emergency to assign their personnel for the duration of the emergency. The field offices of these agencies should be
instructed from the first of their obligation to send capable people
and assign them for the duration. Furthermore, each Region should
establish a standby cadre of about 20 Federal agency personnel in
its immediate area. The cadre should be composed of typists,
stenographers, administrative assistants, computer operators, public
information officers, and persons skilled in writing reports. It
would receive periodic training in OEP responsibilities and functions and would be used to expand the regional staff when this was
required by a natural disaster or other emergency.
The operational staff for the freeze was developed speedily and
with high effectiveness. The use of personnel borrowed from
Federal agencies was approved by almost everyone connected with
administering the freeze. By and large, the detailed personnel were
capable and highly motivated. They worked as a team with the
OEP regulars, and their contribution was indispensable to the
successful management of the 90-day freeze.
ADMINISTRATIVE, LOGISTICAL, AND TECHNICAL SUPPORT
Administrative and Logistical Support
The rapid expansion of OEP National and Regional staffs produced a rash of administrative and logistic support problems.
Requirements for mailroom and messenger service, parking facilities, transportation after normal duty hours, provision of charts and
other graphics, reproduction of press releases and reports and other
documents, and enforcement of security measures were all greatly
increased during the freeze. With only a modest increase in its
staff,31 the Office of the Assistant to the Director for Administration
handled these requirements without serious difficulty.
31
The staff increased from 15 to 16 professionals and from 18 to 27 clerical
workers.
50
ORGANIZATION
The matter of security did pose a problem. On the first day of
the freeze, with the sudden "invasion" of the National Office by
visitors and reporters, adequate control of persons entering securityrestricted areas presented some difficulty. The situation was controlled by the issuance of temporary security passes to all new and
detailed personnel and by requiring all employees to wear their
security badges while on duty. These actions and the enforcement
of other security measures resulted in strict compliance with OEP
security policies throughout the remainder of the freeze.
Arrangements for covering the expenses of the freeze drew the
Administration staff and other OEP officials into negotiations with
the Treasury Department, GSA, and OMB. There were no problems with respect to salaries of persons from other Federal agencies,
since these individuals were detailed to OEP on a non-reimbursable
basis. The funding of other expenses, such as those resulting from
temporary hire, relocating and equipping the OEP Regional
Offices, installation and maintenance of communications and other
equipment, and travel associated with the freeze, presented problems. Negotiations over the funding of these expenses lasted until
June 1972, when it was finally agreed that these expenses would
be paid from funds that Congress had made available to the Cost
of Living Council.
The Assistant to the Director for Administration, J. R. O'Connell, worked closely with GSA to obtain suitable office space for the
National and Regional Offices. The space problem in the National
Office was solved by two means. First, the Disaster Programs and
Stockpile Policy offices, which were not involved in the freeze, were
moved to temporary quarters a few blocks from the National Office.
Second, additional office space was obtained by renovating two old
buildings adjacent to the headquarters building.
Obtaining space for the Regional Offices and equipping them
were much bigger tasks, but these were handled expeditiously with
the assistance of GSA. As related earlier in this chapter, all the
Regional Offices were in their new locations by Wednesday of the
first week of the freeze. Through the cooperation of GSA and
private industry, particularly the telephone companies, logistical
support was adequate by the end of the week and was improved
thereafter. In some Regions, visits by Deputy Director Trent and
O'Connell helped to assure superior office space and desirable locations for those Offices. GSA made special efforts to assist the
Regional Offices in obtaining supplies and stationed GSA employees
in several Offices to assist with procurement. The results achieved
51
ORGANIZATION
through these and other means caused the OEP Regional Directors
to rate GSA's logistical support as outstanding.
Technical Support
The technical support rendered by the U.S. Army Interagency
Communications Agency is described in the following chapter.
Another source of valuable technical support was the Mathematics
and Computation Laboratory (MCL), an element of the U.S.
Army Corps of Engineers.
Some 55 MCL staff members, under the direction of Mr. Irving
Gaskill, devoted a significant amount of their time to the development, support, and operation of the computer-based systems that
helped OEP manage the freeze. MCL experts helped with the
development and maintenance of the EMISARI 32 system and its
improvement; entered the rulings, exemption briefs, and news
items into the system; and visited OEP Regional Offices to instruct
the staff in its operation and uses. The MCL staff developed, maintained, and operated two other computer-based management systems: a computer-operated file to determine the status of staff actions
on requests for policy guidance; and another such file to keep track
of all incoming correspondence related to the freeze. MCL staff
members also developed computer-based techniques for possible use
in Phase II.33
32
For a discussion of the EMISARI system, see pp. 64, 72.
^Irving Gaskill, Memorandum for OEP Historian, June 5, 1972, Subj: MCL
Activities in the Wage Price Freeze. See also p. 184.
52
Managing the Freeze
DIRECTING THE PROGRAM
Setting the Course and Pace
Lincoln applied his concepts of crisis management (explained
in Chapter II) to the direction and overall management of the
freeze program, setting OEP's course according to the principle
that the crisis mission should be the central guide to action. He
reordered the Agency's priorities and modified its organization to
accommodate the functions unique to the freeze. He made it clear
to his staff that they were administering a freeze, not a system of
economic controls. OEP's task was to hold the line while the Administration was preparing a program of controls to follow the
freeze.
Along with this fixed objective, the OEP Director maintained a
flexible posture in managing the freeze. He shifted the emphasis on
specific functions quickly as new developments occurred. For example, when IRS and ASCS were able to take over the main responsibility for contact with the public, he ordered the OEP National and Regional Offices to concentrate on direction, supervision, and analysis of the program. Later, as the outlines of the
postfreeze program became visible, he placed increased emphasis
on making the transition as smoothly as possible.
The Director set a fast pace for his management team—it was
double time almost all the way. Annual leaves were postponed for
most OEP employees, and long hours and 6-day work-weeks were
the norm, not the exception. Only during the last few weeks did
the pace begin to ease. Until then an 80-hour week was the usual
work load for the Director and key members of his staff, and many
others put in equally long days and weeks.
Lincoln set this fast pace because he believed that quick and
positive response is a cardinal requirement in a crisis situation. In
53
MANAGING
THE FREEZE
his view, those managing the freeze had to act quickly and positively
to let the people know that an agency of the Government was
"minding the store." For this reason, the National Office staff began
manning the telephones on the first day of the freeze, and continued this service until the field offices were able to take over.
Believing that in a crisis situation prolonged deliberation permits too many problems to pile up, Lincoln established short
deadlines for decision and action. To keep the work load from
piling up in the National and Regional Offices, he directed that
the backlog of written inquiries not be allowed to exceed the total
of 3 days average input, and that a system be set up to monitor
this activity. He also directed IRS to set a goal of resolving each
week as many complaints as it received the preceding week. By
and large, once the management system was in full swing, these
targets were met.
Questions that required legal interpretations or new policy guidance usually could not be answered in this time frame, but were
handled as rapidly as their complexity permitted. In the case of
new guidance, this meant fast staff work to frame the questions
properly for decision by the Cost of Living Council. CLC decisions
were released to the press immediately if newsworthy, and all policy
statements were distributed to field offices by teletype as soon as
final wording was agreed upon.
The Director's policy of fast pace, quick response, and short
deadlines enabled him to maintain the momentum of his initial
fast start and make optimum use of his resources. Or, as he expressed it, his organization was able "to stay up on the power
curve." It sought in this way to forestall unnecessary questions
from the public and keep to a minimum violations that might have
resulted from ignorance.
Techniques and Instruments of Control
Lincoln believed that as the freeze administrator he should avoid
immersion in details so that he could be free to orchestrate and
direct the entire operation. As a general rule he took no telephone
calls except from ranking officials in the Government. While he
granted requests for appointments to many representative groups
from private sectors of the economy, his practice was to leave any
extended discussions to staff members. To avoid being swamped
by minutiae he delegated some functions, adapted his regular man54
MANAGING
THE FREEZE
agement team to the exigencies of the freeze, and created some new
management subsystems to deal with special functions.
In his role of freeze administrator, Lincoln exercised central control and established a single, direct line of command over his
resources. There were suggestions at the time that the responsibility for administering the freeze be divided among several Federal
agencies. In the Director's judgment, however, such a course would
have been unwise. Coordinating the actions of a new decentralized
system in a fast moving situation, he believed, would have been an
almost impossible task. Moreover, he could not make broad delegations to the agencies without policy to guide them, and the necessary policy guidance did not exist at the outset of the freeze. Consequently, as mentioned in Chapter II, personnel from other Federal agencies were integrated into OEP's staff.
While he maintained a single, direct line of control over his
organization, the Director found that frequently there was no time
for briefings up and down the line. Therefore, when necessary, he
laid the requirement directly on the person who was to do the job.
As soon as there was time for it, this person briefed the chiefs of
intervening echelons on what he was doing.
The Director stressed teamwork as the key to success in administering the freeze program and established coordinating mechanisms at all levels to promote it. He made sure that pertinent
information was dispatched to everyone who needed it—the members of CLC, the Federal agencies in Washington and in the field,
the State Governors, and the general public. While the Director
used the news media to help spread information to the public, he
depended on direct channels to get prompt and accurate information to his own field structure.
COORDINATION AND LIAISON
National Office
Coordination within the National Office was accomplished principally through two special instruments: (1) the Coordination
Office, consisting of three special assistants to the Director and
headed by Assistant Director Haakon Lindjord, and (2) the Daily
Coordination Meeting attended by the members of the Coordination Office and the chief or the executive officer of all major headquarters offices participating in the freeze.
55
MANAGING
THE FREEZE
During the first week of the freeze, the Director appointed three
special assistants to help coordinate the activities of the greatly
expanded national staff: E. R. Heiberg, III, Anthony A. Smith, and
Richard L. Berkman. Berkman was replaced by G. Lee Butler
early in September.1 On August 22 the three special assistants were
assigned to the newly formed Coordination Office.
Heiberg worked mainly with organizational matters, OEP Regional Office operations, and Federal agency support. Smith concentrated on the internal organization and functioning of the
Washington office, policy questions, and compliance activities.
Berkman concentrated on policy issues and was also Executive
Secretary of EPC. Butler, Berkman's replacement, served as Executive Secretary of EPC, worked on policy issues, and toward the
end of the freeze served in a liaison capacity with CLC, the Pay
Board, and the Price Commission. These individuals knew OEP
well, had no bureaucratic aspirations there, and were held in high
regard as professional public servants by OEP personnel. They
served well as coordinators, bottleneck-breakers, troubleshooters,
innovators, and expediters.
While comprising a secretariat of expediters, these special assistants were not in the chain of command. Most of their work was
done by personal or telephone contact, although they occasionally
produced staff papers on problems of interagency or intra-agency
coordination. They could execute special assignments rapidly because they were not expected to assist in normal bureaucratic
operations. The three special assistants reported to the Director on
CLC and EPC policy matters, to the Deputy Director on organizational and field problems, and to the Assistant Director on in-house
operational and management problems. Lindjord and the three
special assistants had immediate access to the Director and every
member of OEP, and could speak for the Director outside and
inside the Agency.
The institution of the Coordination Office provided a second
channel for matters requiring the Director's attention. The Executive Assistant, Mr. Thomas J. Simmons, continued to handle on1
Colonel Heiberg, who had served as Lincoln's executive assistant in 1969-70,
was on loan from the Office of the Chief of Staff, U.S. Army, as was Lt. Col. Smith.
Smith was just completing a year's tour at OEP when the freeze hit, and his tour
was extended for the duration of the freeze. Mr. Berkman, who served in OEP's
Planning Review Office from 1969 to 1970, returned to OEP to help out in the
early days of the freeze, but left on September 6 to return to Harvard Law School.
His successor, Major Butler, had been detailed to OEP from the U.S. Air Force
Academy for part of the summer of 1971 and was called back for the duration of
the freeze.
56
MANAGING
THE FREEZE
going OEP matters, while the Coordination Office handled the
economic stabilization load.
The central coordinating mechanism in the National Office was
the Coordination Meeting held each day at 5:00 P.M. in the
Director's conference room. Assistant Director Lindjord usually
chaired the meetings, although occasionally Deputy Director Trent
acted as chairman. The following attended these meetings: the
members of the Coordination Office; the chief, the executive officer,
or another representative of each headquarters office engaged in
freeze activities; and the OEP Historian.2 The meetings were
designed to ensure that all offices were following compatible
policies, to provide a forum for discussing problems and, if possible, to solve problems on the spot. The strong spirit of cooperation
that prevailed enabled Lindjord to resolve most problems within
the meeting, but in a few instances the final decision was deferred
to the Director.
At the beginning of these meetings the participant from each
office turned in a brief written report on the activities in his area.
These reports were assembled and distributed that evening as the
Daily Economic Stabilization Report to the Director.
The executive officers spoke for their chiefs at Coordination
Meetings and subsequently informed them and their staffs of
actions taken. These officers played a key role in the freeze because
they maintained an overview of stabilization matters within their
respective offices and could respond instantly on specific problems
affecting their areas of operation.
Lincoln himself played the leading liaison role with other Federal agencies at the national level. His most important functions
in this connection were performed through his membership on
CLC and the Council's Executive Policy Committee. In his work
with these bodies, he had the support of his Policy and Guidance
Liaison Office, headed by Mr. Louis Neeb. Through this office OEP
funneled to EPC and CLC its proposals for actions on policy issues
and guidance.
Another important link with CLC was the Executive Secretary
of EPC, who was provided by OEP. This official attended daily
2
The Assistant to the Director for Administration, Mr. J. R. O'Connell, the
Special Assistant for Regional Affairs, Mr. John P. Cannon, and the Chief of the
Correspondence Section, Mr. Douglas Johnston, usually attended these meetings. The
executive officers who usually attended were: Mr. William Baird for the Operations
Office, Mr. Orcutt P. Drury for Resource Analysis, Major John Simpson for the
General Counsel, Mr. Spence Perry for Exceptions and Exemptions, Col. Howard
M. Steele for Congressional and Public Affairs, Mr. Lloyd Eno for Policy Questions,
and Mr. John Chesley for Information and Analysis.
57
MANAGING THE FREEZE
meetings of EPC and explained to OEP's Policy Questions and
General Counsel staffs the actions taken at these meetings.3
Liaison with the IRS and ASCS National Offices was maintained
through IRS and ASCS representatives in the Operations Office,
frequent visits, telephone calls, continuous courier service, and, in
the case of IRS, use of facsimile equipment. Copies of all reports,
instructions to the field, guidance papers, press releases, and other
significant documents were rapidly distributed to these offices. The
OEP, IRS, and ASCS offices in Washington coordinated with each
other all guidance on operational procedures before sending it to
their respective field offices. These techniques helped to ensure
effective working relationships among the three agencies throughout the freeze.
Personnel from other Federal agencies who were assigned to the
Policy Questions, Operations, and General Counsel's Offices played
an important but informal liaison role. They used their home
agency connections to supplement their own expertise and kept
their home agencies informed of important developments in the
freeze.
The Compliance Branch of OEP's General Counsel's office had
a valuable liaison role. Through it, the Department of Justice
provided current information to OEP on the status of suits brought
against the Government and of private suits involving freeze
matters, as well as the status of suits filed by the Government to
enforce the economic stabilization program.4
Regional Offices
The Operations Office provided the principal means for coordinating activities at the regional level, but the Director also
used other coordinating techniques, including direct telephone
contacts with his Regional Directors. Deputy Director Trent made
a number of visits to the Regional Offices. One special assistant,
E. R. Heiberg, kept regional activities under surveillance and
visited the Regional Offices to note and discuss special problems.
The Special Assistant for Regional Affairs, John Cannon, helped
expedite the solution of regional problems and reported daily to
3
E . R. Heiberg, After Action Report, November 12, 1971, p. 1. The position of
Executive Secretary was held in turn by Richard L. Berkman, G. Lee Butler, and
Patricia Spencer. Butler took over Neeb's liaison functions when the latter moved
to the Price Commission.
4
Bennett, Memorandum for the Director, November 10, 1971, Subj: The Conduct
of the Freeze, Office of the General Counsel.
58
MANAGING
THE FREEZE
the Director and at the Coordination Meetings on special aspects
of regional activities. The Director's Executive Assistant, Thomas
Simmons, also helped coordinate sensitive aspects of regional activities while continuing to assist the Director in his management of
OEP's nonfreeze functions.
Although there were some variations, the OEP Regional Offices
had substantially similar arrangements for internal coordination
and external liaison. Internal coordination was accomplished
through such traditional devices as central direction, staff meetings,
informal conferences, and daily reports. In some Regions, responsibility for reports and correspondence control was assigned to an
administrative or operations officer; in others, the Deputy Director
supervised such activities.
External liaison was accomplished by a variety of means. The
Regional Director usually played the dominant liaison role with
the Federal agencies in his Region. But in some cases most of the
liaison activity was delegated to an administrative officer. All the
Regional Offices had an IRS official and an ASCS official assigned
for liaison with their respective agencies. Close liaison was also
maintained between the OEP regional public information offices
and the corresponding offices of the Internal Revenue Service.
In each Region the assistant U.S. Attorney who worked in the
OEP office was the main link with the Department of Justice. He
consulted with the IRS and the OEP Regional Directors on matters
of enforcement and was responsible for the documentation of Potential Court Cases.5
All Regional Directors maintained liaison with the State governors and mayors of large cities in their Regions, and some
designated a specific member of their staff to serve in this capacity.
Each of the governors appointed a member of his staff to serve as
the principal point of contact with OEP. Some Regional Directors
established special liaison arrangements with mayors of large cities.
These arrangements contributed to a closely coordinated effort
at the regional, State, and local levels. OEP Regional Directors, in
their after-action reports, stated that relationships with IRS and
ASCS were generally excellent, although there were instances of
strain between some OEP Regional Offices and the IRS offices.
ASCS activities were never of a volume or complexity to cause
much strain, and no problems were reported.
5
See p. 119.
59
MANAGING
THE FREEZE
COMMUNICATIONS AND OPERATIONAL CONTROL
The National Office's principal interface with the field was the
Operations Office, which was under the direction of Mr. Eugene
J. Quindlen. His Special Assistant, Mr. William D. Baird, was
named executive officer. The Operations Office was organized
functionally into an Operations Center and Communications, Inquiry Review, Agency Coordination, and Reports Sections.6 Initially this office was also OEP's main point of contact with the public,
as it handled telephone inquiries from all over the United States.
By the second week, however, OEP Regional Offices and IRS and
ASCS field offices had taken over most of this activity. Also, by this
time, the newly created Correspondence Section and the greatly
expanded Congressional and Public Affairs Office were responding
to public inquiries at the national level. Thus, on August 27, the
Operations Office was relieved of its task of responding to telephone
queries from the public.7
Operations Center
The Operations Center served as the hub of communications
linking the OEP National Office with other Federal agencies in
Washington and with all participating field offices. Quindlen
selected three senior staff members to direct activities in the Operations Center on a rotational basis: Mr. Leonard Reese, Mr.
Avery E. Kolb, and Mr. Wayne Althaus. The Center was in business on the first day of the freeze and functioned on two 8-hour
shifts throughout most of the freeze period. It was the focal point
for information and guidance to the OEP Regional Offices and
the IRS offices. It was the central point for collecting, collating,
and distributing information and messages flowing to the National
Office from the field structure and the main vehicle for distributing
freeze information within the National Office. It maintained a
running file on incomplete actions and kept the Director and the
OEP management staff informed of the status and progress of
program implementation. As a central depository of information
on operational aspects of the freeze, the Center maintained files
on guidance issued by the OEP Director, outgoing and incoming
6
The Inquiry Review and Agency Coordination Sections are discussed on pp. 68-70.
and the Reports Section on pp. 70-73.
7
OEP Press Release 407, August 27, 1971.
60
MANAGING
THE FREEZE
messages, incomplete actions (action suspense files), reports from
the Regions, and other operational matters.8
Communications Section
The Communications Section was developed from the austere
prefreeze communications capability that served OEP's Natural
Disaster Operations Center. This capability consisted principally
of a Teletypewriter Exchange Service (TWX) terminal, a facsimile
(FAX) terminal, and two secretaries experienced in their operation. The facilities and staff were rapidly expanded. By the end
of the second week, the Communications Section had two TWX
terminals, two FAX terminals, and a GSA Advance Record System
(ARS) terminal. The TWX system is owned by Western Union,
while ARS is owned by and serves the Federal Government. In
both of these systems, a message is typed into the sending terminal,
transmitted over telephone lines, and retyped by the receiving
terminal. Facsimile transmission also uses telephone lines, but reproduces an exact facsimile of the original.
The Communications Section was headed by Mr. Robert Mills,
who was drawn from OEP's Government Preparedness Office. He
was assisted by a communications supervisor from the U.S. Army
Interagency Communications Agency (USAICA) and seven experienced teletype operators, six from the USAICA and one from
GSA. This staff transmitted, processed, and accounted for all messages, and by the end of the second week was effectively handling
OEP's requirements for TWX and facsimile communications.
During the period August 15 to November 12 it handled some
1,900 outgoing and 2,500 incoming messages.
OEP developed a diverse, flexible, and versatile communications
system during the freeze. This system provided a rapid and reliable
means of transmitting orders, requests, and information to those
administering the freeze and receiving feedback from the field.
Figure 6 shows those means of communication other than telephone and mail contacts that were available to various offices
involved in administering the freeze.
Communication Within the System
Though usually taken for granted, meetings, telephone contacts,
the mails, and messenger services were important channels of com5
OEP Operations Center Standard Operating Procedure, October 24, 1971, p. 22a.
61
MANAGING
THE FREEZE
FIGURE 6
FLOW OF COMMUNICATIONS
COST OF LIVING
COUNCIL
OTHER
DEPARTMENTS
AND
AGENCIES
COMPU
EXECUTIVE
POLICY
COMMITTEE
NATIONAL
OFFICE OF EMERGENCY
PREPAREDNESS
ASCS
NATIONAL
OFFICE
ARS
IRS
NATIONAL
OFFICE
ASCS
50 STATE
OFFICES
ASCS
2819 COUNTY
OFFICES
62
OEP
10 REGIONAL OFFICES
FAX
IRS
7 REGIONAL AND
58 DISTRICT
OFFICES
IRS
302 SUBDISTRICT
OFFICES
MANAGING
THE FREEZE
munication. The freeze greatly increased requirements for messenger service, and additional messengers were added quicky at
both the National and Regional levels. The U.S. Postal Service was
used to distribute some types of operational and administrative
guidance and for the transmission of bulky reports.
Requirements for telephone services increased greatly under the
impact of expanded staffs and accelerated activity. To meet these
requirements telephone workers put forth an all-out effort to
install additional service. By the end of the first week of the freeze,
the number of telephone stations in the national headquarters had
almost doubled, and those in the Regional Offices had increased
by several times.
Telephones were constantly used for contacts between headquarters and the field. Both commercial telephone service and the
Federal Telecommunications System (FTS) connected all Federal
agencies involved in administering the freeze, with FTS being the
officially preferred channel. The telephone was usually used when
the national staff requested urgent ad hoc reports on conditions
in the field. Occasionally, official directives and instructions were
initially transmitted by telephone, with hard copy coming later.
Facsimile transmissions were sent by telephone, almost always by
FTS, and the telephone was essential to the computer-based system
discussed later in this chapter.
The OEP Director kept in close contact with his Regional
Directors by telephone. He talked to one or more of them individually almost every day, and on several occasions he talked with
them as a group in telephone conferences. To ensure an open line
for incoming calls from the National Office, two unlisted commercial telephones were installed in each OEP Regional Office.
To prevent these phones from being used routinely, the numbers
were known only by senior officials. The Special Assistant for
Regional Affairs provided a "hot-line" service for expediting urgent
actions between the Regions and the National Office when the
Director and Deputy Director were not available.
While the Operations Center used telephone channels extensively, it sent most official messages to the IRS and ASCS National
Offices and to the field by ARS or facsimile. These means not only
expedited the flow of essential information, but by producing hard
copy they also facilitated record-keeping and the monitoring of
suspense files, both highly essential to OEP's central control system.
Hard copy communications from the Operations Center were numbered in three series: ALPHA messages, addressed to all OEP
63
MANAGING
THE FREEZE
Regional Offices, IRS District Offices, and the IRS and ASCS
National Offices; BRAVO messages, addressed to all OEP Regional
Offices; and CHARLIE messages, to single addressees.
Facsimile channels were especially useful for transmitting formats, official forms, news items, and material such as legal documents in compliance cases that had to be transmitted without error.
Since facsimile messages were transmitted by telephone, they could
be sent to any office with a telephone connection and compatible
facsimile equipment. OEP's National Office could send facsimile
messages to all OEP Regional Offices and to the IRS National and
District offices, but not to ASCS offices inasmuch as their facsimile
equipment was not compatible with that of OEP. ASCS weekly
reports were collected by the State offices and FAX'ed to the ASCS
National Office, where a consolidated weekly report was prepared
and submitted to OEP.
During the course of the freeze, OEP's communications capability was increased by the development of a computer-based information system known as EMISARI (Emergency Management
Information System and Reference Index). EMISARI served two
important purposes: it was an element of OEP's operational feedback and reporting system (described later in this chapter), and
it was a supplementary channel for disseminating guidance and
information to the OEP Regional Offices. It also afforded an additional channel for person-to-person communication among the
Regional Offices as well as between the Regional Offices and the
National Office.
Data stored in EMISARI on a constantly updated basis included
CLC rulings and interpretations in question-and-answer form;
summary statistics on requests for exemptions and reports of violations; briefs of all rejected requests for exemptions, briefs of
pertinent news items, and selected economic indicators. By use of
a key-word search technique, specialists could retrieve items from
EMISARI in a display tailored to individual needs.
EMISARI connected the OEP National Office with CLC and
the OEP Regional Offices by means of UNIVAC terminals. Since
each terminal permitted the insertion of questions as well as the
insertion and retrieval of information, the system constituted a
communications channel as well as a storehouse for information.
EMISARI was used extensively by those who availed themselves
of its special capabilities, but was not widely adopted as a person-to64
MANAGING
THE FREEZE
person communications system.9 During the last few weeks of the
freeze, the IRS National Office was also tied into this computer
system to facilitate the transfer of information in the transition
period.
Communications with the Public and Outside Agencies
Administration of the freeze also required frequent communication with Members of Congress, Federal and State agencies, and
the general public. Much of the communication was face-to-face, in
the form of walk-in visits at the OEP-IRS-ASCS offices, OEP staff
appearances before public groups, and Regional Directors' visits to
Governors and other State officials to explain various aspects of
the freeze. The telephone, however, was the most frequently used
link between those administering the freeze and the general public,
the Congress, and the press. Altogether, the vast majority of the
approximately one million public queries about the freeze were
initially raised by telephone, and most were answered the same
way.
The importance of the U.S. Postal Service as a communications
channel is indicated by the approximately 55,000 letters from the
public addressed to OEP about some aspect of the freeze.10 Mail
channels were also used to send printed Stabilization Program
Guidelines and other materials, including official correspondence,
to Governors and State officials.
In contacting Governors and other State officials, OEP frequently
used the National Communications Network, which the U.S.
Army Strategic Communications Command operates for the Defense Civil Preparedness Agency. This system, known as NACOM-I,
can send TWX messages to these State officials via the State
Emergency Operating Centers. OEP's less urgent communications
with these officials, however, went through the Regional Offices.
OEP used the press, radio, and television extensively to support
its public information program. Use of the media and other communications channels for this purpose is discussed in Chapter VII.
9
The EMISARI System was designed by Dr. Murray Turoff of the OEP Information Systems Division. A brief, nontechnical account of the system's design, development, capabilities, and characteristics is given by Robert Kupperman and Richard
H. Wilcox in OEP Report ISP-108, "EMISARI-An On-Line Management System
in a Dynamic Environment," May 1972.
10
Approximately 52 percent of these letters were mailed to OEP Regional Offices,
which redirected about 6,000 to the Internal Revenue Service. OEP Weekly Summary Report to CLC Chairman, November 13, 1971, p. 11.
65
474-893 O - 72 - 6
MANAGING
THE FREEZE
RESPONDING TO PUBLIC INQUIRIES
The approximately one million inquiries generated during the
freeze came from people in all walks of life. Inquiries entered the
management system at all levels through letters, telegrams, telephone calls, and walk-in visits. Thirty-nine percent of the questions
concerned prices, 30 percent wages, and 31 percent rents.
The OEP National Office had three divisions that handled inquiries: (1) a Correspondence Section handled correspondence
coming to the National Office; (2) a greatly enlarged Congressional
and Public Affairs Office handled all inquiries from the press and
telephone inquiries from Congressmen and Senators; and (3) an
Inquiry Review Section in the Operations Office handled questions
coming from the field via the OEP Regional Offices.
Correspondence Section
The general public was advised to direct questions and complaints to the local IRS and ASCS offices, and the great majority
of people who asked questions about the freeze did contact these
offices. A substantial number did not, but wrote letters to the OEP
National Office, Secretary Connally, other members of CLC, or
the President. Rather than rerouting these letters to the field
offices, OEP set up a special Correspondence Section to handle
them. Lincoln established this section as a high quality operation,
using two of his best young staff members, Douglas Johnston and
William Fletcher, to head it. They reported to the Director without intermediaries. The professional nucleus of this section was
provided by young employees (including some on "intern" status) ,
who quickly built an esprit that carried them through the challenges of the freeze.
The Correspondence Section routed to the appropriate Federal
agencies in Washington letters with fairly simple questions that
could be answered on the basis of existing guidelines. Wage questions, for example, were sent to the Department of Labor. Questions cutting across several areas but requiring only minimum
interpretation of existing guidance were answered directly by the
Correspondence Section. It routed all other mail according to
areas of responsibility—to Exceptions and Exemptions for requests
in that area, to the General Counsel for rulings and interpretations, and to Policy Questions for issues requiring new guidance.
66
MANAGING
THE FREEZE
The Correspondence Section tried to keep its backlog of unanswered letters below a 3-day average intake, and after it had been
operating a few weeks it was generally successful in meeting this
goal. Letters from Members of Congress often required more careful staffing than ordinary letters and usually took longer to answer.
There was also a substantial delay in answering letters that raised
complex legal questions or issues on which there was no CLC
guidance.
During the 90-day period, the Correspondence Section processed
more than 27,000 letters, including more than 3,000 from Members
of Congress. A record of this correspondence was entered into the
computer system, which provided a comprehensive printout for
quick reference and also facilitated control of follow-up correspondence.11
Congressional and Public Affairs Office
The Congressional and Public Affairs Office (CPA), under the
direction of Mr. David J. Pattison, handled all questions from
the press and all questions raised in telephone calls from Members
of Congress. CPA greatly expanded its staff with detailed personnel
to meet the onslaught of freeze business.
When CPA could not answer congressional inquiries on the
basis of information on hand, it usually asked the callers to submit
their questions in writing. In such cases the incoming letters were
processed by the Correspondence Section, as described above. Telephone calls from congressional offices ranged from an average of
200 calls a day in the first weeks of the freeze to a low of about 40
a day later on. In urgent cases, the CPA staff immediately sought
answers from the appropriate OEP office and, when necessary, from
the CLC staff, and relayed them promptly to the Member of
Congress.
Questions from trade associations, the press, and the media
generally averaged around 400 per day during the first few weeks,
leveled off to around 100 per day, and rose again in the last few
weeks as callers sought information on the postfreeze program.12
Most of these questions dealt with operational matters and could be
answered from information on hand. If not, the answers were
11
Cost of Living Council, Economic Stabilization Program Quarterly Report
Covering the Period August 15 Through December 31, 1971 (Washington: Government Printing Office, 1972) , p. 13. Hereinafter cited as CLC Quarterly Report,
August
15-December 31, 1971.
12
Howard Steele, After-Action Report on the Freeze, November 22, 1971.
67
MANAGING
THE FREEZE
quickly obtained from the appropriate OEP staff office and given
to the media. Where questions involved new policy guidance, CPA
referred the callers to the CLC staff.
Inquiry Review Section
Approximately 80 percent of the public's questions were received
initially by local IRS and ASCS offices. Table 3 gives an OEP
regional breakdown of OEP-IRS inquiries for the period August
28 to November 9, 1971. By referring to OEP's published guidance,
TABLE 3.—Number of Inquiries by OEP Regions and Percentages by Category
August 28-Novernber 9
Region
1-Boston
Total
Inquiries
63,275
2 - N e w York
183,379
3-Philadelphia
81,100
4—Atlanta
69,389
5-Chicago
146,140
6-Dallas
51,890
7-Kansas City
33,392
8—Denver
21,925
9-San Francisco
123,194
10-Seattle
27,794
Total
801,478 b
Wage (%)
30
22
33
35
34
36
40
35
28
32
30
a
Price (%)
Rent (%)
30
40
41
31
21
26
16
18
29
34
20
31
37
36
44
40
47
42
36
38
48
39
a
The figures for each Region include all inquiries received by IRS and OEP in
that OEP Region.
b
If inquiries received before August 28 and all inquiries received directly at the
National Office and by ASCS are added to this figure, the grand total of inquiries
received comes to about one million.
the ASCS and IRS offices were able to answer most questions immediately. When the office receiving a question could not provide
an answer, it referred the question to the next higher level in the
system.13 The offices participating in this information system were
ASCS county offices, IRS Subdistrict and District Offices, OEP
Regional Offices, and the OEP National Office.14 OEP Regional
13
ASCS county offices referred their questions to the nearest IRS office.
To provide a uniform basis for reporting and controlling responses to public
contacts, OEP furnished all ASCS and IRS offices with a single, standardized check
list form. See Robert Kupperman, Memo to Regional Directors, August 26, 1971,
Subj: OEP Form 401-OEP Contact Record.
14
68
MANAGING
THE FREEZE
Offices, making use of official guidance and agency experts assigned
to them, were able to answer the vast majority of questions referred
to them by IRS as well as the 28,000 letters addressed directly to
them. The Regions did, however, forward to the National Office
about 1,100 questions they were unable to answer.
Questions coming from the Regional Offices were received in
the National Office's Operations Center. Some were addressed
specifically to the General Counsel's Office or to the Office of
Exceptions and Exemptions, and were referred to these offices. The
remainder went to the Inquiry Review Section, which was directed
by Mr. Arnold C. Lewis.
In some instances the Inquiry Review Section was able to send
an immediate reply based on standard answers in recently available
guidance or on replies developed for similar queries from other
sources. The great majority of questions, however, were referred
to the agency representatives in the Agency Coordination Section,
who provided draft responses. During the first few days, questions
were directed to these experts without regard to their specialized
knowledge. Subsequently, however, they were asked to advise on
stabilization matters related to their normal duties. For example,
Treasury personnel provided advisory opinions on the surcharge
on imports, and HUD personnel on rents and housing.15
After advisory opinions had been received from the Agency
Coordination Section, Inquiry Review referred to the General
Counsel those questions involving legal interpretations and to the
Policy Questions staff those involving issues for which there was no
approved guidance. These policy issues were considered by CLC
or its Executive Policy Committee.
When CLC action resulted in new guidance on the subject, this
was widely disseminated and the Inquiry Review Section notified
the Regional Office initiating the question of the applicability of
the new policy statement to its specific inquiry. When an interpretation given by the National Office was thought to have general
applicability, an information copy of it was sent to all Regional
Offices.
Almost all of the 1,100 policy questions which the Regions referred to the National Office required at least some processing by
the General Counsel's Office. This office also provided legal interpretations for some 2,200 questions referred to it by the Cor16
These experts contributed to OEP's daily report to CLC by highlighting
significant items within their areas of expertise, assisted in the preparation of certain
studies and surveys and in drafting the Stabilization Program Guidelines, and occasionally participated in conferences with industry representatives.
69
MANAGING
THE FREEZE
respondence Section and the Policy Questions Office. When any
interpretations were of general applicability, the Operations Office
dispatched them to all Regional Offices for guidance.
During the freeze it was suggested that the system of handling
inquiries in the National Office be revamped to reduce the possibility of inconsistent responses. It was pointed out that the system
in use permitted four sections in the National Office to issue
interpretations—Inquiry Review, Correspondence, General Counsel, and Congressional and Public Affairs. There was a possibility
that one office's responses would not be consistent with those coming from another office. The Director was aware of the organizational problem, but declined to change the system in the midst
of the freeze because of the program's relatively short duration.
Inconsistency of response was minimized by the fact that personnel
responding to public questions were all guided by the same,
constantly updated policy statements. The daily Coordination
Meetings and other coordination mechanisms also helped. The
determination as to which questions called for a new policy statement was made in some cases by the Policy Questions Office and
in the final analysis by Lincoln himself.
OPERATIONAL FEEDBACK AND REPORTING
Public reaction to the freeze was widely discussed by the news
media, by pollsters, and by popular magazines and business
journals. The most direct expression of public attitudes, views, and
reactions took the form of telephone calls and letters to those
administering the freeze. While these provided some information
on the progress of the freeze, Lincoln also felt it necessary to require
the Regional Offices and the divisions of the National Office to
submit regular reports of their activities.
During the first few days of the freeze, a reporting system was
hastily created by the OEP staff. As the freeze organization settled
into place, the Reports Section became a separately organized
activity in the Operations Office, with a regularly assigned staff
headed by Mr. George Hotchkiss.
Lincoln charged Deputy Director Trent with the responsibility
for developing a standardized reporting system that would provide
reliable information on public reactions to the freeze and record
important developments in its implementation. Trent assigned the
task to Mr. Robert H. Kupperman, Deputy Assistant Director for
70
MANAGING
THE FREEZE
Information and Analysis. The system that evolved after a few
weeks was a Daily Economic Stabilization Report to the Director,
a Daily Report to the Cost of Living Council, and a Weekly Report
to the Cost of Living Council. Kupperman's staff produced the
weekly reports, and the Coordination Office produced the two
daily reports, as explained below. These standard reports were
supplemented by numerous ad hoc reports on particular problems.
Daily Economic Stabilization Report
The Daily Economic Stabilization Report kept the Director
informed of significant developments and problems connected
with administration of the freeze. The report was prepared from
inputs by the OEP Regional Offices and by major headquarters
offices involved in the freeze. The Special Assistant for Regional
Affairs and the Reports Section of the Operations Office submitted
narrative accounts of regional activities. Until October 6, the Reports Section was also responsible for collating regional statistical
summaries on correspondence, exemptions, inquiries, and other
activities. After October 6, the data on these activities were entered
into OEP's on-line computer system and were readily available to
the National Office in summary form. The Information Systems
Office was thenceforth responsible for providing the daily statistical
data when it was requested.
All inputs, whether from the Regions or the National Office
divisions, were submitted at the daily 5:00 p.m. Coordination
Meeting; the coordination staff consolidated them into a daily
report to the Director. This report was used as an in-house OEP
management tool. It provided a forum for free discussion of problems—each office had a clear shot at the Director's evening reading.
Daily and Weekly Reports to CLC
During the first several weeks of the freeze the Director provided
a Daily Report to the Cost of Living Council, covering the highlights of the freeze. The developments and data included were
essentially a digest of those in the Daily Economic Stabilization
Report to the Director, polished and condensed by the Coordination Office. The Daily Report to the Council was discontinued
after September 25, since the Weekly Report and occasional special
reports were considered sufficient to meet the Council's needs at
that stage of the freeze.
71
MANAGING
THE FREEZE
The first official weekly report to the Council covered the period
beginning September 4, 1971. The format of the report reflected
OEP's initial reporting experiences and also CLC specifications on
data to be reported. The report was prepared by the Information
and Analysis Office from material submitted by the OEP Regional
Offices and by the major National Office divisions involved in the
freeze. Data submitted by an OEP Regional Office reflected the
activities of that office as well as those of the IRS field offices in the
Region. The activities of the ASCS field offices were not covered;
however, 10 percent of the ASCS offices did report data on the
public inquiries they received. These reports, transmitted to the
OEP National Office through the ASCS State and National Offices,
enabled OEP to estimate the number of inquiries from the Nation
as a whole.
The Weekly Report summarized the general situation. It highlighted developments concerning policy formulation and promulgation, interpretation of policy, complaints of alleged violations,
exceptions and exemptions, suits involving the wage-price freeze,
congressional and public affairs, and selected economic indicators. Statistical data on inquiries, alleged violations, exceptions and
exemptions, and litigation were included.
The Systems Evaluation Division prepared the statistics on inquiries from data submitted by the Regional Offices. Until October
6, the tables were prepared by hand; subsequently, they could be
obtained as printouts from EMISARI. This was possible because
OEP had developed a special computer program called IRS SUM
which aggregated the IRS data and the Regional Office data and
automatically inserted the Regional summaries into EMISARI.
The National Office could retrieve the information in nationwide
summary tables as well as summary tables for each OEP Region.
The Bureau of the Census compiled more detailed statistics on
alleged violations and on requests for exemptions. The OEP National and Regional Offices and IRS District Offices gathered data
on these activities in considerable detail and sent them to the
Bureau of the Census for keypunching and computer processing.
The data on suits were prepared by the OEP General Counsel's
office in coordination with the Department of Justice.
Lincoln used the reports to identify problem areas, but never
acted on the problem without obtaining additional information.
He used the Coordination Meetings, his Special Assistant for
Regional Affairs, direct phone calls, and other means to verify
facts and judgments, particularly in the first few weeks of the freeze.
72
MANAGING
THE FREEZE
His careful testing of the reported problems in the early weeks
improved the objectivity and balance of reports received during
the remainder of the freeze.
Some Regional Directors indicated at the end of the freeze that
they had found National Office requirements for reports extremely
burdensome. They found the preparation of the statistics to be a
time consuming process and noted that the requests for special
reports that came from different parts of the National Office were
not adequately coordinated and sometimes duplicated each other.
Statistical accuracy suffered because of the frequent shifts in reporting formats and some confusion as to the definition of reporting categories.16
During the freeze, Lincoln had realized the need for greater
coordination of requests for special reports, and he made the
Operations Office the focal point for all such requests. Stabilization
of the format for routine reports also lessened the workload in the
Regional Offices.
10
See Regional Directors' After-Action Reports to OEP Historian.
73
IV
Policy and Guidance
LEGAL BASE
While the legislative authorization for the freeze was contained
in the Economic Stabilization Act of 1970, the broad outlines of
freeze policy were set forth in Executive Order 11615. The order
limited prices and wages during the freeze period to levels attained
in a substantial volume of transactions by each individual or business during the 30-day period ending August 14, 1971. This rule
was qualified, however, by a provision in the Economic Stabilization Act of 1970 that ceilings could not be established below levels
prevailing on May 25, 1970.
The provisions of the Executive order were clarified in the days
following the President's announcement of the freeze. After receiving authority from CLC Chairman John B. Connally to "implement, administer, monitor, and enforce" the program,1 OEP Director George A. Lincoln issued Economic Stabilization Regulation
1, which specified more precisely the provisions of the order and
defined 13 key terms. The regulation also exempted stocks, bonds,
and exports from the freeze. OEP did not issue any additional
Economic Stabilization Regulations, but it amended the first
regulation five times to adjust terminology and clarify the dates
of the freeze and of the base period.2 The documents on which
implementation and enforcement of the freeze rested were, therefore, substantially complete as of August 20, 1971.
All further policy determinations were made on an ad hoc basis,
in response to specific problems that arose, or were expected to
arise, during the freeze period. As will be explained more fully
later, policy decisions were circulated within Government channels
in the Stabilization Program Guidelines (SPG) and were published
in the Federal Register as Economic Stabilization Circulars (ESC).
1
2
CLC Order No. 1, August 17, 1971.
See Exhibit 9 for the regulation and amendments.
74
POLICY
This guidance differed from the regulation discussed above in that
its legal force was not as broad. Each of the 26 ESC's began with
the statement:
This circular is designed for general information only. The statements herein
are intended solely as general guides drawn from OEP Economic Stabilization
Regulation No. 1 and from specific determinations and policy statements by the
Cost of Living Council and do not constitute legal rulings applicable to cases
which do not conform to the situations clearly intended to be covered by such
guides.
The Circulars were not intended, therefore, to have the kind of
broad application that would be appropriate to a more carefully
codified set of Government regulations. The statement makes it
clear, however, that they were issued as having legal force in the
situations "clearly intended to be covered," and they were so interpreted by the courts. Two suits which the Government brought
against landlords and won, for instance, involved interpretations
of the transaction rule and the rule on capital improvements.3
OPERATIVE PRINCIPLES
The possibility of formulating a codified set of regulations
tailored to various sectors of the economy was considered but was
rejected as inappropriate to a short-term control program. The
goal during the freeze was to give authoritative answers to specific
questions that arose regarding the extent of coverage of the freeze
order and the ways in which it affected particular transactions.
The system of price and wage controls suited to a long-range
program was not established until the beginning of Phase II.
The coverage of the freeze was comprehensive. Although there
were specific exceptions, such as raw agricultural products and
exports, the freeze was intended to affect all segments of the
economy. Application to concrete situations was governed by the
need to be consistent, stringent, and reasonable.4
Consistency, a requisite of any government program, was of
special importance in the freeze because of the decisive economic
impact of the decisions. Both the policies set by CLC and the
interpretations made by OEP had to give equal treatment to all
those who found themselves in comparable situations.
Stringency was called for because of the nature and goals of
8
See p. 127.
*G. A. Lincoln, Remarks Before the National Association of Food Chains,
September 8, 1971; and CLC Quarterly Report, August 15-December 31, 1971, p. 6.
75
POLICY
the freeze: as an emergency measure of brief duration, it was by
definition an inflexible program. Most individuals and businesses
that were caught at a disadvantage were told that little relief
would be available until after the 90-day period. This policy meant
that loopholes were excluded from the guidance as far as possible,
only a few exemptions were granted, and all violations, no matter
how minor, were subject to enforcement measures.
Despite this "hard line," however, a policy of reasonableness was
maintained. There were regulations, for example, allowing seasonal price increases, the pass-through of some taxes, and increases
in some insurance premiums.
FORMULATION OF GUIDANCE
The freeze administration utilized elements of several agencies
plus the newly formed CLC and its small staff. The short deadlines
and the sensitive nature of many decisions made it essential to
have close coordination among all agencies concerned, and a highly
cooperative spirit did in fact prevail.
Most guidance was formulated in response to specific questions
coming from businessmen, landlords, unions, trade and professional
associations, government officials, and individuals affected by the
freeze. Sometimes the answers were broadened to cover a wider
field than that specifically raised by the questioner, and some
guidance was formulated in anticipation of questions that were
considered likely to arise.
In the early days of the freeze, Lincoln established procedures
for channeling policy issues to the Executive Policy Committee
(EPC) and CLC for answers. As explained in Chapter II, personnel in ASCS, IRS, and OEP Regional Offices responded to questions as they arose in all cases where existing guidance was
applicable. In the OEP National Office, inquiries were answered
by the Inquiry Review Section, Correspondence Section, General
Counsel's Office, and the Office of Congressional and Public Affairs.
When any of these offices decided that a question required a new
policy determination, they sent it to Mr. Edward R. Saunders, Jr.,
the Deputy Assistant Director for Resource Evaluation. His staff,
greatly expanded to cope with freeze tasks,5 drafted suggested
5
From the normal staff of about 20, seven were sent off to another building to
continue handling stockpile and industrial mobilization matters; the remaining
group was expanded to 33 by personnel detailed from other agencies. This group
was known as the Policy Questions Office during the freeze.
76
POLICY
answers to policy questions (and disseminated the guidance after
decisions had been made). The drafts usually contained two or
more optional responses with the pros and cons for each and a
recommended action. They were sent to the General Counsel, who
supplied any necessary legal precision to the wording and forwarded the drafts to Lincoln.
As a member of both the Executive Policy Committee and the
Cost of Living Council, Lincoln took the questions and proposed
answers to the meetings of these policymaking bodies. To assist
him in coordinating policy questions and decisions, he named Mr.
Louis Neeb to a newly created post of Special Assistant to the
Director for Policy and Guidance Liaison. During the freeze Neeb
accompanied Lincoln to meetings of EPC and CLC and coordinated the revision and refinement of policy statements that
they directed.
In theory, everything that could be settled by an interpretation
of existing guidance was handled by the OEP staff and only those
questions requiring a new policy determination were sent to EPC.
In fact, most questions with a major economic impact went to
EPC. Since the line between interpretation and new policy was
hard to define anyway, Lincoln preferred to take the questions of
greater impact to the daily EPC meetings for resolution. By following this procedure he kept the policy echelon informed of all
significant issues, achieved coordination in a rapidly moving situation, and assured broad participation in decisions in controversial
cases.
The Executive Policy Committee chose one of the options,
sometimes altering the wording, or directed either the OEP or the
CLC staff to write a new statement. The most basic policy decisions and those that were particularly sensitive or controversial
were referred to CLC, but after the first week of the freeze EPC
resolved about 90 percent of the questions itself.6 Although OEP
was the source of most of the questions and proposed answers,
some came from the CLC staff and from other Federal agencies.
Members of CLC sometimes presented policy questions from their
own areas of activity directly to the Council.7 The guidance was
put in question-and-answer form at first, but there was a gradual
transition to direct statements of policy as the issues became more
complex.
6
Lincoln, Remarks to the Pay Board and Price Commission, October 22, 1971.
Copies of the discussion papers submitted to EPC, with marginal notations of
actions taken, are kept in OEP's files. They are referred to in this history as EPC
Notes.
7
77
POLICY
DISSEMINATION AND INTERPRETATION OF POLICY
Whatever the source of the proposals, all policy decisions were
turned over to Saunders for official dissemination. He sometimes
found it necessary to rephrase the policy statements in the interests
of consistency, clarity, or responsiveness to the original questions;
these changes were worked out in coordination with the General
Counsel.
There was also an unofficial dissemination through the press and
other media. The policy statements were released in Washington,
at first by the Treasury Department and later by CLC and OEP,
and in the Regions by the OEP Regional Offices. This public
dissemination is discussed in Chapter VII, but it should be noted
here that Regional Directors were cautioned not to rely on press
accounts of policy decisions, since they did not always agree with
the officially disseminated guidance.
A high priority was placed on speed in developing responses to
policy questions. Once OEP had formulated a proposed response
to a question, Lincoln took it to the early morning EPC meeting
and, if necessary, to the CLC meeting in late afternoon on the same
day. When EPC or CLC had approved a policy statement, OEP
immediately circulated it within headquarters, sent it by teletype
to OEP Regional Offices and IRS Regional and District Offices,
and put it into the EMISARI computer system. Within a few days,
10,000 printed copies of the guidance were distributed to 28 Federal agencies, all OEP, IRS, and ASCS field offices, all State Governors, and a few other organizations.
A loose-leaf manual called Stabilization Program Guidelines
(SPG) served as the principal repository of official guidance
throughout the freeze. All material inserted into the SPG was
coded so that decisions in the same subject area would automatically appear under the same tab. The manual, which was
designed, printed, and in use before the freeze was a week old, was
generally acclaimed by OEP and IRS personnel as an indispensable
tool for keeping track of the steady stream of policy statements.
IRS, in cooperation with the Government Printing Office, handled
the actual printing and distribution of the original manual and
the materials to be inserted into it.
The SPG manual was not released to the public, but reporters
and interested citizens could inspect copies at OEP and IRS offices.
Some Regional Offices made it a practice to send copies of relevant
guidance to State agriculture officials, public utilities, labor unions>
78
POLICY
and associations of bankers, real estate brokers, educators, and
similar groups. Beginning on August 24, the Council distributed
10 million copies of a small booklet, "The Wage-Price Freeze:
Questions and Answers/' which contained the questions most
frequently asked at that time. Copies were available at OEP, IRS,
and other Government offices, including all local post offices.
Most of the guidance became available to the public when it
appeared in OEP Economic Stabilization Circulars (ESC), which
were printed in the Federal Register. OEP's Office of the General
Counsel reviewed all SPG material as it came out and adapted
it to a form suitable for the Register. The question-and-answer
form was replaced by direct statements, and some other minor
changes in wording were made. About 70% of the SPG material
appeared in the 26 Circulars. Two compilations of this material
were also published as Circulars 101 and 102, which pulled together the guidance according to subject areas and made some
minor changes in wording dictated by later clarifications or interpretations.8
The breadth of dissemination of policy decisions depended on
their degree of applicability. Decisions that were relevant only to
the questioner were communicated to him by letter. Decisions
that would be applicable to others were also published in the
SPG manual, which was used by Government personnel in responding to questions from the public. Determinations of broader
application were included in the Circulars and printed in the
Federal Register, and much of this material was also included in
press releases.
No less important than the guidance itself was the prompt,
authoritative interpretation of its provisions. As detailed in Chapter III, personnel in the OEP-IRS-ASCS network used existing
guidance to respond to questions as they arose, forwarding up
the line those queries they were unable to handle. For the approximately one million inquiries received during the freeze, the
"last stop" for authoritative rulings was the OEP General Counsel,
who issued rulings on about 3,300 questions. To handle these
interpretations, as well as compliance work and preparation of
the Economic Stabilization Circulars, the General Counsel's staff
was expanded from five to nearly 60, of whom 28 were attorneys.
Lincoln considered the ability to respond quickly to questions
8
Circulars 1-10 were replaced by Circular 101 on September 21, and Circulars
11-20 by Circular 102 on October 22. Circular 102 contained a comprehensive subject
index. These Circulars were available for public sale and enjoyed a wide distribution.
79
POLICY
an essential ingredient of successful freeze administration. He felt
that businesses and other organizations should not be required to
operate in the dark and that they would appreciate a prompt
response, even if it was not the one they had hoped for. Regional
Directors gave the headquarters staff high marks for generally
prompt and adequate answers to their questions, but complained
of delays in getting guidance on some of the more complex issues
that were referred to EPC or CLC, and of the vagueness of some
guidance.9 The Regions included in their daily reports to the
Director a list of the questions they had submitted that remained
unanswered, noting how long they had waited for an answer. The
National Office's goal was to reply to all questions within 3 days.
MAJOR POLICY DETERMINATIONS
As noted earlier, policy decisions were concerned mostly with
defining the coverage of the freeze order. This provided a much
simpler set of directives than would have been necessary if an
attempt had been made to allow a pass-through of cost increases
and similar adjustments. Nevertheless, the guidance that was
developed reached a remarkable degree of complexity. About 450
policy decisions were printed in the SPG manual, ranging from
simple, one-line answers issued in the first weeks to elaborate explanations of policy that covered several pages. It is obviously
impossible to summarize or even catalog these policies here, but
a few key decisions in each economic area will be discussed as
examples of the types of issues that arose.
Transaction and Seasonally Rules
A policy of basic importance to all elements of the economy was
the use of actual transactions during a base period as the means of
determining ceiling prices. The Executive order set the terms:
Prices, rents, wages, and salaries shall be stabilized for a period of 90 days
from the date hereof at levels not greater than the highest of those pertaining
to a substantial volume of actual transactions during the 30-day period ending
August 14, 1971, for like or similar commodities or services.10
9
After-Action Reports from Regional Directors to the OEP Historian mentioned
delays in obtaining guidance on price lists and on the prices of school milk, wood
products, railroad car demurrage, and ski facilities. The problem of vague or confusing guidance was associated mainly with wage contracts, teachers' salaries, and
insurance premiums.
10
Executive Order 11615, August 15, 1971, Sec. l.a.
80
POLICY
Economic Stabilization Regulation 1 provided the following definitions:
Base Period: . . . the period from July 16, 1971, through August 14, 1971, and,
in the event that no transaction occurred in the latter period, the nearest
preceding 30-day period in which a transaction did occur: Provided, however,
That prices, rents, wages, and salaries need not be established at levels less than
those prevailing on May 25, 1970.
Substantial volume of transactions: . . . The ceiling price is the price at or above
which 10 percent of the actual transactions during the base period were made,
except that in the case of posted and effective prices during the base period, the
base period itself will be considered to have begun at the time of the increase
in posted and effective prices.
When a question was submitted by a seller who had taken a
large order during the base period for delivery during the freeze
and wanted to know whether this order constituted a "transaction,"
the answer was:
A transaction takes place when the seller ships the product to the buyer, not
when the order is received. In the case of a service, the transaction takes place
when the service is performed.11
In ordinary business and legal usage, "transaction" can have a
range of meanings, including an oral agreement, written contract,
deposit, complete payment, or delivery. By defining transaction as
delivery (shipment), CLC made sure the freeze order would affect
the economy in the most decisive and immediate way possible.
Except by requiring price rollbacks, there was no way the order
could have been made more immediate; other options would have
delayed the impact to a greater or lesser extent.
Besides blocking price increases that were included in contracts
calling for delivery during the freeze, this definition ruled out
wage increases covered by previously negotiated contracts and rent
increases provided for under leases. All rent increases were stopped,
even when advance deposits had been made or rent had been paid
in advance, as long as occupancy had not occurred at the higher
rental rates prior to August 15. The most heated dispute over
application of the transaction rule concerned advance sales of
tickets to sporting events.12 Many also questioned the rule allowing
increases in tuition and school room-and-board charges when advance deposits had been made; this rule (discussed below) was
based on the thesis that an educational institution performs part
of its service to the student before the actual beginning of classes.
The use of the transaction rule had the evident purpose of
giving equal treatment to prices, wages, and rents. It was necessary
11
12
ESC 7, September 2, 1971, Sec. 401 (e) ; ESC 101, Sec. 302 (1).
See pp. 135-138.
81
474-893 O - 72 - 7
POLICY
to spell out in guidance, however, how it applied in each area,
as will be seen in the following sections.
The seasonality rule also applied across the board to prices,
wages, and rents. It permitted sellers to increase their prices to the
levels charged in the previous year if they could demonstrate that
their prices had undergone "large and distinct fluctuations" at a
specific time in each of the 3 years prior to the freeze. Examples
given were Puerto Rican hotel rates, auto dealers' selling prices
at the time of introduction of new models, and wage rates for
some seasonal agricultural workers.13 Some important interpretations of this rule were those that denied its applicability to fuel
oil and coal prices. A similar negative ruling was rendered in the
case of several potash producers, whose normal seasonal price
variations had been disrupted in 1969 and 1970 because of domestic
market aberrations related to international dumping.
Prices
Price ceilings were not as easy to determine as was popularly
imagined. Policy makers had to take into account such factors as
seasonal discounts and promotional discounts offered during the
base period, quantity discounts, and differing prices in different
market areas. Specific rulings were made on subjects as diverse as
business mergers, advertising rates, foreign tours, State regulated
liquor prices, railroad freight rates, second hand cars and furniture,
auctions, Christmas candy, trading stamps, and sale of real estate.14
This list is only the top of the iceberg, but is sufficient to give
some idea of the variety of problems encountered.
The more complex issues involved considerable staff work and
were not always put to rest by the first policy statement on the
subject. As the President's Council of Economic Advisers said:
"Because of the complexities of the markets for many goods and
services . . ., it proved difficult to develop precise definitions that
applied with equal effect in all situations." 15
The application of the transaction rule to prices was fairly
straightforward. Perhaps the most rigorous application was to long
13
ESC 101, Sec. 303. When auto dealers introduced 1972 models they were allowed
to sell at the full list price of 1971 models instead of using the prices charged for
1971 models during the base period, a period of traditionally large discounts. See
p. 134 for application of the seasonality rule to propane gas prices.
"ESC 101, Sees. 401-408; ESC 102, Sees. 303 and 401-405. See Chapter V for
exceptions
and exemptions.
15
Annual Report of the Council of Economic Advisers, January 1972 (Washington: Government Printing Office, 1972) , p. 77.
82
POLICY
term contracts calling for delivery during the freeze. Certain castings, forgings, and special machines are produced for various
industries in "job shops" using designs that are unique for each
purchaser. Because of the high cost of tooling, quantity production
runs are made at infrequent intervals, sometimes 2 or 3 years apart.
