Harris’ plan to stop price gouging could create more problems than it solves | CNN Business
Vice President Kamala Harris announced her plan to tackle price gouging on August 16, 2024. The plan is part of her broader strategy to curb rising food costs, which have surged over 20% during the Biden-Harris administration. At a campaign event, Harris proposed a federal ban on price gouging across the food industry, claiming it would protect consumers from opportunistic companies exploiting crises.
Harris emphasized the need for penalties against businesses that break the rules, but some experts are concerned about the potential consequences of such a plan. Economists like Gavin Roberts argue that the proposal could worsen the situation. Roberts, chair of the economics department at Weber State University, studied anti-price gouging laws passed during the pandemic and found that these laws often led consumers to buy more than they needed. This, in turn, strained supplies further and exacerbated shortages, particularly in grocery stores.
Roberts pointed out that when prices rise, consumers naturally adjust their behavior. If the price of beef increases, for example, some people might switch to other meats or protein sources, leaving beef available for those willing to pay the higher price. He suggested that the best policy might be to let market forces play out rather than imposing strict controls. Roberts also warned that Harris’ plan could stifle competition by preventing new businesses from entering the market, which could have long-term negative effects on prices.
Jason Furman, a top economist in the Obama administration, echoed these concerns. He described Harris’ proposal as “not sensible policy” and expressed hope that it would remain more rhetoric than reality. Furman argued that the downside risks of such a ban outweigh any potential benefits, suggesting that it could inadvertently harm consumers by maintaining the status quo and preventing the market from adjusting naturally.
Despite these criticisms, Harris’ campaign remained firm in its stance. A campaign fact sheet highlighted her commitment to making more resources available to the federal government to combat price-fixing and other anti-competitive practices in the food industry. However, Harris’ team declined to comment on the specific critiques raised by economists.
The debate over price gouging and its role in recent inflation has been ongoing. Some research, like that from the San Francisco Federal Reserve, suggests that corporate price gouging was not a primary cause of the inflation surge that began in 2021. Others, particularly from progressive think tanks, argue that there is a more direct link between corporate behavior and rising prices.
During the pandemic, companies often increased prices because demand remained high, fueled by bigger paychecks and government stimulus that bolstered savings accounts. This led some economists to argue that the inflation Americans have faced is a result of supply and demand dynamics rather than corporate greed alone.
The Harris proposal also has its supporters. Lindsay Owens, executive director of the progressive think tank Groundwork Collaborative, praised the plan. Owens argued that the price gouging statute would not result in shortages but would instead empower government agencies like the Federal Trade Commission to crack down on businesses charging unfair prices. She described Harris’ approach as aggressive and necessary to protect consumers.
As the debate continues, the impact of Harris’ plan remains uncertain. The proposal aims to address a pressing issue for many Americans struggling with high food prices, but its potential unintended consequences have sparked concern among economists. Whether the plan will succeed in curbing price gouging without creating additional problems will likely be a key point of discussion in the coming months as Harris continues her campaign.
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