How To Fix High Prices
As high inflation spread across the world following the COVID pandemic and supply chain disruptions, many corporations saw an opportunity to raise prices by more than they needed to. The result was both record corporate profits and anger for Americans dealing with the sudden cost jumps.
It has been almost 18 months since we last dealt with high inflation, which is 2.9% today, but many prices are still quite a bit higher than before the pandemic. Rightfully so, Americans are frustrated by these prices and looking for someone to fix it.
Trump’s plan is to enact tariffs on all imports, which will only cause prices to jump even higher because Americans will foot the bill for those tariffs. Trump’s other plan is to “drill, drill, drill,” even though the US is already producing more oil than ever before in history.
Republicans offer no plan forward while accusing Democrats of spending too much. They even reference the Inflation Reduction Act as a cause for higher prices despite the fact that not only was inflation a global event, but it peaked in the US in June 2022, and the Inflation Reduction Act was signed in August 2022. Inflation dropped rapidly afterward.
Democrats mainly blame corporate price gouging, which has prompted Vice President and Democratic Presidential Nominee Kamala Harris to announce a plan to restrict price hikes during times of crisis. The details of this proposal haven’t been released, but concerns are about who will define what constitutes a crisis and how much control the government will have over prices.
Contrary to Republicans calling such a move communist or socialist, 34 states already have anti-price gouging laws, and the federal government price-fixes some products, including sugar and tart cherries.
The largest issue with an anti-price gouging law is that it only addresses the symptom, and only during a severe enough crisis, instead of addressing the root causes to fix prices as a whole.
Corporations didn’t cause inflation, but they did capitalize on it. Using inflation as a cover, companies raised prices higher and higher, which resulted in huge profits.
It makes sense to react to that greed by saying that we should stop companies from taking advantage of a crisis. But why was it so easy for them to price gouge in the first place?
America has been lax in upholding antitrust laws, allowing major markets to be dominated by just a few huge corporations and limiting the competition necessary for capitalism to work correctly. The fewer the number of companies in control of a market, the easier it is for them to manipulate the market instead of competing for the lowest price to draw in customers.
There are numerous examples you could use to illustrate this point. Since people are upset about grocery prices, we’ll use that.
Markets become bad for consumers when as few as four companies own 40% or more of the sector. Just four companies own over 65% of all grocery stores in America.
One of those four, Kroger, has been on a buying spree and recently put in a bid to buy Albertson’s for ~$25 billion, the largest grocery merger in history. The FTC sued, which resulted in a temporary block of the merger while the case works its way through the court system.
The Biden administration has taken a stronger stance on enforcing antitrust laws and pushing back against corporations exploiting consumers than previous administrations, including both Republican and Democratic presidencies.
Kroger currently owns over 10% of grocery stores, and the merger would push them close to 15%. Walmart owns ~24% of grocery stores and ~5% more if you include Sam’s Club. Corporations aren’t supposed to be allowed to take over this much of a market. That is explicitly what antitrust laws are written to prevent.
The United States has the authority to break up businesses when they’ve grown too big and pushed out too much of the competition. This happened to AT&T’s Bell System. The breakup formed companies such as Bell South and Bell Atlantic. The latter ended up merging with another company to form Verizon.
If no one is going to take on breaking up these mega-corporations, then the next approach is to block new mergers of large companies while investing in smaller ones to help them compete and grow. The downside is that while this is a good course of action, consumers won't feel the returns on those investments for a long time. Harris announced both of these measures on the campaign trail, which is far more than any Republican has proposed to deal with prices.
Another way to make life more affordable is to increase wages. The federal minimum wage has been stuck at $7.25 since 2009. While the lowest-paid workers saw their wages rise the most during the recovery, and only 13% of Americans now earn below $15 an hour, 23% still earn below $17 an hour. That is where the federal minimum wage would be today if it had been set to track inflation from its peak back in 1968. It was a time when the middle class was at its strongest and GDP growth was at its highest.
Critics of increasing the minimum wage claim that it causes inflation, high prices, and job loss. That isn’t true. Numerous reviews of past minimum wage increases have found that price increases were minimal, they didn’t contribute to any meaningful amount of inflation, and they didn’t cause job losses. It is simply corporate propaganda intended to allow companies to enrich themselves off the backs of low-paid workers.
Amazon is a tragic example of this. Before 2018, a significant portion of Amazon workers were receiving SNAP benefits, food assistance available only to the poorest Americans, because their wages were too low to live off of. In Arizona, it was 33% of Amazon workers. In other states, it was above 10%. At the end of 2018, Amazon increased its lowest wages to $15 an hour in response to criticism and to combat workers growing more interested in unionizing. However, $15 an hour is not a livable wage anywhere in America, meaning Amazon workers still rely on federal assistance.
It is simply absurd to claim that raising the minimum wage would raise costs while being okay with letting companies use your tax dollars to subsidize their workers, all while making record-breaking profits.
The last solution to look at is reallocating federal funding. Take the subsidies that go to oil and corn, which combined with price fixing on sugar has led to corn syrup being in most US food products today, and direct those resources towards smaller farms growing healthy vegetables, grains, and fruits along with funding investment into new grocery store locations to end food deserts. The result would be lower costs for healthy food and increased competition in the food and grocery markets.
It shouldn’t be hard to sell such a proposal to the American people using rhetoric such as:
“Why are the big oil companies that are price gouging you at the pump getting your tax dollars as subsidies to increase their record-breaking profits? Why are we rewarding them for making life harder for struggling Americans in a time of need?
We’re going to end those subsidies and use the money to invest in family farmers. These farmers will grow healthy vegetables, grains, and fruits to create a large supply of affordable, nutritious food.
We will also invest in building new neighborhood grocery stores to end food deserts across the country and ensure all Americans have access to good, healthy food for every meal.
We’re going to increase competition against the behemoth grocery store chains that bought up your local grocery store only to raise prices and lower quality. Capitalism only works when there is competition. Competition is what they’re going to get.
It’s time to rebuild America for the middle class. No American, no child, needs to be homeless or hungry. Taking care of each other improves all of our lives. Corporations have funded campaigns to divide us in order to gain power over us. It is time to unite against big business and return to being a nation by the people, for the people.”
It is time to fight back against corporations and to fix the root causes that created these problems.
