Vice President Kamala Harris will reportedly call for price controls — a federal ban on food and grocery price gouging by corporations — in a speech on Friday.
Harris will introduce the policy during a rally speech in North Carolina, her campaign told CNBC. She will also speak about other economic policies she would attempt to implement if she is elected.
The statement from her campaign said she would concentrate on the meat industry because, “soaring meat prices have accounted for a large part of Americans’ higher grocery bills, even as meat processing companies registered record-breaking profits following the pandemic.”
The price of U.S. food has risen 25% from 2019 to 2023, according to the Economic Research Service. It is expected the rise of food prices will slow overall in 2024, but consumers will still see an increase of around 2% on food prices from 2023 to 2024.
Why are groceries so expensive?
An analysis from the White House Council of Economic Advisers released in 2024 showed there were elevated profit margins for grocery retailers, especially during 2021 and 2022. But the report also noted the majority of the price hikes consumers have seen have not come from corporate markups.
Instead, inflation, supply chain issues, rising cost of production for companies, the pandemic, foreign wars and other factors like avian flu have kept grocery prices high. A study from the Federal Reserve Bank of San Francisco found that across the economy markups have not been a major driver of inflation.
“Yes, consumers are seeing higher prices, but it doesn’t necessarily mean somebody is gouging them,” Kansas State University agricultural economist Glynn Tonsor told The Associated Press.
“Supply chain disruptions triggered by the pandemic account for some of these inflationary trends,” wrote University of Delaware assistant professor Kofi Britwum. “Increased consumer demand after lockdowns were lifted coincided with floundering supply chains and labor shortages, limiting supply and driving prices upward.”
Britwum wrote relief packages implemented during the pandemic and foreign wars impacting the trade of certain goods like wheat and fertilizers also contribute to the high prices.
So, would price controls help lower grocery prices?
When price controls have been implemented in the past, they have resulted in shortages. This was a criticism made on a social media post by Utah Sen. Mike Lee who said, “Price controls work like a charm — at creating scarcity.”
“Prices are high because government spends too much money, printing more money to cover shortfalls. But printing more money reduces the purchasing power of every dollar,” said Lee. “Excessive federal regulations — federal laws written by unelected bureaucrats — also contribute to higher prices. These regulations make everything you buy a little more expensive, to the tune of trillions of dollars every year.”
“Kamala Harris can’t hide from her disastrous record of skyrocketing inflation, resulting in a 20 percent increase in prices since she took office,” Trump spokesperson Steven Cheung told Politico. “Americans are struggling under the Biden-Harris economy, and now she wants to gaslight them into believing her bald-faced lies. She has no shame and ultimately she can’t hide from all the hurt she has caused every American because they feel it every single day.”
“Studies find near universal evidence of shortages when ceilings prevent prices from adjusting to ensure the scarce goods go to those who value them most,” said a 2022 report from the Joint Economic Committee Republicans. “For example, one study estimates that price controls on natural gas used for residential heating by U.S. households between 1954 and 1989 led to a shortage of nearly 20 percent of the amount of natural gas households wished to consume.”
David Henderson, research fellow with the Hoover Institution, wrote that there are two outcomes for price control: if the price is above what market price would be, nothing happens. However, if the price is below the market price, there is a different impact.
“A price ceiling below the free-market price causes buyers to demand more than they wanted at the free-market price and sellers to sell less than they wanted to sell at the free-market price,” wrote Henderson. “The result: a shortage.”
A 2022 report from the Federal Reserve Bank of St. Louis outlined two impacts of price controls: “they allocate scarce goods and services to buyers who are most willing and able to pay for them” and “they signal that a good is valued and that producers can profit by increasing the quantity supplied.”
“Economists generally oppose most price controls, believing that they produce costly shortages and gluts,” said the report. In cases where there is a monopoly, temporary price controls may be effective.
What the nation’s top economists think of price control
The University of Chicago’s Kent A. Clark Center for Global Markets surveyed 41 U.S. economy experts in 2022 about inflation.
When these experts were asked if higher inflation in the U.S. was due to corporations raising prices to increase their profit margins, the majority of them either disagreed (51%) or strongly disagreed (16%).
These experts were also surveyed on whether or not price controls like those deployed in the 1970s could reduce inflation, the majority of experts said they could not.
The survey gave experts the options to write a short explanation of their answers.
“Many interventions are on behalf of high-cost disappointed rivals, so the interventions tend to raise prices,” said Stanford economist Robert Hall. Yale economist Larry Samuelson said he thought antitrust intervention is warranted in many markets, but he said it was unclear this would actually reduce the rate of inflation.
“Effective price controls, by definition, would reduce price increases, but they would most probably create other huge distortions,” said MIT economist Daron Acemoglu.
Harvard economist Oliver Hart said, “They could reduce inflation but the consequence would be shortages and rationing.”