Would Harris's Price Gouging Plan Actually Help U.S. Consumers?
When Kamala Harris was asked about her approach to lowering grocery prices during a recent event in Pennsylvania, she proposed a national ban on price gouging. Her plan, she explained, would prevent companies from exploiting consumers by hiking prices during emergencies. This policy, one of her core economic strategies, is meant to safeguard consumers during crises. However, the question remains: would such a ban truly lower prices, or could it backfire?
The Rising Price Problem
In recent years, inflation and the high cost of living have become major concerns for Americans. In fact, as of April 2024, 41% of Americans identified rising living expenses as their family’s biggest financial issue, a level of concern not seen since 2005. The inflation rate peaked at 9.1% in mid-2022, marking the highest increase in four decades, with food prices rising even faster, up 11.4% by August of that year.
While inflation has cooled since then—now below 3%—the cost of food is still about 27% higher than it was at the end of 2019. Harris’s plan seems aimed at addressing these price hikes, which some argue were worsened by the Biden-Harris administration’s stimulus policies. There’s also a view that certain companies took advantage of the 2020 pandemic, raising prices unfairly, a concept referred to as “greedflation.”
Critics, including former President Donald Trump, have labeled her plan as akin to “communist price controls,” comparing it to policies seen in countries like Venezuela and the former Soviet Union.
What Is Harris Proposing?
Harris’s plan would place federal limits on price gouging during “emergencies or times of crisis,” covering essential goods. Currently, 37 U.S. states already have anti-price-gouging laws for local emergencies such as hurricanes or wildfires. These laws were also enacted during the COVID-19 pandemic. Harris’s proposal would likely mirror these state-level laws, applying them nationwide.
In 2020, as a senator, Harris co-sponsored a bill that would have defined price gouging as raising prices by more than 10% during emergencies. It’s assumed her federal plan would follow similar lines. However, when asked how her policy would lower grocery prices in non-emergency times, Harris didn’t provide a direct answer, instead focusing on companies’ exploitative practices during recent crises.
The Economic Debate
Economists are divided over how much price gouging contributed to the U.S. inflation surge. Some, like economist Isabella Weber from the University of Massachusetts, argue that corporate price hikes have been significant, pointing to data showing increased corporate profits during 2020–2022. She uses the example of meat giant Tyson, which saw its profit margins double in late 2021.
However, others argue that the real driver of inflation has been supply shortages, not price gouging. According to Oxford Economics, price gouging played only a minor role in recent inflation, with supply and demand imbalances being the main factor.
Many economists are also cautious about government interference in market prices. They argue that, while price increases during crises may seem unfair, they serve a purpose by encouraging retailers to restock and suppliers to ramp up production. A 2007 study, for instance, found that federal price controls on gasoline after hurricanes Katrina and Rita could have worsened the economic damage, costing the economy up to $3 billion.
Critics of Harris’s approach argue that breaking up corporate monopolies and increasing market competition would be a better way to keep prices in check rather than directly regulating prices.
Historical Lessons and Potential Pitfalls
History offers numerous examples where price controls have backfired. For instance, the Soviet Union’s price control policies led to widespread shortages and long lines in stores. In Venezuela, price caps on food imposed by former President Hugo Chávez in 2003 resulted in chronic shortages and a surge in hunger among the population.
However, Harris’s plan isn’t a sweeping price control measure but rather a limited one focused on crises. It’s unlikely to mirror the full extent of these historical examples, as her proposal is aimed at short-term emergency situations.
Prescription Drug Prices
In addition to her price gouging plan, Harris has also proposed lowering prescription drug costs by extending price caps. Currently, insulin is capped at $35 a month for Medicare patients, but she wants to extend this to all Americans. While this would help patients afford insulin, some experts warn that private health insurers might raise premiums to cover the cost difference, potentially negating the benefit for consumers.
Similarly, her plan to cap total out-of-pocket costs for prescription drugs at $2,000 annually for all Americans may lead to increased premiums for those with private insurance, even if it helps with medication costs directly.
In conclusion, while Harris’s price gouging plan and other economic policies aim to protect consumers during emergencies, there are concerns about their long-term effectiveness and potential unintended consequences. The debate over government intervention in pricing is far from settled, and the success of these policies will depend on how they’re implemented and the broader economic context.
