So far, Kamala Harris’s presidential campaign has been cautious in rolling out its policy initiatives, and — at least in a political sense — with good reason.
Policy details at this stage of a campaign do little more than provide foes and pundits with food for thought. Most voters aren’t particularly interested in the details of what a given legislative project will look like once it’s been through the Capitol Hill meat grinder. Political journalists, for their part, seem mostly interested in finding holes in the proposal.
For Harris’ campaign, this seems like a lose-lose proposition. After complaining incessantly that Harris had not provided policy details since becoming the clear Democratic nominee on July 21, the press has moved to cast doubt on her intentions, sometimes by citing misrepresentations of her actual proposals.
Vice President Harris will … direct her administration to crack down on unfair mergers and acquisitions that give big food companies the power to drive up food and grocery prices.
Harris campaign
It’s been happening since Friday, when Harris released her first policy agenda. It was largely devoted to lowering the cost of housing, food, medical services, and raising children for families, and it prompted a wave of whining in the press and the punditocracy. As it stands, Harris is right about the burden of those costs, and right about the best ways to address them.
At this point in an election cycle, presidential campaigns are all about themes and impressions. Harris is clearly laying out a theme of helping a middle class American who rightly feels neglected by the government for decades. Donald Trump’s theme is … what, besides whining about how he’s being treated?
Harris’s stated desire to lower food prices led to a flood of news articles and columns claiming she was proposing “price controls.”
It’s hard to know where that idea came from; in fact, it reached its peak even before Harris’s policy paper was published on Friday, when the hand-wringers discovered she was considering nothing of the sort.
Some commentators, aided by the right-wing elite, may have simply inferred from the evidence that she was targeting price gouging, but that is their fault, not hers. (The Murdoch-owned New York Post went to such lengths to label her policies “Camunism” that one might almost fear she has broken herself up.)
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In its formal statement, Harris’ campaign proposed establishing “the first-ever federal ban on food and grocery overpricing.”
Some commentators have pointed out that the average net profit margin for supermarkets is about 1 percent. They argued that this rules out any indication that Americans have been victims of profiteering by retailers.
Is that so?
It’s true that retail grocery profit margins are in the very low single digits. They always have been. But food retail is a high-volume business, so margins under 2% can translate into annual profits of — to name just two examples — $1.3 billion (at Albertsons) and $2.2 billion (at Kroger).
That doesn’t mean grocers can’t rip off customers, which is what they did during the pandemic.
How do we know this? From their own financial disclosures, which show that Albertsons and Kroger have raised their prices significantly, far more than the cost increases.
Albertsons’ pretax profit margin rose from 0.96% in 2019 to 1.62% in 2020 and 2.92% in 2021, before falling back to 2.01% in 2023 as the pandemic appeared to fade into the rearview mirror. Kroger’s margin fell from 1.62% in 2019 to 2.54% the following year, falling to 1.49% in 2021, but rising back to 1.96% in 2022 and 1.89% last year.
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Nothing explains the pandemic-era spike in profits better than these companies raising prices faster than their costs. In other words: profiteering.
The Federal Trade Commission said that, without using the term. It found that food and beverage retailers’ revenues rose 7 percent relative to total costs during the pandemic, well above “their recent peak of 5.6 percent in 2015.” That trend, the FTC reported, “casts doubt on claims that rising grocery store prices simply match rising retailer costs.”
Even outside of the food sector, as I’ve reported before, corporate profit-seeking has been an undeniably significant contributor to inflation in recent years. That was the conclusion of a team at the Federal Reserve Bank of Kansas City, which reported that markup growth “could account for more than half of inflation in 2021.” The annualized inflation rate that year reached 5.8%.
Despite the hyped controversy surrounding Harris’ anti-pricing initiatives, it is fair to note that pricing and related price-fixing have traditionally been a bipartisan concern.
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In 2020, Donald Trump issued an executive order to prevent excessive pricing of health care and medical supplies. His claim that Harris’ price-fixing initiatives amount to “communism” seems quite hypocritical.
