Wartime Price Controls: Economic Restrictions in a State of Emergency

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Although there hasn’t been a manifestation of voting on national COVID-19 economic restrictions as these have been governor and local authority dictates, conservative opposition to strong and lengthy restrictions on business has manifested itself here on the state level, through protests, and through presidential tweets. This opposition to strong and lengthy restrictions on business reminded me of the imposition of economic controls during World War II. After all, if you think about it, humanity is in a war against COVID-19 and everyone is de facto drafted in the effort against it. Price controls, as well as national conservative opposition to them, manifested during World War II and in the post-war period.

In 1942, Congress passed the Emergency Price Control Act, establishing the Office of Price Administration (OPA) as an independent agency, which had been previously created by President Roosevelt. The purpose of this law was to prevent high inflation due to the economic circumstances of wartime, which would require vast levels of military spending. The fear of inflation was that it would lessen consumer spending and be particularly disadvantageous to working class American families. This passed the House on January 26th by a vote of 289-114, with Democrats breaking for 220-23 and Republicans breaking against 68-87. The Senate passed it the next day 65-14, with Democrats breaking for 48-6 and Republicans 15-8. Nearly all the Democrats who voted against were from rural areas, as the prices of agricultural commodities would be artificially capped. The legislation was far better received in the Northeast, with the entirety of New England, Republicans and Democrats alike, voting for it with the sole exception of Senator George Aiken of Vermont, who had been a non-interventionist. Its reception, however, was most hostile in the Midwest. The OPA also imposed rationing in response to shortages on certain goods that were caused by war. These included sugar, coffee, rubber, and tin. Efforts to curb price control would gain a great deal of support from Republicans in the next Congress, including proposals by Congressman Everett Dirksen, one of only two Illinois House Republicans to vote for the original price control legislation, to reduce funds for the Office of Price Administration and to subject price control to judicial review. Some supporters of price control urged it beyond wartime and immediate postwar conditions and argued that a release of such controls would serve to jack up prices again. The OPA ultimately came to an end on May 29, 1947.

The subject of price control, as I have written about before, ultimately was the greatest deciding factor of the 1946 midterms that briefly catapulted Republicans back into a legislative majority, specifically as it applied to meat. The Korean War once again brought price controls to the United States, this time through a body called the Wage Stabilization Board, which ultimately came to an end with President Dwight Eisenhower’s executive order abolishing it on February 6, 1953. Unlike COVID-19 controls, price controls were subjected to numerous votes in Congress, some of the most critical ones I have listed here, including with vote breakdowns to show how the parties voted. This information comes from Govtrack as well as my own research into Congressional Quarterly.

Key Votes on Price Control During World War II and Immediate Aftermath, House

1. Price Control Bill

This was the initial price control proposal in the face of impending war for the United States.

Passed 224-161: D 166-64; R 56-93; P 0-3. FL 0-1, I 1-0, A 1-0, 11/28/41.

2. Recommit Price Control Bill

Motion to recommit the bill setting price controls, striking authorization for the OPA to issue and revoke licenses and to reinstate a board of review.

Defeated 189-210: D 36-203; R 149-6; P 3-0; FL 1-0, I 0-1, 1/26/42.

3. Conference Report on Price Control Bill

Passed 289-114: D 220-23; R 68-87; P 0-3; FL 0-1; I 1-0, 1/26/42.

4. Cut Funds for Office of Price Administration

Rep. Everett Dirksen (R-Ill.) amendment, reducing funds for the OPA from $165 million to $130 million.

Passed 185-147: D 26-135; R 156-11; P 2-0; FL 1-0; ALP 0-1, 6/18/43.

5. Limit Food Price Controls

Rep. Harry Sauthoff (Progressive-Wis.) amendment, providing that no part of the appropriation be employed for price control over any food commodity that has yet to reach parity, nor for any commodity that isn’t a necessity.

Passed 229-105: D 63-101; R 163-3; P 2-0; FL 1-0; ALP 0-1, 6/18/43.

6. Limit Oil Price Controls

Rep. Wesley Disney (D-Okla.) amendment, providing that in the setting of parity prices for crude oil, consideration be given to the necessity of drilling for oil.

Defeated 178-204: D 61-121; R 116-80; P 0-2; FL 1-0; ALP 0-1, 6/14/44.

