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From LeverNews.com — Lever Time is the flagship podcast from the investigative news outlet The Lever. Hosted by award-winning journalist, Oscar-nominated writer, and Bernie Sanders' 2020 speechwriter David Sirota, Lever Time features exclusive reporting from The Lever’s newsroom, high-profile guest interviews, and expert analysis from the sharpest minds in media and politics.
David Sirota 0:10
Hey there and welcome to another episode of lever time the flagship podcast from deliver an independent investigative news outlet. I'm your host, David Sirota on today's show, we're going to be talking about greed inflation. After corporate pundits spent a year gaslighting the public into thinking there could be no possible way that rising corporate profits were driving inflation. Now, economists are arriving at a consensus that yes, rising corporate profits are driving inflation. And there's a ton of data behind that. Today, I'll be joined by two experts who have been sounding the alarm about this and calling out the nonsense since the beginning. And they're gonna break down everything you need to know about this issue, as well as what we can do to rein in that profiteering that is driving inflation. For paid subscribers. We're also dropping exclusive bonus episodes into our lever premium podcast feed. Last week, we shared my interview with Brendan blue and Josh Rosner, who both authored fascinating new books about the private equity industry, which is slowly plundering the entire economy. Coming up next week, we're going to be discussing the soaring rent prices in cities across the country. We'll be speaking with Tara Raghuveer, the campaign director for the People's Action home guarantee campaign, who explains who is profiting off of rising rents, and what policies can be put in place to help America's renters. If you want to access our premium content, head over to lever news.com and click the subscribe button in the top right to become a supporting subscriber. That'll give you access to the lever premium podcast feed exclusive live events and all of the in depth reporting and investigative journalism that we do here at the lever. The only way independent media grows and thrives is because of passionate supporters and by word of mouth. So we need all the help we can get to combat the inane bullshit that is corporate media. So go subscribe it directly funds the work that we do, as always, I'm here today with lever times producer Frank a producer Frank What's up
Frank Cappello 2:12
little sleepy today, David? I don't know if you heard but the new Legend of Zelda game for the Nintendo Switch released this past weekend. So I have been logging some serious, serious hours on that game. So
David Sirota 2:26
I have heard about this from my 12 year old son who is begging me to get that game. He got obsessed with the first Legend of Zelda I guess the first new version of Legend of Zelda. I'm old enough to remember the original Nintendo Legend of Zelda, which I got obsessed with as a child. But yes, I know about that. I'm sure he's going to be spending some hours on it. I'm sure I'll spend some hours on it. Is it good?
Frank Cappello 2:51
Oh, it's phenomenal. It's it's definitely going to be one of the best video games of the year. I should admit I am not an avid gamer. I only played The Legend of Zelda series at this point in my life. So this is like this is a momentous occasion. For me.
David Sirota 3:06
I can't say I only play Legend of Zelda I remain obsessed with Halo. And I play the various Tetris iterations that are still out there. I wish they would just provide the original Tetris. It's kind of when they're coming out with new Tetris is Oh, yeah, no, no, no. And some of the new ones are cool, where you can compete with people online and stuff. It's actually actually pretty, pretty cool. My wife and I play it pretty often to the kids get into it, then it gets like super competitive. And Emily is like, amazing at Tetris, and it's really it's actually kind of annoying how good she is. But I digress. Before we get to our interview today about reflation. First, I want to talk about a big story that the leverage just broke about Florida Governor Ron DeSantis. Now, if you know anything about Ron DeSantis, he purports to hate anything and everything that he would deem to be, quote, unquote, woke. He regularly rails against companies that appear to woke, and he hates when public money is used for politicized investments. But what he doesn't hate is allowing that public money that pension money to be invested with some of the Republican Party's big Wall Street donors. That's what we reported this week, despite a federal anti corruption rule that is designed to prevent those donors from receiving pension investments. Private Equity executives have donated lots of money to political groups supporting DeSantis. All while the governor oversaw the transfer of more than 1 billion that's billion with a B $1 billion of Florida public employees retirement money into these donors high fee high risk so called alternative investments. So money went into a Republican Politik. Group and pension investments that's Florida public workers retirement savings was funneled to some of those donors, financial firms, they went through an intermediary. I should mention that they went through the Republican Governors Association, that's where they put the donations into. And then the Republican Governors Association, use the money to support DeSantis. So kind of an end run around this anti corruption rule. And what the lever found was get this because you could say, Hey, listen, what what's the big deal? Alright, so DeSantis has given money to his donors. If his donors are delivering big returns for the pensioners, then who cares, right? Well, a level review found that had the state pension fund, instead invested in a simple low cost index fund, like a Vanguard fund one of those stock and bond funds, how have they done that compared to its present mix of holdings investing in these exotic investments? teachers, police officers, other state employees would have about $10 billion more in their pension fund $10 billion. So this is going to be I think, a pretty big issue for Ron DeSantis. He already faced questions I should mention at a press conference right after the story came out, he faced questions about it. He kind of pretended like he didn't know what what was going on. And then he turned it into a criticism of ESG investing, so called woke investing. So he sort of tried to brush this off, but I think this may end up being a pretty big deal for him. Especially the thing that bothers me about this producer, Frank, is that on top of everything, like this is a guy who who's made clear he doesn't like public employees, he doesn't like public employees money, and yet he's overseeing the funneling of those public employee savings to firms whose executives are donating money to him, right. I mean, it's, it's like it's kind of using it as a piggy bank.
