Kamala Harris Rediscovers Richard Nixon

And It's Not A Good Look For Her

The media was surprisingly demur in its reaction to Kamala Harris’ economic address on Friday. Perhaps the most positive response came from CNN, which approvingly tut-tutted that her agenda was now “populist”.

One item on her agenda, however, stands out as the archetype of noxious authoritarian populism: her proposal to target “price gouging” on by the nation’s grocers.

And just like that, Kamala Harris rediscovered Richard Milhous Nixon’s 1971 economic stabilization plan. That’s not a good thing.

To be sure, Kamala Harris did not couch her proposal in Nixonian terms. Rather, she sought to blame corporate greed for inflation at the grocery checkout line.

“As president, I will take on the high costs that matter most to most Americans,” she said. “I know most businesses are creating jobs, contributing to our economy and playing by the rules. But some are not, and that’s just not right, and we need to take action when that is the case.”

Before his departure from the 2024 race last month, Biden struggled to articulate and defend his economic record. Harris is seeking to sell an amped-up series of progressive proposals with a more forward-looking message — one that pledges to strengthen the middle class and take on big businesses that she says bear the blame for rising costs.

However, her proposed federal ban on “price-gouging” leads to the exact same place as Richard Nixon’s Cost of Living Council, as the text of Nixon’s Executive Order¹ amply demonstrates:

Prices, rents, wages, and salaries shall be stabilized for a period of 90 days from the date hereof at levels not greater than the highest of those pertaining to a substantial volume of actual transactions by each individual, business, firm or other entity of any kind during the 30-day period ending August 14, 1971, for like or similar commodities or services. If no transactions occurred in that period, the ceiling will be the highest price, rent, salary or wage in the nearest preceding 30-day period in which transactions did occur. No person shall charge, assess, or receive, directly or indirectly in any transaction prices or rents in any form higher than those permitted hereunder, and no person shall, directly or indirectly, pay or agree to pay in any transaction wages or salaries in any form, or to use any means to obtain payment of wages and salaries in any form, higher than those permitted hereunder, whether by retroactive increase or otherwise.

Whether framed as an assault on miscreant corporate grocers or a reach for price “stability”, the end result is the same: prices get set by the federal government and not by the marketplace.

Why would she do this? In a word, “inflation”.

Will her propsal work as intended? Not in the slightest. First, let’s understand the evolution of consumer price inflation during the Biden-Harris Administration.

We scarely need to rehash recent history to understand that over the past three years inflation has been a tremendous problem in this country—so much so that as inflation finally began to approach the Federal Reserve’s “Holy Grail” of 2% inflation year on year, the residual damage to consumers’ wallets remained and remained substantial.

Inflation Drops To 3%. Is There A "But..."?

If we look at just the percent year on year inflation, one could argue that the crisis has arguably passed.

Food price inflation—the prices Kamala Harris specifically wants to target—is at its lowest level year on year since before Kamala Harris was first elected.

However….

The tremendous spike in consumer prices during 2022 and slowly coming back down in 2023 means that prices have risen in absolute terms by quite a bit.

If we index the Consumer Price Index to January of 2021—to the start of the Biden-Harris Administration, that is—we see that, as of today, consumer prices overall are up 19% from when Harris took office, core consumer prices are up 18%, and food prices are up 21% overall.

Energy price inflation has been so great it has to be graphed separately. Even after nearly two years of energy price deflation, energy prices are still up 32% in this country.

At the same time, wages have risen much more slowly.

How do the declining year on year percentages impact overall wage growth? By registering smaller increases in wages than are being seen in prices. This is made abundantly clear if we index wages along side consumer prices.

Since the start of the Biden-Harris Administration, wages have grown more slowly than prices. This is the “foundaton” upon which Kamala Harris wants to build her “opportunity economy.”

As a consequence, even though inflation has cooled dramatically from its 2022 peak, prices are still much higher relative to wages than they before Kamala Harris took office. That is the imbalance she thinks can be addressed by setting food prices for the country in Washington, DC.

Nixon had the same thought. It did not end well.

In August, 1971, America was just under a year out of a year long recession. Consumer price inflation and core inflation were actually trending down. However, food price inflation was trending up, although it was still running below headline and core inflation.

Even wages were not just keeping pace with inflation, but running ahead of it.

However, the economy was still languishing with elevated unemployment, which did not recover after the 1970 recession.

The ranks of the unemployed had swollen by two-thirds during that recession, and had barely come down at all—which is unusual after a recession, as the resumption of economic growth presumably spurs job creation and hiring.

