As we all know, Zohran Mamdani ran for mayor of New York City and won on a series of promises that included free buses (paid for by someone else), free child care (paid for by someone else) and a rent freeze.
The rent freeze was very popular despite the fact that most economists agree a rent freeze makes it less likely that new construction will happen in a city that has high rents because there aren't enough apartments. They also tend to reduce improvements and maintenance on existing properties because landlords have less money to make needed improvements.
Mamdani also talked about opening city run grocery stores which, he claimed, would be cheaper than corporate ones.
Now a progressive think tanks is combining two of Mamdani's worst ideas into one truly terrible new idea. Are you ready for government capped prices on food?
On Thursday, the Center for American Progress, a prominent left-leaning think tank that often cultivates policy ideas later adopted by the Democratic Party, proposed a two-year freeze on the prices of 22 food items, such as strawberries and steak.
There's a really awkward problem with this proposal from one of Biden's advisers. The article proposing this starts with a lot of blather mentioning Trump but eventually, they admit the real problem was inflation during the Biden administration.
Over the long term since the 1960s, annualized wage growth was faster than grocery price growth, meaning that Americans could generally expect a typical paycheck to go further at the store. That trend—where wages grew faster than grocery prices—was a bedrock of the American middle class. But the 2021–2022 price spike ended that trend, as shown in Figure 1 below, meaning grocery prices rose so fast that they swallowed up increases in worker pay...
The inflationary shock of 2021–2022, especially following a period of flat price growth, hit shoppers hard with steep price jumps from just a few years ago, and they have not yet recovered.
Another way to put this might be: For nearly 70 years wages outpaces grocery prices but Joe Biden ruined that trend by encouraging overspending in response to the pandemic and helping to spike inflation at a time when the supply of goods was already constrained.
Having helped to create this problem, the same experts now want to fix it with a new plan that is terrifically terrible and dumb.
To help with this transition and to lower costs at the grocery checkout while giving wages a chance to catch up with the price increases since 2019, the Center for American Progress proposes the following new strategy for food affordability. The CAP plan has three major components:
- Provide immediate relief to households through a negotiated, temporary price cap on core grocery items to help wages catch up to food costs while ensuring farmers receive a fair price on these products.
- Increase competition and protect consumers and producers from abusive practices.
- Modernize U.S. agricultural policy to build resilience to prevent future price shocks by supporting farmers, strengthening supply chains, and investing in innovation.
This strategy would save the typical family of four an estimated $134 per year...
They want to screw around with our food supply to save $134 a year? That's 0.36 cents per day. For a family of four. The whole thing wouldn't cover one week's worth of groceries for a family of four.
The cost of capping food prices would be passed from grocery stores to credit card companies by also capping the amount they can charge to use a credit card at the grocery store.
Grocers would voluntarily agree to capping the cost of food in exchange for paying lower fees on credit card transactions, according to the proposal, which was written by a group led by Jared Bernstein, who chaired the White House Council of Economic Advisers during Joe Biden’s presidency.
That, in effect, would force credit card companies to absorb the cost of subsidizing food purchases, a highly unusual arrangement. A draft of the proposal said the Federal Reserve could force credit card companies to do so via its regulatory oversight, though that provision was removed after questions from The Washington Post.
It is not clear how else the government might persuade credit card companies to foot the bill, nor how many grocers would agree.
As with Mamdani's rent freeze, economists think this is a terrible idea.
“Price caps interfere with the very basics of a capitalist economy,” said Steven Kamin, an economist at the American Enterprise Institute who read the Center for American Progress paper before its publication. “Maybe it’s impossible to produce eggs at $3. Maybe the cost of producing them is $3.50. In which case the eggs come off the market entirely, or … only the cheapest producers can sell at $3, and then the supermarket puts them out at $3, and they sell an hour later, and everybody else goes and sees empty shelves.”
When Kamala Harris proposed a law against grocery “price gouging” on the campaign trail two years ago, economists on the right rushed to deride the proposal for distorting the market price of food, and supporters on the left hastened to say that Harris wasn’t actually advocating for price controls.
Thursday’s paper comes somewhat closer to proposing exactly that.
The Center for American Progress is doing the meme. We've gone from 'no one is saying that, you right-wing nutjobs' to 'yes, we're saying that because it's a great idea.'
So get ready for empty shelves if Democrats retake power in Washington. They are going to screw up the market for food and the one for credit cards simultaneously and when it all falls apart they'll blame the Trump administration and say we need more socialism to fix it.
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