Frank Cappello 7:00
Yeah, it's truly disgusting. I mean, this this stuff makes me so angry, particularly with DeSantis because he is one of the most vindictive and self interested politicians out there. And you know what he's, he's good at what he at what he does at like, ginning up rage, getting people upset and angry over this, like woke culture war nonsense, while behind the scenes, he's actually doing all of these maneuvers to just enrich his donors. And, you know, he's, it's upsetting that he is so tactically good at this particular brand of of terrible corporate leaning governance that he does.
David Sirota 7:40
And we have another story that notes that there's this funny one day situation where, at roughly the same time, he met with one of the Republican Party's biggest donors, head of a huge private equity firm, the Florida pension fund that he oversees, approved a $150 million investment in that donors firm. Now, to be clear, that donor has not given money directly to DeSantis. But DeSantis obviously wants to court billionaires in the like if he's running for president. So this money $150 million goes to this Republican mega donors private equity firm right around the same time DeSantis reportedly met with him, and it went into that private equity firms Green Energy Fund, one day before Ron DeSantis, ran out and signed an anti ESG investment rule. So he's like quietly funneling pension money to his to two big donors, their firms, including one of their green energy funds, while he's then publicly running out and decrying any kind of investments that consider the environment at all right? I mean, so talk about a guy who it sure seems like is operating on multiple diabolical levels. That is Ron DeSantis. And we will have more more coverage of Ron DeSantis over at the lever, you can find it at lever news.com. Okay, let's stop there, because we should get to our main interview about how the false narrative about inflation was successfully foisted onto the American public. We're gonna get into that right after we take a quick break. Welcome back to labor time. For our main story. Today, we're going to be talking about so called greed, deflation. So unless you're insanely wealthy, the rising inflation we've had over the last couple of years is probably put some strain on your finances in one way or another. If you've been at the grocery store, at the gas station, or even worse by your car or flying on a plane, you've most likely wondered to yourself, why the fuck is everything so expensive right now? Well, if you've been listening to corporate pundits and beltway economists, the narrative you've probably heard is that inflation is being caused by pandemic stimulus money. The federal government spent too much Make sure we didn't slide into the dark ages or because of a tight labor market and those pesky workers who were supposedly getting paid too much. But the one thing those pundits and economists agreed on, was that massive corporate profits at the same time of inflation, were absolutely certainly definitively not driving inflation. That's what they were saying. Well, now it's been over a year since inflation became a major issue for Americans. And finally, there's a growing consensus that that greed floatation theory, that those pundits brushed aside was actually correct, that rising corporate profits are in fact, one of the main drivers of inflation, that companies using their larger and larger market power to jack up prices, knowing that there is no price competition from a smaller competitor. That is what is driving prices higher. That's what the data is saying. And you don't have to take my word on it. This reality has been recognized by a federal reserve study, a top economist at UBS, a huge Wall Street bank, European central bankers, and now even Rupert Murdoch's Wall Street Journal. Why was the gaslighting before such a problem? Because those corporate pundits created a fake inflation narrative, a narrative with real consequences. It was a narrative that provided government officials justification to cut off pandemic aid, block new spending on social programs, abandon any push for a minimum wage increase and raise interest rates with the express goal of driving down workers wages. That's what the narrative created, the conditions for the result has been a sharp increase in the number of Americans who can't afford to pay their bills. In a sense, this is like the WMD lies before the Iraq War. The lies about Iraq supposedly having WMDs created the narrative and the media conditions for policymakers to support that war. In the same way, that creating a fake narrative that it was workers wages, creating the inflation problem, or government spending on social programs, creating the inflation problem and not corporate profiteering. Creating that narrative resulted in real consequences. It created the political conditions for policies that crushed the working class. So today, I'm going to be speaking with two experts who have been trying to sound this alarm. For a very long time, I'm going to be talking to Lindsay Owens, the executive director of the groundwork collaborative, and how singer, the managing director of econ one, both of them, showing that corporate profiteering is a big driver of inflation, Lindsay and Halle, break down everything that you need to know about how the false inflation narrative came to dominate, popular thought came to be constructive narrative. And we talk about what can actually be done to rein in corporate price gouging, and profiteering Hey, Lindsay, hey, hello, David. Hey, is there anything Hey there, so you both should sort of be doing a victory lap? I think, although it's kind of it's kind of a sad victory. It's like a victory that you were right for a very long time. And for a while, nobody seemed to listen. And then there were all these like horrible consequences of people refusing to listen, and now it's proven right. So let's, let's get into the debate and the discourse about inflation. For the last year, you both been sounding the alarm about how corporate profits are actually a thing that had been driving inflation. We've had that data for a while now, the Economic Policy Institute a long time ago at this point issued a report April 2022. substantiating that claim. So I think the first question I would ask how is why would corporate profits drive inflation? How does that exactly work? Like what is what is the theory behind how that would happen?
