Today in Raleigh, North Carolina, Vice President Kamala Harris is expected to propose several economic measures aimed at addressing key voter concerns such as housing and grocery costs. Her proposals include:
• Federal ban on price gouging: Harris plans to introduce a federal ban on price gouging in the food and grocery sectors, particularly targeting the meat processing industry, which she claims is highly consolidated and contributes to rising grocery prices. Harris has declined to detail what her administration would consider “excessive” price gouging and how they would go about targeting companies, appearing to leave much of those decisions to FTC discretion. Calling out companies for running up the price of some food products polls well with swing-state voters and is supported by progressive groups. Several factors have made grocery prices volatile since the pandemic, including supply chain disruptions and a big shift in consumer buying patterns.
• Price controls: The vice president also envisions new price controls on groceries, and expanding limits on out-of-pocket prescription drug prices to all Americans. Harris says she would push the government to negotiate additional drug savings faster, and cap the monthly cost of insulin at $35 for all Americans. Jason Furman, a Harvard economist who worked in the Obama administration, warned about potential market disruptions that such pricing policies could unleash. If prices don’t rise as demand grows, companies might be less inclined to increase supplies. “This not sensible policy and I think the biggest hope is that it ends up being a lot of rhetoric and no reality,” he told the New York Times.
• Housing initiatives: She will propose tax incentives to facilitate the creation of 3 million new housing units over four years, surpassing previous initiatives. This includes unspecified tax advantages for builders focusing on entry-level buyers and affordable rental properties, as well as a $40 billion fund to assist local governments in financing housing developments.
• Down payment assistance: Harris is set to propose providing up to $25,000 in down payment support for first-time homebuyers, a plan that her campaign suggests could benefit over 4 million buyers.
• Tax relief on tips: Harris will advocate for eliminating federal taxes on tips, a proposal also supported by former President Donald Trump.
• Tax credits: Harris’ plan would expand the child tax credit to $3,600 from $2,000 per dependent, with a $6,000 credit for newborns. She also proposes expanding the Earned Income Tax Credit for childless low-wage workers and increasing subsidies for those who purchase insurance on federal health exchanges.
These proposals are part of her broader economic agenda aimed at reducing costs for consumers and addressing inflationary pressures, which remain a significant concern for voters despite a generally strong economic performance.
Of note: Harris’ price-gouging initiatives are unlikely to pass in Congress due to insufficient support. Her plan mirrors stalled legislation from Democratic Sens. Elizabeth Warren (D-Mass.), Bob Casey (D-Pa.), and Tammy Baldwin (D-Wis.), which has faced strong opposition from Republicans.
Meat Industry Speaks Out
The meat industry has strongly rejected Harris’ pointing to meat prices at the center of food inflation.
“It’s time for this administration to stop using the meat and poultry industry as a scapegoat and a distraction for the root causes of inflation and the significant challenges facing our economy,” National Chicken Council Interim President Gary Kushner said in a statement.
The Meat Institute issued the following statement from Meat Institute President and CEO, Julie Anna Potts, in response to news reporting of a Harris Campaign proposal to place a federal ban on price gouging:
“Consumers have been impacted by high prices due to inflation on everything from services to rent to automobiles, not just at the grocery store. A federal ban on price gouging does not address the real causes of inflation.
“The Harris campaign rhetoric unfairly targets the meat and poultry industry and does not match the facts. Food prices continue to come down from the highs of the pandemic. Prices for meat are based on supply and demand. Avian Influenza, a shortage of beef cattle and high input prices like energy and labor are all factors that determine prices at the meat case.
“Prices that livestock producers receive for their animals are also heavily influenced by supply and demand. Prices for cattle producers especially are at record highs, surpassing the 2014-2015 previous record highs. Today, well into 2024, cattle prices remain at record levels because the US has the lowest cattle inventory since Harry Truman was President.
“Major meat companies have reported losses during the Biden-Harris Administration, with some closing facilities and laying off workers.”
— Donald Trump held a press conference yesterday where he labeled Harris’ plan as “communist” and warned efforts to control grocery prices would lead to “food shortages, rationing, hunger, dramatically more inflation.”
