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

Worried about inflation? Don’t worry. Senator Elizabeth Warren (D-MA)”have a plan. “There’s just one problem: it’s horrible.

Warren has repeatedly blamed big business and “corporate greed” for soaring inflation, which has hit households hard.The solution she proposed with some other top Democrats is the so-called Prevention of Price Gouging Act 2022Warren and her allies claim the bill will “reduce costs to households” by cracking down on “price gougers” who are allegedly taking advantage of the current crisis to make huge profits.

The first obvious problem with the plan is that it will by no means address inflation, as “corporate greed” is not the cause of it.

This left-wing narrative never made sense. It’s true that businesses are “greedy” in the pursuit of profit, but this year is no more so than it was five or 15 years ago, when we didn’t have such high inflation. What’s more, some industries have seen their prices rise much more than others. Should we believe that some companies are randomly more “greedy” than others?

You don’t have to take my word for it, this inflation claim is nonsense.A sort of recent survey Top economists from across the political spectrum found that, weighted by confidence, 80% immediately rejected the explanation.

What’s more, the Price Gouging Prevention Act of 2022 is very vague. It empowers unelected bureaucrats to “target dominant companies that are using the pandemic to increase profits” and flushes federal bureaucrats’ budgets with an additional $1 billion from taxpayers to fund this campaign against these very subjective companies. The company’s fuzzy motion standard. Warren’s bill goes on to ban “unconscionably excessive price increases.”

But what exactly does this mean? Who decides what level of price increase is “unconscionable excess”? How is it possible for a detached bureaucrat assembled in Washington to understand the millions of factors that affect price levels in every different industry and then decide whether it is the “correct” price?

They can’t. At least, without any ability.

So Warren’s plan won’t address the real problem of inflation. But the Senator’s legislation is actually worse than useless — it could make our economic problems and supply chain problems worse.

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

When resources are scarce and supply exceeds demand, companies will naturally raise prices. This encourages those who don’t really need the resources or have easy alternatives to not buy them all and reserve resources for those who need them most.

For example, think about gasoline prices. When we have a severe fuel shortage—as we are now—gas prices can go up to $4. With prices so high, those who can bike to work but prefer to drive may still save money by cycling.but those Have Driving to work with no choice will pay a higher price. It’s an imperfect mechanism, to be sure, but it still mostly ensures that scarce fuel ends up going to those who need it most.

However, if the “anti-price gouging” law sets the price at $2, since $4 is considered “unreasonably high,” gas stations will run out quickly. Who gets it and who doesn’t is just a matter of chance.

More importantly, high prices during times of high demand for a product are the force that attracts more businesses to come in and offer more goods or services, eventually easing shortages and lowering prices again over time. But if prices remain low, market forces naturally won’t bring in more investment to increase supply to keep up with demand.

So, under Warren’s legislation, we’ll see more Shortages and rationing. It’s not just economic theory. This is reality.peer review Research It has been shown that during the pandemic, states with similar “anti-price gouging” laws have experienced more shortages of COVID-19-related goods, such as hand sanitizer, than states without these laws.

Elizabeth Warren wants to apply this approach to economic illiteracy to our national economy. It’s a disastrous idea, and even for her own sake, the senator had better hope her legislation never gets passed. If it does, the public will be affected — and Warren will have plenty of questions to answer.

Brad Polumbo (@Brad_Polumbo) is a co-founder Basic Political Networkco-host of based on politics podcastand a Washington Examiner Contributor.

Leave a Reply

Your email address will not be published. Required fields are marked *