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 member 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 gin the hearing in just a moment whenhey tell me they are ready to begin the livestream. The committee will come to order, without objection the chair authorized to declare recess of the committee at any time. I welcome everyone to todays hearinthat in sport hat explores the important topic of excess corporate price hikes and their ro in drivingnflation. I recognize myself for an opening statement. Cbs news reported earlier this year, a resident of southwt florida used to build provide her family of four with balanced. Als that included me at most dinners. When roastery prices grocery prices doubled the transition to meet oy two to three times a week. At the same time americas for a five Meat Processing companies saw ofits surge to nearly 9 billion in 2021. In the first half of 2022 alone there combined profi 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 whwe 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. Someould have you believe the American Rescue plan is the primary factor driving inflation. Those critics, however caot explain how the arp caused inflation soar and other countriearound the world. The uks extrinsic 20 more inflation than the United States, but the arp did not exist there. The eus experiencing 22 more inflation, but the arp did not exist in any of the eurozone countries. Rkey is experiencing 900 more inflation but itid not exist there is or either. Economisat moody and elsewhere have credited the arp from creating another recession and ating as 4 million jobs in 2021. There are other factors that have not received enough attentn. One of those factors is extreme ice hikes. Companies raising prices far more than required to offset higher costs even whe accounting for shifts in higher demand resulng in the highest Profit Margins we haveeen in the last 70 years. Americans outside the halls of congress recognize the imrtance 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 ug prices and save the family 500 a year on energy christ costs, several companies hiked their prices under the smokescreen of inflation. We lnched an vestigation into industries that unched price hikes far in excess of their Cost Increases to cor inflation. In january we sent letters to et processing giants, in march, we jointly sent letters to three of the Largest Shipping Companies inhe world. The shipping companies had 2021 profits 200 times greater than 2019. 200 tis greater than 2019. Their average erating 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 corporatns. As a former small businessman, i know that American Innovation is the backbone of oueconomy, and many corporate lders deserve praise for creatinjobs and growth. Inflation reduction act is alreaddrawing huge new investments from American Manufacturing and the chips in science act has led to immediate plans for semiconductor plants. Were 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 thanver, while increasing pris more than necessary to cover cosall at the expense of the america consumer. And we must do everying in our por to shine a light on these practices. Th 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. Thent was at 0 a couple days before jamming the inflati reduction t through cgress that does not reduce ilation but does higher 87,000 new irs ents to go aft americans. After trying to redefine what recession mes with all too complicit media owing to carry their water, we find out sunday that the white house is meuring inflation in inches per month, and ben conce 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 ef prices up 24 , bacon prices 26 , chicken breast 45 . Gas prices most doubling in the lastwo years in spite of biden releasing strategic from our Strategic Oil reserves oil to drive down prices artificially in the lead up of an electi. When the family arrives at home they found the cost of running the home has risen 60 in electricity, rent has gone up, 16 lectricity, rent has gone up, this is difficult for the vast majity 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 devtating. 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 collar 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 heing 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 e 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 predent 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 continue 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 inflatn reduction act. In just a few days later on cbs president bin 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 sufferinis acceptable we are working to conduct real oversight, the House Republicans on this Community Committee we have written multiple letters. St 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 ho for the sake of the American People we can conduct real oversight into the cause of this historic inflation and work to ensure the americapeople 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 macroenomic 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 jo and seeking more productive ones. This recovery is also featured higher than expected inflation. Is 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 business 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. Resear ivan conducted with my colleagues was the first conducted since he pandemic to explore the size distributionf 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 dated 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 incrse in markups in 2021. Suggesting that market power had a role in inflation. Inflation has brought in since the 20 results. In between 22, inflation was more driven by 22, inflation was drin by Services Including housing. It is not seen deflatioback to prior prices. If Corporate Power allows margins inoods 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 hasrown faster