I am so sick and tired of lazy “horse race” political reporting masquerading as “economics” reporting, especially from the the New York Times.
Alan Rappeport is an economic policy reporter for The New York Times, based in Washington. He covers the Treasury Department and writes about taxes, trade and fiscal matters.
He is also good at parroting Republican campaign talking points. For example, this report. Democrats Face Deepening Peril as Republicans Seize on Inflation Fears.
I defy you to find anywhere in this reporting where Rapparort asks any Republican whose talking points he is parroting, “OK, genius, what is your plan to deal with inflation?” Go ahead, I’ll wait. I’ll save you the trouble, he doesn’t.
Because Republicans don’t have a plan to deal with inflation, “zero, zip, zilch, nada.” Republicans are a post-policy party. Moreover, they know nothing about economics, and they don’t care that they know nothing about economics.
More importantly, Rappaport never points out the rank hypocrisy of Republicans on this issue.
If Covid-19 relief funding to Americans after the government shut down the economy in a failed attempt to control Covid-19 is the source of excess demand leading to inflation, as Republcians assert, then Mitch McConnell’s Republican Senate and President Donald Trump surely provided “rocket fuel” with four bills passed by Congress during 2020.
When the Trump administration shut down the nation’s economy in March 2020, Congress passed the Coronavirus Aid, Relief, and Economic Security Act aka the CARES Act, a $2.2 trillion economic stimulus bill, the version unanimously passed by the Senate on March 25, 2020, and signed by President Trump on March 27, 2020. Unprecedented in size and scope, the legislation was the largest economic stimulus package in U.S. history, amounting to 10% of total U.S. gross domestic product. The CARES Act was Phase 3 of Congress’s coronavirus response.
Phase 1 of the response was the Coronavirus Preparedness and Response Supplemental Appropriations Act which provided for vaccine research and development. The legislation provided emergency supplemental appropriations of $8.3 billion in fiscal year 2020. The legislation received broad bipartisan support. The bill passed the House 415–2 on March 4 and the Senate 96–1 on March 5, 2020.
Phase 2 of the response was the Families First Coronavirus Response Act, which focused on unemployment and sick leave compensation. The act provided funding for free coronavirus testing, 14-day paid leave for American workers affected by the pandemic, and increased funding for food stamps. The CBO estimated the bill would cost $192 billion. The Republican Senate approved the bipartisan plan in a 90-8 vote. Two senators — Republicans Cory Gardner of Colorado and Rick Scott of Florida — did not vote while in self-quarantine after exposure to people who tested positive for the coronavirus disease known as COVID-19.
An additional $900 billion in relief was attached to the Consolidated Appropriations Act, 2021, which was passed by Congress on December 21, 2020, and signed by President Trump on December 27, after some CARES Act programs being renewed had already expired. The $2.3 trillion spending bill ombined $900 billion in stimulus relief for the COVID-19 pandemic in the United States with a $1.4 trillion omnibus spending bill for the 2021 federal fiscal year (combining 12 separate annual appropriations bills) to prevent a government shutdown. The bill is one of the largest spending measures ever enacted, surpassing the $2.2 trillion CARES Act, enacted in March 2020. The bill was passed by both houses of Congress on December 21, 2020, with large bipartisan majorities in support. The Republican Senate passed the bill 92–6.
Rappaport does not recount any of this history in his reporting. Republicans would like you to forget any of this ever occurred, like the “neuralyzer” in Men in Black (only Republicans use the feckless media to achieve this).
Republicans would have you believe that all those trillions of dollars in governent spending that they approved and President Trump signed into law had nothing to do with creating inflationary pressures after the economy opened back up again under President Biden.
Oh no, in Republicans’ retelling of the Covid-19 Pandemic, it is all the fault of the Fifth phase of pandemic relief, the $1.9 trillion American Rescue Plan Act that Democrats passedin 2021 (smaler than the bills passed by the Republican Senate and signed by President Trump.) That package built upon many of the measures in the CARES Act from March 2020, and in the Consolidated Appropriations Act from December 2020.
Of course, now that a Democrat was in the White House, all of that bipartisan support disappeared after the MAGA/QAnon violent insurrection in the nation’s Capitol on January 6. 2021, and seditious Republlicans reverted back to their default position, Mitch McConnel’s policy of total obstruction and sabotage of a Democratic president, even during a national emergency (just as he did to Barack Obama during the Great Recession).
