Vice President Kamala Harris announced her economic agenda last Friday. It can best be summarized as deflection and projection. She attempts to defer the blame for inflation from Biden-Harris economic policy — where it belongs — to what she claims is "price gouging" by American businesses. Ironically, data from the administration’s own Labor Department proves her claims of price gouging are simply false.
Prices paid by businesses (as measured by the producer price index) have risen 19.4 percent under the Biden-Harris administration. That’s precisely the same increase as occurred in the prices paid by consumers over this period (as measured by the consumer price index). In other words, inflation has been impacting the entire supply chain from producers to consumers.
Had producers or retailers been price gouging (that is, increasing prices more than inflation justified), the rate of inflation for consumers would have exceeded that for producers. It did not.
In fact, consumer price increases have only recently caught up with the price increases businesses faced. For most of the last three and half years, cumulative inflation for businesses has been higher than cumulative inflation for families. In other words, businesses were increasing consumer prices more slowly than inflation was increasing their costs.
KAMALA HARRIS' ECONOMICALLY ILLITERATE AGENDA WILL JUST TANK AMERICANS' FINANCES EVEN MORE
Either businesses were unable to keep pace with rapidly surging inflation, or they were protecting consumers from the intensity of the Biden-Harris inflationary surge — or both. Either way, businesses clearly weren’t price gouging.
Here’s the reality — Biden-Harris economic policy caused the inflation working- and middle-class Americans are living through. Those policies include massive government spending that required a dramatic increase in the money supply plus burdensome costs of overregulation. Their cumulative effect has been devastating.
First among the Biden-Harris administration’s public policy blunders was excessive government spending. This shouldn’t have been a surprise. Recall that in February 2021, before passage of the ironically named American Rescue Plan and its $1.9 trillion in government spending, Democrat economist emeritus Larry Summers warned that it would "set off inflationary pressures of a kind we have not seen in a generation."
Combine that bill with about another trillion in spending under the absurdly named Inflation Reduction Act, which passed the following year, and we experienced inflation at levels we haven’t seen since the 1980s. That spending binge has now institutionalized multi-trillion-dollar annual deficits. Outside of national emergencies, like war or recession, our deficits have never been so gargantuan.
The Federal Reserve has financed this spending by literally creating the money for the Treasury to borrow and spend. This devalued the dollar and caused prices everywhere to rise at the fastest rate in over 40 years, far outpacing wage growth. As a result, even though personal incomes have risen, people can afford far less today than just three and a half years ago.
Government overspending not only drove up prices but also pushed up interest rates. That increased borrowing costs for businesses and consumers alike, exacerbating the cost-of-living crisis. Between higher prices and higher borrowing costs, the typical American family has effectively lost over $8,000 in annual income, compared to when Harris took office.
Harris bears tremendous responsibility for the overspending that caused these problems. Not only did she advocate for every major spending plan over the last three and a half years while praising the success of "Bidenomics," as vice president she was also the tie-breaking vote in the Senate on the two largest spending bills. Her fingerprints are all over the powerful weapon that killed Americans’ finances.
But spending is only part of the story behind today’s cost-of-living crisis. The regulatory burden on American families and American businesses has exploded under this administration.
Both producers and consumers pay these regulatory costs because they represent higher production costs which are simply passed on to customers.
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A study released just last month found that the Biden-Harris administration will have increased regulatory costs per household by almost $50,000 (net present value) by the end of their current term in office. This corresponds with an annual cost of $6,300 per household for 10 years.
This regulatory burden is actually excluded from inflation metrics, so it represents a cost in addition to the 19.4 percent inflation the Biden-Harris administration has inflicted on American consumers.
The bottom line: Biden-Harris economic policies drove the debilitating inflation we’ve been experiencing over the past three and a half years. Claims of price gouging are a baseless attempt to avoid blame for what should have been the obvious consequences of those policies.
Imposing price controls on groceries will neither reverse those policies nor reduce their impact. In fact, it is simply yet another big-government program — which has already failed every time and everywhere it has been tried — that would exacerbate the inflation Biden-Harris administration policies caused in the first place.
It’s bad enough that Harris has played such a key role in raising prices on corporations and consumers alike. But it adds insult to injury when she attempts to blame hard-working business owners for the mess she helped cause.
E.J. Antoni, a public finance economist at Heritage, is a senior fellow at Unleash Prosperity.
Heritage is listed for identification purposes only. The views expressed in this article are the authors’ own and do not reflect any institutional position for Heritage or its Board of Trustees