in other countries than here tords the end of 2021. Even before the insion of ukraine by russia. Even though inflation is a global phenomenacorporate profits are one reason it mains high. Since it becomes so unusually high there is room for reversing them with little economic harm and huge societal befits. Wer prices ithe shortterm term and less quality and more less inequali in the longterm. There is room for wages t 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, regulatorypproach administrative and reglet tory approach. Regle 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 withoulosing 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 econo 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 cgress and the administration to take erect action against this profit Price Inflation rather than ly 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 i 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 needo be controlled. Thank you. Thank you secretary reh, i appreciate you getting uso 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 economisand 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 pfits for themselves and shareholders. Executives are forthright that the crises have been goofor businesses. Even asnput cts go wn, Corporate Executives e reporting how they will keep prices hh. Autozone said it h increased prices due to ination and said higher period of inflation, our industry has not reduced prices to reflect apple costs. Output cts. Extreme sticky prices and said the company would push harder on price incrses. 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 brg raw material costs down even more. The megacorporations are acutely aware of how their marketower affords h the ability to keeprices high as costs go down. Procter gamble, a massive conglomerate that has major diaper brands, and detergent brand says in july they plan t raise crisis prices across most categories in coming months despite paying shareholders. They sai conmers were responding well to price hikes, sayinghey caot deselect their daily use products. In other words, Big Companies know they can take a vanta of consumers basic needs be advantage of consumers basics needs beuse th know they need them. Beuse of the significant market share they know consumer does not have a short choice but to accept the price increase because there ifew if any alternatives. Price his are hitting the orest families hardest, the major drivers of highest costs right now take of a bigger proporti 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 11 diversity withinur supply chain witht 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 suld have price gouging andard congress should continue tmake 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 nothg to address the underlying causes of surprise supply shortages and nothing to address profiteering. Is has supplanted the functioning resilient system we could have made through resilit 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 hnz 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 conce 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 s 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 exceptio of of brazil, turkey, kingdom of saudi arabia. Mpanies 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 ente 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 a40 annualized goods for the estate. That is for the unit 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 incree in demand, and impairment to the covery and supply, the gap between pply 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 expectatio. We have heard re today, what we have heard here today, this is instead, the four decadhigh impression inflation is not because of suppland demand. It would be what appears to be unprecedented corporate profiteering. For that to be true, for questions must be answer. One, why did we only observe this in 2021 and 2021 not detected pceeding . Why unl the invasion of ukraine was his only observed in such aevel in the eyes states versus the euro level for example. Three, why would this increa the overall price level rather than the increase in relative price level of the spefic mark concentrated more concentrated sectors. Why would profiteering in021, result in inflaon, thrate of change in prices ther than a oneoff incrse in the price level. I ha notad 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. E of the slides you presented in your work was the contribuon of prots versus other cts to the growth of prices. Aryou familiar with tha rakeen yes. Can you talk to us abouthe factors that go into why there wod be such a huge increase in the contribution of profits total prices versus the contbution 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 more than 55 . Everyrimeequires means, motive, opportunity. That is at we see here, companies because of endemic concentration in our economy have long had the means t go pushup prices and go for market share. What has chang in this current period is opportunity. The cover inflation. What does that mean cover of inflation . Rakeen when prices go up generally companiesre able t raise prices while the consumer undersnding how much is t factors happeng in the country and how much is gilding the lily . We have gonehrough hundred of earnings calls, sector after sector, corporation afte corporation, ceos are forthright that the crises has been good for business. Dr. Goodspeed presents an analysis, comparing 2021 to 2019 but admits all of022 omits all of 202 that loo like an odd analysis. Why would someone admit all of 2022 . How would that affect the alysis . We see overall inflation, also core inflation it, excluding ergy and food prices that are vatile after geopolitical events. Inflation in europe catches up que a bit, yearoveryear inflation bubbles ou levels out. U. S. Inflation levels out in 2022 at a very high and elevate rate, other countries catch up us. The other thing about looking at just between 21 we had a really robust recovery 021 we had a really robust recovery. Our gdp grow 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 exnt wead. You said inour statement, the magnitude was smuch greater in the United States and coincided precisely with an unprecedented mand shock in march 2021. Sir, i should point out to you a couple of things. One, are you contending th 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 . T vast majority of checks when out march 2021. By april 19, only 485 billio of the 1. 