By the way, the alternative to the Covid-19 relief plans, which were adopted by countries around the world, would have been economic depression and massive unemployment without any government assistance to the unemployed, on a scale far worse than the Great Depression. The world’s economy could have reverted to a dark ages. The infusion of government stimulus money from countries around the world was the only thing that prevented this calamity from happening.
So would you have preferred a Great Depression and being unemployed with no government relief aid to the inflation we are experiencing today? Because those are your binary choices. It was one or the other: An economic calamity unlike anything the world has seen since the Great Depression, or a period of inflation as the world recovers from Covid-19, which will resolve itself over time as supply chain disruptions unwind and the world learns to live with new emergent variants of Covid-19. (A similar situation occurred in the post-War II era as the world reverted from a war economy back to a consumer economy with years of pent-up consumer demand and the resulting shortages and inflation from demand outstripping supply. Spoiler alert: we survived and thrived economically in the following 20 years).
The COVID-19 pandemic created a tale of two economies: those who were able to save, and those who struggled to make ends meet. Sixty-four percent of Americans called themselves savers in 2020, and 80% said they planned to continue to save more than they spend in 2021. How COVID-19 Changed Our Saving and Spending Habits.
The COVID-19 pandemic created a lot of pent up demand, and government assistance gave many Americans savings to spend. And spend Americans did in 2021 buying goods, rather than services like eating out in restaurants and bars, going to the movies, or getting their hair cut at the barber shop or hair salon.
That explosion in personal spending created shortages and supply-chain disruptions. Companies that had to shut down their global operations could not keep up with demand as only portions of their operations could reopen around the world. Some of those disruptions continue to this day as China shut down its economy earlier this year under its “zero Covid” policy, and may do so again with the emergence of new outbreaks of Covid-19 variants, including BA.4, BA.5 and BA.2.12.1.
You may be done with Covid-19, but Covid-19 is not done with you. It will continue to cause economic disruption around the world. That disruption creates shortages in which supply cannot meet demand. And that causes inflation.
So does companies taking advantage of the situation with price gouging, or predatory pricing. Are record corporate profits driving inflation? Here’s what experts think.
While sky-high inflation has crunched budgets for essentials like gas and groceries, many large corporations have reported record profits, eliciting anger from some everyday people and public officials over price-gouging.
Such frustration recently rose to the fore over eye-popping gas prices. Earlier this month, President Joe Biden sent a letter to major oil refinery companies accusing them of taking advantage of the market environment to reap profits while Americans struggle to afford gas.
The problem extends well beyond gas, according to progressives like Sen. Elizabeth Warren, D-Mass., and Sen. Jeff Merkley, D-Ore., who backed a billlast month that would empower a federal agency and state attorneys general to enforce a ban on excessive price hikes.
But economists disagree over the role that elevated corporate profits have played in driving inflation, as some say they account for more than half of the increase in prices while others say they have caused little or none of the hikes.
Some who do blame corporate price-gouging for a portion of the price increases said it arises from market concentration that allows a handful of dominant companies in a given sector to raise prices without fear of competitors undercutting them with lower-priced alternatives. But others doubt that explanation, noting the unlikelihood that a major shift in corporate concentration took place over just a couple years amid the pandemic.
The divide among economists also owes in part to mixed assessments over whether corporate profits have driven inflation or merely responded to it, since a global market rocked by pandemic-induced supply-demand shocks has created a favorable environment for many companies to hike prices.
“It’s a very intense time for people and their pocketbooks — I understand why these debates are very heated,” Michael Konczal, the director of macroeconomic analysis at the Roosevelt Institute, told ABC News. “A lot of people are on team demand, team supply, team transitory, team corporate gouging.”
“I think there’s reflection that there are a lot of causes,” he added. “Even as those causes are evolving.”
Economists agree that inflation owes at least in part to a supply-demand crunch amid the pandemic in which federal stimulus helped consumers purchase goods at the exact time that they got stuck in a production and distribution bottleneck, experts told ABC News.
But economists disagree over how much that supply disruption has contributed to inflation, as opposed to the market environment that it has created, in which companies could raise prices knowing that their competitors faced similar supply shortages that prevented any of them from flooding the market with cheaper alternatives [predatory pricing.]
“In the case of sector-wide supply chain issues, as during the pandemic, firms know that their competitors face the same bottlenecks as themselves,” Isabella Weber, a professor of economics at the University of Massachusetts Amherst, told ABC News. “The public, too, is aware of the supply issues. Taken together, this presents a pretext to increase prices.”
