Lee: Price Controls Don't Work
WASHINGTON—Today, Ranking Member Mike Lee (R-UT) released a Joint Economic Committee report showing the high cost of responding to inflation with price controls.
In a misguided attempt to protect consumers from the highest levels of inflation reported in the past 40 years, policymakers in recent months have proposed setting government-determined price controls. The report reviews past episodes of high inflation and finds that when price controls are implemented, they always result in negative outcomes, including shortages, rationing, quality reductions, and even higher inflation when price controls expire.
The report finds that the de facto price controls on certain prescription drugs in the Inflation Reduction Act of 2022 will mean less innovation and fewer life-saving drugs make it to market, resulting in 6 million to 19 million years of lost life over the next three decades.
Ranking Member Lee said, “Congress cannot fix inflation through price controls. Economic theory and repeated historical failures show that artificially fixing prices always backfires. Unfortunately, the price controls on prescription drugs in the Inflation Reduction Act will cause the equivalent of up to 1.9 million Americans to lose a full decade of life over the next thirty years.”
Instead of using price controls to lower inflation, policymakers should stop authorizing new spending and reduce regulatory and other supply-side barriers that keep American businesses from meeting consumer needs.
The Joint Economic Committee is Congress's bicameral economic research center and home of the Social Capital Project, led by Ranking Member Mike Lee.