Kamala Harris' outdated excuse for policy proposals: price controls

When leftists run out of alternative ideas, they dive into the stupid bucket to invent flowery oldies like price controls, which is exactly what Vice President Kamala Harris just proposed for groceries.

Price controls have been tried in many countries over many years and have failed miserably. Whether on wages, gas prices, or food prices, the basic economics of price controls remains in each case and is inviolable. This is a conclusion that virtually all reputable economists agree with, regardless of political persuasion. Former Obama administration economist Jason Furman demonstrated a knack for understatement when he commented: “This is not a sensible policy.“

Harris is following in the footsteps of President Richard Nixon, although he probably doesn't know it. Inflation began to rise in the 1970s, and Nixon responded with a temporary freeze on many wages and prices. As expected, the temporary freeze became an indefinite freeze and expanded in scope.

Over time, a widening gap developed between the frozen prices that were in place and the prices that would be obtained under normal market forces. This gap tainted the decisions of households and businesses, leading to distortions that led to growing complaints about the resulting shortages and cascading economic weaknesses.

As the complaints grew cacophonous, politicians relented, relaxing price controls on most things, resulting in markets stabilizing, supplies replenishing, and prices normalizing. But price controls remained on energy, prompting President Jimmy Carter to put limits on gas purchases and the notoriously long lines at gas stations. All goods and services are rationed, either by price or quantity. Freeze prices and rationing comes from quantities.

When President Ronald Reagan abolished Energy price controls In the 1980s, energy prices first rose, but then demand declined and production soared. Energy prices fell quickly and then stabilized, just as the theory predicts. Now, the only time we see a line is when a discount station has a sale.

What if Harris' food price controls went into effect? As the resulting price distortions grew, the food supply would contract. Farmers don't voluntarily work at a loss, and grocery stores generally don't stock items that lose money. It doesn't do much good to be faced with a low price on a product so scarce you'd think you were scanning the empty shelves of Cuban grocery stores.

Harris says the focus is on rising grocery prices. Perhaps someone on your staff should point out that grocery store profit margins are among the smallest of all retail.

If she thinks food prices are too high, she should know because it was her and Biden's policies that drove them up, specifically those policies that caused inflation to skyrocket in the first place.

Thanks to Biden-Harris inflation, Inflation-adjusted earnings down nearly 4% since Biden-Harris took office. This translates into an annual hit of about $2,000. It's true that inflation-adjusted incomes are finally rising and inflation is down, but the Biden-Harris hole that families are climbing out of is deep.

This hole is why the polls show 59% of Americans believe we are in a recession when the usual indicators like employment and GDP say the economy is growing. Families are in recession as they struggle with their own budgets. Price controls and their accompanying distortions will not fill the hole.

Silly ideas like price controls are like cotton candy to a child: they look good, but there's no substance, just a quick sugar buzz and a lot of stickiness to clean up later. It's not a good sign when Harris lunges for the cotton candy. Maybe it's because his father was one Marxist economics teacher who finds the example of Cuba so attractive.

JD Foster is the former Chief Economist of the Office of Management and Budget and former Chief Economist and Senior Vice President of the US 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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