We Saw How Price Controls Worked in the 1970s. Did We Learn Anything?

Since Kamala Harris assumed the role of Democrat presidential nominee, she has presented few specific policy proposals for voters to use in making their ballot decisions. As I was writing some posts over the weekend, detailing my work experiences with the changes that took place in that timeframe, including automation eliminating most paper check transactions, I remembered some other events of that period.

The Vietnam conflict had been a major issue for Americans as the decade of the sixties concluded, but it was in the seventies when we got some real learning experiences in macroeconomics and government monetary policy interventions. The American economy went into what was termed an economic recession in 1970. That was a new experience for many Americans, and it was a big part of what prompted me to leave the small data processing service bureau where I had been employed for three years after leaving a position in commercial bank operations systems development.

I remember the first half of the decade as being dominated by political issues: President Nixon's dealings with China, the election campaign against Democrat George McGovern, Vice-President Agnew's expulsion from office for uncovered misbehavior, and Gerald Ford replacing him; Watergate and Nixon's resignation, Ford becoming president, and wrapping up with the end of the American involvement in the Vietnam conflict. Wow! That seems like a really busy half-decade — and I left out several significant events. But we were just getting started.

After Nixon left office, the 1976 presidential campaign started. I recall that Ronald Reagan, former Hollywood actor and governor of California challenged President Ford but the incumbent got the nomination and was pitted against a former Democrat governor of Georgia, Jimmy Carter. Guess what the Republican election campaign slogan was: "WIN," or "Whip Inflation Now." It didn't work. Carter won the election, but "WIN" said a lot about America's economic dilemma during the first half of the decade.

This was about the time that I started working at the Treasury Department, managing the systems development project to convert federal check payments to electronically delivered Direct Deposit. Both inflation and interest rates rose over time to double digits. The OPEC energy cartel limited market production of crude oil, and this had an immediate effect on the world market price. Retail gasoline prices rose rapidly in America. The Carter Administration placed price controls on retail gasoline at the pump, and this created shortages in supply immediately. This created a new problem for the people in our society.

The gap created distanced demand from the supply of retail gasoline, causing enormous lines at gasoline stations, which were aggravated by the shortage that left many stations without gasoline to sell. A rule was put in place to limit customers at stations to alternate days depending on whether tags ended in even or odd numbers. This reduced the size of lines, but they were still long and this just added to the frustrations of a people already burdened with inflation and high interest rates. My family and I experienced it all very directly.

And it eventually arrived as an issue in my job responsibility. The professional economists in the Carter Administration and the Treasury Department were of two minds. Those who supported the price controls on retail gasoline, which were already in effect at something like $.75/gallon, considered implementing rationing similar to what had been done during WWII. This would involve my staff in analysis, for planning how to produce and distribute rationing coupons for gasoline. The more free-market economists said the short supply problem would not exist and would go away if the price controls were removed, allowing the price to rise to the world market price — somewhere in the neighborhood of $1.50/gallon. The latter approach was taken and the problem went away. (A miracle.)

So my Operations Planning and Research Staff went back to work on getting rid of checks.