The Nation: Nixon’s Freeze and the Mood of labor

AT the end of an elegant White House dinner held on Labor Day last year, the President of the United States rose to offer a toast. Lifting his champagne glass in the direction of the rumpled patriarch seated to his right, Richard Nixon paid tribute to “a distinguished labor statesman, a man who stands for the best in free labor and for the best of America.” Flushed with presidential praise, George Meany, leader of the giant, 13.5 million-member A.F.L.-C.I.O., responded with words of glowing admiration for Nixon as a leader “dedicated to the same ideal and the same end” as U.S. labor.

As they prepare to celebrate Labor Day, 1971, Meany and the nation’s other union chiefs are in a far different mood. The man who wined and dined them so graciously that September evening had suddenly, without consulting any of them, imposed the most stringent economic controls in U.S. peacetime history. Most labor leaders are convinced that his rules are patently unfair to their vast constituency—and far too generous to the big businessmen with whom they must bargain for the nation’s wages.

In a cause that depends above all on high morale and pull-together cooperation, labor’s disapproval is a serious threat to Nixon’s program. Outright union defiance could prove disastrous. Almost nothing could paralyze economic expansion, which the President is counting on to create new jobs and improve productivity, so quickly as a series of major strikes. More than one Administration official last week recalled apprehensively the blunt words of longtime Mine Workers Boss John L. Lewis, who by angry threats almost alone destroyed the wage freeze that followed World War II. Said Lewis: “You can’t mine coal with bayonets.”

Union leaders were not alone in their feeling that Nixon’s program puts too heavy a burden on the workingman and the poor. John Kenneth Galbraith. even while “wishing him well,” said that the tax and federal-expenditure adjustments added up to “a minor bonanza mostly for the rich.” Robert M. Williams, director of a U.C.L.A. forecasting service, predicted that the rate of unemployment, currently at a painful 5.8%, would fall by only .5% as a result of the program. Senators William Proxmire and Hubert Humphrey, among others, hinted that the new Nixonomics may be due for some design changes when it reaches the Senate.

The Little War

To lead their opposition to the President’s new game plan, labor’s leaders turned naturally to their Grand Old Man. Though he celebrated his 77th birthday the day after the freeze announcement, Meany seemed more than equal to the task. He denounced the plan as a “tax bonanza to American corporations at the expense of American workers” and called the A.F.L.-C.I.O.’s 35-man executive council into session to issue a detailed list of criticisms. Other union executives—notably Leonard Woodcock, whose 1.4 million-member United Auto Workers left the A.F.L.-C.I.O. fold three years ago—flew to Meany’s headquarters in Washington to confer. Labor Secretary James Hodgson, the Administration’s belated emissary, also stopped by to pay his respects. He was one of the few White House men who managed to get the last word in during a slanging match with onetime Journeyman Plumber Meany (see box, page 10). After being labeled a “janitor” by Meany, Hodgson allowed as how “even a janitor can sometimes show a plumber where the leak is.”

The top echelons of the A.F.L.-C.I.O. and the U.S. Government soon began to snipe at each other. At an annual golfing affair thrown in his honor by the retail clerks’ union, Meany groused to some friends at the bar: “You know, until three weeks ago we had George Shultz and James Hodgson coming, and Mr. Shultz even thought the President might stop by. Well, we lost the President and Mr. Shultz, and Mr. Hodgson is probably down in the cellar somewhere.” Meany played the course with three lower-ranking officials. His temper grew still shorter when Hodgson treated Teamster Boss Frank Fitzsimmons and his aides to a special briefing on the freeze at the Labor Department, apparently because their reaction to the Nixon program had seemed favorable. In fact, although the Teamsters hailed it as a “bold measure,” they went on to criticize the same inequities Meany had singled out.

