Dems blast corporate profits while inflation keeps surging
Inflation remains rapid as the economy enters 2022, and Democrats have begun pointing to a new culprit for the high and lasting price increases: Greedy corporations.
Sen. Sherrod Brown of Ohio, Sen. Elizabeth Warren of Massachusetts, and White House spokesperson Jen Psaki, have been among those pointing to excessive profits in certain industries as one thing jacking up costs for consumers. They don’t blame overall inflation on price-gouging businesses — but the implication is that higher prices are partly the product of corporate opportunism.
The explanation for inflation is the latest in a string Democrats have offered since price gains shot up to uncomfortably high levels last year. It is partly grounded in economic reality, partly in political necessity: Rising prices are burdening and unsettling consumers, making them a liability for a party with a tenuous hold on congressional control headed into 2022 midterm elections.
Prices are increasing at the fastest pace since 1982, and while inflation is broadly expected to fade in the year ahead, the speed and extent of that moderation is uncertain. Even if price gains slow down, they could remain a headache for the Biden administration if they continue to rise more rapidly than was normal before the pandemic — which is what economists increasingly expect. They had hovered around or below 2% for years, but Federal Reserve officials think they will reach an average of 2.6% by the end of this year.
Administration officials and prominent lawmakers have refined their message to focus more blame on corporations, especially those in industries with a handful of powerful firms, like meat processing or gas.
Many companies are raking in bigger profits as they successfully raise their prices or discount less while still managing to sell as much or more.
But economists have pointed out that in many cases, blaming big firms for worsening inflation is overly simplistic. Industries have been relatively concentrated for years, but businesses now have the wherewithal to charge more because consumers are spending strongly. That owes partly to government stimulus checks and other benefits.
“It’s what you would fully expect when demand goes up,” said Jason Furman, a Harvard economist and a former chair of the White House Council of Economic Advisers during the Obama administration.
The laws of supply and demand have not stopped many on the political left from calling companies out.
“Profits at the biggest U.S. companies shot above $3 trillion this year, and the margins keep growing,” Brown, chair of the Senate Banking Committee, said during a recent hearing.
“Megacorporations would rather pass higher costs on to consumers than cut into their profits.”
Warren has pointed to robust corporate profits as a sign companies are partly to blame for rising costs.
“Corporations are exploiting the pandemic to gouge consumers with higher prices on everyday essentials,” she posted on Twitter on Nov. 26.
And White House economic advisers have pointed to what they have called price gouging behavior in a few specific, concentrated industries. Biden has publicly encouraged an examination of oil company pricing, and the administration has announced measures to try to combat price fixing in meat processing, pointing out that four large companies control 85% of the beef market.
It is the case that big company profits are surging across many industries, a sign that companies are either selling more goods and services or are managing to eke more profit out of each unit that they are selling thanks to higher prices or better productivity. Based on corporate earnings calls and a spate of data, it is likely a combination of those factors.