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<text id=93HT1089> <title> 68 Election: Nixon's Grand Design for Recovery </title> <history> TIME--The Weekly Newsmagazine--1968 Election </history> <article> <source>Time Magazine</source> <hdr> August 30, 1971 THE ECONOMY Nixon's Grand Design for Recovery </hdr> <body> For the second time in two months, President Richard Nixon reversed his own and his party's policies with a swiftness and style that is virtually unmatched in modern American politics. What he did in foreign policy with his approach to Peking he outdid in domestic affairs last week. Casting aside "the game plan" he has so long and implacably pursued, the President announced "the most comprehensive New Economic Policy to be undertaken by this nation in four decades." The claim was merited. A show of firm leadership was clearly needed in order to get the U.S. industrial machine running smoothly once more. He indeed laid out the most sweeping changes since the Hundred Days of the New Deal in 1933, when Franklin Roosevelt took the U.S. off the gold standard and began to get the Depression-racked economy into gear. The Nixon program had immediate and dramatic impact at home: on the first day the Dow-Jones average took a record jump on the New York Stock Exchange. But abroad there was consternation. Nixon's measures threatened a serious reversal of the postwar trend toward freer trade. They also ripped the fraying international monetary agreements that have made expanded trade possible. Canada and Japan, America's two largest trading partners, sent anxious emissaries to plead for explanations. Declining Confidence The Tokyo exchange led other overseas markets into a disastrous slide. Foreign exchange markets shut down, helpless in the currency confusion. Europe's finance ministers interrupted their vacations and rushed to Brussels to try to patch up the international monetary order. Only three years ago, U.S. Treasury Secretary John Connally had stoutly told a Munich bankers' convention that the dollar would not be devalued. Now it almost certainly will be. Many factors coalesced to force the swift move. Pollster- Analyst Albert Sindlinger found early in August that the consumer confidence index had fallen to 55%--lower, he said, than during the 1957 recession. Only 27% of those he interviewed wanted to see Nixon re-elected. Secretary of Commerce Maurice Stans warned that this year the U.S. may be running a trade deficit for the first time since 1893. House Ways and Means Chairman Wilbur Mills was getting ready to hold hearings on his own proposals for the economy. The final blow was a devastating new attack on the long-weakened dollar in the world's money markets. Nixon imposed direct controls on prices and wages for the first time since the Korean War. Confronted with a situation of inflation-cum-unemployment in which the old textbook remedies were no longer working, he seemed to be committing the Federal Government to an intimate role in major pay and pricing decisions by U.S. business for some time to come. The changes were all the more remarkable for having been agreed to in the course of one short weekend at Camp David. Politically, it was a particularly satisfying coup for the Republicans, as the President's measures were in several cases neatly lifted from the proposals of his Democratic critics. Not only did he take the Democrats' advice, but he also used as his authority for a key order legislation that the Democrats had forced upon him. And the stakes were high. His trip to China is almost certain to bring him political rewards, but come Election Day in 1972, mending the nation's pocketbook could pay off at the polls as Peking never would. The President's Package The program the President has ordered, or asked Congress for, separates into eight parts: -- The U.S. will no longer convert foreign-held dollars into gold; temporarily, at least, the dollar will no longer be the foundation of international monetary dealings, as it has been since 1944. -- With minor exceptions, all prices, wages, rents and dividends are frozen at present levels for 90 days. -- A Cabinet-level Cost of Living Council, headed by Treasury Secretary John Connally, will preside over the freeze. -- Government spending will be reduced by $4.7 billion. Federal payrolls will be cut 5%; foreign aid will be pared by 10%; and the effective dates of Nixon Administration programs for revenue sharing and welfare reform will be pushed back. -- The 7% excise tax on automobiles will be repealed retroactive to Aug. 15; that means an average saving of $200 per car, which should be passed along to the buyer. -- Industry will get a 10% tax credit on new investment for one year; the credit will thereafter become 5%. -- A $50 increase in the federal personal income tax exemption will take effect at the beginning of 1972 instead