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**MARCH 25, 2022**
Kuttner on TAP
Inflation and Corporate Price-Gouging
****
Biden has the power to do a lot more-which would be good economics and
good politics.
As the debate goes on about how much inflation is due to (a) excess
demand, (b) supply chain shocks, (c) the war, or (d) opportunistic
corporate price-gouging, the political fact is that inflation is
ravaging President Biden's popularity. While discouraging the Fed from
worsening matters by overdoing interest rate hikes can help, the
administration needs to be more proactive on other fronts.
Reshoring sources of supply is a promising policy, but it will take
time. Likewise offsetting consumer price increases by putting more money
in people's pockets, by supporting policies like the expanded Child
Tax Credit and affordable child care and pre-K. But this runs into Joe
Manchin.
One promising area is price controls, which worked well in World War II,
but not so well in the 1970s, when they were half-baked and badly
executed. Explicit controls on prices also require legislation. But a
variation of price controls that can be done by executive action is a
severe crackdown on corporate price-gouging.
Corporations, and not just oil companies, are making record profits. The
psychology is obvious. Consumers now expect rising prices, so why not
tack on a little extra beyond the corporation's own increased costs of
inputs.
In November, Biden made a good start by directing the Federal Trade
Commission to look into price-gouging
by oil and gas companies. But he could go further.
A good model is a bill
introduced by Rep. Jan Schakowsky of Illinois, the COVID-19 Price
Gouging Prevention Act. The bill provides that "it shall be unlawful for
any person to sell or offer for sale a good or service at a price that
is unconscionably excessive; and indicates the seller is using the
circumstances ... to increase prices unreasonably."
The bill goes on to direct the Federal Trade Commission to investigate
whether the price reasonably reflects "additional costs, not within the
control of" the seller, or whether it reflects opportunistic
price-gouging.
Since much price-gouging is the result of monopoly pricing power that
undermines the ability of consumers to keep sellers honest by shopping
around, there is a good case that the FTC already has the power to carry
out such investigations and impose penalties under existing law. The
FTC's prime mission is to protect consumers by resisting monopolies.
There is substantial evidence that the oil companies are taking
advantage of inflationary circumstances to gouge consumers, but it
doesn't stop with them. A few high-profile cases would remind
consumers (and voters) that a good part of today's inflation reflects
corporate abuses. It would also remind voters whose side the
administration is on.
****
~ ROBERT KUTTNER
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**Robert Kuttner's latest book is**
The Stakes: 2020 and the Survival of American Democracy
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