Almost all surveys show that most Americans regard the cost of living to be their primary issue heading into the November election. Kamala Harris is attempting to tackle it. “Lower costs for American families” is the centerpiece of her economic strategy, which she is expected to reiterate on August 22nd in a speech to the Democratic National Convention.
But just because her technique is understandable doesn’t mean it’s sensible. Her ideas risk leading America down a path of self-defeating economic policy. Ms Harris cannot be held solely responsible for this trajectory; many other Democrats and Republicans, beginning with Donald Trump, have already been pushing in this direction, albeit with different emphasis. Nonetheless, Ms Harris’s cost-of-living plan may usher in a new chapter in the troubling odyssey. She targets four types of costs: housing, grocery, medical, and taxes. Although some of her suggestions are reasonable and useful, many more would stifle growth and drive up costs, the polar opposite of their intended outcome.
Ms Harris’ grocery idea has been heavily criticized. She wants to enact the first federal ban on price gouging in food and groceries. This may not foreshadow a return to the price controls imposed by President Richard Nixon in the 1970s, but the logical basis for such a program is flawed. The left-wing of American politics frequently accuses firms of fueling inflation during the COVID-19 pandemic by exploiting shortages to raise prices. However, Federal Reserve analysts decided that there was no indication of increased aggregate mark-ups, which would have been required for pricing decisions to produce inflation. Furthermore, increased costs for everything from cars to ham sent a strong signal to businesses to produce more and to customers to reduce demand.
Concerns regarding Ms Harris’ anti-gouging legislation should be mitigated by the fact that it is unlikely to ever pass Congress. However, legislative infeasibility does not excuse bad thinking, and her emphasis on corporate greed suggests that she is at least partially loyal to the Democratic party’s left wing. Although Ms Harris’ commitment to crack down on unfair mergers and acquisitions in the food business that result in less competition and higher pricing is admirable, it is just a reiteration of America’s existing anti-monopoly legislation. The Federal Trade Commission, for example, is currently engaged in a legal struggle to prevent the largest supermarket merger in American history.
Source: Economist