Meany responded to the slights by hustling 135 labor lawyers from across the nation into Washington to consider ways to fight the freeze in court. They concluded that there was almost no way to do so, but the meeting drew crowds of newsmen—and headlines in the little cold war. Afterward, a staffer in the office of Charles Colson, a presidential counsel, put in a telephone call to U.S. Chamber of Commerce Executive Arch Booth. He suggested that the chamber, in the interests of more efficient contract negotiations, call for the retirement of labor leaders over the age of 70. Booth quickly declined, and for good reasons, among them the fact that many of the executives active in the chamber are well beyond that age. The White House announced that any such phone call was entirely “unauthorized,” but the revelation that it had been made provided Septuagenarian Meany with some of his few moments of hilarity during the week. Finally the Administration called a truce, sending out that well-known conciliator Spiro Agnew. Speaking in Florida, the Vice President made a point of lauding Meany as “a patriotic American,” predicting that he would go along with the wage-price freeze.

Out of Step

Much of labor’s bombast had been for rhetorical effect, as well as to set up a bargaining position. Under Meany’s wily guidance, the war of words yielded to a major change in strategy. Although many union leaders, including Meany, originally threatened to fight the 90-day freeze, they soon backed away from that stand. For one thing, a court test of the ban on wage raises negotiated prior to the presidential freeze—the provision that unions dislike most—might well take longer than 90 days. A more embarrassing reason for the retreat was the absence, so far, of any significant clamor against the freeze on the part of rank-and-file union members.

Convinced that the President’s plan deserves at least a fair trial, the vast majority of Americans, including union members, tentatively support the pay freeze (see box, page 12). Their patience augurs well for a smoothly running freeze period and apparently provides Nixon, initially at least, with the broad consensus that he needs. It also indicates that the first intemperate remarks of Meany, Woodcock and other labor leaders—which were gradually toned down—did indeed, as the Administration claimed, put them “out of step” with ordinary union members.

However, union bosses believe that it will not take long for their members to do an about-face and fall in with their stride. “Just wait until the next cost of living raise is scheduled to go in,” says Irving Bluestone, head of U.A.W.’s General Motors Department. “The men are going to realize that they’re not getting money they went out on strike for, and I think all hell’s going to break loose.” Not consulted on the Administration’s planning for the freeze, Meany & Co. are determined to play a major role in shaping the post-freeze rules, which Steelworkers Boss I.W. Abel and others suspect could last for “months or perhaps years to come.” Although Secretary Hodgson made it clear that one purpose of his fence-mending visit to Meany was to assure him that labor will “have a voice in planning what we are going to do in Phase 2,” that was hardly sufficient to placate the A.F.L.-C.I.O. chief. “He said the White House wanted to know what was bothering me,” grumps Meany. “I told him a lot was.”

Meanwhile, with about 15% of the freeze period already passed, the nation continued to discover how it feels to live in a constrained economy. Already well over half a million Americans have called in questions about their personal or business financial problems to federal centers, where harried officials ruled on—or guessedat—the answers as best they could. In Washington, reported Director George A. Lincoln of the Office of Emergency Preparedness, scores of lobbyists began seeking favored treatment for their business clients. In answer to a private query, Los Angeles OEP Supervisor Pat Hogan ruled that a divorcee who had served her former husband with papers demanding an increase in alimony could not collect it during the 90-day term. “It’s a fee—for services not rendered—and it’s frozen,” said Hogan.

Mixed Responses

In Boston, a young couple walked into the OEP boiler room to ask for confirmation that rents could not be raised until at least mid-November. “It’s O.K. then,” said the man happily. “We can get married.” The couple’s budget could not have taken a rent increase. In Seattle, an OEP official admitted to a caller that there was no way to fine a marijuana dealer who had raised prices. Even so, he said, such price increases were clearly an infraction of the rules.

