[House Hearing, 117 Congress]
[From the U.S. Government Publishing Office]





 
                  POWER AND PROFITEERING: HOW CERTAIN

                    INDUSTRIES HIKED PRICES, FLEECED

                     CONSUMERS, AND DROVE INFLATION

=======================================================================

                                HEARING

                               before the

              SUBCOMMITTEE ON ECONOMIC AND CONSUMER POLICY

                                 of the

                         COMMITTEE ON OVERSIGHT
                               AND REFORM

                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED SEVENTEENTH CONGRESS

                             SECOND SESSION

                               __________

                           SEPTEMBER 22, 2022

                               __________

                           Serial No. 117-106

                               __________

      Printed for the use of the Committee on Oversight and Reform
      
      
      
 [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]     




                       Available on: govinfo.gov
                         oversight.house.gov or
                             docs.house.gov
                             
                             
                        ______
 
              U.S. GOVERNMENT PUBLISHING OFFICE 
 48-803PDF           WASHINGTON : 2022                             
                             
                             
                             
                             
                   COMMITTEE ON OVERSIGHT AND REFORM

                CAROLYN B. MALONEY, New York, Chairwoman

Eleanor Holmes Norton, District of   James Comer, Kentucky, Ranking 
    Columbia                             Minority Member
Stephen F. Lynch, Massachusetts      Jim Jordan, Ohio
Jim Cooper, Tennessee                Virginia Foxx, North Carolina
Gerald E. Connolly, Virginia         Jody B. Hice, Georgia
Raja Krishnamoorthi, Illinois        Glenn Grothman, Wisconsin
Jamie Raskin, Maryland               Michael Cloud, Texas
Ro Khanna, California                Bob Gibbs, Ohio
Kweisi Mfume, Maryland               Clay Higgins, Louisiana
Alexandria Ocasio-Cortez, New York   Ralph Norman, South Carolina
Rashida Tlaib, Michigan              Pete Sessions, Texas
Katie Porter, California             Fred Keller, Pennsylvania
Cori Bush, Missouri                  Andy Biggs, Arizona
Shontel M. Brown, Ohio               Andrew Clyde, Georgia
Danny K. Davis, Illinois             Nancy Mace, South Carolina
Debbie Wasserman Schultz, Florida    Scott Franklin, Florida
Peter Welch, Vermont                 Jake LaTurner, Kansas
Henry C. ``Hank'' Johnson, Jr.,      Pat Fallon, Texas
    Georgia                          Yvette Herrell, New Mexico
John P. Sarbanes, Maryland           Byron Donalds, Florida
Jackie Speier, California            Mike Flood, Nebraska
Robin L. Kelly, Illinois
Brenda L. Lawrence, Michigan
Mark DeSaulnier, California
Jimmy Gomez, California
Ayanna Pressley, Massachusetts

                      Russ Anello, Staff Director
               Jonathan Misk, Subcommittee Staff Director
                    Amy Stratton, Deputy Chief Clerk

                      Contact Number: 202-225-5051

                  Mark Marin, Minority Staff Director
                                 ------                                

              Subcommittee on Economic and Consumer Policy

                Raja Krishnamoorthi, Illinois, Chairman
Katie Porter, California,            Michael Cloud, Texas, Ranking 
Cori Bush, Missouri                      Minority Member
Jackie Speier, California            Fred Keller, Pennsylvania
Henry C. "Hank" Johnson, Jr.,        Scott Franklin, Florida
    Georgia                          Andrew Clyde, Georgia
Mark DeSaulnier, California          Byron Donalds, Florida
Ayanna Pressley, Massachussetts
Shontel M. Brown, Ohio

                         C  O  N  T  E  N  T  S

                              ----------                              
                                                                   Page
Hearing held on September 22, 2022...............................     1

                               Witnesses

Mike Konczal, Director, Macroeconomic Analysis, Roosevelt 
  Institute
    Oral Statement...............................................     5
Robert B. Reich, Carmel P. Friesen Professor of Public Policy, 
  The Goldman School of Public Policy University of California, 
  Berkeley
    Oral Statement...............................................     7
Rakeen Mabud, Ph.D., Chief Economist and Managing Director of 
  Policy and Research, Groundwork Collaborative
    Oral Statement...............................................     8
Tyler Goodspeed (Minority Witness), Kleinheinz Fellow Hoover 
  Institution
    Oral Statement...............................................    10

Written opening statements and statements for the witnesses are 
  available on the U.S. House of Representatives Document 
  Repository at: docs.house.gov.

                           INDEX OF DOCUMENTS

                              ----------                              

Documents entered into the record during this hearing and 
  Questions for the Record (QFR's) are available at: 
  docs.house.gov.

  * Letter to Brian Deese, the Director, National Economic 
  Council; submitted by Rep. Cloud.

  * CalPERS 2021 Annual Investment Report; submitted by Rep. 
  Keller.

  * Pennsylvania State Employee Retirement System 2021 Detailed 
  Holdings; submitted by Rep. Keller.

  * Pew Research Article on Inflation; submitted by Rep. 
  Krishnamoorthi.

  * QFR: to Mr. Konczal; submitted by Rep. Krishnamoorthi.

  * QFR: to Mr. Reich; submitted by Rep. Krishnamoorthi.



                  POWER AND PROFITEERING: HOW CERTAIN

                    INDUSTRIES HIKED PRICES, FLEECED

                     CONSUMERS, AND DROVE INFLATION

                              ----------                              


                      Thursday, September 22, 2022

                  House of Representatives,
                 Committee on Oversight and Reform,
              Subcommittee on Economic and Consumer Policy,
                                                   Washington, D.C.

