Rubber Stamping High Prices

President Nixon’s Cost of Living Council (CLC) conducted a one-day hearing last week as a prelude to rubber-stamping over $1 billion of unjustified price increases desired by the profit-glutted auto industry.

The hearing was a charade. In came GM, Ford, Chrysler and AMC, as they did last year, implying that they would have to go on welfare if they didn’t get their price increases. As usual, they blamed the price increases not on their lust for greater profits but on new government, pollution and safety standards.

They also added that they would be back soon before the CLC asking for another round of price-increases for the 1974 cars after the labor negotiations were completed.

Since labor costs were not involved in this first round, it is useful to examine how the CLC saw its obligations to obtain a diversity of viewpoints in open hearings so that it can make the auto companies prove their case.

First, the hearing date of August 28 was announced in the press on August 21, with the first official notice coming on August 22 in the Federal Register. Anyone wanting to testify had just one day to inform the CLC. With such calculatedly short notice it’s not surprising that the only other witness was my associate, Peter Petkas, a young lawyer who has been watching the government’s feeble efforts to control prices.

Except for Petkas no one challenged the auto industry spokesmen who were financial executives heavy with jargon and light with candor. The CLC officials conducting the hearings, led by James W. McLean, the Deputy Director, displayed an invincible combination of indifference, ignorance or subservience to the executives from Detroit.

Kay Ryan, the CLC’s consumer advisor and other staffers were beside themselves with frustration as they watched their superiors go through their languid motions. With numerous TV cameras and press people there trying to get some factual truth to American consumers, McLean and his assistants let the industrialists propagandize without questioning them closely.

The director of the CLC, former Harvard professor John Dunlop, was not there. With his well-known contempt for the press and open democratic procedures, he just wasn’t interested.
As the champion of secrecy, Dunlop has infected the entire CLC with this bureaucratic disease.

No information submitted by the auto companies to the CLC was made public. This practice makes it almost impossible for any citizen to comment on the auto companies price increase requests without exhaustive investigation elsewhere.

Under the Economic Stabilization Act, the CLC has the authority to make this information public. But it has chosen not only to keep secret company pre-notification statements and most quarterly report data, but it has permitted large companies to evade or violate the Hathaway amendment to the price control law. This amendment requires more corporate disclosure of commercial information.

Petkas pointed out the following gaps in the auto companies statements which the CLC seems bent on ignoring:

(1) contrary to the industry’s inference, there are no new pollution controls for the 1974 cars required by the government.

(2) the very minimal 1974 government safety standards have either been met by prior year models or applied to only some types of 1974 vehicles or are much more modest in cost than the companies allege.

(3) judging by prior practice, the CLC has no intention of recognizing quality deterioration, excess profits, or the violation of standards which were given price increases in the past. Yet if these factors along with productivity were considered, the CLC would be giving the companies no price increases at all.

One clue to the CLC’s disinterest in curbing price rises is its woefully small staff. The Council simply does not have accountants, a fraction of the economists,/engineers, and other skills needed to process and challenge the mounds of secret corporate bull.

When the CLC makes its decisions on the auto and other industry price increase requests, it will divulge no reasons and present no evidence. As an anti-consumer Czar, it will only issue “fiats.”

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