Coverage. Cspan campaign 2022 your unfiltered view of politics. Next a look at role Certain Industries and driving inflation, we heard testimony from an economist and academics that overcharging for goods and services they major contributor. The hearing is an hour and a half. Good morning everybody, welcome everybody to todays hybrid hearing. Pursuant to house rules some members and witnesses will appear in person and others will appear by zoom. I know you are familiar with zoom by now. Let me remind everyone of a few points. First, the house rules require that we see you. Please have your cameras turned on at all times. Second, members appearing remotely who are not recognized should remain muted to minimize background noise and feedback. Third, i will recognize members verbally, members retain the right to seek recognition verbally. In regular order members will be recognized in crd for questions, lastly if you want to be recognized outside of regular order you may identify that in several ways. You may use the chat unction to send a request, you may send an emailed to the majority staff, or you may unmute your mike to seek a condition. We will get begin the hearing in just a moment when they tell me they are ready to begin the livestream. The committee will come to order, without objection the chair is authorized to declare recess of the committee at any time. I welcome everyone to todays hearing that in sport that explores the important topic of excess corporate price hikes and their role in driving inflation. I recognize myself for an opening statement. Cbs news reported earlier this year, a resident of southwest florida used to build provide her family of four with balanced. Meals that included me at most dinners. When roastery prices grocery prices doubled the transition to meet only two to three times a week. At the same time americas for a five Meat Processing companies saw profits surge to nearly 9 billion in 2021. In the first half of 2022 alone there combined profits totaled 2. 5 billion. Almost a 100 increase over between 19 2019. Her story and the stories of others their struggled to feed families, afford insulin, purchase gas is why we are here. Early 2021 americans are suffering from rising prices that has been caused by supply chains, and changing demand patterns due to the pandemic. These elements are insufficient to totally explain why inflation remains elevated. Some would have you believe the American Rescue plan is the primary factor driving inflation. Those critics, however cannot explain how the arp caused inflation to soar and other countries around the world. The uks extrinsic 20 more inflation than the United States, but the arp did not exist there. The eu is experiencing 22 more inflation, but the arp did not exist in any of the eurozone countries. Turkey is experiencing 900 more inflation but it did not exist there is or either. Economist at moody and elsewhere have credited the arp from creating another recession and crating as 4 million jobs in 2021. There are other factors that have not received enough attention. One of those factors is extreme price hikes. Companies raising prices far more than required to offset higher costs even when accounting for shifts in higher demand resulting in the highest Profit Margins we have seen in the last 70 years. Americans outside the halls of congress recognize the importance of this issue. In april that Navigator Research released in late i late july, a majority of americans viewed corporations raising prices to great record price profits is a cause of inflation. President biden has adopted a longterm plan to fight inflation to reduce Prescription Drug prices and save the family 500 a year on energy christ costs, several companies hiked their prices under the smokescreen of inflation. We launched an investigation into industries that launched price hikes far in excess of their Cost Increases to cover inflation. In january we sent letters to meet processing giants, in march, we jointly sent letters to three of the Largest Shipping Companies in the world. The shipping companies had 2021 profits 200 times greater than 2019. 200 times greater than 2019. Their average operating cost only increased 18 . Across the economy corporate net Profit Margins continued to hover at x historic highs. We have at historic highs. We have convened this hearing to see how Certain Companies have engaged in excessive price hikes, economics, and the harm on the americans american consumers. We are not here today to vilify corporations. As a former small businessman, i know that American Innovation is the backbone of our economy, and many Corporate Leaders deserve praise for creating jobs and growth. Inflation reduction act is already drawing huge new investments from American Manufacturing and the chips in science act has led to immediate plans for semiconductor plants. We are also not here to suggest that excessive price hikes are the sole cause of inflation. But we cannot ignore the reality that American Companies today are reporting higher Profit Margins than ever, while increasing prices more than necessary to cover costsall at the expense of the american consumer. And we must do everything in our power to shine a light on these practices. With that i would like to recognize my distinguished Ranking Member for his opening statement. Thank you, chairman. First inflation was because of putin. That it was not. Then it was transitory and that it was not. Then it was at 0 a couple days before jamming the Inflation Reduction Act through congress that does not reduce inflation but does higher 87,000 new irs agents to go after americans. After trying to redefine what recession means with all too complicit media owing to carry their water, we find out sunday that the white house is measuring inflation in inches per month, and biden conceit biden seems content. The problem is, for all the denials the American People know theyre not being told the truth. This American Administration does not seem to get most americans do not get their Economic News from a report or a White House Press conference. They get their Economic News when they go to the Grocery Store to find ground beef prices up 24 , bacon prices 26 , chicken breast 45 . Gas prices most doubling in the last two years in spite of biden releasing strategic from our Strategic Oil reserves oil to drive down prices artificially in the lead up of an election. When the family arrives at home they found the cost of running the home has risen 60 in electricity, rent has gone up, 16 electricity, rent has gone up, this is difficult for the vast majority of americans. Specially those on low and fixed income whose dollar does not make to the month anymore. Those whose life savings are not worth as much as it used to be. It is completely devastating. The purchasing power of families in america is diminishing. In all practical purposes because of inflation they have lost a months income a year. I am happy that we have a hearing on inflation instead of dog collars. It is in recognition of what the white house has denied all along that inflation in this country is real and having a real impact on the American People. I am concerned this hearing is another effort to ship lane from the blame from the policies of this administration and the record was spending of the reckless spending of the congress and scapegoat businesses with the blame. Todays panel of businesses does not include any official from the Biden Administration. A thing we have seen throughout this term in this committee and the full committee. For the purpose of the hearing it was stated in the meadow memo to examine how Certain Industries have used market power to drive inflation. Nowhere in the memo does discuss nearly 4 trillion we have spent sense president truck biden has taken office. Inflation spiked after the passage of the nearly 2 trillion American Rescue plan act. By may of 2021 inflation nearly doubled to 5 . Even liberal economist warned that the one the president the American Rescue plan would overheat the economy. Harvard political Professor Larry summers warned that the almost 2 trillion stimulus plan was three times as large as the projected shortfall. He said policymakers need to ensure they have plans in place to address the possible and quite serious problem of inflation. Instead of taking time to analyze the impact that additional Government Spending would have on inflation the Biden Administration continues to pump money into the economy and inflation continues to worsen. September 13, 2020 when the august numbers were released showing a. 3 8. 