Page 9


BOB ECKHARDT’S QyARTERLY D EPORT To Fight Inflation in the Next Congress In my last Quarterly Report’ I called inflation our common enemy and pointed out some ways in which we were acting, or had acted in the last Congress, to unload wasteful costs. I want here to further identify the major sources of inflation and suggest a more comprehensive program to fight it For the past nine months, basic necessities have risen at an annual rate of 11.6 percent, more than twice the rate of increase for luxuries. The new inflation in basic necessities results from excess costsnot excess demand. Many of these costs are avoidable or controllable. To get at them, they need to be studied on a case-bycase basis. Here are just a few: An item that measures in the cost of every product is energy; and, if energy costs are forced up by cartel-manipulated prices, these costs are avoidable. Another major source of excess costs is interest. To increase interest rates in the way that it is being done today is inflationary, not deflationary. There is much cost which is avoidable in insurance. For instance: health insurance should not carry the cost of hospitalization in instances when outpatient care is adequate and preferable; auto liability insurance should not carry its present heavy overload of attorneys’ fees and adjusters’ costs. There are excessive costs occasioned by monopoly positions. Houston utility users should not have to pay the railroads 40 percent more for hauling a ton of Montana coal than was quoted to our major utility company just a few years ago. 2 A third of our car repair costs should not go for work and parts which are unnecessary and work which is performed because of faulty diagnosis or downright fraud. The list goes on and on: excessive moving costs, oppressive funeral costing practices, over-priced services in buying and selling big and little items of avoidable cost, added together, afford the major impetus for our present inflation. Let us ask first What is wrong about our society that these avoidable costs can be loaded on the consumer?and second: Is there anything we can do about it by any government action? On the first point There is certainly something wrong when our economic society operates on The good old rule . . . , the simple plan, That they should take, who have the power, And they should keep who can. Let me show you graphically what has happened to one-half of the consumer’s dollar from 1960 to 1977. About half of it has been spent for the four items: food costs, clothing costs, automobile costs, and utility costs. Here is what has happened to half of the dollar: 1960-1961 1977 Thus, the scramble for the consumer dollar is going to the strong. Much of the cost associated with your automobile and with your gas and electric bill has to do with the price of oil and gas. Inflated Price of Oil and Gas Let us look at how the prices of oil and gas have gone up in the last decade: Year Average Domestic Crude Oil Prices at the Wellbead \(Actual Dollars Average Wellhead Price of Natural Gas Texas Sales \(Cents per McD 4 1968 2.94 11.1 1969 3.09 11.2 1970 3.18 12.1 1971 3.39 14.4 1972 3.39 13.9 1973 3.89 19.5 1974 6.87 34.7 1975 7.67 62.8 1976 8.18 80.0 1977 8.57 101.2′ 1978 First Half 8.83 110.3′ * This data is prepared on a fiscal year basis. The price of oil directly affects the price of gasoline which is, of course, a major part of the cost of operating an automobile. The cost of gas directly affects the cost of electricity in Texds, since gas is currently the principal source of energy from which our THE TEXAS OBSERVER