7. Judicial Review of Price Control

Rep. Everett Dirksen (R-Ill.) amendment, providing for judicial review for price controls.

Passed 206-181: D 63-122; R 142-56; P 0-2; FL 1-0; ALP 0-1, 6/14/44.

8. Profit Margin Amendment to Price Control Bill

Rep. George Bates (R-Mass.) amendment, providing that Office of Price Administration price ceilings must allow a profit margin in each category of livestock products.

Passed 249-123: D 87-120; R 161-2; P 1-0; AL 0-1, 6/23/45. 

9. Judicial Review Amendment to Price Control Bill
Rep. Everett Dirksen (R-Ill.) amendment, permitting judicial review of Office of Price Administration enforcement actions.

Passed 200-164: D 47-154; R 153-8; P 0-1; AL 0-1, 6/23/45.

10. Price Control Extension

Passage of the bill extending the Office of Price Administration’s authority to impose price ceilings.

Passed 255-94: D 176-15; R 77-79; P 1-0; AL 1-0, 6/23/45. 

11. Terminate Price Controls on March 31, 1947

Rep. Jesse Wolcott (R-Mich.) amendment, ending price controls on March 31, 1947.

Adopted 209-189: D 45-171; R 164-16; P 0-1; AL 0-1, 4/17/46.

12. Account for Costs and Profit in Price Control

Rep. Jesse Wolcott (R-Mich.) amendment, requiring price controls must be based on current costs of production and processing and permitting a margin for reasonable profit.

Adopted 260-137: D 88-126; R 172-9; P 0-1; AL 0-1, 4/17/46.

13. End Price Controls on Livestock

Rep. James Wadsworth (R-N.Y.) amendment, ending price controls on livestock immediately.

Defeated 172-223: D 44-170; R 128-51; P 0-1; AL 0-1, 4/17/46.

14. End Food Subsidies December 31, 1946

Rep. Jesse Wolcott (R-Mich.) amendment, ending food subsidies on December 31, 1946.

Adopted 245-151: D 77-137; R 168-12; P 0-1; AL 0-1, 4/17/46.

15. End Meat Subsidies

Rep. John Flannagan (D-Va.) amendment, ending meat subsidies promptly.

Adopted 214-182: D 79-134; R 135-46; P 0-1; AL 0-1, 4/17/46.

16. Recommit Price Control Bill

Rep. Ross Rizley (R-Okla.) motion to recommit the extension of the authority of the Office of Price Administration to control prices, ending all controls on livestock, meat, and dairy products immediately.

Defeated 151-220: D 31-162; R 119-57; P 1-0; AL 0-1, 6/25/46.

Senate

  1. Price Control Bill

Passed 65-14: D 48-6; R 15-8; I 1-0; P 1-0, 1/27/42.

  1. “Little Steel” Formula

Sen. Joseph Ball (R-Minn.) proposed to authorize wage increases by as much as 15% over rates paid on January 1, 1941.

Defeated 12-69: D 1-56; R 11-11; I 0-1; P 0-1, 9/30/42.

  1. Require Congressional Reauthorization for Food Subsidies Past June 30, 1945

End food subsidies June 30, 1945, unless authorized by Congress.

Passed 50-22: D 21-22; R 27-0; P 1-0, 6/5/44.

  1. Increase Parity Oil Prices Before Control Applies

Boost oil price ceiling by $0.35 per barrel.

Defeated 25-42: D 16-24; R 9-17; P 0-1, 6/9/44.

  1. Price Ceiling for Agricultural Products

Sen. Alben Barkley (D-Ky.) amendment, making unlawful maximum prices resulting from processing of any agricultural commodity including livestock which doesn’t equal all costs and expenses plus reasonable profit.

Adopted 36-31: D 29-7; R 6-24; P 1-0, 6/11/45.

  1. Fix Price Control – Dollar Margins Over Cost to 1939

Sen. Robert Taft (R-Ohio) amendment, providing for fixing maximum prices the same dollar margin over cost received for commodities in 1939.

Rejected 26-41: D 1-35; R 25-5; P 0-1, 6/11/45.

  1. Price Control – Costs and Reasonable Profit for Agriculture

Sen. Kenneth Wherry (R-Neb.) amendment, require inclusion in maximum price fixed for producers of livestock, grain, or other agricultural commodity, all costs and expenses plus a reasonable profit.