3 inflation. Biden hosted a party for the Inflation Reduction Act. In just a few days later on cbs President Biden told the American People that inflation was increased by just an inch. If the white house thinks this is what we need to raise measure inflation by, the American People think this is what we need to measure inflation by. President biden with an attitude toward the American Peoples suffering is acceptable we are working to conduct real oversight, the House Republicans on this Community Committee we have written multiple letters. Last year, june 2, 2021 we wrote to the director of National Economic counsel requesting information on the administrations plan to combat inflation. We have not received a response. More recently we wrote to President Biden requesting a briefing on his response to inflation and received no response. Today we send another letter requesting a briefing on the solution to address the economic part crisis. I hope for the sake of the American People we can conduct real oversight into the cause of this historic inflation and work to ensure the American People are better taking care of. And get through this crisis. Thank you very much. I yelled back. Thank you, mr. Clout. Cloud. I would like to introduce our witnesses. Our first witness. His mr. Mike dccpa mike konczal, director of macroeconomic analysis at the Roosevelt Institute. Our third witness is miss rakeen mabud, finally the minority witness is dr. Tyler goodspeed. The witnesses appearing remotely will be unmuted so we can swear everyone in. I will now swear in the witnesses. Please raise your right hands. Do you swear or affirm the testimony or affirm the testimony about to give is the truth, the whole truth, the nothing but the truth so help you god . I do. Let the records show the witnesses answered in the affirmative, thank you. Without objection each of your written statement we made part of the record. With that, you are now recognized to provide your testimony. Chairman, Ranking Member, distinguished members of the committee thank you for inviting me to testify. My name is mike konczal, director of macroeconomic analysis at the Roosevelt Institute and the economic think tank. This has been a remarkable recovery for workers, unemployment 1. 2 lower and Labor Force Participation a third of a percent higher than the cbo project without the American Rescue plan. Depressed for decades before the covid19 pandemic, skyrocketed enabling workers to move up the career ladder, quitting their jobs and seeking more productive ones. This recovery is also featured higher than expected inflation. This has occurred alongside record high corporate. Profit margins relationships between these two trends is a central Profit Margins of the highest rates since 1950, since 2020, 40 of the increases in prices are reflected in higher corporate prices profits compared to the 22 for employee wages. This is in stark contrast to the previous 40 years were these values were 11 for corporate profits and for wages. They have found a connection between higher prices and gross Profit Margins. Especially high during this recovery. There is a growing disconnect between prices paid in input to businesses and a comparatively larger prices consumers pay for goods like automobiles. Without firm level data is difficult to determine the exact leadership between the increases in markups, revenues, and the revenue inflation. Research ivan conducted with my colleagues was the first conducted since he pandemic to explore the size distribution of markups across 37 hundred firms. Against 207,000 observations going back to 19 to five. We report 1955. We found markets mark ups increased in a steady fashion. Our paper updated this work through 2021. Relying on the research a standard for publicly traded data, that pauls publicly closed that pulls properly disclosed data. We found that profits skyrocketed. Firms increased their markups and profits at the fastest annual pray pace since 19 to five. This was driven largely by firms at the top of the distributional. Markups increased most of the top. Markups from before the pandemic were a strong particular of the increase in markups in 2021. Suggesting that market power had a role in inflation. Inflation has brought in since the 2021 results. In between 22, inflation was more driven by 2022, inflation was driven by Services Including housing. It is not seen deflation back to prior prices. If Corporate Power allows margins in goods and continue continue to be elevated there is no way back down without harming the economy. Inflation is a global phenomenon, it true when you look at core inflation. It has grown faster in other countries than here towards the end of 2021. Even before the invasion of ukraine by russia. Even though inflation is a global phenomena, corporate profits are one reason it remains high. Since it becomes so unusually high there is room for reversing them with little economic harm and huge societal benefits. Lower prices in the shortterm term and less quality and more less inequality in the longterm. There is room for wages to increase without increasing prices and the strong labor market that we have. We believe the evanescent evidence points towards tackling inflation and all of government within the missed rate of, regulatory approach administrative and reglet tory approach. Reglet tory approach. I now recognize secretary rush reich. Yesterday dead policymakers continued their fed policymakers continued their battle against inflation with a third supersized rate increase. They assume that the underlying economic problem is a tight labor market causing wages to rise and prices rise in response. Interest rates and Interest Rate increases are necessary to slow wage growth. With due respect, this assumption is wrong. Recent wage hikes have not kept up with inflation. Most workers paychecks are shrinking in terms of real purchasing power. Rather than causing inflation, wages are reducing Inflationary Pressures. The underlying economic problem, in addition to global problems is not wage Price Inflation. It is profit Price Inflation. Corporations raising their prices above increases in their costs. Using those Cost Increases as excuses to raise their prices and profits. Corporate profits are close to levels not seen in over a halfcentury. Operations have the power to raise prices without losing customers because they face so little connotation. Since the 1980s two thirds of all American Industries have become more concentrated. Grocery prices are through the roof, for example largely because just for companies four Companies Control 85 of meat and poultry processing. One Corporation Says the price for most of the nations feed corn. Two firms dominate consumer staples. All are raising prices and increasing process profits because they can. Big pharma has increased prices, Airline Carriers are going from 12 carriers to just 4 today. Wall street has consolidated 25 giant banks. Broadband consolidated to 5 five giant banks. With inflation driven by these conglomerates, raising prices to increase their Profit Margins, the major affective Interest Rate hikes is to just depress wages and limited jobs. As the economy slows workers are less likely to get wage increases to keep up with inflation. Unemployment will rise. The fed now sees the Unemployment Rate rising to 4. 