Source: Jon N. Hall

In his State of the Union Address on March 1, the president repeatedly used the word “price” and its synonym “cost.” What’s clear from his SOTU speech is that President Biden doesn’t really understand prices and pricing, for he said, “let’s cap the cost of insulin at $35.”

Let’s not, okay. Biden claimed: “Insulin costs about $10 a vial to make.” If politicians feel the irresistible urge to dictate what the price of insulin will be, then why allow the pharmaceutical companies a 350 percent markup, why not set the price at $11 a vial, allowing them to make a reasonable 10 percent profit?

Biden also said, “let’s let Medicare negotiate the price of prescription drugs.” If American retirees are paying more for prescription drugs than the citizens of other countries, as is the case, then the solution is to demand that Big Pharma charges everyone the same prices, not have prices set by government diktat. Let’s stop subsidizing foreigners’ drugs.

Biden said that his “top priority is getting prices under control,” which was an acknowledgment of his growing problem, which is that price inflation is getting out of control on Biden’s watch.

In the SOTU, Biden assured us: “I’m a capitalist.” But Joe doesn’t appreciate the importance, the centrality, of prices in an economy like ours. Ideally, prices are “set” by millions of free folk constantly making billions of transactions based on an untold number of calculations and decisions about what they need or desire, and what they can afford. That’s how prices work in a free market system.

Such a pure, laissez-faire, capitalist, free-enterprise system, however, hasn’t existed for huge sectors of the American economy since at least the New Deal era. More and more, the government comes between buyer and seller and subverts the sensitive price mechanism.

Where price is especially sensitive to “supply and demand” is in the realm of essentials, such as food and fuel, and we’re seeing this right now in spades. If the supply of an essential is low, its price immediately rises. Government can try to stop upward spirals in the price of essentials, but such measures can cause supply to run out even sooner or drive sales underground.

But just as the government tries to make some prices low, it tries to make other prices high. The Agricultural Adjustment Act (1933) was an effort to raise prices for farmers, who “were paid to destroy crops and livestock, which led to depressing scenes of fields plowed under, corn burned as fuel, and piglets slaughtered.” In other words, prop up prices by reducing supply. (This destruction of food, by the way, was done when Americans were standing in breadlines.)

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America experimented with wage and price controls back in the 1970s, and the results weren’t good. We speak of wages and prices as though they were two different things. But a wage is a price, the price of labor and services rendered; it’s just one of the costs of doing business.

In his SOTU, Biden said: “Let’s… raise the minimum wage to $15 an hour.” But often, the value added to a business by the work of some individuals just isn’t worth $15. Minimum wage laws are the government dictating a price, which jacks up other prices, like for a cheeseburger.

In the sphere of wages, government intrudes into price in a variety of ways. The bailouts of GM and Chrysler were partly about the government propping up the price of UAW labor. Mandated employee benefits jack up the price of labor, which gets passed along to the consumer.

An amazing thing about progressive politicians is that they actually think they know what prices should be, despite so many of them never having run a business. And their preferred prices always seem to dovetail with their own political needs.

So, politicians want to set some prices at lower points, and other prices, like for the labor of their favored groups, at higher points. And then they want to simply wipe out some prices altogether, by forgiving student debt and giving folks stuff. Of course, they can’t actually erase the price of free stuff; they just shift the paying of such prices to the taxpayer.

The consequences of government intrusion into prices include shortages; unemployment; inflation; loss of industry due to offshoring; and artificial prices that foul the real market.

On March 7, The Hill reported that the national average gas price hit an all-time-high (italics added):

The national average on Monday reached $4.104 a gallon, surpassing the 2008 record of $4.103. […]

“Americans have never seen gasoline prices this high, nor have we seen the pace of increases so fast and furious. That combination makes this situation all the more remarkable and intense, with crippling sanctions on Russia curbing their flow of oil, leading to the massive spike in the price of all fuels: gasoline, diesel, jet fuel and more,” Patrick De Haan, head of petroleum analysis at GasBuddy, said in a statement.

“It’s a dire situation and won’t improve any time soon. The high prices are likely to stick around for not days or weeks, like they did in 2008, but months. GasBuddy now expects the yearly national average to rise to its highest ever recorded,” he added.

Biden had already tapped the Strategic Petroleum Reserve, to presumably drive down the price at the pump by creating more supply. Because the SPR is for emergencies only, that was an obvious misuse of the SPR, especially since Biden won’t do the one obvious thing that would bring fuel prices down.

What Biden needs to do to bring fuel prices down is to reverse his destructive policies for domestic oil and gas production. Not only would that help America and her allies, but it could also hurt Putin. But Biden needs Putin to help him with his Iran nuclear deal, so turning on the domestic spigot appears unlikely.

In its broader sense, a price is anything that must be given up in order to obtain something. The title of the old comedy What Price Glory? poses a question that can be entertained seriously. The price of glory is sacrifice. One usually can’t achieve glory (i.e. greatness) in anything without giving up a lot. Foregoing a soft life of ease and creature comforts is the price of achieving anything in sports and the arts. Most folks aren’t willing to pay that price; they’d rather sit and watch than participate.

At least Biden’s speechwriter understands this broader sense of “price,” for in the SOTU Biden read this: “When dictators do not pay a price for their aggression, they cause more chaos. […] But while he may make gains on the battlefield, he will pay a continuing high price over the long run.”

With the prices for food, fuel, and so much else rising so fast, now is the time for Americans to consider whether they can afford to continue paying the price for the Biden presidency.