
Harris Proposes Federal Ban on ‘Price Gouging’ Amid Persistent Inflation Concerns
- foodfightadmin
- August 18, 2024
- Federal, Hunger In America
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In a bold move to address the ongoing economic pressures facing American consumers, Vice President Kamala Harris proposed a federal ban on “price gouging” by food suppliers and grocery stores. The proposal comes as part of a broader agenda aimed at lowering the cost of housing, medicine, and food—areas where rising prices have been particularly painful for many voters.
Harris’s proposal targets a practice that has long been contentious but lacks a clear, universally accepted definition. “Price gouging” generally refers to sharp increases in prices following a disruption in supply, such as after a natural disaster. Consumer advocates argue that the practice becomes exploitative when retailers significantly hike prices on essential goods during such times. While several states already have restrictions on price gouging, there is currently no federal-level ban.
The proposal seeks to address a vulnerability that has been a point of criticism for the Biden-Harris administration: under their leadership, grocery prices have surged by 21%, contributing to an overall inflation increase of about 19%. Despite the historic lows in unemployment and wages outpacing prices for more than a year, many Americans remain frustrated by high costs, particularly at the grocery store. As Harris pointed out in Raleigh, North Carolina, “We all know that prices went up during the pandemic when the supply chains shut down and failed. But our supply chains have now improved and prices are still too high.”
Harris’s plan has sparked debate among economists and policymakers. The central question is whether this proposed ban on price gouging would effectively lower grocery prices. Many economists are skeptical. Grocery prices, while still high compared to four years ago, increased by only 1.1% in July compared with the previous year, aligning with pre-pandemic levels. President Joe Biden recently declared that “inflation has been defeated,” noting that it fell to 2.9% in July, the smallest increase in three years. This raises questions about the timing and necessity of Harris’s proposal. “There’s some dissonance between claiming victory on the inflation front in one breath and then arguing that there’s all this price gouging happening that is leading consumers to face really high prices in another breath,” observed Michael Strain, an economist at the American Enterprise Institute.
Economists generally agree that returning prices to pre-inflationary levels is challenging, especially without inducing a recession. They argue that a more viable approach is for wages to continue rising so that Americans can better manage higher costs. However, the political salience of inflation remains strong, and Harris’s proposal may be as much about addressing voter concerns as it is about enacting economic policy. Corporate profits surged during the inflationary spike of 2021 and 2022, fueling public perception that businesses, including grocery stores and food suppliers, capitalized on the situation to the detriment of consumers. “It could be that they’re looking at opinion polls that show that the number one concern facing voters is inflation and that a large number of voters blame corporations for inflation,” Strain said.
Harris’s focus on price gouging is timely, given that prices remain high despite resolved supply chain issues. Elizabeth Pancotti, a policy analyst at Roosevelt Forward, highlighted this disparity by pointing to the wood pulp used in diapers. Although the price of wood pulp has dropped by half from its post-pandemic peak, diaper prices have not followed suit. “So that just increases the [profit] margins for both the manufacturers and the retailers,” she explained.
The debate over whether price gouging caused the recent inflation is complex. Most economists attribute the inflationary surge to basic supply and demand dynamics: pandemic-related disruptions, such as the closure of meat processing plants and the shortage of semiconductors for car manufacturing, reduced supply while stimulus checks and “revenge spending” bolstered demand. However, some economists, like Isabella Weber from the University of Massachusetts, Amherst, suggest that large corporations exploited the situation, a phenomenon she termed “seller’s inflation,” while others have referred to it as “greedflation.” Pancotti echoed this sentiment, stating, “What a lot of corporations did was exploit consumers’ willingness” to accept the disruptions and pay higher prices.
Critics of Harris’s proposal liken it to the price controls of the 1970s, which were widely blamed for creating shortages and economic inefficiencies. Kevin Hassett, a former top economic adviser in the Trump administration, dismissed the proposal as “a heavy-handed socialist policy that I don’t think any economist would support.” However, Pancotti countered that the proposal is more about consumer protection than price controls. Under Harris’s plan, the Federal Trade Commission (FTC) would not set specific prices but could investigate and take action against unjustified price spikes. “The proposal is really about protecting consumers from unscrupulous corporate actors that are trying to just rip the consumer off because they know they can,” she said.
As Harris pushes forward with this initiative, the debate over price gouging and its impact on the economy is likely to intensify. Whether the proposal gains traction or faces resistance, it underscores the ongoing challenges the administration faces in managing the complex interplay of inflation, corporate behavior, and consumer protection in today’s economy.