Joe Biden wants lower prices and higher wages

US President Joe Biden issued an important Executive Order on 9 July, pledging to strengthen market competition to lower prices, increase choice, raise low wages and break cartels.

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  1. Charles Stanley

Whilst the Executive Order issued by President Biden largely urges proper and tougher enforcement of the legal codes already passed and more vigilant enforcement by the Agencies already on the case, it can also be seen as a work programme for future legislative change. It is also a warning to those running the relevant Agencies that they are being watched and are expected to file action programmes that meet the President's aims. The tone is, by implication, critical of their work to date, and signals a wish for a new, much tougher policy.

The ruling philosophy states: "The American promise of a broad and sustained prosperity depends on an open and competitive economy". The order is lengthy, as it goes into detail sector by sector and department of government by department of government on what can and should be done.

Clearly the president and his advisers are concerned by the way inflation is picking up, so considerable attention is given to probes into unreasonable pricing, possible cartels, and into how small-company competition can be augmented to provide compensating downwards pressure on prices. We are told that "a whole-of-government approach is necessary to address over concentration, monopoly and unfair competition".

The supporting press release claims that the combination of low wages and high prices is costing the average American worker $5,000 a year. The president and his advisers identify 72 actions that they think could help redress these imbalances and injustices.

  • The healthcare sector is told it is charging too much for prescription medicine and for general healthcare services. More regulation of prices and an expansion of the public sector is planned to tackle it.
  • The travel and aviation industries are told to improve consumer safeguards for flights, facilitate refunds and raise their game generally.
  • The large tech companies are warned about the way "the dominant internet platforms use their power to exclude market entrants, to extract monopoly profits and to gather personal information they can exploit for their own advantage".
  • Container traffic, financial services and communications are also criticised for not treating customers well and for overcharging. It argues that internet service cancellation fees should be tackled – and it should be easier to switch banks with your account.

Presidential oversight

The president is establishing a White House Competition Council to supervise all the work the Executive Order unleashes. Departments and regulators are under tight timelines to report back on how they will contribute to this large programme. He is looking at revising the merger guidelines to make mergers more difficult. He is willing to go back over past mergers where the authorities think, in retrospect, that was a bad decision. He wants more detailed rules on broadband. Within 45 days he expects a plan to cut drug prices, foster generics and promote more low-cost hearing aids.

Mr Biden is also keen to promote higher wages for the lower paid at the same time. He believes that a more competitive labour market promotes more higher paid and higher quality jobs and encourages people to switch to them. He dislikes the way small farmers are squeezed by large retailers and seeks solutions to the imbalance of power between suppliers and shop groups. He will use public procurement and the promotion of unions to further this agenda of lower prices, more choice, higher wages and more small business activity. If he has his way it means a profit squeeze on large corporations, caught between price erosion and higher costs.

Meanwhile, house prices in the US rose by 14% over the last twelve months in the latest figures. Those on the Policy Committee of the Fed who wish to end the purchase of mortgage securities by the central bank have a good case to make. So far, chairman Jerome Powell is worried about sustaining recovery – and doubtless concerned about his own reappointment as his term as chairman expires next February.

The US economy remains primed both for fast recovery and for more inflation by the hugely-accommodative stance of the Fed and of the government. This Executive Order is unlikely to provide much countervailing pressure to rising prices in the crucial next few months.

As the work programme emerges this autumn there could be hits to individual sectors and even to past mergers as the administration lashes out against some of the symptoms of the inflation they have helped create. Drugs and healthcare are likely to stay high up the priority list for treatment, alongside communications and internet services.

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