9 trillion had been spent. Instead, by april 19, 686 billion of the consolidated appropriations act have en spent. 50 billion of the ppp program had been spent, 10 billion of famies first coronirus act was spent in 2021. You did not mention any othe other potential recovery prrams. 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. No 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. Itaid, following a period of higher inflation our industry has not historically reduced pricing treflect lower ultimate cost. At does that mn . Rakeen even as input pris start to come down, they ar keeping prices high because they know that they can. Why . It is good for business. They make record profits and sue 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 tha Economic Impact payments were dispersed ickly in march and april 2021 desdirect stimulus to personal consumption that is the direct stingls to personal consumption goods. One of the major drivers is cost of energy, that is u. S. Energy policy fecting International Marks 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 whate saw a convergence of inflation between europe and the United States. The supsition being made, a Company Makes profit, and that the solution is, all of vernment approach. Higher regulation, higher business. Does that help these major corporationsr 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 y 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, cayou 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, th supplyside component, was the potential output and was he supposed suspected increase in nominal mand . Was difference between that increase in demand and the potential output of the unite states economy . That difference re goi to be price. Increased prices for shelter, food, medical care where the largest and most relevant ctors contribute to higher cpi in august, we think do you think the by demonsttion will make that to connue 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 sen this thus far this year an annualized rate of 6. 67 . It rose in august at 8. 6 . If congress belies that the inflation are observing is based on collusion, than0 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 noesidential investment, decline on Consumer Spending on goods. The only thing those positive was consumer snding on services. One of the major things, i speak to every sine industry throughout my district, every single Business Owner that i am that they are facing is t 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 happenin 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 wagencome and wealth inequality. Thank you. Before i move, i would ask an enemas enter into the record unanimous csent 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 congsswoman brown for five and subquestio 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 totore shelves around the country. Can you explain how largescale consolidation with an industry can drive uprices 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 onomy 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 a 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 understandhe economic imbance tt affects our workg and middleclass families. Thank you again, ill back. Thank you, congresswoman browi 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 yojust 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 nsideration, 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 t 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 nexyear. We stillntend to take a significant amount of pricing. We will take as much pricing as we think the consumer wi 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. Axs said the same thing. What is ur comment on that . It strikeme as broadly corrupt and inaccurate. I would add that our employment revery has been significantly better than our peers. We are all dealing with the challenge of inflation and we have a lot oother 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 gog 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 engy 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 l 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 tn 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 dt 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 inouthern arizona. Its not fun but we did it. My dad could have taught us to be envious. Heever did. You respected the fact that in america that if you worked hard u could own things and do well and succeed. Thats fo all theeople that own these retiment plans want to do and they want to have a Better Future for their kids. They dont want to be taxed to deh or regulated to death. The American People care and have done more for humanity than anyone else around the world and its pathetic that membersf hungers are demozing the american peoe because they own shares in these companies and because th are reacting to the polici of their government on energysupply chains and all the other things taking their dollars. I just say i think we need to realize who really pays the bis around here. Ive done it a 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 theecord 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 chartrom your paper. This chart is about markups, what is a markup . It is the increase in sales over the pce of production. Over the price of production. If it costs 10 to make the item and you sell it for 12, you have awo dollar markup . 