VP Kamala Harris Wants New Federal ‘Gouging’ Law
In her first big policy speech since becoming the Democratic nominee for President, Vice President Kamala Harris said that as President she would go after big corporations who are ‘price gouging’ consumers, especially on food. Now we know the devil is always in the details when it comes to laws and rules. How is gouging defined? Are businesses still allowed to fully pass on their costs, not just of wholesale goods, but also things like increasing labor costs? Does it apply to all businesses or just those over a certain size, and if so what is the size and how is that determined (gross revenue, profits, employee count)? Is it just groceries or also prepared foods, what about motor fuel? Will it expand to services like auto repair, will it cover the cost of parts and if so on the supplier or shop or both?
How much our industry needs to be concerned by this proposal depends on the answers to these questions. But after some research, it turns out there are no answers, because there is no proposal. Her campaign website has no policy, it’s just short bios of herself and her running mate and a lot of requests to donate money. The closest you can get is a transcript of her speech HERE. She says she will “work to pass the first ever federal ban on price gouging on food”. She wants “new penalties for opportunistic companies that exploit crises and break the rules, and we will support smaller food businesses that are trying to play by the rules and get ahead”. For all the attention the issue has got, these two sentences are about the only discussion of the plan in the half-hour speech.
Virtually all economists agree that outright price controls are a disaster that backfire and lead to supply shortages. A law could be drafted that has little negative impact simply because it’s so narrow it effectively never gets used–in which case what’s the point? Most states already have gouging laws, like in New Jersey the laws only apply during some kind of state of emergency. Even news coverage in places like the New York Times and CNN has been extremely skeptical of the claim that ‘corporate greed’ is a major or even meaningful factor in the increase in prices, with the Washington Post Editorial Board blasting the idea.
Years ago when a presidential campaign came out with a distinct policy proposal, there was some kind of document and fact sheet detailing exactly what the proposal was and what impact they felt it would have. But over the last decade in particular, political campaigns have gotten less and less serious and detail-oriented, and more focused on partisan attacks on the other side. Publishing detailed thoughts gives your opponent the opportunity to pick apart and criticize your ideas and plans, so why give them the ammunition (the conventional thinking goes).
On the other hand, a vague proposal also allows your opponent to assume the worst. For example, in her speech she makes direct reference to former President Trump’s call for a 10% tariff on all foreign imports. Tariffs, like other taxes, get passed on to retailers and consumers, so this plan would raise the cost of food, fuel, and auto parts. She cites a study that estimates this tariff plan would increase costs by an average of almost $4,000 a year per household. If Trump genuinely issued a 10% tariff on ALL foreign imports, then we could expect to see the price of motor fuel in NJ go up about 20¢-30¢ a gallon, since a large portion of the refined gasoline and diesel sold in the Northeast is imported from overseas, often because it’s actually cheaper to import it than to ship it by tanker up from Texas and Louisiana. The crude oil refined in Linden is also often imported from overseas for the same reasons. Since Trump has also said he wants gas prices to be lower, it’s likely he would exempt crude oil and refined products, but technically we don’t know that for sure.
There’s been reports that members of Congress are using less of their staff budget to hire policy-focused aides and more on communications-focused staff, so they can get themselves injected into the news cycle more often. Ultimately, voters are letting them get away with it. Most voters see a massive gulf between the parties, and politicians have realized that in a two-party system there’s no place for many unhappy voters to go. You’re stuck with ‘your’ side being mediocre because the alternative is viewed as either communist or fascist.
Then there is the actual likelihood that even if she is elected President, she will be able to get any version of this passed. The House is narrowly divided and even if she is elected President the Senate is expected to flip Republican, (if Democrats win every Senate race in a swing state, Democratic Senators in Ohio and Montana both need to win in states Trump won by 8% and 16% respectively). Betting markets think there’s a 50-50 chance of her winning, but only a 23% chance of Democrats controlling all 3.
Given the unlikelihood of it becoming law, or becoming law in a way that would have an impact, it starts to feel like what some commentators have suggested: that this isn’t a serious proposal for the future, but more of a messaging argument. If the number one problem swing voters have with the Biden-Harris Administration is high prices, then this speech is really about shifting the conversation away from inflation being caused by high spending and saying that it was caused by ‘corporate greed’. Even if voters aren’t sold on the truth of that argument, her campaign may be hoping that it’s enough of an argument to get people to move on to other issues they are stronger on.
We will be on alert nevertheless.
:extract_focal()/https%3A%2F%2Fpbs.twimg.com%2Fmedia%2FGVRStpHXoAATN4i%3Fformat%3Djpg%26name%3Dlarge)
.jpg)
