On Tuesday, Rep. Katie Porter, a California Democrat, received millions of views, endless online praise, and sycophantic progressive media coverage for her “takedown” of Big Business as the true culprit behind inflation on the House floor. There’s just one problem: almost everything she said was wrong.
Still, you’ve gotta give the congresswoman points for presentation. Armed with a blown-up bar chart, she claimed that “over half the increased prices people are paying are coming from increases in corporate profits.”
Bigger corporate profits account for *over half* of the higher prices people are paying. pic.twitter.com/RZr5O0X4oJ
— Rep. Katie Porter (@RepKatiePorter) October 18, 2022
If this sounds far-fetched, well, that’s because it is. This argument is both empirically untrue and obviously false in its very premises.
Firstly, the input costs facing businesses have actually increased significantly more than consumer prices. Just consider the below graph.
The red line is the Producer Price Index (PPI), which estimates the average input costs businesses are experiencing. Meanwhile, the blue line is the Consumer Price Index (CPI), which is an estimate of average consumer prices. Both have increased sharply since January 2021 (hmm, what else happened that month?), yet the PPI has actually increased more than the CPI. If businesses were truly engaging in rampant “price-gouging,” we would expect the opposite to be true.
Yes, corporate profits have nominally risen, but that’s in the same way that government tax receipts have also risen—when the dollar value of everything goes up, so too would profits and tax receipts.
It’s also just obviously illogical to argue that “corporate greed” is what’s driving inflation. Such economically illiterate mental gymnastics require one to believe that corporations went from being generous and benevolent in 2020 to mean and greedy in 2021. And, we’d have to believe another falsity, that corporations in some sectors where prices are higher are just meaner and greedier than those in other sectors where prices haven’t risen as much.
It’s toddler-level economics.
You don’t have to take my word for it that this progressive narrative is hogwash. A survey of top economists, weighted for confidence, found that 80% don’t think corporate greed is a significant factor contributing to our ongoing inflation crisis.
The real culprits, as we all know, are runaway government spending and money printing. Viral stump speeches, blown-up charts, and all the handwaving in the world can’t change this fundamental economic reality.