Josh Bivens, the director of research at the left-leaning Economic Policy Institute, published a study in April that found corporate profits accounted for more than half of the price growth between 2020 and 2021 in the non-finance corporate sector, which makes up about 75% of the private sector.
But the surge in profits stems from a confluence of factors that is likely unique to the pandemic-era economy, Bivens said.
“I view the big fattening of profit margins that boosted prices as another shock, like the pandemic, like the oil price shock,” he said.
A separate report from the Roosevelt Institute, a liberal think tank, found that companies that imposed higher-than-typical markups before the pandemic were likely to be the same companies that hiked prices during the pandemic, suggesting that certain firms exploited their market position to raise prices during the pandemic. In other words, if a company could mark up prices before the pandemic without fear of competitors, it could do so during it.
“This makes us think there’s a small but real role for corporate power to be involved with the increase in inflation,” said Konczal, the economist at the Roosevelt Institute, who co-authored the study.
But other experts contested the explanation that market power or greed has driven companies to exploit market conditions during the pandemic, arguing that high prices reflect forces of supply and demand rather than any misdeed on the part of a company.
Michael Faulkender, a professor of finance at the University of Maryland’s Robert H. Smith School of Business, compared companies charging high prices to an individual who puts his or her home on the market at a favorable time.
“Let’s say I bought a house five years ago, and I’m looking to sell it for whatever reason. Do I price it at what the market will bear or what I bought it for plus a politically correct predetermined markup?” he said. “I’m going to price it at what the market can bear.”
The high prices at the grocery store or the pump are the expected outcome of a market in which individuals have ample money to spend but few products to buy, Faulkender said.
“The limited supply available goes to those with the highest value,” he said. “The profits then generated are a consequence but not the cause.”
Treasury Secretary Janet Yellen appears to share a view that minimizes the role of corporate profits as a cause of inflation. Earlier this month, at a Senate Finance Committee hearing, Yellen refused an opportunity to blame price hikes on company greed, citing supply and demand as the primary explanation.
Bivens, the economist at the Economic Policy Institute, criticized the value of recent price hikes as market signals, which typically tell market actors where to invest resources. The pandemic-induced shift to goods like Pelotons and lumber and away from face-to-face services is unlikely to persist for a prolonged period, he said.
“The line between price gouging versus useful market signals is always a pretty tough one,” he said. “I don’t think these are useful signals.”
Where economists come down on corporate profits informs what, if anything, they think should be done about it. Bivens said he supports a tax on windfall corporate profits, a version of which was proposed by Sen. Bernie Sanders, I-Vt.., in March. Meanwhile, Faulkender said the government should promote greater supply, especially in the energy sector, as a key way to address high prices. [Supply is not the issue so much as refining capacity, which oil companies shut down during the pandemic. Refining capacity cannot be brought back quickly.]
Personal finances nationwide will depend on the outcome for corporate profits, Konczal said.
“Whether they’re naturally competed away on their own, whether policy intervention is going to help nudge the process along, it does have important consequences for inflation and everyday people’s pocket books,” he said.
There, I just provided you with more “economics reporting” than anything which appeared in Rappaport’s New York Times piece, the point of which appears to be to simply parrot the falsehood from Republicans that “inflation is all the fault of Democratic policies.” It is lazy “horse race” political reporting masquerading as “economics” reporting.
Inflation is a global problem, for all countries, caused by the economic disruptions of the Covid-19 pandemic and how those countries responded to it. Sorry myopic “America First” Republicans. Inflation is not uniquely American, and Democrats are not at fault. If they are, then so are all the Republicans who voted for the first four phases of Covid-19 relief. You cannot have it both ways.
So let’s get real: every candidate for federal office must be asked one basic question: “What is your plan to deal with inflation?” If the candidate cannot provide you with a solid economics-based answer which demonstrates that the candidate has at least a middling understanding of economics, instead of resorting to a stupid talking point like “It’s all the Democrats’ fault!,” that candidate should not receive your vote. They are both a liar and ignorant, and we cannot afford to elect ignorant liars to Congress at a time when thoughtful and intelligent people are needed to navigate us out of this once in a lifetime global pandemic and its economic consequences.
Reject this Republican smear campaign, and then ask Republicans, “OK, genius, what is your plan to deal with inflation?”
Like I said, Republicans don’t have a plan to deal with inflation, “zero, zip, zilch, nada.” Republicans are a post-policy party. Moreover, they know nothing about economics, and they don’t care that they know nothing about economics.
You would be a damned fool to put such useless people in charge of the economy.