In the food sector, Republicans and Democrats in Congress took aim last year at price-fixing in the meatpacking industry. In 2022, StarKist pleaded guilty to tuna price-fixing and paid a $100 million fine; Bumble Bee also pleaded guilty and its former CEO was sentenced to prison.
A cornerstone of Harris’ attack on food prices is a closer look at consolidation in the food industry. “Vice President Harris will … direct her administration to crack down on unfair mergers and acquisitions that give big food companies the power to drive up food and grocery prices,” the campaign said.
If you’re an executive at Kroger and Albertsons, you can probably guess she’s talking about you. Those grocery giants are trying to push through a massive $24.6 billion merger that, like all mergers, will almost certainly mean higher prices at the checkout counter. Harris’ campaign has telegraphed that she’s giving the Federal Trade Commission more authority to go after bad actors in the food industry. The FTC has already filed a lawsuit to block the merger , and it’s a fair assumption that under a Harris presidency, the agency won’t back down.
On the housing front, Harris is proposing $25,000 in down payment assistance for first-time homebuyers, with a special focus on first-generation homebuyers. Her campaign did not specify how that assistance would be delivered, but did predict that more than 4 million first-time homebuyers would qualify over four years.
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This proposal was criticized by the chatterboxes, who argued that it would cause house prices to rise, so that the $25,000 subsidy would be absorbed, leaving houses out of reach of the beneficiaries.
A couple of points are relevant here. One is that government-sponsored down payment assistance programs exist in all 50 states and the District of Columbia. The difference in Harris’ proposal is that it would be federalized and somewhat more generous than many state programs.
Experts who claim the proposal would drive up prices probably don’t know much about how the housing market works. For one thing, less than a third of homebuyers are first-time buyers.
Sellers who assume that all bidders have $25,000 in government funds on hand risk having their home fall off the market in a market where two-thirds of buyers use their own money.
Budget hawks at the Committee for a Responsible Federal Budget, which was founded with money from a hedge fund billionaire, feared the down payment proposal would increase the federal deficit by $100 billion over at least 10 years.
To put this in perspective, consider the biggest federal benefit to homeowners: the mortgage interest deduction on federal income taxes.
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The deduction costs the Treasury about $30 billion a year. If the increase in the standard deduction, which was enshrined in the Republicans’ 2017 Tax Cuts and Jobs Act, goes ahead as planned next year, the cost of the mortgage deduction will reach $84 billion by 2026, according to Congress’s joint tax committee.
Unlike the down payment assistance Harris envisioned, the mortgage interest and points deductions are aimed primarily at the wealthy.
More than 63% of taxpayers in tax year 2018, the most recent year for which the IRS provides statistics, had incomes of more than $100,000. The $123 billion in deductible interest and points they reported to the IRS made up 73% of the total.
In fact, the mortgage interest deduction is a worthless tool for encouraging homeownership, which is supposedly the goal of such tax breaks. That’s because it “is biased toward the wealthy, who are almost always homeowners,” as Harvard economists Edward L. Glaeser and Jesse Shapiro noted in 2003.
For middle- and low-income Americans, on the other hand, the down payment is the biggest barrier to homeownership. Helping those households buy a home is essentially the government putting its money where its mouth is.
During an impromptu press briefing on Sunday, Harris rightly described her initiatives as investments, not expenditures. Consider her comments on the child tax credit, which she proposes restoring to the $3,600-per-child level enshrined in the Biden administration’s American Rescue Plan and increasing to $6,000 for the first year of a child’s life.
“The return on investment in terms of what it will do and what it will deliver will be enormous,” she said.
She’s right: In 2021, when the enhanced credit was enacted, the credit reduced the child poverty rate by about 30%, keeping a whopping 3.7 million children out of poverty by the end of that year. When the enhancements expired in January 2022 and the credit dropped to $2,000, the child poverty rate shot up from 12.1% to 17%, pushing those 3.7 million children back into poverty.
This is the program that Sen. J.D. Vance, the GOP vice presidential nominee, says he loves. When an increase in the program came up for a Senate vote earlier this month, Vance didn’t even bother to vote.
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This story originally appeared in the Los Angeles Times.
