Writing in The Atlantic, Scott Lincicome explains “what Kamala Harris doesn’t get about food costs.”Two slices:
The evidence that price gouging was responsible for the post-pandemic spike in food prices is somewhere between thin and nonexistent. A recent report from the New York Federal Reserve found that retail food inflation was mainly driven by “much higher food commodity prices and large increases in wages for grocery store workers,” while profits at grocers and food manufacturers “haven’t been important.” Similarly, a 2023 report from the Kansas City Fed observed that rising food prices were overwhelmingly concentrated in processed foods, the prices of which are more sensitive to (and thus driven by) labor-market tightness and wage increases. Grocery profits did rise briefly during the pandemic, but the increase was the predictable result of increased demand (thanks to government stimulus along with more Americans eating at home) running headfirst into restricted supply (thanks to pandemic-related closures and supply-chain snarls, along with the war in Ukraine, a major food producer). In fact, expanding corporate profits frequently accompany bouts of heightened demand and inflation; the past few years have been no different.
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Inflation is generally a macroeconomic issue, driven by broad monetary and fiscal policies, not the choices of individual corporate actors. Food prices in particular are shaped by volatile forces—weather, geopolitics, natural disasters—beyond government control or influence, which is why economists’ “core inflation” metric omits them. As economics textbooks and centuries of experience teach us, limiting the amount that companies can charge is more likely to reduce supply by discouraging investment and production: a recipe for both shortages and higher, not lower, prices in the long term. The main solution to voters’ grocery angst is simply time, as normal market conditions return and American incomes slowly outpace U.S. food prices.
That fix, of course, is a nonstarter for candidates running for an election just months away and tagged, fairly or not—mostly not—with causing higher grocery prices. Politicians whose pitch to voters is “Just be patient” could soon be out of a job—so they must promise to do something. The good news is that an eager White House and Congress, laser-focused on food prices, have plenty of policy reforms available that would give American consumers some relief. The bad news is that they would all involve angering powerful business interest groups, which is why they never actually happen.
Start with trade restrictions. To protect the domestic farming industry from foreign competition, the United States maintains tariffs and “trade remedy” duties on a wide range of foods, including beef, seafood, and healthy produce that can’t be easily grown in most parts of the country: cantaloupes, apricots, spinach, watermelons, carrots, okra, sweet corn, brussels sprouts, and more. Special “tariff-rate quotas” further restrict imports of sugar, dairy products, peanuts and peanut butter, tuna, chocolate, and other foods. These tariffs do what they are designed to do: keep prices artificially high. Sugar, for example, costs about twice as much in the U.S. as it does in the rest of the world. The USDA conservatively estimated in 2021 that the elimination of U.S. agricultural tariffs would benefit American consumers by about $3.5 billion.
ending the “de minimis” exemption (from the Latin for “pertaining to tiny or trivial things”) in tariff law that spares goods valued under $800 originating from non-market economies like China. Senate Finance Chairman Ron Wyden has introduced separate legislation that would impose an average 14.7 percent tax on all low-priced clothing imports.
Wall Street Journal columnist Mary Anastasia O’Grady wisely recommends shorting Mexico. A slice:
In a report subtitled “Downgrade Mexico to Underweight,” Morgan Stanley Research warned last week that President Andrés Manuel López Obrador’s proposed constitutional reform of the judiciary is expected to increase the country’s risk premium and limit capital expenditures. “That’s a problem as nearshoring is reaching key bottlenecks,” the bank said.
It’s far from the only problem facing investors. There’s also the fiscal hangover from the spending binge Mr. López Obrador went on this year so his Morena party could win the June 2 presidential and congressional elections. More government largess is built in to the president’s other constitutional reforms. He also proposes amendments that will violate the U.S.-Mexico-Canada Agreement and the Trans-Pacific Partnership.
Jeff Jacoby writes with deep wisdom about politics, politicians, and voters. A slice:
I LIKE my primary care doctor very much. Not only is he friendly, attentive, and reassuring, but I can reach him easily with questions and he is unfailingly quick to reply.
I also like the painter that my wife and I have hired several times for jobs around the house. He operates quickly and efficiently, his rates are reasonable, and he has an engaging personality.
But it would never occur to me to put my doctor or painter — or for that matter my dentist, accountant, or plumber, all of whom are also skilled and reliable — on a pedestal for veneration. I certainly wouldn’t automatically endorse anything they might tell me. I value them highly for the good service they provide, but I don’t idolize them. I imagine that’s true of most people: They appreciate professionals and craftsmen who are capable and trustworthy, but they don’t make demigods out of them.
Why do so many have a different standard for politicians?
I’ve never understood the giddy rapture with which countless Americans regard political candidates and elected officials, especially at the presidential level. This is not a knock on the recent Democratic and Republican conventions. It’s fine for parties to organize a few nights every four years to cherish and cheer for their standard-bearers. But in America the glorification of politicians by their adherents never seems to let up.
David Henderson reads about “the Nazi war on wealth.”
And Wall Street Journal columnist Allysia Finley decries Kamala Harris’s war on entrepreneurs. A slice:
Americans who tuned in to Kamala Harris’s coronation last week heard from plenty of celebrities, labor leaders and politicians. Missing from the “joyous” celebration, however, were entrepreneurs who generate middle-class jobs.
No surprise. Cheered on by the crowd, Democrats took turns whacking “oligarchs” and “corporate monopolists.” By the time Ms. Harris took the stage, the pinatas’ pickings had been splattered around. This is what Democrats plan to do if they win: destroy wealth creators so they can spread the booty among their own.
Bob Graboyes riffs deliciously and insightfully on today’s confused ideologies.
