By Andrew Moran *
President Joe Biden is under pressure to do anything – anything – to drive up generalized price inflation. While he did not initiate a consumer price index (CPI) hitting its highest level in about 31 years, the president contributed to the inflationary crisis with billions of dollars in deficit-financed spending, which ‘he recently admitted. But as both sides demand White House action, the potential cure, price controls, could be as terrifying as grocery store prices have become, as they would inevitably exacerbate the current economic hardship inflicted on the post-consumer economy. pandemic.
Bidenomics Lesson 8: Price controls
The Biden administration and House Democrats flirted with price controls in September as authorities instituted the measure for prescription drugs. The White House has proposed to mandate Medicare to “negotiate” drug prices, issuing an ultimatum for the pharmaceutical industry: face a tax of up to 95% on sales if companies do not accept the government price . Although they claim Washington is “negotiating,” officials are demanding, coercing and strengthening the private sector.
If Biden and his team are willing to use a failed mechanism with something as critical as pharmaceuticals, why would the Oval Office refrain from adopting food and energy price controls?
While the administration has yet to reveal its tactics to tackle the surging food inflation, its team has discussed potential solutions to the energy crisis. In addition to begging the Organization of the Petroleum Exporting Countries (OPEC) and its allies, OPEC +, to increase production, the White House plans to tap the more than 600 million barrels of the country’s strategic reserves. The president could also encourage more domestic production and relax regulations, but that would contradict his green energy initiative.
Could Biden channel the mind of former president Richard Nixon and make price controls part of the Bidenomics experience?
In 1971, Nixon imposed a 90-day economy-wide wage and price control, known as the Nixon Shock. Crude oil and gasoline were two of the most affected commodities, as Nixon and his two successors, Gerald Ford and Jimmy Carter, kept them intact. This was a disastrous policy for the US economy, resulting in a substantial slowdown in domestic crude production and oil exploration, relying on foreign markets to fill US gas reservoirs. When the Middle East did not pour crude into the United States, shortages were rife, creating famous images of long gas lines.
Although they aggravated a problem with their economic nostrums, the interventionists could not help themselves. In 1979, the Carter administration set prices for ten different types of crude oil, ranging from $ 6 to $ 15 a barrel. These mechanisms have plunged the US energy industry into depression. As a result, many oil wells expired because companies had no incentive to maintain and operate them, leading oil and gas companies to invest in wells that did little to reduce energy demand in the world. country.
It wasn’t until 1981 that then-President Ronald Reagan abolished price controls, allowing the price of a gallon of gasoline to drop 33% in five years. To be fair to Carter, he also tried to root out the controls, but failed. Nonetheless, it has been a dark time for the critical sector of the country to power the nation and ensure everyone’s lights stay on and motorists’ tanks are full.
Indeed, economists engage in debates on a wide range of issues. However, one subject sparked near universal agreement, price controls still lead to economic devastation.
Price controls always lead to socialism
The American people are urging the federal government to take action and develop prescriptions for the global supply chain crisis, soaring inflation and the coming energy calamity. The public may have good intentions, but Washington’s record is abysmal and dangerous because it will likely lead the United States down the wrong path. Price controls are usually the short-term response to a challenge crippling the nation. With inflation running across all sectors of the U.S. economy and concerns about the rising cost of living affecting Democrats’ dreams for the 2022 midterm election, the Oval Office could consider this failed economic policy.
Conservatives and libertarians oppose this idea. However, progressives and the socialist left could encourage price controls because, as the eminent economist Ludwig von Mises wrote, they lead to socialism:
“Isolated pricing measures are failing to achieve their ends. In fact, they produce effects contrary to those intended by the government. If the government, in order to eliminate these inexorable and undesirable consequences, continues its course further and further, it ultimately transforms the system of capitalism and free enterprise into socialism.
Ultimately, the Biden administration must step back and allow the free enterprise system to solve the myriad of problems the state created in the first place.
* About the author: economic correspondent at LibertyNation.com. Andrew has written extensively on economics, business, and politics over the past decade. He also writes about economics on Economic Collapse News and commodities on EarnForex.com. He is the author of “The War on Cash”. You can find out more at AndrewMoran.net.
Source: This article was published by Liberty Nation