Harris Aims to Address Inflation as Economists Claim Fight Is Nearly Done

Vice President Kamala Harris has introduced a detailed agenda aimed at reducing inflation, even as many economists believe the struggle against rising prices may be nearing its end.

Recent data from the U.S. government indicates that inflation has dipped below 3% for the first time since 2021. Analysts anticipate that the Federal Reserve will likely reduce interest rates during its September meeting, hinting at a potential retreat from the prolonged effort to rein in prices.

Despite this positive trend, consumer prices have surged by over 20% in the past three years, which has left many shoppers feeling discouraged and placed a significant strain on household budgets. Inflation remains a primary concern for voters as discussions about economic stability continue.

Experts consulted by ABC News express that the present price levels represent an unfortunate reality that may be challenging to reverse. They argue that lowering prices significantly usually entails economic distress severe enough to warrant measures that could be more painful than the current situation.

Some economists are optimistic that Harris’s proposals could help lower costs for essential items like food while suppressing inflation for other goods, such as housing, which are still experiencing rapid price hikes. Others, however, believe that these policy initiatives are addressing a problem that has largely been resolved, stating that delayed legislative actions could hinder economic activity.

“We can’t unwind prices back to a certain place,” stated Catherine Pakaluk, an economics professor at the Busch School of Business at Catholic University. She explained that current prices are subject to a global tug-of-war between supply and demand, and that any general cost reductions would need an economic shock to disrupt the existing balance.

“All prices are linked together,” Pakaluk continued. “We all share the sentiment of wishing we could reset prices to where they were three years ago, but there’s no mechanism for that.”

In response to requests for comments, the Harris campaign highlighted a recent speech where Harris emphasized her commitment if elected president. “I will prioritize lowering costs and enhancing economic security for all Americans,” she stated, particularly noting the rising costs during the pandemic and the subsequent recovery of supply chains without a corresponding drop in prices.

While acknowledging the challenges in achieving overall price decreases, some economists noted that price reductions could be feasible in specific industries, particularly in food and grocery sectors that Harris is targeting with her proposals.

Harris attributes exorbitant food prices to the market power of large corporations that dominate the grocery industry, claiming that these companies can increase prices without the fear of competition. The campaign asserts that consumers are left with limited choices.

“Extreme consolidation in the food industry has contributed significantly to the higher prices reflected in grocery bills,” the campaign stated on Friday.

Dan Scheitrum, agribusiness professor at California Polytechnic State University, noted that if price-fixing in the food sector is effectively addressed, it may lead to lower prices for staple household items. “If we can tackle price manipulation, I believe we could see some price reductions,” Scheitrum remarked.

Although overall inflation shows signs of moderating, inflated housing prices remain a significant issue, with a 5.1% increase reported over the year ending in July—more than double the overall inflation rate. The Harris campaign proposes enhancing affordability through boosting housing supply and easing financial burdens for prospective homebuyers.

While most economists support Harris’s focus on increasing housing supply, opinions diverge regarding her suggestion of a $25,000 subsidy for first-time homebuyers. Pakkaluk indicated that such a subsidy could unintentionally drive prices higher as it might empower buyers to bid more aggressively.

Peter Morici, a professor emeritus at the University of Maryland’s School of Business, cautions against the economic ramifications of trying to cool prices when they are stabilizing. “The price increases we’ve experienced are tough to reverse,” Morici commented. “It can’t be fixed without harsh measures.”

Nevertheless, some economists argue that a broader initiative aimed at combating inflation could play a critical preventative role, protecting the economy against potential price surges due to unforeseen events, including future pandemics. Isabella Weber, an economics professor at the University of Massachusetts Amherst, emphasized the importance of preparing for unexpected economic shocks.

“Even when you return to your budget, there’s still a lingering fear,” Weber shared. “This traumatic experience was not caused by your actions, yet the apprehension remains.”

“We must be ready for the next shock,” she concluded.

Source: ABC News