Councilor to Canute

"To say that we have no need for a tax increase is becoming easier and easier," declared a White House economist last week. His remark reflects a growing confidence within the Administration that it can avert serious inflation without boosting taxes, that President Johnson's stubborn refusal to do so will prove in coming months to have been not only politically astute, but economically wise as well. If this confidence is borne out -- in the face of mounting war costs and the free-spending mood of Congress -- the nation can thank Gardner Ackley, the self-effacing former University of Michigan economist who devised the President's anti-inflationary strategy last January.

"More Information." Ackley, 50, and his two colleagues on the President's Council of Economic Advisers have, in fact, been in a very lonely minority. Nearly every leading economist -- not excluding Walter Heller, Ackley's brilliant predecessor as council chairman --as well as influential members of the banking and business communities, has backed a tax boost as the surest way to keep the boom in balance. "We have," Ackley insists, "better and more complete information than they do."

Ackley's information indicates that the current inflationary surge may taper off as early as this summer or fall. Higher withholding tax rates will hit most paychecks in May and, together with last January's boost in social security taxes and recent reimposition of telephone and automobile excises, should put a crimp in consumer demand. Bank credit has been slowing, and industry's heavy investment in capital growth over recent years will permit a lower rate of plant expansion. Preliminary figures for the first quarter of this year point to a slight slowdown in the economy's feverish rate of growth.

"Healthy Warmth." More important for the near future is a leveling off of food prices, which have accounted for most of the inflationary push in the last year. Figures released last week showed that the Wholesale Price Index, considered the most reliable gauge of inflation, held firm last month for the first time since October. "At the moment," says Ackley, "I would describe the situation as one of healthy warmth. But I would also immediately add that it's necessary to keep a careful eye on it, to watch for too high a temperature or too fast a rise."

A significant, though statistically unmeasurable, factor in Ackley's optimism must be the Canute-like figure of Lyndon Johnson, who more than any other President has thrown the full force of his office and his own mighty powers of persuasion against the tide of inflation. Though Ackley is less of an innovator than Heller, whom he succeeded a year and a half ago, and is the temperamental opposite of the President, he is by economic instinct perhaps even more in the Johnson mold. He has made the council an even more zealous watchdog of the economic guidelines, pushed it into an ever more active role as a shaper of the economy. If Ackley's council proves to have been right about inflation, that role will be more active yet.

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