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BLOOM: Harris’s Price Controls Ignore Basic Economics

Vice President Kamala Harris wants to make groceries cheaper. However, her vague proposal to ban “price gouging” will have the opposite effect.

Economists, not known for consensus, agree on one thing: Price controls don’t work. By mandating price ceilings, government price controls always lead to shortages.

And this isn’t some abstract economic theory; instead, it’s a real-world observation of their historically bad track record.

Anybody who bought gasoline in the 1970s can attest. To curb high fuel prices and inflation, the U.S. government instituted price controls on gasoline. This disastrous policy resulted in long lines of cars at fueling stations that spilled into the streets.

The 1970s fuel shortages gave Americans, in the words of Hugh Rockoff, “a little taste of what life was like for people in the Soviet Union.” Under oppressive price controls, citizens endured “the Soviet queues,” waiting in long lines to buy household necessities. In its callous efforts to control inflation, the Soviet system also reduced its citizenry to a brutally low standard of living.

Interestingly, an American grocery store began the downfall of Soviet central planning. In 1989, Boris Yeltsin—who supported the USSR dissolution and, in 1991, became Russia’s first elected president—visited a Houston neighborhood market. The abundance of affordable goods and the lack of lines amazed Yeltsin.

“I think we have committed a crime against our people by making their standard of living so incomparably lower than that of the Americans,” said Yeltsin during his return flight to Moscow.

The USSR wasn’t the only Marxist-Leninist country to abandon its centrally planned economy.

China emerged as a global superpower because of markets, not socialism. In the 1980s, the Chinese Communist Party instituted several market reforms, including privatizing its industries, removing state monopolies, and lifting all price controls. Since then, China’s economic output has grown 36-fold.

Assuredly, China is no bastion of liberty. To call the country’s human rights record appalling is an understatement.

However, Harris’s unforced error borrows from the economic failures of these authoritarian countries. “When your opponent calls you ‘communist,’ maybe don’t propose price controls?” writes Catherine Rampell, an opinion columnist at the Washington Post.

Harris is correct about one thing: Groceries are expensive. Since President Joe Biden took office, grocery prices are up about 20 percent. Even Harris concedes—despite rosy claims of reduced inflation—prices remain too high.

Yet, while Harris and her followers correctly identify the problem, their diagnosis is wrong.

During his most recent State of the Union address, Biden claimed that “shrinkflation”—companies reducing product sizes to cut costs—was the root of the problem. The President encouraged lawmakers to pass legislation, sponsored by U.S. Sen. Bob Casey (D-PA), that would empower the Federal Trade Commission to crack down on these corporations.

Casey’s bill is a direct attack on his constituents. Pennsylvania is home to “the Snack Belt,” with more than two dozen snack food companies competing internationally. Over 80 percent of pretzels consumed in the United States originate in the Keystone State. Penalizing these companies with arbitrary regulations would wreak havoc on Pennsylvania’s already vulnerable economy.

Moreover, shrinkflation didn’t cause grocery bills to skyrocket. Instead, injecting trillions of federal dollars into the money supply—coupled with pandemic-related supply chain failures and pent-up demand from locked-down consumers—destroyed the dollar’s value.

Now, politicians—often the ones who claimed inflation would be “transitory”—offer policies that undermine the foundation of our market economy.

Prices provide essential signals. When low, they tell producers to throttle down production and avoid costly surpluses. When high, they influence producers to ramp up production and meet increasing demand. Without a market-defined price, this natural equilibrium cannot achieve the proper balance between supply and demand.

To make matters worse, price controls, especially on groceries, are a solution in search of a problem. Profit margins at grocery markets are already razor-thin—1.2 percent compared to 8.5 percent across all industries. Due to competition, grocery stores can’t afford to be “greedy.”

Artificially controlling prices amounts to shortsighted economic suicide.

If we want the United States to compete internationally, the last thing we should do is hobble our economy with price controls. In the long run, citizens benefit from marketplace competition, not unnecessary government intervention.

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As Philadelphia Goes, So Goes the Delaware Valley?

Why should suburban residents care about Philadelphia’s next mayor?

David Oh, a Republican running for Philadelphia mayor, said spreading crime is one reason. Economics is another. The city remains the major economic force in the area, and what happens in Philly ripples through the entire Delaware Valley.

