Price gouging
JESSICA CORBETT For Common Dreams
A report by a panel of the U.S. House Committee on Oversight and Reform highlighted how "certain corporations are using the cover of inflation to raise prices excessively, resulting in record profits and profit margins" at the expense of consumers.
The analysis—Power and
Profiteering: How Certain Industries Hiked Prices and Drove Inflation—was
produced by the House Subcommittee on Economic and Consumer Policy, which held a
related hearing featuring testimony from economists in September.
Rep. Raja Krishnamoorthi (D-Ill.), the subcommittee chair, said in
a statement that "today's analysis reaffirms what an overwhelming 80%
majority of Americans already recognize according to a recent poll: Under the
guise of inflation, certain corporations excessively hiked prices far beyond
what their costs necessitated, further driving inflation."
"As American corporations report their highest profit margins the United States has seen in over 70 years, executives of leading companies are admitting on earnings calls that they're taking advantage of inflation," the congressman continued.
"One executive argued that 'a
little bit of inflation is always good in our business' while another admitted
that his company's prices wouldn't fall with decreasing costs, stating, 'We
don't reduce prices on the back end of these increases.'"
"It is unacceptable that certain companies and industries
are engaged in extreme price hikes under the cover of inflation," he
declared. "Americans understand this is happening, and they want it to
stop. We have an obligation in Congress to shine light on this practice, which
is exactly what today’s analysis does."
The document states that an "analysis of financial information from a sampling of the largest corporations in several industries shows massive increases in profits between 2019 and 2021."
According to the subcommittee:
- Three
of the five largest companies in the shipping industry saw profits rise by
29,965%;
- The two
largest public companies in the rental car industry enjoyed a profit
increase of 597%
- Four of
the largest public companies in the meat processing industry saw profits
go up by 134%; and
- Four of
the 10 largest public companies by market cap in the oil and gas industry
had profits rise by 62%.
"Over the same period, profit margins increased by 201%
among the companies analyzed in the shipping industry, by 262% among the
companies analyzed in the rental car industry, and by 53% among the companies
analyzed in the meat processing industry," the document notes.
The report also points out that "recent economic studies
make clear that record corporate markups, profits, and profit margins
contributed to—and continue to contribute to—ongoing Inflation."
Specifically, the document says that "studies by the
Economic Policy Institute and Roosevelt Institute demonstrate that profits
contributed more to price growth in the United States from mid-2020 through the
end of 2021 than at any other point from 1979 to the present—and continue to
contribute markedly today. This is especially true in highly concentrated
industries."
The document concludes with the assertion that "the federal
government can and should play an important role in addressing inflation,
including by passing legislation to address excessive price hikes," and
highlights the Inflation Reduction Act, which Democrats finally passed this
summer after months of party infighting and opposition from the GOP.
Some progressive lawmakers and policy experts continue to advocate for
a windfall profits tax bill to target companies like the fossil fuel giants
that have recently raked in massive profits, which they've used to benefit
shareholders.
The new analysis comes just days before the U.S. midterm
elections—which will determine whether Democrats retain control of Congress for
the second half of President Joe Biden's first term—and on the heels of the
Federal Reserve announcing yet another interest rate hike.
The sixth rate hike of the year came despite warnings from
economists, progressive lawmakers, and other critics that the approach could have
"catastrophic outcomes" for working-class people while not actually
impacting inflation, due to corporate profiteering.
Notably, as Common Dreams reported,
while Fed Chair Jerome Powell took questions about the rate hike from reporters
for about 40 minutes on Wednesday, not one of them asked about the impact of
corporate profits.