Business continued to have mixed responses to the new policies. Sears, Roebuck, which had already printed 13 million copies of its Christmas catalogue, has had to put a small army to work weeding out the price increases among the 15,000 items listed; the catalogue will have to be reprinted. Dillard Munford, whose Atlanta-based enterprises include a chain of food markets, had the reverse experience. “I think this is a great thing. I’ve had three people doing nothing but marking up prices. Now I can put them to work doing something else.” Pier 1 Imports of Fort Worth, which claims to be the largest import company in the world, sees no change in volume of sales or in customers’ tastes despite the import tax. Says one Pier manager: “Ten percent is such a small amount that we can absorb it.” Though Congress must approve the President’s requested repeal of the 7% excise tax on autos, American Motors began issuing rebates immediately to attract new-car buyers.

The major policy decisions about the freeze came from the office of Treasury Secretary John Connally, chairman of the Cost of Living Council (COLC) and thus the man likely to be remembered as the Czar of the Freeze. Many of the rulings carried enormous significance, at least for the short term. For example, the council stated that landlords could not charge rent increases on apartments that were vacated before the freeze, and that they could not evict tenants who refused to pay a higher rent. That decision had its greatest impact in New York City, where some 1.3 million apartments were in the process of being released from World War II controls. Edward Sulzberger, head of a landlords’ association, complained that its effect was “to put a freeze on a freeze,” but promised that his members would comply.

Raises for Teachers

One increasingly vocal segment of the organized labor movement got substantial relief from Connally’s council. Classroom teachers, who had feared that all. salary increases scheduled for the next school year would be disallowed, were permitted to collect any raise provided for in contracts that became effective before Aug. 15, even though most do not begin working until later. As a result, said National Education Association President Donald E. Morrison, more than 80% of the nation’s 2.1 million teachers can pocket any raise to which they were entitled before the freeze; the funds for many were already provided for in school-district tax rates.

The other major exception to the rules fell in the lap of the U.S. steel industry. On orders from the White House, foreign steel became the only major industrial product that will be subject to both an import quota and an import tax surcharge. Sellers of nearly all other foreign products whose importation is formally restricted, notably oil, will not have to pay the 10% surcharge. When asked to explain the ruling, which amounts to double protection for domestic steel, COLC Executive Director Arnold Weber pointed out that the original White House explanation of the import surcharge did not contain any mention of steel. Weber continued Delphically: “That flower didn’t grow in this field.” Actually, the President may well have tacitly agreed at the time of the recent contract negotiations to provide special protection for U.S. steel firms as part of a plan aimed at preventing a steel strike.

Already, the Nixon plan had made some solid gains. By far the most important was Japan’s decision to float the yen on international currency markets (see BUSINESS). In addition, some banks—including New York’s Chemical Bank and Atlanta’s Trust Company of Georgia—reduced interest rates on consumer loans. Such rates are not governed by the Nixon program, but the Administration has applied strong pressure on bankers to freeze or lower them voluntarily.

Despite such successes, the key to Nix on’s program remains the enthusiasm with which most Americans abide it—especially the working men and women who are expected to toil under its restrictions. The President’s freeze on wages, in effect, is a sacrifice demanded of each of them. After an initial burst of optimism over the President’s speech, laboring Americans—including millions who do not belong to unions—were be ginning to realize that his plan placed limits on their livelihood such as have not been dreamed of for a generation.

Labor leaders were the first group to criticize the program in any numbers, and they spoke in terms that caused many Americans to take a second look at the President’s program. “He takes some money away from Government employees and some more from the poor, then gives it to business,” said Meany.

“It’s Robin Hood in reverse.”

Labor’s Skepticism

What union officials objected to more than anything else was Nixon’s failure to freeze profits along with wages and prices. Unlike employees, they point out, corporations are still free to make as much money as they can. What is more, they contend, business has been given several new ways to make it—by taking advantage of the new 10% investment credit, by using the liberalized depreciation rules announced by Nixon in January, by increasing production as the economy picks up and by not paying previously contracted wage hikes. Although the Administration claims that its rules will stimulate the whole econ omy and raise generally low corporate profits to reasonable levels, union leaders have another viewpoint. Noting that union employees of McDonnell Douglas Corp. were entitled to a 35¢-per-hour increase during the freeze period to offset recent cost of living increases, U.A.W. President Woodcock complained: “Now Mr. Nixon says they can’t pay it. Well, what happens to that 35¢? It goes into the corporate treasury of the company.” Agrees Meany: “It would have been better to put it into escrow or give it to the Little Sisters of the Poor.”

