Kamala Harris at the store at a gas station in Pennsylvania on August 18, 2024 (AFP / ANGELA WEISS)
The fight against price cuts in American supermarkets has become one of the main axes of the campaign of the Democratic candidate Kamala Harris, but this electoral measure against inflation is attracting criticism not only from Republicans, but also from economic circles.
The proposal, presented a week before the Democratic convention, aims to “ban price leakage in food and everyday products”, his campaign team explained, by “establishing clear rules” in this area to limit the “excessive” profits and strengthen regulatory authorities.
The proposal, popular among Democrats, drew strong reactions from Republicans, with their candidate Donald Trump seeing it as a desire to “implement Soviet-style price controls.”
At the same time, the former president is trying to take advantage of the rise in prices observed in the United States after the pandemic, hoping to take advantage of it in light of the November 5 election by making Democrats responsible for inflation.
And economic reality helps: never since the 1980s has the US faced such inflation, which rose to 9.1% over the year in June 2022.
Overall, prices are an average of 20% higher today than before the pandemic, and up to 30% for certain everyday products.
To be sure, wages have generally risen more than prices, but the waltz of labels, especially on everyday consumer goods and housing, has come to mask the good health of the US economy that outgoing President Joe Biden hoped to campaign on — before it pulled stand back.
Exclusively, the distribution sector defended itself, notably through the voice of Target supermarket chain boss Brian Cornell, who asked if there was a sector more competitive than global or lower-margin distribution.
On the other hand, the strong competition in the sector, which gives them little room to raise prices, with the risk of seeing their customers rush to another brand.
– A political cost –
“Their margins are very low,” confirms Gary Hufbauer, a researcher for the Peterson Institute for International Economics. “They rose by two percentage points at the height of the inflation peak, we cannot consider that as a sign of abusive prices.”
In reality, the causes of the inflation spike in recent years are perfectly identified, recalls Ryan Sweet, chief economist of Oxford Economics.
“It is both a supply shock with disruption of the supply of goods”, especially due to bottlenecks from ports or a gradual resumption of production, “and increasing demand due to budget support given to households”, the dual effect of increasing demand and scarcity of supply drives prices up.
The perception of consumers “who often know the price of gasoline to the nearest cent” does the rest, forgetting that “we will not return to pre-pandemic prices”, he insists.
Should we therefore follow the development of it? “We already know the story and how it ends: never good,” emphasizes Mr. Sweet, “that was the case in the 1970s and 1980s, we don’t really want to go back down that road.”
At that time, the double oil shock, in conjunction with the end of dollar-gold convertibility, had caused a sudden increase in inflation to more than 12% in the United States in late 1974 and even more than 14% in May 1980, before the Federal Reserve decided to act.
In these situations, it is difficult to determine whether companies are profiting or not.
“It’s easier to identify during a natural disaster, for example,” emphasizes Ryan Sweet, taking the example of Hurricane Katrina, which hit Louisiana in 2005: “the infrastructure was affected and we were able to see abusive prices at gas stations.
More than the day-to-day costs, it is the political costs that Democrats want to avoid by raising the issue.
In the late 1970s, “high inflation caused (Jimmy) Carter’s defeat,” Mr. Hufbauer said, “I think it was the main reason he lost to (Ronald) Reagan in 1980.”
A lesson the Democrats have learned this election.