new york
CNN
—
Some progressives frequently blame corporate greed for fueling the high cost of living that Americans are tired of.
still new research Researchers at the Federal Reserve Bank of San Francisco are questioning the theory of grief.
Economists at the SF Fed said business price gouging was not the main driver of the inflation spike in 2021-2022.
Fed researchers found that some companies exercise pricing power by raising prices above the cost of production, a gap known as a markup.
For example, 2021 saw sharp increases in the prices of gasoline, cars, and other goods. Similarly, price increases for repairs, miscellaneous goods, laundry, personal care and other services increased, the Fed said.
Of course, the inflation crisis is not limited to a few key sectors. It was the entire economy. (annual inflation rate It fell slightly in April.(but still well above the Fed’s 2% target).
When San Francisco Fed economists zoomed out to look at the economy-wide rise, they found little evidence that price gouging was the main culprit.
“Total price increases, a better measure of overall inflation, have remained roughly flat since the start of the economic recovery,” the paper concluded. “Rising markups are not the main driver of the recent inflation spike and subsequent decline in inflation during the current economic recovery.”
In fact, the San Francisco Fed found that the trajectory of collective price increases over the past three years was “not unusual compared to past recoveries.”
“It makes them angry and it makes me angry.”
This runs counter to the claims of some progressives, including Sen. Elizabeth Warren, who has long advocated conservatism. refocused on inflation A discussion of corporate greed.
“Right now, prices are going up.” You can buy it at the pump, at the supermarket, or online. At the same time, energy companies, grocery companies and online retailers are reporting record profits. ” Warren said “This is not just a matter of a pandemic. It’s not just an inevitable economic force of nature. It’s greed and in some cases completely illegal.”
Most recently, President Joe Biden cited corporate greed as the reason prices remain high.
“If you look at what people have, they have money to spend. Having to spend more makes them angry, and it makes me angry,” Biden said. CNN’s Erin Burnett, notes that the sizes of Snickers bars and other foods are shrinking. “It’s about 20% cheaper for the same price. That’s corporate greed. That’s corporate greed. And we have to deal with it. And that’s what I’m working on.”
“There are still too many companies in America that are ripping people off,” Biden said in February. Price gouging, junk fees, greedflation, shrinkflation. ”
“America – we’re tired of being played for!” Biden said.
Although the paper does not directly address corporate greed, shrinkflation, or Biden, the study undermines the argument that greedy inflation caused the initial inflation.
White House Press Secretary Jeremy Edwards told CNN that the study supports Biden’s claim that “record profits are driving up inflation in some sectors, such as gas and general merchandise.” issued a statement.
“These price increases were supposed to reverse as we recover from the pandemic. The fact that they haven’t reversed means prices could fall once corporate profits recover,” Edwards said. Ta. “President Biden has repeatedly called on big companies to lower prices and pass record profits on to customers. The president will continue to condemn corporate rip-offs and fight to keep money in Americans’ pockets.”
The discussion comes as inflation remains a major complaint for Americans and a major political liability for Biden ahead of the November election.
consumer sentiment, an indicator closely tracked by the White House; Prices unexpectedly fall to their lowest in six months At the beginning of May. It was the biggest one-month decline in nearly three years, exacerbated in part by concerns about inflation and interest rates.
Greg Barriere, chief U.S. policy strategist at AGF Investments, said the White House is “very bent on blaming someone or something for inflation.”
“By blaming greedy corporations, you’re just looking for a scapegoat,” Vallière told CNN. “There is no prescription that will have much immediate impact other than the Fed reluctantly raising rates. Incredibly, this option is not out of the question.”
Many economists blame the recent spike in inflation on more traditional factors: higher production costs related to fluctuations in demand and coronavirus-era supply problems.
Indeed, inflation has improved dramatically over the past two years.
The annual inflation rate, as measured by the Consumer Price Index (CPI), peaked at 9% in June 2022, before declining to the low-to-mid 3% range.
But progress in fighting inflation has stalled in recent days, with statistics from the past three months showing prices rising faster than expected. And inflation remains well above the Federal Reserve’s 2% target. The so-called last mile to bring inflation back to normal has proven difficult.
This situation has left the Fed unable to protect Americans from rising borrowing costs, which are at a 20-year high.
Chairman of the Federal Reserve Board Jerome Powell reiterated “It will likely take longer before we can be confident that inflation will fall to 2% over time,” he said on Tuesday.
While the SF Fed report pokes holes in the greedflation argument, other findings are more mixed.
For example, the progressive advocacy group Groundwork Collaborative recently discussed Corporate profits drove 53% of inflation in the second and third quarters of 2023, the report found.Corporate profits have been responsible for 34% of inflation since the outbreak of COVID-19. found.
“There’s a reason most Americans blame corporate greed for price gouging. It’s because they know a price gouging when they see one,” said Caroline of the progressive watchdog group. Chairman Ciccone says: Accountable.USsaid in a statement. “It just doesn’t make sense that companies enjoying record profits, enriching investors and handing out huge bonuses to their CEOs claim creeping price increases are out of control. They could have passed some of the success on to consumers in the form of reasonable prices, but many chose to reap the benefits many times over.”
Last year, the Federal Reserve Bank of Kansas City found that: Corporate profits contributed 41% to inflation. The first two years of recovery from COVID-19.
But the same Kansas City Fed paper notes that this is not unusual, and that corporate profits have contributed even more to inflation (59% on average) during previous economic recoveries.