4 next year up from 3. 7 now. That would mean the loss of 1. 2 million jobs. I urge congress and the administration to take erect action against this profit Price Inflation rather than rely solely on the fed to raise Interest Rates and put the burden on fighting inflation average working people who are not responsible for. First a windfall profits tax would help. A temporary tax on price increases exceeding the Producer Price index cost of producing consumer goods. Congress should direct the federal trade commission to investigate if price increase are for added cost for opportunistic price gouging. Old antitrust enforcement is incorrect in central essential. Even the credible threat can Keep Companies from rising their costs. As a backstop price controls should be considered. They have many disadvantages in terms of distorting argus, the current inflation emerging from the pandemic is analogous to the inflation emerging from ward were to. Economist ww ii. Economist urged price controls to prevent corporate profiteering. The inflation we are now experiencing is not due to wage gains, it is due to increases in corporate profits. It is excessive profits, not wages, that need to be controlled. Thank you. Thank you secretary reich, i appreciate you getting up so early to testify in california. Next i will recognize dr. Mabud. Thank you for inviting me to testify today. My name is rakeen mabud chief economist and managing director of policy and research at the groundwork collaborative. Megacorporations are choosing to keep prices skyhigh even as input costs come down. These price hikes are not falling evenly across the economy. The most marginalized groups are paying the highest prices. The inflation crisis we are facing today is due to date gates decades of directors asian deregulate station families have struggled to navigate a deadly pandemic and rising costs, corporations have seen the highest quarterly Profit Margins in over 70 years. We know why. We have corn gone through hundreds of corporate earnings calls to understand how these megacorporations have taken advantage of recent crises to make profits for themselves and shareholders. Executives are forthright that the crises have been good for businesses. Even as input costs go down, Corporate Executives are reporting how they will keep prices high. Autozone said it had increased prices due to inflation and said higher period of inflation, our industry has not reduced prices to reflect apple costs. Output costs. Extremely sticky prices and said the company would push harder on price increases. He put it even more bluntly, we do not reduced prices on the backend of increases. He went as far as to say a nice light recession will be perfect for us because it would bring raw material costs down even more. These megacorporations are acutely aware of how their market power affords him the ability to keep prices high as costs go down. Procter gamble, a massive conglomerate that has major diaper brands, and detergent brand says in july they plan to raise crisis prices across most categories in coming months despite paying shareholders. They said consumers were responding well to price hikes, saying they cannot deselect their daily use products. In other words, Big Companies know they can take a vantage of consumers basic needs be advantage of consumers basics needs because they know they need them. Because of the significant market share they know consumer does not have a short choice but to accept the price increase because there is few if any alternatives. Price hikes are hitting the poorest families hardest, the major drivers of highest costs right now take of a bigger proportion of their Household Budgets. The sway of the companys hold over pricing is not inevitable. It is the result of decades of deregularization deregulation and privatization. This a hollowed out and nearly 1180 diversity within our supply chain without competition to undercut companies that are charging accents prices, those companies with market power are able to raise prices with impunity. It is not too late, we have many policy tools at our disposal. Congress should tax excess and windfall profits. They should strengthen the laws on the books to make markets more competitive and prevent collusion on pricefixing. They should have price gouging standards. Congress should continue to make the long overdue investments in the supply and tackle costs like house cant house care and Housing Health care and housing. It is making people port and doing nothing to address the underlying causes of surprise supply shortages and nothing to address profiteering. This has supplanted the functioning resilient system we could have made through resilient competition. Big corporations are getting away with pushing up prices and families are paying the price. It is time to rein them in, thank you i look forward your questions. Thank you. Now i would like to recognize dr. Goodspeed. You may provide your testimony. Thank you. I am the klein heinz below at Stanford University at Stanford University at the hoover institution, at 20172021 i was senior and chief economist for and ultimately acting chairman of the council of Economic Advisors. I advise the u. S. Government on the response of the coronavirus pandemic. Thank you for the opportunities be with you today about a Macro Economic issue of utmost concern to the u. S. Economy. Namely the fact that inflation in the United States as recently hit levels not observed since 1981. Indeed if we look at measures of core or underlying inflation they suggest that underlying Inflationary Pressure in the eyes states today the United States today was higher than 3, 6, 12 month ago. I submit to you today that the primary cause of the inflation we have observed over the past 18 months cannot be a factor that is global in nature. Supply chain disruptions, port closers, corporate profiteering, because the timing and the magnitude of the initial surge in inflation in the eyes states was earlier and greater than that observed in other Major Economies. Of the 46 Major Economies that the chairman earlier observed, the increase in the average rate of inflation in 2021 over its prepandemic level was greater than all 45 other countries with the exception of of brazil, turkey, kingdom of saudi arabia. Companies i do not think of as paragons of fiscal very virtue. If we look at the euro area and take a harmonized index of quarks and core Consumer Prices to compare apples to apples. In the 12 months, core inflation in the euro area was 1. 1 versus 1. 