Coverage. Cspan campaign 2022 your unfiltered view of politics. Next a look at role Certain Industries and driving inflation, we heard testimony from an economist and academics that overcharging for goods and services they major contributor. The hearing is an hour and a half. Good morning everybody, welcome everybody to todays hybrid hearing. Pursuant to house rules some members and witnesses will appear in person and others will appear by zoom. I know you are familiar with zoom by now. Let me remind everyone of a few points. First, the house rules require that we see you. Please have your cameras turned on at all times. Second, members appearing remotely who are not recognized should remain muted to minimize background noise and feedback. Third, i will recognize members verbally, members retain the right to seek recognition verbally. In regular order members will be recognized in crd for questions, lastly if you want to be recognized outside of regular order you may identify that in several ways. You may use the chat unction to send a request, you may send an emailed to the majority staff, or you may unmute your mike to seek a condition. We will get begin the hearing in just a moment when they tell me they are ready to begin the livestream. The committee will come to order, without objection the chair is authorized to declare recess of the committee at any time. I welcome everyone to todays hearing that in sport that explores the important topic of excess corporate price hikes and their role in driving inflation. I recognize myself for an opening statement. Cbs news reported earlier this year, a resident of southwest florida used to build provide her family of four with balanced. Meals that included me at most dinners. When roastery prices grocery prices doubled the transition to meet only two to three times a week. At the same time americas for a five Meat Processing companies saw profits surge to nearly 9 billion in 2021. In the first half of 2022 alone there combined profits totaled 2. 5 billion. Almost a 100 increase over between 19 2019. Her story and the stories of others their struggled to feed families, afford insulin, purchase gas is why we are here. Early 2021 americans are suffering from rising prices that has been caused by supply chains, and changing demand patterns due to the pandemic. These elements are insufficient to totally explain why inflation remains elevated. Some would have you believe the American Rescue plan is the primary factor driving inflation. Those critics, however cannot explain how the arp caused inflation to soar and other countries around the world. The uks extrinsic 20 more inflation than the United States, but the arp did not exist there. The eu is experiencing 22 more inflation, but the arp did not exist in any of the eurozone countries. Turkey is experiencing 900 more inflation but it did not exist there is or either. Economist at moody and elsewhere have credited the arp from creating another recession and crating as 4 million jobs in 2021. There are other factors that have not received enough attention. One of those factors is extreme price hikes. Companies raising prices far more than required to offset higher costs even when accounting for shifts in higher demand resulting in the highest Profit Margins we have seen in the last 70 years. Americans outside the halls of congress recognize the importance of this issue. In april that Navigator Research released in late i late july, a majority of americans viewed corporations raising prices to great record price profits is a cause of inflation. President biden has adopted a longterm plan to fight inflation to reduce Prescription Drug prices and save the family 500 a year on energy christ costs, several companies hiked their prices under the smokescreen of inflation. We launched an investigation into industries that launched price hikes far in excess of their Cost Increases to cover inflation. In january we sent letters to meet processing giants, in march, we jointly sent letters to three of the Largest Shipping Companies in the world. The shipping companies had 2021 profits 200 times greater than 2019. 200 times greater than 2019. Their average operating cost only increased 18 . Across the economy corporate net Profit Margins continued to hover at x historic highs. We have at historic highs. We have convened this hearing to see how Certain Companies have engaged in excessive price hikes, economics, and the harm on the americans american consumers. We are not here today to vilify corporations. As a former small businessman, i know that American Innovation is the backbone of our economy, and many Corporate Leaders deserve praise for creating jobs and growth. Inflation reduction act is already drawing huge new investments from American Manufacturing and the chips in science act has led to immediate plans for semiconductor plants. We are also not here to suggest that excessive price hikes are the sole cause of inflation. But we cannot ignore the reality that American Companies today are reporting higher Profit Margins than ever, while increasing prices more than necessary to cover costsall at the expense of the american consumer. And we must do everything in our power to shine a light on these practices. With that i would like to recognize my distinguished Ranking Member for his opening statement. Thank