Labor leaders are skeptical about the President’s plan to create new jobs through subsidizing capital investment. In fact, they claim, with industrial production running at a low 73% of capacity, businessmen will be much more likely to take advantage of the program by buying job-eliminating machinery than by adding to their payrolls. Finally, labor is viscerally hostile to any ban on the right to strike, a power that union men have always felt they must claim as their ultimate weapon. Thus far, Nixon has asked for voluntary cooperation, adding that he believes that he has the authority to order strikers back to work.

Feeling of Opportunity

In fact, almost none of the 150,000 workers on strike when the freeze was declared have returned to their jobs. Dock Workers Chief Harry Bridges, whose men have paralyzed West Coast shipping for nine weeks, has pledged that they will not go back to work until a contract has been signed, presumably one with a hefty post-freeze pay raise. Perhaps the major test of union strike intentions will come on Sept. 30, when the coal miners’ contract expires.

As businessmen and their employees assess their immediate future, the differences can seem vast indeed. To a corporate official looking 90 days ahead, the road appears considerably more free of barriers than it did before Aug. 15. He has a virtual guarantee of stable costs—including one of the fastest rising costs of all, labor—until mid-November and perhaps beyond. More important, he can see opportunity ahead—in an invitation to expand his operation and in the expectation of higher sales, both of which gains have already been reflected in the optimism of a rising stock market. G.M. Chairman James Roche, looking into one of U.S. industry’s key crystal balls, last week came up with a prediction little short of shining. G.M., said Roche, believes that the 1972 model-year “could be a record one for the automobile industry, with total motor vehicle sales approaching 12,750,000 units.” That would be a 15% increase oversales in the 1971 model-year.

By contrast, hourly wage earners who look down the same road do not see quite so many satisfying signs. At best, with wages frozen, their buying power will remain stationary if prices also stay fixed—a condition that few union leaders believe will prevail. “When you’ve got a loophole as large as in fruits and vegetables, you have no price controls,” says Sigmund Arywitz, executive director of the Los Angeles County Federation of Labor. “Food, the consumer’s biggest item, has no ceiling.” In addition, they point out, there are no restraints on taxes or the price of credit. Each of these contributes mightily to the cost of living, yet automatic escalators in labor contracts to compensate for hikes in the cost of living index have been specifically denied during the freeze. As labor sees it, the result is much more than temporary “inequity,” as the President described such situations; it is blatant discrimination. “The wage freeze is going to work very well because employers will be only too happy to see it work,” says Woodcock.

“But how are they going to make the price freeze work?”

The business community’s widespread endorsement of the Nixon program should probably not be taken as permanent approval. Commerce Secretary Maurice Stans, who tried to assume just that, quickly learned better. After conferring with a dozen top business leaders last week, Stans reported that they reached a “general conclusion” that the controls will have to be extended beyond 90 days. When newsmen caught up with some of the participants, however, they found General Electric Chairman Fred Borch “skeptical” of such a plan. G.M.’s Roche favored “some kind of wage restraint,” but blanched at the suggestion of a further hold on prices. “Our industry has an excellent record of price restraint,” he said.

To assure labor what he fully believes is its rightful voice in shaping Phase 2 of the Nixon plan when the 90 days have expired, Meany last week engaged in a game of political chess as only a man who has dealt with five Presidents can play it. In a cool-headed assessment of Nixon’s timing, he decided that there was no way to challenge the President on the freeze itself. Thus, his first job was to persuade other labor leaders to begin immediately looking beyond midnight,* Nov. 14. U.A.W.’s Woodcock was among the first to agree. Immediately after meeting with Meany, the man who had accused the Administration of wanting “war” with labor promised that his union would “cooperate in principle” with freeze rules. It soon became clear that Meany’s strategy was to stop the shouting and start the bargaining with the White House.

