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In a recent ad, Rep. Sharice Davids looks directly into the camera, addressing a key issue that has impacted the country over the past four years: the rising cost of groceries.
“Increased grocery prices, often for smaller packages, are hurting families. It’s called greedflation,” says Davids, a Democrat from Johnson County, in the ad. “And I’m working to stop it.”
Davids refers to the Price Gouging Prevention Act, which would prohibit companies from drastically increasing prices during an emergency. However, according to economists, this proposal may not do much to tackle the current rise in food prices, as they are primarily a result of higher costs throughout the supply chain.
“I wish a politician would just say, ‘Prices are not going to come down,’” said Aaron Smith, an agricultural economics professor at the University of California, Berkeley.
The Economics of Price Gouging
Economists generally oppose legislation aimed specifically at price gouging, arguing that in a free market, businesses charge what consumers are willing to pay. If prices get too high, demand decreases, reducing profits. Recent inflation, largely due to supply chain disruptions during the pandemic, has fueled the rise in prices across the board.
By pushing for a federal ban on price gouging, Davids and other Democrats are making both an economic and political statement, especially with the midterm elections approaching.
“Rep. Davids recognizes that Kansans are feeling the pinch at the grocery store and is working hard to lower costs,” said her spokesman, Zac Donley, acknowledging that there’s no easy fix.
The Political Debate
Republicans have criticized the federal price gouging ban, likening it to “price controls.” However, Prasanth Reddy, Davids’ Republican opponent, hasn’t taken a clear stance on the issue, instead focusing on government spending and inflation.
“We must do everything we can to bring down inflation and the cost of living so every family can afford food,” Reddy said in a written statement.
Why Are Prices Rising?
Since President Joe Biden took office in 2021, consumer food prices have increased by around 20%. According to Smith, this is part of a broader trend of rising costs worldwide, largely due to the disruption caused by the pandemic.
As for claims that companies are price gouging to boost profits, Smith’s response is clear: “The short answer is no.”
However, some companies did see record profits during the pandemic, as wages rose and raw materials, such as energy, became more expensive. In sectors like beef production, where there is limited competition, prices can remain high because businesses aren’t pressured to lower them.
“There are areas where competition is low, and companies can raise prices,” Smith said.
Addressing Competition and Profits
Democrats have pointed to cases where the cost of materials has fallen, but companies continue to charge high prices. For example, despite a 25% drop in the price of wood pulp, the cost of diapers remained high in 2023. The Groundwork Collaborative, a progressive economic think tank, has argued that a federal price gouging ban would prevent such practices.
Additionally, consolidation in the food industry, such as the proposed merger between grocery giants Albertsons and Kroger, has raised concerns about reduced competition leading to higher prices for consumers.
Can Legislation Help?
The price gouging bill supported by Davids won’t immediately lower prices but aims to prevent future price hikes during emergencies. The bill targets businesses with over $100 million in revenue and would allow the Federal Trade Commission and state attorneys general to enforce the law.
Similar price gouging laws exist in Kansas and Missouri, where businesses can be investigated for raising prices excessively during emergencies. However, such laws are more of a political statement than an immediate economic solution.
Inflation remains a top concern for voters. In a recent Pew poll, over 80% of respondents cited the economy as a key factor in their voting decisions.
Rep. Emanuel Cleaver, a Kansas City Democrat, noted the political advantage of focusing on price gouging. While he hasn’t backed the legislation himself, Cleaver acknowledged that it shows voters Davids is addressing rising costs.
The Reality of High Prices
Despite political promises, food prices aren’t likely to fall anytime soon. In fact, Smith said a significant price drop would typically indicate a severe economic downturn. Instead, the solution lies in higher wages to offset the cost of living.
“I think many people understand prices won’t come down,” Smith said. “But politically, it’s popular to say you’re going to bring them down.”