This Graph on How Corporate Profiteering is Driving Inflation Could Win the Midterms for Dems
But only if Dem leaders and progressive pundits can coordinate messaging
I’m obsessed with this graph produced by Josh Bivens at the Economic Policy Institute. It shows everything Republicans and much of the media are saying about inflation is a lie, that it’s corporate profiteering driving inflation NOT government spending or high wages for workers.
And Dems need to regain control of the inflation narrative if they want to win the midterms.
Debunking the GOP attack on Biden economy
Republicans have tried to blame Biden’s recovery policies for inflation, arguing too much money in the hands of workers has pushed up prices. Argued Mitch McConnell, “It's a direct result of flooding the country with money.” Republicans blame workers driving up wages and demanding too much from employers, thereby pushing up prices.
The Economic Policy Institute analysis makes clear that’s a lie. It’s not even just about supply-chain problems and companies facing higher costs and passing them on to consumers, although that’s a small part of the problem.
But the big reason prices are rising is company profiteering, raising prices NOT because of higher wages and NOT because of higher costs, but just because they have the market power to do it - and can conveniently blame the pandemic and workers to get away with it. As they write, “over half of this increase (53.9%) can be attributed to fatter profit margins, with labor costs contributing less than 8% of this increase.”
As the graph above shows, profits over the last four decades before the pandemic made up only 11.4% of new prices. But now profits are gobbling up over 50% of price increases. Conversely, labor costs are traditionally the main drivers of price increases - but not now, when only 7.9% of price increases are going to wage increases.
What’s amazing is that the media is even questioning that corporate profiteering is driving inflation when those companies are boasting about it to their shareholders.
Corporate executives are not hiding their handiwork; instead, they’re boasting about it in financial disclosures and earnings calls. “We have not seen any material reaction from consumers,” said the chief financial officer of Procter & Gamble, the world’s largest consumer goods company, which has hiked prices three times in the past year. “What we are very good at is pricing,” said Colgate-Palmolive’s CEO. “We find that taking several small price increases is more effective than one large price jump,” added the CFO of Unilever. Dollar Tree, a discount store which has the word “dollar” in its name, has decided to permanently set its price point at $1.25, stating specifically that the move is “not a reaction to short-term or transitory market conditions.”
Progressives need to make the election about corporate monopoly power driving up prices
Even before the devastating EPI numbers, Robert Reich has good talking points up on how to make corporate greed the focus of political debate on inflation.
Corporate profiteering shows solution going forward is not austerity
Forcing public debate on the role of corporate power in driving inflation is critically important since it means the "solution" proposed by the corporate elite - raising interest rates and throwing people out of work - is not just immoral but won't work.
Economist JW Mason points out that the media is rather blithely buying into the corporate drumbeat of raising interest rates to tank the economy as the only solution- without even admitting other options should be considered.
The public itself may not be sure about the source of inflation, but the policy of raising interest rates is wildly UNPOPULAR - with only 25% of Americans supporting it. Yet it’s almost the only solution getting any play in the media.
What's needed is to address this corrupt profiteering,
With oil giants driving gas prices up far beyond the increases in wholesale prices - and playing a disproportionate role in driving overall inflation- many are calling for a windfall profits tax.
Others like Elizabeth Warren have emphasized aggressive enforcement of antitrust and other measures to restrain corporate price-fixing:
United States Senator Elizabeth Warren (D-Mass.) wrote a letter to Attorney General Merrick Garland and Deputy Attorney General Lisa Monaco calling on the DOJ to take more aggressive action against corporations violating antitrust laws to hike prices for consumers. In the letter, Senator Warren called out major poultry firms, big pharmaceutical companies, and other industries notorious for their price-fixing schemes, that have received only ineffectual penalties for their criminal antitrust activity. Senator Warren is urging the DOJ to prosecute executives engaging in price-fixing and other anticompetitive practices to help relieve the burden Americans are feeling from inflation rising to its highest level in decades, driven by companies passing along high costs and jacking up prices to pad their bottom line.
Congressional hearings and DOJ lawsuits targeting corporate executives for illegal price-fixing would help reframe the public debate on inflation.
Shifting the inflation debate would open up political room for direct ways to help families deal with rising prices
As long as Republicans get away with blaming workers’ wages and consumer demand for driving inflation, they can attack any spending program or any policy to increase wages as “inflationary.”
But if progressives shift the inflation debate to blaming corporate profiteering, then the midterms can be about popular programs in the Build Back Better plan, such as easing child care and health care costs, as well as policies to raise wages. Biden has dozens of economists supporting his Build Back Better plan as a way to counteract inflation
The economists signed a letter, released Friday morning in conjunction with left-leaning advocacy group Invest in America Action, urging Congress to pass the social spending plan swiftly, in order to get the ball rolling on programs that will lower costs for essentials like child care, health care and education.
Notable signatories include Alan Blinder, former vice chairman of the Board of Governors of the Federal Reserve, and Elgie Holstein, former special assistant to the president for economic policy at the White House National Economic Council.
The failure of wages to keep up with corporate-induced price hikes also should put the minimum wage and the PROACT front-and-center in public debate for the midterms- and if Dems can keep the House and pick up a few Senate seats, they could actually get enacted.
Winning the inflation debate will help defend aggressive Keynesian interventions for future recessions
Whatever the frustrations of Joe Manchin blocking the long-term spending of Build Back Better, progressives should revel in the success of the American Rescue Plan and other earlier Democratic-driven initiatives like CARES, which helped tens of millions during the Covid-induced downturn and ensured this was the strongest economic recovery in modern history.
As I detailed in How Dems Saved the Economy and in the followup We are Winning - Even if We Lose the Midterms in 2022, this success proved the effectiveness of aggressive Keynesian spending to fight economic recessions. Retroactively, conservatives will seek to use current inflation in the future to tar that success and argue to spend less and have people suffer more to prevent future inflation.
Taking on the ideological fight over the causes of inflation now will help win that political fight in the future.
Coordinating the Message on Inflation- And Repeating it
What conservatives do far better than progressives is pick an ideological point of attack and repeat it. Then repeat it. Then repeat it again. Progressives tend to move on from one outrage to the next and then the next.
So in the spirit of repetition, let me repost the EPI graph. It’s really hard to overstate how dramatically the current trend of corporate profits making up most of inflation is from the reality of the previous four decades. This should be highlighted by every progressive elected leader and pundit, over and over again, until the midterms.
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