    The subcommittee met, pursuant to notice, at 9:08 a.m., in 
room 2154, Rayburn House Office Building, and via Zoom; Hon. 
Raja Krishnamoorthi (chairman of the subcommittee) presiding.
    Present: Representatives Krishnamoorthi, Porter, Bush, 
DeSaulnier, Brown, Cloud, Keller, Clyde, and Donalds.
    Mr. Krishnamoorthi. The committee will come to order.
    Without objection, the chair is authorized to declare a 
recess of the committee at any time.
    I welcome everyone to today's hearing, which explores the 
important topic of excess corporate price hikes and their role 
in helping to drive inflation.
    I now recognize myself for an opening statement.
    As CBS News reported earlier this year, Selina Flores, a 
resident of southwest Florida, used to be able to provide her 
family of four with balanced meals that included meat at most 
dinners. But when grocery prices nearly doubled, the Flores' 
diet then transitioned to meat only 2 or 3 days a week.
    At the same time the Flores family was struggling to keep 
up with record meat prices, America's four largest meat 
processing companies saw their profits surge 134 percent from 
nearly $4 billion in 2019 to nearly $9 billion in 2021.
    In the first half of 2022 alone, their combined profits 
totaled $2.5 billion, almost a 100 percent increase over the 
first half of 2019.
    Ms. Flores' story and the stories of others like her who 
are struggling to feed their families, afford insulin, or 
purchase gas is why we are here.
    Since early 2021, Americans have been suffering from rising 
prices caused primarily by global supply chain disruptions and 
changing demand patterns due to the pandemic. Even combined 
with traditional supply and demand factors, however, these 
elements are insufficient to totally explain why inflation 
remains elevated.
    Some would have you believe the American Rescue Plan is the 
primary factor driving inflation. Those critics, however, 
cannot explain how the ARP somehow caused inflation to soar in 
other countries around the world.
    For example, the U.K. is currently experiencing 20 percent 
more inflation than the United States, but the ARP did not 
exist there. The EU is collectively experiencing 22 percent 
more inflation than the United States, but the ARP did not 
exist in any of the Eurozone countries. And Turkey is 
experiencing over 900 percent more inflation than the U.S., but 
the ARP did not exist there either.
    Additionally, nonpartisan economists at Moody's Analytics 
and elsewhere have credited the ARP with preventing another 
recession that occurred during the Trump years and, instead, 
created as many as 4 million jobs in 2021.
    There are, however, other factors that contribute to 
inflation that have not received enough attention. One of those 
factors is extreme price hikes; in other words, companies 
raising prices far more than required to offset higher costs, 
even when accounting for shifts in supply and demand, resulting 
in the highest profit margins we have ever seen in the last 70 
years.
    Americans outside the Halls of Congress recognize the 
importance of this issue. In a poll that Navigator Research 
released in late July, a whopping 80 percent majority of 
Americans, including many Republicans, viewed corporations 
raising prices to make record profits as a, quote, ``cause of 
inflation.''
    Although Democrats in Congress and President Biden have 
adopted a long-term plan to fight inflation that will reduce 
prescription drug prices and save the average family $500 per 
year on energy costs, certain companies instead dramatically 
hiked up their prices under the smokescreen of inflation.
    That is why, under my chairmanship, this subcommittee 
launched investigations this year into industries that 
implemented price hikes far in excess of the cost increases, 
all under the cover of inflation.
    In January, we sent letters to meat processing giants. In 
March, our subcommittee and the Select Subcommittee on COVID 
jointly sent letters to three of the largest shipping companies 
in the world. The shipping companies had 2021 profits 200 times 
greater than in 2019--let me repeat that, 200 times greater 
than in 2019--but their average operating costs only increased 
by 18 percent. And across our entire economy, corporate net 
profit margins continue to hover at historic highs.
    We have convened this hearing so that our distinguished 
panel of experts can help us understand how certain companies 
are engaged in excessive price hikes, the economics behind 
these practices, and their harmful effects on American 
consumers.
    We are not here today to vilify corporations. As a former 
small businessman, I know that American innovation is the 
backbone of our economy. And many corporate leaders deserve 
praise for creating jobs and growth.
    The Inflation Reduction Act is already drawing huge new 
investments in American manufacturing, and the CHIPS and 
Science Act has led to immediate plans for new semiconductor 
plants.
    We are also not here to suggest that excessive price hikes 
are the sole cause of inflation, but we cannot ignore the 
reality that American companies today are reporting higher 
profit margins than ever, while increasing prices more than 
necessary to cover costs, all at the expense of the American 
consumer. And we must do everything in our power to shine a 
light on these practices.
    With that, I'd like to recognize my distinguished ranking 
member, Mr. Cloud, for his opening statement.
    Mr. Cloud. Thank you, Chairman.
    First, inflation was because of Putin. Then it wasn't. Then 
it was transitory. And then it wasn't. Then it was at zero 
percent just a couple of days before jamming the Inflation 
Reduction Act through Congress, which actually doesn't reduce 
inflation, but it does hire 87,000 new IRS agents to go after 
Americans.
    And so after trying to redefine what recession means with 
an all-too-complicit media willing to carry their water, we 
find out Sunday in a bizarre interview that the White House is 
now measuring inflation in inches per month and that Biden 
seems content with the inflation that Americans are dealing 
with.
    The problem for this administration is that, for all the 
denials, the American people know that they're not being told 
the truth.
    What this administration doesn't seem to get is that most 
families across America don't get their economic news from some 
report or a White House press conference.
    They get their economic news when they go to the grocery 
store to find that ground beef prices have gone up 24 percent 
and bacon prices have gone up 26 percent, chicken breast prices 
have gone up 45 percent; or when they fill up at the pump to 
find out that gas prices have almost doubled in the last two 
years, in spite of Biden releasing, from our strategic oil 
reserves, oil in an effort to drive down prices artificially in 
the lead-up to an election.
    Then, when the family arrives at home, they find the cost 
to power their homes has risen 16 percent in electricity in the 
last year, 33 percent for gas, and rent's gone up 25 percent 
since Biden took office.
    This is, of course, extremely difficult for the vast 
majority of Americans, but especially for those in low-income 
and those on a fixed income whose dollar doesn't make it 
through the month anymore, those whose life savings isn't worth 
what it used to be. For them, this is just completely 
devastating.
    The purchasing power for families in America is 
diminishing. And for all practical purposes, because of 
inflation, they've lost one month's income a year.
    And I'm thankful that we're having a hearing today on 
inflation. This is certainly better than our last hearing, 
which was on dog collars. In some ways it's a recognition of 
what the White House has been denying all along, that inflation 
in this country is real and having a real impact on the 
American people.
    But I'm concerned that this hearing may be another effort 
to shift blame from the policies of this administration and the 
reckless spending of this Congress, which have been the major 
contributors of inflation we're experiencing, and scapegoat 
businesses with the blame.
    In fact, today's panel of witnesses doesn't include any 
officials from the Biden administration, a theme we've seen 
throughout this term in this committee and the full committee.
    For the purpose of this hearing, it was stated in the memo 
to examine how certain industries have used their market power 
to drive inflation. Nowhere in the memo does it discuss the 
nearly $4 trillion we have spent since President Biden took 
office.
    The reality is that inflation spiked after the passage of 
the new, nearly $2 trillion American Rescue Plan Act. Inflation 
was at 2.6 percent in March 2021 when it was passed. And by May 
2021, inflation had nearly doubled to five percent.
    Even liberal economists warned the President that the 
American Rescue Plan would overheat the economy on February 4 
before it was passed.
    Harvard Professor Larry Summers, a top economic adviser to 
both President Clinton and President Obama, warned that the 
almost $2 trillion stimulus plan was three times as large as 
the projected shortfall. He said, quote, ``Policymakers need to 
ensure that they have plans in place to address the possible 
and quite serious problem of inflation.''
    Instead of taking time to analyze the impact that 
additional government spending might have on inflation, the 
Biden administration continued to pump money into the economy 
and inflation has continued to worsen.
    On September 13 in 2022, when the August numbers were 
released showing 8.3 percent inflation, Biden hosted a party to 
celebrate the passage of a half trillion dollars of additional 
spending, ironically called the Inflation Reduction Act, which, 
as we've already mentioned, does not reduce inflation.
    And just a few days later, on CBS, President Biden told the 
American people that inflation was increased by just an inch. 
And if the White House thinks that this is what is we need to 
measure inflation by----
    [Mr. Cloud holds up ruler.]
    Mr. Cloud [continuing]. I can assure you the American 
people are thinking that this is what we need to use to measure 
inflation by.
    [Mr. Cloud holds up tape measure.]
    Mr. Cloud. President Biden's flippant attitude toward the 
American people's suffering has been unacceptable. We are 
working to conduct real oversight. And the House Republicans on 
this committee, we've written multiple letters to the Biden 
administration to request information on the plan to 
acknowledge and address lower inflation.
    Last year, June 2, 2021, we wrote to Brian Deese, the 
Director of the National Economic Council, requesting 
information on the administration's plan to combat inflation. 
We have not received a response.
    More recently, on August 24, 2022, we wrote to President 
Biden requesting a briefing on his response to inflation and 
received no response. Today we're sending another letter to 
Brian Deese requesting a briefing on the solution to address 
the economic crisis.
    I hope, for the sake of the American people, the members of 
this committee, that we can conduct real oversight into the 
cause of this historic inflation and work to ensure that the 
American people are better taken care of and get through this 
crisis.
    Thank you very much, and I yield back.
    Mr. Krishnamoorthi. Thank you, Mr. Cloud.
    I'd now like to introduce our witnesses.
    Our first witness is Mr. Mike Konczal, director of 
macroeconomic analysis at the Roosevelt Institute.
    Our second witness is the Honorable Robert Reich, former 
Secretary of Labor and current Carmel Friesen Professor of 
Public Policy at the Goldman School of Public Policy at UC 
Berkeley.
    Our third witness is Ms. Rakeen Mabud, Ph.D., chief 
economist and managing director of policy and research at 
Groundwork Collaborative.
    And, finally, the minority witness is Dr. Tyler Goodspeed, 
Kleinheinz Fellow at the Hoover Institution.
    The witnesses appearing remotely will be unmuted so that we 
can swear everyone in.
    I will now swear in the witnesses. Please raise your right 
hands.
    Do you swear or affirm that the testimony you're about to 
give is the truth, the whole truth, and nothing but the truth, 
so help you God?
    Let the record show that the witnesses answered in the 
affirmative. Thank you.
    Without objection, each of your written statements will be 
made part of the record.
    With that, Mr. Konczal, you are now recognized to provide 
your testimony.

 STATEMENT OF MIKE KONCZAL, DIRECTOR, MACROECONOMIC ANALYSIS, 
                      ROOSEVELT INSTITUTE

    Mr. Konczal. Chairman Krishnamoorthi, Ranking Member Cloud, 
and distinguished members of the committee, thank you for 
inviting me to testify.
    My name is Mike Konczal. I'm the director of macroeconomic 
analysis at the Roosevelt Institute, an economic think tank.
    This has been a remarkable recovery for workers. There are 
now between 2.7 and 3 million more jobs, with unemployment 1.2 
percent lower and labor force participation a third of a 
percent higher than what the CBO projected without the American 
Rescue Plan. Estimates of labor market dynamism, depressed for 
decades before the COVID-19 pandemic, have skyrocketed, 
enabling workers to move up the career ladder and quit their 
jobs to seek better and more productive ones.
    We are also recovering to the pre-COVID macroeconomic trend 
for consumption, something we never did after the Great 
Recession, which represented a loss of trillions of dollars. 
Yet this recovery has also featured higher-than-expected 
inflation. This has occurred alongside record high corporate 
profit margins.
    The relationship between these two trends has been one of 
the central debates of this recovery. According to the national 
accounts, corporate profit margins are at their highest rate 
since 1950. And since 2020, 40 percent of the increases in 
prices for nonfinancial corporate businesses is reflected in 
higher corporate profits, compared to just 22 percent from 
employee wages. This is in stark contrast to the previous 40 
years where these values were 11 percent for corporate profits 
and 62 percent for wages.
    Researchers at the Federal Reserve Bank of New York have 
found a connection between higher prices and gross profit 
margins, a connection that's especially high in this recovery. 
There's also a growing disconnect between the prices paid for 
input to businesses and the comparatively larger increases in 
prices of goods that consumers pay, especially for goods like 
automobiles.
    However, without firm-level data, it's difficult to 
determine the exact relationship between the increases in 
markups, the difference between revenues and the marginal costs 
of production, and inflation.
    Research I have conducted with my Roosevelt Institute 
colleague Niko Lusiani was among the first since the pandemic 
to explore the size and distribution of markups across 3,700 
firms with public data operating in the United States in 2021 
against 270,000 observations going back to 1955.
    We reproduced the analysis of De Loecker, Eeckhout, and 
Gabriel Unger, who found that markups have increased in a 
steady and dramatic fashion from 1980 through the 2010's, 
driven by firms from the top of the markup distribution.
    Our paper updated this work through 2021, relying on 
Compustat, the research standard for publicly traded firm-level 
data, which pulls and standardizes publicly disclosed data from 
a variety of sources.
    We found that markups and profits skyrocketed in 2021 to 
their highest recorded level since the 1950's. Further, firms 
in the U.S. increased their markups and profits in 2021 at the 
fastest annual pace since 1955.
    This was also driven largely by firms at the very top of 
the distribution. Markups increased the most at the very top.
    More importantly, we found that markups from before the 
pandemic were a strong predictor of the increasing markups 
during 2021, suggesting that market power had a role in driving 
inflation.
    More specifically, a 10 percent higher level of size-
adjusted markups before the pandemic was associated with an 
increase of markups between 1.6 and 2.7 percent in 2021.
    Now, inflation has broadened since these 2021 results. In 
2022, inflation is slightly more driven by services, especially 
housing. Though goods inflation still remains high, it has also 
not seen any real deflation back to prior prices.
    If corporate power allows margins and goods inflation to 
continue to be this elevated, then there's no real path back to 
pre-pandemic levels of inflation without severely driving down 
demand for services, harming our economy.
    Now, inflation is a global phenomenon. It's true, even if 
you look at core inflation, excluding volatile energy and food 
prices. It's true that it's grown faster in other countries 
than here toward the end of 2021, even before the invasion of 
Ukraine by Russia.
    But even though inflation's a global phenomenon, corporate 
profits are just one reason it remains high. But since 
corporate profit margins have become so unusually high, there 
is room for reversing them with little economic harm and huge 
societal benefit, including lower prices in the short term and 
less inequality and more innovation in the medium term. This is 
true no matter their origins.
    Such high profit margin also means there's room for wages 
to increase, not necessarily raising prices, an important 
dynamic in the strong labor market that we have.
    We believe the evidence presented by our analysis points to 
tackling inflation with an all-of-government administrative, 
regulatory, and legislative approach.
    I look forward to taking your questions.
    Mr. Krishnamoorthi. Thank you, Mr. Konczal.
    Now I recognize Secretary Reich.
    You may provide your testimony, sir.

