Despite recent decreases in overall inflation, grocery prices continue to strain American budgets. Even in Denver, where inflation is a full percentage point lower than the national average, food costs remain a significant concern. As we move deeper into election season, the persistent issue of high grocery prices has thrust price gouging into the spotlight of policy debates.
A recent policy speech by Democratic nominee Kamala Harris suggests her administration would aim to combat price gouging on grocery items at the federal level. While this policy offers a tempting quick fix to voters burdened by high food costs, it risks doing harm in the name of doing good. Such price control measures, however well-intentioned, are unlikely to achieve their desired outcome and may even exacerbate the problem.
You don't need an economics degree to understand why price controls backfire—it's basic Econ 101. Today's rising prices aren't just greedy corporations pulling a fast one. It's not corporate greed emptying our wallets at the checkout counter—it's the government's monetary mismanagement inflating our grocery bills. Despite rising profits, even retail giants like Walmart still have profit margins less than 3%. Rising prices are the result of pandemic policies that pumped more money into people's pockets, coupled with tariffs implemented by the Trump administration and maintained under the Biden-Harris administration. When everyone's spending more, but supplies are constrained, prices naturally go up. That's exactly what we've seen play out over the last few years.
Imagine a world with federal price gouging laws. When demand surges, the government might cap price increases at 5% instead of the market-driven 10%. The result? Demand keeps climbing, but suppliers, constrained by artificial price limits, can’t justify increasing supply. This mismatch leads to shortages—remember the hand sanitizer shortages and rationing during the pandemic? That wasn’t just pandemic panic; it was retailers fearing price gouging penalties. Price controls don’t make goods more affordable; they make them scarce. Some voters might accept occasional shortages for the promise of lower prices. However, price gouging laws don’t eliminate higher costs; they merely shift them. While black markets can emerge, a more common scenario unfolds in plain sight: consumers spend more time and resources hunting for scarce goods.
Imagine your weekly grocery run during a toilet paper shortage. With prices artificially capped, you find empty shelves. You drive across town, perhaps making multiple trips, burning gas and time. Are you really benefiting from that lower sticker price? The extra fuel, wasted hours, and added pollution are real, often overlooked costs. Recent studies show this phenomenon occurs even during temporary, emergency price gouging laws, like those implemented during the pandemic.
Rising grocery prices are undeniably straining American households. However, price control laws are not the solution. They promise relief but deliver shortages, hidden costs, and economic distortions. We should all be wary of policies that sound too good to be true. Often, the most appealing promises can lead to the most disastrous consequences. Instead of embracing quick fixes, we should focus on addressing the root causes of inflation: expansionary monetary and fiscal policies, supply chain disruptions, and trade barriers. By tackling these issues head-on and thinking critically about proposed solutions, we can work towards genuinely affordable groceries without falling prey to well-intentioned but harmful interventions.
