Biden’s antitrust law enforcement won’t solve inflation

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Panicked by the rising prices and the resulting public anger, the Biden administration is doing what politicians do best: take advantage of a situation to blame it. In this case, the White House evokes fears of companies eager to call for antitrust action against the companies. It’s rich coming from officials who are largely responsible for inflation as well as the industrial concentration they criticize. Don’t fall for their desperate ploy to distract from the mess created by government policies.

“Four big companies control more than half of the beef, pork and poultry markets,” President Biden said. arrogant January 3 by announcing antitrust actions and subsidies to small producers. “These businesses can use their middleman position to overload grocery stores and, ultimately, families.”

The meat packaging industry is certainly concentrated, but this is nothing new and did not cause sticker shock until the recent price increases affected the entire economy. And if there was collusion, the federal government was involved in the scheme. He has long used his authority to protect the big guys from the competition.

“The political power held by the largest companies means that the regulatory environment related to the markets for live cattle, pigs and poultry; labor relations; processing inspection; product labeling; and sales of processed meat favor large-scale producers and processors, ”researchers at University of California, Davis Noted last September. “There are concerns about regulatory capture at the local level as well as the federal level, where labor regulations and inspection services appear to favor the larger meat processors.”

This is not the first time reviews underline this bureaucracy favors established companies with the connections and the ability to create and navigate a complicated regulatory environment. Instead of intervening more in the market, more competition and the benefits it would provide to consumers would seem to require the federal government to do a lot. less of what he does.

But the attack on the meat packaging industry is only part of a global push to present antitrust enforcement as a panacea for inflation. The administration is pushing the policy even though “White House officials admit their antitrust measures are unlikely to immediately reduce costs to American businesses or consumers,” as The New York Times reported the day of Christmas. They don’t even hesitate to admit that “fighting inflation was not the original motivation for Mr. Biden’s competition agenda.”

Thus, antitrust is an unlikely and opportunistic remedy for price hikes constituting “the largest 12-month increase since the period ending June 1982,” according to the Bureau of Labor Statistics. announcement last month.

“The emerging claim that antitrust laws can fight inflation reflects ‘denial of science’,” argues Larry Summers, who headed the National Economic Council under former President Barack Obama. “There are many areas like transitory inflation where serious economists diverge. Antitrust as an anti-inflation strategy is not one of them.” In reality, he adds, it is “more likely to increase prices than to lower them” by reducing supply.

To find a solution, it is therefore necessary to better define the problem.

“From March 2020, in response to the disruptions of Covid-19, the US government created around 3 trillion in new bank reserves, equivalent to cash, and sent checks to individuals and businesses,” said the economist John Cochrane in a new paper for a political conference of the Cato Institute. “The Treasury then borrowed about an additional $ 2 trillion and sent more checks. The overall federal debt grew by almost 30%.”

“It’s hard to ask for a clearer demonstration of fiscal inflation, a huge tax helicopter drop, Exhibit A for the price level tax theory,” he adds.

Economist Nicolás Cachanosky explicitly accepts with Cochrane in a December article for the US Institute of Economic Research “that these stimulus packages are a candidate for explaining the recent spike in inflation rates.” He argues that authorities are playing down the role played by the massive sums sent directly to consumers and businesses by the Trump and Biden administrations in raising prices.

“It is more convenient for the government to say that inflation is due to supply chain shocks or scapegoats (like bad companies) than to admit that it is of their own doing.” , comments Cachanosky. “Can you imagine the Biden administration admitting that the US bailout and all those checks sent to families across the country are a big part of why we have higher inflation today? “

This means that antitrust policy is not going to get us out of this mess because the corporate concentration it targets (forget that government officials pushing antitrust helped create that concentration) is not the culprit. In fact, more paperwork can make the problem worse. For example, David R. Henderson of the Hoover Institute warns that the White House plans to re-regulate the railways threatens further supply chain disruptions and higher prices.

But that doesn’t mean that nothing can be done.

“The future is not without hope,” Cochrane assures readers of his journal. “Controlling inflation simply requires that our government, including the central bank, understand the classic lessons of history. Preventing inflation is a joint task of fiscal, monetary and microeconomic policy. “

What would understanding the classic lessons of history look like for policymakers? are urges the White House to “consider reducing ‘buying America’ in favor of cheap buying, reducing restrictions on entry into energy production, reducing tariffs and anti-dumping actions, and reducing regulatory delays that prevent capacity increases “.

The Tax Foundation agrees that “Trump-Biden tariffs have been passed on almost entirely to US businesses or end consumers” in the form of higher prices. Although he suggests that the effect of tariffs on headline inflation is relatively small, “repealing them would be a directional improvement.”

And maybe – just an idea – avoiding another “helicopter tax dump” of money made from nothing would be a wise idea. It wouldn’t eliminate the price increases we’ve already seen, but it would help prevent further inflation and the very real economic pain people are going through as a result.

If the White House is to fight concentration in certain industries, the best place to start is to remove regulatory barriers to competition. It would be much more fruitful than raising bogus antitrust claims about an inflation problem that government officials themselves have created.



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