That doesn’t look like anything to me.
interesting piece discussing ARPA role in inflation from Vox. Again, only question is magnitude and then can discuss trade-off. But most think trade-off not worth it. Biden’s American Rescue Plan worsened inflation - Vox
(again look at some differences between US/rest of world to see impact of us fiscal/monetary policy that has driven up demand side inflation)
You are also seeing the center left econ world turning on Biden Administration and congressional Dems. The price control bill being advanced next week in House and then the super crazy Warren bill is making a lot of the Clinton-Obama alums disgusted/angry.
https://www.washingtonpost.com/opinions/2022/05/12/democratic-conspiracy-theory-on-inflation-makes-things-worse/
Are these the same noeliberal clinton/obama alums that helped get us here?
It would be politically popular to pressure/force the costs of inflation to go primarily on stockholders/companies and less on consumers.
This is what the Dems need to do, but too many neoliberal Clintons who have learned nothing and forgotten nothing to get this done.
If the Clinton/Obama alums hate something the Dems are doing, then I know it’s a good thing.
Can you explain this? Where are we exactly and how did we get here? How are Clinton/Obama era economic advisors responsible?
What kind of policy would accomplish this? Inflation is precisely an effect on consumer prices so it’s hard to imagine how you can make it not fall on consumer goods.
Can you excerpt this? It’s paywalled.
My fave parts of Rampell column (and I recommend reading her stuff. I disagree with a lot of it but she is principles and not polemic. A good opinion writer and makes you think. WaPo has several like that (which now that I think about it are women. Helain Olen, Rampell, Christine Emba, Megan Mcardle. I am most sympathetic to the latter but enjoy reading others/following them on twitter b/c they are interesting writers and make me ponder their thoughts. More than makeup for the embarrassment of a Jen Rubin).
From the column:
A conspiracy theory has been infecting the Democratic Party, its progressive base, even the White House. It’s not quite as self-sabotaging as the [horse-dewormer-cures-covid] false theory that swept up many Republicans last year, but it’s pretty damaging nonetheless.
Call it “Greedflation.”
The theory goes something like this: The reason prices are up so much is that companies have gotten “greedy” and are conspiring to “pad their profits,” “profiteer” and “price-gouge.” No one has managed to define “profiteering” and “price-gouging” more specifically than “raising prices more than I’d like.”
…
Why are companies, which have always been “greedy” (or, one might say, “profit-maximizing”), able to raise prices now ? What changed between early 2020, when [corporate profits]( and [inflation]) were plummeting, and today, when both metrics are “unconscionably” up?
The answer is important, because it determines what policymakers can or should do about it.
Here is how economists explain the recent run-up in inflation: Demand is strong, thanks to pandemic-forced savings plus expansionary government policies (stimulus payments, low interest rates, etc.). Meanwhile, supply remains constrained by covid-related disruptions, labor shortages, [other unfortunate shocks]. Companies can’t ramp up production quickly enough to procure all the stuff that consumers want to buy, whether that “stuff” is oil, furniture or eggs.
Consumers still want to buy all this stuff, though, and Americans overall have an unusually high amount of cash on hand. So they are willing to pay more. That pushes prices up.
A concrete example: In 2019, a car dealer that raised prices 10 percent might have lost customers and watched inventory sit. Today, that dealer can raise prices 20 percent and still have trouble keeping anything in stock. That’s because cars remain hard to come by, and customers are willing and able to pay a premium for whatever’s available.
The solution to the broader increase in prices, then, is ramping up supply (e.g., getting more workers in the labor force, removing trade barriers, encouraging oil-drilling); and/or, tamping down demand (e.g., raising interest rates).
“Supply and demand” is not the greedflationists’ preferred lens on inflation. They say inflation is driven by a Manichean struggle between big corporations and their innocent victims, the customers.
So what’s the supposed evidence that businesses are pro-inflation? The greedflationists — including President Biden — complain that executives are boasting on corporate earnings calls about how much money they’re making. This might sound like a smoking gun if you have never listened to an earnings call, in which executives usually boast about how great profits are or will be.
The greedflationists argue that something fishy is afoot because companies are not merely “passing along” their higher costs; their profit margins are expanding, too. But this is exactly what you’d expect when flush customers are [buying more stuff] and willing to pay whatever’s necessary to get what they want. Prices and profits rise.