0 in the United States. In the 12 months since the brewery 2021. That takes debbie wary that takes us up to the invasion of ukraine. The increase in the rate of United States is four times that is the euro area. What happened in march of 2021 . We had a deficit financed equal stimulus equal to almost 10 of the entire annual output of the u. S. Economy. Deficit financed fiscal stimulus equal to 10 of the annual output of the entire u. S. Economy. The Immediate Impact of that was a demand for goods United States surge to 11 month over month. That is a 240 annualized goods for the estate. That is for the United States. That is a lot. Americans reporting they did not look for work in the past month because of the pandemic. Worse than that, provisions within the raising implicit marginal tax rates on the return work. We have a big increase in demand, and impairment to the recovery and supply, the gap between supply and demand had to go somewhere. In 2021 it went into prices. One of the lessons in the 1970s, once you get a big impression inflation shock that we saw in 2021, households and workers begin to incorporate that into the price expectations. We have heard here today, what we have heard here today, this is instead, the four decade high impression inflation is not because of supply and demand. It would be what appears to be unprecedented corporate profiteering. For that to be true, for questions must be answered. One, why did we only observe this in 2021 and 2021 not detected proceeding . Why until the invasion of ukraine was his only observed in such a level in the eyes states versus the euro level for example. Three, why would this increase the overall price level rather than the increase in relative price level of the specific mark concentrated more concentrated sectors. Why would profiteering in 2021, result in inflation, the rate of change in prices rather than a oneoff increase in the price level. I have not had an answer to those questions today. Thank you. Thank you mr. Goodspeed. Dr. Goodspeed, sorry about that. First of all that we recognize myself or five minutes of questions. I would like to start with dr. Mabud. One of the slides you presented in your work was the contribution of profits versus other costs to the growth of prices. Are you familiar with that . Rakeen yes. Can you talk to us about the factors that go into why there would be such a huge increase in the contribution of profits to total prices versus the contribution of profits to prices in the preceding decades . As you can see here, from 1979 to 2019, profits account for 4 of growth in unit prices. And just last year it contributes to more than 55 . Every crime requires means, motive, opportunity. That is what we see here, companies because of endemic concentration in our economy have long had the means to go pushup prices and go for market share. What has changed in this current period is opportunity. The cover inflation. What does that mean cover of inflation . Rakeen when prices go up generally companies are able to raise prices while the consumer understanding how much is the factors happening in the country and how much is gilding the lily . We have gone through hundreds of earnings calls, sector after sector, corporation after corporation, ceos are forthright that the crises has been good for business. Dr. Goodspeed presents an analysis, comparing 2021 to 2019 but admits all of 2022 omits all of 2022. That looks like an odd analysis. Why would someone admit all of 2022 . How would that affect the analysis . We see overall inflation, also core inflation it, excluding energy and food prices that are volatile after geopolitical events. Inflation in europe catches up quite a bit, yearoveryear inflation bubbles out. Levels out. U. S. Inflation levels out in 2022 at a very high and elevated rate, other countries catch up to us. The other thing about looking at just between 21 we had a really robust recovery 2021 we had a really robust recovery. Our gdp growth was far above other nations. We had a much faster, stronger, robust recovery than pure nations. It does not peer nations. It does not surprise me, because they had not yet recovered to the extent we had. You said in your statement, the magnitude was so much greater in the United States and coincided precisely with an Unprecedented Demand shock in march 2021. Sir, i should point out to you a couple of things. One, are you contending that the arp stimulus package of 1. 9 trillion was all spent in the march of 2021 . It was spent largely throughout 2021. Was it spent march 2021 . The vast majority of checks when out march 2021. By april 19, only 485 billion of the 1. 9 trillion had been spent. Instead, by april 19, 686 billion of the consolidated appropriations act have been spent. 50 billion of the ppp program had been spent, 10 billion of Families First coronavirus act was spent in 2021. You did not mention any of the other potential recovery programs. It appears you cherry picked one program that comprised a minority of the spending by march 2021 in your analysis. That undermines the integrity of your entire analysis. Not me just point out a couple of the quotations from autozone as well as hp fuller that you had presented to us. They are very disturbing. It said, following a period of higher inflation our industry has not historically reduced pricing to reflect lower ultimate cost. What does that mean . Rakeen even as input prices start to come down, they are keeping prices high because they know that they can. Why . It is good for business. They make record profits and issue massive stock buybacks to enrich shareholders. Thank you. About i now recognize mr. Clout for his questions. Thank you, sharon. First chairman. Would you like to finish what you are saying . I would like to specify that Economic Impact payments were dispersed quickly in march and april 2021 desi direct stimulus to personal consumption that is the direct stingless to personal consumption goods. One of the major drivers is cost of energy, that is u. S. Energy policy affecting International Markets as well. Can you speak to the connections to that and how it affects the economy . Certainly, in 2021 we see a large global shock to energy. There was another leg up in early 2021 with the Russian Federation invasion of ukraine. That disproportionately affected europe, thats what we saw a convergence of inflation between europe and the United States. The supposition being made, a Company Makes profit, and that the solution is, all of government approach. Higher regulation, higher business. Does that help these major corporations or hurt major corporations when there is a Regulatory Burden in contrast to other entities entity entering the market. And increased reglet tory burden will raise barry reg ulatory burden will raise the barrier to entry and the investment burden on a project to make it viable. What we see in washington dc, there is consolidation going on among corporations, corporations write the regulations to the government, passive mother congress, so it will give them an advantage pass it onto congress, to give them an advantage. That observation would be consistent with going back all the way to adam smith. That is what i was thinking. What you mentioned in your testimony that the two major drivers of the economy, major Government Spending, supply chain disruption, can you speak more to that . A simple analysis in 2021 would help one to predict inflation quite accurately. As a productive potential of the u. S. Economy, the supplyside component, was the potential output and was he supposed suspected increase in nominal demand . Was difference between that increase in demand and the potential output of the unite states economy . That difference were going to be price. Increased prices for shelter, food, medical care where the largest and most relevant factors contribute to higher cpi in august, we think do you think the by demonstration will make that to continue to write do you think we will continue to see that due to the Biden Administration policies . I do, rent right now, the cost of shelter has risen this thus far this year an annualized rate of 6. 67 . It rose in august at 8. 