of a year later; this should release an extra $2 billion to consumers next year. -- Most imports will be subjected to a 10% surcharge, which in most cases will make U.S. goods more competitive in the domestic market with those from overseas. Nixon's proposals were designed 1) to stimulate the domestic economy by encouraging industrial investment and consumer spending and making imported goods more expensive, and 2) to blunt the mounting attack on the wavering dollar. Said the President: "Every action I have taken tonight is designed to nurture and stimulate [the] competitive spirit, to help us snap out of the self-doubt, the self-disparagement that saps our energy and erodes our confidence in ourselves." Once more, Nixon was handling a crisis, and he seemed to be enjoying it all hugely. Observes TIME Washington Bureau Chief Hugh Sidey: "Nixon clings to what is familiar until the last moment. Then, when the evidence overwhelms him or something happens in his gut, he decides to act, and nothing stands very long in his way. He abandons his philosophy, his promises, his speeches, his friends, his counselors. He marches out of one life into a new world without any apologies or glancing back." Basic Ingredients What prompted the turnabout? Earlier in the year, Nixon ruled out a tax cut as a means of restarting the economy. Over objections from his Council of Economic Advisers, headed by Paul McCracken, Nixon took the advice of George Shultz, chief of the Office of Management and Budget. Shultz thought that large doses of money from the Federal Reserve, presided over by Nixon's old economic mentor Arthur Burns, would be enough to get things moving. Besides, a tax cut would require a trek up to Capitol Hill, a humiliating concession that all was not well. The Fed put more money into the economy, but Burns himself knew that it could do so only temporarily without having an inflationary effect. He went to see shrewd, conservative Wilbur Mills, whose word on economic matters is virtually law in the House. Mills agreed to promote an investment-credit bill, should one be needed. Burns also opened communications with John Connally, the Texas Democrat whom Nixon had just made Secretary of the Treasury. But Shultz still had Nixon's ear. With Nixon's express approval, he proclaimed in April that no changes were contemplated in the Administration's approach. "Steady as she goes" was the watchword, said Shultz. At first, Connally went along with the Shultz conclusions; then he started boning up on reports dealing with the nation's economic miseries. Urged on by two deputies--Paul Volcker, an expert in international monetary affairs, and Murray Weidenbaum, a specialist in the domestic economy--Connally soon found himself studying a package of proposals that contained the basic ingredients of the New Economic Policy. Early in July, Connally asked his staff for weekly memos on anything that was on their minds. "I wanted their opinions on where we are," he recalls, "on the President, the Congress, the economy, what should be done, anything." The recommendations he got included wage and price guidelines, freezes, tax cuts. A month ago, Weidenbaum began working out the details of a wage-price freeze; at the same time Volcker stepped up his study of the specifics of cutting the dollar loose from gold. More planning followed, though few of those doing the staff work were told that what they were handling was anything more than a contingency plan. Indeed, a contingency plan was all it was until the last minute, when the President was persuaded that he should act. On short notice, Nixon summoned his key economic advisers to a climactic weekend gathering at Camp David, his Catoctin Mountain retreat. Burns and McCracken were there; so were Shultz and his deputy, Caspar Weinberger, and the two Teutons who guard Nixon's gates, H.R. Haldeman and John Ehrlichman. Peter Peterson, a presidential aide for international economic affairs, joined the sessions. Volcker and Speechwriter Bill Safire sneaked across Washington to the Anacostia Naval Air Station, where they boarded a helicopter for Camp David. John Connally, who had no way of knowing that the pressure on the dollar would propel him into prominence so soon, had just gone to his Texas ranch for a vacation. He jetted hastily back, and when the first meeting began Friday afternoon, he sat at Nixon's right. Remembered Weekend "It was tough," Connally, says. "A damn tough re-evaluation and re-analysis." But, says another participant, "We all knew there had to be change." Nixon made it plain from the beginning that the time had come to try a new strategy. When it was all over, when the draft of his Sunday television speech was finished, he gave each man a Camp David jacket, a blue windbreaker that bears the presidential seal. It was, said Nixon, "a weekend that would long be remembered." Next