Inflation sits at 8.3% and the national average for a tank of gas hit another record high of $4.57 per gallon. Americans are right to be worried.
As they look to Washington for solutions, they are being gaslighted–or told that what they are experiencing is not what’s really happening.
President Biden and lawmakers on the Left have blamed soaring prices at the gas pump and grocery store on various causes such as Putin, workers, and the pandemic. Now they are casting blame on price gouging by large corporations.
Recently, Congress introduced legislation in the U.S. House of Representatives and the U.S. Senate to attack price gouging. Scapegoating corporate greed may make for sensational headlines and the fodder of congressional hearings–such as the one I testified before yesterday–but is not a serious solution to rising prices.
Currently, inflation is widespread, reaching across virtually every industry, not just in energy or meat-packing. We need a dose of truth about the drivers of inflation if Congress is ever to find real solutions. Until then American households will continue to suffer.
Price Gouging Bills Take the Stage
There are currently two bills under consideration.
The Consumer Fuel Price Gouging Prevention Act would make it illegal to sell gasoline to consumers at “unconscionably excessive” and “exploitive” prices–whatever that means. In addition, the bill would beef up the Federal Trade Commission’s (FTC) authority to penalize oil companies if the government can prove they are hiking gasoline prices.
In the Senate, Democrats Tammy Baldwin of Wisconsin and Elizabeth Warren of Massachusetts introduced the Price Gouging Prevention Act to empower the FTC and state attorneys general to enforce a federal ban on large companies in any industry that engage in “unconscionably excessive” price increases. Again, we don’t know what “unconscionably excessive” means, but that is likely intentional to give enforcers wide latitude. This bill also increases requirements for public companies to disclose their pricing strategies with the Securities and Exchange Commission (SEC).
Both of these approaches start from the assumption that price gouging is occurring and that it is driving inflation. Their goal is to expand the FTC’s enforcement power and resources.
The right and left agree these bills are ill-advised. Columnist Catherine Rampell wrote a masterful takedown of the Senate bill in the Washington Post:
A conspiracy theory has been infecting the Democratic Party, its progressive base, even the White House.
Call it “Greedflation.”
…
I’ve been scolded before, including by White House senior aides, for making a fuss about Democrats’ demagoguery on this issue. So what if Biden and Democratic lawmakers want to grandstand about corporate greed? Who cares whether Biden asks for another gratuitous investigation into whether “illegal” conduct is driving up gas prices? This kind of populist anti-corporate rhetoric polls well, they say. It does no harm. It’s just cheap talk, so Democrats can show they’re Doing Something about inflation.
But such allegedly cheap talk has become very expensive.
At best, this approach has done nothing to curb inflation. Worse, it has distracted Democrats from taking actions that could help, because this “greedflation” narrative has persuaded both policymakers and the public to misdiagnose the problem’s causes.
Former President Barack Obama’s chair of the Council of Economic Advisers called the efforts “dangerous misguided nonsense” on Twitter.
If price gouging is not the problem, why is the Left leaning into this message so hard? To deflect, deflect, deflect. Evidence continues to mount that the $1.9 trillion American Rescue Plan has fueled inflation. It added at least 3 percentage points according to the Federal Reserve Bank of San Francisco.
To save face for supporting an inflationary bill and to appear to be doing something about a problem they created, the Left is plowing ahead with these bills that are doomed to the dustbin.
An energy analyst, David Blackmon, summarized it well for Forbes:
The point is that building this construct is good politics, regardless of whether the legislation makes any real sense or not from a public policy perspective…
So, Sec. Buttigieg and other Biden officials will be able to keep appearing on “Face the Nation” or another of the myriad Sunday political talk shows, where they can keep promising to “crack down” on whatever definition of “price-gouging” the administration and congressional Democrats pick on any given week, wherever they can find it. The foregone conclusion that they will never be able to find it, and really won’t even try, isn’t important. The narrative is the only thing that matters.
What a terrible way to run a country.
Bottom line
Near 40-year-high inflation is not due to price gouging. We have a demand and supply problem.
Demand for goods and services outpaces companies’ ability to produce, import, and deliver those goods and services. Thus, prices are high.
Some companies may be enjoying record profits, but profits are not evidence of price gouging. If someone is price gouging they should be prosecuted, but there is no evidence that is occurring across the economy.
Congress should focus on increasing supply and reducing demand rather than chasing a boogeyman they can’t prove exists, because he likely does not.