A “D” for Price Gouging Policy
Grading Kamala Harris’s price gouging policy
I’m Isaac Saul, and I’m the executive editor at Tangle where I write an independent, nonpartisan, subscriber-supported politics newsletter that summarizes the best arguments from across the political spectrum on the news of the day — then “my take.” For more political analysis like this, subscribe to Tangle here!
On Friday, Vice President Kamala Harris announced a set of economic policy plans at a rally in Raleigh, North Carolina. Those proposals included an expanded Child Tax Credit, financial assistance for first-time homebuyers, cutting regulations to boost homebuilding, and a federal ban on price gouging on food. The price gouging plan in particular represents one of Harris’s most notable policy ideas since she became the Democratic nominee for president, and it has attracted scrutiny and interest from across the political spectrum.
Harris said she would “work to pass the first-ever federal ban on price gouging on food and groceries” as part of an effort to lower food costs, which are 21% higher than three years ago, according to the July inflation report. The plan calls for new rules to ensure corporations “can’t unfairly exploit consumers to run up excessive profits on food and groceries,” as well as “new authority” for the Federal Trade Commission and state attorneys general “to investigate and impose strict new penalties on companies that break the rules.” The Harris campaign has not shared additional details about how the plan would be enacted.
It’s a little hard to believe that we’re sitting here in 2024, with the benefit of decades of economic progress, talking about price fixing.
Previously, I’ve covered the “no tax on tips” policy that the Harris campaign took from Trump’s platform. There, I gave Trump an A+ for the idea, Harris a B for taking it, and the policy as a whole an optimistic C. On this, Harris gets a D for pulling a bad idea from the history books.
What the Harris campaign has said about its price gouging plan
Let’s start with what the Harris campaign actually said. On Friday, Harris gave her first policy-focused speech since she became the Democratic Party’s presumptive nominee. In that speech, she shared her grand vision for what she called an “opportunity economy,” outlining her plan for allocating tax credits, incentivizing home purchasing, bringing healthcare costs down, and more. There’s a lot I could talk about with any of those issues — some, like cutting housing regulations, sounded quite good.
However, much of the reaction to Harris’s speech was focused on something that her campaign addressed the day before: price gouging. According to a campaign statement, a Harris presidency would introduce “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.”
That might sound like a good idea — who doesn’t want to make it illegal for corporations to rob consumers? But the government getting into the business of defining what prices are acceptable isn’t something that works. Ever.
There are things government is good at: Setting monetary policy and taxation come to mind. So does granting subsidies, though people of different political persuasions disagree over how much is healthy, and in which industries. The government is also good at setting regulations; obviously it can go too far, but people tend to agree that some common sense regulation to ensure a free market is a good thing — and setting laws against price collusion is something the government already does!
But if the government opts instead to define consumer prices when they start getting high, that can lead to unintended consequences: black markets, hoarding, shortages, and even price increases — as Catherine Rampell wrote in The Washington Post. Any graduate of Econ 101 can tell you that one of the biggest strengths of a free market economy is that it’s really good at setting fair prices. Handing the reins over to the government, even just to set guardrails for those prices, can get problematic fast.
In her scathing piece, Rampell described how the left’s most revered economic policy wonk, Sen. Elizabeth Warren (D-MA), had trouble defining those terms in her own bill on price gouging: “Warren’s bill would ban any ‘grossly excessive price’ during any ‘atypical disruption’ of a market. Alas, no definition was provided for these terms, either; rather, the bill would empower the Federal Trade Commission to enforce bans using any metric it deems appropriate,” Rampell wrote.
That’s to say nothing of what Harris is responding to with this proposal, which is higher costs caused by inflation following the pandemic.
Kamala Harris is attempting to address a “high cost of living” with this policy
Throughout her speech on Friday, she repeatedly railed against a “high cost of living,” careful not to draw a direct line between economic hardships and post-pandemic inflation, which would reflect poorly on the Biden administration’s handling of the issue. When she got into the causes of those high costs, she came up with two: a disrupted global supply chain and corporate greed.
And to be fair, I give Harris a much better grade for that. A disrupted supply chain and general market disruptions did cause global inflation. On the other hand, while I do think that it’s easy to find examples of corporate greed during and following the pandemic, smoking-gun evidence that greed was driving inflation is much harder to come by — economists from the San Francisco Federal Reserve Bank recently went as far as to say that consumer price markups “have not been a main driver of the ups and downs of inflation.”
What’s more, Harris notably left out one pretty obvious partial driver of inflation: too much stimulus. As I’ve said before, I don’t think Biden’s stimulus checks solely caused inflation, but I do think adding too much stimulus played a significant role in driving prices up.
Yet, I didn’t hear Harris accept any blame for that — instead, she pointed the finger at some bad corporate actors who weren’t “playing by the rules,” and then offered a weak solution to fix it.
All of this brings up an obvious question: Why is Harris proposing something so many people — herself included — probably understand won’t work? One answer is that this is not a policy proposal she actually intends to act on, but rather one that is designed to whitewash the Biden administration’s record on inflation. Another possibility is one that writers on both the left and right suggested: Harris has identified an issue that polls well with voters and is trying to reap the benefits of highlighting the issue without actually putting forward a serious plan to address it.
But those are just guesses, and I truly don’t know what Harris’s motivation here is. What I do know is that inflation will come up a lot between now and November, and when it does, it looks like “price gouging” is going to be Harris’s scapegoat for what is one of the Biden administration’s stickiest issues. And I don’t think voters are going to buy it.
If you liked this article, you can subscribe to Tangle here to receive free politics newsletters like this one Monday-Thursday and can sign up for a paid membership to receive special Friday editions.