’ve been scolded before, including by White House senior aides, for making a fuss about Democrats’ demagoguery on this issue. So what if Biden and Democratic lawmakers want to grandstand about corporate greed? Who cares whether Biden asks for [another gratuitous investigation]) into whether “[illegal]” conduct is driving up gas prices? This kind of populist anti-corporate rhetoric polls [well]), they say. It does no harm. It’s just cheap talk, so Democrats can show they’re Doing Something about inflation.
But such allegedly cheap talk has become very expensive.
At best, this approach has done nothing to curb inflation. Worse, it has distracted Democrats from taking actions that could help, because this “greedflation” narrative has persuaded both policymakers and the public to misdiagnose the problem’s causes.
Worst of all, it is encouraging Democrats to pursue policies that could be actively harmful. These include a proposed tax on “windfall” oil profits oil production exactly when we want output to increase. Or a mass student debt jubilee, which could drive consumer demand even higher.
It may feel good to throw red meat to the anti-corporate populist left. Righteous fury about evil businesses earns plenty of retweets. But it has also hampered Democrats’ efforts to get inflation under control — and in so doing, sabotaged their reelection prospects.
END. (tried to take out links so may be a bit choppy
Some of what that article talks about is true. Costs in a lot of sectors have risen throughout the pandemic due to basic supply and demand. Take construction for example, at the height of the pandemic literally everything used in the construction of and remodeling of housing was super expensive because it simply wasn’t being produced in high enough supply to keep up with demand that had been severely impacted by COVID. Furniture, Electronics, Automobiles, and many other consumer goods were in the same boat. People complained, but understood what was up. This was inflation, sure, but reasonable inflation with an easily traceable cause (which would presumably ease once COVID eased and supply chain began functioning again).
Then along comes oil. Russia invades Ukraine, and suddenly oil companies jack up the price of their products by 20-25% because of “supply concerns”. Except America was only importing less than 1% of it’s total oil consumption from Russia, a number that could be easily replaced simply by ramping up domestic production a fractional amount. The world market sees a brief spike in the price per barrel over concerns about supply, but that spike quickly eases and oil retreats to the same or even less per barrel as pre-Ukraine invasion.
But American gas prices remain at all time highs. They remain at these levels despite a 20% drop in the price per barrel throughout April. Twenty Percent. They remain high despite the President pledging to release one million barrels from the strategic reserve. In fact, in the past few days, even as oil remains fixed in price, gas prices begin to rise yet again, to even new highs.
Supply and demand? That would be odd given that the supply of oil to American refineries has not been greatly reduced versus pre-pandemic levels. Perhaps if this were March of 2021, and everyone was just beginning to come back to work, travel again, etc., we would see a sudden marked increase in demand that was difficult for refineries that had been running at 50%-75% to adjust to, but that has happened pretty gradually over the course of the past year as most places have come out from under the COVID bubble, and statistics show American refineries are back to producing nearly as much product as they were in 2019, pre-pandemic.
So how does $90 a barrel oil, full refinery production capacity, and 2019 levels of demand suddenly add up to “ZOMG WE NEED TO JACK UP THE PRICES BECAUSE WE CAN’T MAKE ENOUGH GAS FOR EVERYONE DEMANDING IT!”? - It Doesn’t.
When the price of gas goes up, the price of literally everything else goes up to account for the increase in production and shipping costs. If gas prices are inflated, you get…inflation. If the reason those gas prices are inflated isn’t due to supply and demand issues, but rather due to “because we can and we want to make back all the money we missed out on during the pandemic”, then that’s “profiteering”, and when it’s done by the oil companies in collusion, it’s called “undermining the economy” and flirts dangerously with creating a recession.
Dems shouldn’t be going after ALL companies who have had to raise prices. There is a very specific industry they can and should investigate and single out. Problem is, that same industry has deep pockets filled with the hands of politicians on both sides of the isle (though far more heavily on one particular side).
I am all in on this post–both in the sense that I can see the point that there’s probably a little bit too much political hay being made about corporate greed, but also in the sense that it’s really hard to understand why gas prices are what they are without that explanation.
And I’ve argued against willy nilly student debt forgiveness in other threads for a variety of reasons. I’m very much a realist and not an idealist. But I think realism leans quite a bit more leftward than even the current political mainstream.