Hal Singer 14:21
Sure. It's kind of a formula just prices are a function of your costs and your profits. And so you get a price hike can go up for one of two reasons, either, because your costs go up, because your margins go up, which is that is that simple. So they've always contributed to inflation. The question is, you know, how do you disentangle the causes in this case, and here we're in a very unique situation you mentioned Josh Bivins excellent study, which came out a long time ago now and said something weird is happening here and that profits are contributing a disproportionately large share of price hikes for this battle. have inflation which makes it very unusual.
David Sirota 15:02
But I think the the additional question or the will people say, well, companies always want to make profit. So what about the last few years would have allowed companies to extract bigger profits off of higher prices without the fear of being undercut by lower prices by competitors.
Hal Singer 15:24
So I think what happened here is that consumers were primed to expect prices going up and they sympathized with, with the counterparty, they're the seller. they rationalize, well, hey, if the seller if the supplier is incurring its own higher cost, then they must be justified in raising the price. And I feel like sellers took advantage of that, particularly those that were in consolidated industries, who could coordinate their pricing decisions easily with their rivals, particularly during earnings calls, which is something that Lindsey has been all over. And so I feel like I use this term softening the beachheads what a little bit of inflation did and a little initially justified. Inflation through those supply shortages created? Was this expectation that maybe there is this is justified, and if it's justified, I should go along with it. Right. But the problem is that as a consumer, we have no Vantage into what's going on behind the curtain, you know, at the seller, so the seller could just be making things up, and we're gonna just take them at their word.
David Sirota 16:25
So Lindsay, let's turn to you. So seems to me that, as hell just said, so there was this sort of temporary inflation supply chain issues, et cetera, et cetera, the companies cited as hey, we got to raise our prices. Oh, wow, we've just made a whole boatload of money because we raised our prices. And now, actually, our input prices haven't really gone up. The inflation in the in the cost of actually making things hasn't really gone up, or it's been temporary, but we're gonna keep our prices high. And we can do that. Because over the last many years, more and more industries have become consolidated, aka, they're these companies are more oligopolistic, they can raise prices without fear of competitors, undercutting their price. And at some point, the companies as hell just alluded to, they started kind of admitting some of this in their earnings calls when they were talking to their investors and kind of forgetting that everybody else could hear what they were saying. So tell us a little bit about what they were saying, and why it's so important.
Lindsay Owens 17:30
Yeah, absolutely. I mean, what I like to say is these companies needed means motive and opportunity to commit the perfect crime. The means, you know, is is their pricing power, which they derive, really from their market power. You know, that was a massive over decades, right, that didn't happen as a result of the pandemic. And, you know, these companies have been getting bigger and bigger, while antitrust authorities were asleep at the wheel, and greenlighting mergers. You know, over decades, the motive was always there to write corporations were always out to make a buck that's as old as capitalism itself. You know, I definitely don't agree that there was a secular increase in greed over over the period. I think, you know, what changed is the opportunity. And I think he was right, that some of that comes from consumer expectations. But some of it was inflation itself. It was the cover that inflation provided to make different decisions around pricing. It was the other justifications that were available, such as the war in Ukraine, such as the supply shortages. I mean, people saw on the news, the, you know, the ships piling up outside of the Port of LA, they knew that, you know, that companies were facing real constraints. They were indeed facing real constraints. What these companies did, and what we see in the earnings calls, is they not only passed along their rising costs, they go to the Lilly, they went for more, and how we know that is because they told us, so this wasn't a really difficult who done it to solve, you know, an earnings call after earnings call, beginning actually, as early as q3 of 2021. You know, August 2021, we started looking through the earnings calls and the CEOs. I mean, in the early period in 2021, you know, you saw CEOs just giddy? You know, they've been presiding over these companies for years and decades, in some cases, and they've never really had the opportunity to to go for broke on pricing, and this moment, provided that opportunity, and they were letting their shareholders No, they were saying, Look, everybody's doing it. So it's totally fine that we're doing it. We're not worried about our competition. And the hostess food CEO literally said, when everyone does it, it helps. You know, other other companies felt like the inflationary environment was, you know, a win win for them. I mean, you know, the visa CEO, said, you know, historically inflation is good for us, but this particular period is especially good for us. You know, obviously companies like Visa do really well in inflation during inflation because they take a person tonnage of the, you know, price at the transaction. And so as the price goes up, you know, they just make more even at a flat percentage, you know, even if they change none of their business practices. So, you know, the the companies were really clear about this, the CEOs were clear. And I will tell you, you know, the shareholders liked it, too. And frankly, we're, you know, quite successful, I think, in disciplining these companies. So we saw early on, a couple of larger players like Walmart, and target told their shareholders that they were actually going to hold off on the big price increases that they felt like it was at odds with their brand and wanted to go a little slower tread a little lightly. And there were savage sell offs at the end of 2021, which I think send a signal not only to Walmart and Target, but to everybody else on the on the street, that the expectation was that everybody took advantage of this moment, for as long as they could.
