Harris's Dangerous Dalliance with Price Controls Undermines Economic Agenda
Vice President Kamala Harris took the policy stage this week, rolling out an ambitious set of economic proposals aimed at easing the financial strains on American families. However, her centerpiece idea of imposing price controls has economists sounding the alarm about potential unintended consequences.
Sponsor
Free ChatGPT Investor Guide: 5 Stocks to Buy ASAP
Urgent report reveals top stock picks to help investors profit from emerging AI technology.
You don't want to miss these surprising stocks with explosive upside potential. Access the report now.
In a detailed speech in the battleground state of North Carolina, Harris laid out plans to tackle key pocketbook issues from housing to healthcare costs if elected president. Her agenda includes:
A first-ever federal ban on "corporate price gouging" for groceries and food staples
Expanding the $35 insulin price cap for Medicare to all Americans
Tax incentives for builders to construct more affordable "starter homes"
Down-payment assistance up to $25,000 for first-time/first-gen homebuyers
Restoring the expanded child tax credits from the pandemic
New tax relief up to $6,000 for families with a newborn
For struggling middle-class families grappling with stubbornly high prices, many of these proposals could provide much-needed financial relief if implemented effectively. But Harris's price control mechanisms are generating skepticism from economists across the ideological spectrum.
The Perils of Price Controls
While the intuitive appeal of forcing companies to keep prices in check is understandable, economists warn that price controls often prove counterproductive. By distorting normal market forces of supply and demand, they risk causing shortages as producers scale back output.
As Scott Lincicome, director of economics and trade at the Cato Institute, points out: "Price controls don't change the fundamental drivers of inflation; they just obscure them for a while by capping prices via brute force." He argues they simply "transfer the problem to other parts of the economy" rather than resolving it.
Milton Friedman famously quipped, "One of the great mistakes is to judge policies and programs by their intentions rather than their results." Price controls may seem well-intentioned, but a long history of unintended consequences from distorting market prices should give policymakers pause.
Monopoly Concerns
To Harris's credit, her price control efforts appear targeted primarily at sectors with significant monopoly power like Big Tech, broadband, and food production. In concentrated industries, there are legitimate concerns about corporations abusing their pricing power over consumers who lack alternative options.
But as Michael Strain, director of economic policy studies at the American Enterprise Institute, cautions: "Price controls are an awfully blunt instrument and they risk creating other problems down the road."
Most free market economists argue that directly tackling monopoly power through robust antitrust enforcement and promoting more competition would be a superior approach to price controls.
The Economic Tightrope
Of course, Harris's agenda extends well beyond price controls, with housing support, tax relief for families, and reining in healthcare costs all forming key components. And she'll face immense political barriers, needing Congress to approve much of her economic agenda.
But as the nation's economic debate intensifies ahead of the 2024 election, Harris's embrace of price controls is proving controversial. Carefully threading the needle between promoting affordability and inadvertently choking off supply will be critical to ensuring her plans don't fall victim to the long trail of price control failures throughout history.
So while shoring up the financial pressures on American households is a noble goal, executing policies that align with economic realities rather than potentially disruptive interventions will be an immense challenge for the Vice President-turned-candidate. Harris's dangerous dalliance with price controls threatens to undermine an otherwise substantive economic agenda.
YOU NEED TO READ THIS NEXT
America's Next Nightmare (has nothing to do with November)
Roosevelt failed to make it work during World War II. It failed again for Nixon in the ‘70s. Right now, our government is so desperate, they're pulling the same dangerous maneuver... and when it inevitably fails this time, it could tip America into an economic nightmare. It doesn't matter who the Dems select as their nominee – Biden has already set this in motion. Full details here.
