Stewart Leonard Jr., President and CEO of Stew Leonard, reacts to a significant downward revision in U.S. job creation on “The Evening Edit” and discusses Vice President Kamala Harris’ economic plan.
Vice President Harris’ On the economic agenda is a recently announced push to impose controls on alleged “price gouging” by food and grocery companies and to prevent them from making “excessive profits.” But the plan provides no details on how those conditions would be defined and enforced.
Harris’ campaign released a document on Friday saying that if elected, her administration would work with Congress to “advance the first-ever federal ban on price gouging on food and groceries; establish clear rules to make it clear that big companies cannot unfairly exploit consumers to raise prices. excessive profits on food and groceries.”
A Harris-Waltz administration will also seek to “give the FTC and state attorneys general new powers to investigate and impose tough new penalties on companies that violate the regulations,” the document says.
But the Harris campaign’s plan does not include a definition of what “price gouging” means or what would constitute “excessive profits” in the eyes of regulators. Nor does it describe how companies accused of wrongdoing could fix the problem. FOX Business reached out to the Harris campaign for more details on how their proposal would be implemented and did not receive a response by deadline.
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Vice President Kamala Harris’ plan to put a stop to alleged “price gouging” and “excessive profits” at grocery stores has met with criticism. (Bing Guan/Bloomberg via Getty Images / Getty Images)
The Harris campaign’s proposal has drawn criticism from economists and business experts who say the restrictions on price increases are counterproductive.
Patrick Gourley, an associate professor of economics at the University of New Haven, told FOX Business he was “pretty baffled” by the proposal and the lack of clarity on how illegal conduct would be determined.
“It’s really important to know what price gouging is. There’s no official definition,” Gourley said. “If you want to say you can’t gouge prices in a recession, we have a group that calls recessions, so we know what that means. We just say, ‘Oh, companies can’t gouge prices.’ What is price gouging? Who gets to say that. Who gets to make that decision? That’s really concerning.”
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Compared to companies in other sectors of the economy, grocery stores have relatively low profit margins. (Liu Guanguan/China News Service/VCG via Getty Images / Getty Images)
“In general, the government shouldn’t really be involved in restricting prices. Prices move for a reason,” he explained. “There might well be very limited situations where you want to restrict price gouging, given how some gas stations have doubled or tripled their prices. Prices for gas after September 11, just to try to make money off people.”
Gourley said that in these circumstances, you could argue that it’s “just really bad behavior and the government should step in and stop it.” But that’s the exception that proves the rule. Generally, a rise in prices means that people want that good or service, and so you should let prices rise.
“Overall, from an economic perspective, I think a law against price gouging is a very bad policy,” Gourley said. He also noted that it would hamper investment and the emergence of competition in a sector such as the food industry.
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Harris’ plan does not explain how alleged “price gouging” and “excessive profits” would be defined. (Allison Joyce/AFP via Getty Images / Getty Images)
“One of the perverse long-term effects of price controls and anything that prevents price increases is that they limit future investments” he explained. “When prices for a good are very high over a long period of time, you expect new producers to enter the market. But if existing firms are not allowed to raise their prices and you end up with shortages, there is no incentive to enter the market and create competition because profits will not be as high.”
Ken Mahoney, president and CEO of Mahoney Asset Management, told FOX Business that price controls do not work and would have “almost COVID-like effects in that people would stockpile and actually make the situation worse.”
Mahoney noted that grocery stores are relatively tight profit margins compared to companies in other sectors of the economy and that a price control plan could put these companies under even greater pressure, even to the point of being completely unable to operate.
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“I look at some of these companies. Albertsons and Kroger, for example, are trying to get together and do a grocery store merger. … Their margins are about 1.5%,” he noted. “Those margins are already very low. Should it be zero and then the government should just take over these grocery stores? I’m not sure where they’re headed.”
Mahoney added that grocery stores may be forced to Consider layoffs if they are prohibited from raising their prices because they have to maintain “a certain margin for shareholders”.