Hal Singer 20:55
Just one thing I want to add, which is so important to me, as an economist is that the earnings calls become a mechanism by which firms and concentrated industries can engage in what's called tacit collusion. Oh, yeah, this is so important. It is a facilitated, right, and they are getting away with this stuff. scot free. And I've been, I've been banging on the doors, the FTC, to go after one of these guys. Because what there are these collaboration guidelines that the DOJ and the FTC have issued, and they warn against particular types of information not to be shared with rivals, and one of the things we're particularly worried about is pricing information that's either current or forward looking, they're also very worried about capacity information, either current or forward looking. So if I'm a CEO in a concentrated industry, and I take the podium, and an earnings call, and I say, you know, we raised prices by 17.2%, last quarter, which you would have never been able to find out without me saying that, and we feel that we're gonna have just as much pricing power to take another big price hike next quarter, that is a signal to all of my rivals that if you come up with me, right, you're not going to lose any share. We can all do this together. And it's very hard to go after these cases. I know from personal history under the antitrust laws and the Sherman Act, but the FTC does have unique powers to police what are called invitations to collude under Section Five of the FTC act. Okay, so
David Sirota 22:16
you've just explained what's been going on, which is a counter to the narrative that we were told for a year, year and a half that what was really driving inflation, we were told, was spending on pandemic aid and subsistence benefits to the working class. And workers being annoying and asking for, for being not just annoying, but being greedy. By asking for wage increases after like 40 or 50 years of being crushed into the dust with flat wages. That's what we were told by corporate media. Now, before we get into why we were told that, why don't I follow up? How and you just tell us? What have we learned since then, about that argument? Like who's who's told us different things? What has the data said about what's really going on?
Hal Singer 23:10
Yeah, the data has showed that certainly for 2021, that workers made a much smaller contribution to prop to inflation that did profits. Now it kind of caught up in 2022. But still, the relevant comparison, my mind and this is what, you know, the economist who is hunkered down in this position, that is still the workers fault, is what what have workers and profits contributed relative to their historical averages to price inflation, right. And we're by far and away. And what Bivins has shown is that in this bout of inflation, that profits are contributing twice through their historical contribution. Right. So the only anomaly here is this explosion in profits, right? Wages, yes, are doing something, but not anything more than what they do traditionally, to price hikes. Right. And so that was the that was the story. And yeah, it was missed, we can go into reasons for why it was missed. But it's certainly very convenient, right? If you want to deflect attention away from the culprit into some, you know, some alternative explanation.
Lindsay Owens 24:12
Yeah, just to add one point to that. So I think, you know, the data definitely don't support the thesis that this is a wage driven inflation. And one of the kind of really simple ways of of looking at that is that inflation precedes the the wage growth that we see in this period. And so if anything, workers are actually responding to the fact that their wages aren't keeping up with prices, not the other way around. It isn't businesses, responding to demands from workers and then raising their prices commensurately. The other thing we know from the data, and the timing, I think matters a lot here. You know, the inflation that we saw started ticking up in February March 2021. Well, what else happened in February March 2021. You know, President Biden passed the American rescue plan, which did include cash assistance, as well as, you know, the expanded child tax credit funds that went to, you know, millions of families across the country. And so, you know, there was an argument being made at the time that the inflation we were seeing was a response to President Biden going too big, with public investment, and Americans having too much money. You know, at the time, when we started making the profiteering argument, we didn't really have strong data to rebut the kind of excess demand too much money chasing too good, too few good story. But we do now, we actually have analysis showing that if anything, the American rescue plan contributed, you know, maybe point three percentage points to inflation, you know, so, like, instead of hitting almost 10%, we might have hit the high nines, right. So, I mean, the story here, you know, the excess demand theory of inflation that so many people promulgated for so long has not held up, you know, at all
Hal Singer 25:56
those checks went out in 2021. And how could they be responsible for 2023 inflation? When the economist is still hunkered down? They really they literally ran a story on Saturday saying that it was the stimulus checks that were that were contributing to inflation in 2023, which is pretty mind boggling.
David Sirota 26:12
Let's let's talk a little bit about the the media situation here. So again, for months, there were these high profile publications, pundits, insisting that so called green inflation, and they came up with that term to make fun of the idea, right? Oh, yeah, you guys are? How could you insist that corporations are just becoming more greedy? They've always been greedy. Now, at one level, I actually agree with that, right? Like corporations have always been greedy. They've always been trying to maximize profits. And you're right, the kind of greed as a human impulse, I don't think has changed. But I do think the market position of these bigger and bigger companies have in the sense that after an era of lacks antitrust enforcement, more and more companies are in a position to jack up prices, knowing that they're not going to face price competition from smaller competitors, offering the same product at a lower price. So they're in a better position to raise prices without consequences. My question as it relates to the media, is, why do you think this reality that I've just outlined of actual profits driving inflation? Why was this so scoffed at? And who if you can name names, who were the people who most kind of drove the fake narrative that suppressed the profit factor in this and put out there the idea that it's, you know, we should blame workers like who was driving it? And and what do you think was the motive of creating that narrative?
