Democrats are vowing to crack down on corporate greed and price gouging on the campaign trail as the party aims to quell voters’ concerns over decades-high inflation.
Economists widely view supply and demand as the driving force behind the cost of goods and services, not arbitrary price hikes. But Democrats point to the fact that big companies are profiting from surging inflation.
U.S. nonfinancial corporate profits soared to $2 trillion for the first time in the second quarter of 2022, while corporate profit margins as a share of the economy rose to the highest level in over seven decades, according to Bureau of Economic Analysis data released Thursday.
Following President Biden’s lead, Democrats are taking aim at energy giants and meatpacking companies that recently notched record-shattering earnings on the back of higher prices.
“As families struggle, oil companies are earning record profits. When corporations take advantage of a crisis, that’s price gouging, and it’s wrong,” Sen. Mark Kelly (D-Ariz.), whose race could decide control of the Senate, told viewers in a campaign ad this month.
Shortly before pulling off an upset win in a New York special House election Tuesday, Democrat Pat Ryan ran ads touting his efforts as county executive to take on the region’s top utility, which he accused of ripping off consumers.
“I approve this message because big corporations have too much power. It’s time our families had more,” he told viewers.
Pennsylvania Lt. Gov. John Fetterman (D), another key Senate hopeful, took things further by unveiling a plan to prosecute corporate executives who are found to artificially inflate prices.
“It’s gross, and deeply unpatriotic, for the big corporations to be rolling around in cash while charging us record high prices for gas and groceries,” Fetterman wrote in a recent opinion piece for the Wilkes-Barre Times Leader.
The remarks are meant to show voters that Democrats have their own plans to tackle inflation, and draw attention away from GOP criticism that the party’s own COVID-19 relief package ignited inflation by injecting huge sums of money into the economy.
“Biden Democrats refuse to take responsibility for their reckless spending that caused runaway inflation,” said Nathan Brand, a spokesperson for the Republican National Committee.
Inflation has slowed in recent months. Consumer prices remained flat in July and gas prices fell 20 percent from their peak in mid-June. Still, prices remain far higher than they were one year ago, and housing and automobiles are particularly unaffordable for many Americans.
Inflation remains the top issue on Americans’ minds in swing states like Arizona and Wisconsin, and the corporate greed argument appears to resonate with voters.
Voters primarily blame “companies’ attempts to maximize profits” and supply chain issues for fueling red-hot inflation, according to a June Morning Consult poll.
A May survey from the pollster found that 77 percent of voters support a federal government ban on energy price gouging, the most popular effort to counter soaring gas prices at the time.
Most top economists have poured cold water on the price gouging argument, instead blaming some combination of supply shocks, complications from the war in Ukraine and red-hot consumer demand stemming from the nation’s economic recovery from COVID-19.
But critics of corporate giants argue that insufficient competition in the U.S. enables the biggest companies to raise prices at will, and that corporations refuse to invest in resilient supply chains because they prioritize short-term profits and stock buybacks.
“Why is it that we have too few goods? It’s because we have companies throttling supply in order to keep prices high,” said Rakeen Mabud, chief economist at the Groundwork Collaborative, a left-leaning think tank. “We have an economy that is absolutely riddled with outsize market power by big corporations that use supply and demand as marionettes.”
Corporate executives have publicly noted that they’ve raised prices far beyond the additional costs incurred from supply chain issues or increased wages, and that customers are willing to pay more in the inflationary environment. Several companies say that they intend to raise prices further or keep them elevated even as inflation appears to cool.
“As we continue to price inflation, the inflation events that start to ease, that might put us in a better position for us to continue to recover the margin,” Andre Maciel, chief financial officer at Kraft Heinz, said on a recent earnings call.
Energy companies were the top beneficiaries of this summer’s oil supply shock. ExxonMobil raked in $17.9 billion in second-quarter earnings, the largest ever figure for any oil company, while Chevron tripled its year-over-year profits to $11.6 billion.
House Democrats responded in May by passing a largely symbolic bill to give the Federal Trade Commission powers to investigate allegations of price gouging in the energy sector. Senate Democrats recently unveiled legislation to tax oil companies’ “excess profits.”
At a Maryland rally on Thursday, Biden pointed to the Inflation Reduction Act, the sweeping climate, tax and health care bill signed into law this month, as evidence of Democrats’ ability to take on powerful corporations.
He noted that the bill allows Medicare to negotiate lower drug prices and enacts a 15 percent minimum tax on large corporations’ profits. The president added that Democrats will work on a bill to cap the cost of insulin after Republicans successfully got the measure removed.
“This year, some of the biggest companies in America flooded Capitol Hill with lobbyists and money and campaign contributions, and they lost. The American people won,” Biden said.