The July 3, 2016 edition of The Marietta Daily Journal published an op-ed by Foundation Vice President Benita Dodd, “Price Controls, a Poor Prescription for Georgia.” The article is below in its entirety; access it online here.
Price Controls, a Poor Prescription for Georgia
By Benita Dodd
It’s been 15 months since the end of a war — and one country has decided to keep its war-time price controls on meat intact. The result? Social and economic chaos. Hundreds of meat shelves empty, thousands of jobs lost and dozens of businesses gone under.
Sound like fiction? Unfortunately, as Georgians from the Greatest Generation may recall, this exact situation plagued the United States in the months following the end of World War II.
By May of 1946, the Bureau of Labor Statistics reported that meat counters were virtually empty. Seventy percent of food markets had no beef or lamb and more than 80 percent were without most pork products, including bacon and ham. Thousands of packing plant workers lost their jobs, and many slaughterhouses and meat wholesalers went out of business. Consumers obtained their meat on the black market, paying extra for products of questionable quality.
Equilibrium was only re-established in the national meat supply and associated labor sectors when President Harry Truman — with some reluctance — finally lifted controls.
We’ve seen such scenarios of government overreach play out time and again. Whenever the government attempts to artificially limit the price of anything, that product becomes scarce or unattainable. Price controls reduce incentives to provide goods and services, and consumers ultimately suffer.
A comparison of rents in San Francisco and Atlanta confirms this.
San Francisco has some of the most onerous rent control ordinances in the nation. Average monthly apartment rentals in San Francisco are $3,484. Vacancy rates of 2.99 percent — less than half the national average — indicate a shortage of apartments for rent.
At least 100,000 apartments could easily be converted to rental units, but haven’t been. Landlords don’t want to deal with the oppressive regulations and price controls that bar them from turning a profit.
Atlanta, by contrast, is unburdened by rent controls. Average apartment rents are only $1,419 per month, and vacancy rates stand at five percent. Landlords put over 9,000 new units on the market last year, giving city residents ample options to choose from.
In short, government attempts to protect consumers by fixing rent prices inevitably backfire. If landlords see no reason to put units on the market, shortages result and prices skyrocket.
Now President Obama and his allies in Congress want to impose price controls on drugs purchased through the Medicare Part D program. Of course, they aren’t calling their proposal a “price control.” Rather, they bill it as a “negotiation” for lower costs. But make no mistake: Their scheme would put government bureaucrats in charge of determining which medicines are covered by Medicare, and at what prices.
For evidence of how this drug “negotiation”/price control story ends, look at the Department of Veterans Affairs.
The VA sets drug prices artificially low. Much as landlords won’t voluntarily rent apartments at a loss, drug manufacturers will not sell medicines below cost. The result is that dozens of common medicines simply aren’t available to our military veterans through the VA.
That’s why, in the first year that Medicare’s drug benefit took effect, 40 percent of Medicare-eligible veterans filled their prescriptions through Part D rather than the VA.
Price controls haven’t worked in the past. They’re not working in the present. And unless Georgia’s congressional delegation and others join forces to stand up to President Obama and his allies, price controls will fail in the future. Sadly, this time it will be seniors who suffer the consequences.
Benita Dodd is vice president of the Georgia Public Policy Foundation, an independent think tank that proposes practical approaches to public policy to improve the lives of Georgians.