 STATEMENT OF ROBERT B. REICH, CARMEL P. FRIESEN PROFESSOR OF 
PUBLIC POLICY, THE GOLDMAN SCHOOL OF PUBLIC POLICY, UNIVERSITY 
    OF CALIFORNIA, BERKELEY, FORMER U.S. SECRETARY OF LABOR

    Mr. Reich. Mr. Chairman, members of the committee, my name 
is Robert Reich.
    Yesterday, Fed policymakers continued their battle against 
inflation with a third straight supersized rate increase, 
warning that they will continue to raise borrowing costs. They 
assume that the underlying economic problem is a tight labor 
market, causing wages to rise and prices to rise in response. 
So, interest rates and interest rate increases are necessary to 
slow wage growth.
    With due respect, this assumption is wrong. Recent wage 
hikes have not kept up with inflation. Most workers' paychecks 
are shrinking in terms of real purchasing power. Rather than 
causing inflation, wages are reducing inflationary pressures.
    The underlying economic problem, in addition to global 
problems, is not wage price inflation. It's profit price 
inflation, that is, corporations raising their prices above 
increases in their costs, using those cost increases as excuses 
to raise their prices and profits.
    Corporate profits are close to levels not seen in over a 
half century. Corporations have the power to raise prices, 
without losing customers, because they face so little 
competition.
    Since the 1980's, two-thirds of all American industries 
have become more concentrated. Grocery prices are through the 
roof, for example, largely because just four companies control 
85 percent of meat and poultry processing and four giants 
control 70 percent of grain. One corporation sets the price for 
most of the Nation's seed corn. Two firms dominate consumer 
staples. All are raising prices and increasing profits because 
they can.
    Meanwhile, Big Pharma is increasing drug prices like mad. 
The airline industry has gone from 12 carriers in 1980 to just 
four today, which are rapidly raising ticket prices. Wall 
Street has consolidated into five giant banks, raking in record 
profits of higher spreads. Broadband is dominated by three 
giant cable companies that are raising their fees. And so on.
    With inflation driven by these conglomerates raising prices 
to increase their profit margins, the major effect of interest 
rate hikes is just to depress wages and limit jobs. As the 
economy slows, workers are even less likely to get wage 
increases that keep up with inflation.
    And unemployment is going to rise. The Fed now sees the 
unemployment rate rising to 4.4 percent next year, up from 3.7 
percent now. That would mean the loss of 1.2 million jobs.
    I urge Congress and the administration to take direct 
action against this profit price inflation, rather than rely 
solely on the Fed to raise interest rates and put the burden of 
fighting inflation on average working people who are not 
responsible for it.
    First, a windfall profits tax would help, a temporary tax 
on price increases exceeding the Producer Price Index's costs 
of producing customer goods. Congress should also direct the 
Federal Trade Commission to investigate whether price increases 
reflect added costs or opportunistic price gouging.
    Second, bold antitrust enforcement is essential. Even the 
credible threat of antitrust enforcement can deter corporations 
from raising prices higher than their costs.
    And third, as a backstop, price controls should be 
considered.
    Now, it's true they have many disadvantages in terms of 
distorting markets. But the current inflation emerging from the 
pandemic is analogous to the inflation that occurred right 
after World War II when economists argued for temporary price 
controls on important goods to buy time to overcome supply 
bottlenecks and prevent corporate profiteering. They should be 
considered now for the same reasons.
    In sum, the inflation we are now experiencing is not due to 
wage gains. It is due to increases in corporate profits. And 
it's excessive profits, not wages, that need to be controlled.
    Thank you.
    Mr. Krishnamoorthi. Thank you, Secretary Reich. And I 
appreciate you getting up so early to testify in California. So 
thank you.
    Next, I will recognize Dr. Mabud.
    You may provide your testimony.

STATEMENT OF RAKEEN MABUD, PH.D., CHIEF ECONOMIST AND MANAGING 
   DIRECTOR OF POLICY AND RESEARCH, GROUNDWORK COLLABORATIVE

    Ms. Mabud. Chairman Krishnamoorthi, Ranking Member Cloud, 
thank you for inviting me to testify today.
    My name is Rakeen Mabud, and I am the chief economist and 
managing director of policy and research at the Groundwork 
Collaborative.
    My testimony today will focus on three key points.
    First, mega-corporations are choosing to keep prices sky 
high, even as input costs begin to come down.
    Second, these price hikes are not falling evenly across the 
economy. The most marginalized groups are paying the highest 
price.
    Finally, the inflation crisis we're facing today is due to 
decades of deregulation and privatization, resulting in brittle 
supply chains that can't handle shifts in our economy without 
supply shortages and bottlenecks.
    While families have struggled to navigate a deadly pandemic 
and rising costs, corporations saw the highest quarterly profit 
margins in over 70 years in Q2 2022. And we know why. For over 
a year now, Groundwork has combed through hundreds of corporate 
earnings calls to better understand how these mega-corporations 
are taking advantage of recent crises to make record profits 
for themselves and their shareholders.
    Executives are forthright that these crises have been very 
good for business. In fact, even as input costs come down, 
corporate executives are gleefully reporting on how they plan 
on keeping prices high.
    On one recent earnings call, the car repair company 
AutoZone said it had increased pricing due to inflation and 
that, quote, ``Following periods of higher inflation, our 
industry has historically not reduced pricing to reflect lower 
ultimate costs,'' end quote.
    H.B. Fuller, an adhesive manufacturing company, told 
analysts in June that the company expected ``sizable margin 
expansion'' as costs decline because of ``extremely sticky'' 
prices and said that the company would ``push harder'' on price 
increases.
    H.B. Fuller's CEO put it even more bluntly. Quote, ``We 
don't reduce prices on the back end of these increases,'' end 
quote. He even went as far to say, quote, ``A nice light 
recession would be perfect for us,'' end quote, because it 
would bring raw material costs down even more.
    These mega-corporations are acutely aware of how their 
market power affords them the ability to keep prices high, even 
as their costs go down.
    Procter & Gamble, a massive conglomerate that encompasses 
major diaper brands such as Luvs and Pampers and detergent 
brands Tide, Downy, Bounce, and Gain, said in July that they 
plan to raise prices ``across most categories'' in the coming 
months and despite paying shareholders $3.5 billion last 
quarter.
    Executives also told analysts that consumers were 
responding well to price hikes, noting that they, quote, 
unquote, ``don't deselect'' their ``daily use'' products.
    In other words, big companies like Procter & Gamble know 
that they can take advantage of consumers' basic needs because 
they make necessities like diapers and laundry supplies. Even 
if the price of these goods rises, people will continue to buy 
them. And because of their significant market share, they know 
consumers don't have a choice except to accept these price 
increases because there are few, if any, available 
alternatives.
    And these price hikes are hitting the poorest families the 
hardest because essentials like food and shelter, the major 
drivers of higher costs right now, take up a bigger proportion 
of household budgets.
    However, the sway that these companies hold over pricing 
was not inevitable. It is the result of decades of deregulation 
and privatization and a ruthless pursuit of efficiency and 
short-term profits that left us vulnerable to profiteering.
    These choices hollowed out and nearly eliminated diversity 
in our supply chains, leaving us without fail-safes to 
withstand significant shifts in demand without shortages. 
Without competition to undercut companies that are charging 
excess prices, those companies with market power are able to 
raise prices with impunity.
    But it's not too late. We have many policy tools at our 
disposal.
    Congress should tax excess and windfall profits to 
encourage productive investment instead of profiteering.
    Congress should also strengthen the laws already on the 
books to make markets more competitive and prevent collusion 
and price-fixing.
    Congress should pursue a Federal price-gouging standard to 
protect against excessive price hikes during periods of 
economic crisis.
    And Congress should continue to make the long overdue 
investments in our supply chain and tackle costs like 
healthcare and housing that have too long put pressure on 
family budgets.
    Importantly, interest rate hikes, which slow inflation by 
tamping down demand and making people poorer, will do nothing 
to address the underlying causes, such as supply shortages, and 
will do nothing to address profiteering.
    Giant corporations' control over our supply chains has 
supplanted the functioning resilient system we could have built 
through robust public investment and free and fair competition. 
Big corporations are getting away with pushing up prices to 
fatten their profit margins, and families are quite literally 
paying the price. It's time to rein them in.
    Thank you, and I look forward to your questions.
    Mr. Krishnamoorthi. Thank you, Dr. Mabud.
    Now I'm like to recognize Dr. Goodspeed.
    You may provide your testimony.

