When leftists run out of alternative ideas, they dip into the stupid bucket to come up with such moldy oldies as price controls — which is just what Vice President Kamala Harris just proposed for groceries.
Price controls have been tried in many countries over many years and have consistently failed miserably. Whether on wages, gas prices, or food prices, the basic economics of price controls holds in each case and is inviolable. This is one conclusion on which virtually every reputable economist agrees regardless of political persuasion. Former Obama administration economist Jason Furman demonstrated a talent for understatement when he remarked, “This is not sensible policy.”
Harris is following in President Richard Nixon’s footsteps, though she probably does not know it. Inflation started to rise in the 1970s and Nixon responded with a temporary freeze on many wages and prices. As one would expect, the temporary freeze became an indefinite freeze and expanded in scope.
Over time, a growing gap developed between the frozen prices that were in effect and the prices that would obtain under normal market forces. This gap fouled the decisions of families and businesses, leading to distortions that led to growing complaints about resulting shortages and cascading economic weaknesses.
As the complaints grew cacophonous, the politicians relented, relaxing price controls on most things, which resulted in markets stabilizing, supplies replenishing, and prices normalizing. But price controls remained on energy, which led to President Jimmy Carter placing limits on gas purchases and famously long lines at gas stations. All goods and services are rationed, either by prices or quantities. Freeze the prices and rationing comes from quantities.
When President Ronald Reagan abolished energy price controls in the 1980s, energy prices first rose, but then demand abated and production soared. Energy prices soon fell rapidly and stabilized, as theory predicts. Now, the only time we see a line is when a discount station has a sale.
What would happen if Harris’ price controls on food went into effect? As the consequent price distortions grew, food supply would contract. Farmers don’t voluntarily farm at a loss, and grocery stores don’t generally stock items on which they lose money. It’s not much use facing a low price on a product so scarce you would think you were scanning Cuba’s empty grocery store shelves.
Harris claims she is focusing on price gouging in grocery prices. Perhaps someone on her staff should point out that profit margins in grocery stores are among the smallest in all of retail.
If she thinks food prices are too high, well she should know because it was her and Biden’s policies that pushed them up, specifically those policies that caused inflation to soar in the first place.
Thanks to the Biden-Harris inflation, inflation-adjusted earnings are down almost 4% since Biden-Harris took office. That translates to about a $2,000 annual hit. True, inflation-adjusted earnings are finally rising and inflation has fallen, but the Biden-Harris hole out of which families are climbing is deep.
This hole is why polls show 59% of Americans think we’re in a recession when the usual indicators like jobs and GDP say the economy is growing. The families are in a recession as they struggle with their own budgets. Price controls and their attendant distortions aren’t going to fill the hole.
Silly ideas like price controls are like cotton candy to a kid – they look good but there is no substance, just a quick sugar buzz and a lot of stickiness to clean up later. It is not a good sign when Harris lunges left for the cotton candy. Maybe it’s because her father was a Marxist economics professor that she finds Cuba’s example so appealing.
J.D. Foster is the former chief economist at the Office of Management and Budget and former chief economist and senior vice president at the U.S. Chamber of Commerce. He now resides in relative freedom in the hills of Idaho.
The views and opinions expressed in this commentary are those of the author and do not reflect the official position of the Daily Caller News Foundation.
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