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close video How surging inflation could affect the midterm elections
Townhall.com editor Katie Pavlich and former Tennessee congressman Harold Ford Jr. weigh in on key voter issues ahead of the midterm elections.
Democrats have blamed rising inflation on "corporate greed" for the last several months, but economists note that the Biden administration’s own data proves that, if anything, companies are going out of their way to keep costs down for consumers.
One way the government measures inflation is by examining changes in the prices companies pay for goods and services, known as the Producer Price Index (PPI). Another measure, the Consumer Price Index (CPI), measures changes in the prices consumers pay for what they buy.
Rising prices for companies often foreshadow rising prices for consumers, and both the PPI and CPI have measured a steep increase in inflation since President Biden took office. But economists noted to FOX Business this week that since early 2021, the price hikes that companies have faced are higher than the increases seen by consumers.
In other words, while company costs are rising, not all of those costs are being passed on to consumers.
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Rising prices for companies often foreshadow rising prices for consumers, and both the PPI and CPI have measured a steep increase in inflation since President Biden took office. (Jim Watson/AFP via Getty Image / Getty Images)
"Businesses being greedy is not the cause of inflation," U.S. Chamber of Commerce chief economist Curtis Dubay told FOX Business. "Inflation is rising because there is too much money chasing too few goods."
Dubay noted that company costs as measured by PPI have risen faster than consumer costs since January 2021. In September, for example, PPI inflation rose 8.5% from the prior year, but consumer inflation as measured by CPI rose 8.2% in that same period, according to the U.S. Bureau of Labor Statistics.
Dubay said despite what government officials and candidates say, most consumers are aware that "corporate greed" is not behind rising prices.
"Most people understand inflation well, they know it’s not businesses that are gouging them and that there are real underlying consequences for price increases," he said. "It can take a while for that to work out, but they’re not looking to businesses as the bad guys."
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Dubay and other economists agreed that blaming "corporate greed" is illogical because it doesn’t explain why inflation started to spike in 2021.
"As far as the corporate greed thing, I would love to know how corporations magically became greedy right when Biden became president," said E.J. Antoni, an economist at the Heritage Foundation.
“Businesses have seen their prices go up faster than the prices they charge consumers,” said a Heritage Foundation economist.
Antoni said that when Biden took office inflation was lower than 2%. Since then, PPI has been running hotter than CPI for every single month of Biden’s presidency.
"Businesses have seen their prices go up faster than the prices they charge consumers," Antoni said.
Even if companies did somehow decide 2021 was a time to get greedy, the Democratic theory assumes widespread, coordinated collusion among all companies in each industry to raise prices at the same time. It also assumes companies have no fear of losing customers in the face of inflation rates that haven’t been seen in decades.
"Democrats say companies are raising prices because they’re greedy, and consumers will just take it," said Veronique de Rugy, a senior research fellow at the Mercatus Center at George Mason University. "As if every company is in a monopoly position … and selling something that consumers can’t live without."
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She said Democratic claims that corporate greed is behind rising inflation is "ridiculous on its face."
However, it’s an argument Democrats continue to make.
Sen. Bernie Sanders, I-Vt., said inflation is being caused by “incredible corporate greed.” (Stefani Reynolds/Bloomberg via Getty Images / Getty Images)
In the last several months, Biden has blamed pharmaceutical companies and shipping companies for unnecessary price increases. His energy secretary, Jennifer Granholm, on Sept. 30 blamed energy companies for charging more in order to boost their profit margins.
Sen. Mark Kelly, D-Ariz., who is campaigning to keep his seat, said in a recent ad that it’s wrong for companies to "take advantage of a crisis" by "price gouging."
Over the weekend, former Labor Secretary Robert Reich, who served under President Clinton, tweeted that the Republican argument saying inflation is caused by excessive federal spending is "baloney" and that corporate greed was the real reason.
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"The major domestic cause of inflation is corporations that have been taking advantage of inflation by raising their prices higher than increasing costs," Reich said.
Also over the weekend, Sen. Bernie Sanders, I-Vt., said inflation is being caused by "incredible corporate greed."