Democrats Blast Corporate Profits as Inflation Surges

The administration has limited power over prices: It is making tweaks around the edges to help to tamp them down, but keeping a lid on inflation is mostly the job of the Fed, which has signaled it expects to begin raising interest rates this year to help control it.

Still, as consumers feel the pinch of higher prices for food, gas and household goods, it’s creating a political messaging problem for Democrats. Lawmakers and the White House had initially argued that fast inflation was a sign that airfares and hotel rates were bouncing back and would fade quickly, but supply chain snarls and booming consumer demand for goods kept them elevated throughout 2021. More recently, price pressures have begun to broaden to service categories, like rent, in which increases tend to be long-lasting — and as wages climb swiftly, it raises the possibility that companies will keep lifting prices to cover their costs.

As inflation proves stubbornly sticky, administration officials and prominent lawmakers have refined their message to focus more blame on corporations, especially those in concentrated industries with a handful of powerful firms, like meat processing or gas.

Many companies — from car dealerships to beauty stores and beef sellers — are raking in bigger profits as they successfully raise their prices or discount less while still managing to sell as much or more. But economists have pointed out that in many cases, blaming big firms for worsening inflation is overly simplistic. Industries have been relatively concentrated for years, but businesses now have the wherewithal to charge more because consumers are spending strongly. That owes partly to government stimulus checks and other benefits that have put more money in shoppers’ pockets.

“It’s what you would fully expect when demand goes up,” said Jason Furman, a Harvard economist and a former chairman of the White House Council of Economic Advisers during the Obama administration.

Article source: https://www.nytimes.com/2022/01/03/business/economy/inflation-democrats-corporations.html