“Philadelphia is a very important economic engine for this state, and it most dramatically impacts our surrounding counties. And for people in the suburbs, they oftentimes…experience the ability to enjoy a suburban lifestyle and yet go to the Eagles game, go to live entertainment in the city, go see the museums, enjoy what’s there in a big city while living, in a nice suburban setting,” said Oh, a lawyer who grew up in Philadelphia and served on the city council until stepping down to run for mayor.

“Unfortunately, they probably are not going take public transportation into the city like they used to, or they may not even drive into the city. It’s very difficult to have such a great amenity for them as universities and research and hospitals and all that great stuff in our city that you cannot visit and go out to dinner and things like that.”

“The other thing is that the crime in our city impacts our surrounding communities. One, unfortunately, crime imitates crime. People out in the counties start seeing the things that are happening in Philadelphia, and they emulate it.

“They also come into our city, and unfortunately, so many people who are addicted to heroin and things like that end up not just coming to our city but living here for years at a time (with) their parents and their loved ones trying to find them.”

“They’re only attracted to Philadelphia because we have the most hands-off policy where drug-addicted people end up in the most inhumane conditions on Kensington Avenue because of the policies of the city. That is to let them purchase their drugs, to let the drug dealers exist. And, by the way, the drug dealers (are) murdering each other because of so much money that is there,” said Oh.

Paul Martino, a Bucks County resident and owner of the new Philadelphia sports bar Bankroll, agrees that crime is a major problem for the city.

“Crime is one the primary issues facing the city of Philadelphia. Many suburbanites refuse to come to the city to visit its businesses, historical and cultural locations as a result. This is why people from Bucks and Montco are following this year’s Philly mayor’s race much more closely than prior years,” said Martino.

Jeff Jubelirer, vice president of Bellevue Communications, said, “What happens in Philly affects everyone in the region, albeit in different ways.  When suburbanites have a negative perception of Philadelphia – whether fair or not – the implications are tangible.

“They work, play, and visit the city, and their tax dollars and spending contribute to its betterment. Therefore, engendering confidence among suburbanites constitutes a critical task for Philadelphia’s next mayor,” Jubelirer said.

Guy Ciarrocchi, former president of the Chester County Chamber of Business and Industry and a former Congressional candidate, likes Oh.

“He’s a good guy. Has really grown into his role—understands issues, how government works (and doesn’t) and focuses on people, not grandiose policies or ideology,” said Ciarrocchi, who grew up in South Philadelphia.

“We care not just in a good government or humanitarian way like I hope the drought in Sudan ends, because it impacts our quality of life,” Ciarrocchi said.  “It affects the growth of our economy—the companies that support and interact with major Philadelphia companies. And bad economics, bad schools and rising crime eventually come into the bedroom communities of the suburbs.”

“And, its also about our overall quality of life—from the zoo to the Franklin Institute, from the orchestra to the stadiums—as traveling to an annoying Philadelphia is a part of the reason many of us live in the suburbs—a car ride or train ride away.

“A growing, vibrant Philadelphia helps our economy and quality of life, A shrinking, decaying Philadelphia does the opposite.

“David can help by winning—or, at a minimum, being the grown-up and the kitchen-table candidate making sure that the campaign is about fighting crime, having good schools and helping businesses create jobs, rather than focusing on plastic straws and defunding the police,” said Ciarrocchi.

Albert Eisenberg, a political consultant and founder of BlueStateRed, also believes that Philadelphia and its mayor are important to the health of the suburbs.

“Suburban voters, and voters from across the state, should care very much who is elected mayor of Philadelphia,” said Eisenberg. “The city is the economic and cultural driver for our entire state, and with issues like crime spilling over the city line, higher taxes on business owners, and building a city and region that people actually want to move to, that will affect regular people in the collar counties as well. People should keep a close eye on David Oh and his campaign for mayor, especially with some very far-Left candidates with the potential to come out of the Democratic Primary in May.

Joyce Koh, of Bala Cynwyd, donated to Oh’s campaign. She believes a vibrant Philadelphia is with its diversity of arts, culture and food is “vital” to the suburbs.