  STATEMENT OF TYLER GOODSPEED, MINORITY WITNESS, KLEINHEINZ 
                   FELLOW, HOOVER INSTITUTION

    Mr. Goodspeed. Thank you, Chairman Krishnamoorthi, Ranking 
Member Cloud, members of the subcommittee.
    I am the Kleinheinz Fellow at Stanford University at the 
Hoover Institution. And from 2017 to 2021, I was senior 
economist, chief economist for macroeconomic policy, vice 
chairman, and ultimately acting chairman of the Council of 
Economic Advisers, in which capacity I advised the U.S. 
Government on its response to the coronavirus pandemic.
    Thank you for the opportunity to speak with you today about 
a macroeconomic issue of utmost concern to the U.S. economy, 
namely the fact that inflation in the United States has 
recently hit levels not observed since 1981. And, indeed, if we 
look at measures of core or underlying inflation, they suggest 
that underlying inflationary pressure in the United States 
today is higher than it was 3, 6, or even 12 months ago.
    I submit to you today that the primary cause of the 
inflation we have observed over the past 18 months cannot be a 
factor that is global in nature--supply chain disruptions, port 
closures, corporate profiteering--because the timing and the 
magnitude of the initial surge in inflation in the United 
States was so much earlier and greater than that observed in 
other major economies.
    So, of the 46 major economies tracked by the OECD to which 
the chairman earlier referred, the increase in the average rate 
of inflation in the United States in 2021 over its pre-pandemic 
level was greater than in all 45 other countries, with the 
exceptions of Brazil, Turkey, and the Kingdom of Saudi Arabia, 
countries which I do not typically think of as paragons of 
fiscal virtue.
    If we look at the Euro area and take a harmonized index of 
core customer prices, so that we are comparing apples to 
apples, in the 12 months through February 2021, core inflation 
in the Euro area was 1.1 percent versus 1.0 percent in the 
United States.
    In the 12 months since February 2021, which takes us right 
up to the invasion of Ukraine by the Russian Federation, the 
increase in the rate of inflation in the United States was four 
times that in the Euro area.
    What happened in March 2021? Well, 11 months into an 
economic expansion we had a deficit-financed fiscal stimulus 
equal to almost 10 percent of the entire annual output of the 
U.S. economy. I repeat, a deficit-financed fiscal stimulus 
equal to 10 percent of the annual output of the entire U.S. 
economy.
    The immediate impact of that was that demand for goods in 
the United States surged 11 percent month over month. That is a 
240 percent annualized rate of growth in demand for goods. 
That's a lot. That is a lot.
    And we poured this demand onto a supply side of the U.S. 
economy that was still recovering from the pandemic, with 3.7 
million Americans still reporting that they didn't look for 
work in the past month because of the pandemic.
    Worse than that, provisions in the American Rescue Plan in 
March 2021 exacerbated that supply side recovery by raising 
implicit marginal tax rates on the return to work.
    So we have this big increase in demand, a further 
impairment to the recovery and supply. That gap between supply 
and demand has to go somewhere. And in 2021, it went into 
prices.
    And one of the lessons of the 1970's is that, once you get 
a big inflation shock like we saw in 2021, it can quickly 
become self-sustaining as households and businesses and workers 
begin to incorporate that inflationary shock into their price 
expectations.
    Now, what we've heard here today is that this is, instead, 
this four-decade high inflation is, instead, the result not of 
supply and demand, but of what would appear to be unprecedented 
corporate profiteering. For that hypothesis to be true, four 
questions must be answered.
    One, why did we only observe this in 2021 and 2022 and not 
in the decade preceding?
    Two, why until the invasion of Ukraine was this only 
observed to such a level in the United States versus in the 
Euro area, for example?
    Three, why would this cause an increase in the overall 
price level rather than an increase in relative prices in 
specific, more concentrated sectors?
    Four, why should corporate profiteering in 2021 have 
resulted in an increase in inflation, the rate of change in 
prices, rather than a one-off increase in the price level?
    I have not heard answers to those four questions here 
today.
    Thank you.
    Mr. Krishnamoorthi. Thank you, Dr. Goodspeed.
    OK. First of all, let me recognize myself for five minutes 
of questions. And I'd like to start with Dr. Mabud.
    Dr. Mabud, one of the slides that you presented in your 
work was the contribution of profits versus other costs to the 
growth of prices.
    Are you familiar with that?
    Ms. Mabud. Yes.
    Mr. Krishnamoorthi. And can you talk to us about the 
factors that go into why there would be such a huge increase in 
the contribution of profits to total prices versus the 
contribution of profits to prices in the preceding decades?
    As you can see here, from 1979 to 2019, profits accounted 
for about 11.4 percent of the growth of unit prices, whereas in 
just the last one year, it contributes to more than 55 percent.
    Can you comment on that?
    Ms. Mabud. Yes. Thank you for that question.
    You know, every crime requires means, motive, and 
opportunity, and that's exactly what we're seeing here. 
Companies, because of endemic concentration in our economy, 
have long had the means to push up prices or go for market 
share. They've also long had a profit motive.
    But what's changed in this current period is opportunity. 
The cover of inflation, the cover----
    Mr. Krishnamoorthi. What does that mean, cover of 
inflation?
    Ms. Mabud. Yes. When prices go up generally, companies are 
able to raise prices without the consumers understanding how 
much of that price increase is coming from factors that are 
happening in the economy and how much of that price increase is 
coming from them just gilding the lily.
    And at Groundwork Collaborative we've combed through 
hundreds of earnings calls, and what we see is, in sector after 
sector, corporation after corporation, CEOs are very forthright 
that these crises have been really, really good for business.
    Mr. Krishnamoorthi. Mr. Konczal, Dr. Goodspeed presents an 
analysis within his statement. He compares 2021 to 2019, but he 
omits all of 2022. That looks like a rather odd analysis.
    Why would someone omit all of 2022 in their analysis of the 
comparison of an inflation? And how would that affect the 
analysis?
    Mr. Konczal. Well, one is that we see inflation, both 
overall inflation but also core inflation, so excluding the 
energy and food prices that we know are particularly volatile 
in the aftermath of geopolitical events this year, inflation in 
Europe catches up quite a bit and year-over-year inflation 
starts to level out, which is not necessarily the best metric 
for looking at inflation right now but it's the metric that's 
being discussed here.
    So, while U.S. inflation basically levels out in 2022 at a 
very high and elevated rate, other countries catch up to us.
    The other thing about looking at just 2021 is that we had a 
really robust recovery. Our GDP growth is far above peer 
nations. The upgrade to our estimates for GDP by such places as 
the IMF were much higher. We had a much faster, stronger, and 
robust recovery than peer nations.
    So, it does not surprise me that it took a while for their 
supply chains and their ability to address complicated global 
problems didn't really catch up, because they had not yet 
recovered to the extent we have.
    Mr. Krishnamoorthi. So, Dr. Goodspeed, in your statement 
you say, ``the magnitude of the increase in the rate of 
inflation in 2021 was so much greater in the United States . . 
. and coincided precisely with an unprecedented demand shock in 
March 2021.''
    Now, sir, I should just point out to you a couple things. 
One, are you contending that the ARP stimulus package of $1.9 
trillion was all spent in March 2021?
    Mr. Goodspeed. I am contending that it was spent largely 
throughout 2021.
    Mr. Krishnamoorthi. But was it spent in March 2021?
    Mr. Goodspeed. The vast majority of the checks went out in 
March 2021.
    Mr. Krishnamoorthi. That's incorrect. By April 19, 2021, 
only $485 billion of the $1.9 trillion had been spent.
    Mr. Goodspeed. The checks----
    Mr. Krishnamoorthi. Instead, instead, by April 19, $686 
billion of the Consolidated Appropriations Act had been spent, 
$50 billion of the PPP program had been spent by April 19, 
2021, and $10 billion of Families First Coronavirus Act was 
spent in 2021.
    However, you didn't mention any of those other potential 
recovery programs. And it that appears that you cherry-picked 
one program which only comprised a minority of the spending by 
March 2021 in your analysis. So, that undermines the integrity 
of your entire analysis.
    Dr. Mabud, let me just point out a couple of the quotations 
from AutoZone, as well as H.B. Fuller, that you had presented 
to us. They're very disturbing.
    You said, ``Following periods of higher inflation, our 
industry has historically not reduced pricing to reflect lower 
ultimate costs.''
    What does that mean?
    Ms. Mabud. It means that, even as prices, input prices, 
start to come down, they're keeping prices high because they 
know that they can.
    Mr. Krishnamoorthi. Why?
    Ms. Mabud. Because it's really, really good for business. 
They're making record profits and issuing massive stock 
buybacks to enrich their shareholders.
    Mr. Krishnamoorthi. Thank you.
    I'll now recognize Mr. Cloud for his questions.
    Mr. Cloud. Thank you, Chairman.
    First of all, would you like to finish what you were saying 
before the chairman cut you off?
    Mr. Goodspeed. Sure. I would just like to specify that the 
economic impact payments were disbursed quickly in March and 
April 2021, and that is the direct stimulus to personal 
consumption expenditure on goods.
    Mr. Cloud. OK. One of the major drivers right now is the 
cost of energy, and that's U.S. energy policy affecting 
international markets as well.
    Could you speak to the connection of that and how that 
affects the economy?
    Mr. Goodspeed. Certainly. I mean, energy passes through to 
prices throughout the economy. And in 2021, we did see a large 
global shock to energy and that was--there was another leg up 
in early 2021 with the Russian Federation invasion of Ukraine. 
That disproportionately affected Europe, and that is why we 
have seen convergence in inflation rates in 2022 between Europe 
and the United States.
    Mr. Cloud. Now, it seems to me that the supposition being 
made is that a company makes a profit and that the solution 
is--I think it was all-of-government approach, higher 
regulations, higher business.
    Does that actually help these major corporations, or does 
that hurt these major corporations when there's a regulatory 
burden put on, in contrast to other companies trying to enter 
the market?
    Mr. Goodspeed. Generally speaking, an increased regulatory 
burden is going to raise barriers to entry and is also going to 
raise the break-even rate of return on an investment project in 
order for that to be viable.
    Mr. Cloud. As a matter of fact, what we see up here in 
