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Op-ed Placement

Their Support for Price Controls Confirms Republicans Are Dems Following Speed Limit

BY Daniel Savickas
12/11/2019
Originally Published in Real Clear Markets by Daniel Savickas on 12/11/19.

Libertarian author and media personality Michael Malice has a saying that goes something along these lines, “Conservatives are just progressives driving the speed limit.” It is one of the more prescient observations in modern politics today. Republican politicians who self-describe as conservatives will eventually come to the same conclusions as progressive Democrats, just a little bit later.

There is no shortage of examples of this phenomenon in Washington. Most professed conservatives have now, under the current administration, embraced the command-and-control model when it comes to international trade. You’ll hear barely a peep from elected Republicans about out-of-control government spending, so long as enough hundreds of billions go to the military. The list could (and does) go on.

However, one of the latest iterations of this trend is particularly striking both for how quickly the conversion has occurred and how dangerous it is in what it means for our economy. There are now Republican politicians out and about touting the benefits of price controls on prescription medicine. Not only that, but they are smearing anyone who dares speak out in opposition.

Less than a year ago, Sen. Chuck Grassley (R-Iowa) joined with many conservative voices to oppose the international pricing index (IPI) proposal from the Trump administration. This proposal would impose price controls on prescription medicine in the United States based on what the list prices are in foreign nations. Grassley, at the time, rightly pointed out that such a proposal would harm research and development of new cures.

Grassley vowed to offer an alternative with Sen. Ron Wyden (D-Ore.) that would be less harmful to the market. It was only a matter of months before the Grassley-Wyden bill was put before the American people, containing its own variant of price controls. Grassley presented his bill without a hint of irony or acknowledgment of the blatant hypocrisy.

One key provision of the Grassley-Wyden bill would impose a severe tax on pharmaceutical companies who raise their prices faster than inflation. This ignores the fact that these companies might incur certain costs or face economic realities that necessitate a price hike. It also completely eschews the conservative vision that the market should dictate which prices are and are not reasonable, not the government.

Grassley actually had the gall to claim this wasn’t a price control, because companies could still raise their prices, they’d just have to pay this penalty tax. Grassley may call it a “rebate” to make it sound less scary to his constituents, but it is nothing more than a penalty tax and a price control. This is a government action meant to manipulate prices by any other means than market supply and demand. That is definitionally a price control.

One of the other defenses offered by supposedly conservative proponents of this bill is that it is actually a spending cut. The logic goes that if drugs in Medicare are less expensive, the government won’t have to subsidize as much. By that logic, the government should put price controls on produce in order to “cut spending” on the food stamp program.

Perhaps more absurd than that tortured logic is the notion that the adverse effects of price controls can be stopped or insulated. If drug manufacturers have to pay a penalty tax for raising the prices of their products within Medicare, they will naturally try to offset those costs by raising the prices of their drugs in the commercial market even more. Now, not only is this provision a tax on manufacturers, but it becomes a tax on every man, woman, and child who needs prescription medicine from the commercial market. Conservatives used to understand this. Senator Grassley must have lost the memo.

In a last-ditch effort to paper over the apparent hypocrisy of his bill, Grassley fell back on the old standby of Washington politicians: impugning the motives of your opponents. Grassley took to the Senate floor to call the opposition to his bill shills of the pharmaceutical industry. According to Senator Grassley, anyone who is fearful of price controls on prescription medicine is a corporate sellout. He forgets that he was one of those people not too long ago.

Grassley also forgets that some of the organizations he broadly smeared as sellouts to the pharmaceutical industry were allies when it came to fighting back against the abuses of the industry. Many were behind Grassley and Sen. Patrick Leahy (D-Vt.) when they pushed a bill to make it easier to sue the pharmaceutical manufacturers for patent abuse. Sadly, Grassley has abandoned bipartisan approaches like that in favor of outright price controls.

This is dangerous, especially given the rhetoric on the left these days. Almost every Democratic candidate in the 2020 primary has endorsed some variant of single-payer healthcare. The Trump administration has pushed their IPI proposal. Nancy Pelosi has a drug pricing bill with strict controls on prices. Grassley thinks his is better because it is not as overt as these others. That is just not true.

In fact, Grassley’s could be more dangerous because of what it means going forward. To paraphrase the great Ron Paul, “If you give up one percent, you give up 100 percent of the principle, because one percent becomes two percent until it becomes thirty percent.” Grassley’s proposal may not be as radical as the others described, but he has conceded the argument that the government has a role to play in policing prices. Once that argument has been lost by free market thinkers, it is only a matter of time until we arrive at the more radical answer. Sadly, Grassley has given up the right flank of this argument with stunning speed and with such little resistance to the statist alternative.

This is why it is so important to vociferously oppose any price control with the same fervor. Though you may be driving at a slower speed, you will still end up at the same terrifying destination. Anyone claiming to be a conservative needs to slam on the brakes, or even start driving the other way.