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To address increased food and grocery prices, Vice President Kamala Harris’ campaign has promised to enact a federal ban on price gouging. In an Aug. 16 press release, the campaign vowed to “go after bad actors to bring down Americans’ grocery costs and keep inflation in check.”
The Harris campaign’s proposal arrives amid heightened concerns from voters regarding the cost of living. On Aug. 21, Ipsos reported that “50% of Americans now say inflation is a top concern for their country.” While the rate at which grocery prices have increased has slowed in recent months (including only a 1.3% rise over the last year), the price of “food at home” has still increased by 21.6% since the start of President Joe Biden’s term in January 2021, according to the Bureau of Labor Statistics.
Harris blames the surge in food prices, in part, on corporate price gouging. At an Oct. 23 town hall event on CNN, she said, “Companies are taking advantage of the desperation and the need of the American people — we saw it, actually during the pandemic as well, where, because of supply chain issues, there was a reduction of supply, and then they would inflate the price of everyday necessities.”
But economists primarily blame the COVID-19 pandemic, supply chain disruptions and rising labor costs, among other reasons, for inflation.
Asked to evaluate the anti-price gouging proposal, economists gave us mixed responses — some believed a federal price gouging ban could be an effective tool to restrain food costs during emergencies, while others argued the reform would create supply shortages. However, the economists we interviewed largely agreed that on its own, the Harris campaign’s proposal would have little to no effect on current grocery prices.
What Harris Proposes
During a campaign event in Raleigh, North Carolina, on Aug. 16, Harris told voters, “I will work to pass the first-ever federal ban on price gouging.” She continued, “My plan will include new penalties for opportunistic companies that exploit crises and break the rules, and we will support smaller food businesses that are trying to play by the rules and get ahead.” Opposition to price gouging has since become a central aspect of the Harris campaign. Bloomberg reported on Oct. 16 that “Harris ads mentioning price gouging have aired at least 175,000 times on broadcast, cable and online.”
In the August press release, the Harris campaign proposed to “work with Congress” to “set clear rules of the road to make clear that big corporations can’t unfairly exploit consumers to run up excessive profits on food and groceries.” To enforce the price gouging ban, the Harris campaign promised to “secure new authority for the FTC [Federal Trade Commission] and state attorneys general to investigate and impose strict new penalties on companies that break the rules.”
Harris’ campaign website states that her policy would “build on the anti-price gouging statutes already in place in 37 states.” These 37 state-level anti-price gouging laws largely function by banning firms from significantly increasing the price of essential goods during disasters or states of emergency. When we spoke to the Harris campaign, a representative confirmed that the anti-price gouging proposal is specifically meant to curtail price increases during emergency situations.
The Harris campaign elaborated on its proposal in an 82-page economic policy plan published on Sept. 25. The document describes that Harris would “go after nefarious price gouging on essential goods during emergencies or times of crisis,” and cites statutes in Texas, North Carolina, New York and Florida as examples of current anti-price gouging laws.
However, thus far the campaign has provided limited details on the exact mechanisms or parameters of its anti-price gouging proposal. Importantly, many states differ in how they define price increases that constitute “gouging.” For example, Delaware implemented an anti-price gouging law “during the COVID-19 recovery period” that banned price increases above 10% of previous sale prices unless the additional costs were justified, while Pennsylvania’s statute set the price gouging threshold at 20%. Harris’ home state of California also has an anti-price gouging law that bans companies from increasing prices by more than 10% relative to their price before a declared state of emergency, given that the company’s production costs do not significantly increase.
Conversely, Florida’s statute instead defines an “unconscionable” price increase as “a gross disparity” between prices during a state of emergency and average prices over the previous 30 days without offering a specific benchmark.
Additionally, in an article published by the American Bar Association, litigator Patricia Conners said state statutes differ significantly in the types of goods protected by anti-price gouging laws. “In some states and territories, the statutes apply across the board to all products and services,” she wrote. “Others apply to products and services considered ‘necessities,’ ‘essential,’ or ‘critical.’ Still others apply only to a single product or a handful of products deemed necessary to a consumer’s health and safety in an emergency, such as food, gasoline, and medical goods.”
Conners also pointed out the significant variance in punishments against firms that violate price gouging laws depending on the state, with some states only enforcing civil fines and others imposing criminal penalties that could include prison sentences.
The Harris campaign’s proposal could also potentially borrow ideas from the Price Gouging Prevention Act proposed in February by Democratic Sens. Elizabeth Warren of Massachusetts, Tammy Baldwin of Wisconsin and Bob Casey of Pennsylvania, and Democratic Rep. Jan Schakowsky of Illinois. This bill would “allow the FTC and state attorneys general to stop sellers from charging a grossly excessive price,” and require “public companies to transparently disclose and explain changes in their cost of goods sold, gross margins, and pricing strategies” during an “exceptional market shock.” No votes have been held on the bill.
Evaluations of the Proposal by Economists
The differences between existing state anti-price gouging laws, coupled with the Harris campaign’s lack of specific details on thresholds for enforcement and punishment, have led economists to disagree on how the proposed policy would affect firms and consumers.
Dean Baker, senior economist for the Center for Economic and Policy Research, a labor-focused think tank, told us in an email that he believes the policy could be “somewhat effective” as a deterrent. He argues that the policy would allow the federal government to report stores that significantly increase prices in response to emergencies, leading to “embarrassment and bad publicity that most stores would like to avoid.” Therefore, he concludes that the Harris campaign’s proposed policy would “work about as well as state policies do in disasters.”
