Why doesn't the goverment put a freeze on prices instead of raising the wages?

Question

Every time the wages are raised, everyone else wants a piece of it so that whatever the amount of the increase is, the person ends up paying out more in the long run including those on a limited income (social security/disabled/Vets/AFDC) and they don't get a raise. The poor get poorer.

Excuse me, my Mother's last SS raise was $20. for a year! (Cost-of-living)

Answer 1

This was done during WWII. It was never rescinded until the war ended but the fraud and black market in some products was rife.
Cattle rustling was big time, not only because of meat rationing but controlled pricing.
If the gov. initiates price controls, there will be shortages of some products. If one can sell butter at a higher price on the global market, can you see where all the butter will go?
Russia did this and created shortages since global products were too high to sell at controlled prices.

I agrre with you on the point that when wages increase, prices also increase in order to pay the wages. One on a fixed income takes a cut in buying power.
The only ones who keep pace are those who receive increased wages.
Union members come to my mind. The "select few" receive wage increases, medical benefits, etc, and all consumers pay for them. WE pay $1,500.00 or more per automobile to pay benefits.

Answer 2

In a free economy prices are set by the "invisible hand of the market", whatever that means. Many anal retainers out there think that is reason enough to resign to pay higher prices.

If you decide to scrap 100% free markets there is no reason as to why prices could not be fixed up to a certain degree.
It should be possible to cut prices for products sold with high profit margins, although you certainly cannot cut back prices for goods sold almost at the cost of production.

This approach can only work for goods showing an ineleastic demand curve, goods whose demand wont skyrocket just because they are cheap, like AIDS drugs. Demand for most products will increase if prices are artificially repressed but that shouldnt be a problem if production can keep up with demand. If production cant keep up you got a serious problem.

In practice this approach doesnt work due to its inner complexity but there is a better alternative. The government can choose to tax to death greedy companies out there and use the money to pay for subsidies on your basic needs like housing, electricity, food, healthcare, transportation, etc. So they get the money, the goverment takes it away and mail it back to you. Works for me.

I dont see why the government cannot charge Exxon an 80% tax rate and later mail you a little check to help with your gas purchases, it would all be done in a free market system after all.

Many armchair, dick-sucking economists such as the now deceased Milton Friedman (thank god) believe that government control and taxation will lead us to a socialist (communist) society were YOUR fortune 500 company wont have enough incentives to produce. That is bullshit. If there is money to be made production will continue as usual even if your taxes are very high. What do you prefer, less money or no money at all?

Now comes the bad news: If the economy physical capacity to produce or import goods shrinks there is no economic policy on this planet capable of keeping or upgrading your life quality in the long term.

Answer 3

Price ceilings cause shortages.
Price floors cause surpluses.

The federal government has tried both, unsuccessfully.

It should not set any price controls, unfortunately the one on labor persists - and it is a good thing for the workers in question that the price floor is economically not meaningful (it's $5.85, they pay $7 to start at McDonald's).

Answer 4

People on Social Security DO get cost of living increases every year.

Govt. can't put a freeze on prices because they can't tell business how to price their goods and services. We have a free economy.

Answer 5

Because price freezes are very bad. They create shortages of needed items.

The government shouldn't be setting the price of anything.

Fefek, you don't know a damn thing about economics. The government can choose to do many things, but it would be theft to do what you say. Additionally, it would destroy our economy.

Answer 6

because that would make sence. you are right. ss does not keep up with cost of living.

Answer 7

as it was in the beginning, is now and ever shall be . . .it never ends until the music stops.