Today marks exactly two years since the Inflation Reduction Act was signed into law. Despite the name of the bill, inflation has persisted, leading consumers to cut back on purchases. In addition, regulatory policies from federal and state governments have increased the cost of doing business, compounding the impact of price-weary consumers spending less. As a consequence, many businesses are laying off employees or closing down.
Inflation is still bad enough that Vice President Kamala Harris has now proposed price controls for groceries as part of her economic agenda. Reminiscent of the awful ideas from her last presidential run, her plan to “end price gouging” completely ignores the root causes of inflation and will hurt consumers and employers more.
To put it very simply, grocery prices are not determined in a vacuum by one or two greedy company bosses. In fact, the grocery industry is highly competitive with incredibly small profit margins of about 1.2 percent compared to a market average of 8.5 percent. The groceries we buy typically come from food producers that incur a variety of production, packaging, transportation, and other costs—all of which factor into grocery prices even before hitting the shelves.
Grocery stores also face competition from the broader food market, as people could also dine at a restaurant, order take-out, get fast food, buy groceries from bulk stores such as Costco, or even go to local farmers’ markets. In fact, the U.S. Department of Agriculture (USDA) estimates that more of Americans’ disposable incomes are being spent on food away from home than on groceries.
Harris’s plan is to “end price gouging” on groceries, as if the government can know what the appropriate price is for every grocery item, and give the Federal Trade Commission (FTC) authority to punish whoever it thinks is stepping out of line. As we have seen, the FTC under this Administration is already crusading against consumers and innovation in other industries within its purview. Giving this kind of power to an agency that already has a very problematic record of trying to exceed its regulatory authority will amount to serious overreach.
Harris’s policy also fails to address the factors that have led to inflation, especially those that have impacted food producers. The agricultural sector, already strained by rising operational costs, is now grappling with the consequences of international sanctions on Russia, a key supplier of fuel and fertilizer. These sanctions have driven up the prices of essential inputs, putting further pressure on food producers. As these costs inevitably get passed down the supply chain, consumers are left shouldering the burden at the checkout counter. Traditional inflation measures often downplay these price hikes, but alternative indexes that account for volatile food and gas prices paint a more accurate picture of the real impact on American households.
It is time for the Biden-Harris Administration to face the reality that prices are high across the board, not just for groceries, and that their policies have not helped. Since coming into office, this Administration has gone from blaming high energy prices on “Putin’s price hike” to now dubbing high prices as “greedflation.” The fact is that two years after the Inflation Reduction Act, the law has not done what was promised, as NTUF warned would happen before it was enacted.
Price controls for groceries won’t actually fix inflation. Moreover, past history shows that price controls can lead to shortages or encourage black market activity, worsening the economic impact on consumers. Instead, the Administration should consider broad anti-inflationary measures to eliminate government barriers to production, repeal harmful tariffs, and reduce deficit spending.