day, speaking to a group of second-echelon Administration officials, Nixon was quick to pay tribute to Connally's forcefulness and expertise. "This kind of program doesn't come off the top of a President's head," he said. "It was developed by a great team quarterbacked by Secretary Connally. I was more like the coach. I learned as much from the quarterback as he learned from me." Two days after the President's television broadcast, vacationing congressional leaders, hastily rounded up and flown to Washington in five planes that had been dispatched by Nixon, filed into the White House for a briefing. Nixon nodded in Mills' direction. "We can all take credit for this program," Nixon said. "Wilbur, these are some of your ideas." Mills smiled wanly. The moment of glory was Nixon's, but Mills will have plenty to say about those parts of the program that require congressional consent. Evangelical Fervor At the briefing, Burns said of Nixon's proposals: "This has electrified the nation." It had obviously electrified Nixon too. Before settling into San Clemente for a rest, he spent the rest of the week barnstorming the U.S. with the fervor of a newly sawdusted evangelist. He had the Knights of Columbus standing on their chairs to applaud him in New York. In Springfield, Ill., Nixon invoked "Lincoln's legacy." America, said the President, needs sacrifice and competition: "We can at this point in our history nobly save, or meanly lose, man's last best hope." Nixon capped his week with a gesture of reconciliation toward the nation most aggrieved by his recent acts. He revealed that he will meet Emperor Hirohito in Anchorage, Alaska, on Sept. 26--the first U.S. visit of a Japanese emperor. While the President was trumpeting his rhetorical ruffles and flourishes, his dramatic new plan left many Americans confused about just how it will affect them. The confusion began with the Government itself. At first the word was that state and local government employees who had pay raises in the works would be allowed to get them during the freeze; that decision was reversed. Most embarrassing to the Administration, the Pentagon announced that an Oct. 1 pay boost would go through despite the freeze; John Connally ruled that out too--vehemently. The task of trying to interpret the wage-price freeze fell to the little-known Office of Emergency Preparedness. The OEP aims to answer all the questions raised by the freeze. But no structure is contemplated that would be remotely similar to that of the Office of Price Administration, which at its peak during World War II included 63,000 paid and over 200,000 volunteer employees. In 1942, one of those OPA employees was a young lawyer named Richard Nixon. He stayed just long enough to build an abiding dislike for the ponderous bureaucratic mechanism. So it was with some feeling that Nixon said in his television address: "While the wage-price freeze will be backed by Government sanctions, if necessary, it will not be accompanied by the establishment of a huge price-control bureaucracy. I am relying on the voluntary cooperation of all Americans." He is not likely to get it from all Americans. The first strident objections came from labor leaders. The Government's rule is that no wage increase scheduled to take effect during the freeze period may be paid, even if it has already been agreed to in a contract. United Auto Workers President Leonard Woodcock noted that two of his contracts--with Caterpillar and John Deere--call for raises during the three-month freeze. He threatened to sue, and added: "If this Administration thinks that just by issuing an edict they can tear up contracts, they are saying they want war. If they want war, they can have war." Another loud demurrer came from A.F.L.-C.I.O. President George Meany. Shultz and Labor Secretary James Hodgson explained the Nixon program to the 35-member A.F.L.-C.I.O. executive council, but they might as well have saved their breath. Meany called the wage freeze "patently discriminatory" against labor. Hodgson insisted that the rank-and-file union man would back the Nixon plan and accused Meany of being "out of step" with the average working man. That struck a raw nerve, for the aged Meany, 77, feels his leadership threatened by younger union Turks. He sneered: "I don't pay too much attention to the Secretary. If you have a problem with the landlord, you don't discuss it with the janitor." Open Defiance The Nixon Administration pleaded with labor leaders to make a voluntary end to existing strikes in order to help the economy pick up at the maximum possible speed. The most devastating strike under way is the West Coast dock stoppage, now eight weeks old, led by Harry Bridges. It is likely to continue. Bridges wired Nixon that the freeze "favors the rich," and he added: "We are with you in your desire to stop inflation in our country, but