Critics of Vice President and presumptive Democratic presidential nominee Kamala Harris’ proposal to control food and pharmaceutical inflation by enacting government-enforced price controls at grocery stores and drug stores say it would backfire, leading to supply shortages and increased inflation.
Harris on Friday unveiled her plan to go after what she called “price gouging” at grocery stores and to cap the costs of certain prescription medications.
“Most businesses are creating jobs, contributing to our economy, and playing by the rules, but some are not. And that’s just not right,” Harris said. “As president, I will go after the bad actors and I will work to pass the first ever federal ban on price gouging on food.”
Critics said such price caps have been tried plenty of times before — by the Nixon administration in the early 1970s in the U.S. and by Communist regimes across the globe — and they actually hurt consumers and the economy overall.
“Vice President Harris’ gambit may prove politically popular, just as Nixon’s wage and price controls were for him,” Robert Bork Jr., president of the Antitrust Education Project, said, referring to the late President Richard Nixon’s 1971 executive order that imposed a 90-day freeze on wages and prices in an attempt to counter inflation. “But the economic effects will cause us all to suffer, just as Nixon’s plan paved the way for stagflation.”
The free-market Cato Institute wrote of Nixon’s price control measures: “As Nobel Prize-winning economist Milton Friedman correctly predicted, however, Nixon’s gambit ended ‘in utter failure and the emergence into the open of the suppressed inflation.’ The people would pay the price – but not until after he’d coasted to a landslide re-election in 1972 over Democratic Sen. George McGovern.”
As retired diplomat and author William Walker wrote in the Wall Street Journal in 2021: “Safely re-elected, Nixon ended the experiment on Jan. 15, 1973. The stock market promptly plummeted and the rate of inflation exploded. Government and private forecasters alike failed to recognize that during the price-freeze period, demand had grown exponentially, putting such severe pressure on supplies that within months, prices of nearly everything – commodities, foodstuffs, minerals and petroleum – would soar, an inflationary shock that left the economy in shambles.”
Harris’ plan to crack down on grocery companies’ “excessive corporate profits” also comes as the grocery industry’s profits have decreased. According to Grocery Dive, “In 2023, profit margins in the grocery industry hit 1.6% – the lowest level since it was 1% in 2019 – as total expenses increased, FMI found. The industry’s slowed same-store sales growth of 2.1% last year was driven by inflation.”
Under Harris’ plan, the Federal Trade Commission would impose “harsh penalties” on companies that break whatever the new limits on price gouging would be. Harris did not specify what the price limits or how harsh the penalties would be.
“Some might say that Harris really doesn’t mean to do this and that the FTC can’t legally regulate prices anyway,” Bork said. “Don’t be so sure. Nixon froze all wages and prices by executive order. Don’t underestimate the hunger of Kamala Harris and [FTC Commissioner] Lina Khan to subsume private business into the public and political sphere. That is what this is really all about.”
Former President Donald Trump, the GOP nominee for president, compared Harris’ plan to Soviet-era price controls.
“If you think things are expensive now, they will get 100 times WORSE if Kamala gets four years as President,” Trump wrote on Truth Social. “Under her plan, Kamala will implement SOVIET Style Price Controls.”
The communist nation set strict controls on consumer prices, leading to empty store shelves.
“This led to shortages because, if wages were rising while goods prices could not, demand quickly exceeded supply,” Mises Institute senior editor Ryan McMaken wrote. “Soviet citizens often found they had very little to spend their money on, with the result being the long queues and empty store shelves we now associate with the Soviet economy.”