20 markup. So this shows that markups have gone up beginning 40 years ago but what is this top gun trajectory that is vertica here . It is the level of mkups i 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 corporations addi to the cost of the producin order to pad its bottom line . Yes, after the costs which is rt 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 sw other 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 inorporate profits. How does that compare historically to her 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 inclung maintenance. I have to buy the stuff and i hao have a factory and keep the lights on and hire meone to make the widgets. Thats is stuff. This is what i add on on top. Yes. Your Research Shows that in some indusies, this 50 , more th half of inflation driven by corporate profits, was driven by some industries that increased significantly their prices during t pandec but her industries didnt. When you analyze the different industries, on thing you found was that companies that have the highest profits that are driving those marps straight up are the same compaes that had th highest prots before the pandic. 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 marke economy but it is bad for markets to be anticompetitive. That anticompetitive nature of th market is submitting markups soaring upward and permitting corporate profits to drive inflation rather than unit cost and labor. Thats whats permitting the pre 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. Tha 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 inflati. 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 foet that the other hearings we have had have been inconsistent. We have experience the highest inflation in decadesnd is troubng to me that democrats on this committee seem to have decided to turn a blind eye to the painful pce hikes their policies have flicted on the American People. Democrats are desperately trying to deflect the blame larly for capitalism and socalled corporate greed rather than adtting their runaway spending and big goverent sociali agenda has caused and continues to fuel the inflation crisis. Last week, the c report revealed that during the month ofugust, inflation had a whopping 8. 3 , exceeding all expections. The average price of gas is still 25 higher than last year and groceries have surged almost 14 . The price of groceries continues toise hitting t lowest income americans the hardest. Eggs arep nearly 4 compared to august of 2021, chicken is u 17 and bread is up over 16 . Americans are struggling to buy grocerieand afrd gas and it sily did not have to be like is. I believe y both served in the Clinton Administration . Yes. Do you think he is a qualified and knowledgble individual . I do, he is a friend and i respec him. Thank you. Harvard professor mr. Larry summers was a top Economic Advisor tooth resident clinton and president obama i think thats pretty impressive. Yet the Biden Administration seems to he refused to heed economist warnings of growing inflation. On february 4, 20 21, professor summers who served in both the clinn 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 shorall and policy makers to ensure that they have plans place to address the possible anserious problem o inflation. I want to point out that i voted against this disastrous piec of Democratic Left death legislation st 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 takg substantial risks on the inflation side given that even Top Democrats and Economic Advisors and economists like mr. Summers warned of this inflation becae of the policies, it seems to echo that now, democrats are bling coanies for rising prices. Dr. Ma i would like to ask you a simplebud,. Are the Biden Administration and Congressional Democrats to blame itll for the crippling inflation burdening hardworking American Families . The critil investmen congress made over the coue of the paemic is the reason we are in the middle of a job recovery. I didnt k you about th, asked you about inflati. Please answer the qution. Its important to address the fact that working people are the people who kp 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 mth to month was just an inch, hardly at all. So mr. Goodspeed, is inflation just up one inch, hardly aall . 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. Youtime 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 heari. E severity of corrate up a tearing and its negative impact on workers, nsumers and small businees witn our community cannot beverstated step in my town of st. Louis, rising costs of ren food, health care, transportion and childcare means more people are working harder than ever and going home with less moy to show for it. The cap between less wages leads families to becrambling for goodand seices despi producing more profits for corporatns. Consumers are forced to rely on edit when theipaychecks are not enough and racking up the ancredit card that with studenloans and medical debt. Have er 40 years ofata that proves errors policy monopolies are increasingly fewer hands. When one company includes pfit conols profit and loss, prices are set by corporations and are no competive. The price for basic human needs like toothpaste, detergent, toil paper continue to rise above profit marns with no end in sight. The power and influence of corporions hasnt reached financially while labor union participation has significtly declined. Unionization was resnsible for historicames like wage increases, eight hour days, sickly pay and more. Lawmakers and regulators are the last line defense for workers. Its time for us to reconsider the tremendous influence of. The por 50 millionmericans have to live paycheck to paycheck ruba 500 ceos can get richer . These questions