Washington, DC, is, OK, there's a consolidation going on among 
corporations. The corporations are actually usually the ones 
writing the regulations, giving them to the government, getting 
them passed through Congress, because they give them a 
competitive advantage over smaller companies trying to enter 
the market that would provide competition and to help drive 
down prices. Is that----
    Mr. Goodspeed. That observation would be consistent with an 
observation going back all the way to Adam Smith.
    Mr. Cloud. OK. That's kind of what I was thinking.
    You mentioned in your testimony the two major drivers of 
the economy: major government spending, supply chain 
disruption. Could you speak a little more to that?
    Mr. Goodspeed. Well, I think that a simple analysis in 2020 
would have helped one to predict inflation quite accurately, 
which would be to simply add up the productive potential of the 
U.S. economy, the supply side components.
    What is the potential output? And then what is the expected 
increase in nominal demand, given a fiscal stimulus of the 
magnitude we observed in 2021? What is the difference between 
that increase in nominal demand and the potential output of the 
United States economy? That difference is going to go into the 
price level.
    Mr. Cloud. Roger.
    Increased prices for shelter, food, and medical care were 
the largest and most relevant factors contributing to the 
higher CPI in August. Do you think we'll continue to see those 
indexes rise under the Biden administration's economic 
policies?
    Mr. Goodspeed. I do. Those tend to be what we call the more 
inertial components of inflation, a lot of these services, 
particularly shelter, rent, and owner-equivalent rent.
    And rent right now, the cost of shelter, has risen thus far 
this year at an annualized rate of 6.6 percent. It rose at an 
annualized rate in August of 8.6 percent.
    And insofar as one thinks that the inflation we're 
observing is a consequence of collusion or corporate power, 
then evidently 80 million homeowners are somehow colluding to 
increase the implicit rent that they pay to themselves.
    Mr. Cloud. Right. Now, historically, recession's been 
defined as two consecutive quarters of negative GDP growth.
    Have we had that?
    Mr. Goodspeed. We have had two consecutive quarters of 
negative GDP growth, yes.
    Mr. Cloud. OK. So, are we in a recession? Or why is the 
White House denying we're in a recession?
    Mr. Goodspeed. Well, typically we think of three ``D's'' 
when it comes to defining a recession: depth, duration, and 
diffusion.
    So, we have the duration with two quarters.
    We have depth. If you look at the depth of the contraction 
in output in the first quarter, first half of this year, it was 
deeper than the recession in the early 2000's. It was deeper 
than the recession in 1969 and 1970. It was deeper than the 
recession in the early 1960's.
    And when you look at diffusion, we had a decline in 
inventory investment. We had a decline in business investment. 
We had a decline in nonresidential investment. We had a decline 
in consumer spending on goods. The only thing that was positive 
was customer spending on services.
    Mr. Cloud. Now, one of the major things when I talk to 
every single industry throughout my district, every single 
business owner, the biggest issue that they're facing is the 
employment market. They can't find people to fill positions. 
And it's making it difficult for them to thrive and to grow 
their companies right now.
    Now, just a couple years ago we had the same issue, but it 
was for very different reasons. We had a thriving economy. 
Wages across every demographic were growing. It was amazing to 
see what was happening really in our economy.
    Could you speak to the labor issues and how they're 
connected to what's going on, how our policies are driving the 
labor crisis?
    Mr. Goodspeed. Yes. I think when you have good, sound tax 
and regulatory policy you see an economy such as we observed in 
2018-2019, wherein three-quarters of the flows into employment 
were people coming in from out of the labor force. We had 
positive real wage growth, and we had declining wage, income, 
and wealth inequality.
    Mr. Cloud. Thank you.
    Mr. Goodspeed. Thank you.
    Mr. Cloud. Yield back.
    Mr. Krishnamoorthi. Thank you.
    And before I move to Mr. DeSaulnier, I ask unanimous 
consent to enter into the record this June 14, 2022, Pew 
Research Center study showing that the U.S. has had lower 
comparative inflation, core inflation among OECD peers from Q1 
2020 to Q1 2022. If we can enter that into the record.
    Mr. Krishnamoorthi. Now I'd like to recognize Mr. 
DeSaulnier for five minutes of questions.
    Mr. Krishnamoorthi. I'm sorry. We're going to recognize 
Congresswoman Brown for five minutes of questions.
    Ms. Brown. Thank you, Chairman Krishnamoorthi and Ranking 
Member Cloud, for holding this hearing.
    This week, JBS, one of the largest meat producers in the 
world, agreed to pay $20 million to settle a lawsuit with 
consumers who have accused them of intentionally eliminating 
competition to inflate the price of their pork products.
    And this is not the first settlement of its kind. Meat 
producers of all kinds have entered into settlements after 
being accused of price fixing.
    And, although these settlements are not an admission of 
wrongdoing, they do open the conversation of how the 
concentration of power at the top can trickle down to store 
shelves across the country.
    Dr. Mabud, can you explain how large-scale consolidation 
within industries can drive up prices for consumers?
    Mr. Mabud. Absolutely. I mean, to take beef, for example, 
four companies in the meatpacking industry, Tyson, Cargill, 
JBS, and National Beef Packing, control 85 percent of the 
industry. That means two things.
    One, if one of those companies goes down for any reason, 
the whole supply chain for meat is disrupted, which drives up 
prices.
    It also means that they have an enormous amount of pricing 
power because of the market share that they hold, and consumers 
are paying really high prices at the checkout counter as a 
result.
    Ms. Brown. Thank you very much for that.
    Following up on your response, it is important to 
acknowledge that these price hikes do not land equally across 
the country. Low-income and marginalized communities, like mine 
in the 11th congressional District, seem to always be hit the 
hardest.
    So, Doctor, can you talk about how these disenfranchised 
communities are uniquely affected when our economy is 
struggling and what we can do here in Congress to reverse this?
    Mr. Mabud. Yes. That's a really, really important question.
    Low-income families, especially families of color, are 
disproportionately impacted by higher prices, especially when 
those higher prices are being driven by essentials, such as 
food and shelter. Low-income families spend about 75 percent of 
their income on necessities, such as food, gas, and shelter, 
more than double the 31 percent for high-income households. So, 
when these prices go up, it eats up family budgets, and their 
dollar just doesn't go as far.
    To address this, we have to address the rampant corporate 
profiteering that is endemic in our economy. We've seen 
examples. I've cited examples in my testimony earlier today. We 
also must continue to invest in these working families who keep 
our economy going.
    Ms. Brown. Well, with that, I thank you for that response. 
And it's clear that we need to have these conversations so that 
we can fully understand the economic imbalance that affects our 
working and middle-class families.
    So, thank you again, Doctor.
    And with that, I yield back. Thank you, Mr. Chairman.
    Mr. Krishnamoorthi. Thank you, Congresswoman Brown.
    I will use your remaining time.
    So, I'm going to ask Dr. Reich this.
    Dr. Reich, in Dr. Goodspeed's analysis he claims that $1.9 
trillion ARP stimulus package is what caused a spike in 
inflation in March 2021. However, it was a clear minority of 
the spending that had happened by April 2021.
    Why would you just focus on the ARP as opposed to the 
Family First Act, the CARES Act, the Consolidated 
Appropriations Act, which disbursed far more money than what 
had happened with the ARP by April 2021?
    Mr. Reich. Mr. Chairman, there is no reason to focus on the 
ARP.
    I want to add, though, and this is an important 
consideration, the ARP did a lot of good. It kept Americans 
afloat. It made sure that a lot of Americans did not fall into 
poverty at one of the most critical and difficult periods of 
time we have had in this country over the last century in terms 
of a public health crisis. It did a lot of good.
    And the other thing is that we've seen that, after all of 
the CARES Act, the ARP, all of the other structures that we put 
into place, a lot of that is now gone. A lot of American 
families are now back to where they were before.
    Although jobs are plentiful, note that employers are not 
raising wages as high as inflation. Wages and wage gains 
continue to trail inflation, which means that most families, 
particularly low-income families, but even middle-class 
families, are falling further and further behind.
    Mr. Krishnamoorthi. Thank you, Dr. Reich.
    Let me just direct a question to Dr. Mabud.
    Constellation Brands, Dr. Mabud, said the following: ``We 
continue to think that inflation is going to be a big factor 
for us next year, and we still intend to take a significant 
amount of pricing. We'll take as much pricing as we think the 
consumer can absorb.'' That's what Constellation Brands said.
    What does that mean, ``We'll take as much pricing as we 
think the consumer can absorb''?
    Mr. Mabud. It means that they'll keep prices as high as 
they possibly can to rake in record profits, as long as they 
don't start losing consumers.
    Mr. Krishnamoorthi. Mr. Konczal, I want to go back to the 
comparative inflation that we saw in other countries versus the 
United States.
    The Pew Research study shows that, again, America is, 
quote/unquote, ``middle of the pack'' when it comes to the 
comparative growth in inflation in 2022 versus 2020.
    Axios said the same thing.
    What is your comment on that?
    Mr. Konczal. I'd have to see the specific analysis, but it 
strikes me as broadly correct and accurate and concluded by 
many other impartial analysts, such as the IMF.
    I would also add that our employment recovery has been 
significantly better than peers, and our growth recovery has 
been way better than peers.
    So, though we're all dealing with this challenge of 
inflation, we have a lot of other things going for our country 
that are very important.
    Mr. Krishnamoorthi. Thank you.
    I now recognize Mr. Keller for five minutes of questions.
    Mr. Keller. Thank you.
    I've just been listening to what's going on here. And I 
just have a question.
    Mr. Goodspeed, I'll just start out with this. I heard that 
wages had not increased as much as inflation.
    How would a person that's running a business know how much 
inflation is going to be until we see what that is? Wouldn't 
wages normally be increased after we see what the inflation 
number is?
    Mr. Goodspeed. Historically, wages have tended to lag 
inflation, yes.
    Mr. Keller. Yes, because you don't think, oh, my gosh, 
President Biden is going to go and have an assault on American 
