Federal Price Controls Didn’t Work Very Well 50 Years Ago

Vice President Kamala Harris has proposed an economic plan, which includes price controls, to fix the problems created during the Biden-Harris administration. The plan involves establishing federal price controls on food and implementing punishment for grocery stores for “price gouging.”

The history of price controls dates back some 50 years and involves energy.

On August 15, 1971, ironically Harris introduced her plan on August 16, President Richard Nixon introduced his “90-day price freeze” on many items including petroleum. Shortages began the next year, and the industry was fast-tracked to allocation controls and a suite of government programs to increase supply or reduce demand.

“The 37^th president of the United States got on the wrong side of economic law three years before his resignation by imposing the first peacetime wage-and-price controls in American history,” wrote Robert L.Bradly, Jr., Senior Fellow at the American Institute of Economic Research.

Nixon’s Phase I turned into Phase II, Phase III, Phase III½, and Phase IV. Worse, petroleum was singled out for continued tip-to-toe regulation under the Emergency Petroleum Allocation Act of 1973, which would not be revoked until early 1981.

The propensity of government intervention to expand from its own shortcomings defined U.S. energy policy in the 1970s. Price deregulation, meanwhile, was off the table, Bradly stated.

First, federal bureaucracies managed the shortage with a variety of edicts. Congressional hearings in March 1973 on energy conservation, a first, attracted testimony from the Environmental Defense Fund, Friends of the Earth, and the Sierra Club.

Second, different price tiers for physically identical crude (old oil, new oil, etc.) required a very complicated, politicized program to equalize prices for refineries.

Third, federal authorities restarted programs to turn relatively plentiful coal into natural gas and oil (synfuel programs would be abandoned).

Fourth, the U.S. created the Strategic Petroleum Reserve to prepare for another oil-import crisis.

The initial regulations, covering 27 pages in the Federal Register, would burgeon into more than 5,000 pages in its first two years. By the time it was over seven years later, there would be “no fewer than six different regulatory agencies and seven distinct price control regimes, each successively more complicated and pervasive,” Bradly stated.

Politics were rampant. Between 1977 and 1980, more than 300 energy bills were considered in Congress. State legislatures considered countless more.

Bradly noted even ardent interventionists would throw in the towel. Senator Edward Kennedy (D-MA) complained about the “outrageous weed garden of regulation.” James Schlesinger, the first head of the U.S. Department of Energy (created in 1977), called the experience “the political equivalent of Chinese water torture.”

And it all started with Nixon’s “temporary” price control order, with energy an afterthought, Bradly said.

Alex Mills is the former President of Texas Alliance of Energy Producers.