As rising prices and diminishing supplies have replaced COVID as the American people’s number one concern, President Biden has unsurprisingly announced several initiatives aimed at lowering prices and restocking the shelves. Unfortunately, Biden’s proposals will increase prices and decrease supply of goods and services.
For example, Biden has announced plans to spend $1 billion in an attempt to increase competition in the meat processing industry. According to the President, the reason meat prices are high and supplies are low is because of greedy big business. Not because, wait for it, the government shut down the economy for a year.
Where he is right is that four companies control 85% of the packaged beef market; 70% of the pork market; and 54% of the poultry market. This is definitely enough consolidation to draw attention. However, if one takes the modern approach of applying the consumer welfare standard to one or a few companies allegedly controlling a market, one sees no need for government intervention.
Better yet, Biden’s case for antitrust style intervention gets even worse as you keep looking.
When adjusted for inflation, the price of a pound of ground beef only increased by 2 percent between 2014-2018. Not only has meat been affordable, but it has been plentiful. All of this raises a basic question: what changed? Was there a spike in greed once President Trump left office?
Of course not.
The rising prices and supply shortages that Biden points to are both the result of lockdowns and quarantine guidelines which have disrupted supply chains in the short run, along with a heavy handed government approach to regulation of the meat-packing market. Large companies, whether meat processors, oil companies, or large retailers are simply easy scapegoats for the failures of government.
The market is a process, not a result. If government does not block access to the marketplace, any business is at risk of having its dominance challenged by a smaller competitor. These government-imposed barriers often times are unintended consequences of government policies. For example, most big business survived the lockdowns, but many small businesses were forced to close.
Another example is the prohibition on custom slaughterhouses from selling their products directly to consumers. This gives slaughterhouses two options to market their products. One is to sell the entire animal to consumers. Second is to spend thousands of dollars to have their livestock slaughtered at a federally licensed slaughterhouse. Both of these “solutions” are obviously impractical for both consumers and the custom slaughterhouses.
The market effects of higher barriers to entry into a given market – is a more concentrated market. This is what Biden should focus on – handling the poor public policy instead of throwing money at the issue and ignoring the underlying problems.
Thankfully, in the case of meatpacking Kentucky Representative Thomas Massie and Maine Senator Angus King have introduced the PRIME Act (HR 3835/S. 2001), which allows custom slaughterhouses to sell their products directly to consumers in the same state. This legislation increases competition, consumer choice, and in the process provides a market solution.
The Prime Act has 47 bipartisan cosponsors in the House and six cosponsors in the Senate. Passage of the PRIME Act would be a major step forward toward ending government policies that facilitate concentration in the marketplace, thus rising prices and limiting choices. If Biden wants to be a truly transformational President, he should call on Congress to send the PRIME Act to his desk as the first step in ending government policies that benefit big government at the expense of small companies and consumers.
While the Prime Act would solve President Biden’s problem with the meat industry – what is evident is that he doesn’t think that it would help his polling the same way that pursuing false solutions, throwing money at the problem, and attacking basic economic principles would help him. So, we shouldn’t be surprised when he starts using the same bad arguments falsely against other industries.
