It’s amazing how corporate greed became a problem at just the same moment that Joe Biden took office, eh? Biden and his team have tried to flog “corporate greed” as the cause of inflation since at least Thanksgiving of last year, to no avail. Six months of futile blame-shifting later, Biden returned to that theme yesterday after the awful CPI inflation rate report once again exposed his incoherence on the economy:
President Biden: “As big companies made massive profits, the prices you see at the grocery stores have gone up and the prices farmers receive have gone down. This reflects a market distorted by lack of competition.” https://t.co/eAuZqFzevD pic.twitter.com/o6I7VhdATV
— The Hill (@thehill) May 12, 2022
Washington Post columnist Catherine Rampell scornfully rebuked Biden and Elizabeth Warren at Thanksgiving for this cynical attempt to avoid responsibility for bad policy. The Post’s editorial board followed up in January in criticizing the White House’s excuse-making in general. A month ago, former Barack Obama economic adviser Jason Furman called it meaningless “political ranting,” which is a pretty good description of Biden in general.
At the time, the Post’s David Lynch debunked this claim by looking at the corporate reporting on profit margins:
Where corporate critics see unrestrained greed and exploitation of vulnerable consumers, however, business-friendly Democrats detect the unremarkable workings of supply and demand.
Thanks to nearly $6 trillion in government spending, consumers — taken as a whole — are flush with cash. Surging spending on products like laptops and furniture, coupled with snarled supply chains, is resulting in higher prices, they say. …
Corporations banked a near-record $2.7 trillion in after-tax profits during the fourth quarter of 2021, almost twice as much as in the same period in 2009. But the average operating profit margin for companies in the S&P 500 index — how much is earned from each additional dollar of revenue — peaked in the middle of last year and is now 12.7 percent, about unchanged from 2018, according to Yardeni Research.
Carlos Gutierrez, who ran Kellogg’s Mexico business in the 1980s when annual inflation approached 100 percent, said refusing to raise prices or cut spending in response to rising input costs would cripple a company.
This points to a common strategy for misdirection from anti-capitalist progressives. They focus on gross profits rather than the final operating margins that account for all costs to revenue. Are producers making more topline revenue in this inflationary wave? Sure, but their costs are going up at the same rate, and those costs have now caught up with revenue, which produced the equilibrium on operating margin that Yardeni found. Anyone who’s ever had to manage a P&L sheet would immediately grasp the dishonesty of focusing on the topline revenue only.
We can test Biden’s hypothesis with other data too. If the cause of inflation is “corporate greed,” a common complaint from progressives, then inflation should be relatively constant and delinked from public policy. Is that what we see in the data? Not according to this NYT chart of consumer price index data over the last sixty years:
Not from the BLS’ ten-year data on the producer-price index either, which should show consistent “corporate greed” more clearly:
In both charts on historical inflation data, we don’t see any evidence of “corporate greed” having an impact consistent with current measures of inflation. For that matter, the increases in inflation have no correlation to Vladimir Putin’s invasion of Ukraine. Above-threshold (the 2% Fed target) inflation began in March 2021, two months after Biden took office and in the same month he pushed the COVID-19 stimulus bill that economists such as Larry Summers warned would touch off inflation.
With this data in hand, Biden’s insistence on flogging “corporate greed” as the culprit can only lead people to conclude that Biden is either (a) a shameless lying demagogue, (b) an ignorant fool, or (c) both. While you’re mulling your choices, allow me to throw this clip of Biden from the same event nattering about the etymology of the phrase “ugly Americans” as evidence of either (b) or (c):
Biden: “We’re the only nation in the world … that has come out of every crisis stronger than we went in it … no other nation has done that. It’s one of the reasons why in some places we’re called the ugly Americans.” pic.twitter.com/ct9askJdit
— Washington Free Beacon (@FreeBeacon) May 11, 2022
This is such a stupid statement that it defies belief. The term “ugly American” sprang from the reputation that American tourists earned in the post-WWII period: entitled, arrogant, ignorant of local languages and customs, with tastes that ran the gamut from McDonalds to Burger King. (Our reputation has improved since then.) The phrase itself originated in the title of a 1958 novel that depicted American failures in foreign policy, specifically in Southeast Asia, not triumphs in crisis management. I’d call this great evidence of (c), especially since Biden seems to want to embrace this term to describe voters he’s hoping to woo.