you, chairman. First inflation was because of putin. That it was not. Then it was transitory and that it was not. Then it was at 0 a couple days before jamming the Inflation Reduction Act through congress that does not reduce inflation but does higher 87,000 new irs agents to go after americans. After trying to redefine what recession means with all too complicit media owing to carry their water, we find out sunday that the white house is measuring inflation in inches per month, and biden conceit biden seems content. The problem is, for all the denials the American People know theyre not being told the truth. This American Administration does not seem to get most americans do not get their Economic News from a report or a White House Press conference. They get their Economic News when they go to the Grocery Store to find ground beef prices up 24 , bacon prices 26 , chicken breast 45 . Gas prices most doubling in the last two years in spite of biden releasing strategic from our Strategic Oil reserves oil to drive down prices artificially in the lead up of an election. When the family arrives at home they found the cost of running the home has risen 60 in electricity, rent has gone up, 16 electricity, rent has gone up, this is difficult for the vast majority of americans. Specially those on low and fixed income whose dollar does not make to the month anymore. Those whose life savings are not worth as much as it used to be. It is completely devastating. The purchasing power of families in america is diminishing. In all practical purposes because of inflation they have lost a months income a year. I am happy that we have a hearing on inflation instead of dog collars. It is in recognition of what the white house has denied all along that inflation in this country is real and having a real impact on the American People. I am concerned this hearing is another effort to ship lane from the blame from the policies of this administration and the record was spending of the reckless spending of the congress and scapegoat businesses with the blame. Todays panel of businesses does not include any official from the Biden Administration. A thing we have seen throughout this term in this committee and the full committee. For the purpose of the hearing it was stated in the meadow memo to examine how Certain Industries have used market power to drive inflation. Nowhere in the memo does discuss nearly 4 trillion we have spent sense president truck biden has taken office. Inflation spiked after the passage of the nearly 2 trillion American Rescue plan act. By may of 2021 inflation nearly doubled to 5 . Even liberal economist warned that the one the president the American Rescue plan would overheat the economy. Harvard political Professor Larry summers warned that the almost 2 trillion stimulus plan was three times as large as the projected shortfall. He said policymakers need to ensure they have plans in place to address the possible and quite serious problem of inflation. Instead of taking time to analyze the impact that additional Government Spending would have on inflation the Biden Administration continues to pump money into the economy and inflation continues to worsen. September 13, 2020 when the august numbers were released showing a. 3 8. 3 inflation. Biden hosted a party for the Inflation Reduction Act. In just a few days later on cbs President Biden told the American People that inflation was increased by just an inch. If the white house thinks this is what we need to raise measure inflation by, the American People think this is what we need to measure inflation by. President biden with an attitude toward the American Peoples suffering is acceptable we are working to conduct real oversight, the House Republicans on this Community Committee we have written multiple letters. Last year, june 2, 2021 we wrote to the director of National Economic counsel requesting information on the administrations plan to combat inflation. We have not received a response. More recently we wrote to President Biden requesting a briefing on his response to inflation and received no response. Today we send another letter requesting a briefing on the solution to address the economic part crisis. I hope for the sake of the American People we can conduct real oversight into the cause of this historic inflation and work to ensure the American People are better taking care of. And get through this crisis. Thank you very much. I yelled back. Thank you, mr. Clout. Cloud. I would like to introduce our witnesses. Our first witness. His mr. Mike dccpa mike konczal, director of macroeconomic analysis at the Roosevelt Institute. Our third witness is miss rakeen mabud, finally the minority witness is dr. Tyler goodspeed. The witnesses appearing remotely will be unmuted so we can swear everyone in. I will now swear in the witnesses. Please raise your right hands. Do you swear or affirm the testimony or affirm the testimony about to give is the truth, the whole truth, the nothing but the truth so help you god . I do. Let the records show the witnesses answered in the affirmative, thank you. Without objection each of your written statement we made part of the record. With that, you are now recognized to provide your testimony. Chairman, Ranking Member, distinguished members of the committee thank you for inviting me to testify. My name is mike konczal, director of macroeconomic analysis at the Roosevelt Institute and the economic think tank. This has been a remarkable recovery for workers, unemployment 1. 