Bidenomics & Price Controls | National Review

They are papering over its failures.


oters don’t trust President Biden and congressional Democrats on the economy. According to the latest NBC News national poll, the GOP holds a commanding 49–28 lead on the question of which party does a better job with economic stewardship. So much for the political appeal of “Bidenomics,” which has been characterized thus far with excessive government spending, easy money, crippling regulations, and calls for higher taxes.

One pattern inside Bidenomics is the desire to implement price controls in various sectors of the economy. Doing so is meant to be populist, recruiting the government on behalf of the consumer. Scratch the surface a little, and one sees that the price controls being proposed not only would harm the consumer but would put the government in the position of picking winners and losers among giant, multinational corporations.

To level-set, price controls don’t work. They invariably result in the lowered supply of the good or service that is price controlled, since the producer has less or no incentive to make any more than they have to. That in turn leads to scarcity and eventually government rationing. Where there was once “unfair” surplus supply, there are at the end of the price-control process “fair” but empty shelves. Those old enough to remember Soviet grocery stores will get this.

Just this September in Washington, three major price controls have been proposed by the Biden administration and/or congressional Democrats: credit-card price controls, so-called net neutrality, and prescription-drug price controls.

Credit-card price-control proposals have been around a long time. Two of them are currently floating around Capitol Hill, each introduced by Senator Dick Durbin (D., Ill.) The first is S. 1838, the “Credit Card Competition Act of 2023.” It would require credit-card-issuers to let retailers choose from any payment-card network they want. While that sounds like a good thing in theory, it’s in fact a backdoor price control. The credit-card companies today charge what’s called an “interchange fee” to retailers with every swipe in order to pay for the back-end security of credit cards, issue credit-card rewards like frequent-flier miles, and deal with customer service. Durbin’s real goal in this bill is to cut the amount of interchange fees paid by retailers by mandating a lower priced option they get to use instead of the one the credit-card company contractually requires.

If retailers want to pay less in interchange fees, they should negotiate that with the banks and credit-card companies. This is not a matter for government intervention on price. Remember debit-card reward programs? Those all went away in the last decade after a similar Durbin price-control law passed that made debit cards unprofitable. Price controls led to reward-program scarcity because of the lack of surplus profit.

Who stands to benefit from this is large retailers, who would pay the lower, price-controlled amount effectively dictated by the law. Here we see a familiar pattern with price controls: Parts of the economy (banks, credit unions, credit-card companies) are mugged in favor of another (big retailers). It’s the government picking winners and losers vs. the pro-consumer benefits of robust private competition and innovation.

Another Durbin bill on credit cards is S. 2730, the “Protecting Consumers from Unreasonable Credit Rates Act of 2023.” This bill is an explicit price control on credit-card companies, setting a national interest-rate cap of 36 percent. While that’s higher than most card rates today, it would result in the scarcity of credit availability for those with bad credit scores, teenagers, and others seen as credit risks. This idea is a pure example of limousine liberalism, kind of like raising the minimum wage or turning a blind eye to shoplifting. What seems like a benefit to the poor actually hurts the very people they are trying to help.

The next area of price controls that has cropped up in September 2023 is the revival of an “oldie but goodie:” net neutrality. The Federal Communications Commission (FCC) recently re-established a Democratic voting majority, and FCC chairwoman Jessica Rosenworcel has said she will re-implement the Obama-era rules.

“Net neutrality” was all the rage in the middle 2010s, as liberals and Big Tech companies stoked fear that internet-service providers (ISPs) would “throttle” internet speeds based on pay-to-play arrangements with websites. In order to prevent this, ISPs would be placed in the public-utility tier of FCC regulation that, among other things, allows the government to set rates. Net neutrality was implemented late in the Obama administration but quickly reversed by former FCC chairman Ajit Pai.

Pai has pointed out since then that the price controls would have done severe damage to the growth of internet access (there’s that price control leading to scarcity again). The superabundance of affordable, reliable, and high-speed plans that do not throttle content today gives lie to the implicit threat net neutrality is purported to “fix.” Americans in 2023 have access to much better internet plans than they did in 2015 (I myself pay $50 per month for a 200 Mbps download speed plan with no data cap), and competitors like 5G ultra-wide and satellite ISP are going to continue this pro-consumer expansion. The only thing that could screw it up is the government coming in to “help.”

“Net neutrality” will lead to price controls, which will lead to scarcity — internet-service providers won’t invest nearly as much in infrastructure, so the ever improving availability of high-speed internet at faster and faster speeds and lower and lower prices will stop. Who is the beneficiary? Big Tech companies will benefit since they will get access to the internet at price-controlled rates.

The final area of Bidenomics price controls evident in September was the unveiling of the first ten prescription drugs subject to price controls in the Medicare program. A company unwilling to submit to the “negotiated” price imposed by the government has the choice of exiting the Medicare program entirely (corporate suicide) or paying a 95 percent excise tax on the sale of the drug anywhere (another form of corporate suicide). Eventually, the number of drugs subject to this price control will grow to 60.

By now, you should be looking for where the price control will create scarcity, and in this case it’s new miracle cures. Everyone knows someone who is trying or wants to try new weekly stomach shots in order to lose a lot of weight. Still others are excited about nonhormonal therapy for menopause hot flashes or new treatments for cholesterol. The only way these new cures are possible is if the drug companies can sell medicines at a market rate and invest the profit in research and development. If the government takes away the market rate and replaces it with a price control, there is no more money left for research. No research means no new cures.

The winners in this price control are the other areas of the health-care sector that buy prescription drugs and would love to do so at government price-controlled rates — pharmacy benefit managers (PBMs) and giant health-insurance companies.

Bidenomics is a failure. It has led to high inflation; record debt and deficits; mortgage rates locking people out of the market for homes; and unaffordable gas, groceries, and cars. Price controls are the papering over of these failures, a shiny short-term bauble meant to distract Americans from the long-term damage price controls can do. Both parties should reject price controls as bad for the little guy and bad for the economy.

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