— Do food price controls work?
While food price controls can offer short-term benefits in specific situations, such as during acute supply disruptions, they are generally seen as economically unsound in the long term. They tend to create more problems than they solve by distorting market mechanisms and leading to shortages. Most economists recommend targeted income support and structural economic policies as more effective alternatives for addressing food price inflation.
— The Biden administration has previously raised concerns about potential price gouging in the food industry, particularly in the context of rising grocery prices. However, these charges have not been proven. Vice President Kamala Harris has been vocal about the issue, emphasizing the role of corporate price gouging in driving up grocery costs, particularly in the meat industry, which she claims has seen significant price increases. The administration has proposed measures to address these concerns, including advocating for a federal ban on corporate price gouging. This proposal aims to hold large corporations accountable for maintaining high prices on essential goods. Despite these claims, the economic community remains divided on the issue. Many economists argue that the primary drivers of recent price increases are supply chain disruptions, changes in consumer behavior, and increased demand due to government stimulus measures, rather than corporate practices. Some economists have criticized the administration’s focus on price gouging as a political maneuver rather than a substantive economic policy.
— Fed study: Corporate price gouging not a significant factor in U.S. inflation surge. Earlier this year, a study published by economists at the Federal Reserve Bank of San Francisco concluded that corporate price gouging has not been a significant factor in the recent surge of U.S. inflation. The study, led by researchers Sylvain Leduc, Huiyu Li, and Zheng Liu, found that while there were spikes in markups for specific sectors like motor vehicles and petroleum products, the overall markups for U.S. goods and services have remained relatively stable. This suggests that rising corporate profits and price increases were not the primary drivers of inflation during the post-pandemic recovery.
The study contradicts the narrative that corporate greed, often referred to as “greedflation,” is a major cause of inflation. Instead, it attributes the inflationary pressures to supply chain disruptions, a decrease in labor supply, and a surge in consumer demand during the recovery period. The easing of inflation is credited to improvements in supply chains, increased immigration, and reduced demand due to higher borrowing costs as the Federal Reserve raised interest rates.
— Several recent U.S. presidents have attempted to implement price controls, with varying degrees of success and consequences.
• Richard Nixon: Wage and Price Controls (1971-1973): President Richard Nixon is perhaps the most famous for implementing wage and price controls in the early 1970s. In August 1971, Nixon imposed a 90-day freeze on wages and prices to combat inflation, which was part of a broader economic strategy that included taking the U.S. off the gold standard. These controls were initially popular and appeared to be effective in curbing inflation temporarily. However, once the controls were lifted, inflation surged again, leading to economic distortions and shortages. The controls were largely seen as a failure in the long term, as they did not address the underlying causes of inflation and led to economic inefficiencies.
• Gerald Ford: President Gerald Ford did not implement new price controls during his administration. Instead, he focused on ending existing controls. In response to the economic issues of the mid-1970s, Ford proposed ending price controls on domestic oil as part of his broader energy policy. This was part of a compromise with Congress, which allowed for a gradual phasing out of these controls over a forty-month period. Ford believed that removing price controls would stimulate domestic oil production and align with his free-market philosophy. However, this decision was contentious, with Democrats worried about potential long-term price increases and conservative Republicans dissatisfied with the compromise. Ultimately, Ford’s administration focused more on tax and spending policies, such as the “Whip Inflation Now” (WIN) campaign, which aimed to combat inflation through voluntary measures rather than mandatory controls.
• Jimmy Carter: President Jimmy Carter, facing high inflation, introduced a program of voluntary wage and price controls in 1978. This approach was part of a broader anti-inflation strategy that included government restraint and efforts to reduce the federal deficit. The voluntary nature of the controls, however, led to skepticism about their effectiveness. Critics argued that voluntary controls were insufficient to curb inflation, which continued to rise during Carter’s presidency. In addition to voluntary controls, Carter also dealt with energy price controls. In response to the energy crisis and rising oil prices, he gradually deregulated oil prices starting in 1979, while also proposing a windfall profits tax to address public concerns about oil company profits. Despite these efforts, inflation remained a significant issue throughout Carter’s term, contributing to economic instability and public dissatisfaction.