“The city is like the warmth of the the sun,” Koh said. “If our sun is dying, our suburbs will fail.”

Mark Ruhl, a Chester County resident who supports Oh, said, “What goes on in the city affects the suburbs. We used to go into the city more but we stopped going in because we don’t feel safe any more.”

“And then we see, for example, when, when the lawlessness goes from Philadelphia out into the suburban areas, carjackings, you know, all kinds of shootings,” said Oh. “The thing about the crime today is it is traveling, traveling from the neighborhoods where it used to be contained, into Center City, into some of the nicer neighborhoods of Philadelphia and out into the suburban areas.

“We really need to stop that because the thing is, we have to stop the next generation and the following generation of violent criminals that is being created here in Philadelphia, because of really bad policies,” Oh said.

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TOOMEY: Farewell to The Senate (Part Two)

As a general matter, as a body, I think we all understand we are not that popular, but I don’t think I have ever worked with a more impressive group of individuals. So I appreciate having had that chance.

I also have to thank the people o this great Commonwealth of Pennsyl- vania that my family and I get to live in. Leader McConnell  used my line. It is true, and I say it all the time, and will always be true; representing Pennsylvania in the U.S. Senate for these 12 years has been the greatest honor of my professional life. I will always be enormously grateful to the wonderful people of this great State for their entrusting me with this awesome responsibility.

I am also uniquely grateful to the people, the volunteers, who made those campaigns successful.

When I think about my mission in the Senate, I think about two complimentary aspects of it. First, it is to represent and defend the specific interests of Pennsylvania, and I tried to do that to the best of my ability.

You know, I think sometimes we are such a big and diverse state that what is good for Pennsylvania is usually good for America and vice versa, but it has also been important to me to defend and advance the cause of personal freedom. In the hierarchy of political values, freedom is first for me.

I think the purpose, the real purpose of government is to secure the blessings of liberty, and government too often is the source of restrictions on our freedom instead. But in this category of defending and advancing personal freedom, my focus has tended to be the economic realm.

Economic freedom is a fundamental aspect of personal freedom, and there is awell-documented high correlation between a society’s economic freedom and the level of prosperity and th standard of living of the people in that society.

So you probably won’t be surprised to learn that I think my biggest legislative accomplishment was that opportunity that I had to be a part of a small group of Senators, Finance Committee members, who got a chance to develop and help pass the 2017 tax reform. That group included Sen. Portman, Sen. Scott, Sen. Thune, and countless hours that we spent in a conference room dealing with what was a very complex product. We took our draft, and we presented it to our colleagues, and over a course of many weeks, we kind of iterated our way to what became the most sweeping tax reform in at least 30 years. And we expanded economic freedom with that product. Honestly, I have to tell you, I think the results were even better than what we had hoped for.

By the time the tax reform had been fully implemented—I think calendar year 2019—we had the strongest economy of my lifetime. We had strong eco- nomic growth, a 50-year low unemployment, all time record-low unemployment for African Americans, all time record-low unemployment for Hispanic Americans and other ethnic minority  groups. Wages were growing, and they were growing faster than the rate of inflation, which means that workers  were able to see a rise in their standard of living. And wages were growing fastest for the lowest income Americans so we were also narrowing the income gap.

We ended corporate inversions. There hasn’t been one since. Remember how frequently they were occurring?

And with a lower corporate tax rate but also fewer deductions, business boomed. The corporate tax rate was down to 21 percent. This year, with a 21-percent top rate, we are exceeding the revenue projections that were made prior to tax reform when the rate was 35 percent. This is not just about inflation.  As a share of our economy, total federal tax revenue is at a multi-decade high. So much for the thought that we were going to increase the size of the deficit from the tax reform.

Oh, and by the way, we also made the Tax Code even more progressive than it was. That is right. Higher earners now pay a greater portion of the total tax burden than they did before our tax reform.

I know my Democratic colleagues were skeptical about this, and I understand. But I would like to suggest, the data is in, and it is really good. There are important provisions that are scheduled to expire, and I do hope that Congress and the administration can find a bipartisan path to extending—or better still—making permanent these otherwise expiring provisions.

(Please look for Part 3 of Sen. Toomey’s remarks in an upcoming issue of the Delaware Valley Journal.)