The many media comparisons between Jimmy Carter and Joe Biden’s disastrous economic and energy polices, and the resulting “stagflation” got us reminiscing about the 1970s and the halcyon days of our college years.
The national college debate team question my freshman year was about wage and price controls, and through the flip of a coin my partner and I were chosen to advocate for the pro-wage and price controls side.*
This wasn’t as hard as it might seem for a budding Republican political operative because it was Republican Richard Nixon who was President at the time and it was Nixon, not Jimmy Carter, who implemented wage and price controls.
There was no national emergency in the summer of ’71: unemployment stood at 6 percent and inflation was relatively low, but, as CATO scholar Gene Healy pointed out in a 2011 essay, after Nixon’s announcement, the markets rallied, the press swooned, and 75 percent backed the plan in polls.
Nixon coasted to victory in the 1972 election, which was the whole point of the exercise, and inflation reared its ugly head when Nixon lifted the price controls – exactly as Milton Friedman had predicted.
I was sure I still had my old debate team binder and notes, but a troll through a box of fraternity mugs and other college souvenirs did not reveal it, so I’ll have to go on a memory fogged by 50-years of good living, but looking back it seems the arguments in favor of wage and price controls were all political, and such Keynesian economic arguments as were to be made have subsequently proven themselves to be wrong time and again.
But the fact that wage and price controls failed the last time they were tried hasn’t stopped the Left from demanding they be tried again. The Roosevelt Institute, a left-wing think-tank, has called for the federal government to “regulate and negotiate” more prices. Isabella Weber, an economist at the University of Massachusetts Amherst, wants “a systematic consideration of strategic price controls”. Both point to high corporate profits to support their arguments.
Biden and the Democrats now have a long list of villains who are, in their narrative, responsible for rising prices, and who need to be punished or regulated to bring prices down. And they remind me a lot of the political arguments used to justify wage and price controls the last time they were tried.
As The Economist reported:
Over the past year corporate profit margins have surged as the economy has recovered. Elizabeth Warren, a senator, says that this shows how businesses have exploited the pandemic to “gouge” consumers; Mr. Biden’s press secretary has castigated firms for “jacking up prices during a pandemic”. The administration thinks that antitrust enforcement can help control price growth. On January 3rd Mr. Biden unveiled plans to increase competition among slaughterhouses, which he blames for a 16% rise in meat prices in the year to November. He has also called for investigations into the energy and shipping industries, the sources of recent shortages and bottlenecks.
Even the mild-mannered establishment Republican President Jerry Ford threw out anti-trust enforcement as a tool to curb inflation, demonstrating that it is much easier to blame evil corporations gouging consumers than it is to man-up and take the politically risky and unpopular pill that everyone knows is the only real way to curb inflation: raise interest rates and cut spending.
Scholarship by Burton A. Abrams and James L. Butkiewicz on the Nixon tapes has revealed evidence that Nixon manipulated both monetary and fiscal policies to create a political business cycle that helped secure his reelection victory in 1972.
Abrams and Butkiewicz wrote Nixon was very knowledgeable about economic matters and understood the risks to the economy of his macroeconomic policy actions and the imposition of wage and price controls, but chose to tradeoff longer-term economic costs to the economy for his own short-term political gain.
Naturally, we didn’t have access to the Nixon tapes back in the 1970s. As we prepared our college debate case Nixon was having those conversations in real time, but it still turned out the arguments in favor of wage – price controls were mostly political. If Joe Biden and the Democrats follow Nixon down the road to implemented wage and price controls, it will be for the same reasons Nixon did – to tradeoff longer-term economic costs to the economy for their own short-term political gain.
*My partner and I won every debate save one. Although I can’t remember what college the guy went to I remember vividly the team’s first speaker had shoulder-length hair and used a regimental tie as a headband – it was the 70s after all.
George Rasley is editor of Richard Viguerie's ConservativeHQ.com. A veteran of over 300 political campaigns, including every Republican presidential campaign from 1976 to 2004, he served as a staff member or advance representative for some of America’s most recognized conservative political figures, including Ronald Reagan, Sarah Palin and Jack Kemp. A member of American MENSA, he served on the House and Senate staff and on the staff of Vice President Dan Quayle. Rasley is a graduate of Hanover College and studied international affairs at Oxford University's Worcester College.
wage and price controls
government spending cuts
interest rate hikes
Nixon economic policy