81%, no, now 85% of Americans Increasingly See Corporations Being Greedy as Cause of Inflation

The Biden administration, and increasingly both parties, have moved to skepticism towards consolidated corporate power. In 2016, the Republicans and Democrats included commentary about anti-monopoly in their party platforms for the first time in decades. Both Trump and Biden brought ground-breaking antitrust suits against Google, and experts on both sides have come to recognize that there is a serious monopoly crisis in America, with a lack of competition across the board in sectors as diverse as search engines, agribusiness, and airlines. This concentration crisis fosters inequality, damages innovation and productivity, harms incomes, and transforms entire industries into ‘kill zones’ where no one will invest.

A recognition of the problem is shaping policy. In the summer of 2021, the Biden administration issued an executive order making competition a centerpiece of the White House’s economic agenda, with minimal pushback from the GOP. Biden is following a broader social trend of seeing markets as politically constructed.

Last year, Congress moved for the first strengthening of antitrust law in decades, allowing state AGs an easier time to bring cases. It also passed the CHIPS Act, recognizing that semiconductors matter to the U.S., and that the ‘free market’ isn’t a thing. Similar deliberate policy choices are happening in electric vehicles, solar panels, and fossil fuels.

The national security world is a key forum for this debate; military leaders have recognized the devastation that monopolies have wrought on the defense base. Indeed, Jake Sullivan, the head of the National Security Council, offered a death knell to the old philosophy when criticizing America’s old global economic strategy vis-a-vis China. “There was one assumption at the heart of all of this policy,” he said, “that markets always allocate capital productively and efficiently—no matter what our competitors did, no matter how big our shared challenges grew, and no matter how many guardrails we took down… The shocks of a global financial crisis and a global pandemic laid bare the limits of these prevailing assumptions.” Here too there are consequences; the Department of Defense and Federal Trade Commission worked together to block the merger of Lockheed Martin and Aerojet.

And yet, this epiphany, that markets are politically structured and don’t have a will of their own, hasn’t made it to one very important place: the judiciary. The same week Sullivan gave his speech, a panel of three D.C. Circuit Court judges struck down a monopolization case against Facebook on the grounds that markets self-correct. "Many innovations may seem anti-competitive at first but turn out to be the opposite,” wrote the panel, “and the market often corrects even those that are anti-competitive." The D.C. Circuit Court panel was bipartisan, and included Republican appointees Karen L. Henderson and Raymond Randolph, as well as Obama appointed judge Robert Wilkins.

Why are the Fed’s rate hikes having so little effect?

Because inflation is not being propelled by an overheated economy. It’s being propelled by overheated profits.

Once dismissed as a fringe theory, the idea that corporate thirst for profits drives up inflation, aka "greedflation," is now being taken more seriously by economists, policymakers and the business press.

Why it matters: Though inflation is starting to come down, it still remains well above the Fed's target level of 2%, and understanding what's causing inflation is key to combatting it — now and the next time.

The idea that profits drove our current bout of inflation surfaced in the last few years among progressive economists and lawmakers but was waved away by more mainstream types as a "conspiracy theory." That changed earlier this year.

In a speech in January, then-Fed vice chair Lael Brainard said wages weren't the main driver of inflation and pointed to a "price-price spiral," where companies mark up prices far higher than the increases in their input costs.

In March, the chief economist at UBS Global Wealth Management, Paul Donovan, published a note on "profit margin-led inflation," describing how in late 2022 and into this year, companies — particularly retailers and consumer goods makers — convinced consumers that they needed to raise prices. (They didn't really.)

AvgMSUJoe wrote:It's all about Capitalism right? Ya need legit competition for Capitalism to happen. Even right-wingers would tell you this (in theory).

China/Mexico flooding the market with low cost goods isn't the problem, the fact that 'merican goods cost so damn much is the problem. With most/many corporations having record profits year after year, and the middle class and poors not getting a cut of the gains means someone else is. "Business people" will NEVER admit this, because it is the antithesis of what they believe (essentially, greed is good... the more I make, the better for EVERYONE).

Unless their are market pressures to be the "low cost" supplier for a good/service, there will only be a high cost ones...

Floyd Robertson wrote:

AvgMSUJoe wrote:It's all about Capitalism right? Ya need legit competition for Capitalism to happen. Even right-wingers would tell you this (in theory).

China/Mexico flooding the market with low cost goods isn't the problem, the fact that 'merican goods cost so damn much is the problem. With most/many corporations having record profits year after year, and the middle class and poors not getting a cut of the gains means someone else is. "Business people" will NEVER admit this, because it is the antithesis of what they believe (essentially, greed is good... the more I make, the better for EVERYONE).

