The oddest thing about this presidential election is that nominees base their programs on highly discredited ideas. Price caps, tariffs, and industrial policy underlie Trump and Harris programs. One might think that finding what works and building on these have a better chance of success, but both have gone in the opposite direction.
In her first economic speech, Kamala Harris positioned her inflation-fighting program on a FTC crackdown on grocery price gouging. Rather than overspending by the Government resulting in too much money chasing too few goods, the accepted reason for inflation is those rascally grocers jacking up prices to fatten their profits. Better, the Government can control inflation by determining the “correct price.”
Price controls have a long history, going back to Roman times or earlier. They have uniformly failed, often making the situation far worse. High prices signal markets to increase supply or provide substitutes. Capping prices at a lower level sends the opposite signal, resulting in less supply, increasing shortages, and black markets. Marxist countries such as the USSR, Cuba, and Venezuela suffered from the Government dictating prices.
In an era of “Super Abundance,” as documented in the same-titled book by Tupy and Pooley I’ve been recommending, you must work hard to have so much less. Richard Nixon discovered this through his wage and price controls in the 1970s. Shortages and lines were a feature of our lives. Autos in long lines at gas stations brought home this policy failure to every community.
Upon his election in 1980, Ronald Reagan dumped the price caps on oil. Many projected the price of a barrel of oil would soar to over $100. Instead, the price ultimately bottomed out at around $10. The market reacted to price signals and brought forth price-reducing supply.
Why would anyone replicate a failed policy? Kamala Harris’s boss, Joe Biden, proposed rent control, an even worse policy. Will the Democratic nominee pursue this? What other prices will she cap?
In any case, why pick on grocers? Of the top five places most people purchase groceries, who’s a gouger? Walmart? Costco? Who should the FTC go after?
Not to be outdone in resurrecting bad policy, Trump is touting tariffs as a cure-all. Keeping out foreign products will foster making things here, producing good-paying jobs. Foreigners who have been taking advantage of us will pay huge taxes into our coffers-America first. What’s not to like? After all, didn’t we have high tariffs in the past to protect our industries?
Continue reading
Detour on the Road 