6 . If congress believes that the inflation we are observing is based on collusion, than 80 million homeowners have collude to inclusive increase rent on themselves. Inflation has been the recession has been defined as two negative quarters of gdp growth have we had that . Yes. Why is the white house denied that . We think of threeds when it comes to defining inflation, weve had it was deeper than the recession in the earlier 2000. Deeper than the recession in the early 60s. When you look at diffusion we had a decline in inventory investment, decline in nonresidential investment, decline on Consumer Spending on goods. The only thing those positive was Consumer Spending on services. One of the major things, i speak to every single industry throughout my district, every single Business Owner that i am that they are facing is the employment market. They cannot find people to fill positions. It makes it difficult for them to thrive and grow their companies right now. A couple years ago we had the same issue, but it was for very different reasons. We had a thriving economy, wages across every demographic were growing. It was amazing to see what was happening, really in our economy. Can you speak to the labor issues and how they are connected to what is going on . How our policies are driving labor prices . When you have sound tax and revelatory policy you see where three quarters flow into the employment come out of the labor growth, declining wage income and wealth inequality. Thank you. Before i move, i would ask an enemas enter into the record unanimous consent to enter into record this study showing the u. S. Has had lower comparative inflation, core inflation from oecd peers from q1 2020 to q2 2022. Now i would like to recognize we are going to recognize congresswoman brown for five and subquestions five minutes of questions. Thank you, this week jbs owning the largest fleet in the world has agreed to pay millions of dollars and potentially eliminate competition to inflate prices. This is not the first settlement of their kind, meet producers of all kinds have entered this settlement after accused of pricefixing. The settlements are not an admission of wrongdoing, it opens up the conversation of how concentration at the top trickles down to store shelves around the country. Can you explain how largescale consolidation with an industry can drive up prices for consumers . Absolute, take the for example, for Companies Control 85 of the industry. That means two things. If one of those companies goes down for any reason, the whole supply chain form meat is disrupted and drives up prices. It also means they have an enormous amount of Pricing Power because of the market share they hold and consumers are paying high prices at the checkout counter as a result. Thank you very much for that. Following up on your response it is important to acknowledge that these price hikes do not land equally across the country. Low income and marginalized economy communities like mine in the 11th Congressional District seem to be hit the hardest. King talk about how the disenfranchised can you talk about the disenfranchised communities are hit and what we can do to reverse this . Yes, low income committees and ones of color are hit by higher prices when it is driven by essentials such as food and shelter. Low income families spend 75 of their income on necessities such as food, gas, shelter, more than double that of high income households. When this goes up it eats up Household Budgets a dollar does not go as far. To address the rampant corporate profiteering that is endemic in our economy. I cited examples of my testimony earlier today. We must continue to invest in these working families to keep our economy going. I thank you for that response. It is clear we need to have these conversations so that we can fully understand the economic imbalance that affects our working and middleclass families. Thank you again, ill back. Thank you, congresswoman brown i will use your remaining time. I will ask dr. Reich. In dr. Goodspeeds analysis he claims that 1. 9 trillion arp stimulus packages what caused a spike in inflation in march of 2021. It was a clear minority of the spending that had happened by april of 2021. Why would you just focus on the arp as opposed to the family post first act, cares act, and other acts that dispersed far more money than what happened with the arp in april of 2021. There is no reason to focus on the arp. I want to add, this is important consideration, the arp did a lot of good. Its kept americans afloat. It made sure a lot of americans did not fall into poverty at one of the most critical and difficult periods of time we have had in this country over the last century in terms of a Public Health crisis. It did a lot of good. The other thing is, we have seen after all of the cares act, arp, all of the other structures we put into place, and a lot of that is now gone. American families are back to where they were before, although jobs are plentiful note that employers are not raising wages as high as inflation. Wages, and wage gains continued to trail inflation. That means that most families, particularly low income families, even middleclass families are falling further and further behind. Thank you dr. Lemming directed question to dr. Mabud. Constellation brands and said the following we continue to think that inflation will continue to be a big factor for us next year. We still intend to take a significant amount of pricing. We will take as much pricing as we think the consumer will absorb. That is what they set. What does that mean . It means they will keep prices as high as they can to reagan record profits as long as they dont lose consumers. Mr. Counsel, i want to go back to the comparative inflation that we saw in other countries versus the United States. The Pew Research Study shows that america is middle of the pack when it comes to the comparative growth in inflation in 20 versus 2020. Axios said the same thing. What is your comment on that . It strikes me as broadly corrupt and inaccurate. I would add that our employment recovery has been significantly better than our peers. We are all dealing with the challenge of inflation and we have a lot of other things going for our country that are very important. Thank you, i recognize mr. Keller for five minutes. Thank you. Ive just been listening to whats going on here and i have a question. I heard that wages had not increased as much as inflation. How would a person running a business know how much inflation will be until we see what that is . Wouldnt wages normally increase after we see what the inflation number is . Historically, wages have tended to lag inflation. You dont think President Biden will have an assault on American Energy and do all these things. I better raise my wages before gas prices go up. Usually the prices increase in the answer to that his businesses taking care of their employees and raise their wages so it would be a national thing for ray just went wages to increase after we see what the Inflation Numbers are. Also wage contracts tend to be negotiated at a lower frequency than other price contracts. Thank you, i hear a lot of things that my colleagues on the other end and some experts and i dont know whether they ran a business or not have been saying. One thing they are saying is we are less worse than someone else. In america, thats not good. I dont measure that im less worse than some other nations economy. Want to be the best. I dont want to settle for second for anybody in america. I think it is really sad we have people trying to say we are not so that up because we are less worse. My favorite president , ronald reagan, said governments view of the economy can be summed up in a few short phrases. If it moves, tax it. If it keeps moving, regulate it and if it stops moving, subsidize it. I have heard mention of all these corporations and some of them were from autozone, procter gamble, General Motors and ford. I hear these corporations mention in the testimony. The title of our hearing is power and profiteering, how Certain Industries hike prices, fleece consumers and drive inflation. I dont know if these companies have shareholders that have to be profitable. I dont know when america, it became a bad thing to be profitable. Thats not the america i grew up in. Lets talk about who owns these