In a recent speech, Vice President Kamala Harris announced a plan to ban what her campaign calls “food price gouging.”
Americans are certainly concerned about rising costs, with the rising price of eggs being a prime example. 19 percent We've learned over the past year that inflation isn't caused by price gouging. But it can be caused by a combination of an increasing money supply and an unsustainable budget deficit — both of which sound familiar — and other parts of Harris's policies could make the problem worse by increasing the budget deficit.
To begin with, the claim that food producers are inflating prices is highly dubious, as there is fierce competition between farmers, processors, wholesalers and retailers to keep prices down and attract inflation-weary customers.
Supermarkets account for approximately 2 percentEven if some companies exercise monopoly power and charge high prices, this does not necessarily lead to inflation (a measure of how quickly prices rise each year).
inflation result This is due to government monetary and fiscal policies, not corporate greed.
With federal deficits approaching $2 trillion per year and growing, and no plans to raise taxes to pay off the debt, bondholders have good reason to expect their bonds to fall in value.
This causes people to try to sell their bonds in exchange for other things, increasing demand for goods and services and driving up prices, which is one of the big reasons why inflation has risen sharply in 2021 and 2022.
Also, as many astute observers have noted, during the pandemic, the government $5 trillion The stimulus package was passed without plans to raise taxes to pay for it, leading to Americans spending more on goods and services and a faster expansion of demand than supply.
Putting all this together, it's easy to see why prices have risen so much. The year-on-year inflation rate is 9.1 percent in June 2022The cause has been government recklessness: government price controls cannot end the situation without creating shortages.
Inflation is falling Less than 3%But it's still too high: The prospect of future deficits that are already large and getting bigger makes people less willing to buy bonds. To encourage people to buy bonds, interest rates have risen, which means more and more of the government's spending goes towards paying interest on the debt.
Rising interest costs are another reason why the next president may pressure the Federal Reserve to ease monetary policy and lower interest rates, which could reinvigorate the economy and consumer demand and contribute to inflation again.
In addition, deficits are expected to increase in the future due to an increasing share of government spending from benefit programs that are not subject to annual budget limits, such as Social Security, Medicare, and Medicaid.
With all these challenges in mind, how can the next President and Congress limit the budget deficit and contain inflation? The answer is simple: take steps to reduce both entitlement and discretionary spending without implementing deep tax cuts.
Instead, Harris goes further: Increased deficit spendingFor example, expanding Affordable Care Act subsidies and making the child tax credit refundable and increasing it. Former President Donald Trump's plan to cut taxes on Social Security benefits would also increase the deficit. In this case, $1.6 trillion and $1.8 trillion More than 10 years.
Without a credible plan to maintain government surpluses in the future, we can expect further inflation.
What we need is a chief executive who is willing to make the hard choices and not blame others, including corporations, for our economic woes.
Tracy C. Miller He is a senior research editor at the Marketas Center at George Mason University.
