Harris Economic Plan to Fight Inflation Will Cause More Inflation

August 16, 2024

Vice President Kamala Harris doubled down today in her Raleigh, North Carolina, speech on the same strategy that gave Americans inflation. Her plan promises more inflation, only this time with food shortages. Harris would do that by putting the government in charge of approving food prices, while extending the Biden budget blowout.

Even The Washington Post and New York Times were skeptical this morning about the reasons and the effects of instituting price controls on “price gougers” through the Federal Trade Commission – and injecting more money into the system by reviving pandemic-level payments.

Never mind that the FTC doesn’t have the statutory authority to order companies to lower prices. The impact of such a policy is clear from President Nixon’s wage-and-price controls, which were politically popular (and helped get Nixon re-elected) but set the stage for Seventies’ stagnation – low economic growth plus inflation.

Corporate greed cannot be the reason for the recent spike in food prices, now subsided. For more than 40 years, food prices rose at around 2.5 percent a year. Double-digit food inflation began with the pandemic’s disruption of the supply chain. This negative economic effect was exacerbated by the Biden Administration policy of following up on pandemic spending with the risibly named Inflation Reduction Act. Biden injected trillions of dollars into the pockets of consumers, leading to too much money chasing too few goods. Add to that a budget that is debasing the currency by adding $1 trillion of debt to the nation every 100 days, and Kamala Harris would put us on the path to the biggest economic own goal in modern history.

What would work in this environment? Letting prices match supply and demand. Consider the case of postwar West Germany under Allied occupation. The American officers who ran that country were schooled in the economics of the U.S. military, which is essentially socialist. They couldn’t understand why their price controls coincided with empty store shelves. While the Americans looked the other way, a German bureaucrat, economist and future Chancellor, Ludwig Erhard, lifted price controls, and within a week the store windows of West Germany were stocked full of hams, cheeses, and bread. That act of rebellion set West Germany on its way to enjoying its Wirtschaftswunder, or miracle economy – enabled by free-market economics.

Don’t expect any miracles from Harris’s plan. As with Nixon, Harris’s gambit may prove politically popular. But the economic effects will cause us all to suffer. Some might say that Harris really doesn’t mean it and that the FTC can’t legally regulate prices anyway. Don’t be so sure. Nixon froze all wages and prices by executive order. Don’t underestimate the hunger of Kamala Harris and Lina Khan to subsume private business into the public and political sphere.

That is what this is really all about.