When contracts for such items called for delivery during the freeze,
a seller was held to the price of the previous delivery of the same
products, even if his contract called for a higher price and production costs exceeded the ceiling price.16
A similar ruling was given in the case of commodity futures that
matured during the freeze; regardless of the contract price, the
ceiling price was determined by deliveries during the base period.17
Futures contracts for raw agricultural products were not affected
by the freeze because of the exemption of such products.
The policy of "reasonableness" was illustrated in such rulings
as the one upholding rate increases by public utilities. Under
widely used formulas, increased fuel costs in July resulted in rate
increases for August. Even though bills reflecting these increases
were not prepared or sent out until September, the increases were
upheld on the grounds that delivery had taken place before the
freeze. The decision involved millions of dollars for some large
utility companies.18
As noted above, OEP applied the transaction rule to services by
saying the transaction took place when the service was performed.
It was usually easy to date the base period transactions by this rule,
but it proved difficult in cases where the performance included
several steps. An advertising company, for instance, usually completes work on a magazine or television advertisement in several
stages, and the service might be thought of as having been performed for the purchaser long before the advertisement appears
in print or is seen by the public on TV. Adhering to a rigorous
application of the transaction rule, however, OEP required delivery of at least one unit of the final service (actual appearance
of the advertisement) in order to fix a transaction date.19
The transaction rule applied to renewals of insurance policies.
If a rate increase was announced prior to August 15 and a substantial number of transactions (renewals) occurred at the in16
ESC
"ESC
38
ESC
10
SPG
102, Sees. 402 (5) , 403 (3) .
101, Sec. 403 (13) ; ESC 102, Sec. 403 (1).
102, Sec. 406 (5) ; EPC Notes, September 17, 1971.
3.1901.
83
POLICY
creased rates, then the higher rates could apply to the renewals
occurring during the freeze.20
Premiums on group health insurance policies that are based on
experience-rating formulas are normally increased to reflect increases in such factors as average cost per claim and frequency of
claims. Insurance companies were allowed to increase premiums
on such policies during the freeze to reflect experiences on actual
costs and changed conditions of risk (such as the age-sex distribution of groups) but were not allowed to reflect anticipated cost
increases nor to use new formulas that w'ould result in higher
premiums.21
An atypical application of the transaction rule was made for
tuition. The first ruling, which did not mention deposits, stated
that tuition increases that had been announced prior to August 15
could take effect.22 A later ruling stated that tuition and room
and board increases had to have been confirmed by deposits during
the base period.23 When it was later defined that a service transaction takes place "when the service is performed/' 24 it was apparent that the rule on tuition did not conform to this definition.
A new policy statement reiterated the rule—that tuition increases
could remain in effect if they had been announced and at least one
deposit had been received prior to August 15—and added the
following explanation:
This treatment of the student-school relationship is unique to tuition and
room and board transactions and does not apply to any other form of transaction. . . . The use of prior announcement and payment to show completion of
transactions results from the unique arrangement schools have with their enrolled
students. Although the level of service performed by schools varies with the
school year, certain year-round services are available to enrolled students, i.e.,
access to research facilities (libraries) , administrative support, student guidance
activities, etc.1'5
Many inquiries were received about the interpretation of this
ruling, and many students and parents complained that tuitions
should have been frozen along with their sources of income.
Numerous organizations tried without success to apply the rationale
for tuition increases to other situations, such as the advance sale of
tickets to college football games.
20
ESC
ESC
ESC
23
ESC
that ESC
24
ESC
25
ESC
21
22
101, Sec. 407 (5,6).
102, Sec. 407 (2).
1, A u g u s t 2 4 , 1971, Sec. 4 0 7 .
3, August 28, 1971, Sec. 401 (b). The Circular did not include a statement
1 was superseded, and this oversight led to some compliance problems.
7, S e p t e m b e r 2 , 1971, Sec. 401 ( e ) .
15, S e p t e m b e r 2 3 , 1 9 7 1 , Sec. 4 0 3 ( 1 ) ; E S C 102, Sec. 4 0 3 ( 5 ) . See also
p. 110.
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POLICY
A seller could price a new commodity or service by applying
the percentage markup he was receiving on his most similar item
or (if that rule did not apply) by using the prevailing price for
comparable items in the same area. A slight change in appearance
or slight functional modification did not, however, qualify a
product as "new." 26 The 1972 model cars, for instance, were not
considered new products, so the sticker prices on them were the
same as those on 1971 models. As noted above, the seasonality
rule allowed retailers to sell at the full sticker price instead of
following the actual prices charged during the base period. Automobile manufacturers who converted items that were optional on
1971 models into standard equipment on 1972 models were allowed
to include the normal price of the options in the prices charged
for the 1972 models. On the other hand, new features that had not
previously been offered as options, such as new anti-pollution
equipment, did not justify price increases.27
A manufacturer was not allowed to make a change in business
practices as a way of circumventing the freeze.28 A seller could not
reduce the quality of a commodity or service unless he reduced
the cost proportionately.29 A transportation company, for instance,
could not eliminate a route or decrease frequency of service without reducing fares proportionately, unless the appropriate regulatory agency stated that the reduction was due to a decrease in
demand.30
Dues paid to organizations such as professional associations,
unions, and country clubs were considered fees for services and
thus were frozen. However, members could be assessed a prorated
share of the costs of increased services.31 Several compliance cases
resulted from this ruling, including Recommended Courts Cases 32
against three unions, but no suits were filed.
A ruling was issued in the early days of the freeze to the effect
that State and local taxes were not frozen. The principle followed
in later clarifications was that government fees and service charges
were frozen, but taxes were not. Thus, the freeze did not affect
income taxes, sales taxes, property taxes, license fees, or legal
penalties. It did, however, cover fees for water, gas, and sewer
26
ESC 101, Sec. 402 (4); ESC 102, Sees. 401 (1), 402 (1,2).
CLC Quarterly Report, August 15-December 31, 1971, p ; 19.
28
ESC 102, Sec. 402 (4).
29
ESC 101, Sec. 402 (9).
80
ESC 102, Sec. 407 (11). See p. 135 for application to a local transit company.
81
ESC 101, Sec. 403 (5); ESC 102, Sec. 403 (4).
82
See p. 120.
27
85
POLICY
service, road and bridge tolls, and utility franchise fees.33 Merchants
were allowed to increase prices to cover increases in "surcharges
or other sales or excise taxes/' but had to absorb increases in
"property or business taxes." 34 This ruling caused some confusion,
as there are many types of taxes in general use and even wider
variations in the terminology applied to them. Two cities were in
the process of installing new parking meters (with increased rates)
when the freeze was announced and had to backtrack because
the parking fee was frozen.
The prices of commodities exported to other countries were not
frozen,35 but imported commodities were subject to the freeze.
Increases in U.S. customs duties and tariffs, including the 10 percent surcharge imposed as part of the New Economic Policy, could
be passed on to the ultimate buyer. This was true even if the
imported item was transformed or incorporated into another
product, as when an imported engine was used in an automobile
that was assembled in this country. Sellers were free to absorb the
surcharge themselves, but if they passed all or part of it on they
were obliged to specify the amount on the sales ticket or provide
the information to the purchaser upon request.
Importers and resellers could also pass on other increases in
costs of imports, such as price increases by foreign suppliers and
increases caused by fluctuations in world currencies, as long as the
imported item was not physically transformed or incorporated into
another product.36 These rules on imports had a significant impact
on utility companies using imported fuel. They had to absorb
increases in fuel prices, since the fuel was transformed in the
production of electricity.37
Wages
The prohibition of wage increases covered all forms of remuneration, including fringe benefits such as paid vacations, holidays,
and employer contributions to insurance and pension funds. The
prohibition covered all wage earners, including military personnel
and employees of Federal, State, and local governments.88
33
ESC 1, August 24, 1971, Sec. 402; ESC 101, Sees. 406 (5), 407 (8), 410; ESC
102, Sees. 401 (4), 407 (8).
34
ESC 102, Sec. 402 (8).
35
Economic Stabilization Regulation 1, Sec. 4; see ESC 102, Sec. 401 (7) .
^CLC Order No. 2, August 17, 1971; Economic Stabilization Regulation 1, Sec.
5; ESC 101, Sec. 404; ESC 102, Sec. 404.
37
ESC 101, Sec 403 (10).
38
ESC 101, Sees. 501, 502. See p. 104 for exceptions and exemptions.
86
POLICY
Economic Stabilization Regulation 1 connected the transaction
rule with wages and salaries, saying that ''remuneration shall be
based upon a substantial number of actual transactions for services
of like or similar nature." 39 The rule was applied to remuneration
in a limited way, however. It did apply to fees charged by a doctor
or lawyer; as with other purchased services, rates prevailing in at
least 10 percent of the transactions in the base period could be
maintained during the freeze.40 The rule was not applied, however,
to wage earners by category. The fact that 10 percent of the employees of a particular firm or of the workers in a given category
had received an increase in wages or fringe benefits before the
freeze did not entitle others in the same category to the increase.41
For most wage-earners, wages during the freeze were determined
by the individual's wages during the base period.
From another point of view, the freeze on wages applied to job
categories rather than to individuals. A person could be promoted
to a higher level job and thus obtain increased pay. Apprentices,
learners, and persons hired on probation could be promoted in
normal fashion, according to programs established before the
freeze, and thus receive pay increases.42
Over a hundred rulings on wages and fringe benefits appeared
in the Circulars. Some idea of the complexity of policy making
can be seen from a partial listing of topics covered: workers on
strike, professional athletes, severance pay, returning veterans,
incentive pay plans, piece rates in the California raisin harvest,
deferred cost-of-living increases, Idaho gold miners, State minimum
wage laws, wage cases pending before regulatory agencies, legal
holidays, ''lag dates" in steel workers' contracts, profit sharing,
construction workers under the Davis-Bacon Act, workers transferred to new locations, clergymen's salaries, and Americans working for U.S. firms abroad.
A critical question arose as to how the freeze affected wage
contracts negotiated during the 90 days and covering retroactively
work performed before August 15. There were several instances
where contracts had expired before the freeze but employees had
continued working during wage negotiations. CLC ruled that,
once a new contract was signed, a wage increase could be paid
39
Economic Stabilization Regulation 1, August 20, 1971, Sec. 2 (b).
ESC 101, Sec. 407 (3).
This situation arose, of course, only when there was no wage contract; when
there was a contract and a wage increase had taken effect before the freeze, all
workers received the increase.
42
ESC 101, Sec. 503; ESC 102, Sec. 503.
40
41
87
POLICY
retroactively for the time before the freeze, but not for the period
of the freeze. Furthermore, the parties had to demonstrate that
they did not change their bargaining position in order to compensate for or absorb the impact of the freeze.43
The question of whether a contract was actually in effect by
August 15 or not came up several times. A contract which had
been signed by management and union officials before August 15
but was ratified by workers after the freeze began was allowed to
stand. In another case, a contract was offered by management and
accepted and signed by the union before the freeze, but was not
signed by management until August 16; this was also allowed to
stand.44 In these cases, since the effective date of the wage agreement and the accrual of pay both antedated the freeze, the wage
increase applied both to the prefreeze period and to the freeze
period itself. Although labor leaders contended that wages had
been absolutely frozen, there were many borderline situations like
these in which CLC allowed pay increases.
Fringe benefits could not be increased during the freeze, and
this led to some problems. Firms normally grant a paid vacation
after a specified period of service, such as 1 year, and increase the
vacation time with added years of service. When the specified
period of service was completed during the freeze, employees were
not allowed to take the vacations because they were seen as increases in fringe benefits. In the final days of the freeze, however,
the rule was reversed and the vacations were allowed on the
grounds that they had been accrued during the year or years of
work and were not therefore a new or added benefit.45
A similar decision concerned stock options, which some firms
grant to employees at periodic intervals. The initial ruling was that
no new stock options could be issued and that existing stock
options could not be exercised during the freeze period unless the
right to exercise them expired before November 14.46 CLC later
ruled that stock options could be issued "for the same number of
shares as in the base period (adjusted, if necessary, for stock splits
and stock dividends) and under the same terms and conditions."47
43
ESC
ESC
ESC
502 (1).
46
ESC
47
ESC
1971.
44
45
101, Sec. 502 (3); ESC 102, Sec. 505 (6) .
101, Sec. 502 (30,35).
102, Sees. 502 (2), 504 (8); reversal in ESC 25, November 10, 1971, Sec.
101, Sec. 504 (3) ; ESC 102, Sec. 502 (14) .
25, November 10, 1971, Sec. 504 (1) . See CLC press release, November 10,
88
POLICY
Teachers' Salaries
Teachers' salaries were one of the most hotly debated issues of
the freeze. Since the freeze was imposed just before the opening of
a new school year, the time when a majority of the Nation's two
million teachers would normally receive salary increases, it had
a greater impact on members oT this profession than on any comparable group. This situation was aggravated by two factors: the
feeling of many teachers that their profession is consistently underpaid and should have been exempted from the freeze to begin
with, and the ambiguities found in the freeze regulations that
attempted to deal with unique features of teachers' contracts. The
result was a serious problem of opposition to the freeze by a large
and influential group, with widespread instances of noncompliance.
Those who set freeze policies had no intention of putting teachers' salaries in a favored position. The special rules made for
teachers (which applied also to school administrators, cafeteria
workers, etc.) were intended only to prevent teachers from suffering inequities because of unique contractual or salary conditions.48
The date on which a teacher or administrator begins work in
relation to a new school year is often hard to determine, since he
may be working at home, in a library, or at a professional meeting.
Depending on local rules and the teacher's choices, he may have
his pay spread over 9 months, 12 months, or some in-between
period, not necessarily coinciding with the period of actual work.
If a pay increase based on longevity or intended for all teachers
in a system went into effect with the fall term, it was often nearly
impossible to answer the critical question of whether a pay increase
was or was not "in effect" for a particular teacher before August 15.
OEP regulations allowed all teachers who were eligible to be
paid over a 12-month period, but had opted for a 10-month plan,
to receive a pay increase which was in effect in their school district
before August 15.49 Otherwise, some teachers would have suffered
an inequity merely because of the pay plan they had chosen.
Another complicating factor was the form of teachers' contracts.
A union's contract with an employer affects all workers impartially;
during the freeze, a worker under a union contract received a pay
increase even if he was on vacation or was laid off during the base
period. A nonunion worker, on the other hand, generally has a
wholly individual contract with his employer, with terms of em48
49
Interview with G. A. Lincoln, February 3, 1972.
ESC 2, August 26, 1971, Sec. 501 (h) .
89
POLICY
ployment and compensation tailored to him. The teacher's situation lies somewhere between these points: there is usually a fixed
pay scale and uniform contract for all teachers, but each teacher
signs the contract individually. This made it difficult at times to
tell whether a teacher was governed by an individual or a group
contract, and, therefore, on what date a pay increase took effect for
him.
The salary question was easily settled for teachers who were
clearly on individual contracts. Aside from the 10 month/12 month
rule noted above, teachers on individual contracts were governed
by a simple rule: those who were eligible to accrue pay at the increased rates before August 15 obtained the increase; others did
not.50
Where there was a system-wide contract, the interpretation was
more difficult. The salient regulation was:
In the case of school systems that have negotiated a system-wide contract
which is applicable to all teachers in the system and which makes all teachers
eligible to receive payments prior to August 15, all teachers may receive these
increased payments if any one teacher either performed work or was accruing
pay prior to August 15.51
This rule clearly permitted raises for many teachers, perhaps as
many as 80 percent of the 2.1 million in the country, as the National Education Association estimated. But it also opened the door
to misinterpretations. Some school systems seized on this "golden
sheep rule," as it came to be called, and began granting pay increases to all their teachers providing at least one had worked
before August 15. This was often done regardless of their individual eligibility and even in the absence of a system-wide contract.
The golden sheep rule applied only to those teachers who were
made eligible, under a system-wide contract, to accrue pay before
August 15.
In the face of the widespread noncompliance that resulted,
Arnold Weber and other CLC spokesmen began taking a "hard
line" on teachers' pay by putting the narrowest possible interpretation on the rules,52 and this led to widespread charges that CLC
had reversed its earlier ruling. The confusion was largely resolved
in mid-September when OEP issued new guidance clearly separating system-wide contracts from individual contracts. It stated that
80
ESC 5, August 31, 1971, Annex 2; ESC 13, September 13, 1971, Annex 1.
ESC 5, August 31, 1971, Annex 2. Originally published in a CLC press release
on August 26, 1971.
52
See Statement of Arnold R. Weber to the Press, September 3, 1971, and press
accounts of it on September 4, including Washington Post, p. 4, New York Daily
News, p. 2.
51
90
POLICY
all teachers under system-wide contracts who were eligible to accrue
pay before August 15 could receive the fall pay increases, and
added:
If, in fact, such a contract makes all teachers eligible to accrue pay prior to
August 15, it is irrelevant whether "any one teacher" performed work or accrued
pay prior to August 15. If the employment arrangement requires that a teacher
begin work to be eligible for pay, then the date of beginning work is the date
the teacher is eligible to accrue pay.53
This supplement, carefully prepared by lawyers in the OEP General Counsel's office, resolved most of the confusion on teachers'
salaries, according to reports from Regional Directors.54
Rents
The rent freeze applied to all residential and commercial properties, including hotel rooms and trailer courts, and to the rental of
furnishings and provision of services connected with rental properties. Tenants could not, for instance, be required to pay utility
bills that had formerly been paid by the landlord, unless rents
were lowered proportionately. A ceiling rent was determined for
each house, apartment unit, hotel room, or similar unit by actual
rentals during the base period—the most recent 30-day period
during which the property was occupied. Units not previously
rented were priced at the same level as similar units in the same
locality. The rental rate was set by transactions in the base period,
and "transaction" meant performance of the service, that is, occupancy of the property by the renter. It did not matter when a
rent increase was announced, a lease was signed, a deposit was
made, or even when the rent was paid.55
The transaction rule was applied to rents in a limited way. If
a hotel room was rented many times during the base period, the
ceiling rent wras determined by the level attained by the highest
10 percent of the rentals. The transaction rule could not be used
to equalize rents on several units in the same building or owned
by the same firm. Rather, each dwelling or commercial unit had
its own ceiling.
The amount of guidance issued on rents was much smaller than
that on prices or wages. Reports from OEP Regional Offices indi53
ESC 13, September 16, 1971, Annex 1.
Memo, Leonard Reese to Lincoln, September 18, 1971, Subj: Regional Reports
on Teachers' Salaries. The compliance problems resulting from this policy situation
are covered on pp. 128—131.
55
Economic Stabilization Regulation 1, August 20, 1971, Sees. 2 (c) and 3 (b);
ESC 101, Sees. 601, 602.
54
91
POLICY
cated that problems of interpretation in this area were relatively
minor. There were a few rulings, however, that are of general
interest. Subject to a number of qualifications, a property that
underwent capital improvements could be treated as a new rental
unit and thus draw higher rent. 56 In government aided housing
programs that charge a fixed percentage of tenants' income as rent,
rents could increase as a tenant's income increased, but the percentage charged could not be increased.57
Formula rentals and the pass-through of certain taxes presented
some difficult policy questions. Most formula rental agreements are
found in leases for commercial property, though they may also
apply to rental of residences and commercial equipment, such as
aircraft. For example, a commercial tenant might agree to pay
for all taxes, insurance, and repairs plus a fixed monthly rent; in
such a case the owner is in effect investing his money at a fixed
rate of return and does not assume the normal duties of a landlord.
In a residential lease, a tenant might agree to normal rent plus
payment of the property taxes.
It was ruled early in the freeze that increases in occupancy taxes
on rental dwelling units could not be passed on to tenants. 58 T h e
position on the pass-through of property taxes underwent several
changes, partly because it was intertwined with formula rentals.
The final ruling, published on October 20, was that increases in
property taxes could be passed on if the effective date of the
increase was before the freeze.59
The use of formula rentals was at first approved only for new
commercial tenants—those whose leases began during the freeze
and who operated businesses different from those of previous
tenants. In early October the ruling was changed to allow all
formula rental agreements to remain in effect during the freeze,
except that certain specific types of rent increases were forbidden.60
LOOKING FORWARD
As the freeze neared its end, OEP's attention shifted to smoothing the way for the post-freeze program. An important contribution in the policy area was to provide to the Pay Board and Price
56
ESC 101, Sec. 601 (21) ; see also p. 127.
ESC 101, Sec. 601 (5,10).
ESC 3, August 28, 1971, Sec. 602 (d).
69
ESC 21, October 20, 1971, Sec. 602; see also Sec. 602 in ESC's 7, 17, and 19.
60
See Sec. 602 in ESC 17, September 30; ESC 19, October 6; and ESC 21, October
20, 1971.
57
58
92
POLICY
Commission a number of people familiar with policy writing and
interpretation. OEP's Policy and Guidance Liaison Office became
the nucleus of the Price Commission's policy staff, and other OEP
and detailed personnel were attached to the Board or the Commission either for the transition period or as permanent staff
members.
OEP also contributed to the formulation of Phase II policy by
highlighting the problems encountered during the freeze and suggesting some solutions. On October 22 Lincoln and eight members
of OEP's freeze staff briefed the members of the Pay Board and
the Price Commission on major policy issues that would need to
be resolved by those bodies. OEP's compilations of major policy
problems were submitted to the Pay Board and the Price Commission on October 29.
The paper for the Price Commission described 38 issues and
singled out 10 of these as requiring earliest attention. 61 Most of
the priority items concerned the alleviation of hardship situations,
such as allowing steel processors, lumber companies, and grocery
wholesalers to pass on increases in their costs, lest a prolonged
profit squeeze should result in permanent damage to many businesses. Similarly, it was suggested that sellers of imported goods be
allowed to pass on price increases, even when the imported item
was transformed or incorporated into another product. The hardship imposed on the die casting, forging, and metal stamping
industries, which operate under long term contracts, was also
cited, and it was pointed out that relief could be obtained by
redefining "transaction" or by allowing formula pricing, as had
been done for the insurance industry.
Some items of lower priority were: exempting auction sales and
sales of secondhand items, because the fair market price is elusive
and policing is therefore difficult; allowing industries to pass on
the costs of using cleaner fuels when these were required by antipollution laws; and exempting all regulated industries (electric,
gas, telephone, and transportation) , leaving price control in this
area to the existing regulatory agencies.
In the area of rents, changes in the application of the seasonality
rule and of formula rentals were suggested, as was special treatment of apartment rents in New York City. Authorities in New
York had begun on July 1, 1971, to phase out the State rent control
program dating from World War II because of the dire shortage
61
Problem Areas Related to Sales of Goods and Services and Rentals and Sales
of Property which Deserve Early Attention by the Price Commission, October 29,
1971.
93
POLICY
of decent housing in the city. The controls had made renovation
of older buildings uneconomical, with the result that thousands
of buildings had been abandoned. New York authorities had accepted the prospect of rent increases of 80-100 percent after renovations, but the freeze re-imposed rent control and stopped most
renovation work.
The companion paper for the Pay Board listed 17 policy issues,
only three of which were designated as high priority items.62 These
were: allowing equalization of the wages being paid for the same
type of work within one plant or company; allowing cost-of-living
increases covered by wage contracts to take effect, since they are
seen as "catch up" rather than "move ahead" raises; and eliminating salary differences among teachers in the same system which
resulted from some getting raises and others being denied them
under the freeze.
Greater leniency was suggested in allowing employees to obtain
fringe benefits, such as health insurance, pension plans, added days
off, and the right to join thrift incentive plans. It was also pointed
out that merit and longevity increases are important for morale
and could be allowed without being inflationary.
In his briefing of the Pay Board and Price Commission on
October 22, Lincoln summed up the main lessons learned from
the freeze. He emphasized the vastness and complexity of the
problems involved in trying to control all aspects of the economy,
even for 90 days. He stressed the need for consistency of policy
and the need to respond quickly to questions and problems as
they arise, to keep from being snowed under by them. He also
mentioned the importance of teamwork among the many Federal,
State, and local agencies and private entities involved in this type
of fast moving program. Lincoln recognized that it might be appropriate in Phase II to exempt many areas that had been tightly
controlled during the freeze, but added: "we have to keep in
mind the purpose of this great effort, which is to get the rate of
inflation down to 2 or 3 percent by the end of next year. That
purpose seems to me to be overriding." 63
OEP's Regional Directors evaluated the guidance they received
and were required to interpret and apply, with adjectives ranging
from "generally adequate" to "superb" and "outstanding." The
problems they encountered with the policy statements—undefined
terms, vague formulations, inconsistencies, reversals, and delays in
^Problem Areas Related to Wages and Salaries which Deserve Early Attention
by 63
the Pay Board, October 29, 1971.
Lincoln, Remarks to the Pay Board and Price Commission, October 22, 1971.
94
POLICY
getting answers—were usually attributed to the fact that the freeze
was launched with a minimum of advance planning and policy
had to be written in piecemeal fashion, in response to concrete
problems. Regional Directors generally found the guidance on
rents the clearest and that on wages and salaries the most difficult
to interpret. They were acutely aware of the problems that OEP's
stringent application of the freeze order had caused for businesses
and recommended that a number of exceptions and adjustments
be made at the outset of Phase II. 64
1
Regional Directors' After-Action Reports to OEP Historian.
95
V
Exceptions and Exemptions
AUTHORITY
Whenever wage and price controls have been imposed on the
American economy, a means has been provided for exempting
individuals or specified groups in order to alleviate hardships or
meet special emergency requirements. Conforming to this pattern,
the Economic Stabilization Act of 1970 gave the President the
authority to "provide for making of such adjustments as may be
necessary to prevent gross inequities." 1
As this authority was delegated from the President to the Cost
of Living Council and redelegated to the Director of OEP, the
concept of "adjustments" was further defined and a policy spelled
out. The President told CLC it could "make exceptions or grant
exemptions," 2 and CLC Chairman Connally added that "significant policy decisions shall be made only after consultation with
the Council." 3 OEP's own regulation on the subject gave the first
comprehensive statement of the policy:
The Director of the OEP at his discretion may make exceptions to or grant
exemptions from the prohibitions listed in Section 2 of this regulation for the
purpose of preventing or correcting gross inequities*
The terminology used in this area was not further defined for
the general public. During the freeze, the terms "exceptions and
exemptions" usually appeared in tandem, with no apparent distinction being made between them. A clarification approved for
staff use defined an exception as a policy decision "which applies
to an entire class of individuals or organizations" and an exemption as the "waiver of a ruling for the benefit of a single individual
or organization." 5 The distinction is adhered to in this history,
1
Economic Stabilization Act of 1970, Sec. 202.
Executive Order 11615, August 15, 1971, Sec. 4.a.ii.
CLC Order No. 1, August 17, 1971.
4
OEP Economic Stabilization Regulation 1, August 20, 1971, Sec. 4.a. The "prohibitions" covered the whole range of prices, wages, salaries and rents.
6
Executive Policy Committee (EPC) Notes, September 24, 1971.
2
3
96
EXEMPTIONS
although it was not widely disseminated or applied during the
freeze. The discussion in this chapter relates primarily to the
category of exemptions.
An Office of Exceptions and Exemptions was established in OEP
headquarters on August 18 under the direction of Mr. Christopher
A. Norred, Jr. A Foreign Service Officer, Norred had been on
detail to OEP from the Department of State for two and a half
years. He was just preparing to return to the State Department
when Lincoln asked him to head this office for the duration of the
freeze. Mr. Spence W. Perry was appointed executive officer and
in this capacity represented the Exceptions and Exemptions office
in the daily Coordination Meetings, in which the interrelationships
of all freeze activities were worked out.6
POLICY
In order to see how the policy on exceptions and exemptions
fitted into the overall strategy of the freeze, it is useful to compare
the situation to the inception of controls in World War II and
the Korean War. In both these previous cases, prices and wages
were initially frozen, but regulations were issued within a matter
of weeks to provide for adjustments, some of which were required
by the basic legislation. This was possible because a skeleton staff
had been assembled during a period of voluntary restraints which
had preceded the freeze. The transition from the period of "freeze'*
to a later period of more flexible regulation was thus made gradually. During the initial freeze period, exceptions of an emergency
nature could be made, but most adjustments were postponed until
relevant regulations had been issued.
In the 1971 control program, on the other hand, there was no
"warm up" period of voluntary controls before the freeze was imposed, so the freeze was maintained for a longer period in order
to provide time to plan strategy, form structures, and assemble the
expert staff required to administer the long-range control program.
Another unique feature of the 1971 program was that the second
phase was begun on a fixed date instead of by a gradual transition.
The small, quickly assembled staff that administered the freeze
could make exceptions and exemptions, but as in previous control
programs most relief was postponed until the second phase.
It was inevitable that a freeze of such duration would impose
8
On executive officers and Coordination Meetings, see pp. 55-57.
97
474-893 O - 72 - 8
EXEMPTIONS
hardships on some individuals and organizations. The freeze caught
some employers who had just granted a wage increase, manufacturers who had just experienced an increase in the cost of
materials, and retailers whose wholesale prices had just risen. On
the other side of the wage-price spiral, many wage earners whose
earnings had been eaten away by cost-of-living increases were
prevented by the freeze from obtaining catch-up raises. Some employee groups were caught after they had canceled one group
insurance plan but before a new one had taken effect. Some landlords had just made improvements to their property with the
intention of raising rents, and numerous other large and small
businesses were thwarted in the normal execution of their plans.
Nevertheless, the strategy of the freeze was to ask all who were
disadvantaged by it to bear with the hardship in the traditional
American spirit of belt tightening during a war or other crisis. At
his press conference on August 16, Secretary Connally said on the
subject of exemptions: ". . . we don't anticipate making any except
in most extreme and dire cases of hardship and inequity." 7 It was
thus clear from the first that the policy on exemptions was to be
stringent. Lincoln adhered to this policy and impressed it on
others. In denying a price increase to New York school bus contractors, for instance, he told them:
It is hoped that the bus contractors involved will accept their share of the
burden in stopping inflation and will not use the needs of students, including
those handicapped, to attempt to receive preferential treatment during a period
when all are being asked to make sacrifices.8
The purpose of the exemption authority, as noted above, was
''to prevent or correct gross inequities/' Regional Directors asked
that "gross inequity" be defined so they would have a more precise
criterion by which to review requests, and Norred suggested that
the criterion could be "the degree of individual hardship." 9 No
formal definition was adopted, however, so there was no predefined
situation that could be counted on to trigger an exemption. Rather,
the Director applied the criterion of "gross inequity" to each case
as it arose.
In making decisions on individual exemption requests, Lincoln
was careful to maintain the consistency of treatment on which
public support for the freeze was based. Even the Girl Scouts of
America were required to rescind a dues increase. In the absence
7
Department of the Treasury News, August 16, 1971, p. 19.
Msg Charlie 129, September 10, 1971, quoted in New York Times, September 11,
1971, p. 1.
9
EPC Notes, September 1, 1971.
8
98
EXEMPTIONS
of an elaborate bureaucracy to investigate every request, the best
way to assure equal treatment to all was to deny requests except
in a very few, unusual cases. The strategy employed therefore had
much in common with that used for compliance, which was to
demand compliance of all, whether violations were major or minor.
In all, only five requests for exemptions were granted: three allowing increases in fringe benefits, and two allowing increases in local
water rates.
ORGANIZATION
The Office of Exceptions and Exemptions had a staff of about
25 people, who reviewed all exemption requests and related correspondence received in the National Office. The professional staff
members were specialists on prices, wages, or rents on detail from
the Departments of Commerce, Labor, Agriculture, Housing and
Urban Development, and other Federal agencies.
Exemption requests had to be submitted in writing to an OEP
Regional Office or the National Office (not to IRS or ASCS offices).
An applicant was required to identify his organization, state how
the freeze was believed to be grossly inequitable, and specify the
relief sought. This had to be done in considerable detail, often
with supporting affidavits.10 Regional Directors were told to discourage exemption requests because of the short duration of the
freeze. Applicants were informed, however, of their legal right
to pursue this administrative remedy and were assisted in filing
the exemption requests if they chose to do so. The normal procedure was to file a request at a Regional Office; but those that
were sent to the OEP National Office or to CLC were handled in
Washington in order to provide the quickest possible response.
Each Regional Office had a small staff division for processing
exemption requests. The initial analysis of cases was done by the
specialists on prices, wages, etc., who had been drawn from various
Federal agencies to make up the Regional Office freeze staff. Some
cases involving small businesses were also evaluated by the local
office of the Small Business Administration.
In the first two weeks of the freeze all requests were forwarded
to OEP headquarters for a decision. On September 3, Regional
Directors received authority to deny, but not grant, exemptions in
10
"Provisional Guidance on Exceptions and Exemptions," OEP Message 18, August
18, 1971; see OEP Press Release 395, August 20, 1971.
99
EXEMPTIONS
cases where a clear precedent had been established; after that they
forwarded only novel or complex cases to Washington.11 The delegation of denial authority for use in instances where there were
clear precedents provided faster settlement of cases and reduced
the load of decision making in Washington. All denials by Regional Directors were reviewed at the National Office to assure
uniformity of policy application.12
Exemption requests received at OEP headquarters were analyzed
by Norred's staff, with assistance from the General Counsel on
legal questions. IRS was asked to investigate 70 exemption cases,
and all but 14 of the investigations were completed before November 13. Because of the time required for these investigations,
however, most of the complex exemption cases did not come up
for a decision until the latter half of the freeze.
The results of these investigations and studies were presented,
along with staff recommendations, to the OEP Director. The Director sought the advice of the Executive Policy Committee on the
more difficult cases and took up with CLC those involving significant policy decisions. Early in the freeze period he selected several
particularly persuasive applications and discussed them with the
Committee and the Council in order to determine more precisely
what the policy on exemptions should be. Throughout the freeze
he consulted with EPC and CLC on unusual exemption requests
before exercising his authority to grant or deny them.
Requests for reconsideration of a decision, sometimes accompanied by additional information, were submitted through the
same channels as the original requests. As stated earlier, OEP
headquarters reviewed all denials, but there was no provision for
administrative appeal of decisions to higher levels of authority.
Those who felt they had been unjustly dealt with had available
the recourse of taking CLC or OEP to court to force the reversal of
a decision.
OEP publicly announced the first 14 denials made by the National Office in generic terms, such as, "A bicycle manufacturer
was denied a price exemption.'' At the suggestion of the Executive
Policy Committee, however, the names of persons and companies
were added to the denial announcements in the belief that this
would increase the public impact. This policy was followed from
September 2 to October 9.
11
OEP Messages Bravo 125, August 31, 1971, and Alfa 43, September 3, 1971.
As will be indicated below, two exemptions that had been denied by Regional
Directors were later granted by the OEP Director; both authorized increases in
municipal water rates.
12
100
EXEMPTIONS
In early October complaints began to come to OEP that it was
unfair to announce the names of those denied exemptions. Those
who had violated the freeze, knowingly or not, were allowed to
discontinue the illegal practice without any public announcement.
Those who were denied exemptions felt they had even more right
to anonymity, since the pursuit of a legal remedy should not be
penalized by unfavorable publicity. On October 9 EPC agreed that
exemption denials should thenceforth be given to the press only
as statistics, without names or case descriptions.13
THE STATISTICAL PICTURE
Despite the crisis atmosphere that characterized the freeze period,
OEP sought to keep accurate records and to compile statistical reports as an aid to better management and evaluation. While the
figures on exemption requests may not be absolutely accurate, they
do provide a picture of the task that confronted the staff and give
some idea of the impact of the freeze on the economy.
The number of items of correspondence on exceptions and exemptions received during the freeze was 5558. Of these, 4532 were
received at the Regional Offices and 1026 were received directly
at the National Office. In addition to those received directly, the
National Office received 1231 pieces of correspondence from Regional Offices, so the total received in the National Office was
2257. It should be noted that these figures give the number of
items of correspondence, not of actual exemption requests.
Table 4 gives a breakdown of the ways in which this correspondence was handled. As indicated in the table, many who
applied for an exemption did not actually need one, because the
desired action was not in violation of freeze regulations. Even
when a request was denied, the petitioner was sometimes advised
to explore means of meeting his needs within existing regulations,
and this was sometimes possible. Some applications were rejected
because they came from trade associations or other organizations
not eligible to file for exemptions. (Petitions were accepted only
from individuals or organizations actually affected by the freeze.)
13
EPC Notes, October 9, 1971.
101
EXEMPTIONS
TABLE 4.—Correspondence on Exception/Exemption
No exemption needed
Not eligible to file
Request withdrawn
More information requested
Requests denied
Exemptions granted
Congressional referrals answered
Cases reconsidered and denied
Under investigation by IRS on Nov. 13
,
Requests
Regional
Offices
National
Office
309
89
209
242
2365
162
Totals
23
112
865
5
157
234
14
471
89
232
354
3230
5
157
234
14
Total actions taken
Forwarded to National Office
Additional correspondence received
3214
1231
87
1572
4786
685
772
Total correspondence received
4532
2257
5558
Note: The first figure in the second column (162) includes all National Office
cases in which no exemption was needed or the applicant was not eligible to file for
an exemption. "Additional correspondence received" includes duplicate correspondence on some cases plus correspondence received in the last few days of the freeze
period and forwarded to IRS, the Pay Board, or the Price Commission. The figure
at the bottom of the right hand column (5558) was obtained by adding vertically
in the right hand column, not by adding horizontally.
Some applicants withdrew their requests after discussing the matter
with an IRS or OEP representative and finding that they had
weak grounds for an exemption. Some gave the impression that
they wanted only to be "talked into" abiding by the freeze, and
when this was done they withdrew their requests. Some submitted
applications that were incomplete or obscure and were asked to
supply more information.
A total of 3230 requests for exemptions were denied, and 73
percent of the denials were made by the Regional Directors. These
were cases where a clear policy had been established at the national
level and generally involved relatively slight hardships. Some were
essentially complaints about basic policies—the situations where a
wage or price increase had been announced before the freeze but
could not be put into effect, or where a rate increase had been
authorized by a regulatory agency but the effective date fell within
the freeze period. Some requests appeared to have been made for
the record, with no real expectation of approval. Some employers,
for instance, requested authorization for wage increases simply to
satisfy the employees or the union that all avenues had been explored. As noted earlier, Regional Directors referred the more
intricate cases and those involving new policy decisions to the
102
EXEMPTIONS
National Office. The 1231 cases that were forwarded constituted 27
percent of the correspondence received in the Regional Offices.
Many of the 157 congressional referrals in Table 4 were equivalent to denials. A constituent would write his Congressman for
help in obtaining an exemption, and the Congressman would
refer the letter to OEP. OEP usually asked the Congressman to
inform his constituent that he could file a formal request if he
wished, but that it would probably result in a denial. The 14 cases
still under investigation by IRS on November 13, plus 19 others
received shortly before that date, were transferred to IRS for
processing as part of Phase II. In addition (not shown in Table
4), 45 requests pertaining to Phase II were forwarded to the Pay
Board and 112 to the Price Commission.
Correspondence on exceptions and exemptions received in Regional Offices fell into the following categories: 45 percent pertained to prices, 36 percent to wages, and 19 percent to rents.
Percentages based on correspondence received in the National
Office showed that 48 percent pertained to prices, 40 percent to
wages, and 12 percent to rents. There was, therefore, a significant
decrease in the proportion of rent cases considered at the national
level as compared to the regional level. Many rent cases were uncomplicated and thus were more likely to be resolved at the regional level. Another reason for the slight differences in percentage
figures is that large industries and unions were more likely to
apply directly to the National Office.
Some indication of the extent of the hardship experienced can
be obtained by comparing the number of exemption requests to
the number of businesses or persons that were potential applicants.
There were 11.6 million business establishments in the country,
for instance, but fewer than 2,500 applied for exemptions. There
were 23.6 million renter occupied housing units in the country,
but fewer than 1,000 requests for rent exemptions were received.
There was a civilian labor force of 78 million, but there were only
about 2,000 requests for wage exemptions.14
Table 5 shows the results of the National Office's review of
denials made by Regional Directors. OEP terminated this review
process on November 12 and forwarded all cases that had not been
reviewed to IRS, which channeled requests to the Pay Board or
the Price Commission.
"Some exemption requests, of course, covered several rental units or many
employees. Source of figures: U.S. Bureau of the Census: Statistical Abstract of the
U.S. for 1971 (Washington: Government Printing Office, 1971), pp. 210, 459, and 673.
103
EXEMPTIONS
TABLE 5.—National Office Review of Regional Denials of Exemption
Requests
Denials affirmed by OEP Director
Exemptions granted
No action necessary
Additional information or guidance requested
Cases not reviewed due to lack of time
(forwarded to IRS)
1077
2*
40
96
1150
Total denials made by Regional Directors
2365
•These two exemptions are not in addition to the five given in Table 4 but are
part of that total. The two given here, both pertaining to municipal water rates,
were denied by Regional Directors but later granted at the national level.
SIGNIFICANT CASES
Wages and Fringe Benefits
There were a few exceptions—policy decisions affecting classes
of individuals—that permitted increases in wages or fringe benefits.
One permitted wage increases for military personnel who were in
combat zones, missing in action, prisoners of war, or hospitalized as
war casualties. Construction workers covered by the Davis-Bacon
Act could receive increases in certain circumstances. Social Security
could be added as a fringe benefit. Some forms of personal income
were defined as "not wages or salaries" and therefore not covered
by the freeze; these included child support, alimony, welfare payments, and workmen's compensation. Those who retired before or
during the freeze were allowed to receive increases in pension
benefits that had been planned before the freeze. Bona fide promotions were permitted; and apprentices, learners, and persons hired
on probation who were advanced at normal times to increased
duties or levels of responsibility were allowed to receive the higher
pay commensurate with their new positions.15
Forty percent of the requests for exemptions received at the
National Office were for increases in wages or in fringe benefits.
All requests for wage increases were denied. Most increases in the
employer contribution to fringe benefits were also denied, but
three exemptions were granted permitting implementation of
group health-insurance plans (all granted on September 29). Two
of the plans also included optional life insurance. The exemptions
15
Guidance on wages and salaries, including all excepted categories, is in Sections
502, 503, and 504 of OEP's Economic Stabilization Circulars (ESC) ; see also ESC
101, Sec. 410.
104
EXEMPTIONS
allowed employees of the State of Texas, teachers in Missouri, and
teachers in Columbia County, Florida, to be covered by new groupinsurance policies that took effect during the freeze.16 Employees
had been enrolled in these new plans prior to the freeze, but the
effective date of the policies fell within the freeze period. In Texas
and Missouri, old group policies had been terminated in anticipation of the new policies, leaving many employees with no health
insurance or else no life insurance. Some employees were unable
to obtain insurance except as part of a group.
The only possible alternative to exemptions was to have the
employees pay the employer contribution themselves. This would
have been difficult administratively, since the plans required 100
percent participation. The relative poverty of many employees was
also taken into consideration. In one department of the Texas
State government, 41 percent of the employees were earning less
than $4,000 a year, which meant that the monthly cost of about
$12.50 per person could have been a hardship. It was therefore
judged that refusing to allow the group plans to go into effect
would be a gross inequity and that an exemption should be
granted.17
At the same time that these exemptions were granted, the volunteer firemen in the State of Nebraska were told they could inaugurate new group life insurance policies. A recent Nebraska law had
required all municipalities and rural fire boards to buy $2,000
worth of life insurance for each volunteer fireman, but OEP had
ruled against this on September 1 on the grounds that it was an
increase in fringe benefits. When the matter came up again, however, as an exemption request, it was decided that group life insurance for volunteer firemen should be considered a gratuity rather
than a wage or fringe benefit, and in that case it was not covered
by the freeze.18
One group insurance case illustrated the way government regulations can complicate people's lives in unexpected ways. The Woodmen Accident and Life Company of Lincoln, Nebraska, had
contracted to provide group health and life insurance for the 12
employees of a manufacturing firm, beginning September 1. This
firm canceled a Blue Cross/Blue Shield group health policy (which
16
The exemption for Texas was granted to the Texas Public Employees Association. Two other exemptions were sought on behalf of Texas State employees, but
both were denied. One was sought by the State for all its employees, the other by
the Texas Public Employees Association for 6,600 low income employees. See OEP
Press Release 455, September 29, 1971.
"EPC Notes, September 16, 25, 27, and 29, 1971.
38
EPC Notes, September 21, 22, 23, 1971.
105
EXEMPTIONS
had no life insurance provision) in anticipation of the new policy.
The intervention of the freeze prevented the new policy from
taking effect, and the situation was gravely complicated on September 12 by the accidental death of one employee. The question of
whether he had or had not been covered by the life insurance
policy was of critical importance to his widow and five children,
who were eligible for $10,000 in death benefits from the new
policy.19
Although a request for an exemption was denied, it was later
discovered that there was no need for an exemption because the
premiums for the new policy were lower than for the old one,
which meant there was technically no increase in fringe benefits.20
By the time this was discovered, however, the firm had dropped
the Woodmen's policy and gone back to the earlier health insurance policy. The matter was finally resolved when the Pay Board
allowed all fringe benefits of this type to be applied retroactively,21
which made it possible for the family of the deceased employee to
receive the death benefits.
The Texas Public Employees Association and the Governor of
South Carolina both requested exemptions for wage increases for
low-paid State employees. The Texas group used as a criterion the
Federally established poverty level, and South Carolina used $6,000
a year. These increases were disallowed on the grounds that failure
to obtain them did not constitute a gross inequity. The question
of how persons of low income were affected by the freeze was
clarified on September 22 by the issuance of the following "Supplemental Information":
No formal exemptions are provided solely because of low income. However,
the following provisions do afford substantial relief to persons of low income:
(a) Wages are not frozen below minimum wage standards of general application;
(b) Wages are not frozen where increases are necessary to eliminate unlawful
discriminatory wage practices; (c) There is no freeze on welfare payments; and
(d) There is no freeze on increases in coverage or benefits under Social Security.22
The reference to minimum wages meant that employees actually
covered by minimum-wage laws could obtain wage increases up to
19
EPC Notes, November 12 and 24, 1971.
ESC 102, Sec. 504 (10).
Federal Register, December 7, 1971, p. 23219.
22
SPG 4.0852. The extension of the Economic Stabilization Act, signed on December 23, 1971, exempted from regulation the wages of "any individual whose earnings
are substandard or who is amongst the working poor." No definition of "the working
poor" was provided in the law, and CLC interpreted the exemption as applying to
those earning less than $1.90 an hour. After a Federal District Court ruled on July
14, 1972 that this was less than Congress intended, CLC raised the cutoff level to
$2.75 an hour. This decision, along with earlier exemptions, left free from wage
controls 56 percent of the Nation's 58 million nongovernment, nonfarm workers.
(See New York Times, July 25, 1972, p. 1).
20
21
106
EXEMPTIONS
the minimum wage. Discriminatory wage practices would be, for
instance, those based on age, sex, or race. If a State increased its
legal minimum wage during the freeze, wages could be raised to
comply with the law. However, an increase in minimum wages for
specific occupational groups, such as teachers, could not be put into
effect during the freeze.23
Government Service Charges
The fourth and fifth exemptions granted during the freeze
allowed increases in local water rates. They are discussed here in
the context of decisions on other government service charges.
At the time the freeze was imposed many American communities
were faced with the need to expand or improve their water and
sewer facilities, often because of new Federal or State requirements
for pollution abatement. In various places, water supplies failed to
meet recommended levels of purity, water pressure was insufficient
to control fires, or raw sewage was being dumped into lakes and
rivers, causing water problems for other cities. New construction
or other major new costs in water systems are usually covered by
bond sales; and State laws and the bond brokers require that, before bonds are sold, the water or sewer rates be set at a level
sufficient to repay the bonds. Rates are usually set by public
authority just high enough to cover such costs.
The question of increases in government service charges was
presented to OEP early in the freeze. The Los Angeles City Council had granted a 12 percent electricity rate increase on July 19 to
the Los Angeles Water and Power Department, a municipally
owned utility. The utility had sold $39 million in bonds on August
11 and planned to sell a like amount on October 21, all to be paid
for by the rate increase, which was to take effect on August 21.
However, the imposition of the freeze blocked the rate increase and
eliminated $6.3 million in increased revenue that would have come
in during the 90-day period. The utility applied for an exemption,
stating that 3,000 to 4,000 employees would have to be laid off if
the rate increase were not approved.24 OEP denied the request on
August 26, after consulting with CLC. Within the next few weeks
Los Angeles stopped construction on a new hydroelectric power
plant, but laid off only about 400 construction workers. An appeal
to OEP for a reconsideration was also denied.
23
24
ESC 102, Sec. 502 (5).
EPC Notes, August 24, 1971.
107
EXEMPTIONS
During the first two months of the freeze the National Office
denied exemptions to about a dozen other cities that wanted to
increase rates for water, sewer service, or trash collection. Portland,
Michigan, wanted to increase sewer rates from $7.67 to $25.34 per
quarter in order to build a new sewage treatment facility that had
been ordered by the State of Michigan. New Orleans proposed
increases in sewer and water rates and the wages of city employees.
The needs of these cities to abide by State laws on bonded indebtedness and to control water pollution were given careful consideration, but it was decided in all instances, as in the Los Angeles
case, that rate increases could be deferred until after the freeze. In
some cases applicants had not demonstrated that alternative
methods of financing would not suffice for the freeze period.
The basic policy in this area was that taxes were not frozen but
that charges made by a municipality for specific services, such as
water, sewer, or gas service, were subject to the freeze; they could
not be increased, nor could new charges be inaugurated.25 There
was some discussion of modifying this policy to allow more flexibility. The possibility of allowing cities to establish a sewer service
charge to cover costs formerly covered by taxes was rejected.26 A
later proposal to except from the freeze all municipal water and
sewer rates was also rejected.27
On October 13, however, CLC approved the decision that put
Cresco, Iowa "on the map." Cresco was authorized to increase
water and sewer rates, because it was already in default on payments for construction of a sewage disposal plant and had no
alternative way to raise money. Its case was similar to previous
ones except for the extremity of financial distress, which was considered equivalent to imminent bankruptcy.28 A similar exemption
for water rates was granted to West Daviess County Water District,
Owensboro, Kentucky, on November 4. Without the increase the
District would not have been able to meet bond payments due in
March 1972, and might have been forced into receivership.29
Both of these water-rate exemptions had originally been denied
by OEP Regional Offices, but the cases were reviewed and the
exemptions granted at the national level. The proposal to grant a
blanket exception for water and sewer rates was discussed again on
October 21 but was deferred to the Price Commission, since the
25
See p. 92.
EPC Notes,
^EPC Notes,
28
EPC Notes,
Notes,
26
108
September 13, 1971; SPG 3.1509, issued September 14, 1971.
October 9 and 12, 1971.
October 12 and 13, 1971; OEP Press Release 470, October 13, 1971.
November 4, 1971; OEP Press Release 485, November 5, 1971.
EXEMPTIONS
rate increases would not take effect until after November 13. The
Farmers Home Administration reported at that time that it had
a backlog of 300 requests from small municipalities for loans for
water facilities but could not grant such loans until rate increases
sufficient to repay them were authorized.30
A North English, Iowa, request for a water-rate increase to pay
for drilling a new well presented a unique problem. The old well
casing had deteriorated to the point where the water contained
five times the recommended level of dissolved solids and large
amounts of sodium. Protracted use of such water can cause health
problems, particularly for persons on low-sodium diets. The yellowish color and bad odor of the water caused sales of beer and
soft drinks in the town to rise sharply.
To drill a new well the town had to increase water rates by 50
percent, and it requested an exemption for this increase. The OEP
Regional Office denied the request because OEP did not have
authority to grant an increase that would take effect after November 13; a second request, submitted at the national level, was
denied on November 13. To the great relief of the people in
North English, Phase II regulations left room for the rate increase,
and work on the new well was allowed to proceed.31 The case
illustrates a difficulty experienced by several other cities: that it was
impossible to obtain authorization during the freeze period for a
rate increase that would take effect after November 13, since OEP
could not grant it and the Price Commission was not yet operative.
Prices and Rents
The first policy decision on prices that could be called an exception was included in the original Executive order, which excepted
all "raw agricultural products" from the freeze.32 With the assistance of the Department of Agriculture, OEP produced a lengthy
list of foodstuffs to clarify what was "raw" and what was "processed." The category of raw products was stretched somewhat to
include semiprocessed foods like shelled nuts and honey that had
been strained from the comb and put into jars.33
OEP also classified fish products as raw agricultural products;
Notes, October 21, 1971.
The Price Commission authorized all regulated public utilities to raise their
rates providing the increase was approved by the local regulatory agency. See
Federal Register, December 16, 1971, Sec. 300 (16).
32
Executive Order 11615, August 15, 1971, Sec. I.e.
33
ESC 101, Sec. 409 (2).
31
109
EXEMPTIONS
these were excepted from the freeze "until they are shelled,
shucked, skinned, or scaled." 34 Some problems arose in determining precisely when fish becomes a processed product, since some
modification of raw fish normally occurs aboard the fishing vessels.
Processors of foodstuffs \tfere inevitably caught in a squeeze between the unregulated prices of raw foods and the regulated prices
of their products. Packing companies in Texas that process yearling
beef presented an urgent exemption request in October, claiming
that a 2 cents a pound increase in yearlings on the hoof had wiped
out their \i/z cents a pound margin. They stated that 26 packing
companies were heading for bankruptcy and massive layoffs of
personnel. This request was referred to the Price Commission.35
An expansion of the exceptions list came on August 20 when
OEP listed as excepted categories: raw agricultural products, school
tuition, stocks and bonds, and exports; a few days later tuition was
removed from this list.36 The tuition question was later clarified
by the stipulation that increases that were announced and on which
deposits had been made before the freeze would be allowed to
stand. School room and board charges were handled according to
the same norms.37
The policy of "holding the line" was firmly maintained with
respect to individual price exemptions. Some firms did lose money
because of the freeze, but their resources were generally sufficient
to absorb these losses for the brief period of 90 days. When they
were not, and bankruptcy appeared to be a real possibility, the case
was usually presented to CLC for guidance.
CLC policy required that firms claiming imminent bankruptcy
should first utilize all other means of relief, leaving an exemption
from the freeze as a last resort. CLC took the position that, if
imminent bankruptcy were accepted as sufficient reason for an
exemption, the exemptions would become a mechanism for propping up inefficient firms that were on the verge of failure before
the freeze. This view was embodied in a statement accepted by the
Executive Policy Committee on September 2:
Impending bankruptcy per se should not be a justification for exemption. It
may, however, be accepted as one criterion in considering requests for exemptions.
The burden of proof lies with the petitioner in demonstrating the validity of
34
ESC 101, Sec. 409 (4).
^EPC Notes, October 21, 1971. The Price Commission allowed purchasers of
raw agricultural products to pass on price increases provided they did not increase
profit margins.
38
OEP Economic Stabilization Regulation 1, August 20, 1971, Section 4.b; Amendment omitting tuition August 23, 1971.
37
ESC 102, Sec. 403 (5); see p. 84.
110
EXEMPTIONS
his difficulties. Specifically, he must demonstrate that all the alternatives to
exemption (reducing costs, improving efficiencies, etc.) open to him have been
exhausted.38
Besides exhausting all other means of relief, the petitioner had to
show that the bankruptcy was due to the freeze rather than to poor
management, that the firm would survive if an exemption was
granted, and that inflationary effects of the exemption would be
minor.39
The leading case on this issue was that of the Kentucky Transport Corporation, a trucking firm whose sole customer was the
A & P grocery chain. The firm had reduced its rates in February
and May 1971, with the understanding that they would be raised
again in early August, when a 30 percent wage increase and the
purchase of new equipment would add to costs. On August 6, the
trucker and grocery chain agreed to a rate increase, to take effect
August 22. A & P did not intend to pass its increased costs on to its
customers. When the rate increase was blocked by the freeze, the
order for new equipment was canceled; but even so the company
stated that it would soon be bankrupt without the rate increase.
The case was extensively investigated by IRS and OEP and was
analyzed by Labor and Commerce Department experts in Washington. The exemption was denied on October 6.40 Noting the
decision the next day, The Wall Street Journal quoted a CLC
analyst as saying the denial was necessary in order to avoid "a
stream of other requests" of a similar nature.41 In mid-October
OEP was informed that Kentucky Transport had avoided bankruptcy by obtaining a loan from A & P o n favorable terms.
The dilemma over whether to grant exemptions in cases of alleged imminent bankruptcy or severe financial loss troubled OEP
throughout the freeze. It seemed unjust, on the one hand, to deny
relief to those who were particularly disadvantaged by the timing
of the freeze announcement. On the other hand, if a policy of
granting exemptions in "hardship cases" had been adopted, the
stream of exemptions could well have undermined public support
for the freeze by giving the impression that it was not being enforced equitably. The dilemma was resolved in favor of holding
the line in all cases. After the Kentucky Transport request was
denied, OEP denied about a dozen others that included a claim of
Notes, September 23, 1971.
38
Ibid.
*°EPC Notes, September 1, 9, 14, 24, and October 13, 1971. OEP Press Release
466, October 7, 1971.
" Wall Street Journal, October 7, 1971, p. 1.
Ill
EXEMPTIONS
imminent bankruptcy, but whose circumstances were less urgent.42
The claims of severe hardship came from many parts of the
economy, but there was a concentration of cases in one segment—
the distributors and fabricators of steel. Most steel prices had increased about 7 percent in June and another 8 percent in early
August, and few users of steel had raised their prices to cover the
August increase before the freeze was announced on August 15.
Steel is generally the major cost item for distributors and fabricators of steel products (often over 50 percent of costs), and some
also had to cover recent wage increases. One pipe manufacturer
in Texas asked that either the users of steel be allowed to raise
their prices or that the steel makers be forced to roll theirs back.
The latter solution was impossible, since the steel price increase
antedated the freeze; but the case is a prime illustration of the
kind of squeeze that inevitably accompanies any price freeze. When
presented on September 27 with a list of 22 exemption requests
for steel forgers, foundries, finishing mills, and makers of steel
tanks, shelving, stampings, pipe, screws, and wire, the Executive
Policy Committee did not find any of the companies in such dire
straits as to warrant an exemption, and all were denied. Requests
from eight other steel users were denied within the following week.
A different kind of pressure was presented by an exemption
request from three bus companies in New York City. The companies, which provided most of the transportation for school
children in the city, threatened to stop running buses if the exemption was not granted, and this loss of service would have
produced chaotic results in the school system. There had been no
price increase for three years, and a new 3-year contract called for
prices to increase from $87 a day to $108 a day per bus. The
companies claimed this increase was needed to cover higher wages,
equipment costs, license fees, and increased obligations included
in the new contracts. The request was denied because the IRS
investigation determined that the companies would experience
only small losses during the freeze and could make these up during
the balance of the contract period.43
School lunch prices also presented unique problems, largely
because many States forbid deficit operation of lunch programs.
Since the cost of milk and other foods had increased since the
previous school year, about 25 school districts asked for exemptions
to increase prices on lunches or milk, and two States asked for
^Interview with C. A. Norred, Jr., November 18, 1971.
«EPC Notes, September 14, 17, and 22, 1971.
112
EXEMPTIONS
blanket exemptions for all their school districts. Proposed increases
ranged from 5 to 15 cents on lunches and from 1 to 5 cents for a
half-pint of milk. The Executive Policy Committee agreed to consider exemption requests when programs were operating at a deficit
and could not legally do so, additional funds were not available,
all other remedies had been exhausted, and the program would
probably terminate in the absence of an exemption. No exemptions
for school lunches were granted, however.44
The West Coast dock strike, which began July 1, 1971, necessitated a shift to air freight for food and other essential items
shipped to Hawaii. The State of Hawaii also chartered two ships
to bring goods from Vancouver, B.C., Canada, a move which increased shipping costs between 35 and 40 percent. (Goods were
moved by surface from western States in the U.S. to Vancouver.)
