When the prepared congressional testimony of a senior administration official was circulated inside the White House in recent weeks, it included a passage tying inflation to corporate consolidation and monopoly power.
The alteration of the testimony highlights the tensions within the administration over whether the White House should blame corporate consolidation and monopoly power for price hikes. Some officials in the White House National Economic Council believe the administration could more aggressively advance that argument, and Democratic pollsters have told the White House that a populist economic message on corporate greed and prices broadly resonates with voters.
But economists inside the administration, particularly at the CEA, are uncomfortable with the push. “It’s been the war of the ‘track changes’ inside the administration over how much the White House can lean in on the extent to which competition and greed are driving inflation,” said one person briefed on the internal dynamics, who spoke on the condition of anonymity due to fear of professional reprisals.
The phrase “track change” can refer to the practice of editing a shared computer document to suggest additions or deletions.
Prices rose 7.5 percent in January compared to one year earlier, the biggest spike in 40 years. White House officials early last year said these price increases would likely just be temporary. But they were wrong, and the increases have persisted amid labor shortages, supply chain issues and robust consumer demand. These higher prices have eaten into wage increases and become one of the most dominant economic issues facing voters, putting the White House on the defensive as its attempts to curb inflation come up short.
CEA chair Cecilia Rouse and NEC deputy director Bharat Ramamurti said they were unaware of any incident in which an administration official’s testimony was altered to take out references to corporate consolidation’s role in inflation. Rouse and Ramamurti also said the president’s economic advisers have worked closely together on the administration’s broader competition agenda for months, downplaying any friction as part of the natural policymaking process.
“The policy debate within the economic team is totally normal. It’s malpractice for there not to be debate because that would suggest we are working in an echo chamber and the president is not getting the benefit of critical thinking of diverse opinions,” Rouse said. Ramamurti added, “We have discussions about what the evidence shows.”
The White House has faced substantial political head winds from the pressures caused by inflation, with President Biden’s economic approval rating declining amid the biggest price increases in four decades.
While price hikes have hurt many Americans, large corporations have had their most profitable quarters in years, with corporate profits up by as much as 27 percent from 2019 to 2021, according to Dean Baker, a liberal economist. The share of corporate income going to profits rose from 24 percent to over 26 percent from the fourth quarter of 2019 to the third quarter of last year.
To this point, Biden has mostly limited his remarks on corporate greed and inflation to specific sectors in which a few firms hold massive amounts of market power, stopping short of embracing either the rhetoric or the policy response called for by Sen. Elizabeth Warren (D-Mass.). Biden said at the end of January, “This isn’t a new issue. It’s not been the reason we’ve had high inflation today. It’s not the only reason. But, over time, it has reduced competition, squeezed out small businesses and farmers, ranchers, and increased the price for consumers.”
Part of his hesitance reflects the trepidation among his economic team about whether inflation actually is tied to corporate consolidation. CEA officials believe that monopoly power is a major economic problem and support the broader White House antitrust agenda. But these economists do not believe consolidation explains the 7.5 percent surge in prices over the last year.
The differences among Biden’s advisers are also broadly described as collegial and a matter of degree, rather than the kind of internal warfare that characterized much of the Trump administration’s economic team. Some economists have praised the White House for resisting the political temptation to make a bigger deal out of monopoly’s role in inflation.
“I think they’ve tried to be honest about the economic situation and I, for one, appreciate that,” Baker said. “They have to make a political call about whether that’s the right decision, but I think it’s best for them to be honest and I think they’ve done that.”
Still, the administration faces mounting pressure from other key allies to more aggressively connect rising prices to corporate power and exploitation.
This week, two groups — the American Economic Liberties Project and the Groundwork Collaborative — sent a letter to Biden urging him to order the CEA to “study market realities” and determine the connection between corporate profits and higher prices.
The memo also told Biden to instruct the CEA to study the question: “What percentage of recent price hikes are opportunistic and not associated with any documented shortage or supply chain failure?”
Antitrust advocates often say their arguments are more nuanced than their opponents suggest. They contend that while it is true that American industry has been consolidated gradually over the course of several decades, only now in an environment where it has become easy for firms to blame broader trends are they able to fully exploit it by passing costs onto consumers.
Celinda Lake, a Democratic pollster, pointed to the recent result of a focus group in which some respondents expressed outrage at corporations over a massive increase in the cost of chicken fingers. “People are really responding to the idea that corporations are price gouging. You can’t tell people that’s not going on. They’re experiencing it,” Lake said. She added that “it’s testing off the charts.”
The letter from the American Economic Liberties Project and the Groundwork Collaborative pointed to an analysis finding corporate consolidation costs the average American household $5,000 per year. “There is now overwhelming evidence that large corporations with significant market power are exploiting the broader supply chain crisis to raise prices even when no bottleneck or shortage seems to exist,” the letter stated.
Warren, who has pushed the White House to get tougher on the issue, said in a statement, “CEOs of giant companies are saying the quiet part out loud: Corporate executives are happy to help drive inflation and fatten their profit margins by price gouging Americans. More evidence that years of corporate consolidation in the U.S. economy is hurting families’ wallets and workers’ wages will strengthen the case for strong antitrust enforcement as a critical tool to fight inflation.”
But many economists, including those influential with the White House, think these arguments are strained. In particular, they say high corporate profits and high prices are both the function of the same underlying cause of elevated consumer demand. Higher demand leads companies to raise prices, causing inflation, which in turn leads to higher profits. Even many liberal economists, such as Baker and Claudia Sahm of the Jain Family Institute, have dismissed the argument that consolidation accounts for a major part of inflation.
Former Democratic treasury secretary Larry Summers and Jason Furman, a top economist in the Obama administration, have also been openly critical of the attempts to blame corporations for inflation. “Business bashing is terrible economics and not very good politics in my view,” Summers said in an interview.