Under the first year of Biden’s administration, Americans have been paying much more for steak dinners, fried chicken and other American culinary staples. Why? Because, according to CNBC, meat prices have risen drastically over the past year, with chicken prices up 8.8 percent, pork prices up 14 percent and beef prices up a whopping 20 percent.
In order to combat these rising prices, on Jan. 3 the Biden administration announced an aggressive $1 billion plan to tackle the issue. The plan seems to place the blame for high prices on big business and the failures of free-market capitalism.
A number of economists, experts and even one rancher currently serving in Congress disagree with this assessment, however. In their view, the blame for higher meat prices can be placed squarely on the shoulders of Biden’s government.
The White House plan correctly notes that a handful of large meat and poultry processors control the majority of their markets. The administration then goes on to berate these companies as “dominant middlemen” that seek only to “increase their own profits” at the expense of farmers and consumers.
In order to correct this, the White House will spend $1 billion in taxpayer funds on “independent processing projects” and other resources that will introduce more competition into the meatpacking industry.
Suggesting a lack of competition has caused rising prices is ridiculous, in one economist’s view, considering that the current level of competition has existed for decades.
That economist — James Mitchell, the assistant professor in the Department of Agricultural Economics and Agribusiness at the University of Arkansas — spoke with CNN Business regarding the issue and Biden’s proposed solution.
Furthermore, the administration’s analysis of why an apparent “lack of competition” exists in the meatpacking industry is misinformed at best.
Economist Walter Block contends that “concentration ratios are being misused as competition.” In other words, just because four companies control 85 percent of the beef processing market does not necessarily imply a lack of competition, as Biden claims.
Block is the Harold E. Wirth Eminent Scholar and professor of economics at Loyola University New Orleans.
Block illustrated this notion with an example.
“If there is only one grocer in a small town, he has control over 100% of the grocery industry,” Block told The Western Journal via email. “Mainstream economists would unduly deduce from that fact that there is lack of competition.”
Block did note, however, that “to the extent that there is any lack of competition in the meatpacking industry,” that lack competition is due to government regulation enforced by Biden’s government. These regulations make it “more difficult for new firms to enter this industry,” Block explained.
According to the Acton Institute, a pro-free-market think-tank, when it comes to meat packers, the cost of following federal U.S. Department of Agriculture guidelines and various other federal rules is so high that only the most powerful processors can stay in business, essentially creating an “artificial oligopoly” — a market structure in which only a few firms dominate.
So, more regulation leads to less competition in the processing sector, which does have an effect on rising prices.
This phenomenon was exacerbated by the Biden administration’s strictly enforced COVID regulations. According to Mitchell, COVID restrictions at meatpacking facilities — social distancing measures, for instance — are “slowing the line speeds as well as increasing the costs for meat processors.”
Those costs are then being passed on to consumers.
Biden could redress the cost-inducing excesses of federal regulations. Instead, the president has chosen to distribute a whopping $1 billion in an attempt to stop the issues they cause.
If Biden were to pursue a solution that does not involve $1 billion in taxes, such a plan already exists. Legislation that has been sitting in Congress for roughly six years — the PRIME Act — would accomplish the same goal by cutting back unnecessary federal regulations.
As a rancher himself, Rep. Thomas Massie, a Republican from Kentucky and the author of the bill, understands these issues intimately. In his view, Biden’s plan “is over the target.”
We all agree: the solution is to promote competition.
Biden advisors recommend antitrust lawsuits against the big packers and subsidies for the little guys.
There’s a better answer though that’s free: Roll back crippling regulations on the little guys and they will flourish.
— Thomas Massie (@RepThomasMassie) January 3, 2022
Among other things, the PRIME Act would allow local farmers to sell meat in local grocery stores. These smaller processors would still adhere to some regulations, just not the exorbitantly expensive ones currently enforced by Biden’s government.
Massie agrees with Biden’s assessment about competition but also notes that “there’s a better answer though that’s free.”
That answer is “rolling back crippling regulations on the little guys.”
Via The Western Journal.