it is wrong to pick on the workers, who suffer first and the most from inflation." Other complaints came in from Ralph Nader, who told a congressional committee that he suspected General Motors had been given advance notice of the price freeze, possibly during a recent meeting between Connally and G.M. President James Roche. (G.M. had raised prices on its 1972 models before the freeze went into effect, but agreed to rescind the increases.) In some political quarters there was open defiance: Democrat Preston Smith, John Connally's successor as Governor of Texas, announced that he had ordered state officials to proceed with scheduled 6.8% pay raises for teachers and other state government workers. There are problems with teacher contracts elsewhere. Most of them take effect at the start of the school year. Nixon took Smith's defiance calmly. "I think Governor Connally can take care of him," Nixon said. The Justice Department intends to ask for an injunction against Smith this week. Connally may have a somewhat more difficult time taking care of congressional objectors to the President's New Economic Policy. Nixon held the Hill leaders' feet to the fire at their briefing early last week. "The basis of this program is legislation," he said. "If you don't hurry, it will hurt. We've got to do these things and we've got to do them now. Now." Democrats hastened to spell out their objections. Wages are frozen, but not interest rates; strikes are discouraged, but profits are free to rise; the Administration's chief social welfare innovation, the family assistance program, carrying a guaranteed minimum income, has been deferred for a year as part of the price of economic stability. Said a Muskie aide: "You create enough money for millionaires to buy Cadillacs, and you create jobs for chauffeurs." Senator Muskie was more guarded, but he made approximately the same point. Said Muskie: "I don't believe that the best way or the fairest way to stimulate the economy is a series of large tax breaks for industry which far exceed their ability to expand, and which will depend on benefits trickling down to the consumer." Oklahoma's Senator Fred Harris described Nixon's program as "an economic fan dance which attempts to hide the pro-business bias of his proposals." TIME correspondent Simons Fentress summed up: "The Democrats have been embarrassed by this President who opened their closet and stole their shoes. They are by no means boxed in, however, and they are opening up alternate lines of attack." Post-Freeze Problems Neither the narrower political consequences nor the broader effectiveness of the New Economic Policy will be known for some time. Nixon's store of national good will is not overwhelming, but it should be enough to persuade most Americans to go along for the initial 90-day period, given the near universal dissatisfaction with the way the economy stood. More important, though, is what happens after the freeze expires--and that is a problem that the Administration is already worrying about. The immediate post-freeze period is already known around the White House as "Phase 2." It is of vital importance. For if controls are suddenly lifted, without any transitional mechanism or any ongoing wage-price review board to hold increases firmly within acceptable limits, there would be no point to the freeze in the first place. All the gains would evaporate at once; prices would rise sharply to make up for the hold-down, and wages would jump to keep pace. The federal official charged with special responsibility for Phase 2 is Herbert Stein of the Council of Economic Advisers, an outspoken economist who was a vigorous opponent of wage-price regulation only a few months ago. Elusive Mood When the freeze expires in mid-November, how will anyone know whether or not it has been a success? Phase 2 will be the real test, but at the end of the first 90 days there will be several useful points at which to apply the economic litmus. Part of the test will be psychological: there will have to be a popular consensus that the program is working, some feeling that things look better. Even before then, there will have to have been serious negotiations between labor, management and Government to get Phase 2 under way. If Phase 1 has been a success, wages, of course, will be steady; so should the cost of living, particularly since automobile prices will remain level or even decrease. If there is a resurgence in consumer confidence, the high rate of savings should have come down and retail sales should have picked up well before the freeze expires. If labor costs are stable, as they should be, even a modest increase in productivity will mean higher profits for manufacturers. That, in turn, means a net gain in real income across the U.S. For whom? If prices are frozen beyond the end of Phase 1 and wages are allowed to rise moderately--say, by 