Vice President Harris’ economic agenda includes a recently announced push to enact controls for alleged “price gouging” by food and grocery companies and prevent them from reaping “excessive profits.” But the plan lacks details about how those terms would be defined and enforced.
Harris’ campaign released a document Friday saying that if she’s elected, her administration would work with Congress to “advance the first-ever federal ban on price gouging on food and groceries; set clear rules of the road to make clear that big corporations can’t unfairly exploit consumers to run up excessive profits on food and groceries.”
A Harris-Walz administration would also look to secure “new authority for the FTC and state attorneys general to investigate and impose strict new penalties on companies that break the rules,” according to the document.
However, the Harris campaign’s plan doesn’t include a definition of how “price gouging” would be defined or what would constitute “excessive profits” in the eyes of regulators. Nor does it describe how companies accused of wrongdoing could remediate the issue. FOX Business reached out to the Harris campaign for more details about how her proposal would be enacted and did not receive a response prior to deadline.
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The Harris campaign’s proposal has drawn criticism from economists and business experts who say the restrictions on price increases would be counterproductive.
Patrick Gourley, an associate professor of economics at the University of New Haven, told FOX Business he’s “pretty perplexed” by the proposal and the lack of clarity about how it would determine illegal conduct.
“It’s really important to know what would constitute price gouging. There isn’t an official definition,” Gourley said. “If you want to say if the economy is in a recession you can’t price gouge, well we have a group that declares recessions, so we would know what that meant. We’re just saying, ‘Oh, companies aren’t allowed to price gouge.’ What is price gouging? Who gets to make that call. Who gets to make that decision? That’s really concerning.”
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“In general, the government really shouldn’t be in the business of restricting prices. Prices move for a reason,” he explained. “There could very well be very limited situations where you want to limit price gouging, when you think about how some gas stations doubled or tripled their prices for gas after Sept. 11 just to try and make money off people.”
Gourley said in those circumstances there could be an argument that it’s “just really bad behavior and something the government should step in and stop. But that’s the exception to prove the rule. In general, if prices are going up, that means people want that good or service, and, so, you should let prices go up.
“Overall, from an economic standpoint, I think any sort of broad price gouging law would be very bad policy,” Gourley said. He also noted that it would discourage investment and the emergence of competition in a sector like the food and grocery industry.
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“One of the perverse long-term effects of price controls and anything that’s eliminating price increases is that it will restrict future investment,” he explained. “If prices are really high for a good over a long term, you expect new producers to enter the market. But if those existing companies aren’t allowed to raise their prices, and, so, you just wind up with shortages, there’s no incentive to move into the market and provide competition because the profits won’t be that high.”
Ken Mahoney, president and CEO of Mahoney Asset Management, told FOX Business price controls don’t work and would “have an impact almost like COVID with people stocking up on things and actually making it worse.”
Mahoney noted that grocery stores have relatively tight profit margins compared to companies in other sectors of the economy and that a price control plan could squeeze those further to the point businesses can’t operate.
“I look at some of these companies. Like, Albertsons and Kroger are trying to get together to do a grocery store merger. … Their margins are like 1.5%,” he noted. “These margins are really low to begin with. Should it be zero and then just have the government take these grocery stores over? I’m not sure where they’re heading.”
Mahoney added that grocery stores could be forced to consider layoffs if they’re restricted from raising prices when they need to preserve “some type of margin for shareholders.”
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