The Governor of Hawaii requested exemptions to allow the higher
air freight and shipping costs to be added to goods sold in Hawaii,
claiming that this was the only way to assure that essential goods
would be available. The problem persisted even after the longshoremen returned to work early in October, since the added costs
had already been incurred. No exemption was granted in this case,
however.
As November 13 approached, the conviction grew that most
pending cases could best be handled by deferring relief to Phase
II. The Central Railroad of New Jersey was such a case. The firm
had been in bankruptcy since March 1967, and its operations were
closely regulated by Federal and State laws. A special agreement
with the U.S. Department of Transportation stipulated that a 20
percent fare increase be effected as part of a program that was
intended to show the railroad could be self-sustaining. This increase was approved by the State of New Jersey on August 4, 1971,
but was delayed by the freeze until after November 13.
The Yellow Cab Company of Philadelphia also had a serious
problem concerning a rate increase. The Pennsylvania Public
Utility Commission approved a 10 cent per mile rate increase on
September 10, and the company claimed it would have to cease
operations at the end of September if the increase was not effected
by then.45 A cessation of operations would have thrown the company's 4,000 employees out of work and eliminated 90 percent of
44
EPC
45
Notes, September 28, 1971; Cf. also October 20 and 28, 1971.
The claim was that the company's liquid assets would at that time drop below
the amount required for it to remain a self-insured motor carrier of passengers under
Pennsylvania law, and that it would have to cease operations at that point. See EPC
Notes, October 18, 1971.
113
474-893 O - 72 - 9
EXEMPTIONS
Philadelphia's cab service. The denial of the exemption on October 18, however, did not result in any cessation of service.
REA Express presented an urgent request for rate increases for
freight moving into or out of New York City, claiming heavy
financial losses because of increased costs in the New York area.
OEP refused to act on this until the appropriate Federal regulatory
agencies had approved the increases, and Phase I ended before this
occurred.46
A number of small businesses made claims of imminent bankruptcy, but it was often difficult to perceive the exact relationship
between the bankruptcy and the freeze. A small furniture company
admitted that its losses were due to poor management, but it had
recently fired the president who had set prices too low to cover
costs. The company stated it would have to make price increases
ranging up to 12 percent in order to avoid bankruptcy. A nonprofit
environmental magazine was losing over $10,000 a month and
wanted to increase subscription prices. A purchaser of old newspapers found he could not attract a sufficient volume of papers at
the prices he was paying and said he would have to pay more or
go out of business. A home for maladjusted boys and one for the
aged said they would have to close unless they could increase rates.
These requests were all deferred until Phase II.
As noted earlier, only 12 percent of the exemption requests received at the National Office related to rents, and very few of these
were presented to CLC. Many came from landlords of fairly low
income who rented out a house or a few apartments and said they
were losing money on them; but the amount of money that would
be lost over the 90 days was fairly small. There were also requests
from large apartment complexes, but there were no cases in which
an exemption was granted.
TRANSITION
President Nixon outlined his plans for Phase II in an address to
the Nation on October 7 and in a subsequent Executive order
which established the Pay Board and the Price Commission. These
actions focused public attention on the postfreeze period and generated a number of exemption requests related to that period. OEP
referred all requests that clearly pertained to Phase II to the Pay
Board, the Price Commission, or IRS.
"EPC Notes, November 8, 1971.
114
EXEMPTIONS
The major problem in the last two weeks of the freeze was determining who should handle the requests received during that
time, since only OEP had authority to grant exemptions through
November 13, and only CLC after that date. Norred proposed that,
in order to have time to clear out its backlog, OEP should stop
accepting requests on October 29, referring all others to IRS to
be processed. It was decided, however, that OEP should process all
requests through November 13. After November 8, Regional Directors either issued denials or transferred cases to the appropriate
IRS office. On November 12 the OEP Regional Offices transferred
all case files to local IRS offices, and the OEP National Office
transferred all of its exemptions files to the IRS National Office.
CONCLUSIONS
The record of exemption requests received and of actions on
them tells us something about the way the freeze affected the
economy. The number of requests received was small in relation
to the potential applicants, indicating that businessmen were generally accepting the restrictions imposed by the freeze. The tone
of most applications and of petitioners' conversations with OEP
was one of acceptance and understanding, even when petitions
were being denied.47 This general public acceptance made it possible to adhere to the firm policy on exemptions, which was considered essential to the success of the freeze.
Public acceptance seemed to stem primarily from the general
desire to conquer inflation. The average citizen was willing to
bear a temporary inequity if he saw it as a means of slowing inflation, since this would provide everyone with long range gains in
real purchasing power. There was some resistance, however, to the
policy of allowing so few exemptions. Denials that generated the
most criticism were those affecting wage increases, group insurance
plans, school lunch programs, water or sewage facilities, and small
businesses.48
Many small businessmen complained that they were treated too
harshly. It was argued that large corporations could absorb losses
for 90 days and make them up later, but losses in the same period
by a small, one-owner business could be disastrous. Businesses were
47
C. A. Norred, Jr., Memorandum for the Record: Post Action Critique of the
Freeze and Exemptions Processing, November 10, 1971.
48
See After-Action Reports from Regional Directors to OEP Historian, Regions
1, 4, 6, 8, 10.
115
EXEMPTIONS
also affected differently according to the method of merchandising
used. Some use inflated "list prices" and offer large discounts and
specials, which could easily be discontinued during the freeze,
whereas in other businesses the list price is the normal selling
price and may represent only a small markup.
The Administration's recognition of these inequities was reflected in the statement released as background for the President's
speech announcing plans for Phase II:
If a program is to be durable, it must appeal to the American people as
basically fair. Arbitrariness and inequity will be tolerated briefly for an important
purpose, as it is being tolerated during the freeze. But this will not last for long.
Therefore, more concern for fairness is required, even though perfect fairness is
difficult to attain.49
Solutions to most of these inequities were found early in Phase
II, when moderate increases in prices, wages, and rents were allowed and some segments of the economy were entirely decontrolled. Whether more could have been done to ease the burdens
during the freeze itself is an open question. Most of OEP's Regional Directors felt that more exemptions should have been
granted. They were the ones who held the "front line" positions,
dealing directly with merchants, landlords, school superintendents,
wage earners, etc., and were therefore perhaps more impressed
with the need for relief than with the need to maintain a national
strategy. Other suggestions made by Regional Directors in AfterAction Reports were: allowing Regional Directors to grant exemptions in some cases of a local nature and involving small sums, thus
avoiding the fanfare of national publicity; having more detailed
policies and procedures planned in advance of need; providing
earlier relief from the inequities of the freeze; and making the
transition from freeze to postfreeze periods a gradual one.
49
Background Paper on Post-Freeze Economic Stabilization Program, The White
House, October 7, 1971.
116
VI
Compliance and Enforcement
THE GOAL: VOLUNTARY COMPLIANCE
An essential ingredient of the New Economic Policy was the use
of emphatic means to slow inflation. The President felt the situation called for more than an incomes policy that would depend
entirely on voluntary support, so he imposed a wage-price freeze
that was backed by legal sanctions. At the same time, he sought to
avoid the establishment of a large enforcement staff by appealing
for voluntary support of the freeze.
The vast majority of the American people, the President felt,
would support the freeze and comply with it voluntarily, thus
making an elaborate enforcement mechanism unnecessary. In his
August 15 address, he stated:
. . . while the wage-price freeze will be backed by government sanctions if
necessary, it will not be accompanied by the establishment of a huge pricecontrol bureaucracy. I am relying on the voluntary cooperation of all Americansworkers, employers, consumers—to make this freeze work.1
Compliance with the freeze was voluntary in the sense that it
was willingly given, not in the sense that it would have been forthcoming in the absence of any law. Most laws in a well run society
enjoy widespread public support and are therefore complied with
willingly. Penalties for infractions are intended for the few who
do not comply willingly. By applying the sanctions provided by
law, the government eliminates pockets of noncompliance and
convinces the members of the law-abiding majority that the sacrifices they are making are imposed impartially on all.
The freeze was not much different from other legal obligations,
therefore, in terms of the degree of voluntary compliance expected.
It was unique in that it imposed unfamiliar obligations with no
advance warning. This is why it was essential to launch a vigorous
1
"The Challenge of Peace," Address by President Richard Nixon, August 15, 1971.
117
COMPLIANCE
public education effort using the press, TV, and speeches to groups
of citizens. This educational effort sought to clarify the obligations
imposed and convince the public that curbing inflation was a major
national priority and that the means being employed would achieve
that goal. This effort to educate and convince was complemented
by well publicized actions to ferret out violators, investigate complaints, and enforce legal sanctions when voluntary compliance was
not forthcoming.
For the freeze to succeed it had to have the support of businessmen, union leaders, and landlords—the major decision makers in
the Nation's economic structure—as well as of the general public.
Both the general public and the economic decision makers supported the freeze, but some complaints were heard from the latter
group. While all desired a stable economy, not all agreed that a
freeze was the best way to achieve it. Particular regulations or
interpretations were criticized on the grounds that they placed the
burdens more heavily on some economic groups than on others.
These reservations might not have been expressed in a major war
or crisis; but in a "business as usual" atmosphere the average
American does not expect to be asked to make sacrifices beyond
the level of minimal inconvenience. From the general public, on
the other hand, there was little tolerance for violators. During the
90-day freeze, public opinion was strongly on the side of compliance
by all.
AUTHORITY AND PROCEDURES
OEP's mandate to enforce the freeze included the authority to
require businesses to keep adequate records and to request the
Justice Department to take violators to court.2 OEP later delegated
to IRS the authority to investigate all complaints and to monitor
compliance by making spot checks of business establishments.3 IRS
District and Subdistrict offices were the normal places for filing
complaints, but they were also accepted at ASCS offices and forwarded to IRS. IRS agents performed all the investigations related
to complaints.
When IRS investigators determined that there was a violation,
they tried to obtain immediate compliance and were able to do so
2
CLC Order No. 1, August 17, 1971.
OEP Economic Stabilization Order 1, August 19, 1971; Msg 29, August 29, 1971;
Ltr, Lincoln to John B. Connally, Secretary of the Treasury, August 25, 1971; Msg
Alfa 43, September 3, 1971.
3
118
COMPLIANCE
in 98.6 percent of such cases.4 They normally settled the simple
complaints by phoning the alleged violator to obtain his side of the
story and, if there was a violation, asking him to comply. In these
cases the violator was asked to submit a signed statement of his
intention to comply. Where some difficulty was encountered either
in obtaining the facts or in gaining compliance, a visit to the site
was made.
Investigators gave special attention to what were called "major
complaints"—those expected to have substantial impact either
economically or in terms of publicity. Examples of the latter were
complaints against celebrities, public officials, and governmental
entities; multiple complaints against the same party; and complaints that had been made public through the mass media. Those
that might have a major economic impact included complaints
against chain stores or national organizations, rent cases involving
a large number of tenants, and wage cases involving a large number of employees. These "major complaints" were also the most
likely to be given a follow-up check to make sure an agreement to
comply was actually carried out.
IRS agents also conducted spot checks on businesses they visited
in the normal course of their duties. These spot checks were begun
early in the freeze period, and in mid-September were put on a
more formal basis with a carefully designed sampling system and
reporting requirement.5 Agents checked wage agreements, leases,
prices, and the adequacy of ceiling price records. When a violation
was discovered, the proprietor was asked to correct it. If he did so,
no further action was taken. If he did not comply, the violation was
recorded in the IRS District Office and processed thereafter in the
same manner as a citizen's complaint.
IRS offices forwarded to an OEP Regional Office those cases they
could not resolve. They normally included in the file affidavits from
complainants and similar material that would be required for
litigation. The 214 such cases received by OEP Regional Offices
were designated Potential Court Cases (PCC's), but only a small
percentage of these actually reached the courts. The Regional
Director and the Assistant U.S. Attorney assigned by the Justice
Department collaborated on processing compliance cases. They
were able to obtain compliance in some cases and closed others by
a determination of "no violation." Unresolved cases were reviewed
for adequacy of documentation and then forwarded to the Na4
Based on figures in Table 6, below.
Msg Bravo 201, September 21, 1971, giving the text of a message from the
Deputy Commissioner of IRS to all Regional Commissioners.
5
119
COMPLIANCE
tional Office. At this point the Regional Director sent the violator
a "last chance" telegram asking for a reply within 24 hours and
indicating that the Government might take "further action" if he
did not comply.
The 73 cases forwarded to the National Office were designated
Recommended Court Cases (RCC's). Compliance activities in the
National Office were centered in the office of the General Counsel,
Mr. Elmer F. Bennett, who established a Compliance Branch to
evaluate and process compliance cases. This.Branch was headed for
two months by Mr. Raymond Snead and for the final month by Mr.
Charles A. Gibb. Snead was a former OEP employee detailed from
the Treasury Department, and Gibb was detailed from IRS. OEP's
liaison with the Justice Department was greatly assisted by having
one of the Department's own attorneys, Mr. Charles R. McConachie, present through most of the freeze to help review cases
and assure the adequacy of evidence. Constant liaison was maintained with Assistant Attorney General L. Patrick Gray III and
with the General Counsel for CLC.6
A further effort was made at the national level to close cases by
obtaining compliance. "Jawboning" was in fact a major component
of the compliance effort; it was successfully practiced by IRS
officials, by OEP's Regional and National Offices, and by Justice
Department attorneys. The National Office also closed some cases
by a determination of "no violation" after fully reconsidering the
legal evidence. Changes in policy or in its interpretation resulted
in the closing of some cases.
Only those cases that appeared suitable for litigation were forwarded to the Justice Department. Decisions as to whether litigation was warranted were made at periodic meetings attended by
OEP Director Lincoln, Assistant Attorney General Gray, and the
Executive Director of CLC, Mr. Arnold R. Weber. Lincoln and
Weber sought to bring violators to court as quickly as possible, in
order to maintain a vigorous pace of enforcement. The Justice
Department, on the other hand, was understandably inclined to
move more deliberately and emphasized the need for strong evidence before taking cases into court. All cooperated in the effort
to get strong cases quickly, and the record (see Table 8) indicates
a reasonably successful achievement of this goal.
A means of assuring compliance that received little publicity
6
The position of CLC General Counsel was held successively by Mr. Arnold
Lewis and Mr. William E. Nelson. At the beginning of Phase II, Nelson became
chief of the Economic Stabilization Section of the Civil Division in the Department
of Justice.
120
COMPLIANCE
was use of the Federal Government's purchasing power. The Federal Regulations and Purchasing Review Board, headed by Mr.
Caspar Weinberger, declared on August 20 that in placing contracts for goods and services Government officials "should consider,
as a decisive factor, whether contractors are in compliance with
the freeze." 7 The Department of Defense ordered its contracting
officers to carry out this directive and to report any suspected
violations of the freeze.8
THE RECORD OF COMPLIANCE
Compliance with the freeze was generally high. Most people were
upset by continually rising prices and seemed ready to support any
program that promised to halt inflation. While it is true that the
public was more interested in stopping price increases than pay
increases, there was still a general willingness to go along with the
program in hope that it would bring some improvement.
The most objective measure of general compliance was the IRS
spot checks of businesses's all over the country. Formal, systematic
checks were begun in mid-September and covered a total of 85,444
business establishments during the remainder of the 90-day period.
IRS found that 91.8 percent of those visited were in compliance,
and an additional 4.2 percent agreed to comply when told they
were violating the freeze. The remaining 4 percent did not comply
immediately; complaints were filed at IRS offices and were then
processed along with complaints from the general public. Many of
these violators did comply when a little more pressure was applied.9
If it is assumed that these percentages are statistically valid for
business establishments in general, this would mean that noncompliance, whether deliberate or inadvertent, was limited to
about 8 percent of all business establishments. Even this figure
must be qualified, as it includes instances where one or two items
in a market were overpriced, out of perhaps 20 or 30 checked.
Analysis of the complaints received by IRS also attests to widespread support for the freeze. Of the complaints processed during
the freeze, 62 percent resulted in a finding of "no violation"; 37
7
8
Federal Controls (Washington: Bureau of National Affairs), August 20, 1971.
Daily Report for Executives (Washington: Bureau of National Affairs), August
20, 91971.
Source: OEP Weekly Summary Report to CLC Chairman, November 13, 1971.
See Chapter IX for evidence of compliance with the freeze based on the Consumer
Price Index and the Wholesale Price Index.
121
COMPLIANCE
percent did involve violations, but the parties agreed to comply
as soon as the violation was brought to their attention. This left
less than one percent to which enforcement procedures had to be
applied. Table 6 shows the way IRS responded to all complaints
received during the freeze.
TABLE 6.—Disposition of Complaints by IRS
IRS
IRS
IRS
IRS
found no violation
obtained compliance
forwarded to OEP as PCC's
retained for Phase II processing
Total complaints received
24,547
14,701
214
6,925
(62.2%)
(37.3%)
( 0.5%)
46,387
Note: The percentages apply to the total processed in Phase I, which was 39,462.
The abbreviation PCC means Potential Court Case, which was explained above. The
6,925 complaints retained by IRS represent just over one normal week's flow of
complaints, which was about 5,000 during the latter weeks of the freeze. Source of
these figures is OEP Weekly Summary Report to CLC Chairman, November 13,
1971, and OEP General Counsel's list of PCC's, November 13, 1971.
The OEP actions listed in Table 7 include those taken at the
Regional Offices as well as at the National Office. The Table shows
the status of cases on the day the freeze ended and the status on
December 2. By that date OEP had disposed of the six cases it held
when the freeze ended: two by a finding of "no violation," two by
compliance, and two by referral to the Justice Department.
TABLE 7—OEP*s Disposition of Potential Court Cases
Nov. 13
No violation
Compliance obtained
Held by OEP
Cases returned to IRS
Forwarded to Justice Department
Total Potential Court Cases
Dec. 2
25
70
6
76
37
27
72
0
76
39
214
214
Source: OEP General Counsel's lists of PCC's, November 12 and 13, 1971, revised
on December 2 on basis of interview with John D. Simpson, Executive Assistant to
General Counsel. Some of the cases listed in the first two categories were resolved
after referral to the Justice Department; the total number of cases actually forwarded
to the Justice Department was therefore somewhat more than the 39 shown in the
table.
The cases designated "no violation" included some borderline
situations in which the evidence against the violator was so weak
that taking the case to court would not be worthwhile. The cases
returned to IRS required some further investigation or documentation and were subsequently resolved under the processes established
122
COMPLIANCE
for Phase II. From the 39 cases referred to it, the Justice Department filed eight suits involving only Phase I violations. Eleven
cases regarding tickets for sporting events were held in abeyance
because they hinged on pending suits, and 10 teacher salary cases
were dropped when the salary increases were granted.10
The Bureau of the Census tabulated data on the freeze. Its report
on complaints of violations showed that 75 percent pertained to
prices, 19 percent to rents, and 6 percent to wages. The reported
price violations were listed by business category, and the three
largest categories were: retail trade, 56 percent; services and repairs, 8 percent; and insurance, 7 percent. It should be noted that
these percentages are based on alleged violations and that 62 percent of those alleged proved to be unfounded. Individuals (as
opposed to businesses or organizations) made 78 percent of the
violation reports.11
ENFORCEMENT
Executive Order 11615 authorized civil suits for injunctions and
criminal suits with fines of up to $5,000 per violation.12 An injunction simply forces a particular violator to comply with the law,
whereas a fine has the added effect of punishment, one purpose of
which is to deter others from similar violations. All Government
suits brought to enforce the freeze were suits for injunctions. It
was felt they would be sufficient to ensure compliance, and they
were preferable in that they can be processed more quickly and
require less of a burden of proof than do criminal suits.
Reliance on injunctive suits fitted in with the strong emphasis
on voluntary compliance that characterized this program. It also
seemed more suitable than levying fines in many instances, because
new policies and regulations were issued every few days and the
public had a limited time in which to assess its obligations and
clarify the legal status of the many regulations and interpretations
that were issued. For the same reasons, those charged with enforc10
These cases are discussed in subsequent sections. The 10 remaining cases were
either incorporated into suits involving both Phase I and Phase II violations or
dropped due to lack of sufficient evidence. It is worth noting that Phase I violations
were not simply dropped because Phase I had ended; as late as March 7, 1972, the
Justice Department filed suit against Robert Dedoes of Kalamazoo, Michigan, for
a rent violation that occurred in Phase I. The suit was later expanded to include
a Phase II violation and was unresolved as of this writing.
11
Source: OEP Weekly Summary Report to CLC Chairman, November 13, 1971.
"Executive Order 11615, Sec. 7.
123
COMPLIANCE
ing the freeze felt that if they could obtain injunctions in several
cases they would thereby make it easier to obtain voluntary compliance from others in similar circumstances. Injunctions would
prove to the skeptical that the regulations were legally enforceable
and that the Government was serious about enforcing them.
The effort to bring several typical cases of noncompliance to a
head early in the freeze period was partially motivated by a desire
to establish the "credibility" of the freeze itself. Some consumer
groups and labor unions had fixed on the nonavailability of price
lists as evidence that prices were not effectively controlled while
wages had been rigidly frozen. The AFL-CIO established "watchdog" groups throughout the country to monitor price increases.13
A report appearing in the New York Times charged that 98 out
of 102 Manhattan markets checked by one union group were
violating the freeze because they did not have "price lists" available. Although this story was based on an erroneous interpretation
of the regulations, it and others like it had considerable negative
impact.14 The Administration's reports that the freeze was working
and voluntary compliance was at a high level were sometimes
greeted with the suspicion that the data actually indicated "a lack
of adequate monitoring and enforcement rather than patriotism
and selflessness." 15
Since opposition from newspapers, unions, and consumer groups
could have undermined public confidence in the effectiveness and
fairness of the freeze, an effort was launched in mid-September to
step up enforcement efforts. IRS put new emphasis on monitoring
prices, following up telephoned promises of compliance with onsite checks, and rapidly forwarding noncompliance cases to OEP.16
OEP speeded up its evaluation and processing of cases and forwarded to the Department of Justice several considered suitable
for litigation.17 Between September 23 and 30 the Justice Department filed five suits for injunctions. In a statement to the press on
September 26, Arnold Weber made it clear that these suits were
intended to show the Government's determination to enforce the
freeze: "Today's announcement . . . emphasizes our intention to
13
Wall Street Journal, October 15, 1971, p. 18.
"98 Markets Accused of Violating Price Freeze," New York Times, September
16, 1971. The failure to produce "price lists" was not a violation because the only
requirement in effect at that time was that "a record" of transactions during the
base period should be available.
™New York Times, September 17, 1971, p. 25.
16
Msg Bravo 201, September 21, 1971, giving the text of a message from the
Deputy Commissioner of IRS to all Regional Commissioners.
"Messages Bravo 180, September 15; Alfa 87, September 20; and Bravo 212,
September 27, 1971.
14
124
COMPLIANCE
be more forceful when necessary. The problem we have to solve—
economic stability—is a serious one and we are serious about it." 18
Although considerations of public impact and deterrent effect
did motivate this push for litigation, publicity value did not determine the selection of individual cases. Three cases were local
rent violations with a negligible impact on the national economy.
The other two suits ran the danger of a negative public reaction
because they attacked groups with considerable popular supportteachers and a football team. The cases were selected, in other
words, more because they were available at the time than because
they were considered ideal in terms of impact and deterrence.
The vigorous Government efforts to assure compliance did not
quiet all doubts about the efficacy of the price freeze. A series of
articles appearing on the front page of the New York Times, for
instance, asserted that a survey of 22 stores had revealed price
increases on 25 percent of the meat cuts covered by the survey
and price increases of 25 percent on some types of fish.19 When
IRS agents made a special check of meat prices in the same stores,
however, they found only two violations.20 In fact, the survey used
by the Times bore little relation to ceiling prices established by
the freeze and did not prove that any violations had occurred (as
the article on fish prices admitted). Nevertheless, these and similar
press accounts continued to belabor the theme that the price freeze
was ineffective.
Besides the suits mentioned previously, three additional suits
for injunctions were filed during the freeze. The eight suits with
the U.S. as plaintiff are listed in Table 8. There were also several
Phase II suits which included charges of Phase I violations; these
are not included in the table, as they belong more properly to the
history of Phase II.
In addition to the suits filed by the Government, there were
over 80 suits on Phase I matters in which the Government was the
defendant, filed an amicus curiae (friend of the court) brief, or
18
Washington Post, September 26, 1971.
New York Times, October 25 and 29, 1971, and November 1, 1971. The October
25 and November 1 articles are reprinted in Economic Stabilization
Legislation,
Hearings before the Senate Committee on Banking, Housing, and Urban Affairs,
92d Congress, 1st Sess. (Washington: Government Printing Office, 1971), pp. 334-339.
20
New York Times, November 5, 1971, p. 28.
19
125
COMPLIANCE
TABLE 8.—Phase I Suits Filed by the U.S. Government
Date
Filed
Sept. 23
Sept. 24
Sept. 27
Sept. 28
Sept. 30
Oct. 18
Nov. 2
Nov. 11
Category
Defendant
Jefferson Parish School Board
Dwight L. Lieb
Atlanta Falcons
Jack L. Joyce
Martin J. DeStefano
Huber Investment
Intone Corp
Okla. City School Board
Outcome
Lost
Won
(Pending)
Won
Won
Won
Won
Dropped
Teacher salaries
Rent
Ticket prices
Rent
Rent
Rent
Rent
Teacher salaries
simply took an interest because the suit involved the freeze. These
suits are listed by category in Table 9.
TABLE 9.-All Phase I Suits
Category
Rent
Wages
Teachers' salaries
Sporting events
Other price cases
TOTALS
U.S.
Plaintiff
U.S.
Defendant
Amjcus
Curiae
5
2
1
0
2
11
15
6
3
10
~8
37
lo
Private
Totals
f~
2
31
1
2
8
13
58
8
5
^7
^2
Sources: Memo, L. Patrick Gray III to Donald Rumsfeld, December 22, 1971, Subj:
Status Report, Legal Proceedings under Executive Orders 11615 and 11627; interview
with WilHam E. Nelson, April 21, 1972. Suits charging both Phase I and Phase II
violations are not included in this table.
There was strong public interest in the number of complaints
being received, the way they were being investigated, and the
actions taken against those who did not agree to comply. It was
not always easy to satisfy this public desire for knowledge. As
reported earlier in this chapter, 62 percent of the complaints were
without foundation, and most of those who were in violation
agreed to comply with little urging. The few "tough" cases remaining required thorough investigation and documentation before
they could be taken to court, and no information was released on
them until a suit was filed. The names of violators who complied
willingly were rarely released at all, as the Government did not
want to embarrass needlessly those who had violated the freeze
through ignorance or inadvertence. This policy of maintaining the
confidentiality of investigations also came in for some criticism
from consumer groups, but was firmly adhered to by OEP as the
most equitable solution to a difficult problem.
126
COMPLIANCE
Rent Cases
Rent violations constituted the preponderance of the Government's Phase I suits, accounting for five of the eight suits filed.
This came about because, in the limited time available, the rent
cases were the easiest to verify and document and because aggrieved
tenants were usually quite willing to appear as witnesses against
their landlords. The complexities that delayed many price and
wage cases were simply not present in the rent cases.
The first three rent suits were filed between September 24 and
30, and the Government had won all three by October 22. 21 One
landlord had made minor improvements to his apartments and
claimed his rent increases were permitted to cover the cost of
"capital improvements." The relevant regulation 22 required that
the cost of improvements be at least equal to three months' rent,
while in his case they equaled about half of one month's rent.
Another landlord had purchased his apartments in July and tried
to raise the rents on September 1, but was turned back. The
third case involved apartments near the University of Texas that
had lower rates for the summer months than for the school year.
In reverting to the winter rates at the end of August, the landlord
tacked on an extra $10.00 a month, but was required to give this
up.
The fourth rent suit was against a large real estate firm renting
over 1,000 units. The firm contended that the Government should
regulate rents the way it did prices, using the "10 percent transaction rule," 23 and had raised rents on about 37 houses to bring
them up to the level of similar units. A judgment in favor of the
Government was obtained on January 12, 1972.
Wages and Salaries
The Government's effort to prohibit pay increases that were
authorized by contracts signed before the freeze, but scheduled to
take effect during the freeze, was successful in the short run but
aroused considerable opposition among the affected groups. The
blunt opposition of organized labor and the hassle over teachers'
salaries had impacts that outlasted the freeze.
21
See Table 8 for details.
OEP Economic Stabilization Circular (ESC) 101, Sec. 602 (21).
23
The price of a commodity was held to that charged for at least 10 percent of
transactions during the base period, whereas the rent on each dwelling unit was
frozen 5eparately. See pp. 80-82, 91-92.
22
127
COMPLIANCE
The first opposition to the freeze on wages came from Governor
Preston Smith of Texas, who announced that, despite the freeze,
130,000 State employees would get pay increases authorized for
September 1 and Texas teachers would receive their automatic increases. There was a question, according to the Governor, of
"whether the President of the United States has the authority to
overrule our Texas laws." 24 His Attorney General ruled the pay
increases illegal, however, and a strong plea for compliance was
sent to the Governor by CLC Chairman Connally. The Texans
then deferred the pay increases and sought to have them authorized
by an exemption, but this request was denied. 25
Although this incident quickly blew over, it was a harbinger of
further problems. Opposition to the entire New Economic Policy
from the AFL-CIO and its President, Mr. George Meany, was
immediate and vociferous.26 Labor quickly concluded, however,
that it could do little to influence the administration of Phase I.
"We're not advocating defiance," Meany told a news conference.
"We're just not cooperating. If they can put it over without our
cooperation, I guess they will." 27 Labor's influence was concentrated on the Congress, which was preparing to extend the Economic Stabilization Act and to take action on other aspects of the
NEP. As will be seen later in this section, labor achieved some of
its goals by this means.
The most serious opposition to the wage freeze in Phase I came
from teachers. The National Education Association (NEA) issued
a statement denouncing the application of the freeze to teachers.
The American Federation of Teachers, an AFL-CIO union, took
the same position. They felt the freeze order was discriminatory
to teachers because it coincided with a new school year, the only
time most teachers get pay raises, and also because of the seasonal
nature of teachers' employment.28
The policies on teachers' pay are discussed in Chapter IV and
will not be repeated here. The confusion on the part of teachers,
the press, and the public was due largely to this chain of events:
OEP guidance on August 26 appeared to be quite liberal; the
NEA estimated that it would allow 80 percent of the teachers to
24
Quoted in New York Times, August 20, 1971, p. 1.
See pp. 104-107 and Denton, Texas Record-Chronicle, August 23, 1971.
* See pp. 144-145.
27
New York Times, August 20, 1971, p. 1.
28
New York Times, August 20, 1971. See also testimony of Donald E. Morrison,
President of NEA, October 5, 1971, in Economic Stabilization, Hearings before the
House Committee on Banking and Currency, 92d Congress, 1st Sess. (Washington:
Government Printing Office, 1971), pp. 173-198.
25
128
COMPLIANCE
get pay increases. Arnold Weber's press statement on September 3,
however, put a narrow interpretation on the guidance and was
followed by estimates that only 20 percent would get increases.
There was not, strictly speaking, any change in the regulations; but
there was a change in the rhetoric of Government spokesmen and
in the interpretations appearing in the press. Guidance issued on
September 16 clarified the meaning of the regulations, but it was
impossible then to overcome the teachers' feeling that the Government had altered its position and was discriminating against them.
In a suit filed September 24, the NEA accused the Government of
making "vague, inconsistent, and contradictory rulings, interpretations, and policy statements" and asked that CLC be prevented
from blocking scheduled teacher salary increases.29 Noncompliance
on teachers' salaries was widespread and enduring.
The Government brought suit against the School Board of
Jefferson Parish, Louisiana (on the west side of New Orleans) at
the end of September in an attempt to establish a legal precedent
for teacher pay compliance efforts. A pay increase of $400 a year
had been authorized, effective July 1. Teachers in Louisiana are
employed on a continuing employment arrangement; they do not
sign annual contracts. Many school employees, including some
teachers, were working on a 12-month basis and had thus begun
receiving the increased pay before the freeze. Most of the teachers,
however, began work on August 26 and received no pay during
the base period. They were, however, "employed" during the
period in that they could not be dismissed without cause, could
not seek other jobs, and could not draw unemployment insurance.
The suit thus pinpointed the question of whether a pay increase
authorized for all teachers in a system was "in effect" during the
base period for teachers who were hired but not actually drawing
PayOrleans Parish (largest in the New Orleans area) had originally
complied with the freeze on teachers' pay, but its decision was
challenged in a suit filed in a State court by the Orleans Educators'
Association. The Parish lost this suit on October 1 and proceeded
to grant the pay increase. The Federal Government then expanded
its suit against Jefferson Parish to include Orleans. A decision
against the Government was given in the combined suit on
October 8.
The Government had argued that only those teachers who had
29
NEA v. CLC et ah, filed September 24, 1971, in U.S. District Court, District of
Columbia.
129
474-893 O - 72 - 10
COMPLIANCE
actually worked during the base period were eligible for the pay
increases. But the court, noting that Economic Stabilization Regulation 1 allowed pay increases to remain in effect if they were
"paid or received or in effect during the base period/' said that
the salary increases in question were clearly "in effect" on July 1
and thus should remain in effect during the freeze. The court
admitted that some of OEP's Circulars narrowed the range of
allowable pay increases, but found these Circulars contradictory
and inconsistent. It concluded:
The Court takes notice that the Federal agencies responsible for this gargantuan task have been swamped with myriad requests for administrative
determinations. . . . Conflicting guidelines are perhaps inevitable because of the
immediacy and urgency of the administrative inquiries. Nevertheless, the Court
cannot elevate to the level of enforceable law the inconsistent and contradictory
directives provided by the various Circulars. Instead, the Court will adhere to
Regulation No. 1 as properly interpretive of the Executive Order.30
The Government saw this loss as a serious blow to its stabilization
efforts and appealed the decision. Efforts to obtain compliance were
pressed forward in other States, where laws and contract details
were different.
Several surveys were taken to ascertain the extent of noncompliance on teachers' salaries. An October 2 report showed apparent
noncompliance by six southern States and 50 additional school
districts.31 A more systematic survey at the end of October showed
there was suspicion of noncompliance in 1,761 school districts.
Almost all of these were concentrated in eight southern States plus
California, Iowa, and West Virginia. It was reported at the same
time that 364 districts had rolled back previous pay increases.32
Further investigation of the 11 States with major compliance
problems produced the following results: Regional Directors considered 584 districts in those States to be in violation and had
serious questions about more than 200 additional districts.33
The Government's second effort to resolve the teacher pay issue
in court came on November 11 with a suit against the Oklahoma
City School Board. Under Oklahoma's continuing contract law,
the teachers were bound by their contracts from July 1 onward.
30
Opinion in United States v. Jefferson Parish School Board, U.S. District Court,
E.D. Louisiana, October 8, 1971. Reprinted in Economic Controls: 90 Days: August
16-November 13, 1971 (Chicago: Commerce Clearing House, 1971), pp. 9886-9891.
31
Memo, Avery E. Kolb to Lincoln, October 2, 1971, Subj: Regional Directors'
Appraisal of School Salary Compliance Situation in Regions.
32
Memo, Kolb to Lincoln, October 29, 1971, Subj: Teachers' Pay Situation; Msg
Bravo 297, November 1, 1971. The eight southern States were Florida, Mississippi,
North Carolina, South Carolina, Tennessee, Kentucky, Arkansas, and Louisiana.
33
Memo, Kolb to Lincoln, November 2, 1971, Subj: Regional Updating Reports
on 11 States with Particular Problems in Teacher Pay Area.
130
COMPLIANCE
Employees on 11- and 12-month contracts were actually working
before August 15 and hence got raises, but those on 10-month
contracts were not scheduled to begin work until August 23. The
latter could not get the pay raise, according to the Government's
interpretation of its regulations; but the School Board interpreted
the regulations its own way and granted the increases.
OEP and IRS officials worked vigorously throughout the freeze
to obtain compliance on teachers' pay, and they were successful in
most cases. But there was still more noncompliance than in any
other segment of the economy, and the short duration of the freeze
did not allow time to settle many cases by court action.
The problem was resolved in Congress. After a week of hearings
on extension of the Economic Stabilization Act, the House Banking and Currency Committee voted on November 4 to include in
the extension of the Act the requirement that most wage increases
covered by contracts made before the freeze should be paid retroactively.34 The bill, also providing a 5.5 percent increase to Federal
civilian and military personnel, was signed into law on December
22. The Pay Board's consequent regulation was explained as
follows:
In general, retroactive payment of salaries and wages, including fringe
benefits, of no more than seven percent is permitted where increases were called
for in employment agreements, or practices that were agreed to or were in
effect before the economic freeze was imposed on August 15, 1971, but were
prevented from being paid because of the freeze.
Required to grant pay increases retroactively regardless of the amount of
increases are all employers who, before August 15, 1971, raised prices, increased
productivity, raised taxes, made appropriations, or otherwise raised funds to
cover pay hikes prevented by the freeze.35
This regulation rendered moot most pending litigation on wages
and salaries held up by the freeze, including the suit against the
Oklahoma City School Board. Table 9 above indicates that there
were 71 suits involving wages and salaries, and most of these were
still pending in court at the time of the Pay Board action.
Price Lists
The President's freeze order provided that "each person engaged
in the business of selling or providing commodities or services shall
84
New York Times, November 5, 1971, p. 1. Later Senate action on this provision
softened the wording slightly but left it substantially intact. See Congressional
Quarterly Almanac, 1971, Vol. 27, pp. 459-471.
35
Pay Board Press Release, January 13, 1972; the regulation appeared in the
Federal Register, January 27, 1972.
131
COMPLIANCE
maintain available for public inspection a record of highest prices
or rents charged for such or similar commodities or services during
the 30-day period ending August 14, 1971." 36 While this appeared
to be clear and precise, many questions quickly arose. For example,
were merchants required to post lists of prices or merely to have
record books available? Were merchants required to open confidential records to the public or only to Government inspectors?
Were chain stores required to have records available at each outlet
or only in a central office?
Merchants were reluctant to incur the considerable expense of
preparing and printing price lists. Consumer groups, on the other
hand, complained that they could not detect violations unless ceiling price information was readily available. The seller's obligations
remained unclear during the first part of the freeze, until clarifying
regulations were issued.
OEP moved in mid-September to tighten up the price list requirement. In reply to an inquiry from Mr. Ralph Nader, Director
of the Center for the Study of Responsive Law, Arnold Weber said
on September 16: "The retailer must maintain and have available
for public inspection a list of his ceiling prices. The consumer
can demand to see these ceiling price lists if he has a question." 37
This letter was the first official or quasi-official use of the term
"price lists" and became the basis for new guidance issued by OEP
on September 25 and October 4.38 The guidance provided that
sellers must have available at each place of sale "ceiling price lists"
from which they would supply information to the public in response to specific requests.
An alternative method of complying with the price list requirement was promulgated on October 14 and remained in force during
the rest of the freeze period and into Phase II. This method consisted of the seller's posting large signs directing purchasers to
Ceiling Price Information Request Forms, which had to be available in the store. The purchaser would indicate on the form the
specific item for which he wished to know the ceiling price, and
would receive an answer by mail within 48 hours.39
The guidance establishing the alternative method also set a dead36
Executive Order 11615, August 15, 1971, Sec. 1 (b) .
^Ltr, Weber to Nader, September 16, 1971. The letter also responded to Nader's
inquiries about wage exemptions for low income people, appeal proceedings, disclosure of CLC minutes, and possible consumer participation in policy formulation.
38
E S C 16, S e p t e m b e r 2 5 , 1971, S e c . 7 0 1 ( 1 ) ; O E P P r e s s R e l e a s e 4 6 4 , O c t o b e r 4 ,
1971. See also ESC 19, October 6, 1971, Sec. 402 (2) , and ESC 102, Sec. 402 (9).
39
OEP Press Release 471, October 14, 1971; ESC 20, October 15, 1971, Sec. 402;
ESC 102, Sec. 402 (9,10).
132
COMPLIANCE
line of November 1 for the availability of price lists at each point of
sale. This requirement was later dropped,40 however, since the
alternative method was working well and it was not clear what the
Price Commission would require for Phase II. Some retail associations had insisted their members were supplying prices on an
item-by-item basis but that preparing special price lists would be
prohibitively expensive.41
IRS made a nationwide survey during the first 4 days of November to see how many businesses were providing ceiling price
information to customers or at least promised to have it by November 5. It was found that 36 percent were not in compliance when
checked, but most of those promised to comply by November 5.
TABLE 10.—Availability of Ceiling Price
November 1-5, 1971
Information,
Price lists available at point of sale
Information available by mail within 48 hours
Promised to comply by November 5
No assurance of compliance
1171
473
847
66
46%
18%
33%
3%
Total stores checked
Source: Msg Alfa 238, November 4, 1971.
2557
100%
Price Violations
It was not surprising that 75 percent of all complaints received
concerned prices, since people make dozens of retail purchases for
every one rent payment or wage adjustment. Complaints of price
violations flowed in, ranging from the trivial to the extremely
complex; the vast majority were promptly resolved by IRS agents
either because there was no violation or because the merchant
quickly rolled back the price.
Consumers were often confused because of the many brands and
sizes available or by special sale prices, and the formula for computing base prices was more complex than was generally realized.
The difficulties consumers had in obtaining base price information
also contributed to the large number of unfounded complaints.
During the first half of the freeze, for instance, there were over a
thousand complaints about gasoline prices—more than on any
other item. Although a few of these were valid, most concerned
Press Release 26, October 27, 1971.
"New York Times, October 29, 1971, p. 1.
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COMPLIANCE
price increases that had occurred just before the freeze and hence
were legal.42
An increase in the price of propane gas (a type of liquefied
Petroleum Gas, or LPG) also sparked numerous complaints and
heated editorial comment. Ten companies located in Texas and
Oklahoma announced increases of one cent a gallon about October
1. Since propane had been selling for 6 to 10 cents a gallon in that
market area, the percentage increase was considerable. The companies said their prices had regularly gone up in the fall, because
of increased winter demand for fuel, and were therefore justified by
the seasonal price rule. The seasonal rule provided that, where
prices had shown "a large, distinct fluctuation at a specific, identifiable point in time" during each of the past 3 years, the price
could be raised during the freeze to the price in effect during the
previous season.43
While it was true that propane prices had generally risen in the
fall, the timing of these increases varied widely. From the winter
of 1970-71 to the time of the freeze the prices had risen steadily
rather than fluctuated. The OEP General Counsel provided an
opinion that the seasonal rule did not apply, and by October 22
OEP's Dallas office and IRS agents in that area had obtained rollbacks from all 10 companies.44 This was the most significant price
rollback occurring during the freeze period, representing a saving
to consumers of about $100 million a year.45
There were numerous complaints on increases in premiums for
group medical insurance. The guidance on insurance allowed
formula-based premiums to increase to reflect changes in actuarial
factors or cost increases that had occurred before the freeze, using
methods of computation in use before the freeze. They did not
allow premiums to increase to provide for future (projected) increases in hospital costs or doctors' fees.46 The Connecticut General
Life Insurance Company voluntarily rolled back rate increases in
order to comply with this policy.47 OEP's Kansas City office conducted lengthy investigations of premium increases in the Midwest,
42
See CLC Press Release 5, September 24, 1971, and New York Times, September
21, 1971, p. 1.
43
ESC 101, Sec. 303.
44
CLC Press Releases 23 and 24, October 20, 21, 1971; Memo, Bruce Marshall,
OEP Dallas, to Bruce Whelihan, OEP Washington, October 22, 1971, Subj: LPG
Price Increases.
45
Washington Post, October 18, 1971, p. B-13; Wall Street Journal October 22,
1971, p. 2.
46
ESC 102, Sec. 407 (2).
47
CLC Press Release 14, October 6, 1971.
134
COMPLIANCE
but the complexity of the factual situations in these cases prevented
any resolution of the cases before the freeze ended.
As the freeze progressed, the Compliance Branch adopted more
systematic means to locate price violations. When the Wholesale
Price Index or the Consumer Price Index showed price increases
on particular commodities, for instance, special checks were made
on those items.48
An interesting price case that eventually went to court was that
of Cincinnati Transit, Inc., a private local bus company. The
Cincinnati Public Utilities Director had, on June 23, 1971, approved certain reductions in scheduled service, which were to take
effect on September 5. On the basis of an affidavit submitted by
the company, the OEP General Counsel initially ruled that the
schedule reductions could be made without a fare reduction.
Additional facts later submitted by the City and other interested
parties prompted a withdrawal of the earlier OEP ruling. OEP and
IRS representatives were of the opinion that freeze regulations
required a fare reduction commensurate with the service reduction
and suggested a 5-cent cut. The company contended that no fare
reduction was required, since the rider was getting the same service
once he was on the bus.49
Although there was nothing unique in the situation (the gradual
erosion of local bus service has been a familiar phenomenon in
many American cities for the past 20 years), there was at least a
technical violation of freeze regulations. OEP ruled that it was a
violation; the company filed a suit to reverse OEP's ruling; and on
November 15 it raised fares by 5 cents, apparently violating Phase
II regulations. The Government sued on December 17 regarding
both violations; this suit was settled out of court, with the court
approving the stipulated judgment on May 9, 1972. Cincinnati
Transit agreed to reduce fares for stated periods, thus in effect
returning the excess charges to its customers.50
Sporting Events
Price increases on tickets for sporting events became one of the
major bones of contention in the compliance area. Several pro48
See OEP Weekly Summary Report to CLC Chairman, November 6, 1971, p. 1.
*9Ltr, Lawrence J. Kemper, IRS, Cincinnati, to John Simpson, Office of OEP
General Counsel, September 17, 1971, with attachments. For discussion of relevant
policy, see pp. 8(M*2.
50
Interview with William C. McCorriston, Economic Stabilization Section, Civil
Division, Department of Justice, July 19, 1972.
135
COMPLIANCE
fessional and college football teams and some professional hockey
teams increased the prices of tickets for the season beginning in
the fall of 1971. These increases were usually announced during
the preceding winter or spring, and many season tickets were sold
during the spring and summer. The advent of the freeze on August
15 created unique problems of interpretation and enforcement
with respect to these tickets. CLC discussed the matter early in
September and ruled that admission prices for sporting events and
other entertainments were frozen, and that those who had purchased tickets at higher prices should be reimbursed.51
This policy was clearly stated and firmly adhered to by the
government, but was not readily accepted by some of the athletic
clubs. The Government policy was that, for regular season games
played during the freeze period, admission prices could be no
higher than those charged for regular season games during the base
period. Most football teams had not begun their 1971 season prior
to August 15, so their base period fell during the 1970 season.
Teams that had increased prices for the fall 1971 season were thus
required to roll them back to 1970 levels, and this applied even to
season tickets that had been sold long before August 15. The
Government took the position that the "transaction" was completed only when the game was played, as this constituted delivery
of the "service" that had been contracted for in advance. The
teams in general took the position that, if the ticket had been paid
for and delivered before August 15, the transaction was then complete and could not be affected by the freeze announcement.
Several teams rolled back all price increases that had been
planned for the 1971 season. Others complied to the extent that
they rolled back prices on tickets actually sold after August 15.
On tickets that had been sold in advance, however, there was a
major controversy that led to several court suits. A man who had
purchased tickets for Atlanta Falcons games sued that team on
September 10 on behalf of all Falcons ticket holders; he had
purchased four season tickets on June 4, 1971, for $7.50 per game,
whereas the price the previous season had been $6.00 per game.
The Falcons sued the U.S. Government on September 25, seeking a declaratory judgment; and the Government filed a counter
suit on September 27, challenging the price increase. In their suit
the Falcons stated they had sold 70 percent of their season tickets
before August 15 and had made business plans and financial com51
ESC 102, Sec. 403 (2); see also CLC News Release dated September 9, 1971,
and SPG 3.0963, 3.0969, and 3.0996.
136
COMPLIANCE
mitments based on the increased revenue. They argued that the
President did not intend for his Executive order to render illegal
sales that antedated that order. The Falcons also pointed out that
CLC was allowing increases in tuition and room and board to
remain in effect if they had been announced and deposits had
been made before August 15, although the "services" were actually
delivered during the freeze period. They implied that the government was obliged to follow the same policy with regard to athletic
tickets.52
Long before this matter could be settled in court, four other
professional football teams and one university had sued the government over the ticket issue. One of these suits was brought by the
Miami Dolphins, who had played "preseason" (exhibition) games
on August 7 and 13. Season tickets, of which 75 percent had been
sold before the freeze began, included admission to these preseason
games. The Dolphins contended that these two games, having been
played during their base period, established the price level that
should prevail during the freeze. The government's position was
that preseason games differ substantially from regular games and
cannot therefore be used to establish a base price.
The Dolphins suit also advanced several new arguments, including charges that the Economic Stabilization Act was unconstitutional and that OEP's order to make immediate cash refunds,
without allowing the Dolphins any opportunity for a hearing,
denied them equal protection of the laws and due process of law.53
In order to avoid multiplying lawsuits, OEP signed agreements
with other teams whose situations paralleled those of the Falcons
or Dolphins to the effect that they would abide by the outcome
of the suits already pending in court. These teams placed money
in escrow or filed letters of credit to provide for the reimbursement
of ticket purchasers should that be necessary.
One of the suits on the ticket issue was brought against CLC
by the University of Southern California. For the 1971 season, the
university had increased prices for reserved seats by 50 cents per
game and had sold over 125,000 season tickets before the freeze
began. When ordered to refund the increase, the university responded by suing CLC. The court ruled in favor of the university
on May 12, 1972, saying in part:
52
On tuition policy, see p. 84.
Joseph Robbie et al. (Miami Dolphins) v. John B. Connolly et al., in U.S.
District Court, S.D. Florida, October 6, 1971. The constitutional issues are discussed
later in this chapter.
53
137
COMPLIANCE
The fundamental legal issue is the meaning of the word "transactions" as it is
used in the Executive Order and ensuing regulation. . . . No amount of interpretation or rationalization can remove the retroactive nature of the burden
that the council here seeks to impose. . . . Nothing in the Executive Order or
in Economic Stabilization Regulation No. 1 suggests restrictions on anything other
than prospective charging and payment of prices.54
The Government appealed this suit to the Temporary Emergency
Court of Appeals, the special appeals court set up to handle Economic Stabilization cases, and won this appeal on September 18,
1972. The status of the other cases on ticket prices was still pending
at this writing.
A unique problem was presented by two teams that opened the
fall 1971 season in new stadiums. The teams argued that they were
selling a "new product" featuring greater comfort and convenience
for the spectator. One of these teams, the San Francisco FortyNiners, compared its old stadium—wooden benches without backs,
no parking facilities, inadequate restrooms—with its new situation
in Candlestick Park, which had individual plastic seats and all the
comforts expected by the modern fan. The St. Louis Blues Hockey
Team similarly tried to justify price increases on the basis of improvements made to its Arena. CLC ruled that use of new facilities
could justify price increases but not improvements to existing
facilities.55
THE QUESTION OF CONSTITUTIONALITY
Many suits that sought to override the Government's freeze
policies or decisions charged that the Economic Stabilization Act
of 1970 or some actions taken under it were unconstitutional. By
October 26, 24 suits had been filed challenging the legislation on
constitutional grounds.56 The two most common arguments were
that Congress had delegated law-making authority to the President,
thus violating the constitutional separation of powers, and that
the inadequacy of administrative and judicial review procedures
created a situation in which people were denied their property
without due process of law. The latter charge, for instance, was
made by some landlords who had been ordered to refund rent
increases even though no formal hearing had been held on the
question of whether they had violated the law.
54
University of Southern California v. CLC, U.S. District Court for Central
California, May 12, 1972; reprinted in US. Law Week (Washington: Bureau of
National Affairs) , May 23, 1972, pp. 1179, 2762-63.
55
ESC 102, Sec. 402 (6).
56
New York Times, October 26, 1971, p. 66.
138
COMPLIANCE
Those who raised the constitutional question were, of course,
primarily interested in obtaining a particular wage increase or
other direct benefit. Nevertheless, the constitutional question was
of serious concern to Justice Department lawyers. Assistant Attorney General Gray admitted: "A lot of lawyers on the outside say
the statute is barren, that it's unconstitutional on its face." 57
The suit in which the constitutional issues were most fully aired
was that filed on September 10 by the Amalgamated Meat Cutters
and Butcher Workingmen, an AFL-CIO union. The suit sought
an injunction to require eight meat packing firms to grant a
25-cent-an-hour wage increase to 50,000 workers. It asserted the
wage increase was being withheld illegally, since both the Act and
Executive Order 11615 were unconstitutional. The complaint said:
The Act is an unconstitutional delegation of legislative power to the President,
in violation of the Constitution, Article 1, Section 1. The Act empowers the
President to impose wage and price controls when and as he sees fit, without
any standards established by Congress to guide the President in deciding whether
economic conditions warrant such action, or the timing of such action, or the
nature and extent of such controls.58
The complainant also contended that Executive Order 11615 was
unconstitutional because "nothing in the Economic Stabilization
Act of 1970 . . . empowers the President retroactively to deprive
persons of rights under existing contracts." 59
U.S. District Judge Aubrey E. Robinson, Jr., requested on
September 30 that a three-judge panel be named to hear the case.
The panel's decision, written by its chairman, U.S. Circuit Judge
Harold Leventhal, found the Act and Executive order fully constitutional and therefore denied the union's motion.60
Judge Leventhal's opinion upheld the right of Congress to delegate wide authority provided that Congress exercised "the essentials
of the legislative function"—of determining the basic legislative
policy and formulating a rule of conduct.
The key question is not answered by noting that the authority delegated is
broad, or broader than Congress might have selected if it had chosen to operate
57
Quoted in Business Week, October 23, 1971.
Amalgamated Meat Cutters and Butcher Workingmen v. Connally et al., filed
September 10, 1971, in U.S. District Court, District of Columbia, Count 1, Sec.
13.a. Reprinted in Federal Controls, (Washington: Bureau of National Affairs),
October 5, 1971.
68
Ibid., Count 1, Sec. 12.a.
80
Opinion of special three-judge District Court of the District of Columbia,
rendered October 22, 1971. The other members of the panel were Judge Robinson
and U.S. District Judge Charles E. Richey. The opinion was printed in Federal
Controls, October 26, 1971, and in Economic Stabilization Legislation, Hearings
before Senate Committee on Banking, Housing, and Urban Affairs on S-2712, 92nd
Congress, 1st Sess., November 1-5, 1971 (Washington: Government Printing Office,
1971) , pp. 132-150.
58
139
COMPLIANCE
within a narrower range. The issue is whether the legislative description of the
task assigned sufficiently marks the field within which the Administrator is to act
so that it may be known whether he had kept within it in compliance with the
legislative will.61
Leventhal held that the 1970 Act was sufficiently precise to fulfill
this requirement.
The court also held that review procedures were adequate. Any
person charged with a violation could obtain judicial review by
inserting a defense to the enforcement proceeding, the court said,
adding, ". . . this provides ample judicial review for constitutional
purposes/' The court also held that the Administrative Procedures
Act (APA) was definitely applicable to this statute, which meant
any citizen could seek an injunction against actions of the Government agency, in this case CLC. One provision of the APA is that
public hearings be held in advance of rulemaking, but this requirement is waived when the agency finds "that notice and public
procedure thereon are impracticable, unnecessary, or contrary to
the public interest." 62 Public hearings were not held on freeze
regulations because of the time factor.
The court did not agree to the union's argument that a wage
contract made before the freeze was immune from the effects of
the Executive order. This argument was advanced frequently by
other Labor leaders, who charged that the President had no authority to invalidate existing contracts. In support of the Government's position, Leventhal cited a previous opinion, which stated:
Contracts, however express, cannot fetter the constitutional authority of the
Congress. Contracts may create rights of property, but when contracts deal with
a subject matter which lies within the control of the Congress, they have a
congenital infirmity. Parties cannot remove their transactions from the reach of
dominant constitutional power by making contracts about them.68
Judge Leventhal's opinion thus resolved most doubts about the
constitutionality of the freeze and largely stopped any further discussion of the topic. Although the opinion applied directly only to
Phase I, the principles enunciated were applicable to Phase II and
were used in enforcing it. The opinion was thus of immense help
to those charged with enforcement, both before and after November 13.64
61
Ibid., Sec. B.2, quoting the opinion in Yakus v. U.S., which sustained the grant
of price fixing authority in the Emergency Price Control Act of 1942. (Judge
Leventhal was Assistant General Counsel for the OPA during World War II.)
62
Ibid., Sec. B. 11.
63
Norman v. B.&O. R.R. (1935), cited in t h e Justice Department's response t o
the A m a l g a m a t e d suit, Federal Controls, October 5, 1971.
64
Interview w i t h W i l l i a m E. Nelson, April 2 1 , 1972.
140
COMPLIANCE
CONCLUSIONS
One conclusion that arises from this study of compliance and
enforcement is that there is a tremendous reservoir of good will
in the American people that can be tapped when pressing national
needs must be met. The general spirit of cooperation and support
was reminiscent of historic crises in past decades and showed that
Americans will pull together when convinced of the need to
achieve common goals.
One must also conclude, in a more pragmatic vein, that more extensive advance preparation of specific regulations would have been
of great benefit to the program. If the price list requirement, for
instance, had been spelled out clearly on the first day of the freeze,
it would have relieved both merchants and consumers of much
anxiety and would have contributed to a greater coherence in the
whole price control program. Similarly, if the regulations on teachers' pay had been formulated in advance, they could have prevented
the uncertainty and bitterness that developed on this issue. Few
would doubt, in fact, that every segment of the economy would be
regulated more smoothly by the use of rules systematically prepared
in advance than by those churned out "in the heat of battle"—after
a freeze is already in effect. The problem was and is that it is extremely difficult to know well in advance what regulations would be
appropriate for a given set of economic conditions.
A question frequently asked about the total enforcement effort
was: why did the Government end up prosecuting teachers, football
teams, and a few landlords when the major inflationary pressures
against which the freeze was aimed obviously lay elsewhere? It
seemed ironic that charges were pressed mainly against minor elements of the national economy. This occurred largely because the
leaders of major industries and unions, and of most smaller economic units as well, realized from the outset that they would have
to comply, and so they presented few enforcement problems. A
few major economic entities, such as the propane producers, did
have to be brought into line, but this was done in the realm of
"voluntary" rather than enforced compliance.
The legal proceedings that were entered into, therefore, were
directed against the small remnant that felt it could successfully
defy the freeze. As Arnold Weber said in a review of the freeze,
". . . the primary objective of the compliance program was not so
much to have a direct impact on the economic effectiveness of the
141
COMPLIANCE
freeze but to preserve the sense of equity and uniformity necessary
to maintain the underlying consensus." 65
This turn of events showed, among other things, the desirability
of limiting an across-the-board freeze to as short a period as possible. The problem with a sweeping economic control program is
that it catches in its net the millions of "little fish" as well as the
big ones, and if they are held too long the little fish begin to require an undue amount of attention. The three-tier control system
inaugurated with Phase II 66 allowed the Government to concentrate its efforts on the more significant economic entities. As
Lincoln often noted, however, the circumstances prevailing during
the freeze required the vigorous application of legal sanctions
against all violators in order to maintain broad public support for
the program.
66
Arnold R. Weber, "The 1971 Wage-Price Freeze and Incomes Policy," Monthly
Labor Review (U.S. Department of Labor), April 1972, pp. 18-21.
66
See p. 173.
142
VII
Building Public Understanding
President Nixon emphasized in his August 15 address to the
Nation that the success of his program would depend on the cooperation of all the American people and on their willingness to
sacrifice in the long-term public interest. OEP, as manager of the
freeze, recognized that an important part of its task was to develop
a wide-ranging information program that would secure the support
of the public, business, and labor through knowledge and understanding.
