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The Agenda

NRO’s domestic-policy blog, by Reihan Salam.

On High Food Prices



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Scott Lincicome argues that U.S. laws and regulations make food more expensive than it needs to be for American families:

Although market forces like increasing global demand and recent droughts have undoubtedly helped to push food prices higher, there is also little doubt that U.S. laws and regulations add insult to injury.

For starters, archaic trade restrictions that shield certain food producers from international competition inflate U.S. prices for many foods. According to the U.S. International Trade Commission, these artificial barriers to free trade make dairy, sugar, tuna and other foods much more expensive here than they are overseas.

It is worth noting, however, that as of 2011, food represented 6.7 percent of household final consumption expenditures in the U.S., vs. 9.7 percent in Canada, 10.7 in Australia, 13.3 percent in France, 11.1 percent in Germany, and 9.4 percent in the United Kingdom. The country that comes closest to the U.S. is Singapore, at 7.4 percent. These numbers have presumably changed since 2011, and the mere fact that Americans spend less than people in other affluent countries hardly disproves Lincicome’s point that U.S. laws and regulations governing food are problematic. Though I don’t agree with every aspect of Lincicome’s analysis, e.g., I don’t share what I take to be his view of U.S. monetary policy, I agree that tariff barriers and regulations that raise the price of basic foodstuffs are a real problem. 

If I were focused increasing the disposable income available to U.S. households, I’d focus on job creation (with an eye towards increasing earnings) first and the cost of medical care, housing, education, and perhaps even commuting next. In 2010, the Commerce Department released a report which included hypothetical budgets for middle-income families with school-aged children, and it suggests that the price of food isn’t the most pressing consideration. But while a focus on food leads us to a deregulation-first approach, a focus on this broader spectrum of issues gets us into thornier territory: deregulation can sometimes be a key solution, e.g., curbing local land-use regulation that raises housing prices, but in other cases we need to reform and rethink public institutions. Michael R. Strain’s new jobs agenda is a good example: moving to lump-sum unemployment insurance payments, encouraging work-sharing arrangements, and relocation vouchers all have the potential to increasing employment levels, yet they aren’t best understood as deregulatory, government-shrinking measures, at least not in the short run. But these are the kind of ideas conservatives ought to pursue if we’re really going to increase disposable income.

My broader point, as is obvious to those of you who follow intra-conservative debates, is that the ideas advanced by libertarian populists are best understood as a complement to the ideas advanced by reform conservatives rather than as an alternative. Occupational licensing, dairy cartels, agricultural subsidies, and all the rest are indeed problematic. But so is the tangle of dysfunction that plagues the health and education sectors, and the persistence of hard-core worklessness in the bottom fifth of the income distribution. 



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