At the same time, the dollar was coming under increasing pressure internationally, as spending on the war in Vietnam was causing an accelerating growth in the money supply.

Nixon’s price control scheme was, like Kamala Harris’ proposal on Friday, was part of a much larger economic program, the New Economic Program: Nixon would also use the opportunity to end Bretton Woods and take the dollar off the gold standard, as well as imposing a 10% surcharge on imported goods.

NEP, however, was only part of a more sweeping package, and here, in my view, lies the true explanation of the Nixon Administration’s sudden about-face. Apart from its impact on the domestic scene, this grotesque package also contained provisions of far-reaching significance abroad. Specifically, the President on August 15 decreed an immediate 10 percent across-the-board surcharge on most imported goods and services. This, of course, was a unilateral abrogation of commitments incurred by the U.S. in accord with the General Agreement on Tariffs and Trade. Far more basic was Washington’s decision to scuttle the Bretton Woods Agreement, under which the International Monetary System, for more than a generation, had functioned. That pact required this country, in all circumstances, to exchange one ounce of gold for 35 American dollars. With a stroke of the pen, the President violated these solemn obligations, thereby welching on our creditors and setting the International Monetary System adrift on a sea of floating exchange rates.

While future historians may disagree, it strikes me as likely that the White House, by including a wage-price freeze as part of the package deal, was seeking to distract public attention from the fact that it was doing the unthinkable, i.e., reneging on solemn obligations. The ploy (if ploy it was) worked like a charm. To this day, few observers realize what a heavy setback, economic and political, this country suffered when it slammed the gold window shut.

As anyone who lived through the 1970s will surely recall, however, the “New Economic Program” turned into a decade of high inflation and rising unemployment.

To appreciate just how badly the NEP went off the economic rails, we need only look past 1972, into Nixon’s second abbreviated term. The inflation he had intended to tame came back.

Of particular note, food price inflation skyrocketed, pushing above 18% year on year as the country entered the 1974-1975 recession.

To add insult to injury, the uemployment rate did not move all that much until the 1974-1975 recession, when it rose.

Wages, which had been keeping ahead of inflation, had fallen below the inflation rate by 1974.

Food prices especially began taking larger and larger bites out of the average paycheck.

Nixon sought to “stabilize” the US economy. He very nearly wrecked it instead.

This outcome one would think would worry Kamala Harris, as unemployment under the Biden-Harris Administration has been trending back up for the past year.

If her economic vision is that her proposed price control scheme will have any beneficial effect on overall employment in this country, she is simply ignoring history. Nixon’s heavy handedness smothered the US economy, and by every single metric it was a complete failure.

That is not just the judgment of history either. Studies of price-gouging laws at the state level suggest they have a distorting effect on consumption patterns, causing people to buy more than they otherwise would.

Gavin Roberts studied anti-price gouging laws some states passed during the pandemic. One of the biggest effects he observed, especially at grocery stores, was that these laws motivated people “to go buy goods more than they would if prices had risen.”

When consumption patterns change for any reason other than consumer preference, the marketplace is not merely less free but also less efficient.

Additionally, Roberts, the chair of Webster State University’s economics department, sees a significant risk that the food industry will end up consolidating and becoming less competitive.

And while Harris claims her proposal “will help the food industry become more competitive,” Roberts said it would do just the opposite. “It’s more likely to maintain that status quo,” he said because it would keep new competition from moving in to take advantage of the bigger profit margins — competition that could have helped lower prices in the long run.

Even the Washington Post, normally a reliably Democratic Party media mouthpiece, is critical of Harris’ economic agenda.

Americans are clearly still anxious and angry about the high cost of groceries, housing and even $5.29 Big Macs. While the inflation rate has cooled substantially since the 2022 peak, an ostensible Biden-Harris administration accomplishment, prices remain elevated relative to the Trump years. So it’s a real political issue for Ms. Harris. One way to handle it might be to level with voters, telling them that inflation spiked in 2021 mainly because the pandemic snarled supply chains, and that the Federal Reserve’s policies, which the Biden-Harris administration supported, are working to slow it. The vice president instead opted for a less forthright route: Blaming big business. She vowed to go after “price gouging” by grocery stores, landlords, pharmaceutical companies and other supposed corporate perpetrators by having the Federal Trade Commission enforce a vaguely defined “federal ban on price gouging.”

Moreover, the White House’ own Council of Economic Advisors looked at the impact corporate profit-taking might have on food price inflation, and it found that grocery stores’ margins still lagged behind those of other retailers.

But the White House analysis also implies that increased grocery profit margins do not come close to accounting for the price spikes that grocery shoppers have experienced under Mr. Biden’s tenure.