The idea that consumers are so flush with cash that they’re buying loads more…eggs and milk…doesn’t really compute. They can’t really enjoy eggs and milk any more than they did before the pandemic. They can’t really store them for later, when they’re not flush with cash. Same with gas, to a lesser extent, but the same with heating oil, with electricity, for that matter. You can see the argument for some manufactured goods, but not for spoilable staples.
Does anyone think this exonerates greedy executives from any blame? If profits are higher, then there is room to lower prices. I can understand why executives don’t want to do that: because they’re greedy.
How long after the last stimulus payment (which would barely cover a couple months’ rent most places) went out (over a year ago), and after the last gasps of tepid “lockdowns” (getting close to two years ago here) will people still be claiming there is some kind of huge pent-up savings somehow continually being expended? I simply don’t believe it.
This is the part I call bullshit on. That car dealer does NOT have to raise his prices. He could sell those cars for the same amount and profit the same amount. They would sell faster, in fact. And if he suppliers didn’t raise their prices, we’d all just be sitting in the same spot. Somewhere in the supply chain, somebody is jacking somebody.
Sure, a war absorbs production. COVID hit Chinese production in particular. Getting a barge stuck in the SUEZ for a month didn’t help. But I also lay a fair share of the blame on short-sighted corporate policies like just-in-time production just to save a buck on warehouse space, but never considering they might NEED a stockpile of parts and materials.
A lot of these “center left” economists are not “center left,” but at core are deficit hawks (Rattner e.g. had an op-ed some months back trying to blame deficit spending for inflation.) Most things I see attribute around 2-3% of inflation to federal stimulus, but in return we’ve had full employment recovery. We would have recovered anyway is not only unprovable but its scant solace to those who needed the aid (and last I checked, $1400 isn’t some kind of kingly ransom.)
As for oil prices, in 2020 after crude oil cratered, 13 Republican Senators and trump pressured Saudi Arabia to cut production. OPEC+ obliged, cutting production 10 million bbd. They’re still producing less now than they did in 2020 (and keep in mind cost to refine crude in SA and the UAE is much cheaper than US producers) - and it turns out, scarcity is great for profits so that’s probably here to stay.
Good video by Wendover:
The United States only imports 9% of the crude we consume. We are currently the largest crude producer in the world. (We’ve been a net exporter of oil for the last two years.) 2/3 of the 9% we import comes from our own hemisphere (mostly Canada). Less than 10% of the 9% we import comes from OPEC countries. In a world where oil markets made sense, we’d be relatively insulated from price shocks caused by geopolitical shenanigans.
Actually maybe this is part of the explanation. Despite historically high prices here, our gas prices are still low when compared to other countries. We, right now, pay less for gas than any European country except Russia. What’s potentially happening is that U.S. consumers are competing with consumers in other countries who are willing to pay more.
EDIT: Our top recipients are Mexico, Canada, India, China, and S. Korea. Mexico’s prices are about the same as ours. All of those other countries pay slightly more than we do, but less than most European countries.
EDIT2: I’ll note that this is what it means to be a net exporter. In general exporting goods tends to raise prices domestically, and importing goods lowers them.
Greed is a problem because… the CEOs had no compunction about going to Bloomberg and the like they were using expectations to increase prices on non-affected products.
But say they generally aren’t, what of it? How is increasing unemployment and cutting wages supposed to make more stuff appear? Or, if you increase it as much as “the theory” tells you, how is increasing the KPI of hungry homeless any better?
At least it allows us to prepare for November 8th: it’s the economy, fools.
I’m not following. One, I think it is foolish to expect macro economics to work on the “generosity” of single actors. Two, your assumption is that the dealer can get in more supply. If his business needs X amount of profit per year, but he expects supply to be cut in half, he needs to double the profit per vehicle just to maintain the same amount of annual profit. Any dealer seeing supply issues coming down the line, with increasing demand, is going to have to do something in response.
Why would he expect that? I thought the rationale being put forward is free Biden moneys flooded the market and increased demand so prices went up, not that supply went down.
It’s true the market can’t rely on benevolent capitalists; but that is pretty much the opposite of exonerating them of the blame for higher prices.
I’m pretty sure all dealers have been well aware of new car supply issue for a while, now. I would think they place orders and get numbers from the manufacturers months in advance.
In a competitive market, this is done by optimizing costs when there’s a crisis, as the competition will try the same to undercut your price. Instead, we just have rising prices.
If you are in business, and you don’t take profits when the opportunity arises, you can find yourself in a bind when things go poorly. Profits cam build cash reserves that you can use to get through lean times.