energy and he's going to do all these things. Oh, my gosh, I 
better raise my wages before gas prices go up.
    I mean, usually the prices increase, and then the answer to 
that is businesses, taking care of their employees, raise their 
employees' wages. So, it would be a natural thing for wages to 
increase after we see what the inflation numbers are.
    Mr. Goodspeed. Yes. Also, wage contracts tend to be 
negotiated at a lower frequency than a lot of price contracts.
    Mr. Keller. OK. Thank you. Because I hear a lot of things 
that my colleagues on the other side and some experts, that I 
don't know whether they ever ran a business or not, have been 
saying. And one of the things they're saying is, oh, we're less 
worse than someone else.
    In America, that's not good. I don't measure that I'm less 
worse than some other country's economy. We want to be the 
best. I don't want to settle for second for anybody in America. 
And I think it's really sad that we have people that try to 
say, oh, we're not so bad off because we're less worse.
    And my favorite President, the first President for which I 
could vote, Ronald Reagan, said: ``Government's view of the 
economy could be summed up in a few short phrases. If it moves, 
tax it. If it keeps moving, regulate it. And if it stops 
moving, subsidize it.''
    You know, I've heard mention of all these corporations, and 
some of them were from Dr. Mabud, AutoZone, Proctor & Gamble, 
General Motors, and Ford. I hear all these corporations 
mentioned in the testimony. And the title of our hearing is, 
``Power and Profiteering: How Certain Industries Hiked Prices, 
Fleeced Consumers, and Drove Inflation.''
    So I don't know. It's these companies who have 
shareholders, right, that have to be profitable. I mean, I 
don't know when in America it became a bad thing to be 
profitable. I mean, that's not the America I grew up in.
    But let's talk about who owns these companies. And I would 
like to submit for the record, with unanimous consent, to 
submit for the record two reports, one from CalPERS, which is 
California's retirement system, and one from the Pennsylvania 
State Employees' Retirement System. I'd like to submit these 
for the record, if I may.
    Mr. Krishnamoorthi. Sure.
    Mr. Keller. It proves that our teachers, our highway 
workers, our police officers, our firefighters are the people 
that own these companies right there. That's who it is. And the 
company has a fiduciary responsibility, which means they're 
supposed to look out for their shareholders. And if companies 
aren't profitable, then we don't have retirement plans for all 
these people. So, where are we going to get that money?
    I think we probably--Mr. Goodspeed, if CalPERS can't 
afford--doesn't have enough income on their retirement system, 
they would probably have to raise taxes or something to make 
those retirement payments, wouldn't they?
    Mr. Goodspeed. Yes.
    Mr. Keller. OK. And then who would pay for these taxes?
    Mr. Goodspeed. The American tax base.
    Mr. Keller. Yes. Yes. Exactly.
    So, I don't know why we're having a hearing demonizing--of 
course, that's the thing to do now, demonize Americans. 
President Biden did it in front of Independence Hall and said 
half of us are terrible people. And now we're having a hearing 
saying that our factory workers and our highway workers and our 
police officers are bad people because they own stocks in these 
corporations to pay for their retirement. And all of a sudden 
this is a bad thing.
    You know what? Everybody talks about poor people. I grew up 
poor. It's not fun OK? It is not fun. We lived in a shack for a 
period of time with no running water, no electricity.
    And in 1973, that summer, we moved into a tent. We walked 
the highways picking up aluminum cans and soda bottles in 
southern Arizona. It's not fun, but we did it.
    And you know what? My dad could have taught us to be 
envious. He never did. You respected the fact that in America, 
if you worked hard, you could own things and you could do well 
and you could succeed.
    That's what all the people that own these retirement plans 
want to do, and they want to have a better future for their 
kids. They don't want to be taxed to death. They don't want to 
be regulated to death.
    American people care and have done more for humanity than 
anybody around the world. And I think it is pretty pathetic 
that Members of Congress are demonizing the American people 
because they own shares in these companies and because they're 
reacting to the policies of their government on energy, on 
supply chain, and all the other things taking their dollars.
    So, I just say that I think we need to realize who really 
pays the bills around here. It's the people who get up to work 
every day. I've done it, and I think some people in this room 
have not. And if they did, they'd have a lot more respect for 
the person that works every day and owns these funds.
    I yield back.
    Mr. Cloud. Mr. Chairman, I ask unanimous consent to submit 
this letter for the record to Director Neese, Director of the 
National Economic Council, again requesting information from 
the Biden administration's plans to address the ongoing 
economic crisis.
    Mr. Krishnamoorthi. So entered.
    Mr. Krishnamoorthi. And now, as I recognize Congresswoman 
Porter for her questions, I'll just point out, in the first 
year of Ronald Reagan's Presidency, inflation was 10.32 
percent. I don't blame him for it, but it was 10.32 percent.
    Mr. Keller. We were coming out of Jimmy Carter's disaster.
    Mr. Krishnamoorthi. Congresswoman Katie Porter, please 
begin your questions.
    Ms. Porter. Good morning.
    Mr. Konczal, you published a paper, ``Profits, Prices, and 
Power: An Analysis of 2021 Firm-Level Markups.''
    This is a chart from your paper. This chart is about 
markups. What is a markup?
    Mr. Konczal. A markup is the increase in sales over the 
price of production, the marginal cost of production.
    Ms. Porter. Over the price of production?
    Mr. Konczal. Yes.
    Ms. Porter. So, let's break down for people what this 
means. If it costs $10 to make the item, the product, and you 
sell it for $12, you have a $2 markup, right?
    Mr. Konczal. Correct. A 20 percent markup.
    Ms. Porter. So, this is showing that markups have gone up 
beginning about 40 years ago. But what is this top gun kind of 
trajectory that's basically vertical here? What is this?
    Mr. Konczal. That is the level of markups in aggregate 
across the publicly traded companies starting in 2020, 
particularly in 2021, the highest increase--highest one-year 
increase on record.
    Ms. Porter. So, this is after they pay their expenses, 
after they deal with supply chain, after they pay their labor. 
This is what the corporation is adding to the cost of the 
product in order to pad its bottom line.
    Mr. Konczal. Absolutely. That is after the cost of goods 
sold, which they record as part of their accounting.
    Ms. Porter. So, this chart shows that corporations are 
adding to the cost to boost their profits beyond their costs?
    Mr. Konczal. Correct.
    Ms. Porter. Mr. Konczal, did you also see in this period a 
rise in corporate profit margins?
    Mr. Konczal. Yes. Undoubtedly, that is at the highest level 
since the 1950's.
    Ms. Porter. OK. So, I want to show another one, another 
chart.
    All right. So, this is a really important point when we 
talk about inflation, what consumers are experiencing. Prices 
are not going up just because of supply chain or labor or some 
other invisible market forces. They are going up because 
powerful executives are making deliberate choices to maximize 
their profits at the expense of the rest of us.
    According to this chart, what is the biggest driver of 
inflation during the pandemic? The blue is the--the dark blue 
is the recent period.
    Mr. Konczal. It would be corporate profits.
    Ms. Porter. And what is that percentage?
    Mr. Konczal. It is 54 percent. And that number does stay 
that level of high if you update that number to more recent 
numbers as well.
    Ms. Porter. So, over half of the increased prices people 
are paying are coming from increases in corporate profits.
    Mr. Konczal. Yes. The unit price index is reflected in 
corporate profits as opposed to other costs.
    Ms. Porter. And how does that compare historically to other 
periods of inflation or over other periods of economic time?
    Mr. Konczal. As reflected there and in other analysis, it 
is significantly higher in this recovery, 11.5 percent.
    Ms. Porter. And what is it today?
    Mr. Konczal. Fifty-three percent.
    Ms. Porter. So, I want to make sure everyone in America 
understands this chart.
    What is a unit labor cost?
    Mr. Konczal. Wages and associated worker costs.
    Ms. Porter. So, we can adjust wages.
    What is a nonlabor input cost?
    Mr. Konczal. A variety of things, including maintenance and 
investments.
    Ms. Porter. OK. So, I have to buy the stuff to make the 
widget. I have to have a factory. I have to keep the lights on. 
I have to hire someone to make the widget. That's this stuff.
    Mr. Konczal. Uh-huh.
    Ms. Porter. And this is what I add on----
    Mr. Konczal. Yes.
    Ms. Porter [continuing]. On top.
    Mr. Konczal. Yes.
    Ms. Porter. So, your research shows that, in some 
industries, this 50 percent, this more than half of inflation 
driven by corporate profits, was driven by some industries that 
increased significantly their prices during the pandemic, but 
other industries didn't.
    When you analyze the different industries, one of the 
things you found that I thought was really interesting was that 
the companies that have the highest profits, that are driving 
those markups straight up, are the same companies that had the 
highest profits before the pandemic.
    Why?
    Mr. Konczal. We believe those high markups from before the 
pandemic reflected a severe market power problem that we had 
even before COVID, and those companies were able to increase 
their prices at an even higher pace as a result of the 
reopening.
    Ms. Porter. So, I want to be clear with my colleagues on 
the other side of the aisle and the American people. It's not 
bad for corporations to be profitable in a market economy, but 
it is bad for markets to be anticompetitive.
    And that, that anticompetitive nature of the market, is 
what's permitting markups that are soaring upward, what's 
permitting corporate profits to drive inflation rather than 
unit costs and labor. That's what's permitting the price 
gouging.
    So, we need to pass my Competitive Prices Act to give 
consumers the tools they need to create a competitive 
marketplace and to hold corporations accountable when they 
abuse market power to gouge Americans.
    I yield back.
    Mr. Krishnamoorthi. Thank you, Congresswoman.
    Now I'd like to recognize Mr. Clyde for five minutes of 
questions.
    Mr. Clyde. Thank you, Chairman.
    And I was elated to hear that our subcommittee, the 
Subcommittee on Economic and Consumer Policy, was actually 
holding a hearing on inflation. Thank you.
    Today is September the 22nd, meaning that, after nearly 
nine full months, this is only the second hearing that we have 
had this calendar year. So, I am very glad that Democrats are 
actually holding a hearing on a relevant topic. Let's not 
forget that the only other hearing that this subcommittee has 
