JOE’S INFLATION RX INVITES DISASTER
PRESIDENT Biden is the opposite of Harry Truman. “Give ’Em Hell, Harry” had a famous sign on his desk in the Oval Office: “The Buck Stops Here.” That meant that when things went wrong, he shouldered the blame — as any good chief executive of a company or a country should do.
What Biden is best at when things go wrong is pointing his finger at someone else. He passes the buck. The Afghanistan debacle? The Pentagon brass told me to do it. The disaster at the border? Blame Congress for not authorizing enough money.
High gas prices? Blame Russian President Vladimir Putin. Runaway inflation? Price gouging by American companies.
The obvious solution to $5-a-gallon gas, surging prices at the grocery store and higher drug and hospital costs is to stop the multitrillions of dollars of debt-spending in Washington that is dumping cheap money into the economy.
When President Donald Trump left office 15 months ago, inflation was less than 2%. It is now somewhere between 7% and 10%, depending on the measure. And Biden-flation isn’t “transitory.” If anything, the up escalator on prices is getting worse.
Now the Biden administration complains that producers are taking advantage of product shortages and supply-chain constraints by jacking up their prices. He wants to penalize the meat packers for the high beef prices, the poultry industry for the rising expense of a chicken dinner, the drug companies for the high cost of pharmaceuticals and the oil and gas industry for recording record profits while gas prices soar.
He wants the Federal Trade Commission and other regulators to impose price ceilings to be monitored by an army of federal price-control police.
This is economic amnesia. We tried all these government manipulations in the 1960s and ’70s. The ruinous price regulations on industry made inflation worse. Back then we had Soviet-style central planners imposing price limits on everything: long-distance phone calls, oil and gas, airlines, rail service, trucking and banking services.
This was supposed to protect consumers, but by making it illegal for prices to rise, we got hit with empty shelves, shortages and gas lines.
The price ceilings became de facto price floors. Inflation shot up from 5% to 8% to 10% by 1980.
Even Democrats Jimmy Carter and Ted Kennedy realized that things were going haywire. They took the lead in ushering in an era of decontrol of prices. And when President Ronald Reagan was elected, his first executive order was to end oil and gas price controls.
What was the result? A famous study by the Brookings Institution found that the airline prices collapsed by one-third (ushering in an era of everyday Americans being able to afford to fly here, there and everywhere) and banking charges fell by half, as did trucking and rail costs. The price of oil briefly rose when the price controls were lifted, but then as energy supplies were unleashed, prices fell by more than 60%.
Brookings found “in every industry” in which price controls were lifted, “prices fell and service quality improved.”
Why is this history lesson so hard for the modern Democrats to learn?
Just this week, Bernie Sanders called for a backdoor form of price controls with his proposal of a 95% windfall-profits tax on such firms as oil companies, pharmaceuticals and meat producers. No one told the senator that when you tax something, you get less of it. This will only make supply-chain problems worse and fuel even higher prices.
Businesses aren’t charities. And it’s not “greed” or price gouging to make a profit. Adam Smith taught us in 1776 that it’s profit, not “benevolence,” that induces companies to produce more of the things we want at prices we can afford. That eventually brings prices down.
How depressing that here we are 250 years later and our politicians in Washington still don’t understand that enduring economic lesson.