Federal Reserve Study Destroys Biden’s Claim About Corporate Greed Causing Inflation

A recent report from the Federal Reserve Bank of San Francisco has cast doubt on President Joe Biden’s assertions that corporate greed and price gouging are the primary drivers of the current inflationary pressures in the United States.

The research suggests that while certain industries, such as motor vehicles and petroleum, have seen substantial increases in markups since 2021, overall markups have remained relatively stable, consistent with previous economic recoveries over the past three decades.

The San Francisco Fed’s findings indicate that “markup fluctuations have not been a main driver of the ups and downs of inflation during the post-pandemic recovery.”

This contradicts President Biden’s repeated claims that “greedflation” or “corporate greed” are responsible for the elevated prices, rather than other factors like high government spending.

Inflation, as measured by the consumer price index, reached a peak of 9% in June 2022 during the nation’s recovery from the COVID-19 pandemic.

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Despite some decline, inflation has struggled to fall below 3%, with the most recent figure standing at 3.5% in March.

The Federal Reserve suggests that the combination of large stimulus payments, higher unemployment benefits, and low interest rates during the pandemic boosted demand for goods and services while the economy faced shortages and rising costs.

As a result, corporations increased prices to account for these challenges rather than to boost profits at the expense of consumers.

President Biden has touted the strength of the U.S. economy, stating in February, “And it’s clear we have the strongest economy in the world: nearly 15 million new jobs since I came to office. Inflation is down. In fact, the costs have fallen from everything from a gallon of gas to a gallon of milk. We know prices are still too high because of what I call ‘greedflation’ and ‘shrinkflation.’ I’m calling on corporations to pass their savings on to consumers, for God sake.”

However, the San Francisco Fed’s research indicates that the spike in corporate profits during the pandemic recovery is not unusual compared to other economic recoveries, such as the one following the Great Recession.

The report attributes the rise in corporate profits to increased income from pandemic-era subsidies and lower business taxes, rather than excessive markups.

Many economists point to high levels of government deficit spending as a significant contributor to persistent inflation, beginning with the substantial stimulus payouts made during the COVID-19 pandemic.

Under President Biden, the national debt has increased by nearly $6.8 trillion, reaching over $34.5 trillion, according to the Treasury Department.

The producer price index, which measures inflation for businesses before it affects consumers, has risen 18.6% since Biden took office in January 2021, mirroring the rise in consumer inflation.

The prices of commodities used as inputs for manufacturing saw significant spikes in June 2021 and March 2022 before declining in December 2022, as reported by the Institute for Supply Management.

President Biden has also accused corporations of engaging in “shrinkflation,” the practice of reducing product size while maintaining prices.

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However, companies often resort to shrinking product sizes in response to rapid inflation that has increased their own costs, allowing them to raise prices in line with inflation without losing price-sensitive customers who are less sensitive to changes in size.