University of Tennessee Knoxville - Volunteer Yearbook (Knoxville, TN)

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Inflation becomes one of nation's top economic problems Spiraling inflation was one of the nation's chief economic problems during the school year At the beginning of his term in office, President Fordipromised to hold down federal spending and called double-digit inflation Public Enemy Number One . After the consumer price index rose by 13h: in August alone la compound annual rate of 168M, govern- ment officials felt that immediate action was necessary. President Ford held a series of meet- ings with various economic and business leaders which ended with a two-day National Conference on Inflation. Knox- ville's Mayor Kyle Testerman attended the conference, and he presented the President with a survey in which Knox- ville area citizens blamed the government and union wage increases for the infla- tion problem. The citizens surveyed felt that decreased government spending in such areas as foreign aid would be the best solution. Several inflation-fighting alternatives were discussed by economic experts at the conference, but no agree- ment was reached as to the best solu- tion. In October, President Ford presented his own inflation-fighting measures. In a speech to Congress. Ford said that inflation could destroy the country as surely as any wartime enemy . His plan for stopping inflation was centered around a 506 surcharge or additional income tax which would be imposed on middle and high income taxpayers and corporations. Wearing a red and white WIN lWhip Inflation Nowl button, Ford stated that his plans would meaningfully reduce inflation by early 1975. Reaction to Ford's proposals, especially to the 570 surcharge. was not enthusiastic: both Republican and Democratic Congressional leaders criticized the surcharge as being too hard on middle income taxpayers. After the November elections which gave the Democratic party a large major- ity in both houses of Congress, Ford's inflation-.fighting measures met with even more opposition. Against his advice Congress passed a veteran's aid bill which would give veterans a 2370 increase in benefits: Ford vetoed the bill and stated that the nation would have to reduce federal spending if weare to reduce the inflation spiral . By January, however. inflation ap- peared to be slowing down on its own: 28 A Issues and Events the rise in the consumer price inde for December was only Th3, an annual rate of 90A: as compared to a 12.270 rate for 1974 as a whole. Price increases became less frequent, largely because of overstocked inventories and a decrease in consumer spending. Most government officials began to regard recession land not inflationl as the chief economic problem. The decreased emphasis on inflation was evident in President Ford's State of the Union address to Congress in January. He appeared to be willing to risk further inflation in trying to overcome the problem of recession. Ford's new eco- nomic proposals included a tax rebate. an energy tax. and a permanent tax cut. The most controversial of his suggestions was the energy tax: by proposing large in- creases in the price of oil, Ford was risking further inflation because the prices of goods transported by oil or using oil in production would also rise. Many critics of Ford's plan felt that any tax rebates would be wiped out by the huge in- creases in prices resulting from the energytax. Because of the Democratic majorities in both houses of Congress, it appeared likely that most of Ford's proposals would eventually be modified. Democratic leaders seemed to favor increased deficits in the federal budget and tax rebates over any inflationary increases in fuel prices. While the President and Congress attempted to work out a compromise, it appeared that inflation was becoming less of a threat to the economy than recession. University of Tennessee students were affected by inflation both on and off campus. University Residence Halls raised fees by 6Tb and blamed 3 20h: rise in coal costs as the chief cause for the in- crease. University Food Services, which are seIf-supporting, were faced with large price increases in food, paper products, and utility costs. Charges to students for the meal plan were up 8W0, but this rate was set some eight months before the school year started and before the in- flation rate peaked. The University book store reported that its costs were up 50A: on supplies and 7th; on textbooks, but they held down prices anyway. It was expected that prices would eventually go up in future quarters. RIGHT: President Ford wears his WlN button. BELOW: Students experience inflation buying books for the year.

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27 Issues and Events

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