Why Elizabeth Warren’s new ‘anti-inflation’ plan will fail miserably

Annoyed by inflation? Don’t worry. Senator Elizabeth Warren (Democrat – MA)”He has a plan for that. There is only one problem: it is horrible.

Warren has repeatedly blamed big business and “corporate greed” for the high rates of inflation that are hurting families so hard right now. The solution that I have proposed, along with a number of other senior Democrats, is the so-called The Price Manipulation Prevention Act of 2022. Warren and her allies claim that this bill would “reduce costs to families” by going after “price-motivators” who are supposed to be taking advantage of the current crisis to reap huge profits.

The first glaring problem with this plan is that it will do absolutely nothing to tackle inflation because “corporate greed” does not cause it.

This left-wing novel had absolutely no meaning. Sure, companies are “greedy” in the sense that they’re looking for profit, but no more than this year five years ago or 15 years ago, and we didn’t have such high inflation back then. Moreover, some industries have experienced much higher price hikes than others. Are we supposed to believe that some companies are randomly more “greedy” than others?

You don’t have to take my word for it because this inflation story is nonsense. a recent study Leading economists from across the political spectrum found that 80%, weighted for confidence, rejected this explanation outright.

Furthermore, the Price-Gouging Prevention Act of 2022 is dangerously ambiguous. It enables unelected bureaucrats to “target dominant corporations that have exploited the pandemic to increase profits” and flush the federal bureaucrats’ budget with an extra billion of taxpayer dollars as a good measure to fund this shadowy campaign against corporations that go against these very subjective corporate standards. Warren’s bill goes on to prohibit “unreasonably excessive price increases”.

But what does that mean on the ground? Who decides what level of “unreasonably excessive” price increases will be? And how can the separate bureaucrats in Washington understand the millions of factors in every different industry that affect price levels and then decide whether the price is “right” or not?

They can’t. At least not with any jurisdiction.

So, Warren’s plan won’t do anything to address the actual issue of inflation. But the senator’s legislation is actually worse than useless — it could make our economic and supply chain issues that much worse.

why? Well, it disrupts the market mechanisms that keep our shelves stocked and naturally rationing resources.

When resources are scarce and demand exceeds supply, firms naturally raise prices. This encourages those who don’t really need the resource or have an easy alternative not to buy it all, while keeping the resources for those who need them most.

Think gas prices, for example. When we face serious fuel shortages – as now – gas prices can rise to $4. With prices so high, people who can go to work by bike but prefer to drive may continue to bike to save money. But those who You have Driving to work and having no other choice will pay the highest price. This is an imperfect mechanism, sure, but it’s still one that often ensures that scarce fuel will end up with those who need it most.

However, if “anti-price gouging” laws keep the price set at $2 because $4 is considered “unreasonably excessive,” gas stations will quickly run out of it. Who gets it versus who doesn’t would be just a matter of chance.

Moreover, higher prices during periods of high demand for a product is the force that attracts more firms to come in and offer more goods or service, eventually relieving shortages and lowering the price again over time. But if the price remains low, there is no market force that will naturally bring in more investment to boost supply to keep up with the increasing demand.

So, under the Warren legislation, we’ll see more shortage and rationing. This is not just an economic theory. It’s a reality. Peer review Research He showed that during the pandemic, states with similar “anti-price gouging” laws have seen more shortages of COVID-19-related goods such as hand sanitizers than states without them.

Elizabeth Warren wants to apply this economically illiterate approach to our national economy. It’s a disastrous idea, and even for its own sake, the senator would better hope her legislation never gets passed. If that happens, the public will suffer — and Warren will have a lot to answer.

Brad Polombo (Tweet embed) is one of the founders Based-Politics.comis a co-host of BasedPolitics audio notationand Washington Examiner contributor.

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