OEP faced the problem of assuring support for a program that
was unanticipated and that disrupted normal business practices in
a peacetime economy. Fighting inflation is not ordinarily a
glamorous or moving cause; for this freeze, there was no external
enemy threat against which to rally patriotic support. Yet the great
mass of citizens, recognizing inflation as a national disease, responded positively to the Administration's request for support.
OEP strove to sustain this support by keeping the public well informed and aware of tangible signs of the success of the program.
INITIAL RESPONSE TO THE FREEZE
The wage-price freeze had an immediate personal impact on
almost every adult American. The initial response was highly
favorable. The President's dramatic move struck a responsive
chord; "man-in-the-street" interviews following the August 15 announcement of the New Economic Policy (NEP) found praise for
the President's courage and an enthusiastic determination to "pull
together." A traditional American indicator of the public mood, the
stock market, reflected this enthusiasm; the Dow Jones industrial
average scored a record 32.93 point gain in a single day and ended
the week with a healthy 24.89 point increase.
Evidence of polls, borne out by mail received by the White
143
PUBLIC
UNDERSTANDING
House and OEP and by reports from Regional Offices, pointed to
broad support of the program by a majority of citizens. An early
outpouring of letters from teachers registering their opposition
constituted the bulk of OEP's unfavorable mail.
The first reactions from industry were very favorable. Businessmen eagerly anticipated a revival of consumer confidence and
increased sales as a result of the President's initiatives. W. P. Gullander, President of the National Association of Manufacturers,
immediately declared: "The bold move taken by the President to
strengthen the American economy deserves the support and cooperation of all groups." Although his statement avoided complete
endorsement, it seemed to reflect the sentiment of a broad spectrum
of business.1 The U.S. Chamber of Commerce and other major
business groups also endorsed the President's actions despite their
philosophical and historical distaste for controls.
Organized labor was the source of the most vociferous protests
against the freeze. The Executive Committee of the AFL-CIO had
been on record since February 1966 as willing to cooperate with
economic stabilization measures provided the restraints were equitably placed on all costs and incomes; it reiterated this position on
August 9, 1971.2 However, to George Meany, President of AFLCIO, the wage-price freeze did not meet labor's requirements. On
August 16, he labeled the freeze "patently discriminatory against
working men and women." 3 At an emergency session, the AFLCIO Executive Council formally proclaimed its opposition. The
Council declared its lack of faith in the ability of President Nixon
"to successfully manage the economy for the benefit of the majority of its citizens"; it called on Congress to assert control over
the economy, to provide an equitable, effective, and enforceable
program. The Executive Council went on to state:
We will insist that controls on prices and wages be made equitable, and that
all other forms of income—profits, interest rates, executive compensation, expense
accounts, the prices of stocks and bonds—be brought under equal restraints.4
Among major labor leaders, only Teamsters President Frank E.
Fitzsimmons pledged to "cooperate fully" with the NEP, including
1
New York Times, August 17, 1971, p. 1.
"The National Economy," Statement by the AFL-CIO Executive Council, August
9, 1971.
3
Quoted in Newsweek, August 30, 1971.
4
Statement Adopted by the AFL-CIO Executive Council (Washington: AFL-CIO) ,
August 19, 1971, pp. 6-7.
2
144
PUBLIC UNDERSTANDING
the freeze. He did urge, however, correction of the "legislative
omission" of a freeze on profits, dividends, and interest.5
Despite the opposition of labor leaders, early Gallup polls indicated that a majority of union members supported the freeze. On
August 20, 65 percent of union families surveyed stated that they
favored the President's program—as compared with 73 percent of
all families.0 Union leaders predicted that the attitude of workers
would shift when they personally felt the full impact of the freeze
and its "discriminatory" aspects.
These attitudes were the backdrop against which the freeze
administrators had to conduct the program. The basic objective of
the public information program was to elicit compliance from all
these sectors of the economy. But a further goal was to inspire and
sustain positive support and assistance from the public.
FREEZE REQUIREMENTS AND PUBLIC INFORMATION
It was clear from the start of the freeze that its success would
rest largely on an informed public. Given the nature of the 90-day
freeze—the heavy dependence on voluntary compliance, the inevitable inequities and hardships, and the psychological objective
of a revival of public confidence—a solid and extensive public
information program was essential.
The strategy of the freeze was based on the premise that most
Americans would obey a Presidential order, even one as disruptive
of normal life as the freeze, if their obligations were clearly explained and if they believed the measures to be in the national
interest. The first responsibility of the public information program,
therefore, was to educate; the second was to persuade. The prerequisite to voluntary compliance was wide dissemination of information on these new requirements of the Government. In
addition, the public information program had to convince those
among the public who were adversely affected that their sacrifice
was in a good cause and that, although it was impossible to avoid
all inequities, the freeze was administered in as even-handed a
manner as possible. Business and labor, the sectors which have the
major economic impact, also had to be convinced of the need for
5
Daily Report for Executives (Washington: Bureau of National Affairs), August
19, 61971.
Gallup poll reported in Washington Post, August 29, 1971.
145
474-893 O - 72 - 11
PUBLIC
UNDERSTANDING
cooperation despite the suspension of their normal pricing and
wage-bargaining practices.
For the first days after the announcement of the freeze, "convincing" was far less urgent than simply getting information to
the public; this basic problem preoccupied a large portion of OEP
and detailed employees. Although the answers to many questions
had yet to be formulated, the Operations Center in the National
Office had a major telephone answering service in place from the
first morning of the freeze. To meet the urgent demands of the
press, the Director and Deputy Director devoted much time to
informal interviews, though no formal press conference was held.
In addition, the Director permitted the press to observe the activity
of the Operations Center for the first few days. Because of these
efforts and the interest of the media, the news coverage of freeze
operations during the first week was thorough, lively, generally
favorable, and effective in conveying to the public the impact of
the freeze.7
The goal during the first weeks of the freeze, when public
enthusiasm was high, was to publicize the regulations through as
many channels as possible and to give quick, consistent responses
to questioners anxious to inform themselves. The task was largely
one of getting the word out fast enough to satisfy the virtually
insatiable information needs of the media and the public. Later,
when the initial spontaneous support lessened under various economic pinches, OEP's public information program became more
specialized and focused on specific problem areas.
From the outset Lincoln was aware of the need for a formal
structure to meet the information requirement, and he took early
steps to organize a public information network and program. Each
of the components of the information program, though of different
degrees of sophistication and efficiency, had a special role. Direct
telephone and letter contact with the public served to answer
immediate personal problems and to identify policy issues that
had to be resolved. The use of the mass media to spread guidance
forestalled many direct inquiries. Contact with trade and professional associations and State and local government units provided
opportunities to channel pertinent information to special interest
groups. All of these information routes were used to provide timely
and detailed information to the public and to gain their coopera7
Public knowledge of the freeze was measured by Sindlinger & Co. to be 96
percent; the same firm found only 94 percent who were aware of the first moon trip.
Albert E. Sindlinger, quoted in Business Week, August 28, 1971.
146
PUBLIC
UNDERSTANDING
tion through understanding.8 The National Office shared with the
Regional Offices the operational responsibility for these activities,
while retaining the overall responsibility for management and
coordination.
PUBLIC INFORMATION NETWORK
National Office Organization
The basic strategy for public information activities was developed by the Director's office in coordination with the Cost of
Living Council (CLC). OEP's public information network
centered around a greatly expanded Office of Congressional and
Public Affairs (CPA), under the direction of Mr. David J. Pattison.9 CPA assumed the major responsibility for building broad
understanding and popular support. This office coordinated the
dissemination of information through the Regional Offices, where
particular local problems could be squarely faced.
CPA was OEP's primary point of contact with Congress and
State and local government associations, with business and professional associations, and with the public and press at the national
level. A specially established Speakers' Bureau within CPA coordinated the considerable effort made to go out to the questioner's
own ground. On August 27, when the field network was functioning efficiently and the flow of calls coming into the National Office
diminished, CPA took over from the Operations Center the burden
of answering calls from the public. It had already been handling all
congressional calls. The calls from the public ranged from under
100 to about 500 a day during the remainder of the freeze.
A Correspondence Section, separate from CPA, was established
to answer or forward for specialized handling all written inquiries
from the public and Members of Congress. This office, under Mr.
Douglas M. Johnston, processed about 27,000 letters and telegrams
during the 3 months.10 The Section was taken over by Mr. William
8
Official policy dissemination within the CLC-OEP-IRS-ASCS chain is discussed
on pp. 78-79.
9
Lt. Col. William Snyder, an economist on the Army War College faculty,
served as Pattison's executive officer for the first 2 weeks; he was succeeded by Col:
Howard Steele, who remained for the rest of the freeze. Mr. Bruce Whelihan came
from the White House staff to be Special Assistant to the Director for Public Information, dealing primarily with the news media.
10
The general public was told to direct questions to the Regional Offices; however, in the interests of speed and practicality, those communications arriving
directly in the National Office were handled there. See pp. 66-70 for a discussion
of the handling of inquiries.
147
PUBLIC
UNDERSTANDING
A. Fletcher toward the end of the freeze when Johnston moved to
CLC.
The National Office developed and coordinated the total information program, while leaving most direct public contact to the
local level. In the National Office, the time-consuming "walk-ins"
by reporters, lobbyists, and anxious citizens were soon diverted to
a Press Reception Room. Here, an average of 100 persons a day
found OEP releases and circulars, plus CLC and Treasury Department releases provided as an added service. This procedure proved
helpful in informing both the man in the street and the specialized
inquirer.
Field Network
The OEP Regional Offices, which were the front line in the
interaction with the public, labored under special handicaps in
coping with the initial flood of inquiries. The Regions were in
the spotlight before they had settled the matters of new office space,
furniture, telephones, and personnel; calls began pouring into
some Regional Offices before they had time to brief new employees
on what few answers were available. The problem of accommodating the huge number of information requests remained serious
throughout most of the freeze. To help meet the public's demands,
the 360 local IRS offices and 2,819 ASCS county offices were drawn
into the information business. The total OEP-IRS-ASCS information system received approximately one million inquiries during
the wage-price freeze. In general, IRS handled most of the telephone inquiries, as well as routine correspondence.11
The exact configuration of the information network varied from
Region to Region. The IRS and OEP regional structures did not
coincide, and each OEP Regional Public Information Officer
(PIO) had to establish his own working relationships with the
IRS and ASCS personnel. In addition, all OEP Regional Offices
but one had to borrow PIO's from other agencies, which figured
as a potential handicap. Given the diversity and breadth of the
field network, guidance from the National Office was clearly needed
to build a good team that would be well coordinated with Washington.
Deputy Director Trent, who had special responsibility for the
coordination of field activities, devoted a major part of his energies
to orchestrating and monitoring the regional public information
31
Calls to ASCS constituted only about 3 percent of the total inquiries received.
148
PUBLIC UNDERSTANDING
effort. His goal was to present the program to the country as uniformly as possible in order to establish a broad base of public
understanding and support. Trent and CPA invested considerable
effort from the outset to make sure that the Regions built positive
programs and that these were moving well. They sought first to
secure experienced PIO's for each Region and then to formulate a
centralized plan to assist the Regional PIO's.
The paramount importance of the Regional Offices' information
activities received formal recognition in an August 22 meeting in
the National Office with regional representatives. Trent stressed
that each Regional Office was first of all an information office, in
the broadest sense. He noted that continuing contact with people
would be very important for determining what questions needed
attention. Pattison reiterated that information flow was of first
priority in the Regions, as it was in Washington. He promised
that guidance for the Regional PIO's would be given high priority
by the National Office.12
By the end of the first week of the freeze, CPA had sent the OEP
Regional PIO's brief preliminary instructions, which included a
requirement to establish contact with the IRS and ASCS PIO's.13
OEP and IRS soon worked out a division of responsibilities to
guide their respective field offices. CPA, charged with the overall
supervision of the program, provided guidance to the OEP Regional PIO's, who coordinated their activities with the IRS Regional PIO's. These PIO's were considered to be members of a
Federal team; press conferences were held jointly by OEP and IRS,
when possible, to display the team. The programs formulated by
this team were implemented on the IRS District level. Here, the
IRS PIO was responsible for disseminating information through
his local media contacts. Detailed, policy-related questions beyond
his scope were referred to the IRS or OEP Regional PIO.14
Subsequent guidance on public information activity in the field
focused on specific areas of concern. The Regional Offices, for
example, would receive draft press releases or other suggestions for
publicity to meet some pressing issue. The guidance was somewhat
sporadic, often verbal and improvised; the National Office never
formulated broad guidelines for the daily operations of the Re12
Memorandum for the Record, August 25, 1971, Subj: Regional Representatives
Meeting, August 22, 1971, Morning and Afternoon Sessions.
"Memo, David J. Pattison, Assistant to the Director for CPA, to OEP Regional
Directors for Regional PIO's, August 22, 1971, Subj: Economic Stabilization Information Activity.
"Msg Alpha 9, August 27, 1971, Subj: Federal Economic Stabilization Public
Information Activity.
149
PUBLIC
UNDERSTANDING
gional public information activity. The absence of generalized,
formal instructions was attributed to the speed of events and to a
widespread belief that decisions on local problems could best be
made in the field. The variations in the style of Regional Directors,
in the working relationships established with IRS, and in local
problems seemed to argue for the more flexible, problem-oriented
approach.
The public information task as envisaged for Washington and
the Regions was discussed in depth in a conference for Regional
PIO's held in Washington on September 17-18. The meeting permitted a mutual exchange of problems, many of which were solved
on the spot. Lincoln, Trent, General Counsel Bennett, and the
head of the Office of Exceptions and Exemptions, Christopher
Norred, provided the PIO's with the background and rationale for
certain important policy decisions. The discussion centered on
areas of particular public concern and on ways to reduce confusion
and promote understanding of the program.
PUBLIC INFORMATION ACTIVITIES
Relations with the News Media
In its attempt to reach the widest possible audience, OEP relied
very heavily on the assistance of the news media. Both worked
toward the goal of an informed public. The early guidelines made
good copy and were given wide publicity; the reporting was accurate to an extraordinary degree, and those few cases of factual
error were easily corrected. The first 2 weeks of the freeze received
considerable attention under the impetus of the public's desire to
inform itself and the eagerness of the press to accommodate this
desire. Analytical stories appeared in the second week.
National news magazines and newspapers planning feature stories
continued to request interviews throughout the freeze. The teacher
salary problem was featured in press stories for the first 2 months
of the freeze; other compliance cases, particularly as related to
ticket sales for sports events, also attracted wide attention. However, the PIO's experienced considerable difficulty in maintaining
the interest of the media in routine policy announcements. After
the first month, the attention of the public and the press focused
on speculation about Phase II developments and only returned to
the freeze when sparked by major events or controversial cases.
150
PUBLIC
UNDERSTANDING
Reporters remained very interested in data on violations—of the
ceiling price list requirement and of propane gas and grocery prices,
for example—and reacted unhappily to the decision of CLC and
OEP not to release the name of a suspected violator before a suit
had been filed. In support of its decision to withhold names, OEP
pointed to the fact that a high percentage of violations was due
to innocent misunderstanding and that many unfounded complaints were filed with the IRS. Moreover, there was the possibility
of endangering legal proceedings by making a public accusation
before a suit was filed.15
Lincoln did recognize the public's interest in compliance cases
and urged the Regional Offices to give special attention to this
subject. "The purpose of the publicity," he said, "should be to
deter violators, to add to the flow of information to those who are
unknowingly engaged in violations, and to indicate the positive
operation of the program." 16 The Regional Directors were instructed, however, to limit their comments in the compliance area
to regional events, refer to general trends and approximate figures
only, and avoid any detail on the status of a specific complaint,
violation, or investigation. The National Office provided examples
of compliance cases for use in regional press releases and speaking
engagements.17
Press Releases.—The President's Economic Stabilization Program
was run by a coalition of executive departments and agencies, each
with its own public information staff. The small staff of the Cost
of Living Council coordinated these independent voices to make
sure the program was being described consistently.
The freeze was presented to the public primarily by the public
affairs staffs of OEP and CLC, which worked through press releases, interviews, and TV appearances. With OEP catapulted into
its freeze role and CLC organizing from base zero, no formal
allocation of duties was made at the outset. The public affairs staffs
of the two agencies soon established personal liaison, and by the
end of August the CLC staff had assumed overall responsibility
for the coordination of releases.
In general, OEP publicized the administrative decisions and
rules, and CLC handled releases covering major policy developments and groundbreaking events, such as the first suit or exemption. There was natural overlap in responsibilities, and the
15
See p. 126.
Memo, Lincoln to Regional Directors, August 23, 1971.
"Message No. 120, August 30, 1971, Subj: Public Presentations and Appearances.
16
151
PUBLIC
UNDERSTANDING
occasional duplication caused concern about possible public confusion over which agency was responsible for particular actions.18
A modus operandi gradually developed between the two public
affairs offices. OEP public information officers cleared their releases
through their CLC counterparts, most often by telephone. If CLC
vetoed a release, it did so in order to study further the policy to be
announced or to issue the release itself for the greater impact. In
these cases, since CLC had no field apparatus, OEP would incorporate the same information in its own releases for the customary local distribution by its Regional Offices.
Of the 89 releases issued by CPA during the 90-day freeze, 28
dealt with administrative decisions and policy rulings. These were
the heart of the public information program. Lincoln often expressed his belief that in a crash program spreading the basic
information comes before any storytelling. There were only four
releases that might be categorized as "human interest" or feature
stories and twice that number consisting of statistical compilations
dealing with the response to the freeze.
Brief descriptions of the exemptions denied were catalogued in
26 releases. These advertised the firm policy on exemptions and
conveyed the message that the freeze was being applied stringently
but in an even-handed manner. Three releases described the exemptions granted. Finally, 20 releases featured examples of voluntary compliance, court suits, and other actions on complaints; these
releases effectively emphasized the voluntary compliance noted
throughout the country as well as the "teeth" ready to meet noncompliance.
While OEP had impelling reasons for its choice of subjects for
its releases, the PIO's noted a basic difficulty: the reluctance of
national papers to pick up OEP's releases. In an effort to avoid
public relations gimmicks, the drafters of the releases had given
them a dry, "regulatory" tone. The almost total absence of anecdotes likely to be picked up by the wire services made the public
information job more difficult. Announcements that only clarified
and reclarified policies lacked the punch to move editors to enthusiastic coverage.
The New York Times and the Wall Street Journal did a particularly thorough job of printing the policy Questions and
Answers (Q&A's). Most newspapers, accustomed to the annual
IRS Taxpayer column, ran the Q&A's in the same manner, but
18
See, for example, OEP Press Release 442, and CLC Press Release 6, September
24, 1971.
152
PUBLIC
UNDERSTANDING
only during the first weeks. When the freeze became "old news/'
big-city newspaper coverage of new guidelines became more
sketchy. Releases of statistics or exemption denials got even less
coverage in the major papers.
On the local level, many newspapers only intermittently received
Associated Press and United Press International coverage (often
condensed) of freeze information released in Washington. In addition, the local press often ignored releases that were not written
to encompass local statistics and human interest items in a livelier,
more newsworthy style than that of the National Office releases.
Local papers, however, were far more likely than national papers
to print the details of the releases if the information were "localized" by the Regional Offices. Consequently, the localized release
became OEP's principal medium for getting its message to the
general public.
The Regional Offices issued 472 releases on freeze matters. The
National Office in its directives to the Regions had stressed from
the start of the freeze the important role of the press release in
the Regional PIO's program. Lincoln, on September 8, asked his
Regional Directors to continue using press releases originating in
the National Office for localized distribution within each Region.
The Regional Offices could reissue the full text as sent by CPA;
however, Lincoln noted that editing to reflect specialized concerns
of the Regions or communities might result in more comprehensive coverage by the regional and local media.19 Again on
October 4 he stressed "the urgency of the timely publication and
dissemination of Regional press releases." 20
There were almost as many methods to meet the requirement
for the dissemination of local news as there were Regions. Close
coordination between OEP and IRS proved the most common
arrangement, and probably the most efficient. Most OEP Regional
PIO's relied heavily on the IRS network to distribute the releases
to local papers; some also asked IRS to rewrite the releases; other
OEP PIO's preferred to work alone with their own mailing lists;
and many worked out variations of these methods. On the periphery
were the ASCS county offices, which received OEP releases for
distribution to weekly newspapers and local radio stations.
Coverage by the News Media.—The final measure of the success
of the public information effort was the extent of the public's
awareness and support of the program. Regional Directors without
10
Msg Bravo 157, September 8, 1971.
^ M Bravo 230, October 4, 1971.
153
PUBLIC UNDERSTANDING
exception voiced the conviction that the public was well informed
of the broad outlines of the freeze, and they attributed this to the
generally good coverage by the media.
The major national newspapers gave wide circulation to the
early rulings and other major policy developments. Those businessmen and lawyers who needed complete and accurate accounts of
the regulations resorted to the Federal Register, their association
newsletters, and private news services. Two such news services,
Bureau of National Affairs and Commerce Clearing House, extended their regular coverage of economic developments in the
Government to report in depth on freeze regulations and policy
developments. Each service increased its already broad circulation
in business, labor, legal, and governmental circles. Furthermore,
each published a new report specifically designed to cover the
freeze, thereby attracting additional subscribers.
The depth and kind of news coverage in the mass media varied
considerably. Geography, size and philosophy of the newspaper,
the editor's whims, the availability of alternate sources of information, and the PIO's efforts—all influenced the sort of coverage the
freeze received. Southern and Midwestern papers, for example,
were more likely to cover the freeze sympathetically than those in
the Northeast. In the Kansas City Region, the broadcasters and
newspaper reporters held a special news conference with the Regional Director and PIO to pledge their support to OEP and its
efforts.
Major announcements made in Washington were generally well
covered in the larger cities through the wire services, the networks,
and Washington correspondents. As a consequence, big-city media
tended to ignore regional releases of regulations and the more
prosaic decisions. This required the Regional PIO to focus on local
problems for the media of small towns and communities. Every
PIO discovered that press releases on local matters, plus personal
contacts and efficient use of IRS resources, would secure good
coverage.
While more suited to impressionistic reporting, the electronic
media did help to convey the basic freeze information to their wide
audiences. The television footage of OEP in the bustle of its first
days brought the impact of the freeze to millions and gave them
information on where to turn for help. CLC members and staffers
handled most of the later Washington press conferences and guest
appearances on network panels. Encouraged by the National Office,
the Regional Offices made extensive use of television and radio.
154
PUBLIC
UNDERSTANDING
Through frequent appearances on talk shows, panels, and press
conferences, Regional Directors and their PIO's sought to build
recognition in their new locations and to spread awareness that
OEP and IRS were available to answer individual questions.21
In sum, the national and regional coverage by the news media
was generally gratifying. The Government and the media were
trying together, in a wide variety of ways, to inform the public as
thoroughly as possible. Most important, the public wanted to be
informed. As a result, the general public was surprisingly well
aware of the broad aspects of the freeze, and special-interest groups
were very well informed.
The Speakers' Program
Requests for speakers to address civic, trade, and professional
organizations began to arrive in the OEP National and Regional
Offices at the onset of the freeze. Speaking engagements received
high priority in the information program. Speakers at meetings of
large, nationally prominent associations had the opportunity to
present specialized information directly applicable to pressing needs
of the audience. Speakers could thus provide more detailed explanations, beyond those commonly published in the regular news
media, which the associations could distribute to their members
by way of circulars and newsletters. The Speakers' Program also
offered a means of feeding back into the policy planning process
any critical problems brought up by these audiences.
The Director and Deputy Director filled the first requests from
major national associations, but special machinery was needed to
handle the increasing volume of requests. Early in September, the
Director established a Speakers' Bureau within CPA to prepare
guidelines and sample speeches for the use of speakers, to maintain
a list of approved speakers, and to schedule requests according to
given priorities. OEP Regional Offices advised the National Office
of requests from the most significant groups within the Region
and honored other requests, as appropriate, without referral to the
iNational Office.22
Most of the speeches were given to trade and professional as21
The Boston Region handled 44 TV, radio, and newspaper interviews and talkshow appearances the first week of the freeze. In the Kansas City Region, the
Regional Director gave 37 radio and eight television interviews, and four news
conferences in three major cities between August 23 and 27.
22
Memo, Lincoln to All OEP Personnel, September 13, 1971, Subj: Speakers'
Bureau.
155
PUBLIC
UNDERSTANDING
sociations, retail federations, and chambers of commerce. The
Speakers' Bureau generally booked requests only from major national and regional organizations; those organizations serving only
a city or a State were referred to the appropriate Regional Office.
By the end of the freeze, the Speakers' Bureau had filled 95 speaking engagements, broken down as follows: OEP National Office
representatives (including staff detailed from other agencies), 68;
OEP Regional Office representatives, 15; National Defense Executives Reserve (NDER) consultants, 5; other Federal agency representatives, 7.
On September 16, Lincoln requested OEP's 137 NDER economic
stabilization consultants and advisory committee members to accept
speaking engagements on invitation by OEP National and Regional
Offices.23 OEP Regional Directors were encouraged to extend similar invitations to members of their Regional Economic Stabilization Committees. All participants were given a "speakers' kit" of
suggested speeches.
The short duration of the freeze made extensive use of the
Executive Reservists difficult. The Speakers' Bureau hesitated to
disrupt the Reservists' busy schedules or to request much traveling.
Moreover, it was difficult to keep the Reservists abreast of rapidly
multiplying regulations. In these circumstances, the Reservists
would be forced to stick to the formal speech format, when most
audiences preferred a question-and-answer session.
The National Office called upon only five Reservists to fill engagements during the freeze. At the Regional level, only the Boston, New York, and Chicago offices used their Executive Reservists
as speakers. Most Regional Offices consulted with individual Reservists for feedback on business and public reactions. Regional
Offices which used the Reservists most easily and profitably were
those with long-standing habits of communication and personal
friendships between the Regional Director and the Reservists.
The Regional Offices filled a total of 639 requests for speakers.
The number per Region varied widely—from 16 in Dallas to 111
in San Francisco. The highly industrial and commercial Regions
generally received more requests for speakers. Some Regional
Directors and PIO's preferred to substitute for speeches direct
mailings to special-interest groups, numerous press releases, and
broad media coverage of difficult matters. In addition, geographical
28
OEP's stand-by plans for economic mobilization had included provisions for
the full activation of the NDER. For a discussion of the decision to use the
Reservists only as speakers and as consultants on the public and business mood,
see pp. 42-43.
156
PUBLIC
UNDERSTANDING
size and degree of IRS participation in the Speakers' Program
accounted for some of the differences in the number of speeches
given. In some large Regions, IRS relieved OEP of obligations in
areas far from the Regional Office.
The Regional Directors made the large majority of speaking
appearances themselves, and in some Regions these filled most of
their time. Some found the demands so heavy that careful screening of requests became necessary; in one Region it was decided
that no group would be addressed unless at least 100 people were
present.24 About 95 percent of the engagements were by request;
in a few cases, OEP offered speakers to meet some special problem.
The Speakers' Program on both the National and Regional
levels was highly successful in communicating information to key
groups. There were problems, of course, in the execution of the
program. The press of time and lack of detailed information for
the Q&A sessions were handicaps in the beginning. In addition,
the speakers most in demand were key staff members whose preoccupation with the immediate problems of freeze management
prevented them from filling more than a few very important engagements. Toward mid-October, the focus of attention moved to
Phase II, and speakers had little information to satisfy the curiosity
and quiet the anxieties of the public. OEP representatives were
instructed not to answer questions or speculate on postfreeze
policies, which were beyond OEP's responsibilities. No other
agency was yet equipped to handle the questions. During the
transition period, the Speakers' Bureau actively discouraged requests and referred as many as possible to Phase II agencies.
Trade Associations and the Spread of Information
OEP's emphasis on informing the major trade associations bore
fruit when these organizations took over, in large part, the responsibilities of disseminating information through the business
world.
Many Washington-based associations sent representatives to
OEP's Press Reception Room daily to pick up the latest OEP and
CLC releases. The information garnered from these releases was
published in association newsletters and bulletins. The Grocery
Manufacturers of America established a "freeze line," a 3-minute
telephone message, which member companies could tap to receive
24
After-Action Report to OEP Historian from Region 1, Boston, November 30,
1971.
157
PUBLIC
UNDERSTANDING
current information 24 hours a day. Lincoln was impressed with
the "freeze line" and directed CPA to call it to the attention of
other major associations.
On September 2, OEP provided answers to 89 of a total of 94
special questions submitted by the U.S. Chamber of Commerce on
behalf of its members; the other questions needed CLC resolution.
The Chamber then included these questions and answers in a
compilation of 250 Q&A's it distributed to over 1,300 trade associations and businesses. An OEP press release featured the good
example set by the Chamber of Commerce and the Grocery
Manufacturers of America in helping to disseminate information.
"I am certain," Lincoln noted, "that the tremendous job being
done by these associations has helped us greatly in achieving voluntary compliance with the President's program." 25
An October 7 press release further saluted 79 State and national
trade associations whose members had adopted an anti-inflation
emblem. The poster was distributed by associations affiliated with
the American Retail Federation, the National Association of Retail
Druggists, and the National Restaurant Association—a total representation of nearly one million retail establishments nationwide.
Lincoln viewed the adoption of this emblem as "another welcome
example of voluntary public support of the President's drive
against inflation." 26
OEP encouraged major business associations and organizations
of associations to pass along freeze information to their member
organizations. Toward this end, OEP circulated useful ideas as
they were developed by each group and responded to offers of
assistance by other organizations. Selected guidelines also went out
to a few specialized magazines and information offices for the
benefit of their clientele. In addition, with the assistance of the
Department of Commerce's Office of Business Services, the Director
sent a letter on November 9 to 123 retail associations asking them
to remind their members of the ceiling price list requirements.
On certain occasions, the flow of information was reversed and
industry supplied the necessary facts to the freeze planners and
administrators. Representatives of several major corporations and
business associations met with the Director or his representatives
to discuss policies as they applied to their industry and to suggest
adjustments to fit the practicalities of implementation. Two proposals which became the basis for official policy changes involved
25
26
OEP Press Release 437, undated.
OEP Press Release 451, October 7, 1971.
158
PUBLIC
UNDERSTANDING
modifications in the requirement to record the import surcharge
and in the obligation to post ceiling price lists. Feedback from
speeches before associations also went into the formulation of
policy. The rules on new products and seasonality, for example,
were shaped in part by the information obtained through such
contacts.27 The insights of several industry groups were also considered in Phase II planning.
Many businesses and municipalities, when unhappy with particular rulings or denied an exemption, requested special hearings
to present their cases in person. The Director or Deputy Director
granted a few requests of major importance, and lawyers in the
General Counsel's office met fairly frequently with those having
special legal problems. In a few cases, Pattison met with the petitioner and accepted a written exposition of his problem for processing through the prescribed channels. But the majority of the
hundreds of requests for an audience were denied, because administrators' time was short and written requests were preferred
to facilitate careful replies.
Coordination with State and Local Governments
When given operational responsibility for the freeze, OEP used
its established contacts with State and local government officials to
obtain their support for and active involvement in the Economic
Stabilization Program. Within OEP, the Regional Directors have
the principal responsibility for liaison with State and local officials;
CPA coordinates with the State and local government associations,
which are based in New York or Washington. Therefore, at the
outset of the freeze, the Regional Directors moved immediately
to meet with the Governors in their Regions; each Governor was
asked to appoint a personal representatives for regular liaison. The
Governors and their designees communicated to OEP the problems encountered by State and local officials and their reading of
public reaction to the freeze.
In order to inform the Governors promptly and thoroughly of
relevant policy developments, OEP provided them with the Stabilization Program Guidelines and sent them and their State Attorneys
General all other pertinent policy announcements. Messages to the
Governors' offices from the National Office were usually relayed
through the communications network operated by the Army for
the Office of Civil Defense (since redesignated Defense Civil
27
Interview with Darrell M. Trent, Deputy Director, February 15, 1972.
159
PUBLIC
UNDERSTANDING
Preparedness Agency). In congressional testimony, Deputy Director
Trent noted the importance of this network:
This communications system was of great help in delivering messages to the
Governors during the 90-day freeze when timely receipt of information from
Washington was of significant importance.28
In addition, CPA coordinated with the National Governors' Conference to take advantage of its communications channels; the
Governors' Bulletin, its weekly publication, carried to all Governors the CLC Q&A's and other information of interest to State
officials.
Some Regional Offices were successful in actively involving the
Governors' offices in the flow of information to the public. The
Seattle Region, during the early days of the freeze, channeled information to the Oregon public through the Governor's office,
maintaining daily contact to provide advice and answer questions.
The link worked well but was no longer needed when IRS joined
the network.
The State of California performed another sort of service for
OEP, thanks to contacts made during the rail strike crisis earlier
in the summer. Its Office of Emergency Services coordinated all
requests for information from State agencies and employees. OEP
also worked closely with the State Chamber of Commerce, which
kept OEP informed of activities and attitudes within the State.
Finally, the State Attorney General and State Superintendent of
Schools sent a joint letter to all county and district school superintendents proclaiming support for the freeze and asking for their
cooperation to make it work.
The Regional Directors worked closely with the mayors of major
cities. Joint news conferences were frequent in the early days of
the freeze, and in some cases close coordination and positive assistance extended throughout the freeze. In New York City, for
example, a liaison task force set up by the Mayor's office stayed in
almost daily communication with the Regional Office.
The National Office used the U.S. Conference of Mayors as its
point of contact with the mayors. This group, together with the
National League of Cities, publicized CLC and OEP policy pronouncements in newsletters to the mayors and managers of their
member cities and the executive directors of State municipal
leagues. Other national associations of local governments also gave
^Testimony by Darrell M. Trent, Deputy Director of OEP, before the House
Armed Services Committee, Subcommittee on Civil Defense, December 9, 1971.
160
PUBLIC
UNDERSTANDING
regular coverage to stabilization guidelines in their publications,
thus easing OEP's burden of disseminating information.
On September 21, Lincoln briefed the heads of the Washington
offices of the six principal organizations of State and local officials.29
The briefing gave Lincoln an opportunity to assure continued
rapport with these organizations, to acquaint them with OEP's
stabilization role, and to discuss their problems regarding Phase I.30
Throughout the freeze, the associations of State and local government officials stressed their desire to participate in the development
of policy for Phase II. Despite the strong support of many Governors, mayors, and State legislators, as well as of the associations,
there was wide recognition that State and local governments had
particular problems that would need priority attention upon termination of the freeze.
Congressional Relations
The President's announcement of a wage-price freeze was greeted
by statements of general support from most congressional leaders.
The National Journal noted that "the program has won a sufficient
degree of public support to make an open display of partisan
politics dangerous." 31 House Speaker Carl Albert urged Democratic cooperation:
The revitalization of our national economy must be our paramount domestic
objective. So vital is that objective that all considerations of partisan political
advantage must be scrupulously eschewed.32
Members of Congress were, of course, greatly interested in specific freeze policies of concern to their constituents. OEP greatly
expanded its congressional liaison function in order to respond
to the inquiries and referrals. Telephone inquiries from congressional offices ranged from 40 to 200 a day, placing heavy
demands on CPA's small staff. The highest volume of calls was
received in late August, but there were many peaks as new issues
arose. The Correspondence Section handled more than 3,000 congressional letters and referrals. These also came in waves. The
single largest issue was the teacher salary question, but a consider29
These groups were the National Association of Counties, National League of
Cities, U.S. Conference of Mayors, International City Management Association,
Council of State Governments, and National Governors' Conference.
30
OEP Press Release 432, September 21, 1971.
31
"Congress to Sweeten Tax Plan," National Journal, September 18, 1971.
32
Ibid. There was, however, serious opposition in Congress to some aspects of
the New Economic Policy, in particular the tax measures and the shape of the
Phase II controls.
161
474-893 O - 72 - 12
PUBLIC UNDERSTANDING
able percentage of the congressional mail referred to requests for
exemptions.
In addition to responding to direct requests from Congress, OEP
kept Members of Congress and their staffs informed of policy
developments in the Economic Stabilization Program. Lincoln, on
September 1, participated in the initial Administration briefing of
Congress. Pattison spoke by invitation to the Administrative Assistants to Republican Members of the House of Representatives.
Beginning with an August 19 package of press releases and Questions and Answers, CPA dispatched materials to Members of
Congress on an almost daily basis. It apprised all Members of the
role of IRS and ASCS field offices in handling calls from the public
and solicited their assistance in making this known to their constituencies. On the particularly volatile teacher salary issue, OEP
on September 16 furnished definitive guidance to all Members of
Congress for use in answering inquiries. Thus, an attempt was
made not only to keep the Congress informed but also to use this
channel as a way of reaching a wider audience.
Delays in obtaining substantive answers to specific queries at
times proved irritating to Members of Congress. Many answers
simply were not available for the first few weeks, and even later
CLC took a long time to resolve some complex issues. Most Members of Congress were in favor of the freeze, but some were critical
of the paucity of information on the status of requests for exemptions, of Phase II plans, and of other issues. In most cases, however,
dissatisfaction ceased when adequate information became available.
Congressional staffs commented on the relatively low volume of
mail they had received on Phase I. In a letter to OEP in midSeptember, House Republican Conference Committee Chairman
John B. Anderson (R.-Ill.) observed: "The lack of complaints to
our offices certainly shows how effective OEP's operation has been
as well as how well the public had accepted the President's program." 33
RESPONDING TO PUBLIC CONCERNS
The primary purpose of OEP public information efforts was to
inform the public about freeze policies and activities. Distribution
of basic information was an essential part of the administrative task
and was continued throughout the freeze with little change in aims
33
Quoted in OEP Weekly Summary Report to CLC Chairman, October 2, 1971.
162
PUBLIC
UNDERSTANDING
or strategy. There was another aspect of dealing with the public,
however, which sought to respond to changes in the public mood
or to varying conditions. Through letters and telegrams from
the public, Regional reports, and a daily news summary prepared
by CPA for the executive staff, OEP kept itself informed of the
ways different segments of the public were reacting to the freeze.
It tailored some public affairs activities to these reactions in order
to maximize support and counter public criticism.
The initial, generally positive response to the freeze discussed
earlier in this chapter became more varied as the freeze continued.
Business leaders were the most constantly favorable supporters of
the freeze. Representatives of business indicated in congressional
testimony and in responses to polls that their support was motivated by concern over high materials costs, soaring interest rates,
consumer reluctance to spend, and particularly by the high cost of
labor. Most businessmen were hoping that the inflationary psychology would be broken and consumer confidence restored by the
Economic Stabilization Program. Indeed, retail trade picked up
noticeably after the imposition of the freeze.34
A majority of the public similarly welcomed the freeze as a
promising solution to the commonly recognized menace of inflation. OEP's weekly reports to the CLC Chairman regularly noted
that nationwide public opinion polls indicated continued public
acceptance of the freeze. One typical survey showed 73 percent
public support in August and 65 percent in September; the figures
for union families were 65 and 54 percent respectively.35 Yet the
same polls showed that some serious reservations about the equitableness of the freeze had developed among some segments of the
population, even among those who continued to assert general
support for the program.
Most small businessmen and landlords complied with the freeze,
usually without significant financial hardship. The criticism that
did arise from this sector came from those who were more seriously
affected by the freeze, applied for an exemption, and saw it denied.
Charges of "inflexibility" and a "doctrinaire approach" were received as a result of OEP's policy of allowing very few exemptions.
Criticism also arose from wage-earners who had lost a scheduled
34
See Nation's Business, October 1971 and April 1972, for Chamber of Commerce
surveys of executives; U.S. News & World Report, September 20, 1971 for a survey
of retailers; Testimony of W. P. Gullander, President of NAM, September 22, 1971,
before the Joint Economic Committee, in The President's New Economic Program,
Hearings, Part 4. (Washington: Government Printing Office, 1971) , pp. 668-695.
35
See OEP Weekly Summary Reports to CLC Chairman, October 9 and October
16, 1971; also Gallup polls reported in Newsweek, October 11, 1971.
163
PUBLIC
UNDERSTANDING
pay increase. To most working people of modest income, "inflation" meant rising prices, and "fighting inflation" therefore meant
stopping price increases. Pay increases, on the other hand, were
seen as the just rewards of greater proficiency and longevity of
service. Wage and salary earners thus greeted enthusiastically the
freeze on prices and rents, but many of those directly affected
reacted to the freeze on pay with suspicion and in some cases with
bitter criticism. Exacerbating the situation was the fact that pay
levels were easily controlled by employers, while monitoring prices
was a difficult and uncertain undertaking. The Government's
efforts at price controls proved to be an area of considerable friction and skepticism as the suspicion that prices were creeping up
became widespread.36 Consumer groups and newsmen led the attack
on the alleged laxity in enforcement. Their suspicions were increased by the difficulty in getting information from retailers on
their ceiling prices and by OEP's policy of confidentiality regarding the names of suspected violators and of those who complied
voluntarily when confronted by IRS.
The most open opposition and defiance came from labor leaders
and teachers, who focused their attacks on the alleged inequity of
the freeze's impact. Organized labor, decrying the exclusion of
profits, interest rates, and dividends from control, claimed that big
business, banks, and major stockholders were reinforcing their
already favored position, while the poor, city and State governments, and Federal workers paid for this "bonanza for business."
Congressional hearings provided the forum throughout September
and October for the labor leaders' denunciation of the freeze and
its effect on working people, the "chief sacrificial lambs." 37 However, George Meany, President of the AFL-CIO, realistically described his organization's operational position as noncooperation
rather than outright defiance.38
The question of whether or not union rank-and-file sided with
union leaders was hotly debated but never settled definitely. As
indicated above, the majority of union families expressed support
38
A survey requested by CLC and conducted by the Census Bureau from September 24 to October 2 found that 60 percent of the national sampling of 2,216 persons
felt the freeze had stopped wage increases, while only 33 percent said it had stopped
price increases. Cited in article by Michael C. Jensen in New York Times, October
15, 1971.
37
Leonard Woodcock, in testimony October 6, 1971, before the House Banking
and Currency Committee, in Economic Stabilization, Hearings. (Washington: Government Printing Office, 1971) , p. 219; see also other testimony before this Committee and hearings of the Joint Economic Committee and the House Ways and
Means Committee.
38
Daily Report for Executives (Washington: Bureau of National Affairs), August
19, 1971.
164
PUBLIC
UNDERSTANDING
for the freeze, but various polls seemed to indicate that workers
generally had doubts about the equitableness of the freeze and its
effectiveness in controlling inflation. Workers, already disgruntled
by the loss of pay or stalled contract negotiations, were further
irritated by the spreading belief that business was profiting unjustly
from the program.39
Teachers voiced strong dissatisfaction over their loss of scheduled
pay increases; teachers' salaries proved the single most troublesome
problem in all the Regions throughout the first half of the freeze.
Many teachers felt that their unique contractual situation justified
a general exemption from the freeze and therefore that the rulings
in their case were discriminatory and unduly harsh. This negative
response was aggravated by the confusion that arose over the early
guidance in this area. The result was widespread noncompliance
by teachers and an outburst of public sympathy toward them.40
Public information activities were geared to maintaining the
general public support at a high level and to winning back those
groups whose support was wavering. In many cases, all that was
needed was to clarify the guidance in a particular area to end the
frustration of the confused. This approach was used, for instance,
to minimize the opposition of teachers. Earlier confusion was
largely cleared up by the issuance of definitive guidance on September 16. As this was disseminated through the mass media and
directly to public officials, the attitude of teachers changed from
antagonism to a generally resigned acceptance of the situation. 41
A strengthened public information effort of persuasion and explanation was directed against the charges of inequity and the
suspicions of widespread price violations. The Administration, or
more specifically CLC and OEP, sought to convince the doubtful
of two major points: that the freeze was necessary and that every
effort was being made to keep it stringent, consistent, and reasonable. The President in his August 15 television address stressed the
first point; he conveyed to millions the seriousness of the inflationary situation and the need for the freeze. Members of CLC
and other Administration spokesmen continued to emphasize the
existence of a national crisis. Addressing themselves to corporations
and other large economic entities, as well as to the average American, they worked to foster a mood of ideological support conducive
39
The Census Bureau survey cited above indicated that 62 percent of those
questioned felt that "working people, union members, wage-earners, either blue
or white collar" were not benefiting from the freeze. See also Gallup polls in
Newsweek, October 11, 1971; Harris poll in Washington Post, October 11, 1971.
40
Weekly Report from Region 6, Dallas, Texas, September 10, 1971.
41
See pp. 89-91 and 128-131 for a full discussion.
165
PUBLIC
UNDERSTANDING
to the revival of a healthy business atmosphere and to a willingness
to comply even to the extent of personal disadvantage.
OEP's task was largely one of sustaining a more pragmatic type
of support, or obedience to the regulations regardless of one's personal feelings on the NEP or specifically on the freeze. To obtain
cooperation from the general public and specialized sectors, including the union rank-and-file, OEP concentrated on publicizing its
consistent and impartial administration and its success in controlling prices and preventing loopholes.
OEP conveyed its message through press releases, speeches, and
responses to inquiries. To those who complained of a lost wage
increase or a denied exemption request, the reply was that everyone else in a similar situation was being treated in the same manner. OEP admitted that the impact of the freeze was arbitrary, that
some by a simple chance of timing were hurt more than others.
It repeatedly stressed, however, that no favoritism or leniency was
being shown, even to such popular groups as teachers, professional
football teams, and the Girl Scouts. The constant emphasis in press
releases on the overwhelming number of exemptions denied, as
well as their variety, conveyed to those who might otherwise have
complained of their own hardships that many others were suffering
at least as much as they were.
To deal with public suspicions of price violations, potentially
fatal to the delicate fabric of public support and voluntary compliance, OEP constantly reiterated in public statements that a high
degree of compliance was being achieved, and it offered as proof
the results of spot checks made by IRS. By accenting the theme of
the fine response of the American people, the Government hoped
to convince the skeptical and the potential violators that they
should join in the majority reaction. OEP's policy of confidentiality
in compliance cases kept CPA from satisfying the curiosity of reporters and from calming consumers' fears that retailers were
violating the freeze with impunity. As a substitute for releasing
names of violators, OEP gave wide publicity to general descriptions
of cases resolved by voluntary compliance.
While in practice OEP and CLC relied heavily on voluntary
compliance for the success of the freeze, a visible program of enforcement was used to bolster public confidence in the effectiveness of the freeze administration. With the help of IRS and the
Department of Justice, OEP intensified its actions against violators
in the latter part of September to refute the doubters. And the
tightened requirements on ceiling price lists (discussed in Chapter
166
PUBLIC
UNDERSTANDING
VI) were a direct result of an OEP-CLC desire to end consumers'
feelings of suspicion and helplessness by giving them a tool for
monitoring retail prices.
OEP's relations with most business leaders and associations were
on the whole amiable. Information was communicated efficiently
to individual businesses through trade association newsletters and
speeches by OEP representatives; conferences with various OEP
officials provided a way for business leaders to explain their problems and needs for Phase II. Their tendency to wait until Phase II
requirements were better known before investing in new equipment was largely beyond OEP's ability to affect. As for organized
labor, OEP concentrated on winning the support of union rankand-file; the approach differed little from that used to win general
public support. While labor leaders remained adamant in their
opposition, they were more concerned with influencing Phase II
legislation and policy than with changing Phase I administrative
decisions.
The reservations and skeptical attitudes found among the general public indicated that many were waiting to see how the whole
NEP would work out before giving it an unqualified endorsement.
These reservations did not, however, have much effect on the generally satisfactory picture of cooperation and compliance.
The support shown for the freeze reflected the willingness of
Americans to give Government initiatives a trial if the situation
seems to call for it. But in addition, the support demonstrated the
success of the Administration, and most directly of OEP, in building public understanding through a program emphasizing broad
dissemination and explanation of information. The assistance given
to OEP by the media and trade and professional associations,
coupled with the public's own vital interest in the program, contributed significantly to the goal of an informed and cooperative
public.
167
VIII
Planning for the Postfreeze Period
LOOKING BEYOND THE FREEZE
What Comes Next?
From the outset of the freeze the Cost of Living Council had
responsibility for determining the actions that would have to be
taken after the 90 days. Dr. Herbert Stein of the Council of
Economic Advisers headed a task force which set out promptly to
consider this matter. Administration plans called for consultations
with industry, organized labor, consumer groups, and other interested parties on future courses of action. About two months after
the beginning of the freeze, some time in October, would come
final decisions on transition and on the strategy, organizations, and
programs to be used after November 13.
The freeze was still in its early stages when the OEP National
and Regional Offices began receiving queries concerning the Administration's plans for "Phase IF'—the period that would follow
the 90-day freeze. Clearly the American economy could not long
function efficiently within the straitjacket of a wage-price freeze.
But it was equally clear, as Secretaries Connally and Stans indicated in late August, that some curbs would be needed to restrain
inflationary pressures beyond the 90-day period. The positive effects
of the freeze would surely be lost if it were to be lifted without
some mechanism to hold wage and price increases within acceptable
limits.
The general feeling among the public was that longer-term restraints would be needed if a wave of pent-up inflation was not to
wash across the country with the lifting of the freeze. As the administrator of the freeze, OEP Director Lincoln was in a good
position to sense this sentiment. In his September 8 address before
the National Association of Food Chains, Lincoln left no room for
doubt as to his feeling about the postfreeze challenge and the alternatives for the Nation:
168
PLANNING
FOR POSTFREEZE PERIOD
. . . There will be a Phase II which of course can be another return to the
cannibalistic wage, price, rent situation we had pre-freeze, or on the other hand
an extension of the current freeze—or it can be any of a large variety of options
in between. . . .
If the freeze period were followed by an inflationary bubble, it would be a
saddening outcome for the great effort all of us are engaged in. . . .
We must think of how to stop cancelling our great technological assets through
increases in other costs which place us at a disadvantage in trade with other
countries and in trade with our own domestic consumers. We should think
about how to pace increases in wages, prices, and rents with equivalent gains in
productivity in order that we may travel on a steady upward economic path and
avoid the debilitating inflation we have been experiencing.1
As was indicated earlier, President Nixon, in an address before a
joint session of the Congress on September 9th, ruled out a return
to the status quo ante. The freeze would end as scheduled, he
promised, but he would take "all the steps needed" to prevent a
new surge of runaway inflation. Nixon announced that he would
soon begin consultations with representatives of industry, labor,
agriculture, and the Congress in preparation for setting his postfreeze course. Some system of wage and price stabilization, the
President said, would emerge from these discussions. He was not
ready at that point to describe the system nor to forecast its duration, though he pledged that it would be temporary.2
At a press conference the following week the President set forth
his "tentative conclusions" with regard to the direction of the
Administration's thinking about Phase II:
. . . First, there will be a strong, effective follow-up program. The American
people overwhelmingly support the wage-price freeze. . . . They don't want to
have a freeze followed by a thaw where you can get stuck in the mud. . . .
Phase II will be strong. It will be effective. . . . [It] will restrain wages and
prices in major industries.
Second, it will require the cooperation of labor and management.
But third, and this is vitally important, it will have teeth in it. You cannot
have jawboning that is effective without teeth.3
Thus it seemed clear that there would be no immediate return to
the prefreeze situation. Nor would there be imposed the allpervasive controls used in World War II or the Korean War. The
President had in mind a program that would lie somewhere between these extremes.
By then, though the point of final decision had yet to be reached,
the Stein group was well along in formulating the philosophy and
1
2
Remarks before the National Association of Food Chains, September 8, 1971.
A New Prosperity Without War and Without Inflation, Message from the President of the United States Concerning His Economic Policies, House Doc. No. 92-162,
92nd
Cong., 1st Sess., September 9, 1971.
3
Press Conference No. 19 of the President of the United States, September 16,
1971.
169
PLANNING
FOR POSTFREEZE PERIOD
broad outlines of the Phase II program. Goals would be sufficiently
optimistic to generate confidence and to discipline the administrators of wage and price policies, but not so optimistic as to be unattainable. The program would be of sufficient scope to have the
desired effects, but at the same time the Administration would
seek to minimize the buildup of bureaucracy and undue interference with the economy. Further, the Phase II program would be
comprehensive, but the governing standards and procedures would
provide for greater flexibility and equity than was possible during
the 90-day freeze. Phase II, like the freeze, would depend heavily
for its success on voluntary cooperation of the great majority of
the people, with the government ready to impose sanctions on
those few who would not comply.
OEP Inputs to Phase II Planning
The substantive details of CLC's planning for Phase II and the
events surrounding the Administration's decisions on the organization and strategy that finally surfaced lie beyond the scope of this
history. It is relevant, however, to highlight some of the ways in
which the OEP Director as a member of CLC and several members
of his staff contributed to the planning process.
Members of CLC and other top government officials consulted
actively with representatives of various sectors of the economic community to determine their views concerning appropriate policies
and procedures to maintain wage and price stability.4 The task
was informally split up among CLC members.5 OEP consultations
embraced the oil and energy (including power) industries, wholesale and retail associations, the fiber box industry, State and local
government organizations, and several other segments of the economy.6 The meetings brought out the primary concerns of these
economic sectors regarding Phase II and their suggestions on
arrangements and methods of control. The information gleaned
4
Ltr, Weber to Eugene A. Kenney, President, American Retail Federation,
August 27, 1971; Weber, Memorandum to All Department and Agency Heads,
September 22, 1971.
5
Lincoln, Note to Harry B. Yoshpe, February 8, 1972.
6
Lincoln, Memorandum for Weber, October 4, 1971, Subj: Your memorandum
of September 22, 1971 re consultations with various segments of the economy re
Phase II.
170
PLANNING
FOR POSTFREEZE PERIOD
from these consultations was analyzed to highlight problems that
had important implications for Phase II.7
At the OEP staff level, William C. Truppner, Assistant Director
for Resource Analysis, presented to Lincoln and the CLC staff ideas
and proposals for consideration by those responsible for putting
together the postfreeze program. Along with general thoughts on
the administration of a postfreeze control system, Truppner set
forth specific suggestions for the control of "key" firms in "key" industries, control by "self-authorization," practicable patterns of organization and staffing, and the application of analytical techniques
for assessing the inflationary impacts of proposed price and wage
increases and for the selection of industries to be decontrolled.8
In addition to this analytical and computational support, the
CLC staff received support from the Economic Stabilization Division in OEP headquarters. In accordance with instructions from
Lincoln, the major thrust of the division's work throughout the
freeze was to help CLC's planning and analysis staff to develop
concepts for Phase II.9 The division made available to the CLC
staff many papers on organizational concepts and operating methods based on its experience with contingency planning.10
In response to varying CLC scenarios for Phase II, the division
came up with alternative concepts and systems of control. Among
the division's inputs were proposed structures and operating pro7
See Memoranda for the Record by L. D. Olvey, G. L. Butler, R. E. Plett and
others in Lincoln File—Wage-Price Ceiling—1971 Meetings with Industries and Associations; Michael M. Tansey, Memorandum for Lincoln, September 17, 1971, Subj:
Industry by Industry Summary of the Effects of the Freeze; OEP Press Release 432,
September 21, 1971.
8
See Memoranda, Truppner to Lincoln, September 14, 1971, Subj: Some Notes
on the Stabilization Program After 11/12/71 (Draft No. 2); Truppner to Charles
H. Sevin, CLC Plans and Analysis, September 23, 1971, Subj: Operating Concept
and Data Base Requirements and Sources for Postfreeze Stabilization Control System
(SCS) ; Truppner to Lincoln, October 15, 1971, Subj: Assessing Inflationary Impact
of Wage Settlements and Price Increases, and attachment; Truppner to Lincoln,
October 27, 1971, Subj: Inflationary Impact Criteria for Selective Industry and
Company Coverage Under Phase II Control System; Truppner to Lincoln, December
2, 1971, Subj: Selective, Time-Phased Decontrol Procedure, and attached memorandum from Lester Tepper, Consultant, Resource Analysis, to Truppner, same date
and subject.
9
At the onset of the freeze, the Economic Stabilization Division was under the
jurisdiction of Eugene J. Quindlen, Assistant Director for Government Preparedness.
Mr. Leonard Skubal, the division director, had previously retired from government
service, but continued as a consultant to help until September 1st. It was anticipated
that this planning assignment to the division would require analytical support. As
an interim measure, therefore, Lincoln assigned the division to Mr. Truppner, and
designated Francis J. Russo acting chief of the division. See Memo, Lincoln to All
OEP Personnel, September 3, 1971; Skubal, "Critique of OEP's Role and Performance
in the Economic Stabilization Program of the New Economic Policy," January 1972.
w
Russo, Memorandum for the Record. November 29, 1971, Subj: Partial list of
stabilization concepts and standby programs supplied to the Program and Analysis
Division of the CLC (Sept. thru Nov. 14) .
171
PLANNING
FOR POSTFREEZE PERIOD
from these consultations was analyzed to highlight problems that
had important implications for Phase II.7
At the OEP staff level, William C. Truppner, Assistant Director
for Resource Analysis, presented to Lincoln and the CLC staff ideas
and proposals for consideration by those responsible for putting
together the postfreeze program. Along with general thoughts on
the administration of a postfreeze control system, Truppner set
forth specific suggestions for the control of "key" firms in "key" industries, control by "self-authorization," practicable patterns of organization and staffing, and the application of analytical techniques
for assessing the inflationary impacts of proposed price and wage
increases and for the selection of industries to be decontrolled.8
In addition to this analytical and computational support, the
CLC staff received support from the Economic Stabilization Division in OEP headquarters. In accordance with instructions from
Lincoln, the major thrust of the division's work throughout the
freeze was to help CLC's planning and analysis staff to develop
concepts for Phase II.9 The division made available to the CLC
staff many papers on organizational concepts and operating methods based on its experience with contingency planning.10
In response to varying CLC scenarios for Phase II, the division
came up with alternative concepts and systems of control. Among
the division's inputs were proposed structures and operating pro7
See Memoranda for the Record by L. D. Olvey, G. L. Butler, R. E. Plett and
others in Lincoln File—Wage-Price Ceiling—1971 Meetings with Industries and Associations; Michael M. Tansey, Memorandum for Lincoln, September 17, 1971, Subj:
Industry by Industry Summary of the Effects of the Freeze; OEP Press Release 432,
September
21, 1971.
8
See Memoranda, Truppner to Lincoln, September 14, 1971, Subj: Some Notes
on the Stabilization Program After 11/12/71 (Draft No. 2); Truppner to Charles
H. Sevin, CLC Plans and Analysis, September 23, 1971, Subj: Operating Concept
and Data Base Requirements and Sources for Postfreeze Stabilization Control System
(SCS) ; Truppner to Lincoln, October 15, 1971, Subj: Assessing Inflationary Impact
of Wage Settlements and Price Increases, and attachment; Truppner to Lincoln,
October 27, 1971, Subj: Inflationary Impact Criteria for Selective Industry and
Company Coverage Under Phase II Control System; Truppner to Lincoln, December
2, 1971, Subj: Selective, Time-Phased Decontrol Procedure, and attached memorandum from Lester Tepper, Consultant, Resource Analysis, to Truppner, same date
and subject.
6
At the onset of the freeze, the Economic Stabilization Division was under the
jurisdiction of Eugene J. Quindlen, Assistant Director for Government Preparedness.
Mr. Leonard Skubal, the division director, had previously retired from government
service, but continued as a consultant to help until September 1st. It was anticipated
that this planning assignment to the division would require analytical support. As
an interim measure, therefore, Lincoln assigned the division to Mr. Truppner, and
designated Francis J. Russo acting chief of the division. See Memo, Lincoln to All
OEP Personnel, September 3, 1971; Skubal, "Critique of OEP's Role and Performance
in the Economic Stabilization Program of the New Economic Policy," January 1972.
10
Russo, Memorandum for the Record. November 29, 1971, Subj: Partial list of
stabilization concepts and standby programs supplied to the Program and Analysis
Division of the CLC (Sept. thru Nov. 14) .
