In response to the ongoing frustration over inflation and high grocery prices, Vice President Kamala Harris has proposed a ban on “price gouging” by food suppliers and grocery stores. This initiative is part of a broader agenda aimed at reducing the costs of housing, medicine, and food.
Addressing a vulnerability
Harris’s proposal seeks to tackle a significant issue under the Biden-Harris administration: a 21% increase in grocery prices, contributing to an overall 19% surge in costs. While unemployment has fallen to historic lows and wages have risen sharply since the pandemic, many Americans continue to grapple with higher costs.
“We all know that prices went up during the pandemic when the supply chains shut down and failed,” Harris said Friday in Raleigh, North Carolina. “But our supply chains have now improved and prices are still too high.”
What is ‘price gouging’?
“Price gouging” lacks a strict, universally accepted definition among economists. Generally, it refers to significant price spikes following supply disruptions, such as natural disasters. Consumer advocates argue that gouging occurs when retailers sharply increase prices for necessities during such periods.
While several states already have restrictions on price gouging, there is no federal-level ban. Existing federal laws target related practices, such as price-fixing, which prevents companies from colluding to set higher prices.
Will the ban lower prices?
The effectiveness of Harris’s proposal in lowering prices remains uncertain. While grocery prices are significantly higher than four years ago, they increased by just 1.1% in July compared to the previous year, aligning with pre-pandemic trends. President Joe Biden recently declared that inflation has been defeated, citing a 2.9% inflation rate in July, the smallest increase in three years.
“There’s some dissonance between claiming victory on the inflation front in one breath and then arguing that there’s all this price gouging happening that is leading consumers to face really high prices in another breath,” said Michael Strain, an economist at the American Enterprise Institute.
Economists generally agree that returning prices to pre-inflation levels is challenging, except during severe, prolonged recessions. Instead, they advocate for rising wages to help Americans manage higher costs.
Pandemic-era exploitation and ‘greedflation’
During the pandemic, stimulus checks boosted Americans’ bank accounts, and “revenge spending” emerged after initial lockdowns. The combination of increased demand and reduced supply led to rising prices.
Some economists argue that large food and consumer goods companies exploited pandemic-era disruptions, taking advantage of consumers’ acceptance of higher prices due to empty store shelves and disrupted supply chains. Economist Isabella Weber at the University of Massachusetts, Amherst, termed it “seller’s inflation,” while others referred to it as “greedflation.”
“What a lot of corporations did was exploit consumers’ willingness” to accept pandemic disruptions, said an economic expert.
Historical context
During the inflation spike of the 1970s, both Democratic and Republican administrations imposed price controls, which were widely blamed for causing shortages and long lines for gas. Some economists fear Harris’s proposal could have a similar impact.
“It’s a heavy-handed socialist policy that I don’t think any economist would support,” said Kevin Hassett, a former top economic adviser in the Trump White House.
However, proponents like Pancotti argue that Harris’s proposal is more of a consumer protection measure. Under the plan, the government wouldn’t set specific prices, but the Federal Trade Commission could investigate price spikes.
“The proposal is really about protecting consumers from unscrupulous corporate actors that are trying to just rip the consumer off because they know they can,” Pancotti said.