Lindsay Owens 27:44
I'll give you two answers. The first answer we'll give you is the generous answer will be generous to the folks who were taking this position, right? And then I'll give you an answer that I think does sort of impugn motives, which I do think is the truth is a combination of the two. The generous answer is like, you know, these guys have been hogging the same theories about the macro economy for decades. Macroeconomics is not a particularly fast moving field within economics. We hadn't had a period of major inflation and over 40 years, and you know, they were just going off the old playbook, which is too much money chasing too few goods. And the biggest danger we face right now, in the world is a wage price spiral, the idea that workers will, you know, demand wages, wage increases, and businesses will respond, and then workers will demand or more rate wage increases in response to that. And, you know, I think macro economics as a field hasn't accounted for the changes in our economy over the last 40 years, namely the massive and extraordinary amount of concentration that is the hallmark of the modern American economy. And the financialization, you know, we didn't have share buybacks, the last time we had high inflation, the incentives for corporations were different. And so I think the generous interpretation is they got, you know, kind of caught flat footed and, you know, their theories couldn't really adapt to the reality of the modern American economy. I think the less generous interpretation is that there were a couple of people. You know, we'll we'll go with Larry Summers as the kind of canonical example here, who, frankly, were fighting the last war, they presided over an extraordinarily failed response to the Great Recession, a prolonged jobless recovery, a recession that destroyed generational wealth, because we didn't new do what we needed to do in terms of assistance to folks who are underwater on their mortgages. And, you know, I think the best kind of, you know, revenge they could get was like seeing the Biden administration, go in a different direction, but go too far and cause inflation and then they could say, oh, well, at least You didn't cause inflation, right. That's why we went. That's why we went to small because we knew that there was, you know, there were these other sort of collateral consequences. And so I actually think, you know, it's frustrating that the press didn't cover it this way. But I don't think these were disinterested parties. I think they were interested in having the Biden recession. And the economic team who took an approach that was a direct rebuke to the failed approach of Larry Summers go in a different direction, and they didn't want it to be seen as successful. And I think it was very important to them that, that it'd be Biden's fault and it'd be the fault of the American rescue plan. And because that was something that mattered to them a lot. I mean, it's quite petty. But I do think that was part of part of why they were so reactionary.
David Sirota 30:42
Yeah, how I would I would follow up and ask you, I mean, is this groupthink was this simply, there was an old way of looking at inflation, you know, the so called wage price spiral. And that's just what very serious people say. And that must be true. And therefore, the group, aka the economists, and pundits just can't think outside the box can't see anything different. Or was there a nefarious motive here, and I want to add one point to this, which is that at one point, we wrote a story about how none other than Jeff Bezos, the third richest man on the planet, tweeted out a column from the newspaper that he owned, owns, still owns in the Washington Post, a column from Catherine Rampell, The Washington Post columnist, who was making fun of Democrats, who were saying that corporate profits were driving inflation. She called it a conspiracy theory, and Bezos blast this out to however many, you know, hundreds of 1000s Millions of people who follow him on Twitter and I, I looked at that, and I said, you know, if the third richest man in the world is blasting this out, there's got to be a kind of a deeper motive here, which I and you can call me a conspiracy theorist. But I think it goes beyond groupthink into corporate Titans wanting to blame workers, they don't want to have to pay workers more right Bezos is facing and for instance, it his Amazon workers wanted to be paid more money which they deserve. They don't want the narrative to be about corporations using their market power to raise prices. They want the narrative to be that inflation is a problem of workers being too greedy. So I all that's a question for you, which is, why is this group think? Or do you think there's a more pointed political motive in creating the fake narrative? Rather than acknowledging the real facts about corporate profits?
Hal Singer 32:37
I want to try one out on you, which is the corruption of the economics profession. And, please, and what I what I worry about, and, you know, we haven't changed, we can go into it. When we listen to this economist, this young economist speak on his NPR program this weekend, I think there's a real fear that if you cross corporate America, if you cross corporate interests, that will that will spell doom in the profession, and particularly in terms of funding. And so if you think about what what we were saying, The Story of Lindsay and I, Isabella, where we're pedaling, it was really it was really a rejection of this neoliberal construct that we should just turn over all decision making to firms and let them merge, like like crazy and just trust that deficiencies are going to keep prices low. I mean, their whole paradigm is crumbling. And they cannot accept the notion that maybe we designed our economy in the wrong way, you know, they were on the attack starting in the 70s, you know, the Chicago School revolution, which basically put into defending the antitrust enforcement and basically said, any economist who even suggests that concentration could be a causal factor to pricing behavior, you know, is going to be effectively shut out of the profession, right? You cannot, you cannot go there. And I can give you names of economists who have tried, including myself, and have an effect and have felt a fierce resistance. And we listened to the young economist speaking on NPR the other day, just trying so hard to come up with a story that could accommodate corporate interest, despite the fact that he recognized he himself through his own study found that, you know, profits were primarily driving inflation, you know, in 20, and 2021, and 2022. And he had to come up with this story that said, Well, maybe they were just doing raising prices in anticipation of future costs increases, and you can hear he was reading his language requiring, and what I heard through the lines was, I need to come up with a story that just is going to keep peace, you know, keep peace with the gatekeepers, and it's very sad statement and commentary on where we are as a profession, and Orion and economics that we're willing to come up with stories and Ben truths, to kind of go with the flow and satisfy the gatekeepers.
