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From "The Atlantic" - generally very pro Democrat!
"The evidence that price gouging was responsible for the post-pandemic
spike in food prices is somewhere between thin and nonexistent."

from https://www.theatlantic.com/politics/archive/2024/08/kamala-harris-food-prices/679593/

What Kamala Harris Doesn’t Get About Food Costs
The real culprit is the host of federal laws and regulations propping up
prices to benefit corporate interests.

By Scott Lincicome
An upside-down shopping cart on top of the U.S. Capitol
Illustration by Akshita Chandra / The Atlantic. Source: Getty.
August 23, 2024
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Last week in North Carolina, Kamala Harris called for a new federal law
to ban “price gouging on food.” Such a law might be popular, but it
would have, at best, no impact on grocery prices and might even make the problem worse. That’s especially unfortunate because it distracts from
all the federal policy changes that actually could reduce food prices.

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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Even if excessive corporate profits had been the cause of higher food
costs, a price-gouging ban would do nothing to relieve Americans’
current burdens for the simple reason that food prices long ago stopped
rising. From January 2023 to July 2024, the “food at home” portion of
the Consumer Price Index increased by just over 1 percent, much less
than the overall rate of inflation, and consistent with the long-term, pre-pandemic trend. The U.S. Department of Agriculture adds that the
share of consumers’ income spent on groceries, which did tick up during
the pandemic, declined last year and remains far below levels seen in
previous decades. Did corporate profiteering suddenly just stop?

Gilad Edelman: The English-muffin problem

In reality, the grocery business has always had notoriously thin profit margins. According to the latest industry-wide data from NYU’s Stern
School of Business, the industry’s average net profit margins were just
1.18 percent in January 2024—ranking 80th of the 96 industries surveyed
and lower than the margins the food industry recorded in all but one of
the past six years. Even Biden White House economists’ own analyses of grocery-price inflationin both 2023 and 2024 downplayed corporate
profiteering when discussing recent price trends and what’s behind them.

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.

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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.

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In addition to tariffs, regulatory protectionism—against imported
products such as tuna, catfish, and biofuel inputs—causes more consumer
pain for little health, safety, or environmental gain. The 2022
baby-formula crisis exposed the degree to which Food and Drug
Administration regulations effectively wall off the U.S. market from high-demand, safely regulated alternatives made abroad—alternatives that
the Biden administration tapped when the crisis hit. These regulatory
measures further inflate prices: The USDA, for example, once calculated
that mandatory country-of-origin labeling for meat imports cost American meatpackers, retailers, and consumers about $1.3 billion annually. Those
rules were scrapped after years of litigation, but cattle ranchers and
their congressional champions continue working to reinstate them.

Propping up the domestic food sector is a long-standing American
tradition. For dairy products, the Agricultural Marketing Agreement Act
of 1937 artificially raises milk, cheese, and other dairy prices, while
USDA loans to sugar processors effectively create a price floor for
sugar. Produce-marketing orders allow U.S. fruit, nut, and vegetable
farmers to limit supply and set rigid inspection rules and other terms
of sale that stymie foreign competition and entrepreneurship and further increase domestic prices.

Finally, there’s U.S. biofuel policy. The federal Renewable Fuel
Standard, created by Congress in the 2000s, requires a certain amount of biofuels to be blended into transportation fuel. The purpose of this
mandate is ostensibly environmental: Burning corn-based ethanol produces
lower greenhouse-gas emissions than burning gasoline. But, as a 2022
study published in the Proceedings of the National Academy of Sciences concluded, when the environmental impact of growing and processing the
corn is taken into account, ethanol contributes significantly more to
climate change. The fuel standard thus has a negative environmental
impact even as it significantly increases U.S. corn prices and reduces
the land available for other crops. The Congressional Budget Office and
other organizations estimate that artificial demand for ethanol has
raised Americans’ total food spending by 0.8 to 2 percent. Additional
price pressures are likely on the way, if they’re not here already: A
2024 Kansas City Fed analysis estimates that Inflation Reduction Act
subsidies for “clean” and plant-based transportation fuels could boost demand for and prices of oilseed crops and vegetable oils.

Laws and regulations like these add up—especially for Americans with low incomes or large families. So, with grocery prices front of mind for
millions of voters, you might expect campaigning politicians to target
these policies to achieve a significant, onetime reduction in U.S. food
prices and, perhaps, an accompanying bump in the polls.

Annie Lowrey: The truth about high prices

Instead, our elected officials not only ignore these measures but
actively work to add even more. In just the past year, for example, the
Senate voted to override a USDA rule allowing beef from Paraguay, and
various members of Congress have championed new duties on imported
shrimp and tomatoes.

This reveals a sad reality for American consumers. The federal policies inflating U.S. food prices all result from the same political malady:
Each one on its own costs the average person a few cents here and there,
but it delivers big and concentrated financial benefits to American
cattlemen, shrimpers, farmers, sugar barons, and other powerful groups.
As a result of this imbalance, we consumers rationally ignore the
policies, while the beneficiaries fiercely lobby to maintain them. So,
when elected officials must choose between modestly reducing Americans’ grocery bills and delivering many millions of dollars’ worth of
regulatory goodies to entrenched political benefactors, the choice is
simple. Consumers don’t stand a chance.

“Corporate greed” is indeed a problem in the U.S. grocery market. Just
not in the way politicians say it is.

Support for this project was provided by the William and Flora Hewlett Foundation.

About the Author
Scott Lincicome is the director of general economics and trade at the
Cato Institute and a senior visiting lecturer at Duke University Law School. More Stories

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