What Explains Our Current High Inflation?
“Corporate Profits Drive 60% of Inflation Increases: Higher prices aren’t just a result of supply chain chaos or government spending. Inflation is being driven by the pricing power and higher profits of corporations, costing $2,126 per American…” Matt Stoller, December 2021
“[O]ver half of this [inflationary] increase (53.9%) can be attributed to fatter profit margins, with labor costs contributing less than 8% of this increase.” Economic Policy Institute, April 2022
Patriotic Millionaires, May 2022: Over half (53.9%) of the increase in consumer prices is attributable to fatter corporate profits. Higher labor costs, on the other hand, explain just 7.9% of recent inflation.
- Read their five favorite policies: https://patrioticmillionaires.org/policy
Robert Reich explains the link between corporate greed and inflation in this short video.
Mark Zandi, Chief economist at Moody’s Analytics says in Fortune, June 2022:
- The American Rescue Plan represented only 0.1% year-over-year growth.
- For the most part wage growth is being driven by inflation and not vice versa.
- Higher energy prices have in turn spread into other sectors of the economy. “It’s led to higher diesel prices, which causes food prices to be higher…”
- The COVID-19 pandemic, mainly through its disruption of supply chains, was responsible for 2% year-over-year growth in consumer price inflation.
- Zandi added in his tweets that an unspecified “other” category—which he told Fortune denotes underlying inflation—contributed to 2.3% of the rise. “At an estimated 2.3%, it is consistent with the Federal Reserve’s inflation target. It suggests that if not for the factors accounted for in the analysis, inflation would currently be near the Fed’s inflation target.”
Wages are not keeping up with profits
If salaries had kept up with increases in productivity over the past 40 years, the average worker would be making much more per hour. In that time, worker productivity has grown 3.5 times faster than pay. Where did the excess money go, if not to workers? To executive salaries and shareholder payouts (www.epi.org/productivity-pay-gap). So, for the sake of fairness and fair compensation, we need many types of wages to go up.
Why Is Gas So Expensive? Biggest Reason: Price Gouging
“The largest oil and gas companies made a combined $174B in profits in the first nine months of the year [2021]…Exxon, Chevron, Shell and BP among group of 24 who resisted calls to increase production but doled out shareholder dividends” – The Guardian, Dec. 2021
It got worse in 2022. Check out some oil companies’ profits this year as compared to 2021:
What about the XL pipeline? Biden cancelled this when it was 8% complete [Reuters] and it would not have gone online until 2023. Do we want to continue to supporting old, dirty industries and forms of energy, or lean into less expensive and more environmentally protective technologies?
A Better Way
Owners of electric cars pay the equivalent of $1/gallon. This is the direction of the future. It costs less, is much better for the Earth and climate, and allows us to be more energy independent. Thanks to President Biden’s Inflation Reduction Act, hundreds of millions of dollars are coming to Oregon to improve electric infrastructure. As your legislator, I will be part of deciding how and where that money is well-spent.
My opponent has received $43,000 so far in direct, redirected (transferred through another PAC) and in-kind campaign donations from Koch Industries. “Koch family foundations have spent over $145 million financing 90 groups that have attacked climate change science and policy solutions between 1997 and 2018 alone, according to Greenpeace and this article in Vice, April 2022. Obviously Koch Industries counts on their campaign donations to support candidates who will vote against protecting our environment.
“America’s biggest financial threat isn’t government spending. It’s the cost of climate change…Republicans claim that the Inflation Reduction Act, Biden’s climate bill, represents reckless government spending. Guess what’s way more reckless? Ignoring the costs of climate change.” – Fast Company Magazine, August 2022
Standing Up for Main Street Over Wall Street
Tax money, properly spent, is an investment in our shared present and future – think infrastructure, educated workers and engaged citizens, defense and security, a healthy environment, childcare so families can work, healthcare so getting ill is not an automatic ticket to bankruptcy…
What does freedom look like? How about the freedom that comes from a high quality of life: The freedom to choose work that one finds meaningful, and to have ease and time to enjoy family, recreation activities, community volunteerism, and attendance at community events.
Concerned about the federal deficit? “Democrats’ plan would decrease deficit by more than $100B: Congressional Budget Office (CBO)” The Hill, August 2022
What to do?
- Stay informed. I recommend free subscriptions to Substack newsletters of Robert Reich and Matt Stoler (and follow Robert on Twitter and Facebook).
- Call out anti-worker policies on social media, when you learn about it, and include the company’s username so corporate will know of your dissatisfaction.
- Encourage rules that encourage opportunity for the many over outrageous profits for the few. Ask your favorite and/or the biggest companies to become benefit corporations – changing their articles of incorporation to add employee benefit, community welfare, and economic stewardship – balancing the normal mandae to maximize shareholder profit above all else.
- Get vocal to federal legislators about the need to uphold investment oversight rules and fund IRS workers to go after high-income tax cheats (part of the Investment Reduction Act, fortunately). And tell federal and local legislators to discourage companies from buying up single-family homes as profit-making ventures.
- Read about the Kansas Experiment to cure yourself of the fantasy that cutting taxes will lead to economic growth and a better society. Companies and states thrive when they provide a good quality of life, which means good education, cared-for natural spaces with clean air and water, and enough social services and economic opportunity that service workers can thrive.
- Vote for and support Democratic and Independent Party candidates who stand up for working people.
Background
Raz Mason has a degree in mathematics, taught high school economics, and has a teaching endorsement in Business. She was the profit sharing administrator of a large investment company.