Montgomery County resident Erin Wiggle has struggled since the pandemic began, as the costs of caring for her children, running the nonprofit animal rescue organization she runs with her husband and buying the things she needs to survive have all skyrocketed.
“We have a lot of expenses, from diapers and food to gas and vet bills,” Wiggle told a committee of U.S. senators Tuesday in Washington, D.C. “That’s especially true for the medical needs of some of our children who have special needs. Some require special diets, while others require frequent visits to specialists.”
Wiggle was invited by Sen. Bob Casey (D-Pa.) to testify before the Senate Health, Education, Labor and Pensions Committee’s Subcommittee on Children and Families on the impact of inflation. Tuesday’s hearing focused on the soaring cost of living since the start of the COVID-19 pandemic, with everyday necessities like gas, groceries and housing rising in price as Americans struggle to keep up.
Both Democratic and Republican lawmakers agree that action needs to be taken to cut costs and mitigate the effects of inflation. But the two sides disagree on what is causing the problem or what should be done next.
Casey, a Democrat, has released four studies in the past year trying to explain the source of rising commodity prices across the country. And he has a term for it: “greedflation.”
Casey acknowledges that pandemic-era supply chain problems, exacerbated by the war in Ukraine, have driven up prices at a time when many Americans are unemployed. But he says the main problem now is unchecked corporate greed.
“They’re ripping people off, quite simply,” Casey said. “Using inflation as a cover, corporations have artificially raised prices, which has led to skyrocketing profits. Record profits and exploding costs — all at the same time.”
Casey cites statistics from the Federal Reserve Bank of Kansas City that show corporate profits jumped 75% between July 2020 and July 2022, growing five times faster than inflation.
Senator Bob Casey’s recent report shows the impact of ‘greed’
But Sen. Tommy Tuberville (R-AL), the minority chairman of the subcommittee, put forward a different theory.
He places all the blame on “President Joe Biden and a Congress that is obsessed with spending money our country doesn’t have.”
“The Biden administration has effectively pushed through trillions of dollars in irresponsible deficit spending and added fuel to the inflation fire that is consuming our country,” Tuberville said.
Different theories about the causes of inflation have led to different proposals on how to fix the effects.
For Casey, the solution is corporate regulation to curb uncontrolled price increases.
In February, he introduced a bill that would ban what he described as “grossly excessive price increases.”
“Preventing price gougingt” would allow both the Federal Trade Commission and state attorneys general to investigate and penalize companies that excessively raise prices at various points in the supply chain and distribution network, with exceptions for tiny businesses. It would also require companies to explain their reasons for raising prices during “periods of exceptional market shock.”
For Tuberville, the solution is to leisurely government spending and deregulate the market to encourage growth in the production of goods and services. Tuberville called this “unleashing the power of the free market system.”
To back up his claims, Casey invited David Malpass, former president of the World Bank Group, to testify.
Malpass pointed to May study from the Federal Reserve Bank of San Francisco, which found that while some companies are raising the prices of goods well above their costs of production, corporate greed is not a factor driving inflation.
Ultimately, Tuberville and Casey have diametrically opposed views on the causes of inflation and how to solve it.
Dr. Emily Gee, an economist and vice president of the Center for American Progress, who was invited to testify by Casey, questioned the notion that plain deregulation was the solution.
“Growing corporate power and rising inequality are the result of decades of overly permissive antitrust policies, labor laws that are hostile to workers, and a tax system that allows corporations to avoid paying their fair share of taxes,” Gee said.
Gee argues that inequality between enormous corporations and tiny businesses has created an environment that stifles competition and keeps wages low and prices up.
Daniel Lee, owner of Philadelphia pasta restaurant Farina Pasta and Noodle, said he has had to raise prices not only because of rising costs but also because of junk fees and competition from private-equity-backed chains.
“Fast casual corporate chains, many backed by private equity investors, are opening up around me,” Lee said. “I’m not afraid of competition. I’ll stand behind my products and services. But it’s not a level playing field. We don’t have the purchasing power they have. We can’t buy in bulk.”
In addition, Lee points to recent costs of running a restaurant in 2024, such as fees charged by delivery apps like Grubhub and Doordash. To offset the fees, he’s had to raise prices on the food he sells on his apps. But raising prices solely on apps, he says, has led to his restaurant’s lower rankings in search results. And if he wants to get preferential placement on apps, he’ll have to pay extra for that.
“When prices went up during the pandemic, we accepted across-the-board price increases for everything from products to packaging,” Lee said. “But there’s no shortage of products, drivers and general things that could bring those prices down… Why haven’t we seen those prices come down?”
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