had was on pet flea and tick collars.
    This year, the United States has experienced the highest 
inflation in decades, and it is deeply troubling to me that 
Democrats on this committee seem to have decided to turn a 
blind eye to the painful price hikes their policies have 
inflicted on the American people.
    Now Democrats are desperately trying to deflect the blame, 
largely toward capitalism and so-called corporate greed, rather 
than admitting that their runaway spending and big government 
socialist agenda has caused and continues to fuel the inflation 
crisis.
    Last week, the CPI report revealed that, during the month 
of August, inflation hit a whopping 8.3 percent, exceeding all 
expectations. The average price of gas is still 25 percent 
higher than last year, and groceries have surged almost 14 
percent.
    Groceries, the price of groceries continues to rise, 
hitting the lowest-income Americans the hardest. Eggs are up 
nearly 40 percent compared to August 2021. Milk is up 17 
percent, chicken is up 17 percent, and bread is up over 16 
percent.
    Now Americans are struggling to buy groceries and to afford 
gas, and it simply did not have to be like this.
    Mr. Reich, I believe you served in the Clinton 
Administration. Is that correct?
    Mr. Reich. That's correct, Congressman.
    Mr. Clyde. All right. I believe Mr. Larry Summers, who 
served as the 71st United States Treasury Secretary, also 
served in the Clinton Administration. Is that correct?
    Mr. Reich. Yes. I was there. We overlapped, same time.
    Mr. Clyde. OK. Great.
    Do you think he is a qualified and knowledgeable 
individual?
    Mr. Reich. I do. He's a friend, and I respect him.
    Mr. Clyde. Thank you.
    Well, Harvard professor Mr. Larry Summers was a top 
economic adviser to both President Clinton and President Obama, 
and I think that's pretty impressive. And, yet the Biden 
administration seems to have refused to heed economists' 
warnings of growing inflation.
    On February 4, 2021, Professor Summers, who, again, served 
in both the Clinton and the Obama Administrations, warned that 
President Biden's almost 2 trillion, quote, ``stimulus plan,'' 
known as the American Rescue Plan, was three times as large as 
the output shortfall and that, quote, ``Policymakers need to 
ensure that they have plans in place to address the possible 
and quite serious problem of inflation.''
    And I want to point out that I voted against this 
disastrous piece of Democrat legislation last year.
    Yet again, on May the 18th of this year, Mr. Summers 
reiterated his concern, but the concern apparently, again, fell 
on deaf ears. He said that Democrat policymakers are--and I 
quote--``taking very substantial risks on the inflation side.''
    Given that even top Democrat economic advisers, economists, 
like Mr. Summers, warned of this inflation because of the 
left's policies, it seems hypocritical that now Democrats are 
blaming companies for rising prices.
    Dr. Mabud, I would like to ask you a pretty simple 
question. A ``yes'' or ``no'' will suffice.
    Are the Biden administration and congressional Democrats to 
blame at all for the crippling inflation burdening hardworking 
American families?
    Mr. Mabud. The critical investments the administration and 
Congress made over the course of the pandemic is the reason 
that we're in the middle of a jobful recovery rather than a 
jobless recovery.
    Mr. Clyde. I didn't ask you about that. I asked you about 
inflation. Could you please answer the question?
    Mr. Mabud. It's really important to address the fact that 
working people are the people who keep this economy going.
    Mr. Clyde. OK. So, you're not going to answer the question. 
You're not going to answer whether or not Democrats and the 
Biden administration are to blame at all for crippling 
inflation burdening hardworking families.
    Mr. Mabud. You know, I'm here today to talk about corporate 
profiteering, which has been hiking prices for American 
families.
    Mr. Clyde. OK. All right. So, we're not going to get 
anywhere here.
    Over the weekend, President Biden stated in a ``60 
Minutes'' interview that inflation had hardly risen. Quote, 
``The inflation rate month-to-month was just--just an inch, 
hardly at all.''
    So, Mr. Goodspeed, is inflation just up an inch, hardly at 
all?
    Mr. Goodspeed. No. You can look at the year-over-year 
figure, which is 8.3 percent headline. You can look at the core 
or underlying measures of inflation, median inflation, to which 
everyone was pointing a year ago saying: This is evidence that 
we don't have an inflation problem.
    In August, that rose at an annualized rate of 9.2 percent.
    Mr. Clyde. So, we have a problem with inflation.
    Mr. Goodspeed. Yes.
    Mr. Clyde. Thank you. Do you----
    Mr. Krishnamoorthi. Thank you, Mr. Clyde. Your time has 
expired. And Democrats aren't the ones blaming corporations. 
Eighty percent of Americans, including many Republicans, are.
    I'd like to now recognize Congresswoman Bush.
    Mr. Clyde. I believe it's excess Federal spending there, 
Mr. Chairman.
    Mr. Krishnamoorthi. Congresswoman Bush, you are recognized 
for questions.
    Ms. Bush. Thank you. And thank you, Chairman 
Krishnamoorthi, for convening this deeply important and timely 
hearing.
    The unprecedented severity of corporate profiteering and 
its negative impact on workers, consumers, and our small 
businesses within communities cannot be overstated.
    In my hometown of St. Louis and every corner of this 
country, rising costs of rent, food, healthcare, 
transportation, and childcare means more people are working 
harder than ever, but coming home with less money to show for 
it.
    The gap between depressed wages and increased worker 
productivity leaves family scrambling to afford basic goods and 
services, despite producing more profit than ever for these 
same corporations.
    Consumers are forced to rely on banks to extend lines of 
credit when their paychecks aren't enough, racking up billions 
in credit card debt, auto loans, student loans, and medical 
debt.
    We have over 40 years of data that proves Reagan-era 
policies encouraged monopolies and concentrated markets into 
increasingly fewer hands. When one company controls daily 
essentials, such as Proctor & Gamble, consumers are forced to 
accept prices set by one corporation with no competitors.
    The price for basic human needs, like toothpaste, 
detergent, toilet paper, continues to rise well above previous 
profit margins, with no end in sight.
    The power and influence of corporations has increased 
exponentially while labor union participation has significantly 
declined. Unionization was responsible for historic gains, such 
as wage increases, eight-hour days, sick leave, paid time off, 
child labor laws, and more.
    Without strong unions, lawmakers and regulators are the 
last line of defense for workers in the bitter fight between 
labor and big business. It's time for us to reconsider the 
tremendous influence a select few corporations have over our 
economic and political systems.
    Do 150 million Americans have to live paycheck to paycheck 
so a group of 500 CEOs can get richer? Shouldn't we champion 
monetary policies that encourage unemployment to rise so that 
markets can thrive? These questions are equal parts economic, 
political, and moral, and they deserve our careful 
consideration.
    So, Secretary Reich, it's been nearly a decade since you 
released the documentary ``Inequality for All,'' in which you 
sounded the alarm about harmful corporate practices.
    How has the relationship between worker productivity and 
wages changed since then?
    Mr. Reich. So, Congresswoman, I wish I could say that there 
was a dramatic difference in the relationship. But actually 
we've seen that worker productivity has continued to rise, but 
wages have continued to stay relatively flat adjusted for 
inflation.
    In fact, what we've seen recently is that, even though 
inflation continues to rise, those worker wages are 
relatively--are still relatively flat.
    Employers are complaining they can't find workers. Well, 
there is a way to find the workers: raise pay. They won't do 
it. They'll raise the prices of their goods, but they're not 
raising their wages.
    Ms. Bush. So, as a followup, Secretary Reich, given the 
historical disparities between Black and White unemployment 
levels, can you estimate how the Federal Reserve's policies 
will impact Black workers?
    Mr. Reich. Yes. Undoubtedly, the Fed's continuing rate 
increases are not only flirting with a recession, but they are 
making it harder for workers, particularly Black workers who 
are disproportionately low-wage, to get income increases, to 
get wage increases.
    And one of my biggest fears is, because Black workers are 
disproportionately low wage, they are also disproportionately 
going to be the first fired when we head into an economic 
slowdown.
    This is a problem for Black workers. It's a problem for the 
working poor. It's a problem for the lower middle class. These 
are the people who are drafted into the fight against inflation 
when we rely solely on the Fed and on interest rate hikes to 
control inflation.
    Ms. Bush. Thank you for your explanation and for being so 
clear and concise in speaking the truth.
    While we are here to discuss corporate accountability, I 
must also emphasize lawmakers set the rules of engagement. If 
corporations are acting in bad faith, it is incumbent upon 
regulators to close legal loopholes before consumers and 
workers are negatively impacted. It's time to change the rules 
that implement price gaps, strengthen antitrust laws, increase 
minimum wage, bolster the power of our unions, and reinvest in 
people, not profits.
    Thank you, and I yield back.
    Mr. Krishnamoorthi. Thank you.
    I'll use that to ask Dr. Mabud, are we demonizing 
shareholders, are we demonizing someone else, or are we 
questioning the judgment of executives when they raise prices 
far beyond costs?
    Mr. Mabud. We live in a system where corporate executives 
are really beholden to their shareholders, and what we're 
seeing is that shareholders are demanding higher and higher 
profits.
    This is essentially a story of a financialized economy. 
When it's really effective for a company to raise prices and 
that company can offer its shareholders a lot of money, those 
shareholders go to other sectors in the economy and demand 
higher prices there, too.
    Mr. Krishnamoorthi. OK. Thank you.
    Mr. Donalds, you are recognized for five minutes.
    Mr. Donalds. Thank you, Mr. Chairman.
    Couple things. Let's level set here for a moment.
    We are in a recession. We have had two quarters of negative 
GDP growth. I don't know in what world we decided we wanted to 
change the definition that not only government, but financial 
markets have been using for 80 years now. We've called two 
negative quarters of GDP growth a recession.
    Why are we trying to change language now? Because of the 
economic policies by Joe Biden and Democrats in Congress that 
have brought forward a couple of things.
    No. 1, an artificial labor shortage coming out of the 
pandemic. Doctor--I don't want to mispronounce your name since 
I wasn't here for the opening remarks, Mabud, is that correct?
    Dr. Mabud. Mabud
    Donalds. My apologies. Dr. Mabud, why was there a labor 
shortage coming out of the COVID-19 pandemic?
