Inflation leaves next US president little room for economic razzle-dazzle

Americans, perhaps to their surprise, are unlikely to note jarring changes in US economic policy, no matter which man slides into the Oval Office hot seat next January.

During the long campaign, the rhetoric of Jimmy Carter and Ronald Reagan flashed like gleaming swords, as each slashed at the economic proposals espoused by the other.

All this made it sound as though a Reagan victory would propel the United States onto a new economic path, catastrophic or beneficial, depending on one's point of view.

In fact, many experts agree, the wolrd and national situation will compress any president within a rather narrow band of options as far as inflation, unemployment, and the flow of oil are concerned.

"The latitude for new approaches and adventures," said a senior government official, "is limited. The economic constraints are so great that I really can't see either of them moving in radically new directions."

"Also," he said, "neither man will have a substantial enough mandate [from voters] to branch out very far."

High on the list of these constraints is rising inflation -- not only the Consumer Price Index, but even more the underlying inflation rate, fed by higher costs to businessmen of labor, energy, and materials.

This broad measure of inflation, which has moved up from 7 to 9 percent during the Carter years, spells a warning for the future, if inflation is to be controlled.

At the heart of the problem, according to a high-ranking member of President Carter's economic team, is a steady upward push of wages and fringe benefits, as trade unions struggle to keep their workers abreast of inflation.

Another major constraint on presidential initiatives is Congress, which ultimately decides how much of the taxpayer's money will be spent, in what ways, and whether or not taxes will be cut.

"The President proposes, Congress disposes," is an old Washington saying, proved anew each time a chief executive sends a budget up to legislators on Capitol Hill.

Right now, the mood of Congress is conservative, embracing several goals -- higher defense spending, smaller federal deficits, and very few, if any, major new spending initiatives.

So far, so good, where both Reagan and Carter are concerned. Both men support these general goals, though their stress differs.

But Congress (like Carter) is not in a mood to cut deeply into existing social programs. Reagan, too, says he would save from the ax programs of genuine help to poor and elderly Americans, such as social security.

Since many such programs are indexed to inflation, it is hard for many observers to see how Reagan as president could cut personal income taxes steeply , as he proposes, raise defense spending, and still inch the federal budget closer toward balance.

Congress might not endorse Reagan's belief that a major income tax cut would so stimulate business activity that federal revenues would grow, productivity would improve, and inflationary pressures would lessen.

In today's relatively slack economy, says former US Treasury Secretary William E. Simon, a Reagan adviser, there is room to pump up the economy through additional consumer spending, without unleashing more inflation.

The current consensus in Congress, shared by the Carter White House, is to target next year's expected tax cut more toward relief for business to stimulate modernization of plants and equipment, and less toward individuals.

A reasonable compromise between Reagan and Congress would likely bring forth a tax bill not dissimilar to the one Carter is expected to propose, if re-elected.

Finally, US dependence on Arab oil -- roughly 50 percent of all imported crude comes from Arab countries -- will weigh heavily on both energy and foreign policies of the next president.

Neither man can risk a full or partial Arab oil cutoff by adopting policies that appear to be, or are, pro-Israel.

As for Reagan's claim that plenty of US oil remains to be discovered and produced, some leading US oil company executives are skeptical, stressing that drilling activity already is nearing an all-time high and that domestic production continues to shrink.