2 lower and Labor Force Participation a third of a percent higher than the cbo project without the American Rescue plan. Depressed for decades before the covid19 pandemic, skyrocketed enabling workers to move up the career ladder, quitting their jobs and seeking more productive ones. This recovery is also featured higher than expected inflation. This has occurred alongside record high corporate. Profit margins relationships between these two trends is a central Profit Margins of the highest rates since 1950, since 2020, 40 of the increases in prices are reflected in higher corporate prices profits compared to the 22 for employee wages. This is in stark contrast to the previous 40 years were these values were 11 for corporate profits and for wages. They have found a connection between higher prices and gross Profit Margins. Especially high during this recovery. There is a growing disconnect between prices paid in input to businesses and a comparatively larger prices consumers pay for goods like automobiles. Without firm level data is difficult to determine the exact leadership between the increases in markups, revenues, and the revenue inflation. Research ivan conducted with my colleagues was the first conducted since he pandemic to explore the size distribution of markups across 37 hundred firms. Against 207,000 observations going back to 19 to five. We report 1955. We found markets mark ups increased in a steady fashion. Our paper updated this work through 2021. Relying on the research a standard for publicly traded data, that pauls publicly closed that pulls properly disclosed data. We found that profits skyrocketed. Firms increased their markups and profits at the fastest annual pray pace since 19 to five. This was driven largely by firms at the top of the distributional. Markups increased most of the top. Markups from before the pandemic were a strong particular of the increase in markups in 2021. Suggesting that market power had a role in inflation. Inflation has brought in since the 2021 results. In between 22, inflation was more driven by 2022, inflation was driven by Services Including housing. It is not seen deflation back to prior prices. If Corporate Power allows margins in goods and continue continue to be elevated there is no way back down without harming the economy. Inflation is a global phenomenon, it true when you look at core inflation. It has grown faster in other countries than here towards the end of 2021. Even before the invasion of ukraine by russia. Even though inflation is a global phenomena, corporate profits are one reason it remains high. Since it becomes so unusually high there is room for reversing them with little economic harm and huge societal benefits. Lower prices in the shortterm term and less quality and more less inequality in the longterm. There is room for wages to increase without increasing prices and the strong labor market that we have. We believe the evanescent evidence points towards tackling inflation and all of government within the missed rate of, regulatory approach administrative and reglet tory approach. Reglet tory approach. I now recognize secretary rush reich. Yesterday dead policymakers continued their fed policymakers continued their battle against inflation with a third supersized rate increase. They assume that the underlying economic problem is a tight labor market causing wages to rise and prices rise in response. Interest rates and Interest Rate increases are necessary to slow wage growth. With due respect, this assumption is wrong. Recent wage hikes have not kept up with inflation. Most workers paychecks are shrinking in terms of real purchasing power. Rather than causing inflation, wages are reducing Inflationary Pressures. The underlying economic problem, in addition to global problems is not wage Price Inflation. It is profit Price Inflation. Corporations raising their prices above increases in their costs. Using those Cost Increases as excuses to raise their prices and profits. Corporate profits are close to levels not seen in over a halfcentury. Operations have the power to raise prices without losing customers because they face so little connotation. Since the 1980s two thirds of all American Industries have become more concentrated. Grocery prices are through the roof, for example largely because just for companies four Companies Control 85 of meat and poultry processing. One Corporation Says the price for most of the nations feed corn. Two firms dominate consumer staples. All are raising prices and increasing process profits because they can. Big pharma has increased prices, Airline Carriers are going from 12 carriers to just 4 today. Wall street has consolidated 25 giant banks. Broadband consolidated to 5 five giant banks. With inflation driven by these conglomerates, raising prices to increase their Profit Margins, the major affective Interest Rate hikes is to just depress wages and limited jobs. As the economy slows workers are less likely to get wage increases to keep up with inflation. Unemployment will rise. The fed now sees the Unemployment Rate rising to 4. 4 next year up from 3. 7 now. That would mean the loss of 1. 2 million jobs. I urge congress and the administration