4%--that would distribute the net gain fairly widely. At best, there will be a good start toward building a new international monetary structure, and the U.S. will avoid touching off a protectionist trade war. Administration experts have already started speculating about the shape of Phase 2. There will be neither a return to the pre-freeze status quo nor permanent imposition of a thoroughgoing control system. Instead, the President is likely to pick one or more intermediate devices within the first 60 days of the freeze period, thus leaving the final 30 days for setting up whatever administrative machinery is required. He will probably make use of wage-price review boards for various industries, selective controls for others, economic sanctions through withholding or awarding Government buying contracts, and just plain jawboning. Quite possibly the freeze could be extended for a time beyond the end of the 90-day period, then lifted industry by industry as continuing arrangements are worked out. If, in the end, the New Economic Policy is a failure, then John Connally's brightening star will surely fade, Shultz could re-emerge with new political clout, and Spiro Agnew--who was consulted in the New Economic Policy deliberations, as he never was about the overtures to Peking--would find himself no longer threatened by Connally for the vice-presidential nomination in 1972. In that case, however, even the Republican presidential nomination would be worth very little, for Nixon's best chance to get the U.S. economy under control would have failed. In the dismal and difficult science of economics, one of the most important factors is the elusive matter of the public mood. Already there is an indication that Nixon's program is what Americans think they want. Pollster Sindlinger's consumer confidence index had climbed back to 64% by the middle of last week. Now 40% of Sindlinger's sample want Nixon re-elected. The White House men are guardedly optimistic. Says one: "Economics isn't chemistry. You can take any theory you've got. If people think it's going to work, it will work. If they don't, it won't." If it does work, Nixon's program will pay off politically for him, and economically for most Americans. Putting on the Freeze The task of making the wage-price freeze work--deciding who and what is covered by it, improvising compromises, enforcing the rule--will be one of the most complex of bureaucratic exercises. Who's Who in running the show for the Administration: TREASURY SECRETARY JOHN CONNALLY, as head of the Cost of Living Council, has overall authority to wheedle, cajole, crack heads and otherwise employ his considerable political skills in imposing the freeze. He has moved briskly. When the Pentagon announced that certain servicemen's pay raises would go through on schedule, Connally called Deputy Defense Secretary David Packard and said: "You rescind those raises or I will." After Texas Governor Preston Smith declared that his state employees would received their regular pay increases, Connally signed an order directing the Attorney General to see that Texas complied with the freeze. A thoroughgoing practical activist with a lawyer's talent for bending the System to his advantage, Connally, 54, has become one of the strong men of the Nixon Cabinet since he joined it last February. Although a Democrat and former L.B.J. man, Texan Connally is increasingly mentioned as the man who may replace Spiro Agnew on the G.O.P. ticket next year. ARNOLD WEBER, executive director of the Cost of Living Council, is acting as policy and planning director, overseeing the council's staff of about 40. A wry, 41-year-old labor economist, Weber is a protege of George Shultz, the Administration's director of the Office of Management and Budget; he worked for Shultz as Assistant Secretary of Labor for Manpower. Weber had already packed his family off and was preparing to return to his University of Chicago teaching post when he was tapped for the council job. "We froze my leave of absence," Weber says. GEORGE LINCOLN, 64, a retired Army brigadier general, will disseminate the policy guidelines framed by the Cost of Living Council. He will also monitor the questions and complaints that flow in, administer the information and investigative network, which now includes the Internal Revenue Service and the Department of Agriculture as well as the Office of Emergency Preparedness. White-haired and scholarly, Lincoln spent 15 years as a professor and head of the social sciences department at West Point before becoming director of the OEP in the Nixon Administration's first year. His work at OEP, notably in the wake of Hurricane Camille two years ago, gained him a reputation as an able administrator. But as director of the President's Oil Policy Committee, he has been criticized by some as too sympathetic to the oil industry. LOUIS