A Biden plan for the price? No thanks

Fruit for sale at a grocery store in New York City.


Jeenah Moon / Bloomberg News

When asked about his plan against a dangerous opponent, boxer Mike Tyson once said: “Everybody has a plan until they get punched in the mouth.” President Biden has proposed many coping plan with inflation.

Prices rise when goods become scarce or the money supply expands rapidly. Pandemic holdouts in the supply chain have caused shortages; The Federal Reserve has increased the money supply by more than 40% in the past two years alone. After spending months dismissing inflation as a fad, the administration is now taking it seriously.

But American consumers have been hit by a dizzying combination of power and leverage. Entitlement comes from a real shortage or surplus. Prices are signals wrapped in offers. Couches, cars, and Christmas gifts are expensive because shipping and shipping are months behind. Attempting to manage prices without alleviating potential scarcity is worse than doing nothing at all. Impacting from the left is the prospect of an economic “plan” that includes taxes, subsidies, price controls and efforts to manage shortages.

Economists across the ideology agree that government plans to manage prices have not worked. But the notion continued, in the hope that this time it would be different. In the 1970s, when a federal board was organized to manage price increases, the result was huge profits for some corporations and a loss of jobs and consumption options for the middle class. Any price control plan by the Biden administration would clash with a key progressive initiative – raising wages for workers. Keeping wages low while hiring millions of workers for the holiday shopping season is a tacit goal Mr. Biden has set out for his inflation-fighting plan.

On the money supply front, the Fed is making noise about backing down from the aggressive expansion. But one CNBC Report It is estimated that more than $5 trillion in cash is sitting in company coffers and bank accounts. Middle-class savers holding onto cash will see its value erode – essentially a tax on the middle class, which is promised not to be taxed. Some rich people will pour their cash into real estate, increasing the housing shortage.

Whatever you think of Congress’s bipartisan infrastructure initiative, its timing is unfortunate. It will be expanding aggressively on the financial front, with new demands on the already strained labor market in search of workers. All the cash from the Fed’s monetary expansion is ready to spend. Mr. Biden’s Build Back Better plan will make these problems worse by injecting trillions into the economy.

Things aren’t so bad that a plan can’t make them worse. In one recent newspaper for the Center for Law and Economics at George Mason University, I evaluated a policy to manage prices — a top-down approach directed from Washington. I find that such plans are plagued by information problems (officials don’t know enough to direct resources or decide prices) and incentive problems (the power to decide what prices to charge). allowed to rise and which price is held back, will be corrupted. according to politics).

We were stuck with supply chain bottlenecks and too much cash. A government pricing scheme can only make things worse. Isn’t that a punch in the mouth?

Munger is a professor of political science and economics at Duke University and a research fellow at the George Mason Center for Law and Economics.

The Editorial Review: A Split Party Moves Towards Midterms. Image: Drew Angerer / Getty Images

Copyright © 2021 Dow Jones & Company, Inc. All rights reserved. 87990cbe856818d5eddac44c7b1cdeb8

Appears on December 15, 2021, print edition as ‘Biden Plan for Pricing? No thanks.’

https://www.wsj.com/articles/no-biden-price-plan-wage-stagnation-inflation-money-supply-price-regulation-control-federal-reserve-11639517901 A Biden plan for the price? No thanks

Ethan Gach

TheHiu.com is an automatic aggregator of the all world’s media. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, all materials to their authors. If you are the owner of the content and do not want us to publish your materials, please contact us by email – admin@thehiu.com. The content will be deleted within 24 hours.

Related Articles

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top button