Greedflation

By jonsinton on June 21, 2024

JUN 21, 2024

Inflation is not political, but everything's political these days, so spin away, D's and R's—each has a predictable explanation that blames the other—the truth is, the economy has recovered from the pandemic, but some prices haven't come back down. Things cost more today than they did yesterday. Especially consumer goods like groceries. And the Fed's efforts to check inflation by raising interest rates has worked well, even as it has hurt the housing market.

The biggest culprits, we're to believe, are minimum wage increases (that's the Republican argument), and the long recovery from the pandemic, which interrupted supply chains, and left sellers with reduced inventory against resurgent demand as the COVID-19 emergency receded (that's the Democratic argument).

The American economy rebounded faster and better than other countries, including China, which is in the quiet (although not for long) midst of a massive real estate bubble. They went on a spending spree, building cities meant to house millions at a pace that would embarrass any NBA team famous for its fast-break.

The stock market is at historic highs. Unemployment (which should theoretically rise as interest rates go up) is at historical lows. Inflation, now down to 3.3%, is nearing the Fed target of 2.5%. It's a little topsy-turvy since raising interest rates is supposed to cool economic activity and make the economy contract, but the American economy won't relent. It just keeps growing.

Whether you're better or worse off today than you were four years ago is an established political benchmark. People tend to vote their pocketbooks, so it's in the right-wing media's interest to lie openly; they have a candidate to elect, and as James Carville famously advised Bill Clinton, "Stay away from the interns." Oh wait, that's a different column. He told Clinton, "It's the economy, stupid." And, yes, it's always the economy, stupid.

People don't fact check, and when they hear that:

•Crime is rising in major cities, it isn't. Reported carjacking incidents fell by 5% in 10 reporting cities; reports of residential burglaries (-3%), nonresidential burglaries (-7%), and larcenies (-4%) all decreased in 2023 compared to 2022.

•Or that inflation is skyrocketing, it isn't. It rose to 8% in the throes of the pandemic, but has fallen pretty consistently since.

•The stock market is crashing, it isn't. If you were early to buy the AI chipmaker, Nvidia, you're looking pretty smart right now since it is out performing a very good stock market like it's the Harlem Globetrotters and the Dow Jones is the Washington Generals. (Thus ends my homage to the NBA Finals.)

•Unemployment is at an all-time high, it isn't. Four percent represents a healthy picture of an expanding job market, as witnessed by the 272,000 jobs gained in May, versus the predicted 180,000 jobs.

The problem is that people are uninformed and misinformed. There is a perception gap that owes its perniciousness to right-wing media. And perception is reality. Countless millions of Americans simply don't know any of these facts. According to a recent Harris Poll, cited by the New York Times, "Fifty-five percent of Americans believe the economy is shrinking, 56 percent believe that the United States is in a recession, 49 percent think the S&P 500 stock index is down for the year, and 49 percent believe — incredibly enough — that unemployment is at a 50-year high. An overwhelming majority of Americans (77 percent) believe that crime is rising — one of the most pessimistic assessments in a generation."

Not to let the left off the hook, I have to point out that real people are feeling a real squeeze—that's not misperception. Costs for certain things are stubbornly high. High enough to make economists wonder if corporate greed—companies taking advantage of the media hype and the since-past pandemic—is a driver of high-prices.

The popular political argument is that granting entry-level workers a living wage will be the death of "America's Best First Job," a McDonalds slogan. In fact, McDonalds has been raising prices for a long time. A Quartz exposé shows that the hamburger chain has raised prices 100% in the last decade—long before the pandemic or new minimum wage standards were even imagined, and way ahead of inflation: The Big Mac has gone from its 2014 price of $1.99 to its current $3.99. A 50% increase. The Double Cheeseburger has gone from $1.19 in 2014 to $3.19 today, an increase of 168%.

Starbucks is also consistently raising prices, and loves to poor-mouth, saying it can't afford to increase pay to its workers. It is being sued both by associates and the federal government for unfair labor practices.

People are feeling the price-pain, but many more companies than these two are taking advantage of a confusing moment. Call it "Greedflation."