David Sirota 34:52
I want to ask you, knowing what we know now, we know that that narrative, oh, it's the workers faults not Corporation. Since fault, we know that that narrative had very real world policy consequences, that it created the conditions for various policies. It created the the media environment in which policymakers whether in the White House, whether in Congress anywhere else could say, well, listen, if the problem is workers wages are the problem is government spending on subsistence benefits, that argues for a certain set of policy prescriptions, rather than if the media environment is acknowledging the corporate profits are driving inflation. So Lindsay, tell us what you think, was the result of the fake narratives that were put out there the narratives that did that suppressed the idea that corporate profits were the real culprit?
Lindsay Owens 35:47
Oh, yeah. I mean, there is no doubt in my mind that the kind of, you know, aggressive response, and rebuttal of the idea that that corporations had a role to play in accelerating prices, had a chilling effect on a whole host of policy solutions, that a could have brought inflation down, and B could have done so without some of the collateral damage that we get from other approaches. And so, you know, if you'll recall, in September of 2021, early September of 2021, President Biden and Vilsack, Secretary of Agriculture, got out there and said, Hey, like, meat prices are up. And this has to do with consolidation among meat packers, and we're gonna go after the meat packers and, you know, pursued what would have been, I think, a really appropriate strategy. That, you know, that was lambasted by folks in the economics profession, folks in the elite media that, you know, that that the White House does listen to. And I think that that aggressive response, definitely put the White House kind of back on their heels a bit and, you know, made it made it clear to them that they didn't have a lot of the elite support, they would need to continue pursuing an approach like that. Other policies that would have worked, you know, this is a profit, purely rent seeking profit driven inflation, we've got the tax code, we could have done an excess profits tax, obviously specific to an industry or more broadly, or we could use the oldest excess profits tax in the book, a straight increase in the corporate rate, I think would have been really appropriate. We also had, you know, the opportunity to do what other countries did and take a look at some price regulation, particularly for upstream industries, where pricing actions, they are really feed through prices downstream. So there were a number of approaches from antitrust, from tax policy from, from price regulation that could have been pursued. Instead, I think, you know, policymakers, you know, really sort of, you know, stepped back and said, Okay, you know, we'll leave this to the Fed. And that's certainly what the White House did. And, you know, the Fed has won, you know, they have one play, they can run, they can just crank the shit out of interest rates. And, you know, the idea there is to slow the economy and get people, you know, get companies to stop investing, start firing some workers and, and slow the labor market and the slow, slow demand, ie make people poor. And so that's the option we were left with, we didn't have a multifaceted approach, we had, you know, a cruel brute force approach. And, and, you know, I think, hopefully, you know, a big part of why it's so important to continue having this conversation for making sure it's, you know, solid and known, is important. You know, it may not be, you know, maybe too late this go around, but I think you know, the next time we see a bout of inflation, we can have a much more robust and honest and useful policy conversation about the tools we have at our disposal to take on inflation. And not all those tools have to require that the workers pay the price.