The Shape of Phase 2

Hodgson’s visit to Meany was a signal that the Administration was also ready to negotiate. “He tried to feel me out,” Meany told TIME Correspondent Mark Sullivan. “I told him we figure Nixon stole $5 billion from our members with this freeze. Now I’m waiting for them to come up with something.” He also hinted to Hodgson that labor might be agreeable to a Phase 2 arrangement in which controls were in the hands of a panel modeled on the National War Labor Board of 1942 to 1945. It was made up of business, labor and “public” representatives. In Nixon’s view, that hint was doubtless Meany’s most constructive act in weeks: the President has avoided the use of controls for as long as he could, and would doubtless like as little as possible to do with them personally. One White House official predicted that “advisory panels” of business and labor leaders would be named within a week.

Whatever the formal mechanism, labor leaders are adamant that Phase 2 must reinstate raises called for in already negotiated contracts, along with the right to bargain for new increases. In return, they will probably have to agree to some kind of “productivity bargaining” in which wage hikes are tied to worker output. Still another possibility is a new labor campaign for increased fringe benefits. It was during the days of World War II that the push for company-paid health and pension plans began. The major issue will be prices, which the Administration may be unwilling to control quite so tightly as wages. But labor leaders reasonably demand that prices be treated the same as wages. In addition, Meany plans to help shape Nixon’s tax measures through his influence in Congress, which is considerable. Solely because of Meany’s fierce anti-Communist sensibilities, Congress had held up for more than a year U.S. dues to the International Labor Organization, which acquired a Soviet representative on its board.

Even if Meany is successful in his demands for Phase 2, the important question remains: Did he misjudge the mood of his constituency in disparaging so quickly the merits of a major presidential effort? The vehemence with which he reacted to the Administration’s suggestion that he had got “out of step” with his members suggests that the old veteran might be worried about having done just that. Labor experts have long predicted that the union movement’s aging rulers are overdue for replacement. Although many expect the challenge to them to come from an increasingly militant left, it might also be mounted by labor’s prospering, middle-class right. Nearly 30% of union cardholders, after all, voted for Nixon in 1968 and might be expected to rise to his defense even against the wishes of Meany.

In a sense, they did. Nearly two weeks after union printing presses started to grind out blistering attacks on the President’s program, a majority of union members questioned around the nation by TIME correspondents seemed to agree with Atlanta Hod Carrier W.C. Herd: “Something had to be done. If this holds prices down, it’s bound to help.” Many expressed no bitterness at the prospect of living on their current wages for 90 days. Says New York Policeman Jim Fitzpatrick, whose union has been negotiating with the city for a new contract in place of the expired one for eight months: “I think most ordinary people know that the few extra dollars they got were just being taken away by price increases.” Striking Gunter David of the Newark Evening News had an unself-centered point of view: “We just happened to get caught in the middle of the situation, but if we hadn’t been on strike I would have said fine to the freeze.”

The little man’s traditional distrust of those with power—whether they are national or even union leaders—was also voiced. “Nixon’s program is unfair, discriminatory and economically idiotic,” says Los Angeles’ Arywitz. “The other day somebody—oh, yes, it was that other idiot, Agnew—said that what’s good for America is good for the worker. Since 95% of all Americans are workers, we take the position that what’s good for the worker is good for America.” Says Earl Shaw, a Berkeley typesetter: “Meany is so far removed from the workingman. Organized labor leaders are too much the Establishment. They are concerned with being friends of the President.”

Nixon in California

Many sensed, however, that Meany had aimed his blunt criticism beyond its immediate mark. Said a Manhattan construction worker: “He’s thinking of the overall problem, which he knows and I don’t.” Moreover, an increasing number repeated labor’s ceaselessly argued point: that the Nixon program places an unfair burden on labor. C.L. Dennis, president of the Brotherhood of Railway, Airline and Steamship Clerks, pointed to perhaps the greatest disparity possible in a period of incomes policy. Says he: “Sure, I’ve got a few shares of stock myself. But it’s wrong as hell to have fortunes made by speculators on the stock market while workingmen’s wages stand frozen.”

