End Price Ceilings—and ‘Parity’

May 21, 1951

At this moment Congress has a rare opportunity. The economic situation and political sentiment at last combine to make it possible to return to free markets—to get rid of both price ceilings and “parity” price supports at a single stroke.

The price-control program is heading into obvious absurdities and inconsistencies. The government is asking for subsidies and “parity” to put farm income and food prices up, and price ceilings to hold them down. It wants to put its foot on the gas and the brake at the same time. The result of that kind of driving, as it ought to have learned, is not to maintain an even rate of speed, but to stall the motor.

The public is becoming disillusioned with price control. So are special groups. Neither workers nor employers can understand wage ceilings that are riddled with exceptions, or escalator clauses for some and not for others. Meat producers and congressmen from cattle- raising states are appalled by the ineptitude of the beef-price “rollback” and predict that it will bring the same sort of beef shortage as in the fall of 1946.

The influential American Farm Bureau Federation is now opposing the continuance of price control in general, and not merely for farm products. This is something different from the tactics of those groups which have put themselves in the untenable position of demanding tight price control for what they have to buy, while vehemently opposing it or demanding loose standards, for what they have to sell.

Of course the OPS warns that without price control living costs may skyrocket. But Congress can prevent this by insisting on a balanced budget and an end to the credit expansion policies of the Treasury and the Federal Reserve System. This is the real remedy for inflation; price control is a fraudulent one.

Labor officials are right in fearing wage control. Farm groups are right in opposing price control. Price ceilings on farm products—whenever those ceilings are below free-market rates—chronically bring black markets or food shortages. In Yugoslavia and India today price ceilings have even brought famines, which are then blamed on “droughts” or “floods” or anything but government policy.

As a condition for granting relief from wage control and price control, Congress and the consumers have a right to demand a quid pro quo. They should remove not only the ceilings but the floors. Congress should not only allow wage control to lapse, but should repeal the Walsh-Healey Act. In addition, it might fix the minimum legal hourly overtime rate at $1.12½ (50 percent above the minimum straight-time rate of 75 cents) and leave higher overtime rates to be determined by collective bargaining.

As applied to agriculture, Congress should end the whole “parity” price formula. That formula constantly raises the food prices paid by city workers. It is a built- in “inflationary pressure.” It tries to freeze forever the price relationships that happened to prevail in a carefully selected five-year period nearly 40 years ago. If that formula is really sound it ought to be applied universally—to steel, aluminum, freight rates, rents, neckties, haircuts—in fact, to the price relationship of every commodity in 1910–14 to every other.

I cannot recall that any member of the farm bloc ever suggested this. In February of this year farm prices averaged 13 percent above even the parity level. This is another way of saying that industrial and other prices averaged 11 percent below the parity level. The farm bloc did not recommend correcting this inequity. “Parity” is a one-way street.

Of course the whole principle of freezing past price relationships is wrong, whether they happen to be the prices of 1910–14 or of June 24, 1950. We freeze the price structure merely at the cost of distorting the structure of production. The very function of free prices and free wages is to balance and synchronize production as among thousands of different commodities and services. Optimum employment and production need two-way freedom for wages and prices. Controls are no substitute for the graded incentives of the market.