acesfull86
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https://www.msn.com/en-us/money/markets/what-kamala-harris-doesn-t-get-about-food-costs/ar-AA1pk6zu
Last week in North Carolina, Kamala Harris called for a new federal law to ban “price gouging on food.” Such a law might be popular, but it would have, at best, no impact on grocery prices and might even make the problem worse. That’s especially unfortunate because it distracts from all the federal policy changes that actually could reduce food prices.
The evidence that price gouging was responsible for the post-pandemic spike in food prices is somewhere between thin and nonexistent. A recent report from the New York Federal Reserve found that retail food inflation was mainly driven by “much higher food commodity prices and large increases in wages for grocery store workers,” while profits at grocers and food manufacturers “haven’t been important.” Similarly, a 2023 report from the Kansas City Fed observed that rising food prices were overwhelmingly concentrated in processed foods, the prices of which are more sensitive to (and thus driven by) labor-market tightness and wage increases. Grocery profits did rise briefly during the pandemic, but the increase was the predictable result of increased demand (thanks to government stimulus along with more Americans eating at home) running headfirst into restricted supply (thanks to pandemic-related closures and supply-chain snarls, along with the war in Ukraine, a major food producer). In fact, expanding corporate profits frequently accompany bouts of heightened demand and inflation; the past few years have been no different.
…
Inflation is generally a macroeconomic issue, driven by broad monetary and fiscal policies, not the choices of individual corporate actors. Food prices in particular are shaped by volatile forces—weather, geopolitics, natural disasters—beyond government control or influence, which is why economists’ “core inflation” metric omits them. As economics textbooks and centuries of experience teach us, limiting the amount that companies can charge is more likely to reduce supply by discouraging investment and production: a recipe for both shortages and higher, not lower, prices in the long term. The main solution to voters’ grocery angst is simply time, as normal market conditions return and American incomes slowly outpace U.S. food prices.
That fix, of course, is a nonstarter for candidates running for an election just months away and tagged, fairly or not—mostly not—with causing higher grocery prices. Politicians whose pitch to voters is “Just be patient” could soon be out of a job—so they must promise to do something. The good news is that an eager White House and Congress, laser-focused on food prices, have plenty of policy reforms available that would give American consumers some relief. The bad news is that they would all involve angering powerful business interest groups, which is why they never actually happen.
Start with trade restrictions. To protect the domestic farming industry from foreign competition, the United States maintains tariffs and “trade remedy” duties on a wide range of foods, including beef, seafood, and healthy produce that can’t be easily grown in most parts of the country: cantaloupes, apricots, spinach, watermelons, carrots, okra, sweet corn, brussels sprouts, and more. Special “tariff-rate quotas” further restrict imports of sugar, dairy products, peanuts and peanut butter, tuna, chocolate, and other foods. These tariffs do what they are designed to do: keep prices artificially high. Sugar, for example, costs about twice as much in the U.S. as it does in the rest of the world. The USDA conservatively estimated in 2021 that the elimination of U.S. agricultural tariffs would benefit American consumers by about $3.5 billion.
In addition to tariffs, regulatory protectionism—against imported products such as tuna, catfish, and biofuel inputs—causes more consumer pain for little health, safety, or environmental gain. The 2022 baby-formula crisis exposed the degree to which Food and Drug Administration regulations effectively wall off the U.S. market from high-demand, safely regulated alternatives made abroad—alternatives that the Biden administration tapped when the crisis hit. These regulatory measures further inflate prices: The USDA, for example, once calculated that mandatory country-of-origin labeling for meat imports cost American meatpackers, retailers, and consumers about $1.3 billion annually. Those rules were scrapped after years of litigation, but cattle ranchers and their congressional champions continue working to reinstate them.
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Yes
Last week in North Carolina, Kamala Harris called for a new federal law to ban “price gouging on food.” Such a law might be popular, but it would have, at best, no impact on grocery prices and might even make the problem worse. That’s especially unfortunate because it distracts from all the federal policy changes that actually could reduce food prices.
The evidence that price gouging was responsible for the post-pandemic spike in food prices is somewhere between thin and nonexistent. A recent report from the New York Federal Reserve found that retail food inflation was mainly driven by “much higher food commodity prices and large increases in wages for grocery store workers,” while profits at grocers and food manufacturers “haven’t been important.” Similarly, a 2023 report from the Kansas City Fed observed that rising food prices were overwhelmingly concentrated in processed foods, the prices of which are more sensitive to (and thus driven by) labor-market tightness and wage increases. Grocery profits did rise briefly during the pandemic, but the increase was the predictable result of increased demand (thanks to government stimulus along with more Americans eating at home) running headfirst into restricted supply (thanks to pandemic-related closures and supply-chain snarls, along with the war in Ukraine, a major food producer). In fact, expanding corporate profits frequently accompany bouts of heightened demand and inflation; the past few years have been no different.
…
Inflation is generally a macroeconomic issue, driven by broad monetary and fiscal policies, not the choices of individual corporate actors. Food prices in particular are shaped by volatile forces—weather, geopolitics, natural disasters—beyond government control or influence, which is why economists’ “core inflation” metric omits them. As economics textbooks and centuries of experience teach us, limiting the amount that companies can charge is more likely to reduce supply by discouraging investment and production: a recipe for both shortages and higher, not lower, prices in the long term. The main solution to voters’ grocery angst is simply time, as normal market conditions return and American incomes slowly outpace U.S. food prices.
That fix, of course, is a nonstarter for candidates running for an election just months away and tagged, fairly or not—mostly not—with causing higher grocery prices. Politicians whose pitch to voters is “Just be patient” could soon be out of a job—so they must promise to do something. The good news is that an eager White House and Congress, laser-focused on food prices, have plenty of policy reforms available that would give American consumers some relief. The bad news is that they would all involve angering powerful business interest groups, which is why they never actually happen.
Start with trade restrictions. To protect the domestic farming industry from foreign competition, the United States maintains tariffs and “trade remedy” duties on a wide range of foods, including beef, seafood, and healthy produce that can’t be easily grown in most parts of the country: cantaloupes, apricots, spinach, watermelons, carrots, okra, sweet corn, brussels sprouts, and more. Special “tariff-rate quotas” further restrict imports of sugar, dairy products, peanuts and peanut butter, tuna, chocolate, and other foods. These tariffs do what they are designed to do: keep prices artificially high. Sugar, for example, costs about twice as much in the U.S. as it does in the rest of the world. The USDA conservatively estimated in 2021 that the elimination of U.S. agricultural tariffs would benefit American consumers by about $3.5 billion.
In addition to tariffs, regulatory protectionism—against imported products such as tuna, catfish, and biofuel inputs—causes more consumer pain for little health, safety, or environmental gain. The 2022 baby-formula crisis exposed the degree to which Food and Drug Administration regulations effectively wall off the U.S. market from high-demand, safely regulated alternatives made abroad—alternatives that the Biden administration tapped when the crisis hit. These regulatory measures further inflate prices: The USDA, for example, once calculated that mandatory country-of-origin labeling for meat imports cost American meatpackers, retailers, and consumers about $1.3 billion annually. Those rules were scrapped after years of litigation, but cattle ranchers and their congressional champions continue working to reinstate them.
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Yes
