Episode Details

It makes my blood boil.

Since March I’ve been screaming about the Fed’s total misreading of inflation — believing it’s being caused by workers getting wage hikes, when the real cause is powerful corporations raising prices higher than their costs.

I’m not so grandiose as to think my screams would have any direct influence on the Fed. My hope was that my argument and data might be picked up by a few voices in the media, which would lead some Democrats in Congress to pick up on it, and that maybe they’d put some pressure on the Fed — such as asking Fed chief Jerome Powell to respond to those arguments when he next testifies.

It’s not happened yet. Yesterday Powell and the Fed raised interest rates again — another three-quarters of a percent — bringing the official rate from near zero in March to over 3 percent now.

Insane.

Well, now I get a chance to tell Congress why this is insane.

The House Oversight Committee’s subcommittee on economic and consumer policy holds a hearing this morning and has asked me to testify. (Thankfully, they’re allowing me to do it remotely from my home here in California, although the timing isn’t ideal — the hearing starts 9 am Eastern Time, which is 6 am here — and because I’m the lead-off witness they want me to check in remotely at 5:45 am. I’ll have to drink plenty of coffee.)

When you testify before Congress, you get 5 minutes to summarize your views. You submit your detailed testimony, which is read by the committee’s staff, who then give members of Congress questions to ask you based on the submitted testimony (the Democratic staff’s questions are usually quite different from Republican staff’s). Those questions, hopefully, allow you to get into the details.

My aim is to state as clearly as possible that the underlying problem is not wage-price inflation. It’s profit-price inflation. And the Fed’s continuing rate hikes will hurt average workers by slowing the economy — making it harder for workers to get wage increases and causing many to lose their jobs.

I’m going to suggest that Congress consider ways to control inflation that limit corporate profits rather than jobs and wages — such as a windfall profits tax, tougher antitrust enforcement, and even temporary price controls.

Will Congress do any of this? Here again, I’m not so full of myself as to think I can sway a single member of Congress, let alone Congress as a whole. But in my experience, policy ideas that are useful and timely often find their way into politics — eventually displacing old ones that are no longer useful and may be damaging.

At least that’s my hope with “profit-price” inflation replacing the anachronistic “wage-price” inflation.

I’m going to add my testimony to this post right after I testify this morning — and fill you in on what happened.

***

The hearing was just adjourned.

The good news is that the Democrats on the committee got it. They understood that big corporations raising their prices in excess of their costs — to score record profits — is a major reason for the inflation we’re now experiencing. And workers are paying for those record profits in two ways — real wage losses (wage gains have been more than offset by price increases, making most workers worse off) and by the higher prices themselves (the result of corporations increasing their profit margins).

I was particularly impressed by the chairman of the subcommittee, Representative Raja Krishnamoorthi (from the 8th district of Illinois), who understood the issues and expressed them cogently, and by Cori Bush (from the 1st district of Missouri), who asked terrific questions. Katie Porter did a fabulous job breaking the issue down.

There was less discussion of remedies than I’d hoped — only passing reference to tougher antitrust enforcement and no real discussion of a windfall profits tax — and no