DV Journal

For another point of view, see: Counterpoint: Harris’ Price Controls Won’t Tame Inflation

As the warmth of summer finally begins to ease, an already feverish election season will continue heating up. So, let’s do a temperature check on the sliver of folks still deciding about their voting based on finances. Which candidate has articulated an economic agenda that will be most helpful to you?

The answer is that Kamala Harris has an economic agenda that would help the broadest section of the population in ways that are most helpful.

Let’s take a look at the top proposals from each candidate.

First, if you haven’t noticed, Donald Trump frequently goes into great detail about his personal grievances and topics of division. However, details on solutions to issues affecting most Americans, more often than not, come up short.

One of the more specific economic proposals is that Trump wants to double down on tariffs for imports — 10 percent to 20 percent on imports from all countries and upward of 60 percent on imports from China. We need to realize that while there are targeted reasons to deploy tariffs in certain circumstances, the benefit is hard to see as a long-term strategy.  Not only will this increase the cost of goods coming from other countries for American consumers already struggling with the effects of pandemic inflation and “greedflation,” but it will also hurt American businesses that sell their goods overseas. These factors seriously mute the intended potential positive effect of turning American consumers toward domestically produced goods.

Trump also wants to extend the tax cuts enacted during his first term. While these did bring down taxes for most Americans, the benefits are seriously imbalanced toward those already wealthy.

Trump also continues ranting against undocumented immigrants, offering crackdowns and deportations. I bring this up because, in addition to the human effect, this will devastate our economy.

Other proposals from Trump include not taxing tips or Social Security income, implementing regulatory reform, and more drilling for oil and natural gas, which he thinks will bring down inflation.

Vice President Kamala Harris has her economic agenda. These are not overly detailed, but compared to Trump’s brief rants, they do seem more so.

Harris has come out pledging to crack down on price gouging, even offering a ban on such activity. Past efforts on this haven’t always come to fruition, but highlighting the problem and making an attempt are worthy.

Harris wants to ease the cost of housing with a range of proposals, mostly tax credits to help first-time home buyers, incentivizing the building of starter homes and affordable housing, and developing unused public land to build more housing.

Harris also proposes increasing the child and earned income tax credit. Additionally, her more nuanced approach to the challenges of immigration works toward easing the pressure on the border. Still, it provides sensible pathways to citizenship that would minimize the effect on the economy.

On healthcare, Harris wants to open up more Medicare price negotiation eligibility, lower the cap on insulin, cap out-of-pocket costs for prescription drugs at $2,000, and extend subsidies for the Affordable Care Act.

Harris has an economic agenda more closely aligned with workers and organized labor. It’s essential that everyone benefits from fair wages, workplace protections, good benefits and a strong labor movement.

The candidates largely agree on a few items, like not taxing tips. However, Trump’s top-heavy, sound-bite approach to economic issues does not stack up to the more comprehensive Harris approach.

Harris provides a warm embrace to working-class citizens while the effect of Trump’s proposals leaves most people out in the cold.  Trump will claim he is out for you, but he is only out for himself. Those closest to him testify to this.  Don’t buy his lies; embrace the people who have your back: Vote Democratic.

For another point of view, see: Point: An Economic Agenda for the People

Right problem, wrong solution. It’s one of the most familiar stories in politics.

Thanks to inflation, every American is paying higher prices for groceries and housing than before the pandemic. But politicians’ proposed solutions would make those problems even worse.

The right solution is to attack inflation’s root cause, a money supply that ran amok during COVID. When the amount of money grows faster than the amount of real goods and services, you get inflation. Conversely, inflation stays low when money and goods grow in sync.

In September 2024, we’re most of the way back to that point, but keeping inflation low for the long haul means reducing deficit spending, which neither party will do.

Instead of fiscal and monetary restraint, Democratic presidential nominee Kamala Harris pledged to enact a grocery store price gouging ban “to make clear that big corporations can’t unfairly exploit consumers to run up excessive corporate profits on food and groceries.”

A problem with this is that the industry average for grocery store profits is 1.6 percent. This leaves little room for price gouging. For context, the stock market averages an 8 percent return.

This is a perfect example of the right problem, wrong solution dynamic. Price controls have failed everywhere they have been tried because they aim at symptoms of inflation and not its root cause.

Since COVID-19, grocery prices have risen at about the same rate as overall inflation. Inflation is the culprit here, not a sinister CEO cabal. Over the last year, grocery prices have gone up slower than inflation, according to the Bureau of Labor Statistics. While overall inflation was 2.9 percent over the last year, food prices rose 2.2 percent.

Housing prices also have a right problem, wrong solution story. Unlike groceries, housing prices are going up faster than inflation. But even here, price controls and price gouging laws will not make housing more affordable. The best way to make housing more affordable is to build more housing.

Instead, President Biden floated a plan to cap rent increases at 5 percent annually. Harris endorsed the plan soon after becoming the nominee. Rent controls create shortages. They reduce housing construction. They reduce the maintenance of existing housing. This has been the experience everywhere, from San Francisco to Minneapolis.

There just isn’t much the federal government can do here. Zoning laws and permits are mostly set at the state and local levels. Modernizing local codes and taking on NIMBY (Not In My Back Yard) activists in city council meetings is a city-by-city project for which presidential candidates can’t take credit.

Harris’ rent control proposals are about virtue signaling, not substance. On an issue with little federal role, Harris is letting voters know she still hears their problems and wants to do something about it. That is a good message, but Harris supporters should not be defending price controls on the merits.

There are a few things the federal government can do. It can speed up federally required environmental reviews, which can average 4.5 years to complete before construction may begin. Removing tariffs on building supplies like steel and lumber can save thousands of dollars on homebuilding costs.

Instead of those helpful things, the administration is up to something else highly unhelpful.

The Justice Department has sued RealPage, which uses AI technology to comb through comparable real estate listings in various markets and suggest rents to landlords. This price-fixing lawsuit will do nothing to increase the housing supply.

It could actually keep rents higher for longer. RealPage’s algorithm brings price signals to markets faster than going through listings manually. If housing supplies do increase and rents go down, it will take longer to show up in market prices without algorithmic help, and landlords will collect higher rents for longer than if RealPage were allowed to operate.

Republicans are no better. Donald Trump’s proposed 20 percent across-the-board trade tariff would cause at least as much damage as Harris’ price controls. New tariffs would pile onto existing steel and lumber tariffs.

Both parties have identified the right problem — rising prices — but have proposed the wrong solutions. Our best hope is that these Harris and Trump policy promises are empty campaign rhetoric.

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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