Thin-skinned, vain, prone to seeing conspiracies — Barack Obama now broadens his Richard Nixon impersonation with the imposition of price controls. Obamacare is the gift that keeps on giving — giving us higher real taxes, a bigger deficit, a bloated federal state, and now, if past is prologue, significantly lower quality and less innovation in the field of health care. As some of the smarter critics predicted, Obamacare, butt-ugly as it was in legislative form, is turning into a real beast in the hands of the executive-branch geniuses charged with implementing it and dreaming up the new regulations to make that possible.
This might be a good time to revisit the history of price controls, which the CBO has helpfully compiled here. Short version: They do not work. They undermine quality and quantity. And they do not even control costs in the medium to long term. From the Nixon era:
The apparent success of the controls program was reversed in late 1972 and 1973 when large and rapid increases in the prices of food and farm products were followed by increased prices of petroleum and energy products. . . . Due to these rapidly rising prices, market disruptions, and shortages, public support for the controls program eroded rapidly in 1973.
As decontrol took place during Phases III and IV and for at least a year after the program ended, there was a “price explosion” during which inflation was greater than it had been at any time in the post-World War II period. Contributing to this explosion were shortages (or the withholding of supplies), hoarding, inefficiencies due to the controls program, and anticipation of its ending. . . The explosion would have been less severe had earlier structural and macroeconomic policies of the government addressed the underlying causes of inflation rather than the accompanying symptoms.
Heckuva job, Tricky.
Price controls cause shortages — that is Econ 101, but this is a White House that has declared a War on (Social) Science, at least when it comes to fundamentals such as supply and demand, which is apparently believes are the invention of a right-wing think tank somewhere in Arlington. I have spent part of the morning debating people who are very upset that George W. Bush may have entertained heterodox views about evolution (I do not know that he did), but, given a choice, I will take the government that has insufficient appreciation for advanced biology over the government that has insufficient appreciation for fundamental economics.
And there is good precedent for that: What did the emperor Diocletian think about price controls? Bruce Bartlett knows.