Unless their are market pressures to be the "low cost" supplier for a good/service, there will only be a high cost ones...

Let's not forget the impact of consolidation in EVERY industry, which results in less competition with 2-3 players in every category.

Pretty soon all restaurants will be Taco Bell.

So, you’d think that if America’s biggest companies were spending roughly a trillion dollars every year they were doing something important with it.

You’d think that maybe they were doing it because the government had provided them with some incentive, either direct payments or tax advantages, to do it.

Sadly, you’d be wrong: that’s very much not the case.

Not one penny of that nearly $2 trillion in 2021 and 2022 went to developing new products, promoting existing products, paying employees better, building new facilities, or supporting the communities in which they operate.

Instead, virtually all of that money went straight into the pockets of shareholders, senior executives, and CEOs who are compensated with stock and stock options.

Before Reagan, this was a felony; CEOs who executed share buybacks just to artificially inflate stock prices could go to prison.

FDR criminalized share buybacks in the early 1930s because they’re simply a form of stock price manipulation and were one of the main reasons for the stock market crash of 1929 that kicked off the Republican Great Depression.

Which super-illustrates the point that there’s nothing magical, normal, or “natural” about national economies. They’re not the result of immutable laws, any more than the NFL’s rules for football are.

The rules of marketplaces are created by governments, and governments decide who will benefit from those rules.

Instead, without warning, her career began to implode. Just before New Year’s Eve, while Weber was on the bunny slopes, a short article on inflation that she’d written for the Guardian inexplicably went viral. A business-school professor called it “the worst” take of the year. Random Bitcoin guys called her “stupid.” The Nobel laureate Paul Krugman called her “truly stupid.” Conservatives at Fox News, Commentary, and National Review piled on, declaring Weber’s idea “perverse,” “fundamentally unsound,” and “certainly wrong.”

But Weber’s argument was carefully grounded in history. Price controls, she argued, had been an essential element of the U.S. mobilization strategy during the Second World War. And there were several striking similarities between the economy of the nineteen-forties and that of the present day, including very high consumer demand for goods, record corporate profits, and production bottlenecks in important areas. Back then, the Office of Price Administration simply prohibited companies from raising prices above certain levels.

The initiative worked. During the First World War, inflation had run rampant. During much of the Second, it was close to two per cent. And yet factories were operating at peak levels. If contemporary policymakers could do the same thing, Weber argued, they could limit inflation without inducing layoffs and wage cuts.

...

The German “price brake” is currently scheduled to run through April, 2024. After almost four months in operation, inflation in Germany fell to 7.4 per cent, the first time that it had dipped below eight per cent in half a year. And Germany’s example seems to have encouraged broader initiatives. In February, the European Union began implementing a separate price cap on natural gas that applies to the entire Eurozone. Weber’s fundamental point that corporate profits are a key driver of today’s inflation is now openly embraced by the establishment on multiple continents. Researchers at the Kansas City Federal Reserve recently concluded that corporate price markups may have accounted for more than half of the inflation experienced by the U.S. in 2021. Weber’s ideas have shifted from “truly stupid” to sound economic practice, supported by an ideologically broad coalition.

Although US consumer prices provided further signs of relief for consumers in April, there are still factors keeping inflation elevated — and corporations may be reaping the benefits of that.

"We've had a really unfortunate situation where we've had three very, very different inflation waves caused by very different things," UBS Global Wealth Management Chief Economist Paul Donovan told Yahoo Finance (video above). "And they've just come one after the other. So it looks like you've had this continuous period of inflation."

The first wave, primarily in consumer durable goods, "was demand-led," Donovan explained. "That's over. Durable goods prices in the States are falling. You've got outright deflation."

That was followed by a second wave of supply-led inflation, he added, "and that was the energy shock coming out of the war in Ukraine." And then "the third wave of inflation — the one we're getting now — is this unusual profit-led inflation story."

Floyd Robertson wrote:Why Isn’t Joe Biden Getting More Credit for a Big Drop in Inflation?

It’s not every day that a former President gets indicted—even though, with this former President, it is beginning to feel that way.

