Don't Sleep on All of President Ford's 'Whip Inflation Now' Ideas

Back in November 2021, when the clerk at my favorite Dollar Tree told me their time-honored “everything-for-one-dollar” pricing strategy was on its deathbed, I had the feeling that inflation was embedded in our economy and no longer “transitory.” Sure enough, in December, the Consumer Price Index grew by more than 7 percent, year-over-year. In January 2022, the increase hit 7.5 percent; and in February almost 8 percent. By then, Federal Reserve Chair Jerome Powell and Treasury Secretary Janet Yellen were admitting what Dollar Tree had known before. We have since seen 8.5 percent CPI growth in March and 8.3 percent in April.

Nevertheless, much of what we’re still hearing out of Washington — especially talk of price gouging — is a convenient distraction and a far cry from past leaders’ willingness to listen and address root causes of inflation.

Yes, the Fed finally had little choice but to deal with the problem by raising interest rates and slowing economic activity. Even so, elected officials had political incentives to show that inflation had nothing to do with their actions — especially the trillions in COVID-19-related stimulus spending promoted by the White House and Congress. The real culprit just had to be found somewhere else. Perhaps to deflect attention and shift blame, some government officials point the finger of inflationary guilt at the private sector and what remains of free-market capitalism.

For example, in an effort to “Whip Inflation Now” — to draw on a sometimes-maligned slogan and the accompanying buttons from the Gerald Ford presidency — we have congressional proposals to empower the Federal Trade Commission to investigate and regulate firms charged with price gouging, a position endorsed by a number of elites. Their logic seems straightforward: When consumers are flush with extra money, product demand increases, shoppers rush to buy more goods in a short period of time, and prices rise (otherwise, the shelves at Dollar Tree would be bare). Higher profits can and often do soon follow.

It takes a while for wage and salary increases to catch up and for more products to get to market and relieve the stress. During the interval, it’s easy to get the erroneous impression that the washing machine or cat food producer, meat packer or gasoline vendor, or used car dealer or university board of trustees are making unnecessary profits.

It gets a little more complicated in our highly regulated world, where all this can be more than just an erroneous impression. Business-friendly regulations — limitations on imports, regulated entry into the market, subsidies to existing firms — do in fact enable higher prices and profits to stay around longer than would be the case otherwise. Resolving the problem can spur calls for piling on more regulation, as with the proposed FTC regulation — or we can look to regulatory reform.

It was during the 1974-1977 Gerald Ford presidency that concern over inflation led to major deregulation efforts and a better understanding that government itself can be an unrecognized accomplice to the economic forces that generate higher levels of inflation. Upon taking office, President Ford instructed the Department of Commerce to hold hearings in cities and towns nationwide to gain an understanding of the situation. It turned out that burdensome regulation was a common topic of concern expressed by people who wanted to innovate, produce more and cheaper products, and find lower-cost ways to operate.

I participated in one of those hearings in Columbia, South Carolina, and later joined the staff of the Ford administration’s Council on Wage & Price Stability, where major steps were taken to reduce the burden of federal regulation. The energetic Ford effort led to an ongoing executive branch initiative that continues to guide the federal regulatory process in the hope of generating lower-cost and more effective outcomes. But there is only so much it can do in a massive government with a penchant for regulation and favoritism.

Given where we are today, with record-setting inflation and a highly regulated economy, this is an ideal time to reexamine the role regulation plays in reducing the ability of the economy to energetically adjust to the massive changes imposed by COVID, stimulus, Russia-Ukraine crisis-induced energy and food price shocks, and the ongoing realignment of America’s trade relationships.

Instead of adding more regulations, we should take concerted action at all government levels to free up the economy. That’s one way to Whip Inflation Now.

Bruce Yandle is a distinguished adjunct fellow with the Mercatus Center at George Mason University, dean emeritus of the Clemson College of Business and Behavioral Sciences, and a former executive director of the Federal Trade Commission.