An economist from the Obama administration thinks Vice President Kamala Harris' price control plan is "not sensible."
The Democratic presidential nominee said during an Aug. 14 event that she plans to implement a federal price-fixing plan on grocery chains and their suppliers. The move ostensible aims to combat "corporate price gouging" at grocery stores and other everyday expenses. "My plan will include new penalties for opportunistic companies that exploit crises and break the rules," Harris said during the event.
This, in turn, would authorize the Federal Trade Commission (FTC) and state attorneys general to impose penalties on corporations for setting excessively high prices. The Harris campaign defended the measure, saying: "There’s a big difference between fair pricing in competitive markets and excessive prices unrelated to the costs of doing business. Americans can see that difference in their grocery bills." (Related: Kamala Harris unveils plan for Soviet-style CONTROLS on food, grocery prices.)
But economist Jason Furman, former deputy director of the National Economic Council during the Obama administration, warned that the price control policy could significantly disrupt the market and cause unintended harm to consumers during an interview with the New York Times.
According to him, price control policies discourage new businesses from joining the market to meet consumer demand. Corporations do not play a huge role in rising grocery prices, he added.
"Egg prices went up last year – it’s because there weren’t as many eggs, and it caused more egg production. This is not sensible policy, and I think the biggest hope is that it ends up being a lot of rhetoric and no reality. There's no upside here, and there is some downside."
Other economists and financial experts share the same sentiment
Furman wasn't alone in his sentiment, as other economists and financial experts had the same thoughts. They argued that the price control proposal could lead to unintended consequences, such as supply shortages, reduced competition and ultimately, higher prices for consumers.
"It's hard to exaggerate how bad this policy is," columnist Catherine Rampell wrote in an op-ed published in the Washington Post on Aug. 15. "It is, in all but name, a sweeping set of government-enforced price controls across every industry, not only food."
"Supply and demand would no longer determine prices or profit levels – far-off Washington bureaucrats would. The FTC would be able to tell, say, a Kroger in Ohio the acceptable price it can charge for milk."
Even personal finance expert Dave Ramsey agreed with Furman. He expressed this sentiment during an interview with Laura Ingraham of Fox News, even recounting an earlier instance of such price controls being put in place in the 1970s.
"We tried it. There was a whole movement for price controls across everything, because inflation was out of control and rampant, just like it is now," Ramsey told Ingraham. "And so it's been tried. It does not work. What works is to flood the market with supply."
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