But the eclipse of the inflation figure is emblematic of a larger story, which is that the U.S. economy has done a lot better in the past year than most experts expected. This development, however, has largely failed to penetrate the public consciousness. With inflation down and unemployment at 3.7 per cent, the so-called misery index, which combines these two rates, is at 7.7 per cent. In January, 2021, when Joe Biden was inaugurated, the misery index was also at 7.7 per cent. (The inflation rate was 1.4 per cent and the unemployment rate was 6.3 per cent.) And, yet, according to the RealClearPolitics poll average, Biden’s approval rating has dropped from above fifty per cent during the first months of his Presidency to just 37.6 per cent now, with a disapproval rating of fifty-nine per cent. This is a disconnect that demands an explanation.

Economists often talk about lags in policy. It takes a while for changes in interest rates or taxes to feed through to the economy, but there are lags in public perception of the economy’s health, too. Although inflation has been falling for nearly a year, the process has been gradual, and people may be only starting to notice.

This is largely because, despite the inflation rate falling over all in the past year, many individual prices still remain considerably higher than they were when Biden took office. “Economists tend to look at the rate of change of prices, rather than price levels,” Bernard Yaros, an economist at Moody’s Analytics, told me, on Friday. “Inflation is important, partly because it helps determine what the Federal Reserve will do. But most people tend to look at price levels. And, if you look at levels, it’s understandable why households are still downbeat.”

...but the media doesn’t face the same constraint. Last year, it provided blanket coverage of the inflation crisis, giving extensive airtime to inflation hawks like the Harvard economist Larry Summers, who said “we need five years of unemployment above five per cent to contain inflation.” Now that the inflation rate has come down further and more quickly than many so-called experts predicted, and without a big jump in the joblessness rate, surely the media should focus on this positive news, too.

As the election campaign proceeds, maintaining some media balance will be particularly important. There’s a danger that Trump will do what he’s done many times before: suck up all the attention and distract from anything positive in the records of his opponents. He can’t be held responsible for doing that this week; obviously, he didn’t want to be indicted

But, even as the Trump saga continues, the media has a responsibility not to let it drown out other important stories, a category that most certainly includes the fall in inflation.

Floyd Robertson wrote:Why Isn’t Joe Biden Getting More Credit for a Big Drop in Inflation?

“Higher interest rates haven’t stopped S&P companies, especially in the big food industry, from inflating consumer prices despite reporting billions in extra net earnings and over a trillion dollars in giveaways to wealthy investors,” said Liz Zelnick, the director of economic security and corporate power at the nonprofit Accountable.US, in a release.

Trapper Gus wrote:

“Higher interest rates haven’t stopped S&P companies, especially in the big food industry, from inflating consumer prices despite reporting billions in extra net earnings and over a trillion dollars in giveaways to wealthy investors,” said Liz Zelnick, the director of economic security and corporate power at the nonprofit Accountable.US, in a release.

https://thehill.com/business/economy/4057722-greedflation-is-the-new-inflation-as-corporate-profits-balloon-report/

Floyd Robertson wrote:

Trapper Gus wrote:



https://thehill.com/business/economy/4057722-greedflation-is-the-new-inflation-as-corporate-profits-balloon-report/

So, the $64,000,000,000 question is, what do we do about that?

Floyd Robertson wrote:Anti-Trust is definitely a major factor. The consolidation of every industry into oligopolies is not consumer-friendly. Regulating profit margins seems like it would be a huge step toward socialism, but limiting consolidation could negate that need.

Los Angeles, CA—California gasoline prices have dropped significantly and stabilized relative to national gas prices in the wake of the Governor’s call, and enactment of, California’s anti-gouging law, according to an analysis by Consumer Watchdog.

tNYT Morning Newsletter wrote:Profits over incomes
The United States spends an average of about $13,000 per person every year on health care. No other country comes close to spending so much

What do Americans get for all this spending? Our health care system does tend to produce more innovation than many others. U.S. companies developed some of the first Covid vaccines, for example. (GD tNYT - the covid vaccines were developed by part of the US government's research and quickly passed onto commercial vaccine producers) But much of the spending does little to improve people’s lives. Despite all our spending, the U.S. has the lowest life expectancy of any high-income country

Twenty years ago, a group of researchers — Gerard Anderson, Uwe Reinhardt, Peter Hussey and Varduhi Petrosyan — published an academic paper that tried to solve the mystery. The title told the story: “It’s the prices, stupid.”

The main reason that U.S. health spending is so high is not that Americans are sicker than people elsewhere or are heavier users of medical care (although both those factors play a role). The main reason is that almost every form of care in the U.S. costs more: doctor’s visits, hospital stays, drug prescriptions, surgeries and more. The American health care system maximizes the profits of health care companies at the expense of families’ budgets.