Adopted 37-29: D 10-25; R 27-3; P 0-1, 6/11/45.

  1. Increase Meat and Flour Subsidies

Amendment to the Office of Price Administration extension, increasing meat and flour subsidies for fiscal 1947.

Passed 44-33: D 34-9; R 9-24; P 1-0, 2/27/46.

  1. Reduce Funds for the Office of Price Administration

Passed 45-25: D 17-21; R 28-3; P 0-1, 2/27/46.

  1. Limit Price Control to Costs of Products for October 1941

Sen. Robert Taft (R-Ohio) amendment, requiring that maximum prices be set on manufacturers and processors be based on the cost of the product for the base period of October 1-15, 1941.

Adopted 44-29: D 16-25; R 28-3; P 0-1, 6/12/46.

  1. Maximum Prices Based on Costs and Profits

Sen. Kenneth Wherry (R-Neb.) amendment, requiring that maximum price established for distributors, wholesalers, and retailers shall be based on current costs of acquisition in addition to prewar markup.

Adopted 42-25: D 18-20; R 24-5, 6/13/46.

  1. Extend Price Control, No Changes

Sen. Claude Pepper (D-Fla.) amendment, extending price control with no amendments.

Rejected 17-52; D 16-25; R 1-27, 6/13/46.

  1. No Price Ceilings on Food

Sen. Elmer Thomas (D-Okla.) amendment, prohibiting price ceilings on livestock, poultry, eggs, or food or feed products from any agency.

Defeated 25-51: D 7-38; R 18-12; P 0-1, 7/9/46.

  1. Decontrol Meat, Poultry, and Eggs

Sen. Kenneth Wherry (R-Neb.) amendment, prohibiting price ceilings on meat, poultry, and eggs from the Office of Price Administration.

Adopted 49-26: D 18-25; R 31-0; P 0-1, 7/9/46.

  1. End Federal Rent Control in States That Established Rent Control

Sens. William Knowland (R-Calif.) and Homer Ferguson (R-Mich.) amendment, ending federal rent controls in states where rent control has been established.

Passed 59-20: D 27-19; R 31-1; P 1-0, 7/11/46.

  1. Use 1940 Prices Plus Cost Increases for Price Control

Sen. Robert Taft (R-Ohio) amendment, allowing the use of 1940 prices plus cost increases since then in determining price controls.

Defeated 40-40: D 9-37; R 31-2; P 0-1, 7/11/46.

What we see here is a mixed Republican view on whether price control should exist at all in war and in immediate post-war conditions and most of them wanted restrictions on price controls to make them easier for business to handle. The conservative proposals constituted a mostly market approach to wartime economics. This is a similar line to how Republicans have reacted to COVID-19, although I would argue that opposition to wartime controls were far more justified than opposition to mask-wearing. Price and rent controls are widely panned as policies by economists, although some make exceptions for wartime and others make exceptions for healthcare. OPA supporters defended the organization by pointing out that prices only increased in World War II by 31% rather than how they did in World War I, by 62%. However, there is no doubt that a substantial black market formed in response, including a substantial rise in cattle rustling and under-the-table dealings, especially on meat and gasoline. The rationing stamp program also proved to be overly complicated and getting the right food with the right government-issued stamps could mean going to multiple stores to buy dinner. There was also significant adulteration of products advised by the OPA that lowered their quality in the name of maintaining low prices. Keeping businesses open with certain safety restrictions seems to be the maximum the mainstream conservative position for the pandemic goes and it is possible that with the incoming Biden Administration we will start to see Congressional votes surrounding such restrictions, depending on how long the vaccines take to distribute and how far Biden is willing to take the use of executive power.

References

Higgs, R. The Two-Price System: U.S. Rationing During World War II. Foundation for Economic Education.

Retrieved from

https://fee.org/articles/the-two-price-system-us-rationing-during-world-war-ii/

Office of Price Administration. Encyclopedia.com.

Retrieved from

https://www.encyclopedia.com/history/united-states-and-canada/us-history/office-price-administration

Urgent Deficiency Appropriation, 1946. CQ Almanac.

Retrieved from

https://library.cqpress.com/cqalmanac/document.php?id=cqal46-1410506

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