PATRICK GRAY III, 55, Assistant Attorney General in charge of the Civil Division, will be responsible for enforcing the council's policies. Under Gray, Justice Department attorneys, one assigned to each of the OEP's ten regional offices, will ask for the injunctions and fines required by the law and Nixon's executive order. They will concentrate on cases involving substantial violations. An Annapolis graduate and onetime submarine commander, Gray is preeminently a Nixon man, an old friend who has known the President since they met at a Washington party in 1947. Since he left the Navy in 1960, he has alternated between practicing law in New London, Conn., and working for Nixon. Skilled at negotiation, he is so self-confident that this week he is going ahead with a planned vacation in Connecticut, where he will give his house a coat of price-frozen paint. HERBERT STEIN, 55, an owlish and acerb economic theoretician, is a member of the President's Council of Economic Advisers. He is now responsible for planning Phase 2 of the Nixon strategy: what comes after the 90-day freeze. Known for an intellectual agility that some dismiss as sophistry, he will need to be nimble in the task; for several years he has been a determined spokesman against the sort of policy Nixon finally adopted. Before joining the Council of Economic Advisers, Stein was chief economist for the Committee for Economic Development, an organization of business leaders. He is the author of "The Fiscal Revolution in America," an elegantly written study that reflects among other things a distaste for economists who confuse rhetoric with action. In his present job he will need both. The Law Nixon Used When he announced the wage-price freeze, President Nixon based his action on the Economic Stabilization Act of 1970. The law gives stand-by powers to the President to "issue such orders as he may deem appropriate to stabilize prices, rents, wages and salaries." The irony is that Nixon vigorously opposed the bill when it was debated in Congress and said he would not use it. It was passed as part of the continuing cat-and-mouse game between Congress and the President. In August 1970 inflation was climbing and job rolls were shrinking. Anxious about the economy, Wright Patman, the aged and wily chairman of the House Banking and Currency Committee, decided to put the President on the spot. He maneuvered to attach the Economic Stabilization Act with its wage and price controls as an amendment to a bill extending the life of the Defense Production Act, which was about to expire. The provision was approved by both Democrat-controlled houses of Congress. Nixon was forced to sign the bill because it provides for the procurement of basic resources needed for national defense. But he was quick to express his disapproval of the move. If Congress believes that controls are needed, he said, it should "face up to its own responsibilities and make such controls mandatory." Congress preferred to let Nixon take the responsibility. In March it voted to extend the Economic Stabilization Act, and Nixon once more protested, although this time the Administration softened its position somewhat; it was growing less confident about its own economic policies. Treasury Secretary Connally told the Patman committee that the White House would "accept" the bill rather than fight it. And last week Nixon enthusiastically assumed the powers that he had once brusquely turned down. Taking Out The Chill Ordinarily, the 325-man Office of Emergency Preparedness deals with damage done by such natural disasters as hurricanes and earthquakes. Last week OEP suddenly found itself handling the results of a man-made storm for which it was decidedly unprepared. Without warning, President Nixon plucked the tiny agency out of the anonymity of the "U.S. Government Organization Manual" to supervise the wage-price freeze. The OEP director, Brigadier General George Lincoln, was on his ranch near Denver when he got the White House call to action. He phoned his eight regional directors and sent them scurrying. "Get a bunch of borrowed people," he advised. "We don't want to pay them." The morning after the President's announcement, Lincoln's men set up improvised regional offices in ten major cities. In the Midwest, the branch moved from Battle Creek, Mich., to Chicago. In Georgia, OEP-ers transferred from Thomasville to Atlanta, where they found room in an insurance office sandwiched between two topless restaurants, one of them called The Booby Hatch. They were scarcely settled before the telephones started ringing. Nixon's mandate was a tall order for one of the smallest agencies in the federal establishment. Set up in 1961, OEP's primary duty is preparing for civilian defense in case of nuclear attack. It has been given the additional jobs of stockpiling strategic materials and coordinating