New research released Monday from the Federal Reserve Bank of San Francisco shows that Biden is incorrect when he claims that companies marking up prices are the driver of recent inflation.
While there has been an increase in the amount companies are marking up in select industries like motor vehicles, the overall markup rate has remained comparable with previous economic recoveries when huge inflationary shocks did not occur, according to the report from the San Francisco Fed. Biden has claimed several times that prices were elevated and have remained elevated because of “greedflation” or “corporate greed” instead of other factors like high-government spending.
“Since 2021, markups have risen substantially in a few industries such as motor vehicles and petroleum,” the report reads. “However, aggregate markups — which are more relevant for overall inflation — have generally remained flat, in line with previous economic recoveries over the past three decades. These patterns suggest that markup fluctuations have not been a main driver of the ups and downs of inflation during the post-pandemic recovery.”
Inflation, as measured through the consumer price index, peaked at 9% under Biden in June 2022 amid a national recovery from the COVID-19 pandemic. Since peaking, inflation has failed to retreat below 3%, measuring at 3.5% in March.
The federal government made large stimulus payments and issued a higher amount of unemployment benefits throughout the COVID-19 pandemic while interest rates were set low by the Federal Reserve, boosting demand for goods and services at the same time the economy was experiencing shortages and the costs of products were rising, according to the San Francisco Fed. Corporations raised prices during this time to account for higher costs and rampant shortages rather than to increase profits and squeeze consumers.
“And it’s clear we have the strongest economy in the world: nearly 15 million new jobs since I came to office,” the president said in remarks made in February. “Inflation is down. In fact, the costs have fallen from everything from a gallon of gas to a gallon of milk. We know prices are still too high because of what I call ‘greedflation’ and ‘shrinkflation.’ I’m calling on corporations to pass their savings on to consumers, for God sake.”
While corporate profits did spike in the recovery of the COVID-19 pandemic, they are typically volatile and did not spike more than in any other economic recovery such as the Great Recession, according to the research. The rise in corporate profits is attributable to increased income from pandemic-era subsidies and lower business taxes.
“Moreover, the path of aggregate markups over the past three years is not unusual compared with previous recoveries,” the report reads. “Aggregate markups have stayed roughly constant throughout all four recoveries.”
Many economists blame high levels of government deficit spending for persistent inflation, starting with huge stimulus payouts made during the COVID-19 pandemic. The president has signed the $1.9 trillion American Rescue Plan and the $750 billion Inflation Reduction Act.
The national debt has increased nearly $6.8 trillion under Biden, totaling over $34.5 trillion, according to the Treasury Department.
The producer price index, which tracks inflation for businesses before it reaches consumers, has risen 18.6% since Biden took office in January 2021, around the same as consumer inflation, according to the Federal Reserve Bank of St. Louis. The prices for commodities used as inputs for manufacturing spiked in June 2021 and again in March 2022 before falling in December 2022, according to the Institute for Supply Management.
Biden has also pointed to corporations engaging in “shrinkflation,” the act of reducing product size but keeping prices the same, as a way companies are charging more for less. Companies often shrink product sizes in response to rapid inflation that has increased their own costs in a way to raise prices in accordance with inflation without losing price-sensitive customers who are less sensitive to size.
The White House did not immediately respond to a request to comment from the Daily Caller News Foundation.