companies. I would like to submit for the record with unanimous consent to reports, one from calpers which is the california retirement system and one from the Pennsylvania State employees retirement system. Id like to submit these for the record if i may. It proves that our teachers, or highway workers, our Police Officers, our firefighters are the people that own these companies. Thats who it is. A company has a fiduciary responsibility which means they are supposed to look out for the shareholders. If companies are not profitable, we dont have retirement plans for all these people. Where are they going to get that money . If calpers cannot doesnt have enough income in the retirement system, they would have probably have to raise taxes to make those retirement payments . Yes. Who would pay for those taxes . The american taxpayer. Exactly. I dont know why we are having a hearing demonizing thats the thing to do is demonize americans. President biden said half of us are terrible people and now we are having a hearing singer factory workers in our highway workers and Police Officers are bad people because they own stocks in these operations to pay for their retirement. All of a sudden, this is a bad thing. Everybody talks about poor people. I grew up poor, its not fun. We lived in a shack with no Running Water and no electricity and in 1973, we moved into a taint and walked the highways picking up bottles in southern arizona. Its not fun but we did it. My dad could have taught us to be envious. He never did. You respected the fact that in america that if you worked hard you could own things and do well and succeed. Thats for all the people that own these retirement plans want to do and they want to have a Better Future for their kids. They dont want to be taxed to death or regulated to death. The American People care and have done more for humanity than anyone else around the world and its pathetic that members of hungers are demonizing the American People because they own shares in these companies and because they are reacting to the policies of their government on energy, supply chains and all the other things taking their dollars. I just say i think we need to realize who really pays the bills around here. Ive done it and i think some people in this room have not and if they did, they would have more respect for person who works every day. I yield. Unanimous consent to enter this letter for the record requesting it admitted an information from the government. As i recognize congresswoman porter for bastions, the first year of Ronald Reagans presidency, inflation was 10. 2 . Congresswoman jimmy carter was a disaster. Please begin your questions. Good morning. You published a paper, places, profits and power, and analysis of 2021 firm level markups. This is a chart from your paper. This chart is about markups, what is a markup . It is the increase in sales over the price of production. Over the price of production. If it costs 10 to make the item and you sell it for 12, you have a two dollar markup . A 20 markup. So this shows that markups have gone up beginning 40 years ago but what is this top gun trajectory that is vertical here . It is the level of markups in aggregate across publicly traded companies starting in 2020 and the highest increase in one year was 2021. This is after they paid their expenses and dealt with supply chains and after they pay their labor. This is what the corporation is adding to the cost of the product in order to pad its bottom line . Yes, after the costs which is part of their accounting. This chart shows that corporations are adding to the cost to boost their profits. Correct. Did you see also period a rise in corporate Profit Margins . Yes, its at the highest level since the 1950s. I want to show another chart. This is an important point to talk about, inflation, what consumers are experiencing. Prices are not going up just because of supply chain or labor or some other invisible market forces. They are going up because powerful executives are making deliberate choices to maximize their profits at the expense of the rest of us. According to this chart, what is the negative driver of inflation during the pandemic. The dark blue is the recent perio itd. Is that percentage . Its 54 and you can update that as well. So over half of the increased prices, people are paying are coming from increases in corporate profit. Yes, the unit price index is reflected in corporate profits. How does that compare historically to other periods it is significantly higher. 11. 5 . What is it today . 53 . I want to make sure everyone in america understands this chart. What is a unit labor cost . The cost of wages and associated costs. What is a nonlabor input cost . A variety of things including maintenance. I have to buy the stuff and i have to have a factory and keep the lights on and hire someone to make the widgets. Thats this stuff. This is what i add on on top. Yes. Your Research Shows that in some industries, this 50 , more than half of inflation driven by corporate profits, was driven by some industries that increased significantly their prices during the pandemic but other industries didnt. When you analyze the different industries, one thing you found was that companies that have the highest profits that are driving those markups straight up are the same companies that had the highest profits before the pandemic. Why . We believe those high markups from before the pandemic reflected a severe market power problem we had even before covid. Those companies were able to increase their prices and even higher base as a result of the reopening. I want to be clear with my colleagues on the other cited the aisle and the American People. Its not bad for corporations to be profitable in a market economy but it is bad for markets to be anticompetitive. That anticompetitive nature of the market is submitting markups soaring upward and permitting corporate profits to drive inflation rather than unit cost and labor. Thats whats permitting the price damaging so we need to pass the Competitive Price act to give consumers the tools they need to create a competitive marketplace and hold corporations accountable and they abuse market power to gouge americans. I yield back. Thank you, congresswoman. I would like to recognize mr. Clyde for five minutes of questions. Thank you, chairman. I was elated to hear that her subcommittee on economic and consumer policy was holding a hearing on inflation. Thank you. Today is september 22 meaning that after nearly nine full months, this is only the second hearing we have had this allender year. Im very glad that democrats are holding a hearing on a relevant topic. Lets not forget that the other hearings we have had have been inconsistent. We have experience the highest inflation in decades and is troubling to me that democrats on this committee seem to have decided to turn a blind eye to the painful price hikes their policies have inflicted on the American People. Democrats are desperately trying to deflect the blame largely for capitalism and socalled corporate greed rather than admitting their runaway spending and Big Government socialist agenda has caused and continues to fuel the inflation crisis. Last week, the cpi report revealed that during the month of august, inflation had a whopping 8. 