March 25, 2010
While an undergraduate at Michigan State University about 1969, there was a little steak cafeteria just off campus that I’d go to maybe once a week. I could buy a nice little steak, some Texas toast, a baked potato, and a salad. By drinking water, I kept the price to right at a dollar – that’d be about $5.75 today. Not bad for a really good meal.
Then came graduation and a move to Colorado in 1971. That was the year President Richard Nixon introduced wage and price controls. It was his plan to fight inflation that was what? Five percent?
Introduced in August, the wage and price controls lasted ninety days. Then for the next few years, there were different phases of wage and price controls that were, I think, on again and off again.
My personal problem with those wage and price controls was that they made me stop eating steak.
In 1972, having married the lady who would someday become the Cutest Community Organizer, I enjoyed going maybe once a week with her to a little steak house near where we lived in Pueblo, Colorado. It was somewhat similar to the cafeteria at Michigan State and the steak was good and the price was right.
As the seventies moved on and the Nixon Administration attempted to work its magic with the economy, I noticed the quality of steak began to decline. Then I learned that wage and price controls had messed up the supply chain that delivered the steak. I don’t remember the details, but as the cattle moved from rancher to feedlot operator to slaughterhouse to wholesaler to retailer to my plate, somebody in the chain got to raise their prices while somebody else in the chain could not. Again, I can’t recall the specifics, but it might have been something like the ranchers or feed suppliers could raise their prices but the feedlot operator could not. At any rate, somebody in the chain had to buy product at unregulated prices then had to sell the product at regulated prices. It was an economic idea worthy of government: buy high, sell low.
With those machinations, whoever was being squeezed in the supply chain began to pass on lower qualities of meat. Instead of those nice sweet steaks of Michigan State and early Pueblo days, I now was wrestling with tough junk that tasted flat and was hard to chew.
I quit eating steak. I learned that the low priced steak houses could no longer provide what I had expected in one of my favorite foods. To this day, I dislike modestly-priced steak. Even in nice restaurants where I would pay more money for steak, I found that you take your chances: sometimes a high-priced steak would be good; otherwise it wouldn’t. So why bother? Why risk a good amount of money to be disappointed?
I may be missing something in the economics of this. Since I rarely eat steak any more, I don’t pay much attention to it as a product . It may be many things have occurred besides Nixon messing with the economy nearly forty years ago that have resulted in my inability to find good inexpensive steak and my reluctance to spend top dollar for so-called quality steak.
All I know is that government tampering with markets ruined for me the pleasure of a nice, juicy steak.
Which brings me to my real concern.
I can live without a modest steak indulgence, but the forces which wrecked the steak supply chain are going to start killing people.
Watching government types think they can command and control all aspects of the pricing, supplying, regulating, and, yes, rationing of the health care system would be funny if it weren’t so serious.
They’ve developed a Rube Goldberg device and no one can comprehend what’s in it. How many rancher-to-feedlot-type contradictions are in there? What happens when there is too much Item A provided when we need Item B? And that it all should at Point C instead of Point D? What if the whole thing creates a picture as ridiculous as all of those New Orleans buses that could have been used to evacuate people from Katrina but were never moved to higher ground before the flooding began?
People are going to die from this.
Already I’ve heard two insurance professionals say that the new health care bill’s demand that insurers pay out 85 percent of premiums instead of the current 65 percent will have a devastating effect come January 1. Either insurance companies will have to double or triple premiums or go out of business.
Buy high, sell low.
Other creepy things are beginning to push their way out of this mess of a health bill. For instance, one of the big arguments for the health plan was that it would cover pre-existing conditions. Now, the Associated Press says the language of the bill does not cover pre-existing conditions for some children.
Great. I thought that was another reason why they had to do this. For the children.
What governments refuse to face is that free markets create information that allows buyers and sellers to determine the true value of goods and services. In other words, free markets determine prices. Given the seemingly infinite number of transactions and prices that must be determined, only markets – not government – can generate the required information to truly determine value.
But the government guys always have to interfere.
“We want to help the people. We’ll use our power to suspend the laws of economics. After all, it’s for the people. We know what’s best for them. We want to protect them. True, they may not like it, but they’ll come love it. In the meantime…
“Let them eat steak.”