    Mr. Mabud. We're actually back to----
    Mr. Donalds. No, no. Dr. Mabud, there was a labor shortage 
that was coming out of the COVID-19 pandemic. Do you 
acknowledge that?
    Mr. Mabud. I don't think we had a labor shortage. I think 
we had a shortage of good jobs.
    Mr. Donalds. Mr. Goodspeed, did we have a labor shortage 
coming out of the COVID-19 pandemic?
    Mr. Goodspeed. Yes. We had 1.5 million early retirements, 
we had 3.7 million Americans indicating that they didn't look 
for work for the past month because of the pandemic, and we had 
an extension of--expansion of the child tax credit and an 
extension of Federal supplemental unemployment insurance 
benefits that exacerbated the labor supply shortage
    Mr. Donalds. Dr. Mabud, let's get out of the statistical 
world. Let's go into real world America.
    You buy goods and services like any other American does. 
I'm quite sure you went to stores where the signs were in the 
windows about how they were basically paying people to come for 
an interview, let alone for the job itself.
    Do you acknowledge that to be a reality of what was 
happening?
    Mr. Mabud. Yes. I also want to acknowledge that low job 
quality and low wages are a huge liability in our economy. I 
mean, last week's recently averted rail strike is an example of 
this, right? When you don't have workers who can come to work 
because they literally can't take a routine doctor's 
appointment, that's not the fault of that worker. That's the 
fault of the company that is driving down the job market.
    Mr. Donalds. Dr. Mabud, do you acknowledge that, if 
somebody is giving dollars, if they're given revenue, if 
they're given cash, and they don't have to exchange their labor 
for money in order to pay for goods and services, that that 
lowers the productivity or the desire to actually go get 
working hours at a company or firm or shop or whatever the case 
may be?
    Mr. Mabud. I believe that people should be treated with 
dignity at work.
    Mr. Donalds. Oh, I believe everybody should be treated with 
dignity, but that's not what we're talking about. When it comes 
to labor shortages, what we're trying to surmise is that, if 
you go down the pathway of providing dollars to people and they 
don't have to exchange labor, which is the way our economy 
functions, for money to pay for their goods and services, do 
you think that leads to a labor shortage? Yes or no?
    Mr. Mabud. Like I said, I believe we are experiencing a 
shortage of good jobs, not a shortage of labor. And I think 
it's really critical not to blame working people for higher 
prices.
    Mr. Donalds. I'm not blaming working people. What I would 
say is I'm blaming government policy, because if you're given 
money without having to exchange it with labor, having to take 
your talents and abilities, and you're getting money as a 
result, it depends on the industriousness of the individual at 
that point. I'm not blaming anybody.
    If you're giving out free money, shoot, OK, cool. Most 
people are just going to go ahead and take it. We know this.
    But if have you a legitimate economic choice to make at 
your kitchen table--I can go work 40 hours, or I can go work 20 
hours, and our living does not change--people have their own 
decision to make about what they're going to do.
    The point I'm making is that labor shortage, which was 
created by the, quote/unquote, American Rescue Plan, led to a 
labor shortage, and that labor shortage has led to price 
increases because you had people who had the revenue and the 
disposable cash-flow to buy goods, but not enough goods in 
circulation to purchase.
    Mr. Goodspeed, is that an accurate assessment of what's 
happened in America since Joe Biden became President of the 
United States?
    Mr. Goodspeed. Yes, I think that's a fair description.
    Mr. Donalds. So, let's establish a couple things.
    Are prices up? Yes, they are. Electricity prices are up. 
Good prices are up. The only reason why fuel--gasoline prices 
are down is because the President's been basically buying down 
the price with releases from the Strategic Petroleum Reserve--
which, by the way, that's coming to an end as well. We are in a 
recession. I think we've covered a lot here.
    Look, I understand the majority party's desire to try to 
put this on corporate America for raising prices. But if you do 
not have enough workers working, there is not enough goods 
produced. If there is not enough goods produced but everybody 
still has money to go buy goods, the price of each unit 
actually goes up. That's how inflation is always created. More 
policies of the same is only going to lead us further down the 
road to perdition, which we are already on.
    With that, I yield back
    Mr. Krishnamoorthi. Thank you, Mr. Donalds.
    Now I'd like to recognize Ranking Member Cloud for a 
closing.
    Mr. Cloud. Thank you, Chairman.
    I appreciate the fact that we've been able to have a robust 
discussion. Certainly the economy is something that affects so 
many people. We've discussed that today.
    Families are suffering because of the policies of this 
administration. We've seen energy prices go through the roof. 
They're causing fertilizer prices to go up. They're causing 
pesticide prices to go down. That's making our yields be lower 
while our food prices are going higher. The cost of goods are 
going up. We have a work force that's not incentivized to 
return to work, causing the supplies to go down, leading to 
rising prices.
    And the solution that's being presented today is more 
government intervention, which intervention by the government 
has only, in the past, worked to create--and, as a matter of 
fact, in the last couple of years, what we've seen.
    You know, just a few years ago, we had an economy that was 
thriving. Virtually every single demographic, wages were 
rising, and people were flourishing, families were flourishing.
    And now what we have is a massive wage shortage--or 
employment shortage--and an economy that's struggling to keep 
going. And the solution of more government intervention being 
the solution is just not what's going to work.
    What that will continue to do is to create the disparity 
that we see happening now between the rich and the poor. Where 
we had a thriving middle class that was beginning to grow and 
that gap diminishing just 2 and 3 years ago, now that gap is 
extremely growing.
    As those who are well connected and people who can come 
here and have access to help write these regulations toward 
their favor, create a less competitive environment, that means 
prices go up, versus what needs to happen in the reverse, where 
we create a more competitive environment to lead prices to go 
down.
    And so we have a lot of work to do to return our economy to 
a thriving economy where families can flourish in all 
demographics. And I appreciate the conversation today. We 
certainly have to go back to sound fiscal policy.
    Thank you. I yield back.
    Mr. Krishnamoorthi. Thank you, Mr. Cloud.
    Thank you all. Thank you to all the witnesses for coming in 
today. Thank you to the audience for tuning in. Thank you to 
Dr. Reich for--I finally see some sunlight coming through that 
window, so it's starting to get later in the morning there.
    I think that this hearing is really not about denying that 
supply chain disruptions occurred or that there were changing 
patterns in demand, but rather to acknowledge something that 
the American people themselves have been saying very strongly, 
which is that 80 percent of Americans say corporations raising 
prices to make record profits is a cause of inflation. That's 
it. Eighty percent of Americans.
    We're not talking about just Democrats. We're talking about 
a large majority of Americans know in their bones something 
that we are finally acknowledging here in this hearing, which, 
unfortunately, some of my colleagues on the other side do not 
want to acknowledge.
    What we've heard from the testimony of our witnesses is 
that we're seeing record profits. But more than that, record 
profit margins, huge increases in those profit margins year 
over year, unprecedented level of market concentration, and 
corporations even stating that they are increasing prices and 
don't intend to let them fall even as their costs fall.
    So that is a problem. And when we see corporations--and not 
all corporations, but certain corporations--do this, especially 
in the meat-processing industry, which we've talked about, 
which affects average, ordinary people every day, where they 
saw their profits surge 134 percent from nearly $4 billion in 
2019 to nearly $9 billion in 2021, it has real effects. People 
cannot eat meat. People cannot do the things that they would 
ordinarily do to feed their families. And that, unfortunately, 
has repeated itself in other industries as well.
    Now, some of my colleagues on the other side say that 
Democrats are blaming corporations or Democrats are blaming 
shareholders. No. What we're saying is that corporations 
raising profits excessively is a cause of inflation. It may not 
be necessarily illegal, but it's probably, in some cases, 
unethical. And to say that increasing wages is the cause of 
inflation when they could have reduced profits to allow for 
lower prices is also disingenuous
    Now, Dr. Goodspeed presents an analysis whose integrity has 
been undermined. He says that the ARP is what caused the sudden 
rise in inflation because of a, quote/unquote, ``unprecedented 
demand shock in March 2021.''
    But when he was asked does he believe that $1.9 trillion 
went out in April--sorry, March 2021--he says the majority did, 
when actually a small sliver of that $1.9 trillion went out in 
March 2021.
    That is a problem with his analysis, and it has not been 
rebutted even once during this hearing.
    And so I just want to say thank you for everyone's 
participation. Thank you for your interest in this very 
important topic.
    And in closing, I express my gratitude again----
    Mr. Cloud. Mr. Chairman?
    Mr. Krishnamoorthi [continuing]. For the witnesses who 
testified----
    Mr. Cloud. Mr. Chairman, if you're going to challenge 
someone's integrity in your closing statement, you should give 
him a chance to respond.
    Mr. Krishnamoorthi. That was up to you guys to ask him the 
question about his analysis, and you failed to do so.
    Mr. Cloud. You are disparaging a man's integrity----
    Mr. Krishnamoorthi. I did not----
    Mr. Cloud [continuing]. In your closing argument----
    Mr. Krishnamoorthi. No.
    Mr. Cloud. It's a very cowardly thing to do----
    Mr. Krishnamoorthi. No.
    Mr. Cloud [continuing]. Not to give him a chance to 
respond.
    Mr. Krishnamoorthi. I actually criticized the integrity of 
the analysis, Mr. Cloud.
    Mr. Cloud. You mentioned his integrity.
    Mr. Krishnamoorthi. No. I said the integrity of the 
analysis. And I think that's a very desperate move to try to 
hold up the analysis in the last seconds of this hearing.
    All members will have five legislative days within which to 
submit additional written questions to the chair for the 
witnesses, including any of the witnesses present today. These 
questions will be forwarded to the respective individual for 
his or her response.
    I ask our witnesses to please respond as promptly as you 
are able.
    The hearing is now adjourned.
    [Whereupon, at 10:36 a.m., the subcommittee was adjourned.]