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The State of the Union and the Allure of Price Controls

Those who embrace statist economic policies tend to believe the government can guide and even control human economic actions to achieve whatever goals the statists want to achieve.
Those who espouse free market economics tend to say that’s a bunch of bull hockey. Rather, individuals often respond to government efforts to guide or manipulate their economic decisions in ways the statists did not foresee, undermining their efforts.
History is on the side of the free marketers.
But statists never learn, and we are likely to see evidence of that in President Joe Biden’s State of the Union address.
The economy is just not going as planned—and remember, statists are all about a planned economy.
Prices are rising much faster than Team Biden anticipated, in large part due to the Federal Reserve Bank’s easy-money policies and especially Biden’s American Rescue Plan pouring even more money into the economy.
Biden and the left’s first response to the resulting inflation wasn’t to cut government spending—indeed, they want to dramatically increase spending. Their first response was to cut prices by imposing price controls. But Biden’s ability to do that legislatively is limited by a split Senate. Few if any Senate Republicans would vote for price controls.
And so Biden has called on companies to voluntarily abstain from or limit price increases of their products and services. And some tried for a while. But companies are themselves faced with rising prices for labor, goods and services. Most have succumbed and are raising prices.
Next Biden tried shaming companies for “profiteering” on the backs of struggling families. Again, that avenue can only work for a short time, if at all, when input prices are rising rapidly. So nothing’s working as planned.
In tonight’s State of the Union, Biden will reportedly propose several steps to try and tackle inflation. He will likely call for an increase in the minimum wage to $15 an hour. But that’s a price control on the cost of labor, which further increases input costs.
He will likely push for more spending on renewable energy projects. But that will result in increased energy costs for families.
And he may propose various ways to lower the current cost of energy. For example, he could release more crude oil from the Strategic Petroleum Reserve, which will have very little price impact.
Or he might propose temporarily sidelining the federal gasoline tax, which is 18.4 cents per gallon (24.4 cents for diesel). That would help, but not much when the price of gasoline can rise 20 cents a gallon or more in a week.
In short, without a legislative majority in Congress, Biden’s ability to impose price controls is limited, so he will take other more-limited steps. That’s actually good news for the economy, though Biden won’t realize it.