**The Truth Behind Harris’ Inflation and Corporate Greed Claims**
**CNN** — Vice President Kamala Harris has taken up President Joe Biden’s fight against so-called "greedflation," the idea that corporate profit-taking has played a significant role in the United States’ recent inflation crisis. Harris argues that some companies have marked up goods excessively or reduced product sizes to boost their bottom lines, contributing to the inflation woes faced by American consumers.
**Is There Truth to Harris’ Claims?**
In her speech on the economy in North Carolina, Harris pointed out that while supply chains have improved since the pandemic, prices remain stubbornly high. She highlighted that many major food companies are reporting their highest profits in two decades. “Many of the big food companies are seeing their highest profits in two decades. And while many grocery chains pass along these savings, others still aren’t,” Harris said. She emphasized that while most businesses are playing by the rules, some are exploiting the situation, and action is needed against these bad actors.
However, Harris' argument overlooks some key points. Firstly, consumer behavior plays a crucial role in setting prices. Secondly, while corporate greed may have contributed to inflation in certain sectors, it was not the primary driver. Lastly, the war on inflation has largely been won, with inflation rates dropping significantly in recent months.
**Profits Are Up, But They’ve Been Higher**
It’s undeniable that some of the largest food companies have seen substantial profits. For instance, PepsiCo reported a $9.1 billion profit last year, which is $2 billion more than in 2020. However, this figure is still below the $12.5 billion profit it earned in 2018 when inflation was much lower. Similarly, Kroger, one of the largest supermarket chains in the U.S., earned a bigger profit in 2018 compared to 2023. Kraft Heinz made $10.9 billion in 2017, almost four times what it earned last year. These figures suggest that while corporate profits have indeed risen, they were even higher during periods of low inflation.
**The Role of Supply and Demand**
It’s important to note that supply and demand fundamentally set prices, not corporations alone. The San Francisco Federal Reserve’s study from May indicated that while there were some unusual price spikes in specific sectors, overall corporate profit-taking was not a leading cause of inflation. The U.S. economy, a $29 trillion entity, cannot be boiled down to a few markets where "greedflation" might have been a factor.
Current trends in retail further highlight the role of consumer behavior. After years of rising prices, companies like Target, Starbucks, and McDonald’s have started lowering prices and offering deals to attract customers who are refusing to pay more. Additionally, rents have dropped as a glut of new rental housing has led landlords to offer perks like free rent to entice tenants.
**What Actually Caused the Inflation Crisis?**
The inflation crisis has its roots in the global turmoil caused by the Covid-19 pandemic. The pandemic temporarily halted production and created massive supply and demand imbalances. Governments, including the U.S., injected trillions of dollars into the economy to support businesses and workers, which artificially boosted consumer spending. The Federal Reserve kept interest rates near zero for two years, leading to a surge in home purchases and refinancing at historically low rates.
Russia’s invasion of Ukraine and the resulting global supply chain disruptions further exacerbated the situation, driving prices higher. For a while, chaos in the Middle East also pushed up oil prices, adding to the inflationary pressures.
**Inflation Isn’t the Big Concern Anymore**
While inflation continues to be a concern for many Americans, it is no longer the primary economic issue. Inflation has moderated significantly, with consumer inflation falling below 3%, a three-year low. The Federal Reserve’s preferred measure of inflation, the Personal Consumption Expenditures price index, is now within half a percentage point of the Fed’s 2% target.
As a result, some economists believe that Harris’ plan to cap certain prices may be more of a political move than a necessary policy. While regulations are essential to keep corporations in check, the war on inflation has largely been won. Consumers have adjusted their spending habits, and the market is self-correcting.
Vice President Harris’ claims about corporate greed contributing to inflation hold some truth but overlook the broader economic context. While some companies have indeed profited during the inflationary period, the root causes of inflation are far more complex, involving global events and government policies. As inflation continues to fall, the focus may need to shift from battling price gouging to addressing other economic concerns.
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