Inflation is punching far above its weight in the minds of Americans immersed in louder and louder media alarms about rising prices — often stripped of any context or policy prescriptions that might complicate the narrative, embarrass the rich, or spotlight the predatory business practices of wildly profitable corporations.
Have you noticed that all the media fearmongering about wage inflation hasn’t mentioned the soaring salaries of corporate executives?
Have you noticed how most of the headlines about price increases haven’t mentioned medicine, health insurance, and housing prices that have been skyrocketing for years?
Have you noticed that stories about expensive essential goods don’t mention the record profits of the companies selling them?
That’s not an accident. The discourse is being rigged and manipulated by media and political voices so that the conversation serves the business interests and donors benefiting from the status quo.
Make no mistake, higher prices are annoying, and for 70 percent of households with an annual income below $40,000, they are causing financial hardship. For some people, the rate of inflation has outpaced wage increases. But the bottom 60 percent of earners have more money in their pockets than they did pre-pandemic, even after accounting for inflation, when wage increases and government programs like COVID relief checks and the Child Tax Credit are included. That spending successfully cut poverty nearly in half.
Why is inflation overshadowing these positive indicators? In part, it’s because — as social scientists have long observed — people tend to have a negative gut reaction to increased prices, since they don’t intuitively connect inflation to increasing wages or aforementioned government benefits that may contribute to inflation.
That lack of context is exacerbated by corporate media.
Like the pundit freakout over worker shortages last summer, the conversation about inflation is being driven by corporate lobbying groups like the US Chamber of Commerce, whose self-serving talking points are echoed across the mediascape — and amplified by ever-more cartoonish sensationalism.
Instead of reporting context, corporate media is busy finding families that drink forty-eight gallons of milk a month to talk about milk inflation (which, by the way, was higher a decade ago) or people who drive older Cadillac Escalades to talk about gas prices (which were also higher a decade ago). Corporate media outlets are also falsely predicting food and labor shortages, writing stories based on the inflation concerns of anonymous CEOs, and falsely claiming that inflation is being caused by wage increases for rank-and-file workers.
As a result, even though people think the job market is better than it’s been in decades, consumer confidence is plummeting — likely due to price increases largely caused by sector-specific shortages and a global energy crisis, according to a Conference Board Consumer Confidence survey. Meanwhile, even though people are spending no more of their income on gas than pre-pandemic, and far less on gas than a decade ago, President Joe Biden’s low approval ratings seem inextricably tied to rising gas prices over the past ten months.
In this Great Inflation Scare of 2021, we’re not talking about the following six issues at play in the economy.
1. Inflation at the Very Top
Perhaps the most important point being overlooked by the corporate media is that inflation is being driven by the greed and power of wealthy people and corporations.
As banks notch record profits, executives are finding ways to “juice” their salaries. There’s a 20 to 30 percent “private jet inflation” caused by booming demand from rich people who saw their wealth soar during the pandemic. Rich people have so much spare cash laying around they are buying digital art for tens of millions of dollars, creating new speculative bubbles. Corporations are seeing their largest profits since 1950 (and still jacking up prices of essentials). Over the last forty years, the top 1 percent have seen income gains far outpacing inflation, while workers’ wages have flatlined.
And yet, John Deere workers are being scapegoated for demanding wage increases because it might cause a wage-price spiral (even though the company is reporting record profits this year). An MSNBC host lamented that rank-and-file workers’ “higher wages are one of the contributing factors to inflation.” Even the 2021 survival checks green-lit by the American Rescue Plan Act are being blamed for inflation.
This all shows that the inflation scare, like any crisis moment, is being cynically exploited by corporate actors to entrench their own power and further erode the power of working people.
2. Corporate Consolidation
Relatedly, unchecked corporate consolidation is making it easier for corporations to cite the inflation crisis to unilaterally jack up prices, even as their huge profit margins show they don’t actually need to.
For many essential goods, ranging from diapers to meat to insulin, there are just a few companies that dominate the market for that product. When the one or two companies that make a product raise prices, consumers have no choice but to buy essential goods at that higher price.
Monopolies can also artificially restrict supply in order to keep prices high, explained the American Economic Liberties Project’s Matt Stoller, leading to shortages. This is why some corporate leaders seem to be celebrating higher prices in their earnings calls.
This concentration of corporate power also makes supply chains more vulnerable to the bottlenecks that are now contributing to inflation.
3. Wars And Fossil Fuels
There seems to be an unspoken rule among the corporate media that when it comes to fear mongering about government spending, the deficit, and inflation, the US military budget doesn’t matter and isn’t worth discussing. In fact, intervening in overseas conflicts, killing civilians, and siphoning public money to military contractors have all proven to be major contributors to inflation. The Vietnam War, for example, wasn’t just long, bloody, and unnecessary, but it was also inflationary, economists agree.
Running a fossil fuel economy also subjects American consumers to the price volatility associated with the geopolitics of a global energy market. “Clean energy is much less economically volatile than fossil fuels, and its ever-declining costs aren’t prone to the same boom and bust cycles that have defined the age of oil,” wrote the New Republic’s Kate Aronoff in a piece about how transitioning away from fossil fuels could help tackle inflation.
