Price controls: right problem, wrong solution
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In an op-ed being syndicated by Inside Sources, I take a look at Kamala Harris’s price control proposals for groceries and housing:
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.
Her housing policy proposals have a similar problem:
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…
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.
This is not to pick on Democrats. Republicans are no better. They have no plans to reduce deficit spending. Donald Trump has expressed a desire to interfere with the Federal Reserve’s interest rate decisions. His proposed across-the-board tariffs would invite retaliation and raise prices on a much larger range of goods than Harris’ price controls, while making American businesses less competitive.
George Will, who is receiving the Prometheus Award at CEI’s Julian Simon Award dinner on September 19, recently pointed out that the two parties have not been this closely aligned on economic policy since the Eisenhower administration.
Voters in search of sound economic policy are, as usual, politically homeless.
Read the whole piece here. My CEI paper on COVID-related price controls is here.