You can find a poignant example in a series that The Times and KFF Health News (a nonprofit) have been publishing in recent weeks. It’s called Dying Broke, and it examines the long-term care industry. One major part of the industry is known as assisted living, a name for facilities that are home to about 850,000 older Americans who need help with daily activities — like getting dressed or taking medications — but who don’t need constant nursing care.

These facilities can be highly profitable. “Half of operators in the business of assisted living earn returns of 20 percent or more than it costs to run the sites, an industry survey shows,” Jordan Rau, a reporter for KFF, writes. “That is far higher than the money made in most other health sectors.”

Many facilities, Jordan explains, “charge $5,000 a month or more and then layer on extra fees at every step. Residents’ bills and price lists from a dozen facilities offer a glimpse of the charges: $12 for a blood pressure check; $50 per injection (more for insulin); $93 a month to order medications from a pharmacy not used by the facility; $315 a month for daily help with an inhaler.”

Other countries tend to hold down health care costs through regulation. Their government officials set prices that are high enough for health care providers to operate yet significantly lower than in the U.S. Policymakers here, by contrast, allow the market to operate more freely. But competition often fails to bring down prices because the health care sector is so complex, with opaque pricing and bureaucratic insurance plans.

It’s worth pointing out that the U.S. didn’t always have such high health care prices relative to other countries. The gap began to widen in the 1980s, as Austin Frakt, a health economist at Boston University, has pointed out. That decade also happens to be when the U.S. began moving more toward a laissez-faire economy.

(Related: A 2018 investigation in The Washington Post found that care deteriorated at a chain of nursing homes after the Carlyle Group, a private equity firm, took it over.)

The problems with long-term care in the U.S. involve much more than high prices, as Jordan and The Times’s Reed Abelson explain in the Dying Broke series. They also stem from our country’s aging population; slow income growth in recent decades that has left families without much savings; a broken long-term insurance market; a lack of subsidies to help Americans care for aging relatives at home (which is much cheaper than institutional care); and a patchwork, inefficient health sector.

Many other countries are also aging and struggling with long-term care. But the problems are worse in the U.S.

The thing is, we have a standard story about why ’70s inflation was so hard to end, which relies on the way persistent inflation had become entrenched in expectations. But this clearly wasn’t the case in 2022. So while predictions of inflation in 2021 more or less reflected textbook macroeconomics, predicting stagflation after 2022 meant throwing out the textbook in favor of novel arguments for pessimism.

Furthermore, what struck me in 2022 was that the arguments that leading pessimists were making for persistent high inflation had no logical connection to the arguments they had made for a surge in inflation back in 2021. They were predicting the same thing but for completely different reasons. There was nothing linking the inflationist views of 2022 to those of 2021 except a shared pessimistic vibe.

And vibes are a poor basis for economic analysis. Indeed, vibe-based predictions of stagflation — vibeflation? — turn out to have been completely, you might say epically, wrong.

Floyd Robertson wrote:Eggflation isn't over yet: Why experts say egg prices will be going up

Would it surprise anyone to find out that corporations have induced bird flu to their hen populations in order to keep egg prices high?

Not me.

ile there were increases in their expenses, it should be obvious to anyone with a brain, that t

More than a century later, the philosophy of “the people’s lawyer,” as Brandeis was known, is again ascendant in Washington, challenging the long-dominant free-market orthodoxy of Milton Friedman’s Chicago School. The Biden administration has filled key regulatory roles with prominent members of the New Brandeis Movement. Besides Wu, who served for nearly two years on the National Economic Council before returning to academia last January, this includes Jonathan Kanter, who oversees the Justice Department’s antitrust division, and FTC chair Lina Khan. “Brandeis and many of his contemporaries feared that concentration of economic power aids the concentration of political power, and that such private power can itself undermine and overwhelm public government,” Khan wrote in 2018.

In a newly released survey, the progressive consortium Navigator Research found that 85% of voters now view corporate greed as a cause of inflation, with 59% calling it a "major" factor—a 15-percentage-point increase since January 2022.

kingstonlake wrote:Cool. I promise not to vote for a corporation for president.

Trapper Gus wrote: why is it that taxes in this country are regressive, not progressive.

Zurn wrote:

Trapper Gus wrote: why is it that taxes in this country are regressive, not progressive.

mmm....as my income goes up my taxes go up even more.    But maybe my lawyer and accountant suck.  

Floyd Robertson wrote:Great for the employees to get a piece, but you don't get that haul without gouging customers.

Delta paying $1.4 billion in profit sharing payments to employees