We can happily acknowledge that Joe Biden has had a number of successes in his first year:
Domestically, jobs are way up, and unemployment is way down (3.6%); 80 percent of American adults have received at least one shot of a Covid vaccine; the American Rescue Plan poured $1.9 trillion into the economy, helped cut child poverty by half, and expanded Obamacare; and Congress passed a $1.2 trillion infrastructure bill.
On the international scene, Biden has strengthened NATO and bolstered our allies in their stance against Putin’s invasion of Ukraine; rejoined the Paris Agreement; renewed ties with South Korea, thus pulling them away from China; withdrew from Afghanistan; and revived the 2015 nuclear deal with Iran.
Meanwhile, in the last three months of 2021 the economy grew by more than seven percent with predictions for growth in 2022 of around four percent, higher than any other country in the world.
Yet we are constantly smacked in the face by the news of the downside of these economic successes: inflation. Is Biden the cause of this inflation? He’s certainly getting the blame.
Americans are noticing the dramatic rise in inflation and are generally worried about it. That is understandable; consumer prices jumped 8.5% in the US in March. Although the situation in Ukraine rightly dominates headlines and news coverage, kitchen-table issues dominate many Americans’ concerns.
But if not Biden, then what is causing inflation?
My inexpert view finds three causes:
1) Pandemic Exhale. Many Americans are now climbing out of the Covid funk that for months had tethered many of us to our homes. Now with the pandemic receding and with money in their pockets in part because of the Biden response to Covid, Americans are unleashing pent-up demand for consumer goods. That demand has outstripped supply, causing prices of those consumer goods to rise, especially prices of food and petrol.
2) Supply-Chain Bottlenecks. Getting products to consumers requires a chain of companies providing links from manufacturers to consumers. Links in that supply chain include logistics firms who store and deliver goods and retailers who sell the goods. Covid lockdowns and restrictions across the globe blocked the chain. We saw a snapshot of this blocked chain in the operations of LA’s ports. We also saw Texas Republican Governor Greg Abbott apply a supply-chain chokehold for no reason other than sheer political mischief.
3) Corporate Greed. Large corporations raise prices in the face of high demand because they can and they want to. If markets were competitive (which for many means “free”), then corporations couldn’t do this. Competition would keep prices low to keep customers. But many markets aren’t competitive, as corporations consolidate their power into fewer and fewer hands. From meat markets to airlines; from retail stores to media conglomerates; from US car manufacturers to drug stores, health insurers, banks, book publishers, wireless carriers and more, America can easily be described now as an oligopoly — that is, an economic system where a small number of companies dominate, if not control, their markets.
Of the three causes of inflation, corporate greed is, for me, the runaway winner of who bears responsibility for inflation.
Corporate firms influence, if not control, their markets by raising near-insurmountable barriers for new companies to enter the markets and by setting prices and production quantities.
But this smacks of collusion! Yes, indeed, it does, because that is what it is.
Adam Smith warned about this as far back as the 18th century. In the Wealth of Nations, Smith observed that merchants and manufacturers, whom he called “dealers,” were inexorably drawn to collude to control their markets. Smith wrote: “People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.”
Of course, it isn’t the case that today’s corporate heads meet in pubs and high-end restaurants to raise prices. They don’t have to. As Smith pointed out, “widening the market and narrowing the competition is always the interest of the dealers” (Wealth of Nations, p. 267).
Here we are in the United States where corporate profits grew 35% last year to hit their highest level since 1950. A seventy-year high in profits and yet prices are going up. How can that be in the face of record profits? Because companies can raise their prices without penalty.
The penalty would be that a company that raised its prices in a competitive market would see customers flee to other companies. But when a few players dominate markets, increased costs of supplies or labor can be passed along to consumers. Where are those consumers going to go?
Thus, corporations, scooping up record profits, are simply passing along increased costs to consumers and using inflation as a cover for their actions.
So, is Biden to be blamed for inflation? No. The chief culprit is corporate concentration and corporate greed. Prices rise because corporate heads are greedy. They want more profits to raise share prices and then buy back their stocks to raise per-share value even more.
Hence the message to Democrats heading into the 2022 midterms: STOP PUSSYFOOTING!
The campaign messaging is clear: Corporations are to blame. So, blame them.
TO ALL DEMOCRATIC CANDIDATES:
Say something like the following:
“Who’s to blame for inflation? Who’s to blame for you having to pay more for groceries, medicine, and gas? Corporate heads. Nobody else.
Sure, Republicans will tell you that it’s Biden, that it’s Biden’s failure to push for more oil and gas drilling, that it’s Biden’s pouring all that government money into the economy that made prices go up.
That’s all nonsense, and you know it. How can companies rake in record profits, and still raise prices? Because they can. That’s all there is to it.
And guess who else gets the blame for inflation? You do. Corporations say, “Costs of labor have gone up. We have to raise prices to keep up.”
More nonsense. Your wage increase of five percent this year is a pay cut. It’s not causing inflation. It’s just keeping you from being able to buy what you need to feed and clothe your family.
Is the system working for you? No! It works against you to keep corporate profits at an all-time high. And who’s in charge of these corporations? Who wants corporate taxes low? Who wants to skip capital-gains taxes? MY OPPONENT! (or opponent’s name)
Who’s against having the rich pay their fair share of taxes? MY OPPONENT!
Who’s against the wealthy paying pennies on their assets over $100 million? Over $100 million! MY OPPONENT!
Who opposes the child tax credit to get more help to families? Who opposes affordable child care? MY OPPONENT!
Who is fine having teachers pay a higher tax rate than billionaires and corporations? MY OPPONENT!
Who thinks that subsidies to oil and gas companies and other corporations earning record profits are a “stimulus” but that helping working families is a “hand-out”? MY OPPONENT!
Who thinks that unions exploit workers but corporations protect and serve them? MY OPPONENT!
Republicans in the House and Senate have opposed all of these bills or ideas. All of them. And (opponent’s name) is a Republican.
Exxon earned over $9 billion in profits last quarter, up nearly $2 billion from last year. Yet you’re paying more at the pump for no reason other than corporate greed. Do you think that electing (opponent’s name) will bring a change to that?
Do you think that electing (him/her) will bring a change to the Republican opposition to helping you and your loved ones?
No, you don’t, and I don’t either. Because opposition to helping you is the entire Republican platform!
Elect me, and I’ll fight every day to put a stop to Republican politicians picking your pocket to pay rich corporate heads to fill theirs.
Perhaps you and I can’t stop the graft, because our own party has a healthy helping of corporate Democrats who urge us to think small and go slow. But I promise you that every day I’ll call out the meek and small-minded and call out the Republican greed and hypocrisy that prevents you from doing well and allows them to fleece Americans.”
Is all of this accurate? Have I oversimplified our situation? Perhaps. But let’s stop pussyfooting and point a finger at who is really harming America. To do that, Democrats need to use a straightforward message and a clear target.