171
PLANNING
FOR POSTFREEZE PERIOD
cedures for the projected wage and price bodies, position papers
on industry-wide problems with suggested solutions, postfreeze
exceptions and definitions, various pricing techniques, industry
reporting requirements, drafts of regulations, and lists of industry
advisory committees and consultants working with OEP in stabilization planning. Follow-on meetings were held with the CLC staff,
and the division also participated in the Director's discussions with
industry representatives to elicit their views on Phase II.11
The Postfreeze Program
On October 7 the President and CLC unveiled the goals,
strategy, and structure of the postfreeze program.12 The Administration set down twin goals for the program: (1) to reduce the rate
of inflation to between 2 and 3 percent annually by the end of
1972—about half the prefreeze rate—and (2) to eliminate "inflationary expectations/'
No time limit was set for the program. It would be terminated
as soon as possible, but not until a reasonable degree of continuing
price stability was assured. Some products and services were to be
exempted outright, and controls over particular economic sectors
would be removed or relaxed when feasible. To ensure victory in
his fight against inflation, President Nixon asked Congress for a
one year extension of the Economic Stabilization Act of 1970,
which was due to expire April 30, 1972. He also asked for standby
u
See, e.g., Memoranda, Russo to Lloyd Eno, Resource Analysis Office, September
9 and 22, 1971, Subj: Economic Stabilization Division—Current Operations; Russo
to Louis Neeb, Policy and Guidance Liaison, October 20, 1971, Subj: Comments on
Post-Freeze Exceptions and Definitions; Russo to Edward R. Saunders, Jr., Deputy
Assistant Director for Resource Evaluation, November 4, 1971, Subj: Rent Stabilization—Phase II; Russo to Saunders, November 8, 1971, Subj: Improved Definition and
Required Adjustment for Early Attention of Price Commission; Enclosure to
Memo, Truppner to Laurent Morin, Planning Review Office, November 16, 1971,
Subj: After-Action Reports on OEP's Role in the Wage-Price Freeze; Skubal,
"Critique of OEP's Role and Performance in the Economic Stabilization Program
of the New Economic Policy," January 1972.
12
The discussion which follows is based essentially on the following: The President's speech, "The Continuing Fight Against Inflation," October 7, 1971, White
House release transmitted to the OEP Regional Offices by Msg Alfa 171; "Background Paper on Post-Freeze Economic Stabilization Program," transmitted to OEP
Regional Directors on a "personal priority" basis by Msg Alfa 168, October 7, 1971;
Executive Order No. 11627, October 15, 1971, "Further Providing for the Stabilization
of the Economy"; White House Fact Sheet, October 15, 1971; "Statement by Donald
Rumsfeld, Director, CLC, November 10, 1971, CLC News Release transmitted to OEP
Regional Offices by Msg Alfa 256; and Economic Report of the President
Transmitted
to the Congress January 1972, together with the Annual Report of the Council of
Economic Advisers (Washington: Government Printing Office, 1972), particularly pp.
82-95. (Hereinafter cited as CEA Annual Report)
172
PLANNING
FOR POSTFREEZE PERIOD
authority to control interest rates and dividends, although he hoped
voluntary restraint would suffice.13
While the program covered almost the entire economy, special
attention would be focused on major industries and unions. CLC
decided on a three-tier structuring of economic units for purposes
of prenotification, reporting, and monitoring of price and wage
increases as follows:
TABLE 11.—Required Reporting of Price and Wage Increases
Tier
Action required
(a) Prenotification of Price
Commission or Pay
Board (increase to be
effective with approval
of
Commission
or
Board) .
(b) Tier I firms to submit
quarterly price, cost
and profits reports to
Price Commission.
II
Ill
Price increases
(size of firm)
Wage increases
(number of workers)
Sales of $100 million Affecting 5,000 or
and over (1570 firms more workers (10 perwith 45 percent of cent of all employees).
all sales) .
1,000
to
(a) Report to Price Com- Sales of $50 million Affecting
to $100 million (1,000 5,000 workers (7 permission or Pay Board.
firms with 5 percent cent of all employees).
of all sales).
(b) Tier II firms to submit
quarterly price, cost
and profits report to
Price Commission.
No reports (but increases to be made only
in
accordance
with
Price Commission and
Pay Board regulations
and to be subject to
monitoring and spot
checks).
Sales of less than $50
million (10 million
enterprises with 50
percent of all sales).
Affecting less than
1,000 workers (83 percent of all employees).
13
Legislation enacted December 22, 1972 extended the stabilization authority to
April 1973. Extension of this authority, the Council of Economic Advisers later
noted, "provides sufficient continuity and duration of the stabilization program to
permit it to succeed." Some of the amendments voted by Congress, however, were
not requested by the Administration, and these held out the prospect of adding to
the complexities of program execution (see CEA Annual Report, p. 95) . The provisions which the Administration opposed included requirements that (a) scheduled
wage increases be honored, retroactively if deferred by the freeze, unless they were
unreasonably inconsistent with established stabilization guidelines, and in any cases
if prices or taxes had been raised or other provisions made to finance the increases;
(b) the chairmen of the Pay Board and Price Commission be confirmed by the
Senate and the two bodies operate by majority rule; (c) interest rates be stabilized
whenever wage and price authority was used, except when the President determined
that economic conditions did not require control over interest; and (d) Federal
employees' pay be increased by up to 5.5 percent at the beginning of 1972, instead
of at mid-year, as the President had proposed (see 1971 Congressional Quarterly
Almanac, p. 31.)
173
PLANNING
FOR POSTFREE1E PERIOD
As in the case of the freeze, the President sought to avoid a big
bureaucracy to administer the Phase II program. "Stabilization
must be made to work," he told the Nation on October 7, "not by
an army of bureaucrats, but by an army of patriotic citizens in
every walk of life." The program again would he based largely on
voluntary restraint. Nonetheless, the President said: "If there are
any who try to take advantage of the patriotic cooperation of their
fellow Americans, I can assure you that the government must be
and will be prepared to act against them." u
The administrative machinery for Phase II of necessity was more
complex than the freeze structure.15 The Cost of Living Council
was to have overall responsibility, as it did during the freeze. It
would serve as a policy review group to assure that actions and
decisions of the postfreeze bodies were "of such a pattern and impact" as to achieve the President's objective of cutting inflation in
half by the end of 1972. As a concession to organized labor, whose
cooperation was essential in the fight on inflation, the President on
October 11 approved a statement that CLC would not veto decisions on individual cases by the two new and primary bodies, the
Pay Board and Price Commission.16
CLC would, however, monitor, evaluate and coordinate the
policy and conduct of the postfreeze agencies. It would provide
logistic support to these agencies; recommend enforcement proceedings; and initially determine, with the advice of the agencies,
the extent to which various elements of the economy were to be
covered by controls. Donald Rumsfeld, Counsellor to the President
and former head of the Office of Economic Opportunity, was
designated as Director of CLC.17
The development of guidelines and standards to attain the goal
of the Phase II program fell to two new bodies—the Pay Board
and the Price Commission. The Pay Board would be tripartite,
with five members each from labor, business, and the public; the
chairman would be drawn from the public members. The Board
would establish standards and make generally applicable decisions,
14
"The Continuing Fight Against Inflation," October 7, 1971.
The postfreeze organization is depicted in Figure 7.
White House summary statement on the respective roles of CLC, Pay Board
and Price Commission, with the President's "O.K." and initials, October 11, 1971,
reprinted in New York Times, October 13, 1971.
"Arnold Weber, Special Assistant to the President and Executive Director of
CLC, resigned from these posts on October 22. Weber returned to the faculty of the
University of Chicago, but agreed to serve as a public member of the Pay Board.
Edgar R. Fiedler, director of the Council's Policy Review Staff, was named Deputy
Director of CLC for the remainder of Phase I; see CLC News Release, October 22,
1971.
15
16
174
PLANNING
FOR POSTFREEZE PERIOD
FIGURE 7
POSTFREEZE ORGANIZATION
Committee on
Interest and
Dividends
COST OF LIVING
COUNCIL
National
Commission on
Productivity
Committee on
Health Services
Industry
Committee on
State and Local
• Government
Cooperation
PRICE COMMISSION
PAY BOARD
RENT ADVISORY
BOARD
EXECUTIVE
COMPENSATION
SUBCOMMITTEE
Construction
Industry
Stabilization
Committee
STABILIZATION
OFFICES
(INTERNAL REVENUE
SERVICE)
Agricultural
Stabilization
and Conservation
Service
Source: CEA Annual Report, p. 86.
175
PLANNING
FOR POSTFREEZE PERIOD
as well as decisions on changes in compensation (wages, salaries,
and fringe benefits) on a case-by-case basis.
The Price Commission held similar powers in the price field. The
Commission would be composed of seven public members—"not
beholden to any special interest group," the President told the
Nation. Along with efforts to restrain price and rent increases, the
Commission would seek to prevent employers from reaping "windfall" profits because of the operation of wage restraints. The President called for price cuts as a means of distributing such profits to
consumers.
A number of specialized advisory committees were also to be
established. These were designed to help restrain interest rates and
dividends, seek cooperation with State and local governments, and
suggest ways to curtail price increases in the health services industry. A Rent Advisory Board was established in November to
advise and assist the Price Commission in handling rent stabilization matters.18 The preexisting, tripartite Construction Industry
Stabilization Committee came under the authority of the Pay
Board. Further, the preexisting National Commission on Productivity was expanded and assigned the role of recommending to
CLC and other stabilization agencies ways to stimulate economic
growth and improve the productivity of American labor and
industry.
Primary responsibility for the management task in the postfreeze
period devolved on a "Service and Compliance Administration"—
within the Internal Revenue Service—reporting to CLC. Within
the guidelines and regulations issued by CLC, the Price Commission, and the Pay Board, IRS would answer inquiries, act on
requests for interpretations, and process appeals from adverse determinations. In addition, IRS was to provide information to the
public, investigate complaints, and monitor compliance with stabilization guidelines. It was also to conduct fact-finding investigations for the Pay Board, Price Commission, and CLC.
IRS was to carry out these functions through a national system
of regional and local service and compliance centers located in the
IRS District and Subdistrict Offices. The centers would require
approximately 3,000 people. Almost all these people would be
located in the field offices, and they would be supplemented by
personnel from other agencies with expertise in labor, housing,
and other specialty fields.
In addition, IRS would continue to be assisted by the Agri18
See Executive Order No. 11632, November 22, 1971.
176
PLANNING
FOR POSTFREEZE PERIOD
cultural Stabilization and Conservation Service of the Department
of Agriculture. ASCS would provide information about the program through its more than 2,800 local offices, as it did during the
90-day freeze, although it was not anticipated that ASCS would be
required to devote much effort to Phase II.
For many people within OEP headquarters and in the Regions,
the assignment of Phase II administration to IRS came as a surprise; for many, especially those detailed from other agencies, it
brought a sense of disappointment. The OEP management of the
freeze had been exciting. From the outset most participants committed themselves to giving the best possible service to the public,
and they drew considerable satisfaction from the knowledge that
they had performed well under that commitment. Many detailees
would have chosen to continue serving with OEP had that Agency
remained in the driver's seat during Phase II.
In a personal message to his Regional Directors on October 7,
Lincoln indicated the rationale for the assignment to IRS of the
postfreeze management task:
. . . This arrangement follows the thesis that OEP is an emergency agency,
and although OEP is handling the emergency phase in an outstanding manner,
we should not properly be charged for a prolonged period with what will become
a routinized administrative management task. In addition, OEP needs to revert
to giving adequate attention to its other formal responsibilities. Furthermore,
from the standpoint of practical administration, it will be necessary to expand
economic stabilization personnel by 3,000 or more. This number of personnel
can be absorbed through attrition and without RIF-ing (reduction-in-force) in a
large agency as the stabilization program tapers off, but would present an unmanageable administrative problem to a small agency, and would be an unsuitable
personnel load for the Executive Office.
Lincoln would continue to be a member of CLC and of its Executive Policy Committee, and would require some staff support for
that function. His immediate concern, however, was to get the
National Office and Regional Directors to continue their fine work
on Phase I operations and begin planning for smooth transition
to the Phase II program. That transition was to involve the passing
of OEP activities to a number of different agencies (see Figure 7,
above). Many questions regarding the final close-out of Phase I
operations had to be resolved. Lincoln's first instruction to the
Regional Directors was: "We will give maximum assistance to IRS
in picking up the load." 19
19
Lincoln, Personal Message to OEP Regional Directors (Msg Bravo 251),
October 7, 1971. The President's New Economic Policy, it will be recalled, included
provision for a general 5 percent cutback in Federal personnel, which would have
cost IRS about 3,500 spaces by the end of the fiscal year 1972. With the decision
to give IRS a major role in the freeze program, Treasury Secretary Connally got
an exemption of IRS from the personnel cutback. See "IRS Head Count: Too Much
for Too Few," National Journal, April 8, 1972, p. 602.
177
474-893 O - 72 - 13
PLANNING FOR POSTFREEZE PERIOD
OEP LINKS TO THE POSTFREEZE PROGRAM
Following the President's October 7 announcement of the Phase II
program OEP directed substantial effort to ensuring an orderly
transfer of its Phase I responsibilities. Clearly, this was vital to the
continued success of the President's program. In the less than six
weeks remaining to the termination of the freeze, the new agencies
would have to organize, recruit staffs, develop guidelines for price
and wage behavior, and be prepared to cope with the flood of
applications for increases and with special problems created by the
freeze. Along with continued concern with the administration of
the freeze, OEP now also had to help the new agencies get
launched.
Many complex problems with respect to this change-over had
to be addressed. Who would handle substantive policy questions
before the Pay Board and Price Commission became operational?
What disposition would be made of the personnel loaned to OEP?
Precisely what would be the roles and relationships, the budgets
and staffing levels, and the operating procedures of the Phase II
agencies? Should OEP concentrate on reducing its backlogs in the
remaining weeks of the freeze, or should it devote resources to
refining policies and definitions as a help to the Phase II agencies?
Should OEP's analytical, computational, and management information capabilities be made available for postfreeze stabilization work,
and could this be done without detriment to OEP's continuing
missions and without injecting OEP into the other agencies' management systems? Should certain OEP freeze functions be transferred before November 13? Pending the launching of Phase II,
who should handle postfreeze correspondence and requests for
speakers? And what liaison channels, if any, should be established
as the Phase II agencies got organized and became operational? 20
Clearly the utmost coordination would be required to assure a
smooth and effective transition from the freeze to the longer-range
program. Task forces were created, with representation from CLC,
OEP, IRS, the Department of Justice, and the Office of Management and Budget, to direct the effort required for decisions on
these and other matters. Lincoln designated E. R. Heiberg, a
30
E. R. Heiberg III, Memorandum for Director, October 8, 1971, Subj: Transition
Problems; Truppner, Memorandum to Heiberg, October 13, 1971, same subject;
Heiberg, Memorandum for Director, October 14, 1971, Subj: Notes for OMB Inspectors; R. A. Karam, Planning Review, Memorandum for Deputy Director Darrell
M. Trent, October 19, 1971, Subj: MCL Activity in Economic Stabilization; Heiberg,
Memorandum for Record, October 26, 1971, Subj: Meeting Concerning Transition.
178
PLANNING
FOR POSTFREEZE PERIOD
special assistant on his Coordination staff, to plan and follow
through on OEP's part in this vital task. Top priority items regarding Phase II transition were set down, with a tight time
schedule for decisions.
Continuity of Freeze Rules
In this spirit of assisting the Phase II agencies, Lincoln asked
his Regional Directors to include in their remaining weekly reports
any comments received on the current acceptability of the economic
stabilization program, principal criticisms, and critical problems
that would require early attention.21 Among the problems that
came up from the field was a sense of uncertainty regarding the
Phase II program. Elements of the public and the business community had gotten the impression that the lid on prices, rents,
wages, and salaries would be lifted with the end of the freeze on
November 13. Another problem was that the new economic stabilization agencies might not be ready to provide guidance for the
Phase II program by the time it began.
Executive Order 11627 of October 15 sought to solve both these
problems by stipulating that all existing provisions of the economic
stabilization program would remain in effect until they were
specifically modified by the Pay Board, Price Commission, or CLC.
To reinforce this point CLC Director Rumsfeld, in a release to
the public later the same month, emphasized that there would be
no automatic ending of the existing freeze rules on November 13;
they would be changed only by the introduction of new regulations
for Phase II. The Administration thus sought to prevent "a gap
that would occur if present rules were allowed to end before new
ones had been instituted." 22
Issue Papers
It was clear also that many postfreeze policy questions would
involve an extension of issues arising during Phase I. In an effort to
assist the postfreeze agencies, OEP undertook to determine broad
policy issues that the new agencies might want to consider prior to
the advent of Phase II, the more detailed questions that would
21
Msg Alfa 214, October 26, 1971.
CLC News Release, October 28, 1971; see also Lincoln's Msg Bravo 304 to all
OEP Regional Directors, November 4, 1971. As things turned out, the Pay Board
and Price Commission came out with fairly comprehensive regulations prior to
November 13.
22
179
PLANNING
FOR POSTFREEZE PERIOD
carry over from Phase I, and other issues that were likely to arise
in the postfreeze program.23 Primary responsibility for compiling
these issue papers rested with Mr. Edward R. Saunders, Jr., Deputy
Assistant Director for Resource Evaluation, who had cognizance
of freeze "policy questions."
An ad hoc committee under Saunders's leadership addressed
itself to this task. Coverage extended not only to substantive policy
matters but to organizational and procedural issues as well.24 National Office staff elements and OEP Regional Offices submitted
statements of issues which they believed should receive priority
attention in planning for the postfreeze period.25 These issue
papers were made available to the Price Commission and Pay
Board on October 29.26
OEP counseled the new agencies on many other anticipated
Phase II problems. As was indicated earlier, OEP conducted advance planning on standards, techniques, and formula methods of
selective control programs and on the application of econometric
models to the estimation of inflationary impacts of alternative
price and wage policies. Definitions of complex terms were made
available for use in Phase II planning. OEP compiled data on
national level denials of requests for exceptions and exemptions,
as perhaps the best indicator of types of cases that were likely to
arise again after November 13. Exception and exemption case
materials relating to Phase II were channeled to the Price Commission and Pay Board, so that they could become acquainted
with the problems at hand and begin "building case law." 27 In
the later stages of the freeze period, OEP's entire Office of the
General Counsel devoted substantial effort to ensuring an orderly
transition of rulemaking, compliance, and interpretations functions
which that office exercised during Phase I. 28
28
G. L. Butler, Coordination Office, Memorandum for the Record, October 15,
1971, Subj: OEP Input to Phase II Policy Formulation; Haakon Lindjord, Assistant
Director, Memorandum for Resource Analysis Staff et al., October 18, 1971, Subj:
Preparation of Issues for Possible Use by Pay Board and Price Commission.
24
Lindjord, Memorandum for Record, October 19, 1971, Subj: Issue Papers for
Possible Use by Pay Board and Price Commission.
^Quindlen, Memorandum for Director, October 26, 1971, Subj: Economic Stabilization Activities (Opns); Ltr, A. D. O'Connor, Regional Director, Region 1, Boston,
Mass., to Paul Smith, Emergency Preparedness Coordinator, Department of Housing
and Urban Development, November 8, 1971, end. to Ltr, Lincoln to Thomas B.
Curtis, Chairman, Rent Advisory Board, Price Commission, December 1, 1971.
26
The contents of these papers are discussed on pp. 92-94.
^Msg Alfa 247, November 6, 1971; Ltr. Lincoln to C. Jackson Grayson, Jr.,
Chairman, Price Commission, November 10, 1971, and enclosed "Index of Exception
and Exemption Precedents Through P.R. 470."
28
Elmer Bennett, General Counsel, Memorandum for the Director, November 10,
1971. Subj: The Conduct of the Freeze, Office of the General Counsel.
180
PLANNING FOR POSTFREEZE PERIOD
Detail of Personnel
OEP assisted the "successor" agencies in several other ways.
Many of the qualified personnel who had been detailed to OEP
from other agencies were reassigned to the Phase II agencies.
Offices which were to assume OEP functions were invited to observe the Agency's operations and to send key personnel to work
on-site during the remainder of the freeze. As for the detail of
OEP's regular staff, Lincoln was loath to turn over to the Phase
II agencies the talent that he had concentrated at "pressure" points
for the freeze period. Any takeover of this talent would have
seriously impaired the current and future leadership of the agency.
Exceptions were made in some instances, but only with the Director's explicit approval.29
Regular OEP staff professionals and OEP-trained detailees from
other agencies helped in Phase II preparations; some made up the
basic cadres of agency staffs for the conduct of postfreeze operations. The entire Policy and Guidance Liasion unit, headed by
Louis Neeb, moved over to the Price Commission and formed the
initial core of its staff. In the 3 weeks before the end of the freeze,
this group, along with key staff members from other OEP offices
and the detailed personnel from OEP, constituted the principal
source of policy papers for the Commission and provided the
initial administrative support for all components of the organization. Neeb continued with the Price Commission, serving in the
pivotal post of Executive Secretary. The OEP personnel who
shifted to the Price Commission took with them a familiarity with
Phase I rulings, problems of impact, and problems of organization.30
Richard Murray, Deputy General Counsel at OEP and chief of
interpretations during the freeze, joined the staff of the CLC
General Counsel in Phase II. Another key OEP staffer, Douglas
Johnston, head of the OEP freeze Correspondence Section, joined
the CLC Policy and Analysis staff to assist in the development of
policy issues for CLC consideration and to serve as direct liaison
between CLC and the Pay Board.
The Director also loaned two key people to help establish the
Pay Board: Spence Perry, who had been Norred's executive officer
a
E . R. Heiberg, Memorandum of October 26, 1971, Subj: Personnel Actions
During Transition Period; Heiberg, Memorandum to Members, ESP Coordination
Group,
November 3, 1971, Subj: Support for Phase II Activities.
80
See e.g., Kenneth Clark, "A Suggested Approach to Post-Freeze Price Regulation," October 28, 1971; Ltr., Robert A. Kagan, Yale Law School, New Haven, Conn.,
to OEP Historians, March 28, 1972.
181
PLANNING
FOR POSTFREEZE PERIOD
in the exceptions and exemptions area, and Arthur Dover, who
had served as Operations Center chief. They were assigned to the
Pay Board on November 1, and over the ensuing three weeks
contributed significantly to the development of the Board's mission
statements, organization plan, manning tables, job descriptions,
and other documents needed to activate the Board. As the Board
staff took hold, Perry and Dover returned to OEP.31
OEP also assisted the Phase II agencies by making available an
imposing array of consultants and the members of its Industry
Advisory Committees. Constituting the Economic Stabilization
Division's "stable of advisory talent," they represented nearly all
major sectors of the economy.32 Prior to the freeze, the efforts of
the OEP consultants and advisory committees had been directed
toward the development of direct controls tailored to particular
industries. The plans they helped to develop were not applied
either in Phase I or Phase II. Nevertheless, several policy recommendations submitted to CLC and the Price Commission stemmed
from OEP stabilization staff discussions with its consultants. And
several committee members were helpful in the identification of
potential postfreeze problem areas.33 Rosters of these experts were
made available to the Price Commission and IRS for possible use
in their programs.34
Planning for IRS Takeover
The most substantive transition planning related to the assumption by IRS of the OEP responsibility for the implementation and
enforcement of the stabilization program. Fortunately, excellent
relationships had been established between OEP and IRS at both
the national and field levels. Mr. Edward F. Preston, who had
served as IRS liaison with OEP in Phase I, was named IRS Assistant Commissioner for Stabilization in Phase II. And in the field
the OEP and IRS offices drew on their past harmonious working
relationships. The two agencies strove to make the changeover as
81
Dover, Memorandum to Lincoln, November 18, 1971, Subj: Wrap-Up Report.
R. L. Hawes, "Position Paper on Post-Freeze Stabilization Program Potential
for Consultation and Handling of Appeals," November 4, 1971, encl. to Memo,
Russo to Truppner, November 15, 1971, Subj: Industry Consultation in Phase II.
88
Semiannual Report of the Office Of Emergency Preparedness, Executive Office
of the President, July 1-December 31, 1971, February 15, 1972, pp. 27-28.
®* Russo, Memorandum to Butler, December 2, 1971, Subj: Input for the Price
Commission Staff; Lincoln, Memorandum to C. Jackson Grayson, Jr., Chairman,
Price Commission, December 20, 1971, Subj: OEP Consultants and Industry Advisory
Committees; Ltr, Grayson to Lincoln, December 22, 1971.
32
182
PLANNING
FOR POSTFREEZE PERIOD
complete as possible by November 13. Problems pertaining to the
adaptation and streamlining of IRS's already efficient organization
for the Phase II mission were resolved by effective liaison and by
the positive attitude adopted by both agencies.
At the national level the two agencies established an "OEP/IRS
Transition Task Force." Members broke into functional groups,
consulted with their counterparts, and developed papers for discussion and resolution of specific problems. For each basic freeze
function examined, the task force study covered that part of the
OEP organization that had carried out the function, the staffing
pattern, the personnel most suited for detail to IRS, and when the
function might be transferred. In addition, OEP pointed up key
areas in which differences between freeze and postfreeze periods
"are likely to be critical for organizational and personnel resource
planning." 35 The process not only served to spotlight the nature
and scope of the changeover, but also was considered a "learning
function" for all IRS personnel on the task force.
A major decision had to be made concerning the organizational
structure and management philosophy that IRS would employ to
carry out its postfreeze assignment. IRS hoped that it could maintain a decentralized structure. On the other hand, in light of its
experience in coordinating field operations on freeze policy directives, OEP cautioned against excessive decentralization. "In our
judgment," Heiberg advised Preston, "the press of the issues and
the fierce heat of both external and internal pressures at the
Council-Commission-Board level will require a strong IRS National Office . . . and a strong, knowledgeable, and involved regional office. This situation will require the National Office to
place reporting and executive demands on the regions." 36 The
IRS organization included a National Office in Washington, D.C.;
Assistant Commissioners for Stabilization in each of the seven IRS
Regions; and stabilization chiefs for most of the District Offices.37
In the final 2 weeks of the freeze, IRS and OEP personnel met
in groups and individually in training sessions. Lincoln invited
IRS to send its key people to OEP headquarters to observe and
work with OEP personnel as they completed Phase I business. He
designated Mr. Arnold C. Lewis, who headed the OEP Inquiry
Review segment of the Phase I operations, as chief OEP liaison
35
E. R. Heiberg, Chairman, Transition Task Force, Memorandum for CLC Staff,
October 14, 1971, Subj: Transition Task Force.
36
Heiberg, Memorandum to Preston, October 27, 1971, Subj: Comments on Papers.
37
For a list of key IRS stabilization officials, including the designation of Mr.
Gerald G. Portney, also an IRS careerist, as Preston's deputy, see IRS News Release
(IR-1174), October 31, 1971.
183
PLANNING FOR POSTFREEZE PERIOD
with IRS to help ensure a smooth transition. As was to be the case
with CLC and the Price Commission, IRS gave special attention to
OEP's correspondence, Operations Center, and computer-based
information systems activities; these three sections had set up
effective complementary systems for organizing and communicating
feedback of information from field offices, industry, and private
citizens to the OEP and CLC policy groups.
IRS technical specialists reviewed the OEP computerized system,
EMISARI, to determine what aspects of the system might be converted to run on IRS computers. The batch-oriented IRS computers were totally incompatible with the on-line EMISARI system. Nevertheless, IRS concluded that the OEP approach of
computer linking between the national and field offices was indispensable to effective stabilization management. At the request
of IRS, OEP undertook to design a version modified to suit special
IRS needs and to run it for them until alternate computer support
could be established.38
At the field level OEP Regional Directors initiated meetings with
IRS officials early in October to coordinate details of the transition
to the postfreeze program.39 The IRS National Office issued to the
Regional Offices a timetable running through November 13 for the
assumption of OEP's stabilization functions,40 and IRS "coordinators'* were designated to facilitate the transition. OEP Regional
Directors briefed these coordinators and were asked to report any
foreseeable problems to the National Office. Questions that surfaced
early related to the discrepancies between OEP and IRS regional
boundaries; the need to train IRS personnel while continuing to
meet OEP responsibilities which were not abating significantly;
the disposition of freeze records pertinent to IRS's newly acquired
functions and of legal cases in mid-stream; the availability to IRS
88
Robert H. Kupperman, Deputy Assistant Director for Resource Analysis,
Memorandum to Edward F. Preston, Assistant Commissioner (Administration), IRS,
October 26, 1971, Subj: Postfreeze Information and Reporting Systems for IRS.
^Eugene J. Quindlen, Assistant Director for Government Preparedness, Memorandum to Director, October 12, 1971, Subj: Economic Stabilization Activities (Operations) , encl. to Memo, Heiberg to Director, October 12, 1971, Subj: Daily Status
Report, Economic Stabilization Activities.
40
John P. Cannon, Special Assistant/Regional Affairs, Memorandum to Director,
October 12, 1971, Subj: Regional Operations Report.
184
PLANNING
FOR POSTFREEZE PERIOD
of the personnel then on loan to OEP Regional Offices; and the
reporting, facilities, and public information needs of IRS.41
Because organizational relationships with IRS differed among
the OEP Regions, it appeared to be impractical to develop a single
guide and timetable for transferring OEP functions.42 It was agreed,
therefore, that arrangements for transition would be made on a
region-by-region basis. At the National Office, Mr. John P. Cannon,
Special Assistant/Regional Affairs, concentrated on ensuring the
readiness of the OEP Regional Offices to transfer their functions to
IRS. The Regional Directors drew up transition activity schedules
and forwarded these to the National Office. Cannon and his liaison
officers monitored the activities in the field and kept a daily log
of progress in effecting the transition.43
As was the case at the national level, OEP Regional Office personnel assisted the IRS in establishing the postfreeze organizations
and developing plans for the orderly assumption of OEP functions.
IRS liaison officials observed and reviewed all aspects of the OEP
freeze activity and interviewed "detail personnel" for possible
assignment to IRS. IRS employees were put into OEP Regional
Offices early for on-the-job training, and OEP personnel in turn
were stationed at some IRS offices to assist in launching the new
activities.44 Such assistance extended not only to the substantive
details of the work in the field, but also to the development of
relationships with high level representatives of business interests,
unions, citizens groups, and Federal and State agencies.
The OEP and IRS Regional Offices reached agreements on all
steps in the transition and on the timing of the takeover—on inquiries, requests for exceptions and exemptions, compliance cases
that had long-range implications, communications equipment, records, computer operations and preparation of reports, speaking
41
Cannon, Memorandum to Director, October 12, 1971, Subj: Regional Operations Report; Quindlen, Memorandum to Director, October 15, 1971, Subj: Economic
Stabilization Activities (Operations) ; Haakon Lindjord, Assistant Director, Memorandum for Record, October 18, 1971, Subj: Notes from General Lincoln's Discussion
with Regional Directors, October 16, 1971; Heiberg, Memorandum for Transition
Task Force, October 20, 1971, Subj: Regional Transition Fact Sheet; William H.
Hollaway, Regional Director, OEP Region 4, Atlanta, Georgia, Memorandum to
William J. Bookholt, IRS Regional Commissioner, Atlanta, Ga., and Eugene Quindlen, OEP National Operations Center, October 21, 1971, Subj: Suggestions for Transition Phase of Economic Stabilization Program.
42
Lincoln, Msg Bravo 277 to OEP Regional Offices, October 22, 1971.
43
Cannon, Memorandum for Director, November 1, 1971, Subj: Consolidation of
Replies to Bravo 277—Transition; Joseph Gerrety and E. R. Pereira, Memorandum
to Cannon, November 8, 1971, Subj: After-Action Report.
^Cannon, Memorandum to Director, October 14, 1971, Subj: Regional Operations
Report; J. F. Sullivan, Jr., Regional Director, Region 2, New York, N.Y., Memorandum to OEP Assistant Director, November 9, 1971, Subj: After-Action Report on
OEP Region 2's Role in the Wage-Price Freeze.
185
PLANNING FOR POSTFREEZE PERIOD
engagements, and numerous other matters. Through jointly sponsored press conferences, the news media and the public were alerted
to the IRS assumption of the OEP functions.
The changeover went smoothly; no serious problems arose. A
final status report to the Director, dated November 12, indicated
the completion of virtually all transition activity. Only a few
matters remained for disposition after November 13.45 The approach of this takeover date found IRS ready for the task of administering the Phase II program.46
REDIRECTION OF OEP EFFORTS
On November 15, Lincoln reported to the President on his
stewardship of the freeze. He stated in this report:
I have now terminated my managerial functions associated with the 90-day
freeze, have assisted in setting up the ongoing stabilization organization, have
transferred the borrowed personnel to that organization or returned them to
their own agencies, and have refocused my Agency's efforts on its regular
emergency and preparedness responsibilities. OEP will continue to provide all
practicable support to the ongoing Economic Stabilization Program.
In addition to handling its responsibilities under the freeze, OEP
had carried on its normal disaster assistance operations and other
high priority tasks. Of necessity, however, OEP had "cut back
temporarily on all but the most critical activities in our other
normal areas of responsibility." As a result, Lincoln told the President, OEP now had to intensify its efforts in areas outside the
economic stabilization and disaster assistance programs. Substantial
emphasis, for example, would have to be placed on the Agency's
responsibilities for the oil policy program and for assuring a
capability to deal effectively with fuel and energy crises.47
With respect to postfreeze stabilization activities, Lincoln had
continuing responsibilities as a member of CLC. In this capacity
Lincoln saw his role, in addition to his general contributions to
the deliberations of the Council, as serving two purposes: first, to
continue to make available to those administering the postfreeze
program the experience gained in Phase I; and second, to ensure
45
Cannon, Memorandum for Director, November 12, 1971, Subj: Regional Operations Report. OEP continued computer support to IRS for some weeks after the
termination of the freeze.
46
Press Conference of Donald Rumsfeld, Director, CLC, November 12, 1971
(White House Release) ; OEP Press Release 490, November 12, 1971.
47
Lincoln, Memorandum for the President, November 15, 1971, Subj: Report on
Management of Phase I of the Economic Stabilization Program.
186
PLANNING
FOR POSTFREEZE PERIOD
that relevant experience with the ongoing stabilization program
was made available for OEP use in future planning.
While Lincoln would continue as an active member of CLC, it
was apparent that OEP would have to redirect its limited resources
to its regular missions. Two staff members of his Planning Review
group—William A. Fletcher and Patricia L. Spencer—provided immediate support for the Director's role as a member of CLC; they
were authorized to call on other OEP elements as appropriate for
assistance in fulfilling this support role. The Director agreed to
allow his staff to provide analytical and computational support to
CLC, the Pay Board, and the Price Commission on a case-by-case
basis, upon request and with due regard to OEP's limited resources.
On this basis, three tasks were performed: (1) estimates of the
impact on the GNP deflator (a comprehensive indicator reflecting
changes in prices in the economy as a whole) of increases in certain
fees charged by State and local governments; (2) estimates of the
inflationary impacts of input-output sectors between 1965 and
1970; and (3) the transfer to the Price Commission of the OEP
inter-industry wage-price model and its associated data base for use
by Phase II agencies, with the computer work done for the Commission by an outside computer contracting firm. The effect of
these efforts was to free OEP from a continuing responsibility for
analytical support of the Phase II agencies by helping them to
become self-sufficient in this field.48
OEP's ongoing responsibilities for emergency economic stabilization planning were made the subject of further analysis and discussion. Lincoln called for staff proposals on how to proceed with
economic stabilization planning for nuclear attack and less-thannuclear attack situations. With respect to the first, he asked
Truppner to consider "working with or making delegations to a
Federal agency having economic responsibilities and having a field
organization." The feasibility and desirability of such an approach
were to be considered in comparison with previous reliance on the
States (via the OEP Regional Offices).
"As regards economic stabilization planning for less-than-nuclear
attack situations," Lincoln indicated, "we clearly must take into
account the fact that a substantial on-going economic stabilization
program is now in existence. This raises questions about the level
48
Terrell E. Hunt, Economic Stabilization Division, Memorandum to Historian,
March 14, 1972, Subj: Postfreeze Analytical Support to the NEP Agencies, and
attachments.
187
PLANNING
FOR POSTFREEZE PERIOD
of resources which OEP should devote to this area at present." 49
With this guidance, extensive staff work ensued on a program that
would reflect the experience with the freeze and the realities of
the significantly different environment created by the existence of
the Phase II stabilization agencies.50
In July 1972 the Director returned the Economic Stabilization
Division to the Government Preparedness Office, thus terminating
its temporary location under the Assistant Director for Resource
Analysis. At this time the Director made it clear that OEP planning
for economic stabilization in situations short of nuclear war would
be kept to a minimal level until the existing structure (CLC, Pay
Board, Price Commission, etc.) was terminated. As soon as it
appeared that this structure was to be phased out, however, OEP
would promptly consider the requirements for an expanded effort
in planning for less-than-nuclear economic stabilization.51
49
Lincoln, Memorandum to Truppner, December 20, 1971, Subj: OEP Economic
Stabilization
Activities.
50
Truppner, Memorandum to Lincoln, January 21, 1972, Subj: Proposed OEP
Economic Stabilization Program and attachments A-H; Lincoln, Memorandum for
Record, February 7, 1972; Russo, Memorandum to Truppner, February 16, 1972,
Subj: Economic Stabilization Program; William A. Fletcher, Planning Review, Memorandum for Lincoln, May 15, 1972, Subj: Economic Stabilization Program; Lindjord,
Memorandum for Lincoln, no date, same subject; Lindjord, Memorandum for
Quindlen and Truppner, May 22, 1972; Truppner, Memorandum for Lindjord, May
31, 511972, Subj: Economic Stabilization Program.
Lincoln, Memorandum to All OEP Personnel, July 21, 1972, Subj: Economic
Stabilization Division—Organization and Program.
188
IX
Concluding Observations
The economic stabilization program was designed to achieve
price stability with strong economic growth and high employment
at home and to check the erosion of the Nation's international
economic position. The President's August 15 announcement of
his New Economic Policy brought a surge of confidence and a
feeling of hope to many Americans. Congressman Wilbur D. Mills,
Arkansas Democrat and Chairman of the House Ways and Means
Committee, in a news conference some 4 weeks later, said that
the Nixon program had effectively kept the national economy from
worsening. "I believe," Mills asserted, "that we would not have
seen the worst in the path of our economy by August 15 if the new
policies had not been put into effect." *
The freeze had the desired effects: it checked the upward surge
of prices and wages, began to dampen the inflation psychology,
and afforded the Administration the breathing space needed to
design and put in place a longer-term and more flexible stabilization program. The sense of euphoria with which the President's
August 15 pronouncement was greeted, however, showed signs of
fading as the Nation got down to the practical, day-to-day problems
of living under the freeze.
There were those who felt, too, that the Administration was
unduly and prematurely optimistic about the success of its efforts;
they could point to flaws in the program and to many unmet objectives. On two points, however, there could be little room for
disagreement: the ''shock therapy" of the freeze achieved measurable results in stemming inflation; and the Office of Emergency
Preparedness, with the very extensive help of other agencies and
the gratifying cooperation of the American people, accomplished
its assigned mission in an outstanding manner.
1
Quoted by Isadore Barmash in article "Mills Says He Still Favors a Tripartite
Board," New York Times, September 18, 1971.
189
CONCLUDING OBSERVATIONS
BENCHMARKS OF SUCCESS
No one could claim that total victory was achieved on the
inflation front. Nonetheless, indices of economic activity soon provided evidence that the freeze had achieved its primary goal of
reducing the rate of inflation.
Consumer Price Index
The Consumer Price Index (CPI) showed a dramatic slowdown
in the rate of inflation. In the 3 months of the freeze, the CPI rose
only 0.4 percent, compared to 1.0 percent in the previous 3 months
—a decline of more than half. Translated into annual rates, the
percentage changes for selected months in 1971 are depicted in
Table 12.
TABLE 12.—Changes in consumer prices, selected months, 1971
(Seasonally adjusted, except for services)
Percentage change from 3 months
earlier (annual rate)
Item
All items
Food
Nonfood commodities
Services
February
May
August
November
4.0
1.7
3.2
5.6
4.2
8.2
4.2
2.9
4.0
2.7
3.1
6.1
1^7
L7
.0
3.1
Source: Department of Labor/CEA Annual Report, p. 81.
Even this good record reflects only part of the story. All prices
were not frozen; some items such as unprocessed agricultural
products, imported goods, and interest rates were exempt from
the freeze. Furthermore, the time lags in gathering and reporting
price data inevitably brought prefreeze price changes into the
picture. To get a clearer reading of the effect of the freeze, special
analyses of item-by-item price changes were undertaken. "These
showed," the Council of Economic Advisers observed in its 1971
report to the President, "that except for raw agricultural products
the prices were unchanged between October and November for 86
percent of 120,000 consumer items for which comparisons could
be made; for about 6i/£ percent prices declined, and for about 7
percent prices increased. . . . A similar pattern was found for the
September-October period. Some increases were, of course, permitted by the CLC regulations, but it was not possible to determine
190
CONCLUDING OBSERVATIONS
from these data whether the small proportion of increases that did
occur were entirely the result of allowable increases." 2
Thus, while the statistics do not reveal with absolute precision
the impact of the freeze, they do attest to the effectiveness of the
freeze in moderating, if not halting, consumer price increases. The
freeze, it appeared, went a long way toward breaking "inflationary
expectations." Noting the CPI for October, Ezra Solomon, member
of the Council of Economic Advisers, asserted: "We can safely
assume that the kind of inflation we were seeing prior to August
is something of the past." 3 With the CPI for November again
pointing to a rise of only 0.2 percent, President Nixon observed:
"We can now confidently say that 1971 is ending on a most encouraging economic note, and that 1972 will begin as a year of great
economic promise." 4
Wholesale Price Index
More dramatic evidence of the role of the freeze in cracking the
inflation problem could be gleaned from the Wholesale Price Index
(WPI). September—the first full month of the freeze—saw wholesale prices turning sharply downward. They fell 0.4 percent—the
largest monthly decrease after seasonal adjustment since October
1966. Most of the commodities measured were covered by the
freeze, and nearly all prices used in the September index were
those in effect after the freeze began. The message that this September WPI conveyed, Lincoln reported to CLC Chairman Connally,
"is that the freeze is working." 5 In announcing his Phase II program on October 7, President Nixon could point to the September
decline in the WPI as clear evidence that the wage-price freeze "has
been remarkably successful." 6
The WPI declined at an annual rate of 1.3 percent from August
through November 1971. Table 13 reflects the changes overall and
by specific commodity groups for selected months in 1971:
2
3
CEA Annual Report, pp. 81-82.
Quoted by Carole Shifrin in article, "Consumer Price Rise 0.2%, Smallest
Increase
in 4 Years," Washington Post, November 20, 1971.
4
Quoted by Edwin L. Dale, Jr., in article, "Price Index Rises by a Small Amount
for 5a Third Month," New York Times, December 23, 1971.
OEP Weekly Summary Report to CLC Chairman, October 9, 1971, p. 25.
0
"The Continuing Fight Against Inflation," White House Release, October 7,
1971.
191
CONCLUDING OBSERVATIONS
TABLE 13—Changes in wholesale industrial commodity prices, selected months, 1971
(Seasonally adjusted except as noted)
„
,.
Commodity group
Industrial commodities
Textile products and apparel
Hides, skins, leather, and related
products
Fuels and related products and
power
Chemicals and allied products . . . .
Rubber and plastic products
Lumber and wood products
Pulp, paper, and allied products ..
Metals and metal products
Machinery and equipment
Furniture and household
durables
Non metallic mineral products . . .
Transportation equipment •
Miscellaneous products
a
Percentage change from 3 months
earlier (annual rate)
February
2.9
— 1.1
v
May
5.0
5.7
August
6.5
6.1
November
-1.3
— .4
6.7
4.3
3.6
.7
13.0
3.9
1.5
9.0
.0
— 4.7
4.3
3.6
— .8
.7
24.2
2.2
9.3
3.2
2.8
.8
.0
44.9
4.5
10.9
3.9
- .7
-1.9
— .7
-3.2
.4
- .7
-1.4
3.7
11.6
4.5
4.4
1.1
10.2
.4
— 1.1
2.2
9.9
2,6
.7
— .4
1.3
1.1
.7
Not seasonally adjusted
Source: Department of Labor/CZL4 Annual Report, p. 82.
"The decline/' the Council of Economic Advisers reported, "affected most of the industrial commodity categories; the few increases that did occur were attributable to import price increases
or factors such as the seasonal fluctuations associated with introductions of new automobile models/' 7
Other Encouraging Signs
Reductions in interest rates afforded further evidence that the
NEP during the freeze period was moving in the right direction.
In testimony before the Senate Committee on Banking, Housing
and Urban Affairs, November 2, 1971, Dr. Arthur F. Burns, Chairman of the Federal Reserve Board, noted that, since mid-August,
long-term market interest rates had come down three-fourths to
one percentage point, and that short-term market rates had declined about one-half to three-fourths of a percentage point. Further, there were signs of improvement in economic activity. Figures
for September 1971 showed a good expansion in retail sales, with
automobile sales particularly strong. Industrial production rose,
and employment increased sharply, with gains widespread among
7
CEA Annual Report, p. 82.
192
CONCLUDING OBSERVATIONS
various industries. Although orders for business capital equipment
remained sluggish, contracts for commercial and industrial construction spurted. As the economic recovery gathered momentum
in the postfreeze period, the Administration hoped to see substantial alleviation of the Nation's unemployment problem.8
POINTS OF CONFLICT
While few would quarrel with the statistical record, the freeze
remained a matter of some concern and disagreement. Labor leaders, for example, frequently denounced the freeze as grossly inequitable. Employers, they contended, cheerfully helped to block
wage increases, while the policing of prices left much to be desired.
Business found ways to evade the freeze, labor spokesmen argued,
and the continued sluggishness of the economy and high unemployment were added proof that the President's New Economic Policy
fell short of its objectives.
American business, though heartened by evidence of an easing
of inflation, was far from exuberant as the period of the freeze drew
to a close. Some industry leaders were fearful that the Government's
huge budget deficits would continue to contribute to inflation. The
United States balance-of-payments deficits and international monetary problems also contributed to uneasiness in the business world.
After registering major gains in the first flourish of enthusiasm over
the President's program, the financial markets treated their way with
caution as concern over the general economic situation deepened
in investment circles. There was considerable uncertainty over
the Government's plans for Phase II; and, while Government
officials voiced optimism over the postfreeze program and the
prospects for business in 1972, industry remained hesitant about
committing large amounts of capital for new equipment and en-
8
Economic Stabilization Legislation, Hearings before the Senate Committee on
Banking, Housing and Urban Affairs, on S. 2712, 92nd Cong., 1st Sess. (Washington:
Government Printing Office, 1971), p. 98.
193
474-893 O - 72 - 14
CONCLUDING OBSERVATIONS
larging inventories, which they would be expected to do in anticipation of a sharp economic upturn.9
At the consumer level, the feeling generally was that the freeze
had slowed inflation. As Phase I neared its end, however, many
people saw the prospect of renewed price rises. Few consumers
could fathom the subtleties of price indices; for many the ultimate
test was what was left in the pocketbook after leaving the grocery
store. On this score, consumer attitudes gave little cause for enthusiasm. Along with concern about price hikes, there was vexation
over wage ceilings, and much grumbling from wage-earners who
had been deprived of approved but not yet effective pay boosts.
Nor was there a consensus among professional economists on the
purpose and direction of the stabilization program. Some would
simply have accepted inflation, even at the rate of about 5 percent,
as a lesser evil than direct price and wage controls. And others,
while recognizing the need to control inflation, urged the necessity
of addressing more fundamental problems, such as channeling the
Nation's resources and energies toward optimum real economic
growth, meeting priority domestic needs, and achieving economic
and social justice.10
OEP MANAGEMENT OF THE FREEZE
Considering the secrecy surrounding the President's decision on
a freeze and the consequent lack of opportunity for advance ad9
Strong gains in industrial output in the first 3 full months of the postfreeze
program (December 1971 and January and February 1972) , however, seemed to
indicate that the expected upturn of the economy in 1972 might be occurring; see
Herbert Stein, "Things Look Better," New York Times, March 21, 1972: Edwin L.
Dale, Jr., "Production Rises in First Quarter; Inflation Up Too," New York Times,
April 20, 1972. By mid-1972, almost a year after the launching of the President's
New Economic Policy, the Council of Economic Advisors could point to significant
progress on a wide front. See The Economy at Mid-1972, Testimony of the Council
of Economic Advisors submitted to the Joint Economic Committee of the Congress,
with an Introduction by the President, August 1972 (Washington: Government
Printing Office, 1972) . See also Department of Commerce Press Release BEA 72-53,
August 17, 1972, which issued revised statistics reflecting an even better economic
recovery than indicated by the preliminary statistics of the CEA report.
10
See, e.g., Samuel Lubell, "Testimony before the Joint Economic Committee
on the President's New Economic Program," September 15, 1971; Brookings Papers
on Economic Activity 2: 1911, Arthur M. Okun and George L. Perry, editors (Washington: Brookings Institution, 1971) ; Gottfried Haberler, "Incomes Policy and
Inflation: Some Further Reflections," Proceedings, 24th Annual Winter Meeting,
Industrial Relations Research Association, New Orleans, La., December 27-28, 1971,
p. 134; William E. Fellner, Aiming for a Sustainable Second Best During the Recovery from the 1970 Recession (Washington: American Enterprise Institute for
Public Policy Research, 1971) ; Leon H. Keyserling, Wages, Prices, and Profits,
Phase II Guidelines vs. Appropriate Policies (Washington: Conference on Economic
Progress, December 1971), and article "Keyserling Sees Confusion About National
Goals, Means," adapted from this study, in Washington Post, January 16, 1972.
194
CONCLUDING OBSERVATIONS
ministrative preparations, the administration of the program, the
Council of Economic Advisers reported in January 1972, "must be
accounted outstandingly effective/' u On very short notice OEP
reordered its priorities, assumed its new responsibilities, modified
its field structure, relocated its Regional Offices, doubled its National Office staff, and expanded the field staff sixfold by borrowing
personnel from more than 40 other Federal agencies. There was no
lead time to organize the operation fully before the flood of queries
descended upon the OEP National and Regional Offices. Yet,
within a few days, OEP had in place a functioning nationwide
administrative, information, and compliance network.
Some measure of the management challenge facing OEP can be
obtained from the volume of actions involved in the administration
of the freeze. More than one million public inquiries were handled
—just over 10,000 per day on the average. Some 50,000 letters were
answered in the OEP National and Regional Offices. Nearly 46,000
reports of alleged violations were received, and about 5,500 letters
concerned with exceptions and exemptions were considered.12 Its
time-tested capability for rapid response to domestic economic
crises and natural disasters and its smooth interaction with other
agencies and effective communication with the public on these
matters all stood OEP in good stead in meeting the challenge.
Organization
The structure and procedures put together to carry out the job
were essentially adaptations of existing systems both in the National Office and the field—systems already tested in OEP's typical
emergency operations. They proved basically sound, and the speed
with which they became operational was remarkable. Life for OEP
staff, regulars and detailees alike, was hectic, but morale was high
throughout the freeze. Nearly all the participants felt especially
privileged to have had a part in an important and exciting undertaking.
This response to the demands of the freeze was in part made
possible by the assistance of the General Services Administration
(GSA) and the Civil Service Commission (CSC) and by the wholehearted support of other Federal agencies in lending highly qualified personnel to OEP. Faced with the need to relocate eight
Regional Offices to new sites and to establish two Regional Offices
11
CEA Annual Report, pp. 80-81.
™CLC Quarterly Report, August 15-December 31, 1971, p. 11.
195
CONCLUDING OBSERVATIONS
from scratch, OEP inevitably encountered logistic support problems. None of these, however, was of such magnitude or duration
as to endanger the success of the program.
OEP's ability to muster the cooperation of other Federal agencies
stemmed from the good will and procedures built up in working
with agencies in emergency planning, crisis management, and
disaster assistance activities. Staff augmentation with temporaryduty people presented logistical and administrative problems and
posed demanding requirements for orientation, training, and coordination of effort. The technical and professional people assigned
to OEP from the other Federal agencies were generally of high
caliber; a number were definitely outstanding. Representatives of
the Civil Service Commission and the Office of Management and
Budget were helpful in preventing excessive turnover of key personnel and in prying loose sorely needed attorneys and stenographers. The borrowed personnel proved indispensable in meeting
the requirement for immediate response, and they made a vital
contribution to the successful management of the program. Their
use also fitted in well with the temporary nature of the freeze and
the desire to avoid building a permanent bureaucracy.
OEP's working relationships with IRS in the field were excellent,
and they were a key element in the success of the program. Relationships with the Agricultural Stabilization and Conservation
Service also were excellent; the ASCS country offices met a basic
need, although public demands on them were relatively light.
Administrative Management
OEP's freeze responsibilities generated a major requirement for
a greatly increased volume of rapid communications, particularly
between the National Office and the Regional Offices. It was important that all citizens receive timely and valid information concerning the freeze and its impact, and that inquiries, complaints,
and requests for exceptions and exemptions receive prompt and
appropriate attention. Upon the Regional Offices fell a great part
of the burden of achieving effective communication with the public. Almost without exception, the Regional Directors cited shortage
of communications facilities as one of the principal problems encountered during the initial days of the freeze. Shortages were soon
overcome, however, and by the end of the first week messages were
generally being handled with a high degree of efficiency.
The freeze further emphasized the need for the immediate es196
CONCLUDING OBSERVATIONS
tablishment of a strong link between headquarters and field offices
in freeze operations. This was the essential function of the Operations Center at OEP headquarters. The Operations Center functioned occasionally around-the-clock but generally on a two-shift
basis, receiving inquiries; reviewing, processing, and distributing
them to headquarters staff divisions and other government agencies;
and following through to ensure prompt action. Personnel assigned
to this office by other Government agencies to assist OEP staff
facilitated liaison and rapid response. After-action reports from
both the headquarters and field elements emphasized the importance of having from the outset of an emergency a single control
system to facilitate the processing of inquiries.
Initially, different OEP headquarters elements made separate
and duplicating requests for information from the Regions. To
some extent this came about because various headquarters offices,
especially the Operations Center and the Regional Affairs Office,
tried to handle directly problems encountered in the Regions.13
The problem also stemmed from the fact that responsibilities were
not always well defined and tight deadlines left little time to coordinate with all interested offices.
All this pointed to the need to establish promptly a single focal
point at OEP headquarters to control all communications with the
Regional Offices. At the same time, the work of Mr. Cannon, as
Special Assistant for Regional Affairs, was essential, particularly in
the early weeks, in ensuring that important problems received
prompt attention despite the huge volume of traffic in the Operations Center. Lincoln resolved the problem by issuing instructions
that all incoming and outgoing communications go through the
Operations Center. Direct staff contacts on technical and administrative matters, however, were permitted. Cannon served as the
"Inspector General" as well as a direct conduit from the Regional
Offices to the Director, the Deputy Director, and other components
of the National Office on special problems.
One general complaint from the Regions was that the National
Office requirements for reports were extremely burdensome.14 OEP
Regional Directors were accustomed to operating in emergencies
with minimal reporting. Some did not sense that this national effort
required consistent, up-to-the-minute reporting as a management
tool. Lincoln explained this need; at the same time, to ensure
13
Cannon, Memorandum to Planning Review (Attn: Laurent Morin), November
9, 1971, Subj: After-Action Report.
14
"Lessons Learned in Phase One", Attachment to Memorandum, Truppner to
Morin, December 13, 1971, Subj: After-Action Report on Freeze.
197
CONCLUDING OBSERVATIONS
better control, he directed that no reporting requirement be placed
on the field unless specifically authorized by him.
One device for achieving coordination was the 5 o'clock Coordination Meeting of key officials from all major headquarters
components. Chaired by Assistant Director Lindjord, these meetings went far to meet the need for a focal point for intra- and
interagency contact. They helped to keep the program coherent
and on the track. Lincoln's early institution of this coordinating
mechanism contributed notably to OEP's effectiveness in the administration of the freeze.
Policy Guidance
The success of Phase I operations depended in no small measure
on the timely and effective formulation, dissemination, and interpretation of policy. In thefirstfew days of the freeze, the urgent
need for guidance was met, in part, by giving wide publicity to
standard answers to the most common questions. Nevertheless,
people manning phones in information centers at headquarters and
field offices alike had one general complaint: there were too many
questions and too few answers. Reflecting on the hectic experience
in the initial stage, some OEP planners wondered whether it might
not have been wiser to have put a moratorium on replies to queries
for several days pending the development of meaningful guidance
by economists and lawyers. Another alternative, they thought,
might have been to put a group of experts to work on stabilization
guidelines "prior to the freeze announcement and under lock-up
conditions" at some remote location.15
Considering the circumstances and the pressures under which
they worked, the OEP staff, backed up by experts from other
agencies, responded ably to the challenge. They gave strong support
to the Director in his work with CLC and its Executive Policy
Committee. With these bodies meeting almost daily and even more
frequently in the early days, Lincoln was in a good position to
bring up issues for deliberation and decision without unacceptable
delay. The core of the Stabilization Program Guidelines manual
was compiled and distributed in the first week, and new policy
issuances were added to it every few days. The OEP General
Counsel played a vital role in the policy area, and his input became
all the more evident as he expanded his legal staff to the level
15
Enclosure to Memorandum, Truppner to Morin, November 16, 1971, Subj:
After-Action Report on OEP's Role in the Wage-Price Freeze.
198
CONCLUDING OBSERVATIONS
needed to ensure the legality and consistency of proposed policy
papers, answer complex inquiries, provide needed interpretations,
or have the issues referred to CLC for resolution.
Policy development was a never-ending task, and it was never
devoid of problems. There were instances, especially in the first
few weeks of the freeze, when guidance was unclear, contradictory,
or long delayed, with resultant embarrassment and frustration in
the field. Regional Offices complained that some inquirers went on
"shopping sprees'* at various echelons of the system in quest of
answers they wanted. As questions became more involved, the
available guidance did not always suffice; and policy clarifications
or changes, especially with regard to teachers' salaries, caused
criticisms and strained relationships in some cases. In the vast
majority of situations, however, guidance and rulings were entirely
adequate for program administration.
Exceptions and Exemptions
The "hard line" taken on requests for exceptions and exemptions
was criticized by some as overly harsh. Only five requests were
granted, while 3,230 were denied. The seeming inflexibility of the
freeze was a sore point with a number of Regional Directors and
with individuals and firms whose requests were denied. Many cases
of "gross inequity" existed, the Regional Directors contended, but
most of these were rejected as a matter of policy. Even for 90 days,
they felt, greater flexibility based on justice and common sense was
desirable.
A stringent policy admittedly caused hardships, and perhaps even
some inequities. The inequities, however, did not stem from the
fact that particular decisions were unfair but rather were a reflection of a policy to put a lid on the pot that was boiling too fast
and to keep the lid on for 90 days. A freeze simply precluded the
latitude and dynamic adjustments that would come under a system
of controls such as that planned for Phase II.
In retrospect, it would appear that most people were willing to
accept personal deprivation and even a sense of inequity if they
were all in the same boat. The fact that requests for exemptions
were comparatively few may have reflected a sense of futility, but
it also suggests that few firms and individuals were seriously injured by the freeze. The Government's hard line met with a favorable response from the general public. By keeping exemptions to
199
CONCLUDING OBSERVATIONS
a minimum, OEP prevented requests from snowballing and thus
helped to ensure continued public acceptance of the freeze.