You never see this fact discussed in corporate media. It appears journalists are too busy combing gas stations for people who are annoyed about how expensive it’s getting to fill up their tank-size SUVs.
The New York Times, for example, interviewed an auto repair shop owner last month who “recalled recently filling his 2003 Cadillac Escalade and seeing the price go above $100, where it used to be $45.”
This is a ridiculous editorial decision when you consider that a 2003 Cadillac Escalade gets thirteen-fourteen miles per gallon. Were no Hummer owners available? Unmentioned: The last time it would have typically cost $45 or less to fill up a 2003 Escalade fuel tank was in 2003.
4. Addressing Health Care and Housing Costs
The government has other tools at its disposal to manage rising cost of living and exorbitant corporate profits. Biden, for example, has claimed that the investments in health care, housing, and other sectors in the Democrats’ Build Back Better social spending and climate bill will help address inflation in the longer term. His claim is partially true.
In truth, lawmakers have ways to address the fact that prices have risen faster in health care over the past thirty years than in any other sector. After promising for years to pass legislation to allow Medicare to negotiate drug prices, Democrats have included a significantly watered-down drug pricing provision in Build Back Better. While the new provision will lower out-of-pocket costs for certain drugs and impose price inflation caps, Democrats could do much more than what they’ve settled on.
Biden could also use march-in rights to lower the cost of patented drugs when companies are keeping costs prohibitively high — a process by which the Health and Human Services Secretary could license patented drugs developed using federal funding to other manufacturers. Democrats could also fight to implement a single-payer health system, which, even the Republican-led Congressional Budget Office agrees would reduce costs and massively expand health care access.
Housing is also increasingly unaffordable, due to a myriad of factors including restrictive zoning laws and decades of underinvestment in public housing. Biden claims Build Back Better would solve housing inflation, but it likely won’t, as Jerusalem Demsas reports for Vox, because it doesn’t adequately tackle the lack of housing supply that is causing high prices.
Representative Ilhan Omar (D-MN) and Senator Jeff Merkley (D-OR) have introduced a bill to put $40 billion into the Housing Trust Fund to build more affordable housing, an essential antidote to housing inflation. But so far, the legislation hasn’t gone anywhere.
5. The Fed Tradeoff
The Federal Reserve has a dual mandate to use monetary policy to maintain price stability and achieve maximum employment. The bank manages that balancing act mainly by adjusting interest rates — the cost of borrowing money — and buying government bonds.
In August 2020, Fed chairman Jerome Powell announced at the central bank’s annual symposium in Jackson Hole that the bank was changing its approach to inflation. For decades, the Fed had kept interest rates high, leading to low inflation or even deflation, and more importantly kept unemployment high enough to suppress the bargaining power of workers. But Powell said that he would keep interests low until the labor market reached full employment, and wasn’t worried that it might cause high inflation.
Now, Powell is under pressure from inflation “hawks” to taper bond purchases and raise interest rates sooner.
The pressure campaign seems to be having an impact. Fed Governor Christopher Waller implied in a recent statement to reporters that workers taking advantage of a tight labor market was making him concerned about inflation. Similarly, Biden Treasury secretary Janet Yellen also recently expressed some concern that rising wages could be a problem if inflation persisted.
But if the Fed raises interest rates, making it more expensive for businesses to borrow money and discouraging spending, it will slow down the labor market recovery.
Higher than usual inflation is less devastating than mass unemployment, which would be the impact of an interest rate hike, or cutting back social spending in an attempt to keep prices down, according to economists J.W. Mason and Lauren Melodia.
“After 2007, the United States experienced many years of high unemployment and depressed growth, thanks in large part to a stimulus that most now agree was too small,” they recently wrote in the Washington Post. “Policymakers belatedly learned that lesson, and as a result, the United States is making a rapid recovery from the most severe economic disruption in modern history. Yes, inflation is a real problem that needs to be addressed… But as bad as inflation is, mass unemployment is much worse. Given the alternatives, policymakers made the right choice.”
6. Price Controls
Congress could tackle inflation without triggering mass unemployment if lawmakers are actually concerned about rising cost of living for working Americans. It could also do so without killing or further gutting the Democrats’ Build Back Better reconciliation bill, even though the US Chamber of Commerce is arguing that the legislation would make matters worse. Instead, lawmakers could address inflation by implementing price controls, meaning placing legal limits on the amounts that prices of certain goods can increase.
As a recent report from the Roosevelt Institute detailed, the United States has used price controls during wartime in the past, and Congress could grant Biden the statutory authority to do so now.
One benefit of price controls, according to Todd Tucker, the author of the Roosevelt Institute report, is that they would prevent corporations from using the guise of inflation to jack up prices beyond the increased cost of input and report fat profits, as they have been doing in recent weeks.
“The thing about crises is that the normal forces of supply and demand don’t work well,” Tucker told The Daily Poster. “Firms who have a lot of power in the economy know that, and can use that information to charge people much more than the increased costs that they are experiencing because of the crisis.”
Price controls can tackle that problem, said Tucker: “The government and the public aren’t at the mercy of private forces here.”