Lindsay Owens, executive director at the left-leaning Groundwork Collective, expressed her approval of the Harris campaign’s proposal. “Having the ability to go after folks who use crises or exploit crises to run up the score on profits I think would be a useful tool to have going forward,” she stated. Owens, who was a top aide to liberal members of Congress, pointed out that while current state anti-price gouging laws cover much of the country, a federal policy could better regulate price gouging occurring through interstate commerce.
Both Baker and Owens also noted that the policy would create relatively little additional regulatory cost. “By definition, we will not have many extraordinary situations, so we will not have a large standing group of enforcers ready to pounce if price gouging does occur,” Baker told us. Similarly, Owens said that because food prices are relatively transparent, regulators can monitor for potential price gouging “pretty easily.”
Conversely, other economists told us that the proposed policy would create more harm than good by distorting supply markets and creating shortages.
Clifford Winston, a senior fellow in economic studies at the Brookings Institution, told us that intervening in free markets to constrain the prices firms could charge carries a “big risk,” even if the law only applies to emergency situations. He said firms are simply “responding to market forces” when they raise prices to match increased consumer demand during an emergency.
In a basic model without regulation, economists generally predict that an emergency situation will increase consumer demand for certain goods, raising their prices. The model predicts that these higher prices will incentivize firms to produce and sell more of these products, potentially offsetting the initial supply shortage. However, Winston said that if firms cannot significantly raise their prices in response to rising demand, they may decide that it is no longer profitable for them to produce and transport additional products to the affected area, causing them to “cap supply.” As a result, he argued that a federal anti-price gouging law is “not the correct policy lever.”
Similarly, Harvard economic policy professor and former Obama administration economist Jason Furman told the New York Times in August, “This is not sensible policy, and I think the biggest hope is that it ends up being a lot of rhetoric and no reality … there’s no upside here, and there is some downside.”
However, Baker pointed out that because Harris’ proposal likely only affects prices during emergencies, an anti-price gouging law would not create “long-term” supply distortions. While he agreed that “there will be shortages” during emergencies by “the nature of the problem,” he said that because firms do not plan “production around extreme events,” an anti-price gouging law would not induce lasting distortions in firm decision-making.
Douglas Holtz-Eakin, president of the conservative-leaning American Action Forum and former director of the Congressional Budget Office, also told us that he believed an anti-price gouging law “would have a minimal impact” on the supply of goods.
Overall, many economists agree with Winston’s and Furman’s opposition to the anti-price gouging policy proposal. In a 2022 poll conducted by the University of Chicago, only 5% of economists supported a policy proposal to “make it unlawful for companies with revenues over $1 billion to offer goods or services for sale at an ‘unconscionably excessive price’ during an exceptional market shock,” with 65% expressing moderate or strong disagreement to the proposal.
However, polling data indicate that voters support anti-price gouging laws at a much higher rate than economists. An August YouGov poll identified that 65% of voters supported Harris’ proposal of “capping increases on food and grocery prices,” with only 24% of voters opposing the proposed policy.
Potential Effects of Proposal on Grocery Prices
Economists consistently stated that the anti-price gouging proposal would have little effect on current grocery prices. Mark Zandi, chief economist at Moody’s Analytics, said on a Sept. 13 podcast that the emergency circumstances that would trigger anti-price gouging restrictions described in the proposal are “not what we’re observing now,” pointing to the relatively flat inflation rates for grocery prices in recent months.
Sharing this skepticism during the same podcast, Moody’s economist Marisa DiNatale called the Harris campaign’s proposal a “political populist play to placate people’s ire over the fact that food prices are high.” Holtz-Eakin also told us that he believed the policy proposal would not affect current grocery prices.
Additionally, in many of the potential emergency situations that could activate a federal anti-price gouging law, existing state-level legislation already exists to limit firm price increases. For example, Florida and North Carolina, two states heavily impacted by Hurricane Helene and Hurricane Milton, are among the 37 states that already have anti-price gouging laws. CNBC reported on Oct. 8 that the Florida attorney general expanded a statewide “price gouging hotline” enabling citizens to report illegal price increases during the hurricanes. It is unclear whether a federal anti-price gouging law under Harris may differ from Florida’s existing legislation.
Many economists are also dubious of the oft-cited argument by the Harris campaign that corporate profit-seeking is a key driver of inflation for groceries.
While progressive think tanks often blame inflation on rising corporate profits, a May 13 report by the Federal Reserve Bank of San Francisco said economy-wide aggregate price markups, defined as the difference between a company’s prices and production costs, “stayed essentially flat during the post-pandemic recovery,” leading the authors to conclude that “markups were not a main driver of the post-pandemic surge in inflation.” Additionally, an April 2023 report by the Federal Reserve Bank of Kansas City found that “tight labor market conditions have put upward pressure on wages and contributed to higher food production costs.” Corroborating these reports, Holtz-Eakin told us that cost pressures on firms were the “dominant factor” in increasing food prices, with corporate profit margins only being “a tiny part of the story.”
As we’ve written before, economists instead primarily blame rising inflation earlier during the Biden administration on the disruptions inflicted by the COVID-19 pandemic, such as supply shortages, labor market distortions and increased consumer spending on goods, as well as the Russian invasion of Ukraine.
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