Compliance and Enforcement
With the program so heavily dependent on public confidence
and support, it was especially important to ensure widespread compliance. The freeze administrators relied primarily on voluntary
compliance, but this was supplemented by a system for reporting
and investigating complaints of alleged violations. Informal persuasion generally brought violators into line; only 45 cases out of
approximately 46,000 complaints received over the 3-month period
were referred to the Justice Department for legal action.
The available statistics attest to a very high degree of compliance
with the freeze. Surveys by IRS and several consumer groups uncovered some violations, but these appeared to have been relatively
minor exceptions to the general adherence to the rules of the freeze.
Still, some Regional staff specialists had strong suspicions that
many violations never came to light. IRS lacked sufficient personnel
to police the program in depth. Had the requirement for ready
access to price information been firmly established from the outset,
consumers would have had a better basis for detecting and reporting violations. Moreover, incomplete investigations and insufficient
documentation of alleged violations delayed the processing of cases
for prosecution. More active pursuit of violators and imposition of
penalties even on those who agreed voluntarily to roll back illegal
price increases, several Regional after-action reports asserted, would
have generated even greater voluntary compliance and public confidence in the freeze. These improvements, of course, could only
have been achieved with a larger bureaucracy.
Informing the Public
Despite complaints about undetected violations and the firm
policy on exceptions, public support for the program remained
strong to the very end of the freeze. The wide public support was
of prime importance in the successful administration of the freeze.
Lincoln attested to this on many occasions during the 90-day
period. In his Economic Report transmitted to the Congress in
January 1972, President Nixon observed: "The freeze was a great
testimonial to the public spirit of the American people, because
200
CONCLUDING OBSERVATIONS
that result could have been achieved with the small enforcement
staff we had only if the people had been cooperating voluntarily." 16
The OEP National Office and the Regional Offices conducted
vigorous public information programs. The news media were used
fully and regularly to inform the public of policy pronouncements
and to explain the operation of the freeze. To explain the program
and seek support for it, top management and staff specialists appeared frequently on TV and radio, spoke before business, labor,
and other groups, and maintained liaison with officials of State and
local governments. IRS support was most helpful in adjusting national press releases to local conditions, distributing them to the
news media, and providing useful feedback on the public's reaction
to the freeze.
After-action reports contained very few criticisms of the information activities. At the national level the OEP Congressional and
Public Affairs Office noted the lack of a single, central point for
the release of all printed materials dealing with the freeze. General
releases from OEP headquarters, some field offices felt, went unheeded because they were not sufficiently responsive to local interests. OEP's public image, others noted, was not helped by the
Agency's espousal of unpopular causes, such as challenging hikes in
teachers' pay, Girl Scout fees, and sport ticket prices. By and large,
however, there was general agreement that the public information
program was highly effective in furthering the objectives of the
freeze.
Transition to Phase II
Even though preoccupied with the day-to-day problems of administering the freeze, OEP staffers contributed conceptual and
analytical papers for consideration in the early planning for the
postfreeze stabilization program. During the later stages of the
freeze, they devoted substantial effort to working with IRS, the Pay
Board, the Price Commission, and the CLC staff in preparing to
shift to those agencies the policy formulation and management
responsibilities that OEP exercised during Phase I. Of special
importance was the OEP contribution in terms of personnel, both
permanent and detailees, who had their baptism of fire during the
freeze. This experience had given them all some sense of what the
control effort was about, and some "feel" for the problems and
for their resolution. With Lincoln's approval, many were detailed
16
CEA Annual Report, p. 4.
201
CONCLUDING OBSERVATIONS
to the new Phase II agencies; they gave these agencies the advantage of their experience and contributed significantly to getting
these organizations off the ground.
Overall Assessment
The major problems encountered during the freeze related to
the unavoidable lack of specific administrative preparation and the
overwhelmingly heavy burden of responsibility thrust upon OEP
without warning. Yet, for all the problems, the program was carried
out with extraordinary success. It was a measure of OEP's ability
to handle crisis-type responsibilities. The record abounds in recognition at the highest levels of the outstanding performance of the
Phase I mission.17
Repeatedly in the later stages and at the end of the freeze,
Lincoln praised his people for their accomplishment. He was particularly appreciative of the efforts of those on the firing line. They
had done "an almost impossible job" well, Lincoln told his Regional Directors at a conference in Washington on October 16,
and he recognized "the tremendous help" of other Federal agencies
in this achievement.18 On the eve of the IRS takeover, Lincoln
sent a priority message to the Regional Directors, reiterating his
appreciation of the job they had done "with the magnificent assistance of the other Federal agencies" in undertaking and executing the field mission.
You carried out the task in an outstanding manner and the achievement has
been widely recognized by knowledgeable people. A member of the Council of
Economic Advisers, in a speech recently, categorized personnel of this agency as
"the heroes of the freeze."
This message is to transmit to you my personal thanks for a superb job well
done and to ask that you inform all those working with you including the
members of your team effort from other agencies.
The 90-day effort has been a success and that success would not have been
achieved without the magnificent effort in the field.19
"See, for example Philip Shabecoff, "Director of Freeze Satisfied Thus Far,"
New York Times, September 13, 1971; "Text of Remarks by the President Taped
for Closed-Circuit Television Replay to 26 Regional Meetings of the National
Association of Manufacturers," White House Release, October 28, 1971; "Remarks
of the President in a Meeting of the Cost of Living Council," White House Release,
November 15, 1971; CEA Annual Report, pp. 80-81; CLC Quarterly Report, August
15-December 31, 1971, p. 95; Arnold R. Weber, "A Wage-Price Freeze as an Instrument of Incomes Policy; or the Blizzard of 71," Proceedings of the Twenty-Fourth
Annual Winter Meeting, Industrial Relations Research Association, New Orleans,
La., December 27-28, 1971, pp. 153-161.
18
Haakon Lindjord, Assistant Director, Memorandum for Record, October 18,
1971, Subj: Notes from General Lincoln's Discussion with Regional Directors, October
16, 1971.
19
Msg Bravo 326, November 12, 1971.
202
CONCLUDING OBSERVATIONS
Later that month, in acknowledging a report from Lincoln on
his management of the freeze, President Nixon paid tribute to the
Director and his people on their performance:
With the August 15 announcement of the 90-day wage-price freeze came the
enormous and unprecedented task of administering the new Economic Stabilization Program. This was assumed by the Office of Emergency Preparedness with
a thoroughness, efficiency and dispatch that has long been characteristic of you
and your small staff, and the clear success of this initial phase is ample testimony
to your splendid efforts.
While few Americans have specific knowledge of your contributions, I am
certain that I speak for all of them in expressing admiration and gratitude for
the sound and responsive management you provided. . . . You and your colleagues are to be commended and I hope you will convey to them my deep
appreciation for their fine work.20
Lincoln shared the President's letter with all OEP personnel, and
he added his personal thanks for their part "in meriting the President's recognition and commendation to this Agency and its personnel/' 21
In the final analysis, the success in administering the freeze can
be ascribed to the overwhelming support and continuing cooperation of the American public. At the same time, this does not detract
from the central importance of timeliness of action, consistency
of response, and closely coordinated teamwork.
Lincoln highlighted these factors in a broad review of his experience as manager of the freeze. Timely action, he indicated,
was a keynote in OEP's operations—both to keep up with the heavy
workload and to allow the public to plan intelligently on the basis
of the Federal Government's answers to questions. Expeditious
action helped to prevent freeze violations and to reduce the number
of investigations and court actions. Throughout the freeze, OEP
placed heavy dependence on the thesis that timely provision of
information, coupled with an obvious presence of authority with
the power to enforce the freeze, would help maintain the high
degree of voluntary compliance shown by the public from the
beginning.
Consistency in policy application, Lincoln observed, was facilitated by an efficient communication network and a closely knit
staff operation in Washington and in the field.
Finally, Lincoln stressed the vital importance of teamwork in
the successful administration of the freeze. There was complete
cooperation among OEP's small but expanded organization, the
other agencies involved, and the small staff of the Cost of Living
^Ltr, President Richard Nixon to Lincoln, November 23, 1971.
21
Lincoln, Memorandum to All OEP Personnel, November 29, 1971.
203
CONCLUDING OBSERVATIONS
Council. On top of this integrated administrative framework, moreover, was a responsive policy body, the Cost of Living Council
under the chairmanship of the Secretary of the Treasury.22
Support of the President's freeze program inevitably diverted
manpower from programmed planning tasks. Accomplishments by
OEP and other agencies in the freeze activities, however, were of
transcendent importance. Responding to a real emergency, OEP
and all collaborating agencies found themselves in an environment
that taught them more about emergency management than could
any amount of planning and exercises. The experience with the
freeze, along with experience with natural disasters and with
managing resource-crises, substantially improved the Government's
preparedness posture. Future preparedness planning will, no doubt,
reflect the lessons learned in the quest for solutions to problems
encountered in these live emergencies. In that respect the wageprice freeze was of special importance because of its national scope
and the variety of management problems it presented.
22
"Activities of the Office of Emergency Preparedness During the 90-Day Freeze,"
Encl. to Memorandum, Lincoln to Earl D. Rhode, CLC, January 10, 1972; Semiannual Report of the Office of Emergency Preparedness, July 1-December 31, 1971,
February 15, 1972, pp. 54-55.
204
List of Abbreviations
AFL-CIO
APA
ARS
ASCS
BNA
CEA
CLC
CPA
CPI
CSC
DCPA
EMISARI
EPC
ESC
ESR
ESP
FAX
FRB
FTS
GNP
GSA
HEW
HUD
IRS
JEC
Ltr
MCL
NDER
NEA
NEP
OCD
ODR
OEP
OMB
OPA
PCC
PIO
Q&A's
RCC
SPG
TWX
USAICA
WPI
American Federation of Labor-Congress of Industrial Organizations
Administrative Procedures Act
Advance Record System
Agricultural Stabilization and Conservation Service
Bureau of National Affairs
Council of Economic Advisers
Cost of Living Council
Office of Congressional and Public Affairs
Consumer Price Index
Civil Service Commission
Defense Civil Preparedness Agency (formerly Office of Civil Defense)
Emergency Management Information System and Reference Index
Executive Policy Committee
Economic Stabilization Circular
Economic Stabilization Regulation
Economic Stabilization Program
Facsimile
Federal Reserve Board
Federal Telecommunications System
Gross National Product
General Services Administration
Department of Health, Education, and Welfare
Department of Housing and Urban Development
Internal Revenue Service
Joint Economic Committee
Letter
Mathematics and Computation Laboratory
Message
National Defense Executive Reserve
National Education Association
New Economic Policy
Office of Civil Defense (now Defense Civil Preparedness Agency)
Office of Defense Resources
Office of Emergency Preparedness
Office of Management and Budget
Office of Price Administration
Potential Court Case
Public Information Officer
Questions and Answers
Recommended Court Case
Stabilization Program Guideline (s)
Teletypewriter Exchange Service
U.S. Army Interagency Communications Agency
Wholesale Price Index
205
Chronology
This chronology is designed to highlight, for quick reference,
key developments bearing on the wage-price freeze within the
larger framework of the Economic Stabilization Program. The
section of the chronology covering events before August 15, 1971
concentrates on shifts in the economic climate, public opinion, and
Government programs which led up to the announcement of the
New Economic Policy. The latter part of the chronology covers
steps taken by OEP and CLC, as well as other Government
agencies, to implement the freeze; in addition, it includes major
developments leading to the establishment of the postfreeze Economic Stabilization Program.
1969
December 23
President signs the Credit Control Act of 1969,
which permits him to authorize the Federal
Reserve Board (FRB) "to regulate and control
any or all extensions of credit" whenever he
determines such action is "necessary or appropriate for the purpose of preventing or controlling inflation."
1970
June 17
206
President Nixon, in an address to the Nation,
announces three steps to speed up the fight
against inflation: (1) appointing a National
Commission on Productivity to explore means
of improving productivity and achieving "a
balance between costs and productivity that will
lead to more stable prices"; (2) instructing the
Council of Economic Advisers (CEA) to prepare periodic "inflation alerts" calling attention
to outstanding cases of price and wage increases
and analyzing their impact on the general price
level; and (3) establishing a Federal Regulations and Purchasing Review Board to examine
all government actions "to determine where
CHRONOLOGY
Federal purchasing and regulations drive up
costs and prices/'
July 27
Congressman Wright Patman, chairman of the
House Banking and Currency Committee, submits committee report on the Defense Production Act Extension and Economic Stabilization
Act. The report cites a Gallup poll conducted
in mid-June which indicated that if the question
of wage and price controls "were put to the
people of the Nation in the form of a referendum . . . they would . . . vote in favor of mandatory controls."
August 7
CEA issues its first inflation alert.
August 15
The Economic Stabilization Act of 1970 is enacted. Grants President authority "to issue such
orders and regulations as he may deem appropriate to stabilize prices, rents, wages, and
salaries at levels not less than those prevailing
on May 25, 1970."
November 23
Fifty-eight members of the Democratic Study
Group in the House of Representatives urge the
President to adopt wage-price guideposts and to
stand ready to impose controls if guideposts fail
to curb inflation.
December 1
CEA issues its second inflation alert.
December 4
President, in address at 75th anniversary meeting of the National Association of Manufacturers, highlights the Administration's economic
plan, its results, "the problems that we still
confront," and the prospects for the next phase.
Criticizes the construction industry for its abnormally high wage settlements and stresses the
need for change in the industry's structure of
bargaining. Calls upon business and labor to
make "a special effort to exercise restraint in
price and wage decisions" and to "stop freezing
into wage settlement and price actions any expectation that inflation will continue in the
future at its peak rate of the past."
207
CHRONOLOGY
December 7
Arthur F. Burns, Chairman, FRB, urges creation
of a high-level wage and price review board
which would investigate cases and make recommendations, but lack enforcement powers.
1971
January 12
President denounces a round of price increases
by Bethlehem Steel Company; increases rescinded a few days later.
January 14
Senator William Proxmire, Chairman, Joint
Economic Committee (JEC), announces that
he will hold hearings on the economy. Current
economic conditions, he said, "should give us
all a great feeling of urgency."
January 22
President Nixon, in his State of the Union address, presents as one of his "six great goals,"
"full prosperity in peacetime," with "more jobs,
more income and more profits, without inflation
and without war."
January 29
President's message to Congress on the Fiscal
Year 1972 budget includes a proposal to move
from restrictive to more expansive economic
policies "without losing ground in the battle
against inflation."
February 1
President's message accompanying his annual
Economic Report to Congress cites "orderly expansion" as the key to economic policy in 1971.
Calls for raising total spending and total output
as rapidly as possible "to lift the economy to
full employment and full production," while at
the same time continuing to reduce the rate of
inflation.
February 23
President suspends Davis-Bacon Act, which requires contractors on government-financed
construction to pay prevailing (union) wage
scales.
Treasury Secretary John B. Connally tells the
House Banking and Currency Committee that
the Administration accepts extension of the
President's power to impose wage-price controls
208
CHRONOLOGY
under bill extending Economic Stabilization
Act through April 30, 1972.
March 29
JEC report on the Economic Report of the
President finds "serious deficiencies" in the Administration's economic programs and urges the
President to adopt a clear-cut and comprehensive wage-price policy, interim and long-term
goals for inflation and unemployment, and
guidelines for the economy to meet the goals.
Executive Order 11588 establishes review mechanisms for wages and prices in the construction
industry (a Construction Industry Stabilization
Committee); Nixon rescinds February 23
suspension of the Davis-Bacon Act.
May
Consumer Price Index (CPI) rises at annual
rate of 6 percent (announced June 21, 1971).
May 18
T h e Economic Stabilization Act is extended until April 30, 1972; an amendment prohibits the
President from singling out "a particular industry or sector of the economy on which to
impose controls" unless he made a specific finding that the prices or wages in that area had
increased at a rate grossly disproportionate to
the rate for the economy as a whole; extends
authority of federal banking agencies to establish
ceilings on interest rates paid by financial institutions through March 31, 1973; grants
permanent authority to the President to initiate
a program of voluntary credit controls which
would be implemented by the FRB.
June
CPI rises at an annual rate of 7.2 percent (announced July 23, 1971).
Gallup survey finds that 50 percent of persons
questioned favor wage and price controls.
June 29
President designates Treasury Secretary Connally as the Administration's chief economic
spokesman.
Connally announces that the President has rejected proposals for simultaneously stimulating
209
474-893 O - 72 - 15
CHRONOLOGY
the economy and curbing inflation by means of
tax cuts, spending increases, wage and price
controls, and creation of a wage-price review
board to induce moderation in private wage
and price decisions.
July
Gallup poll finds 49 percent of persons surveyed
believe unemployment would be higher in 6
months, while only 25 percent believe it would
be lower.
JulyS
Paul W. McCracken, Chairman of CEA, and
Herbert Stein, CEA member, defend Administration policies in testimony before JEC.
July 23
FRB Chairman Burns, in testimony before JEC,
urges the Administration to take further steps
to control inflation.
July 25
Connally in a television interview indicates that
international monetary problems, inflationary
wage settlements, and high interest rates might
influence the President to impose wage and
price controls.
July 27
Commerce Secretary Maurice H. Stans states
that the U.S. faces the probability of a deficit
in its export-import trade in 1971, the Nation's
first in the 20th Century.
July 28
McCracken in a newspaper column criticizes
John Kenneth Galbraith's advocacy of wageprice controls.
August 4
Fourteen Republican Senators publicly urge the
President to adopt wage and price restraints to
bring inflation under control; 12 of the group
indicate they plan to introduce a bill creating
a wage-price board.
The President in a news conference indicates
that he will "keep an open mind in terms of
examining various proposals" to see if there is
a new approach to stem the wage-price spiral.
August 9
210
AFL-CIO Executive Council restates its February 1966 policy of support for controls so long
CHRONOLOGY
as such restraints are equitably placed on all
costs and incomes.
August 15
President Nixon addresses the Nation, announcing 90-day freeze on wages, salaries, prices, and
rents, imposition of an imports surcharge, proposals for tax relief, and other economic stabilization measures.
Executive Order 11615 is issued, providing for
the stabilization of prices, rents, wages and
salaries and establishing a Cost of Living Council ( C L C ) . Amended September 2 to include
the Secretary of Housing and U r b a n Development ( H U D ) among CLC members.
Presidential Proclamation 4074 imposes a 10
percent supplemental duty on imports, declares
a "national emergency,'* and calls upon the public and private sectors "to make the efforts necessary to strengthen the international economic
position of the United States."
Secretary Connally, at a White House press
conference, mentions the decision to delegate to
O E P the responsibility for the administrative
management of the freeze.
George A. Lincoln, Director of O E P , expands
O E P Regions from 8 to 10, orders them to move
their headquarters to the 10 Federal Regional
Centers and to be operational by noon, August
18. (He had previously, on January 11, 1971,
ordered the realignment of regional boundaries
to coincide with Standard Federal Regions.)
August 16
OEP's Government Preparedness Office is transformed into an Operations Office. W i t h i n a
week, the reorganization of O E P for the freeze
is substantially complete.
August 17
C L C delegates to the Director of O E P the authority to implement, administer, monitor, and
enforce the freeze (CLC Order No. 1).
Justice Department assigns to its Civil Division
the responsibility for handling all litigation,
211
CHRONOLOGY
civil and criminal, arising under the Economic
Stabilization Act of 1970.
CLC announces that prices on wholesale and retail imported goods may be increased in order to
pass along the supplemental duty.
August 18
Federal Reserve Board requests banks and other
financial institutions to continue to comply with
voluntary foreign credit restraint program.
Lincoln issues preliminary compliance and enforcement procedures to the Regional Offices
(Regional Service and Compliance Centers) ;
preliminary guidance on exceptions and exemptions also sent to the Regions.
August 19
Director of OEP redelegates authority to the
Secretary of the Treasury to establish, operate,
and maintain local service and compliance
centers. These centers are to disseminate information, receive, evaluate, and investigate
complaints, and enforce the program (OEP
Economic Stabilization Order 1) .
Secretary of the Treasury charges the taxpayer
assistance network of the Internal Revenue
Service (IRS) with the operation of these local
service and compliance centers.
Lincoln arranges for the county offices of the
Agricultural Stabilization and Conservation
Service (ASCS) to function as information
centers.
CLC Chairman Connally urges financial institutions to hold down interest rates.
Secretary of the Treasury issues a preliminary
definition of articles exempt from the 10 percent
duty.
AFL-CIO Executive Council formally proclaims
its opposition to the President's economic
measures.
Director of the Federal Mediation and Conciliation Service asks for the full cooperation of
212
CHRONOLOGY
labor and management to end all strikes and
lockouts for the duration of the 90-day freeze.
August 20
OEP issues its Economic Stabilization Regulation 1, setting forth initial guidance and procedures for the implementation of the Economic
Stabilization Program. Raw agricultural products, stocks and bonds, school tuitions, and
exports are excepted categories (tuitions removed from this list on August 23).
Commissioner of Internal Revenue Service
delegates to IRS field offices authority to establish, operate, and maintain local service and
compliance centers.
Federal Regulations and Purchasing Review
Board issues statement on the use of "government purchasing power'' to support the 90-day
freeze.
Defense Department announces its requirements
for certification of compliance by contractors.
OEP Press Release gives instructions on the
form of exemption requests.
August 23
Ten thousand copies of the newly printed
Stabilization Program Guidelines (SPG) are
ready for distribution to government officials
and field offices involved in economic stabilization activities.
Four Catholic University law professors file suit
in U.S. District Court for the District of Columbia, challenging the constitutionality of the
90-day freeze.
Lincoln instructs OEP Regional Directors to
use their Regional Economic Stabilization Committees as sources of information on the program's acceptance and problem areas.
August 24
Distribution is begun of 10 million copies of a
booklet on the most frequently asked questions
on the freeze.
213
CHRONOLOGY
August 25
Lincoln requests IRS to institute a spot-check
monitoring system under the general direction
of OEP, in addition to its responsibilities for
disseminating information and for enforcing
compliance.
FRB Chairman Burns asks banks to furnish information on interest rates; includes form on
which rates are to be reported.
OEP announces the first denials of requests for
exemptions.
August 26
Lincoln clarifies the effective dates of the base
period, the beginning and the end of the freeze,
and the special status of August 15.
CLC releases a summary of its decisions to date
on teachers' salaries.
August 27
At the requests of the US Commissioner of
Education, OEP releases supplementary guidance on teachers' salaries and further explanation of CLC summary of its decisions on the
subject.
OEP Operations Center discontinues its telephone answering service for public calls.
General guidance sent to the OEP Regional
Offices on public information activity and coordination with IRS in this area.
August 28
Press briefing given by Arnold R. Weber, CLC
Executive Director, and other government officials, on the seasonality rule and other aspects
of the wage-price freeze; the seasonality rule
allowed certain seasonal price increases during
the freeze.
CLC press release addresses issues of seasonality
and wage and salary contracts in the field of
education as decided by the Council.
August 30
214
McCracken, Weber, and Lincoln testify before
the Joint Economic Committee of the Congress
on the President's New Economic Policy.
CHRONOLOGY
OEP Regional Service and Compliance Centers
redesignated "OEP Regional Offices."
August 31
President asks Congress to support a delay in
pay increases for Federal employees until July
1972.
August-September JEC holds hearings on the Administration's
New Economic Policy.
September 1
Lincoln, Weber, and Charls Walker, Under
Secretary of the Treasury, brief the House and
Senate on the Economic Stabilization Program.
Treasury Department announces an exemption
from the 10 percent duty for all goods which
had left foreign ports before August 16; previously, only articles imported into the U.S. before August 16 had been ruled exempt.
September 2
OEP press releases covering denials of exemption requests begin to include the names of
persons and companies (policy terminated October 9 when the Executive Policy Committee
decides it is better to release only statistics).
A transaction is defined as taking place ''when
the seller ships the product to the buyer, not
when the order is received. In the case of a
service, the transaction takes place when the
service is performed." (Economic Stabilization
Circular 7)
September 3
Weber gives a news briefing designed to clarify
CLC policy on teachers' salaries.
Commerce Secretary Stans sends wires to 1,250
corporations asking them to affirm their willingness to comply with the voluntary freeze on
dividends.
McCracken sends telegrams to six companies
suspected of raising dividends.
OEP Regional Directors receive from Lincoln
authority to deny requests for exemptions, but
not to grant exemptions.
215
CHRONOLOGY
OEP National Office guidance to the field network clarifies the relationships and defines the
missions of the field offices of OEP, IRS, and
ASCS.
September 9
President addresses a joint session of Congress,
seeking cooperation in achieving "a new prosperity without war and without inflation;" announces that the freeze will not be extended
beyond the 90 days, but that he will take "all
the steps needed to see that America is not again
afflicted by the virus of runaway inflation."
CLC announces that the freeze prohibits increases in prices of tickets for sporting events
and other entertainments occurring during the
freeze, even when the tickets were sold before
the freeze.
General Services Administration issues Federal
Procurement Regulations advising heads of
Federal agencies how to comply with the freeze
in making purchases.
September 10
Amalgamated Meat Cutters and Butcher Workingmen file complaint in U.S. District Court for
the District of Columbia against CLC and eight
meatpacking companies challenging the constitutionality of the freeze.
September 13
Lincoln formally establishes the OEP Speakers'
Bureau.
September 14
Labor Secretary J. D. Hodgson states that the
freeze should not be interpreted as a moratorium on collective bargaining or as an effort to
discourage settlements.
September 15
Labor Department issues Memorandum No.
100 to all Government contracting agencies on
the impact of the freeze on wage determinations
under the Davis-Bacon Act and related acts and
the Service Contract Act.
September 16
OEP issues definitive clarification on teachers'
salaries.
216
CHRONOLOGY
Lincoln asks 137 National Defense Executive
Reservists to participate in the Speakers' Program.
September 21
Lincoln briefs the heads of the Washington
offices of the six principal organizations of State
and local officials on the freeze program.
O E P issues Economic Stabilization Circular 101,
a compilation superseding Economic Stabilization Circulars 1 through 10.
September 23
Justice Department files first freeze suit against
the Jefferson Parish, Louisiana, School Board
for raising teachers* salaries.
U.S. Savings and Loan League issues statement
pledging voluntary support of their 5,000 member institutions to hold the line on mortgage
interest rates.
September 24
National Education Association and affiliates
file complaint for declaratory judgment and injunctive relief against C L C and others in U.S.
District Court for the District of Columbia.
Justice files a suit against Dwight L. Lieb for
alleged rent violations.
September 25
Guidance issued requiring merchants to have
ceiling price lists available for inspection by the
customer.
September 27
Justice files a suit against Atlanta Falcons for
alleged violation on ticket prices.
September 28
Justice files a suit against Jack L. Joyce for
alleged rent violations.
September 29
O E P announces the first three exemptions from
the freeze, allowing group insurance programs
designed to replace previous group policies to
go into effect in Florida, Texas, and Missouri.
September 30
Justice files a suit against Martin J. DeStefano
for alleged rent violations.
Connally addresses the Joint Meeting of the
World Bank and International Monetary F u n d ;
217
CHRONOLOGY
urges floating exchange rates and dismantling
barriers to trade.
October 1
CLC announces that the Justice Department
will include the Orleans Parish, Louisiana,
School Board in suit against Jefferson Parish on
teachers' salary increases.
October 6
CLC announces that Connecticut General Life
Insurance Company of Hartford has rolled back
the premium rates of its group insurance
policies in order to comply with the freeze.
October 7
President in a radio and T V address to the
Nation unveils Phase II of his New Economic
Policy to go into effect after November 13.
Commerce Department announces that it has
received agreement from 1,250 of the largest
American business firms not to raise their dividend rates.
October 8
Decision is rendered against the Government in
the teachers' salary suit against Jefferson Parish
and Orleans Parish.
October 11-12
Statement on the respective roles of CLC, the
Pay Board, and the Price Commission is initialed by the President on October 11. After
the President approves the statement, AFL-CIO
officials agree, on October 12, to serve on the
Pay Board. Union states that it will establish
watchdog units to monitor prices.
October 13
An exemption is granted to Cresco, Iowa, for
increased sewer and water rates to meet the cost
of new sewage disposal plant that is under construction.
October 14
U.S. wins the Joyce rent suit; landlord ordered
to roll back rents to the base period level and
to refund excess amounts he had collected.
New guidance sets deadline of November 1 for
ceiling price lists to be available for public inspection at the point of sale and offers alter-
218
CHRONOLOGY
native method of complying with price list
requirement by posting signs in stores and
making available request forms that customers
may use to obtain ceiling price information on
specific items.
OEP states that the freeze applies to fuel oil
prices; however, low sulfur oil may be priced as
a "new product" when introduced into new
market areas.
October 15
Executive Order 11627 establishes Pay Board,
Price Commission, and other structures for
administering Phase II of the Economic Stabilization Program; stipulates that all existing
provisions of the program will remain in effect
until specifically modified by the Pay Board,
Price Commission, or CLC.
October 18
Justice Department files a suit against Huber
Investment Co. for alleged rent violations.
The Administration's proposed legislation to
extend and expand the President's economic
stabilization authority is sent to Congress.
October 19
CLC announces that IRS is investigating complaints that seven major oil companies had
illegally raised prices on propane gas.
October 20
CLC announces rollback of propane gas prices
by Wanda Petroleum Company; other companies soon follow.
Committee on Interest and Dividends announces that it expects all lenders to assemble
and keep on file their schedule of lending rates
on August 15 and thereafter.
October 22
U.S. wins the DeStefano rent case.
A three-judge panel, chaired by Judge Harold
Leventhal, finds that the Economic Stabilization
Act and Executive Order 11615 are fully constitutional. (Amalgamated Meat Cutters and
Butcher Workingmen v. Connolly et al). The
special court rejected the union's argument that
219
CHRONOLOGY
the 1970 statute was a "blank check" to the
President allowing him to impose "controls
beyond the initial freeze . . . without any standard other than the President's unfettered discretion including the discretion to be unfair
and inequitable."
President announces the appointment of the
chairmen and members of the Pay Board and
Price Commission.
Arnold W e b e r resigns as Executive Director of
C L C and agrees to serve as a public m e m b e r of
the Pay Board. Edgar Fiedler to serve as C L C
Deputy Director until the end of the freeze.
Donald Rumsfeld, Counselor to the President,
to be C L C Director for Phase II.
O E P issues Circular 102 which compiles and
supersedes Circulars 11 to 20.
October 27
Patman opens hearings of the House Banking
and Currency Committee on Administration's
proposed economic stabilization legislation.
C L C drops the November 1 deadline for the
availability of ceiling price lists b u t retains the
requirement that one of the two methods announced on October 14 be employed. IRS to
conduct special survey to determine availability
of ceiling price information in stores across the
Nation.
October 28
T o end public confusion, C L C reiterates previous announcement that the regulations and provisions of the freeze continue in effect until
specifically modified by Phase II agencies.
President tells a National Association of Manufacturers teleconference on economic stabilization that the freeze has been "extraordinarily
successful." Predicts the same high marks for
Phase II program.
November 2
220
Justice files a suit against Intone Corporation,
Lubbock, Texas, for alleged rent violations.
CHRONOLOGY
Committee on Interest and Dividends puts a 4
percent ceiling on increases in dividends to be
paid in 1972.
November 4
An exemption is granted to West Daviess
County Water District, Owensboro, Kentucky,
for increased water rates.
House Banking and Currency Committee votes
to include in the extension of the Economic
Stabilization Act the requirement that most
wage increases covered by contracts made before
the freeze be paid retroactively.
November 8
Pay Board announces its general policies governing pay adjustments in Phase II.
November 10
C L C announces its decisions for implementing
the Phase II program; includes the three-tier
classification system and excepted categories.
C L C reverses its policies on vacation benefits
and stock options.
November 11
Suit filed against Oklahoma City School Board
for raising teacher salaries.
Price Commission
policies.
announces
its
Phase
II
President appoints the chairmen and members
of the Committee on the Health Services Industry and the Committee on State and Local
Government Cooperation, both committees to
function as advisory panels to CLC, the Pay
Board, and the Price Commission.
November 12
IRS issues statement on its administrative and
enforcement role in the postfreeze program.
November 13
Donald Rumsfeld, acting for CLC, delegates
authority to the Secretary of the Treasury to
administer and enforce the Economic Stabilization Program during Phase II, subject to the
general policy guidance of CLC. Director of
O E P to continue to exercise responsibility and
authority as necessary to effectuate an orderly
221
CHRONOLOGY
transfer of functions to Pay Board and Price
Commission.
November 14
Phase II begins.*
* Some events occurring in Phase II are of special interest to the Phase I story,
for example: November 22, President creates the Rent Advisory Board to advise
and assist the Price Commission; designates its membership the following day.
December 18, major industrial nations (Group of Ten) reach agreement on a general
realignment of currencies. December 20, the President announces the termination
of the import surcharge. December 22, the Economic Stabilization Act Amendments
of 1971 are enacted (see Exhibit 11) . January 10, 1972, CLC announces that it will
disclose names of some violators consistent with the public's need to know whether
the postfreeze controls are working fairly. January 13, Pay Board announces it is
permitting most retroactive wage payments. March 7, Justice Department files suit
against Robert Dedoes over alleged rent violation that occurred during Phase I.
222
Exhibits
EXHIBITS
EXHIBIT 1
Public Law 91-379
91st Congress, S. 3302
August 15, 1970
To amend the Defense Production Act of 1950, and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
TITLE I—DEFENSE PRODUCTION ACT AMENDMENTS
tt * *
TITLE II—COST OF LIVING STABILIZATION
Economic
Stabilization
Act of 1970.
Standbycontrols.
84 STAT. 799
84 STAT. 800
§201. Short title
This title may be cited as the "Economic Stabilization Act of 1970".
§ 202. Presidential authority
The President is authorized to issue such orders and regulations as
he may deem appropriate to stabilize prices, rents, wages, and salaries
atjevels not less than those prevailing on May 25, 19(0. Such orders
and regulations may provide for the making of such adjustments as
may be necessary to prevent gross inequities.
§203. Delegation
The President may delegate the performance of any function under
this title to such officers, departments, and agencies of the United
States as he may deem appropriate.
§204. Penalty
Whoever willfully violates any order or regulation under this title
shall befinednot more than $5,000.
§205. Injunctions
Whenever it appears to any agency of the United StateSj authorized
by the President to exercise the authority contained in this section to
enforce orders and regulations issued unaer this title, that any person
has engaged, is engaged, or is about to engage in any acts or practices
constituting a violation of any regulation or order under this title, it
may in its discretion bring an action, in the proper district court of the
United States or the proper United States court of any territory or
other place subject to the jurisdiction of the United States, to enjoin
such acts or practices, and upon a proper showing a permanent or
temporary injunction or restraining order shall be granted without
bond. Upon application of the agency, any such court may also issue
mandatory injunctions commanding any person to comply with any
regulation or order under this title,
§206. Expiration
The authority to issue and enforce orders and regulations under this
title expires at midnight February -28, 1J)71, but such expiration shall
not affect any proceeding under section 204 for a violation of any such
order or regulation, or for the punishment for contempt committed in
the violation of any injunction issued under section 205, committed
prior to March 1,1971.
Approved August 15, 1970.
224
EXHIBIT 2
EXHIBITS
EXECUTIVE ORDER 11588, PROVIDING FOR THE STABILIZATION OF WAGES AND
PRICES IN THE CONSTRUCTION INDUSTRY
Whereas, the stabilization of wages and prices in the construction industry is
essential to the maintenance of a strong national economy; and
Whereas, wages and prices in the construction industry have tended in recent
years to increase at a rate greater than that for the economy as a whole; and
Whereas, the Congress has expressed its concern over the unrestrained rise in wages
and prices through the enactment of the Economic Stabilization Act of 1970 (84 Stat.
799 as amended) ; and
Whereas, it was necessary to suspend the prevailing rate provisions of the DavisBacon Act in order to assist in alleviating the inflationary spiral of wages and prices
in the construction industry, which suspension is no longer required due to the establishment of an equitable stabilization plan under this order; and
Whereas, the national leaders of labor and management in the construction industry have indicated, since the suspension of the Davis-Bacon Act, that under such
an order they will participate with the Government in fair measures to achieve
greater wage and price stability; but are unable to agree on any voluntary arrangement; and
Whereas, stabilization of wages and prices is most effectively achieved when accompanied by positive action of labor and management; and
Whereas, this order is required to establish an arrangement for the application of
general criteria by an operating structure with a minimum of Government involvement and sanctions within which labor and management may act to effectuate the
stabilization of wages and prices consistent with and in furtherance of effective collective bargaining: in the industry.
Now, therefore, by virtue of the authority vested in me by the Economic Stabilization Act of 1970 (84 Stat. 799 as amended) and as President of the United States,
it is ordered as follows:
SECTION. 1. (a) A Construction Industry Stabilization Committee (hereinafter
referred to as "Committee") is hereby established to assure generally conformance of
any increase in any wage or salary in the construction industry to the provisions of
this order.
(b) The Committee shall be composed of 12 members appointed by the Secretary
of Labor and selected as follows: four of the members shall be representative of labor
organizations in the construction industry; four of the members shall be representative of employers in the construction industry; and four of the members shall be
representative of the public. The Secretary of Labor shall appoint one of the public
members as chairman of the committee.
SEC. 2. Associations of contractors and national and international unions shall
jointly establish craft dispute board (hereinafter referred to as "boards") to determine whether wages and salaries are acceptable in accordance with the criteria established in section 6. Each board shall be composed of appropriate labor and management representatives.
SEC. 3. (a) It shall be the responsibility of each board, in relation to the craft or
branch over which it has jurisdiction, to provide advice and assistance in an effort to
resolve any unresolved collective bargaining disputes involving wages and salaries and
to promptly examine every collective bargaining agreement negotiated on or after
the date of this order and to determine, in accordance with the criteria established in
section 6, whether wage and salarv increases in the agreement are acceptable and mav
thus be approved. The board shall make determinations within a reasonable time and
shall notifv the parties and the Committee of action taken. When it is determined by
the board that a wage or salary increase is not acceptable, the board shall also notify
the Secretary of Labor.
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474-893 O - 72 - 16
EXHIBITS
(b) Each board shall also have the authority to examine collective bargaining agreements negotiated prior to the date of this order which contain wage or salary increases
scheduled to take effect on or after such date to determine whether any increase is unreasonably inconsistent with the criteria established in section 6.
SEC. 4. (a) Upon receipt of a notification by a board that it has found a wage or
salary increase acceptable, the Committee shall have 15 days in which to determine
whether it will assume jurisdiction over the matter. If the Committee does not
determine within that time, and so notify the parties and the board, that it will
assume jurisdiction, the board's determination will be deemed final and the increase
may take effect. If the Committee determines that it will assume jurisdiction it shall
be a violation of this order to implement the increase unless and until the Committee
affirms the board's initial determination. The Committee shall notify the parties, the
board and the Secretary of Labor of itsfinalaction.
(b) The Committee is also authorized, upon its own motion, if a board has not
yet reported or an appropriate board has not been established, to review any proposed
wage or salary increase to determine its acceptability.
(c) Unless and until an increase in wage or salary has been approved in accordance
with the provisions of sections 3(a) and 4 of this order, it shall be a violation of this
order to put such a wage or salary increase into effect.
SEC. 5. Upon a determination by a board or the Committee that a proposed wage
or salary increase is not acceptable and certification of that determination by the
Secretary of Labor, the following actions shall be taken:
(a) In implementing the provisions of the Davis-Bacon Act of March 3, 1931 (46
Stat. 1494, as amended), and related statutes the provisions of which are dependent
upon determinations by the Secretary of Labor under the Davis-Bacon Act, and including State statutes or laws requiring similar wage standards, the Secretary of Labor
and all States shall not take into consideration any wage or salary increase in excess
of that found to be acceptable in making determination under that act and related
statutes.
(b) In order to assure that unacceptable wage rates shall not be utilized in
Federal or federally related construction, the heads of all Federal departments and
agencies, subject to the direction and coordination of the Secretary of Labor:
(1) Shall review all plans for construction and financial assistance for construction in localities in which wage or salary increases have been certified by the
Secretary of Labor to be unacceptable and shall, on the basis of that review,
determine whether such plans can be approved or continued; and
(2) Shall review current and prospective construction contracts for Federal
construction and for construction on projects receiving Federal financial assistance in the area affected by a certification by the Secretary of Labor and shall,
on the basis of such review, determine whether such contracts can be awarded
or continue.
(c) The Committee and the boards shall make public their determinations, specifying the craft and area affected and the wages or salaries deemed unacceptable.
(d) Any other action authorized by law to carry out the purposes and policy of
this order shall be available to the Secretary of Labor to assure the stabilization of
wages and prices in the construction industry.
SEC. 6. The following criteria shall be applied in determining whether any wage
or salary increase is acceptable:
(a) Acceptable economic adjustments in labor contracts negotiated on or after the
date of this order will be those normally considered supportable by productivity
improvement and cost of living trends, but not in excess of the average of the median
increases in wages and benefits over the life of the contract negotiated in major
construction settlements in the period 1961 to 1968.
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EXHIBITS
(b) Equity adjustments in labor contracts negotiated on or after the date of this
order may, where carefully identified, be considered over the life of the contract to
restore traditional relationships among crafts in a single locality and within the same
craft in surrounding localities.
SEC. 7. The parties to a labor contract negotiated in the construction industry
shall promptly submit that contract to the appropriate board or boards. Where there
is no appropriate board to consider the acceptability of a proposed wage or salary
increase, the affected national or international union, and the affected association of
contractors shall promptly submit that contract to the Committee.
SEC. 8. The Interagency Committee on construction (hereinafter referred to as
"Interagency Committee"), is hereby established to develop criteria for the determination of acceptable prices in construction contracts as well as criteria for acceptable
compensation, including bonuses, stock options and the like. Officers and employees of
Federal departments and agencies shall be designated to serve as members of the Interagency Committee by the Secretary of Housing and Urban Development who shall
also designate its chairman. The Interagency Committee shall consult with the Secretary of Labor, with major Government procurement agencies and with the Committee in developing such criteria and concerning the application of such criteria.
Until criteria have been developed and applied and prices and compensation are
determined to be unacceptable, prices, and compensation shall not be deemed in
violation of this order.
SEC. 9. In the conduct of every Federal or federally assisted construction project
or program the affected Federal agency shall assure the conformance of such project
or program with the criteria established in section 8.
SEC. 10. The Committee and the Interagency Committee, subject to approval by
the Secretary of Labor, and the Secretary of Labor are authorized to issue such
rules and regulations as may be necessary to provide for the expeditious and effective
conduct of their responsibilities under this order and to effectuate its purposes. Such
authority of the Committee under this section shall include the authority to issue
such rules and regulations as may be necessary to assure the effective operation
of any board which may be established under this order, and to provide for the resolution of impasses within any board.
SEC. 11. (a) The term "construction" shall mean, for the purpose of this order
(1) all work relating to the erecting, constructing, altering, remodeling, painting,
or decorating of installations such as buildings, bridges, highways and the like, when
performed on a contract basis, but shall not include maintenance work performed by
workers employed on a permanent basis in a particular plant or facility for the purpose of keeping such plant or facility in efficient operating condition; (2) the transporting of materials and supplies to or from a particular building or project by the
workers of the contractor or subcontractor performing the constuction or the manufacturing of materials, supplies, or equipment on the site of a project by such workers; and (3) all other work classified as construction in section 5.2(g) of part 5,
title 29 of the Code of Federal Regulations.
(b) The term "wage or salary" shall mean, for the purpose of this order, all wage
or salary rate schedules and economic benefits established pursuant to a collective
bargaining agreement in the construction industry.
SEC. 12. (a) Expenses of the Committee and the Interagency Committee shall
be paid from such appropriations to the Department of Labor and other Federal
agencies as may be made available therefor.
(b) All departments and agencies of the Federal Government are authorized and
directed to cooperate with the Committee and the Interagency Committee in order
that they may carry out their responsibilities under this order.
SEC. 13. There shall be periodic examination of the effectiveness of this order to
227
EXHIBITS
determine whether further measures will be required to effectuate a stabilization of
wages and prices in the construction industry.
SEC. 14. This order shall be effective immediately.
RICHARD NIXON.
EXHIBIT 3
Public Law 92-15
92nd Congress, H. R. 4246
May 18. 1971
85 STAT. 38
To extend certain laws relating to the payment of interest on time and saYingg
deposits and economic stabilization, and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
EXTENSION OF AUTHORITY FOR THE FLEXIBLE REGULATION OF INTEREST
RATES ON DEPOSITS AND SHARE ACCOUNTS I N FINANCIAL INSTITUTIONS
Interest rates
and oost-pfliving stabilization.
Extension.
SECTION 1. Section 7 of the Act of September 21, 1966, as amended
(Public Law 91-151; Public Law 92-8), is amended by striking out Ante, p. 13.
"1971" and inserting in lieu thereof "1973".
REMOVAL OF TIME LIMITATION ON T H E AUTHORITY OF T H E PRESIDENT TO
APPROVE CERTAIN VOLUNTARY AGREEMENTS
SEC. 2. The first sentence of section 717(a) of the Defense Production Act of 1950 (50 U.S.C. App. 2166(a)) is amended by striking out 84 stat. 796.
"714 and 719" and inserting in lieu thereof "708,714, and 719".
PRICE AND WAGE CONTROLS
SEC. 3. (a) Section 202 of the Economic Stabilization Act of 1970
(Public Law 91-379) is amended—
(1) by inserting " (a)" before the text of such section; and
(2) by adding at the end thereof a new subsection as follows:
u
(b) The authority conferred on the President by this section shall
not be exercised with respect to a particular industry or segment of the
economy unless the President determines, after taking into account the
seasonal nature of employment, the rate of employment or underemployment, and other mitigating factors, that prices or wages in that
industry or segment of the economy have increased at a rate w^ich is
grossly disproportionate to the rate at which prices or wages have
increased in the economy generally."
(b) Section 206 of such Act is amended by striking out "May 31,
1971" and "June 1, 1971" and inserting in lieu thereof "April 30,
1972" and "May 1,1972", respectively.
Approved May 18, 1971.
228
84 Stat. 799.
12 USC 1904
note.
Ante, p. 13*
EXHIBITS
EXHIBIT 4
T H E PRESIDENT
EXECUTIVE ORDER
11615
PROVIDING FOR STABILIZATION OF PRICES, RENTS, WAGES, AND SALARIES
WHEREAS, in order to stabilize the economy, reduce inflation, and minimize
unemployment, it is necessary to stabilize prices, rents, wages, and salaries; and
WHEREAS, the present balance of payments situation makes it especially urgent
to stabilize prices, rents, wages, and salaries in order to improve our competitive
position in world trade and to protect the purchasing power of the dollar:
NOW, THEREFORE, by virtue of the authority vested in me by the Constitution and statutes of the United States, including the Economic Stabilization Act of
1970 (Public Law 91-379, 84 Stat. 799), as amended, it is hereby ordered as follows:
SECTION 1. (a) Prices, rents, wages, and salaries shall be stabilized for a period
of 90 days from the date hereof at levels not greater than the highest of those pertaining to a substantial volume of actual transactions by each individual, business,
firm or other entity of any kind during the 30-day period ending August 14, 1971,
for like or similar commodities or services. If no transactions occurred in that period,
the ceiling will be the highest price, rent, salary, or wage in the nearest preceding
30-day period in which transactions did occur. No person shall charge, assess, or
receive, directly or indirectly in any transaction prices or fents in any form higher
than those permited hereunder, and no person shall, directly or indirectly, pay or
agree to pay in any transaction wages or salaries in any form, or to use any means
to obtain payment of wages and salaries in any form, higher than those permitted
hereunder, whether by retroactive increase or otherwise.
(b) Each person engaged in the business of selling or providing commodities or
services shall maintain available for public inspection a record of the highest prices
or rents charged for such or similar commodities or services during the 30-day period
ending August 14, 1971.
(c) The provisions of sections 1 and 2 hereof shall not apply to the prices charged
for raw agricultural products.
SEC. 2. (a) There is hereby established the Cost of Living Council which shall act
as an agency of the United States and which is hereinafter referred to as the Council.
(b) The Council shall be composed of the following members: The Secretary of the
Treasury, the Secretary of Agriculture, the Secretary of Commerce, the Secretary of
Labor, the Director of the Office of Management and Budget, the Chairman of the
Council of Economic Advisers, the Director of the Office of Emergency Preparedness,
and the Special Assistant to the President for Consumer Affairs. The Secretary of the
Treasury shall serve as Chairman of the Council and the Chairman of the Council of
Economic Advisers shall serve as Vice Chairman. The Chairman of the Board of Governors of the Federal Reserve System shall serve as adviser to the Council.
(c) Under the direction of the Chairman of the Council a Special Assistant to the
President shall serve as Executive Director of the Council, and the Executive Director
is authorized to appoint such personnel as may be necessary to assist the Council in the
performance of its functions.
SEC. 3. (a) Except as otherwise provided herein, there are hereby delegated to the
Council all of the powers conferred on the President by the Economic Stabilization
Act of 1970.
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EXHIBITS
(b) The Council shall develop and recommend to the President additional policies,
mechanisms, and procedures to maintain economic growth without inflationary increases in prices, rents, wages, and salaries after the expiration of the 90-day period
specified in Section 1 of this Order.
(c) The Council shall consult with representatives of agriculture, industry, labor
and the public concerning the development of policies, mechanisms and procedures to
maintain economic growth without inflationary increases in prices, rents, wages, and
salaries.
(d) In all of its actions the Council will be guided by the need to maintain consistency of price and wage policies with fiscal, monetary, international and other economic policies of the United States.
(e) The Council shall inform the public, agriculture, industry, and labor concerning the need for controlling inflation and shall encourage and promote voluntary action
to that end.
SEC. 4. (a) The Council, in carrying out the provisions of this Order, may (i) prescribe definitions for any terms* used herein, (ii) make exceptions or grant exemptions,
(iii) issue regulations and orders, and (iv) take such other actions as it determines to
be necessary and appropriate to carry out the purposes of this Order.
(b) The Council may redelegate to any agency, instrumentality or official of the
United States any authority under this Order, and may, in administering this Order,
utilize the services of any other agencies, Federal or State, as may be available and
appropriate.
(c) On request of the Chairman of the Council, each Executive department or
agency is authorized and directed, consistent with law, to furnish the Council with
available information which the Council may require in the performance of its
functions.
(d) All Executive departments and agencies shall furnish such necessary assistance
as may be authorized by section 214 of the Act of May 3, 1945 (59 Stat. 134; 31
U.S.C. 691).
SEC. 5. The Council may require the maintenance of appropriate records or other
evidence which are necessary in carrying out the provisions of this Order, and may
require any person to maintain and produce for examination such records or other
evidence, in such form as it shall require, concerning prices, rents, wages, and salaries
and all related matters. The Council may make such exemptions from any requirement
otherwise imposed as are consistent with the purposes of this Order. Any type of record
or evidence required under regulations issued under this Order shall be retained for
such period as the Council may prescribe.
SEC. 6. The expenses of the Council shall be paid from such funds of the Treasury
Department as may be available therefor.
SEC. 7. (a) Whoever willfully violates this Order or any order or regulation issued
under authority of this Order shall be fined not more than $5,000 for each such
violation.
(b) The Council shall in its discretion request the Department of Justice to bring
actions for injunctions authorized under Section 205 of the Economic Stabilization
Act of 1970 whenever it appears to the Council that any person has engaged, is engaged, or is about to engage in any acts or practices constituting a violation of any
regulation or order issued pursuant to this Order.
RICHARD NIXON.
T H E WHITE HOUSE,
August 15, 1971.
NOTE.—For the text of the President's radio and television address in connection with
E.O. 11615, above, see Weekly Comp. of Pres. Docs., Vol. 7, No. 34. issue of Aug. 23, 1971.
Amended by Executive Order 11617 of September 2, 1971, to add the Secretary of
Housing and Urban Development to the membership of the Cost of Living Council.
230
EXHIBITS
EXHIBIT 5
COST OF LIVING COUNCIL ORDER NO. I
Pursuant to the authority vested in the Council by section 4 of Executive Order
No. 11615 (hereinafter referred to as the order), it is hereby ordered as follows:
1. There is hereby delegated to the Director, Office of Emergency Preparedness
(hereinafter referred to as the Director), responsibility and authority to implement,
administer, monitor, and enforce the stabilization of prices, rents, wages, and salaries
as directed by section 1 of the order.
2. There is hereby delegated to the Director the authority vested in the Council
by sections 4(a), 5, and 7 of the order.
3. All executive departments and agencies shall furnish such necessary assistance
to the Director as may be authorized by section 214 of the Act of May 3, 1945, 59
Stat. 134(31 U.S.C. 691).
4. Significant policy decisions shall be made only after consultation with the
Council.
5. The Director may redelegate to any agency, instrumentality, or official of the
United States any authority under this order, and may, in carrying out the functions
delegated to it by this order, utilize the services of any other agencies, Federal or
State, as may be available and appropriate.
By direction of the Council.
[SEAL]
JOHN B. CONNALLY,
Chairman.
AUGUST 17,
1971.
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EXHIBITS
EXHIBIT 6
OFFICE OF EMERGENCY PREPAREDNESS
ECONOMIC STABILIZATION ORDER NO. 1
By virtue of the authority vested in the Director of the Office of Emergency Preparedness by section 5 of Cost of Living Council Order No. 1, it is hereby ordered as
follows:
SECTION 1. Purpose. The purpose of this order is to delegate to the Secretary of the
Treasury, hereinafter referred to as the Secretary, certain administrative and operating
functions relating to the implementation of the program providing for stabilization of
prices, rents, wages, and salaries pursuant to Executive Order 11615 of August 15,
1971. The Secretary shall, in carrying out said functions, provide by redelegation or
otherwise for their performance.
SEC. 2. Functions delegated. There is hereby delegated to the Secretary the responsibility and authority for the establishment, operation and maintenance of local
service and compliance centers established in support of the economic stabilization
program in Standard Metropolitan Statistical Areas and such other places as the Secretary may determine. The functions to be exercised through these centers will include but not be limited to the following:
a. Dissemination of information and guidance to the public;
b. Receipt, analysis, and evaluation of complaints received with respect to program
violations;
c. Subject to the general policy guidance and coordination of the Director of the
Office of Emergency Preparedness, or his designee, the investigation, compliance, and
enforcement of the stabilization of prices, rents, wages and salaries as directed by
section 1 (a) of Executive Order No. 11615.
SEC. 3. Effective date. This Order is effective the date of issuance.
Dated: August 19, 1971.
;
G. A. LINCOLN,
Director, Office of Emergency Preparedness.
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EXHIBITS
EXHIBIT 7
TREASURY DEPARTMENT ORDER NO. 150-75
Delegation of Authority
The authority delegated to the Secretary of the Treasury by Office of Emergency
Preparedness Order 1 of August 19, 1971, is hereby redelegated to the Commissioner
of Internal Revenue. The Commissioner may redelegate this authority to any officer
or employee of the Internal Revenue Service.
Under the terms of Section 4<d) of Executive Order 11615 of August 15, 1971,
all Treasury bureaus and organizations are available to assist Internal Revenue
Service in carrying out the responsibilities assigned by this delegation.
John B. Connally
Secretary of the Treasury
Date: August 19, 1971
EXHIBIT 8
INTERNAL REVENUE SERVICE ORDER NO. 117
SUBJECT Implementation of the Program Providing for Stabilization of Prices,
Rents, Wages and Salaries
The authority delegated to the Secretary of the Treasury by OEP Economic
Stabilization Order No. 1, dated August 19, 1971, and redelegated to the Commissioner of Internal Revenue by Treasury Department Order No. 150-75, dated August
19, 1971, is hereby redelegated to Regional Commissioners, District Directors, and
Service Center Directors, as follows:
/. Responsibility and authority for the establishment, operation and maintenance
of local service and compliance centers established in support of the economic
stabilization program in Standard Metropolitan Statistical Areas and such other
places as they may determine. The functions to be exercised through these centers
Will include but not be limited to the following:
(a) Dissmination of information and guidance to the public;
(b) Receipt, analysis, and evaluation of complaints received with respect td
program violations; and
(c) Subject to the general policy guidance and coordination of the Director of
the Office of Emergency Preparedness, or his designee. the investigation, compliance,
and enforcement of the stabilization of prices, rents, wages, and salaries as directed
by Section 1 (a) of Executive Order 11615 of August 15, 1971.
2. The authority to establish local service and compliance centers may not be
redelegated. All other authority delegated by this Order may be redelegated.
3. Under the terms of Section 4(d) of Executive Order 11615 and Treasury
Department Order No. 150-75. all Treasury Bureaus and organizations are available
to assist the Internal Revenue Service in carrying out the responsibilities assigned
by this Order.
Johnnie M. Walters
Commissioner
Date: August 20, 1971
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EXHIBITS
EXHIBIT 9
OFFICE OF EMERGENCY PREPAREDNESS
ECONOMIC STABILIZATION REGULATION NO. 1
Sec.
1 Purpose.
2 Prohibition.
3 Guidance.
4 Exemptions.
5 Imports.
6 Definitions.
7 Administration.
8 Record keeping.
9 Applicability.
10 Violations and penalties.
11 Information.
AUTHORITY: Sections 1 to 11 issued under the Economic Stabilization Act of 1970,
as amended, Public Law 91-379, 84 Stat. 799; Public Law 91-558, 84 Stat. 1468;
Public Law 92-8, 85 Stat. 13, Public Law 92-15, 85 Stat. 38; Executive Order No.
11615, 36F.R. 15127, Aug. 17, 1971, Cost of Living Council Order No. 1.
Section 1 Purpose.
The purpose of this regulation is to promulgate initial guidance and procedures
for implementing the stabilization of prices, rents, wages, and salaries in accordance
with the provisions of Executive Order No. 11615 of August 15, 1971. It is expected
that all persons will voluntarily comply with the provisions of the Executive order and
all regulations, circulars, and orders issued thereunder.
Sec. 2 Prohibition
(a) No person may charge, assess or receive more for commodities and services than
the highest prices, including customary price differentials, pertaining to a substantial
volume of actual transactions in any class of trade by such person which were in effect
during the base period.
(b) No employer shall pay and no employee shall receive a wage, salary, or other
form of compensation at a rate higher than that paid or received or in effect during
the base period, nor shall any person use any means to obtain payment of wages,
salaries or other form of compensation higher than those permitted under the Executive order or this regulation. Such remuneration shall be based upon a substantial
number of actual transactions for services of like or similar nature.
(c) No person shall offer, demand, or receive any rent higher than the maximum
rent prevailing for the same or comparable property for a substantial number of actual
transactions during the base period.
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EXHIBITS
(d) No owner of any interest in real property shall demand or receive more than
the sales price ceilings which shall be:
(1) The sale price specified in a sales contract signed by both parties on or before
August 14, 1971.
(2) Where there is no such sales contract, the fair market value of the property as
of the base period based on sales of like or similar property.
Sec. 3 Guidance
(a) Prices. (1) The ceiling price for the sale of a commodity or service is the
highest price at which a seller delivered or furnished such commodity or service to
purchasers in a substantial number of transactions during the base period.
(2) If a seller delivers or offers a commodity or service which he did not previously deliver or furnish, he can determine his ceiling price either by (i) applying
to his current direct unit cost or to his net invoice cost the percentage markup he is
currently receiving on the most nearly similar commodity or service he sells, or
(ii) using the ceiling price prevailing for comparable commodities or services in the
same locality.
(3) A seller's ceiling price when determined, shall reflect his customary price
differentials.
(4) Even though the price charged is no higher than the ceiling permitted hereunder, the transaction may be in violation if the commodity or service sold has been
reduced in quality or otherwise is not comparable to that sold in the base period.
