Kamala Harris’ Grocery ‘Price Gouging’ Plan Is Riddled With Problems, Experts Say

Vice President Kamala Harris is making a bold — and controversial — move to tackle rising grocery prices, unveiling a federal proposal that would ban “price gouging” in an effort to protect American consumers from what she describes as “corporate greed.”

This proposal, part of a broader economic platform being unveiled on Friday, is an attempt by the Harris campaign to address the one issues voters say remains at the top of their list of concerns: the cost of living.

“Vice President Harris recognizes the significant difference between fair pricing and the excessive prices that Americans have seen in the food and grocery industry, prices that are unrelated to the costs of doing business,” the campaign said in a statement ahead of Harris economic policy speech on Friday in Raleigh, North Carolina.

But the embrace of price controls as a way of addressing inflation — which has now come down to under 3%, near the Fed’s target — comes with risks, even as food prices remain 21% higher than they were three years ago.

The campaign claims that many large grocery chains have kept prices high despite stable production costs, leading to their highest profits in 20 years. That fails to take into account that grocery stores tend to have razor-thin profit margins, typically between 1-3%, far lower than other retail sectors.

Former President Donald Trump, speaking at his Bedminster golf club on Thursday, criticized the proposal, likening it to “Maduro-esque price controls” that have crippled the Venezuelan economy.

In theory, a ban on price gouging would prevent food and grocery companies from excessively raising prices over a set period. However, as Harris doubles down on the policy, economists interviewed by Newsweek argue that such measures would be unlikely to address the root causes of price increases and could even backfire.

“The idea of a political solution to an economic non-problem is flawed. There’s very little evidence that corporate greed or price gouging is responsible for high grocery or housing prices,” said Scott Lincicome, Vice President of General Economics and Trade at the libertarian Cato Institute in Washington D.C.

The Harris campaign argues that the measure would create “clear rules of the road” to ensure that large corporations cannot exploit consumers for excessive profits on food and groceries. Like the Biden administration, Harris’s campaign has focused on the meat industry, accusing it of raising prices beyond actual costs.

“Soaring meat prices have accounted for a significant portion of Americans’ higher grocery bills, even as meat processing companies registered record-breaking profits following the pandemic,” the campaign’s statement reads.

Lincicome pointed out that grocery prices have been relatively stable since January 2023, suggesting that the inflationary spike during the pandemic was driven by factors other than corporate pricing behavior, such as supply chain and labor constraints.

“Yes, consumers are seeing higher prices, but it doesn’t necessarily mean someone is gouging them,” added Glynn Tonsor, an agricultural economist at Kansas State University.

“The cost of raising the animal, converting it into meat, and getting that meat to consumers is higher than it was,” he said.

Luis Cabral, a professor of economics at New York University, also expressed doubts about the effectiveness of a federal ban on price gouging, noting that many states already have such laws. “It’s not clear to me what a federal ban would add,” he said.

Cabral warned of the unintended consequences of such a policy, comparing it to surge pricing models like the widely despised version pioneered by Uber during high-demand periods. He said that while price controls might prevent sudden spikes, they could also lead to shortages or reduced supply.

“When you short-circuit those price signals, you get bad market reactions,” he said, suggesting that the issue of grocery prices might be better addressed through measures targeting market concentration and potential collusion in the food industry.

“Preventing price increases sounds good, but what do investors and farmers do when they can’t guarantee a return on investment or cover their costs? They cut back on investment, leading to reduced supply and even higher prices or outright shortages,” Lincicome, from Cato, added.

Still, Harris’s proposal polls well — resonating with many voters who are worried about high grocery bills. Her campaign argues that without federal intervention, large grocery chains would be free to exploit consumers with unjustified price hikes.

“A loaf of bread costs 50% more today than it did before the pandemic, and ground beef is up almost 50%,” Harris said on Friday. “Meanwhile, many big food companies are enjoying their highest profits in two decades, and while some grocery chains pass along savings, others still do not.”

Despite how it polls, the issue also has political risk. The columnist Catherine Rampbell, writing in the Washington Post Friday, said it was “hard to exaggerate how bad Kamala Harris’s price-gouging proposal is.”

“If your opponent claims you’re a ‘communist,’ maybe don’t start with an economic agenda that can (accurately) be labeled as federal price controls,” she wrote.

Lincicome downplayed the significance of Harris’s proposal, arguing that it is more about politics than economics. “Grocery and housing prices have moderated but are still high compared to 2020, which is a political liability for the Biden administration and Vice President Harris,” he said.

“But the likelihood of these policies becoming law is minimal. It’s bad policy targeting a non-problem, driven by political motives.”

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