Other research suggests additional forces — like consumer demand and supply-chain disruptions — are a much bigger factor in the price increases. A bout of avian flu caused egg prices to spike last year, for example. And food producers, like soft-drink manufacturers, have continued to raise prices even as their costs have declined, leading to heady profit margins.

Not even the economic staff of the Biden-Harris Administration supports price-gouging laws or any other sort of regulatory relief for high food prices.

Given Kamala Harris’ expressed interest in building an “opportunity economy”, she would do well to consider one other aspect of rising corporate margins in the post-COVID era: returning demand after the prolonged shutdown and traumas of 2020.

Researchers at the liberal Groundwork Collaborative in Washington produced a report in January calculating that corporate profit margins accounted for about half of American inflation in the second half of 2023.

But companies were able to rake in those profits for a reason, some economists point out: Consumer demand was very strong. Fed and congressional efforts to boost households and businesses during the pandemic, like the $1,400 payments for individuals Mr. Biden signed as part of the economic rescue plan early in 2021, fueled consumption.

“If prices are rising on average over time and profit margins expand, that might look like price gouging, but it’s actually indicative of a broad increase in demand,” said Joshua Hendrickson, an economist at the University of Mississippi who has written skeptically of claims that corporate behavior is driving prices higher. “Such broad increases tend to be the result of expansionary monetary or fiscal policy — or both.”

People’s consumption patterns were thwarted and disrupted in 2020, and retailers’ profit margins are an inevitable part of that shifting pattern. Kamala Harris’ price controls would disrupt that ongoing evolution, which is certainly not going to help the unemployment and jobs numbers any.

That Kamala Harris is championing an issue which will do no good and inflict great harm also recalls another of Nixon’s darker aspects: his sole concern in all of this was to get re-elected. Nixon’s event horizon for his New Economic Program was the 1972 election.

Harris’ window is even smaller, with the Presidential election just a few weeks away.

The short time frame in which to establish her agenda and build a political mandate for her election also offers the most obvious and the most disappointing reason behind Kamala Harris’ rather discordant embrace of populist themes in her economic message: she’s pandering and jonesing for votes.

Kamala Harris eleventh-hour embrace of price controls is unfathomable in any other context but as a vehicle for election.

Her apparent lack of understanding that the United States has gone down this road already to calamitous effect argues neither she nor her economic advisory team put a great deal of time into developing her agenda. The truth remains, however, that the pitfalls of Nixonomics have been shown to be far worse than the potholes we’ve seen with Bidenomics.

Harris herself gave the game away when she abruptly embraced Donald Trump’s proposal to eliminate income taxes on tip income earlier this month. There was little effort on her part to even color the proposal with her own nuances—it was a truly Bidenesque exercise in political plagiarism, and an exercise in naked opportunism.

It was also a revelation: Kamala Harris has no animating economic focus or priorities of her own. Her price gouging plan is not the product of passionate concern for an exploited and harried middle class, nor an eternal animus against “corrupt” corporations. These are not the things which truly get Kamala Harris worked up.

As much as Donald Trump is a populist, and as much as Joe Biden has made his political career using a political rhetoric steeped in working class oratory, Kamala Harris is that much the social justice warrior. The rhetoric of social justice comes much more easily to her than the rhetoric of populism, as her successes earlier this year as the Biden-Harris Administration advocate on reconstituting the Roe v Wade abortion rules overturned by the Supreme Court in the Dobbs decision. The rhetoric of social justice plays out also in her emergence as the Biden-Harris Administration’s most forceful critic of Israel in the wake of Hamas’ genocidal attack on October 7th.

Kamala Harris’ embrace of economic populism emerges less as an expression of political or economic philosophy and more of simply an effort to co-opt Donald Trump’s economic message in hopes of stealing some of his thunder. There is even a hint of adolescent insecurity to her efforts, a sense of “see, I can be populist, too!”

Alas for her economic message, so intent was she on showing some populist chops that she neglected the blunt lesson of political history: not every populist idea is a good idea, and not every populist message is a worthwhile message.

Nixonian price controls and promises to take on “greedy” grocery stores is a populist idea whose time will never come, and whose message will never be worth anything other than a derisive snort while heading into the ballot booth to vote for Donald Trump.

1. “Executive Order 11615—Providing for Stabilization of Prices, Rents, Wages, and Salaries” The American Presidency Project. 15 Aug. 1971, https://www.presidency.ucsb.edu/documents/executive-order-11615-providing-for-stabilization-prices-rents-wages-and-salaries.