(b) Rents. The ceiling rent for commercial property, housing accommodations,
hotels, motels, rooming houses, farms and other establishments, together with all
privileges, services, furnishings, furniture, equipment, facilities, improvements, and
any other privileges connected with the use thereof shall be no greater than the
highest rent charged for the same property during the base period. If the property
was not rented during the base period, the ceiling price shall be no higher than the
highest rent charged during the nearest preceding 30-day period prior to the base
period. If the property was never previously rented, the ceiling rent shall be no
higher than the ceiling rent charged for similar or comparable property in the locality
or area.
(c) Wages and salaries. Deferred wage or salary increases which were negotiated
to take effect in the future, cost-of-living increases built into wage contracts or
provided by management, and routine in-grade increases not in effect on or before
August 14, 1971, are not permitted. Regardless of any right or contract heretofore
or hereafter existing, no change or adjustment shall be made in rates of wages, salaries,
or other forms of compensation whether by retroactive increases or otherwise.
Sec. 4 Exemptions
(a) The Director of OEP at his discretion may make exceptions to or grant exemptions from the prohibitions listed in section 2 of this regulation for the purpose of
preventing or correcting gross inequities.
(b) Prices of the following categories of goods and services are not subject to
the provisions of Executive Order No. 11615 and this regulation:
(1) Raw agricultural products.
(2) School tuitions.
(3) Stocks and Bonds.
(4) Exports.
Sec. 5 Imports
Sales of commodities imported from other countries are subject to the provisions of
this regulation. Price ceilings at all levels, however, may be increased by an amount
equivalent to increases in the landed cost of the commodity imported after August 15,
1971, due to changes in United States customs duties.
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EXHIBITS
Sec. 6 Definitions
(a) For purposes of this regulation, the term—
(1) "Base period"—for any commodity, service', rent, salary or wage includes the
period from July 16, 1971, through August 14, 1971, and, in the event that no
transaction occurred in the latter period, the nearest preceding 30-day period in
which a transaction did occur: Provided, however, That prices, rents, wages, and
salaries need not be established at levels less than those prevailing on May 25, 1970.
(2) "Person"—shall include any individual, corporation, partnership, association
or any other organized group of persons, or legal successors or representatives of the
foregoing, and the United States, the States or any other government or their political
subdivisions or agencies subject to this regulation, or any other entity of any kind.
(3) "Price"—shall include rentals, commissions, margins, rates, fees, charges or
other forms of prices paid or received for the sale or use of commodities or services
or for the sale of real property.
(4) "Commodity"—means all commodities, articles, products, and materials, including those provided by public utilities services, such as electricity, gas, and water.
(5) "Services"—means all services rendered, other than as an employee, in connection with the processing, distribution, storage, installation, repair, or negotiation
or purchases or sales of a commodity, or in connection with the operation of any service establishment for the servicing of a commodity, or professional services.
(6) "Sale"—includes sales, dispositions, exchanges, and other transfers and contracts.
(7) "Class of trade"—means categories of sellers and/or purchasers such as manufacturers, wholesalers, jobbers, distributors, retailers, government agencies, public
institutions, individual consumers, and bulk purchasers.
(8) "Class of purchasers or purchasers of same class"—This term refers to the
practice adopted by a seller in setting different prices for sales to different purchasers
to kinds of purchasers (for example, manufacturer, wholesaler, shopper, retailer,
Government agency, public institutions or individual consumer) or for purchasers
located in different areas or for purchasers of different quantities or grades or under
different terms or conditions of sale or delivery.
(9) "Rent"—Includes charges for any building, structure or part thereof, or land
appurtenant thereto, or services, furnishings, furniture, equipment, facilities, and improvements connected with ths use or occupancy of such property.
(10) "Net invoice cost"—This term refers to a seller's invoice cost less any discount
or allowance he took or could have taken. It does not include separately stated charges
such as freight, taxes, etc.
(11) "Unit direct cost"—This terms means labor and material costs which enter
directly into the product. It does not include factory overhead, or indirect manufacturing expenses, administrative, general, or selling expenses.
(12) "Customary price differentials"—Means differentials, including discounts, allowances, premiums and extras, based upon differences in classes or location or purchasers, or in terms and conditions of sale or delivery.
(13) "Substantial volume of transactions"—is determined as follows: The ceiling
price is the price at or above which 10 percent of the actual transactions during the
base period were made, except that in the case of increases in posted and effective
prices during the base period, the base period itself will be considered to have begun
at the time of the increase in posted and effective prices.
(b) For purposes of this regulation, wage, salary, or other form of compensation
includes all forms of remuneration to an employee by an employer for personal services, including, but not limited to premium overtime rate payments, night shift, yearend, and other bonus payments, incentive payments, commissions, vacation and holiday payments, employer contributions to or payments of insurance or welfare benefits
or pension funds or annuities, and payments in kind.
236
EXHIBITS
Sec. 7 Administration
Pursuant to Cost of Living Council Order No. 1, the Director of OEP has been
delegated authority to implement, administer, monitor and enforce the stabilization
of prices, rents, wages, and salaries established by Executive Order 11615. Significant
policy decisions shall be made only after consultation with the Cost of Living Council
established under Executive Order 11615.
Sec. 8 Recordkeeping
(a) All records in existence reflecting prices which were charged for the commodities
or services during the base period, together with all other pertinent records of any
kind or description shall be preserved and there shall be maintained available for
public inspection a record of the highest prices charged during the base period. All
records hereafter required to be kept pursuant to regulations or directives issued
hereunder shall be maintained and preserved.
(b) All persons subject to this regulation shall maintain and preserve all records
which are necessary to show the manner by which the ceiling rentals were determined
and the record of payments made by persons in occupancy of real property or any part
thereof and shall maintain available for public inspection a record of the highest rents
charged during the base period.
(c) All employers shall maintain and preserve all records which reflect the rates of
wages, salaries, or other forms of compensation paid during the base period.
(d) All persons covered by this regulation, upon demand of the Council, the OEP,
or their authorized representatives, shall make available for inspection and copying
such books and records as may be deemed necessary by the Council or the OEP to carry
out the purpose and provisions of the Executive order and the rules and regulations
promulgated thereunder.
Sec. 9 Applicability
The provisions of this regulation shall be applicable to the United States, the District of Columbia and the Commonwealth of Puerto Rico. This regulation shall not
apply to territories and possessions of the United States.
Sec. 10 Violations and penalties
(a) Any practice which constitutes a means to obtain a higher price, wage, salary
or rent, than is permitted by this regulation is a violation of this regulation. Such
practices include, but are not limited to, devices making use of inducements, commissions, kickbacks, retroactive increases, transportation arrangements, premiums, discounts, special privileges, tie-in agreements, trade understandings, falsification of
records, substitution of inferior commodities or failure to provide the same services
and equipment previously sold.
(b) Whenever it appears that any person is engaged, or is about to engage, in any
acts or practices constituting a violation of any regulation or order under this program,
the U.S. Government may, in its discretion, bring an action in the proper district court
of the United States or other place subject to the jurisdiction of the United States
to enjoin such acts or practices. Upon a proper showing, a permanent or temporary
injunction or restraining order shall be granted. In addition, upon proper application,
such court may issue mandatory injunctions commading any person to comply with
any regulation or order under this program.
(c) Any person who willfully violates the provisions of Executive Order 11615 or
this regulation shall be subject to a fine of not more than $5,000 for each violation.
Sec. 11 Information
All persons seeking information with respect to the provisions of this regulation
or the administration of this program should contact the local office of the Internal
Revenue Service, or the Regional Service and Compliance Center of the Office of
Emergency Preparedness in their geographical area, or such other local Federal offices
237
EXHIBITS
as may be hereafter designated. Persons requesting exemptions, exceptions, or adjustments should direct their request, in writing, to the Director of the appropriate
Regional Service and Compliance Center. OEP Regional Service and Compliance
Centers are located in the following cities:
Atlanta.
Boston.
Chicago.
Dallas.
Denver.
Kansas City.
New York.
Philadelphia.
San Francisco.
Seattle.
Effective date. This regulation, unless modified, superseded or revoked, is effective
on the date of publication for a period terminating on November 12, 1971.
Dated: August 20, 1971.
G. A. LINCOLN,
Directory Office of Emergency Preparedness.
Amendment 1, August 23, 19*1, deletes school tuitions from the list of goods and
services exempt from Executive Order 11615 and this Regulation; Section 11 of the
Regulation is amended by adding a second paragraph authorizing the periodic
issuance of Circulars containing implementing instructional material.
Amendment 2, August 30, 1971, substitutes the word "ceiling" for the word
"maximum" in Section 2(c) of the Regulation; Section 3(c) of the Regulation is
revised to change the date after which delayed or deferred wage or salary increases
negotiated to take effect in the future, cost-of-living increases built into wage
contracts or provided by management, and routine in-grade increases are not permitted; the last paragraph of Section 11 of the Regulation is revised to change the
termination date of the Regulation, or freeze, from November 12, 1971, to November
13, 1971.
Amendment 3y September 2, 1971, reverses the sequence of the criteria set out
in Section 3 (a) (2) of the Regulation for sellers to determine ceiling prices on new
products or services.
Amendment 4, September 25, 1971, adds a new paragraph (b) to Section 8, to
provide guidance with respect to customer access to price records of sellers.
Amendment 5, October 30, 1971, revises the last paragraph of Section 11 to extend
the effective date of the Regulation, or freeze, from November 13, 1971, until altered,
amended, or revoked by the Cost of Living Council.
Amendment 6, November 15, 1971, adds a second paragraph to Section 7, stating
that it is not necessary to follow the usual rulemaking procedure.
238
EXHIBITS
EXHIBIT 10
THE
PRESIDENT
EXECUTIVE ORDER
11627
FURTHER PROVIDING FOR THE STABILIZATION OF THE ECONOMY
On August 15, 1971, I issued Executive Order No. 11615 providing for the stabilization of prices, rents, wages, and salaries, for a period of 90 days from the date of that
Order. That Order also established the Cost of Living Council and charged it with the
primary responsibility for administering the stabilization program, and for recommending to me additional policies and mechanisms to permit an orderly transition from
the 90-day general price, rents, wages, and salaries freeze imposed by Executive Order
No. 11615 to a more flexible and selective system of economic restraints.
I have received recommendations from the Cost of Living Council, and have determined that the intent of the Economic Stabilization Act of 1970 (Public Law 91-379;
84 Stat. 799), as amended, can more effectively be carried out and the goals I specified
in my speech to the Nation on October 7, 1971, can more effectively be achieved, on
and after the date of this Order, by substituting this Order for Executive Order No.
11615, as amended. Notwithstanding this substitution, the findings which I made in
the preamble of Executive Order No. 11615 of August 15, 1971, are, after careful
reconsideration, reaffirmed.
Under this Order, the Cost of Living Council will be continued and will be given
broad authority to stabilize prices, rents, wages, and salaries for so long as the Economic Stabilization Act of 1970, as amended, is in effect or until such other time as the
President may hereafter prescribe. This, in effect, will result in the establishment of a
239
EXHIBITS
new economic stabilization program. That program will be carried out through a Pay
Board and a Price Commission each of which is newly established by this Order. The
Pay Board will be a tripartite organization composed of five representatives of organized labor, five representatives of business, and five representatives of the general
public. The Price Commission will be composed of seven members, all from the general
public. The President will appoint all members of both the Board and the Commission
and will designate the Chairman of each, who will be a full-time official of the United
States.
The Cost of Living Council will establish broad stabilization goals for the Nation,
and the Pay Board and Price Commission, acting through their respective Chairmen,
will prescribe specific standards, criteria, and regulations, and make rulings and decisions aimed at carrying out these goals.
In addition, this Order establishes three new committees to assist the Council, the
Pay Board, and the Price Commission in the performance of their functions. They are
the Committee on Interest and Dividends, an inner-agency body made up of the
heads of various Federal departments and agencies having financial regulatory functions; the Committee on the Health Services Industry; and the Committee on State
and Local Government Cooperation.
Finally, this Order modifies Executive Order No. 11588 so as to bring the Construction Industry Stabilization Committee established by that Order into the framework
of the new economic stabilization program established by this Order.
NOW, THEREFORE, by virtue of the authority vested in me by the Constitution
and statutes of the United States, particularly the Economic Stabilization Act of 1970,
as amended, it is hereby ordered as follows:
SECTION 1. (a) The Pay Board and Price Commission established by sections 7
and 8 of this Order, respectively, and the Chairman of each of those bodies, shall, pursuant to goals of the Cost of Living Council, take such steps as may be necessary, and
authorized by or pursuant to this Order, to stabilize prices, rents, wages, and salaries.
Pending action under this Order, and except as otherwise provided in section 202 of
the Economic Stabilization Act of 1970, as amended, prices, rents, wages, and salaries
are stabilized effective as of August 16, 1971, at levels not greater than the highest
of those pertaining to a substantial volume of actual transactions by each individual,
business, firm, or other entity of any kind during the 30-day period ending August 14,
1971, for like or similar commodities or services. If no transactions occurred in that
period, the ceiling will be the highest price, rent, salary, or wage in the nearest preceding 30-day period in which transactions did occur. No person shall charge, assess, or
receive, directly or indirectly in any transactions, prices or rents in any form higher
than those permitted hereunder, and no person shall, directly or indirectly, pay or
agree to pay, in any transaction, wages or salaries in any form, or to use any means to
obtain payment of wages and salaries in any form, higher than those permitted hereunder, whether by retroactive increase or otherwise.
(b) Each person engaged in the business of selling or providing commodities or
services shall maintain available for public inspection a record of the highest prices
or rents charged for such or similar commodities or services during the 30-day period
ending August 14, 1971.
(c) The provisions of sections 1 and 2 of this Order shall not apply to the prices
charged for raw agricultural products.
SEC. 2. (a) The Cost of Living Council (hereinafter referred to as the Council),
established by section 2 of Executive Order No. 11615 of August 15, 1971, is hereby
continued and shall continue to act as an agency of the United States.
(b) The Council shall be composed of the following members: The Secretary of the
Treasury, the Secretary of Agriculture, the Secretary of Commerce, the Secretary of
Labor, the Secretary of Housing and Urban Development, the Director of the Office
of Management and Budget, the Chairman of the Council of Economic Advisers, the
240
EXHIBITS
Director of the Office of Emergency Preparedness, the Special Assistant to the President for Consumer Affairs, and such others as the President may, from time to time,
designate. The Secretary of the Treasury shall serve as Chairman of the Council and
the Chairman of the Council of Economic Advisers shall serve as Vice Chairman. The
Chairman of the Board of Governors of the Federal Reserve System shall serve as
adviser to the Council.
(c) There shall be a Director of the Cost of Living Council who shall be appointed
by the President, be a member of the Council, be a full-time official of the United
States, and be the Council's chief executive officer.
SEC. 3. (a) Except as otherwise provided herein, there are continued to be delegated to the Council all of the powers conferred upon the President by the Economic
Stabilization Act of 1970, as amended.
(b) The Council shall develop and recommend to the President policies, mechanisms and procedures to achieve and maintain stability of prices and costs in a growing
economy. To this end it shall consult with representatives of agriculture, industry,
labor, State and local governments, consumers and the public, through the National
Commission on Productivity and otherwise.
(c) In all of its actions the Council shall be guided by the need to maintain consistency of price and wage policies with fiscal, monetary, international, and other economic
policies of the United States.
(d) The Council shall inform the public, agriculture, industry, and labor concerning the need for controlling inflation and shall encourage and promote voluntary
action to that end.
SEC. 4. (a) The Council, in carrying out the provisions of this Order, may continue
to (i) prescribe definitions for any terms used herein, (ii) make exceptions or grant
exemptions, (iii) issue regulations and orders, (iv) provide for the establishment of
committees and other comparable groups, and (v) take such other actions as it
determines to be necessary and appropriate to carry out the purposes of this Order.
More particularly, the Council, working through appropriate delegations to the Chairman oflhe~Pay Board and the Chairman of the Price^ Commission, may (1) notwithstanding the provisions of subsection (a) of section 1 of this Order, prescribe base
periods for determining maximum levels for prices, rents, wages, and salaries other
than the base period specified in subsection (a) of section 1 of this Order, and (2)
otherwise increase or decrease, subject to section 202 of the Economic Stabilization
Act of 1970, as amended, the maximum levels for prices, rents, wages, and salaries
prescribed by subsection (a) of section 1 of this Order.
(b) The Council may redelegate to any agency, instrumentality, or official of the
United States any authority under this Order, and may, in administering this Order,
utilize the services of any other agencies, Federal or State, as may be available and
appropriate.
(c) On request of the Chairman of the Council, each executive department or
agency is authorized and directed, consistent with law, to furnish the Council with
any available information which the Council may require in the performance of its
functions.
SEC. 5. The Council may require the maintenance of appropriate records or other
evidence which are necessary in carrying out the provisions of this Order, and may
require any person to maintain and produce for examination such records or other
evidence, in such form as it shall require, concerning prices, rents, wages, and salaries
and all related matters. The Council may make such exemptions from any requirement otherwise imposed as are consistent with the purposes of this Order. Any type
of record or evidence required under regulations issued under this Order shall be
retained for such period as the Council may prescribe.
SEC. 6. The expenses of the Council shall be paid from such funds of the Department of the Treasury or otherwise as may be available therefor.
241
474-893 O - 72 - 17
EXHIBITS
SEC. 7. (a) There is hereby established a "Pay Board" (hereinafter referred to as
the Board).
(b) The Board shall be composed of 15 members. The members shall be appointed
by the President and shall include five labor representatives, five business representatives, and five representatives of the general public. The members of the Board shall
serve at the pleasure of the President and the President shall designate one of the
members representing the public to serve as Chairman. The Chairman shall serve full
time and be an official of the United States. The Chairman shall designate an Executive Director of the Board who shall serve under the direction of the Chairman of the
Board and perform such duties as the Chairman may specify.
(c) The Board shall perform such functions with respect to the stabilization of
wages and salaries as the Council delegates to the Board. The Chairman of the
Board shall perform such functions with respect to the stabilization of wages and
salaries as the Council may delegate to him and, in performing those functions,
shall exercise such authority, including the development and establishment of
criteria for the stabilization of wages and salaries which shall be applied in the administration of this Order, as may be delegated to him by the Council.
SEC. 8. (a) There is hereby established a "Price Commission" (hereinafter referred
to as the Commission).
(b) The Commission shall be composed of seven members. The members shall
be appointed by the President and shall be representative of the general public. The
Members of the Commission shall serve at the pleasure of the President, and the
President shall designate one of the members to serve as Chairman. The Chairman
shall serve full time and be an official of the United States. The Chairman shall
designate an Executive Director of the Commission who shall serve under the direction
of the Chairman of the Commission, and perform such duties as the Chairman may
specify.
(c) The Commission shall perform such functions with respect to the stabilization
of prices and rents as the Council delegates to the Commission. The Chairman of
the Commission shall perform such functions with respect to the stabilization of prices
and rents as the Council may delegate to him and, in performing these functions,
shall exercise such authority, including the development and establishment of criteria
for the stabilization of prices and rents which shall be applied in the administration
of this Order, as may be delegated to him by the Council.
SEC. 9. (a) There is hereby established a Committee on Interest and Dividends.
The Committee shall be composed of the Chairman of the Board of Governors of
the Federal Reserve System, the Secretary of the Treasury, the Secretary of Commerce, the Secretary of Housing and Urban Development, the Chairman of the
Federal Deposit Insurance Corporation, the Chairman of the Federal Home Loan
Bank Board, and such others as the President may, from time to time, designate. The
Chairman of the Board of Governors of the Federal Reserve System shall serve as
Chairman of the Committee.
(b) This Committee shall, subject to review by the Council, formulate and
execute a program for obtaining voluntary restraints on interest rates and dividends.
SEC. 10. (a) There is hereby established a Committee on the Health Services
Industry. This Committee shall be composed of such members as the President may
from time to time appoint. The members shall be generally representative of medical professions and related occupations, hospitals, the insurance industry, other
supporting industries, consumer interests, and the public. The President shall designate the Chairman of the Committee.
242
EXHIBITS
(b) This Committee shall provide advice concerning special considerations that
tend to contribute to inflation in the health services industry. This Committee shall
also assist the Board and Commission in the performance of their functions by making
technical analyses of specific matters referred to it by the Board or Commission.
SEC. 11. (a) There is hereby established a Committee on State and Local Government Cooperation. The Committee shall be composed of such representatives of State
and local governments and subdivisions thereof, representatives of State and local
employees, and such others as the President may, from time to time, appoint. The
President shall designate the Chairman of the Committee.
(b) This Committee shall provide advice concerning special considerations involved
in the stabilization of prices, rents, wages, and salaries pursuant to this Order as they
relate to State and local governments, and subdivisions and employees thereof. This
Committee shall also assist the Board and Commission in the performance of their
functions by making technical analyses of specific matters referred to it by the Board
or Commission.
SEC. 12. Upon request of the Chairman of the Council, Federal departments and
agencies shall provide such assistance in carrying out the provisions of this Order
as is permitted by law.
SEC. 13. All orders, regulations, circulars, or other directives issued and all other
actions taken pursuant to Executive Order No. 11615, as amended, are hereby
confirmed and ratified, and shall remain in full force and effect, as if issued under
this Order, unless and until altered, amended, or revoked by the Council or by such
competent authority as the Council may specify.
SEC. 14. (a) The Construction Industry Stabilization Committee established by
Executive Order No. 11588 of March 29, 1971, and the craft dispute boards authorized by section 2 of that Order, are hereby continued.
(b) The Chairman of the Pay Board, established by section 7 of this Order, shall
henceforth perform all functions vested in the Secretary of Labor by Executive Order
No. 11588, with respect to (1) the certification of determinations that a proposed
wage or salary increase is not acceptable, (2) the approval of rules and regulations
issued by the Construction Industry Stabilization Committee, and (3) the issuance
of rules and regulations.
(c) Subsection (d) of section 5 and section 6 of Executive Order No. 11588, are
hereby revoked.
(d) Subsections (a) and (c) of this section are effective immediately. Subsection
(b) of this section shall be effective on the day the Chairman of the Pay Board gives
notice that the Pay Board is operational.
SEC. 15. (a) Whoever willfully violates this Order or any order or regulation issued
under authority of this Order shall be fined not more than $5,000 for each such
violation.
(b) The Council may in its discretion request the Department of Justice to bring
actions for injunctions authorized under Section 205 of the Economic Stabilization
Act of 1970, as amended, whenever it appears to the Council that any person has
engaged, is engaged, or is about to engage in any acts or practices constituting a
violation of any regulation or order issued pursuant to this Order.
SEC. 16. Executive Order No. 11615 of August 15, 1971, and Executive Order
No. 11617 of September 2, 1971, are hereby superseded.
RICHARD NIXON.
T H E WHITE HOUSE,
October 15, 1971.
243
EXHIBITS
EXHIBIT 11
Public Law 92-210
92nd Congress, S. 2891
December 22, 1971
an act
To extend and amend the Economic Stabilization Act of 1070, as amended, and
for other purposes.
Be it enacted by the Senate and House of Representatives of the
United /States of America in L 1ongress assembled. That this Act may be Economic
cited as the "Economic Stabilization Act Amendments of 1971".
stabilization
Act Amendments
ECONOMIC STABILIZATION ACT OF 19 70
of
97 .
SEC. ± Title I I of the Act entitled "An Act to amend the Defense
Production Act of 1950, and for other purposes*', approved August 15,
1970 (Public Law 91-379), as amended, is amended to read as follows: 84 stat. 799.
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
"TITLE II—COST OF LIVIXG STABILIZATION
12 USC 1904
\ note.
\ 8 5 STAT, 743
"§201. Short title
85 STAT. 744
"This title may be cited as the 'Economic Stabilization Act of 1970'.
a
§202. Findings
"It is hereby determined that in order to stabilize the economy,
reduce inflation, minimize unemployment, improve the Nation's competitive position in world trade, and protect me purchasing power of
the dollar, it is necessary to stabilize prices, rents, wages, salaries,
dividends, and interest. The adjustments necessary to carry out this
program require prompt judgments and actions by the executive branch
of the Government. The President is in a position to implement
promptly and effectively the program authorized by this title.
"§ 203. Presidential authority
"(a) The President is authorized to issue such orders and regulations as he deems appropriate, accompanied by a statement of reasons
for-such orders and regulations, to—
" (1) stabilize prices, rents, wages, and salaries at levels not less
than those prevailing- on May 25,1970, except that prices may be
stabilized at levels below those prevailing on such date if it is
necessary to eliminate windfall profits or if it is otherwise necessary to carry out the purposes of this title; and
"(2) stabilize interest rates and corporate dividends and similar
transfers at levels consistent with orderly economic growth.
Such orders and regulations shall provide for the making of such
adjustments as may be necessary to prevent gross inequities, and shall
be consistent with the standards issued pursuant to subsection (b).
" (b) In carrying out the authority vested in him by subsection (a), standards.
the President shall issue standards to serve as a guide for determining levels of wages, salaries, prices, rents, interest rates, corporate dividends, and similar transfers which are consistent with the purposes
of this title and orderly economic growth. Such standards shall—
" (1) be generally fair and equitable;
"(2) provide for the making of such general exceptions and
variations as are necessary to foster orderly economic growth
and to prevent gross inequities, hardships, serious market disruptions, domestic shortages of raw materials, localized shortages of
labor, and windfall profits;
"(3) take into account changes in productivity and the cost of
living, as well as such other factors consistent with the purposes
of this title as are appropriate;
244
EXHIBITS
Pub. Law 92-210
Limitation,
85 STAT, 744
85 STAT. 745
Substandard
wages.
Limitation.
52 Stat. 1060.
29 USC 201.
- 2 -
December 22, 1971
"(4) provide for the requiring of appropriate reductions in
prices and rents whenever warranted after consideration of lower
costs, labor shortages, and other pertinent factors; and
"(5) call for generally comparable sacrifices by business and
labor as well as other segments of the economy.
"(c)(1) The authority conferred on the President by this section
shall not be exercised to limit the level of any wage or salary (including
any insurance or other fringe benefit offered in connection with an
employment contract) scheduled to take effect after November 13,
1971, to a level below that which has been agreed to in a contract which
(A) related to such wage or salary, and (B) was executed prior to
August 15, 1971, unless the President determines that the increase
provided in such contract is unreasonably inconsistent with the standards for wage and salary increases published under subsection (b).
" (2) The President shall promptly take such action as may be necessary to permit the payment of any wage or salary increase (including
any insurance or other fringe benefit offered in connection with an
employment contract) which (A) was agreed to in an employment
contract executed prior to August 15,1971, (B) was scheduled to take
effect prior to November 14,1971, and (C) was not paid as a result of
orders issued under this title, unless the President determines that
the increase provided in such contract is unreasonably inconsistent
with the standards for wage and salary increases published under
subsection (b).
"(3) In addition to the payment of wage and salary increases provided for under paragraphs (1) and (2), beginning on the date on
which this subsection takes effect, the President shall promptly take
such action as may be necessary to require the payment of any wage
or salary increases (including any insurance or other fringe benefits
offered in connection with employment) which have been, or in the
absence of this subsection would be, withheld under the authority of
this title, if the President determines tlhat—
(A) such increases were provided for by law or contract prior
to August 15,1971; and
(B) prices have been advanced, productivity increased, taxes
have been raised, appropriations have been made, or funds have
otherwise been raised or provided for in order to cover such
increases.
"(d) Notwithstanding any other provisions of this title, this title
shall oe implemented in such a manner that wage increases to any
individual whose earnings are substandard or who is a member of the
working poor shall not be limited in any manner, until such time as his
earnings are no longer substandard or he is no longer a member of
the working poor.
"(e) Whenever the authority of this title is implemented with
respect to significant segments of the economy, the President shall
require the issuance of regulations or orders providing for the stabilization of interest rates and finance charges, unless he issues a determination, accompanied by a statement of reasons, that such regulations
or orders are not necessary to maintain such rates and charges at levels
consonant with orderly economic growth.
" (f) The authority conferred by this section shall not be exercised to
preclude the payment of any increase in wages—
"(1} required under the Fair Labor Standards Act of 1938, as
amended, or effected as a result of enforcement action under such
Act: or
"(2) required in order to comply with wage determinations
made by any agency in the executive branch of* the Government
pursuant to law for work (A) performed under contracts with,
or to be performed with financial assistance from, the United
States or the District of Columbia, or any agency or instrumentality thereof, or (B) performed by aliens who are immi-
245
EXHIBITS
December 22, 1971
- 3-
Pub. Law 92-210
85 STAT. 746
grants or who have been temporarily admitted to the United
66 Stat. 163.
States pursuant to the Immigration and Nationality Act; or
"(3) paid in conjunction with existing or newly established 8 USC 1101
note.
employee incentive programs which are designed to reflect
directly increases in employee productivity.
"(g) For the purposes of this section the term 'wages' and 'salaries' "Wages,"
do not include contributions by any employer pursuant to a compensa- "salaries."
tion adjustment for—
"(1) any pension, profit sharing, or annuity and savings plan
which meets the requirements of section 401 (a), 404(a) (2), or
68A Stat. 134,
403 (b) of the Internal Revenue Code of 1954;
138.
" (2) any group insurance plan; or
72 Stat. 1620.
" (3) any disability and health plan;
26 USC 401,
unless the President determines that the contributions made by any 404,
403.
such employer are unreasonably inconsistent with the standards for
wage, salary, and price increases issued under subsection (b).
" (h) No State or portion thereof shall be exempted from any application of this title with respect to rents solely by virtue of the fact that
it regulates rents by State or local law, regulation or policy.
"(I) Rules, regulations, and orders issued under this title shall
insofar as practicable be designed to encourage labor-management
cooperation for the purpose of achieving increased productivity,
ana the Executive Director of the National Commission on Productivity shall when appropriate be consulted in the formulation of
policies, rules, regulations, orders, and amendments under this title.
"§204. Delegation
"The President may delegate the performance of any function under
this title to such officers, departments, and agencies of the United
States as he deems appropriate, or to boards, commissions, and similar
entities composed in whole or in part of members appointed to represent different sectors of the economy and the general public.
Members of such boards, commissions, and similar entities shall be
appointed by the President by and with the advice and consent of the
Senate; except that—
" (1) the foregoing requirement with respect to Senate confirmation does not apply to any member of any such board, commission,
or similar entity (other than the Chairman of the Pay Board,
established by section 7 of Executive Order Numbered 11627 of
October 15, 1971, and the Chairman of the Price Commission, 36 F.R. 20142.
established by section 8 of such Executive order) who is serving,
pursuant to appointment by the President, on such board, commission, or similar entity on the date of enactment of the Economic Stabilization Act Amendments of 1971, and who continues Ante, p. 743,
to serve, pursuant to such appointment, on such board, commission,
or similar entity after such date; and
" (2) any person serving in the office of Chairman of such Pay
Board, and any person serving in the office of Chairman of such
Price Commission, on the date of enactment of the Economic
Stabilization Act Amendments of 1971, may continue to serve in
such capacity on an interim basis without regard to the foregoing
requirement with respect to Senate confirmation until the expiration of sixty days after the date of enactment of the Economic
Stabilization Act Amendments of 1971, and the provisions of sections 910-913 of title 5, United States Code, shall be applicable 80 Stat. 397;
with respect to the procedure to be followed in the Senate in Ante, p. 576.
considering the nomination of any person to either of such offices
submitted to the Senate by the President during such sixty-day
period, except that references in such provisions to a 'resolution
with respect to a reorganization plan' shall be deemed for the
purpose of this section to refer to such nominations.
246
EXHIBITS
Pub. Law 92-210
- 4 -
December 22, 1971
85 STAT. 747
76 stat. 11211125.
62 stat. 791.
5 use 551,701.
si stat. 54,80 stat. 383.
Where such boards, commissions, and similar entities are composed in
part of members who serve on less than a full-time basis, legal
authority shall be placed in their chairmen who shall be employees of
the United States and who shall act only in accordance with the
majority vote of members. Nothing in section 203, 205, 207, 208, or
209 of title 18, United States Code, shall be deemed to apply to any
member of any such board, commission, or similar entity who serves
on less than a full-time basis because of membership on such board,
commission, or entity.
"§ 205. Confidentiality of information
"All information reported to or otherwise obtained by any person
exercising authority under this title which contains or relates to a
trade secret or other matter referred to in section 1905 of title 18, United
States Code, shall be considered confidential for the purposes of that
section, except that such information may be disclosed to other persons
empowered to carry out this title solely for the purpose of carrying out
this title or when relevant in any proceeding under this title.
"§ 206. Subpena power
"The head of an agency exercising authority under this title, or his
duly authorized agent, shall have authority, for any purpose related to
this title, to sign and issue subpenas for the attendance and testimony of
witnesses and the production of relevant books, papers, and other
documents, and to administer oaths. Witnesses summoned under the
provisions of this section shall be paid the same fees and mileage as are
paid to witnesses in the courts of the United States. In case of refusal
to obey a subpena served upon any person under the provisions of this
section, the head of the agency authorizing such subpena, or his delegate, may request the Attorney General to seek the aid of the district
court of the United States for any district in which such person is
found to compel such person, after notice, to appear and give testimony,
or to .appear and produce documents before the agency.
"§ 207. Administrative procedure
"(a) The functions exercised under this title are excluded from the
operation of subchapter I I of chapter 5, and chapter 7 of title 5,
United States Code, except as to the requirements of sections 552, 553,
and r>55 (o) of title 5, United States Code.
"(h) Any agency authorized by the President to issue niles, regulations, or orders under this title shall, in regulations prescribed by it,
establish procedures which are available to any person for the purpose
of seeking an interpretation, modification, or rescission of, or seeking
an exception or exemption from, such rules, regulations, and orders.
If such person is aggrieved by the denial of a request for such action
under the preceding sentence, he may request a review of such denial
by the agency. The agency shall, in regulations prescribed by it, establish appropriate procedures, including hearings where deemed advisable, for considering such requests for action under this section.
"(c) To the maximum extent possible, the President or his delegate
shall conduct formal hearings for the purpose of hearing arguments
or acquiring information bearing on a change or a proposed change
in wages, salaries, prices, rents, interest rates, or corporate dividends or
similar transfers, which have or may have a significantly large impact
upon the national economy, and such hearings shall be open to the
public except that a private formal hearing may be conducted to
receive information considered confidential under section 205 of this
title.
"§208. Sanctions; criminal fine and civil penalty
"(a) Whoever willfully violates any order or regulation under this
title shall befinednot more than $5,000 for each violation.
247
EXHIBITS
December 22, 1971
- 5 -
Pub. Law 92-210
85 STAT, 748
"(b) Whoever violates any order or regulation under this title shall
be subject to a civil penalty of not more than $2,500 for each violation.
"§ 209. Injunctions and other relief
"Whenever it appears to any person authorized by the President
to exercise authority under this title that any individual or organization has engaged, is engaged, or is about to engage in any acts or
practices constituting a violation of any order or regulation under
this title, such person may request the Attorney General to bring an
action in the appropriate district court of the United States to enjoin
such acts or practices, and upon a proper showing a temporary restraining order or a preliminary or permanent injunction shall be granted
without bond. Any such court may also issue mandatory injunctions
commanding any person to comply with any such order or regulation.
In addition to such injunctive relief, the court may also order
restitution of moneys received in violation of any such order or
regulation.
"§ 210. Suits for damages or other relief
"(a) Any person suffering legal wrong because of any act or practice arising out of this title, or any order or regulation issued pursuant
thereto, may bring an action in a district court of the United States,
without regard to the amount in controversy, for appropriate relief,
including an action for a declaratory judgment, writ of injunction
(subject to the limitations in section 211), and/or damages.
"(b) In any action brought under subsection (a) against any person renting property or selling goods or services who is found to have
overcharged the plaintiff, the court may, in its discretion, award the
plaintiff reasonable attorney's fees and costs, plus whichever of the
following sums is greater:
"(1) an amount not more than three times the amount of the
overcharge upon which the action is based, or
"(2) not less than $100 or more than $1,000;
except that in any case where the defendant establishes that the overcharge was not intentional and resulted from a bona fide error notwithstanding the maintenance of procedures reasonably adapted to
the avoidance of such error the liability of the defendant shall be limited to the amount of the overcharge: Provided, That where the overcharge is not willful within the meaning of section 208 (a) of this title,
no action for an overcharge may be brought by or on behalf of any
person unless such person nas first presented to the seller or renter a
bona fide claim for refund of the overcharge and has not received
repayment of such overcharge within ninety days from the date of the
presentation of such claim.
"(c) For the purposes of this section, the term 'overcharge' means "Overcharge."
the amount by which the consideration for the rental of property or
the sale of goods or services exceeds the applicable ceiling under regulations or orders issued under this title.
"§ 211. Judicial review
"(a) The district courts of the United States shall have exclusive
original jurisdiction of cases or controversies arising under this title,
or under regulations or orders issued thereunder, notwithstanding the
amount in controversy; except that nothing in this subsection or in
subsection (h) of this section affects the power of any court of competent jurisdiction to consider, hear, and determine any issue by way of
defense (other than a defense based on the constitutionality of this
title or the validity of action taken by any agency under this title)
raised in any proceeding before such court. If in any such proceeding
an issue by way of defense is raised based on the constitutionality of
this title or the validity of agency action under this title, the case shall
be subject to removal by either party to a district court of the United
248
EXHimS
Pub. Law 92-210
- 6 -
December 22, 1971
85 STAT+ 749
28 USC 1441.
Temporary
Emergency
Court of
Appeals.
Establishment.
Jurisdiction.
Enjoinment.
80 Stat. 393.
72 Stat. 1770.
States in accordance with the applicable provisions of chapter 89 of
title 28, United States Code.
"(b) (1) There is hereby created a court of the United States to be
known as the Temporary Emergency Court of Appeals, which shall
consist of three or more judges to be designated by the Chief Justice
of the United States from judges of the United States district courts
and circuit courts of appeals. The Chief Justice of the United States
shall designate one of such judges as chief judge of the Temporary
Emergency Court of Appeals, and may, from time to time, designate
additional judges for such court and revoke previous designations.
The chief judge may, from time to time, divide the court into divisions
of three or more members, and any such division may render judgment
as the judgment of the court. Except as provided in subsection (d) (2)
of this section, the court shall not have power to issue any interlocutory decree staying or restraining in whole or in part any provision
of this title, or the effectiveness of any regulation or order issued
thereunder. In all other respects, the court shall have the powers of a
circuit court of appeals with respect to the jurisdiction conferred
on it by this title. The court shall exercise its powers and prescribe
rules governing its procedure in such manner as to expedite the determination of cases over which it has jurisdiction under this title. The
court shall have a seal, hold sessions at such places as it may specify,
and appoint a clerk and such other employees as it deems necessary
or proper.
"(2) Except as otherwise provided in this section, the Temporary
Emergency Court of Appeals shall have exclusive jurisdiction of all
appeals from the district courts of the United States in cases and controversies arising under this title or under regulations or orders issued
thereunder. Such appeals shall be taken by the filing of a notice of
appeal with the Temporary Emergency Court of Appeals within thirty
days of the entry of judgment by the district court.
" (c) In any action commenced under this title in any district court
of the United States in which the court determines that a substantial
constitutional issue exists, the court shall certify such issue to the
Temporary Emergency Court of Appeals. Upon such certification, the
Temporary Emergency Court of Appeals shall determine the appropriate manner of disposition which may include a determination that
the entire action be sent to it for consideration or it may, on the issues
certified, give binding instructions and remand the action to the
certifying court for further disposition.
" ( d ) ( l ) Subject to paragraph (2), no regulation of any agency
exercising authority under this title shall be enjoined or set aside, in
whole or in part, unless a final judgment determines that the issuance
of such regulation was in excess of the agency's authority, was
arbitrary or capricious, or was otherwise unlawful under the criteria
set forth in section 706(2) of title 5, United States Code, and no order
of such agency shall be enjoined or set aside, in whole or in part, unless
a final judgment determines that such order is in excess of the agency's
authority, or is based upon findings which are not supported by substantial evidence.
" (2) A district court of the United States or the Temporary Emergency Court of Appeals may enjoin temporarily or permanently the
application of a particular regulation or order issued under this title
to a person who is a party to litigation before it. Appeals from
interlocutory decisions by a district court of the United States under
this paragraph may be taken in accordance with the provisions of
section 1292(b) of title 28, United States Code; except that reference
in such section to the courts of appeals shall be deemed to refer to the
Temporary Emergency Court of Appeals.
" ( e ) ( l ) Except as provided in subsection (d) of this section, no
interlocutory or permanent injunction restraining the enforcement,
249
474-893 O - 72 - 18
EXHIBITS
December 22, 1971
- 7 -
Pub. Law 92-210
85 STAT, 750
operation, or execution of this title, or any regulation or order issued
thereunder, shall be granted by any district court of the United States
or judge thereof. Any such court shall have jurisdiction to declare
(A) that a regulation of an agency exercising authority under this title
is in excess of the agency's authority, is arbitrary or capricious, or is
otherwise unlawful under the criteria set forth in section 706(2) of
title 5, United States Code, or (B) that an order of such agency is
invalid upon a determination that the order is in excess of the agency's
authority, or is based upon findings which are not supported by substantial evidence.
"(2) Any party aggrieved by a declaration of a district court of
the United States respecting the validity of any regulation or order
issued under this title may, within thirty days after the entry of such
declaration, file a notice of appeal therefrom in the Temporary Emergency Court of Appeals. In addition, any party believing himself
entitled by reason of such declaration to a permanent injunction
restraining the enforcement, operation, or execution of such regulation
or order may file, within the same thirty-day period, a motion in the
Temporary Emergency Court of Appeals requesting such injunctive
relief. Following consideration of such appeal or motion, the Temporary Emergency Court of Appeals shall enter a final judgment affirming, reversing, or modifying the determination of the district court
and granting such permanent injunctive relief, if any, as it deems
appropriate.
"(f) The effectiveness of a final judgment of the Temporary Emergency Court of Appeals enjoining or setting aside in whole or in part
any provision of this title, or any regulation or order issued thereunder, shall be postponed until the expiration of thirty days from
the entry thereof, except that if a petition for a writ of certiorari is
filed with the Supreme Court under subsection (g) within such thirty
days, the effectiveness of such judgment shall be postponed until an
order of the Supreme Court denying such petition becomes final, or
until other final disposition of the action by the Supreme Court.
"(g) Within thirty days after entry of any judgment or order by the
Temporary Emergency Court of Appeals, a petition for a writ of
certiorari may be filed in the Supreme Court of the United States,
and thereupon the judgment or order shall be subject to review by
the Supreme Court in the same manner as a judgment of a United
States court of appeals as provided in section 1254 of title 28, United
States Code. The Temporary Emergency Court of Appeals, and the
Supreme Court upon review of judgments and orders of the Temporary Emergency Court of Appeals, shall have exclusive jurisdiction to
determine the constitutional validity of any provision of this title or
of any regulation or order issued under this title. Except as provided
in this section, no court, Federal or State, shall have jurisdiction or
power to consider the constitutional validity of any provision of this
title or of any such regulation or order, or to stay, restrain, enjoin,
or set aside, in whole or in part, any provision of this title authorizing
the issuance of such regulations or orders, or any provision of any
such regulation or order, or to restrain or enjoin the enforcement
of any such provision.
"(h) The provisions of this section apply to any actions or suits
pending in any court, Federal or State, on the date of enactment of
this section in which no final order or judgment has been rendered.
Any affected party seeking relief shall be required to follow the procedures of this title.
"§ 212. Personnel
"(a) Any agency or officer of the Government carrying out functions under this title is authorized to employ such personnel as the President deems necessary to carry out the purposes of this title.
250
so stat. 393.
Appeal.
62 stat. 928.
Effective
date.
EXHIBITS
Pub. Law 92-210
- 8 -
December 22, 1971
85 STAT. 751
" ( b ) The President may appoint five officers to be responsible for
carrying out functions of this title of whom three shall be compensated
at the rate prescribed for level I I I of the Executive Schedule (5 U.S.C.
80 s t a t . 460;
5314) and two at the rate prescribed for level V of t h e Executive
83 s t a t . 864.
Schedule (5 U.S.C. 5316). Appropriate titles and the order of succession
among such officers may be designated b}- the President.
u
( c ) A n y member of a board, commission, or similar entity established by the President pursuant to authority conferred by this title
who serves on less than a full-time basis shall receive compensation
from the date of his appointment at a rate equal to the per diem
equivalent of the rate prescribed for level I V of the Executive
Schedule (5 U.S.C. 5315) when actually engaged in the performance
of his duties as such member.
" ( d ) (1) I n addition to the number of positions which may be placed
80 s t a t . 878; in GS-16,17, and 18, under section 5108 of title 5, United States Code,
84 s t a t . 1955. not to exceed twenty positions may be placed in GS-16, 17, and 18, to
carry out the functions under this title.
" ( 2 ) T h e authority under this subsection shall be subject to the
procedures prescribed under section 5108 of title 5, United States
Code, and shall continue only for the duration of the exercise of functions under this title.
" ( e ) The President may require the detail of employees from any
executive agency to carry out the purposes of this title.
" ( f ) T h e President is authorized to appoint, without regard to the
civil service laws, such advisory committees as he deems appropriate for the purpose of consultation with and advice to the President
in the performance of his functions under this title. Members of
advisory committees, other than those regularly employed by the Federal Government, while attending meetings of such committees or
while otherwise serving at the request of the President may be paid
compensation at rates not exceeding those authorized for individuals
under section 5332 of title 5, United States Code, and, while so serving away from their homes or regular places of business, may be
allowed travel expenses, including per diem as authorized by section
83 s t a t . 190. 5703 of title 5, United States Code, for persons in the Government
service employed intermittently.
" ( g ) ( l ) Under such regulations as the President may prescribe,
officers and employees of the Government who are appointed, without
a break of service of one or more work days, to any position for
carrying out functions under this title are entitled, upon separation
from such position, to reemployment in the position occupied at
the time of appointment or in a position of comparable grade and
salary.
" ( 2 ) An officer or employee who, at the time of his appointment
under paragraph (1) of this subsection, is covered by section 8336 (c)
80 s t a t . 571. o f title 5, United States Code, shall continue to be covered thereunder while carrying out functions under this title.
"§ 213. Experts and consultants
"Experts and consultants may be employed, as authorized by section
3109 of title 5, United States Code, for the performance of functions
under this title, and individuals so employed may be compensated
at rates not to exceed the per diem equivalent of the rate for grade
18 of the General Schedule established by section 5332 of title 5,
United States Code. Such contracts may fee renewed from time to
time without limitation. Service of can individual as an expert or
consultant under this section shall not be considered as employment
or the holding of an office or position bringing such individual within
the provisions of section 3323 (a) of title 5, United States Code, sec74 s t a t . 846; tion 872 of the Foreign Service Act of 1946, or any other law limiting
75 s t a t . 464. the reemployment of retired officers or employees.
2 2 US C 1 1 1 2 .
251
EXHIBITS
December 22, 1971
- 9 -
Pub. Law 92-210
85 STAT. 752
"§ 214. Small business
"(a) It is the sense of the Congress that small business enterprises
should be encouraged to make the greatest possible contribution toward
achieving the objectives of this title.
" (b) In order to carry out the policy stated in subsection (a)—
"(1) the Small Business Administration shall to the maximum
extent possible provide small business enterprises with full information concerning (A) the provisions of this title relating or of
benefit to such enterprises, and (B) the activities of the various
departments and agencies under this title;
"(2) in administering this title, such exemptions shall be provided for small business enterprises as may be ieasible without impeding the accomplishment of the purposes of this title; and
" (3) in administering this title, special provision shall be made
for the expeditious handling of all requests, applications, or
appeals from small business enterprises.
"§ 215. Mass transportation systems
"No company, or other entity constituting a public benefit corporation, charged by law or contract with the responsibility to operate a
mass transportation facility or facilities, the fares of which are not
otherwise regulated, shall increase any fare without first obtaining
approval under this section from the President or his delegate.
"§216. Reports
"(a) In transmitting the Economic Report required under section
3(a) of the Employment Act of 1946 (15 IJ.S.C. 1022), the President 60 stat. 24$.
shall include a section describing the actions taken under this title 70 stat. 290.
during the preceding vear and giving his assessment of the progress
attained in achieving the purposes of this title. The President shall also
transmit quarterly reports to the Congress not later than thirty days
after the close of eacn calendar quarter describing the actions taken
under this title during the preceding quarter and giving his assessment
of the progress attained in achieving the purposes of this title.
"(b) In carrying out his authority under this title, the President
shall study and evaluate the relationship between excess profits, the
stabilization of the economy, and the creation of new jobs. The results
of such study shall be incorporated in the reports referred to in
subsection (a).
"§ 217. Funding
"(a) There are authorized to be appropriated to the President, to
remain available until expended, such sums as may be necessary to
carry out the provisions of this title.
"(b) The President may accept and use in furtherance of the purposes of this title money, funds, property, and services of any kind
made available for such purposes by gift, devise, bequest, grant, or
otherwise.
"§ 218. Expiration
"The authority to issue and enforce orders and regulations under
this title expires at midnight April 30,1973, but such expiration shall
not affect any action or pending proceedings, civil or criminal, not
finally determined on such date, nor any action or proceeding based
upon any act committed prior to May 1,1973.
"§219. Ratification
"The assignment of personnel and expenditure of funds pursuant to
the authority conferred on the President by this title prior to the date
of enactment of the Economic Stabilization Act Amendments of 1971 Ante, p. 743.
are hereby approved, ratified, and confirmed.
252
EXHIBITS
85 STAT. 753
Pub.
Law 92-210
- 10 -
December 22, 1971
a
§220. Severability
"If any provision of this title or the application of such provision to
any person or circumstances is held invalid, the remainder of the title,
and the application of such provision to persons or circumstances other
than those as to which it is held invalid, shall not be affected thereby."
FEDERAL EMPLOYEE COMPENSATION
84 S t a t . 1948.
5 USC 5305
note.
Ante, p. 38.
Effective
date.
SEC. 3. Notwithstanding any provision of section 3(c) of the Federal Pay Comparability Act of 1970 (Public Law 91-656), or of section 5305 of title 5, United States Code, as added by section 3(a) of
Public Law 91-656, and the provisions of the alternative plan submitted by the President to the Congress pursuant thereto on August
31, 1971, such comparability adjustments in the rates of pay of each
Federal statutory pay system as may be required under such sections
5305 and 3(c), based on the 1971 Bureau of Labor Statistics survey—
(1) shall not be greater than the guidelines established for the
wage and salary adjustments for the private sector that may be
authorized under authority of any statute of the United States,
including the Economic Stabilization Act of 1970 (Public Law
91-379; 84 Stat. 799), as amended, and that may be in effect on
December 31,1971; and
(2) shall be placed into effect on the first day of the first pay
period that begins on or after January 1,1972.
Nothing
hinff in this section shall be construed to iprovide any adjustments
in rates of pay of any Federal statutory pay system which are greater
than the adjustments based on the 1971 Bureau of Labor Statistics
survey.
NATIONAL PRODUCTIVITY POLICY
SEC. 4. (a) (1) It is the policy of the United States to promote efficient production, marketing, distribution, and use of goods and services in the private sector, and improve the morale of the American
worker, all of which are essential to a prosperous and secure free
world, and to achieve the objectives of national economic policy.
(2) The Congress finds that the persistence of inflationary pressures, and of a high rate of unemployment, the underutilization and
obsolescence of production facilities, and the inadequacy of productivity are damaging to the effort to stabilize the economy.
(3) The Congress, therefore, finds a national need to increase economic productivity which depends on the effectiveness of management, the investment of capital for research, development, and
advanced technology and on the training and motivation of the
American worker.
(4) The Congress further finds that at a time when economic stabilization programs require price-wage restraints, management and
labor have a strong mutual interest in containing "cost-push" inflation
and increasing output per man-hour so that real wages may increase
without causing increased prices, and that, without in any way
infringing on the rights of management or labor, machinery should be
provided for translating this mutuality of interest into voluntary
action.
(b) It shall be the objective of the President's National Commission on Productivity (hereinafter referred to as the "Commission")—
(1) to enlist the cooperation of labor, management, and State
and local governments, in a manner calculated to foster and promote increased*productivity through free competitive enterprise
253
EXHIBITS
D e c e m b e r 22, 1971
- 11 -
Pub. Law 92-210
toward the implementation of the national policy declared in the
Employment Act of 1946 to create and maintain "conditions 60 stat. 23.
under which there will be afforded useful employment opportuni- 15 use 1021
ties, including self-employment, for those able, willing, and seek- note.
ing to work, and to promote maximum employment, production,
and purchasing power";
(2) to promote the maintenance and improvement of worker
motivation and to enlist community interest in increasing productivity and reducing waste;
(3) to promote the more effective use of labor and management
personnel in the interest of increased productivity;
(4) to promote sound wage and price policies in the public interest, and to seek to accomplish that objective within a climate of
cooperation and understanding between labor, management, and
the public, and within a framework of peaceful labor-management relations and free and responsible collective bargaining;
(5) to promote policies designed to insure that United States
products are competitive in domestic and world markets;
(6) to develop programs to deal with the social and economic
problems of employees adversely affected by automation or other
technological change or the relocation of industries.
(c) (1) It shall be the duty and function of the Commission, in order
to achieve the objectives set forth in subsection (b) of this section, to
encourage and assist in the organization and the work of labor-management-public committees and similar groups on a plant, community,
regional, and industry basis. Such assistance shall include aid—
(A) in the development of apprenticeship, training, retraining, and other programs for employee and management education
for development of greater upgraded and more diversified skills;
(B) in the formulation of programs designed to reduce waste
and absenteeism and to improve employee safety and health;
(C) in the revision of building codes and other local ordinances
and laws, in order to keep them continuously responsive to current
economic conditions;
(D) in planning for provision of adequate transportation for
employees;
(E) in the exploration of means to expand exports of the products of United States industry;
(F) in the development, initiation, and expansion of employee
incentive compensation, profit-sharing and stockownership systems and other production incentive programs;
(G) in the dissemination of technical information and other
material to publicize its work and objectives;
(H) to encourage studies of techniques and programs similar
to those in paragraphs (A) to (G) of this subsection, as they are
applied in foreign countries; and
(I) in the dissemination of information and analyses concerning the economic opportunities and outlook in various regions and
communities, and of information on industrial techniques designed
for the increase of productivity.
(2) The Commission shall transmit to the President and to the Report to
Congress not later than March 1 of each yeafan annual report of its President and
previous year's
activities under this Act.
^
Congress.
y
(3)
Th Commission
C i i
h l l pp.rfhmn
f
h ntVior
tV fiinAf.inng>nnnqiqfi>nf\85
\ STAT. 754
(3) The
Shall
snph
with the foregoing, as it determines to be appropriate and necessary 8 5 STAT» 7 5 5
to achieve the objectives set forth in subsection (b) of this section,
(d) (1) In exercising its duties and function under this Act—
(A) the Commission may consult with such representatives of
industry, labor, agriculture, consumers, State and local governments, and other groups, organizations, and individuals as it
deems advisable to insure the participation of such interested
parties;
254
EXHIBITS
85 STAT. 755 •
Executive
Director.
80 Stat. 416.
Appropriation.
Pub. Law 92-210
- 12 -
D e c e m b e r 2 2 , 1971
(B) the Commission shall, to the extent possible, use the services, facilities, and information (including statistical information) of other Government agencies as the President may direct
as well as of private agencies and professional experts in order
that duplication of effort and expense may be avoided;
(C) the Commission shall coordinate such services and facilities referred to in subsection (B) above in order to supply technical and administrative assistance to labor-management-public
committees and similar groups referred to in subsection (c) (1);
(D) the Commission shall establish the regional offices and
such local offices as it deems necessary;
(E) the Commission shall hold regional and industrywide conferences to formulate ideas and programs for the fulfillment of
the objectives set forth in subsection (C);
(F) the Commission may formulate model programs to ameliorate the effects of unemployment caused by technological progress;
(G) the Commission may furnish assistance to parties in
collective bargaining entering into collective bargaining agreements; and
(H) the Commission may review collective bargaining agreements already in effect or those being negotiated to ascertain
their effects on productivity; and it may have the power to make
recommendations with respect to the agreements made or about
to be made in specific industries.
(2) The Commission may accept gifts or bequests, either for
carrying out specific programs which it deems desirable or for its
general activities.
(e) (1) The Executive Director of the Commission shall be the
principal executive officer of the Commission in carrying out the
objectives, functions, duties and powers of the Commission described
in subsections (b) through (d) of this section.
(2) The Executive Director of the Commission, with the approval
of the Chairman of the Commission, is authorized (A) to appoint
and fix the compensation of such officers and employees, and prescribe
their functions and duties, as may be necessary to carry out the
provisions of this section, and (B) to obtain the services of experts
and consultants in accordance with the provisions of section 3109 of
title 5, United States Code.
(f) There is hereby authorized to be appropriated the sum of
$10,000,000 to carry out the purposes of this section during the period
ending April 30, 1973.
Approved December 22, 1971.
LEGISLATIVE HISTORY:
HOUSE REPORTS: No. 92-714 accompanying H.R. 11309 (Comm. on Banking
and Currency) and Nos. 92-745 and 92-753 (Comm. of
Conference).
SENATE REPORT No. 92-507 (Comm. on Banking, Housing and Urban A f f a i r s ) .
CONGRESSIONAL RECORD, Vol. 117 (1971):
Nov. 29, 30, Dec. 1, considered and passed S e n a t e .
Dec. 10, considered and passed House, amended, in l i e u of H. R. 11309,
Dec. 13, Senate agreed t o conference report No. 92-745.
Dec. 14, House sustained point of order a g a i n s t conference report
No. 92-745 and requested f u r t h e r conference; Senat.e and
House agreed t o conference report No. 92-753.
WEEKLY COMPILATION OF PRESIDENTIAL DOCUMENTS, Vol. 7, No. 52:
Deo» 22, P r e s i d e n t i a l s t a t e m e n t .
255
Bibliographical Mote
The principal sources of information for this history have been
the records accumulated by the Office of Emergency Preparedness
during the freeze. Research in these records was supplemented by
interviews with OEP officials. Published materials relating to the
wage-price freeze and to background events and problems have
also been used extensively. The following notes specify these
sources and give some suggestions for further reading.
OFFICIAL RECORDS AND PERSONAL INTERVIEWS
The work is based largely on the official documents and files of
OEP relating to all aspects of its responsibilities for managing the
freeze. These include planning documents, policy papers, minutes
and notes of meetings, periodic reports and after-action reports
from all headquarters and field elements, reports of visits and inspections, statistics, messages, letters, memoranda, and sundry other
materials. While some of these records were of a routine nature,
others contained highly significant information on the activities,
problems, and accomplishments of the freeze period. The major
collections of these materials are the following:
—OEP Director's files
—Stabilization Program Guidelines
—Executive Policy Committee Notes
—Daily Reports of the Director of OEP to the Chairman of
the Cost of Living Council
—Weekly Reports of the Director of OEP to the Chairman of
the Cost of Living Council
—National Office Operations Center message file
—Daily Status Reports of Economic Stabilization Activities,
from OEP headquarters offices to OEP Director
—After-Action Reports from National Office elements and
Regional Offices to Assistant Director Haakon Lindjord
—After-Action Reports from Regional Directors to OEP Historian
257
BIBLIOGRAPHY
—OEP Economic Stabilization Division files
—OEP Coordination Staff files
—CLC and OEP Press Releases
—Speeches of OEP Director and other key officials
—Memoranda and Letters by OEP officials
During the freeze the OEP Historian's office built up a file of
documents of historical significance as an aid to the research and
writing to be done. The Historian was placed on distribution
schedules for all incoming and outgoing messages, policy documentation, reports, and other relevant materials and had access to the
complete files of all OEP divisions. The materials assembled by
the Historian constitute the Agency's "Historical Documentation
File." The basic documents in this file will eventually be placed
in the custody of the National Archives and Records Service of
the General Services Administration.
