NRPLUS MEMBER ARTICLE I n a series of tweets published yesterday, Senator Elizabeth Warren (D., Mass.) makes several claims about inflation.
She begins, “Inflation isn’t some magic unstoppable force.” Correct! It is the result of monetary- and fiscal-policy errors that cause the money supply to increase too quickly relative to the amount of output the economy is able to produce.
But then Warren continues, making clear that she does believe inflation is a magic unstoppable force. “It’s influenced by corporate greed,” she writes. “And we aren’t powerless to fight back.”
Corporations have been greedy for as long as there have been corporations. If their greed caused inflation, it would probably be unstoppable. Their greed didn’t suddenly start in 2021, when inflation began to spike, and then gradually lessen over the last year, as inflation receded.
And as for our power to “fight back,” Warren’s evidence for it is President Biden’s appointments of Lina Khan to chair the FTC and Jonathan Kanter to lead the antitrust division of the DOJ, which is strange for two reasons.
The first is that Khan and Kanter are not responsible for price stability. That’s the Federal Reserve’s job, while the FTC and the DOJ share the duties of antitrust enforcement.
The second is that Khan and Kanter have, rather notably, failed to win the court cases their agencies have brought. They have rewritten policy guidelines and filed lawsuits, but the courts have consistently rejected their arguments for lacking supporting evidence (as a Biden-appointed federal judge did again earlier this month). Mergers they have sought to block have not been blocked, and they have not broken up big companies as they might have wished to.
As further examples of “fighting back,” Warren points to campaign statements made by victorious Democratic candidates in 2022, such as Senator John Fetterman (D., Pa.) and Representative Katie Porter (D., Calif.). “Voters rewarded Democrats who said plainly that they would fight to beat back giant corporations that are driving up inflation,” Warren writes.
So what Warren is saying is that Khan, Kanter, and elected Democrats have said the right words, in Warren’s view, about corporate greed. They haven’t won court cases or passed new laws or done anything substantial about corporate greed. They’ve said and written the right words, and inflation has gone away.
Sounds a lot like magical thinking to me.
She goes on to note that yearly inflation declined for the twelfth straight month in July, and that’s correct, according to the CPI measure. (The number is for June; it was released in July.) But the next tweet says, “I’ll keep fighting to break up corporate monopolies, prevent price gouging, and lower costs.” A declining rate of inflation does not mean costs are lower. It only means that the price level is increasing at a lower rate than it was previously increasing. Perhaps Warren is saying that she will continue to fight until costs are lower, but deflation would be a somewhat odd goal for a senator to pursue.
“We called out corporate greed, and the Biden administration cracked down on price gouging and corporate concentration across the economy,” Warren writes. But mean tweets about “greedflation” aren’t economic policy, and the Biden administration’s effort to overhaul antitrust law has so far been a failure.
What caused inflation? It probably had something to do with the Fed’s expansionary monetary policy lasting too long after the Covid recession was over, combined with the federal government’s decision to spend trillions of dollars. The second part of that is partly Warren’s fault, because she and her fellow Democrats voted for the American Rescue Plan Act, which added almost $2 trillion in unnecessary spending to the economy that even some left-leaning economists warned would be inflationary.
So it makes a perverse kind of sense that Warren would claim Democrats brought down inflation by, more or less, casting magic spells: The alternative would mean admitting that they’d helped cause the problem in the first place.