David Sirota 38:57
Okay, knowing what we know now, knowing that the original narrative, oh, it's the workers and the like that that was false. Knowing that corporate profits are in fact driving inflation, if we could run back the playbook here. Right? If we could, if you could wave a wand and put in place some basic policies, policies based on actually addressing the real problem here? What would those policies look like? In other words, what does that information give us to know what kinds of things could be done? Other than just you know, cutting spending on food stamps or not raising the minimum wage, right, like, like, arguably, those kinds of policies, they're not only immoral, in my view, but but they don't address a profit led inflation problem, what kinds of policies do so I'm going
Hal Singer 39:47
to try to add to Lindsay's excellent ideas already because she came she already came with a profit excess profit tax, but I want to just put out some basic things. One is that the President should use the bully pulpit more than he's done already. And the few times that he's done that they've actually been successful, right when he in the State of the Union address, he talked about John the fees, allowing families to sit together and they were gone, they just retracted them. And I think on insulin, I think Congress should be holding hearings. And you know, Lindsey, and I have the pleasure and privilege of testifying in front of Congress. But I want to see CEOs who are part of industries where profits are record breaking, and prices are spiraling out of control. I want to see them called before Congress, and I want to see them explain themselves right to the to the American people, right. The third thing I already mentioned, the FTC could go after what I call invitations to collude under Section Five of the FTC act, all it would take, right is one very public announcement, right? Where we're going to crack down on one CEO who just basically invited his rivals to follow him next quarter at 17.2% price increase or capacity reduction, it would just take one very public investigation into a CEO, and it would it would put a freeze on this behavior. Right, the the party would end right if it just if the FTC announced one. I want to also say that well, Isabella Weber were here she she'd mentioned price controls, and certain industries have and states have selectively used price controls in a way that kind of slow this this spiral. And finally, you know, I found through a paper that I did with Ted Titus and and Jacob Langer. For the OECD, we found that concentration and consolidation among rental properties in Florida is a statistically and economically significant contributor to rental inflation, right in Florida rentals. And so what we've been allowing is just massive consolidation of rental properties in Florida, right? And the question is, why should any one entity be able to own say more than 5% of the properties in a given neighborhood, to me, this will be a very simple fix. To go after the kind of inflation we know that rental inflation is one of the primary drivers shelter, I think accounts for something like 30% of the total inflation is going on. And what's what's really sad is that the the rate hikes are perversely worsening rental inflation, because they're taking demand away from housing from ownership, right, and taking it out of the reach of homeowners and instead putting them into rental markets. So just the this the fix that we've gotten as a result of inaction has perversely made in a rental inflation and overall inflation worse,
Lindsay Owens 42:22
just want to add one thing, you know, you asked about the impact of, you know, not believing that profits mattered for for prices and inflation. And, you know, I answered the question quite narrowly about its impacts on anti inflation policy specifically, but I actually think we should, you know, remember that it was more dangerous than that. And it was more dangerous than that in the following way. It wasn't just the way that it contained and circumscribed the policies that were available up for us to combat inflation. It was also the way blaming workers and blaming excess demand was weaponized to oppose other policies that were being considered at the time, whether that was the inflation Reduction Act policies, whether that was student loan forgiveness, right? Oh, we can't afford to do student loan forgiveness right now. Because the problem is that these people already have too much money. And if you forgive their loans, they'll have even more, which will drive inflation. So it was It wasn't just the anti inflationary policies that were, you know, chilled. By this approach. It was actually also a whole suite of things that would have been good for workers and good for families that were off the table, because you know, they already had it to good.
Hal Singer 43:37
Can I just add one thing on impact as an economist, I can't help myself, but we end up with the most regressive policy prescription possible, right? Because who bears the brunt of the pain from the rate hikes, right? It's unemployed or displaced workers. And they're probably going to be the ones who have the least position, right relative to corporations to bear that that pain, a progressive policy would be identify, you know, those policies that push the pain and the burden onto those who are most capable of bearing it that would be the corporation's here,
David Sirota 44:07
I want to end this conversation with not just a football spike from both of you for being right. I mean, I'm sure there's been this like impulse to be like, we told you so and, and I hope you felt some personal satisfaction about that. I mean, I guess it's personal satisfaction, but I'm guessing it's like, it's not so satisfying, because, of course, the policies that were put in place based on the on the lies and the and the the fake narrative were put in place and a lot. A lot of people, including a lot of kids were really harmed. I mean, this justified, oh, we can't spend money on the working class. It's driving inflation. I mean, that that quite literally helped justify, for instance, the end of the Child Tax Credit, the expanded Child Tax Credit. I think my question here at the end is now knowing where we are, knowing that even you know, UBS bank and the Federal Reserve are acknowledging this central bankers are acknowledging this. Do you think the media as an example, and I know there's different kinds of media, but I'm talking about the sort of the legacy elite press corps has learned any lessons? Do you think the economics profession has learned any lessons? Or do you think the next time if you know, God, God forbid, inflation spikes, it's just gonna be the same? It's gonna be the same thing again, let me let me I'll start with Lindsey on that question. Yeah.
Lindsay Owens 45:28
I mean, like, I take solace in the fact that Americans know about this, you know, the polling has been crystal clear. And, you know, it was pretty crystal clear early on. I mean, I think most Americans when they go to the grocery store, and they see that, you know, the price of Cheerios is up, they they think that General Mills might have had something to do with that, and they would be right. And Americans, you know, the the polling shows that they believe, you know, to an even greater extent now that that corporate price gouging and kind of gilding the lily was was behind this. So, I do think there's, you know, there's something there. That's pretty important. The other thing that I that I take solace in is, I think, a really important part of this body of work. And obviously, you're right, it is, you know, it is a very Pyrrhic victory, because because what we wanted was different policy outcomes. But an important part of this work for me, intellectually, is that I think Americans and elites, the media, policymakers in Washington, economists need to understand the power matters and the economy. And I think what we did is showed that it does, inflation doesn't fall from the sky, it's not, you know, it's not a weather pattern that is beyond human control. There are CEOs, humans and firms dialing, the price is up. And I think, I think folks really understanding agency and the role of power in our economy, and how that shapes macroeconomic factors, how that shapes inflation, how that shapes, all of our lives is really critical. And so, you know, I don't, I don't know if the media have learned their lesson. But I do think there is a greater understanding, you know, that inflation isn't something that's sort of too complicated for a journalist to understand that, you know, the stuff we were seeing as early as March and April 2021, was real. And sometimes it's okay, as I like to say, to, you know, close your textbook, and open your eyes and look at what's happening in the real world and the real economy. And so I do think there has been a kind of nice dose of realism and understanding of the role of power and powerful people in shaping economic outcomes. So that's it, that's my, like, most optimistic take on this. But, you know, these, you know, we have these fights over and over again, and, and, you know, the, the media does default, in many cases to, you know, to the experts that Howe was talking about, who aren't quite allergic to power and who are quite allergic to taking, you know, taking this on, I mean, the last thing I'll say is like, the fact that this conversation is having a bit of a resurgence under a sanitized name, right, moving from greed inflation, to excuse Felician and now that it's called excuse suasion, there's a whole bunch of reporters who are like, oh, excuse suasion is a real big deal. I think it just really betrays that that allergy to power that many of them have.
