“Price gouging” is the focus of Vice President Kamala Harris economic agendasays his presidential campaign. It will crack down on “excessive pricing” and “excessive corporate profits,” especially for groceries.
So what level is considered “excessive,” you might ask? TBD, but Harris will ban it.
That's the thing about price gouging: As stated hardcore pornyouknow it when you see it.
It's not hard to figure out where this proposal came from. Voters want someone to blame for high grocery bills, and the presidential candidates have apparently decided the choices are the Biden administration or corporate greed. Harris has chosen the latter.
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In a press release Wednesday, said his campaign the first 100 days of his presidency would include the “first federal ban on food and grocery price gouging, setting clear rules of the road to make it clear that large corporations cannot unfairly exploit consumers for excessive corporate profits on food “. and groceries”.
What are these “clear rules of the road” or the thresholds that determine when a price or profit level becomes “excessive”? The memo doesn't say, and the campaign didn't respond to questions I sent seeking clarification.
keep going Caterina Rampell
The most likely template for Harris' proposal is a recent invoice from Sen. Elizabeth Warren (D-Mass.). (Harris co-sponsors similar legislation with Warren in 2020, when Harris was a senator.) Warren's bill would prohibit any “grossly excessive pricing” during any “unusual disturbance” in a market. Unfortunately, no definitions were given for these terms either; rather, the bill would empower the Federal Trade Commission to enforce the bans using whatever metrics it sees fit.
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It's hard to overstate how bad this policy is. It is, in all but name, a broad set of price controls applied by the government to all industries, not just food. Supply and demand would no longer determine prices or profit levels. Some distant bureaucrat in Washington would. The FTC could tell, for example, a Kroger in Ohio what an acceptable price it can charge for milk.
At best this would lead to shortages, black markets i hoardingbetween other distortions seen previous times, countries tried to limit price growth by fiat. (There's a reason why the narrower “price gouging” laws that exist in some US states are rarely invoked.) At worst, it could be accidental go up prices.
That's because, among other things, the legislation would prohibit companies from offering lower prices to a big customer like Costco than to Joe's Corner Store, meaning volume discounts are in trouble. Worse, it would require public companies to release detailed internal data on costs, margins, contracts and their future pricing strategies. Publish cost and pricing plans publicly is a fantastic way for companies collusion to keep prices higher – all facilitated by the government.
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Usually, the government does not like collusion. In fact, the Harris campaign's statement about its anti-“gouging” agenda highlights a case he won as California attorney general against businesses. collusion to fix the prices of LCD flat screens. Similarly, presidential administrations of both parties have pursued cases against cartels and other anti-competitive conduct.
That's because pricing is alreadyillegal. And it should be! It is important to distinguish between actual cartel behavior (whether among television manufacturers or meat packers) and temporary spikes in prices and profits due to high demand or supply chain disruptions. Harris financial advisors are too confused or lazy to tell the difference. They don't seem to know the history of these kinds of policies, and apparently haven't thought much about what would make markets more competitive or improve the lives of voters.
They don't even seem very familiar with what's going on with grocery prices, where the battle against inflation has, believe it or not, practically. alreadyit has been earned.
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Grocery price inflation has fallen sharply since its peak in 2022
Percentage change in grocery prices compared to the previous year
On Wednesday, a government report showed that grocery prices rose sharply in July 1 percent of last year, like the The White House itself promoted. In fact, annual grocery price inflation has remained around this level for the past eight months, well below double-digit inflation in mid-2022.
Also, supermarket profit margins are notoriously thin. Despite Harris's (and Warren's) accusations of “excessive corporate profits,” these margins remained relatively thin even as prices rose. Net profit margins in the grocery industry hit an all-time high 3 percent in 2020which fell to 1.6 percent last year. If that seems high, consider that the average net profit margin (what's left after expenses) for all public companies nationwide is 8 percent.
So what really happened to grocery inflation, if not “price gouging” (however that's defined)? Strong consumer demand and major supply disruptions (coronavirus pandemic, bird flu, Russian invasion of Ukraine, etc.) pushed up prices and profits. Once these shocks subsided and consumers began spending their pandemic savings, price growth cooled.
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These are the kinds of facts the Harris campaign should be telling consumers, not exploiting them for demagogic profit because polls suggest people are mad with “greed.”
But besides the point: if your opponent says you are a “communist” you might not start with an economic agenda that can (accurately) be labeled as federal price controls. We already have a lot of them economic joke from the Republican presidential ticket. Do we really need more of the other side, too?
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