If Price Controls will lower costs and stop inflation - WHY AREN'T YOU AND JOE DOING IT NOW??? Why should I vote for you by believing you will do something if elected that you WOULD NOT DO WHEN YOU ALREADY ARE IN OFFICE???
by Michael Schellenberg, Public.news, August 16, 2024
After weeks of Republicans and others complaining that she has failed to say what she would do as president, tomorrow, Democratic presidential nominee Kamala Harris will propose what her campaign is calling "the first-ever federal ban on price gouging on food and groceries—setting clear rules of the road to make clear that big corporations can't unfairly exploit consumers to run up excessive corporate profits on food and groceries." It appears to be a major economic policy announcement and one directly aimed at solving what many voters say is their number one issue: inflation.
But a more accurate way of describing Harris’s proposed “ban on price gouging” is “price controls,” and their record in reducing inflation is awful. President Richard Nixon imposed them in the 1970s, which brought down prices immediately, but as soon as they were lifted, prices rose again. The fundamental driver of price inflation is too little supply, and so reducing prices ultimately has to be achieved by increasing supply.
That’s not to say it’s never appropriate for the government to impose industry price controls. The government can justify price controls in wartime and other emergencies where it must temporarily run much of the economy. And governments have rightly imposed price controls on natural monopolies such as the railroads, electric utilities, waste collection, and water.
But the instances when price controls are justified are very few and far between, and they are certainly not justified today when it comes to food production. We are not at war, at least not directly, and in various wars since the 1970s, we have not required price controls to prevent inflation. There is a relatively free market when it comes to food, from production to grocery stores.
Read: WaPo Busts Kamala in Glorious Op-Ed Linking 'Communist' and Her Proposed 'Price Controls'
There is no evidence that some new food monopoly has emerged which is responsible for keeping prices high. The profit margins of the grocery industry are just 1.2% per year compared to the all-industry average of 8.5%. And even if there were, then the right policy response would be anti-trust action by the Justice Department, not price controls.
Allowing the market to respond to higher prices through expanded supply is and remains the best and only long-term way for societies to deal with inflation in non-monopoly sectors of the economy. Around the world, most recently in Venezuela, price controls stifle private sector investment to increase supply, thus failing to address the underlying driver of inflation and, in fact, making the situation much worse.
None of this is controversial among economists. There is little debate among mainstream economists, including the ones who support Harris like Paul Krugman, that price controls are almost always a bad idea. “Price controls VERY occasionally have their uses — during wartime when rationing is rampant and perceived fairness/lack of profiteering are important,” wrote Krugman in December 2021. And most if not all of the owners and managers of mainstream newspapers and TV networks that support Harris are likely against price controls.
READ: What Economists Think of Price Controls
The idea of price controls on grocery stores and food producers makes so little sense that it is highly unlikely that Harris would ever implement them if she becomes president. So, why, then, is she proposing them? What is she thinking?
The obvious reason Harris is proposing price control is because they are wildly popular with voters. In May, Data for Progress found that 71% of all voters, 83% of Democrats, 71% of independents, and 60% of Republicans agreed with the statement, “The US government should do more to regulate corporate food producers that raise prices to maximize profits. This will help lower food costs for millions of Americans and their families.” And it found that 69% of all voters, 83% of Democrats, 66% of independents, and 58% of Republicans agreed with the statement, “The US government should do more to regulate grocery stores that raise prices to maximize costs. This will help lower food costs for millions of Americans and their families.”
To be fair, the question the poll asked was a loaded. It was conducted by a progressive Democratic organization. And pollsters can generate 60% support among voters for a lot of policy proposals. The questions Data Progress asked was, “When thinking about grocery stores [or food producers] that raise prices to maximize profits, which of the following comes closer to your view?” That’s considered “priming” by researchers and likely increased support among voters for the proposal.
But even if the biased questions increased support, there is other evidence of strong support for price controls. A large March-April YouGov poll of 4,000 voters commissioned by public opinion expert Ruy Teixeira of The Liberal Patriot found that five of the ten most popular policies were either direct or indirect price control policies.
The fact that Harris is making a “ban on price gouging” the centerpiece of her first major economic policy announcement is evidence that it has strong polling. Given the high level of sophistication already demonstrated by the Harris campaign, which is proven by her rise in the polls, it likely did focus groups and polling in battleground states to develop the specifics of the proposal, and the language Harris will use, to persuade and influence swing voters.
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And Harris’ price control proposal is powerful for reasons that aren’t easily quantified by polling, or articulated by focus groups participants.
First, the price gouging strategy takes Harris off of the defense regarding inflation and puts her on the offense. Trump and Republican vice presidential candidate JD Vance will be forced to either endorse Harris’ plan, which Trump is likely loath to do, and which would alienate the traditional free market Republican base, or reject it, potentially alienating many swing voters.
Second, Harris’ proposal is more direct and concrete than Trump’s proposal for reducing inflation. Harris can say, “I’m going to ban price gouging and thus lower bacon prices." That’s direct and concrete. Trump is saying, “I’m going to expand drilling and that will lower energy prices and then that will lower bacon prices.” Many swing voters don’t understand supply and demand very well and often gravitate to highly simplistic solutions. Price controls are more direct and simpler than expanding supply to lower prices.
Finally, Harris’ proposal is populist. It positions her as a person standing up to big and powerful corporations. Harris will be saying that the American people should have more say in how the economy is run, which is what Trump and Vance have been saying about manufacturing, trade, and monetary policy. The more the establishment criticizes Harris for her proposal, the more she will reinforce her independent, populist, and anti-establishment bona fides.
As such, Harris’ price controls strategy promises to be a virtuous cycle for her and her campaign. The campaign has had to overcome a big obstacle. Harris is part of the administration and thus responsible for the issue voters are most concerned with, inflation. With the price control strategy, Harris can potentially turn the obstacle into an opportunity while positioning her as an outsider and change agent.
So why is Harris proposing price controls, which almost always fail? Harris has hired some of the best political marketing strategists in the world to work for her, and she is taking their advice.
Given the above, it would be a grave error for Trump and Vance to reject price controls on principle. A better approach for Trump and Vance would be to say that they support price controls when needed, like in times of war and when dealing with monopoly utilities like electricity, water, and garbage and that lowering prices requires increasing supply, and the Biden-Harris administration has done the opposite. That may not be strong enough, and if it’s not, then Trump and Vance could go further and attempt to take the issue away from Harris. (Editors Note: The counter to Harris's proposal is why aren't you doing it NOW??? If you really care about the fact I can't afford goceries and this plan will do it - then DO IT NOW!)
What’s clear is that Harris has raised the bar for being competitive in this election on the central issue of inflation. Trump and Vance will need to provide an economic vision and agenda more compelling than the one Harris is preparing to announce tomorrow.
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