Hal Singer 48:27
I think they we may have pulled over a few and a marginal voters. And maybe there are some open minded economists who might come over to our side. And by the way, Lindsey now is actually being referred to as profit price spirals or price price breakthrough, that was a big deal. But when I read, you know, David went out and asked these people, Jason Furman, you know, to explain themselves, and I don't know if you saw his answer back, but you know, and Rand pal refused to answer Matt Yglesias, you know, wouldn't I wouldn't acknowledge your change in the facts. These people are hunkered down, and I think they're paid to hunker there, right. I mean, I think their funding depends on them keeping their head in the sand. So I'm not very optimistic about about what's happening. And I do want to say something about the elite media too. I know I'm not your expert on media, but I read a read the elite media and reading the economist, The New York Times, and they are hunkered down the Economist has run two weekends in a row. Last weekend was the prior weekend was about how wages were actually more more important than profits and they were trying to push back on this new narrative that was warming and then this week they came back with and blamed Biden's but did stimulus package, you know, for inflation. And this is as elite as you can get the economic circles and in the New York Times, I don't want to name this writer you probably know her but she's their inflation, you know, coverage person. And, and I every time I read it, she she sneaks in a paragraph suggesting strongly that that workers are to blame, you know, for inflation. And I just like what are you reading? How are you not seeing But the rest of us are seeing and so I, I come away with this thinking that we haven't moved. I'm going to use your word kind of elite media yet. I don't think they're ready to go. And I think they're always going to call on their Larry Summers. And Jason Furman, you know, as authorities to cement, you know, this old view, the only kind of optimistic thing that I have. I don't want to leave you with complete pessimism is that now that now that Larry has been proven wrong, I know that Larry, this is a little blowing smoke, but I did have the opportunity to go to the White House and I was overruled by Larry, I know this. And I feel like Larry now has basically been shown to be wrong on a very important issue. And I hope that if we ever get into a debate, you know, in the future again, and Larry makes a phone call, and he says, you know, ignore what the progressives are saying, I feel like he may have lost some credibility there. And so maybe on the next, the next fight, maybe even though we've lost this one, that says that we got the wrong policies and high interest rates, maybe on the next flight, we'll have a better shot, at least moving this White House.
David Sirota 51:02
Lindsay Owens is the executive director of the groundwork collaborative. She served as a senior economic policy adviser to Senator Elizabeth Warren was the Deputy Chief of Staff and legislative aide for representatives Keith Ellison and famila Jaya Jaya Paul. And Howie singer is the managing director at econ one and a professor of economics at the University of Utah, who has been working diligently to try to shake some sense into the economics profession. Thank you to both of you, first and foremost for being right and for sounding the alarm, and then also for spending some time with us today.
Hal Singer 51:35
Thank you. Thanks for having me.
Lindsay Owens 51:36
Thanks, David. Thanks so much for your reporting on this too.
David Sirota 51:40
Okay, that's it for today's show. As a reminder, our paid subscribers who get overtime premium, you get to hear next week's bonus episode, our interview with Tara Raghuveer about the soaring cost of rent in cities across the United States. Tara is the campaign director for the People's Action home guarantee campaign, which is organizing to try to enshrine federal protections for tenants, we go into details about what that organizing and what those federal protections can be. So listen to lever time premium, just head over to lever news.com To become a supporting subscriber. When you do you get access to all delivers premium content, including our weekly newsletters and our live events. And that's all for just eight bucks a month, or 70 bucks for the year. One last favor. Please be sure to like subscribe and write a review for lever time on your favorite podcast app. The app you are listening to right now. Take 10 seconds and give us a positive review in that app. And make sure to check out all of the incredible reporting our team has been doing over at lever news.com Until next time, I'm David Sirota rocked the boat. The lever time Podcast is a production of the lever and the lever Podcast Network. It's hosted by me David Sirota Our producer is Frank Capella with help from the levers lead producer Jared Yucheng mer
Transcribed by https://otter.ai