While the controversy was building, the man at the very center of it—Richard M. Nixon—had retired from the battle. From the Western White House, near Casa Pacifica, his oceanside home in San Clemente, the President kept in close touch with his economic advisers back in Washington. He scheduled stops in Ohio and Illinois on his return trip, during which he will undoubtedly resume a strong defense of his program. But for the time being, Nixon was content to remain serenely above the fray. He took a daily swim in his pool (a tanker had spilled oil near Nixon’s ocean beach while on a refueling operation) and also went out to dinner at one of his favorite restaurants, El Adobe in San Clemente, where he met the chef and chatted with some customers.

Presidential Strategy

Was Nixon’s display of Olympian unconcern a wise course? To some, it seemed that the President was once again showing an unwillingness to follow through on major decisions. Through his presidency, they argued, Nixon has sounded the trumpet on one program after another—welfare reform, the governmental reorganization of his “New American Revolution,” revenue sharing—and then lost interest in making them work. To engineer a turnaround of the U.S. economy, his critics charge, Nixon must forsake the security of the television screen and reassure doubters in person.

Others believe with some justification that Nixon has chosen his present strategy shrewdly. The original bombshell announcement, they say, was bound to be followed by the harsh chorus of controversy. Better to leave to others the first-aid job of mollifying the unhappy and cajoling the defiant; that is John Connally’s main task, they reason, and the President can later be brought back on stage when all parties are ready to reach a consensus in the fresh light of reason. Clearly, Nixon cannot wait too long before committing the prestige of his office to finding that consensus. Still, his instinct for caution has proved sound before.

The main argument for using it now is the enormousness of the job ahead. What the President and his advisers must achieve before mid-November is the fashioning of an incomes policy—nothing less than a guide to the future distribution of U.S. wealth. In the past, the distribution has usually been left to the forces of the marketplace. But now that they have been politically altered, those forces must be politically governed, and the result will be a change, however slight, in the basic balance of earning power among the U.S. economy’s various sectors.

Toward a Social Compact

Labor leaders contend that such a change has already occurred—for the worse for labor—as a result of the wage-price freeze. They have already presented some convincing evidence in behalf of their claim. What is merely a temporary inequity for 90 days would be an intolerable burden if made permanent, they point out, and that is a possibility to be avoided at all costs. Businessmen as well as labor leaders will undoubtedly be called on to compromise on matters of equity in their negotiations with Connally’s council, which will become increasingly active in weeks ahead. The final shape of Phase 2 is still uncertain. Says Arnold Weber: “What most people don’t understand is that Phase 1 and Phase 2 are connected. What’s going to happen in Phase 2 will become feasible because of what has or has not happened in Phase 1.”

Already U.S. economists have offered alternatives to the broad outlines Nixon has made. Former Budget Director Charles Schultze, now at Brookings Institution, proposed a plan that he believes would provide as much economic stimulation as Nixon’s, with more help to the poor. Schultze would hasten personal tax relief, keep the investment tax incentive for corporations but not liberalized depreciation, maintain the auto excise-tax cut, and inaugurate an aid program to the cities.

As President, Nixon cannot set a new long-term economic course for the nation without the support of the labor movement’s 20 million card carriers. He specifically decided against provoking an all-out fight with Meany, and has privately made clear his desire to begin seeking labor’s counsel quickly. Labor leaders would prove sadly shortsighted if they used grievances of the moment to delay granting it. Along with businessmen, they must share in the job of forming what Presidential Economist Paul McCracken has called a new social compact for the U.S. Meany & Co. now seem willing to cooperate in doing that. If the results are not to their liking, U.S. labor may yet stage a major showdown with the President.

* The official cutoff point of the freeze, as determined last week by COLC. It is 36 hours later than most calculators had expected.