iStock.com/Cemile Bingol
Vice President Kamala Harris’ proposal to ban "price gouging" to combat runaway inflation in recent years is expected to prove popular with voters but sparked criticism from some economists.
“My plan will include new penalties for opportunistic companies that exploit crises and break the rules,” said Harris on Friday as she offered details of her economic agenda less than three months before the presidential election.
Harris said inflation had fallen below 3% for the first time since March 2021, according to a recent federal report.
“Our supply chains have now improved, and prices are still too high,” Harris said. “Many of the big food companies are seeing their highest profits in two decades. And while many grocery chains pass along these savings, others still aren’t.”
She continued, “Look, I know most businesses are creating jobs, contributing to our economy, and playing by the rules. But some are not, and that’s just not right, and we need to take action when that is the case.”
No details on how the ban would work were provided, but the plan could resemble the price-gouging bans currently in place in 37 states, which prohibit a sudden spike in prices for scarce goods.
The debate over the causes of inflation in recent years remains unresolved. While the San Francisco Federal Reserve found no strong link between price gouging and inflation, progressive think tanks argue there may be a direct connection.
Biden administration economists have found that corporate behavior has played a role in pushing up grocery costs in recent years — but that other factors have played a much larger one.
Lindsay Owens, executive director of the progressive advocacy group Groundwork Collaborative, in a statement on Friday echoed the Harris campaign's criticism of the broken market for groceries.
“Price gouging, price fixing, and just plain profiteering are rampant in the food and grocery sector,” Owens said. “There is still more the government can do to reduce food and grocery concentration and stop the cheating that is costing families dearly.”
Some economists, however, rejected the notion of corporate power as an important cause of inflation, saying a limit on price hikes could result in shortages of goods.
Gavin Roberts, chair of Weber State University’s economics department, studied anti-price gouging laws enacted during the pandemic and observed that such measures often prompted consumers to buy more than they typically would, exacerbating shortages.
When prices are high, the best policy is often no action at all, Roberts told CNN, explaining that consumers deterred by high prices of items like beef might switch to other types of proteins, helping maintain stock levels for those willing to pay more. The higher prices often encourage new competition that eventually lowers prices in the long run, he argues.
Jason Furman, a top economist in the Obama administration, shared Roberts’ view that anti-price gouging laws could inadvertently harm consumers. “This is 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. “There’s no upside here, and there is some downside.”
Prices have cooled sharply as the shocks from pandemic-era supply chain issues and the war in Ukraine fade. In July, grocery prices were up only 1.1%, in line with pre-pandemic increases. However, grocery prices are still 21% higher than they were when President Joe Biden took office.
An Economist/YouGov poll of about 1,600 U.S. adults, conducted Aug. 11-13, found inflation/prices to be the “most important issue” among 15 topics, followed by jobs and the economy, immigration, and healthcare.