Taming the Pricing Beast

A Biden win in November is the remedy, and this message needs to travel.

The government has a variety of strategies to protect the public from price-gouging and information advantages over the consumer.

BY BILAL BAYDOUN JUNE 14, 2024

The responsibility for reining in high prices has in recent decades been relegated to a single body: the Federal Reserve. Since May 2022, the Fed has raised interest rates to slow the economy by making it more expensive to borrow money. When businesses can’t borrow, the story goes, they’re less likely to expand operations and hire people—and when families can’t borrow, they buy less. The goal is to ensure people have less money to spend “chasing goods,” thereby cooling the economy.

Of course, this theory falls flat when it is collusion, price-maximizing algorithms, and opportunistic price-gouging driving up prices, as opposed to high demand. Indeed, despite these interest rate hikes, the economy has not slowed down, and while inflation has eased—mainly thanks to supply chains returning to normal—it has not returned to the 2 percent target level, as corporate pricing strategies persist.

Over the past four years, inflation of housing, food, and gas prices has garnered widespread attention and angered millions of Americans. Yet over the same period, federal regulators have uncovered actual price-fixing conspiracies in rentals, meat processing, and oil and gas. In the latter, price-fixing may have accounted for 27 percent of inflation in 2021, according to estimates from Matt Stoller, research director at the American Economic Liberties Project.

How Tax Reform Can Change the Rules
Low taxation is a key yet underdiscussed enabling force of this new pricing regime. Companies may be able to hike prices by taking advantage of their market power, technological innovation, and economic emergencies like the pandemic recession. But those higher prices reap supernormal profits because of tepid taxation, creating a perverse incentive to profiteer.
https://prospect.org/economy/2024-06-14-taming-the-pricing-beast/