disaster relief. Some 35 economists specializing in stabilization under emergency conditions serve on OEP's staff, and their training was recognized as an invaluable asset for the current task. So, too, was the agency's reputation for moving quickly into a disaster area and getting out just as fast when a job was done. That sort of experience doubtless appealed to President Nixon, who at the moment has little intention of setting up a bureaucracy on the scale of the OPA, or even the Korean War wage-price control boards. For all its practice in emergencies, though, OEP quickly showed the strain of its first days on the new job. Manpower was urgently needed, and was borrowed haphazardly from other Government agencies. Highly paid federal economists, HUD officials and even agriculture experts found themselves answering phones in regional offices. Nevertheless, OEP could not cope with the flood of inquiries. In the Washington headquarters a block from the White House, confusion was compounded as cameramen tangled lines with telephone installers. Even when they had time to answer the phones, OEP staffers often could not answer the questions. They had to wait for the Cost of Living Council to provide guidelines for a wide variety of puzzlers. Chrysler Corp., for example, asked if the import surcharge applied to tax-free automobiles that were supplied to the diplomatic community. (Answer: maybe.) Many people wanted to know how to distinguish between raw foods, which are not subject to price control, and processed foods, which are. In some cases, that was easy to answer. Whatever is totally unprocessed--eggs, oranges, fresh fish--escapes control. Most meats are processed and therefore subject to the freeze. Still, the status of many foods remained in doubt. Does shelling almonds amount to processing? one caller wanted to know. Again the answer was maybe. Government Economist Sidney L. Jones offered a tongue-in-cheek rule of thumb for baffled consumers: "Anything that snaps, crunches, bites or quivers when you eat it is not frozen." Uncertain how to handle reports of freeze violations, OEP simply recorded them and filed them away. Later, the Justice Department will decide whether to prosecute. The first complaint to Washington came from an irate consumer of cigarettes that had cost him only $2.60 the week before. Next came a call from a boarder who said that his landlord told him either to pay more rent or eat one less meal a day. By and large, the complaints were low-keyed and did not involve extravagant sums of money. When they could not provide answers, OEP staffers tried at least to be reassuring. After all, everyone was in the same boat. In Chicago, Michael Sanders, an attorney in the Agriculture Department, commiserated with a man who complained about not getting his raise. "I know," said Sanders, "I had an increase coming. This freeze has thrown a monkey wrench into the whole thing." Helen Balch, an appraiser on loan from HUD, discussed with a caller whether to put off a trip to Europe. Eventually, guidelines began to take shape. Prices and wages are frozen at their highest level during the 30 days ending Aug. 14; imported goods are excepted. Included are most wholesale and retail goods; rents; bus, air and train fares; doctor, dentist and lawyer fees; telephone, electricity and gas costs; commission and insurance rates. Exempt from control are previously announced school tuition rates, even though they have not yet become effective, and state and local taxes. No raises or cost of living increases will be allowed except in cases of promotions to jobs with more responsibility. Thus those railroad workers of the United Transportation Union who had not yet ratified an agreement reached on their behalf on Aug. 2 will not get their raises until Nov. 12 at the earliest. In California, employees of General Telephone Co. had reached a tentative agreement giving them about the same pay raise granted to employees of the Bell System. The Bell workers ratified their agreements the day before the freeze took effect; the General Telephone employees, on the other hand, delayed. "So General workers doing the same work that Bell workers are doing will get lower wage rates during the freeze," noted a communications union spokesman. "We're sorry, but that's it." At the end of the week OEP remained swamped by far more work than it could handle. Other agencies were recruited to come to the rescue. In some 200 cities, Taxpayer Assistance offices of the Internal Revenue Service began to take over some of the inquiries that were flooding into OEP. The Agriculture Department's Stabilization and Conservation Service started fielding questions in rural areas. All together, some 1,500 federal employees are now feeding out information and relaying it back to Washington in a unique operation of improvisation. </body> </article> </text>