3 , exceeding all expectations. The average price of gas is still 25 higher than last year and groceries have surged almost 14 . The price of groceries continues to rise hitting the lowest income americans the hardest. Eggs are up nearly 40 compared to august of 2021, chicken is up 17 and bread is up over 16 . Americans are struggling to buy groceries and afford gas and it simply did not have to be like this. I believe you both served in the Clinton Administration . Yes. Do you think he is a qualified and knowledgeable individual . I do, he is a friend and i respect him. Thank you. Harvard professor mr. Larry summers was a top Economic Advisor to both resident clinton and president obama i think thats pretty impressive. Yet the Biden Administration seems to have refused to heed economist warnings of growing inflation. On february 4, 20 21, professor summers who served in both the clinton and the Obama Administration warned that President Bidens almost 2 trillion stimulus plan known as the American Rescue plan was three times as large as the shortfall and policy makers to ensure that they have plans in place to address the possible and serious problem of inflation. I want to point out that i voted against this disastrous piece of Democratic Left death legislation last year. On may 18 of this year, mr. Summers reiterated his concern but the concern apparently fell on deaf ears. He said democrat policymakers are taking substantial risks on the inflation side given that even Top Democrats and Economic Advisors and economists like mr. Summers warned of this inflation because of the policies, it seems to echo that now, democrats are blaming companies for rising prices. Dr. Ma i would like to ask you a simplebud,. Are the Biden Administration and Congressional Democrats to blame it all for the crippling inflation burdening hardworking American Families . The critical investments congress made over the course of the pandemic is the reason we are in the middle of a job recovery. I didnt ask you about that, asked you about inflation. Please answer the question. Its important to address the fact that working people are the people who keep this economy going. So you will not answer the question. Youre not going to answer whether or not democrats in the Biden Administration are to blame at all for crippling inflation for hardworking families . Im here to talk about corporate profiteering which has been hiking prices. So we will not get anywhere here. Over the weekend, President Biden stated that inflation had hardly risen. The inflation rate month to month was just an inch, hardly at all. So mr. Goodspeed, is inflation just up one inch, hardly at all . No, the yearoveryear figure is 8. 3 and you can look at the Core Measures of inflation to which everyone was pointing a year ago saying this is evidence we dont have inflation problem. In august, it rose at 9. 2 . We have a problem with inflation. Yes. Thank you. Your time has expired and democrats are the just arent the ones blaming corporations. 80 of americans including many republicans are. Excess federal spending their. Congresswoman busch, you are recognized questions. Thank you for convening this important and timely hearing. The severity of corporate up a tearing and its negative impact on workers, consumers and Small Businesses within our community cannot be overstated step in my town of st. Louis, rising costs of rent, food, health care, transportation and childcare means more people are working harder than ever and going home with less money to show for it. The cap between less wages leads families to be scrambling for goods and Services Despite producing more profits for corporations. Consumers are forced to rely on credit when their paychecks are not enough and racking up the and credit card that with Student Loans and medical debt. We have over 40 years of data that proves errors in policy monopolies are increasingly fewer hands. When one company includes profit controls profit and loss, prices are set by corporations and are not competitive. The price for basic human needs like toothpaste, detergent, toilet paper continue to rise above Profit Margins with no end in sight. The power and influence of corporations hasnt reached financially while labor union participation has significantly declined. Unionization was responsible for historic games like wage increases, eight hour days, sickly pay and more. Lawmakers and regulators are the last line of defense for workers. Its time for us to reconsider the tremendous influence of. The power 50 million americans have to live paycheck to paycheck so ruba 500 ceos can get richer . These questions are equal part economics, political and more and they deserve our careful consideration. Secretary reisch, its been nearly a decade since you released a documentary on inequality for all which you sounded the alarm about corporate practices. How has the relationship between workers and wages changed since then . I wish i could say that there was a dramatic difference in the relationship but actually, we have seen that worker productivity has continued to rise but wages have continued to stay relatively flat adjusted for inflation. In fact, recently, even though inflation continues to rise, worker wages are relatively flat. Employers are complaining they cant find workers well there is a way to find workers. Raise pay. They wont do it. They will raise the prices of their goods but they are not raising their wages. As a followup, given the historical disparities between black and white unemployment levels, can you estimate how the Federal Reserve policies will impact black work is . Black workers . Undoubtedly, the feds continuing rate increases are not only flirting with a recession but they are making it harder for workers, particularly black workers who are disproportionately low wage, get income increases, to get wage increases. One of my biggest fears is because black workers are disproportionately low wage, they are also disproportionately going to be the first fired when we head into an economic slowdown. This is a problem for black workers and the problem for the lower middle class. These are the people who are drafted into the fight against inflation when we rely so much on the fed and an Interest Rate hikes to control inflation. Thank you for your explanation and for being so clear and concise in speaking the truth. We are here to discuss corporate responsibility, it is incumbent upon regulators to act for consumers. Its time to change the rules in strengthen antimonopolies. [no audio] [indiscernible] no microphone [indiscernible] we will pause to fix the audio difficulties. We will test the audio here. Testing, 1, 2 on the three. Are we back . Can we reset the clock . Mr. Dom, you are recognized for five minutes. A couple of things, lets level set. We are in a recession. We have had two quarters of negative gdp growth. I dont know what world we decided to change the definition of not only government but financial governments have been using for 80 years now. We called to negative quarters of gdp growth a recession. Why are we trying to change the language now . Because of the economic policies by joe biden and democrats in congress that it brought forward a couple of things. Dr. Mabud, why was there a labor shortage coming out of the covid19 pandemic . There was a labor shortage that was coming out of the covid19 pandemic. Do you acknowledge that . I dont think we had a labor shortage, i think we had a shortage of good jobs. Did we have a labor shortage coming out of the pandemic . We had 1. 