a equal part economics, political and more and they deserve our careful consideration. Secretary reisch, its been nearly a dece since you released a documenta on inequaty forll which you sounded the alarm about corporate practices. How s the relationship betwe workers and wages changed since then . I wish i could say that there was a dramatic diffence in the retionsh but aually, we have seen that worker productivityas continued to rise but wages have continued to stay relatelylat adjusted for ilation. In fact, recently, even though ination continues to re, worker wages a relatively fl. Employers are complaining they cant find workersell there is a way to find workers. Raise pay. Theyont do it. They will raise thprices 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 polici will impact black work is . Black workers . Undoubtedly, the feds continuing rate increases are not onlylirting wita ression t they are making it harder for workers, partilarly 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 dproportionately going to be the first fired when we head into an ecomic slowdown. This is a problem for black workers and the problem for the wer 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 speaki the truth. We are here to discuss corporate responsibility, it is incumbent upon regulators to act for consumers. Its time to change theulesn strengthen antimonopolies. [no audio] [indiscernible] no microphone ndiscernible] 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 ia recession. We have had two quarters of negative gdp growth. I dt know what world we deded to change the definition of not only government but financiagovernnts have been using for 80 years now. We called to negative quarters of gdp growth a recession. Why are we trying to changthe language n . 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 cominout of the covid19 pandemic . There was a labor shortage that was coming out of the covid19 pandemic. Do you acknowledge tha i dont think we had a labor shtage, 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 becau of the pandemic and we had an extension an expansion of the Child Tax Credit and expansionf supplemental Unemployment Benefits that exacerbated the labor supply shortage. Ets 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 payi people to come for an interview let alone for the job itself. Doou acknowledge that to be a reality . Yes, i so want to acknowledge that low job qualy 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 change their labor for money in order to pay for goods an services that that lers the productivity or the desire to actually gget working hos 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 shortage of labor. Its credible is critical not to blame working people. Im blaming government policy because if youre given money thout 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 sayhank 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 ciulation to purchase. Mr. Goodspeed, is that an accurate assessment of what has happened in america sie joe biden became president . Yes, i thk thas a fair description. Lets establish a couple of things. Prices are up, electric the electricity pric are up food is price and the only reason gasoline prices are down is because the presidenhas bee 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, 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 afcts so many people. Families are suffering because of the policies of this administration. We have seen energy ices go through the roof and using fertilizer pces to go up, causing pesticidprices to go down and thats making her yields lower while food prices are gog higher and the cost of goods are going up. We have a work force that is not incentized 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. Intervenon by the government in the past has only worked to create in the last coue of years, we had an economy that was thriving with virtually every demographic rate wages were rising and peop were flourishing. Now what we have is massive wage shortager emplment srtage and an economy that struggling to keep going. The solution of more governmen intervention being the solution is not whats going to work. That will continue to createhe disparity we see happening now beeen the rich and the poor where we had a thriving middleclasslass that was beginning to grow and that gap diminishing two and three years ago. Now that gap is growing as ose who are wellconnted and people who c have access to health and writehese regulations into the favorite read a less competitive environment and that means ices go up versus what needs to hapn 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 is hearings 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 th 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 th some of my colleagues and the other side do not want to acknowledge. What we have ard 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 corporationso this especially in the Meat Processing industry which affects average, ordinary ople 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 exceively is a cause of inflatn. It may not be necearily 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 aarps 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 thmajority 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 en 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 someone integrity in your osing statement, you should gi someone a chance to respd. Iwas up to you guys to ask him about his iegrity 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 tplease respond as prompy as you are able. Thhearing is now adjourned. [ctions Copyright National cable satellite corp. 2022 [captioning performed by the national ctioning institute, which is responsible for its caption content and accuracy. Visit ncicap. Org] cspan2. Up next a look at the Sexual Assault in the military. Gil cisneros