Washington’s Soviet-Style Price Controls

Posted: Jul 16, 2012 12:01 AM
Washington’s Soviet-Style Price Controls
The Republican-controlled House could learn something from the Democrat-dominated DC City Council.

Yes, you read that right.

Despite their dysfunction and corruption, Washington’s city officials set a positive example last week when massive public pressure forced them to abandon a half-cocked scheme to implement price controls on a private car service operating in the District.

In an effort to protect the politically influential taxicab industry from competition, several council members sought to set the minimum fare for Uber – the private car service – at no less than five times a taxi’s minimum fare. When the effort failed, one council member complained it “left the D.C. taxicab drivers out" because “they leave here today with no more protections."

Welcome to Washington, where politicians engage in Soviet-style protection from competition for politically influential industries.

Sadly, that characterization extends beyond the DC City Council to our lawmakers in Congress. Last week, after the House Agriculture Committee passed a nearly $1 trillion farm and food stamp bill, the committee chairman touted the “absolute importance of real price protection in a farm bill.”

Real price protections, like the production limits we have in our dairy programs? Remember, just last week Speaker John Boehner (R-OH) said, “We’ve got a Soviet-style dairy program in America today, and one of the proposals in the farm bill would actually make it worse.”

The daylight between the chairman and the Speaker is one of many reasons the massive farm and food bill is unlikely to see time on the House floor.

The massive market distortions in the farm bill are everywhere. Rather than allowing farmers to respond to market forces (i.e., the demands of American and global consumers), they are responding to incentives (and disincentives) from Washington.

One Minnesota farmer revealed the market-distorting nature of the current system, saying, “When you can remove nearly all the risk involved and guarantee yourself a profit, it’s not a bad business decision.” This farmer went on to add, “I can farm on low-quality land that I know is not going to produce and still turn a profit.”

If it seems like farmers are making decisions based on Washington policies that is because they are. Dean North, president of the New York Farm Bureau, explained just how reliant farmers are on Washington. He said his farmers need a long-term farm bill, otherwise there is “uncertainty about what to grow, when to grow and under what programs.”

A crop-specific example would be America’s egregious sugar program, which results in Americans paying two to four times more for sugar than consumers do in other countries. According to the International Trade Commission, sugar quotas alone cost Americans $49 million a year.

Defenders of America’s sugar regime will say that it saves American jobs. The DC City Council made a similar claim to justify their attempted price controls on Uber, saying it would save jobs in the city’s taxi industry. But when it comes to sugar, the Department of Commerce estimates that for every one job saved in the sugar industry, nearly three jobs in the confectionery industry are lost.

The simple truth is that like most market-distorting policies, America’s sugar policy increases costs and kills jobs; and yet, when conservatives on the Agriculture Committee tried to kill the program, Republicans and Democrats united to maintain the destructive status quo.

Those lawmakers should heed the words of DC Council member David Catania, who opposed the Uber price controls, saying, “Our customers are not the taxi cabs, our customers are the residents.?.?. I didn’t take an oath of office to support the taxi cab industry.”

Our representatives in Congress did not take an oath to support the special interests, pick winners and losers in the market place, or implement “real price protection” for commodities. Their obligation is to us, and it is time they start remembering that.