Bidenomics is about ushering in the retro economy. Since President Joe Biden’s time in the White House began, inflation touched a 40-year high, interest rates climbed to a 23-year high, and household food spending reached a 33-year high. Price controls, a potential public policy emanating from the brightest minds in the administration, could be enacted for the first time in about a half-century. What is old is new again.
Creeping Toward Price Controls
As part of his efforts to clamp down on what he calls greedflation, President Biden launched a new “strike force” to fight “unfair and illegal corporate pricing.” What this even means is unclear. The joint Federal Trade Commission and Department of Justice task force will target businesses and how they price their goods and services. The White House’s chief argument is that inflation has slowed so much since peaking in June 2022 that consumers should be witnessing relief by now.
“Over the last year, supply chains have returned to normal, and inflation has come down,” said National Economic Council Director Lael Brainard in a call with reporters. “Some corporations aren’t passing those savings on to consumers. President Biden is fed up with corporate practices that unfairly raise costs for consumers and he’s taking action.”
Liberty Nation has debunked this myth. If companies were ripping off consumers, the producer price index, which is essentially what businesses pay, would have been flat during the current inflationary episode. Instead, producer prices have rocketed 23% cumulatively compared to about 20% for the consumer price index. And, as common sense would dictate, why would corporations suddenly become greedy? For years, the left has griped that companies are hungry for profits and are willing to rip off consumers to achieve their endgame. In other words, it does not make sense.
The chief concern is that the president could be inching toward reintroducing government price controls in the US economy unless he gets his way.
Bidenomics Meets Nixonomics
In August 1971, then-President Richard Nixon issued a 90-day freeze on prices and wages to rein in inflation. It had been nearly three decades since the federal government imposed price controls on the public. Unsurprisingly, the Nixon Shock was an economic failure, triggering a recession, manufacturing stagflation, depreciating the US dollar, and creating shortages. In the preceding months, Nixon knew of the ramifications of wage and price controls, warning that these prescriptions were socializing the United States.
Here is what Nixon stated in February 1971:
“Here’s my concern about the freeze… There is strong support for a wage board and wage-price controls and particularly from sources like [Federal Reserve Chair] Arthur Burns. The difficulty with wage-price controls and a wage board, as you well know, is that the God damned things will not work. They didn’t work even at the end of World War II. They will never work in peacetime.”
The then-president was correct. They never work, whether in wartime or peacetime. And yet, despite the mountain of evidence rejecting this flawed policy mechanism, officials worldwide have employed these measures. In the world’s largest economy, they are slowly making a comeback, and observers, including the US Chamber of Commerce, are noticing.
Neil Bradley, US Chamber of Commerce executive vice president, cautioned about the incremental approach to establishing government price controls. He wrote following Biden’s announcement of another task force (there have been a dozen since 2021): “This effort by the Biden Administration to use regulatory agencies to micromanage how private businesses set prices will have the same result: shortages, fewer choices for consumers, a weaker economy, and less jobs.”
Consumers have already witnessed some of the effects of price controls introduced by the administration. In the Inflation Reduction Act, officials installed price caps on various prescription drugs under the legislation’s provisions. Earlier this year, Liberty Nation reported that several companies are raising prices for other products, suspending research into treatment for other ailments, and adjusting timelines for creating other medications.
Like rent controls, price controls on anything never work.
The War on Profiteers
In 1919, economist John Maynard Keynes discussed how the so-called profiteers would be society’s target in an inflationary climate. “To the consumer, the business man’s [sic] exceptional profits appear as the case (instead of the consequence) of the hated rise in prices.” In other words, when this odious tax ravages consumers, the public will turn its collective wrath on capitalists. Businesses thrive while everyone else suffers, they would say. Keynes’ ideas can be harshly judged, but these sage words are appropriate for today’s world.