To amplify, clarify, and interpret the official records, the authors
interviewed key OEP officials and others who had participated in
the freeze operations. In addition, these officials reviewed drafts of
all chapters and gave the historians the benefit of their intimate
personal knowledge of events. The following OEP officials furnished their views and comments on draft manuscripts:
George A. Lincoln, Director
Darrell M. Trent, Deputy Director
Haakon Lindjord, Assistant Director
Elmer F. Bennett, Assistant Director/General Counsel
Eugene J. Quindlen, Assistant Director for Government Preparedness
William C. Truppner, Assistant Director for Resource Analysis
Robert H. Kupperman, Deputy Assistant Director for Information and Analysis
Edward R. Saunders, Jr., Deputy Assistant Director for Resource
Evaluation
Stephen A. Loftus, Assistant to the Director for Planning Review
David J. Pattison, Assistant to the Director for Congressional
and Public Affairs
J. Ray O'Connell, Assistant to the Director for Administration
Laurent E. Morin, Planning Review
John P. Cannon, Special Assistant for Regional Affairs
F. Joseph Russo, Chief, Economic Stabilization Division
William A. Fletcher, Planning Review
Many who left for other assignments upon the termination of the
freeze reviewed draft chapters that covered their particular specialty
258
BIBLIOGRAPHY
areas. Among these were Christopher A. Norred Jr., E. R. Heiberg
III, Anthony A. Smith, Howard M. Steele, Raymond Snead,
Charles A. Gibb, and Robert A. Kagan. Leonard A. Skubal, former
Chief of the Economic Stabilization Division, in several interviews
and written communications, gave the historians the benefit of his
first-hand experience with pre-freeze and ensuing developments.
The views and comments of these individuals were most helpful on
points obscure in the records.
PUBLISHED WORKS
While placing chief reliance on the primary sources mentioned
above, the authors drew on a wide array of published materials
which provided valuable insights and background information
bearing on the subject of this history. The most important of these
published works are grouped below under three headings: (1)
U.S. Government Documents; (2) Books; and (3) Articles and
Other Materials.
U.S. Government Documents
In addition to the legislation, Executive orders, and Presidential
messages and statements included in the "Exhibits" section or
cited in the text, the following public documents were particularly
useful:
Eckstein, Otto, and Roger Brinner. The Inflation Process in the United States. A
Study Prepared for the Use of the Joint Economic Committee, Congress of the
United States. Joint Committee Print, 92nd Cong., 2d Sess., Feb. 22, 1972. Washington: Government Printing Office, 1972. Examines the relationship between
the level of employment and the rate of inflation and seeks to identify the
processes which produced the combination of high unemployment and rapid
inflation which has recently been experienced in the United States.
Peterson, Peter G. "A Foreign Economic Perspective," and "The United States in
the Changing World Economy," both dated Dec. 27, 1971 (unpublished). A
review and analysis of the changing world economy prepared in two sections
by the Assistant to the President for International Economic Affairs and Executive Director of the Council on International Economic Policy. The first is "a
personal overview of the origins and possible policy implications of the new
world economy." The second section consists largely of statistical background
material that provided the basis for briefings to the President and the Council
on International Economic Policy during 1971.
Schultze, Charles L. Recent Inflation in the United States. Study Paper No. 1, Study
of Employment, Growth, and Price Levels, Joint Economic Committee of the
Congress. Washington: Government Printing Office, 1959.
259
BIBLIOGRAPHY
Thurow, Lester C, and Robert E. B. Lucas. The American Distribution of Income:
A Structural Problem. A Study Prepared for the Use of the Joint Economic
Committee, Congress of the United States. Joint Committee Print, 92nd Cong.,
2d Sess., March 17, 1972. Washington: Government Printing Office, 1972.
U.S. Cabinet Committee on Price Stability. Industrial Structural and Competitive
Policy, Mergers and Acquisitions. Washington: Government Printing Office, 1969.
See also Studies by the Staff of the Cabinet Committee on Price Stability, January
1969. Washington: Government Printing Office, 1969.
U.S. Congress, House, Committee on Government Operations, Subcommittee on
Executive and Legislative Reorganization. Price-Wage Guideposts, Hearings on
H.R. 13278, 91st Cong., 1st Sess. Washington: Government Printing Office, 1969.
.
. Committee on Banking and Currency. Economic Stabilization, Hearings,
92nd Cong., 1st Sess. Washington: Government Printing Office, 1971.
_. Committee on the Judiciary, Subcommittee on Antitrust and Monopoly.
Economic Concentration, Hearings, 90th Cong., 5 Parts. Washington: Government
Printing Office, 1964-67.
U.S. Congress, Joint Economic Committee. U.S. Economic Growth to 1975: Potentials
and Problems. Washington: Government Printing Office, 1966.
Recent Federal Reserve Actions and Economic Policy Coordination.
Washington: Government Printing Office, 1966.
_. Hearings, Twentieth Anniversary of the Employment Act of 1946: An
Economic Symposium, 89th Cong., 2nd Sess., Washington: Government Printing
Office, 1966.
_. The Federal Budget, Inflation, and Full Employment, 91st Cong., 1st
Sess., Washington: Government Printing Office, 1969.
_. The President's New Economic Program, Hearings, 92nd Cong., 1st Sess.
Parts 1-4. Washington: Government Printing Office, 1971.
_. Phase II of the President's New Economic Program, Hearings, 92nd Cong.,
1st Sess., November 18 and 20, 1971. Washington: Government Printing Office,
1972.
U.S. Congress, Senate, Committee on Banking and Currency. State of the National
Economy, Hearings, 91st Cong., 2nd Sess. Washington: Government Printing
Office, 1970.
Committee on Banking, Housing and Urban Affairs. Economic Stabilization Legislation, Hearings on S.2712, 92nd Cong., 1st Sess., November 1-5, 1971.
Washington: Government Printing Office, 1971.
Subcommittee on Production and Stabilization. Inflation: The Need for
a More Balanced Policy Mix, Hearings on S. Res. 357, 91st Cong., 2nd Sess.
Washington: Government Printing Office, 1970.
U.S. Department of Labor. The Anatomy of Inflation. Prepared by Geoffrey H.
Moore. U.S. Department of Labor Report 373. Washington: Department of
Labor, 1969.
Bureau of Labor Statistics. Prices, Escalation, and Economic Stability.
Washington: Government Printing Office, 1971. One of a series of interpretive
publications designed for a broader audience than that reached by the BLS
technical bulletins, reports, and staff papers.
The Meaning and Measurement of Productivity. Bulletin 1714, prepared
for the National Commission on Productivity, Sept. 1971. Washington: Government Printing Office, 1972. Includes two papers: "The Meaning of Productivity,"
by Herbert Stein, member of the President's Council of Economic Advisers; and
"Concepts and Measures of Productivity," by Jerome A. Mark, Assistant Commissioner for Productivity and Technology, Bureau of Labor Statistics, U.S.
Department of Labor.
U.S. Executive Office of the President, Cost of Living Council. Economic Stabilization
Program Quarterly Report Covering the Period August 15 Through December
31, 1971. Washington: Government Printing Office, 1972.
Economic Stabilization Program Quarterly Report Covering the Period
260
BIBLIOGRAPHY
January 1 Through March 31, 1972. Washington: Government Printing Office,
1972.
_. Council of Economic Advisers. The Economy at Mid-1972. Testimony
of the Council of Economic Advisers submitted to the Joint Economic Committee
of the Congress, with an Introduction by the President, August 1972. Washington:
Government Printing Office, 1972. A slightly edited and updated version of
testimony presented July 24, 1972, and a supplementary statement submitted for
the record at that time. Includes a statistical appendix, bringing the key data up
to mid-1972.
U.S. Library of Congress, Legislative Reference Service.. 4 Collection of Excerpts and
Bibliography Relating to the Intercollegiate Debate Topic 1970-71, "Resolved that
the Federal Government Should Adopt Programs of Compulsory Wage and Price
Controls," House Doc. 91-384, 91st Cong., 2nd Sess. Washington: Government
Printing Office, 1970. Provides useful background material on inflation, the
record of past experience in the U.S. and foreign countries, and a range of
current views on the problem and of approaches to its solution.
U.S. President. Economic Reports of the President, with the Annual Reports of the
Council of Economic Advisers. Washington: Government Printing Office, 19691972.
The President's Task Force on Economic Growth. Policies for American
Economic Progress in the Seventies, Report, May 1970. Washington: Government
Printing Office, 1970.
Books
Ackley, Gardner. Stemming World Inflation. The Atlantic Papers 2, 1971. Paris,
France: The Atlantic Institute, 1971.
Alexander, Arthur J. Prices and the Guideposts: The Effects of Government Persuasion on Individual Prices. Santa Monica, California: Rand Corporation, 1970.
Anderson, Leonall C. "A Look at Ten Months of Price-Wage Controls/' Federal
Reserve Bank of St. Louis Review, Vol. 54, No. 6 (June 1972) .
Bain, Joe S. Industrial Organization. 2nd ed. New York: Wiley, 1968.
Blair, John M. Economic Concentration: Structure, Behavior and Public Policy.
New York: Harcourt Brace Jovanovich, 1972. A major work by the former chief
economist of the Senate Antitrust and Monopoly Subcommittee showing how
powerful companies and unions set prices and wages in this country without
regard to the forces of competition.
Bok, Derek C, and John T. Dunlop. Labor and the American Community. New
York: Simon and Schuster, 1970.
Bureau of National Affairs, Inc. Federal Controls. Washington: BNA, 1971-72.
Compilation of material on the wage-price freeze published on an "as-needed"
basis and grouped under basic texts, organization and administration, prices,
rents, import surcharge, and monetary controls. Wage and salary controls are
covered in depth in BNA's labor reports, and taxes are covered in Daily Report
for Executives, Daily Tax Report, and Tax Management. Useful for summaries
of developments and for basic documentation on the economic stabilization
program.
Burns, Arthur F. The Management of Prosperity. Pittsburgh: Carnegie Institute
of Technology, 1965.
,, and Paul A. Samuelson. Full Employment, Guideposts and Economic
Stability. Washington: American Enterprise Institute for Public Policy Research,
1967.
Cagan, Phillip. Recent Monetary Policy and the Inflation, 1965 to August 1971.
Special Analysis No. 9, 1971. Washington: American Enterprise Institute for
Public Policy Research, 1971.
Clark, John M. Competition as a Dynamic Process. Washington: Brookings Institution, 1961.
261
BIBLIOGRAPHY
Coleman, John R., ed. The Changing American Economy. New York: Basic Books,
1967.
Commerce Clearing House, Inc. Economic Controls: 90 Days, August 16-November
13 1971. New York: Commerce Clearing House, 1971.
Committee for Economic Development. Managing a Full Employment Economy.
Symposium on Problems of Maintaining Prosperity Without Inflation, Los
Angeles, 1966. New York: Committee for Economic Development, 1969.
, Program Committee. A Stabilizing Fiscal and Monetary Policy for 1970.
New York: Committee for Economic Development, 1969.
__, Research and Policy Committee. Further Weapons Against Inflation:
Measures to Supplement General Fiscal and Monetary Policies. New York:
Committee for Economic Development, 1970.
_, High Employment Without Inflation: A Positive Program for Economic
Stabilization. New York: Committee for Economic Development, 1972.
Congressional Quarterly, Inc. Congress and the Nation, 1945-1964: A Review of
Government and Politics in the Postwar Years. Washington: Congressional
Quarterly Service, 1965.
Congress and the Nation, 1965-1968: A Review of Government and
Politics During the Johnson Years. Washington: Congressional Quarterly Service,
1969.
Congressional Quarterly Almanac (annual), 1970-1971, and Weekly
Reports.
Copeland, Morris A. Toward Full Employment in Our Free Enterprise Economy.
New York: Fordham University Press, 1966.
Denison, Edward F. The Sources of Economic Growth in the United States and
the Alternatives Before Us (Supplementary Paper No. 13). New York: Committee
for Economic Development, 1962.
Why Growth Rates Differ: Postwar Experience in Nine Western Countries.
Washington: Brookings Institution, 1967.
Edelman, Murray, and R. W. Fleming. The Politics of Wage-Price Decisions. Urbana:
University of Illinois Press, 1965.
Fellner, William E. Aiming for a Sustainable Second Best During the Recovery from
the 1970 Recession. Washington: American Enterprise Institute for Public Policy
Research, 1971.
Friedman, Milton. Capitalism and Freedom. Chicago: University of Chicago Press,
1962.
Gaines, Telford. Economic Report: The Anatomy of Inflation. New York: Manufacturers Hanover Trust Co., February 1969.
Galbraith, John K. The New Industrial State. Boston: Houghton Mifflin Co., 1967.
Gordon, Robert A. The Goal of Full Employment. New York: Wiley, 1967.
Gruchy, Allan C. Comparative Economic Systems: Competing Ways to Stability and
Growth. Boston: Houghton Mifflin Co., 1966.
Haberler, Gottfried. Incomes Policies and Inflation: An Analysis of Basic Principles.
Special Analysis No. 11. Washington: American Enterprise Institute for Public
Policy Research, 1971.
Inflation: Its Causes and Cures. Enlarged edition. Washington: American
Enterprise Institute for Public Policy Research, 1966.
Hansen, Bent. Fiscal Policy in Seven Countries, 1955-65. Paris: Office of Economic
Cooperation and Development, 1969.
Heller, Walter W., ed. Perspectives on Economic Growth. New York: Random
House, 1968.
Holt, C. C, and others. The Unemployment-Inflation Dilemma: A Manpower
Solution. Washington: Urban Institute, 1970.
Houthakker, H. S., and Lester D. Taylor. Consumer Demand in the United States.
Cambridge, Massachusetts: Harvard University Press, 1970. A comprehensive study
of price elasticities.
262
BIBLIOGRAPHY
Kaplan, A. D. H. Big Enterprise in a Competitive System. Revised edition. Washington: Brookings Institution, 1964.
Katona, George, and others. Aspirations and Affluence: Comparative Studies in the
United States and Western Europe. New York: McGraw-Hill, 1971.
Keynes, John Maynard. The General Theory of Employment, Interest, and Money.
New York: Harcourt, Brace & Co., 1936.
Klein, Lawrence R. The Keynesian Revolution. Second edition. New York: Macmillan,
1966.
Kuznets, Simon. Economic Growth and Structure: Selected Essays. New York: Norton,
1965.
Leiserson, Mark W. A Brief Interpretive Survey of Wage-Price Problems in Europe.
Study Paper No. 11, Joint Economic Committee of the Congress. Washington:
Government Printing Office, 1959.
Levy, Michael E., ed. Containing Inflation in the Environment of the 197(fs. New
York: The Conference Board, 1971.
Lewis, H. G. Unionism and Relative Wages in the United States: An Empirical
Inquiry. Chicago: University of Chicago Press, 1963.
Lincoln, George A., and Associates. Economics of National Security: Managing
America's Resources for Defense. Second Edition. New York: Prentice-Hall, 1954.
A comprehensive work by members of the Department of Social Sciences, United
States Military Academy, treating on a closely integrated basis key topics in the
field of "security economics." See especially Part III, entitled "Finance and
Stabilization," with chapters on "The Budget and National Security," "Stabilization in a Defense Economy," "Defense Finance and Stabilization," and "Stabilization—Direct Controls."
Mansfield, Edwin. The Economics of Technological Change. New York: Norton, 1968.
Massell, Mark S. Competition and Monopoly: Legal and Economic Issues. Washington: Brookings Institution, 1962.
Meade, J. E. Wages and Prices in a Mixed Economy. London: Institute on Economic
Affairs, 1971.
Means, Gardiner C. Pricing Power and the Public Interest. New York: Harper &
Row, 1962.
The Corporate Revolution in America. New York: Macmillan, 1964.
Mishan, Ezra J. The Costs of Economic Growth. New York: Praeger, 1967.
Moore, Thomas. U.S. Incomes Policy: Its Rationale and Development. Washington:
American Enterprise Institute for Public Policy Research, 1971.
Nelson, R. R., M. J. Peck, and E. D. Kalachek. Technology, Economic Growth and
Public Policy. Washington: Brookings Institution, 1967.
Okun, Arthur M. Prosperity Without Inflation, Brookings Research Report 102.
Washington: Brookings Institution, 1970. Highlights of the author's work, The
Political Economy of Prosperity, reflecting on the role of professional economists
in government and reappraising the successes and failures of fiscal-monetary
policy in the sixties. Suggests ways to sustain American prosperity and to extend
its benefits more equitably.
The Battle Against Unemployment. Revised Edition. New York: Norton,
1972.
, and George L. Perry, eds. Brookings Papers on Economic Activity. Washington: Brookings Institution, 1970-72.
Organization for Economic Cooperation and Development. Fiscal Policy for a
Balanced Economy: Experience, Problems and Prospects. Paris: OECD, 1968.
—
The Outlook for Economic Growth. Paris: OECD, 1970. Section IV discusses "Income Policies in Selected Countries."
Inflation: The Present Problem. Report by the Secretary General. Paris:
OECD, 1970.
Paish, F. W. Rise and Fall of Incomes Policy. Second Edition. London: Institute
on Economic Affairs, 1971.
263
BIBLIOGRAPHY
Perry, George C. Unemployment, Money Wage Rates, and Inflation. Cambridge,
Massachusetts: M.I.T. Press, 1966.
Phelps, Edmund S. Fiscal Neutrality Toward Economic Growth. New York: McGrawHill, 1965.
Golden Rules of Economic Growth. New York: Norton, 1966.
, and others. Microeconomic Foundations of Employment and Inflation
Theory. New York: Norton, 1970.
Reus, Frederick G. Fiscal Policy for Growth Without Inflation. Baltimore: Johns
Hopkins Press, 1963.
Ross, Arthur M., ed. Unemployment and the American Economy. New York: Wiley,
1964.
Scherer, F. M. Industrial Market Structure and Economic Performance. Chicago:
Rand McNally, 1970.
Schiff, Eric. Incomes Policies Abroad. Special Analysis No. 3. Washington: American
Enterprise Institute for Public Policy Research, 1971.
The Politics and Economics of Public Spending. Washington: Brookings
Institution, 1968.
_, and others. Setting National Priorities: The 1971 Budget. Washington:
Brookings Institution, 1970. Similar analyses of the 1972 and 1973 budgets.
Scitovsky, Tibor. Papers on Welfare and Growth. Stanford, California: Stanford
University Press, 1964.
Silk Leonard S. Nixonomics: How the Dismal Science of Free Enterprise Became
the Black Art of Controls. New York: Praeger, 1972. Highlights the transformation of President Nixon from Friedmanite to Keynesian to Galbraithian.
Thurow, Lester C. The Impact of Taxes on the American Economy. New York:
Praeger, 1971.
Tobin, James. National Economic Policy. New Haven: Yale University Press, 1966.
Ulman, Lloyd, and Robert Flanigan. Wage Restraint: A Study of Incomes Policies
in Western Europe. Berkeley, California: University of California Press, 1971.
Ulmer, Melville J. The Welfare State—U.S.A.: An Exploration In and Beyond
the New Economics. Boston: Hough ton Mifflin, 1969.
Vernon, Raymond, ed. The Technology Factor in International Trade. New York:
Columbia University Press for the National Bureau of Economic Research, 1970.
Articles and Other Materials
"Arthur Burns on Easier Credit . . . Business in 70," U.S. News & World Report,
January 12, 1970.
Bischoff, Charles W. "Plant and Equipment Spending in 1969 and 1970/' Brookings
Papers on Economic Activity, 1:1970.
Bivens, Karen, and John Hein. "Wage and Price Controls Abroad," The Conference
Board Record, Vol. 8, No. 12 (December 1971).
Bowles, Chester, "A Plan for Limited Controls," Washington Post, September 12,
1971.
Branson, William H. "The Balance of Payments in 1970," Brookings Papers on
Economic Activity, 1:1971.
, and Helen B. Junz, "Trends in U.S. Trade and Comparative Advantage,"
Brookings Papers on Economic Activity, 2:1971.
Brown, A. Douglas. "Managing the Wage-Price Freeze," Civil Service Journal, Vol.
12, No. 4 (April-June 1972).
Burck, Gilbert. "Hard Going for the Game Plan," Fortune, May 1970.
Burns, Arthur F. "The Basis for Lasting Prosperity." Address at Pepperdine College,
December 7, 1970.
Cameron, Juan. "How the U.S. Got on the Road to a Controlled Economy,"
Fortune, January 1972.
264
BIBLIOGRAPHY
"Connally's Hard Sell Against Inflation/' Business Week, July 10, 1971.
Cowan, Edward. "Skeptics Find Economic Controls, After a Year, Have Worked
Better than Expected," New York Times, August 11, 1972.
Dale, Edwin L., Jr. "Jawboning's a Joke: You Can't Talk Inflation to Death," New
Republic, Vol. 162, No. 16 (April 18, 1970).
Darnell, Jerome C. "Another Look at the Trade-Off Between Inflation and Unemployment," The Conference Board Record, Vol. 7, No. 1 (January 1970).
Davis, Richard G. "An Analysis of Quantitative Credit Controls and Related
Devices," Brookings Papers on Economic Activity, 1:1970.
Deitch, David. "Nixon's NEP: Watershed of the American Economy," The Nation,
September 13, 1971.
"Phase II: Will it Work? For Whom?" The Nation, December 27, 1971.
Duerr, Michael G. "International Business and the NEP," The Conference Board
Record, Vol. 8, No. 12 (December 1971).
Duggal, Vijoya, and Lawrence R. Klein. "Guidelines in Economic Stabilization: A
New Consideration," Wharton Economic Newsletter, Summer 1970.
Eisner, Robert. "Fiscal and Monetary Policy Reconsidered," American Economic
Review, Vol. 59, December 1969.
Firestone, O. J. "United States Economic Policies: A Canadian View," National
Westminster Bank Quarterly Review, February 1972.
"The Freeze and After," Business Conditions, Federal Reserve Bank of Chicago,
September 1971.
Friedman, Milton. "The Role of Monetary Policy," American Economic Review,
Vol. 58, March 1968.
"Why the Freeze is a Mistake," Newsweek, August 30, 1971.
. "Last Readings on the Old Game Plan," Newsweek, September 27, 1971.
"Morality and Controls," New York Times, October 28 and 29, 1971.
• "Controls: An Exercise in Futility," Newsweek, May 22, 1972.
Galbraith, John K. "Wage-Price Controls—The Cure for Runaway Inflation," New
York Times Magazine, June 7, 1971.
"General Business Conditions: The Administration Shifts Gears," Monthly Economic
Letter, First National City Bank, New York, September 1971.
Gimlin, Hoyt, "Economic Controls," Editorial Research Reports, Vol. 2, No. 6
(August 13, 1969).
"Challenges for the 1970's," Editorial Research Reports, Vol. 2, No. 19
(November 19, 1969).
Gooding, Elmer R. "Inflation—Causes, Consequences, and Cures," Arizona Business
Bulletin, Vol. 18, No. 5 (May 1971).
Gordon, Robert J. "Inflation in Recession and Recovery," Brookings Papers on
Economic Activity, 1:1971.
"Steady Anticipated Inflation: Mirage or Oasis," Brookings Papers on
Economic Activity, 2:1971.
Haberler, Gottfried. "Incomes Policy and Inflation," Industrial Relations Research
Association Series, May 1972 (Proceedings of Annual Winter Meeting, New
Orleans, December 1971).
Hansen, Alvin H. "Inflation and the New Economics," Challenge, Vol. 15, No. 2
(November-December 1966).
"Have Fiscal and/or Monetary Policies Failed," American Economic Review, Vol.
62, No. 2 (May 1972). Papers by Milton Friedman, John G. Gurley, and Arthur
M. Okun, presented at the 84th Annual Meeting of the American Economic
Association, New Orleans, Louisiana, December 27-29, 1971.
Hayes, Alfred, "Inflation: A Test of Stabilization Policy," Monthly Review, Federal
Reserve Bank of New York, Vol. 52, February 1970.
Heilbroner, Robert L. "Phase II of the Capitalist System," New York Times
Magazine, November 28, 1971.
Hein, John. "An Incomes Policy? Who Knows!" The Conference Board Record,
Vol. 9, No. 6 (June 1972).
265
474-893 O - 72 - 19
BIBLIOGRAPHY
, and David Bauer, "Incomes Policies: The Foreign Experience," The
Conference Board Record, Vol. 8, No. 7 (July 1971).
Hymans, Saul H. "1971: Economic Outlook and Uncertainties," Brookings Papers on
Economic Activity, 3:1970.
"Incomes Policies: What Europe Learned," Business Week, November 13, 1971.
"Inflation De-Escalation? The Nation is Skeptical," The National Observer, November 20, 1971.
"Inflation: Problems of the 1960's and Implications for the 1970's," Economic
Review, Federal Reserve Board of Cleveland, February 1970.
"Inflation in Western Europe and Japan," Federal Reserve Bulletin, October 1970.
"Interview With Arnold Weber, Executive Director of the Cost of Living Council,"
U.S. News & World Report, September 20, 1971; reprinted in Bureau of National
Affairs, Federal Controls (9-20-71), pp. 2-2172/2174.
"Is Inflation Inevitable," Monthly Economic Letter, First National City Bank of
New York, January 1970.
Katona, George. "The Impact of Inflation on Consumer Attitudes and Behavior,"
The Conference Board Record, Vol. 8, No. 3 (March 1971).
Krause, Lawrence B. "U.S. Exports and Imports: Are We Tracking?" Brookings
Papers on Economic Activity,
1:1970.
"Trade Policy for the Seventies," Columbia Journal of World Politics,
Vol. 6, January-February 1971.
Kreider, Lawrence E. "Economic Policy Lessons for the 1970's," Business Horizons,
Vol. 13, February 1970.
Levy, Michael E. "From Phase 1 to Phase 3: An Assessment of U.S. Incomes Policy,"
The Conference Board Record, Vol. 9, No. 6 (June 1972).
"U.S. Inflation and Wage-Price Guideposts," The Conference Board
Record, Vol 8, No. 6 (June 1971).
Lewis, Flora, "Is Inflation a Psychosomatic Illness?" New York Times Magazine,
January 30, 1972.
Lincoln, George A. "OEP Role in the Wage-Price Freeze," Statement before the
Joint Economic Committee, U.S. Congress, August 30, 1971.
_
"The 90-Day Freeze: Now and Hereafter," Remarks to the Grocery
Manufacturers of America Public Policy Seminar on Marketing, Washington,
D.C., September 16, 1971 (reprinted in Bureau of National Affairs, Federal
Controls (9-16-71), 5-37/5-38).
Remarks to the Pay Board and Price Commission, October 22, 1971.
_. "Managing the Freeze," Remarks at the Industrial College of the Armed
Forces, Washington, November 18, 1971.
_. "Activities of the Office of Emergency Preparedness During the 90-Day
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incorporated in the CLC's First Quarterly Report cited above).
"Looking Beyond Wage-Price Freeze—Interview with George P. Shultz, Director,
Office of Management and Budget," US. News & World Report, September 6, 1971.
Louis, Arthur M. "Labor Can Make or Break the Stabilization Program," Fortune,
November 1971.
McCracken, Paul W. "The Transition to Economic Stability," Michigan Business
Review, Vol. 21, No. 5 (1969).
McWhirter, William A. "An Expert Views the Freeze and the Future-An Interview
with Economist Otto Eckstein," Life, August 27, 1971.
Maclup, Fritz. "Another View of Cost-Push and Demand-Pull Inflation," Review
of Economics and Statistics, Vol. 42, May 1960.
Means, Gardiner C. "The Phase II Guidelines Nixon Didn't Propose," Washington
Post, October 10, 1971.
Meany, George. "George Meany on Nixonomics," Washington Post, April 16, 1972
(Outlook Section).
__
. "Labor's Case for a Profits Freeze," New York Times, August 31, 1971.
Mueller, Charles E. "Monopoly," Washington Monthly, April 1971.
266
BIBLIOGRAPHY
Myers, John G. "Dampening Inflationary Expectations," The Conference Board
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"When Will the Real Upturn Begin," The Conference Board Record,
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National Journal (Weekly) . Washington: The Government Research Company.
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program.
"Nixon Asks New Powers to Aid Inflation Fight," Commerce Today, November 1,
1971.
"Nixon and Labor Widen the Breach," Business Week, November 27, 1971.
"Nixon's Economic Game Plan II," National Journal, August 21, 1971.
"Nixon's Economics—The Drastic Plan to Save the Dollar," Business Week. August
21, 1971.
"Nixon's New Economic Policy," U.S. News & World Report, August 30, 1971.
North, Cary. "Wage-Price Controls: Effects and Countereffects," Commercial and
Financial Chronicle, August 21, 1969.
Nourse, Edwin G. "Early Flowering of the Employment Act." Virginia Quarterly
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Okun, Arthur M. "The Game Plan of Stop and Go," Business Economics, Vol. 6,
May 1971.
"Perspectives on Business in 1969." The Conference Board Record, Vol.
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_. " T h e Mirage of Steady Inflation," Brookings Papers on Economic
Activity,
2:1971.
and George L. Perry. "Notes and Numbers on the Profits Squeeze,"
Brookings Papers on Economic Activity, 3:1970.
Parrish, Evelyn M. "The U.S. Balance of Payments: Fourth Quarter and Year
1970," Survey of Current Business, Vol. 51, March 1971.
Perry, George L. "Wages and the Guideposts," American Economic Review, Vol.
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"Changing Labor Markets and Inflation," Brookings Papers on Economic
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_. "After the Freeze," Brookings Papers on Economic Activity, 2:1971.
Phelps, Edmund S. "Anticipated Inflation and Economic Welfare," Journal of
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"The New Microeconomics in Inflation and Employment Theory,"
American Economic Review, Vol. 59, May 1969.
"Unreasonable Price Stability—The Pyrrhic Victory Over Inflation," in
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1972.
Plantz, Don V., and Don C. Warner, "A Three-Year Analysis of the Cost of Living,"
Arizona Business Bulletin, Vol. 18, No. 5 (May 1971).
Poole, William, "Thoughts on the Wage-Price Freeze," Brookings Papers on Economic
Activity, 2:1971.
"The President's Actions," The Morgan Guaranty Survey, Morgan Guaranty Trust
Company of New York, August 1971.
"The Price of Ending Inflation Stays High," Business Week, January 31, 1970.
"The Prospects for 1972 Are Now Markedly Improved," Interview with Paul W.
McCracken, Chairman, Council of Economic Advisers, U.S. News & World
Report, August 30, 1971.
Raskin, A. H. "The Freeze: Dr. Nixon Prescribes Shock Therapy," New York Times,
August 22, 1971.
Reynolds, Alan. "The Case Against Wage and Price Control," National
Review,
September 24, 1971.
Rinfret, Pierre A ."Economic Stabilization: The Problem and a Program," reprinted in Congressional Record, Vol. 116, March 12, 1970 (daily edition,
s3641-s3646).
267
BIBLIOGRAPHY
Rivlin, Alice M. "Inflation: The Search for a Cure," Washington Post, September
20, 1971.
.
"Unemployment: A Tough Problem," Washington Post, November 17,
1971.
_. "When Should Wage and Price Controls Be Ended," Washington Post,
January 13, 1972.
Roosa, Robert V. "Controlling Inflation and the Inflationary Mentality," Journal
of Finance, Vol. 25, May 1970.
Rowen, Hobart. "No Eleventh Hour Decision—Genesis of the Economic Change,"
Christian Science Monitor, November 9, 1971.
Samuelson, Paul A. "Public Responsibility for Growth and Stability," in The Goal
of Economic Growth, Edmund S. Pheips, editor. New York: Norton, 1969.
, and Robert M. Solow. "Analytical Aspects of Anti-Inflationary Policy,"
American Economic Review, Vol. 50, May 1960.
Schultze, Charles L. "Has the Phillips Curve Shifted? Some Additional Evidence,"
Brookings Papers on Economic Activity, 2:1971.
Sidey, Hugh. "How the Nixon Team Touched Off the Economic Bombshell," Life,
August 27, 1971.
Silk, Leonard S. "It May Be Time to Change the Game Plan Again," New York
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"Spotlight on 'Productivity'—Why It's a Key to U.S. Problems," US. News & World
Report, October 4, 1971.
Stahl, Sheldon W. "Incomes Policy-An Idea Whose Time Has Come," Monthly
Review, Federal Reserve Board of Kansas City, September-October 1971.
Stein, Herbert. "Unemployment, Inflation, and Economic Stability," in Agenda
for the Nation, Kermit Gordon, Editor. Washington: Brookings Institution, 1968.
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Stern, Michael. "Tories Think the Unthinkable, A Wage-Price Freeze?" New York
Times, June 12, 1972.
"The Story Behind Nixon's Big Decision," Business Week, August 21, 1971.
Suri, Surindre K. "Canada's Uneasy Consensus: Success of Anti-Inflation Measures,"
The Conference Board Record, Vol. 7, No. 5 (May 1970) .
"Three Perspectives on the Wage Price Freeze," Sloan Management Review, Winter
1972. Lester C. Thurow ("Inflation and the Alternatives") questions the wisdom
of imposing controls on a dynamic economy; James E. Annable, Jr., ("The
Making of Economic Mythology, 1971") suggests that the controls selected may
have been inappropriate; and D. Quinn Mills ("Implementing Wage Stabilization") discusses the difficulties of administering a wage freeze.
Tobin, James. "Administration's Gamble with Nation's Economy," Washington Post,
October 31, 1971.
, and Leonard Ross. "Living with Inflation," The New York Times Review
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"Stabilizing the Economy: A Proposal for Full Employment Without
268
BIBLIOGRAPHY
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_. "Controlling Inflation: Is 'Jawboning' a Joke?" New Republic, Vol. 162,
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"Unloved, Unwanted, but Needed—Quarterly Outlook Survey," Nation's Business.
April 1972. Analysis of prevailing sentiment among executives about wage and
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Walker, Charls. "Cost-Push Inflation: What It Is and What Not to Do About It,"
The Conference Board Record, Vol. 7, No. 4 (April 1970) .
Wallis, W. Allen. "United States Growth: What, Why, How," in The Goal of
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.
. "A Wage Price Freeze as an Instrument of Incomes Policy; or the
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Weidenbaum, Murray L. "Fiscal Policy for a Period of Transition," Federal Reserve
Bank of St. Louis Review, Vol. 52, November 1970.
"Alternatives to Price, Pay Curbs," Washington Post, May 7, 1972.
Weintraub, Sidney. "An Incomes Policy to Stop Inflation," Lloyds Bank Review,
January 1970.
Wessell, Robert H. "Institutionalized Inflation in a Cooling Economy," Commercial
and Financial Chronicle, Vol. 210, November 27, 1969.
"What to Watch for in Prices, Profits, Rents—Interview with Top Planner on
Control" (Herbert Stein), U.S. News & World Report, November 8, 1971.
"When the British Imposed Controls," U.S. News & World Report, November 8,
1971.
"Whither the Economy: Inflation, Recession or Both?" Congressional
Quarterly
Weekly Report, Vol. 28, May 1970.
"Why Recession Will Be Avoided, Interview with President's Economic Adviser,
Paul W. McCracken," U.S. News & World Report, January 12, 1970.
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Review of the St. Louis Federal Reserve Bank, December 1969.
269
Index
Ackley, Gardner, 18
Administrative Procedures Act, 140
AFL-CIO, 124, 128, 139, 144, 164
After-action reports, 116, 197, 200-201
Agency Coordination Section, 69
Agricultural products, 17, 83, 109-110
Agricultural Stabilization and
Conservation Service
aid to OEP, 24, 33, 39-40
information activities, 148-149, 239240
OEP liaison with, 58-59, 68, 72, 196
postfreeze program, 177
Agriculture, Secretary of, 42
Albert, Carl, 15, 161
Alimony, 104
Althaus, Wayne, 60
American Federation of Teachers, 128
American Retail Federation, 158
Anderson, John B., 162
Associated Press, 153
Automobile prices, 82, 85, 192
B
Baird, William D., 57n, 60
Balance of payments, 2-3, 7, 11, 193
Bankruptcy, 110-112, 114
Baruch, Bernard M., 15n
Base period, 17-18, 74, 80-81, 83, 87
Bennett, Elmer F., 35, 120, 150
Berkman, Richard L., 56, 58n
Budget deficit, 3, 193
Bureau of National Affairs, 154
Bureaucracy, avoidance of, 12-13, 21, 28,
42, 117, 170, 174
Burns, Arthur F., 9, 19n, 192
Butler, G. Lee, 56, 58n
Cannon, John P., 57n, 58, 185, 197
Ceilings, 17-18, 80-83, 119, 132-133, 159
Census Bureau, 72, 123
270
Chamber of Commerce, U.S., 144, 158
Civil Service Commission, 38, 43-44,
48-49, 195-196
Collective bargaining, 14
Commerce Clearing House, 154
Commerce Department, 99, 158
Commodity futures, 83
Communications Section, OEP, 61
Communications system, OEP, 28, 46,
60-64, 196-197
flow, 62 (chart)
and public, 65-67, 143-167
Complaints, See Violation*
Compliance, 25, 38, 99
Branch, 36, 58, 120, 135
checks on, 39, 118-119, 121
enforcement, 59, 117-138, 141, 166
voluntary, 12, 27, 117-118, 123-124,
145, 166, 200
Compulsory arbitration, 9
Computers, use of, 33, 52, 67, 71-72, 184,
187
Congress, 9, 131, 140
exemption referrals, 102 (table), 103
and freeze, 16, 161-162
inquiries from, 35, 65-67, 147, 162
responsibility for economy, 2, 6, 15,
138-139
and standby legislation, 6-7, 15-16
Congressional and Public Affairs Office,
OEP, 35, 60, 67-68, 70, 147, 149, 152153, 155, 159-163, 166
Connally, Secretary John B., 9-10, 17-21,
74, 96, 98, 128, 177n
Constitutionality of freeze, 138-140
Construction Industry Stabilization
Committee, 7, 23-24, 176
Consumer Price Index, 135, 190-191
Contracts, 83, 87-91, 93, 140
Controls. See also Freeze; Prices; Rents;
Wages
direct, 1, 3-4, 15-16, 23, 27, 194
indirect, 1-3, 23
INDEX
institution of, 1, 8-19, 97
standby, 23
system, 26, 75
techniques, 53-55, 96
Coordination Meetings, 55-57, 59, 70-72,
97, 198
Coordination Office, OEP, 35, 55-57, 71
Correspondence Section, OEP, 35, 60,
66-67, 70, 76, 147, 161
Cost of living, 6, 94, 98
Cost of Living Council, 203-204
establishment, v, 11, 19-21
and freeze, 41 (chart)
guidelines, 18
operations, by OEP, 21-25, 42, 57,
147, 231 (exhibit)
Phase II plans, 168-177
policy, 18, 33, 35, 77, 81, 100, 147
reports to, 71-72
responsibilities, 13, 20, 54, 96, 168,
174-177, 261
Council of Economic Advisers, 5-8, 16,
23, 82, 168, 190-192, 194n, 195
Credit Control Act of 1969, 18n
Crisis management, 22, 26, 28-29, 33, 42,
53-54, 196
Customs duties, 86
Daily Economic Stabilization Report,
57, 71
Davis-Bacon Act, 104
Defense Civil Preparedness Agency, 46,
65, 159-160
Defense Department, 45-46, 48-49, 121
Defense Production Act, 15
Detailed Personnel, 33, 39-40, 41
(chart), 43-50, 45 (table), 47 (table), 55,
181, 185, 195-196
Disasters, natural, 21-22, 28, 30, 32-33,
186, 204
Discounts, price, 82
Disinflation, 4
Dividends, 17-18, 145, 173, 176
Dollar, 2, 8, 11
Dover, Arthur, 182
Dow Jones industrial average, 143
Dues, 85
E
Economic stability, 1, 3, 16, 30, 125, 144,
187-189, 203
Economic Stabilization Act Amendments
of 1971, 244 (exhibit)
Economic Stabilization Act of 1970, 7,
12n, 14-17, 19-20, 74, 96, 128, 131, 138,
139, 172, 207, 224 (exhibit)
Economic Stabilization Agency, 23, 30,
36, 42
Economic Stabilization Circulars, 74-75,
79, 87, 130
Economic Stabilization Division, OEP,
22-23, 33, 171, 182, 188
Economic Stabilization Regulation, 1,
74, 81, 87, 130, 232 (exhibit), 234
(exhibit), 343 (exhibit)
Eisenhower, General Dwight D., 22
Emergency, national, 12n, 14, 22-23, 28,
30, 42, 196
EMISARI system, 52, 64, 65w, 72, 78,
184; See also Computers
Employment, 2-7, 16, 192
Employment Act of 1946, 2-3
Enforcement, freeze, 59, 117-138, 141,
166; See also Compliance
Escalator clauses, 10
Exceptions. See Exemptions.
Executive Order No. 11588, 225 (exhibit)
Executive Order No. 11615, 17, 19-20,
24, 74, 123, 139, 179, 229 (exhibit)
Executive Order No. 11627, 179, 239
(exhibit)
Executive Policy Committee, CLC, 20,
57, 69, 76-77, 100, 110, 113, 177, 198
Executive Reservists; See National
Defense Executive Reserve
Exemptions, 20, 25, 32, 35, 40, 76, 116.
See also Fringe Benefits; Office of
Exceptions and Exemptions
authority, 96-98
denials, 99-104, 106-108, 111-113,
115, 199
machinery, 99-101
price, 109-114
publicity on, 152
requests, 99-104, 102 (table), 104
(table), 112, 114-115, 196
Facsimile terminal (FAX), 61, 62
(chart), 64
Farmers Home Administration, 109
Federal employment, 12-13, 86, 131, 164
Federal Executive Board, 44
Federal Power Commission, 49
Federal Regional Councils, 36
Federal Register, 35, 74, 79
271
INDEX
Federal Regulations and Purchasing
Review Board, 121
Federal Reserve Board, 18n
Federal Telecommunications System
(FTS), 63
Fines, 123
Fitzsimmons, Frank £., 144
Fletcher, William, 66, 147-148, 187
Formula
pricing, 93
rentals, 92
Free market, v, 5, 11, 14
Freeze. See also Exemptions; Inequities;
Lincoln, George A.; Office of Emergency Preparedness; Prices; Rents;
Wages,
administration of, 19-25, 35, 43-49,
53, 55, 145-146, 189
apparatus, 16, 19-25, 40, 41 (chart),
53-55, 99-101, 117
assessment of, 202-204
complaints, 13, 38-40, 54, 101-102,
115, 118-121, 122 (table), 126, 133
compliance machinery, 25, 27, 36,
64, 118-127, 131-133, 141-142, 166
constitutionality, 138-140
enforcement, 59, 117-138, 141, 166
establishment of, 1, 8, 11-15, 17-19,
74, 117
funding, 51
guidelines. See Stabilization Program
Guidelines
impact, 28, 38, 40, 88, 117-118, 145146, 159, 166, 191
inquiries, 27, 49, 54, 60, 65, 67, 80,
115, 197
legislation, 10, 14-17, 74-75, 91, 117121, 123, 138-140
management, 12-14, 32-33, 40, 53-73,
143, 194-204
policy, 13, 74, 78-95, 97-98, 198-199
provisional organization, 30-36
temporary aspect, 12, 15, 97, 142
violations, 16-17, 38, 76, 99, 101,
118-127, 133-135, 166, 200
Fringe benefits, 86-88, 94, 99, 104-107
Fuel prices, 82-83, 86, 133-134
Galbraith, John Kenneth, 5, 8, 15
Game Plan, 2, 8, 42
Gaskill, Irving, 52
272
General Counsel, OEP, 35-36, 49, 69-70,
72, 76-77, 91, 100, 135
and compliance, 58, 120
and policy, 66, 79, 134, 198
postfreeze role, 180
General Services Administration, 38, 5152, 195
Gibb, Charles A., 120
GNP deflator, 187
Golden sheep rule, 90
Government Preparedness Office, 32-35,
46, 188
Government Printing Office, 78
Governors* Bulletin, 160
Gray, L. Patrick, 120, 139
Group health insurance, 84, 98, 104-106,
115, 134
GSA Advance Record System (ARS), 61,
62 (chart)
Guidelines. See Stabilization Program
Guidelines; Voluntary Restraint
Gullander, W. P., 144
H
Hardin, Clifford M., 19n
Hardship situations, 93, 98, 102-103,
111-112, 166
Health, Education, and Welfare
Department, 45
Heiberg, E. R., 56, 58, 178, 183
Historian's Office, OEP, 36, 47 (table),
57, 80n
Hodgson, James, 19n
Hotchkiss, George, 70
House Banking and Currency
Committee, 13T
Housing and Urban Development
Department, 99
Import policy, 6, 11, 86
Incomes policy, 4-5, 117
Industry Advisory Committees, 182
Inequities, 16, 27, 98-99, 106, 115-116,
199
Inflation
alerts, 6-7
control, 8, 11, 143, 168, 187
cost-push, 5, 15
demand-pull, 1, 5, 15
persistence of, 7, 13-15, 165, 168
psychology, 143, 163, 189
INDEX
rate, 5, 172, 190-191, 194
spiral, 4, 9, 164, 169
Information Systems Office, OEP, 71
Injunctions, 16-17, 123-126, 126 (tables).
See also Litigation
Inquiry Review Section, OEP, 66, 68-70,
76, 183
Insurance, 76, 83-84, 94, 98, 104-106, 115
Interest, 10, 17-18, 144-145, 173, 176, 192
Internal Revenue Service. See also Freeze.
aid to OEP, 24-25, 33, 39-40, 54,
118, 201
Delegation Order No. 117, 233
(exhibit)
and exemption cases, 100, 102-104,
114
information activities, 148-149, 153,
160
inquiries to, 68 (table)
investigations of violations, 118-119,
121, 122 (table), 125, 166, 200
OEP liaison with, 58-59, 68, 72, 196
postfreeze program, 176-177, 182-186
Investigation procedures, 39, 118-121
Investment capital, 18
Investment tax credit, 11-12
Jawboning, 4, 120, 169; see also
Voluntary restraint
Johnson, President Lyndon B., 4, 16
Johnston, Douglas, 57n, 66, 147-148, 181
Joint Board on Fuel Supply and Fuel
Transport, 22
Joint Economic Committee, 9
Justice Department, 17, 58-59, 72, 118120, 122 (table), 124, 139, 166, 178, 200
Legislation, control, 10, 14-17, 74-75,
117-121, 123
Lending institutions, 18
Leventhal, Harold, 139-140
Lewis, Arnold, 120n,
Lewis, Arnold C , 69, 183
Lincoln, George A. See also Freeze;
Office of Emergency
Preparedness,
background, 22
Congressional briefing, 162
and Cost of Living Council, iv,
20-21, 24, 42, 57, 71, 74, 76-78, 96,
100, 186, 198, 203
crisis management, 22, 26, 28-29,
33, 42, 53-54, 196
exemption policy, 98
and Executive Reservists, 42-43
and freeze administration, 20-24,
26-28, 42, 70, 202-203
information policy, 146, 150-153,
156, 158, 161, 197-198
liaison role, 57, 77-78, 93, 120, 162,
171
operations management, 21-25, 30,
36, 38-39, 42-43, 70, 74, 76-77
postfreeze plans, 93-94, 168-169, 171,
177-178, 183, 186-188
report to President, 186
and Regional Directors, 202
responsibilities outside freeze, 26,
29-30, 33, 40, 59
and staff expansion, 28, 30, 36, 39,
42-52
tribute by President, 203
Lindjord, Haakon, 35, 55-57, 198
Litigation, 119-126, 122 (tables), 159
M
Knauer, Virginia H., I9n
Kolb, Avery, 60
Korean War, 1, 3, 13, 97, 169
Kupperman, Robert H., 70-71
Labor Department, 45 (table), 66, 99
Labor, organized, 27, 88, 124, 127-128,
139, 144-145, 164, 167, 174, 193. See
also Unions, labor.
Legal assistance, OEP, 49, 54, 69
Manual for Regional Emergency
Operations—Economic
Stabilization
Agency, 36
Marshall, General George C , 22
Mathematics and Computation
Laboratory, 52
McConachie, Charles R., 120
McCracken, Paul W., 8, 19n, 20
Meany, George, 128, 144, 164
Media, communications, 27, 35, 55, 65,
78, 118, 146-155, 164, 201
Military wages, 86, 104, 131
Mills, Robert, 61
273
INDEX
Mills, Wilbur D., 189
Minimum wages, 106-107
Money supply, In
Moral suasion, 4
Murray, Richard, 181
N
Nader, Ralph, 132
National Association of Manufacturers,
7, 144
National Association of Retail Druggists,
158
National Commission on Productivity,
6, 176
National Communications Network, 65
National Defense Executive Reserve,
42-43, 156
National Education Association, 90,
128-129
National Governors' Conference, 160
National Office, OEP, 55-58, 147-148
National Restaurant Association, 158
National Security Council, 30
Natural Disaster Operations Center, 61
Neeb, Louis, 57, 58n, 77, 181
Nelson, William E., 120n
New Economic Policy. See also Freeze;
Office of Emergency Preparedness
establishment vii-viii, 11-12,143, 189
opposition to, 128, 193
program, 11-14, 117
New York Times, 124-125, 152
Nixon, President Richard M., 21, 27
administration economic problems,
1-8, 16-17
before Congress, 14,169,172,200-201
freeze announcement, v, vii-viii, 8,
12, 15, 17, 24, 117, 143, 165, 189
Phase II plans, 114-116, 169-170, 172,
191
public addresses, 5-6, 9-10, 12, 14-15,
19, 114, 116, 143, 165, 189
standby authority, 6-7, 14-15, 17,
172-173
tribute to OEP, 203
Noncompliance, with freeze, 40, 89, 121,
124, 129-131
Norred, Christopher A., 97-98, 100, 115,
150, 181
Nuclear war, 21-23, 27, 188
274
O'Connell, J. Ray, 43, 51, 57n
OEP/IRS Transition Task Force, 183
Office of Civil Defense. See Defense Civil
Preparedness Agency
Office of Congressional and Public
Affairs, OEP. See Congressional and
Public Affairs Office, OEP.
Office of Defense Resources, 30, 42
Office of Emergency Preparedness. See
also Cost of Living Council; Freeze;
Lincoln, George A.
administration, 21, 26-28, 40-42,
194-204
authority of, v, vii, 24, 42, 118-121
assessment of management, 194-204
delegation of functions, 24-25, 28-29,
40
detailed personnel, 33, 39-40, 41
(chart), 43-50, 45 (table),
47
(table), 55, 181, 185, 195-196
duties outside freeze, 26, 29-30, 33,
59, 195
and emergencies, 21-23, 28, 54
and freeze enforcement, 123-131.
See also Enforcement,
funding, 51
mission, 13, 21, 23-26
operating arm of CLC, 21-25, 42,
57, 147, 231 (exhibit)
organization charts, 31, 34, 41
postfreeze program, 92-95, 170-172,
177, 186-188
priorities, 32, 53
questions to, 27, 35, 68-73, 68
(table), 146, 155, 195
regions, 36-42, 37 (map), 41 (chart)
responsibilities, 23, 25, 30, 196, 202
security, 50-51
staff, 24, 26, 28, 35, 42-52, 97, 181
Office of Exceptions and Exemptions,
OEP, 35, 66, 69, 97, 150
Office of Information and Analysis,
OEP, 33, 34 (chart)
Office of Management and Budget, 20,
23, 43-44, 48, 51, 178, 196
Office of Resource Evaluation, OEP, 31
(chart), 33
Okun, Arthur, 18
Operations Center, OEP, 28, 34 (chart),
46, 60-61, 63, 69, 146-147, 184, 197
INDEX
Operations Office, OEP, 32, 34 (chart),
58, 60, 66, 70-71, 73
Pattison, David J., 67, 147, 149, 159, 162
Pay Board, 49, 56, 92-94, 103, 114, 131,
174-176, 178-182, 187-188, 201
Pensions, 104
Perry, Spence W., 97, 181
Personnel problems, OEP, 47-50; See
also Detailed Personnel
Phase I suits, 126 (tables)
Phase II, 13, 19, 35, 93, 95, 103, 114, 116,
133, 142, 167-169, 188, 193
administration, 174-178
planning, OEP input, 170-172
problems, 180, 193
transition to, 178-186, 201-202
Pierce, Charles, 43
Policy and Guidance Liaison Office,
OEP, 35, 57, 93, 150, 181
Policy Questions Office, OEP, 33, 66, 16n
Polls, opinion, 143, 145, 163, 165
Postfreeze program, 19, 24-25, 67, 92-95,
114-116, 168-188, 201-202; See also
Phase II
Potential Court Cases, 59, 119, 122
(table)
President, 1-2, 6-7, 14-17, 96, 140. See
also Johnson, President Lyndon B.;
Nixon, President Richard M.
Presidential Proclamation 4074, 12n
Presidential statement on freeze, v,
vii-viii, 12-14, 19, 117, 143, 165, 189
President's Disaster Relief Fund, 30
Press Reception Room, OEP, 157
Press releases, 148-149, 151-154, 158, 166,
201
Preston, Edward F., 182-183
Price Commission, 49, 56, 92-94, 103,
108, 114, 133, 174-176, 178-182, 184,
187-188, 201
Price lists, 116, 124, 131-133, 133 (table),
141, 159, 166-167
Prices. See also Controls; Exemptions;
Freeze; Price lists; Violations
adjustment, 12, 82
automobile, 12, 82, 85, 192
base, 133
ceilings, 17-18, 80-83, 119, 132-133,
159
complaints of violations, 13, 38-40,
54, 101-102, 115, 118-121, 122
(table), 126, 133, 164
fluctuations, 82
fuel, 81-86, 134
guidelines, 10, 13, 17, 24
increases, 3, 5-6, 13, 16, 76, 81, 110,
125, 194
Phase II reporting, 173 (table)
policy, 75-76, 80-86, 109-114, 200
rollbacks, 10, 81, 133-134
stability, 2, 4-5, 172
steel, 112
Productive capacity, 1, 5
Productivity, 5-6
Profits, 17-19, 93, 144, 176
Public
hearings, 140
information, 25, 35, 39-40, 143,
145-159, 162-167, 200-201
inquiries, 38-40, 65-70, 68 (table),
162-167, 196
opinion, 27-28, 32, 115-116, 118
reaction, 70, 101-102, 143-145
support, 27, 117-118, 142-145, 158,
163-167, 200-201, 203
Public Information Officers, OEP
Regional, 148-150, 152-156
Public Law 92-15, 228 (exhibit)
Public utilities, 83, 86, 93, 107
Purchasing power, 3, 115
Questions and Answers, OEP, 79, 152,
157-158, 160
Quindlen, Eugene, 32n, 60, 171n
Rationing, 6
Recession, 3-4
Recommended Court Cases, 85, 120
Reese, Leonard, 60
Regional Directors, OEP, 21, 36, 38,
43-44. 49, 59, 80, 202
exemption authority, 99-100,102-103,
104 (table), 116
liaison with local officials, 159-160
postfreeze program, 177,179,184-185
problems, 73, 78, 94-95, 98, 116, 184,
196, 199
speaking program, 156-157
and violations, 119-120
275
INDEX
Regional Offices, OEP, 24-25, 35-42, 37
(map), 41 (chart)
duties, 38, 40, 44, 51-52, 147, 195-196
and exemptions, 99, 102-103, 108109, 115
guidance to, 60, 63, 78-79, 196-197
organization, 58-59, 64
postfreeze operations, 184-185
and press, 153-155
and public, 147-150, 155-157, 199
queries to, 68-70, 68 (chart), 148,
195-196
Regulations and Purchasing Review
Board, 6
Relief from the Freeze, 13, 76, 97-99,
111, 116
Rent Advisory Board, 176
Rents, 32-33, 149-151
exemptions, 99
freeze on, 26, 81-82, 91-92
increases, 81, 93-94
policy, 109-114, 176
violations, 127
Reporting system, OEP, 25, 60-61, 64,
70-73, 101-103, 123; See also
After-Action Reports
Resource Analysis Office, OEP, 33-35, 46
Retail sales, 192
Revenue sharing, 12
Robinson, Aubrey E., 139
Romney, George, 19n
Rumsfeld, Donald, 174, 179
Sports events admissions, 81, 135-138
Stabilization Program Guidelines, 33, 40,
65-66, 74, 78-80, 159, 198
Standby authority, 6-7, 14-15, 17, 172-173
Stans, Maurice H., 18, 19n, 168
State officials, 23, 27, 59, 78, 159-161
Steel prices, 112
Stein, Herbert, 5, 8, 168-169
Stock options, 88
Stockpiles, 30, 32
Surcharge, import, 11, 12n, 86
Systems Evaluation Division, OEP, 72
Taxes, 76, 92, 106
credit, 11-12
excess profits, 18
excise, 12, 86
laws, 11
state and local, 85
Teachers' salaries, 89-91, 94, 127-131,
141, 144, 162, 165
Telephones, use, 54, 58, 60-66, 70, 146
Teletypewriter Exchange Service
(TWX), 61, 62 (chart), 65
Television coverage, 151, 154, 201
Trade associations, 67, 101, 155, 157-159,
167
Trade deficit, 7
Transaction rule, 80-84, 87, 91
Transportation, Secretary of, 22
Treasury Department Order No. 150-75,
233 (exhibit)
Salaries. See Teachers' salaries; Wages.
Saunders, Edward R., 76, 78, 180
Seasonality rule, 82
Security, OEP, 50-51
Service and Compliance Administration,
IRS, 176
Service transactions, 84
Shultz, George P., 19n
Simmons, Thomas J., 56, 59
Skubal, Leonard A., 22-24, I71n
Small Business Administration, 99
Smith, Anthony A., 56
Smith, Preston, 128
Snead, Raymond, 120
Social Security, 104, 106
Solomon, Ezra, 191
Speakers' Bureau, OEP, 35, 147, 155-157
Spencer, Patricia, 58n, 187
276
Treasury, Secretary of, 39, 42, 204
Trent, Darrell M., 32-33, 51, 57-58, 70,
148-150, 160
Truppner, William C , 33, 171, 187
Tuition, 81, 84, 110
U
Unemployment, 1-5, 9, 193
Unions, labor, 5, 16. See also Labor,
organized.
United Press International, 153
UNIVAC terminals, 64; See also
Computers
U.S. Army Interagency Communications
Agency, 46, 52, 61
U.S. Army Strategic Communications
Command, 46, 65
U.S. Conference of Mayors, 160
U.S. Postal Service, 63, 65
INDEX
Vietnam War, 1, 3-4
Violations, freeze, 16-17, 38-40, 54, 76,
99, 101, 118-127, 133-135, 166, 200
Volcker, Paul A., 11
Voluntary restraint, 4, 97, 173-174, 200,
203
W
Wage-price Guideposts. See Incomes
Policy; Voluntary Restraint
Wage-price spiral, 5, 98
Wages. See also Teachers' salaries.
adjustment, 12, 131
benefits, 104-107
contracts, 87-88
controls, 6-7, 9-10, 15-17, 74
exemptions, 99
freeze establishment, 17-18, 25-26,
74, 86-87
guidelines, 4, 7, 10, 24
increases, 5-6, 13, 81, 86-88, 104, 115,
128-131
Phase II reporting, 173 (table)
policy, 1, 75, 82, 86-88
Walker, Charls E., 20
Wall Street Journal, 111, 152
Water and sewer rates, 107-109, 115
Weber, Arnold, 12, 19-20, 90, 120, 124,
129, 132, 141, 174n.
Weinberger, Caspar, 121
Welfare, 12, 104, 106
Wholesale Price Index, 135, 191, 192
(table)
Woodcock, Leonard, 164n
World War II, 1-2, 97, 169
Yoshpe, Harry B., x, 15n
U.S. GOVERNMENT PRINTING OFFICE: 1972 O
474-893
277
@FedFRASER