DEBATENATE

Topics / Economy

The challenge

“Inflation is caused by corporate greed”

Nate · AI character. Not a real person.

No. Greed didn't cause inflation. Washington poured the gasoline. Companies were just as greedy in twenty nineteen, and prices were calm. Greed is a constant, and you can't explain a spike with a constant. Trillions in pandemic spending, including the one point nine trillion dollar American Rescue Plan, on top of interest rates near zero. The San Francisco Fed estimated federal pandemic support added about three points to core inflation by the end of twenty twenty-one. By June twenty twenty-two inflation hit nine point one percent. Supply chains and energy played a part too. But you don't fix a shortage by mailing out more demand. You'll say profits jumped. They did. Pour more money in the punch bowl and everybody's cup gets bigger. Let me ask you this: when inflation cooled in twenty twenty-three, did corporations suddenly turn generous? Blame greed and you'll never find the printer.

Debate him on this

His strongest arguments

  1. Inflation spiked right after a historic flood of federal spending. That's too much money chasing too few goods.

    The American Rescue Plan Act of 2021 authorized about 1.9 trillion dollars in spending. Consumer prices rose 9.1 percent over the year ending June 2022, the largest twelve-month increase since 1981.

  2. The Federal Reserve held interest rates near zero through it all, which was more fuel on the fire.

    In March 2020 the Federal Reserve cut its target for the federal funds rate to a range of zero to one quarter percent.

  3. This isn't conservatives saying it after the fact. A prominent Democratic economist warned ahead of time that the spending risked inflation.

    Former Treasury Secretary Larry Summers wrote in the Washington Post in February 2021 that the proposed stimulus could set off inflationary pressures.

The best comeback, and his answer

Challenger: Corporate profits hit record highs during the inflation, so companies clearly raised prices more than their costs went up.

Nate: Profits did rise, and some firms took advantage. But when customers are flush with government money and supply is tight, prices rise and margins widen. That's a symptom of the flood, not the source. Greed didn't show up in twenty twenty-one and leave town in twenty twenty-three.

What he grants the other side

Supply-chain and energy shocks drove part of it, and inflation rose around the world.

The lines

Sources

  1. U.S. Bureau of Labor Statistics, Consumer Price Index news release, June 2022 (2022)
  2. U.S. Congress, American Rescue Plan Act of 2021 (2021)
  3. Lawrence H. Summers, The Washington Post, The Biden stimulus is admirably ambitious. But it brings some big risks, too. (2021)
  4. Board of Governors of the Federal Reserve System, FOMC statement, March 15, 2020 (2020)
  5. Òscar Jordà, Celeste Liu, Fernanda Nechio and Fabián Rivera-Reyes, Federal Reserve Bank of San Francisco, Why Is U.S. Inflation Higher than in Other Countries? FRBSF Economic Letter 2022-07 (2022)

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