Opinion: How to Lower Inflation Now

Four ways to curb rising costs and encourage growth

By Meghan Keivel Cruz, NRF

The following blog appeared on NRF.com and is reposted here with the permission of the National Retail Federation.

With consumer prices surging 8.6 % in May – a level not seen in 40 years – retailers and consumers are feeling the impacts and grappling with how to deal with rising costs.

American families and consumers are seeing higher price tags on everyday goods and services from grocery stores to gas pumps. And retailers are feeling inflation fueled by supply chain challenges, COVID-19 impacts, labor shortages and an anti-competitive payments system. As inflationary pressures build, President Joe Biden and Congress have the opportunity to provide relief to consumers and encourage economic growth. Here are four ways to lower inflation now:

1. Easing the supply chain crisis by enacting the Ocean Shipping Reform Act
The crisis gripping global supply chains is a major contributor to inflation. There are many compounding factors contributing to disruptions in the supply chain, including soaring consumer demand during the COVID-19 pandemic, container and truck driver shortages and logjams at the ports, among many others. However, Congress has the opportunity to enact important reforms to ease supply chain constraints and bring inflation under control by passing the Ocean Shipping Reform Act (OSRA). This bill would address long-standing unfair business practices by ocean carriers and terminal operators that are further complicating supply chain disruptions and adding to price hikes that in turn cause inflation. OSRA would put in place common-sense reforms to address some of these ongoing issues that have been further highlighted by the COVID-19 pandemic.

2. Making everyday necessities more affordable by repealing the failed Section 301 tariffs
The Biden administration could provide immediate economic relief by repealing tariffs imposed on consumer goods under Section 301. These tariffs, which began during the Trump administration and have been continued by the Biden administration, are adding cost pressures on retailers and contributing to higher prices for consumers. Paid for by U.S. families and companies, tariffs have cost hundreds of billions of dollars and have forced many businesses to pass these costs along to customers. To date, U.S. Customs and Border Protection has collected more than $126 billion in Section 301 in tariffs since the onset of the trade war.

Related: Inflation Catching Up to Consumers

3. Address the ongoing labor shortage through smart immigration reforms
Efforts to address our nation’s broken immigration system could begin to mitigate some of the stressors caused by the ongoing labor shortage. NRF has long supported legislation that would provide a path to citizenship for “Dreamers,” immigrants who were brought to the country as minors and remain in good legal standing. Narrower immigration reforms included in the America COMPETES Act, including a new type of visa for entrepreneurs and a direct path to permanent residence for immigrants who earn a Ph.D. in a STEM field while in the United States, would be an important first step as Congress begins to address the many flaws in our immigration policy.

The new “W visa” would be established for citizens of foreign nations who engage in entrepreneurial endeavors. Citizens of foreign nations who earn Ph.D.-level degrees in science, technology, engineering or mathematics from U.S. universities should also be provided with visas. Immigration reforms such as these can, over time, provide more opportunities for innovation across the economy and have a positive effect on efforts to reduce inflation.

4. Lowering the cost to process transactions by increasing competition in the payments system
Congress can help bring inflation under control by supporting a payments system that encourages competition and transparency and lowers the cost to process transactions. When consumers use a credit or debit card to make a purchase, banks and card networks charge retailers hidden swipe fees to process the transaction. Swipe fees are one of retailers’ highest costs and drive up consumer prices as they are forced to offset the expense. During an inflationary environment when prices are higher, swipe fees levied by banks and card networks also go up as the transaction amounts they are based on increase, creating a multiplier effect that further inflates the final prices paid by consumers.

Meghan Keivel Cruz is director, Grassroots, for the National Retail Federation (NRF), the world’s largest retail trade association, and is responsible for developing and implementing effective grassroots campaigns, strategies and tactics in accordance with legislative action plans. For more information, visit NRF’s Action Center here.