The political abuse of antitrust is more likely to raise than lower prices — no matter what the administration may say.
The political abuse of antitrust is more likely to raise than lower prices — no matter what the administration may say.
E conomist John Kenneth Galbraith warned that “nothing so weakens government as persistent inflation.” Inflation isn’t quite yet persistent, but it is, in the words of Federal Reserve chairman Jerome Powell, no longer “transitory.” The Pew Research Center reports that 93 percent of Americans are concerned or very concerned about inflation, which surely has much to do with the Biden administration’s enduring low approval ratings.
The connection is clear. By December, prices for the previous twelve months had risen by 6.8 percent. Remove volatile food and energy prices, and prices still rose by 4.9 percent. With inflation already at a 40-year high, the Biden administration is not planning an economic response but rather resorting to the political misuse of antitrust law. The stage is now set for public show trials of “Big Energy,” “Big Meatpacking,” “Big Grocery,” and other corporate ogres to blame for these rising prices.
Such political theater is worse than misdirection. It is policy malpractice, sanctioning heavy-handed interference in the economy likely to lead to even worse inflation.
Preparing this crusade is Federal Trade Commission chair Lina Khan, who had barely warmed her seat at the agency before upending more than 40 years of bipartisan consensus on antitrust policy. Prior to Khan, the FTC acted when it believed that business concentration may harm consumers by raising prices or lowering quality and innovation. Under this standard, affirmed by the Obama-era FTC, regulators protected competition, not competitors.
Chair Khan led the FTC to jettison that policy. She reoriented federal enforcement against companies that were found to be harming not just competition but also competitors, as well as labor and suppliers. In July, President Biden expanded on Khan’s efforts by issuing 72 orders to departments and agencies to punish “anticompetitive behavior” throughout the economy. The president directed the FTC to investigate oil and gas companies for causing higher gasoline prices, and the Federal Maritime Commission to investigate shipping companies for causing supply-chain disruption.
The administration has one kernel of fact in its favor — as demand, pent-up by the pandemic, continues to be unleashed, corporate profits are rising fast. The administration takes this as a slam-dunk case for blaming concentration in industry. For example, grocery prices are up 5.3 percent in the last year, while grocery-store chains have paid handsome bonuses to executives, prompting administration ally Senator Elizabeth Warren (D., Mass.) to accuse these them of “putting company profits over customers.”
Businesses argue that rising prices result from disruption, scarce labor, and limited supplies. The Biden administration’s counter-narrative is that after decades of modest inflation, American capitalism — meatpackers, energy producers, grocers, furniture makers — decided all at once to collude and gouge the public.
The absurdity of such arguments has been highlighted by Larry Summers, President Obama’s treasury secretary and now Joe Biden’s bête noire. He recently set off a tweet storm of reality checks, calling the notion of using antitrust to combat inflation “science denial” — fighting words on the left.
What about the coincidence of higher prices and higher profits? Summers tweeted that “increases in prices and profit margins are what happens when competitive industries experience increases in demand. That is what calls forth increased supply. This is how a market system operates.”
What about high meat prices? Summers added that “rising demand, with capacity and labor constraints, are fully sufficient to account for what we observe in meat packing.” The Food Marketing Institute reports that despite 80 percent of its members providing bonuses and increased benefits, it is still attracting few workers.
The administration’s March extension and expansion of unemployment benefits only exacerbated the national labor shortage — and thus, inflation. Both parties have helped fuel inflation with four major spending bills totaling $5.5 trillion since the start of the pandemic, pushing U.S. national debt toward the post–World War Two level that triggered painful inflation in the late 1940s. The Federal Reserve Board continued to maintain ultra-low interest rates and expand the monetary supply, even though the economy came out of the pandemic in the first two quarters of 2021 at a blistering 6 percent GDP growth rate.
It adds up: The labor shortage, Federal Reserve profligacy, record national debt. Americans see this and understand what is causing inflation. Worse, they will see what Larry Summers has been trying to warn his fellow Democrats about — that the political abuse of antitrust “is more likely to raise than lower prices.”
After all, the goal of the administration’s antitrust reforms all along has been to raise prices to the benefit of smaller companies, labor, and other favored groups, not to benefit the consumer. By the time this is clear to President Biden, we may all be in melancholic agreement with W. C. Fields, who mourned that “inflation has gone up over a dollar a quart.”