Seize the inflation tiger

Thanks to such happy factors as a decline in grocery store and gasoline prices, the Reagan administration and, most important, the American people at last have some firm economic news to cheer about. Although registering a jump in May, the overall US inflation rate as measured by the Consumer Price Index is now running at an 8.4 percent annual rate. For the 12-month period of May 1980 to May 1981 the rate was 9.8 percent. Looked at either way, these statistics represent the first time since 1979 that inflation has been below double-digit rates of 10 percent or more.

While some analysts would agree with the contention of administration economist Murray Weidenbaum that "double-digit inflation as a phenomenon is behind us," others would add a more cautionary note -- and for sound historical reasons. It is precisely because of longer-range concerns that the administration, while properly appreciative of the current dip, needs to use this period of modest decline in the rise of prices to take those firm steps necessary to ensure that the rate does not once again crash the double-digit level.

The longer-term historical problem remains what economists call the "underlying" rate of inflation, which is now running at around 9 to 10 percent. This bedrock rate is directly affected by labor and management costs. Yet, in scuttling the little-lamented Council on Wage and Price Stability left over from the Carter administration, the Reagan team has not sought to introduce any substitute "incomes policy." The administration has even gone so far as ruling out the use of jawboning as a tool in seeking to hold down excessive wage or price demands.

This lack of an even rudimental incomes policy is worrisome, given the administration's almost total reliance on monetary and fiscal measures in seeking to revitalize the giant United States economy. It could be a risky gamble, what with a number of important contract negotiations coming up later this year and especially in 1982 and 1983. The US will shortly face contract demands from 600,000 postal employees, followed by negotiations in private industry during the remainder of the year. In 1982 contracts involving some 4 million to 5 million workers will have to be negotiated.

The extent of sudden and, in some cases, high gasoline and fuel price hikes shortly after decontrol was announced earlier this year shows what can happen in the absence of a clear White House policy on wages and prices. And while most observers would give the administration high marks for its handling of this week's successful settlement with the air traffic controllers' union, it should not be forgotten that the government in effect agreed to a wage package increase of roughly 11.4 percent, when both the specific 6.6 percent annual increase and the estimated 4.8 percent increase which all federal employees will get are taken together.

Mr. Reagan would also perhaps be well served during this period of somewhat lower fuel prices and ample supplies to remind Americans once again of the need for continuing energy conservation. The American people have made heroic and successful efforts in cutting back their use of oil and moving toward alternative energy sources. There must be no retreat on the energy-conservation front.

Finally, what better time than this to do something at last about revising the CPI itself, which, as many economists have pointed out, tends to overstate the nation's inflation rate? The challenge -- and benefit -- to the administration is obvious. Since many labor agreements are themselves directly linked to the price index, any changes that more accurately reflected the true inflation rate would help to moderate that rate, besides reducing the costs of such federal outlays as social security and pension payments.

With the dreadful "double-digit" inflation at last showing signs of weaknes, the American people and President Reagan have a unique opportunity to take those steps necessary to ensure that inflation is finally brought under control. It would be unconsci onable not to use the opportunity wisely to do just that.