Supply and demand spur confusion inside the White House
Inflation tends to bring out the worst in government. Whether it’s the Nixon administration’s absurd effort at wage and price controls, or Jerry Ford’s “Whip Inflation Now” buttons, or Jimmy Carter’s American malaise speech, rising process make politicians do crazy things.
President Joe Biden is no different, but his administration is adding a twist to the old inflation story: prices are rising because of profiteers:
“About half of the overall increase in grocery prices can be attributed to a significant increase in prices in three products — in beef, in pork and in poultry,” top White House economic adviser Brian Deese told reporters during a briefing, adding that there has been significant consolidation.
“When you see that level of consolidation and the increase in prices, it raises a concern about pandemic profiteering — about companies that are driving price increases in a way that hurts consumers who are going to the grocery store, and also isn’t benefiting the actual producers, the farmers and the ranchers that are growing the product,” said Deese, whose title is director of the National Economic Council.
Yes, cartels can and do try to fix prices and minimize competition. But is that occurring here? The industry says it’s economic conditions driving prices:
“American consumers of most goods and services are seeing higher costs, largely due to a persistent and widespread labor shortage. The meat and poultry industry is no different,” said the [North American Meat Institute’s] chief operating officer, Mark Dopp…
“Issuing inflammatory statements that ignore the fundamentals of how supply and demand affects markets accomplishes nothing. Meat and poultry markets are competitive and dynamic with no one sector of the industry consistently dominating the market at the expense of another.”
The Department of Agriculture’s own analysis price rises sides with the meat producers, not the White House:
Prices [for meat] have been driven up by strong domestic and international demand, high feed costs, and supply chain disruptions. Winter storms and drought impacted meat prices this spring, and processing facility closures due to cybersecurity attacks impacted beef and other meat production in May.
The only thing at work here is supply, demand, and the occasional hacker. In other words, 21 century economics. But we should still keep an eye out for a Biden version of the WIN buttons.