I was in the car today when I heard Rush Limbaugh talk about the history of pensions and how President Franklin D. Roosevelt froze wages and price increases in the country. To entice quality workers General Motors and the United Auto Workers began putting together incentive packages to make them more attractive to workers who knew wages would not increase any time soon. The bottom line of this history is, had government stayed out of the business of the people, our country would not be crippled by unsustainable pension programs today.
Health care benefits came out of price controls. It’s a perfect example of unintended consequences. Health care benefits and pensions coming out of price controls and wage controls is a great example of unintended consequences. ~ Rush Limbaugh
So a way was devised to exceed FDR’s wage freeze, and that was health care benefits and pensions. They had no other way to compete. Now, the reason wage controls and price controls never work — and I love this example — back in 1972, Richard Nixon, when we had I think 3% inflation, or 3% unemployment, it was not bad at all but we were in the middle of a faux oil embargo, instituted wage and price controls.
Yet when you went to the grocery store, things still seemed to cost more and the way that happened was very simple. The butcher would simply devise at the meat counter a new cut that came into existence after the price control was placed on beef, and he could price it whatever he wanted. It was new and not subject to the price control until the price was established.
So just to pick one, the bone-in rib eye, I have no idea if that existed before Nixon or not, but say it had not existed, the bone-in rib eye, all of a sudden the butcher makes a new cut, the bone-in rib eye and charges X for it, and that is how the butcher in a meat market or the supermarket got around the price controls.
Similarly when it came to wages, hello stock options, hello pension plans, health care health care benefits, hello all of that stuff, government attempting to control always runs up against creative entrepreneurs who will find ways around it. So FDR institutes a wage freeze, and in World War II, companies that need qualified workers start to offer attractive employment packages to get good qualified people, and so they started to attract pensions and health care benefits…
Health care benefits came out of price controls. It’s a perfect example of unintended consequences. Health care benefits and pensions coming out of price controls and wage controls is a great example of unintended consequences.
And then they just caught on, and then, once they caught on, it became clear what they were, money laundering schemes. Simply a way for the Democrat Party to engineer money circuitously ending up back under it’s control.
I found this interesting and hope you did too. Pass it on to your middle schoolers.