5 billion early retirements and others did not look for work because of the pandemic and we had an extension an expansion of the Child Tax Credit and expansion of supplemental Unemployment Benefits that exacerbated the labor supply shortage. Lets get out of the statistical world and go into the real world. You buy goods and service like any american does. Im sure you went to stores where the signs were in the windows about how they were paying people to come for an interview let alone for the job itself. Do you acknowledge that to be a reality . Yes, i also want to acknowledge that low job quality and low wages are a huge liability in our economy. When you dont have workers who can come to work because they literally cant take a rooting doctors appointment come its not the fault of the worker, is the fault of the company. Do you acknowledge that if somebody is giving dollars, if they are given revenue, given cash and they dont have to exchange their labor for money in order to pay for goods and services that that lowers the productivity or the desire to actually go get working hours at a company or firm . I believe people should be treated with dignity at work. I believe everybody should be treated with dignity but thats not what we are talking about. We are trying to surmise that if you go down the pathway of providing dollars to people and they dont have the have to exchange labor which of the way our economy functions for money to pay for their goods and services, do you think that leads to a labor shortage . Like i said, i believe we were experiencing a shortage of good jobs, not a shortage of labor. Its credible is critical not to blame working people. Im blaming government policy because if youre given money without having to exchange it with labor, taking your talents and abilities and getting money as a result, it depends on the industriousness of the individual. Im not blaming anybody. If you are giving out free money, people will say thank you. If you have a legitimate economic choice to make at your kitchen table, i can work 40 hours or work 20 hours and are living does not change, people have their own decision to make about what they will do. That labor shortage which was created by the American Rescue plan led to a labor shortage in that labor shortage has led to price increases because you have people who had the revenue and disposable cash flow to buy goods but not an of goods in circulation to purchase. Mr. Goodspeed, is that an accurate assessment of what has happened in america since joe biden became president . Yes, i think thats a fair description. Lets establish a couple of things. Prices are up, electric the electricity prices are up food is price and the only reason gasoline prices are down is because the president has been buying down the prices with the gasoline reserves. I understand the majority of parties desire to put this in Corporate America for raising prices. If you do not have enough workers working, there is none of goods produced and there is none of goods produced but everybody still has money to go buy goods, the price of each unit actually goes up. Thats how inflation is created. More policies of the same will lead us further down the road to perdition which we are already on. With that, i yield back. Now i would like to recognize Ranking Member cloud for a closing. Thank you, chairman, i appreciate that we have had a robust discussion. The economy is something that affects so many people. Families are suffering because of the policies of this administration. We have seen Energy Prices go through the roof and causing fertilizer prices to go up, causing pesticide prices to go down and thats making her yields lower while food prices are going higher and the cost of goods are going up. We have a work force that is not incentivized to return to work causing the supply to go down leading to the rising prices. The solution thats being presented today is more Government Intervention. Intervention by the government in the past has only worked to create in the last couple of years, we had an economy that was thriving with virtually every demographic rate wages were rising and people were flourishing. Now what we have is massive wage shortage or employment shortage and an economy that struggling to keep going. The solution of more Government Intervention being the solution is not whats going to work. That will continue to create the disparity we see happening now between the rich and the poor where we had a thriving middleclass class that was beginning to grow and that gap diminishing two and three years ago. Now that gap is growing as those who are wellconnected and people who can have access to health and write these regulations into their favorite read a less competitive environment and that means prices go up versus what needs to happen in reverse. We have a lot of work to do to return our economy to a thriving economy where families can flourish in all demographics. I appreciate the conversation today. We certainly have to get back to sound fiscal policy, thank you. Thank you to all the witnesses for coming in today and thanks to the audience for tuning in and thank you to dr. Reich and i finally see some sunlight coming into that window. I think this hearing is really not about denying that supply chain disruptions occurred or that there were changing patterns and demands but rather to acknowledge something the American People themselves have been saying strongly which is that 80 of americans say corporations raising prices to make record profits is a cause of inflation. Thats it. 80 of americans, not just the democrats. We are talking about a large majority of americans know in their bones that we are finally something we are acknowledging with some of my colleagues and the other side do not want to acknowledge. What we have heard from the testimony of our witnesses is that we are seeing record profits but more than that, record Profit Margins, huge increases in those Profit Margins yearoveryear, unprecedented level of market concentration and corporations, even stating that they are increasing prices and dont intend to let them fall even as their costs all. Fall. That is a problem and when we see corporations but not all corporations, but certain corporations do this especially in the Meat Processing industry which affects average, ordinary people every day where they saw their profits search 134 from 4 billion to nearly 9 billion last year, it has real effects. People cannot eat meat. People cannot do the things they would ordinarily do to feed their families. Unfortunately, that has repeated itself in other industries as well. Some of my colleagues in the other side say that democrats are blaming corporations or democrats are blaming shareholders. No, we are saying that corporations raising profits excessively is a cause of inflation. It may not be necessarily illegal, but in some cases its unethical. And to say that increasing wages is the cause of inflation when they could have reduced profits to allow for lower prices is also disingenuous. Dr. Goodspeed presents an analysis whose integrity has been undermined. He says the aarp is what caused the sudden rise in inflation because of an Unprecedented Demand shock in 2021. But when he was asked if he believes that 1. 9 trillion went out in march of 2021, he says the majority did when actually a small sliver of that one point 9 trillion went out in march, 2021. That is a problem with his analysis and it has not rebutted even once during this hearing. I just want to say thank you for everyones participation. Thank you for your interest in this important topic. In closing, express my gratitude to the witnesses if youre going to challenge someones integrity in your closing statement, you should give someone a chance to respond. It was up to you guys to ask him about his integrity and you failed to do so. You disparage the mans integrity and your closing in a cowardly way. I criticize the integrity of the analysis. You mentioned his integrity. No i, said the integrity of the analysis and thats a desperate move to hold up the analysis in the last seconds of this hearing. All members will have five legislative days within which to submit additional written questions to the chair for the witnesses including any of the witnesses placed present today. These will be forwarded to the respective individual for his or her response. I ask our witnesses to please respond as promptly as you are able. The hearing is now adjourned. 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